LA BUGAL-B’LAAN VS RAMOS (GR NO.

127882 DECEMBER 1, 2004)

Facts:
The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of (1) Republic
Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its Implementing Rules and Regulations (DENR
Administrative Order No. [DAO] 96-40); and (3) the FTAA dated March 30, 1995,6 executed by the
government with Western Mining Corporation (Philippines), Inc. (WMCP). On January 27, 2004, the Court en
banc promulgated its Decision granting the Petition and declaring the unconstitutionality of certain provisions
of RA 7942, DAO 96-40, as well as of the entire FTAA executed between the government and WMCP, mainly
on the finding that FTAAs are service contracts prohibited by the 1987 Constitution. The Decision struck down
the subject FTAA for being similar to service contracts, which, though permitted under the 1973 Constitution,
were subsequently denounced for being antithetical to the principle of sovereignty over our natural resources,
because they allowed foreign control over the exploitation of our natural resources, to the prejudice of the
Filipino nation. The Decision quoted several legal scholars and authors who had criticized service contracts for,
inter alia, vesting in the foreign contractor exclusive management and control of the enterprise, including
operation of the field in the event petroleum was discovered; control of production, expansion and development;
nearly unfettered control over the disposition and sale of the products discovered/extracted; effective ownership
of the natural resource at the point of extraction; and beneficial ownership of our economic resources.
According to the Decision, the 1987 Constitution (Section 2 of Article XII) effectively banned such service
contracts. Subsequently, respondents filed separate Motions for Reconsideration. In a Resolution dated March
9, 2004, the Court required petitioners to comment thereon. In the Resolution of June 8, 2004, it set the case for
Oral Argument on June 29, 2004.
Issue:
Whether or not the FTAA issued were valid?
Yes. The notion that the deliberations reflect only the views of those members who spoke out and not
the views of the majority who remained silent should be clarified. We must never forget that those who spoke
out were heard by those who remained silent and did not react. If the latter were silent because they happened
not to be present at the time, they are presumed to have read the minutes and kept abreast of the deliberations.
By remaining silent, they are deemed to have signified their assent to and/or conformity with at least some of
the views propounded or their lack of objections thereto. It was incumbent upon them, as representatives of the
entire Filipino people, to follow the deliberations closely and to speak their minds on the matter if they did not
see eye to eye with the proponents of the draft provisions.
In any event, each and every one of the commissioners had the opportunity to speak out and to vote on
the matter. Moreover, the individual explanations of votes are on record, and they show where each delegate
stood on the issues. In sum, we cannot completely denigrate the value or usefulness of the record of the
ConCom, simply because certain members chose not to speak out.
However, it is of common knowledge, and of judicial notice as well, that the government is and has for
many many years been financially strapped, to the point that even the most essential services have suffered
serious curtailments — education and health care, for instance, not to mention judicial services — have had to
make do with inadequate budgetary allocations. Thus, government has had to resort to build-operate-transfer
and similar arrangements with the private sector, in order to get vital infrastructure projects built without any
governmental outlay.
The drafters — whose ranks included many academicians, economists, businessmen, lawyers,
politicians and government officials — were not unfamiliar with the practices of foreign corporations and
multinationals.
Neither were they so naïve as to believe that these entities would provide “assistance” without
conditionalities or some quid pro quo. Definitely, as a business person, well known and as a matter of judicial
notice, this matter is not just a question of signing a promissory note or executing a technology transfer
agreement. Foreign corporations usually require that they be given a say in the management, for instance, of
day-to-day operations of the joint venture. They would demand the appointment of their own men as, for
example, operations managers, technical experts, quality control heads, internal auditors or comptrollers.
Furthermore, they would probably require seats on the Board of Directors — all these to ensure the success of
the enterprise and the repayment of the loans and other financial assistance and to make certain that the funding
and the technology they supply would not go to waste. Ultimately, they would also want to protect their
business reputation and bottom lines.

What is the proper interpretation of the phrase Agreements Involving Either Technical or Financial
Assistance contained in paragraph 4 of Section 2 of Article XII of the Constitution?

The constitutional provision at the nucleus of the controversy is paragraph 4 of Section 2 of Article XII
of the 1987 Constitution. In order to appreciate its context, Section 2 is reproduced in full:
"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.
Petitioners claim that the phrase "agreements x x x involving either technical or financial assistance"
simply means technical assistance or financial assistance agreements, nothing more and nothing else. They
insist that there is no ambiguity in the phrase, and that a plain reading of paragraph 4 quoted above leads to the
inescapable conclusion that what a foreign-owned corporation may enter into with the government is merely an
agreement for either financial or technical assistance only, for the large-scale exploration, development and
utilization of minerals, petroleum and other mineral oils; such a limitation, they argue, excludes foreign
management and operation of a mining enterprise.
We do not see how applying a strictly literal or verba legis interpretation of paragraph 4 could
inexorably lead to the conclusions arrived at in the ponencia. First, the drafters' choice of words -- their use of
the phrase agreements x x x involving... either technical or financial assistance -- does not indicate the intent to
exclude other modes of assistance. The drafters opted to use involving when they could have simply said
agreements for financial or technical assistance, if that was their intention to begin with. In this case, the
limitation would be very clear and no further debate would ensue
In contrast, the use of the word "involving" signifies the possibility of the inclusion of other forms of
assistance or activities having to do with, otherwise related to or compatible with financial or technical
assistance. The word "involving" as used in this context... has three connotations that can be differentiated thus:
one, the sense of "concerning," "having to do with," or "affecting"; two, "entailing," "requiring," "implying" or
"necessitating"; and three, "including," "containing" or "comprising."
Plainly, none of the three connotations convey a sense of exclusivity. Moreover, the word "involving,"
when understood in the sense of "including," as in including technical or financial assistance, necessarily
implies that there are activities other than those... that are being included. In other words, if an agreement
includes technical or financial assistance, there is apart from such assistance -- something else already in, and
covered or may be covered by, the said agreement.
In short, it allows for the possibility that matters, other than those explicitly mentioned, could be made
part of the agreement. Thus, we are now led to the conclusion that the use of the word "involving" implies that
these agreements with foreign corporations are not... limited to mere financial or technical assistance. The
difference in sense becomes very apparent when we juxtapose "agreements for technical or financial assistance"
against "agreements including technical or financial assistance." This much is... unalterably clear in a verba
legis approach.
Second, if the real intention of the drafters was to confine foreign corporations to financial or technical
assistance and nothing more, their language would have certainly been so unmistakably restrictive and stringent
as to leave no doubt in anyone's mind about... their true intent. For example, they would have used the sentence
foreign corporations are absolutely prohibited from involvement in the management or operation of mining or
similar ventures or words of similar import. A search for such stringent wording yields... negative results. Thus,
we come to the inevitable conclusion that there was a conscious and deliberate decision to avoid the use of
restrictive wording that bespeaks an intent not to use the expression "agreements x x x involving either technical
or financial assistance"... in an exclusionary and limiting manner.

Principles:
All mineral resources are owned by the State. Their exploration, development and utilization (EDU) must
always be subject to the full control and supervision of the State. More specifically, given the inadequacy of
Filipino capital and technology in... large-scale EDU activities, the State may secure the help of foreign
companies in all relevant matters -- especially financial and technical assistance -- provided that, at all times,
the State maintains its right of full control. The foreign assistor or contractor... assumes all financial, technical
and entrepreneurial risks in the EDU activities; hence, it may be given reasonable management, operational,
marketing, audit and other prerogatives to protect its investments and to enable the business to succeed.
On the basis of this control standard, this Court upholds the constitutionality of the Philippine Mining Law, its
Implementing Rules and Regulations -- insofar as they relate to financial and technical agreements -- as well as
the subject Financial and Technical Assistance Agreement (FTAA).
On constitutionality of Mining Act.
This case dealt with questions around exploration, development and utilization of mineral resources in the
Philippines with the help of foreign companies. There was a petition before the court challenging the
constitutionality of corresponding parts of the Philippine Mining Act and related rules and regulations.
The lower court had granted the petition and declared the unconstitutionality of certain provisions. The mineral
resources service contracts were criticized for, inter alia, vesting in the foreign contractor exclusive
management and control of the enterprise, control of production, expansion and development, nearly unfettered
control over the disposition and sale of the products discovered/extracted, effective ownership of the natural
resource at the point of extraction, and beneficial ownership of Filipino economic resources.
Upon motion for reconsideration, the Supreme Court interpreted the relevant regulations as well as the
corresponding parts of the Constitution providing that the President could enter into agreements with
foreign-owned corporations for large-scale exploration, development, and utilization of minerals,
petroleum, and other mineral oils. It examined the extent of control of the state in implementing the said
agreements.
It emphasized that all mineral resources were owned by the State. Their exploration, development and
utilization always had to be subject to the full control and supervision of the State. However, given the
inadequacy of Filipino capital and technology, the State could secure the help of foreign companies in all
relevant matters -- especially financial and technical assistance -- provided that, at all times, the State
maintained its right of full control.
The Constitution should not be used to strangulate economic growth. Rather, it should be construed to
grant the President and Congress sufficient discretion to enable them to attract foreign investments and
expertise, as well as to secure for Filipino people prosperity and peace.
The regulations in question vested in the government more than a sufficient degree of control and
supervision over the conduct of mining operations. This setup could not be regarded as disadvantageous
to the State or the Filipino people; it did not convey beneficial ownership of Filipino mineral resources to
foreign contractors.
The Court upheld the constitutionality of the Philippine Mining Law and its implementing rules and
regulations - insofar as they related to financial and technical agreements - as well as the Financial and
Technical Assistance Agreement in question.