The Court en banc issued Decision on January 27, 2004, granting the Petition and declaring the

unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as the entire FTAA executed between
the government and WMCP, based on the finding that FTAAs are service contracts prohibited by the 1987
Constitution. Despite the fact that the La Bugal case was filed in 1997, the Supreme Court took seven years to
reach a decision. This occurred in 2004, when the Court declared the FTAA provisions of the Mining Act, and
the WMCP FTAA in particular, unconstitutional, in a significant (but short-lived) victory for the petitioners.
Even though both the Act and the WMCP FTAA used the Constitution's language of "agreements involving
either technical or financial assistance,"  the FTAA and those agreements proposed by the Mining Act were, in
effect, "service contracts" that granted foreign contractors beneficial ownership over resources that rightfully
belonged to the Philippines and its citizens.  According to the Court, service contracts were included in the
1973 Constitution but were removed from the 1987 Constitution because they were antithetical to
sovereignty over natural resources since they allowed foreign control of such resources. As a result, the Court
interpreted Section 2 of Article XII of the 1987 Constitution as effectively prohibiting such contracts. The Court
concluded that any agreement allowing more than financial and technical assistance or allowing a party to
provide any form of managerial assistance would effectively transfer beneficial ownership of natural resources
to a foreign-owned corporation, and thus would violate the Constitution. According to the Court, the WMCP
FTAA in question went beyond the limits of the paragraph 4 exception and thus constituted a type of "service
contract" that was prohibited. Several provisions of the Mining Act and its IRRs were declared invalid in the
process, including those allowing foreign companies to hold exploration and mineral processing permits. 

The original Decision disposed as follows: 

“WHEREFORE, the petition is GRANTED. The Court hereby declares unconstitutional and void: 

RA 7942 Provisions on Service Contracts Unconstitutional

(1) The following provisions of Republic Act No. 7942: 
(a) The proviso in Section 3(aq), 
(b) Section 23, 
(c) Section 33 to 41, 
(d) Section 56, 
(e) The second and third paragraphs of Section 81, and 
(f) Section 90

The WMCP FTAA Unconstitutional For being a constitutionally prohibited service contract, the WMCP FTAA
was also nullified by the Court. The following stipulations supposedly granted WMCP beneficial ownership of
natural resources that properly belonged to the State and were intended for the benefit of its citizens.

(2) All provisions of Department of Environment and Natural Resources Administrative Order 96-40, s. 1996
which are not in conformity with this Decision, and 
(3) The Financial and Technical Assistance Agreement between the Government of the Republic of the
Philippines and WMC Philippines, Inc.”
AUTHORITY OF THE DEPARTMENT