la bugal-b'laan tribal association, inc. v. ramos (2004)

7/25/2019 La Bugal-B'Laan Tribal Association, Inc. v. Ramos (2004)

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G.R. No. 127882 January 27, 2004

LA BUGAL-B'LAAN TRIBAL ASSOCIATION, INC.,rere!en"e# $y %"! C&a%ran ('LONG )IGU*L ).LU)A+ONG, IGB*RTO *. TAAA, /ONCIANOB*NNAG*N, JAI)* TA*O, R*NATO R. CONSTANTINO,JR., ('LONG AGUSTIN ). ABI*, ROB*RTO /. A)LO+,RAI) L. ABI*, SI)*ON . OLOJO, I)*LA ).GANON, L*N+ B. GUSANAN, )ARC*LO L. GUSANAN,UINTOL A. LABUA+AN, LO)INGG*S . LAA+,B*NITA /. TACUA+AN, %nor! JOL+ L. BUGO+,rere!en"e# $y &%! a"&er UN*RO . BUGO+, ROG*R). AING, rere!en"e# $y &%! a"&er ANTONIO L.AING, RO)+ ). LAGARO, rere!en"e# $y &%! a"&erTOTING A. LAGARO, )I3*N+ JONG B. LU)A+ONG,

rere!en"e# $y &%! a"&er )IGU*L ). LU)A+ONG,R*N* T. )IGU*L, rere!en"e# $y &%! o"&er *ITAT. )IGU*L, AL*)AR L. SAL, rere!en"e# $y &%!a"&er ANN+ ). SAL, AIS+ R*CARS*, rere!en"e#$y &er o"&er L+IA S. SANTOS, *AR ). *)U+,ALAN /. )A)/ARAIR, )ARIO L. )ANGCAL, AL*N S.TUSAN, A)/ARO S. +A/, IRGILIO CULAR, )ARIC)..(. L*ON*N, JULIA R*GINA CULAR, GIAN CARLOCULAR, IRGILIO CULAR, JR., rere!en"e# $y "&e%ra"&er IRGILIO CULAR, /AUL ANTONIO /.ILLA)OR, rere!en"e# $y &%! aren"! JOS*ILLA)OR an# *LI5AB*T /UA-ILLA)OR, ANAGININA R. TALJA, rere!en"e# $y &er a"&er )ARIOJOS* B. TALJA, SAR)AIN* R. CUNANAN,rere!en"e# $y &er a"&er AL(R*O ). CUNANAN,ANTONIO JOS* A. ITUG III, rere!en"e# $y &%!o"&er ANNALI5A A. ITUG, L*AN . NARA*5,rere!en"e# $y &%! a"&er )ANU*L *. NARA*5, JR.,ROS*RIO )ARALAG LINGATING, rere!en"e# $y &era"&er RIO OLI)/IO A. LINGATING, )ARIO JOS* B.TALJA, AI *. * *RA, )ARIA )ILAGROS L. SANJOS*, SR., SUSAN O. BOLANIO, ON, LOLITA G.

*)ONT**R*, B*NJI* L. N*UINTO,1ROS* LILIAS. RO)ANO, ROB*RTO S. *R5OLA, *UAROAUR*LIO C. R*+*S, L*AN LOU*L A. /*RIA,rere!en"e# $y &%! a"&er *L/IIO . /*RIA,2GR**N

(ORU) /ILI//IN*S, GR**N (ORU) *ST*RNISA+AS, 6G(-, *NIRON)*TAL L*GALASSISTANC* C*NT*R 6*LAC, /ILI//IN* 3AISAANTUNGO SA 3AUNLARAN NG 3ANA+UNAN ATR*/OR)ANG /ANSA3AAN 63AISAAN,3AISAANTUNGO SA 3AUNLARAN NG 3ANA+UNAN ATR*/OR)ANG /ANSA3AAN 63AISAAN,/ARTN*RSI/ (OR AGRARIAN R*(OR) an# RURAL**LO/)*NT S*RIC*S, INC. 6/ARRS,/ILI//IN* /ART9N*RSI/ (OR T* **LO/)*NTO( U)AN R*SOURC*S IN T* RURAL AR*AS, INC.

6/ILRRA, O)*N'S L*GAL BUR*AU 6LB,C*NT*R (OR ALT*RNATI* **LO/)*NTINITIATI*S, INC. 6CAI, U/LAN **LO/)*NTINSTITUT* 6UI, 3INAI+AAN (OUNATION, INC.,S*NTRO NG ALT*RNATIBONG LINGA/ /ANLIGAL6SALIGAN, L*GAL RIGTS AN NATURALR*SOURC*S C*NT*R, INC. 6LRC,petitioners,vs.ICTOR O. RA)OS, S*CR*TAR+, */ART)*NT O(*NIRON)*NT AN NATURAL R*SOURC*S 6*NR,ORACIO RA)OS, IR*CTOR, )IN*S ANG*OSCI*NC*S BUR*AU 6)GB-*NR, RUB*N TORR*S,*:*CUTI* S*CR*TAR+, an# )C 6/ILI//IN*S,INC.4respondents.

D E C I S I O N

CAR/IO-)ORAL*S, J.:

The present petition for mandamus and prohibition assailsthe constitutionality of epublic !ct No. "#4$,%other&ise


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'no&n as the ()I*I((INE +ININ !CT O- ##%, alon/ &iththe Implementin/ ules and e/ulations issued pursuantthereto, Department of Environment and Natural esources0DEN1 !dministrative Order #234, and of the -inancialand Technical !ssistance !/reement 0-T!!1 entered into on

+arch 5, ##% by the epublic of the (hilippines and 6+C0(hilippines1, Inc. 06+C(1, a corporation or/ani7ed under(hilippine la&s.

On 8uly $%, #9", then (resident Cora7on C. !:uino issuedE;ecutive Order 0E.O.1 No. $"#2authori7in/ the DENSecretary to accept, consider and evaluate proposals fromforei/n3o&ned corporations or forei/n investors forcontracts or a/reements involvin/ either technical orfinancial assistance for lar/e3scale e;ploration,development, and utili7ation of minerals, &hich, upon

appropriate recommendation of the Secretary, the (residentmay e;ecute &ith the forei/n proponent. In enterin/ intosuch proposals, the (resident shall consider the realcontributions to the economic /ro&th and /eneral &elfare ofthe country that &ill be reali7ed, as &ell as the developmentand use of local scientific and technical resources that &illbe promoted by the proposed contract or a/reement.


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D!O No. #234, s. ##2 &hich &as adopted on December$, ##2.

On 8anuary , ##", counsels for petitioners sent a letterto the DEN Secretary demandin/ that the DEN stop the

implementation of .!. No. "#4$ and D!O No. #234,5%/ivin/ the DEN fifteen days from receipt52to actthereon. The DEN, ho&ever, has yet to respond or act onpetitionersB letter.5"

(etitioners thus filed the present petition for prohibition andmandamus, &ith a prayer for a temporary restrainin/ order.They alle/e that at the time of the filin/ of the petition, -T!! applications had already been filed, coverin/ an areaof 9.4 million hectares,5924 of &hich applications are byfully forei/n3o&ned corporations coverin/ a total of %.9

million hectares, and at least one by a fully forei/n3o&nedminin/ company over offshore areas.5#

(etitioners claim that the DEN Secretary acted &ithout orin e;cess of =urisdiction

I

; ; ; in si/nin/ and promul/atin/ DEN !dministrativeOrder No. #234 implementin/ epublic !ct No. "#4$, thelatter bein/ unconstitutional in that it allo&s fully forei/n

o&ned corporations to e;plore, develop, utili7e and e;ploitmineral resources in a manner contrary to Section $,para/raph 4, !rticle II of the ConstitutionF

II

; ; ; in si/nin/ and promul/atin/ DEN !dministrativeOrder No. #234 implementin/ epublic !ct No. "#4$, thelatter bein/ unconstitutional in that it allo&s the ta'in/ of

private property &ithout the determination of public use andfor =ust compensationF

III

; ; ; in si/nin/ and promul/atin/ DEN !dministrativeOrder No. #234 implementin/ epublic !ct No. "#4$, thelatter bein/ unconstitutional in that it violates Sec. , !rt.III of the ConstitutionF

I?

; ; ; in si/nin/ and promul/atin/ DEN !dministrativeOrder No. #234 implementin/ epublic !ct No. "#4$, thelatter bein/ unconstitutional in that it allo&s en=oyment byforei/n citi7ens as &ell as fully forei/n o&ned corporations

of the nationBs marine &ealth contrary to Section $,para/raph $ of !rticle II of the ConstitutionF

?

; ; ; in si/nin/ and promul/atin/ DEN !dministrativeOrder No. #234 implementin/ epublic !ct No. "#4$, thelatter bein/ unconstitutional in that it allo&s priority toforei/n and fully forei/n o&ned corporations in thee;ploration, development and utili7ation of mineralresources contrary to !rticle II of the ConstitutionF

?I

; ; ; in si/nin/ and promul/atin/ DEN !dministrativeOrder No. #234 implementin/ epublic !ct No. "#4$, thelatter bein/ unconstitutional in that it allo&s the ine:uitablesharin/ of &ealth contrary to Sections GsicH , para/raph ,and Section $, para/raph 4G,H G!rticle IIH of theConstitutionF


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?II

; ; ; in recommendin/ approval of and implementin/ the-inancial and Technical !ssistance !/reement bet&een the(resident of the epublic of the (hilippines and 6estern

+inin/ Corporation (hilippines Inc. because the same isille/al and unconstitutional.4

They pray that the Court issue an order

0a1 (ermanently en=oinin/ respondents from actin/on any application for -inancial or Technical!ssistance !/reementsF

0b1 Declarin/ the (hilippine +inin/ !ct of ##% orepublic !ct No. "#4$ as unconstitutional and null

and voidF

0c1 Declarin/ the Implementin/ ules ande/ulations of the (hilippine +inin/ !ct contained inDEN !dministrative Order No. #234 and all othersimilar administrative issuances as unconstitutionaland null and voidF and

0d1 Cancellin/ the -inancial and Technical !ssistance!/reement issued to 6estern +inin/ (hilippines, Inc.as unconstitutional, ille/al and null and void.4

Impleaded as public respondents are uben Torres, the thenE;ecutive Secretary, ?ictor O. amos, the then DENSecretary, and )oracio amos, Director of the +ines andeosciences ureau of the DEN. !lso impleaded is privaterespondent 6+C(, &hich entered into the assailed -T!!&ith the (hilippine overnment. 6+C( is o&ned by 6+Cesources International (ty., *td. 06+C1, @a &holly o&nedsubsidiary of 6estern +inin/ Corporation )oldin/s *imited,a publicly listed ma=or !ustralian minin/ and e;ploration

company.@4$y 6+C(Bs information, @it is a J o&nedsubsidiary of 6+C *I+ITED.@45

espondents, aside from meetin/ petitionersB contentions,ar/ue that the re:uisites for =udicial in:uiry have not been

met and that the petition does not comply &ith the criteriafor prohibition and mandamus. !dditionally, respondent6+C( ar/ues that there has been a violation of the rule onhierarchy of courts.

!fter petitioners filed their reply, this Court /ranted duecourse to the petition. The parties have since filed theirrespective memoranda.

6+C( subse:uently filed a +anifestation dated September$%, $$ alle/in/ that on 8anuary $5, $, 6+C sold all its

shares in 6+C( to Sa/ittarius +ines, Inc. 0Sa/ittarius1, acorporation or/ani7ed under (hilippine la&s.446+C( &assubse:uently renamed @Tampa'an +ineral esourcesCorporation.@4%6+C( claims that at least 2J of the e:uityof Sa/ittarius is o&ned by -ilipinos andAor -ilipino3o&nedcorporations &hile about 4J is o&ned by Indophilesources N*, an !ustralian company.42It further claimsthat by such sale and transfer of shares, @6+C( has ceasedto be connected in any &ay &ith 6+C.@4"

y virtue of such sale and transfer, the DEN Secretary, by

Order of December 9, $,49

approved the transfer andre/istration of the sub=ect -T!! from 6+C( to Sa/ittarius.Said Order, ho&ever, &as appealed by *epanto Consolidated+inin/ Co. 0*epanto1 to the Office of the (resident &hichupheld it by Decision of 8uly $5, $$.4#Its motion forreconsideration havin/ been denied by the Office of the(resident by esolution of November $, $$,%*epantofiled a petition for revie&%before the Court of !ppeals.Incidentally, t&o other petitions for revie& related to the


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approval of the transfer and re/istration of the -T!! toSa/ittarius &ere recently resolved by this Court.%$

It bears stressin/ that this case has not been renderedmoot either by the transfer and re/istration of the -T!! to a

-ilipino3o&ned corporation or by the non3issuance of atemporary restrainin/ order or a preliminary in=unction tostay the above3said 8uly $5, $$ decision of the Office ofthe (resident.%5The validity of the transfer remains indispute and a&aits final =udicial determination. Thisassumes, of course, that such transfer cures the -T!!Bsalle/ed unconstitutionality, on &hich :uestion =ud/ment isreserved.

6+C( also points out that the ori/inal claimo&ners of thema=or minerali7ed areas included in the 6+C( -T!!,

namely, Sa/ittarius, Tampa'an +inin/ Corporation, andSouthcot +inin/ Corporation, are all -ilipino3o&nedcorporations,%4each of &hich &as a holder of an approved+ineral (roduction Sharin/ !/reement a&arded in ##4,albeit their respective mineral claims &ere subsumed in the6+C( -T!!F%%and that these three companies are the samecompanies that consolidated their interests in Sa/ittarius to&hom 6+C sold its J e:uity in 6+C(.%26+C(concludes that in the event that the -T!! is invalidated, the+(S!s of the three corporations &ould be revived and themineral claims &ould revert to their ori/inal claimants.%"

These circumstances, &hile informative, are hardlysi/nificant in the resolution of this case, it involvin/ thevalidity of the -T!!, not the possible conse:uences of itsinvalidation.

Of the above3enumerated seven /rounds cited bypetitioners, as &ill be sho&n later, only the first and the lastneed be delved intoF in the latter, the discussion shall d&ell

only insofar as it :uestions the effectivity of E. O. No. $"#by virtue of &hich order the :uestioned -T!! &as for/ed.

I

efore /oin/ into the substantive issues, the procedural:uestions posed by respondents shall first be tac'led.

R*UISIT*S (OR JUICIAL R*I*

6hen an issue of constitutionality is raised, this Court cane;ercise its po&er of =udicial revie& only if the follo&in/re:uisites are present

01 The e;istence of an actual and appropriate caseF

0$1 ! personal and substantial interest of the partyraisin/ the constitutional :uestionF

051 The e;ercise of =udicial revie& is pleaded at theearliest opportunityF and

041 The constitutional :uestion is the lis mota of thecase. %9

espondents claim that the first three re:uisites are notpresent.

Section , !rticle ?III of the Constitution states that@0=1udicial po&er includes the duty of the courts of =ustice tosettle actual controversies involvin/ ri/hts &hich are le/allydemandable and enforceable.@ The po&er of =udicial revie&,therefore, is limited to the determination of actual cases andcontroversies.%#


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!n actual case or controversy means an e;istin/ case orcontroversy that is appropriate or ripe for determination,not con=ectural or anticipatory,2lest the decision of thecourt &ould amount to an advisory opinion.2The po&erdoes not e;tend to hypothetical :uestions2$since any

attempt at abstraction could only lead to dialectics andbarren le/al :uestions and to sterile conclusions unrelatedto actualities.25

@*e/al standin/@ or locus standi has been defined as apersonal and substantial interest in the case such that theparty has sustained or &ill sustain direct in=ury as a result ofthe /overnmental act that is bein/ challen/ed,24alle/in/more than a /enerali7ed /rievance.2%The /ist of the:uestion of standin/ is &hether a party alle/es @suchpersonal sta'e in the outcome of the controversy as to

assure that concrete adverseness &hich sharpens thepresentation of issues upon &hich the court depends forillumination of difficult constitutional :uestions.@22


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:uestion in standin/ is &hether such parties have @alle/edsuch a personal sta'e in the outcome of the controversy asto assure that concrete adverseness &hich sharpens thepresentation of issues upon &hich the court so lar/elydepends for illumination of difficult constitutional :uestions.@

0a'er v. Carr, 52#


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e;ercisin/ functions =udicial or ministerial, are &ithout or ine;cess of its or his =urisdiction, or &ith /rave abuse ofdiscretion, and there is no appeal or any other plain,speedy, and ade:uate remedy in the ordinary course of la&,a person a//rieved thereby may file a verified petition in

the proper court alle/in/ the facts &ith certainty andprayin/ that =ud/ment be rendered commandin/ thedefendant to desist from further proceedin/ in the action ormatter specified therein.

(rohibition is a preventive remedy."4It see's a =ud/mentorderin/ the defendant to desist from continuin/ &ith thecommission of an act perceived to be ille/al."%

The petition for prohibition at bar is thus an appropriateremedy. 6hile the e;ecution of the contract itself may be

fait accompli, its implementation is not. (ublic respondents,in behalf of the overnment, have obli/ations to fulfill undersaid contract. (etitioners see' to prevent them fromfulfillin/ such obli/ations on the theory that the contract isunconstitutional and, therefore, void.

The propriety of a petition for prohibition bein/ upheld,discussion of the propriety of the mandamus aspect of thepetition is rendered unnecessary.

I*RARC+ O( COURTS

The contention that the filin/ of this petition violated therule on hierarchy of courts does not li'e&ise lie. The rulehas been e;plained thus

et&een t&o courts of concurrent ori/inal =urisdiction, it isthe lo&er court that should initially pass upon the issues ofa case. That &ay, as a particular case /oes throu/h thehierarchy of courts, it is shorn of all but the important le/alissues or those of first impression, &hich are the proper

sub=ect of attention of the appellate court. This is aprocedural rule borne of e;perience and adopted to improvethe administration of =ustice.

This Court has consistently en=oined liti/ants to respect the

hierarchy of courts. !lthou/h this Court has concurrent=urisdiction &ith the e/ional Trial Courts and the Court of!ppeals to issue &rits of certiorari, prohibition, mandamus,:uo &arranto, habeas corpus and in=unction, suchconcurrence does not /ive a party unrestricted freedom ofchoice of court forum. The resort to this CourtBs primary=urisdiction to issue said &rits shall be allo&ed only &herethe redress desired cannot be obtained in the appropriatecourts or &here e;ceptional and compellin/ circumstances=ustify such invocation. 6e held in (eople v. Cuaresma that

! becomin/ re/ard for =udicial hierarchy most certainlyindicates that petitions for the issuance of e;traordinary&rits a/ainst first level 0@inferior@1 courts should be filed&ith the e/ional Trial Court, and those a/ainst the latter,&ith the Court of !ppeals. ! direct invocation of theSupreme CourtBs ori/inal =urisdiction to issue these &ritsshould be allo&ed only &here there are special andimportant reasons therefor, clearly and specifically set out inthe petition. This is established policy. It is a policynecessary to prevent inordinate demands upon the CourtBstime and attention &hich are better devoted to thosematters &ithin its e;clusive =urisdiction, and to preventfurther over3cro&din/ of the CourtBs doc'et ; ;;."2GEmphasis supplied.H

The repercussions of the issues in this case on the (hilippineminin/ industry, if not the national economy, as &ell as thenovelty thereof, constitute e;ceptional and compellin/circumstances to =ustify resort to this Court in the firstinstance.


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In all events, this Court has the discretion to ta'eco/ni7ance of a suit &hich does not satisfy the re:uirementsof an actual case or le/al standin/ &hen paramount publicinterest is involved.""6hen the issues raised are ofparamount importance to the public, this Court may brush

aside technicalities of procedure."9

II

(etitioners contend that E.O. No. $"# did not ta'e effectbecause its supposed date of effectivity came after(resident !:uino had already lost her le/islative po&ersunder the (rovisional Constitution.

!nd they li'e&ise claim that the 6+C -T!!, &hich &asentered into pursuant to E.O. No. $"#, violates Section $,

!rticle II of the Constitution because, amon/ otherreasons

01 It allo&s forei/n3o&ned companies to e;tendmore than mere financial or technical assistance tothe State in the e;ploitation, development, andutili7ation of minerals, petroleum, and other mineraloils, and even permits forei/n o&ned companies to@operate and mana/e minin/ activities.@

0$1 It allo&s forei/n3o&ned companies to e;tend

both technical and financial assistance, instead of@either technical or financial assistance.@

To appreciate the import of these issues, a visit to thehistory of the pertinent constitutional provision, theconcepts contained therein, and the la&s enacted pursuantthereto, is in order.

Section $, !rticle II reads in full

Sec. $. !ll lands of the public domain, &aters, minerals,coal, petroleum, and other mineral oils, all forces ofpotential ener/y, fisheries, forests or timber, &ildlife, floraand fauna, and other natural resources are o&ned by theState. 6ith the e;ception of a/ricultural lands, all other

natural resources shall not be alienated. The e;ploration,development, and utili7ation of natural resources shall beunder the full control and supervision of the State. TheState may directly underta'e such activities or it may enterinto co3production, =oint venture, or production3sharin/a/reements &ith -ilipino citi7ens, or corporations orassociations at least si;ty per centum of &hose capital iso&ned by such citi7ens. Such a/reements may be for aperiod not e;ceedin/ t&enty3five years, rene&able for notmore than t&enty3five years, and under such terms andconditions as may be provided by la&. In cases of &aterri/hts for irri/ation, &ater supply, fisheries, or industrialuses other than the development of &ater po&er, beneficialuse may be the measure and limit of the /rant.

The State shall protect the nationBs marine &ealth in itsarchipela/ic &aters, territorial sea, and e;clusive economic7one, and reserve its use and en=oyment e;clusively to-ilipino citi7ens.

The Con/ress may, by la&, allo& small3scale utili7ation ofnatural resources by -ilipino citi7ens, as &ell as cooperativefish farmin/, &ith priority to subsistence fishermen and fish3&or'ers in rivers, la'es, bays, and la/oons.

The (resident may enter into a/reements &ith forei/n3o&ned corporations involvin/ either technical or financialassistance for lar/e3scale e;ploration, development, andutili7ation of minerals, petroleum, and other mineral oilsaccordin/ to the /eneral terms and conditions provided byla&, based on real contributions to the economic /ro&th and/eneral &elfare of the country. In such a/reements, the


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State shall promote the development and use of localscientific and technical resources.

The (resident shall notify the Con/ress of every contractentered into in accordance &ith this provision, &ithin thirty

days from its e;ecution.

T* S/ANIS R*GI)* AN T* R*GALIAN OCTRIN*

The first sentence of Section $ embodies the e/aliandoctrine or =ura re/alia. Introduced by Spain into theseIslands, this feudal concept is based on the StateBs po&er ofdominium, &hich is the capacity of the State to o&n orac:uire property."#

In its broad sense, the term @=ura re/alia@ refers to royal

ri/hts, or those ri/hts &hich the in/ has by virtue of hisprero/atives. In Spanish la&, it refers to a ri/ht &hich thesoverei/n has over anythin/ in &hich a sub=ect has a ri/htof property or propriedad. These &ere ri/hts en=oyed durin/feudal times by the 'in/ as the soverei/n.

The theory of the feudal system &as that title to all lands&as ori/inally held by the in/, and &hile the use of lands&as /ranted out to others &ho &ere permitted to hold themunder certain conditions, the in/ theoretically retained thetitle. y fiction of la&, the in/ &as re/arded as the ori/inal

proprietor of all lands, and the true and only source of title,and from him all lands &ere held. The theory of =ura re/alia&as therefore nothin/ more than a natural fruit ofcon:uest.9

The (hilippines havin/ passed to Spain by virtue ofdiscovery and con:uest,9earlier Spanish decrees declaredthat @all lands &ere held from the Cro&n.@9$

The e/alian doctrine e;tends not only to land but also to@all natural &ealth that may be found in the bo&els of theearth.@95Spain, in particular, reco/ni7ed the uni:ue value ofnatural resources, vie&in/ them, especially minerals, as anabundant source of revenue to finance its &ars a/ainst

other nations.94

+inin/ la&s durin/ the Spanish re/imereflected this perspective.9%

T* A)*RICAN OCCU/ATION AN T* CONC*SSIONR*GI)*

y the Treaty of (aris of December , 9#9, Spain ceded@the archipela/o 'no&n as the (hilippine Islands@ to the


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lands shall have paid to the overnment of said Islandssuch additional sum or sums as &ill ma'e the total amountpaid for the mineral claim or claims in &hich said depositsare located e:ual to the amount char/ed by theovernment for the same as mineral claims.


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submitted to the (resident of the


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conse:uent dan/er to its internal security andindependence.

The same Section , !rticle III also adopted theconcession system, e;pressly permittin/ the State to /rant

licenses, concessions, or leases for the e;ploitation,development, or utili7ation of any of the natural resources.rants, ho&ever, &ere limited to -ilipinos or entities at least2J of the capital of &hich is o&ned by -ilipinos. lawph!l.ne+

The s&ell of nationalism that suffused the #5% Constitution&as radically diluted &hen on November #42, the (arity!mendment, &hich came in the form of an @Ordinance!ppended to the Constitution,@ &as ratified in aplebiscite.$The !mendment e;tended, from 8uly 4, #42to 8uly 5, #"4, the ri/ht to utili7e and e;ploit our natural

resources to citi7ens of the


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Concessions &ere /ranted at the complete ris' of theconcessionaireF the overnment did not /uarantee thee;istence of petroleum or underta'e, in any case, title&arranty.$4

Concessionaires &ere re:uired to submit information asmaybe re:uired by the Secretary of !/riculture and Naturalesources, includin/ reports of /eolo/ical and /eophysicale;aminations, as &ell as productionreports.$%E;ploration$2and e;ploitation$"concessionaires&ere also re:uired to submit &or' pro/rams.lavvphi1.net

E;ploitation concessionaires, in particular, &ere obli/ed topay an annual e;ploitation ta;,$9the ob=ect of &hich is toinduce the concessionaire to actually produce petroleum,and not simply to sit on the concession &ithout developin/

or e;ploitin/ it.$#

These concessionaires &ere also bound topay the overnment royalty, &hich &as not less than $Jof the petroleum produced and saved, less that consumed inthe operations of the concessionaire.5


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Disadvanta/es of Concession. There are, ho&ever, ma=orne/ative aspects to this system. ecause the overnmentBsrole in the traditional concession is passive, it is at a distinctdisadvanta/e in mana/in/ and developin/ policy for thenationBs petroleum resource. This is true for several

reasons. -irst, even thou/h most concession a/reementscontain covenants re:uirin/ dili/ence in operations andproduction, this establishes only an indirect and passivecontrol of the host country in resource development.Second, and more importantly, the fact that the hostcountry does not directly participate in resourcemana/ement decisions inhibits its ability to train andemploy its nationals in petroleum development. This factorcould delay or prevent the country from effectively en/a/in/in the development of its resources. *astly, a direct role inmana/ement is usually necessary in order to obtain a'no&led/e of the international petroleum industry &hich isimportant to an appreciation of the host countryBs resourcesin relation to those of other countries.4$

Other liabilities of the system have also been noted

; ; ; there are functional implications &hich /ive theconcessionaire /reat economic po&er arisin/ from itse;clusive e:uity holdin/. This includes, first, appropriationof the returns of the underta'in/, sub=ect to a modestroyaltyF second, e;clusive mana/ement of the pro=ectFthird, control of production of the natural resource, such as

volume of production, e;pansion, research anddevelopmentF and fourth, e;clusive responsibility fordo&nstream operations, li'e processin/, mar'etin/, anddistribution. In short, even if nominally, the state is thesoverei/n and o&ner of the natural resource bein/e;ploited, it has been shorn of all elements of control oversuch natural resource because of the e;clusive nature of thecontractual re/ime of the concession. The concessionsystem, investin/ as it does o&nership of natural resources,constitutes a consistent inconsistency &ith the principle

embodied in our Constitution that natural resources belon/to the state and shall not be alienated, not to mention thefact that the concession &as the bedroc' of the colonialsystem in the e;ploitation of natural resources.45

Eventually, the concession system failed for reasonse;plained by Dima/iba

Not&ithstandin/ the /ood intentions of the (etroleum !ct of#4#, the concession system could not have properlyspurred sustained oil e;ploration activities in the country,since it assumed that such a capital3intensive, hi/h ris'venture could be successfully underta'en by a sin/leindividual or a small company. In effect, concessionairesBfunds &ere easily e;hausted. +oreover, since the concessionsystem practically closed its doors to interested forei/n

investors, local capital &as stretched to the limits. The oldsystem also failed to consider the hi/hly sophisticatedtechnolo/y and e;pertise re:uired, &hich &ould be availableonly to multinational companies.44

! shift to a ne& re/ime for the development of naturalresources thus seemed imminent.

/R*SI*NTIAL *CR** NO. 87, T* 1;7CONSTITUTION AN T* S*RIC* CONTRACT S+ST*)

The promul/ation on December 5, #"$ of (residentialDecree No. 9",4%other&ise 'no&n as The Oil E;plorationand Development !ct of #"$ si/naled such atransformation. (.D. No. 9" permitted the /overnment toe;plore for and produce indi/enous petroleum throu/h@service contracts.@42

@Service contracts@ is a term that assumes varyin/meanin/s to different people, and it has carried manynames in different countries, li'e @&or' contracts@ in


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Indonesia, @concession a/reements@ in !frica, @production3sharin/ a/reements@ in the +iddle East, and @participationa/reements@ in *atin !merica.4"! functional definition of@service contracts@ in the (hilippines is provided as follo&s

! service contract is a contractual arran/ement for en/a/in/in the e;ploitation and development of petroleum, mineral,ener/y, land and other natural resources by &hich a/overnment or its a/ency, or a private person /ranted ari/ht or privile/e by the /overnment authori7es the otherparty 0service contractor1 to en/a/e or participate in thee;ercise of such ri/ht or the en=oyment of the privile/e, inthat the latter provides financial or technical resources,underta'es the e;ploitation or production of a /ivenresource, or directly mana/es the productive enterprise,operations of the e;ploration and e;ploitation of theresources or the disposition of mar'etin/ or resources.49

In a service contract under (.D. No. 9", service andtechnolo/y are furnished by the service contractor for &hichit shall be entitled to the stipulated service fee.4#Thecontractor must be technically competent and financiallycapable to underta'e the operations re:uired in thecontract.%

-inancin/ is supposed to be provided by the overnment to&hich all petroleum produced belon/s.%In case theovernment is unable to finance petroleum e;plorationoperations, the contractor may furnish services, technolo/yand financin/, and the proceeds of sale of the petroleumproduced under the contract shall be the source of funds forpayment of the service fee and the operatin/ e;penses duethe contractor.%$The contractor shall underta'e, mana/eand e;ecute petroleum operations, sub=ect to the/overnment overseein/ the mana/ement of theoperations.%5The contractor provides all necessary servicesand technolo/y and the re:uisite financin/, performs thee;ploration &or' obli/ations, and assumes all e;ploration

ris's such that if no petroleum is produced, it &ill not beentitled to reimbursement.%4Once petroleum in commercial:uantity is discovered, the contractor shall operate the fieldon behalf of the /overnment.%%

(.D. No. 9" prescribed minimum terms and conditions forevery service contract.%2It also /ranted the contractorcertain privile/es, includin/ e;emption from ta;es andpayment of tariff duties,%"and permitted the repatriation ofcapital and retention of profits abroad.%9

Ostensibly, the service contract system had certainadvanta/es over the concession re/ime.%#It has beenopined, thou/h, that, in the (hilippines, our concept of aservice contract, at least in the petroleum industry, &asbasically a concession re/ime &ith a production3sharin/

element.2

On 8anuary ", #"5, then (resident -erdinand E. +arcosproclaimed the ratification of a ne& Constitution.2!rticleI? on the National Economy and (atrimony containedprovisions similar to the #5% Constitution &ith re/ard to-ilipino participation in the nationBs natural resources.Section 9, !rticle I? thereof provides

Sec. 9. !ll lands of the public domain, &aters, minerals,coal, petroleum and other mineral oils, all forces of potentialener/y, fisheries, &ildlife, and other natural resources of the(hilippines belon/ to the State. 6ith the e;ception ofa/ricultural, industrial or commercial, residential andresettlement lands of the public domain, natural resourcesshall not be alienated, and no license, concession, or leasefor the e;ploration, development, e;ploitation, or utili7ationof any of the natural resources shall be /ranted for a periode;ceedin/ t&enty3five years, rene&able for not more thant&enty3five years, e;cept as to &ater ri/hts for irri/ation,&ater supply, fisheries, or industrial uses other than the


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development of &ater po&er, in &hich cases beneficial usemay be the measure and the limit of the /rant.

6hile Section # of the same !rticle maintained the -ilipino3only policy in the en=oyment of natural resources, it also

allo&ed -ilipinos, upon authority of the atasan/ (ambansa,to enter into service contracts &ith any person or entity forthe e;ploration or utili7ation of natural resources.

Sec. #. The disposition, e;ploration, development,e;ploitation, or utili7ation of any of the natural resources ofthe (hilippines shall be limited to citi7ens, or to corporationsor associations at least si;ty per centum of &hich is o&nedby such citi7ens. The atasan/ (ambansa, in the nationalinterest, may allo& such citi7ens, corporations orassociations to enter into service contracts for financial,

technical, mana/ement, or other forms of assistance &ithany person or entity for the e;ploration, or utili7ation of anyof the natural resources. E;istin/ valid and bindin/ servicecontracts for financial, technical, mana/ement, or otherforms of assistance are hereby reco/ni7ed as such.GEmphasis supplied.H

The concept of service contracts, accordin/ to one dele/ate,&as borro&ed from the methods follo&ed by India, (a'istanand especially Indonesia in the e;ploration of petroleum andmineral oils.2$The provision allo&in/ such contracts,accordin/ to another, &as intended to @enhance the properdevelopment of our natural resources since -ilipino citi7enslac' the needed capital and technical 'no&3ho& &hich areessential in the proper e;ploration, development ande;ploitation of the natural resources of the country.@25

The ori/inal idea &as to authori7e the /overnment, notprivate entities, to enter into service contracts &ith forei/nentities.24!s finally approved, ho&ever, a citi7en or privateentity could be allo&ed by the National !ssembly to enter

into such service contract.2%The prior approval of theNational !ssembly &as deemed sufficient to protect thenational interest.22Notably, none of the la&s allo&in/service contracts &ere passed by the atasan/ (ambansa.Indeed, all of them &ere enacted by presidential decree.

On +arch 5, #"5, shortly after the ratification of the ne&Constitution, the (resident promul/ated (residential DecreeNo. %.2"The la& allo&ed -ilipino citi7ens or entities &hichhave ac:uired lands of the public domain or &hich o&n, holdor control such lands to enter into service contracts forfinancial, technical, mana/ement or other forms ofassistance &ith any forei/n persons or entity for thee;ploration, development, e;ploitation or utili7ation of saidlands.29

(residential Decree No. 425,2#

also 'no&n as The +ineralesources Development Decree of #"4, &as enacted on+ay ", #"4. Section 44 of the decree, as amended,provided that a lessee of a minin/ claim may enter into aservice contract &ith a :ualified domestic or forei/ncontractor for the e;ploration, development and e;ploitationof his claims and the processin/ and mar'etin/ of theproduct thereof.

(residential Decree No. "4"0The -isheries Decree of#"%1, approved on +ay 2, #"%, allo&ed -ilipinosen/a/ed in commercial fishin/ to enter into contracts forfinancial, technical or other forms of assistance &ith anyforei/n person, corporation or entity for the production,stora/e, mar'etin/ and processin/ of fish andfisheryAa:uatic products."

(residential Decree No. "%"$0The evised -orestry Code ofthe (hilippines1, approved on +ay #, #"%, allo&ed @forestproducts licensees, lessees, or permitees to enter intoservice contracts for financial, technical, mana/ement, or


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other forms of assistance . . . &ith any forei/n person orentity for the e;ploration, development, e;ploitation orutili7ation of the forest resources.@"5

et another la& allo&in/ service contracts, this time for

/eothermal resources, &as (residential Decree No.44$,"4&hich &as si/ned into la& on 8une , #"9.Section thereof authori7ed the overnment to enter intoservice contracts for the e;ploration, e;ploitation anddevelopment of /eothermal resources &ith a forei/ncontractor &ho must be technically and financially capableof underta'in/ the operations re:uired in the servicecontract.

Thus, virtually the entire ran/e of the countryBs naturalresources Mfrom petroleum and minerals to /eothermal

ener/y, from public lands and forest resources to fisheryproducts M &as &ell covered by apparent le/al authority toen/a/e in the direct participation or involvement of forei/npersons or corporations 0other&ise dis:ualified1 in thee;ploration and utili7ation of natural resources throu/hservice contracts."%

T* 1;87 CONSTITUTION AN T*CNICAL OR(INANCIAL ASSISTANC* AGR**)*NTS

!fter the -ebruary #92 Edsa evolution, Cora7on C. !:uinotoo' the reins of po&er under a revolutionary /overnment.On +arch $%, #92, (resident !:uino issued (roclamationNo. 5,"2promul/atin/ the (rovisional Constitution, morepopularly referred to as the -reedom Constitution. yauthority of the same (roclamation, the (resident created aConstitutional Commission 0CONCO+1 to draft a ne&constitution, &hich too' effect on the date of its ratificationon -ebruary $, #9".""

The #9" Constitution retained the e/alian doctrine. Thefirst sentence of Section $, !rticle II states @!ll lands ofthe public domain, &aters, minerals, coal, petroleum, andother mineral oils, all forces of potential ener/y, fisheries,forests or timber, &ildlife, flora and fauna, and other natural

resources are o&ned by the State.@

*i'e the #5% and #"5 Constitutions before it, the #9"Constitution, in the second sentence of the same provision,prohibits the alienation of natural resources, e;cepta/ricultural lands.

The third sentence of the same para/raph is ne& @Thee;ploration, development and utili7ation of naturalresources shall be under the full control and supervision ofthe State.@ The constitutional policy of the StateBs @full

control and supervision@ over natural resources proceedsfrom the concept of =ura re/alia, as &ell as the reco/nitionof the importance of the countryBs natural resources, notonly for national economic development, but also for itssecurity and national defense."9


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sharin/ a/reements &ith -ilipino citi7ens, or corporations orassociations at least si;ty per centum of &hose capital iso&ned by such citi7ens.

Consonant &ith the StateBs @full supervision and control@

over natural resources, Section $ offers the State t&o@options.@9$One, the State may directly underta'e theseactivities itselfF or t&o, it may enter into co3production, =ointventure, or production3sharin/ a/reements &ith -ilipinociti7ens, or entities at least 2J of &hose capital is o&nedby such citi7ens.

! third option is found in the third para/raph of the samesection

The Con/ress may, by la&, allo& small3scale utili7ation of

natural resources by -ilipino citi7ens, as &ell as cooperativefish farmin/, &ith priority to subsistence fishermen and fish3&or'ers in rivers, la'es, bays, and la/oons.

6hile the second and third options are limited only to-ilipino citi7ens or, in the case of the former, to corporationsor associations at least 2J of the capital of &hich is o&nedby -ilipinos, a fourth allo&s the participation of forei/n3o&ned corporations. The fourth and fifth para/raphs ofSection $ provide

The (resident may enter into a/reements &ith forei/n3o&ned corporations involvin/ either technical or financialassistance for lar/e3scale e;ploration, development, andutili7ation of minerals, petroleum, and other mineral oilsaccordin/ to the /eneral terms and conditions provided byla&, based on real contributions to the economic /ro&th and/eneral &elfare of the country. In such a/reements, theState shall promote the development and use of localscientific and technical resources.

The (resident shall notify the Con/ress of every contractentered into in accordance &ith this provision, &ithin thirtydays from its e;ecution.

!lthou/h Section $ sanctions the participation of forei/n3

o&ned corporations in the e;ploration, development, andutili7ation of natural resources, it imposes certain limitationsor conditions to a/reements &ith such corporations.

-irst, the parties to -T!!s. Only the (resident, inbehalf of the State, may enter into thesea/reements, and only &ith corporations. y contrast,under the #"5 Constitution, a -ilipino citi7en,corporation or association may enter into a servicecontract &ith a @forei/n person or entity.@

Second, the si7e of the activities only lar/e3scalee;ploration, development, and utili7ation is allo&ed.The term @lar/e3scale usually refers to very capital3intensive activities.@95

Third, the natural resources sub=ect of the activitiesis restricted to minerals, petroleum and othermineral oils, the intent bein/ to limit servicecontracts to those areas &here -ilipino capital maynot be sufficient.94

-ourth, consistency &ith the provisions of statute.The a/reements must be in accordance &ith theterms and conditions provided by la&.

-ifth, Section $ prescribes certain standards forenterin/ into such a/reements. The a/reementsmust be based on real contributions to economic/ro&th and /eneral &elfare of the country.


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Si;th, the a/reements must contain rudimentarystipulations for the promotion of the developmentand use of local scientific and technical resources.

Seventh, the notification re:uirement. The (resident

shall notify Con/ress of every financial or technicalassistance a/reement entered into &ithin thirty daysfrom its e;ecution.

-inally, the scope of the a/reements. 6hile the #"5Constitution referred to @service contracts forfinancial, technical, mana/ement, or other forms ofassistance@ the #9" Constitution provides for@a/reements. . . involvin/ either financial or technicalassistance.@ It bears notin/ that the phrases @servicecontracts@ and @mana/ement or other forms of

assistance@ in the earlier constitution have beenomitted.

y virtue of her le/islative po&ers under the (rovisionalConstitution,9%(resident !:uino, on 8uly , #9", si/nedinto la& E.O. No. $ prescribin/ the interim procedures inthe processin/ and approval of applications for thee;ploration, development and utili7ation of minerals. Theomission in the #9" Constitution of the term @servicecontracts@ not&ithstandin/, the said E.O. still referred tothem in Section $ thereof

Sec. $. !pplications for the e;ploration, development andutili7ation of mineral resources, includin/ rene&alapplications and applications for approval of operatin/a/reements and minin/ service contracts, shall be acceptedand processed and may be approved ; ; ;. GEmphasissupplied.H

The same la& provided in its Section 5 that the @processin/,evaluation and approval of all minin/ applications . . .

operatin/ a/reements and service contracts . . . shall be/overned by (residential Decree No. 425, as amended,other e;istin/ minin/ la&s, and their implementin/ rulesand re/ulations. . . .@

!s earlier stated, on the $%th also of 8uly #9", the(resident issued E.O. No. $"# by authority of &hich thesub=ect 6+C( -T!! &as e;ecuted on +arch 5, ##%.

On +arch 5, ##%, (resident amos si/ned into la& .!. No."#4$. Section % thereof declares that the !ct @shall /overnthe e;ploration, development, utili7ation, and processin/ ofall mineral resources.@ Such declaration not&ithstandin/,.!. No. "#4$ does not actually cover all the modes throu/h&hich the State may underta'e the e;ploration,development, and utili7ation of natural resources.

The State, bein/ the o&ner of the natural resources, isaccorded the primary po&er and responsibility in thee;ploration, development and utili7ation thereof. !s such, itmay underta'e these activities throu/h four modes

The State may directly underta'e such activities.

0$1 The State may enter into co3production, =ointventure or production3sharin/ a/reements &ith-ilipino citi7ens or :ualified corporations.

051 Con/ress may, by la&, allo& small3scaleutili7ation of natural resources by -ilipino citi7ens.

041 -or the lar/e3scale e;ploration, development andutili7ation of minerals, petroleum and other mineraloils, the (resident may enter into a/reements &ithforei/n3o&ned corporations involvin/ technical orfinancial assistance.92


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E;cept to char/e the +ines and eosciences ureau of theDEN &ith performin/ researches and surveys,9"and apassin/ mention of /overnment3o&ned or controlledcorporations,99.!. No. "#4$ does not specify ho& theState should /o about the first mode. The third mode, on

the other hand, is /overned by epublic !ct No. ""29#

0the(eopleBs Small3Scale +inin/ !ct of ##1 and otherpertinent la&s.#.!. No. "#4$ primarily concerns itself&ith the second and fourth modes.

+ineral production sharin/, co3production and =oint venturea/reements are collectively classified by .!. No. "#4$ as@mineral a/reements.@#The overnment participates theleast in a mineral production sharin/ a/reement 0+(S!1. Inan +(S!, the overnment /rants the contractor#$thee;clusive ri/ht to conduct minin/ operations &ithin acontract area#5and shares in the /ross output.#4The +(S!contractor provides the financin/, technolo/y, mana/ementand personnel necessary for the a/reementBsimplementation.#%The total /overnment share in an +(S!is the e;cise ta; on mineral products under epublic !ct No.""$#,#2amendin/ Section %0a1 of the National Internalevenue Code, as amended.#"

In a co3production a/reement 0C!1,#9the overnmentprovides inputs to the minin/ operations other than themineral resource,##&hile in a =oint venture a/reement08?!1, &here the overnment en=oys the /reatest

participation, the overnment and the 8?! contractoror/ani7e a company &ith both parties havin/ e:uityshares.$!side from earnin/s in e:uity, the overnment ina 8?! is also entitled to a share in the /ross output.$Theovernment may enter into a C!$$or 8?!$5&ith one ormore contractors. The overnmentBs share in a C! or 8?! isset out in Section 9 of the la&

The share of the overnment in co3production and =ointventure a/reements shall be ne/otiated by the overnment

and the contractor ta'in/ into consideration the 0a1 capitalinvestment of the pro=ect, 0b1 the ris's involved, 0c1contribution of the pro=ect to the economy, and 0d1 otherfactors that &ill provide for a fair and e:uitable sharin/bet&een the overnment and the contractor. The

overnment shall also be entitled to compensations for itsother contributions &hich shall be a/reed upon by theparties, and shall consist, amon/ other thin/s, thecontractorBs income ta;, e;cise ta;, special allo&ance,&ithholdin/ ta; due from the contractorBs forei/nstoc'holders arisin/ from dividend or interest payments tothe said forei/n stoc'holders, in case of a forei/n nationaland all such other ta;es, duties and fees as provided forunder e;istin/ la&s.

!ll mineral a/reements /rant the respective contractors thee;clusive ri/ht to conduct minin/ operations and to e;tractall mineral resources found in the contract area.$4!@:ualified person@ may enter into any of the minerala/reements &ith the overnment.$%! @:ualified person@ is

any citi7en of the (hilippines &ith capacity to contract, or acorporation, partnership, association, or cooperativeor/ani7ed or authori7ed for the purpose of en/a/in/ inminin/, &ith technical and financial capability to underta'emineral resources development and duly re/istered inaccordance &ith la& at least si;ty per centum 02J1 of thecapital of &hich is o&ned by citi7ens of the (hilippines ; ;

;.$2

The fourth mode involves @financial or technical assistancea/reements.@ !n -T!! is defined as @a contract involvin/financial or technical assistance for lar/e3scale e;ploration,development, and utili7ation of natural resources.@$"Any=ua>%%e# er!on ?%"& "e@&n%@a> an# %nan@%a>@aa$%>%"y "o un#er"ae >are-!@a>e e>ora"%on,#eDe>oen", an# u"%>%Ea"%on o na"ura> re!our@e! %n"&e /&%>%%ne! ay en"er %n"o !u@& areeen"


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#%re@">y ?%"& "&e GoDernen" "&rou& "&e *NR.$9(or"&e uro!e o ran"%n an (TAA, a >ea>>y oran%Ee#ore%n-o?ne# @orora"%on 6any @orora"%on,ar"ner!&%, a!!o@%a"%on, or @ooera"%De #u>yre%!"ere# %n a@@or#an@e ?%"& >a? %n ?&%@& >e!! "&an

%! o?ne# $y (%>%%no @%"%Een!20;

%!#eee# a =ua>%%e# er!on.$

Other than the difference in contractorsB :ualifications, theprincipal distinction bet&een mineral a/reements and -T!!sis the ma;imum contract area to &hich a :ualified personmay hold or be /ranted.$@*ar/e3scale@ under .!. No."#4$ is determined by the si7e of the contract area, asopposed to the amount invested 0%,,.1,&hich &as the standard under E.O. $"#.

*i'e a C! or a 8?!, an -T!! is sub=ect to ne/otiation.

$$

TheovernmentBs contributions, in the form of ta;es, in an-T!! is identical to its contributions in the t&o minerala/reements, save that in an -T!!

The collection of overnment share in financial or technicalassistance a/reement shall commence after the financial ortechnical assistance a/reement contractor has fullyrecovered its pre3operatin/ e;penses, e;ploration, anddevelopment e;penditures, inclusive.$5

III

)avin/ e;amined the history of the constitutional provisionand statutes enacted pursuant thereto, a consideration ofthe substantive issues presented by the petition is no& inorder.

T* *((*CTIIT+ O( *:*CUTI* OR*R NO. 27;

(etitioners ar/ue that E.O. No. $"#, the la& in force &henthe 6+C -T!! &as e;ecuted, did not come into effect.

E.O. No. $"# &as si/ned into la& by then (resident !:uinoon 8uly $%, #9", t&o days before the openin/ of Con/ress

on 8uly $", #9".$4

Section 9 of the E.O. states that thesame @shall ta'e effect immediately.@ This provision,accordin/ to petitioners, runs counter to Section of E.O.No. $,$%&hich provides

SECTION . *a&s shall ta'e effect after fifteen daysfollo&in/ the completion of their publication either in theOfficial a7ette or in a ne&spaper of /eneral circulation inthe (hilippines, unless it is other&ise provided.$2GEmphasissupplied.H

On that premise, petitioners contend that E.O. No. $"#could have only ta'en effect fifteen days after its publicationat &hich time Con/ress had already convened and the(residentBs po&er to le/islate had ceased.

espondents, on the other hand, counter that the validity ofE.O. No. $"# &as settled in +iners !ssociation of the(hilippines v. -actoran, supra. This is of course incorrect forthe issue in +iners !ssociation &as not the validity of E.O.No. $"# but that of D!O Nos. %" and 9$ &hich &ere issuedpursuant thereto.

Nevertheless, petitionersB contentions have no merit.

It bears notin/ that there is nothin/ in E.O. No. $ thatprevents a la& from ta'in/ effect on a date other than Meven before M the %3day period after its publication. 6herea la& provides for its o&n date of effectivity, such dateprevails over that prescribed by E.O. No. $. Indeed, thisis the very essence of the phrase @unless it is other&iseprovided@ in Section thereof. Section , E.O. No. $,


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therefore, applies only &hen a statute does not provide forits o&n date of effectivity.

6hat is mandatory under E.O. No. $, and &hat dueprocess re:uires, as this Court held in TaPada v. Tuvera,$"is

the publication of the la& for &ithout such notice andpublication, there &ould be no basis for the application ofthe ma;im @i/norantia le/is nGeminemH e;cusat.@ It &ouldbe the hei/ht of in=ustice to punish or other&ise burden aciti7en for the trans/ression of a la& of &hich he had nonotice &hatsoever, not even a constructive one.

6hile the effectivity clause of E.O. No. $"# does not re:uireits publication, it is not a /round for its invalidation since theConstitution, bein/ @the fundamental, paramount andsupreme la& of the nation,@ is deemed &ritten in the

la&.

$9

)ence, the due process clause,

$#

&hich, so TaPadaheld, mandates the publication of statutes, is read intoSection 9 of E.O. No. $"#. !dditionally, Section of E.O. No.$ &hich provides for publication @either in the Officiala7ette or in a ne&spaper of /eneral circulation in the(hilippines,@ finds suppletory application. It is si/nificant tonote that E.O. No. $"# &as actually published in the Officiala7ette$$on !u/ust 5, #9".

-rom a readin/ then of Section 9 of E.O. No. $"#, Section of E.O. No. $, and TaPada v. Tuvera, this Court holds thatE.O. No. $"# became effective immediately upon its

publication in the Official a7ette on !u/ust 5, #9".

That such effectivity too' place after the convenin/ of thefirst Con/ress is irrelevant. !t the time (resident !:uinoissued E.O. No. $"# on 8uly $%, #9", she &as still validlye;ercisin/ le/islative po&ers under the (rovisionalConstitution.$$!rticle ?III 0Transitory (rovisions1 of the#9" Constitution e;plicitly states

Sec. 2. The incumbent (resident shall continue to e;ercisele/islative po&ers until the first Con/ress is convened.

The convenin/ of the first Con/ress merely precluded thee;ercise of le/islative po&ers by (resident !:uinoF it did not

prevent the effectivity of la&s she had previously enacted.

There can be no :uestion, therefore, that E.O. No. $"# is aneffective, and a validly enacted, statute.

T* CONSTITUTIONALIT+ O( T* )C/ (TAA

(etitioners submit that, in accordance &ith the te;t ofSection $, !rticle II of the Constitution, -T!!s should belimited to @technical or financial assistance@ only. Theyobserve, ho&ever, that, contrary to the lan/ua/e of the

Constitution, the 6+C( -T!! allo&s 6+C(, a fully forei/n3o&ned minin/ corporation, to e;tend more than merefinancial or technical assistance to the State, for it permits6+C( to mana/e and operate every aspect of the minin/activity. $$$

(etitionersB submission is &ell3ta'en. It is a cardinal rule inthe interpretation of constitutions that the instrument mustbe so construed as to /ive effect to the intention of thepeople &ho adopted it.$$5This intention is to be sou/ht inthe constitution itself, and the apparent meanin/ of the

&ords is to be ta'en as e;pressin/ it, e;cept in cases &herethat assumption &ould lead to absurdity, ambi/uity, orcontradiction.$$46hat the Constitution says accordin/ to thete;t of the provision, therefore, compels acceptance andne/ates the po&er of the courts to alter it, based on thepostulate that the framers and the people mean &hat theysay.$$%!ccordin/ly, follo&in/ the literal te;t of theConstitution, assistance accorded by forei/n3o&nedcorporations in the lar/e3scale e;ploration, development,and utili7ation of petroleum, minerals and mineral oils


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should be limited to @technical@ or @financial@ assistanceonly.

6+C( nevertheless submits that the &ord @technical@ in thefourth para/raph of Section $ of E.O. No. $"# encompasses

a @broad number of possible services,@ perhaps, @scientificandAor technolo/ical in basis.@$$2It thus posits that it mayalso &ell include @the area of mana/ement oroperations . . . so lon/ as such assistance re:uiresspeciali7ed 'no&led/e or s'ills, and are related to thee;ploration, development and utili7ation of mineralresources.@$$"

This Court is not persuaded. !s priorly pointed out, thephrase @mana/ement or other forms of assistance@ in the#"5 Constitution &as deleted in the #9" Constitution,

&hich allo&s only @technical or financial assistance.@ Casusomisus pro omisso habendus est. ! person, ob=ect or thin/omitted from an enumeration must be held to have beenomitted intentionally.$$9!s &ill be sho&n later, themana/ement or operation of minin/ activities by forei/ncontractors, &hich is the primary feature of servicecontracts, &as precisely the evil that the drafters of the#9" Constitution sou/ht to eradicate.

espondents insist that @a/reements involvin/ technical orfinancial assistance@ is =ust another term for servicecontracts. They contend that the proceedin/s of the

CONCO+ indicate @that althou/h the terminolo/y BservicecontractB &as avoided Gby the ConstitutionH, the concept itrepresented &as not.@ They add that @GtHhe concept isembodied in the phrase Ba/reements involvin/ financial ortechnical assistance.B@$$#!nd point out ho& members of theCONCO+ referred to these a/reements as @servicecontracts.@ -or instance

S. T!N. !m I correct in thin'in/ that the onlydifference bet&een these future service contractsand the past service contracts under +r. +arcos isthe /eneral la& to be enacted by the le/islature andthe notification of Con/ress by the (residentQ That is

the only difference, is it notQ

+. ?I**E!S. That is ri/ht.

S. T!N. So those are the safe/uardsGQH

+. ?I**E!S. es. There &as no la& at all/overnin/ service contracts before.

S. T!N. Than' you, +adam (resident.$5GEmphasissupplied.H

6+C( also cites the follo&in/ statements ofCommissioners ascon, arcia, Nolledo and Tadeo&ho alluded to service contracts as they e;plainedtheir respective votes in the approval of the draft!rticle

+. !SCON. +r. (residin/ Officer, I vote noprimarily because of t&o reasons One, the provisionon service contracts. I felt that if &e &ouldconstitutionali7e any provision on service contracts,

this should al&ays be &ith the concurrence ofCon/ress and not /uided only by a /eneral la& to bepromul/ated by Con/ress. ; ; ;.$5GEmphasissupplied.H

; ; ;.

+. !CI!. Than' you.

I vote no. ; ; ;.


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Service contracts are /iven constitutionalle/itimi7ation in Section 5, even &hen they havebeen proven to be inimical to the interests of thenation, providin/ as they do the le/al loophole forthe e;ploitation of our natural resources for the

benefit of forei/n interests. They constitute a seriousne/ation of -ilipino control on the use and dispositionof the nationBs natural resources, especially &ithre/ard to those &hich arenonrene&able.$5$GEmphasis supplied.H

; ; ;

+. NO**EDO. 6hile there are ob=ectionableprovisions in the !rticle on National Economy and(atrimony, /oin/ over said provisions meticulously,

settin/ aside pre=udice and personalities &ill revealthat the article contains a balanced set of provisions.I hope the forthcomin/ Con/ress &ill implement suchprovisions ta'in/ into account that -ilipinos shouldhave real control over our economy and patrimony,and if forei/n e:uity is permitted, the same must besubordinated to the imperative demands of thenational interest.

; ; ;.

It is also my understandin/ that service contractsinvolvin/ forei/n corporations or entities are resortedto only &hen no -ilipino enterprise or -ilipino3controlled enterprise could possibly underta'e thee;ploration or e;ploitation of our natural resources

and that compensation under such contracts cannotand should not e:ual &hat should pertain too&nership of capital. In other &ords, the servicecontract should not be an instrument to circumventthe basic provision, that the e;ploration ande;ploitation of natural resources should be truly forthe benefit of -ilipinos.

Than' you, and I vote yes.$55GEmphasis supplied.H

; ; ;.

+. T!DEO. Nais 'o laman/ ipali&ana/ an/ a'in/boto.

+atapos suriin an/ 'ala/ayan n/ (ilipinas, an/sali/an/ suliranin, pan/unahin an/ salitan/@imperyalismo.@ !n/ ibi/ sabihin nito ay an/ sisteman/ lipunan/ pina/haharian n/ iilan/ monopolyon/'apitalista at an/ salitan/ @imperyalismo@ ay buhayna buhay sa National Economy and (atrimony nanatin/ /ina&a. Sa pamama/itan n/ salitan/ @basedon,@ naroroon na an/ free trade sapa/'at tayo aymananatilin/ ta/apa/lu&as n/ hila& na san/'ap atta/aan/'at n/ yarin/ produ'to. (an/ala&a, naroroonpa rin an/ parity ri/hts, an/ service contract, an/234 e:uity sa natural resources. )aban/na/hihirap an/ sambayanan/ (ilipino, /ina/alu/adnaman n/ m/a dayuhan an/ atin/ li'as na yaman.ailan man an/ !rticle on National Economy and(atrimony ay hindi na/paalis sa pa/'aalipin n/ atin/e'onomiya sa 'amay n/ m/a dayuhan. !n/ solusyon


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sa suliranin n/ bansa ay dala&a laman/ an/pa/papatupad n/ tunay na reporma sa lupa at an/national industriali7ation. Ito an/ tinata&a/ namin/pa/si'at n/ ara& sa Silan/an. N/unit an/ m/alandlords and bi/ businessmen at an/ m/a

'omprador ay na/sasabi na an/ free trade na ito,an/ 'ahulu/an para sa amin, ay ipinipilit sa atin/sambayanan na an/ ara& ay sisi'at sa anluran.ailan man hindi pu&eden/ sumi'at an/ ara& saanluran. I vote no.$54GEmphasis supplied.H

This Court is li'e&ise not persuaded.

!s earlier noted, the phrase @service contracts@ has beendeleted in the #9" ConstitutionBs !rticle on NationalEconomy and (atrimony. If the CONCO+ intended to retainthe concept of service contracts under the #"5Constitution, it could have simply adopted the oldterminolo/y 0@service contracts@1 instead of employin/ ne&and unfamiliar terms 0@a/reements . . . involvin/ eithertechnical or financial assistance@1. Such a differencebet&een the lan/ua/e of a provision in a revisedconstitution and that of a similar provision in the precedin/constitution is vie&ed as indicative of a difference inpurpose.$5%If, as respondents su//est, the concept of@technical or financial assistance@ a/reements is identical tothat of @service contracts,@ the CONCO+ &ould not havebothered to fit the same do/ &ith a ne& collar. To uphold

respondentsB theory &ould reduce the first to a mereeuphemism for the second and render the chan/e inphraseolo/y meanin/less.

!n e;amination of the reason behind the chan/e confirmsthat technical or financial assistance a/reements are notsynonymous to service contracts.

GTHhe Court in construin/ a Constitution should bear in mindthe ob=ect sou/ht to be accomplished by its adoption, andthe evils, if any, sou/ht to be prevented or remedied. !doubtful provision &ill be e;amined in li/ht of the history ofthe times, and the condition and circumstances under &hich

the Constitution &as framed. The ob=ect is to ascertain thereason &hich induced the framers of the Constitution toenact the particular provision and the purpose sou/ht to beaccomplished thereby, in order to construe the &hole as toma'e the &ords consonant to that reason and calculated toeffect that purpose.$52

!s the follo&in/ :uestion of Commissioner Luesada andCommissioner ?ille/asB ans&er sho&s the drafters intendedto do a&ay &ith service contracts &hich &ere used tocircumvent the capitali7ation 02J34J1 re:uirement

+S. L


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In a subse:uent discussion, Commissioner ?ille/asallayed the fears of Commissioner Luesadare/ardin/ the participation of forei/n interests in(hilippine natural resources, &hich &as supposed tobe restricted to -ilipinos.

+S. L


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+. D!?IDE. +ay I be allo&ed to e;plain theproposalQ

+. +!!+ON. Sub=ect to the three3minute rule,+adam (resident.

+. D!?IDE. It &ill not ta'e three minutes.

The Commission had =ust approved the (reamble. In the(reamble &e clearly stated that the -ilipino people aresoverei/n and that one of the ob=ectives for the creation orestablishment of a /overnment is to conserve and developthe national patrimony. The implication is that the nationalpatrimony or our natural resources are e;clusively reservedfor the -ilipino people. No alien must be allo&ed to en=oy,e;ploit and develop our natural resources. !s a matter of

fact, that principle proceeds from the fact that our naturalresources are /ifts from od to the -ilipino people and it&ould be a breach of that special blessin/ from od if &e&ill allo& aliens to e;ploit our natural resources.

I voted in favor of the 8amir proposal because it is not reallye;ploitation that &e /ranted to the alien corporations butonly for them to render financial or technical assistance. Itis not for them to en=oy our natural resources. +adam(resident, our natural resources are depletin/F ourpopulation is increasin/ by leaps and bounds. -ifty yearsfrom no&, if &e &ill allo& these aliens to e;ploit our naturalresources, there &ill be no more natural resources for thene;t /enerations of -ilipinos. It may last lon/ if &e &illbe/in no&. Since #5% the aliens have been allo&ed toen=oy to a certain e;tent the e;ploitation of our naturalresources, and &e became victims of forei/n dominance andcontrol. The aliens are interested in comin/ to the(hilippines because they &ould li'e to en=oy the bounty ofnature e;clusively intended for -ilipinos by od.

!nd so I appeal to all, for the sa'e of the future/enerations, that if &e have to pray in the (reamble @topreserve and develop the national patrimony for thesoverei/n -ilipino people and for the /enerations to come,@&e must at this time decide once and for all that our natural

resources must be reserved only to -ilipino citi7ens.

Than' you.$5#GEmphasis supplied.H

The opinion of another member of the CONCO+ ispersuasive$4and leaves no doubt as to the intention of theframers to eliminate service contracts alto/ether. )e &rites

(ara/raph 4 of Section $ specifies lar/e3scale, capital3intensive, hi/hly technolo/ical underta'in/s for &hich the(resident may enter into contracts &ith forei/n3o&ned

corporations, and enunciates strict conditions that should/overn such contracts. ; ; ;.

This provision balances the need for forei/n capital andtechnolo/y &ith the need to maintain the nationalsoverei/nty. It reco/ni7es the fact that as lon/ as -ilipinoscan formulate their o&n terms in their o&n territory, there isno dan/er of relin:uishin/ soverei/nty to forei/n interests.

!re service contracts allo&ed under the ne& ConstitutionQNo.


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-urthermore, it appears that (roposed esolution No.4#2,$4$&hich &as the draft !rticle on National Economy and(atrimony, adopted the concept of @a/reements . . .involvin/ either technical or financial assistance@ containedin the @Draft of the #92


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enter into co3production,=oint venture,

productionsharin/a/reements&ith -ilipinociti7ens orcorporationsorassociationssi;ty per centof &hosevotin/ stoc'

or controllin/interest iso&ned bysuch citi7ensfor a periodof not morethan t&enty3five years,rene&able fornot morethan t&enty3five years

and undersuch termsandconditions asmay beprovided byla&. In caseas to &ater

cent of &hosevotin/ stoc' orcontrollin/

interest iso&ned by suchciti7ens. Sucha/reementsshall be for aperiod oft&enty3fiveyears,rene&able fornot more thant&enty3five

years, andunder suchterm andconditions asmay beprovided byla&. In casesof &ater ri/htsfor irri/ation,&ater supply,fisheries orindustrial uses

other than thedevelopmentfor &aterpo&er,beneficial usemay be themeasure andlimit of the

into co3production,=oint venture,

orproduction3sharin/a/reements&ith -ilipinociti7ens, orcorporationsorassociationsat least si;typer centum

of &hosecapital iso&ned bysuch citi7ens.Sucha/reementsmay be for aperiod note;ceedin/t&enty3fiveyears,rene&able for

not morethan t&enty3five years,and undersuch termsandconditions asmay be

ri/hts forirri/ation,&ater supply,

fisheries, orindustrialuses otherthan thedevelopmentof &aterpo&er,beneficial usemay be themeasure andlimit of the

/rant.

The National!ssemblymay by la&allo& smallscaleutili7ation ofnaturalresources by-ilipinociti7ens.

The National!ssembly,may, by t&o3thirds vote ofall itsmembers byspecial la&

/rant.

The Con/ress

may by la&allo& small3scale utili7ationof naturalresources by-ilipinociti7ens, as&ell ascooperativefish farmin/ inrivers, la'es,

bays, andla/oons.

The (resident&ith theconcurrence ofCon/ress, byspecial la&,shall providethe terms andconditionsunder &hich aforei/n3o&nedcorporationmay enter intoa/reements&ith the/overnmentinvolvin/e%"&er "e@&n%@a> or

provided byla&. In caseof &ater

ri/hts forirri/ation,&ater supply,fisheries, orindustrialuses otherthan thedevelopmentof &aterpo&er,beneficial use

may be themeasure andlimit of the/rant.

The Stateshall protectthe nationBsmarine&ealth in itsarchipela/ic&aters,

territorialsea, ande;clusiveeconomic7one, andreserve itsuse anden=oyment


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provide theterms andconditions

under &hicha forei/n3o&nedcorporationmay enterintoa/reements&ith the/overnmentinvolvin/ e%"&er

"e@&n%@a> or%nan@%a>a!!%!"an@efor lar/e3scalee;ploration,development,or utili7ationof naturalresources.GEmphasissupplied.H

%nan@%a>a!!%!"an@eforlar/e3scale

e;ploration,development,and utili7ationof naturalresources.GEmphasissupplied.H

e;clusively to-ilipinociti7ens.

The Con/ressmay, by la&,allo& small3scaleutili7ation ofnaturalresources by-ilipinociti7ens, as&ell as

cooperativefish farmin/,&ith prioritytosubsistencefishermenand fish3&or'ers inrivers, la'es,bays, andla/oons.

The (residentmay enterintoa/reements&ith forei/n3o&nedcorporationsinvolvin/ e%"

&er"e@&n%@a> or%nan@%a>

a!!%!"an@efor lar/e3scalee;ploration,development,andutili7ation ofminerals,petroleum,and othermineral oilsaccordin/ to

the /eneralterms andconditionsprovided byla&, based onrealcontributionsto theeconomic/ro&th and/eneral&elfare of

the country.In sucha/reements,the Stateshall promotethedevelopmentand use of


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localscientific andtechnical

resources.GEmphasissupplied.H

The (residentshall notifythe Con/ressof everycontractentered intoin accordance

&ith thisprovision,&ithin thirtydays from itse;ecution.

The insi/hts of the proponents of the


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In short, our version of the service contract is =ust a rehashof the old concession re/ime ; ; ;. Some people havepulled an old rabbit out of a ma/icianBs hat, and foisted itupon us as a ne& and different animal.

The service contract as &e 'no& it here is antithetical to theprinciple of soverei/nty over our natural resources restatedin the same article of the G#"5H Constitution containin/ theprovision for service contracts. If the service contractorhappens to be a forei/n corporation, the contract &ould alsorun counter to the constitutional provision on nationali7ationor -ilipini7ation, of the e;ploitation of our naturalresources.$4%GEmphasis supplied.


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passed by an e;traordinary ma=ority to enter into eithertechnical or financial assistance. This is =ustified by the factthat as presently &orded in the #"5 Constitution, a servicecontract /ives full control over the contract area to theservice contractor, for him to &or', mana/e and dispose of

the proceeds or production. It &as a subterfu/e to /etaround the nationality re:uirement of theconstitution.$49GEmphasis supplied.H

In the annotations on the proposed !rticle on NationalEconomy and (atrimony, the


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Such a compromise called for the adoption of a ne& systemin the e;ploration, development, and utili7ation of naturalresources in the form of technical a/reements or financiala/reements &hich, necessarily, are distinct concepts fromservice contracts.

The replacement of @service contracts@ &ith @a/reementsRinvolvin/ either technical or financial assistance,@ as &ell asthe deletion of the phrase @mana/ement or other forms ofassistance,@ assumes /reater si/nificance &hen note ista'en that the


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6hile certain commissioners may have mentioned the term@service contracts@ durin/ the CONCO+ deliberations, theymay not have been necessarily referrin/ to the concept ofservice contracts under the #"5 Constitution. !s notedearlier, @service contracts@ is a term that assumes differentmeanin/s to different people.$%The commissioners mayhave been usin/ the term loosely, and not in its technicaland le/al sense, to refer, in /eneral, to a/reementsconcernin/ natural resources entered into by theovernment &ith forei/n corporations. These loosestatements do not necessarily translate to the adoption ofthe #"5 Constitution provision allo&in/ service contracts.

It is true that, as sho&n in the earlier :uoted portions of theproceedin/s in CONCO+, in response to Sr. TanBs :uestion,Commissioner ?ille/as commented that, other thancon/ressional notification, the only difference bet&een

@future@ and @past@ @service contracts@ is the re:uirement ofa /eneral la& as there &ere no la&s previously authori7in/the same.$%$)o&ever, such remar' is far out&ei/hed by hismore cate/orical statement in his e;chan/e &ithCommissioner Luesada that the draft article @does notpermit forei/n investors to participate@ in the nationBsnatural resources M &hich &as e;actly &hat servicecontracts did M e;cept to provide @technical or financialassistance.@$%5

In the case of the other commissioners, Commissioner

Nolledo himself clarified in his &or' that the present charterprohibits service contracts.$%4Commissioner ascon &as nottotally averse to forei/n participation, but favored stricterrestrictions in the form of ma=ority con/ressionalconcurrence.$%%On the other hand, Commissioners arciaand Tadeo may have veered to the e;treme side of thespectrum and their ob=ections may be interpreted as votesa/ainst any forei/n participation in our natural resources&hatsoever.

6+C( cites Opinion No. "%, s. #9",$%2and Opinion No. "%,s. ##$%"of the Secretary of 8ustice, e;pressin/ the vie&that a financial or technical assistance a/reement @is nodifferent in concept@ from the service contract allo&ed underthe #"5 Constitution. This Court is not, ho&ever, bound bythis interpretation. 6hen an administrative or e;ecutivea/ency renders an opinion or issues a statement of policy, itmerely interprets a pre3e;istin/ la&F and the administrativeinterpretation of the la& is at best advisory, for it is thecourts that finally determine &hat the la& means.$%9

In any case, the constitutional provision allo&in/ the(resident to enter into -T!!s &ith forei/n3o&nedcorporations is an e;ception to the rule that participation inthe nationBs natural resources is reserved e;clusively to-ilipinos. !ccordin/ly, such provision must be construedstrictly a/ainst their en=oyment by non3-ilipinos. !s

Commissioner ?ille/as emphasi7ed, the provision is @veryrestrictive.@$%#Commissioner Nolledo also remar'ed that@enterin/ into service contracts is an e;ception to the ruleon protection of natural resources for the interest of thenation and, therefore, bein/ an e;ception, it should besub=ect, &henever possible, to strin/ent rules.@$2Indeed,e;ceptions should be strictly but reasonably construedF theye;tend only so far as their lan/ua/e fairly &arrants and alldoubts should be resolved in favor of the /eneral provisionrather than the e;ception.$2

6ith the fore/oin/ discussion in mind, this Court finds that.!. No. "#4$ is invalid insofar as said !ct authori7esservice contracts. !lthou/h the statute employs the phrase@financial and technical a/reements@ in accordance &ith the#9" Constitution, it actually treats these a/reements asservice contracts that /rant beneficial o&nership to forei/ncontractors contrary to the fundamental la&.

Section 55, &hich is found under Chapter ?I 0-inancial orTechnical !ssistance !/reement1 of .!. No. "#4$ states


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SEC. 55. Eli/ibility.!ny :ualified person &ith technical andfinancial capability to underta'e lar/e3scale e;ploration,development, and utili7ation of mineral resources in the(hilippines may enter into a financial or technical assistancea/reement directly &ith the overnment throu/h theDepartment. GEmphasis supplied.H

@E;ploration,@ as defined by .!. No. "#4$,

means the searchin/ or prospectin/ for mineral resourcesby /eolo/ical, /eochemical or /eophysical surveys, remotesensin/, test pittin/, trendin/, drillin/, shaft sin'in/,tunnelin/ or any other means for the purpose ofdeterminin/ the e;istence, e;tent, :uantity and :ualitythereof and the feasibility of minin/ them for profit.$2$

! le/ally or/ani7ed forei/n3o&ned corporation may be/ranted an e;ploration permit,$25&hich vests it &ith theri/ht to conduct e;ploration for all minerals in specifiedareas,$24i.e., to enter, occupy and e;plore thesame.$2%Eventually, the forei/n3o&ned corporation, as suchpermittee, may apply for a financial and technical assistancea/reement.$22

@Development@ is the &or' underta'en to e;plore andprepare an ore body or a mineral deposit for minin/,includin/ the construction of necessary infrastructure andrelated facilities.$2"

@


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technical e;pertise. . . .@$"#This su//ests that an -T!!contractor is bound to provide some mana/ementassistance M a form of assistance that has been eliminatedand, therefore, proscribed by the present Charter.

y allo&in/ forei/n contractors to mana/e or operate all theaspects of the minin/ operation, the above3cited provisionsof .!. No. "#4$ have in effect conveyed beneficialo&nership over the nationBs mineral resources to thesecontractors, leavin/ the State &ith nothin/ but bare titlethereto.

+oreover, the same provisions, &hether by desi/n orinadvertence, permit a circumvention of the constitutionallyordained 2J34J capitali7ation re:uirement forcorporations or associations en/a/ed in the e;ploitation,development and utili7ation of (hilippine natural resources.

In sum, the Court finds the follo&in/ provisions of .!. No."#4$ to be violative of Section $, !rticle II of theConstitution

01 The proviso in Section 5 0a:1, &hich defines@:ualified person,@ to &it

(rovided, That a le/ally or/ani7ed forei/n3o&nedcorporation shall be deemed a :ualified person forpurposes of /rantin/ an e;ploration permit, financialor technical assistance a/reement or mineralprocessin/ permit.

0$1 Section $5,$9&hich specifies the ri/hts andobli/ations of an e;ploration permittee, insofar assaid section applies to a financial or technicalassistance a/reement,

051 Section 55, &hich prescribes the eli/ibility of acontractor in a financial or technical assistancea/reementF

041 Section 5%,$9&hich enumerates the terms and

conditions for every financial or technical assistancea/reementF

0%1 Section 5#,$9$&hich allo&s the contractor in afinancial and technical assistance a/reement toconvert the same into a mineral production3sharin/a/reementF

021 Section %2,$95&hich authori7es the issuance of amineral processin/ permit to a contractor in afinancial and technical assistance a/reementF

The follo&in/ provisions of the same !ct are li'e&ise void asthey are dependent on the fore/oin/ provisions and cannotstand on their o&n

01 Section 5 0/1,$94&hich defines the term@contractor,@ insofar as it applies to a financial ortechnical assistance a/reement.

Section 54,$9%&hich prescribes the ma;imumcontract area in a financial or technical assistancea/reementsF

Section 52,$92&hich allo&s ne/otiations for financialor technical assistance a/reementsF

Section 5",$9"&hich prescribes the procedure forfilin/ and evaluation of financial or technicalassistance a/reement proposalsF


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Section 59,$99&hich limits the term of financial ortechnical assistance a/reementsF

Section 4,$9#&hich allo&s the assi/nment ortransfer of financial or technical assistance

a/reementsF

Section 4,$#&hich allo&s the &ithdra&al of thecontractor in an -T!!F

The second and third para/raphs of Section9,$#&hich provide for the overnmentBs share in afinancial and technical assistance a/reementF and

Section #,$#$&hich provides for incentives tocontractors in -T!!s insofar as it applies to said

contractorsF

6hen the parts of the statute are so mutually dependentand connected as conditions, considerations, inducements,or compensations for each other, as to &arrant a belief thatthe le/islature intended them as a &hole, and that if allcould not be carried into effect, the le/islature &ould notpass the residue independently, then, if some parts areunconstitutional, all the provisions &hich are thusdependent, conditional, or connected, must fall &ith them.$#5

There can be little doubt that the 6+C( -T!! itself is aservice contract.

Section .5 of the 6+C( -T!! /rants 6+C( @the e;clusiveri/ht to e;plore, e;ploit, utiliseG,H process and dispose of all+inerals products and by3products thereof that may beproduced from the Contract !rea.@$#4The -T!! also imbues6+C( &ith the follo&in/ ri/hts

0b1 to e;tract and carry a&ay any +ineral samplesfrom the Contract area for the purpose of conductin/tests and studies in respect thereofF

0c1 to determine the minin/ and treatment processes

to be utilised durin/ the DevelopmentAOperatin/(eriod and the pro=ect facilities to be constructeddurin/ the Development and Construction (eriodF

0d1 have the ri/ht of possession of the Contract !rea,&ith full ri/ht of in/ress and e/ress and the ri/ht tooccupy the same, sub=ect to the provisions of(residential Decree No. %$ 0if applicable1 and not beprevented from entry into private ands by surfaceo&ners andAor occupants thereof &hen prospectin/,e;plorin/ and e;ploitin/ for minerals thereinF

; ; ;

0f1 to construct road&ays, minin/, draina/e, po&er/eneration and transmission facilities and all othertypes of &or's on the Contract !reaF

0/1 to erect, install or place any type ofimprovements, supplies, machinery and othere:uipment relatin/ to the +inin/ Operations and touse, sell or other&ise dispose of, modify, remove ordiminish any and all parts thereofF

0h1 en=oy, sub=ect to pertinent la&s, rules andre/ulations and the ri/hts of third (arties, easementri/hts and the use of timber, sand, clay, stone, &aterand other natural resources in the Contract !rea&ithout cost for the purposes of the +inin/OperationsF

; ; ;


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0i1 have the ri/ht to mort/a/e, char/e or encumberall or part of its interest and obli/ations under this!/reement, the plant, e:uipment and infrastructureand the +inerals produced from the +inin/OperationsF

; ; ;. $#%

!ll materials, e:uipment, plant and other installationserected or placed on the Contract !rea remain the propertyof 6+C(, &hich has the ri/ht to deal &ith and remove suchitems &ithin t&elve months from the termination of the-T!!.$#2

(ursuant to Section .$ of the -T!!, 6+C( shall provide@GallH financin/, technolo/y, mana/ement and personnelnecessary for the +inin/ Operations.@ The minin/ companybin

la bugal-b'laan tribal association, inc. v. ramos (2004)

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