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Case Digest Natres
Case Digest Natres
RAMOS, Secretary
Department of Environment and Natural Resources; HORACIO RAMOS, Director, Mines
and Geosciences Bureau (MGB-DENR); RUBEN TORRES, Executive Secretary; and
WMC (PHILIPPINES) INC.
G.R. No. 127882, 27 January 2004, En Banc (Carpio-Morales, J.)
FACTS:
RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA
7942, or on March 30, 1995, the President signed a Financial and Technical Assistance
Agreement (FTAA) with WMCP, a corporation organized under Philippine laws, covering close
to 100,000 hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North
Cotabato. On August 15, 1995, the Environment Secretary Victor Ramos issued DENR
Administrative Order 95-23, which was later repealed by DENR Administrative Order 96-40,
adopted on December 20, 1996.
Petitioners prayed that RA 7942, its implementing rules, and the FTAA between the
government and WMCP be declared unconstitutional on ground that they allow fully foreign
owned corporations like WMCP to exploit, explore and develop Philippine mineral resources
in contravention of Article XII Section 2 paragraphs 2 and 4 of the Charter.
In January 2001, WMC - a publicly listed Australian mining and exploration company - sold its
whole stake in WMCP to Sagittarius Mines, 60% of which is owned by Filipinos while 40% of
which is owned by Indophil Resources, an Australian company. DENR approved the transfer
and registration of the FTAA in Sagittarius name but Lepanto Consolidated assailed the
same. The latter case is still pending before the Court of Appeals.
EO 279, issued by former President Aquino on July 25, 1987, authorizes the DENR to accept,
consider and evaluate proposals from foreign owned corporations or foreign investors for
contracts or agreements involving wither technical or financial assistance for large scale
exploration, development and utilization of minerals which upon appropriate recommendation
of the (DENR) Secretary, the President may execute with the foreign proponent. WMCP
likewise contended that the annulment of the FTAA would violate a treaty between the
Philippines and Australia which provides for the protection of Australian investments.
ISSUES:
1. Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreignowned corporations to exploit the Philippine mineral resources.
2. Whether or not the FTAA between the government and WMCP is a service contract
that permits fully foreign owned companies to exploit the Philippine mineral resources.
HELD:
First Issue: RA 7942 is Unconstitutional
RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign
owned corporations to exploit the Philippine natural resources.
Article XII Section 2 of the 1987 Constitution retained the Regalian Doctrine which states that
All lands of the public domain, waters, minerals, coal, petroleum, and other minerals, coal,
petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are owned by the State. The same
section also states that, the exploration and development and utilization of natural
resources shall be under the full control and supervision of the State.
Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitution
authorizing the State to grant licenses, concessions, or leases for the exploration,
exploitation, development, or utilization of natural resources. By such omission, the utilization
of inalienable lands of the public domain through license, concession or lease is no longer
allowed under the 1987 Constitution.
Under the concession system, the concessionaire makes a direct equity investment for the
purpose of exploiting a particular natural resource within a given area. The concession
amounts to complete control by the concessionaire over the countrys natural resource, for it
is given exclusive and plenary rights to exploit a particular resource at the point of extraction.
The 1987 Constitution, moreover, has deleted the phrase management or other forms of
assistance in the 1973 Charter. The present Constitution now allows only technical and
financial assistance. The management and the operation of the mining activities by foreign
contractors, the primary feature of the service contracts was precisely the evil the drafters of
the 1987 Constitution sought to avoid.
The constitutional provision allowing the President to enter into FTAAs is an exception to the
rule that participation in the nations natural resources is reserved exclusively to Filipinos.
Accordingly, such provision must be construed strictly against their enjoyment by nonFilipinos. Therefore, RA 7942 is invalid insofar as the said act authorizes service contracts.
Although the statute employs the phrase financial and technical agreements in
accordance with the 1987 Constitution, its pertinent provisions actually treat these
agreements as service contracts that grant beneficial ownership to foreign contractors
contrary to the fundamental law.
The underlying assumption in the provisions of the law is that the foreign contractor manages
the mineral resources just like the foreign contractor in a service contract. By allowing foreign
contractors to manage or operate all the aspects of the mining operation, RA 7942 has, in
effect, conveyed beneficial ownership over the nations mineral resources to these
contractors, leaving the State with nothing but bare title thereto.
The same provisions, whether by design or inadvertence, permit a circumvention of the
constitutionally ordained 60-40% capitalization requirement for corporations or associations
engaged in the exploitation, development and utilization of Philippine natural resources.
When parts of a statute are so mutually dependent and connected as conditions,
considerations, inducements or compensations for each other as to warrant a belief that the
legislature intended them as a whole, then if some parts are unconstitutional, all provisions
that are thus dependent, conditional or connected, must fail with them.
Under Article XII Section 2 of the 1987 Charter, foreign owned corporations are limited only to
merely technical or financial assistance to the State for large scale exploration, development
and utilization of minerals, petroleum and other mineral oils.
Second Issue: RP Government-WMCP FTAA is a Service Contract
The FTAA between he WMCP and the Philippine government is likewise unconstitutional
since the agreement itself is a service contract.
Section 1.3 of the FTAA grants WMCP a fully foreign owned corporation, the exclusive right to
explore, exploit, utilize and dispose of all minerals and by-products that may be produced
from the contract area. Section 1.2 of the same agreement provides that EMCP shall provide
all financing, technology, management, and personnel necessary for the Mining Operations.
These contractual stipulations and related provisions in the FTAA taken together, grant
WMCP beneficial ownership over natural resources that properly belong to the State and are
intended for the benefit of its citizens. These stipulations are abhorrent to the 1987
Constitution. They are precisely the vices that the fundamental law seeks to avoid, the evils
that it aims to suppress. Consequently, the contract from which they spring must be struck
down.