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LA BUGAL B’LAAN TRIBAL ASSOCIATION INC., et. al. v. V. O.

RAMOS, Secretary
Department of Environment and Natural Resources; H. RAMOS, Director, Mines and
Geosciences Bureau (MGB-DENR); R. TORRES, Executive Secretary; and WMC
(PHILIPPINES) INC.

FACTS:

The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of (1)
Republic Act 7942 (The Philippine Mining Act of 1995); (2) its Implementing Rules and Regulations
(DENR Administrative Order [DAO] 96-40); and (3) the Financial and Technical Assistance
Agreement (FTAA) dated 30 March 1995, executed by the government with Western Mining
Corporation (Philippines), Inc. (WMCP).

On 27 January 2004, the Court en banc promulgated its Decision, granting the Petition and
declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the
entire FTAA executed between the government and WMCP, mainly on the finding that FTAAs are
service contracts prohibited by the 1987 Constitution. The Decision struck down the subject FTAA
for being similar to service contracts which, though permitted under the 1973 Constitution, were
subsequently denounced for being antithetical to the principle of sovereignty over our natural
resources, because they allowed foreign control over the exploitation of our natural resources, to
the prejudice of the Filipino nation.

Pursuant to Section 2 Article XII of the Constitution it effectively banned such service contracts.
Subsequently, Victor O. Ramos (Secretary, Department of Environment and Natural Resources
[DENR]), Horacio Ramos (Director, Mines and Geosciences Bureau [MGB-DENR]), Ruben Torres
(Executive Secretary), and the WMC (Philippines) Inc. filed separate Motions for Reconsideration.

ISSUE:

Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreign-owned
corporations to exploit the Philippine mineral resources.

HELD:

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 country‘s natural resource, for it is given exclusive and
plenary rights to exploit a particular resource at the point of extraction.

The constitutional provision allowing the President to enter into FTAAs is an exception to the rule
that participation in the nation‘s natural resources is reserved exclusively to Filipinos. Accordingly,
such provision must be construed strictly against their enjoyment by non-Filipinos.

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.

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.