HELD: The Supreme Court declared unconstitutional and void:

(1) The following provisions of Republic Act No. 7942:

(a) The proviso in Section 3 (aq),
(b) Section 23,
(c) Section 33 to 41,
(d) Section 56,
(e) The second and third paragraphs of Section 81, and
(f) Section 90.

(2) All provisions of Department of Environment and Natural Resources Administrative Order 96-
40, s. 1996 which are not in conformity with this Decision, and

(3) The Financial and Technical Assistance Agreement between the Government of the Republic of
the Philippines and WMC Philippines, Inc.

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.
The constitutional provision allowing the President to enter into FTAA is a exception to
the rule that participation in the nation’s natural resources is reserved exclusively to
Filipinos. Provision must be construed strictly against their enjoyment by non-Filipinos.
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Victor Ramos issued DENR Administrative Order 95-23, which was later repealed by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
foreign-owned 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 country‘s
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 nation‘s natural resources is reserved exclusively to
Filipinos. Accordingly, such provision must be construed strictly against their
enjoyment by non-Filipinos. 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 nation‘s
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.
RUling: The Court finds the following provisions of R.A. No. 7942 to be violative of Section 2, Article XII of the
Constitution and hereby declares unconstitutional and void:

(1) The proviso in Section 3 (aq), which defines "qualified person," to wit:
Provided, That a legally organized foreign-owned corporation shall be deemed a qualified person for purposes
of granting an exploration permit, financial or technical assistance agreement or mineral processing permit.

(2) Section 23, which specifies the rights and obligations of an exploration permittee, insofar as said section
applies to a financial or technical assistance agreement,

(3) Section 33, which prescribes the eligibility of a contractor in a financial or technical assistance agreement;
(4) Section 35, which enumerates the terms and conditions for every financial or technical assistance
agreement;

(5) Section 39, which allows the contractor in a financial and technical assistance agreement to convert the
same into a mineral production-sharing agreement;

(6) Section 56, which authorizes the issuance of a mineral processing permit to a contractor in a financial and
technical assistance agreement;
The following provisions of the same Act are likewise void as they are dependent on the foregoing provisions
and cannot stand on their own:

(1) Section 3 (g), which defines the term "contractor," insofar as it applies to a financial or technical assistance
agreement.

Section 34, which prescribes the maximum contract area in a financial or technical assistance agreements;

Section 36, which allows negotiations for financial or technical assistance agreements;

Section 37, which prescribes the procedure for filing and evaluation of financial or technical assistance
agreement proposals;

Section 38, which limits the term of financial or technical assistance agreements;

Section 40, which allows the assignment or transfer of financial or technical assistance agreements;

Section 41, which allows the withdrawal of the contractor in an FTAA;

The second and third paragraphs of Section 81, which provide for the Government's share in a financial and
technical assistance agreement; and

Section 90, which provides for incentives to contractors in FTAAs insofar as it applies to said contractors;

When the parts of the 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, and that if all could not be carried into effect, the legislature would not pass the residue independently,
then, if some parts are unconstitutional, all the provisions which are thus dependent, conditional, or connected,
must fall with them.

WHEREFORE, the petition is GRANTED.

Pros and Cons:

Pros. - the Bangsamoro would have money to improved it's own infrastructure such as road,
building, businesses, transportation and other necessities. This could improve the livelihood of
Mindanao as they old get anywhere with transportations.
- Because of the peace, tourism would increase because of less fear of terrorists. Problem
of foreigners before would be crossfire between military and terrorists, terrorists kidnapping
people for money. With more tourism, the economy could improve because people would spend
for services in Mindanao.

Cons- the Philippines government would received less taxes from the Bangsamoro the law
states that out of all taxes within Bangsamoro, 75% would be kept, while 15% would be given to
the central government every year. What is bad about this is that we wouldn't know what the
government officials of Bangsamoro would do with the excess money at the end of each year
- the Bangsamoro government will received an annual ABG (Annual Block Grant) of 4%,
which can be used for the needs of the fiscal government. The pros is that the government has
more money to use foe the people. The cons is that the leftover money every year will be divided
and pocketed by each government officials.