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141-180

La Bugal-BLaan Tribal Assoc., Inc., v. Ramos

Dec. 1, 2004

ANALYSIS
Section 3(aq) of RA 7942: not unconstitutional

Objection: RA 7942 allows a foreign contractor to apply for and hold an exploration permit. w/c is
unconstitutional
Objection deemed not well-founded; while Constitution mandates the State to exercise full control
and supervision over exploitation of mineral resources, nowhere does it require the government to
hold all exploration permits and similar authorizations
Pursuant to Section 20 of RA 7942: exploration permit merely grants a qualified person the right to
conduct exploration for all minerals in specified areas; such a permit does not amount to an
authorization to extract and carry off the mineral resources that may be discovered
Said permit serves a practical and legitimate purpose in that it protects the interests and preserves
rights of the permits grantee during time of exploration works w/o yet being able to earn revenues to
recoup any of its investments and expenditures

Terms of the WMCP FTAA: a deference to control

Clause 5.1a mandates the contractor to submit a series of work programs (copy furnished director of
MGB) to the DENR secretary for approval, and programs will detail contractors proposed
exploration activities and budget covering each subsequent period of 2 fiscal years
Clause 5.2a grants the government through DENR secretary a very big say in the projects
exploration phase; serious matter considering that the government has absolutely no contribution to
the exploration expenditures or work activities and yet is given veto power over such a critical aspect
of the project
Pursuant to Clause 6.1, work program for development is subject to the approval of DENR secretary,
and upon such approval, the contractor must comply w/ it and complete the development of the
mine; particularly noteworthy since so many millions of dollars worth of investments c/o contractor
are made to depend on the States consideration and action
Per Clauses 6.2 and 6.3, contractor is required to submit to DENR secretary for approval (c/f director
of MGB) work programs covering each period of 3 fiscal yrs, and during same period contractor is
also mandated to submit various quarterly and annual reports to the DENR secretary, c/f director of
MGB, on matters.
Under Sec. VIII, during period of mining operations, contractors also require to submit to DENR
secretary (c/f director of MGB) the work program and corresponding budget for the contract area
In sum, provisions of WMCP FTAA taken together bestow upon the State more than adequate
control and supervision over the activities of the contractor and the enterprise

No Surrender of Control under WMCP FTAA

Petitioners take aim at Clauses 8.2, 8.3 and 8.5 saying they amount to a relinquishment of control by
the State, since it cannot truly impose its own discretion w/ respect to the submitted work
programs
8.2: Secretary shall be deemed to have approved any Work Programme or Budget or variation
thereof
8.3: If secretary gives a Rejection Notice, parties then shall promptly meet and endeavor to agree on
amendments to the Work Programme/Budget; if they fail to agree w/in 30 days from delivery of
Rejection Notice, Work Programme/Budget/variation thereof proposed shall be deemed approved

pp. 141-180

La Bugal-BLaan Tribal Assoc., Inc., v. Ramos

Dec. 1, 2004

So far as is practicable, Contractor shall comply w/ any approved Work Programme and Budget; may
also make changes w/o approval of Secretary provided they do not change the general objective of
any Work Programme, nor entail a downward variance of more than 20% of relevant budget
Petitioners generalized by asserting that government does not participate in making critical decisions
on operations, however Court holds the foregoing provisions not manifesting a relinquishment of
control

Discretion to Select Contract Area not an Abdication of Control

Petitioners complained that contractor has full discretion to select parts of the contract area to be
relinquished pursuant to Clause 4.6; rather, it is a mere acknowledgment of the fact that the
contractor will have determined (after appropriate exploration works) w/c portions of the contract
area do not contain minerals in commercial quantities sufficient to justify developing the same and
ought therefore to be relinquished

Government: not a Subcontractor

Petitioners maintain that contractor can compel government to exercise its power of eminent domain
to acquire surface areas w/in contract area for the contractors use
Clause 10.2(e) contemplates a situation applicable to foreign-owned corporations, where WMCP (at
time of FTAAs execution was foreign-owned) could not acquire land, but as contractor it has ato
some future date to construct the infrastructure needed for large-scale mining operations; thus sets
forth the mechanism whereby the foreign-owned contractor identifies to the government the
specific surface areas w/in the FTAA contract area to be acquired for the mine infrastructure;
government then acquires the surface land areas on contractors behalf to enable the latter to proceed
the FTAAs implementation
Petitioners clearly needlessly jumped to unwarranted conclusions; that said provision does not call
for the exercise of power of eminent domain as much as it calls for a qualified party to acquire the
surface rights on behalf of a foreign-owned contractor

Absence of Provision Requiring Sale at Posed Prices not Problematic

Section 56(n) of DAO 99-56 specifically obligates an FTAA contractor to dispose of the minerals
and by-products at the highest market price and to register w/ the MGB a copy of sales agreement

Contractors Right to Mortgage not Objectionable Per Se

Petitioners question absolute right of contractor to mortgage and encumber its rights, interest in the
FTAA, the infrastructure and improvements introduced, as well as the mineral products extracted.
Court believes that provision Clause 10.2(1) may have to do w/ conditions imposed by creditorbanks of the then foreign contractor WMCP to secure the lendings made or to be made to the latter,
as it is not uncommon to find that a debtor corporation has executed deeds of assignment by way of
security over the production for the next 12 months and/or the proceeds of the sale thereof
Contractor is not freed of its obligation to pay the government its basic and additional shares in the
net mining revenue

Shareholders Free to Sell their Stocks

Petitioner criticized Clause 10.2(k) w/c gives the contractor authority to change its equity structure
at any time; provision may seem somewhat unusual, but considering that WMCP then was 100%

pp. 141-180

La Bugal-BLaan Tribal Assoc., Inc., v. Ramos

Dec. 1, 2004

foreign-owned, any change would mean such percentage would either stay unaltered or be decreased
in favor of Filipino ownership
Court believes it not necessary for government to attempt to limit or restrict shareholders freedom;
rather what is critical is that regardless of identity, nationality and ownership percentage of various
stockholders, the foreign owned contractor is always in a position to render the services required
under the FTAA, under the direction and control of the government

Contractors Right to Ask For Amendment Not Absolute

Petitioners complained that Clauses 10.4(e) and (i) bind government to allow amendments to the
FTAA if required by banks and other financial institutions as part of the conditions for new lendings
Examination of the WMCP FTAA uncovers no such indication; any interest the contractor may have
in the proceeds of the mining operation is merely the equivalent of the consideration the government
has undertaken to pay for its services

Equitable Sharing of Financial Benefits

The general framework in crafting the FTAAs fiscal regime is based on principle that the
government expects real contributions to the economic growth and gen. welfare of the country, while
contractor expects a reasonable return on its investments in the project

Financial Benefits not Surrendered to the Contractor

Beneficial ownership: recognized by law, capable of being enforced in courts at the suit of the
beneficial owner
Provision of fiar amounts for the DAOs Government share, w/c consists of a basic government
share and an additional government share
To remove all doubts (as Justice Carpio still insisted during Courts deliberations that the phrase
among other things refers only to taxes, duties and fees) Court holds that the States share is not
limited to such, and that the DENR/MGB interpretation of the phrase among other things is correct

Approval of Pre-Opening Expenses required by RA 7942

Sec. 23 provides that even at the stage of application for an exploration permit, the applicant is
required to submit a proposed work program, w/ yearly budget and proposed expenditures
Sec.24 requires further filing, this time w/in term of the permit, file with the Mines and Geosciences
Bureau a declaration of mining project feasibility
With submission of approved work programs and budgets for exploration and
development/construction phases, government will be able to scrutinize and approve or reject such
expenditures, and will be well-informed as to the amounts of pre-operating and other expenses

No deprivation of beneficial rights

Conteded that Sections 80, 84 and 112 of RA 7942 operate to deprive State of beneficial rights or
ownership over mineral resources
While there may be cogent grounds to assail the aforecited sections, Court (on consideration of due
process) cannot rule upon them here

Our Mineral Resources Not Given Away for Free by RA 7942


All Businesses Entitled to Cost Recovery

pp. 141-180

La Bugal-BLaan Tribal Assoc., Inc., v. Ramos

Dec. 1, 2004

Only foreign contractors (but all businessmen and all business entities in general) have to recoup
their investments and costs
Though State owns vast mineral wealth, such wealth is not readily accessible w/o intervention of
credible mining companies