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G.R. No.

101083 July 30, 1993


JUAN ANTONIO, ANNA ROSARIO and JOSE
ALFONSO, all surnamed OPOSA, minors, and
represented by their parents ANTONIO and
RIZALINA OPOSA, ROBERTA NICOLE SADIUA,
minor, represented by her parents CALVIN and
ROBERTA SADIUA, CARLO, AMANDA SALUD
and PATRISHA, all surnamed FLORES, minors
and represented by their parents ENRICO and
NIDA FLORES, GIANINA DITA R. FORTUN,
minor, represented by her parents SIGRID and
DOLORES FORTUN, GEORGE II and MA.
CONCEPCION, all surnamed MISA, minors and
represented by their parents GEORGE and
MYRA MISA, BENJAMIN ALAN V. PESIGAN,
minor, represented by his parents ANTONIO
and ALICE PESIGAN, JOVIE MARIE ALFARO,
minor, represented by her parents JOSE and
MARIA VIOLETA ALFARO, MARIA
CONCEPCION T. CASTRO, minor, represented
by her parents FREDENIL and JANE CASTRO,
JOHANNA DESAMPARADO,
minor, represented by her parents JOSE and
ANGELA DESAMPRADO, CARLO JOAQUIN T.
NARVASA, minor, represented by his parents
GREGORIO II and CRISTINE CHARITY
NARVASA, MA. MARGARITA, JESUS IGNACIO,
MA. ANGELA and MARIE GABRIELLE, all
surnamed SAENZ, minors, represented by their
parents ROBERTO and AURORA SAENZ,
KRISTINE, MARY ELLEN, MAY, GOLDA
MARTHE and DAVID IAN, all surnamed KING,
minors, represented by their parents MARIO
and HAYDEE KING, DAVID, FRANCISCO and
THERESE VICTORIA, all surnamed ENDRIGA,
minors, represented by their parents
BALTAZAR and TERESITA ENDRIGA, JOSE MA.

and REGINA MA., all surnamed ABAYA, minors,


represented by their parents ANTONIO and
MARICA ABAYA, MARILIN, MARIO, JR. and
MARIETTE, all surnamed CARDAMA, minors,
represented by their parents MARIO and LINA
CARDAMA, CLARISSA, ANN MARIE, NAGEL,
and IMEE LYN, all surnamed OPOSA, minors
and represented by their parents RICARDO and
MARISSA OPOSA, PHILIP JOSEPH, STEPHEN
JOHN and ISAIAH JAMES, all surnamed QUIPIT,
minors, represented by their parents JOSE MAX
and VILMI QUIPIT, BUGHAW CIELO, CRISANTO,
ANNA, DANIEL and FRANCISCO, all surnamed
BIBAL, minors, represented by their parents
FRANCISCO, JR. and MILAGROS BIBAL, and
THE PHILIPPINE ECOLOGICAL NETWORK,
INC., petitioners,
vs.
THE HONORABLE FULGENCIO S. FACTORAN,
JR., in his capacity as the Secretary of the
Department of Environment and Natural
Resources, and THE HONORABLE ERIBERTO
U. ROSARIO, Presiding Judge of the RTC,
Makati, Branch 66, respondents.
Oposa Law Office for petitioners.
The Solicitor General for respondents.

DAVIDE, JR., J.:


In a broader sense, this petition bears upon the
right of Filipinos to a balanced and healthful
ecology which the petitioners dramatically
associate with the twin concepts of "inter-

generational responsibility" and "inter-generational


justice." Specifically, it touches on the issue of
whether the said petitioners have a cause of action
to "prevent the misappropriation or impairment" of
Philippine rainforests and "arrest the unabated
hemorrhage of the country's vital life support
systems and continued rape of Mother Earth."
The controversy has its genesis in Civil Case No.
90-77 which was filed before Branch 66 (Makati,
Metro Manila) of the Regional Trial Court (RTC),
National Capital Judicial Region. The principal
plaintiffs therein, now the principal petitioners, are
all minors duly represented and joined by their
respective parents. Impleaded as an additional
plaintiff is the Philippine Ecological Network, Inc.
(PENI), a domestic, non-stock and non-profit
corporation organized for the purpose of, inter alia,
engaging in concerted action geared for the
protection of our environment and natural
resources. The original defendant was the
Honorable Fulgencio S. Factoran, Jr., then
Secretary of the Department of Environment and
Natural Resources (DENR). His substitution in this
petition by the new Secretary, the Honorable Angel
C. Alcala, was subsequently ordered upon proper
motion by the petitioners. 1 The complaint 2 was
instituted as a taxpayers' class suit 3 and alleges that
the plaintiffs "are all citizens of the Republic of the
Philippines, taxpayers, and entitled to the full benefit,
use and enjoyment of the natural resource treasure
that is the country's virgin tropical forests." The same
was filed for themselves and others who are equally
concerned about the preservation of said resource but
are "so numerous that it is impracticable to bring them
all before the Court." The minors further asseverate
that they "represent their generation as well as
generations yet unborn." 4 Consequently, it is prayed
for that judgment be rendered:

. . . ordering defendant, his agents,


representatives and other persons
acting in his behalf to
(1) Cancel all existing timber license
agreements in the country;
(2) Cease and desist from
receiving, accepting, processing,
renewing or approving new timber
license agreements.
and granting the plaintiffs ". . . such other reliefs
just and equitable under the premises." 5
The complaint starts off with the general averments
that the Philippine archipelago of 7,100 islands has
a land area of thirty million (30,000,000) hectares
and is endowed with rich, lush and verdant
rainforests in which varied, rare and unique species
of flora and fauna may be found; these rainforests
contain a genetic, biological and chemical pool
which is irreplaceable; they are also the habitat of
indigenous Philippine cultures which have existed,
endured and flourished since time immemorial;
scientific evidence reveals that in order to maintain
a balanced and healthful ecology, the country's
land area should be utilized on the basis of a ratio
of fifty-four per cent (54%) for forest cover and
forty-six per cent (46%) for agricultural, residential,
industrial, commercial and other uses; the distortion
and disturbance of this balance as a consequence
of deforestation have resulted in a host of
environmental tragedies, such as (a) water
shortages resulting from drying up of the water
table, otherwise known as the "aquifer," as well as
of rivers, brooks and streams, (b) salinization of the
water table as a result of the intrusion therein of

salt water, incontrovertible examples of which may


be found in the island of Cebu and the Municipality
of Bacoor, Cavite, (c) massive erosion and the
consequential loss of soil fertility and agricultural
productivity, with the volume of soil eroded
estimated at one billion (1,000,000,000) cubic
meters per annum approximately the size of the
entire island of Catanduanes, (d) the endangering
and extinction of the country's unique, rare and
varied flora and fauna, (e) the disturbance and
dislocation of cultural communities, including the
disappearance of the Filipino's indigenous cultures,
(f) the siltation of rivers and seabeds and
consequential destruction of corals and other
aquatic life leading to a critical reduction in marine
resource productivity, (g) recurrent spells of drought
as is presently experienced by the entire country,
(h) increasing velocity of typhoon winds which
result from the absence of windbreakers, (i) the
floodings of lowlands and agricultural plains arising
from the absence of the absorbent mechanism of
forests, (j) the siltation and shortening of the
lifespan of multi-billion peso dams constructed and
operated for the purpose of supplying water for
domestic uses, irrigation and the generation of
electric power, and (k) the reduction of the earth's
capacity to process carbon dioxide gases which
has led to perplexing and catastrophic climatic
changes such as the phenomenon of global
warming, otherwise known as the "greenhouse
effect."
Plaintiffs further assert that the adverse and
detrimental consequences of continued and
deforestation are so capable of unquestionable
demonstration that the same may be submitted as
a matter of judicial notice. This notwithstanding,
they expressed their intention to present expert

witnesses as well as documentary, photographic


and film evidence in the course of the trial.
As their cause of action, they specifically allege
that:
CAUSE OF ACTION
7. Plaintiffs replead by reference the
foregoing allegations.
8. Twenty-five (25) years ago, the
Philippines had some sixteen (16)
million hectares of rainforests
constituting roughly 53% of the
country's land mass.
9. Satellite images taken in 1987
reveal that there remained no more
than 1.2 million hectares of said
rainforests or four per cent (4.0%)
of the country's land area.
10. More recent surveys reveal that
a mere 850,000 hectares of virgin
old-growth rainforests are left,
barely 2.8% of the entire land mass
of the Philippine archipelago and
about 3.0 million hectares of
immature and uneconomical
secondary growth forests.
11. Public records reveal that the
defendant's, predecessors have
granted timber license agreements
('TLA's') to various corporations to
cut the aggregate area of 3.89

million hectares for commercial


logging purposes.

and unique natural resource


treasure.

A copy of the TLA holders and the


corresponding areas covered is
hereto attached as Annex "A".

This act of defendant constitutes a


misappropriation and/or impairment
of the natural resource property he
holds in trust for the benefit of
plaintiff minors and succeeding
generations.

12. At the present rate of


deforestation, i.e. about 200,000
hectares per annum or 25 hectares
per hour nighttime, Saturdays,
Sundays and holidays included
the Philippines will be bereft of
forest resources after the end of this
ensuing decade, if not earlier.
13. The adverse effects, disastrous
consequences, serious injury and
irreparable damage of this
continued trend of deforestation to
the plaintiff minor's generation and
to generations yet unborn are
evident and incontrovertible. As a
matter of fact, the environmental
damages enumerated in paragraph
6 hereof are already being felt,
experienced and suffered by the
generation of plaintiff adults.
14. The continued allowance by
defendant of TLA holders to cut and
deforest the remaining forest stands
will work great damage and
irreparable injury to plaintiffs
especially plaintiff minors and their
successors who may never see,
use, benefit from and enjoy this rare

15. Plaintiffs have a clear and


constitutional right to a balanced
and healthful ecology and are
entitled to protection by the State in
its capacity as the parens patriae.
16. Plaintiff have exhausted all
administrative remedies with the
defendant's office. On March 2,
1990, plaintiffs served upon
defendant a final demand to cancel
all logging permits in the country.
A copy of the plaintiffs' letter dated
March 1, 1990 is hereto attached as
Annex "B".
17. Defendant, however, fails and
refuses to cancel the existing TLA's
to the continuing serious damage
and extreme prejudice of plaintiffs.
18. The continued failure and
refusal by defendant to cancel the
TLA's is an act violative of the rights
of plaintiffs, especially plaintiff
minors who may be left with a

country that is desertified (sic),


bare, barren and devoid of the
wonderful flora, fauna and
indigenous cultures which the
Philippines had been abundantly
blessed with.
19. Defendant's refusal to cancel
the aforementioned TLA's is
manifestly contrary to the public
policy enunciated in the Philippine
Environmental Policy which, in
pertinent part, states that it is the
policy of the State
(a) to create, develop, maintain and
improve conditions under which
man and nature can thrive in
productive and enjoyable harmony
with each other;
(b) to fulfill the social, economic and
other requirements of present and
future generations of Filipinos and;
(c) to ensure the attainment of an
environmental quality that is
conductive to a life of dignity and
well-being. (P.D. 1151, 6 June 1977)
20. Furthermore, defendant's
continued refusal to cancel the
aforementioned TLA's is
contradictory to the Constitutional
policy of the State to

a. effect "a more equitable


distribution of opportunities, income
and wealth" and "make full and
efficient use of natural resources
(sic)." (Section 1, Article XII of the
Constitution);
b. "protect the nation's marine
wealth." (Section 2, ibid);
c. "conserve and promote the
nation's cultural heritage and
resources (sic)" (Section 14, Article
XIV,id.);
d. "protect and advance the right of
the people to a balanced and
healthful ecology in accord with the
rhythm and harmony of nature."
(Section 16, Article II, id.)
21. Finally, defendant's act is
contrary to the highest law of
humankind the natural law
and violative of plaintiffs' right to
self-preservation and perpetuation.
22. There is no other plain, speedy
and adequate remedy in law other
than the instant action to arrest the
unabated hemorrhage of the
country's vital life support systems
and continued rape of Mother
Earth. 6
On 22 June 1990, the original defendant, Secretary
Factoran, Jr., filed a Motion to Dismiss the

complaint based on two (2) grounds, namely: (1)


the plaintiffs have no cause of action against him
and (2) the issue raised by the plaintiffs is a political
question which properly pertains to the legislative
or executive branches of Government. In their 12
July 1990 Opposition to the Motion, the petitioners
maintain that (1) the complaint shows a clear and
unmistakable cause of action, (2) the motion is
dilatory and (3) the action presents a justiciable
question as it involves the defendant's abuse of
discretion.
On 18 July 1991, respondent Judge issued an
order granting the aforementioned motion to
dismiss. 7 In the said order, not only was the
defendant's claim that the complaint states no
cause of action against him and that it raises a
political question sustained, the respondent Judge
further ruled that the granting of the relief prayed for
would result in the impairment of contracts which is
prohibited by the fundamental law of the land.
Plaintiffs thus filed the instant special civil action
for certiorari under Rule 65 of the Revised Rules of
Court and ask this Court to rescind and set aside
the dismissal order on the ground that the
respondent Judge gravely abused his discretion in
dismissing the action. Again, the parents of the
plaintiffs-minors not only represent their children,
but have also joined the latter in this case. 8
On 14 May 1992, We resolved to give due course
to the petition and required the parties to submit
their respective Memoranda after the Office of the
Solicitor General (OSG) filed a Comment in behalf
of the respondents and the petitioners filed a reply
thereto.

Petitioners contend that the complaint clearly and


unmistakably states a cause of action as it contains
sufficient allegations concerning their right to a
sound environment based on Articles 19, 20 and 21
of the Civil Code (Human Relations), Section 4 of
Executive Order (E.O.) No. 192 creating the DENR,
Section 3 of Presidential Decree (P.D.) No. 1151
(Philippine Environmental Policy), Section 16,
Article II of the 1987 Constitution recognizing the
right of the people to a balanced and healthful
ecology, the concept of generational genocide in
Criminal Law and the concept of man's inalienable
right to self-preservation and self-perpetuation
embodied in natural law. Petitioners likewise rely on
the respondent's correlative obligation per Section
4 of E.O. No. 192, to safeguard the people's right to
a healthful environment.
It is further claimed that the issue of the respondent
Secretary's alleged grave abuse of discretion in
granting Timber License Agreements (TLAs) to
cover more areas for logging than what is available
involves a judicial question.
Anent the invocation by the respondent Judge of
the Constitution's non-impairment clause,
petitioners maintain that the same does not apply in
this case because TLAs are not contracts. They
likewise submit that even if TLAs may be
considered protected by the said clause, it is well
settled that they may still be revoked by the State
when the public interest so requires.
On the other hand, the respondents aver that the
petitioners failed to allege in their complaint a
specific legal right violated by the respondent
Secretary for which any relief is provided by law.
They see nothing in the complaint but vague and

nebulous allegations concerning an "environmental


right" which supposedly entitles the petitioners to
the "protection by the state in its capacity
as parens patriae." Such allegations, according to
them, do not reveal a valid cause of action. They
then reiterate the theory that the question of
whether logging should be permitted in the country
is a political question which should be properly
addressed to the executive or legislative branches
of Government. They therefore assert that the
petitioners' resources is not to file an action to
court, but to lobby before Congress for the passage
of a bill that would ban logging totally.
As to the matter of the cancellation of the TLAs,
respondents submit that the same cannot be done
by the State without due process of law. Once
issued, a TLA remains effective for a certain period
of time usually for twenty-five (25) years. During
its effectivity, the same can neither be revised nor
cancelled unless the holder has been found, after
due notice and hearing, to have violated the terms
of the agreement or other forestry laws and
regulations. Petitioners' proposition to have all the
TLAs indiscriminately cancelled without the
requisite hearing would be violative of the
requirements of due process.
Before going any further, We must first focus on
some procedural matters. Petitioners instituted Civil
Case No. 90-777 as a class suit. The original
defendant and the present respondents did not
take issue with this matter. Nevertheless, We
hereby rule that the said civil case is indeed a class
suit. The subject matter of the complaint is of
common and general interest not just to several,
but to all citizens of the Philippines. Consequently,
since the parties are so numerous, it, becomes

impracticable, if not totally impossible, to bring all of


them before the court. We likewise declare that the
plaintiffs therein are numerous and representative
enough to ensure the full protection of all
concerned interests. Hence, all the requisites for
the filing of a valid class suit under Section 12, Rule
3 of the Revised Rules of Court are present both in
the said civil case and in the instant petition, the
latter being but an incident to the former.
This case, however, has a special and novel
element. Petitioners minors assert that they
represent their generation as well as generations
yet unborn. We find no difficulty in ruling that they
can, for themselves, for others of their generation
and for the succeeding generations, file a class
suit. Their personality to sue in behalf of the
succeeding generations can only be based on the
concept of intergenerational responsibility insofar
as the right to a balanced and healthful ecology is
concerned. Such a right, as hereinafter expounded,
considers
the "rhythm and harmony of nature." Nature means
the created world in its entirety. 9 Such rhythm and
harmony indispensably include, inter alia, the
judicious disposition, utilization, management,
renewal and conservation of the country's forest,
mineral, land, waters, fisheries, wildlife, off-shore
areas and other natural resources to the end that their
exploration, development and utilization be equitably
accessible to the present as well as future
generations. 10 Needless to say, every generation has
a responsibility to the next to preserve that rhythm
and harmony for the full enjoyment of a balanced and
healthful ecology. Put a little differently, the minors'
assertion of their right to a sound environment
constitutes, at the same time, the performance of their
obligation to ensure the protection of that right for the
generations to come.

The locus standi of the petitioners having thus been


addressed, We shall now proceed to the merits of
the petition.
After a careful perusal of the complaint in question
and a meticulous consideration and evaluation of
the issues raised and arguments adduced by the
parties, We do not hesitate to find for the petitioners
and rule against the respondent Judge's challenged
order for having been issued with grave abuse of
discretion amounting to lack of jurisdiction. The
pertinent portions of the said order reads as
follows:
xxx xxx xxx
After a careful and circumspect
evaluation of the Complaint, the
Court cannot help but agree with
the defendant. For although we
believe that plaintiffs have but the
noblest of all intentions, it (sic) fell
short of alleging, with sufficient
definiteness, a specific legal right
they are seeking to enforce and
protect, or a specific legal wrong
they are seeking to prevent and
redress (Sec. 1, Rule 2, RRC).
Furthermore, the Court notes that
the Complaint is replete with vague
assumptions and vague
conclusions based on unverified
data. In fine, plaintiffs fail to state a
cause of action in its Complaint
against the herein defendant.
Furthermore, the Court firmly
believes that the matter before it,

being impressed with political color


and involving a matter of public
policy, may not be taken
cognizance of by this Court without
doing violence to the sacred
principle of "Separation of Powers"
of the three (3) co-equal branches
of the Government.
The Court is likewise of the
impression that it cannot, no matter
how we stretch our jurisdiction,
grant the reliefs prayed for by the
plaintiffs, i.e., to cancel all existing
timber license agreements in the
country and to cease and desist
from receiving, accepting,
processing, renewing or approving
new timber license agreements. For
to do otherwise would amount to
"impairment of contracts" abhored
(sic) by the fundamental law. 11
We do not agree with the trial court's conclusions
that the plaintiffs failed to allege with sufficient
definiteness a specific legal right involved or a
specific legal wrong committed, and that the
complaint is replete with vague assumptions and
conclusions based on unverified data. A reading of
the complaint itself belies these conclusions.
The complaint focuses on one specific fundamental
legal right the right to a balanced and healthful
ecology which, for the first time in our nation's
constitutional history, is solemnly incorporated in
the fundamental law. Section 16, Article II of the
1987 Constitution explicitly provides:

Sec. 16. The State shall protect and


advance the right of the people to a
balanced and healthful ecology in
accord with the rhythm and
harmony of nature.

second, the day would not be too far when all else
would be lost not only for the present generation,
but also for those to come generations which
stand to inherit nothing but parched earth incapable
of sustaining life.

This right unites with the right to


health which is provided for in the
preceding section of the same
article:

The right to a balanced and healthful ecology


carries with it the correlative duty to refrain from
impairing the environment. During the debates on
this right in one of the plenary sessions of the 1986
Constitutional Commission, the following exchange
transpired between Commissioner Wilfrido
Villacorta and Commissioner Adolfo Azcuna who
sponsored the section in question:

Sec. 15. The State shall protect and


promote the right to health of the
people and instill health
consciousness among them.

MR. VILLACORTA:
While the right to a balanced and healthful ecology
is to be found under the Declaration of Principles
and State Policies and not under the Bill of Rights,
it does not follow that it is less important than any
of the civil and political rights enumerated in the
latter. Such a right belongs to a different category of
rights altogether for it concerns nothing less than
self-preservation and self-perpetuation aptly and
fittingly stressed by the petitioners the
advancement of which may even be said to predate
all governments and constitutions. As a matter of
fact, these basic rights need not even be written in
the Constitution for they are assumed to exist from
the inception of humankind. If they are now
explicitly mentioned in the fundamental charter, it is
because of the well-founded fear of its framers that
unless the rights to a balanced and healthful
ecology and to health are mandated as state
policies by the Constitution itself, thereby
highlighting their continuing importance and
imposing upon the state a solemn obligation to
preserve the first and protect and advance the

Does this section


mandate the State
to provide sanctions
against all forms of
pollution air,
water and noise
pollution?
MR. AZCUNA:
Yes, Madam
President. The right
to healthful (sic)
environment
necessarily carries
with it the correlative
duty of not impairing
the same and,
therefore, sanctions
may be provided for

impairment of
environmental
balance. 12
The said right implies, among many other things,
the judicious management and conservation of the
country's forests.
Without such forests, the ecological or
environmental balance would be irreversiby
disrupted.
Conformably with the enunciated right to a
balanced and healthful ecology and the right to
health, as well as the other related provisions of the
Constitution concerning the conservation,
development and utilization of the country's natural
resources, 13 then President Corazon C. Aquino
promulgated on 10 June 1987 E.O. No.
192, 14 Section 4 of which expressly mandates that the
Department of Environment and Natural Resources
"shall be the primary government agency responsible
for the conservation, management, development and
proper use of the country's environment and natural
resources, specifically forest and grazing lands,
mineral, resources, including those in reservation and
watershed areas, and lands of the public domain, as
well as the licensing and regulation of all natural
resources as may be provided for by law in order to
ensure equitable sharing of the benefits derived
therefrom for the welfare of the present and future
generations of Filipinos." Section 3 thereof makes the
following statement of policy:
Sec. 3. Declaration of Policy. It is
hereby declared the policy of the
State to ensure the sustainable use,
development, management,

renewal, and conservation of the


country's forest, mineral, land, offshore areas and other natural
resources, including the protection
and enhancement of the quality of
the environment, and equitable
access of the different segments of
the population to the development
and the use of the country's natural
resources, not only for the present
generation but for future
generations as well. It is also the
policy of the state to recognize and
apply a true value system including
social and environmental cost
implications relative to their
utilization, development and
conservation of our natural
resources.
This policy declaration is substantially re-stated it
Title XIV, Book IV of the Administrative Code of
1987, 15specifically in Section 1 thereof which reads:
Sec. 1. Declaration of Policy. (1)
The State shall ensure, for the
benefit of the Filipino people, the full
exploration and development as
well as the judicious disposition,
utilization, management, renewal
and conservation of the country's
forest, mineral, land, waters,
fisheries, wildlife, off-shore areas
and other natural resources,
consistent with the necessity of
maintaining a sound ecological
balance and protecting and
enhancing the quality of the

environment and the objective of


making the exploration,
development and utilization of such
natural resources equitably
accessible to the different segments
of the present as well as future
generations.
(2) The State shall likewise
recognize and apply a true value
system that takes into account
social and environmental cost
implications relative to the
utilization, development and
conservation of our natural
resources.
The above provision stresses "the necessity of
maintaining a sound ecological balance and
protecting and enhancing the quality of the
environment." Section 2 of the same Title, on the
other hand, specifically speaks of the mandate of
the DENR; however, it makes particular reference
to the fact of the agency's being subject to law and
higher authority. Said section provides:
Sec. 2. Mandate. (1) The
Department of Environment and
Natural Resources shall be
primarily responsible for the
implementation of the foregoing
policy.
(2) It shall, subject to law and higher
authority, be in charge of carrying
out the State's constitutional
mandate to control and supervise
the exploration, development,

utilization, and conservation of the


country's natural resources.
Both E.O. NO. 192 and the Administrative Code of
1987 have set the objectives which will serve as
the bases for policy formulation, and have defined
the powers and functions of the DENR.
It may, however, be recalled that even before the
ratification of the 1987 Constitution, specific
statutes already paid special attention to the
"environmental right" of the present and future
generations. On 6 June 1977, P.D. No. 1151
(Philippine Environmental Policy) and P.D. No.
1152 (Philippine Environment Code) were issued.
The former "declared a continuing policy of the
State (a) to create, develop, maintain and improve
conditions under which man and nature can thrive
in productive and enjoyable harmony with each
other, (b) to fulfill the social, economic and other
requirements of present and future generations of
Filipinos, and (c) to insure the attainment of an
environmental quality that is conducive to a life of
dignity and well-being." 16 As its goal, it speaks of the
"responsibilities of each generation as trustee and
guardian of the environment for succeeding
generations." 17 The latter statute, on the other hand,
gave flesh to the said policy.
Thus, the right of the petitioners (and all those they
represent) to a balanced and healthful ecology is
as clear as the DENR's duty under its mandate
and by virtue of its powers and functions under
E.O. No. 192 and the Administrative Code of 1987
to protect and advance the said right.
A denial or violation of that right by the other who
has the corelative duty or obligation to respect or

protect the same gives rise to a cause of action.


Petitioners maintain that the granting of the TLAs,
which they claim was done with grave abuse of
discretion, violated their right to a balanced and
healthful ecology; hence, the full protection thereof
requires that no further TLAs should be renewed or
granted.
A cause of action is defined as:
. . . an act or omission of one party
in violation of the legal right or rights
of the other; and its essential
elements are legal right of the
plaintiff, correlative obligation of the
defendant, and act or omission of
the defendant in violation of said
legal right. 18
It is settled in this jurisdiction that in a motion to
dismiss based on the ground that the complaint
fails to state a cause of action, 19 the question
submitted to the court for resolution involves the
sufficiency of the facts alleged in the complaint itself.
No other matter should be considered; furthermore,
the truth of falsity of the said allegations is beside the
point for the truth thereof is deemed hypothetically
admitted. The only issue to be resolved in such a
case is: admitting such alleged facts to be true, may
the court render a valid judgment in accordance with
the prayer in the complaint? 20 In Militante vs.
Edrosolano, 21 this Court laid down the rule that the
judiciary should "exercise the utmost care and
circumspection in passing upon a motion to dismiss
on the ground of the absence thereof [cause of action]
lest, by its failure to manifest a correct appreciation of
the facts alleged and deemed hypothetically admitted,
what the law grants or recognizes is effectively

nullified. If that happens, there is a blot on the legal


order. The law itself stands in disrepute."

After careful examination of the petitioners'


complaint, We find the statements under the
introductory affirmative allegations, as well as the
specific averments under the sub-heading CAUSE
OF ACTION, to be adequate enough to
show, prima facie, the claimed violation of their
rights. On the basis thereof, they may thus be
granted, wholly or partly, the reliefs prayed for. It
bears stressing, however, that insofar as the
cancellation of the TLAs is concerned, there is the
need to implead, as party defendants, the grantees
thereof for they are indispensable parties.
The foregoing considered, Civil Case No. 90-777
be said to raise a political question. Policy
formulation or determination by the executive or
legislative branches of Government is not squarely
put in issue. What is principally involved is the
enforcement of a right vis-a-vis policies already
formulated and expressed in legislation. It must,
nonetheless, be emphasized that the political
question doctrine is no longer, the insurmountable
obstacle to the exercise of judicial power or the
impenetrable shield that protects executive and
legislative actions from judicial inquiry or review.
The second paragraph of section 1, Article VIII of
the Constitution states that:
Judicial power includes the duty of
the courts of justice to settle actual
controversies involving rights which
are legally demandable and
enforceable, and to determine
whether or not there has been a
grave abuse of discretion

amounting to lack or excess of


jurisdiction on the part of any
branch or instrumentality of the
Government.
Commenting on this provision in his
book, Philippine Political Law, 22 Mr. Justice Isagani
A. Cruz, a distinguished member of this Court, says:
The first part of the authority
represents the traditional concept of
judicial power, involving the
settlement of conflicting rights as
conferred as law. The second part
of the authority represents a
broadening of judicial power to
enable the courts of justice to
review what was before forbidden
territory, to wit, the discretion of the
political departments of the
government.
As worded, the new provision vests
in the judiciary, and particularly the
Supreme Court, the power to rule
upon even the wisdom of the
decisions of the executive and the
legislature and to declare their acts
invalid for lack or excess of
jurisdiction because tainted with
grave abuse of discretion. The
catch, of course, is the meaning of
"grave abuse of discretion," which is
a very elastic phrase that can
expand or contract according to the
disposition of the judiciary.

In Daza vs. Singson, 23 Mr. Justice Cruz, now


speaking for this Court, noted:
In the case now before us, the
jurisdictional objection becomes
even less tenable and decisive. The
reason is that, even if we were to
assume that the issue presented
before us was political in nature, we
would still not be precluded from
revolving it under the expanded
jurisdiction conferred upon us that
now covers, in proper cases, even
the political question. Article VII,
Section 1, of the Constitution clearly
provides: . . .
The last ground invoked by the trial court in
dismissing the complaint is the non-impairment of
contracts clause found in the Constitution. The
court a quo declared that:
The Court is likewise of the
impression that it cannot, no matter
how we stretch our jurisdiction,
grant the reliefs prayed for by the
plaintiffs, i.e., to cancel all existing
timber license agreements in the
country and to cease and desist
from receiving, accepting,
processing, renewing or approving
new timber license agreements. For
to do otherwise would amount to
"impairment of contracts" abhored
(sic) by the fundamental law. 24
We are not persuaded at all; on the contrary, We
are amazed, if not shocked, by such a sweeping

pronouncement. In the first place, the respondent


Secretary did not, for obvious reasons, even invoke
in his motion to dismiss the non-impairment clause.
If he had done so, he would have acted with utmost
infidelity to the Government by providing undue and
unwarranted benefits and advantages to the timber
license holders because he would have forever
bound the Government to strictly respect the said
licenses according to their terms and conditions
regardless of changes in policy and the demands of
public interest and welfare. He was aware that as
correctly pointed out by the petitioners, into every
timber license must be read Section 20 of the
Forestry Reform Code (P.D. No. 705) which
provides:
. . . Provided, That when the
national interest so requires, the
President may amend, modify,
replace or rescind any contract,
concession, permit, licenses or any
other form of privilege granted
herein . . .
Needless to say, all licenses may thus be
revoked or rescinded by executive action. It
is not a contract, property or a property right
protested by the due process clause of the
Constitution. In Tan vs. Director of
Forestry, 25 this Court held:
. . . A timber license is an instrument
by which the State regulates the
utilization and disposition of forest
resources to the end that public
welfare is promoted. A timber
license is not a contract within the
purview of the due process clause;

it is only a license or privilege,


which can be validly withdrawn
whenever dictated by public interest
or public welfare as in this case.
A license is merely a permit or
privilege to do what otherwise
would be unlawful, and is not a
contract between the authority,
federal, state, or municipal, granting
it and the person to whom it is
granted; neither is it property or a
property right, nor does it create a
vested right; nor is it taxation (37
C.J. 168). Thus, this Court held that
the granting of license does not
create irrevocable rights, neither is
it property or property rights (People
vs. Ong Tin, 54 O.G. 7576).
We reiterated this pronouncement in Felipe
Ysmael, Jr. & Co., Inc. vs. Deputy Executive
Secretary: 26
. . . Timber licenses, permits and
license agreements are the
principal instruments by which the
State regulates the utilization and
disposition of forest resources to
the end that public welfare is
promoted. And it can hardly be
gainsaid that they merely evidence
a privilege granted by the State to
qualified entities, and do not vest in
the latter a permanent or
irrevocable right to the particular
concession area and the forest
products therein. They may be

validly amended, modified, replaced


or rescinded by the Chief Executive
when national interests so require.
Thus, they are not deemed
contracts within the purview of the
due process of law clause
[See Sections 3(ee) and 20 of Pres.
Decree No. 705, as amended. Also,
Tan v. Director of Forestry, G.R. No.
L-24548, October 27, 1983, 125
SCRA 302].
Since timber licenses are not contracts, the nonimpairment clause, which reads:
Sec. 10. No law impairing, the
obligation of contracts shall be
passed. 27
cannot be invoked.
In the second place, even if it is to be assumed that
the same are contracts, the instant case does not
involve a law or even an executive issuance
declaring the cancellation or modification of existing
timber licenses. Hence, the non-impairment clause
cannot as yet be invoked. Nevertheless, granting
further that a law has actually been passed
mandating cancellations or modifications, the same
cannot still be stigmatized as a violation of the nonimpairment clause. This is because by its very
nature and purpose, such as law could have only
been passed in the exercise of the police power of
the state for the purpose of advancing the right of
the people to a balanced and healthful ecology,
promoting their health and enhancing the general
welfare. In Abe vs. Foster Wheeler
Corp. 28 this Court stated:

The freedom of contract, under our


system of government, is not meant
to be absolute. The same is
understood to be subject to
reasonable legislative regulation
aimed at the promotion of public
health, moral, safety and welfare. In
other words, the constitutional
guaranty of non-impairment of
obligations of contract is limited by
the exercise of the police power of
the State, in the interest of public
health, safety, moral and general
welfare.
The reason for this is emphatically set forth
in Nebia vs. New York, 29 quoted in Philippine
American Life Insurance Co. vs. Auditor General, 30 to
wit:
Under our form of government the
use of property and the making of
contracts are normally matters of
private and not of public concern.
The general rule is that both shall
be free of governmental
interference. But neither property
rights nor contract rights are
absolute; for government cannot
exist if the citizen may at will use his
property to the detriment of his
fellows, or exercise his freedom of
contract to work them harm. Equally
fundamental with the private right is
that of the public to regulate it in the
common interest.

In short, the non-impairment clause must yield to


the police power of the state. 31
Finally, it is difficult to imagine, as the trial court did,
how the non-impairment clause could apply with
respect to the prayer to enjoin the respondent
Secretary from receiving, accepting, processing,
renewing or approving new timber licenses for,
save in cases of renewal, no contract would have
as of yet existed in the other instances. Moreover,
with respect to renewal, the holder is not entitled to
it as a matter of right.
WHEREFORE, being impressed with merit, the
instant Petition is hereby GRANTED, and the
challenged Order of respondent Judge of 18 July
1991 dismissing Civil Case No. 90-777 is hereby
set aside. The petitioners may therefore amend
their complaint to implead as defendants the
holders or grantees of the questioned timber
license agreements.
No pronouncement as to costs.
SO ORDERED.
Cruz, Padilla, Bidin, Grio-Aquino, Regalado,
Romero, Nocon, Bellosillo, Melo and Quiason, JJ.,
concur.
Narvasa, C.J., Puno and Vitug, JJ., took no part.

Separate Opinions

FELICIANO, J., concurring


I join in the result reached by my distinguished
brother in the Court, Davide, Jr., J., in this case
which, to my mind, is one of the most important
cases decided by this Court in the last few years.
The seminal principles laid down in this decision
are likely to influence profoundly the direction and
course of the protection and management of the
environment, which of course embraces the
utilization of all the natural resources in the
territorial base of our polity. I have therefore sought
to clarify, basically to myself, what the Court
appears to be saying.
The Court explicitly states that petitioners have
the locus standi necessary to sustain the bringing
and, maintenance of this suit (Decision, pp. 1112). Locus standi is not a function of petitioners'
claim that their suit is properly regarded as a class
suit. I understand locus standi to refer to the legal
interest which a plaintiff must have in the subject
matter of the suit. Because of the very broadness
of the concept of "class" here involved
membership in this "class" appears to
embrace everyone living in the country whether
now or in the
future it appears to me that everyone who may
be expected to benefit from the course of action
petitioners seek to require public respondents to
take, is vested with the necessary locus standi. The
Court may be seen therefore to be recognizing
a beneficiaries' right of action in the field of
environmental protection, as against both the public

administrative agency directly concerned and the


private persons or entities operating in the field or
sector of activity involved. Whether such
beneficiaries' right of action may be found under
any and all circumstances, or whether some failure
to act, in the first instance, on the part of the
governmental agency concerned must be shown
("prior exhaustion of administrative remedies"), is
not discussed in the decision and presumably is left
for future determination in an appropriate case.
The Court has also declared that the complaint has
alleged and focused upon "one specific
fundamental legal right the right to a balanced
and healthful ecology" (Decision, p. 14). There is
no question that "the right to a balanced and
healthful ecology" is "fundamental" and that,
accordingly, it has been "constitutionalized." But
although it is fundamental in character, I suggest,
with very great respect, that it cannot be
characterized as "specific," without doing excessive
violence to language. It is in fact very difficult to
fashion language more comprehensive in scope
and generalized in character than a right to "a
balanced and healthful ecology." The list of
particular claims which can be subsumed under
this rubic appears to be entirely open-ended:
prevention and control of emission of toxic fumes
and smoke from factories and motor vehicles; of
discharge of oil, chemical effluents, garbage and
raw sewage into rivers, inland and coastal waters
by vessels, oil rigs, factories, mines and whole
communities; of dumping of organic and inorganic
wastes on open land, streets and thoroughfares;
failure to rehabilitate land after strip-mining or
open-pit mining; kaingin or slash-and-burn farming;
destruction of fisheries, coral reefs and other living
sea resources through the use of dynamite or

cyanide and other chemicals; contamination of


ground water resources; loss of certain species of
fauna and flora; and so on. The other statements
pointed out by the Court: Section 3, Executive
Order No. 192 dated 10 June 1987; Section 1, Title
XIV, Book IV of the 1987 Administrative Code; and
P.D. No. 1151, dated 6 June 1977 all appear to
be formulations of policy, as general and abstract
as the constitutional statements of basic policy in
Article II, Section 16 ("the right to a balanced
and healthful ecology") and 15 ("the right to
health").
P.D. No. 1152, also dated 6 June 1977, entitled
"The Philippine Environment Code," is, upon the
other hand, a compendious collection of more
"specific environment management policies" and
"environment quality standards" (fourth "Whereas"
clause, Preamble) relating to an extremely wide
range of topics:
(a) air quality management;
(b) water quality management;

(iv) flood control and natural


calamities;
(v) energy development;
(vi) conservation and utilization of
surface and ground water
(vii) mineral resources
Two (2) points are worth making in this connection.
Firstly, neither petitioners nor the Court has
identified the particular provision or provisions (if
any) of the Philippine Environment Code which give
rise to a specific legal right which petitioners are
seeking to enforce. Secondly, the Philippine
Environment Code identifies with notable care the
particular government agency charged with the
formulation and implementation of guidelines and
programs dealing with each of the headings and
sub-headings mentioned above. The Philippine
Environment Code does not, in other words,
appear to contemplate action on the part of private
persons who are beneficiaries of implementation of
that Code.

(c) land use management;


(d) natural resources management
and conservation embracing:
(i) fisheries and aquatic resources;
(ii) wild life;
(iii) forestry and soil conservation;

As a matter of logic, by finding petitioners' cause of


action as anchored on a legal right comprised in
the constitutional statements above noted, the
Court is in effect saying that Section 15 (and
Section 16) of Article II of the Constitution are selfexecuting and judicially enforceable even in their
present form. The implications of this doctrine will
have to be explored in future cases; those
implications are too large and far-reaching in nature
even to be hinted at here.

My suggestion is simply that petitioners must,


before the trial court, show a more specific legal
right a right cast in language of a significantly
lower order of generality than Article II (15) of the
Constitution that is or may be violated by the
actions, or failures to act, imputed to the public
respondent by petitioners so that the trial court can
validly render judgment granting all or part of the
relief prayed for. To my mind, the Court should be
understood as simply saying that such a more
specific legal right or rights may well exist in
our corpus of law, considering the general policy
principles found in the Constitution and the
existence of the Philippine Environment Code, and
that the trial court should have given petitioners an
effective opportunity so to demonstrate, instead of
aborting the proceedings on a motion to dismiss.
It seems to me important that the legal right which
is an essential component of a cause of action be a
specific, operable legal right, rather than a
constitutional or statutory policy, for at least two (2)
reasons. One is that unless the legal right claimed
to have been violated or disregarded is given
specification in operational terms, defendants may
well be unable to defend themselves intelligently
and effectively; in other words, there are due
process dimensions to this matter.
The second is a broader-gauge consideration
where a specific violation of law or applicable
regulation is not alleged or proved, petitioners can
be expected to fall back on the expanded
conception of judicial power in the second
paragraph of Section 1 of Article VIII of the
Constitution which reads:
Section 1. . . .

Judicial power includes the duty of


the courts of justice to settle actual
controversies involving rights which
are legally demandable and
enforceable, and to determine
whether or not there has been
agrave abuse of
discretion amounting to lack or
excess of jurisdiction on the part of
any branch or instrumentality of the
Government. (Emphasis supplied)
When substantive standards as general as
"the right to a balanced and healthy
ecology" and "the right to health" are
combined with remedial standards as broad
ranging as "a grave abuse of discretion
amounting to lack or excess of jurisdiction,"
the result will be, it is respectfully submitted,
to propel courts into the uncharted ocean of
social and economic policy making. At least
in respect of the vast area of environmental
protection and management, our courts
have no claim to special technical
competence and experience and
professional qualification. Where no
specific, operable norms and standards are
shown to exist, then the policy making
departments the legislative and
executive departments must be given a
real and effective opportunity to fashion and
promulgate those norms and standards,
and to implement them before the courts
should intervene.
My learned brother Davide, Jr., J., rightly insists
that the timber companies, whose concession
agreements or TLA's petitioners demand public

respondents should cancel, must be impleaded in


the proceedings below. It might be asked that, if
petitioners' entitlement to the relief demanded
is not dependent upon proof of breach by the
timber companies of one or more of the specific
terms and conditions of their concession
agreements (and this, petitioners implicitly
assume), what will those companies litigate about?
The answer I suggest is that they may seek to
dispute the existence of the specific legal right
petitioners should allege, as well as the reality of
the claimed factual nexus between petitioners'
specific legal rights and the claimed wrongful acts
or failures to act of public respondent administrative
agency. They may also controvert the
appropriateness of the remedy or remedies
demanded by petitioners, under all the
circumstances which exist.
I vote to grant the Petition for Certiorari because
the protection of the environment, including the
forest cover of our territory, is of extreme
importance for the country. The doctrines set out in
the Court's decision issued today should, however,
be subjected to closer examination.

# Separate Opinions
FELICIANO, J., concurring
I join in the result reached by my distinguished
brother in the Court, Davide, Jr., J., in this case
which, to my mind, is one of the most important

cases decided by this Court in the last few years.


The seminal principles laid down in this decision
are likely to influence profoundly the direction and
course of the protection and management of the
environment, which of course embraces the
utilization of all the natural resources in the
territorial base of our polity. I have therefore sought
to clarify, basically to myself, what the Court
appears to be saying.
The Court explicitly states that petitioners have
the locus standi necessary to sustain the bringing
and, maintenance of this suit (Decision, pp. 1112). Locus standi is not a function of petitioners'
claim that their suit is properly regarded as a class
suit. I understand locus standi to refer to the legal
interest which a plaintiff must have in the subject
matter of the suit. Because of the very broadness
of the concept of "class" here involved
membership in this "class" appears to
embrace everyone living in the country whether
now or in the
future it appears to me that everyone who may
be expected to benefit from the course of action
petitioners seek to require public respondents to
take, is vested with the necessary locus standi. The
Court may be seen therefore to be recognizing
a beneficiaries' right of action in the field of
environmental protection, as against both the public
administrative agency directly concerned and the
private persons or entities operating in the field or
sector of activity involved. Whether such
beneficiaries' right of action may be found under
any and all circumstances, or whether some failure
to act, in the first instance, on the part of the
governmental agency concerned must be shown
("prior exhaustion of administrative remedies"), is

not discussed in the decision and presumably is left


for future determination in an appropriate case.
The Court has also declared that the complaint has
alleged and focused upon "one specific
fundamental legal right the right to a balanced
and healthful ecology" (Decision, p. 14). There is
no question that "the right to a balanced and
healthful ecology" is "fundamental" and that,
accordingly, it has been "constitutionalized." But
although it is fundamental in character, I suggest,
with very great respect, that it cannot be
characterized as "specific," without doing excessive
violence to language. It is in fact very difficult to
fashion language more comprehensive in scope
and generalized in character than a right to "a
balanced and healthful ecology." The list of
particular claims which can be subsumed under
this rubic appears to be entirely open-ended:
prevention and control of emission of toxic fumes
and smoke from factories and motor vehicles; of
discharge of oil, chemical effluents, garbage and
raw sewage into rivers, inland and coastal waters
by vessels, oil rigs, factories, mines and whole
communities; of dumping of organic and inorganic
wastes on open land, streets and thoroughfares;
failure to rehabilitate land after strip-mining or
open-pit mining; kaingin or slash-and-burn farming;
destruction of fisheries, coral reefs and other living
sea resources through the use of dynamite or
cyanide and other chemicals; contamination of
ground water resources; loss of certain species of
fauna and flora; and so on. The other statements
pointed out by the Court: Section 3, Executive
Order No. 192 dated 10 June 1987; Section 1, Title
XIV, Book IV of the 1987 Administrative Code; and
P.D. No. 1151, dated 6 June 1977 all appear to
be formulations of policy, as general and abstract

as the constitutional statements of basic policy in


Article II, Section 16 ("the right to a balanced
and healthful ecology") and 15 ("the right to
health").
P.D. No. 1152, also dated 6 June 1977, entitled
"The Philippine Environment Code," is, upon the
other hand, a compendious collection of more
"specific environment management policies" and
"environment quality standards" (fourth "Whereas"
clause, Preamble) relating to an extremely wide
range of topics:
(a) air quality management;
(b) water quality management;
(c) land use management;
(d) natural resources management
and conservation embracing:
(i) fisheries and aquatic resources;
(ii) wild life;
(iii) forestry and soil conservation;
(iv) flood control and natural
calamities;
(v) energy development;
(vi) conservation and utilization of
surface and ground water

(vii) mineral resources


Two (2) points are worth making in this connection.
Firstly, neither petitioners nor the Court has
identified the particular provision or provisions (if
any) of the Philippine Environment Code which give
rise to a specific legal right which petitioners are
seeking to enforce. Secondly, the Philippine
Environment Code identifies with notable care the
particular government agency charged with the
formulation and implementation of guidelines and
programs dealing with each of the headings and
sub-headings mentioned above. The Philippine
Environment Code does not, in other words,
appear to contemplate action on the part of private
persons who are beneficiaries of implementation of
that Code.
As a matter of logic, by finding petitioners' cause of
action as anchored on a legal right comprised in
the constitutional statements above noted, the
Court is in effect saying that Section 15 (and
Section 16) of Article II of the Constitution are selfexecuting and judicially enforceable even in their
present form. The implications of this doctrine will
have to be explored in future cases; those
implications are too large and far-reaching in nature
even to be hinted at here.
My suggestion is simply that petitioners must,
before the trial court, show a more specific legal
right a right cast in language of a significantly
lower order of generality than Article II (15) of the
Constitution that is or may be violated by the
actions, or failures to act, imputed to the public
respondent by petitioners so that the trial court can
validly render judgment granting all or part of the
relief prayed for. To my mind, the Court should be

understood as simply saying that such a more


specific legal right or rights may well exist in
our corpus of law, considering the general policy
principles found in the Constitution and the
existence of the Philippine Environment Code, and
that the trial court should have given petitioners an
effective opportunity so to demonstrate, instead of
aborting the proceedings on a motion to dismiss.
It seems to me important that the legal right which
is an essential component of a cause of action be a
specific, operable legal right, rather than a
constitutional or statutory policy, for at least two (2)
reasons. One is that unless the legal right claimed
to have been violated or disregarded is given
specification in operational terms, defendants may
well be unable to defend themselves intelligently
and effectively; in other words, there are due
process dimensions to this matter.
The second is a broader-gauge consideration
where a specific violation of law or applicable
regulation is not alleged or proved, petitioners can
be expected to fall back on the expanded
conception of judicial power in the second
paragraph of Section 1 of Article VIII of the
Constitution which reads:
Section 1. . . .
Judicial power includes the duty of
the courts of justice to settle actual
controversies involving rights which
are legally demandable and
enforceable, and to determine
whether or not there has been
agrave abuse of
discretion amounting to lack or

excess of jurisdiction on the part of


any branch or instrumentality of the
Government. (Emphasis supplied)
When substantive standards as general as
"the right to a balanced and healthy
ecology" and "the right to health" are
combined with remedial standards as broad
ranging as "a grave abuse of discretion
amounting to lack or excess of jurisdiction,"
the result will be, it is respectfully submitted,
to propel courts into the uncharted ocean of
social and economic policy making. At least
in respect of the vast area of environmental
protection and management, our courts
have no claim to special technical
competence and experience and
professional qualification. Where no
specific, operable norms and standards are
shown to exist, then the policy making
departments the legislative and
executive departments must be given a
real and effective opportunity to fashion and
promulgate those norms and standards,
and to implement them before the courts
should intervene.
My learned brother Davide, Jr., J., rightly insists
that the timber companies, whose concession
agreements or TLA's petitioners demand public
respondents should cancel, must be impleaded in
the proceedings below. It might be asked that, if
petitioners' entitlement to the relief demanded
is not dependent upon proof of breach by the
timber companies of one or more of the specific
terms and conditions of their concession
agreements (and this, petitioners implicitly
assume), what will those companies litigate about?

The answer I suggest is that they may seek to


dispute the existence of the specific legal right
petitioners should allege, as well as the reality of
the claimed factual nexus between petitioners'
specific legal rights and the claimed wrongful acts
or failures to act of public respondent administrative
agency. They may also controvert the
appropriateness of the remedy or remedies
demanded by petitioners, under all the
circumstances which exist.
I vote to grant the Petition for Certiorari because
the protection of the environment, including the
forest cover of our territory, is of extreme
importance for the country. The doctrines set out in
the Court's decision issued today should, however,
be subjected to closer examination.

G.R. No. 180771

April 21, 2015

RESIDENT MARINE MAMMALS OF THE


PROTECTED SEASCAPE TAON STRAIT, e.g.,
TOOTHED WHALES, DOLPHINS, PORPOISES,
AND OTHER CETACEAN SPECIES, Joined in
and Represented herein by Human Beings
Gloria Estenzo Ramos and Rose-Liza EismaOsorio, In Their Capacity as Legal Guardians of
the Lesser Life-Forms and as Responsible
Stewards of God's Creations, Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity
as Secretary of the Department of Energy
(DOE), SECRETARY JOSE L. ATIENZA, in his
capacity as Secretary of the Department of

Environment and Natural Resources (DENR),


LEONARDO R. SIBBALUCA, DENR Regional
Director-Region VII and in his capacity as
Chairperson of the Taon Strait Protected
Seascape Management Board, Bureau of
Fisheries and Aquatic Resources (BFAR),
DIRECTOR MALCOLM J. SARMIENTO, JR.,
BFAR Regional Director for Region VII ANDRES
M. BOJOS, JAPAN PETROLEUM EXPLORATION
CO., LTD. (JAPEX), as represented by its
Philippine Agent, SUPPLY OILFIELD SERVICES,
INC. Respondents.
x-----------------------x
G.R. No. 181527
CENTRAL VISAYAS FISHERFOLK
DEVELOPMENT CENTER (FIDEC), CERILO D.
ENGARCIAL, RAMON YANONG, FRANCISCO
LABID, in their personal capacity and as
representatives of the SUBSISTENCE
FISHERFOLKS OF THE MUNICIPALITIES OF
ALOGUINSAN AND PINAMUNGAJAN, CEBU,
AND THEIR FAMILIES, AND THE PRESENT AND
FUTURE GENERATIONS OF FILIPINOS WHOSE
RIGHTS ARE SIMILARLY
AFFECTED, Petitioners,
vs.
SECRETARY ANGELO REYES, in his capacity
as Secretary of the Department of Energy
(DOE), JOSE L. ATIENZA, in his capacity as
Secretary of the Department of Environment
and Natural Resources (DENR), LEONARDO R.
SIBBALUCA, in his capacity as DENR Regional
Director-Region VII and as Chairperson of the
Taon Strait Protected Seascape Management
Board, ALAN ARRANGUEZ, in his capacity as

Director - Environmental Management BureauRegion VII, DOE Regional Director for Region
VIII ANTONIO LABIOS, JAPAN PETROLEUM
EXPLORATION CO., LTD. (JAPEX), as
represented by its Philippine Agent, SUPPLY
OILFIELD SERVICES, INC., Respondents.

pertinent documents involving the Taon Strait Oil


Exploration Project.
4

DECISION
LEONARDO-DE CASTRO, J.:
Before Us are two consolidated Petitions filed
under Rule 65 of the 1997 Rules of Court,
concerning Service Contract No. 46 (SC-46), which
allowed the exploration, development, and
exploitation of petroleum resources within Taon
Strait, a narrow passage of water situated between
the islands of Negros and Cebu.
2

The Petition docketed as G.R. No. 180771 is an


original Petition for Certiorari, Mandamus, and
Injunction, which seeks to enjoin respondents from
implementing SC-46 and to have it nullified for
willful and gross violation of the 1987 Constitution
and certain international and municipal laws.
3

Likewise, the Petition docketed as G.R. No. 181527


is an original Petition for Certiorari, Prohibition, and
Mandamus, which seeks to nullify the
Environmental Compliance Certificate (ECC)
issued by the Environmental Management Bureau
(EMB) of the Department of Environment and
Natural Resources (DENR), Region VII in
connection with SC-46; to prohibit respondents
from implementing SC-46; and to compel public
respondents to provide petitioners access to the

ANTECEDENT FACTS AND PROCEEDINGS


Petitioners in G.R. No. 180771, collectively referred
to as the "Resident Marine Mammals" in the
petition, are the toothed whales, dolphins,
porpoises, and other cetacean species, which
inhabit the waters in and around the Taon Strait.
They are joined by Gloria Estenzo Ramos (Ramos)
and Rose-Liza Eisma-Osorio (Eisma-Osorio) as
their legal guardians and as friends (to be
collectively known as "the Stewards") who allegedly
empathize with, and seek the protection of, the
aforementioned marine species. Also impleaded as
an unwilling co-petitioner is former President Gloria
Macapagal-Arroyo, for her express declaration and
undertaking in the ASEAN Charter to protect the
Taon Strait, among others.
5

Petitioners in G.R. No. 181527 are the Central


Visayas Fisherfolk Development Center (FIDEC), a
non-stock, non-profit, non-governmental
organization, established for the welfare of the
marginal fisherfolk in Region VII; and Cerilo D.
Engarcial (Engarcial), Ramon Yanong (Yanong)
and Francisco Labid (Labid), in their personal
capacities and as representatives of the
subsistence fisherfolk of the municipalities of
Aloguinsan and Pinamungajan, Cebu.
Named as respondents in both petitions are the
late Angelo T. Reyes, as then Secretary of the
Department of Energy (DOE); Jose L. Atienza, as
then Secretary of the DENR; Leonardo R.
Sibbaluca, as then DENRRegional Director for
Region VII and Chairman of the Taon Strait

Protected Seascape Management Board; Japan


Petroleum Exploration Co., Ltd. (JAPEX), a
company organized and existing under the laws of
Japan with a Philippine branch office; and Supply
Oilfield Services, Inc. (SOS), as the alleged
Philippine agent of JAPEX.
In G.R. No. 181527, the following were impleaded
as additional public respondents: Alan C.
Arranguez (Arranguez) and Antonio Labios
(Labios), in their capacities as then Director of the
EMB, Region VII and then Regional Director of the
DOE, Region VII, respectively.

JAPEX committed to drill one exploration well


during the second sub-phase of the project. Since
the well was to be drilled in the marine waters of
Aloguinsan and Pinamungajan, where the Taon
Strait was declared a protected seascape in
1988, JAPEX agreed to comply with the
Environmental Impact Assessment requirements
pursuant to Presidential Decree No. 1586, entitled
"Establishing An Environmental Impact Statement
System, Including Other Environmental
Management Related Measures And For Other
Purposes."
10

11

On June 13, 2002, the Government of the


Philippines, acting through the DOE, entered into a
Geophysical Survey and Exploration Contract-I 02
(GSEC-102) with JAPEX. This contract involved
geological and geophysical studies of the Taon
Strait. The studies included surface geology,
sample analysis, and reprocessing of seismic and
magnetic data. JAPEX, assisted by DOE, also
conducted geophysical and satellite surveys, as
well as oil and gas sampling in Taon Strait.
7

On January 31, 2007, the Protected Area


Management Board of the Taon Strait (PAMBTaon Strait) issued Resolution No. 2007001, wherein it adopted the Initial Environmental
Examination (IEE) commissioned by JAPEX, and
favorably recommended the approval of JAPEX's
application for an ECC.
12

13

On March 6, 2007, the EMB of DENR Region VII


granted an ECC to the DOE and JAPEX for the
offshore oil and gas exploration project in Taon
Strait. Months later, on November 16, 2007,
JAPEX began to drill an exploratory well, with a
depth of 3,150 meters, near Pinamungajan town in
the western Cebu Province. This drilling lasted
until February 8, 2008.
14

On December 21, 2004, DOE and JAPEX formally


converted GSEC-102 into SC-46 for the
exploration, development, and production of
petroleum resources in a block covering
approximately 2,850 square kilometers offshore the
Taon Strait.
8

From May 9 to 18, 2005, JAPEX conducted seismic


surveys in and around the Taon Strait. A multichannel sub-bottom profiling covering
approximately 751 kilometers was also done to
determine the area's underwater composition.
9

15

On March 31, 2008, SOS filed a Motion to


Strike its name as a respondent on the ground that
it is not the Philippine agent of JAPEX. In support
of its motion, it submitted the branch office
application of JAPEX, wherein the latter's resident
agent was clearly identified. SOS claimed that it
had acted as a mere logistics contractor for JAPEX
in its oil and gas exploration activities in the
Philippines.
17

18

Petitioners Resident Marine Mammals and


Stewards opposed SOS' s motion on the ground
that it was premature, it was pro-forma, and it was
patently dilatory. They claimed that SOS admitted
that "it is in law a (sic) privy to JAPEX" since it did
the drilling and other exploration activities in Taon
Strait under the instructions of its principal, JAPEX.
They argued that it would be premature to drop
SOS as a party as JAPEX had not yet been joined
in the case; and that it was "convenient" for SOS to
ask the Court to simply drop its name from the
parties when what it should have done was to
either notify or ask JAPEX to join it in its motion to
enable proper substitution. At this juncture,
petitioners Resident Marine Mammals and
Stewards also asked the Court to" implead JAPEX
Philippines as a corespondent or as a substitute for
its parent company, JAPEX.
19

16

It was in view of the foregoing state of affairs that


petitioners applied to this Court for redress, via two
separate original petitions both dated December 1
7, 2007, wherein they commonly seek that
respondents be enjoined from implementing SC-46
for, among others, violation of the 1987
Constitution.

On April 8, 2008, the Court resolved to consolidate


G.R. No. 180771 and G.R. No. 181527.
On May 26, 2008, the FIDEC manifested that they
were adopting in toto the Opposition to Strike with
Motion to Implead filed by petitioners Resident
Marine Mammals and Stewards in G.R. No.
180771.
20

On June 19, 2008, public respondents filed their


Manifestation that they were not objecting to
SOS's Motion to Strike as it was not JAPEX's
resident agent. JAPEX during all this time, did not
file any comment at all.

JAPEX Philippines Ltd.

Thus, on February 7, 2012, this Court, in an effort


to ensure that all the parties were given ample
chance and opportunity to answer the issues
herein, issued a Resolution directing the Court's
process servicing unit to again serve the parties
with a copy of the September 23, 2008 Resolution
of the Court, which gave due course to the petitions
in G.R. Nos. 180771 and 181527, and which
required the parties to submit their respective
memoranda. The February 7, 2012
Resolution reads as follows:

JAPEX Philippines
Ltd.
c/o Atty. Maria Farah
Z.G.
Nicolas-Suchianco

19th Floor Pearlbank


Centre
146 Valero Street
Salcedo Village,
Makati City

Atty. Maria Farah Z.G.


Nicolas-Suchianco
Resident Agent of
JAPEX
Philippines Ltd.

Suite 2404 Discovery


Centre
25 ADB Avenue
Ortigas Center, Pasig
City

21

22

G.R. No. 180771 (Resident Marine Mammals of the


Protected Seascape Taon Strait, e.g., Toothed
Whales, Dolphins, Porpoises and Other Cetacean
Species, et al. vs. Hon. Angelo Reyes, in his
capacity as Secretary of the Department of Energy,
et al.) and G.R. No. 181527 (Central Visayas
Fisherfolk Development Center, et al. vs. Hon.
Angelo Reyes, et al.). - The Court Resolved to
direct the Process Servicing Unit to RE-SEND the
resolution dated September 23, 2008 to the
following parties and counsel, together with this
resolution:
Atty. Aristeo O. Carino
Counsel for Respondent
Supply
Oilfield Services, Inc.

20th Floor Pearlbank


Centre
146 Valero Street
Salcedo Village,
Makati City

20th Floor Pearlbank


Centre
146 Valero Street
Salcedo Village,
Makati City

This Resolution was personally served to the above


parties, at the above addresses on February 23,
2012. On March 20, 2012, JAPEX Philippines, Ltd.
(JAPEX PH), by way of special appearance, filed a
Motion to Admit its Motion for
Clarification, wherein JAPEX PH requested to be
clarified as to whether or not it should deem the
February 7, 2012 Resolution as this Court's Order
of its inclusion in the case, as it has not been
impleaded. It also alleged that JAPEX PH had
already stopped exploration activities in the Taft. on
Strait way back in 2008, rendering this case moot.
23

24

On March 22, 2012, JAPEX PH, also by special


appearance, filed a Motion for Extension of
Time to file its Memorandum. It stated that since it
received the February 7, 2012 Resolution on
February 23, 2012, it had until March 22, 2012 to
file its Memorandum. JAPEX PH then asked for an
25

additional thirty days, supposedly to give this Court


some time to consider its Motion for Clarification.
On April 24, 2012, this Court issued a
Resolution granting JAPEX PH's Motion to Admit
its Motion for Clarification. This Court, addressing
JAPEX PH's Motion for Clarification, held:
26

With regard to its Motion for Clarification (By


Special Appearance) dated March 19, 2012, this
Court considers JAPEX Philippines, Ltd. as a real
party-in-interest in these cases. Under Section 2,
Rule 3 of the 1997 Rules of Court, a real party-ininterest is the party who stands to be benefited or
injured by the judgment in the suit, or the party
entitled to the avails of the suit. Contrary to JAPEX
Philippines, Ltd. 's allegation that it is a completely
distinct corporation, which should not be confused
with JAPEX Company, Ltd., JAPEX Philippines,
Ltd. is a mere branch office, established by JAPEX
Company, Ltd. for the purpose of carrying out the
latter's business transactions here in the
Philippines. Thus, JAPEX Philippines, Ltd., has no
separate personality from its mother foreign
corporation, the party impleaded in this case.
Moreover, Section 128 of the Corporation Code
provides for the responsibilities and duties of a
resident agent of a foreign corporation:
SECTION 128. Resident agent; service of process.
- The Securities and Exchange Commission shall
require as a condition precedent to the issuance of
the license to transact business in the Philippines
by any foreign corporation that such corporation file
with the Securities and Exchange Commission a
written power of attorney designating some person
who must be a resident of the Philippines, on whom

any summons and other legal processes may be


served in all actions or other legal proceedings
against such corporation, and consenting that
service upon such resident agent shall be admitted
and held as valid as if served upon the duly
authorized officers of the foreign corporation at its
home office. Any such foreign corporation shall
likewise execute and file with the Securities and
Exchange Commission an agreement or
stipulation, executed by the proper authorities of
said corporation, in form and substance as follows:
"The (name of foreign corporation) does hereby
stipulate and agree, in consideration of its being
granted by the Securities and Exchange
Commission a license to transact business in the
Philippines, that if at any time said corporation shall
cease to transact business in the Philippines, or
shall be without any resident agent in the
Philippines on whom any summons or other legal
processes may be served, then in any action or
proceeding arising out of any business or
transaction which occurred in the Philippines,
service of any summons or other legal process may
be made upon the Securities and Exchange
Commission and that such service shall have the
same force and effect as if made upon the dulyauthorized officers of the corporation at its home
office."
Whenever such service of summons or other
process shall be made upon the Securities and
Exchange Commission, the Commission shall,
within ten (10) days thereafter, transmit by mail a
copy of such summons or other legal process to
the corporation at its home or principal office. The
sending of such copy by the Commission shall be a
necessary part of and shall complete such service.

All expenses incurred by the Commission for such


service shall be paid in advance by the party at
whose instance the service is made.
In case of a change of address of the resident
agent, it shall be his or its duty to immediately notify
in writing the Securities and Exchange Commission
of the new address.
It is clear from the foregoing provision that the
function of a resident agent is to receive summons
or legal processes that may be served in all actions
or other legal proceedings against the foreign
corporation. These cases have been prosecuted in
the name of JAPEX Company, Ltd., and JAPEX
Philippines Ltd., as its branch office and resident
agent, had been receiving the various resolutions
from this Court, as evidenced by Registry Return
Cards signed by its representatives.
And in the interest of justice, this Court resolved to
grant JAPEX PH's motion for extension of time to
file its memorandum, and was given until April 21,
2012, as prayed for, within which to comply with the
submission.
27

Without filing its Memorandum, JAPEX PH, on May


14, 2012, filed a motion, asking this Court for an
additional thirty days to file its Memorandum, to be
counted from May 8, 2012. It justified its request by
claiming that this Court's April 24, 2012 Resolution
was issued past its requested deadline for filing,
which was on April 21, 2012.
28

On June 19, 2012, this Court denied JAPEX PH's


second request for additional time to file its
Memorandum and dispensed with such filing.

Since petitioners had already filed their respective


memoranda, and public respondents had earlier
filed a Manifestation that they were adopting their
Comment dated March 31, 2008 as their
memorandum, this Court submitted the case for
decision.
29

30

Petitioners.' Allegations
Protesting the adverse ecological impact of
JAPEX's oil exploration activities in the Taon
Strait, petitioners Resident Marine Mammals and
Stewards aver that a study made after the seismic
survey showed that the fish catch was reduced
drastically by 50 to 70 percent. They claim that
before the seismic survey, the average harvest per
day would be from 15 to 20 kilos; but after the
activity, the fisherfolk could only catch an average
of 1 to 2 kilos a day. They attribute this "reduced
fish catch" to the destruction of the ''payao," also
known as the "fish aggregating device" or "artificial
reef." Petitioners Resident Marine Mammals and
Stewards also impute the incidences of "fish
kill" observed by some of the local fisherfolk to the
seismic survey. And they further allege that the
ECC obtained by private respondent JAPEX is
invalid because public consultations and
discussions with the affected stakeholders, a prerequisite to the issuance of the ECC, were not held
prior to the ECC's issuance.
31

32

In its separate petition, petitioner FIDEC confirms


petitioners Resident Marine Mammals and
Stewards' allegations of reduced fish catch and
lack of public consultations or discussions with the
fisherfolk and other stakeholders prior to the
issuance of the ECC. Moreover, it alleges that
during the seismic surveys and drilling, it was

barred from entering and fishing within a 7kilometer radius from the point where the oilrig was
located, an area greater than the 1.5-kilometer
radius "exclusion zone" stated in the IEE. It also
agrees in the allegation that public respondents
DENR and EMB abused their discretion when they
issued an ECC to public respondent DOE and
private respondent JAPEX without ensuring the
strict compliance with the procedural and
substantive requirements under the Environmental
Impact Assessment system, the Fisheries Code,
and their implementing rules and regulations. It
further claims that despite several requests for
copies of all the documents pertaining to the project
in Taon Strait, only copies of the P AMB-Taon
Strait Resolution and the ECC were given to the
fisherfolk.

The following are the issues posited by petitioners


Resident Marine Mammals and Stewards in G.R.
No. 180771:

33

34

35

Public Respondents' Counter-Allegations


Public respondents, through the Solicitor General,
contend that petitioners Resident Marine Mammals
and Stewards have no legal standing to file the
present petition; that SC-46 does not violate the
1987 Constitution and the various laws cited in the
petitions; that the ECC was issued in accordance
with existing laws and regulations; that public
respondents may not be compelled by mandamus
to furnish petitioners copies of all documents
relating to SC-46; and that all the petitioners failed
to show that they are entitled to injunctive relief.
They further contend that the issues raised in these
petitions have been rendered moot and academic
by the fact that SC-46 had been mutually
terminated by the parties thereto effective June 21,
2008.
36

ISSUES

I. WHETHER OR NOT PETITIONERS


HAVE LOCUS STAND! TO FILE THE
INSTANT PETITION;
II. WHETHER OR NOT SERVICE
CONTRACT NO. 46 IS VIOLA T[IVE] OF
THE 1987 PHILIPPINE CONSTITUTION
AND STATUTES;
III. WHETHER OR NOT THE ON-GOING
EXPLORATION AND PROPOSED
EXPLOITATION FOR OIL AND NATURAL
GAS AT, AROUND, AND UNDERNEATH
THE MARINE WATERS OF THE TAON
STRAIT PROTECTED SEASCAPE IS
INCONSISTENT WITH THE PHILIPPINE
COMMITMENTS TO INTERNATIONAL
ENVIRONMENTAL LAWS AND
INSTRUMENTS; AND
IV. WHETHER OR NOT THE ISSUANCE
OF THE ENVIRONMENTAL COMPLIANCE
CERTIFICATE (ECC) IN
ENVIRONMENTALLY CRITICAL AREAS
AND HABITATS OF MARINE WILDLIFE
AND ENDANGERED SPECIES IS LEGAL
AND PROPER.
37

Meanwhile, in G.R. No. 181527, petitioner FIDEC


presented the following issues for our
consideration:

I. WHETHER OR NOT SERVICE


CONTRACT NO. 46 EXECUTED
BETWEEN RESPONDENTS DOE AND
JAPEX SHOULD BE NULLIFIED AND SET
ASIDE FOR BEING IN DIRECT
VIOLATION OF SPECIFIC PROVISIONS
OF THE 1987 PHILIPPINE
CONSTITUTION AND APPLICABLE
LAWS;
II. WHETHER OR NOT THE OFF-SHORE
OIL EXPLORAT[I]ON CONTEMPLATED
UNDER SERVICE CONTRACT NO. 46 IS
LEGALLY PERMISSIBLE WITHOUT A LAW
BEING DULY PASSED EXPRESSLY FOR
THE PURPOSE;
III. WHETHER OR NOT THE OIL
EXPLORATION BEING CONDUCTED
WITHIN THE TAON STRAIT
PROTECTED SEASCAPE VIOLATES THE
RIGHTS AND LEGAL PROTECTION
GRANTED TO PETITIONERS UNDER
THE CONSTITUTION AND APPLICABLE
LAWS.
IV. WHETHER OR NOT THE ISSUANCE
OF THE ENVIRONMENTAL COMPLIANCE
CERTIFICATE (ECC) FOR SUCH AN
ENVIRONMENTALLY CRITICAL PROJECT
INSIDE AN ENVIRONMENTALLY
CRITICAL AREA SUCH AS THE TAON
STRAIT PROTECTED SEASCAPE
CONFORMED TO LAW AND EXISTING
RULES AND REGULATIONS ON THE
MATTER.

V. WHETHER OR NOT THE


RESPONDENTS MAY BE COMPELLED
BY MANDAMUS TO FURNISH
PETITIONERS WITH COPIES OF THE
DOCUMENTS PERTAINING TO THE
TAON STRAIT OIL EXPLORATION
PROJECT.

3) The constitutional issue raised requires


formulation of controlling principles to guide
the bench, the bar, and the public; and
4) The case is capable of repetition yet
evading review.
39

38

I. Procedural Issue: Locus Standi of the Resident


Marine Mammals and Stewards, petitioners in G.R.
No. 180771; and

In this case, despite the termination of SC-46, this


Court deems it necessary to resolve these
consolidated petitions as almost all of the foregoing
exceptions are present in this case. Both
petitioners allege that SC-46 is violative of the
Constitution, the environmental and livelihood
issues raised undoubtedly affect the public's
interest, and the respondents' contested actions
are capable of repetition.

II. Main Issue: Legality of Service Contract No. 46.

Procedural Issues

In these consolidated petitions, this Court has


determined that the various issues raised by the
petitioners may be condensed into two primary
issues:

DISCUSSION
At the outset, this Court makes clear that the "'moot
and academic principle' is not a magical formula
that can automatically dissuade the courts in
resolving a case." Courts have decided cases
otherwise moot and academic under the following
exceptions:
1) There is a grave violation of the
Constitution;
2) The exceptional character of the situation
and the paramount public interest is
involved;

Locus Standi of Petitioners Resident Marine


Mammals and Stewards
The Resident Marine Mammals, through the
Stewards, "claim" that they have the legal standing
to file this action since they stand to be benefited or
injured by the judgment in this suit. Citing Oposa v.
Factoran, Jr., they also assert their right to sue for
the faithful performance of international and
municipal environmental laws created in their favor
and for their benefit. In this regard, they propound
that they have the right to demand that they be
accorded the benefits granted to them in
multilateral international instruments that the
Philippine Government had signed, under the
concept of stipulation pour autrui.
40

41

42

For their part, the Stewards contend that there


should be no question of their right to represent the
Resident Marine Mammals as they have stakes in
the case as forerunners of a campaign to build
awareness among the affected residents of Taon
Strait and as stewards of the environment since the
primary steward, the Government, had failed in its
duty to protect the environment pursuant to the
public trust doctrine.
43

Petitioners Resident Marine Mammals and


Stewards also aver that this Court may lower the
benchmark in locus standi as an exercise of
epistolary jurisdiction.
44

In opposition, public respondents argue that the


Resident Marine Mammals have no standing
because Section 1, Rule 3 of the Rules of Court
requires parties to an action to be either natural or
juridical persons, viz.:
Section 1. Who may be parties, plaintiff and
defendant. - Only natural or juridical persons, or
entities authorized by law may be parties in a civil
action. The term "plaintiff' may refer to the claiming
party, the counter-claimant, the cross-claimant, or
the third (fourth, etc.)-party plaintiff. The term
"defendant" may refer to the original defending
party, the defendant in a counterclaim, the crossdefendant, or the third (fourth, etc.)-party
defendant.
The public respondents also contest the
applicability of Oposa, pointing out that the
petitioners therein were all natural persons, albeit
some of them were still unborn.
45

As regards the Stewards, the public respondents


likewise challenge their claim of legal standing on
the ground that they are representing animals,
which cannot be parties to an action. Moreover, the
public respondents argue that the Stewards are not
the real parties-in-interest for their failure to show
how they stand to be benefited or injured by the
decision in this case. Invoking the alter ego
principle in political law, the public respondents
claim that absent any proof that former President
Arroyo had disapproved of their acts in entering
into and implementing SC-46, such acts remain to
be her own.
46

47

The public respondents contend that since


petitioners Resident Marine Mammals and
Stewards' petition was not brought in the name of a
real party-in-interest, it should be dismissed for
failure to state a cause of action.
48

The issue of whether or not animals or even


inanimate objects should be given legal standing in
actions before courts of law is not new in the field o
f animal rights and environmental law. Petitioners
Resident Marine Mammals and Stewards cited the
1972 United States case Sierra Club v. Rogers C.B.
Morton, wherein Justice William 0. Douglas,
dissenting to the conventional thought on legal
standing, opined:

are sometimes parties in litigation. A ship has a


legal personality, a fiction found useful for maritime
purposes. The corporation sole - a creature of
ecclesiastical law - is an acceptable adversary and
large fortunes ride on its cases. The ordinary
corporation is a "person" for purposes of the
adjudicatory processes, whether it represents
proprietary, spiritual, aesthetic, or charitable
causes.
So it should be as respects valleys, alpine
meadows, rivers, lakes, estuaries, beaches, ridges,
groves of trees, swampland, or even air that feels
the destructive pressures of modem technology
and modem life. The river, for example, is the living
symbol of all the life it sustains or nourishes-fish,
aquatic insects, water ouzels, otter, fisher, deer, elk,
bear, and all other animals, including man, who are
dependent on it or who enjoy it for its sight, its
sound, or its life. The river as plaintiff speaks for the
ecological unit of life that is part of it. Those people
who have a meaningful relation to that body of
water-whether it be a fisherman, a canoeist, a
zoologist, or a logger-must be able to speak for the
values which the river represents and which are
threatened with destruction. (Citations omitted.)
50

49

The critical question of "standing" would be


simplified and also put neatly in focus if we
fashioned a federal rule that allowed environmental
issues to be litigated before federal agencies or
federal courts in the name of the inanimate object
about to be despoiled, defaced, or invaded by
roads and bulldozers and where injury is the
subject of public outrage. x x x. Inanimate objects

The primary reason animal rights advocates and


environmentalists seek to give animals and
inanimate objects standing is due to the need to
comply with the strict requirements in bringing a
suit to court. Our own 1997 Rules of Court demand
that parties to a suit be either natural or juridical
persons, or entities authorized by law. It further
necessitates the action to be brought in the name
of the real party-in-interest, even if filed by a
representative, viz.:

Rule 3
Parties to Civil Actions
Section 1. Who may be parties; plaintiff and
defendant. - Only natural or juridical persons, or
entities authorized by law may be parties in a civil
action. The term "plaintiff' may refer to the claiming
party, the counter-claimant, the cross-claimant, or
the third (fourth, etc.)-party plaintiff. The term
"defendant" may refer to the original defending
party, the defendant in a counterclaim, the crossdefendant, or the third (fourth, etc.)-party
defendant.
Sec. 2. Parties in interest. - A real party in interest
is the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to
the avails of the suit. Unless otherwise authorized
by law or these Rules, every action must be
prosecuted or defended in the name of the real
party in interest.
Sec. 3. Representatives as parties. - Where the
action is allowed to be prosecuted or defended by a
representative or someone acting in a fiduciary
capacity, the beneficiary shall be included in the
title of the case and shall be deemed to be the real
party in interest. A representative may be a trustee
of an express trust, a guardian, an executor or
administrator, or a party authorized by law or these
Rules. An agent acting in his own name and for the
benefit of an undisclosed principal may sue or be
sued without joining the principal except when the
contract involves things belonging to the principal.
It had been suggested by animal rights advocates
and environmentalists that not only natural and
juridical persons should be given legal standing

because of the difficulty for persons, who cannot


show that they by themselves are real parties-ininterests, to bring actions in representation of these
animals or inanimate objects. For this reason,
many environmental cases have been dismissed
for failure of the petitioner to show that he/she
would be directly injured or affected by the outcome
of the case. However, in our jurisdiction, locus
standi in environmental cases has been given a
more liberalized approach. While developments in
Philippine legal theory and jurisprudence have not
progressed as far as Justice Douglas's paradigm of
legal standing for inanimate objects, the current
trend moves towards simplification of procedures
and facilitating court access in environmental
cases.
Recently, the Court passed the landmark Rules of
Procedure for Environmental Cases, which allow
for a "citizen suit," and permit any Filipino citizen to
file an action before our courts for violations of our
environmental laws:
51

SEC. 5. Citizen suit. - Any Filipino citizen in


representation of others, including minors or
generations yet unborn, may file an action to
enforce rights or obligations under environmental
laws. Upon the filing of a citizen suit, the court shall
issue an order which shall contain a brief
description of the cause of action and the reliefs
prayed for, requiring all interested parties to
manifest their interest to intervene in the case
within fifteen (15) days from notice thereof. The
plaintiff may publish the order once in a newspaper
of a general circulation in the Philippines or furnish
all affected barangays copies of said order.

Citizen suits filed under R.A. No. 8749 and R.A.


No. 9003 shall be governed by their respective
provisions. (Emphasis ours.)
52

Explaining the rationale for this rule, the Court, in


the Annotations to the Rules of Procedure for
Environmental Cases, commented:
Citizen suit. To further encourage the protection of
the environment, the Rules enable litigants
enforcing environmental rights to file their cases as
citizen suits. This provision liberalizes standing for
all cases filed enforcing environmental laws and
collapses the traditional rule on personal and direct
interest, on the principle that humans are stewards
of nature. The terminology of the text reflects the
doctrine first enunciated in Oposa v. Factoran,
insofar as it refers to minors and generations yet
unborn. (Emphasis supplied, citation omitted.)
Although this petition was filed in 2007, years
before the effectivity of the Rules of Procedure for
Environmental Cases, it has been consistently held
that rules of procedure "may be retroactively
applied to actions pending and undetermined at the
time of their passage and will not violate any right
of a person who may feel that he is adversely
affected, inasmuch as there is no vested rights in
rules of procedure."
53

54

Elucidating on this doctrine, the Court, in Systems


Factors Corporation v. National Labor Relations
Commission held that:
55

Remedial statutes or statutes relating to remedies


or modes of procedure, which do not create new or
take away vested rights, but only operate in
furtherance of the remedy or confirmation of rights
already existing, do not come within the legal

conception of a retroactive law, or the general rule


against retroactive operation of statutes. Statutes
regulating the procedure of the courts will be
construed as applicable to actions pending and
undetermined at the time of their passage.
Procedural laws are retroactive in that sense and to
that extent. x x x.
Moreover, even before the Rules of Procedure for
Environmental Cases became effective, this Court
had already taken a permissive position on the
issue of locus standi in environmental cases. In
Oposa, we allowed the suit to be brought in the
name of generations yet unborn "based on the
concept of intergenerational responsibility insofar
as the right to a balanced and healthful ecology is
concerned." Furthermore, we said that the right to
a balanced and healthful ecology, a right that does
not even need to be stated in our Constitution as it
is assumed to exist from the inception of
humankind, carries with it the correlative duty to
refrain from impairing the environment.
56

57

In light of the foregoing, the need to give the


Resident Marine Mammals legal standing has been
eliminated by our Rules, which allow any Filipino
citizen, as a steward of nature, to bring a suit to
enforce our environmental laws. It is worth noting
here that the Stewards are joined as real parties in
the Petition and not just in representation of the
named cetacean species. The Stewards, Ramos
and Eisma-Osorio, having shown in their petition
that there may be possible violations of laws
concerning the habitat of the Resident Marine
Mammals, are therefore declared to possess the
legal standing to file this petition.

Impleading Former President Gloria MacapagalArroyo


as an Unwilling Co-Petitioner
Petitioners Stewards in G.R. No. 180771
impleaded as an unwilling co-petitioner former
President Gloria Macapagal-Arroyo for the
following reasons, which we quote:
Her Excellency Gloria Macapagal-Arroyo, also of
legal age, Filipino and resident of Malacailang
Palace, Manila Philippines. Steward Gloria
Macapagal-Arroyo happens to be the incumbent
President of the Philippine Islands. She is
personally impleaded in this suit as an unwilling copetitioner by reason of her express declaration and
undertaking under the recently signed ASEAN
Charter to protect Your Petitioners' habitat, among
others. She is meantime dominated as an unwilling
co-petitioner due to lack of material time in seeking
her signature and imprimatur hereof and due to
possible legal complications that may hereafter
arise by reason of her official relations with public
respondents under the alter ego principle in political
law. This is incorrect.
58

party under the jurisdiction of the Court, which can


properly implead him or her through its processes.
The unwilling party's name cannot be simply
included in a petition, without his or her knowledge
and consent, as such would be a denial of due
process.
Moreover, the reason cited by the petitioners
Stewards for including former President
Macapagal-Arroyo in their petition, is not sufficient
to implead her as an unwilling co-petitioner.
Impleading the former President as an unwilling copetitioner, for an act she made in the performance
of the functions of her office, is contrary to the
public policy against embroiling the President in
suits, "to assure the exercise of Presidential duties
and functions free from any hindrance or
distraction, considering that being the Chief
Executive of the Government is a job that, aside
from requiring all of the office holder's time, also
demands undivided attention."
59

Therefore, former President Macapagal-Arroyo


cannot be impleaded as one of the petitioners in
this suit. Thus, her name is stricken off the title of
this case.

Section 10, Rule 3 of the Rules of Court provides:


Main Issue:
Sec. 10. Unwilling co-plaintiff. - If the consent of
any party who should be joined as plaintiff can not
be obtained, he may be made a defendant and the
reason therefor shall be stated in the complaint.
Under the foregoing rule, when the consent of a
party who should be joined as a plaintiff cannot be
obtained, he or she may be made a party
defendant to the case. This will put the unwilling

Legality of Service Contract No. 46


Service Contract No. 46 vis-a-vis
Section 2, Article XII of the
1987 Constitution
Petitioners maintain that SC-46 transgresses the
Jura Regalia Provision or paragraph 1, Section 2,
Article XII of the 1987 Constitution because JAPEX

is 100% Japanese-owned. Furthermore, the


FIDEC asserts that SC-46 cannot be considered as
a technical and financial assistance agreement
validly executed under paragraph 4 of the same
provision. The petitioners claim that La BugalB'laan Tribal Association, Inc. v. Ramos laid down
the guidelines for a valid service contract, one of
which is that there must exist a general law for oil
exploration before a service contract may be
entered into by the Government. The petitioners
posit that the service contract in La Bugal is
presumed to have complied with the requisites of
(a) legislative enactment of a general law after the
effectivity of the 1987 Constitution (such as
Republic Act No. 7942, or the Philippine Mining
Law of 1995, governing mining contracts) and (b)
presidential notification. The petitioners thus allege
that the ruling in La Bugal, which involved mining
contracts under Republic Act No. 7942, does not
apply in this case. The petitioners also argue that
Presidential Decree No. 87 or the Oil Exploration
and Development Act of 1972 cannot legally justify
SC-46 as it is deemed to have been repealed by
the 1987 Constitution and subsequent laws, which
enunciate new policies concerning the
environment. In addition, petitioners in G.R. No.
180771 claim that paragraphs 2 and 3 of Section 2,
Article XII of the 1987 Constitution mandate the
exclusive use and enjoyment by the Filipinos of our
natural resources, and paragraph 4 does not
speak of service contracts but of FTAAs or
Financial Technical Assistance Agreements.
60

61

62

63

64

65

66

The public respondents again controvert the


petitioners' claims and asseverate that SC-46 does
not violate Section 2, Article XII of the 1987
Constitution. They hold that SC-46 does not fall
under the coverage of paragraph 1 but instead,

under paragraph 4 of Section 2, Article XII of the


1987 Constitution on FTAAs. They also insist that
paragraphs 2 and 3, which refer to the grant of
exclusive fishing right to Filipinos, are not
applicable to SC-46 as the contract does not grant
exclusive fishing rights to JAPEX nor does it
otherwise impinge on the FIDEC's right to
preferential use of communal marine and fishing
resources.
67

Ruling of the Court


On the legality of Service Contract No. 46
vis-a-vis Section 2, Article XII of the 1987
Constitution
The petitioners insist that SC-46 is null and void for
having violated Section 2, Article XII of the 1987
Constitution, which reads as follows:
Section 2. All lands of the public domain, waters,
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. With the
exception of agricultural lands, all other natural
resources shall not be alienated. The exploration,
development, and utilization of natural resources
shall be under the full control and supervision of the
State. The State may directly undertake such
activities, or it may enter into co-production, joint
venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at
least sixty per centum of whose capital is owned by
such citizens. Such agreements may be for a
period not exceeding twenty-five years, renewable
for not more than twenty-five years, and under such
terms and conditions as may be provided by law. In

cases of water rights for irrigation, water supply,


fisheries, or industrial uses other than the
development of water power, beneficial use may be
the measure and limit of the grant.
The State shall protect the nation's marine wealth
in its archipelagic waters, territorial sea, and
exclusive economic zone, and reserve its use and
enjoyment exclusively to Filipino citizens. The
Congress may, by law, allow small-scale utilization
of natural resources by Filipino citizens, as well as
cooperative fish farming, with priority to
subsistence fishermen and fishworkers in rivers,
lakes, bays, and lagoons.
The President may enter into agreements with
foreign-owned corporations involving either
technical or financial assistance for large-scale
exploration, development, and utilization of
minerals, petroleum, and other mineral oils
according to the general terms and conditions
provided by law, based on real contributions to the
economic growth and general welfare of the
country. In such agreements, the State shall
promote the development and use of local scientific
and technical resources.
The President shall notify the Congress of every
contract entered into in accordance with this
provision, within thirty days from its execution.
(Emphases ours.)
This Court has previously settled the issue of
whether service contracts are still allowed under
the 1987 Constitution. In La Bugal, we held that the
deletion of the words "service contracts" in the
1987 Constitution did not amount to a ban on them
per se. In fact, in that decision, we quoted in length,

portions of the deliberations of the members of the


Constitutional Commission (ConCom) to show that
in deliberating on paragraph 4, Section 2, Article
XII, they were actually referring to service contracts
as understood in the 1973 Constitution, albeit with
safety measures to eliminate or minimize the
abuses prevalent during the martial law regime, to
wit: Summation of the
ConCom Deliberations
At this point, we sum up the matters established,
based on a careful reading of the Con Com
deliberations, as follows:
In their deliberations on what was to become
paragraph 4, the framers used the term service
contracts in referring to agreements x x x involving
either technical or financial assistance.
They spoke of service contracts as the concept
was understood in the 1973 Constitution.
It was obvious from their discussions that they were
not about to ban or eradicate service contracts.
Instead, they were plainly crafting provisions to put
in place safeguards that would eliminate or
minimize the abuses prevalent during the marital
law regime. In brief, they were going to permit
service contracts with foreign corporations as
contractors, but with safety measures to prevent
abuses, as an exception to the general norm
established in the first paragraph of Section 2 of
Article XII. This provision reserves or limits to
Filipino citizens -- and corporations at least 60
percent of which is owned by such citizens -- the

exploration, development and utilization of natural


resources.
This provision was prompted by the perceived
insufficiency of Filipino capital and the felt need for
foreign investments in the EDU of minerals and
petroleum resources.
The framers for the most part debated about the
sort of safeguards that would be considered
adequate and reasonable. But some of them,
having more "radical" leanings, wanted to ban
service contracts altogether; for them, the provision
would permit aliens to exploit and benefit from the
nation's natural resources, which they felt should
be reserved only for Filipinos.
In the explanation of their votes, the individual
commissioners were heard by the entire body. They
sounded off their individual opinions, openly
enunciated their philosophies, and supported or
attacked the provisions with fervor. Everyone's
viewpoint was heard.
In the final voting, the Article on the National
Economy and Patrimony -- including paragraph 4
allowing service contracts with foreign corporations
as an exception to the general norm in paragraph 1
of Section 2 of the same article --was resoundingly
approved by a vote of 32 to 7, with 2 abstentions.
Agreements Involving Technical
Or Financial Assistance Are
Service Contracts with Safeguards
From the foregoing, we are impelled to conclude
that the phrase agreements involving either

technical or financial assistance, referred to in


paragraph 4, are in fact service contracts. But
unlike those of the 1973 variety, the new ones are
between foreign corporations acting as contractors
on the one hand; and on the other, the government
as principal or "owner" of the works. In the new
service contracts, the foreign contractors provide
capital, technology and technical know-how, and
managerial expertise in the creation and operation
of large-scale mining/extractive enterprises; and
the government, through its agencies (DENR,
MGB), actively exercises control and supervision
over the entire operation.
68

In summarizing the matters discussed in the


ConCom, we established that paragraph 4, with the
safeguards in place, is the exception to paragraph
1, Section 2 of Article XII. The following are the
safeguards this Court enumerated in La Bugal:
Such service contracts may be entered into only
with respect to minerals, petroleum and other
mineral oils. The grant thereof is subject to several
safeguards, among which are these requirements:
(1) The service contract shall be crafted in
accordance with a general law that will set
standard or uniform terms, conditions and
requirements, presumably to attain a
certain uniformity in provisions and avoid
the possible insertion of terms
disadvantageous to the country.
(2) The President shall be the signatory for
the government because, supposedly
before an agreement is presented to the
President for signature, it will have been
vetted several times over at different levels

to ensure that it conforms to law and can


withstand public scrutiny.
(3) Within thirty days of the executed
agreement, the President shall report it to
Congress to give that branch of government
an opportunity to look over the agreement
and interpose timely objections, if any.
69

Adhering to the aforementioned guidelines, this


Court finds that SC-46 is indeed null and void for
noncompliance with the requirements of the 1987
Constitution.
1. The General Law on Oil Exploration
The disposition, exploration, development,
exploitation, and utilization of indigenous petroleum
in the Philippines are governed by Presidential
Decree No. 87 or the Oil Exploration and
Development Act of 1972. This was enacted by
then President Ferdinand Marcos to promote the
discovery and production of indigenous petroleum
through the utilization of government and/or local or
foreign private resources to yield the maximum
benefit to the Filipino people and the revenues to
the Philippine Government.
70

Contrary to the petitioners' argument, Presidential


Decree No. 87, although enacted in 1972, before
the adoption of the 1987 Constitution, remains to
be a valid law unless otherwise repealed, to wit:
ARTICLE XVIII - TRANSITORY PROVISIONS
Section 3. All existing laws, decrees, executive
orders, proclamations, letters of instructions, and

other executive issuances not inconsistent with this


Constitution shall remain operative until amended,
repealed, or revoked.

(d) Presidential Decree No. 1594 is hereby


repealed insofar as it governs locallyfunded projects.

If there were any intention to repeal Presidential


Decree No. 87, it would have been done expressly
by Congress. For instance, Republic Act No. 7160,
more popularly known as the Local Government
Code of 1991, expressly repealed a number of
laws, including a specific provision in Presidential
Decree No. 87, viz.:

(e) The following provisions are hereby


repealed or amended insofar as they are
inconsistent with the provisions of this
Code: Sections 2, 16 and 29 of Presidential
Decree No. 704; Section 12 of Presidential
Decree No. 87, as amended; Sections 52,
53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of
Presidential Decree No. 463, as amended;
and Section 16 of Presidential Decree No.
972, as amended, and

SECTION 534. Repealing Clause. - (a) Batas


Pambansa Blg. 337, otherwise known as the "Local
Government Code," Executive Order No. 112
(1987), and Executive Order No. 319 (1988) are
hereby repealed.

Moreover, in cases where the statute seems to be


in conflict with the Constitution, but a construction
that it is in harmony with the Constitution is also
possible, that construction should be
preferred. This Court, in Pangandaman v.
Commission on Elections expounding on this
point, pronounced:
73

(f) All general and special laws, acts, city


charters, decrees, executive orders,
proclamations and administrative
regulations, or part or parts thereof which
are inconsistent with any of the provisions
of this Code are hereby repealed or
modified accordingly. (Emphasis supplied.)

(b) Presidential Decree Nos. 684, 1191,


1508 and such other decrees, orders,
instructions, memoranda and issuances
related to or concerning the barangay are
hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of
Republic Act No. 1939 regarding hospital
fund; Section 3, a (3) and b (2) of Republic
Act No. 5447 regarding the Special
Education Fund; Presidential Decree No.
144 as amended by Presidential Decree
Nos. 559 and 1741; Presidential Decree
No. 231 as amended; Presidential Decree
No. 436 as amended by Presidential
Decree No. 558; and Presidential Decree
Nos. 381, 436, 464, 477, 526, 632, 752,
and 1136 are hereby repealed and
rendered of no force and effect.

every statute must be so interpreted and brought


into accord with other laws as to form a uniform
system of jurisprudence. The fundament is that the
legislature should be presumed to have known the
existing laws on the subject and not have enacted
conflicting statutes. Hence, all doubts must be
resolved against any implied repeal, and all efforts
should be exerted in order to harmonize and give
effect to all laws on the subject. (Citation omitted.)

This Court could not simply assume that while


Presidential Decree No. 87 had not yet been
expressly repealed, it had been impliedly repealed.
As we held in Villarea v. The Commission on
Audit, "[i]mplied repeals are not lightly presumed."
It is a settled rule that when laws are in conflict with
one another, every effort must be exerted to
reconcile them. In Republic of the Philippines v.
Marcopper Mining Corporation, we said:
71

74

It is a basic precept in statutory construction that a


statute should be interpreted in harmony with the
Constitution and that the spirit, rather than the letter
of the law determines its construction; for that
reason, a statute must be read according to its
spirit and intent. x x x. (Citation omitted.)
Consequently, we find no merit in petitioners'
contention that SC-46 is prohibited on the ground
that there is no general law prescribing the
standard or uniform terms, conditions, and
requirements for service contracts involving oil
exploration and extraction.

72

The two laws must be absolutely incompatible, and


a clear finding thereof must surface, before the
inference of implied repeal may be drawn. The rule
is expressed in the maxim, interpretare et
concordare leqibus est optimus interpretendi, i.e.,

But note must be made at this point that while


Presidential Decree No. 87 may serve as the
general law upon which a service contract for
petroleum exploration and extraction may be
authorized, as will be discussed below, the
exploitation and utilization of this energy resource

in the present case may be allowed only through a


law passed by Congress, since the Taon Strait is a
NIPAS area.
2. President was not the signatory to SC-46 and
the same was not submitted to Congress

signed only by the DOE through its then Secretary,


Vicente S. Perez, Jr., contrary to the said
constitutional requirement. Moreover, public
respondents have neither shown nor alleged that
Congress was subsequently notified of the
execution of such contract.

While the Court finds that Presidential Decree No.


87 is sufficient to satisfy the requirement of a
general law, the absence of the two other
conditions, that the President be a signatory to SC46, and that Congress be notified of such contract,
renders it null and void.

Public respondents' implied argument that based


on the "alter ego principle," their acts are also that
of then President Macapagal-Arroyo's, cannot
apply in this case. In Joson v. Torres, we explained
the concept of the alter ego principle or the doctrine
of qualified political agency and its limit in this wise:

As SC-46 was executed in 2004, its terms should


have conformed not only to the provisions of
Presidential Decree No. 87, but also to those of the
1987 Constitution. The Civil Code provides:
ARTICLE 1306. The contracting parties may
establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs,
public order, or public policy. (Italics ours.)

Under this doctrine, which recognizes the


establishment of a single executive, all executive
and administrative organizations are adjuncts of the
Executive Department, the heads of the various
executive departments are assistants and agents of
the Chief Executive, and, except in cases where
the Chief Executive is required by the Constitution
or law to act in person or the exigencies of the
situation demand that he act personally, the
multifarious executive and administrative functions
of the Chief Executive are performed by and
through the executive departments, and the acts of
the Secretaries of such departments, performed
and promulgated in the regular course of business,
are, unless disapproved or reprobated by the Chief
Executive presumptively the acts of the Chief
Executive. (Emphasis ours, citation omitted.)

75

In Heirs of San Miguel v. Court of Appeals, this


Court held that:
76

It is basic that the law is deemed written into every


contract. Although a contract is the law between the
parties, the provisions of positive law which
regulate contracts are deemed written therein and
shall limit and govern the relations between the
parties. x x x. (Citations omitted.) Paragraph 4,
Section 2, Article XII of the 1987 Constitution
requires that the President himself enter into any
service contract for the exploration of petroleum.
SC-46 appeared to have been entered into and

Constitution to "eliminate or minimize the abuses


prevalent during the martial law regime." Thus,
they are not just mere formalities, which will only
render a contract unenforceable but not void, if not
complied with. They are requirements placed, not
just in an ordinary statute, but in the fundamental
law, the non-observance of which will nullify the
contract. Elucidating on the concept of a
"constitution," this Court, in Manila Prince Hotel v.
Government Service Insurance System, held:
78

79

77

While the requirements in executing service


contracts in paragraph 4, Section 2 of Article XII of
the 1987 Constitution seem like mere formalities,
they, in reality, take on a much bigger role. As we
have explained in La Bugal, they are the
safeguards put in place by the framers of the

A constitution is a system of fundamental laws for


the governance and administration of a nation. It is
supreme, imperious, absolute and unalterable
except by the authority from which it emanates. It
has been defined as the fundamental and
paramount law of the nation. It prescribes the
permanent framework of a system of government,
assigns to the different departments their
respective powers and duties, and establishes
certain fixed principles on which government is
founded. The fundamental conception in other
words is that it is a supreme law to which all other
laws must conform and in accordance with which
all private rights must be determined and all public
authority administered. Under the doctrine of
constitutional supremacy, if a law or contract
violates any norm of the constitution that law or
contract whether promulgated by the legislative or
by the executive branch or entered into by private
persons for private purposes is null and void and
without any force and effect. Thus, since the
Constitution is the fundamental, paramount and
supreme law of the nation, it is deemed written in
every statute and contract. (Emphasis ours.)
As this Court has held in La Bugal, our Constitution
requires that the President himself be the signatory

of service agreements with foreign-owned


corporations involving the exploration,
development, and utilization of our minerals,
petroleum, and other mineral oils. This power
cannot be taken lightly.
In this case, the public respondents have failed to
show that the President had any participation in
SC-46. Their argument that their acts are actually
the acts of then President Macapagal-Arroyo,
absent proof of her disapproval, must fail as the
requirement that the President herself enter into
these kinds of contracts is embodied not just in any
ordinary statute, but in the Constitution itself. These
service contracts involving the exploitation,
development, and utilization of our natural
resources are of paramount interest to the present
and future generations. Hence, safeguards were
put in place to insure that the guidelines set by law
are meticulously observed and likewise to eradicate
the corruption that may easily penetrate
departments and agencies by ensuring that the
President has authorized or approved of these
service contracts herself.
Even under the provisions of Presidential Decree
No. 87, it is required that the Petroleum Board, now
the DOE, obtain the President's approval for the
execution of any contract under said statute, as
shown in the following provision:
SECTION 5. Execution of contract authorized in
this Act. -Every contract herein authorized shall,
subject to the approval of the President, be
executed by the Petroleum Board created in this
Act, after due public notice pre-qualification and
public bidding or concluded through negotiations. In
case bids are requested or if requested no bid is

submitted or the bids submitted are rejected by the


Petroleum Board for being disadvantageous to the
Government, the contract may be concluded
through negotiation.

which protects the rights of the fisherfolk in the


preferential use of municipal waters, with the
exception being limited only to research and survey
activities.

In opening contract areas and in selecting the best


offer for petroleum operations, any of the following
alternative procedures may be resorted to by the
Petroleum Board, subject to prior approval of the
President[.]

The FIDEC, for its part, argues that to avail of the


exceptions under Section 14 of the NIP AS Act, the
gathering of information must be in accordance
with a DENR-approved program, and the
exploitation and utilization of energy resources
must be pursuant to a general law passed by
Congress expressly for that purpose. Since there is
neither a DENR approved program nor a general
law passed by Congress, the seismic surveys and
oil drilling operations were all done illegally. The
FIDEC likewise contends that SC-46 infringes on
its right to the preferential use of the communal
fishing waters as it is denied free access within the
prohibited zone, in violation not only of the
Fisheries Code but also of the 1987 Constitutional
provisions on subsistence fisherfolk and social
justice. Furthermore, the FIDEC believes that the
provisions in Presidential Decree No. 87, which
allow offshore drilling even in municipal waters,
should be deemed to have been rendered
inoperative by the provisions of Republic Act No.
8550 and Republic Act No. 7160, which reiterate
the social justice provisions of the Constitution.

Even if we were inclined to relax the requirement in


La Bugal to harmonize the 1987 Constitution with
the aforementioned provision of Presidential
Decree No. 87, it must be shown that the
government agency or subordinate official has
been authorized by the President to enter into such
service contract for the government. Otherwise, it
should be at least shown that the President
subsequently approved of such contract explicitly.
None of these circumstances is evident in the case
at bar.
Service Contract No. 46 vis-a-vis Other Laws
Petitioners in G.R. No. 180771 claim that SC-46
violates Section 27 of Republic Act. No. 9147 or the
Wildlife Resources Conservation and Protection
Act, which bans all marine exploration and
exploitation of oil and gas deposits. They also aver
that Section 14 of Republic Act No. 7586 or the
National Integrated Protected Areas System Act of
1992 (NIPAS Act), which allows the exploration of
protected areas for the purpose of informationgathering, has been repealed by Section 27 of
Republic Act No. 914 7. The said petitioners further
claim that SC-46 is anathema to Republic Act No.
8550 or the Philippine Fisheries Code of 1998,

80

81

82

83

The public respondents invoke the rules on


statutory construction and argue that Section 14 of
the NIP AS Act is a more particular provision and
cannot be deemed to have been repealed by the
more general prohibition in Section 27 of Republic
Act No. 9147. They aver that Section 14, under
which SC-46 falls, should instead be regarded as
an exemption to Section 27. Addressing the claim
of petitioners in G.R. No. 180771 that there was a
84

violation of Section 27 of Republic Act No. 9147,


the public respondents assert that what the section
prohibits is the exploration of minerals, which as
defined in the Philippine Mining Act of 1995,
exclude energy materials such as coal, petroleum,
natural gas, radioactive materials and geothennal
energy. Thus, since SC-46 involves oil and gas
exploration, Section 27 does not apply.
85

The public respondents defend the validity of SC46 and insist that it does not grant exclusive fishing
rights to JAPEX; hence, it does not violate the rule
on preferential use of municipal waters. Moreover,
they allege that JAPEX has not banned fishing in
the project area, contrary to the FIDEC's claim. The
public respondents also contest the attribution of
the declining fish catch to the seismic surveys and
aver that the allegation is unfounded. They claim
that according to the Bureau of Fisheries and
Aquatic Resources' fish catch data, the reduced
fish catch started in the 1970s due to destructive
fishing practices.
86

Ruling of the Court


On the legality of Service Contract No. 46
vis-a-vis Other Laws
Although we have already established above that
SC-46 is null and void for being violative of the
1987 Constitution, it is our duty to still rule on the
legality of SC-46 vis-a-vis other pertinent laws, to
serve as a guide for the Government when
executing service contracts involving not only the
Tafion Strait, but also other similar areas. While the
petitioners allege that SC-46 is in violation of

several laws, including international ones, their


arguments focus primarily on the protected status
of the Taon Strait, thus this Court will concentrate
on those laws that pertain particularly to the Taon
Strait as a protected seascape.
The Taon Strait is a narrow passage of water
bounded by the islands of Cebu in the East and
Negros in the West. It harbors a rich biodiversity of
marine life, including endangered species of
dolphins and whales. For this reason, former
President Fidel V. Ramos declared the Taon Strait
as a protected seascape in 1998 by virtue of
Proclamation No. 1234 -Declaring the Taon Strait
situated in the Provinces of Cebu, Negros
Occidental and Negros Oriental as a Protected
Area pursuant to the NIP AS Act and shall be
known as Taon Strait Protected Seascape. During
former President Joseph E. Estrada's time, he also
constituted the Taon Strait Commission via
Executive Order No. 76 to ensure the optimum and
sustained use of the resources in that area without
threatening its marine life. He followed this with
Executive Order No. 177, wherein he included the
mayor of Negros Occidental Municipality/City as a
member of the Taon Strait Commission, to
represent the LGUs concerned. This Commission,
however, was subsequently abolished in 2002 by
then President Gloria Macapagal-Arroyo, via
Executive Order No. 72.
87

88

True to the constitutional policy that the "State shall


protect and advance the right of the people to a
balanced and healthful ecology in accord with the
rhythm and harmony of nature," Congress enacted
the NIP AS Act to secure the perpetual existence of
all native plants and animals through the
establishment of a comprehensive system of
89

integrated protected areas. These areas possess


common ecological values that were incorporated
into a holistic plan representative of our natural
heritage. The system encompasses outstandingly
remarkable areas and biologically important public
lands that are habitats of rare and endangered
species of plants and animals, biogeographic
zones and related ecosystems, whether terrestrial,
wetland, or marine. It classifies and administers all
the designated protected areas to maintain
essential ecological processes and life-support
systems, to preserve genetic diversity, to ensure
sustainable use of resources found therein, and to
maintain their natural conditions to the greatest
extent possible. The following categories of
protected areas were established under the NIPAS
Act:
90

91

a. Strict nature reserve;


b. Natural park;
c. Natural monument;
d. Wildlife sanctuary;
e. Protected landscapes and seascapes;
f. Resource reserve;
g. Natural biotic areas; and
h. Other categories established by law,
conventions or international agreements
which the Philippine Government is a
signatory.
92

Under Section 4 of the NIP AS Act, a protected


area refers to portions of land and water, set aside
due to their unique physical and biological
significance, managed to enhance biological
diversity and protected against human exploitation.
The Taon Strait, pursuant to Proclamation No.
1234, was set aside and declared a protected area
under the category of Protected Seascape. The
NIP AS Act defines a Protected Seascape to be an
area of national significance characterized by the
harmonious interaction of man and land while
providing opportunities for public enjoyment
through recreation and tourism within the normal
lifestyle and economic activity of this areas; thus a
management plan for each area must be designed
to protect and enhance the permanent preservation
of its natural conditions. Consistent with this
endeavor is the requirement that an Environmental
Impact Assessment (EIA) be made prior to
undertaking any activity outside the scope of the
management plan. Unless an ECC under the EIA
system is obtained, no activity inconsistent with the
goals of the NIP AS Act shall be implemented.
93

94

95

The Environmental Impact Statement System


(EISS) was established in 1978 under Presidential
Decree No. 1586. It prohibits any person,
partnership or corporation from undertaking or
operating any declared environmentally critical
project or areas without first securing an ECC
issued by the President or his duly authorized
representative. Pursuant to the EISS, which called
for the proper management of environmentally
critical areas, Proclamation No. 2146 was
enacted, identifying the areas and types of projects
to be considered as environmentally critical and
within the scope of the EISS, while DENR
96

97

98

Administrative Order No. 2003-30 provided for its


Implementing Rules and Regulations (IRR).

The public respondents argue that they had


complied with the procedures in obtaining an
ECC and that SC-46 falls under the exceptions in
Section 14 of the NIP AS Act, due to the following
reasons:
103

DENR Administrative Order No. 2003-30 defines an


environmentally critical area as "an area delineated
as environmentally sensitive such that significant
environmental impacts are expected if certain types
of proposed projects or programs are located,
developed, or implemented in it"; thus, before a
project, which is "any activity, regardless of scale or
magnitude, which may have significant impact on
the environment," is undertaken in it, such project
must undergo an EIA to evaluate and predict the
likely impacts of all its stages on the
environment. An EIA is described in detail as
follows:

1) The Taon Strait is not a strict nature


reserve or natural park;

99

100

101

h. Environmental Impact Assessment (EIA) process that involves evaluating and predicting the
likely impacts of a project (including cumulative
impacts) on the environment during construction,
commissioning, operation and abandonment. It
also includes designing appropriate preventive,
mitigating and enhancement measures addressing
these consequences to protect the environment
and the community's welfare. The process is
undertaken by, among others, the project
proponent and/or EIA Consultant, EMB, a Review
Committee, affected communities and other
stakeholders.
102

Under Proclamation No. 2146, the Taon Strait is


an environmentally critical area, having been
declared as a protected area in 1998; therefore,
any activity outside the scope of its management
plan may only be implemented pursuant to an ECC
secured after undergoing an EIA to determine the
effects of such activity on its ecological system.

2) Exploration is only for the purpose of


gathering information on possible energy
resources; and 3) Measures are undertaken
to ensure that the exploration is being done
with the least damage to surrounding
areas.
104

We do not agree with the arguments raised by the


public respondents.
Sections 12 and 14 of the NIPAS Act read:
SECTION 12. Environmental Impact Assessment. Proposals for activities which are outside the scope
of the management plan for protected areas shall
be subject to an environmental impact assessment
as required by law before they are adopted, and
the results thereof shall be taken into consideration
in the decision-making process.
No actual implementation of such activities shall be
allowed without the required Environmental
Compliance Certificate (ECC) under the Philippine
Environmental Impact Assessment (EIA) system. In
instances where such activities are allowed to be
undertaken, the proponent shall plan and carry
them out in such manner as will minimize any
adverse effects and the preventive and remedial

action when appropriate. The proponent shall be


liable for any damage due to lack of caution or
indiscretion.
SECTION 14. Survey for Energy Resources. Consistent with the policies declared in Section 2
hereof, protected areas, except strict nature
reserves and natural parks, may be subjected to
exploration only for the purpose of gathering
information on energy resources and only if such
activity is carried out with the least damage to
surrounding areas. Surveys shall be conducted
only in accordance with a program approved by the
DENR, and the result of such surveys shall be
made available to the public and submitted to the
President for recommendation to Congress. Any
exploitation and utilization of energy resources
found within NIP AS areas shall be allowed only
through a law passed by Congress.
It is true that the restrictions found under the NIP
AS Act are not without exceptions. However, while
an exploration done for the purpose of surveying
for energy resources is allowed under Section 14 of
the NIP AS Act, this does not mean that it is exempt
from the requirement to undergo an EIA under
Section 12. In Sotto v. Sotto, this Court explained
why a statute should be construed as a whole:
105

A statute is passed as a whole and not in parts or


sections and is animated by one general purpose
and intent. Consequently each part or section
should be construed in connection with every other
part or section and so as to produce a harmonious
whole. It is not proper to confine the attention to the
one section to be construed. It is always an unsafe
way of construing a statute or contract to divide it
by a process of etymological dissection, into

separate words, and then apply to each, thus


separated from its context, some particular
definition given by lexicographers, and then
reconstruct the instrument upon the basis of these
definitions. An instrument must always be
construed as a whole, and the particular meaning
to be attached to any word or phrase is usually to
be ascertained from the context, the nature of the
subject treated of and the purpose or intention of
the parties who executed the contract, or of the
body which enacted or framed the statute or
constitution. x x x.
Surveying for energy resources under Section 14 is
not an exemption from complying with the EIA
requirement in Section 12; instead, Section 14
provides for additional requisites before any
exploration for energy resources may be done in
protected areas.
The rationale for such additional requirements are
incorporated m Section 2 of the NIP AS Act, to wit:
SECTION 2. Declaration of Policy - Cognizant of
the profound impact of man's activities on all
components of the natural environment particularly
the effect of increasing population, resource
exploitation and industrial advancement and
recognizing the critical importance of protecting and
maintaining the natural biological and physical
diversities of the environment notably on areas with
biologically unique features to sustain human life
and development, as well as plant and animal life, it
is hereby declared the policy of the State to secure
for the Filipino people of present and future
generations the perpetual existence of all native
plants and animals through the establishment of a
comprehensive system of integrated protected

areas within the classification of national park as


provided for in the Constitution.
It is hereby recognized that these areas, although
distinct in features, possess common ecological
values that may be incorporated into a holistic plan
representative of our natural heritage; that effective
administration of this area is possible only through
cooperation among national government, local
government and concerned private organizations;
that the use and enjoyment of these protected
areas must be consistent with the principles of
biological diversity and sustainable development.
To this end, there is hereby established a National
Integrated Protected Areas System (NIPAS), which
shall encompass outstandingly remarkable areas
and biologically important public lands that are
habitats of rare and endangered species of plants
and animals, biogeographic zones and related
ecosystems, whether terrestrial, wetland or marine,
all of which shall be designated as "protected
areas."
The public respondents themselves admitted that
JAPEX only started to secure an ECC prior to the
second sub-phase of SC-46, which required the
drilling of an oil exploration well. This means that
when the seismic surveys were done in the Taon
Strait, no such environmental impact evaluation
was done. Unless seismic surveys are part of the
management plan of the Taon Strait, such surveys
were done in violation of Section 12 of the NIPAS
Act and Section 4 of Presidential Decree No. 1586,
which provides:
Section 4. Presidential Proclamation of
Environmentally Critical Areas and Projects. - The

President of the Philippines may, on his own


initiative or upon recommendation of the National
Environmental Protection Council, by proclamation
declare certain projects, undertakings or areas in
the country as environmentally critical. No person,
partnership or corporation shall undertake or
operate any such declared environmentally critical
project or area without first securing an
Environmental Compliance Certificate issued by
the President or his duly authorized representative.
For the proper management of said critical project
or area, the President may by his proclamation
reorganize such government offices, agencies,
institutions, corporations or instrumentalities
including the re-alignment of government
personnel, and their specific functions and
responsibilities.
For the same purpose as above, the Ministry of
Human Settlements shall: (a) prepare the proper
land or water use pattern for said critical project(s)
or area(s); (b) establish ambient environmental
quality standards; (c) develop a program of
environmental enhancement or protective
measures against calamitous factors such as
earthquakes, floods, water erosion and others, and
(d) perform such other functions as may be
directed by the President from time to time.
The respondents' subsequent compliance with the
EISS for the second sub-phase of SC-46 cannot
and will not cure this violation. The following
penalties are provided for under Presidential
Decree No. 1586 and the NIPAS Act.
Section 9 of Presidential Decree No. 1586 provides
for the penalty involving violations of the ECC
requirement:

Section 9. Penalty for Violation. - Any person,


corporation or partnership found violating Section 4
of this Decree, or the terms and conditions in the
issuance of the Environmental Compliance
Certificate, or of the standards, rules and
regulations issued by the National Environmental
Protection Council pursuant to this Decree shall be
punished by the suspension or cancellation of
his/its certificates and/or a fine in an amount not to
exceed Fifty Thousand Pesos (P50,000.00) for
every violation thereof, at the discretion of the
National Environmental Protection Council.
(Emphasis supplied.)
Violations of the NIP AS Act entails the following
fines and/or imprisonment under Section 21:
SECTION 21. Penalties. - Whoever violates this Act
or any rules and regulations issued by the
Department pursuant to this Act or whoever is
found guilty by a competent court of justice of any
of the offenses in the preceding section shall be
fined in the amount of not less than Five thousand
pesos (P5,000) nor more than Five hundred
thousand pesos (P500,000), exclusive of the value
of the thing damaged or imprisonment for not less
than one (1) year but not more than six (6) years,
or both, as determined by the court: Provided, that,
if the area requires rehabilitation or restoration as
determined by the court, the offender shall be
required to restore or compensate for the
restoration to the damages: Provided, further, that
court shall order the eviction of the offender from
the land and the forfeiture in favor of the
Government of all minerals, timber or any species
collected or removed including all equipment,
devices and firearms used in connection therewith,
and any construction or improvement made

thereon by the offender. If the offender is an


association or corporation, the president or
manager shall be directly responsible for the act of
his employees and laborers: Provided, finally, that
the DENR may impose administrative fines and
penalties consistent with this Act. (Emphases
supplied.) Moreover, SC-46 was not executed for
the mere purpose of gathering information on the
possible energy resources in the Taon Strait as it
also provides for the parties' rights and obligations
relating to extraction and petroleum production
should oil in commercial quantities be found to exist
in the area. While Presidential Decree No. 87 may
serve as the general law upon which a service
contract for petroleum exploration and extraction
may be authorized, the exploitation and utilization
of this energy resource in the present case may be
allowed only through a law passed by Congress,
since the Taon Strait is a NIPAS area. Since
there is no such law specifically allowing oil
exploration and/or extraction in the Taon Strait, no
energy resource exploitation and utilization may be
done in said protected seascape.
106

In view of the foregoing premises and conclusions,


it is no longer necessary to discuss the other issues
raised in these consolidated petitions.
WHEREFORE, the Petitions in G.R. Nos. 180771
and 181527 are GRANTED, Service Contract No.
46 is hereby declared NULL AND VOID for violating
the 1987 Constitution, Republic Act No. 7586, and
Presidential Decree No. 1586.
SO ORDERED.

G.R. No. 127882

January 27, 2004

LA BUGAL-B'LAAN TRIBAL ASSOCIATION,


INC., represented by its Chairman F'LONG
MIGUEL M. LUMAYONG, WIGBERTO E.
TAADA, PONCIANO BENNAGEN, JAIME
TADEO, RENATO R. CONSTANTINO, JR.,
F'LONG AGUSTIN M. DABIE, ROBERTO P.
AMLOY, RAQIM L. DABIE, SIMEON H. DOLOJO,
IMELDA M. GANDON, LENY B. GUSANAN,
MARCELO L. GUSANAN, QUINTOL A.
LABUAYAN, LOMINGGES D. LAWAY, BENITA P.
TACUAYAN, minors JOLY L. BUGOY,
represented by his father UNDERO D. BUGOY,
ROGER M. DADING, represented by his father
ANTONIO L. DADING, ROMY M. LAGARO,
represented by his father TOTING A. LAGARO,
MIKENY JONG B. LUMAYONG, represented by
his father MIGUEL M. LUMAYONG, RENE T.
MIGUEL, represented by his mother EDITHA T.
MIGUEL, ALDEMAR L. SAL, represented by his
father DANNY M. SAL, DAISY RECARSE,
represented by her mother LYDIA S. SANTOS,
EDWARD M. EMUY, ALAN P. MAMPARAIR,
MARIO L. MANGCAL, ALDEN S. TUSAN,
AMPARO S. YAP, VIRGILIO CULAR, MARVIC
M.V.F. LEONEN, JULIA REGINA CULAR, GIAN
CARLO CULAR, VIRGILIO CULAR, JR.,
represented by their father VIRGILIO CULAR,
PAUL ANTONIO P. VILLAMOR, represented by
his parents JOSE VILLAMOR and ELIZABETH
PUA-VILLAMOR, ANA GININA R. TALJA,
represented by her father MARIO JOSE B.
TALJA, SHARMAINE R. CUNANAN, represented
by her father ALFREDO M. CUNANAN,

ANTONIO JOSE A. VITUG III, represented by his


mother ANNALIZA A. VITUG, LEAN D.
NARVADEZ, represented by his father MANUEL
E. NARVADEZ, JR., ROSERIO MARALAG
LINGATING, represented by her father RIO
OLIMPIO A. LINGATING, MARIO JOSE B.
TALJA, DAVID E. DE VERA, MARIA MILAGROS
L. SAN JOSE, SR., SUSAN O. BOLANIO, OND,
LOLITA G. DEMONTEVERDE, BENJIE L.
NEQUINTO,1 ROSE LILIA S. ROMANO,
ROBERTO S. VERZOLA, EDUARDO AURELIO C.
REYES, LEAN LOUEL A. PERIA, represented by
his father ELPIDIO V. PERIA,2 GREEN FORUM
PHILIPPINES, GREEN FORUM WESTERN
VISAYAS, (GF-WV), ENVIRONMETAL LEGAL
ASSISTANCE CENTER (ELAC), PHILIPPINE
KAISAHAN TUNGO SA KAUNLARAN NG
KANAYUNAN AT REPORMANG PANSAKAHAN
(KAISAHAN),3 KAISAHAN TUNGO SA
KAUNLARAN NG KANAYUNAN AT
REPORMANG PANSAKAHAN (KAISAHAN),
PARTNERSHIP FOR AGRARIAN REFORM and
RURAL DEVELOPMENT SERVICES, INC.
(PARRDS), PHILIPPINE PART`NERSHIP FOR
THE DEVELOPMENT OF HUMAN RESOURCES
IN THE RURAL AREAS, INC. (PHILDHRRA),
WOMEN'S LEGAL BUREAU (WLB), CENTER
FOR ALTERNATIVE DEVELOPMENT
INITIATIVES, INC. (CADI), UPLAND
DEVELOPMENT INSTITUTE (UDI), KINAIYAHAN
FOUNDATION, INC., SENTRO NG
ALTERNATIBONG LINGAP PANLIGAL
(SALIGAN), LEGAL RIGHTS AND NATURAL
RESOURCES CENTER, INC. (LRC), petitioners,
vs.
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 WMC
(PHILIPPINES), INC.4 respondents.
DECISION
CARPIO-MORALES, J.:
The present petition for mandamus and prohibition
assails the constitutionality of Republic Act No.
7942,5 otherwise known as the PHILIPPINE
MINING ACT OF 1995, along with the
Implementing Rules and Regulations issued
pursuant thereto, Department of Environment and
Natural Resources (DENR) Administrative Order
96-40, and of the Financial and Technical
Assistance Agreement (FTAA) entered into on
March 30, 1995 by the Republic of the Philippines
and WMC (Philippines), Inc. (WMCP), a
corporation organized under Philippine laws.
On July 25, 1987, then President Corazon C.
Aquino issued Executive Order (E.O.) No.
2796 authorizing the DENR Secretary to accept,
consider and evaluate proposals from foreignowned corporations or foreign investors for
contracts or agreements involving either technical
or financial assistance for large-scale exploration,
development, and utilization of minerals, which,
upon appropriate recommendation of the Secretary,
the President may execute with the foreign
proponent. In entering into such proposals, the
President shall consider the real contributions to
the economic growth and general welfare of the
country that will be realized, as well as the
development and use of local scientific and
technical resources that will be promoted by the

proposed contract or agreement. Until Congress


shall determine otherwise, large-scale mining, for
purpose of this Section, shall mean those
proposals for contracts or agreements for mineral
resources exploration, development, and utilization
involving a committed capital investment in a single
mining unit project of at least Fifty Million Dollars in
United States Currency (US $50,000,000.00).7
On March 3, 1995, then President Fidel V. Ramos
approved R.A. No. 7942 to "govern the exploration,
development, utilization and processing of all
mineral resources."8 R.A. No. 7942 defines the
modes of mineral agreements for mining
operations,9 outlines the procedure for their filing
and approval,10 assignment/transfer11 and
withdrawal,12and fixes their terms.13 Similar
provisions govern financial or technical assistance
agreements.14
The law prescribes the qualifications of
contractors15 and grants them certain rights,
including timber,16 water17 and easement18 rights,
and the right to possess explosives.19 Surface
owners, occupants, or concessionaires are
forbidden from preventing holders of mining rights
from entering private lands and concession
areas.20 A procedure for the settlement of conflicts
is likewise provided for.21
The Act restricts the conditions for
exploration,22 quarry23 and other24 permits. It
regulates the transport, sale and processing of
minerals,25 and promotes the development of
mining communities, science and mining
technology,26and safety and environmental
protection.27

The government's share in the agreements is


spelled out and allocated,28 taxes and fees are
imposed,29 incentives granted.30 Aside from
penalizing certain acts,31 the law likewise specifies
grounds for the cancellation, revocation and
termination of agreements and permits.32
On April 9, 1995, 30 days following its publication
on March 10, 1995 in Malaya and Manila Times,
two newspapers of general circulation, R.A. No.
7942 took effect.33 Shortly before the effectivity of
R.A. No. 7942, however, or on March 30, 1995, the
President entered into an FTAA with WMCP
covering 99,387 hectares of land in South
Cotabato, Sultan Kudarat, Davao del Sur and North
Cotabato.34
On August 15, 1995, then DENR Secretary Victor
O. Ramos issued DENR Administrative Order
(DAO) No. 95-23, s. 1995, otherwise known as the
Implementing Rules and Regulations of R.A. No.
7942. This was later repealed by DAO No. 96-40, s.
1996 which was adopted on December 20, 1996.
On January 10, 1997, counsels for petitioners sent
a letter to the DENR Secretary demanding that the
DENR stop the implementation of R.A. No. 7942
and DAO No. 96-40,35 giving the DENR fifteen days
from receipt36 to act thereon. The DENR, however,
has yet to respond or act on petitioners' letter.37
Petitioners thus filed the present petition for
prohibition and mandamus, with a prayer for a
temporary restraining order. They allege that at the
time of the filing of the petition, 100 FTAA
applications had already been filed, covering an
area of 8.4 million hectares,38 64 of which
applications are by fully foreign-owned corporations

covering a total of 5.8 million hectares, and at least


one by a fully foreign-owned mining company over
offshore areas.39
Petitioners claim that the DENR Secretary acted
without or in excess of jurisdiction:
I
x x x in signing and promulgating DENR
Administrative Order No. 96-40 implementing
Republic Act No. 7942, the latter being
unconstitutional in that it allows fully foreign owned
corporations to explore, develop, utilize and exploit
mineral resources in a manner contrary to Section
2, paragraph 4, Article XII of the Constitution;
II
x x x in signing and promulgating DENR
Administrative Order No. 96-40 implementing
Republic Act No. 7942, the latter being
unconstitutional in that it allows the taking of private
property without the determination of public use
and for just compensation;
III
x x x in signing and promulgating DENR
Administrative Order No. 96-40 implementing
Republic Act No. 7942, the latter being
unconstitutional in that it violates Sec. 1, Art. III of
the Constitution;
IV

x x x in signing and promulgating DENR


Administrative Order No. 96-40 implementing
Republic Act No. 7942, the latter being
unconstitutional in that it allows enjoyment by
foreign citizens as well as fully foreign owned
corporations of the nation's marine wealth contrary
to Section 2, paragraph 2 of Article XII of the
Constitution;
V
x x x in signing and promulgating DENR
Administrative Order No. 96-40 implementing
Republic Act No. 7942, the latter being
unconstitutional in that it allows priority to foreign
and fully foreign owned corporations in the
exploration, development and utilization of mineral
resources contrary to Article XII of the Constitution;
VI
x x x in signing and promulgating DENR
Administrative Order No. 96-40 implementing
Republic Act No. 7942, the latter being
unconstitutional in that it allows the inequitable
sharing of wealth contrary to Sections [sic] 1,
paragraph 1, and Section 2, paragraph 4[,] [Article
XII] of the Constitution;
VII
x x x in recommending approval of and
implementing the Financial and Technical
Assistance Agreement between the President of
the Republic of the Philippines and Western Mining
Corporation Philippines Inc. because the same is
illegal and unconstitutional.40

They pray that the Court issue an order:


(a) Permanently enjoining respondents from
acting on any application for Financial or
Technical Assistance Agreements;
(b) Declaring the Philippine Mining Act of
1995 or Republic Act No. 7942 as
unconstitutional and null and void;
(c) Declaring the Implementing Rules and
Regulations of the Philippine Mining Act
contained in DENR Administrative Order
No. 96-40 and all other similar
administrative issuances as unconstitutional
and null and void; and
(d) Cancelling the Financial and Technical
Assistance Agreement issued to Western
Mining Philippines, Inc. as unconstitutional,
illegal and null and void.41
Impleaded as public respondents are Ruben
Torres, the then Executive Secretary, Victor O.
Ramos, the then DENR Secretary, and Horacio
Ramos, Director of the Mines and Geosciences
Bureau of the DENR. Also impleaded is private
respondent WMCP, which entered into the assailed
FTAA with the Philippine Government. WMCP is
owned by WMC Resources International Pty., Ltd.
(WMC), "a wholly owned subsidiary of Western
Mining Corporation Holdings Limited, a publicly
listed major Australian mining and exploration
company."42 By WMCP's information, "it is a 100%
owned subsidiary of WMC LIMITED."43

Respondents, aside from meeting petitioners'


contentions, argue that the requisites for judicial
inquiry have not been met and that the petition
does not comply with the criteria for prohibition and
mandamus. Additionally, respondent WMCP argues
that there has been a violation of the rule on
hierarchy of courts.
After petitioners filed their reply, this Court granted
due course to the petition. The parties have since
filed their respective memoranda.
WMCP subsequently filed a Manifestation dated
September 25, 2002 alleging that on January 23,
2001, WMC sold all its shares in WMCP to
Sagittarius Mines, Inc. (Sagittarius), a corporation
organized under Philippine laws.44WMCP was
subsequently renamed "Tampakan Mineral
Resources Corporation."45 WMCP claims that at
least 60% of the equity of Sagittarius is owned by
Filipinos and/or Filipino-owned corporations while
about 40% is owned by Indophil Resources NL, an
Australian company.46 It further claims that by such
sale and transfer of shares, "WMCP has ceased to
be connected in any way with WMC."47
By virtue of such sale and transfer, the DENR
Secretary, by Order of December 18,
2001,48 approved the transfer and registration of the
subject FTAA from WMCP to Sagittarius. Said
Order, however, was appealed by Lepanto
Consolidated Mining Co. (Lepanto) to the Office of
the President which upheld it by Decision of July
23, 2002.49 Its motion for reconsideration having
been denied by the Office of the President by
Resolution of November 12, 2002,50 Lepanto filed a
petition for review51 before the Court of Appeals.
Incidentally, two other petitions for review related to

the approval of the transfer and registration of the


FTAA to Sagittarius were recently resolved by this
Court.52
It bears stressing that this case has not been
rendered moot either by the transfer and
registration of the FTAA to a Filipino-owned
corporation or by the non-issuance of a temporary
restraining order or a preliminary injunction to stay
the above-said July 23, 2002 decision of the Office
of the President.53 The validity of the transfer
remains in dispute and awaits final judicial
determination. This assumes, of course, that such
transfer cures the FTAA's alleged
unconstitutionality, on which question judgment is
reserved.
WMCP also points out that the original claimowners
of the major mineralized areas included in the
WMCP FTAA, namely, Sagittarius, Tampakan
Mining Corporation, and Southcot Mining
Corporation, are all Filipino-owned
corporations,54 each of which was a holder of an
approved Mineral Production Sharing Agreement
awarded in 1994, albeit their respective mineral
claims were subsumed in the WMCP FTAA;55 and
that these three companies are the same
companies that consolidated their interests in
Sagittarius to whom WMC sold its 100% equity in
WMCP.56 WMCP concludes that in the event that
the FTAA is invalidated, the MPSAs of the three
corporations would be revived and the mineral
claims would revert to their original claimants.57
These circumstances, while informative, are hardly
significant in the resolution of this case, it involving
the validity of the FTAA, not the possible
consequences of its invalidation.

Of the above-enumerated seven grounds cited by


petitioners, as will be shown later, only the first and
the last need be delved into; in the latter, the
discussion shall dwell only insofar as it questions
the effectivity of E. O. No. 279 by virtue of which
order the questioned FTAA was forged.
I
Before going into the substantive issues, the
procedural questions posed by respondents shall
first be tackled.
REQUISITES FOR JUDICIAL REVIEW
When an issue of constitutionality is raised, this
Court can exercise its power of judicial review only
if the following requisites are present:
(1) The existence of an actual and
appropriate case;
(2) A personal and substantial interest of
the party raising the constitutional question;
(3) The exercise of judicial review is
pleaded at the earliest opportunity; and
(4) The constitutional question is the lis
mota of the case. 58
Respondents claim that the first three requisites are
not present.
Section 1, Article VIII of the Constitution states that
"(j)udicial power includes the duty of the courts of
justice to settle actual controversies involving rights

which are legally demandable and enforceable."


The power of judicial review, therefore, is limited to
the determination of actual cases and
controversies.59
An actual case or controversy means an existing
case or controversy that is appropriate or ripe for
determination, not conjectural or anticipatory,60 lest
the decision of the court would amount to an
advisory opinion.61 The power does not extend to
hypothetical questions62 since any attempt at
abstraction could only lead to dialectics and barren
legal questions and to sterile conclusions unrelated
to actualities.63
"Legal standing" or locus standi has been defined
as a personal and substantial interest in the case
such that the party has sustained or will sustain
direct injury as a result of the governmental act that
is being challenged,64alleging more than a
generalized grievance.65 The gist of the question of
standing is whether a party alleges "such personal
stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens
the presentation of issues upon which the court
depends for illumination of difficult constitutional
questions."66 Unless a person is injuriously affected
in any of his constitutional rights by the operation of
statute or ordinance, he has no standing.67
Petitioners traverse a wide range of sectors.
Among them are La Bugal B'laan Tribal
Association, Inc., a farmers and indigenous
people's cooperative organized under Philippine
laws representing a community actually affected by
the mining activities of WMCP, members of said
cooperative,68 as well as other residents of areas
also affected by the mining activities of

WMCP.69 These petitioners have standing to raise


the constitutionality of the questioned FTAA as they
allege a personal and substantial injury. They claim
that they would suffer "irremediable
displacement"70 as a result of the implementation of
the FTAA allowing WMCP to conduct mining
activities in their area of residence. They thus meet
the appropriate case requirement as they assert an
interest adverse to that of respondents who, on the
other hand, insist on the FTAA's validity.
In view of the alleged impending injury, petitioners
also have standing to assail the validity of E.O. No.
279, by authority of which the FTAA was executed.
Public respondents maintain that petitioners, being
strangers to the FTAA, cannot sue either or both
contracting parties to annul it.71 In other words, they
contend that petitioners are not real parties in
interest in an action for the annulment of contract.
Public respondents' contention fails. The present
action is not merely one for annulment of contract
but for prohibition and mandamus. Petitioners
allege that public respondents acted without or in
excess of jurisdiction in implementing the FTAA,
which they submit is unconstitutional. As the case
involves constitutional questions, this Court is not
concerned with whether petitioners are real parties
in interest, but with whether they have legal
standing. As held in Kilosbayan v. Morato:72

that only certain parties can maintain an action,


standing restrictions require a partial consideration
of the merits, as well as broader policy concerns
relating to the proper role of the judiciary in certain
areas.["] (FRIEDENTHAL, KANE AND MILLER,
CIVIL PROCEDURE 328 [1985])
Standing is a special concern in constitutional law
because in some cases suits are brought not by
parties who have been personally injured by the
operation of a law or by official action taken, but by
concerned citizens, taxpayers or voters who
actually sue in the public interest. Hence, the
question in standing is whether such parties have
"alleged such a personal stake in the outcome of
the controversy as to assure that concrete
adverseness which sharpens the presentation of
issues upon which the court so largely depends for
illumination of difficult constitutional questions."
(Baker v. Carr, 369 U.S. 186, 7 L.Ed.2d 633
[1962].)
As earlier stated, petitioners meet this requirement.
The challenge against the constitutionality of R.A.
No. 7942 and DAO No. 96-40 likewise fulfills the
requisites of justiciability. Although these laws were
not in force when the subject FTAA was entered
into, the question as to their validity is ripe for
adjudication.

contractors resulting from repeal or amendment of


any existing law or regulation or from the
enactment of a law, regulation or administrative
order shall be considered a part of this Agreement.
It is undisputed that R.A. No. 7942 and DAO No.
96-40 contain provisions that are more favorable to
WMCP, hence, these laws, to the extent that they
are favorable to WMCP, govern the FTAA.
In addition, R.A. No. 7942 explicitly makes certain
provisions apply to pre-existing agreements.
SEC. 112. Non-impairment of Existing
Mining/Quarrying Rights. x x x That the provisions
of Chapter XIV on government share in mineral
production-sharing agreement and of Chapter XVI
on incentives of this Act shall immediately govern
and apply to a mining lessee or contractor unless
the mining lessee or contractor indicates his
intention to the secretary, in writing, not to avail of
said provisions x x x Provided, finally, That such
leases, production-sharing agreements, financial or
technical assistance agreements shall comply with
the applicable provisions of this Act and its
implementing rules and regulations.
As there is no suggestion that WMCP has indicated
its intention not to avail of the provisions of Chapter
XVI of R.A. No. 7942, it can safely be presumed
that they apply to the WMCP FTAA.

The WMCP FTAA provides:


x x x. "It is important to note . . . that standing
because of its constitutional and public policy
underpinnings, is very different from questions
relating to whether a particular plaintiff is the real
party in interest or has capacity to sue. Although all
three requirements are directed towards ensuring

14.3 Future Legislation


Any term and condition more favourable to
Financial &Technical Assistance Agreement

Misconstruing the application of the third requisite


for judicial review that the exercise of the review
is pleaded at the earliest opportunity WMCP
points out that the petition was filed only almost two

years after the execution of the FTAA, hence, not


raised at the earliest opportunity.
The third requisite should not be taken to mean that
the question of constitutionality must be raised
immediately after the execution of the state action
complained of. That the question of constitutionality
has not been raised before is not a valid reason for
refusing to allow it to be raised later.73 A contrary
rule would mean that a law, otherwise
unconstitutional, would lapse into constitutionality
by the mere failure of the proper party to promptly
file a case to challenge the same.

The petition for prohibition at bar is thus an


appropriate remedy. While the execution of the
contract itself may be fait accompli, its
implementation is not. Public respondents, in behalf
of the Government, have obligations to fulfill under
said contract. Petitioners seek to prevent them from
fulfilling such obligations on the theory that the
contract is unconstitutional and, therefore, void.
The propriety of a petition for prohibition being
upheld, discussion of the propriety of the
mandamus aspect of the petition is rendered
unnecessary.

PROPRIETY OF PROHIBITION AND MANDAMUS

HIERARCHY OF COURTS

Before the effectivity in July 1997 of the Revised


Rules of Civil Procedure, Section 2 of Rule 65 read:

The contention that the filing of this petition violated


the rule on hierarchy of courts does not likewise lie.
The rule has been explained thus:

SEC. 2. Petition for prohibition. When the


proceedings of any tribunal, corporation, board, or
person, whether exercising functions judicial or
ministerial, are without or in excess of its or his
jurisdiction, or with grave abuse of discretion, and
there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified
petition in the proper court alleging the facts with
certainty and praying that judgment be rendered
commanding the defendant to desist from further
proceeding in the action or matter specified therein.
Prohibition is a preventive remedy.74 It seeks a
judgment ordering the defendant to desist from
continuing with the commission of an act perceived
to be illegal.75

Between two courts of concurrent original


jurisdiction, it is the lower court that should initially
pass upon the issues of a case. That way, as a
particular case goes through the hierarchy of
courts, it is shorn of all but the important legal
issues or those of first impression, which are the
proper subject of attention of the appellate court.
This is a procedural rule borne of experience and
adopted to improve the administration of justice.
This Court has consistently enjoined litigants to
respect the hierarchy of courts. Although this Court
has concurrent jurisdiction with the Regional Trial
Courts and the Court of Appeals to issue writs of
certiorari, prohibition, mandamus, quo warranto,
habeas corpus and injunction, such concurrence
does not give a party unrestricted freedom of

choice of court forum. The resort to this Court's


primary jurisdiction to issue said writs shall be
allowed only where the redress desired cannot be
obtained in the appropriate courts or where
exceptional and compelling circumstances justify
such invocation. We held in People v. Cuaresma
that:
A becoming regard for judicial hierarchy most
certainly indicates that petitions for the issuance of
extraordinary writs against first level ("inferior")
courts should be filed with the Regional Trial Court,
and those against the latter, with the Court of
Appeals. A direct invocation of the Supreme Court's
original jurisdiction to issue these writs should be
allowed only where there are special and important
reasons therefor, clearly and specifically set out in
the petition. This is established policy. It is a policy
necessary to prevent inordinate demands upon the
Court's time and attention which are better devoted
to those matters within its exclusive jurisdiction,
and to prevent further over-crowding of the Court's
docket x x x.76 [Emphasis supplied.]
The repercussions of the issues in this case on the
Philippine mining industry, if not the national
economy, as well as the novelty thereof, constitute
exceptional and compelling circumstances to justify
resort to this Court in the first instance.
In all events, this Court has the discretion to take
cognizance of a suit which does not satisfy the
requirements of an actual case or legal standing
when paramount public interest is involved.77 When
the issues raised are of paramount importance to
the public, this Court may brush aside technicalities
of procedure.78

II
Petitioners contend that E.O. No. 279 did not take
effect because its supposed date of effectivity came
after President Aquino had already lost her
legislative powers under the Provisional
Constitution.
And they likewise claim that the WMC FTAA, which
was entered into pursuant to E.O. No. 279, violates
Section 2, Article XII of the Constitution because,
among other reasons:
(1) It allows foreign-owned companies to
extend more than mere financial or
technical assistance to the State in the
exploitation, development, and utilization of
minerals, petroleum, and other mineral oils,
and even permits foreign owned companies
to "operate and manage mining activities."
(2) It allows foreign-owned companies to
extend both technical and financial
assistance, instead of "either technical or
financial assistance."
To appreciate the import of these issues, a visit to
the history of the pertinent constitutional provision,
the concepts contained therein, and the laws
enacted pursuant thereto, is in order.
Section 2, Article XII reads in full:
Sec. 2. All lands of the public domain, waters,
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. With the


exception of agricultural lands, all other natural
resources shall not be alienated. The exploration,
development, and utilization of natural resources
shall be under the full control and supervision of the
State. The State may directly undertake such
activities or it may enter into co-production, joint
venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at
least sixty per centum of whose capital is owned by
such citizens. Such agreements may be for a
period not exceeding twenty-five years, renewable
for not more than twenty-five years, and under such
terms and conditions as may be provided by law. In
cases of water rights for irrigation, water supply,
fisheries, or industrial uses other than the
development of water power, beneficial use may be
the measure and limit of the grant.
The State shall protect the nation's marine wealth
in its archipelagic waters, territorial sea, and
exclusive economic zone, and reserve its use and
enjoyment exclusively to Filipino citizens.
The Congress may, by law, allow small-scale
utilization of natural resources by Filipino citizens,
as well as cooperative fish farming, with priority to
subsistence fishermen and fish-workers in rivers,
lakes, bays, and lagoons.
The President may enter into agreements with
foreign-owned corporations involving either
technical or financial assistance for large-scale
exploration, development, and utilization of
minerals, petroleum, and other mineral oils
according to the general terms and conditions
provided by law, based on real contributions to the
economic growth and general welfare of the

country. In such agreements, the State shall


promote the development and use of local scientific
and technical resources.
The President shall notify the Congress of every
contract entered into in accordance with this
provision, within thirty days from its execution.
THE SPANISH REGIME AND THE REGALIAN
DOCTRINE
The first sentence of Section 2 embodies the
Regalian doctrine or jura regalia. Introduced by
Spain into these Islands, this feudal concept is
based on the State's power of dominium, which is
the capacity of the State to own or acquire
property.79
In its broad sense, the term "jura regalia" refers to
royal rights, or those rights which the King has by
virtue of his prerogatives. In Spanish law, it refers
to a right which the sovereign has over anything in
which a subject has a right of property or
propriedad. These were rights enjoyed during
feudal times by the king as the sovereign.
The theory of the feudal system was that title to all
lands was originally held by the King, and while the
use of lands was granted out to others who were
permitted to hold them under certain conditions, the
King theoretically retained the title. By fiction of law,
the King was regarded as the original proprietor of
all lands, and the true and only source of title, and
from him all lands were held. The theory of jura
regalia was therefore nothing more than a natural
fruit of conquest.80

The Philippines having passed to Spain by virtue of


discovery and conquest,81 earlier Spanish decrees
declared that "all lands were held from the
Crown."82
The Regalian doctrine extends not only to land but
also to "all natural wealth that may be found in the
bowels of the earth."83 Spain, in particular,
recognized the unique value of natural resources,
viewing them, especially minerals, as an abundant
source of revenue to finance its wars against other
nations.84 Mining laws during the Spanish regime
reflected this perspective.85
THE AMERICAN OCCUPATION AND THE
CONCESSION REGIME
By the Treaty of Paris of December 10, 1898, Spain
ceded "the archipelago known as the Philippine
Islands" to the United States. The Philippines was
hence governed by means of organic acts that
were in the nature of charters serving as a
Constitution of the occupied territory from 1900 to
1935.86 Among the principal organic acts of the
Philippines was the Act of Congress of July 1,
1902, more commonly known as the Philippine Bill
of 1902, through which the United States Congress
assumed the administration of the Philippine
Islands.87 Section 20 of said Bill reserved the
disposition of mineral lands of the public domain
from sale. Section 21 thereof allowed the free and
open exploration, occupation and purchase of
mineral deposits not only to citizens of the
Philippine Islands but to those of the United States
as well:
Sec. 21. That all valuable mineral deposits in public
lands in the Philippine Islands, both surveyed and

unsurveyed, are hereby declared to be free and


open to exploration, occupation and purchase, and
the land in which they are found, to occupation and
purchase, by citizens of the United States or of said
Islands: Provided, That when on any lands in said
Islands entered and occupied as agricultural lands
under the provisions of this Act, but not patented,
mineral deposits have been found, the working of
such mineral deposits is forbidden until the person,
association, or corporation who or which has
entered and is occupying such lands shall have
paid to the Government of said Islands such
additional sum or sums as will make the total
amount paid for the mineral claim or claims in
which said deposits are located equal to the
amount charged by the Government for the same
as mineral claims.
Unlike Spain, the United States considered natural
resources as a source of wealth for its nationals
and saw fit to allow both Filipino and American
citizens to explore and exploit minerals in public
lands, and to grant patents to private mineral
lands.88 A person who acquired ownership over a
parcel of private mineral land pursuant to the laws
then prevailing could exclude other persons, even
the State, from exploiting minerals within his
property.89 Thus, earlier jurisprudence90 held that:
A valid and subsisting location of mineral land,
made and kept up in accordance with the
provisions of the statutes of the United States, has
the effect of a grant by the United States of the
present and exclusive possession of the lands
located, and this exclusive right of possession and
enjoyment continues during the entire life of the
location. x x x.

x x x.
The discovery of minerals in the ground by one
who has a valid mineral location perfects his claim
and his location not only against third persons, but
also against the Government. x x x. [Italics in the
original.]
The Regalian doctrine and the American system,
therefore, differ in one essential respect. Under the
Regalian theory, mineral rights are not included in a
grant of land by the state; under the American
doctrine, mineral rights are included in a grant of
land by the government.91
Section 21 also made possible the concession
(frequently styled "permit", license" or
"lease")92 system.93 This was the traditional regime
imposed by the colonial administrators for the
exploitation of natural resources in the extractive
sector (petroleum, hard minerals, timber, etc.).94
Under the concession system, the concessionaire
makes a direct equity investment for the purpose of
exploiting a particular natural resource within a
given area.95 Thus, 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.96 In consideration for the
right to exploit a natural resource, the
concessionaire either pays rent or royalty, which is
a fixed percentage of the gross proceeds.97
Later statutory enactments by the legislative bodies
set up in the Philippines adopted the contractual
framework of the concession.98 For instance, Act

No. 2932,99 approved on August 31, 1920, which


provided for the exploration, location, and lease of
lands containing petroleum and other mineral oils
and gas in the Philippines, and Act No.
2719,100 approved on May 14, 1917, which provided
for the leasing and development of coal lands in the
Philippines, both utilized the concession system.101
THE 1935 CONSTITUTION AND THE
NATIONALIZATION OF NATURAL RESOURCES
By the Act of United States Congress of March 24,
1934, popularly known as the Tydings-McDuffie
Law, the People of the Philippine Islands were
authorized to adopt a constitution.102 On July 30,
1934, the Constitutional Convention met for the
purpose of drafting a constitution, and the
Constitution subsequently drafted was approved by
the Convention on February 8, 1935.103 The
Constitution was submitted to the President of the
United States on March 18, 1935.104 On March 23,
1935, the President of the United States certified
that the Constitution conformed substantially with
the provisions of the Act of Congress approved on
March 24, 1934.105 On May 14, 1935, the
Constitution was ratified by the Filipino people.106
The 1935 Constitution adopted the Regalian
doctrine, declaring all natural resources of the
Philippines, including mineral lands and minerals,
to be property belonging to the State.107 As adopted
in a republican system, the medieval concept of
jura regalia is stripped of royal overtones and
ownership of the land is vested in the State.108
Section 1, Article XIII, on Conservation and
Utilization of Natural Resources, of the 1935
Constitution provided:

SECTION 1. All agricultural, timber, and


mineral lands of the public domain, waters,
minerals, coal, petroleum, and other
mineral oils, all forces of potential energy,
and other natural resources of the
Philippines belong to the State, and their
disposition, exploitation, development, or
utilization shall be limited to citizens of the
Philippines, or to corporations or
associations at least sixty per centum of the
capital of which is owned by such citizens,
subject to any existing right, grant, lease, or
concession at the time of the inauguration
of the Government established under this
Constitution. Natural resources, with the
exception of public agricultural land, shall
not be alienated, and no license,
concession, or lease for the exploitation,
development, or utilization of any of the
natural resources shall be granted for a
period exceeding twenty-five years, except
as to water rights for irrigation, water
supply, fisheries, or industrial uses other
than the development of water power, in
which cases beneficial use may be the
measure and the limit of the grant.
The nationalization and conservation of the natural
resources of the country was one of the fixed and
dominating objectives of the 1935 Constitutional
Convention.109 One delegate relates:
There was an overwhelming sentiment in the
Convention in favor of the principle of state
ownership of natural resources and the adoption of
the Regalian doctrine. State ownership of natural
resources was seen as a necessary starting point
to secure recognition of the state's power to control

their disposition, exploitation, development, or


utilization. The delegates of the Constitutional
Convention very well knew that the concept of
State ownership of land and natural resources was
introduced by the Spaniards, however, they were
not certain whether it was continued and applied by
the Americans. To remove all doubts, the
Convention approved the provision in the
Constitution affirming the Regalian doctrine.
The adoption of the principle of state ownership of
the natural resources and of the Regalian doctrine
was considered to be a necessary starting point for
the plan of nationalizing and conserving the natural
resources of the country. For with the establishment
of the principle of state ownership of the natural
resources, it would not be hard to secure the
recognition of the power of the State to control their
disposition, exploitation, development or
utilization.110
The nationalization of the natural resources was
intended (1) to insure their conservation for Filipino
posterity; (2) to serve as an instrument of national
defense, helping prevent the extension to the
country of foreign control through peaceful
economic penetration; and (3) to avoid making the
Philippines a source of international conflicts with
the consequent danger to its internal security and
independence.111
The same Section 1, Article XIII also adopted the
concession system, expressly permitting the State
to grant licenses, concessions, or leases for the
exploitation, development, or utilization of any of
the natural resources. Grants, however, were
limited to Filipinos or entities at least 60% of the
capital of which is owned by Filipinos.
lawph!l.ne+

The swell of nationalism that suffused the 1935


Constitution was radically diluted when on
November 1946, the Parity Amendment, which
came in the form of an "Ordinance Appended to the
Constitution," was ratified in a plebiscite.112 The
Amendment extended, from July 4, 1946 to July 3,
1974, the right to utilize and exploit our natural
resources to citizens of the United States and
business enterprises owned or controlled, directly
or indirectly, by citizens of the United States:113
Notwithstanding the provision of section one, Article
Thirteen, and section eight, Article Fourteen, of the
foregoing Constitution, during the effectivity of the
Executive Agreement entered into by the President
of the Philippines with the President of the United
States on the fourth of July, nineteen hundred and
forty-six, pursuant to the provisions of
Commonwealth Act Numbered Seven hundred and
thirty-three, but in no case to extend beyond the
third of July, nineteen hundred and seventy-four,
the disposition, exploitation, development, and
utilization of all agricultural, timber, and mineral
lands of the public domain, waters, minerals, coals,
petroleum, and other mineral oils, all forces and
sources of potential energy, and other natural
resources of the Philippines, and the operation of
public utilities, shall, if open to any person, be open
to citizens of the United States and to all forms of
business enterprise owned or controlled, directly or
indirectly, by citizens of the United States in the
same manner as to, and under the same conditions
imposed upon, citizens of the Philippines or
corporations or associations owned or controlled by
citizens of the Philippines.
The Parity Amendment was subsequently modified
by the 1954 Revised Trade Agreement, also known

as the Laurel-Langley Agreement, embodied in


Republic Act No. 1355.114
THE PETROLEUM ACT OF 1949 AND THE
CONCESSION SYSTEM
In the meantime, Republic Act No. 387,115 also
known as the Petroleum Act of 1949, was approved
on June 18, 1949.
The Petroleum Act of 1949 employed the
concession system for the exploitation of the
nation's petroleum resources. Among the kinds of
concessions it sanctioned were exploration and
exploitation concessions, which respectively
granted to the concessionaire the exclusive right to
explore for116 or develop117 petroleum within
specified areas.
Concessions may be granted only to duly qualified
persons118 who have sufficient finances,
organization, resources, technical competence, and
skills necessary to conduct the operations to be
undertaken.119
Nevertheless, the Government reserved the right to
undertake such work itself.120 This proceeded from
the theory that all natural deposits or occurrences
of petroleum or natural gas in public and/or private
lands in the Philippines belong to the
State.121 Exploration and exploitation concessions
did not confer upon the concessionaire ownership
over the petroleum lands and petroleum
deposits.122 However, they did grant
concessionaires the right to explore, develop,
exploit, and utilize them for the period and under
the conditions determined by the law.123

Concessions were granted at the complete risk of


the concessionaire; the Government did not
guarantee the existence of petroleum or undertake,
in any case, title warranty.124
Concessionaires were required to submit
information as maybe required by the Secretary of
Agriculture and Natural Resources, including
reports of geological and geophysical
examinations, as well as production
reports.125Exploration126 and
exploitation127 concessionaires were also required
to submit work programs.
lavvphi1.net

Exploitation concessionaires, in particular, were


obliged to pay an annual exploitation tax,128 the
object of which is to induce the concessionaire to
actually produce petroleum, and not simply to sit on
the concession without developing or exploiting
it.129 These concessionaires were also bound to pay
the Government royalty, which was not less than
12% of the petroleum produced and saved, less
that consumed in the operations of the
concessionaire.130 Under Article 66, R.A. No. 387,
the exploitation tax may be credited against the
royalties so that if the concessionaire shall be
actually producing enough oil, it would not actually
be paying the exploitation tax.131
Failure to pay the annual exploitation tax for two
consecutive years,132 or the royalty due to the
Government within one year from the date it
becomes due,133 constituted grounds for the
cancellation of the concession. In case of delay in
the payment of the taxes or royalty imposed by the
law or by the concession, a surcharge of 1% per
month is exacted until the same are paid.134

As a rule, title rights to all equipment and structures


that the concessionaire placed on the land belong
to the exploration or exploitation
concessionaire.135 Upon termination of such
concession, the concessionaire had a right to
remove the same.136

Furthermore, if there is a competitive allocation of


the resource leading to substantial bonuses and/or
greater royalty coupled with a relatively high level
of taxation, revenue accruing to the State under the
concession system may compare favorably with
other financial arrangements.

The Secretary of Agriculture and Natural


Resources was tasked with carrying out the
provisions of the law, through the Director of Mines,
who acted under the Secretary's immediate
supervision and control.137 The Act granted the
Secretary the authority to inspect any operation of
the concessionaire and to examine all the books
and accounts pertaining to operations or conditions
related to payment of taxes and royalties.138

Disadvantages of Concession. There are, however,


major negative aspects to this system. Because the
Government's role in the traditional concession is
passive, it is at a distinct disadvantage in managing
and developing policy for the nation's petroleum
resource. This is true for several reasons. First,
even though most concession agreements contain
covenants requiring diligence in operations and
production, this establishes only an indirect and
passive control of the host country in resource
development. Second, and more importantly, the
fact that the host country does not directly
participate in resource management decisions
inhibits its ability to train and employ its nationals in
petroleum development. This factor could delay or
prevent the country from effectively engaging in the
development of its resources. Lastly, a direct role in
management is usually necessary in order to obtain
a knowledge of the international petroleum industry
which is important to an appreciation of the host
country's resources in relation to those of other
countries.142

The same law authorized the Secretary to create


an Administration Unit and a Technical
Board.139 The Administration Unit was charged, inter
alia, with the enforcement of the provisions of the
law.140 The Technical Board had, among other
functions, the duty to check on the performance of
concessionaires and to determine whether the
obligations imposed by the Act and its
implementing regulations were being complied
with.141
Victorio Mario A. Dimagiba, Chief Legal Officer of
the Bureau of Energy Development, analyzed the
benefits and drawbacks of the concession system
insofar as it applied to the petroleum industry:
Advantages of Concession. Whether it emphasizes
income tax or royalty, the most positive aspect of
the concession system is that the State's financial
involvement is virtually risk free and administration
is simple and comparatively low in cost.

Other liabilities of the system have also been


noted:
x x x there are functional implications which give
the concessionaire great economic power arising
from its exclusive equity holding. This includes,
first, appropriation of the returns of the undertaking,
subject to a modest royalty; second, exclusive

management of the project; third, control of


production of the natural resource, such as volume
of production, expansion, research and
development; and fourth, exclusive responsibility
for downstream operations, like processing,
marketing, and distribution. In short, even if
nominally, the state is the sovereign and owner of
the natural resource being exploited, it has been
shorn of all elements of control over such natural
resource because of the exclusive nature of the
contractual regime of the concession. The
concession system, investing as it does ownership
of natural resources, constitutes a consistent
inconsistency with the principle embodied in our
Constitution that natural resources belong to the
state and shall not be alienated, not to mention the
fact that the concession was the bedrock of the
colonial system in the exploitation of natural
resources.143
Eventually, the concession system failed for
reasons explained by Dimagiba:
Notwithstanding the good intentions of the
Petroleum Act of 1949, the concession system
could not have properly spurred sustained oil
exploration activities in the country, since it
assumed that such a capital-intensive, high risk
venture could be successfully undertaken by a
single individual or a small company. In effect,
concessionaires' funds were easily exhausted.
Moreover, since the concession system practically
closed its doors to interested foreign investors,
local capital was stretched to the limits. The old
system also failed to consider the highly
sophisticated technology and expertise required,
which would be available only to multinational
companies.144

A shift to a new regime for the development of


natural resources thus seemed imminent.
PRESIDENTIAL DECREE NO. 87, THE 1973
CONSTITUTION AND THE SERVICE CONTRACT
SYSTEM
The promulgation on December 31, 1972 of
Presidential Decree No. 87,145 otherwise known as
The Oil Exploration and Development Act of 1972
signaled such a transformation. P.D. No. 87
permitted the government to explore for and
produce indigenous petroleum through "service
contracts."146
"Service contracts" is a term that assumes varying
meanings to different people, and it has carried
many names in different countries, like "work
contracts" in Indonesia, "concession agreements"
in Africa, "production-sharing agreements" in the
Middle East, and "participation agreements" in Latin
America.147 A functional definition of "service
contracts" in the Philippines is provided as follows:
A service contract is a contractual arrangement for
engaging in the exploitation and development of
petroleum, mineral, energy, land and other natural
resources by which a government or its agency, or
a private person granted a right or privilege by the
government authorizes the other party (service
contractor) to engage or participate in the exercise
of such right or the enjoyment of the privilege, in
that the latter provides financial or technical
resources, undertakes the exploitation or
production of a given resource, or directly manages
the productive enterprise, operations of the
exploration and exploitation of the resources or the
disposition of marketing or resources.148

In a service contract under P.D. No. 87, service and


technology are furnished by the service contractor
for which it shall be entitled to the stipulated service
fee.149 The contractor must be technically
competent and financially capable to undertake the
operations required in the contract.150
Financing is supposed to be provided by the
Government to which all petroleum produced
belongs.151 In case the Government is unable to
finance petroleum exploration operations, the
contractor may furnish services, technology and
financing, and the proceeds of sale of the
petroleum produced under the contract shall be the
source of funds for payment of the service fee and
the operating expenses due the contractor.152 The
contractor shall undertake, manage and execute
petroleum operations, subject to the government
overseeing the management of the
operations.153 The contractor provides all necessary
services and technology and the requisite
financing, performs the exploration work
obligations, and assumes all exploration risks such
that if no petroleum is produced, it will not be
entitled to reimbursement.154 Once petroleum in
commercial quantity is discovered, the contractor
shall operate the field on behalf of the
government.155
P.D. No. 87 prescribed minimum terms and
conditions for every service contract.156 It also
granted the contractor certain privileges, including
exemption from taxes and payment of tariff
duties,157 and permitted the repatriation of capital
and retention of profits abroad.158
Ostensibly, the service contract system had certain
advantages over the concession regime.159 It has

been opined, though, that, in the Philippines, our


concept of a service contract, at least in the
petroleum industry, was basically a concession
regime with a production-sharing element.160
On January 17, 1973, then President Ferdinand E.
Marcos proclaimed the ratification of a new
Constitution.161Article XIV on the National Economy
and Patrimony contained provisions similar to the
1935 Constitution with regard to Filipino
participation in the nation's natural resources.
Section 8, Article XIV thereof provides:
Sec. 8. All lands of the public domain, waters,
minerals, coal, petroleum and other mineral oils, all
forces of potential energy, fisheries, wildlife, and
other natural resources of the Philippines belong to
the State. With the exception of agricultural,
industrial or commercial, residential and
resettlement lands of the public domain, natural
resources shall not be alienated, and no license,
concession, or lease for the exploration,
development, exploitation, or utilization of any of
the natural resources shall be granted for a period
exceeding twenty-five years, renewable for not
more than twenty-five years, except as to water
rights for irrigation, water supply, fisheries, or
industrial uses other than the development of water
power, in which cases beneficial use may be the
measure and the limit of the grant.
While Section 9 of the same Article maintained the
Filipino-only policy in the enjoyment of natural
resources, it also allowed Filipinos, upon authority
of the Batasang Pambansa, to enter into service
contracts with any person or entity for the
exploration or utilization of natural resources.

Sec. 9. The disposition, exploration, development,


exploitation, or utilization of any of the natural
resources of the Philippines shall be limited to
citizens, or to corporations or associations at least
sixty per centum of which is owned by such
citizens. The Batasang Pambansa, in the national
interest, may allow such citizens, corporations or
associations to enter into service contracts for
financial, technical, management, or other forms of
assistance with any person or entity for the
exploration, or utilization of any of the natural
resources. Existing valid and binding service
contracts for financial, technical, management, or
other forms of assistance are hereby recognized as
such. [Emphasis supplied.]
The concept of service contracts, according to one
delegate, was borrowed from the methods followed
by India, Pakistan and especially Indonesia in the
exploration of petroleum and mineral oils.162 The
provision allowing such contracts, according to
another, was intended to "enhance the proper
development of our natural resources since Filipino
citizens lack the needed capital and technical
know-how which are essential in the proper
exploration, development and exploitation of the
natural resources of the country."163
The original idea was to authorize the government,
not private entities, to enter into service contracts
with foreign entities.164 As finally approved,
however, a citizen or private entity could be allowed
by the National Assembly to enter into such service
contract.165 The prior approval of the National
Assembly was deemed sufficient to protect the
national interest.166 Notably, none of the laws
allowing service contracts were passed by the

Batasang Pambansa. Indeed, all of them were


enacted by presidential decree.

of assistance . . . with any foreign person or entity


for the exploration, development, exploitation or
utilization of the forest resources."173

On March 13, 1973, shortly after the ratification of


the new Constitution, the President promulgated
Presidential Decree No. 151.167 The law allowed
Filipino citizens or entities which have acquired
lands of the public domain or which own, hold or
control such lands to enter into service contracts for
financial, technical, management or other forms of
assistance with any foreign persons or entity for the
exploration, development, exploitation or utilization
of said lands.168

Yet another law allowing service contracts, this time


for geothermal resources, was Presidential Decree
No. 1442,174 which was signed into law on June 11,
1978. Section 1 thereof authorized the Government
to enter into service contracts for the exploration,
exploitation and development of geothermal
resources with a foreign contractor who must be
technically and financially capable of undertaking
the operations required in the service contract.

Presidential Decree No. 463,169 also known as The


Mineral Resources Development Decree of 1974,
was enacted on May 17, 1974. Section 44 of the
decree, as amended, provided that a lessee of a
mining claim may enter into a service contract with
a qualified domestic or foreign contractor for the
exploration, development and exploitation of his
claims and the processing and marketing of the
product thereof.

Thus, virtually the entire range of the country's


natural resources from petroleum and minerals to
geothermal energy, from public lands and forest
resources to fishery products was well covered
by apparent legal authority to engage in the direct
participation or involvement of foreign persons or
corporations (otherwise disqualified) in the
exploration and utilization of natural resources
through service contracts.175

Presidential Decree No. 704170 (The Fisheries


Decree of 1975), approved on May 16, 1975,
allowed Filipinos engaged in commercial fishing to
enter into contracts for financial, technical or other
forms of assistance with any foreign person,
corporation or entity for the production, storage,
marketing and processing of fish and
fishery/aquatic products.171

THE 1987 CONSTITUTION AND TECHNICAL OR


FINANCIAL ASSISTANCE AGREEMENTS

Presidential Decree No. 705172 (The Revised


Forestry Code of the Philippines), approved on May
19, 1975, allowed "forest products licensees,
lessees, or permitees to enter into service contracts
for financial, technical, management, or other forms

After the February 1986 Edsa Revolution, Corazon


C. Aquino took the reins of power under a
revolutionary government. On March 25, 1986,
President Aquino issued Proclamation No.
3,176 promulgating the Provisional Constitution,
more popularly referred to as the Freedom
Constitution. By authority of the same
Proclamation, the President created a
Constitutional Commission (CONCOM) to draft a
new constitution, which took effect on the date of its
ratification on February 2, 1987.177

The 1987 Constitution retained the Regalian


doctrine. The first sentence of Section 2, Article XII
states: "All lands of the public domain, waters,
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."
Like the 1935 and 1973 Constitutions before it, the
1987 Constitution, in the second sentence of the
same provision, prohibits the alienation of natural
resources, except agricultural lands.
The third sentence of the same paragraph is new:
"The exploration, development and utilization of
natural resources shall be under the full control and
supervision of the State." The constitutional policy
of the State's "full control and supervision" over
natural resources proceeds from the concept of
jura regalia, as well as the recognition of the
importance of the country's natural resources, not
only for national economic development, but also
for its security and national defense.178 Under this
provision, the State assumes "a more dynamic role"
in the exploration, development and utilization of
natural resources.179
Conspicuously absent in Section 2 is the provision
in the 1935 and 1973 Constitutions 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 public domain
through "license, concession or lease" is no longer
allowed under the 1987 Constitution.180

Having omitted the provision on the concession


system, Section 2 proceeded to introduce
"unfamiliar language":181
The State may directly undertake such activities or
it may enter into co-production, joint venture, or
production-sharing agreements with Filipino
citizens, or corporations or associations at least
sixty per centum of whose capital is owned by such
citizens.
Consonant with the State's "full supervision and
control" over natural resources, Section 2 offers the
State two "options."182 One, the State may directly
undertake these activities itself; or two, it may enter
into co-production, joint venture, or productionsharing agreements with Filipino citizens, or entities
at least 60% of whose capital is owned by such
citizens.
A third option is found in the third paragraph of the
same section:

The President may enter into agreements with


foreign-owned corporations involving either
technical or financial assistance for large-scale
exploration, development, and utilization of
minerals, petroleum, and other mineral oils
according to the general terms and conditions
provided by law, based on real contributions to the
economic growth and general welfare of the
country. In such agreements, the State shall
promote the development and use of local scientific
and technical resources.
The President shall notify the Congress of every
contract entered into in accordance with this
provision, within thirty days from its execution.
Although Section 2 sanctions the participation of
foreign-owned corporations in the exploration,
development, and utilization of natural resources, it
imposes certain limitations or conditions to
agreements with such corporations.

The Congress may, by law, allow small-scale


utilization of natural resources by Filipino citizens,
as well as cooperative fish farming, with priority to
subsistence fishermen and fish-workers in rivers,
lakes, bays, and lagoons.

First, the parties to FTAAs. Only the


President, in behalf of the State, may enter
into these agreements, and only with
corporations. By contrast, under the 1973
Constitution, a Filipino citizen, corporation
or association may enter into a service
contract with a "foreign person or entity."

While the second and third options are limited only


to Filipino citizens or, in the case of the former, to
corporations or associations at least 60% of the
capital of which is owned by Filipinos, a fourth
allows the participation of foreign-owned
corporations. The fourth and fifth paragraphs of
Section 2 provide:

Second, the size of the activities: only


large-scale exploration, development, and
utilization is allowed. The term "large-scale
usually refers to very capital-intensive
activities."183

Third, the natural resources subject of the


activities is restricted to minerals, petroleum
and other mineral oils, the intent being to
limit service contracts to those areas where
Filipino capital may not be sufficient.184
Fourth, consistency with the provisions of
statute. The agreements must be in
accordance with the terms and conditions
provided by law.
Fifth, Section 2 prescribes certain
standards for entering into such
agreements. The agreements must be
based on real contributions to economic
growth and general welfare of the country.
Sixth, the agreements must contain
rudimentary stipulations for the promotion
of the development and use of local
scientific and technical resources.
Seventh, the notification requirement. The
President shall notify Congress of every
financial or technical assistance agreement
entered into within thirty days from its
execution.
Finally, the scope of the agreements. While
the 1973 Constitution referred to "service
contracts for financial, technical,
management, or other forms of assistance"
the 1987 Constitution provides for
"agreements. . . involving either financial or
technical assistance." It bears noting that
the phrases "service contracts" and
"management or other forms of assistance"

in the earlier constitution have been


omitted.
By virtue of her legislative powers under the
Provisional Constitution,185 President Aquino, on
July 10, 1987, signed into law E.O. No. 211
prescribing the interim procedures in the
processing and approval of applications for the
exploration, development and utilization of
minerals. The omission in the 1987 Constitution of
the term "service contracts" notwithstanding, the
said E.O. still referred to them in Section 2 thereof:
Sec. 2. Applications for the exploration,
development and utilization of mineral resources,
including renewal applications and applications for
approval of operating agreements and mining
service contracts, shall be accepted and processed
and may be approved x x x. [Emphasis supplied.]
The same law provided in its Section 3 that the
"processing, evaluation and approval of all mining
applications . . . operating agreements and service
contracts . . . shall be governed by Presidential
Decree No. 463, as amended, other existing mining
laws, and their implementing rules and
regulations. . . ."
As earlier stated, on the 25th also of July 1987, the
President issued E.O. No. 279 by authority of which
the subject WMCP FTAA was executed on March
30, 1995.
On March 3, 1995, President Ramos signed into
law R.A. No. 7942. Section 15 thereof declares that
the Act "shall govern the exploration, development,
utilization, and processing of all mineral resources."

Such declaration notwithstanding, R.A. No. 7942


does not actually cover all the modes through
which the State may undertake the exploration,
development, and utilization of natural resources.
The State, being the owner of the natural
resources, is accorded the primary power and
responsibility in the exploration, development and
utilization thereof. As such, it may undertake these
activities through four modes:
The State may directly undertake such activities.
(2) The State may enter into co-production,
joint venture or production-sharing
agreements with Filipino citizens or
qualified corporations.
(3) Congress may, by law, allow small-scale
utilization of natural resources by Filipino
citizens.
(4) For the large-scale exploration,
development and utilization of minerals,
petroleum and other mineral oils, the
President may enter into agreements with
foreign-owned corporations involving
technical or financial assistance.186
Except to charge the Mines and Geosciences
Bureau of the DENR with performing researches
and surveys,187 and a passing mention of
government-owned or controlled
corporations,188 R.A. No. 7942 does not specify how
the State should go about the first mode. The third
mode, on the other hand, is governed by Republic
Act No. 7076189(the People's Small-Scale Mining

Act of 1991) and other pertinent laws.190 R.A. No.


7942 primarily concerns itself with the second and
fourth modes.
Mineral production sharing, co-production and joint
venture agreements are collectively classified by
R.A. No. 7942 as "mineral agreements."191 The
Government participates the least in a mineral
production sharing agreement (MPSA). In an
MPSA, the Government grants the contractor192 the
exclusive right to conduct mining operations within
a contract area193 and shares in the gross
output.194 The MPSA contractor provides the
financing, technology, management and personnel
necessary for the agreement's
implementation.195 The total government share in an
MPSA is the excise tax on mineral products under
Republic Act No. 7729,196 amending Section 151(a)
of the National Internal Revenue Code, as
amended.197
In a co-production agreement (CA),198 the
Government provides inputs to the mining
operations other than the mineral resource,199 while
in a joint venture agreement (JVA), where the
Government enjoys the greatest participation, the
Government and the JVA contractor organize a
company with both parties having equity
shares.200 Aside from earnings in equity, the
Government in a JVA is also entitled to a share in
the gross output.201The Government may enter into
a CA202 or JVA203 with one or more contractors. The
Government's share in a CA or JVA is set out in
Section 81 of the law:
The share of the Government in co-production and
joint venture agreements shall be negotiated by the
Government and the contractor taking into

consideration the: (a) capital investment of the


project, (b) the risks involved, (c) contribution of the
project to the economy, and (d) other factors that
will provide for a fair and equitable sharing between
the Government and the contractor. The
Government shall also be entitled to
compensations for its other contributions which
shall be agreed upon by the parties, and shall
consist, among other things, the contractor's
income tax, excise tax, special allowance,
withholding tax due from the contractor's foreign
stockholders arising from dividend or interest
payments to the said foreign stockholders, in case
of a foreign national and all such other taxes, duties
and fees as provided for under existing laws.
All mineral agreements grant the respective
contractors the exclusive right to conduct mining
operations and to extract all mineral resources
found in the contract area.204 A "qualified person"
may enter into any of the mineral agreements with
the Government.205 A "qualified person" is
any citizen of the Philippines with capacity to
contract, or a corporation, partnership, association,
or cooperative organized or authorized for the
purpose of engaging in mining, with technical and
financial capability to undertake mineral resources
development and duly registered in accordance
with law at least sixty per centum (60%) of the
capital of which is owned by citizens of the
Philippines x x x.206
The fourth mode involves "financial or technical
assistance agreements." An FTAA is defined as "a
contract involving financial or technical assistance
for large-scale exploration, development, and
utilization of natural resources."207 Any qualified

person with technical and financial capability to


undertake large-scale exploration, development,
and utilization of natural resources in the
Philippines may enter into such agreement directly
with the Government through the DENR.208 For the
purpose of granting an FTAA, a legally organized
foreign-owned corporation (any corporation,
partnership, association, or cooperative duly
registered in accordance with law in which less
than 50% of the capital is owned by Filipino
citizens)209 is deemed a "qualified person."210
Other than the difference in contractors'
qualifications, the principal distinction between
mineral agreements and FTAAs is the maximum
contract area to which a qualified person may hold
or be granted.211 "Large-scale" under R.A. No. 7942
is determined by the size of the contract area, as
opposed to the amount invested (US
$50,000,000.00), which was the standard under
E.O. 279.
Like a CA or a JVA, an FTAA is subject to
negotiation.212 The Government's contributions, in
the form of taxes, in an FTAA is identical to its
contributions in the two mineral agreements, save
that in an FTAA:
The collection of Government share in financial or
technical assistance agreement shall commence
after the financial or technical assistance
agreement contractor has fully recovered its preoperating expenses, exploration, and development
expenditures, inclusive.213
III

Having examined the history of the constitutional


provision and statutes enacted pursuant thereto, a
consideration of the substantive issues presented
by the petition is now in order.
THE EFFECTIVITY OF EXECUTIVE ORDER NO.
279
Petitioners argue that E.O. No. 279, the law in force
when the WMC FTAA was executed, did not come
into effect.
E.O. No. 279 was signed into law by then President
Aquino on July 25, 1987, two days before the
opening of Congress on July 27, 1987.214 Section 8
of the E.O. states that the same "shall take effect
immediately." This provision, according to
petitioners, runs counter to Section 1 of E.O. No.
200,215 which provides:
SECTION 1. Laws shall take effect after fifteen
days following the completion of their publication
either in the Official Gazette or in a newspaper of
general circulation in the Philippines, unless it is
otherwise provided.216 [Emphasis supplied.]
On that premise, petitioners contend that E.O. No.
279 could have only taken effect fifteen days after
its publication at which time Congress had already
convened and the President's power to legislate
had ceased.
Respondents, on the other hand, counter that the
validity of E.O. No. 279 was settled in Miners
Association of the Philippines v. Factoran, supra.
This is of course incorrect for the issue in Miners
Association was not the validity of E.O. No. 279 but

that of DAO Nos. 57 and 82 which were issued


pursuant thereto.
Nevertheless, petitioners' contentions have no
merit.
It bears noting that there is nothing in E.O. No. 200
that prevents a law from taking effect on a date
other than even before the 15-day period after
its publication. Where a law provides for its own
date of effectivity, such date prevails over that
prescribed by E.O. No. 200. Indeed, this is the very
essence of the phrase "unless it is otherwise
provided" in Section 1 thereof. Section 1, E.O. No.
200, therefore, applies only when a statute does
not provide for its own date of effectivity.
What is mandatory under E.O. No. 200, and what
due process requires, as this Court held in Taada
v. Tuvera,217is the publication of the law for without
such notice and publication, there would be no
basis for the application of the maxim "ignorantia
legis n[eminem] excusat." It would be the height of
injustice to punish or otherwise burden a citizen for
the transgression of a law of which he had no
notice whatsoever, not even a constructive one.
While the effectivity clause of E.O. No. 279 does
not require its publication, it is not a ground for its
invalidation since the Constitution, being "the
fundamental, paramount and supreme law of the
nation," is deemed written in the law.218 Hence, the
due process clause,219 which, so Taada held,
mandates the publication of statutes, is read into
Section 8 of E.O. No. 279. Additionally, Section 1 of
E.O. No. 200 which provides for publication "either
in the Official Gazette or in a newspaper of general
circulation in the Philippines," finds suppletory

application. It is significant to note that E.O. No.


279 was actually published in the Official
Gazette220 on August 3, 1987.
From a reading then of Section 8 of E.O. No. 279,
Section 1 of E.O. No. 200, and Taada v. Tuvera,
this Court holds that E.O. No. 279 became effective
immediately upon its publication in the Official
Gazette on August 3, 1987.
That such effectivity took place after the convening
of the first Congress is irrelevant. At the time
President Aquino issued E.O. No. 279 on July 25,
1987, she was still validly exercising legislative
powers under the Provisional Constitution.221 Article
XVIII (Transitory Provisions) of the 1987
Constitution explicitly states:
Sec. 6. The incumbent President shall continue to
exercise legislative powers until the first Congress
is convened.
The convening of the first Congress merely
precluded the exercise of legislative powers by
President Aquino; it did not prevent the effectivity of
laws she had previously enacted.
There can be no question, therefore, that E.O. No.
279 is an effective, and a validly enacted, statute.
THE CONSTITUTIONALITY OF THE WMCP FTAA
Petitioners submit that, in accordance with the text
of Section 2, Article XII of the Constitution, FTAAs
should be limited to "technical or financial
assistance" only. They observe, however, that,
contrary to the language of the Constitution, the

WMCP FTAA allows WMCP, a fully foreign-owned


mining corporation, to extend more than mere
financial or technical assistance to the State, for it
permits WMCP to manage and operate every
aspect of the mining activity. 222
Petitioners' submission is well-taken. It is a cardinal
rule in the interpretation of constitutions that the
instrument must be so construed as to give effect to
the intention of the people who adopted it.223 This
intention is to be sought in the constitution itself,
and the apparent meaning of the words is to be
taken as expressing it, except in cases where that
assumption would lead to absurdity, ambiguity, or
contradiction.224 What the Constitution says
according to the text of the provision, therefore,
compels acceptance and negates the power of the
courts to alter it, based on the postulate that the
framers and the people mean what they
say.225 Accordingly, following the literal text of the
Constitution, assistance accorded by foreignowned corporations in the large-scale exploration,
development, and utilization of petroleum, minerals
and mineral oils should be limited to "technical" or
"financial" assistance only.
WMCP nevertheless submits that the word
"technical" in the fourth paragraph of Section 2 of
E.O. No. 279 encompasses a "broad number of
possible services," perhaps, "scientific and/or
technological in basis."226 It thus posits that it may
also well include "the area of management or
operations . . . so long as such assistance requires
specialized knowledge or skills, and are related to
the exploration, development and utilization of
mineral resources."227

This Court is not persuaded. As priorly pointed out,


the phrase "management or other forms of
assistance" in the 1973 Constitution was deleted in
the 1987 Constitution, which allows only "technical
or financial assistance." Casus omisus pro omisso
habendus est. A person, object or thing omitted
from an enumeration must be held to have been
omitted intentionally.228 As will be shown later, the
management or operation of mining activities by
foreign contractors, which is the primary feature of
service contracts, was precisely the evil that the
drafters of the 1987 Constitution sought to
eradicate.
Respondents insist that "agreements involving
technical or financial assistance" is just another
term for service contracts. They contend that the
proceedings of the CONCOM indicate "that
although the terminology 'service contract' was
avoided [by the Constitution], the concept it
represented was not." They add that "[t]he concept
is embodied in the phrase 'agreements involving
financial or technical assistance.'"229 And point out
how members of the CONCOM referred to these
agreements as "service contracts." For instance:
SR. TAN. Am I correct in thinking that the
only difference between these future
service contracts and the past service
contracts under Mr. Marcos is the general
law to be enacted by the legislature and the
notification of Congress by the President?
That is the only difference, is it not?
MR. VILLEGAS. That is right.
SR. TAN. So those are the safeguards[?]

MR. VILLEGAS. Yes. There was no law at


all governing service contracts before.
SR. TAN. Thank you, Madam
President.230 [Emphasis supplied.]
WMCP also cites the following statements
of Commissioners Gascon, Garcia, Nolledo
and Tadeo who alluded to service contracts
as they explained their respective votes in
the approval of the draft Article:
MR. GASCON. Mr. Presiding Officer, I vote
no primarily because of two reasons: One,
the provision on service contracts. I felt that
if we would constitutionalize any provision
on service contracts, this should always be
with the concurrence of Congress and not
guided only by a general law to be
promulgated by Congress. x x
x.231 [Emphasis supplied.]
x x x.
MR. GARCIA. Thank you.
I vote no. x x x.
Service contracts are given constitutional
legitimization in Section 3, even when they
have been proven to be inimical to the
interests of the nation, providing as they do
the legal loophole for the exploitation of our
natural resources for the benefit of foreign
interests. They constitute a serious
negation of Filipino control on the use and
disposition of the nation's natural

resources, especially with regard to those


which are nonrenewable.232[Emphasis
supplied.]

Thank you, and I vote yes.233 [Emphasis


supplied.]

araw ay sisikat sa Kanluran. Kailan man


hindi puwedeng sumikat ang araw sa
Kanluran. I vote no.234 [Emphasis supplied.]

x x x.
xxx
MR. NOLLEDO. While there are
objectionable provisions in the Article on
National Economy and Patrimony, going
over said provisions meticulously, setting
aside prejudice and personalities will reveal
that the article contains a balanced set of
provisions. I hope the forthcoming
Congress will implement such provisions
taking into account that Filipinos should
have real control over our economy and
patrimony, and if foreign equity is permitted,
the same must be subordinated to the
imperative demands of the national interest.
x x x.
It is also my understanding that service
contracts involving foreign corporations or
entities are resorted to only when no
Filipino enterprise or Filipino-controlled
enterprise could possibly undertake the
exploration or exploitation of our natural
resources and that compensation under
such contracts cannot and should not equal
what should pertain to ownership of capital.
In other words, the service contract should
not be an instrument to circumvent the
basic provision, that the exploration and
exploitation of natural resources should be
truly for the benefit of Filipinos.

This Court is likewise not persuaded.


MR. TADEO. Nais ko lamang ipaliwanag
ang aking boto.
Matapos suriin ang kalagayan ng Pilipinas,
ang saligang suliranin, pangunahin ang
salitang "imperyalismo." Ang ibig sabihin
nito ay ang sistema ng lipunang
pinaghaharian ng iilang monopolyong
kapitalista at ang salitang "imperyalismo" ay
buhay na buhay sa National Economy and
Patrimony na nating ginawa. Sa
pamamagitan ng salitang "based on,"
naroroon na ang free trade sapagkat tayo
ay mananatiling tagapagluwas ng hilaw na
sangkap at tagaangkat ng yaring produkto.
Pangalawa, naroroon pa rin ang parity
rights, ang service contract, ang 60-40
equity sa natural resources. Habang
naghihirap ang sambayanang Pilipino,
ginagalugad naman ng mga dayuhan ang
ating likas na yaman. Kailan man ang
Article on National Economy and Patrimony
ay hindi nagpaalis sa pagkaalipin ng ating
ekonomiya sa kamay ng mga dayuhan. Ang
solusyon sa suliranin ng bansa ay dalawa
lamang: ang pagpapatupad ng tunay na
reporma sa lupa at ang national
industrialization. Ito ang tinatawag naming
pagsikat ng araw sa Silangan. Ngunit ang
mga landlords and big businessmen at ang
mga komprador ay nagsasabi na ang free
trade na ito, ang kahulugan para sa amin,
ay ipinipilit sa ating sambayanan na ang

As earlier noted, the phrase "service contracts" has


been deleted in the 1987 Constitution's Article on
National Economy and Patrimony. If the CONCOM
intended to retain the concept of service contracts
under the 1973 Constitution, it could have simply
adopted the old terminology ("service contracts")
instead of employing new and unfamiliar terms
("agreements . . . involving either technical or
financial assistance"). Such a difference between
the language of a provision in a revised constitution
and that of a similar provision in the preceding
constitution is viewed as indicative of a difference in
purpose.235 If, as respondents suggest, the concept
of "technical or financial assistance" agreements is
identical to that of "service contracts," the
CONCOM would not have bothered to fit the same
dog with a new collar. To uphold respondents'
theory would reduce the first to a mere euphemism
for the second and render the change in
phraseology meaningless.
An examination of the reason behind the change
confirms that technical or financial assistance
agreements are not synonymous to service
contracts.
[T]he Court in construing a Constitution should bear
in mind the object sought to be accomplished by its
adoption, and the evils, if any, sought to be
prevented or remedied. A doubtful provision will be
examined in light of the history of the times, and the
condition and circumstances under which the

Constitution was framed. The object is to ascertain


the reason which induced the framers of the
Constitution to enact the particular provision and
the purpose sought to be accomplished thereby, in
order to construe the whole as to make the words
consonant to that reason and calculated to effect
that purpose.236
As the following question of Commissioner
Quesada and Commissioner Villegas' answer
shows the drafters intended to do away with
service contracts which were used to circumvent
the capitalization (60%-40%) requirement:
MS. QUESADA. The 1973 Constitution
used the words "service contracts." In this
particular Section 3, is there a safeguard
against the possible control of foreign
interests if the Filipinos go into coproduction
with them?
MR. VILLEGAS. Yes. In fact, the deletion of
the phrase "service contracts" was our first
attempt to avoid some of the abuses in the
past regime in the use of service contracts
to go around the 60-40 arrangement. The
safeguard that has been introduced and
this, of course can be refined is found in
Section 3, lines 25 to 30, where Congress
will have to concur with the President on
any agreement entered into between a
foreign-owned corporation and the
government involving technical or financial
assistance for large-scale exploration,
development and utilization of natural
resources.237 [Emphasis supplied.]

In a subsequent discussion, Commissioner


Villegas allayed the fears of Commissioner
Quesada regarding the participation of
foreign interests in Philippine natural
resources, which was supposed to be
restricted to Filipinos.
MS. QUESADA. Another point of
clarification is the phrase "and utilization of
natural resources shall be under the full
control and supervision of the State." In the
1973 Constitution, this was limited to
citizens of the Philippines; but it was
removed and substituted by "shall be under
the full control and supervision of the
State." Was the concept changed so that
these particular resources would be limited
to citizens of the Philippines? Or would
these resources only be under the full
control and supervision of the State;
meaning, noncitizens would have access to
these natural resources? Is that the
understanding?
MR. VILLEGAS. No, Mr. Vice-President, if
the Commissioner reads the next sentence,
it states:
Such activities may be directly undertaken by the
State, or it may enter into co-production, joint
venture, production-sharing agreements with
Filipino citizens.
So we are still limiting it only to Filipino citizens.
x x x.

MS. QUESADA. Going back to Section 3,


the section suggests that:
The exploration, development, and utilization of
natural resources may be directly undertaken by
the State, or it may enter into co-production, joint
venture or production-sharing agreement with . . .
corporations or associations at least sixty per cent
of whose voting stock or controlling interest is
owned by such citizens.
Lines 25 to 30, on the other hand, suggest that in
the large-scale exploration, development and
utilization of natural resources, the President with
the concurrence of Congress may enter into
agreements with foreign-owned corporations even
for technical or financial assistance.
I wonder if this part of Section 3 contradicts the
second part. I am raising this point for fear that
foreign investors will use their enormous capital
resources to facilitate the actual exploitation or
exploration, development and effective disposition
of our natural resources to the detriment of Filipino
investors. I am not saying that we should not
consider borrowing money from foreign sources.
What I refer to is that foreign interest should be
allowed to participate only to the extent that they
lend us money and give us technical assistance
with the appropriate government permit. In this way,
we can insure the enjoyment of our natural
resources by our own people.
MR. VILLEGAS. Actually, the second provision
about the President does not permit foreign
investors to participate. It is only technical or
financial assistance they do not own anything
but on conditions that have to be determined by law

with the concurrence of Congress. So, it is very


restrictive.
If the Commissioner will remember, this removes
the possibility for service contracts which we said
yesterday were avenues used in the previous
regime to go around the 60-40
requirement.238 [Emphasis supplied.]
The present Chief Justice, then a member of the
CONCOM, also referred to this limitation in scope
in proposing an amendment to the 60-40
requirement:
MR. DAVIDE. May I be allowed to explain
the proposal?
MR. MAAMBONG. Subject to the threeminute rule, Madam President.
MR. DAVIDE. It will not take three minutes.
The Commission had just approved the Preamble.
In the Preamble we clearly stated that the Filipino
people are sovereign and that one of the objectives
for the creation or establishment of a government is
to conserve and develop the national patrimony.
The implication is that the national patrimony or our
natural resources are exclusively reserved for the
Filipino people. No alien must be allowed to enjoy,
exploit and develop our natural resources. As a
matter of fact, that principle proceeds from the fact
that our natural resources are gifts from God to the
Filipino people and it would be a breach of that
special blessing from God if we will allow aliens to
exploit our natural resources.

I voted in favor of the Jamir proposal because it is


not really exploitation that we granted to the alien
corporations but only for them to render financial or
technical assistance. It is not for them to enjoy our
natural resources. Madam President, our natural
resources are depleting; our population is
increasing by leaps and bounds. Fifty years from
now, if we will allow these aliens to exploit our
natural resources, there will be no more natural
resources for the next generations of Filipinos. It
may last long if we will begin now. Since 1935 the
aliens have been allowed to enjoy to a certain
extent the exploitation of our natural resources, and
we became victims of foreign dominance and
control. The aliens are interested in coming to the
Philippines because they would like to enjoy the
bounty of nature exclusively intended for Filipinos
by God.
And so I appeal to all, for the sake of the future
generations, that if we have to pray in the Preamble
"to preserve and develop the national patrimony for
the sovereign Filipino people and for the
generations to come," we must at this time decide
once and for all that our natural resources must be
reserved only to Filipino citizens.
Thank you.239 [Emphasis supplied.]
The opinion of another member of the CONCOM is
persuasive240 and leaves no doubt as to the
intention of the framers to eliminate service
contracts altogether. He writes:
Paragraph 4 of Section 2 specifies large-scale,
capital-intensive, highly technological undertakings
for which the President may enter into contracts
with foreign-owned corporations, and enunciates

strict conditions that should govern such contracts.


x x x.
This provision balances the need for foreign capital
and technology with the need to maintain the
national sovereignty. It recognizes the fact that as
long as Filipinos can formulate their own terms in
their own territory, there is no danger of
relinquishing sovereignty to foreign interests.
Are service contracts allowed under the new
Constitution? No. Under the new Constitution,
foreign investors (fully alien-owned) can NOT
participate in Filipino enterprises except to provide:
(1) Technical Assistance for highly technical
enterprises; and (2) Financial Assistance for largescale enterprises.
The intent of this provision, as well as other
provisions on foreign investments, is to prevent the
practice (prevalent in the Marcos government) of
skirting the 60/40 equation using the cover of
service contracts.241 [Emphasis supplied.]
Furthermore, it appears that Proposed Resolution
No. 496,242 which was the draft Article on National
Economy and Patrimony, adopted the concept of
"agreements . . . involving either technical or
financial assistance" contained in the "Draft of the
1986 U.P. Law Constitution Project" (U.P. Law draft)
which was taken into consideration during the
deliberation of the CONCOM.243 The former, as well
as Article XII, as adopted, employed the same
terminology, as the comparative table below shows:

DRAFT
OF
THE
UP
LAW
CONST
ITUTIO
N
PROJE
CT

PROPO
SED
RESOLU
TION
NO. 496
OF THE
CONSTI
TUTION
AL
COMMIS
SION

ARTICL
E XII
OF
THE
1987
CONST
ITUTIO
N

Sec. 1.
All
lands of
the
public
domain,
waters,
mineral
s, coal,
petroleu
m and
other
mineral
oils, all
forces
of
potentia
l
energy,

Sec. 3.
All lands
of the
public
domain,
waters,
minerals,
coal,
petroleu
m and
other
mineral
oils, all
forces of
potential
energy,
fisheries,
forests,
flora and

Sec. 2.
All
lands of
the
public
domain,
waters,
mineral
s, coal,
petroleu
m, and
other
mineral
oils, all
forces
of
potentia
l
energy,

fisherie
s, flora
and
fauna
and
other
natural
resourc
es of
the
Philippi
nes are
owned
by the
State.
With
the
excepti
on of
agricult
ural
lands,
all other
natural
resourc
es shall
not be
alienate
d. The
explorat
ion,
develop
ment
and

fauna,
and
other
natural
resource
s are
owned
by the
State.
With the
exceptio
n of
agricultur
al lands,
all other
natural
resource
s shall
not be
alienated
. The
explorati
on,
develop
ment,
and
utilization
of natural
resource
s shall
be under
the full
control
and

fisherie
s,
forests
or
timber,
wildlife,
flora
and
fauna,
and
other
natural
resourc
es are
owned
by the
State.
With
the
excepti
on of
agricult
ural
lands,
all other
natural
resourc
es shall
not be
alienate
d. The
explorat
ion,
develop

utilizatio
n of
natural
resourc
es shall
be
under
the full
control
and
supervi
sion of
the
State.
Such
activitie
s may
be
directly
underta
ken by
the
state, or
it may
enter
into coproducti
on, joint
venture,
producti
on
sharing
agreem
ents

supervisi
on of the
State.
Such
activities
may be
directly
undertak
en by the
State, or
it may
enter into
coproductio
n, joint
venture,
productio
n-sharing
agreeme
nts with
Filipino
citizens
or
corporati
ons or
associati
ons at
least
sixty per
cent of
whose
voting
stock or
controllin

ment,
and
utilizatio
n of
natural
resourc
es shall
be
under
the full
control
and
supervi
sion of
the
State.
The
State
may
directly
underta
ke such
activitie
s or it
may
enter
into coproducti
on, joint
venture,
or
producti
onsharing

with
Filipino
citizens
or
corpora
tions or
associa
tions
sixty
per cent
of
whose
voting
stock or
controlli
ng
interest
is
owned
by such
citizens
for a
period
of not
more
than
twentyfive
years,
renewa
ble for
not
more
than

g interest
is owned
by such
citizens.
Such
agreeme
nts shall
be for a
period of
twentyfive
years,
renewabl
e for not
more
than
twentyfive
years,
and
under
such
term and
condition
s as may
be
provided
by law. In
cases of
water
rights for
irrigation,
water
supply,

agreem
ents
with
Filipino
citizens,
or
corpora
tions or
associa
tions at
least
sixty
per
centum
of
whose
capital
is
owned
by such
citizens.
Such
agreem
ents
may be
for a
period
not
exceedi
ng
twentyfive
years,
renewa

twentyfive
years
and
under
such
terms
and
conditio
ns as
may be
provide
d by
law. In
case as
to water
rights
for
irrigatio
n, water
supply,
fisherie
s, or
industri
al uses
other
than the
develop
ment of
water
power,
benefici
al use
may be

fisheries
or
industrial
uses
other
than the
develop
ment for
water
power,
beneficia
l use
may be
the
measure
and limit
of the
grant.
The
Congres
s may by
law allow
smallscale
utilization
of natural
resource
s by
Filipino
citizens,
as well
as
cooperati

ble for
not
more
than
twentyfive
years,
and
under
such
terms
and
conditio
ns as
may be
provide
d by
law. In
case of
water
rights
for
irrigatio
n, water
supply,
fisherie
s, or
industri
al uses
other
than the
develop
ment of
water

the
measur
e and
limit of
the
grant.
The
Nationa
l
Assemb
ly may
by law
allow
small
scale
utilizatio
n of
natural
resourc
es by
Filipino
citizens.
The
Nationa
l
Assemb
ly, may,
by twothirds
vote of
all its

ve fish
farming
in rivers,
lakes,
bays,
and
lagoons.
The
Presiden
t with the
concurre
nce of
Congres
s, by
special
law, shall
provide
the terms
and
condition
s under
which a
foreignowned
corporati
on may
enter into
agreeme
nts with
the
governm
ent
involving

power,
benefici
al use
may be
the
measur
e and
limit of
the
grant.
The
State
shall
protect
the
nation's
marine
wealth
in its
archipel
agic
waters,
territori
al sea,
and
exclusiv
e
econom
ic zone,
and
reserve
its use
and

membe
rs by
special
law
provide
the
terms
and
conditio
ns
under
which a
foreignowned
corpora
tion
may
enter
into
agreem
ents
with the
govern
ment
involvin
g either
technic
al or
financi
al
assista
nce for
largescale

either
technica
l or
financial
assistan
ce for
largescale
explorati
on,
develop
ment,
and
utilization
of natural
resource
s.
[Emphasi
s
supplied.
]

enjoym
ent
exclusiv
ely to
Filipino
citizens.
The
Congre
ss may,
by law,
allow
smallscale
utilizatio
n of
natural
resourc
es by
Filipino
citizens,
as well
as
coopera
tive fish
farming,
with
priority
to
subsist
ence
fisherm
en and
fish-

explorat
ion,
develop
ment,
or
utilizatio
n of
natural
resourc
es.
[Empha
sis
supplie
d.]

workers
in
rivers,
lakes,
bays,
and
lagoons
.
The
Preside
nt may
enter
into
agreem
ents
with
foreignowned
corpora
tions
involvin
g either
technic
al or
financi
al
assista
nce for
largescale
explorat
ion,
develop

ment,
and
utilizatio
n of
mineral
s,
petroleu
m, and
other
mineral
oils
accordi
ng to
the
general
terms
and
conditio
ns
provide
d by
law,
based
on real
contribu
tions to
the
econom
ic
growth
and
general
welfare
of the

Looking at the Philippine model, we can discern the


following vestiges of the concession regime, thus:
country.
In such
agreem
ents,
the
State
shall
promot
e the
develop
ment
and use
of local
scientifi
c and
technic
al
resourc
es.
[Empha
sis
supplie
d.]
The
Preside
nt shall
notify
the
Congre
ss of
every
contract
entered

into in
accorda
nce
with this
provisio
n,
within
thirty
days
from its
executi
on.

The insights of the proponents of the U.P. Law draft


are, therefore, instructive in interpreting the phrase
"technical or financial assistance."
In his position paper entitled Service Contracts: Old
Wine in New Bottles?, Professor Pacifico A.
Agabin, who was a member of the working group
that prepared the U.P. Law draft, criticized service
contracts for they "lodge exclusive management
and control of the enterprise to the service
contractor, which is reminiscent of the old
concession regime. Thus, notwithstanding the
provision of the Constitution that natural resources
belong to the State, and that these shall not be
alienated, the service contract system renders
nugatory the constitutional provisions cited."244 He
elaborates:

1. Bidding of a selected area, or leasing the


choice of the area to the interested party
and then negotiating the terms and
conditions of the contract; (Sec. 5, P.D. 87)
2. Management of the enterprise vested on
the contractor, including operation of the
field if petroleum is discovered; (Sec. 8,
P.D. 87)
3. Control of production and other matters
such as expansion and development; (Sec.
8)
4. Responsibility for downstream operations
marketing, distribution, and processing
may be with the contractor (Sec. 8);
5. Ownership of equipment, machinery,
fixed assets, and other properties remain
with contractor (Sec. 12, P.D. 87);
6. Repatriation of capital and retention of
profits abroad guaranteed to the contractor
(Sec. 13, P.D. 87); and
7. While title to the petroleum discovered
may nominally be in the name of the
government, the contractor has almost
unfettered control over its disposition and
sale, and even the domestic requirements
of the country is relegated to
a pro rata basis (Sec. 8).

In short, our version of the service contract is just a


rehash of the old concession regime x x x. Some
people have pulled an old rabbit out of a magician's
hat, and foisted it upon us as a new and different
animal.
The service contract as we know it here is
antithetical to the principle of sovereignty over our
natural resources restated in the same article of the
[1973] Constitution containing the provision for
service contracts. If the service contractor happens
to be a foreign corporation, the contract would also
run counter to the constitutional provision on
nationalization or Filipinization, of the exploitation of
our natural resources.245 [Emphasis supplied.
Underscoring in the original.]
Professor Merlin M. Magallona, also a member of
the working group, was harsher in his reproach of
the system:
x x x the nationalistic phraseology of the 1935
[Constitution] was retained by the [1973] Charter,
but the essence of nationalism was reduced to
hollow rhetoric. The 1973 Charter still provided that
the exploitation or development of the country's
natural resources be limited to Filipino citizens or
corporations owned or controlled by them.
However, the martial-law Constitution allowed
them, once these resources are in their name, to
enter into service contracts with foreign investors
for financial, technical, management, or other forms
of assistance. Since foreign investors have the
capital resources, the actual exploitation and
development, as well as the effective disposition, of
the country's natural resources, would be under
their direction, and control, relegating the Filipino

investors to the role of second-rate partners in joint


ventures.

pure contractor instead of the beneficial owner of


our economic resources.247 [Emphasis supplied.]

Through the instrumentality of the service contract,


the 1973 Constitution had legitimized at the highest
level of state policy that which was prohibited under
the 1973 Constitution, namely: the exploitation of
the country's natural resources by foreign nationals.
The drastic impact of [this] constitutional change
becomes more pronounced when it is considered
that the active party to any service contract may be
a corporation wholly owned by foreign interests. In
such a case, the citizenship requirement is
completely set aside, permitting foreign
corporations to obtain actual possession, control,
and [enjoyment] of the country's natural
resources.246 [Emphasis supplied.]

Still another member of the working group,


Professor Eduardo Labitag, proposed that:

Accordingly, Professor Agabin recommends that:


Recognizing the service contract for what it is, we
have to expunge it from the Constitution and
reaffirm ownership over our natural resources. That
is the only way we can exercise effective control
over our natural resources.
This should not mean complete isolation of the
country's natural resources from foreign
investment. Other contract forms which are less
derogatory to our sovereignty and control over
natural resources like technical assistance
agreements, financial assistance [agreements], coproduction agreements, joint ventures, productionsharing could still be utilized and adopted without
violating constitutional provisions. In other words,
we can adopt contract forms which recognize and
assert our sovereignty and ownership over natural
resources, and where the foreign entity is just a

2. Service contracts as practiced under the 1973


Constitution should be discouraged, instead the
government may be allowed, subject to
authorization by special law passed by an
extraordinary majority to enter into either technical
or financial assistance. This is justified by the fact
that as presently worded in the 1973 Constitution, a
service contract gives full control over the contract
area to the service contractor, for him to work,
manage and dispose of the proceeds or production.
It was a subterfuge to get around the nationality
requirement of the constitution.248[Emphasis
supplied.]
In the annotations on the proposed Article on
National Economy and Patrimony, the U.P. Law
draft summarized the rationale therefor, thus:
5. The last paragraph is a modification of the
service contract provision found in Section 9, Article
XIV of the 1973 Constitution as amended. This
1973 provision shattered the framework of
nationalism in our fundamental law (see Magallona,
"Nationalism and its Subversion in the
Constitution"). Through the service contract, the
1973 Constitution had legitimized that which was
prohibited under the 1935 constitutionthe
exploitation of the country's natural resources by
foreign nationals. Through the service contract,
acts prohibited by the Anti-Dummy Law were
recognized as legitimate arrangements. Service
contracts lodge exclusive management and control

of the enterprise to the service contractor, not


unlike the old concession regime where the
concessionaire had complete control over the
country's natural resources, having been given
exclusive and plenary rights to exploit a particular
resource and, in effect, having been assured of
ownership of that resource at the point of extraction
(see Agabin, "Service Contracts: Old Wine in New
Bottles"). Service contracts, hence, are antithetical
to the principle of sovereignty over our natural
resources, as well as the constitutional provision on
nationalization or Filipinization of the exploitation of
our natural resources.
Under the proposed provision, only technical
assistance or financial assistance agreements may
be entered into, and only for large-scale activities.
These are contract forms which recognize and
assert our sovereignty and ownership over natural
resources since the foreign entity is just a pure
contractor and not a beneficial owner of our
economic resources. The proposal recognizes the
need for capital and technology to develop our
natural resources without sacrificing our
sovereignty and control over such resources by the
safeguard of a special law which requires twothirds vote of all the members of the Legislature.
This will ensure that such agreements will be
debated upon exhaustively and thoroughly in the
National Assembly to avert prejudice to the
nation.249 [Emphasis supplied.]
The U.P. Law draft proponents viewed service
contracts under the 1973 Constitution as grants of
beneficial ownership of the country's natural
resources to foreign owned corporations. While, in
theory, the State owns these natural resources
and Filipino citizens, their beneficiaries service

contracts actually vested foreigners with the right to


dispose, explore for, develop, exploit, and utilize
the same. Foreigners, not Filipinos, became the
beneficiaries of Philippine natural resources. This
arrangement is clearly incompatible with the
constitutional ideal of nationalization of natural
resources, with the Regalian doctrine, and on a
broader perspective, with Philippine sovereignty.
The proponents nevertheless acknowledged the
need for capital and technical know-how in the
large-scale exploitation, development and
utilization of natural resources the second
paragraph of the proposed draft itself being an
admission of such scarcity. Hence, they
recommended a compromise to reconcile the
nationalistic provisions dating back to the 1935
Constitution, which reserved all natural resources
exclusively to Filipinos, and the more liberal 1973
Constitution, which allowed foreigners to participate
in these resources through service contracts. Such
a compromise called for the adoption of a new
system in the exploration, development, and
utilization of natural resources in the form of
technical agreements or financial agreements
which, necessarily, are distinct concepts from
service contracts.
The replacement of "service contracts" with
"agreements involving either technical or
financial assistance," as well as the deletion of the
phrase "management or other forms of assistance,"
assumes greater significance when note is taken
that the U.P. Law draft proposed other equally
crucial changes that were obviously heeded by the
CONCOM. These include the abrogation of the
concession system and the adoption of new
"options" for the State in the exploration,

development, and utilization of natural resources.


The proponents deemed these changes to be more
consistent with the State's ownership of, and its "full
control and supervision" (a phrase also employed
by the framers) over, such resources. The Project
explained:
3. In line with the State ownership of natural
resources, the State should take a more active role
in the exploration, development, and utilization of
natural resources, than the present practice of
granting licenses, concessions, or leases hence
the provision that said activities shall be under the
full control and supervision of the State. There are
three major schemes by which the State could
undertake these activities: first, directly by itself;
second, by virtue of co-production, joint venture,
production sharing agreements with Filipino
citizens or corporations or associations sixty per
cent (60%) of the voting stock or controlling
interests of which are owned by such citizens; or
third, with a foreign-owned corporation, in cases of
large-scale exploration, development, or utilization
of natural resources through agreements involving
either technical or financial assistance only. x x x.
At present, under the licensing concession or lease
schemes, the government benefits from such
benefits only through fees, charges, ad valorem
taxes and income taxes of the exploiters of our
natural resources. Such benefits are very minimal
compared with the enormous profits reaped by
theses licensees, grantees, concessionaires.
Moreover, some of them disregard the conservation
of natural resources and do not protect the
environment from degradation. The proposed role
of the State will enable it to a greater share in the
profits it can also actively husband its natural

resources and engage in developmental programs


that will be beneficial to them.
4. Aside from the three major schemes for the
exploration, development, and utilization of our
natural resources, the State may, by law, allow
Filipino citizens to explore, develop, utilize natural
resources in small-scale. This is in recognition of
the plight of marginal fishermen, forest dwellers,
gold panners, and others similarly situated who
exploit our natural resources for their daily
sustenance and survival.250
Professor Agabin, in particular, after taking pains to
illustrate the similarities between the two systems,
concluded that the service contract regime was but
a "rehash" of the concession system. "Old wine in
new bottles," as he put it. The rejection of the
service contract regime, therefore, is in
consonance with the abolition of the concession
system.
In light of the deliberations of the CONCOM, the
text of the Constitution, and the adoption of other
proposed changes, there is no doubt that the
framers considered and shared the intent of the
U.P. Law proponents in employing the phrase
"agreements . . . involving either technical or
financial assistance."
While certain commissioners may have mentioned
the term "service contracts" during the CONCOM
deliberations, they may not have been necessarily
referring to the concept of service contracts under
the 1973 Constitution. As noted earlier, "service
contracts" is a term that assumes different
meanings to different people.251 The commissioners
may have been using the term loosely, and not in

its technical and legal sense, to refer, in general, to


agreements concerning natural resources entered
into by the Government with foreign corporations.
These loose statements do not necessarily
translate to the adoption of the 1973 Constitution
provision allowing service contracts.
It is true that, as shown in the earlier quoted
portions of the proceedings in CONCOM, in
response to Sr. Tan's question, Commissioner
Villegas commented that, other than congressional
notification, the only difference between "future"
and "past" "service contracts" is the requirement of
a general law as there were no laws previously
authorizing the same.252 However, such remark is
far outweighed by his more categorical statement in
his exchange with Commissioner Quesada that the
draft article "does not permit foreign investors to
participate" in the nation's natural resources
which was exactly what service contracts did
except to provide "technical or financial
assistance."253
In the case of the other commissioners,
Commissioner Nolledo himself clarified in his work
that the present charter prohibits service
contracts.254 Commissioner Gascon was not totally
averse to foreign participation, but favored stricter
restrictions in the form of majority congressional
concurrence.255 On the other hand, Commissioners
Garcia and Tadeo may have veered to the extreme
side of the spectrum and their objections may be
interpreted as votes against any foreign
participation in our natural resources whatsoever.
WMCP cites Opinion No. 75, s. 1987,256 and
Opinion No. 175, s. 1990257 of the Secretary of
Justice, expressing the view that a financial or

technical assistance agreement "is no different in


concept" from the service contract allowed under
the 1973 Constitution. This Court is not, however,
bound by this interpretation. When an
administrative or executive agency renders an
opinion or issues a statement of policy, it merely
interprets a pre-existing law; and the administrative
interpretation of the law is at best advisory, for it is
the courts that finally determine what the law
means.258
In any case, the constitutional provision allowing
the President to enter into FTAAs with foreignowned corporations 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. As Commissioner
Villegas emphasized, the provision is "very
restrictive."259 Commissioner Nolledo also remarked
that "entering into service contracts is an exception
to the rule on protection of natural resources for the
interest of the nation and, therefore, being an
exception, it should be subject, whenever possible,
to stringent rules."260 Indeed, exceptions should be
strictly but reasonably construed; they extend only
so far as their language fairly warrants and all
doubts should be resolved in favor of the general
provision rather than the exception.261
With the foregoing discussion in mind, this Court
finds that R.A. No. 7942 is invalid insofar as said
Act authorizes service contracts. Although the
statute employs the phrase "financial and technical
agreements" in accordance with the 1987
Constitution, it actually treats these agreements as
service contracts that grant beneficial ownership to
foreign contractors contrary to the fundamental law.

Section 33, which is found under Chapter VI


(Financial or Technical Assistance Agreement) of
R.A. No. 7942 states:
SEC. 33. Eligibility.Any qualified person with
technical and financial capability to undertake
large-scale exploration, development, and
utilization of mineral resources in the Philippines
may enter into a financial or technical assistance
agreement directly with the Government through
the Department. [Emphasis supplied.]

dispose of the minerals and byproducts produced


at the highest price and more advantageous terms
and conditions as provided for under the
implementing rules and regulations is required to
be incorporated in every FTAA.269
A foreign-owned/-controlled corporation may
likewise be granted a mineral processing
permit.270 "Mineral processing" is the milling,
beneficiation or upgrading of ores or minerals and
rocks or by similar means to convert the same into
marketable products.271

"Exploration," as defined by R.A. No. 7942,


means the searching or prospecting for mineral
resources by geological, geochemical or
geophysical surveys, remote sensing, test pitting,
trending, drilling, shaft sinking, tunneling or any
other means for the purpose of determining the
existence, extent, quantity and quality thereof and
the feasibility of mining them for profit.262
A legally organized foreign-owned corporation may
be granted an exploration permit,263 which vests it
with the right to conduct exploration for all minerals
in specified areas,264 i.e., to enter, occupy and
explore the same.265Eventually, the foreign-owned
corporation, as such permittee, may apply for a
financial and technical assistance agreement.266
"Development" is the work undertaken to explore
and prepare an ore body or a mineral deposit for
mining, including the construction of necessary
infrastructure and related facilities.267
"Utilization" "means the extraction or disposition of
minerals."268 A stipulation that the proponent shall

An FTAA contractor makes a warranty that the


mining operations shall be conducted in
accordance with the provisions of R.A. No. 7942
and its implementing rules272 and for work programs
and minimum expenditures and
commitments.273 And it obliges itself to furnish the
Government records of geologic, accounting, and
other relevant data for its mining operation.274
"Mining operation," as the law defines it, means
mining activities involving exploration, feasibility,
development, utilization, and processing.275
The underlying assumption in all these provisions is
that the foreign contractor manages the mineral
resources, just like the foreign contractor in a
service contract.
Furthermore, Chapter XII of the Act grants foreign
contractors in FTAAs the same auxiliary mining
rights that it grants contractors in mineral
agreements (MPSA, CA and JV).276 Parenthetically,
Sections 72 to 75 use the term "contractor," without
distinguishing between FTAA and mineral

agreement contractors. And so does "holders of


mining rights" in Section 76. A foreign contractor
may even convert its FTAA into a mineral
agreement if the economic viability of the contract
area is found to be inadequate to justify large-scale
mining operations,277 provided that it reduces its
equity in the corporation, partnership, association
or cooperative to forty percent (40%).278
Finally, under the Act, an FTAA contractor warrants
that it "has or has access to all the financing,
managerial, and technical expertise. . . ."279 This
suggests that an FTAA contractor is bound to
provide some management assistance a form of
assistance that has been eliminated and, therefore,
proscribed by the present Charter.
By allowing foreign contractors to manage or
operate all the aspects of the mining operation, the
above-cited provisions of R.A. No. 7942 have in
effect conveyed beneficial ownership over the
nation's mineral resources to these contractors,
leaving the State with nothing but bare title thereto.
Moreover, 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.
In sum, the Court finds the following provisions of
R.A. No. 7942 to be violative of Section 2, Article
XII of the Constitution:
(1) The proviso in Section 3 (aq), which
defines "qualified person," to wit:

Provided, That a legally organized foreignowned 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 23,280 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 35,281 which enumerates the
terms and conditions for every financial or
technical assistance agreement;
(5) Section 39,282 which allows the
contractor in a financial and technical
assistance agreement to convert the same
into a mineral production-sharing
agreement;
(6) Section 56,283 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),284 which defines the term


"contractor," insofar as it applies to a
financial or technical assistance agreement.
Section 34,285 which prescribes the
maximum contract area in a financial or
technical assistance agreements;
Section 36,286 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;
287

Section 38,288 which limits the term of


financial or technical assistance
agreements;
Section 40,289 which allows the assignment
or transfer of financial or technical
assistance agreements;
Section 41,290 which allows the withdrawal
of the contractor in an FTAA;
The second and third paragraphs of Section
81,291 which provide for the Government's
share in a financial and technical
assistance agreement; and
Section 90,292 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.293
There can be little doubt that the WMCP FTAA itself
is a service contract.
Section 1.3 of the WMCP FTAA grants WMCP "the
exclusive right to explore, exploit, utilise[,] process
and dispose of all Minerals products and byproducts thereof that may be produced from the
Contract Area."294 The FTAA also imbues WMCP
with the following rights:
(b) to extract and carry away any Mineral
samples from the Contract area for the
purpose of conducting tests and studies in
respect thereof;
(c) to determine the mining and treatment
processes to be utilised during the
Development/Operating Period and the
project facilities to be constructed during
the Development and Construction Period;
(d) have the right of possession of the
Contract Area, with full right of ingress and
egress and the right to occupy the same,
subject to the provisions of Presidential
Decree No. 512 (if applicable) and not be

prevented from entry into private ands by


surface owners and/or occupants thereof
when prospecting, exploring and exploiting
for minerals therein;

All materials, equipment, plant and other


installations erected or placed on the Contract Area
remain the property of WMCP, which has the right
to deal with and remove such items within twelve
months from the termination of the FTAA.296

xxx
(f) to construct roadways, mining, drainage,
power generation and transmission facilities
and all other types of works on the Contract
Area;
(g) to erect, install or place any type of
improvements, supplies, machinery and
other equipment relating to the Mining
Operations and to use, sell or otherwise
dispose of, modify, remove or diminish any
and all parts thereof;
(h) enjoy, subject to pertinent laws, rules
and regulations and the rights of third
Parties, easement rights and the use of
timber, sand, clay, stone, water and other
natural resources in the Contract Area
without cost for the purposes of the Mining
Operations;
xxx
(i) have the right to mortgage, charge or
encumber all or part of its interest and
obligations under this Agreement, the plant,
equipment and infrastructure and the
Minerals produced from the Mining
Operations;
x x x. 295

Pursuant to Section 1.2 of the FTAA, WMCP shall


provide "[all] financing, technology, management
and personnel necessary for the Mining
Operations." The mining company binds itself to
"perform all Mining Operations . . . providing all
necessary services, technology and financing in
connection therewith,"297 and to "furnish all
materials, labour, equipment and other installations
that may be required for carrying on all Mining
Operations."298> WMCP may make expansions,
improvements and replacements of the mining
facilities and may add such new facilities as it
considers necessary for the mining operations.299
These contractual stipulations, 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.
In arguing against the annulment of the FTAA,
WMCP invokes the Agreement on the Promotion
and Protection of Investments between the
Philippine and Australian Governments, which was
signed in Manila on January 25, 1995 and which
entered into force on December 8, 1995.

x x x. Article 2 (1) of said treaty states that it applies


to investments whenever made and thus the fact
that [WMCP's] FTAA was entered into prior to the
entry into force of the treaty does not preclude the
Philippine Government from protecting [WMCP's]
investment in [that] FTAA. Likewise, Article 3 (1) of
the treaty provides that "Each Party shall
encourage and promote investments in its area by
investors of the other Party and shall [admit] such
investments in accordance with its Constitution,
Laws, regulations and investment policies" and in
Article 3 (2), it states that "Each Party shall ensure
that investments are accorded fair and equitable
treatment." The latter stipulation indicates that it
was intended to impose an obligation upon a Party
to afford fair and equitable treatment to the
investments of the other Party and that a failure to
provide such treatment by or under the laws of the
Party may constitute a breach of the treaty. Simply
stated, the Philippines could not, under said treaty,
rely upon the inadequacies of its own laws to
deprive an Australian investor (like [WMCP]) of fair
and equitable treatment by invalidating [WMCP's]
FTAA without likewise nullifying the service
contracts entered into before the enactment of RA
7942 such as those mentioned in PD 87 or EO 279.
This becomes more significant in the light of the
fact that [WMCP's] FTAA was executed not by a
mere Filipino citizen, but by the Philippine
Government itself, through its President no less,
which, in entering into said treaty is assumed to be
aware of the existing Philippine laws on service
contracts over the exploration, development and
utilization of natural resources. The execution of the
FTAA by the Philippine Government assures the
Australian Government that the FTAA is in
accordance with existing Philippine

laws.300 [Emphasis and italics by private


respondents.]
The invalidation of the subject FTAA, it is argued,
would constitute a breach of said treaty which, in
turn, would amount to a violation of Section 3,
Article II of the Constitution adopting the generally
accepted principles of international law as part of
the law of the land. One of these generally
accepted principles is pacta sunt servanda, which
requires the performance in good faith of treaty
obligations.
Even assuming arguendo that WMCP is correct in
its interpretation of the treaty and its assertion that
"the Philippines could not . . . deprive an Australian
investor (like [WMCP]) of fair and equitable
treatment by invalidating [WMCP's] FTAA without
likewise nullifying the service contracts entered into
before the enactment of RA 7942 . . .," the
annulment of the FTAA would not constitute a
breach of the treaty invoked. For this decision
herein invalidating the subject FTAA forms part of
the legal system of the Philippines.301 The equal
protection clause302 guarantees that such decision
shall apply to all contracts belonging to the same
class, hence, upholding rather than violating, the
"fair and equitable treatment" stipulation in said
treaty.
One other matter requires clarification. Petitioners
contend that, consistent with the provisions of
Section 2, Article XII of the Constitution, the
President may enter into agreements involving
"either technical or financial assistance" only. The
agreement in question, however, is a technical and
financial assistance agreement.

Petitioners' contention does not lie. To adhere to


the literal language of the Constitution would lead
to absurd consequences.303 As WMCP correctly put
it:
x x x such a theory of petitioners would compel the
government (through the President) to enter into
contract with two (2) foreign-owned corporations,
one for financial assistance agreement and with the
other, for technical assistance over one and the
same mining area or land; or to execute two (2)
contracts with only one foreign-owned corporation
which has the capability to provide both financial
and technical assistance, one for financial
assistance and another for technical assistance,
over the same mining area. Such an absurd result
is definitely not sanctioned under the canons of
constitutional construction.304 [Underscoring in the
original.]
Surely, the framers of the 1987 Charter did not
contemplate such an absurd result from their use of
"either/or." A constitution is not to be interpreted as
demanding the impossible or the impracticable; and
unreasonable or absurd consequences, if possible,
should be avoided.305 Courts are not to give words a
meaning that would lead to absurd or unreasonable
consequences and a literal interpretation is to be
rejected if it would be unjust or lead to absurd
results.306 That is a strong argument against its
adoption.307 Accordingly, petitioners' interpretation
must be rejected.
The foregoing discussion has rendered
unnecessary the resolution of the other issues
raised by the petition.

WHEREFORE, the petition is GRANTED. The


Court hereby declares 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.
SO ORDERED.
Davide, Jr., C.J., Puno, Quisumbing, Carpio,
Corona, Callejo, Sr., and Tinga. JJ., concur.
Vitug, J., see Separate Opinion.
Panganiban, J., see Separate Opinion.
Ynares-Santiago, Sandoval-Gutierrez and Austria-

Martinez, JJ., joins J., Panganiban's separate


opinion.
Azcuna, no part, one of the parties was a client.

G.R. No. 157882

March 30, 2006

DIDIPIO EARTH-SAVERS MULTI-PURPOSE


ASSOCIATION, INCORPORATED (DESAMA),
MANUEL BUTIC, CESAR MARIANO, LAURO
ABANCE, BEN TAYABAN, ANTONIO DINGCOG,
TEDDY B. KIMAYONG, ALONZO ANANAYO,
ANTONIO MALAN-UYA, JOSE BAHAG, ANDRES
INLAB, RUFINO LICYAYO, ALFREDO CULHI,
CATALILNA INABYUHAN, GUAY DUMMANG,
GINA PULIDO, EDWIN ANSIBEY, CORAZON
SICUAN, LOPEZ DUMULAG, FREDDIE
AYDINON, VILMA JOSE, FLORENTINA
MADDAWAT, LINDA DINGCOG, ELMER SICUAN,
GARY ANSIBEY, JIMMY MADDAWAT, JIMMY
GUAY, ALFREDO CUT-ING, ANGELINA UDAN,
OSCAR INLAB, JUANITA CUT-ING, ALBERT
PINKIHAN, CECILIA TAYABAN, CRISTA
BINWAK, PEDRO DUGAY, SR., EDUARDO
ANANAYO, ROBIN INLAB, JR., LORENZO
PULIDO, TOMAS BINWAG, EVELYN BUYA,
JAIME DINGCOG, DINAOAN CUT-ING, PEDRO
DONATO, MYRNA GUAY, FLORA ANSIBEY,
GRACE DINAMLING, EDUARDO MENCIAS,
ROSENDA JACOB, SIONITA DINGCOG, GLORIA
JACOB, MAXIMA GUAY, RODRIGO PAGGADUT,
MARINA ANSIBEY, TOLENTINO INLAB, RUBEN
DULNUAN, GERONIMO LICYAYO, LEONCIO
CUMTI, MARY DULNUAN, FELISA BALANBAN,
MYRNA DUYAN, MARY MALAN-UYA,

PRUDENCIO ANSIBEY, GUILLERMO GUAY,


MARGARITA CULHI, ALADIN ANSIBEY, PABLO
DUYAN, PEDRO PUGUON, JULIAN INLAB,
JOSEPH NACULON, ROGER BAJITA, DINAON
GUAY, JAIME ANANAYO, MARY ANSIBEY, LINA
ANANAYO, MAURA DUYAPAT, ARTEMEO
ANANAYO, MARY BABLING, NORA ANSIBEY,
DAVID DULNUAN, AVELINO PUGUON, LUCAS
GUMAWI, LUISA ABBAC, CATHRIN GUWAY,
CLARITA TAYABAN, FLORA JAVERA, RANDY
SICOAN, FELIZA PUTAKI, CORAZON P.
DULNUAN, NENA D. BULLONG, ERMELYN
GUWAY, GILBERT BUTALE, JOSEPH B.
BULLONG, FRANCISCO PATNAAN, JR.,
SHERWIN DUGAY, TIRSO GULLINGAY,
BENEDICT T. NABALLIN, RAMON PUN-ADWAN,
ALFONSO DULNUAN, CARMEN D. BUTALE,
LOLITA ANSIBEY, ABRAHAM DULNUAN,
ARLYNDA BUTALE, MODESTO A. ANSIBEY,
EDUARDO LUGAY, ANTONIO HUMIWAT,
ALFREDO PUMIHIC, MIKE TINO, TONY
CABARROGUIS, BASILIO TAMLIWOK, JR.,
NESTOR TANGID, ALEJO TUGUINAY, BENITO
LORENZO, RUDY BAHIWAG, ANALIZA BUTALE,
NALLEM LUBYOC, JOSEPH DUHAYON,
RAFAEL CAMPOL, MANUEL PUMALO, DELFIN
AGALOOS, PABLO CAYANGA, PERFECTO
SISON, ELIAS NATAMA, LITO PUMALO,
SEVERINA DUGAY, GABRIEL PAKAYAO,
JEOFFREY SINDAP, FELIX TICUAN, MARIANO
S. MADDELA, MENZI TICAWA, DOMINGA
DUGAY, JOE BOLINEY, JASON ASANG, TOMMY
ATENYAYO, ALEJO AGMALIW, DIZON
AGMALIW, EDDIE ATOS, FELIMON BLANCO,
DARRIL DIGOY, LUCAS BUAY, ARTEMIO
BRAZIL, NICANOR MODI, LUIS REDULFIN,
NESTOR JUSTINO, JAIME CUMILA, BENEDICT
GUINID, EDITHA ANIN, INOH-YABAN BANDAO,

LUIS BAYWONG, FELIPE DUHALNGON, PETER


BENNEL, JOSEPH T. BUNGGALAN, JIMMY B.
KIMAYONG, HENRY PUGUON, PEDRO
BUHONG, BUGAN NADIAHAN, SR., MARIA
EDEN ORLINO, SPC, PERLA VISSORO, and
BISHOP RAMON VILLENA, Petitioners,
vs.
ELISEA GOZUN, in her capacity as SECRETARY
of the DEPARTMENT OF ENVIRONMENT and
NATURAL RESOURCES (DENR), HORACIO
RAMOS, in his capacity as Director of the Mines
and Geosciences Bureau (MGB-DENR),
ALBERTO ROMULO, in his capacity as the
Executive Secretary of the Office of the
President, RICHARD N. FERRER, in his capacity
as Acting Undersecretary of the Office of the
President, IAN HEATH SANDERCOCK, in his
capacity as President of CLIMAX-ARIMCO
Mining Corporation. Respondents.
DECISION
CHICO-NAZARIO, J.:
This petition for prohibition and mandamus under
Rule 65 of the Rules of Court assails the
constitutionality of Republic Act No. 7942 otherwise
known as the Philippine Mining Act of 1995,
together with the Implementing Rules and
Regulations issued pursuant thereto, Department
of Environment and Natural Resources (DENR)
Administrative Order No. 96-40, s. 1996 (DAO 9640) and of the Financial and Technical Assistance
Agreement (FTAA) entered into on 20 June 1994
by the Republic of the Philippines and Arimco
Mining Corporation (AMC), a corporation
established under the laws of Australia and owned
by its nationals.

On 25 July 1987, then President Corazon C.


Aquino promulgated Executive Order No. 279
which authorized the DENR Secretary to accept,
consider and evaluate proposals from foreignowned corporations or foreign investors for
contracts of agreements involving either technical
or financial assistance for large-scale exploration,
development, and utilization of minerals, which,
upon appropriate recommendation of the Secretary,
the President may execute with the foreign
proponent.
On 3 March 1995, then President Fidel V. Ramos
signed into law Rep. Act No. 7942 entitled, "An Act
Instituting A New System of Mineral Resources
Exploration, Development, Utilization and
Conservation," otherwise known as the Philippine
Mining Act of 1995.
On 15 August 1995, then DENR Secretary Victor O.
Ramos issued DENR Administrative Order (DAO)
No. 23, Series of 1995, containing the
implementing guidelines of Rep. Act No. 7942. This
was soon superseded by DAO No. 96-40, s. 1996,
which took effect on 23 January 1997 after due
publication.
Previously, however, or specifically on 20 June
1994, President Ramos executed an FTAA with
AMC over a total land area of 37,000 hectares
covering the provinces of Nueva Vizcaya and
Quirino. Included in this area is Barangay Dipidio,
Kasibu, Nueva Vizcaya.

Corporation (CAMC), the controlling 99% of


stockholders of which are Australian nationals.
On 7 September 2001, counsels for petitioners filed
a demand letter addressed to then DENR
Secretary Heherson Alvarez, for the cancellation of
the CAMC FTAA for the primary reason that Rep.
Act No. 7942 and its Implementing Rules and
Regulations DAO 96-40 are unconstitutional. The
Office of the Executive Secretary was also
furnished a copy of the said letter. There being no
response to both letters, another letter of the same
content dated 17 June 2002 was sent to President
Gloria Macapagal Arroyo. This letter was indorsed
to the DENR Secretary and eventually referred to
the Panel of Arbitrators of the Mines and
Geosciences Bureau (MGB), Regional Office No.
02, Tuguegarao, Cagayan, for further action.
On 12 November 2002, counsels for petitioners
received a letter from the Panel of Arbitrators of the
MGB requiring the petitioners to comply with the
Rules of the Panel of Arbitrators before the letter
may be acted upon.
Yet again, counsels for petitioners sent President
Arroyo another demand letter dated 8 November
2002. Said letter was again forwarded to the DENR
Secretary who referred the same to the MGB,
Quezon City.
In a letter dated 19 February 2003, the MGB
rejected the demand of counsels for petitioners for
the cancellation of the CAMC FTAA.
1avvphil.net

Subsequently, AMC consolidated with Climax


Mining Limited to form a single company that now
goes under the new name of Climax-Arimco Mining

Petitioners thus filed the present petition for


prohibition and mandamus, with a prayer for a
temporary restraining order. They pray that the
Court issue an order:
1. enjoining public respondents from acting
on any application for FTAA;
2. declaring unconstitutional the Philippine
Mining Act of 1995 and its Implementing
Rules and Regulations;
3. canceling the FTAA issued to CAMC.
In their memorandum petitioners pose the following
issues:
I
Whether or not Republic Act No. 7942 and the
CAMC FTAA are void because they allow the unjust
and unlawful taking of property without payment of
just compensation , in violation of Section 9, Article
III of the Constitution.
II
Whether or not the Mining Act and its Implementing
Rules and Regulations are void and
unconstitutional for sanctioning an unconstitutional
administrative process of determining just
compensation.
III
Whether or not the State, through Republic Act No.
7942 and the CAMC FTAA, abdicated its primary

responsibility to the full control and supervision


over natural resources.
IV
Whether or not the respondents interpretation of
the role of wholly foreign and foreign-owned
corporations in their involvement in mining
enterprises, violates paragraph 4, section 2, Article
XII of the Constitution.
V
WHETHER OR NOT THE 1987 CONSTITUTION
PROHIBITS SERVICE CONTRACTS.1
Before going to the substantive issues, the
procedural question raised by public respondents
shall first be dealt with. Public respondents are of
the view that petitioners eminent domain claim is
not ripe for adjudication as they fail to allege that
CAMC has actually taken their properties nor do
they allege that their property rights have been
endangered or are in danger on account of CAMCs
FTAA. In effect, public respondents insist that the
issue of eminent domain is not a justiciable
controversy which this Court can take cognizance
of.
A justiciable controversy is defined as a definite
and concrete dispute touching on the legal relations
of parties having adverse legal interests which may
be resolved by a court of law through the
application of a law.2 Thus, courts have no judicial
power to review cases involving political questions
and as a rule, will desist from taking cognizance of
speculative or hypothetical cases, advisory

opinions and cases that have become moot.3 The


Constitution is quite explicit on this matter.4 It
provides that judicial power includes the duty of the
courts of justice to settle actual controversies
involving rights which are legally demandable and
enforceable. Pursuant to this constitutional
mandate, courts, through the power of judicial
review, are to entertain only real disputes between
conflicting parties through the application of law.
For the courts to exercise the power of judicial
review, the following must be extant (1) there must
be an actual case calling for the exercise of judicial
power; (2) the question must be ripe for
adjudication; and (3) the person challenging must
have the "standing."5
An actual case or controversy involves a conflict of
legal rights, an assertion of opposite legal claims,
susceptible of judicial resolution as distinguished
from a hypothetical or abstract difference or
dispute.6 There must be a contrariety of legal rights
that can be interpreted and enforced on the basis
of existing law and jurisprudence.
Closely related to the second requisite is that the
question must be ripe for adjudication. A question is
considered ripe for adjudication when the act being
challenged has had a direct adverse effect on the
individual challenging it.7
The third requisite is legal standing or locus standi.
It is defined as a personal or substantial interest in
the case such that the party has sustained or will
sustain direct injury as a result of the governmental
act that is being challenged, alleging more than a
generalized grievance.8 The gist of the question of
standing is whether a party alleges "such personal
stake in the outcome of the controversy as to

assure that concrete adverseness which sharpens


the presentation of issues upon which the court
depends for illumination of difficult constitutional
questions."9 Unless a person is injuriously affected
in any of his constitutional rights by the operation of
statute or ordinance, he has no standing.10
In the instant case, there exists a live controversy
involving a clash of legal rights as Rep. Act No.
7942 has been enacted, DAO 96-40 has been
approved and an FTAAs have been entered into.
The FTAA holders have already been operating in
various provinces of the country. Among them is
CAMC which operates in the provinces of Nueva
Vizcaya and Quirino where numerous individuals
including the petitioners are imperiled of being
ousted from their landholdings in view of the CAMC
FTAA. In light of this, the court cannot await the
adverse consequences of the law in order to
consider the controversy actual and ripe for judicial
intervention.11 Actual eviction of the land owners
and occupants need not happen for this Court to
intervene. As held in Pimentel, Jr. v. Hon. Aguirre12:
By the mere enactment of the questioned law or
the approval of the challenged act, the dispute is
said to have ripened into a judicial controversy
even without any other overt act. Indeed, even a
singular violation of the Constitution and/or the law
is enough to awaken judicial duty.13
Petitioners embrace various segments of the
society. These include Didipio Earth-Savers MultiPurpose Association, Inc., an organization of
farmers and indigenous peoples organized under
Philippine laws, representing a community actually
affected by the mining activities of CAMC, as well
as other residents of areas affected by the mining

activities of CAMC. These petitioners have the


standing to raise the constitutionality of the
questioned FTAA as they allege a personal and
substantial injury.14 They assert that they are
affected by the mining activities of CAMC. Likewise,
they are under imminent threat of being displaced
from their landholdings as a result of the
implementation of the questioned FTAA. They thus
meet the appropriate case requirement as they
assert an interest adverse to that of respondents
who, on the other hand, claim the validity of the
assailed statute and the FTAA of CAMC.
Besides, the transcendental importance of the
issues raised and the magnitude of the public
interest involved will have a bearing on the
countrys economy which is to a greater extent
dependent upon the mining industry. Also affected
by the resolution of this case are the proprietary
rights of numerous residents in the mining contract
areas as well as the social existence of indigenous
peoples which are threatened. Based on these
considerations, this Court deems it proper to take
cognizance of the instant petition.
Having resolved the procedural question, the
constitutionality of the law under attack must be
addressed squarely.
First Substantive Issue: Validity of Section 76 of
Rep. Act No. 7942 and DAO 96-40
In seeking to nullify Rep. Act No. 7942 and its
implementing rules DAO 96-40 as unconstitutional,
petitioners set their sight on Section 76 of Rep. Act
No. 7942 and Section 107 of DAO 96-40 which
they claim allow the unlawful and unjust "taking" of
private property for private purpose in contradiction

with Section 9, Article III of the 1987 Constitution


mandating that private property shall not be taken
except for public use and the corresponding
payment of just compensation. They assert that
public respondent DENR, through the Mining Act
and its Implementing Rules and Regulations,
cannot, on its own, permit entry into a private
property and allow taking of land without payment
of just compensation.
Interpreting Section 76 of Rep. Act No. 7942 and
Section 107 of DAO 96-40, juxtaposed with the
concept of taking of property for purposes of
eminent domain in the case of Republic v. Vda. de
Castellvi,15 petitioners assert that there is indeed a
"taking" upon entry into private lands and
concession areas.
Republic v. Vda. de Castellvi defines "taking" under
the concept of eminent domain as entering upon
private property for more than a momentary period,
and, under the warrant or color of legal authority,
devoting it to a public use, or otherwise informally
appropriating or injuriously affecting it in such a way
as to substantially oust the owner and deprive him
of all beneficial enjoyment thereof.
From the criteria set forth in the cited case,
petitioners claim that the entry into a private
property by CAMC, pursuant to its FTAA, is for
more than a momentary period, i.e., for 25 years,
and renewable for another 25 years; that the entry
into the property is under the warrant or color of
legal authority pursuant to the FTAA executed
between the government and CAMC; and that the
entry substantially ousts the owner or possessor
and deprives him of all beneficial enjoyment of the
property. These facts, according to the petitioners,

amount to taking. As such, petitioners question the


exercise of the power of eminent domain as
unwarranted because respondents failed to prove
that the entry into private property is devoted for
public use.
Petitioners also stress that even without the
doctrine in the Castellvi case, the nature of the
mining activity, the extent of the land area covered
by the CAMC FTAA and the various rights granted
to the proponent or the FTAA holder, such as (a)
the right of possession of the Exploration Contract
Area, with full right of ingress and egress and the
right to occupy the same; (b) the right not to be
prevented from entry into private lands by surface
owners and/or occupants thereof when
prospecting, exploring and exploiting for minerals
therein; (c) the right to enjoy easement rights, the
use of timber, water and other natural resources in
the Exploration Contract Area; (d) the right of
possession of the Mining Area, with full right of
ingress and egress and the right to occupy the
same; and (e) the right to enjoy easement rights,
water and other natural resources in the Mining
Area, result in a taking of private property.
Petitioners quickly add that even assuming
arguendo that there is no absolute, physical taking,
at the very least, Section 76 establishes a legal
easement upon the surface owners, occupants and
concessionaires of a mining contract area sufficient
to deprive them of enjoyment and use of the
property and that such burden imposed by the legal
easement falls within the purview of eminent
domain.
To further bolster their claim that the legal
easement established is equivalent to taking,

petitioners cite the case of National Power


Corporation v. Gutierrez16 holding that the
easement of right-of-way imposed against the use
of the land for an indefinite period is a taking under
the power of eminent domain.
Traversing petitioners assertion, public
respondents argue that Section 76 is not a taking
provision but a valid exercise of the police power
and by virtue of which, the state may prescribe
regulations to promote the health, morals, peace,
education, good order, safety and general welfare
of the people. This government regulation involves
the adjustment of rights for the public good and that
this adjustment curtails some potential for the use
or economic exploitation of private property. Public
respondents concluded that "to require
compensation in all such circumstances would
compel the government to regulate by purchase."
Public respondents are inclined to believe that by
entering private lands and concession areas, FTAA
holders do not oust the owners thereof nor deprive
them of all beneficial enjoyment of their properties
as the said entry merely establishes a legal
easement upon surface owners, occupants and
concessionaires of a mining contract area.
Taking in Eminent Domain Distinguished from
Regulation in Police Power
The power of eminent domain is the inherent right
of the state (and of those entities to which the
power has been lawfully delegated) to condemn
private property to public use upon payment of just
compensation.17 On the other hand, police power is
the power of the state to promote public welfare by
restraining and regulating the use of liberty and

property.18 Although both police power and the


power of eminent domain have the general welfare
for their object, and recent trends show a
mingling19 of the two with the latter being used as
an implement of the former, there are still traditional
distinctions between the two.
Property condemned under police power is usually
noxious or intended for a noxious purpose; hence,
no compensation shall be paid.20 Likewise, in the
exercise of police power, property rights of private
individuals are subjected to restraints and burdens
in order to secure the general comfort, health, and
prosperity of the state. Thus, an ordinance
prohibiting theaters from selling tickets in excess of
their seating capacity (which would result in the
diminution of profits of the theater-owners) was
upheld valid as this would promote the comfort,
convenience and safety of the customers.21 In U.S.
v. Toribio,22 the court upheld the provisions of Act
No. 1147, a statute regulating the slaughter of
carabao for the purpose of conserving an adequate
supply of draft animals, as a valid exercise of police
power, notwithstanding the property rights
impairment that the ordinance imposed on cattle
owners. A zoning ordinance prohibiting the
operation of a lumber yard within certain areas was
assailed as unconstitutional in that it was an
invasion of the property rights of the lumber yard
owners in People v. de Guzman.23 The Court
nonetheless ruled that the regulation was a valid
exercise of police power. A similar ruling was
arrived at in Seng Kee S Co. v. Earnshaw and
Piatt24 where an ordinance divided the City of
Manila into industrial and residential areas.
A thorough scrutiny of the extant jurisprudence
leads to a cogent deduction that where a property

interest is merely restricted because the continued


use thereof would be injurious to public welfare, or
where property is destroyed because its continued
existence would be injurious to public interest,
there is no compensable taking.25 However, when a
property interest is appropriated and applied to
some public purpose, there is compensable
taking.26
According to noted constitutionalist, Fr. Joaquin
Bernas, SJ, in the exercise of its police power
regulation, the state restricts the use of private
property, but none of the property interests in the
bundle of rights which constitute ownership is
appropriated for use by or for the benefit of the
public.27 Use of the property by the owner was
limited, but no aspect of the property is used by or
for the public.28 The deprivation of use can in fact
be total and it will not constitute compensable
taking if nobody else acquires use of the property
or any interest therein.29
If, however, in the regulation of the use of the
property, somebody else acquires the use or
interest thereof, such restriction constitutes
compensable taking. Thus, in City Government of
Quezon City v. Ericta,30 it was argued by the local
government that an ordinance requiring private
cemeteries to reserve 6% of their total areas for the
burial of paupers was a valid exercise of the police
power under the general welfare clause. This court
did not agree in the contention, ruling that property
taken under the police power is sought to be
destroyed and not, as in this case, to be devoted to
a public use. It further declared that the ordinance
in question was actually a taking of private property
without just compensation of a certain area from a
private cemetery to benefit paupers who are

charges of the local government. Being an exercise


of eminent domain without provision for the
payment of just compensation, the same was
rendered invalid as it violated the principles
governing eminent domain.
In People v. Fajardo,31 the municipal mayor refused
Fajardo permission to build a house on his own
land on the ground that the proposed structure
would destroy the view or beauty of the public
plaza. The ordinance relied upon by the mayor
prohibited the construction of any building that
would destroy the view of the plaza from the
highway. The court ruled that the municipal
ordinance under the guise of police power
permanently divest owners of the beneficial use of
their property for the benefit of the public; hence,
considered as a taking under the power of eminent
domain that could not be countenanced without
payment of just compensation to the affected
owners. In this case, what the municipality wanted
was to impose an easement on the property in
order to preserve the view or beauty of the public
plaza, which was a form of utilization of Fajardos
property for public benefit.32
While the power of eminent domain often results in
the appropriation of title to or possession of
property, it need not always be the case. Taking
may include trespass without actual eviction of the
owner, material impairment of the value of the
property or prevention of the ordinary uses for
which the property was intended such as the
establishment of an easement.33 In Ayala de Roxas
v. City of Manila,34 it was held that the imposition of
burden over a private property through easement
was considered taking; hence, payment of just
compensation is required. The Court declared:

And, considering that the easement intended to be


established, whatever may be the object thereof, is
not merely a real right that will encumber the
property, but is one tending to prevent the exclusive
use of one portion of the same, by expropriating it
for public use which, be it what it may, can not be
accomplished unless the owner of the property
condemned or seized be previously and duly
indemnified, it is proper to protect the appellant by
means of the remedy employed in such cases, as it
is only adequate remedy when no other legal action
can be resorted to, against an intent which is
nothing short of an arbitrary restriction imposed by
the city by virtue of the coercive power with which
the same is invested.
And in the case of National Power Corporation v.
Gutierrez,35 despite the NPCs protestation that the
owners were not totally deprived of the use of the
land and could still plant the same crops as long as
they did not come into contact with the wires, the
Court nevertheless held that the easement of rightof-way was a taking under the power of eminent
domain. The Court said:
In the case at bar, the easement of right-of-way is
definitely a taking under the power of eminent
domain. Considering the nature and effect of the
installation of 230 KV Mexico-Limay transmission
lines, the limitation imposed by NPC against the
use of the land for an indefinite period deprives
private respondents of its ordinary use.
A case exemplifying an instance of compensable
taking which does not entail transfer of title is
Republic v. Philippine Long Distance Telephone
Co.36 Here, the Bureau of Telecommunications, a
government instrumentality, had contracted with the

PLDT for the interconnection between the


Government Telephone System and that of the
PLDT, so that the former could make use of the
lines and facilities of the PLDT. In its desire to
expand services to government offices, the Bureau
of Telecommunications demanded to expand its
use of the PLDT lines. Disagreement ensued on
the terms of the contract for the use of the PLDT
facilities. The Court ruminated:
Normally, of course, the power of eminent domain
results in the taking or appropriation of title to, and
possession of, the expropriated property; but no
cogent reason appears why said power may not be
availed of to impose only a burden upon the owner
of the condemned property, without loss of title and
possession. It is unquestionable that real property
may, through expropriation, be subjected to an
easement right of way.37
In Republic v. Castellvi,38 this Court had the
occasion to spell out the requisites of taking in
eminent domain, to wit:
(1) the expropriator must enter a private
property;
(2) the entry must be for more than a
momentary period.
(3) the entry must be under warrant or color
of legal authority;
(4) the property must be devoted to public
use or otherwise informally appropriated or
injuriously affected;

(5) the utilization of the property for public


use must be in such a way as to oust the
owner and deprive him of beneficial
enjoyment of the property.
As shown by the foregoing jurisprudence, a
regulation which substantially deprives the owner of
his proprietary rights and restricts the beneficial use
and enjoyment for public use amounts to
compensable taking. In the case under
consideration, the entry referred to in Section 76
and the easement rights under Section 75 of Rep.
Act No. 7942 as well as the various rights to CAMC
under its FTAA are no different from the deprivation
of proprietary rights in the cases discussed which
this Court considered as taking. Section 75 of the
law in question reads:
Easement Rights. - When mining areas are so
situated that for purposes of more convenient
mining operations it is necessary to build, construct
or install on the mining areas or lands owned,
occupied or leased by other persons, such
infrastructure as roads, railroads, mills, waste dump
sites, tailing ponds, warehouses, staging or storage
areas and port facilities, tramways, runways,
airports, electric transmission, telephone or
telegraph lines, dams and their normal flood and
catchment areas, sites for water wells, ditches,
canals, new river beds, pipelines, flumes, cuts,
shafts, tunnels, or mills, the contractor, upon
payment of just compensation, shall be entitled to
enter and occupy said mining areas or lands.
Section 76 provides:
Entry into private lands and concession areas
Subject to prior notification, holders of mining rights

shall not be prevented from entry into private lands


and concession areas by surface owners,
occupants, or concessionaires when conducting
mining operations therein.

Moreover, it would not be amiss to revisit the


history of mining laws of this country which would
help us understand Section 76 of Rep. Act No.
7942.

The CAMC FTAA grants in favor of CAMC the right


of possession of the Exploration Contract Area, the
full right of ingress and egress and the right to
occupy the same. It also bestows CAMC the right
not to be prevented from entry into private lands by
surface owners or occupants thereof when
prospecting, exploring and exploiting minerals
therein.

This provision is first found in Section 27 of


Commonwealth Act No. 137 which took effect on 7
November 1936, viz:

The entry referred to in Section 76 is not just a


simple right-of-way which is ordinarily allowed
under the provisions of the Civil Code. Here, the
holders of mining rights enter private lands for
purposes of conducting mining activities such as
exploration, extraction and processing of minerals.
Mining right holders build mine infrastructure, dig
mine shafts and connecting tunnels, prepare tailing
ponds, storage areas and vehicle depots, install
their machinery, equipment and sewer systems. On
top of this, under Section 75, easement rights are
accorded to them where they may build
warehouses, port facilities, electric transmission,
railroads and other infrastructures necessary for
mining operations. All these will definitely oust the
owners or occupants of the affected areas the
beneficial ownership of their lands. Without a
doubt, taking occurs once mining operations
commence.
Section 76 of Rep. Act No. 7942 is a Taking
Provision

Before entering private lands the prospector shall


first apply in writing for written permission of the
private owner, claimant, or holder thereof, and in
case of refusal by such private owner, claimant, or
holder to grant such permission, or in case of
disagreement as to the amount of compensation to
be paid for such privilege of prospecting therein,
the amount of such compensation shall be fixed by
agreement among the prospector, the Director of
the Bureau of Mines and the surface owner, and in
case of their failure to unanimously agree as to the
amount of compensation, all questions at issue
shall be determined by the Court of First Instance.
Similarly, the pertinent provision of Presidential
Decree No. 463, otherwise known as "The Mineral
Resources Development Decree of 1974,"
provides:
SECTION 12. Entry to Public and Private Lands.
A person who desires to conduct prospecting or
other mining operations within public lands covered
by concessions or rights other than mining shall
first obtain the written permission of the
government official concerned before entering such
lands. In the case of private lands, the written
permission of the owner or possessor of the land
must be obtained before entering such lands. In
either case, if said permission is denied, the

Director, at the request of the interested person


may intercede with the owner or possessor of the
land. If the intercession fails, the interested person
may bring suit in the Court of First Instance of the
province where the land is situated. If the court
finds the request justified, it shall issue an order
granting the permission after fixing the amount of
compensation and/or rental due the owner or
possessor: Provided, That pending final
adjudication of such amount, the court shall upon
recommendation of the Director permit the
interested person to enter, prospect and/or
undertake other mining operations on the disputed
land upon posting by such interested person of a
bond with the court which the latter shall consider
adequate to answer for any damage to the owner
or possessor of the land resulting from such entry,
prospecting or any other mining operations.
Hampered by the difficulties and delays in securing
surface rights for the entry into private lands for
purposes of mining operations, Presidential Decree
No. 512 dated 19 July 1974 was passed into law in
order to achieve full and accelerated mineral
resources development. Thus, Presidential Decree
No. 512 provides for a new system of surface rights
acquisition by mining prospectors and claimants.
Whereas in Commonwealth Act No. 137 and
Presidential Decree No. 463 eminent domain may
only be exercised in order that the mining claimants
can build, construct or install roads, railroads, mills,
warehouses and other facilities, this time, the
power of eminent domain may now be invoked by
mining operators for the entry, acquisition and use
of private lands, viz:
SECTION 1. Mineral prospecting, location,
exploration, development and exploitation is hereby

declared of public use and benefit, and for


which the power of eminent domain may be
invoked and exercised for the entry, acquisition and
use of private lands. x x x.
The evolution of mining laws gives positive
indication that mining operators who are qualified to
own lands were granted the authority to exercise
eminent domain for the entry, acquisition, and use
of private lands in areas open for mining
operations. This grant of authority extant in Section
1 of Presidential Decree No. 512 is not expressly
repealed by Section 76 of Rep. Act No. 7942; and
neither are the former statutes impliedly repealed
by the former. These two provisions can stand
together even if Section 76 of Rep. Act No. 7942
does not spell out the grant of the privilege to
exercise eminent domain which was present in the
old law.
It is an established rule in statutory construction
that in order that one law may operate to repeal
another law, the two laws must be
inconsistent.39 The former must be so repugnant as
to be irreconciliable with the latter act. Simply
because a latter enactment may relate to the same
subject matter as that of an earlier statute is not of
itself sufficient to cause an implied repeal of the
latter, since the new law may be cumulative or a
continuation of the old one. As has been the ruled,
repeals by implication are not favored, and will not
be decreed unless it is manifest that the legislature
so intended.40 As laws are presumed to be passed
with deliberation and with full knowledge of all
existing ones on the subject, it is but reasonable to
conclude that in passing a statute it was not
intended to interfere with or abrogate any former
law relating to the same matter, unless the

repugnancy between the two is not only


irreconcilable, but also clear and convincing, and
flowing necessarily from the language used, unless
the later act fully embraces the subject matter of
the earlier, or unless the reason for the earlier act is
beyond peradventure removed.41 Hence, every
effort must be used to make all acts stand and if, by
any reasonable construction, they can be
reconciled, the latter act will not operate as a repeal
of the earlier.
Considering that Section 1 of Presidential Decree
No. 512 granted the qualified mining operators the
authority to exercise eminent domain and since this
grant of authority is deemed incorporated in
Section 76 of Rep. Act No. 7942, the inescapable
conclusion is that the latter provision is a taking
provision.
While this Court declares that the assailed
provision is a taking provision, this does not mean
that it is unconstitutional on the ground that it
allows taking of private property without the
determination of public use and the payment of just
compensation.
The taking to be valid must be for public
use.42 Public use as a requirement for the valid
exercise of the power of eminent domain is now
synonymous with public interest, public benefit,
public welfare and public convenience.43 It includes
the broader notion of indirect public benefit or
advantage. Public use as traditionally understood
as "actual use by the public" has already been
abandoned.44
Mining industry plays a pivotal role in the economic
development of the country and is a vital tool in the

governments thrust of accelerated recovery.45 The


importance of the mining industry for national
development is expressed in Presidential Decree
No. 463:
WHEREAS, mineral production is a major support
of the national economy, and therefore the
intensified discovery, exploration, development and
wise utilization of the countrys mineral resources
are urgently needed for national development.
Irrefragably, mining is an industry which is of public
benefit.
That public use is negated by the fact that the state
would be taking private properties for the benefit of
private mining firms or mining contractors is not at
all true. In Heirs of Juancho Ardona v.
Reyes,46 petitioners therein contended that the
promotion of tourism is not for public use because
private concessionaires would be allowed to
maintain various facilities such as restaurants,
hotels, stores, etc., inside the tourist area. The
Court thus contemplated:
The rule in Berman v. Parker [348 U.S. 25; 99 L.
ed. 27] of deference to legislative policy even if
such policy might mean taking from one private
person and conferring on another private person
applies as well in the Philippines.
". . . Once the object is within the authority of
Congress, the means by which it will be attained is
also for Congress to determine. Here one of the
means chosen is the use of private enterprise for
redevelopment of the area. Appellants argue that
this makes the project a taking from one

businessman for the benefit of another


businessman. But the means of executing the
project are for Congress and Congress alone to
determine, once the public purpose has been
established. x x x"47
Petitioners further maintain that the states
discretion to decide when to take private property is
reduced contractually by Section 13.5 of the CAMC
FTAA, which reads:
If the CONTRACTOR so requests at its option, the
GOVERNMENT shall use its offices and legal
powers to assist in the acquisition at reasonable
cost of any surface areas or rights required by the
CONTRACTOR at the CONTRACTORs cost to
carry out the Mineral Exploration and the Mining
Operations herein.
All obligations, payments and expenses arising
from, or incident to, such agreements or acquisition
of right shall be for the account of the
CONTRACTOR and shall be recoverable as
Operating Expense.
According to petitioners, the government is reduced
to a sub-contractor upon the request of the private
respondent, and on account of the foregoing
provision, the contractor can compel the
government to exercise its power of eminent
domain thereby derogating the latters power to
expropriate property.
The provision of the FTAA in question lays down
the ways and means by which the foreign-owned
contractor, disqualified to own land, identifies to the
government the specific surface areas within the

FTAA contract area to be acquired for the mine


infrastructure.48 The government then acquires
ownership of the surface land areas on behalf of
the contractor, through a voluntary transaction in
order to enable the latter to proceed to fully
implement the FTAA. Eminent domain is not yet
called for at this stage since there are still various
avenues by which surface rights can be acquired
other than expropriation. The FTAA provision under
attack merely facilitates the implementation of the
FTAA given to CAMC and shields it from violating
the Anti-Dummy Law. Hence, when confronted with
the same question in La Bugal-BLaan Tribal
Association, Inc. v. Ramos,49 the Court answered:
Clearly, petitioners have needlessly jumped to
unwarranted conclusions, without being aware of
the rationale for the said provision. That provision
does not call for the exercise of the power of
eminent domain -- and determination of just
compensation is not an issue -- as much as it calls
for a qualified party to acquire the surface rights on
behalf of a foreign-owned contractor.
Rather than having the foreign contractor act
through a dummy corporation, having the State do
the purchasing is a better alternative. This will at
least cause the government to be aware of such
transaction/s and foster transparency in the
contractors dealings with the local property
owners. The government, then, will not act as a
subcontractor of the contractor; rather, it will
facilitate the transaction and enable the parties to
avoid a technical violation of the Anti-Dummy Law.
There is also no basis for the claim that the Mining
Law and its implementing rules and regulations do
not provide for just compensation in expropriating

private properties. Section 76 of Rep. Act No. 7942


and Section 107 of DAO 96-40 provide for the
payment of just compensation:
Section 76. xxx Provided, that any damage to the
property of the surface owner, occupant, or
concessionaire as a consequence of such
operations shall be properly compensated as may
be provided for in the implementing rules and
regulations.
Section 107. Compensation of the Surface Owner
and Occupant- Any damage done to the property of
the surface owners, occupant, or concessionaire
thereof as a consequence of the mining operations
or as a result of the construction or installation of
the infrastructure mentioned in 104 above shall be
properly and justly compensated.
Such compensation shall be based on the
agreement entered into between the holder of
mining rights and the surface owner, occupant or
concessionaire thereof, where appropriate, in
accordance with P.D. No. 512. (Emphasis
supplied.)
Second Substantive Issue: Power of Courts to
Determine Just Compensation
Closely-knit to the issue of taking is the
determination of just compensation. It is contended
that Rep. Act No. 7942 and Section 107 of DAO 9640 encroach on the power of the trial courts to
determine just compensation in eminent domain
cases inasmuch as the same determination of
proper compensation are cognizable only by the
Panel of Arbitrators.

The question on the judicial determination of just


compensation has been settled in the case of
Export Processing Zone Authority v.
Dulay50 wherein the court declared that the
determination of just compensation in eminent
domain cases is a judicial function. Even as the
executive department or the legislature may make
the initial determinations, the same cannot prevail
over the courts findings.
Implementing Section 76 of Rep. Act No. 7942,
Section 105 of DAO 96-40 states that holder(s) of
mining right(s) shall not be prevented from entry
into its/their contract/mining areas for the purpose
of exploration, development, and/or utilization. That
in cases where surface owners of the lands,
occupants or concessionaires refuse to allow the
permit holder or contractor entry, the latter shall
bring the matter before the Panel of Arbitrators for
proper disposition. Section 106 states that
voluntary agreements between the two parties
permitting the mining right holders to enter and use
the surface owners lands shall be registered with
the Regional Office of the MGB. In connection with
Section 106, Section 107 provides that the
compensation for the damage done to the surface
owner, occupant or concessionaire as a
consequence of mining operations or as a result of
the construction or installation of the infrastructure
shall be properly and justly compensated and that
such compensation shall be based on the
agreement between the holder of mining rights and
surface owner, occupant or concessionaire, or
where appropriate, in accordance with Presidential
Decree No. 512. In cases where there is
disagreement to the compensation or where there
is no agreement, the matter shall be brought before
the Panel of Arbitrators. Section 206 of the

implementing rules and regulations provides an


aggrieved party the remedy to appeal the decision
of the Panel of Arbitrators to the Mines Adjudication
Board, and the latters decision may be reviewed
by the Supreme Court by filing a petition for review
on certiorari.51
An examination of the foregoing provisions gives
no indication that the courts are excluded from
taking cognizance of expropriation cases under the
mining law. The disagreement referred to in Section
107 does not involve the exercise of eminent
domain, rather it contemplates of a situation
wherein the permit holders are allowed by the
surface owners entry into the latters lands and
disagreement ensues as regarding the proper
compensation for the allowed entry and use of the
private lands. Noticeably, the provision points to a
voluntary sale or transaction, but not to an
involuntary sale.
The legislature, in enacting the mining act, is
presumed to have deliberated with full knowledge
of all existing laws and jurisprudence on the
subject. Thus, it is but reasonable to conclude that
in passing such statute it was in accord with the
existing laws and jurisprudence on the jurisdiction
of courts in the determination of just compensation
and that it was not intended to interfere with or
abrogate any former law relating to the same
matter. Indeed, there is nothing in the provisions of
the assailed law and its implementing rules and
regulations that exclude the courts from their
jurisdiction to determine just compensation in
expropriation proceedings involving mining
operations. Although Section 105 confers upon the
Panel of Arbitrators the authority to decide cases
where surface owners, occupants, concessionaires

refuse permit holders entry, thus, necessitating


involuntary taking, this does not mean that the
determination of the just compensation by the
Panel of Arbitrators or the Mines Adjudication
Board is final and conclusive. The determination is
only preliminary unless accepted by all parties
concerned. There is nothing wrong with the grant of
primary jurisdiction by the Panel of Arbitrators or
the Mines Adjudication Board to determine in a
preliminary matter the reasonable compensation
due the affected landowners or occupants.52 The
original and exclusive jurisdiction of the courts to
decide determination of just compensation remains
intact despite the preliminary determination made
by the administrative agency. As held in Philippine
Veterans Bank v. Court of Appeals53:

enterprise. In effect, petitioners asserted that the


law, the implementing regulations, and the CAMC
FTAA cede beneficial ownership of the mineral
resources to the foreign contractor.
It must be noted that this argument was already
raised in La Bugal-BLaan Tribal Association, Inc. v.
Ramos,54where the Court answered in the following
manner:
RA 7942 provides for the states control and
supervision over mining operations. The following
provisions thereof establish the mechanism of
inspection and visitorial rights over mining
operations and institute reportorial requirements in
this manner:

The jurisdiction of the Regional Trial Courts is not


any less "original and exclusive" because the
question is first passed upon by the DAR, as the
judicial proceedings are not a continuation of the
administrative determination.

1. Sec. 8 which provides for the DENRs


power of over-all supervision and periodic
review for "the conservation, management,
development and proper use of the States
mineral resources";

Third Substantive Issue: Sufficient Control by the


State Over Mining Operations

2. Sec. 9 which authorizes the Mines and


Geosciences Bureau (MGB) under the
DENR to exercise "direct charge in the
administration and disposition of mineral
resources", and empowers the MGB to
"monitor the compliance by the contractor
of the terms and conditions of the mineral
agreements", "confiscate surety and
performance bonds", and deputize
whenever necessary any member or unit of
the Phil. National Police, barangay, duly
registered non-governmental organization
(NGO) or any qualified person to police
mining activities;

Anent the third issue, petitioners charge that Rep.


Act No. 7942, as well as its Implementing Rules
and Regulations, makes it possible for FTAA
contracts to cede over to a fully foreign-owned
corporation full control and management of mining
enterprises, with the result that the State is
allegedly reduced to a passive regulator dependent
on submitted plans and reports, with weak review
and audit powers. The State is not acting as the
supposed owner of the natural resources for and
on behalf of the Filipino people; it practically has
little effective say in the decisions made by the

3. Sec. 66 which vests in the Regional


Director "exclusive jurisdiction over safety
inspections of all installations, whether
surface or underground", utilized in mining
operations.
4. Sec. 35, which incorporates into all
FTAAs the following terms, conditions and
warranties:
"(g) Mining operations shall be conducted in
accordance with the provisions of the Act and its
IRR.
"(h) Work programs and minimum expenditures
commitments.
xxxx
"(k) Requiring proponent to effectively use
appropriate anti-pollution technology and facilities
to protect the environment and restore or
rehabilitate mined-out areas.
"(l) The contractors shall furnish the Government
records of geologic, accounting and other relevant
data for its mining operation, and that books of
accounts and records shall be open for inspection
by the government. x x x.
"(m) Requiring the proponent to dispose of the
minerals at the highest price and more
advantageous terms and conditions.
xxxx

"(o) Such other terms and conditions consistent


with the Constitution and with this Act as the
Secretary may deem to be for the best interest of
the State and the welfare of the Filipino people."
The foregoing provisions of Section 35 of RA 7942
are also reflected and implemented in Section 56
(g), (h), (l), (m) and (n) of the Implementing Rules,
DAO 96-40.

Moreover, RA 7942 and DAO 96-40 also provide


various stipulations confirming the governments
control over mining enterprises:
o

The contractor is to relinquish to the


government those portions of the contract
area not needed for mining operations and
not covered by any declaration of mining
feasibility (Section 35-e, RA 7942; Section
60, DAO 96-40).
The contractor must comply with the
provisions pertaining to mine safety, health
and environmental protection (Chapter XI,
RA 7942; Chapters XV and XVI, DAO 9640).
For violation of any of its terms and
conditions, government may cancel an
FTAA. (Chapter XVII, RA 7942; Chapter
XXIV, DAO 96-40).
An FTAA contractor is obliged to open its
books of accounts and records for
0inspection by the government (Section 56m, DAO 96-40).

An FTAA contractor has to dispose of the


minerals and by-products at the highest
market price and register with the MGB a
copy of the sales agreement (Section 56-n,
DAO 96-40).

2. Approved three-year work


program (Section 53-a-4, DAO 9640)
3. Environmental compliance
certificate (Section 70, RA 7942)

MGB is mandated to monitor the


contractors compliance with the terms and
conditions of the FTAA; and to deputize,
when necessary, any member or unit of the
Philippine National Police, the barangay or
a DENR-accredited nongovernmental
organization to police mining activities
(Section 7-d and -f, DAO 96-40).

4. Approved environmental
protection and enhancement
program (Section 69, RA 7942)
5. Approval by the Sangguniang
Panlalawigan/Bayan/Barangay
(Section 70, RA 7942; Section 27,
RA 7160)

An FTAA cannot be transferred or assigned


without prior approval by the President
(Section 40, RA 7942; Section 66, DAO 9640).
A mining project under an FTAA cannot
proceed to the
construction/development/utilization stage,
unless its Declaration of Mining Project
Feasibility has been approved by
government (Section 24, RA 7942).
The Declaration of Mining Project
Feasibility filed by the contractor cannot be
approved without submission of the
following documents:
1. Approved mining project
feasibility study (Section 53-d, DAO
96-40)

6. Free and prior informed consent


by the indigenous peoples
concerned, including payment of
royalties through a Memorandum of
Agreement (Section 16, RA 7942;
Section 59, RA 8371)
o

The FTAA contractor is obliged to assist in


the development of its mining community,
promotion of the general welfare of its
inhabitants, and development of science
and mining technology (Section 57, RA
7942).

The FTAA contractor is obliged to submit


reports (on quarterly, semi-annual or annual
basis as the case may be; per Section 270,
DAO 96-40), pertaining to the following:
1. Exploration

2. Drilling

contractor that it has access to all the


financing, managerial and technical
expertise and technology necessary to
carry out the objectives of the FTAA
(Section 35-b, -e, and -f, RA 7942).

3. Mineral resources and reserves


4. Energy consumption
5. Production

6. Sales and marketing


7. Employment
8. Payment of taxes, royalties, fees
and other Government Shares
9. Mine safety, health and
environment
10. Land use
11. Social development
12. Explosives consumption
o

An FTAA pertaining to areas within


government reservations cannot be granted
without a written clearance from the
government agencies concerned (Section
19, RA 7942; Section 54, DAO 96-40).
An FTAA contractor is required to post a
financial guarantee bond in favor of the
government in an amount equivalent to its
expenditures obligations for any particular
year. This requirement is apart from the
representations and warranties of the

Other reports to be submitted by the


contractor, as required under DAO 96-40,
are as follows: an environmental report on
the rehabilitation of the mined-out area
and/or mine waste/tailing covered area, and
anti-pollution measures undertaken
(Section 35-a-2); annual reports of the
mining operations and records of geologic
accounting (Section 56-m); annual progress
reports and final report of exploration
activities (Section 56-2).
Other programs required to be submitted by
the contractor, pursuant to DAO 96-40, are
the following: a safety and health program
(Section 144); an environmental work
program (Section 168); an annual
environmental protection and enhancement
program (Section 171).

The foregoing gamut of requirements, regulations,


restrictions and limitations imposed upon the FTAA
contractor by the statute and regulations easily
overturns petitioners contention. The setup under
RA 7942 and DAO 96-40 hardly relegates the State
to the role of a "passive regulator" dependent on
submitted plans and reports. On the contrary, the
government agencies concerned are empowered to
approve or disapprove -- hence, to influence, direct
and change -- the various work programs and the
corresponding minimum expenditure commitments
for each of the exploration, development and
utilization phases of the mining enterprise.
Once these plans and reports are approved, the
contractor is bound to comply with its commitments
therein. Figures for mineral production and sales
are regularly monitored and subjected to
government review, in order to ensure that the
products and by-products are disposed of at the
best prices possible; even copies of sales
agreements have to be submitted to and registered
with MGB. And the contractor is mandated to open
its books of accounts and records for scrutiny, so
as to enable the State to determine if the
government share has been fully paid.
The State may likewise compel the contractors
compliance with mandatory requirements on mine
safety, health and environmental protection, and
the use of anti-pollution technology and facilities.
Moreover, the contractor is also obligated to assist
in the development of the mining community and to
pay royalties to the indigenous peoples concerned.
Cancellation of the FTAA may be the penalty for
violation of any of its terms and conditions and/or
noncompliance with statutes or regulations. This

general, all-around, multipurpose sanction is no


trifling matter, especially to a contractor who may
have yet to recover the tens or hundreds of millions
of dollars sunk into a mining project.
Overall, considering the provisions of the statute
and the regulations just discussed, we believe that
the State definitely possesses the means by which
it can have the ultimate word in the operation of the
enterprise, set directions and objectives, and detect
deviations and noncompliance by the contractor;
likewise, it has the capability to enforce compliance
and to impose sanctions, should the occasion
therefor arise.
In other words, the FTAA contractor is not free to do
whatever it pleases and get away with it; on the
contrary, it will have to follow the government line if
it wants to stay in the enterprise. Ineluctably then,
RA 7942 and DAO 96-40 vest in the government
more than a sufficient degree of control and
supervision over the conduct of mining operations.
Fourth Substantive Issue: The Proper Interpretation
of the Constitutional Phrase "Agreements Involving
Either Technical or Financial Assistance
In interpreting the first and fourth paragraphs of
Section 2, Article XII of the Constitution, petitioners
set forth the argument that foreign corporations are
barred from making decisions on the conduct of
operations and the management of the mining
project. The first paragraph of Section 2, Article XII
reads:
x x x The exploration, development, and utilization
of natural resources shall be under the full control

and supervision of the State. The State may directly


undertake such activities, or it may enter into coproduction, joint venture, or production sharing
agreements with Filipino citizens, or corporations or
associations at least sixty percentum of whose
capital is owned by such citizens. Such agreements
may be for a period not exceeding twenty five
years, renewable for not more than twenty five
years, and under such terms and conditions as
may be provided by law x x x.
The fourth paragraph of Section 2, Article XII
provides:
The President may enter into agreements with
foreign-owned corporations involving either
technical or financial assistance for large scale
exploration, development, and utilization of
minerals, petroleum, and other mineral oils
according to the general terms and conditions
provided by law, based on real contributions to the
economic growth and general welfare of the
country x x x.
Petitioners maintain that the first paragraph bars
aliens and foreign-owned corporations from
entering into any direct arrangement with the
government including those which involve coproduction, joint venture or production sharing
agreements. They likewise insist that the fourth
paragraph allows foreign-owned corporations to
participate in the large-scale exploration,
development and utilization of natural resources,
but such participation, however, is merely limited to
an agreement for either financial or technical
assistance only.

Again, this issue has already been succinctly


passed upon by this Court in La Bugal-BLaan
Tribal Association, Inc. v. Ramos.55 In discrediting
such argument, the Court ratiocinated:
Petitioners claim that the phrase "agreements x x x
involving either technical or financial
assistance" simply meanstechnical assistance or
financial assistance agreements, nothing more and
nothing else. They insist that there is no ambiguity
in the phrase, and that a plain reading of paragraph
4 quoted above leads to the inescapable
conclusion that what a foreign-owned corporation
may enter into with the government is merely an
agreement for eitherfinancial or technical
assistance only, for the large-scale exploration,
development and utilization of minerals, petroleum
and other mineral oils; such a limitation, they argue,
excludes foreign management and operation of a
mining enterprise.
This restrictive interpretation, petitioners believe, is
in line with the general policy enunciated by the
Constitution reserving to Filipino citizens and
corporations the use and enjoyment of the
countrys natural resources. They maintain that this
Courts Decision of January 27, 2004 correctly
declared the WMCP FTAA, along with pertinent
provisions of RA 7942, void for allowing a foreign
contractor to have direct and exclusive
management of a mining enterprise. Allowing such
a privilege not only runs counter to the "full control
and supervision" that the State is constitutionally
mandated to exercise over the exploration,
development and utilization of the countrys natural
resources; doing so also vests in the foreign
company "beneficial ownership" of our mineral
resources. It will be recalled that the Decision of

January 27, 2004 zeroed in on "management or


other forms of assistance" or other activities
associated with the "service contracts" of the
martial law regime, since "the management or
operation of mining activities by foreign contractors,
which is the primary feature of service contracts,
was precisely the evil that the drafters of the 1987
Constitution sought to eradicate."

when understood in the sense of "including," as


in including technical or financial
assistance, necessarily implies that there
are activities other than those that are being
included. In other words, if an
agreement includes technical or financial
assistance, there is apart from such assistance -something else already in, and covered or may be
covered by, the said agreement.

In contrast, the use of the word "involving" signifies


the possibility of the inclusion of other forms of
assistance or activities having to do with,
otherwise related to or compatible with financial or
technical assistance. The word "involving" as used
in this context has three connotations that can be
differentiated thus: one, the sense of "concerning,"
"having to do with," or "affecting"; two, "entailing,"
"requiring," "implying" or "necessitating"; and three,
"including," "containing" or "comprising."
Plainly, none of the three connotations convey a
sense of exclusivity. Moreover, the word "involving,"

Fifth Substantive Issue: Service Contracts Not


Deconstitutionalized

In short, it allows for the possibility that


matters, other than those explicitly mentioned,
could be made part of the agreement. Thus, we are
now led to the conclusion that the use of the word
"involving" implies that these agreements with
foreign corporations are not limited to mere
financial or technical assistance. The difference in
sense becomes very apparent when we juxtapose
"agreements for technical or financial assistance"
against "agreements including technical or
financial assistance." This much is unalterably clear
in a verba legis approach.

Lastly, petitioners stress that the service contract


regime under the 1973 Constitution is expressly
prohibited under the 1987 Constitution as the term
service contracts found in the former was deleted in
the latter to avoid the circumvention of
constitutional prohibitions that were prevalent in the
1987 Constitution. According to them, the framers
of the 1987 Constitution only intended for foreignowned corporations to provide either technical
assistance or financial assistance. Upon perusal of
the CAMC FTAA, petitioners are of the opinion that
the same is a replica of the service contract
agreements that the present constitution allegedly
prohibit.

Second, if the real intention of the drafters was to


confine foreign corporations to financial or technical
assistance and nothing more, their language would
have certainly been so unmistakably restrictive and
stringent as to leave no doubt in anyones mind
about their true intent. For example, they would
have used the sentence foreign corporations are
absolutely prohibited from involvement in the
management or operation of mining or similar
ventures or words of similar import. A search for
such stringent wording yields negative
results. Thus, we come to the inevitable
conclusion that there was a conscious and
deliberate decision to avoid the use of
restrictive wording that bespeaks an intent not

Again, this contention is not well-taken. The mere


fact that the term service contracts found in the
1973 Constitution was not carried over to the
present constitution, sans any categorical
statement banning service contracts in mining
activities, does not mean that service contracts as
understood in the 1973 Constitution was eradicated
in the 1987 Constitution.56 The 1987 Constitution
allows the continued use of service contracts with
foreign corporations as contractors who would
invest in and operate and manage extractive
enterprises, subject to the full control and
supervision of the State; this time, however, safety
measures were put in place to prevent abuses of
the past regime.57 We ruled, thus:

xxxx
We do not see how applying a strictly literal
or verba legis interpretation of paragraph 4 could
inexorably lead to the conclusions arrived at in
the ponencia. First, the drafters choice of words -their use of the phrase agreements x x
xinvolving either technical or financial
assistance -- does not indicate the intent
to exclude other modes of assistance. The drafters
opted to use involving when they could have simply
said agreements for financial or technical
assistance, if that was their intention to begin with.
In this case, the limitation would be very clear and
no further debate would ensue.

to use the expression "agreements x x x


involving either technical or financial
assistance" in an exclusionary and limiting
manner.

To our mind, however, such intent cannot be


definitively and conclusively established from the
mere failure to carry the same expression or term
over to the new Constitution, absent a more
specific, explicit and unequivocal statement to that
effect. What petitioners seek (a complete ban on
foreign participation in the management of mining
operations, as previously allowed by the earlier
Constitutions) is nothing short of bringing about a
momentous sea change in the economic and
developmental policies; and the fundamentally
capitalist, free-enterprise philosophy of our
government. We cannot imagine such a radical
shift being undertaken by our government, to the
great prejudice of the mining sector in particular
and our economy in general, merely on the basis of
the omission of the termsservice contract from or
the failure to carry them over to the new
Constitution. There has to be a much more definite
and even unarguable basis for such a drastic
reversal of policies.

on account of their objections to the


"constitutionalization" of the "service contract"
concept.
Mr. Gascon said, "I felt that if we would
constitutionalize any provision on service
contracts, this should always be with the
concurrence of Congress and not guided only by a
general law to be promulgated by Congress." Mr.
Garcia explained, "Service contracts are given
constitutional legitimization in Sec. 3, even when
they have been proven to be inimical to the
interests of the nation, providing, as they do, the
legal loophole for the exploitation of our natural
resources for the benefit of foreign
interests." Likewise, Mr. Tadeo cited inter alia the
fact that service contracts continued to subsist,
enabling foreign interests to benefit from our
natural resources. It was hardly likely that these
gentlemen would have objected so strenuously,
had the provision called for mere technical or
financial assistance and nothing more.

xxxx
The foregoing are mere fragments of the framers
lengthy discussions of the provision dealing
with agreements x x x involving either technical or
financial assistance, which ultimately became
paragraph 4 of Section 2 of Article XII of the
Constitution. Beyond any doubt, the members of
the ConCom were actually debating about the
martial-law-eraservice contracts for which they
were crafting appropriate safeguards.
In the voting that led to the approval of Article XII by
the ConCom, the explanations given by
Commissioners Gascon, Garcia and Tadeo
indicated that they had voted to reject this provision

The deliberations of the ConCom and some


commissioners explanation of their votes leave no
room for doubt that the service contract concept
precisely underpinned the commissioners
understanding of the "agreements involving either
technical or financial assistance."
xxxx
From the foregoing, we are impelled to conclude
that the phrase agreements involving either
technical or financial assistance, referred to in
paragraph 4, are in fact service contracts. But
unlike those of the 1973 variety, the new ones are
between foreign corporations acting as contractors

on the one hand; and on the other, the government


as principal or "owner" of the works. In the new
service contracts, the foreign contractors provide
capital, technology and technical know-how, and
managerial expertise in the creation and operation
of large-scale mining/extractive enterprises; and
the government, through its agencies (DENR,
MGB), actively exercises control and supervision
over the entire operation.
xxxx
It is therefore reasonable and unavoidable to make
the following conclusion, based on the above
arguments. As written by the framers and ratified
and adopted by the people, the Constitution allows
the continued use of service contracts with foreign
corporations -- as contractors who would invest in
and operate and manage extractive enterprises,
subject to the full control and supervision of the
State -- sans the abuses of the past regime. The
purpose is clear: to develop and utilize our mineral,
petroleum and other resources on a large scale for
the immediate and tangible benefit of the Filipino
people.58
WHEREFORE, the instant petition for prohibition
and mandamus is hereby DISMISSED. Section 76
of Republic Act No. 7942 and Section 107 of DAO
96-40; Republic Act No. 7942 and its Implementing
Rules and Regulations contained in DAO 96-40
insofar as they relate to financial and technical
assistance agreements referred to in paragraph 4
of Section 2 of Article XII of the Constitution are
NOT UNCONSTITUTIONAL.
SO ORDERED.

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