Republic of the Philippines

SUPREME COURT
Manila
A.M. No. 09-6-8-SC
RULES OF PROCEDURE FOR ENVIRONMENTAL CASES
RESOLUTION
Acting on the recommendation of the Chairperson of the Sub-committee on the Rules of
Procedure for Environmental Cases submitting for this Courts consideration and
approval
the proposed Rules of Procedure for Environmental Cases, the Court Resolved to
APPROVE the same.
These Rules shall take effect within fifteen (15) days following its publication once in a
newspaper of general circulation.
April 13, 2010.
REYNATO S. PUNO
Chief Justice
ANTONIO T. CARPIO
Associate Justice

RENATO C. CORONA
Associate Justice

(on leave)
CONCHITA CARPIO MORALES
Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ANTONIO EDUARDO B.
NACHURA
Associate Justice

TERESITA J. LEONARDO-DE
CASTRO
Associate Justice

ARTURO D. BRION
Associate Justice

DIOSDADO M. PERALTA
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARIANO C. DEL CASTILLO

Associate Justice

ROBERTO A. ABAD
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

JOSE P. PEREZ
Associate Justice

JOSE C. MENDOZA
Associate Justice

The Lawphil Project - Arellano Law Foundation

RULES OF PROCEDURE FOR ENVIRONMENTAL CASES

PART I

RULE 1
GENERAL PROVISIONS
Section 1. Title. These Rules shall be known as "The Rules of Procedure for
Environmental Cases."
Section 2. Scope. These Rules shall govern the procedure in civil, criminal and special
civil actions before the Regional Trial Courts, Metropolitan Trial Courts, Municipal Trial
Courts in Cities, Municipal Trial Courts and Municipal Circuit Trial Courts involving
enforcement or violations of environmental and other related laws, rules and regulations
such as but not limited to the following:
(a) Act No. 3572, Prohibition Against Cutting of Tindalo, Akli, and Molave Trees;
(b) P.D. No. 705, Revised Forestry Code;
(c) P.D. No. 856, Sanitation Code;
(d) P.D. No. 979, Marine Pollution Decree;
(e) P.D. No. 1067, Water Code;
(f) P.D. No. 1151, Philippine Environmental Policy of 1977;
(g) P.D. No. 1433, Plant Quarantine Law of 1978;
(h) P.D. No. 1586, Establishing an Environmental Impact Statement System
Including Other Environmental Management Related Measures and for Other
Purposes;
(i) R.A. No. 3571, Prohibition Against the Cutting, Destroying or Injuring of
Planted or Growing Trees, Flowering Plants and Shrubs or Plants of Scenic Value
along Public Roads, in Plazas, Parks, School Premises or in any Other Public
Ground;
(j) R.A. No. 4850, Laguna Lake Development Authority Act;
(k) R.A. No. 6969, Toxic Substances and Hazardous Waste Act;
(l) R.A. No. 7076, Peoples Small-Scale Mining Act;
(m) R.A. No. 7586, National Integrated Protected Areas System Act including all
laws, decrees, orders, proclamations and issuances establishing protected areas;
(n) R.A. No. 7611, Strategic Environmental Plan for Palawan Act;
(o) R.A. No. 7942, Philippine Mining Act;
(p) R.A. No. 8371, Indigenous Peoples Rights Act;
(q) R.A. No. 8550, Philippine Fisheries Code;
(r) R.A. No. 8749, Clean Air Act;
(s) R.A. No. 9003, Ecological Solid Waste Management Act;
(t) R.A. No. 9072, National Caves and Cave Resource Management Act;

(u) R.A. No. 9147, Wildlife Conservation and Protection Act;

(v) R.A. No. 9175, Chainsaw Act;
(w) R.A. No. 9275, Clean Water Act;
(x) R.A. No. 9483, Oil Spill Compensation Act of 2007; and
(y) Provisions in C.A. No. 141, The Public Land Act; R.A. No. 6657,
Comprehensive Agrarian Reform Law of 1988; R.A. No. 7160, Local
Government Code of 1991; R.A. No. 7161, Tax Laws Incorporated in the Revised
Forestry Code and Other Environmental Laws (Amending the NIRC); R.A. No.
7308, Seed Industry Development Act of 1992; R.A. No. 7900, High-Value Crops
Development
Rules of Procedure for Environmental Cases Act; R.A. No. 8048, Coconut
Preservation Act; R.A. No. 8435, Agriculture and Fisheries Modernization Act of 1997;
R.A. No. 9522, The Philippine Archipelagic Baselines Law; R.A. No. 9593, Renewable
Energy Act of 2008; R.A. No. 9637, Philippine Biofuels Act; and other existing laws that
relate to the conservation, development, preservation, protection and utilization of the
environment and natural resources.
Section 3. Objectives. - The objectives of these Rules are:
(a) To protect and advance the constitutional right of the people to a balanced and
healthful ecology;
(b) To provide a simplified, speedy and inexpensive procedure for the
enforcement of environmental rights and duties recognized under the
Constitution, existing laws, rules and regulations, and international agreements;
(c) To introduce and adopt innovations and best practices ensuring the effective
enforcement of remedies and redress for violation of environmental laws; and
(d) To enable the courts to monitor and exact compliance with orders and
judgments in environmental cases.
Section 4. Definition of Terms. (a) By-product or derivatives means any part taken or substance extracted from
wildlife, in raw or in processed form including stuffed animals and herbarium
specimens. 1avvphi1
(b) Consent decree refers to a judicially-approved settlement between concerned
parties based on public interest and public policy to protect and preserve the
environment.
(c) Continuing mandamus is a writ issued by a court in an environmental case
directing any agency or instrumentality of the government or officer thereof to
perform an act or series of acts decreed by final judgment which shall remain
effective until judgment is fully satisfied.
(d) Environmental protection order (EPO) refers to an order issued by the court
directing or enjoining any person or government agency to perform or desist from
performing an act in order to protect, preserve or rehabilitate the environment.

(e) Mineral refers to all naturally occurring inorganic substance in solid, gas,
liquid, or any intermediate state excluding energy materials such as coal,
petroleum, natural gas, radioactive materials and geothermal energy.
(f) Precautionary principle states that when human activities may lead to threats of
serious and irreversible damage to the environment that is scientifically plausible
but uncertain, actions shall be taken to avoid or diminish that threat.
(g) Strategic lawsuit against public participation (SLAPP) refers to an action
whether civil, criminal or administrative, brought against any person, institution
or any government agency or local government unit or its officials and employees,
with the intent to harass, vex, exert undue pressure or stifle any legal recourse that
such person, institution or government agency has taken or may take in the
enforcement of environmental laws, protection of the environment or assertion of
environmental rights.
(h) Wildlife means wild forms and varieties of flora and fauna, in all
developmental stages including those which are in captivity or are being bred or
propagated.
PART II
CIVIL PROCEDURE
RULE 2
PLEADINGS AND PARTIES
Section 1. Pleadings and motions allowed. The pleadings and motions that may be
filed are complaint, answer which may include compulsory counterclaim and cross-claim,
motion for intervention, motion for discovery and motion for reconsideration of the
judgment.
Motion for postponement, motion for new trial and petition for relief from judgment shall
be allowed in highly meritorious cases or to prevent a manifest miscarriage of justice.
Section 2. Prohibited pleadings or motions. The following pleadings or motions shall
not be allowed:
(a) Motion to dismiss the complaint;
(b) Motion for a bill of particulars;
(c) Motion for extension of time to file pleadings, except to file answer, the
extension not to exceed fifteen (15) days;
(d) Motion to declare the defendant in default;
(e) Reply and rejoinder; and
(f) Third party complaint.
Section 3. Verified complaint. The verified complaint shall contain the names of the
parties, their addresses, the cause of action and the reliefs prayed for.
The plaintiff shall attach to the verified complaint all evidence proving or supporting the
cause of action consisting of the affidavits of witnesses, documentary evidence and if
possible, object evidence. The affidavits shall be in question and answer form and shall
comply with the rules of admissibility of evidence.

The complaint shall state that it is an environmental case and the law involved. The
complaint shall also include a certification against forum shopping. If the complaint is not
an environmental complaint, the presiding judge shall refer it to the executive judge for
re-raffle.
Section 4. Who may file. Any real party in interest, including the government and
juridical entities authorized by law, may file a civil action involving the enforcement or
violation of any environmental law.
Section 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.
Section 6. Service of the complaint on the government or its agencies. - Upon the filing
of the complaint, the plaintiff is required to furnish the government or the appropriate
agency, although not a party, a copy of the complaint. Proof of service upon the
government or the appropriate agency shall be attached to the complaint.
Section 7. Assignment by raffle. - If there is only one (1) designated branch in a multiplesala court, the executive judge shall immediately refer the case to said branch. If there are
two (2) or more designated branches, the executive judge shall conduct a special raffle on
the day the complaint is filed.
Section 8. Issuance of Temporary Environmental Protection Order (TEPO). - If it
appears from the verified complaint with a prayer for the issuance of an Environmental
Protection Order (EPO) that the matter is of extreme urgency and the applicant will suffer
grave injustice and irreparable injury, the executive judge of the multiple-sala court
before raffle or the presiding judge of a single-sala court as the case may be, may issue ex
parte a TEPO effective for only seventy-two (72) hours from date of the receipt of the
TEPO by the party or person enjoined. Within said period, the court where the case is
assigned, shall conduct a summary hearing to determine whether the TEPO may be
extended until the termination of the case.
The court where the case is assigned, shall periodically monitor the existence of acts that
are the subject matter of the TEPO even if issued by the executive judge, and may lift the
same at any time as circumstances may warrant.
The applicant shall be exempted from the posting of a bond for the issuance of a TEPO.
Section 9. Action on motion for dissolution of TEPO. - The grounds for motion to
dissolve a TEPO shall be supported by affidavits of the party or person enjoined which
the applicant may oppose, also by affidavits.
The TEPO may be dissolved if it appears after hearing that its issuance or continuance
would cause irreparable damage to the party or person enjoined while the applicant may
be fully compensated for such damages as he may suffer and subject to the posting of a
sufficient bond by the party or person enjoined.

Section 10. Prohibition against temporary restraining order (TRO) and preliminary
injunction. - Except the Supreme Court, no court can issue a TRO or writ of preliminary
injunction against lawful actions of government agencies that enforce environmental laws
or prevent violations thereof.
Section 11. Report on TEPO, EPO, TRO or preliminary injunction. - The judge shall
report any action taken on a TEPO, EPO, TRO or a preliminary injunction, including its
modification and dissolution, to the Supreme Court, through the Office of the Court
Administrator, within ten (10) days from the action taken.
Section 12. Payment of filing and other legal fees. - The payment of filing and other legal
fees by the plaintiff shall be deferred until after judgment unless the plaintiff is allowed to
litigate as an indigent. It shall constitute a first lien on the judgment award.
For a citizen suit, the court shall defer the payment of filing and other legal fees that shall
serve as first lien on the judgment award.
Section 13. Service of summons, orders and other court processes. - The summons,
orders and other court processes may be served by the sheriff, his deputy or other proper
court officer or for justifiable reasons, by the counsel or representative of the plaintiff or
any suitable person authorized or deputized by the court issuing the summons.
Any private person who is authorized or deputized by the court to serve summons, orders
and other court processes shall for that purpose be considered an officer of the court.
The summons shall be served on the defendant, together with a copy of an order
informing all parties that they have fifteen (15) days from the filing of an answer, within
which to avail of interrogatories to parties under Rule 25 of the Rules of Court and
request for admission by adverse party under Rule 26, or at their discretion, make use of
depositions under Rule 23 or other measures under Rules 27 and 28.
Should personal and substituted service fail, summons by publication shall be allowed. In
the case of juridical entities, summons by publication shall be done by indicating the
names of the officers or their duly authorized representatives.
Section 14. Verified answer. - Within fifteen (15) days from receipt of summons, the
defendant shall file a verified answer to the complaint and serve a copy thereof on the
plaintiff. The defendant shall attach affidavits of witnesses, reports, studies of experts and
all evidence in support of the defense.
Affirmative and special defenses not pleaded shall be deemed waived, except lack of
jurisdiction.
Cross-claims and compulsory counterclaims not asserted shall be considered barred. The
answer to counterclaims or cross-claims shall be filed and served within ten (10) days
from service of the answer in which they are pleaded.
Section 15. Effect of failure to answer. - Should the defendant fail to answer the
complaint within the period provided, the court shall declare defendant in default and
upon motion of the plaintiff, shall receive evidence ex parte and render judgment based
thereon and the reliefs prayed for.
RULE 3
PRE-TRIAL

Section 1. Notice of pre-trial. - Within two (2) days from the filing of the answer to the
counterclaim or cross-claim, if any, the branch clerk of court shall issue a notice of the
pre-trial to be held not later than one (1) month from the filing of the last pleading.
The court shall schedule the pre-trial and set as many pre-trial conferences as may be
necessary within a period of two (2) months counted from the date of the first pre-trial
conference.
Section 2. Pre-trial brief. - At least three (3) days before the pretrial, the parties shall
submit pre-trial briefs containing the following:
(a) A statement of their willingness to enter into an amicable settlement indicating
the desired terms thereof or to submit the case to any of the alternative modes of
dispute resolution;
(b) A summary of admitted facts and proposed stipulation of facts;
(c) The legal and factual issues to be tried or resolved. For each factual issue, the
parties shall state all evidence to support their positions thereon. For each legal
issue, parties shall state the applicable law and jurisprudence supporting their
respective positions thereon;
(d) The documents or exhibits to be presented, including depositions, answers to
interrogatories and answers to written request for admission by adverse party,
stating the purpose thereof;
(e) A manifestation of their having availed of discovery procedures or their
intention to avail themselves of referral to a commissioner or panel of experts;
(f) The number and names of the witnesses and the substance of their affidavits;
(g) Clarificatory questions from the parties; and
(h) List of cases arising out of the same facts pending before other courts or
administrative agencies. Failure to comply with the required contents of a pre-trial
brief may be a ground for contempt.
Failure to file the pre-trial brief shall have the same effect as failure to appear at the pretrial.
Section 3. Referral to mediation. - At the start of the pre-trial conference, the court shall
inquire from the parties if they have settled the dispute; otherwise, the court shall
immediately refer the parties or their counsel, if authorized by their clients, to the
Philippine Mediation Center (PMC) unit for purposes of mediation. If not available, the
court shall refer the case to the clerk of court or legal researcher for mediation.
Mediation must be conducted within a non-extendible period of thirty (30) days from
receipt of notice of referral to mediation.
The mediation report must be submitted within ten (10) days from the expiration of the
30-day period.
Section 4. Preliminary conference. - If mediation fails, the court will schedule the
continuance of the pre-trial. Before the scheduled date of continuance, the court may
refer the case to the branch clerk of court for a preliminary conference for the following
purposes:

(a) To assist the parties in reaching a settlement;

(b) To mark the documents or exhibits to be presented by the parties and copies
thereof to be attached to the records after comparison with the originals;
(c) To ascertain from the parties the undisputed facts and admissions on the
genuineness and due execution of the documents marked as exhibits;
(d) To require the parties to submit the depositions taken under Rule 23 of the
Rules of Court, the answers to written interrogatories under Rule 25, and the
answers to request for admissions by the adverse party under Rule 26;
(e) To require the production of documents or things requested by a party under
Rule 27 and the results of the physical and mental examination of persons under
Rule 28;
(f) To consider such other matters as may aid in its prompt disposition;
(g) To record the proceedings in the "Minutes of Preliminary Conference" to be
signed by both parties or their counsels;
(h) To mark the affidavits of witnesses which shall be in question and answer
form and shall constitute the direct examination of the witnesses; and
(i) To attach the minutes together with the marked exhibits before the pre-trial
proper.
The parties or their counsel must submit to the branch clerk of court the names, addresses
and contact numbers of the affiants.
During the preliminary conference, the branch clerk of court shall also require the parties
to submit the depositions taken under Rule 23 of the Rules of Court, the answers to
written interrogatories under Rule 25 and the answers to request for admissions by the
adverse party under Rule 26. The branch clerk of court may also require the production of
documents or things requested by a party under Rule 27 and the results of the physical
and mental examination of persons under Rule 28.
Section 5. Pre-trial conference; consent decree. - The judge shall put the parties and their
counsels under oath, and they shall remain under oath in all pre-trial conferences.
The judge shall exert best efforts to persuade the parties to arrive at a settlement of the
dispute. The judge may issue a consent decree approving the agreement between the
parties in accordance with law, morals, public order and public policy to protect the right
of the people to a balanced and healthful ecology.
Evidence not presented during the pre-trial, except newly-discovered evidence, shall be
deemed waived.
Section 6. Failure to settle. - If there is no full settlement, the judge shall:
(a) Adopt the minutes of the preliminary conference as part of the pre-trial
proceedings and confirm the markings of exhibits or substituted photocopies and
admissions on the genuineness and due execution of documents;
(b) Determine if there are cases arising out of the same facts pending before other
courts and order its consolidation if warranted;

(c) Determine if the pleadings are in order and if not, order the amendments if
necessary;
(d) Determine if interlocutory issues are involved and resolve the same;
(e) Consider the adding or dropping of parties;
(f) Scrutinize every single allegation of the complaint, answer and other pleadings
and attachments thereto, and the contents of documents and all other evidence
identified and pre-marked during pre-trial in determining further admissions;
(g) Obtain admissions based on the affidavits of witnesses and evidence attached
to the pleadings or submitted during pre-trial;
(h) Define and simplify the factual and legal issues arising from the pleadings and
evidence. Uncontroverted issues and frivolous claims or defenses should be
eliminated;
(i) Discuss the propriety of rendering a summary judgment or a judgment based
on the pleadings, evidence and admissions made during pre-trial;
(j) Observe the Most Important Witness Rule in limiting the number of witnesses,
determining the facts to be proved by each witness and fixing the approximate
number of hours per witness;
(k) Encourage referral of the case to a trial by commissioner under Rule 32 of the
Rules of Court or to a mediator or arbitrator under any of the alternative modes of
dispute resolution governed by the Special Rules of Court on Alternative Dispute
Resolution;
(l) Determine the necessity of engaging the services of a qualified expert as a
friend of the court (amicus curiae); and
(m) Ask parties to agree on the specific trial dates for continuous trial, comply
with the one-day examination of witness rule, adhere to the case flow chart
determined by the court which shall contain the different stages of the
proceedings up to the promulgation of the decision and use the time frame for
each stage in setting the trial dates.
Section 7. Effect of failure to appear at pre-trial. - The court shall not dismiss the
complaint, except upon repeated and unjustified failure of the plaintiff to appear. The
dismissal shall be without prejudice, and the court may proceed with the counterclaim.
If the defendant fails to appear at the pre-trial, the court shall receive evidence ex parte.
Section 8. Minutes of pre-trial. - The minutes of each pre-trial conference shall contain
matters taken up therein, more particularly admissions of facts and exhibits, and shall be
signed by the parties and their counsel.
Section 9. Pre-trial order. - Within ten (10) days after the termination of the pre-trial, the
court shall issue a pre-trial order setting forth the actions taken during the pre-trial
conference, the facts stipulated, the admissions made, the evidence marked, the number
of witnesses to be presented and the schedule of trial. Said order shall bind the parties,
limit the trial to matters not disposed of and control the course of action during the trial.

Section 10. Efforts to settle. - The court shall endeavor to make the parties agree to
compromise or settle in accordance with law at any stage of the proceedings before
rendition of judgment.
RULE 4
TRIAL
Section 1. Continuous trial. - The judge shall conduct continuous trial which shall not
exceed two (2) months from the date of the issuance of the pre-trial order.
Before the expiration of the two-month period, the judge may ask the Supreme Court for
the extension of the trial period for justifiable cause.
Section 2. Affidavits in lieu of direct examination. - In lieu of direct examination,
affidavits marked during the pre-trial shall be presented as direct examination of affiants
subject to crossexamination by the adverse party.
Section 3. One-day examination of witness rule. - The court shall strictly adhere to the
rule that a witness has to be fully examined in one (1) day, subject to the courts
discretion of extending the examination for justifiable reason. After the presentation of
the last witness, only oral offer of evidence shall be allowed, and the opposing party shall
immediately interpose his objections. The judge shall forthwith rule on the offer of
evidence in open court.
Section 4. Submission of case for decision; filing of memoranda. - After the last party has
rested its case, the court shall issue an order submitting the case for decision.
The court may require the parties to submit their respective memoranda, if possible in
electronic form, within a non-extendible period of thirty (30) days from the date the case
is submitted for decision.
The court shall have a period of sixty (60) days to decide the case from the date the case
is submitted for decision.
Section 5. Period to try and decide. - The court shall have a period of one (1) year from
the filing of the complaint to try and decide the case. Before the expiration of the oneyear period, the court may petition the Supreme Court for the extension of the period for
justifiable cause.
The court shall prioritize the adjudication of environmental cases.
RULE 5
JUDGMENT AND EXECUTION
Section 1. Reliefs in a citizen suit. - If warranted, the court may grant to the plaintiff
proper reliefs which shall include the protection, preservation or rehabilitation of the
environment and the payment of attorneys fees, costs of suit and other litigation
expenses. It may also require the violator to submit a program of rehabilitation or
restoration of the environment, the costs of which shall be borne by the violator, or to
contribute to a special trust fund for that purpose subject to the control of the court.
Section 2. Judgment not stayed by appeal. - Any judgment directing the performance of
acts for the protection, preservation or rehabilitation of the environment shall be
executory pending appeal unless restrained by the appellate court.

Section 3. Permanent EPO; writ of continuing mandamus. - In the judgment, the court
may convert the TEPO to a permanent EPO or issue a writ of continuing mandamus
directing the performance of acts which shall be effective until the judgment is fully
satisfied.
The court may, by itself or through the appropriate government agency, monitor the
execution of the judgment and require the party concerned to submit written reports on a
quarterly basis or sooner as may be necessary, detailing the progress of the execution and
satisfaction of the judgment. The other party may, at its option, submit its comments or
observations on the execution of the judgment.
Section 4. Monitoring of compliance with judgment and orders of the court by a
commissioner. - The court may motu proprio, or upon motion of the prevailing party,
order that the enforcement of the judgment or order be referred to a commissioner to be
appointed by the court. The commissioner shall file with the court written progress
reports on a quarterly basis or more frequently when necessary.
Section 5. Return of writ of execution. - The process of execution shall terminate upon a
sufficient showing that the decision or order has been implemented to the satisfaction of
the court in accordance with Section 14, Rule 39 of the Rules of Court.
RULE 6
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION
Section 1. Strategic lawsuit against public participation (SLAPP). - A legal action filed
to harass, vex, exert undue pressure or stifle any legal recourse that any person,
institution or the government has taken or may take in the enforcement of environmental
laws, protection of the environment or assertion of environmental rights shall be treated
as a SLAPP and shall be governed by these Rules.
Section 2. SLAPP as a defense; how alleged. - In a SLAPP filed against a person
involved in the enforcement of environmental laws, protection of the environment, or
assertion of environmental rights, the defendant may file an answer interposing as a
defense that the case is a SLAPP and shall be supported by documents, affidavits, papers
and other evidence; and, by way of counterclaim, pray for damages, attorneys fees and
costs of suit.
The court shall direct the plaintiff or adverse party to file an opposition showing the suit
is not a SLAPP, attaching evidence in support thereof, within a non-extendible period of
five (5) days from receipt of notice that an answer has been filed.
The defense of a SLAPP shall be set for hearing by the court after issuance of the order to
file an opposition within fifteen (15) days from filing of the comment or the lapse of the
period.
Section 3. Summary hearing. - The hearing on the defense of a SLAPP shall be summary
in nature. The parties must submit all available evidence in support of their respective
positions. The party seeking the dismissal of the case must prove by substantial evidence
that his act for the enforcement of environmental law is a legitimate action for the
protection, preservation and rehabilitation of the environment. The party filing the action
assailed as a SLAPP shall prove by preponderance of evidence that the action is not a
SLAPP and is a valid claim.
Section 4. Resolution of the defense of a SLAPP. - The affirmative defense of a SLAPP
shall be resolved within thirty (30) days after the summary hearing. If the court dismisses
the action, the court may award damages, attorneys fees and costs of suit under a
counterclaim if such has been filed. The dismissal shall be with prejudice.

If the court rejects the defense of a SLAPP, the evidence adduced during the summary
hearing shall be treated as evidence of the parties on the merits of the case. The action
shall proceed in accordance with the Rules of Court.
PART III
SPECIAL CIVIL ACTIONS
RULE 7
WRIT OF KALIKASAN
Section 1. Nature of the writ. - The writ is a remedy available to a natural or juridical
person, entity authorized by law, peoples organization, non-governmental organization,
or any public interest group accredited by or registered with any government agency, on
behalf of persons whose constitutional right to a balanced and healthful ecology is
violated, or threatened with violation by an unlawful act or omission of a public official
or employee, or private individual or entity, involving environmental damage of such
magnitude as to prejudice the life, health or property of inhabitants in two or more cities
or provinces.
Section 2. Contents of the petition. - The verified petition shall contain the following:
(a) The personal circumstances of the petitioner;
(b) The name and personal circumstances of the respondent or if the name and
personal circumstances are unknown and uncertain, the respondent may be
described by an assumed appellation;
(c) The environmental law, rule or regulation violated or threatened to be violated,
the act or omission complained of, and the environmental damage of such
magnitude as to prejudice the life, health or property of inhabitants in two or more
cities or provinces.
(d) All relevant and material evidence consisting of the affidavits of witnesses,
documentary evidence, scientific or other expert studies, and if possible, object
evidence;
(e) The certification of petitioner under oath that: (1) petitioner has not
commenced any action or filed any claim involving the same issues in any court,
tribunal or quasi-judicial agency, and no such other action or claim is pending
therein; (2) if there is such other pending action or claim, a complete statement of
its present status; (3) if petitioner should learn that the same or similar action or
claim has been filed or is pending, petitioner shall report to the court that fact
within five (5) days therefrom; and
(f) The reliefs prayed for which may include a prayer for the issuance of a TEPO.
Section 3. Where to file. - The petition shall be filed with the Supreme Court or with any
of the stations of the Court of Appeals.
Section 4. No docket fees. - The petitioner shall be exempt from the payment of docket
fees.
Section 5. Issuance of the writ. - Within three (3) days from the date of filing of the
petition, if the petition is sufficient in form and substance, the court shall give an order:
(a) issuing the writ; and (b) requiring the respondent to file a verified return as provided
in Section 8 of this Rule. The clerk of court shall forthwith issue the writ under the seal of

the court including the issuance of a cease and desist order and other temporary reliefs
effective until further order.
Section 6. How the writ is served. - The writ shall be served upon the respondent by a
court officer or any person deputized by the court, who shall retain a copy on which to
make a return of service. In case the writ cannot be served personally, the rule on
substituted service shall apply.
Section 7. Penalty for refusing to issue or serve the writ. - A clerk of court who unduly
delays or refuses to issue the writ after its allowance or a court officer or deputized
person who unduly delays or refuses to serve the same shall be punished by the court for
contempt without prejudice to other civil, criminal or administrative actions.
Section 8. Return of respondent; contents. - Within a non-extendible period of ten (10)
days after service of the writ, the respondent shall file a verified return which shall
contain all defenses to show that respondent did not violate or threaten to violate, or
allow the violation of any environmental law, rule or regulation or commit any act
resulting to environmental damage of such magnitude as to prejudice the life, health or
property of inhabitants in two or more cities or provinces.
All defenses not raised in the return shall be deemed waived.
The return shall include affidavits of witnesses, documentary evidence, scientific or other
expert studies, and if possible, object evidence, in support of the defense of the
respondent.
A general denial of allegations in the petition shall be considered as an admission thereof.
Section 9. Prohibited pleadings and motions. - The following pleadings and motions are
prohibited:
(a) Motion to dismiss;
(b) Motion for extension of time to file return;
(c) Motion for postponement;
(d) Motion for a bill of particulars;
(e) Counterclaim or cross-claim;
(f) Third-party complaint;
(g) Reply; and
(h) Motion to declare respondent in default.
Section 10. Effect of failure to file return. - In case the respondent fails to file a return, the
court shall proceed to hear the petition ex parte.
Section 11. Hearing. - Upon receipt of the return of the respondent, the court may call a
preliminary conference to simplify the issues, determine the possibility of obtaining
stipulations or admissions from the parties, and set the petition for hearing.
The hearing including the preliminary conference shall not extend beyond sixty (60) days
and shall be given the same priority as petitions for the writs of habeas corpus, amparo
and habeas data.

Section 12. Discovery Measures. - A party may file a verified motion for the following
reliefs:
(a) Ocular Inspection; order The motion must show that an ocular inspection
order is necessary to establish the magnitude of the violation or the threat as to
prejudice the life, health or property of inhabitants in two or more cities or
provinces. It shall state in detail the place or places to be inspected. It shall be
supported by affidavits of witnesses having personal knowledge of the violation
or threatened violation of environmental law.
After hearing, the court may order any person in possession or control of a
designated land or other property to permit entry for the purpose of inspecting or
photographing the property or any relevant object or operation thereon.
The order shall specify the person or persons authorized to make the inspection
and the date, time, place and manner of making the inspection and may prescribe
other conditions to protect the constitutional rights of all parties.
(b) Production or inspection of documents or things; order The motion must
show that a production order is necessary to establish the magnitude of the
violation or the threat as to prejudice the life, health or property of inhabitants in
two or more cities or provinces.
After hearing, the court may order any person in possession, custody or control of
any designated documents, papers, books, accounts, letters, photographs, objects
or tangible things, or objects in digitized or electronic form, which constitute or
contain evidence relevant to the petition or the return, to produce and permit their
inspection, copying or photographing by or on behalf of the movant.
The production order shall specify the person or persons authorized to make the
production and the date, time, place and manner of making the inspection or production
and may prescribe other conditions to protect the constitutional rights of all parties.
Section 13. Contempt. - The court may after hearing punish the respondent who refuses
or unduly delays the filing of a return, or who makes a false return, or any person who
disobeys or resists a lawful process or order of the court for indirect contempt under Rule
71 of the Rules of Court.
Section 14. Submission of case for decision; filing of memoranda. - After hearing, the
court shall issue an order submitting the case for decision. The court may require the
filing of memoranda and if possible, in its electronic form, within a non-extendible period
of thirty (30) days from the date the petition is submitted for decision.
Section 15. Judgment. - Within sixty (60) days from the time the petition is submitted for
decision, the court shall render judgment granting or denying the privilege of the writ of
kalikasan.
The reliefs that may be granted under the writ are the following:
(a) Directing respondent to permanently cease and desist from committing acts or
neglecting the performance of a duty in violation of environmental laws resulting
in environmental destruction or damage;
(b) Directing the respondent public official, government agency, private person or
entity to protect, preserve, rehabilitate or restore the environment;

(c) Directing the respondent public official, government agency, private person or
entity to monitor strict compliance with the decision and orders of the court;
(d) Directing the respondent public official, government agency, or private person
or entity to make periodic reports on the execution of the final judgment; and
(e) Such other reliefs which relate to the right of the people to a balanced and
healthful ecology or to the protection, preservation, rehabilitation or restoration of
the
environment, except the award of damages to individual petitioners.
Section 16. Appeal. - Within fifteen (15) days from the date of notice of the adverse
judgment or denial of motion for reconsideration, any party may appeal to the Supreme
Court under Rule 45 of the Rules of Court. The appeal may raise questions of fact.
Section 17. Institution of separate actions. - The filing of a petition for the issuance of
the writ of kalikasan shall not preclude the filing of separate civil, criminal or
administrative actions.
RULE 8
WRIT OF CONTINUING MANDAMUS
Section 1. Petition for continuing mandamus. - When any agency or instrumentality of
the government or officer thereof unlawfully neglects the performance of an act which
the law specifically enjoins as a duty resulting from an office, trust or station in
connection with the enforcement or violation of an environmental law rule or regulation
or a right therein, or unlawfully excludes another from the use or enjoyment of such right
and there is no other plain, speedy and adequate remedy in the ordinary course of law, the
person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty, attaching thereto supporting evidence, specifying that the petition
concerns an environmental law, rule or regulation, and praying that judgment be rendered
commanding the respondent to do an act or series of acts until the judgment is fully
satisfied, and to pay damages sustained by the petitioner by reason of the malicious
neglect to perform the duties of the respondent, under the law, rules or regulations. The
petition shall also contain a sworn certification of non-forum shopping.
Section 2. Where to file the petition. - The petition shall be filed with the Regional Trial
Court exercising jurisdiction over the territory where the actionable neglect or omission
occurred or with the Court of Appeals or the Supreme Court.
Section 3. No docket fees. - The petitioner shall be exempt from the payment of docket
fees.
Section 4. Order to comment. - If the petition is sufficient in form and substance, the
court shall issue the writ and require the respondent to comment on the petition within ten
(10) days from receipt of a copy thereof. Such order shall be served on the respondents in
such manner as the court may direct, together with a copy of the petition and any annexes
thereto.
Section 5. Expediting proceedings; TEPO. - The court in which the petition is filed may
issue such orders to expedite the proceedings, and it may also grant a TEPO for the
preservation of the rights of the parties pending such proceedings.
Section 6. Proceedings after comment is filed. - After the comment is filed or the time for
the filing thereof has expired, the court may hear the case which shall be summary in

nature or require the parties to submit memoranda. The petition shall be resolved without
delay within sixty (60) days from the date of the submission of the petition for resolution.
Section 7. Judgment. - If warranted, the court shall grant the privilege of the writ of
continuing mandamus requiring respondent to perform an act or series of acts until the
judgment is fully satisfied and to grant such other reliefs as may be warranted resulting
from the wrongful or illegal acts of the respondent. The court shall require the respondent
to submit periodic reports detailing the progress and execution of the judgment, and the
court may, by itself or through a commissioner or the appropriate government agency,
evaluate and monitor compliance. The petitioner may submit its comments or
observations on the execution of the judgment.
Section 8. Return of the writ. - The periodic reports submitted by the respondent detailing
compliance with the judgment shall be contained in partial returns of the writ.
Upon full satisfaction of the judgment, a final return of the writ shall be made to the court
by the respondent. If the court finds that the judgment has been fully implemented, the
satisfaction of judgment shall be entered in the court docket.
PART IV
CRIMINAL PROCEDURE
RULE 9
PROSECUTION OF OFFENSES
Section 1. Who may file. - Any offended party, peace officer or any public officer charged
with the enforcement of an environmental law may file a complaint before the proper
officer in accordance with the Rules of Court.
Section 2. Filing of the information. - An information, charging a person with a violation
of an environmental law and subscribed by the prosecutor, shall be filed with the court.
Section 3. Special prosecutor. - In criminal cases, where there is no private offended
party, a counsel whose services are offered by any person or organization may be allowed
by the court as special prosecutor, with the consent of and subject to the control and
supervision of the public prosecutor.
RULE 10
PROSECUTION OF CIVIL ACTIONS
Section 1. Institution of criminal and civil actions. - When a criminal action is instituted,
the civil action for the recovery of civil liability arising from the offense charged, shall be
deemed instituted with the criminal action unless the complainant waives the civil action,
reserves the right to institute it separately or institutes the civil action prior to the criminal
action.
Unless the civil action has been instituted prior to the criminal action, the reservation of
the right to institute separately the civil action shall be made during arraignment.
In case civil liability is imposed or damages are awarded, the filing and other legal fees
shall be imposed on said award in accordance with Rule 141 of the Rules of Court, and
the fees shall constitute a first lien on the judgment award. The damages awarded in cases
where there is no private offended party, less the filing fees, shall accrue to the funds of
the agency charged with the implementation of the environmental law violated. The
award shall be used for the restoration and rehabilitation of the environment adversely
affected.

RULE 11
ARREST
Section 1. Arrest without warrant; when lawful. - A peace officer or an individual
deputized by the proper government agency may, without a warrant, arrest a person:
(a) When, in his presence, the person to be arrested has committed, is actually
committing or is attempting to commit an offense; or
(b) When an offense has just been committed, and he has probable cause to
believe based on personal knowledge of facts or circumstances that the person to
be arrested has committed it. Individuals deputized by the proper government
agency who are enforcing environmental laws shall enjoy the presumption of
regularity under Section 3(m), Rule 131 of the Rules of Court when effecting
arrests for violations of environmental laws.
Section 2. Warrant of arrest. - All warrants of arrest issued by the court shall be
accompanied by a certified true copy of the information filed with the issuing court.
RULE 12
CUSTODY AND DISPOSITION OF SEIZED ITEMS, EQUIPMENT,
PARAPHERNALIA, CONVEYANCES AND INSTRUMENTS
Section 1. Custody and disposition of seized items. - The custody and disposition of
seized items shall be in accordance with the applicable laws or rules promulgated by the
concerned government agency.
Section 2. Procedure. - In the absence of applicable laws or rules promulgated by the
concerned government agency, the following procedure shall be observed:
(a) The apprehending officer having initial custody and control of the seized
items, equipment, paraphernalia, conveyances and instruments shall physically
inventory and whenever practicable, photograph the same in the presence of the
person from whom such items were seized.
(b) Thereafter, the apprehending officer shall submit to the issuing court the return
of the search warrant within five (5) days from date of seizure or in case of
warrantless arrest, submit within five (5) days from date of seizure, the inventory
report, compliance report, photographs, representative samples and other pertinent
documents to the public prosecutor for appropriate action.
(c) Upon motion by any interested party, the court may direct the auction sale of
seized items, equipment, paraphernalia, tools or instruments of the crime. The
court shall, after hearing, fix the minimum bid price based on the recommendation
of the concerned government agency. The sheriff shall conduct the auction.
(d) The auction sale shall be with notice to the accused, the person from whom the
items were seized, or the owner thereof and the concerned government agency.
(e) The notice of auction shall be posted in three conspicuous places in the city or
municipality where the items, equipment, paraphernalia, tools or instruments of
the crime were seized.
(f) The proceeds shall be held in trust and deposited with the government
depository bank for disposition according to the judgment.

RULE 13
PROVISIONAL REMEDIES
Section 1. Attachment in environmental cases. - The provisional remedy of attachment
under Rule 127 of the Rules of Court may be availed of in environmental cases.
Section 2. Environmental Protection Order (EPO); Temporary Environmental Protection
Order (TEPO) in criminal cases. - The procedure for and issuance of EPO and TEPO
shall be governed by Rule 2 of these Rules.
RULE 14
BAIL
Section 1. Bail, where filed. - Bail in the amount fixed may be filed with the court where
the case is pending, or in the absence or unavailability of the judge thereof, with any
regional trial judge, metropolitan trial judge, municipal trial judge or municipal circuit
trial judge in the province, city or municipality. If the accused is arrested in a province,
city or municipality other than where the case is pending, bail may also be filed with any
Regional Trial Court of said place, or if no judge thereof is available, with any
metropolitan trial judge, municipal trial judge or municipal circuit trial judge therein. If
the court grants bail, the court may issue a hold-departure order in appropriate cases.
Section 2. Duties of the court. - Before granting the application for bail, the judge must
read the information in a language known to and understood by the accused and require
the accused to sign a written undertaking, as follows:
(a) To appear before the court that issued the warrant of arrest for arraignment
purposes on the date scheduled, and if the accused fails to appear without
justification on the date of arraignment, accused waives the reading of the
information and authorizes the court to enter a plea of not guilty on behalf of the
accused and to set the case for trial;
(b) To appear whenever required by the court where the case is pending; and
(c) To waive the right of the accused to be present at the trial, and upon failure of
the accused to appear without justification and despite due notice, the trial may
proceed in absentia.
RULE 15
ARRAIGNMENT AND PLEA
Section 1. Arraignment. - The court shall set the arraignment of the accused within
fifteen (15) days from the time it acquires jurisdiction over the accused, with notice to the
public prosecutor and offended party or concerned government agency that it will
entertain plea-bargaining on the date of the arraignment.
Section 2. Plea-bargaining. - On the scheduled date of arraignment, the court shall
consider plea-bargaining arrangements. Where the prosecution and offended party or
concerned government agency agree to the plea offered by the accused, the court shall:
(a) Issue an order which contains the plea-bargaining arrived at;
(b) Proceed to receive evidence on the civil aspect of the case, if any; and
(c) Render and promulgate judgment of conviction, including the civil liability for
damages.

RULE 16
PRE-TRIAL
Section 1. Setting of pre-trial conference. - After the arraignment, the court shall set the
pre-trial conference within thirty (30) days. It may refer the case to the branch clerk of
court, if warranted, for a preliminary conference to be set at least three (3) days prior to
the pre-trial.
Section 2. Preliminary conference. - The preliminary conference shall be for the
following purposes:
(a) To assist the parties in reaching a settlement of the civil aspect of the case;
(b) To mark the documents to be presented as exhibits;
(c) To attach copies thereof to the records after comparison with the originals;
(d) To ascertain from the parties the undisputed facts and admissions on the
genuineness and due execution of documents marked as exhibits;
(e) To consider such other matters as may aid in the prompt disposition of the
case;
(f) To record the proceedings during the preliminary conference in the Minutes of
Preliminary Conference to be signed by the parties and counsel;
(g) To mark the affidavits of witnesses which shall be in question and answer
form and shall constitute the direct examination of the witnesses; and
(h) To attach the Minutes and marked exhibits to the case record before the pretrial proper. The parties or their counsel must submit to the branch clerk of court
the names, addresses and contact numbers of the affiants.
Section 3. Pre-trial duty of the judge. - During the pre-trial, the court shall:
(a) Place the parties and their counsels under oath;
(b) Adopt the minutes of the preliminary conference as part of the pre-trial
proceedings, confirm markings of exhibits or substituted photocopies and
admissions on the genuineness and due execution of documents, and list object
and testimonial evidence;
(c) Scrutinize the information and the statements in the affidavits and other
documents which form part of the record of the preliminary investigation together
with other documents identified and marked as exhibits to determine further
admissions of facts as to:
i. The courts territorial jurisdiction relative to the offense(s) charged;
ii. Qualification of expert witnesses; and
iii. Amount of damages;
(d) Define factual and legal issues;

(e) Ask parties to agree on the specific trial dates and adhere to the flow chart
determined by the court which shall contain the time frames for the different
stages of the proceeding up to promulgation of decision;
(f) Require the parties to submit to the branch clerk of court the names, addresses
and contact numbers of witnesses that need to be summoned by subpoena; and
(g) Consider modification of order of trial if the accused admits the charge but
interposes a lawful defense.
Section 4. Manner of questioning. - All questions or statements must be directed to the
court.
Section 5. Agreements or admissions. - All agreements or admissions made or entered
during the pre-trial conference shall be reduced in writing and signed by the accused and
counsel; otherwise, they cannot be used against the accused. The agreements covering the
matters referred to in Section 1, Rule 118 of the Rules of Court shall be approved by the
court.
Section 6. Record of proceedings. - All proceedings during the pre-trial shall be recorded,
the transcripts prepared and the minutes signed by the parties or their counsels.
Section 7. Pre-trial order. - The court shall issue a pre-trial order within ten (10) days
after the termination of the pre-trial, setting forth the actions taken during the pre-trial
conference, the facts stipulated, the admissions made, evidence marked, the number of
witnesses to be presented and the schedule of trial. The order shall bind the parties and
control the course of action during the trial.
RULE 17
TRIAL
Section 1. Continuous trial. - The court shall endeavor to conduct continuous trial which
shall not exceed three (3) months from the date of the issuance of the pre-trial order.
Section 2. Affidavit in lieu of direct examination. - Affidavit in lieu of direct examination
shall be used, subject to cross-examination and the right to object to inadmissible portions
of the affidavit.
Section 3. Submission of memoranda. - The court may require the parties to submit their
respective memoranda and if possible, in electronic form, within a non-extendible period
of thirty (30) days from the date the case is submitted for decision.
With or without any memoranda filed, the court shall have a period of sixty (60) days to
decide the case counted from the last day of the 30-day period to file the memoranda.
Section 4. Disposition period. - The court shall dispose the case within a period of ten
(10) months from the date of arraignment.
Section 5. Pro bono lawyers. - If the accused cannot afford the services of counsel or
there is no available public attorney, the court shall require the Integrated Bar of the
Philippines to provide pro bono lawyers for the accused.
RULE 18
SUBSIDIARY LIABILITY
Section 1. Subsidiary liability. - In case of conviction of the accused and subsidiary
liability is allowed by law, the court may, by motion of the person entitled to recover

under judgment, enforce such subsidiary liability against a person or corporation

subsidiary liable under Article 102 and Article 103 of the Revised Penal Code.
RULE 19
STRATEGIC LAWSUIT AGAINST PUBLIC PARTICIPATION IN CRIMINAL
CASES
Section 1. Motion to dismiss. - Upon the filing of an information in court and before
arraignment, the accused may file a motion to dismiss on the ground that the criminal
action is a SLAPP.
Section 2. Summary hearing. - The hearing on the defense of a SLAPP shall be summary
in nature. The parties must submit all the available evidence in support of their respective
positions. The party seeking the dismissal of the case must prove by substantial evidence
that his acts for the enforcement of environmental law is a legitimate action for the
protection, preservation and rehabilitation of the environment. The party filing the action
assailed as a SLAPP shall prove by preponderance of evidence that the action is not a
SLAPP.
Section 3. Resolution. - The court shall grant the motion if the accused establishes in the
summary hearing that the criminal case has been filed with intent to harass, vex, exert
undue pressure or stifle any legal recourse that any person, institution or the government
has taken or may take in the enforcement of environmental laws, protection of the
environment or assertion of environmental rights.
If the court denies the motion, the court shall immediately proceed with the arraignment
of the accused.
PART V
EVIDENCE
RULE 20
PRECAUTIONARY PRINCIPLE
Section 1. Applicability. - When there is a lack of full scientific certainty in establishing a
causal link between human activity and environmental effect, the court shall apply the
precautionary principle in resolving the case before it.
The constitutional right of the people to a balanced and healthful ecology shall be given
the benefit of the doubt.
Section 2. Standards for application. - In applying the precautionary principle, the
following factors, among others, may be considered: (1) threats to human life or health;
(2) inequity to present or future generations; or (3) prejudice to the environment without
legal consideration of the environmental rights of those affected.
RULE 21
DOCUMENTARY EVIDENCE
Section 1. Photographic, video and similar evidence. - Photographs, videos and similar
evidence of events, acts, transactions of wildlife, wildlife by-products or derivatives,
forest products or mineral resources subject of a case shall be admissible when
authenticated by the person who took the same, by some other person present when said
evidence was taken, or by any other person competent to testify on the accuracy thereof.
Section 2. Entries in official records. - Entries in official records made in the
performance of his duty by a public officer of the Philippines, or by a person in

performance of a duty specially enjoined by law, are prima facie evidence of the facts
therein stated.
RULE 22
FINAL PROVISIONS
Section 1. Effectivity. - These Rules shall take effect within fifteen (15) days following
publication once in a newspaper of general circulation.
Section 2. Application of the Rules of Court. - The Rules of Court shall apply in a
suppletory manner, except as otherwise provided herein.
SUB-COMMITTEE ON
THE RULES OF PROCEDURE FOR ENVIRONMENTAL CASES
Chairperson
CHIEF JUSTICE REYNATO S. PUNO
Members
JUSTICE PRESBITERO J. VELASCO, JR.
JUSTICE DIOSDADO M. PERALTA
JUSTICE LUCAS P. BERSAMIN
JUSTICE MA. ALICIA AUSTRIA-MARTINEZ (RET.)
COMMISSIONER MARY ANN LUCILLE L. SERING
JUDGE MYRNA LIM-VERANO
ATTY. ASIS G. PEREZ
Secretary
ATTY. ABEGAIL T. SZE
Asst. Secretary
ATTY. FERMIN NESTOR A. GADRINAB
Secretariat
ATTY. MARIA CAMILLE G. LANTION
JAMES CHRISTIAN A. BITANGA, ESQ.
MS. LIDA A. PILAPIL
MS. CLARITA T. ESCARDA
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
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, INOHYABAN 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 96-40) 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 foreign-owned 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.
Subsequently, AMC consolidated with Climax Mining Limited to form a single company
that now goes under the new name of Climax-Arimco Mining 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
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 foreignowned 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
Multi-Purpose 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 right-of-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 MexicoLimay 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.
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.
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
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.
This provision is first found in Section 27 of Commonwealth Act No. 137 which took
effect on 7 November 1936, viz:
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 96-40 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:
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.
Third Substantive Issue: Sufficient Control by the State Over Mining Operations
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 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,54 where 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:
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";
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;
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:

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 96-40).

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 56-m, 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).

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).

An FTAA cannot be transferred or assigned without prior approval by the

President (Section 40, RA 7942; Section 66, DAO 96-40).

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)
2. Approved three-year work program (Section 53-a-4, DAO 96-40)
3. Environmental compliance certificate (Section 70, RA 7942)
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)
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)

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

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 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).

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 9640, 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 co-production, 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 co-production, 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 BugalBLaan 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 means technical 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 either financial 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."
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 x involving 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.
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," 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 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.

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 to use the expression "agreements x x x involving either
technical or financial assistance" in an exclusionary and limiting manner.
Fifth Substantive Issue: Service Contracts Not Deconstitutionalized
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 foreign-owned 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.
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:
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 terms service 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.
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-era
service 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 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.
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.
MINITA V. CHICO-NAZARIO
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice
Asscociate Justice
ROMEO J. CALLEJO, SR.
Associate Justice
C E R T I F I C AT I O N
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.
ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes
1

Rollo, pp. 595-596.

Velarde v. Social Justice Society, G.R. No. 159357, 28 April 2004, 428 SCRA
283, 291.
3

Philippine Political Law, Isagani Cruz, p. 23 (1995 ed.).

Article VIII, Section 1.xxx 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.
5

Guingona, Jr. v. Court of Appeals, 354 Phil. 415, 425 (1998).

Board of Optometry v. Hon. Colet, 328 Phil. 1187, 1206 (1996).

Intregrated Bar of the Philippines v. Zamora, 392 Phil. 618, 632-633 (2000).

Dumlao v. Commission on Elections, G.R. No. L-52245, 22 January 1980, 95

SCRA 392, 402.
9

Integrated Bar of the Philippines v. Zamora, supra note 7, p. 633.

10

Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of

Manila, 128 Phil. 473, 480-481 (1967).
11

Cruz v. Secretary of Environment & Natural Resources, G.R. No. 135385, 6

December 2000, 347 SCRA 128, 256.
12

391 Phil. 84 (2000).

13

Id., p. 107.

14

La Bugal-BLaan Tribal Association, Inc. v. Ramos, G.R. No. 127882, 27

January 2004, 421 SCRA 148, 179.

15

157 Phil. 329, 344 (1974). It 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
substantially to oust the owner and deprive him of all beneficial enjoyment
thereof.
16

G.R. No. 60077, 18 January 1991, 193 SCRA 1, 7.

17

Robern Development Corporation v. Quitain, 373 Phil. 773, 792-793 (1999).

18

U.S. v. Toribio, 15 Phil. 85, 93 (1910); Rubi v. The Provincial Board of

Mindoro, 39 Phil. 660, 708 (1919).
19

Association of Small Landowners of the Philippines, Inc. v. Secretary of

Agrarian Reform, G.R. No. 78742, 14 July 1989, 175 SCRA 343, 371.
20

U.S. v. Toribio, supra note 18, p. 370.

21

People v. Chan, 65 Phil. 611 (1938).

22

Supra note 18, p. 97.

23

90 Phil. 132 (1951).

24

56 Phil. 204 (1931).

25

THE 1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES: A

COMMENTARY, Bernas, p. 420.
26

Id.

27

Id., p. 421.

28

Id.

29

Id.

30

207 Phil. 648 (1983).

31

104 Phil. 443 (1958).

32

THE 1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES,

supra note 24, p. 422.
33

CONSTITUTIONAL LAW, Cruz, p. 66 (1995 ed.).

34

9 Phil. 215, 221 (1907).

35

Supra note 16.

36

136 Phil. 20 (1969).

37

Id., pp. 29-30.

38

Supra note 15, pp. 345-347.

39

Valera v. Tuason, Jr., 80 Phil. 823, 827 (1998).

40

United States v. Palacio, 33 Phil. 208, 216 (1916).

41

Id.

42

Heirs of Juancho Ardona v. Reyes, 210 Phil. 187, 197 (1983).

43

Id.

44

Id., p. 198.

45

Executive Order No. 211.

46

Supra note 42.

47

Id., p. 201.

48

La Bugal-BLaan Tribal Association, Inc. v. Ramos, G.R. No. 127882, 1

December 2004, 445 SCRA 1, 228.
49

Id., p. 150.

50

G.R. No. L-59603, 29 April 1987, 149 SCRA 305, 312.

51

Section 211 of DAO 96-40 provides: The decision of the Board may be
reviewed by filing a petition for review with the Supreme Court within thirty (30)
days from receipt of the order or decision of the Board.
52

Philippine Veterans Bank v. Court of Appeals, 379 Phil. 141, 147 (2000).

53

Id., p. 149.

54

Supra note 48, pp. 132-137.

55

Id., pp. 101-105.

56

Id.

57

Id.

58

Id., pp. 105-128.

The Lawphil Project - Arellano Law Foundation

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
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, (GFWV), 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
foreign-owned 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,12 and 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,26 and 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. 9640,35 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.44 WMCP 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,64 alleging 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
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 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.
The WMCP FTAA provides:
14.3 Future Legislation
Any term and condition more favourable to Financial &Technical Assistance Agreement
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.
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.
PROPRIETY OF PROHIBITION AND MANDAMUS
Before the effectivity in July 1997 of the Revised Rules of Civil Procedure, Section 2 of
Rule 65 read:
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
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.

HIERARCHY OF COURTS
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:
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.125 Exploration126 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
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
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.
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.
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
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.161 Article 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.
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
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.
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
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 of assistance . . .
with any foreign person or entity for the exploration, development, exploitation or
utilization of the forest resources."173
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.
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
THE 1987 CONSTITUTION AND TECHNICAL OR FINANCIAL ASSISTANCE
AGREEMENTS
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 production-sharing
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 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.
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:
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.
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."
Second, the size of the activities: only large-scale exploration, development, and
utilization is allowed. The term "large-scale usually refers to very capitalintensive 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.201 The 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 pre-operating 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,217 is 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 foreign-owned 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.]
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.
Thank you, and I vote yes.233 [Emphasis supplied.]
x x x.
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 araw ay sisikat sa Kanluran. Kailan man hindi puwedeng
sumikat ang araw sa Kanluran. I vote no.234 [Emphasis supplied.]
This Court is likewise not persuaded.
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 coproduction, 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 productionsharing 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 6040 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 three-minute 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 large-scale 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 CONSTITUTION
PROJECT

PROPOSED
RESOLUTION NO. 496
OF THE
CONSTITUTIONAL
COMMISSION

ARTICLE XII OF THE

1987 CONSTITUTION

Sec. 1. All lands of the

public domain, waters,
minerals, coal, petroleum
and other mineral oils, all
forces of potential
energy, fisheries, flora
and fauna and other
natural resources of the
Philippines are owned by
the State. With the
exception of agricultural
lands, all other natural

Sec. 3. All lands of the

public domain, waters,
minerals, coal, petroleum
and other mineral oils, all
forces of potential
energy, fisheries, forests,
flora and fauna, and other
natural resources are
owned by the State. With
the exception of
agricultural lands, all
other natural resources

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

resources shall not be

alienated. The
exploration, development
and utilization of natural
resources shall be under
the full control and
supervision of the State.
Such activities may be
directly undertaken by
the state, or it may enter
into co-production, joint
venture, production
sharing agreements with
Filipino citizens or
corporations or
associations sixty per
cent of whose voting
stock or controlling
interest is owned by such
citizens for a period of
not more than twentyfive years, renewable for
not more than twentyfive years and under such
terms and conditions as
may be provided by law.
In case as to 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 National Assembly
may by law allow small
scale utilization of
natural resources by
Filipino citizens.
The National Assembly,
may, by two-thirds vote
of all its members by
special law provide the
terms and conditions
under which a foreignowned corporation may
enter into agreements
with the government
involving either
technical or financial
assistance for large-scale
exploration,
development, or

shall not be alienated.

The exploration,
development, and
utilization of natural
resources shall be under
the full control and
supervision of the State.
Such activities may be
directly undertaken by
the State, or it may enter
into co-production, joint
venture, productionsharing agreements with
Filipino citizens or
corporations or
associations at least sixty
per cent of whose voting
stock or controlling
interest is owned by such
citizens. Such
agreements shall be for a
period of twenty-five
years, renewable for not
more than twenty-five
years, and under such
term 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 for
water power, beneficial
use may be the measure
and limit of the grant.
The Congress may by
law allow small-scale
utilization of natural
resources by Filipino
citizens, as well as
cooperative fish farming
in rivers, lakes, bays, and
lagoons.
The President with the
concurrence of Congress,
by special law, shall
provide the terms and
conditions under which a
foreign-owned
corporation may enter
into agreements with the
government involving
either technical or

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 coproduction, 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 case
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

utilization of natural
resources. [Emphasis
supplied.]

financial assistance for

large-scale exploration,
development, and
utilization of natural
resources. [Emphasis
supplied.]

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.
[Emphasis supplied.]
The President shall notify
the Congress of every
contract entered into in
accordance with this
provision, within thirty
days from its execution.

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:
Looking at the Philippine model, we can discern the following vestiges of the concession
regime, thus:
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.
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.]
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], co-production agreements, joint ventures, production-sharing 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 pure contractor instead of the
beneficial owner of our economic resources.247 [Emphasis supplied.]
Still another member of the working group, Professor Eduardo Labitag, proposed that:
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 two-thirds 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 foreignowned 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 preexisting 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
foreign-owned 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.]
"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.265 Eventually, 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 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
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 foreign-owned corporation shall be deemed a
qualified person for purposes of granting an exploration permit, financial or
technical assistance agreement or mineral processing permit.
(2) Section 23,280 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 37,287 which prescribes the procedure for filing and evaluation of financial
or technical assistance agreement proposals;
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 by-products 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;
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
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
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.

Footnotes

Appears as "Nequito" in the caption of the Petition but "Nequinto" in the body.
(Rollo, p. 12.)
2

As appears in the body of the Petition. (Id., at 13.) The caption of the petition
does not include Louel A. Peria as one of the petitioners but the name of his father
Elpidio V. Peria appears therein.
3

Appears as "Kaisahan Tungo sa Kaunlaran ng Kanayunan at Repormang

Pansakahan (KAISAHAN)" in the caption of the Petition by "Philippine Kaisahan
Tungo sa Kaunlaran ng Kanayunan at Repormang Pansakahan (KAISAHAN)" in
the body. (Id., at 14.)
4

Erroneously designated in the Petition as "Western Mining Philippines

Corporation." (Id., at 212.) Subsequently, WMC (Philippines), Inc. was renamed
"Tampakan Mineral Resources Corporation." (Id., at 778.)
5

An Act Instituting A New System of Mineral Resources Exploration,

Development, Utilization and Conservation.
6

Authorizing the Secretary of Environment and Natural Resources to Negotiate

and Conclude Joint Venture, Co-Production, or Production-Sharing Agreements
for the Exploration, Development and Utilization of Mineral Resources, and
Prescribing the Guidelines for such Agreements and those Agreements involving
Technical or Financial Assistance by Foreign-Owned Corporations for LargeScale Exploration, Development and Utilization of Minerals.
7

Exec. Order No. 279 (1987), sec. 4.

Rep. Act No. 7942 (1995), sec. 15.

Id., sec. 26 (a)-(c).

10

Id., sec. 29.

11

Id., sec. 30.

12

Id., sec. 31.

13

Id., sec. 32.

14

Id., ch. VI.

15

Id., secs. 27 and 33 in relation to sec. 3 (aq).

16

Id., sec. 72.

17

Id., sec. 73.

18

Id., sec. 75.

19

Id., sec. 74.

20

Id., sec. 76.

21

Id., ch. XIII.

22

Id., secs. 20-22.

23

Id., secs. 43, 45.

24

Id., secs. 46-49, 51-52.

25

Id., ch. IX.

26

Id., ch. X.

27

Id., ch. XI.

28

Id., ch. XIV.

29

Id., ch. XV.

30

Id., ch. XVI.

31

Id., ch. XIX.

32

Id., ch. XVII.

33

Section 116, R.A. No. 7942 provides that the Act "shall take effect thirty (30)
days following its complete publication in two (2) newspapers of general
circulation in the Philippines."
34

WMCP FTAA, sec. 4.1.

35

Rollo, p. 22.

36

Ibid.

37

Ibid.

38

Ibid. The number has since risen to 129 applications when the petitioners filed
their Reply. (Rollo, p. 363.)

39

Id., at 22.

40

Id., at 23-24.

41

Id., at 52-53. Emphasis and underscoring supplied.

42

WMCP FTAA, p. 2.

43

Rollo, p. 220.

44

Id., at 754.

45

Vide Note 4.

46

Rollo, p. 754.

47

Id., at 755.

48

Id., at 761-763.

49

Id., at 764-776.

50

Id., at 782-786.

51

Docketed as C.A.-G. R. No. 74161.

52

G.R. No. 153885, entitled Lepanto Consolidated Mining Company v. WMC

Resources International Pty. Ltd., et al., decided September 24, 2003 and G.R.
No. 156214, entitled Lepanto Mining Company v. WMC Resources International
Pty. Ltd., WMC (Philippines), Inc., Southcot Mining Corporation, Tampakan
Mining Corporation and Sagittarius Mines, Inc., decided September 23, 2003.
53

Section 12, Rule 43 of the Rules of Court, invoked by private respondent,

states, " The appeal shall not stay the award, judgment, final order or resolution
sought to be reviewed unless the Court of Appeals shall direct otherwise upon
such terms as it may deem just."
54

WMCP's Reply (dated May 6, 2003) to Petitioners' Comment (to the

Manifestation and Supplemental Manifestation), p. 3.
55

Ibid.

56

Ibid.

57

WMCP's Reply (dated May 6, 2003) to Petitioners' Comment (to the

Manifestation and Supplemental Manifestation), p. 4.
58

Philippine Constitution Association v. Enriquez, 235 SCRA 506 (1994);

National Economic Protectionism Association v. Ongpin, 171 SCRA 657 (1989);
Dumlao v. COMELEC, 95 SCRA 392 (1980).
59

Dumlao v. COMELEC, supra.

60

Board of Optometry v. Colet, 260 SCRA 88 (1996).

61

Dumlao v. COMELEC, supra.

62

Subic Bay Metropolitan Authority v. Commission on Elections, 262 SCRA 492

(1996).
63

Angara v. Electoral Commission, 63 Phil. 139 (1936).

64

Integrated Bar of the Philippines v. Zamora, 338 SCRA 81, 100 (2000); Dumlao
v. COMELEC, supra; People v. Vera, 65 Phil. 56 (1937).
65

Dumlao v. COMELEC, supra.

66

Integrated Bar of the Philippines v. Zamora, supra.

67

Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of

Manila 21 SCRA 449 (1967).
68

Petitioners Roberto P. Amloy, Raqim L. Dabie, Simeon H. Dolojo, Imelda

Gandon, Leny B. Gusanan, Marcelo L. Gusanan, Quintol A. Labuayan,
Lomingges Laway, and Benita P. Tacuayan.
69

Petitioners F'long Agutin M. Dabie, Mario L. Mangcal, Alden S. Tusan, Sr.

Susuan O. Bolanio, OND, Lolita G. Demonteverde, Benjie L. Nequinto, Rose
Lilia S. Romano and Amparo S. Yap.
70

Rollo, p. 6.

71

Id. at 337, citing Malabanan v. Gaw Ching, 181 SCRA 84 (1990).

72

246 SCRA 540 (1995).

73

People v. Vera, supra.

74

Militante v. Court of Appeals, 330 SCRA 318 (2000).

75

Ibid.

76

Cruz v. Secretary of Environment and Natural Resources, 347 SCRA 128

(2000), Kapunan, J., Separate Opinion. [Emphasis supplied.]
77

Joya v. Presidential Commission on Good Government, 225 SCRA 568 (1993).

78

Integrated Bar of the Philippines v. Zamora, supra.

79

J. Bernas, S.J., The 1987 Constitution of the Philippines: A Commentary 1009

(1996).
80

Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J.,

Separate Opinion.
81

Id., Puno, J., Separate Opinion, and Panganiban, J., Separate Opinion.

82

Cario v. Insular Government, 212 US 449, 53 L.Ed. 595 (1909). For instance,
Law 14, Title 12, Book 4 of the Recopilacion de Leyes de las Indias proclaimed:
We having acquired full sovereignty over the Indies, and all lands,
territories, and possessions not heretofore ceded away by our royal
predecessors, or by us, or in our name, still pertaining to the royal crown
and patrimony, it is our will that all lands which are held without proper

and true deeds of grant be restored to us according as they belong to us, in

order that after reserving before all what to us or to our viceroys,
audiencias, and governors may seem necessary for public squares, ways,
pastures, and commons in those places which are peopled, taking into
consideration not only their present condition, but also their future and
their probable increase, and after distributing to the natives what may be
necessary for tillage and pasturage, confirming them in what they now
have and giving them more if necessary, all the rest of said lands may
remain free and unencumbered for us to dispose of as we may wish.
83

Republic v. Court of Appeals, 160 SCRA 228 (1988). It has been noted,
however, that "the prohibition in the [1935] Constitution against alienation by the
state of mineral lands and minerals is not properly a part of the Regalian doctrine
but a separate national policy designed to conserve our mineral resources and
prevent the state from being deprived of such minerals as are essential to national
defense." (A. Noblejas, Philippine Law on Natural Resources 126-127 [1959 ed.],
citing V. Francisco, The New Mining Law.)
84

Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J.,

Separate Opinion, citing A. Noblejas, Philippine Law on Natural Resources 6
(1961). Noblejas continues:
Thus, they asserted their right of ownership over mines and minerals or
precious metals, golds, and silver as distinct from the right of ownership of
the land in which the minerals were found. Thus, when on a piece of land
mining was more valuable than agriculture, the sovereign retained
ownership of mines although the land has been alienated to private
ownership. Gradually, the right to the ownership of minerals was extended
to base metals. If the sovereign did not exploit the minerals, they grant or
sell it as a right separate from the land. (Id., at 6.)
85

In the unpublished case of Lawrence v. Garduo (L-10942, quoted in V.

Francisco, Philippine Law on Natural Resources 14-15 [1956]), this Court
observed:
The principle underlying Spanish legislation on mines is that these are
subject to the eminent domain of the state. The Spanish law of July 7,
1867, amended by the law of March 4, 1868, in article 2 says: "The
ownership of the substances enumerated in the preceding article (among
them those of inflammable nature), belong[s] to the state, and they cannot
be disposed of without the government authority."
The first Spanish mining law promulgated for these Islands (Decree of
Superior Civil Government of January 28, 1864), in its Article I, says:
"The supreme ownership of mines throughout the kingdom belong[s] to
the crown and to the king. They shall not be exploited except by persons
who obtained special grant from this superior government and by those
who may secure it thereafter, subject to this regulation."
Article 2 of the royal decree on ownership of mines in the Philippine
Islands, dated May 14, 1867, which was the law in force at the time of the
cession of these Islands to the Government of the United States, says:
"The ownership of the substances enumerated in the preceding article
(among them those of inflammable nature) belongs to the state, and they
cannot be disposed of without an authorization issued by the Superior
Civil Governor."

Furthermore, all those laws contained provisions regulating the manner of

prospecting, locating and exploring mines in private property by persons
other than the owner of the land as well as the granting of concessions,
which goes to show that private ownership of the land did not include,
without express grant, the mines that might be found therein.
Analogous provisions are found in the Civil Code of Spain determining
the ownership of mines. In its Article 339 (Article 420, New Civil Code)
enumerating properties of public ownership, the mines are included, until
specially granted to private individuals. In its article 350 (Art. 437, New
Civil Code) declaring that the proprietor of any parcel of land is the owner
of its surface and of everything under it, an exception is made as far as
mining laws are concerned. Then in speaking of minerals, the Code in its
articles 426 and 427 (Art. 519, New Civil Code) provides rules governing
the digging of pits by third persons on private-owned lands for the purpose
of prospecting for minerals.
86

Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, 261 SCRA 528
(1996).
87

Ibid.

88

Cruz v. Secretary of Environment and Natural Resources, supra, Kapunan, J.,

Separate Opinion.
89

Ibid.

90

McDaniel v. Apacible and Cuisia, 42 Phil. 749 (1922).

91

Noblejas, supra, at 5.

92

V. M. A. Dimagiba, Service Contract Concepts in Energy, 57 Phil. L. J. 307,

313 (1982).
93

P. A. Agabin, Service Contracts: Old Wine in New Bottles?, in II Draft Proposal

of the 1986 U.P. Law Constitution Project 3.
94

Id., at 2-3.

95

Id., at 3.

96

Ibid.

97

Ibid.

98

Ibid.

99

An Act to Provide for the Exploration, Location and Lease of Lands Containing
Petroleum and other Mineral Oils and Gas in the Philippine Islands.
100

An Act to Provide for the Leasing and Development of Coal Lands in the
Philippine Islands.
101

Agabin, supra, at 3.

102

People v. Linsangan, 62 Phil. 646 (1935).

103

Ibid.

104

Ibid.

105

Ibid.

106

Ibid.

107

Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, supra.

108

Bernas, S.J., supra, at 1009-1010, citing Lee Hong Hok v. David, 48 SCRA 372
(1972).
109

II J. Aruego, The Framing of the Philippine Constitution 592 (1949).

110

Id., at 600-601.

111

Id., at 604. Delegate Aruego expounds:

At the time of the framing of the Philippine Constitution, Filipino capital
had been known to be rather shy. Filipinos hesitated as a general rule to
invest a considerable sum of their capital for the development,
exploitation, and utilization of the natural resources of the country. They
had not as yet been so used to corporate enterprises as the peoples of the
West. This general apathy, the delegates knew, would mean the retardation
of the development of the natural resources, unless foreign capital would
be encouraged to come in and help in that development. They knew that
the nationalization of the natural resources would certainly not encourage
the investment of foreign capital into them. But there was a general feeling
in the Convention that it was better to have such development retarded or
even postponed altogether until such time when the Filipinos would be
ready and willing to undertake it rather than permit the natural resources to
be placed under the ownership or control of foreigners in order that they
might be immediately developed, with the Filipinos of the future serving
not as owners but at most as tenants or workers under foreign masters. By
all means, the delegates believed, the natural resources should be
conserved for Filipino posterity.
The nationalization of natural resources was also intended as an
instrument of national defense. The Convention felt that to permit
foreigner to own or control the natural resources would be to weaken the
national defense. It would be making possible the gradual extension of
foreign influence into our politics, thereby increasing the possibility of
foreign control. x x x.
Not only these. The nationalization of the natural resources, it was
believed, would prevent making the Philippines a source of international
conflicts with the consequent danger to its internal security and
independence. For unless the natural resources were nationalized, with the
nationals of foreign countries having the opportunity to own or control
them, conflicts of interest among them might arise inviting danger to the
safety and independence of the nation. (Id., at 605-606.)

112

Palting v. San Jose Petroleum Inc., 18 SCRA 924 (1966); Republic v. Quasha,
46 SCRA 160 (1972).
113

Atok Big-Wedge Mining Co. v. Intermediate Appellate Court, supra.

114

Article VI thereof provided:

1. The disposition, exploitation, development and utilization of all
agricultural, timber, and mineral lands of the public domain, waters,
minerals, coal, petroleum and other mineral oils, all forces and sources of
potential energy, and other natural resources of either Party, and the
operation of public utilities, shall, if open to any person, be open to
citizens of the other Party and to all forms of business enterprise owned or
controlled directly or indirectly, by citizens of such other Party in the same
manner as to and under the same conditions imposed upon citizens or
corporations or associations owned or controlled by citizens of the Party
granting the right.
2. The rights provided for in Paragraph 1 may be exercised x x x in the
case of citizens of the United States, with respect to natural resources in
the public domain in the Philippines, only through the medium of a
corporation organized under the laws of the Philippines and at least 60%
of the capital stock of which is owned or controlled by citizens of the
United States x x x.
3. The United States of America reserves the rights of the several States of
the United States to limit the extent to which citizens or corporations or
associations owned or controlled by citizens of the Philippines may
engage in the activities specified in this Article. The Republic of the
Philippines reserves the power to deny any of the rights specified in this
Article to citizens of the United States who are citizens of States, or to
corporations or associations at least 60% of whose capital stock or capital
is owned or controlled by citizens of States, which deny like rights to
citizens of the Philippines, or to corporations or associations which ore
owned or controlled by citizens of the Philippines x x x.

115

An Act to Promote the Exploration, Development, Exploitation, and Utilization

of the Petroleum Resources of the Philippines; to Encourage the Conservation of
such Petroleum Resources; to Authorize the Secretary of Agriculture and Natural
Resources to Create an Administration Unit and a Technical Board in the Bureau
of Mines; to Appropriate Funds therefor; and for other purposes.
116

Rep. Act No. 387 (1949), as amended, art. 10 (b).

117

Id., art. 10 (c).

118

Id., art. 5.

119

Id., art. 31. The same provision recognized the rights of American citizens
under the Parity Amendment:
During the effectivity and subject to the provisions of the ordinance
appended to the Constitution of the Philippines, citizens of the United
States and all forms of business enterprises owned and controlled, directly
or indirectly, by citizens of the United States shall enjoy the same rights
and obligations under the provisions of this Act 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.
120

Id., art. 10.

121

Id., art. 3.

122

Id., art. 9.

123

Ibid.

124

Rep. Act No. 387 (1949), as amended, art. 8.

125

Id., art. 25.

126

Id., art. 47.

127

Id., art. 60.

128

Id., art. 64. Article 49, R.A. No. 387 originally imposed an annual exploration
tax on exploration concessionaires but this provision was repealed by Section 1,
R.A. No. 4304.
129

Francisco, supra, at 103.

130

Rep. Act No. 387 (1949), as amended, art. 65.

131

Francisco, supra, at 103.

132

Rep. Act No. 387 (1949), as amended, art. 90 (b) 3.

133

Id., art. 90 (b) 4.

134

Id., art. 93-A.

135

Id., art. 93.

136

Ibid.

137

Rep. Act No. 387 (1949), as amended, art. 94.

138

Id., art. 106.

139

Id., art. 95.

140

Ibid.

141

Rep. Act No. 387 (1949), as amended, art. 95 (e).

142

Dimagiba, supra, at 315, citing Fabrikant, Oil Discovery and Technical Change
in Southeast Asia, Legal Aspects of Production Sharing Contracts in the
Indonesian Petroleum Industry, 101-102, sections 13C.24 and 13C.25 (1972).
143

Agabin, supra, at 4.

144

Dimagiba, supra, at 318.

145

Amending Presidential Decree No. 8 issued on October 2, 1972, and

Promulgating an Amended Act to Promote the Discovery and Production of
Indigenous Petroleum and Appropriate Funds Therefor.
146

Pres. Decree No. 87 (1972), sec. 4.

147

Agabin, supra, at 6.

148

M. Magallona, Service Contracts in Philippine Natural Resources, 9 World

Bull. 1, 4 (1993).
149

Pres. Decree No. 87 (1972), sec. 6.

150

Id., sec. 4.

151

Id., sec. 6.

152

Id., sec. 7.

153

Id., sec. 8.

154

Ibid.

155

Ibid.

156

Pres. Decree No. 87 (1972), sec. 9.

157

Id., sec. 12.

158

Id., sec. 13.

159

Dimagiba draws the following comparison between the service contract

scheme and the concession system:
In both the concession system and the service contract scheme, work and
financial obligations are required of the developer. Under Republic Act
No. 387 and Presidential Decree No. 87, the concessionaire and the
service contractors are extracted certain taxes in favor of the government.
In both arrangements, the explorationist/developer is given incentives in
the form of tax exemptions in the importation or disposition of machinery,
equipment, materials and spare parts needed in petroleum operations.
The concessionaire and the service contractor are required to keep in their
files valuable data and information and may be required to submit need
technological or accounting reports to the Government. Duly authorized
representatives of the Government could, under the law, inspect or audit
the books of accounts of the contract holder.
In both systems, signature, discovery or production bonuses may be given
by the developer to the host Government.
The concession system, however, differs considerably from the service
contract system in important areas of the operations. In the concession
system, the Government merely receives fixed royalty which is a certain
percentage of the crude oil produced or other units of measure, regardless
of whether the concession holder makes profits or not. This is not so in the
service contract system. A certain percentage of the gross production is set
aside for recoverable expenditures by the contractor. Of the net proceeds
the parties are entitled percentages of share that will accrue to each of
them.
In the royalty system, the concessionaire may be discouraged to produce
more for the reason that since the royalty paid to the host country is

closely linked to the volume of production, the greater the produce, the
more amount or royalty would be allocated to the Government. This is not
so in the production sharing system. The share of the Government depends
largely on the net proceeds of production after reimbursing the service
contractor of its recoverable expenses.
As a general rule, the Government plays a passive role in the concession
system, more particularly, interested in receiving royalties from the
concessionaire. In the production-sharing arrangement, the Government
plays a more active role in the management and monitoring of oil
operations and requires the service contractor entertain obligations
designed to bring more economic and technological benefits to the host
country. (Dimagiba, supra, at 330-331.)
160

Agabin, supra, at 6.

161

The antecedents leading to the Proclamation are narrated in Javellana v.

Executive Secretary, 50 SCRA 55 (1973):
On March 16, 1967, Congress of the Philippines passed Resolution No. 2,
which was amended by Resolution No. 4, of said body, adopted on June
17, 1969, calling a convention to propose amendments to the Constitution
of the Philippines. Said Resolution No. 2, as amended, was implemented
by Republic Act No. 6132 approved on August 24, 1970, pursuant to the
provisions of which the election of delegates to said convention was held
on November 10, 1970, and the 1971 Convention began to perform its
functions on June 1, 1971. While the Convention was in session on
September 21, 1972, the President issued Proclamation No. 1081 placing
the entire Philippines under Martial Law. On November 29, 1972, the
President of the Philippines issued Presidential Decree No. 73, submitting
to the Filipino people for ratification or rejection the Constitution of the
Republic of the Philippines proposed by the 1971 Constitutional
Convention, and appropriating funds therefor, as well as setting the
plebiscite for such ratification on January 15, 1973.
On January 17, 1973, the President issued Proclamation No. 1102
certifying and proclaiming that the Constitution proposed by the 1971
Constitutional Convention "has been ratified by an overwhelming majority
of all the votes cast by the members of all the Barangays (Citizens
Assemblies) throughout the Philippines, and has thereby come into effect."
162

Bernas, S.J., supra, at 1016, Note 28, citing Session of November 25, 1972.

163

Agabin, supra, at 1, quoting Sanvictores, The Economic Provisions in the 1973

Constitution, in Espiritu, 1979 Philconsa Reader on Constitutional and Policy
Issues 449.
164

Bernas, S.J., supra, at 1016, Note 28, citing Session of November 25, 1972.

165

Ibid.

166

Ibid.

167

Allowing Citizens of the Philippines or Corporations or Associations at least

Sixty Per Centum of the Capital of which is Owned by such Citizens to Enter into
Service Contracts with Foreign Persons, Corporations for the Exploration,

Development, Exploitation or Utilization of Lands of the Public Domain,

Amending for the purpose certain provisions of Commonwealth Act No. 141.
168

Pres. Decree No. 151 (1973), sec. 1.

169

Providing for A Modernized System of Administration and Disposition of

Mineral Lands and to Promote and Encourage the Development and Exploitation
thereof.
170

Revising and Consolidating All Laws and Decrees Affecting Fishing and
Fisheries.
171

Pres. Decree No. 704 (1975), sec. 21.

172

Revising Presidential Decree No. 389, otherwise known as The Forestry

Reform Code of the Philippines.
173

Pres. Decree No. 705 (1975), sec. 62.

174

An Act to Promote the Exploration and Development of Geothermal

Resources.
175

Magallona, supra, at 6.

176

Declaring a National Policy to Implement the Reforms Mandated by the

People, Protecting their Basic Rights, Adopting a Provisional Constitution, and
Providing for an Orderly Transition to a Government under a New Constitution.
177

Const., art. XVIII, sec. 27; De Leon v. Esguerra, 153 SCRA 602 (1987).

178

Miners Association of the Philippines, Inc. v. Factoran, Jr., 240 SCRA 100
(1995).
179

Ibid.

180

Ibid.

181

J. Bernas, S.J., The Intent of the 1986 Constitution Writers 812 (1995).

182

Miners Association of the Philippines, Inc. v. Factoran, Jr., supra.

183

III Records of the Constitutional Commission 255.

184

Id., at 355-356.

185

Const. (1986), art. II, sec. 1.

186

Cruz v. Secretary of Environment and Natural Resources, supra, Puno, J.,

Separate Opinion.
187

188

Rep. Act No. 7942 (1995), sec. 9.

SEC. 82. Allocation of Government Share.The Government share as referred

to in the preceding sections shall be shared and allocated in accordance with
Sections 290 and 292 of Republic Act No. 7160 otherwise known as the Local
Government Code of 1991. In case the development and utilization of mineral
resources is undertaken by a government-owned or -controlled corporation, the

sharing and allocation shall be in accordance with Sections 291 and 292 of the
said Code.
189

An Act Creating A People's Small-Scale Mining Program and for other

purposes.
190

Rep. Act No. 7942 (1995), sec. 42.

191

Id., secs. 3 (ab) and 26.

192

"Contractor" means a qualified person acting alone or in consortium who is a

party to a mineral agreement or to a financial or technical assistance agreement.
(Id., sec. 3[g].)
193

"Contract area" means land or body water delineated for purposes of

exploration, development, or utilization of the minerals found therein. (Id., sec.
3[f].)
194

"Gross output" means the actual market value of minerals or mineral products
from its mining area as defined in the National Internal Revenue Code (Id., sec.
3[v]).
195

Id., sec. 26 (a).

196

An Act Reducing Excise Tax Rates on Metallic and Non-Metallic Minerals and
Quarry Resources, amending for the purpose Section 151 (a) of the National
Internal Revenue Code, as amended.
197

Rep. Act No. 7942 (1995), sec. (80).

198

Id., Sec. 26 (b).

199

"Mineral resource" means any concentration of minerals/rocks with potential

economic value. (Id., sec. 3[ad].)
200

Id., sec. 26 (c).

201

Ibid.

202

Id., sec. 3 (h).

203

Id., sec. 3 (x).

204

Id., sec. 26, last par.

205

Id., sec. 27.

206

Id., sec. 3 (aq).

207

Id., sec. 3 (r).

208

Id., sec. 33.

209

Id., sec. 3 (t).

210

Id., sec. 3 (aq).

211

The maximum areas in cases of mineral agreements are prescribed in Section

28 as follows:
SEC. 28. Maximum Areas for Mineral Agreement. The maximum area
that a qualified person may hold at any time under a mineral agreement
shall be:
(a) Onshore, in any one province
(1) For individuals, ten (10) blocks; and
(2) For partnerships, cooperatives, associations, or
corporations, one hundred (100) blocks.
(b) Onshore, in the entire Philippines
(1) For individuals, twenty (20) blocks; and
(2) For partnerships, cooperatives, associations, or
corporations, two hundred (200) blocks.
(c) Offshore, in the entire Philippines
(1) For individuals, fifty (50) blocks;
(2) For partnerships, cooperatives, associations, or
corporations, five hundred (500) blocks; and
(3) For the exclusive economic area, a larger area to be
determined by the Secretary.
The maximum areas mentioned above that a contractor may hold
under a mineral agreement shall not include mining/quarry areas
under operating agreements between the contractor and a
claimowner/lessee/permittee/licensee entered into under
Presidential Decree No. 463.
On the other hand, Section 34, which governs the maximum area
for FTAAs provides:
SEC. 34. Maximum Contract Area. The maximum contract area that
may be granted per qualified person, subject to relinquishment shall be:
(a) 1,000 meridional blocks onshore;
(b) 4,000 meridional blocks offshore; or
(c) Combinations of (a) and (b) provided that it shall not exceed
the maximum limits for onshore and offshore areas.
212

Id., sec. 33.

213

Id., sec. 81.

214

Kapatiran v. Tan, 163 SCRA 371 (1988).

215

Providing for the Publication of Laws either in the Official Gazette or in a

Newspaper of General Circulation in the Philippines as a Requirement for their
Effectivity.
216

Section 1, E.O. No. 200 was subsequently incorporated in the Administrative

Code of 1987 (Executive Order No. 292 as Section 18, Chapter 5 (Operation and
Effect of Laws), Book 1 (Sovereignty and General Administration).
217

136 SCRA 27 (1985).

218

Manila Prince Hotel v. Government Service Insurance System, 267 SCRA 408
(1997).
219

Const., art. 3, sec. 1.

220

83 O.G. (Suppl.) 3528-115 to 3528-117 (August 1987).

221

Miners Association of the Philippines, Inc. v. Factoran, Jr., supra.

222

Petitioners note in their Memorandum that the FTAA:

x x x guarantees that wholly foreign owned [WMCP] entered into the
FTAA in order to facilitate "the large scale exploration, development and
commercial exploitation of mineral deposits that may be found to exist
within the Contract area." [Section 1.1] As a contractor it also has the
"exclusive right to explore, exploit, utilize, process and dispose of all
mineral products and by-products thereof that may be derived or produced
from the Contract Area." [Section 1.3] Thus, it is divided into an
"exploration and feasibility phase" [Section 3.2 (a)] and a "construction,
development and production phase." [Section 3. 2 (b).]
Thus, it is this wholly foreign owned corporation that, among other things:
(a) operates within a prescribed contract area [Section 4],
(b) opts to apply for a Mining Production Sharing Agreement
[Section 4.2],
(c) relinquishes control over portions thereof at their own choice
[Section 4.6],
(d) submits work programs, incurs expenditures, and makes reports
during the exploration period [Section 5],
(e) submits a Declaration of Mining Feasibility [Sections 5.4 and
5.5],
(f) during the development period, determines the timetable,
submits work programs, provides the reports and determines and
executes expansions, modifications, improvements and
replacements of new mining facilities within the area [Section 6],
(g) complies with the conditions for environmental protection and
industrial safety, posts the necessary bonds and makes
representations and warranties to the government [Section 10.5].

The contract subsists for an initial term of twenty-five (25) years from the
date of its effectivity [Section 3.1] and renewable for a further period of
twenty-five years under the same terms and conditions upon application
by private respondent [Section 3.3]. (Rollo, pp. 458-459.)
223

H. C. Black, Handbook on the Construction and Interpretation of the Laws 8.

224

Ibid.

225

J. M. Tuason & Co., Inc. v. Land Tenure Association, 31 SCRA 413 (1970).

226

Rollo, p. 580.

227

Ibid. Emphasis supplied.

228

People v. Manantan, 115 Phil. 657 (1962); Commission on Audit of the

Province of Cebu v. Province of Cebu, 371 SCRA 196 (2001).
229

Rollo, p. 569.

230

III Record of the Constitutional Commission 351-352.

231

V Record of the Constitutional Commission 844.

232

Id., at 841.

233

Id., at 842.

234

Id. at 844.

235

Vide Cherey v. Long Beach, 282 NY 382, 26 NE 2d 945, 127 ALR 1210
(1940), cited in 16 Am Jur 2d Constitutional Law 79.
236

Civil Liberties Union v. Executive Secretary, 194 SCRA 317, 325 (1991).

237

III Record of the Constitutional Commission 278.

238

Id., at 316-317.

239

III Record of the Constitutional Commission 358-359.

240

Vera v. Avelino, 77 Phil. 192 (1946).

241

J. Nolledo, The New Constitution of the Philippines Annotated 924-926

(1990).
242

Resolution to Incorporate in the New Constitution an Article on National

Economy and Patrimony.
243

The Chair of the Committee on National Economy and Patrimony, alluded to it

in the discussion on the capitalization requirement:
MR. VILLEGAS. We just had a long discussion with the members of the
team from the UP Law Center who provided us a draft. The phrase that is
contained here which we adopted from the UP draft is "60 percent of
voting stock." (III Record of the Constitutional Commission 255.)

Likewise, in explaining the reasons for the deletion of the term

"exploitation":
MR. VILLEGAS. Madam President, following the recommendation in the
UP draft, we omitted "exploitation" first of all because it is believed to be
subsumed under "development" and secondly because it has a derogatory
connotation. (Id., at 358.)
244

Id., at 12.

245

Id., at 15-16.

246

M. Magallona, Nationalism and Its Subversion in the Constitution 5, in II Draft

Proposal of the 1986 U.P. Law Constitution Project.
247

Agabin, supra, at 16.

248

E. Labitag, Philippine Natural Resources: Some Problems and Perspectives 17

in II Draft Proposal of the 1986 U.P. Law Constitution Project.
249

I Draft Proposal of the 1986 U.P. Law Constitution Project 11-13.

250

Id., at 9-11. Professor Labitag also suggests that:

x x x. The concession regime of natural resources disposition should be
discontinued. Instead the State shall enter into such arrangements and
agreements like co-production, joint ventures, etc. as shall bring about
effective control and a larger share in the proceeds, harvest or production.
(Labitag, supra, at 17.)

251

Vide Note 147.

252

Vide Note 230. The question was posed before the Jamir amendment and
subsequent proposals introducing other limitations.
Comm. Villegas' response that there was no requirement in the 1973
Constitution for a law to govern service contracts and that, in fact, there
were then no such laws is inaccurate. The 1973 Charter required similar
legislative approval, although it did not specify the form it should take:
"The Batasang Pambansa, in the national interest, may allow such
citizens to enter into service contracts." As previously noted,
however, laws authorizing service contracts were actually enacted by
presidential decree.
253

Vide Note 238.

254

Vide Note 241.

255

Vide Note 231.

256

Dated July 28, 1987.

257

Dated October 3, 1990.

258

Peralta v. Civil Service Commission, 212 SCRA 425 (1992).

259

Vide Note 238.

260

III Record of the Constitutional Commission 354.

261

Salaysay v. Castro, 98 Phil. 364 (1956).

262

Rep. Act No. 7942 (1995), sec. 3 (q).

263

Id., sec. 3 (aq).

264

Id., sec. 20.

265

Id., sec. 23, first par.

266

Id., sec. 23, last par.

267

Id., sec. 3 (j).

268

Id., sec. 3 (az).

269

Id., sec. 35 (m).

270

Id., secs. 3 (aq) and 56.

271

Id., sec. 3 (y).

272

Id., sec. 35 (g).

273

Id., sec. 35 (h).

274

Id., sec. 35 (l).

275

Id., sec. 3 (af).

276

SEC. 72. Timber Rights.Any provision of the law to the contrary

notwithstanding, a contractor may be granted a right to cut trees or timber within
his mining area as may be necessary for his mining operations subject to forestry
laws, rules and regulations: Provided, That if the land covered by the mining area
is already covered by exiting timber concessions, the volume of timber needed
and the manner of cutting and removal thereof shall be determined by the mines
regional director, upon consultation with the contractor, the timber
concessionaire/permittee and the Forest Management Bureau of the Department:
Provided, further, That in case of disagreement between the contractor and the
timber concessionaire, the matter shall be submitted to the Secretary whose
decision shall be final. The contractor shall perform reforestation work within his
mining area in accordance with forestry laws, rules and regulations. [Emphasis
supplied.]
SEC. 73. Water Rights.A contractor shall have water rights for mining
operations upon approval of application with the appropriate government
agency in accordance with existing water laws, rules and regulations
promulgated thereunder: Provided, That water rights already granted or
vested through long use, recognized and acknowledged by local customs,
laws and decisions of courts shall not thereby be impaired: Provided,
further, That the Government reserves the right to regulate water rights
and the reasonable and equitable distribution of water supply so as to
prevent the monopoly of the use thereof. [Emphasis supplied.]

SEC. 74. Right to Possess Explosives.A contractor/exploration

permittee shall have the right to possess and use explosives within his
contract/permit area as may be necessary for his mining operations upon
approval of an application with the appropriate government agency in
accordance with existing laws, rules and regulations promulgated
thereunder: Provided, That the Government reserves the right to regulate
and control the explosive accessories to ensure safe mining operations.
[Emphasis supplied.]
SEC. 75. 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, tailings 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. [Emphasis
supplied.]
SEC. 76. 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:
Provided, That any damage done to the property of the surface owner,
occupant, or concessionaire as a consequence of such operations shall be
properly compensated as may be bee provided for in the implementing
rules and regulations: Provided, further, That to guarantee such
compensation, the person authorized to conduct mining operation shall,
prior thereto, post a bond with the regional director based on the type of
properties, the prevailing prices in and around the area where the mining
operations are to be conducted, with surety or sureties satisfactory to the
regional director. [Emphasis supplied.]
277

Id., sec. 39, first par.

278

Id., sec. 39, second par.

279

Id., sec. 35 (e).

280

SEC. 23. Rights and Obligations of the Permittee.x x x.

The permittee may apply for a mineral production sharing agreement, joint
venture agreement, co-production agreement or financial or technical
assistance agreement over the permit area, which application shall be
granted if the permittee meets the necessary qualifications and the terms
and conditions of any such agreement: Provided, That the exploration
period covered by the exploration period of the mineral agreement or
financial or technical assistance agreement.

281

SEC. 35. Terms and Conditions. The following terms, conditions, and
warranties shall be incorporated in the financial or technical assistance agreement,
to wit:
(a) A firm commitment in the form of a sworn statement, of an amount
corresponding to the expenditure obligation that will be invested in the

contract area: Provided, That such amount shall be subject to changes as

may be provided for in the rules and regulations of this Act;
(b) A financial guarantee bond shall be posted in favor of the Government
in an amount equivalent to the expenditure obligation of the applicant for
any year;
(c) Submission of proof of technical competence, such as, but not limited
to, its track record in mineral resource exploration, development, and
utilization; details of technology to be employed in the proposed
operation; and details of technical personnel to undertake the operation;
(d) Representations and warranties that the applicant has all the
qualifications and none of the disqualifications for entering into the
agreement;
(e) Representations and warranties that the contractor has or has access to
all the financing, managerial and technical expertise and, if circumstances
demand, the technology required to promptly and effectively carry out the
objectives of the agreement with the understanding to timely deploy these
resources under its supervision pursuant to the periodic work programs
and related budgets, when proper, providing an exploration period up to
two (2) years, extendible for another two (2) years but subject to annual
review by the Secretary in accordance with the implementing rules and
regulations of this Act, and further, subject to the relinquishment
obligations;
(f) Representations and warranties that, except for paymets for
dispositions for its equity, foreign investments in local enterprises which
are qualified for repatriation, and local supplier's credits and such other
generally accepted and permissible financial schemes for raising funds for
valid business purposes, the conractor shall not raise any form of financing
from domestic sources of funds, whether in Philippine or foreign currency,
for conducting its mining operations for and in the contract area;
(g) The mining operations shall be conducted in accordance with the
provisions of this Act and its implementing rules and regulations;
(h) Work programs and minimum expenditures commitments;
(i) Preferential use of local goods and services to the maximum extent
practicable;
(j) A stipulation that the contractors are obligated to give preference to
Filipinos in all types of mining employment for which they are qualified
and that technology shall be transferred to the same;
(k) Requiring the proponent to effectively use appropriate anti-pollution
technology and facilities to protect the environment and to restore or
rehabilitate mined out areas and other areas affected by mine tailings and
other forms of pollution or destruction;
(l) The contractors shall furnish the Government records of geologic,
accounting, and other relevant data for its mining operations, and that
book of accounts and records shall be open for inspection by the
government;

(m) Requiring the proponent to dispose of the minerals and byproducts

produced under a financial or technical assistance agreement at the highest
price and more advantageous terms and conditions as provided for under
the rules and regulations of this Act;
(n) Provide for consultation and arbitration with respect to the
interpretation and implementation of the terms and conditions of the
agreements; and
(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.
282

SEC. 39. Option to Convert into a Mineral Agreement. The contractor has
the option to convert the financial or technical assistance agreement to a mineral
agreement at any time during the term of the agreement, if the economic viability
of the contract area is found to be inadequate to justify large-scale mining
operations, after proper notice to the Secretary as provided for under the
implementing rules and regulations; Provided, That the mineral agreement shall
only be for the remaining period of the original agreement.
In the case of a foreign contractor, it shall reduce its equity to forty percent
(40%) in the corporation, partnership, association, or cooperative. Upon
compliance with this requirement by the contractor, the Secretary shall
approve the conversion and execute the mineral production-sharing
agreement.
283

SEC. 56. Eligibility of Foreign-owned/-controlled Corporation.A foreign

owned/ -controlled corporation may be granted a mineral processing permit.
284

SEC. 3. Definition of Terms. As used in and for purposes of this Act, the
following terms, whether in singular or plural, shall mean:
xxx
(g) "Contractor" means a qualified person acting alone or in consortium
who is a party to a mineral agreement or to a financial or technical
assistance agreement.
285

SEC. 34. Maximum Contract Area. The maximum contract area that may be
granted per qualified person, subject to relinquishment shall be:
(a) 1,000 meridional blocks onshore;
(b) 4,000 meridional blocks offshore; or
(c) Combinations of (a) and (b) provided that it shall not exceed the
maximum limits for onshore and offshore areas.
286

SEC. 36. Negotiations. A financial or technical assistance agreement shall

be negotiated by the Department and executed and approved by the President. The
President shall notify Congress of all financial or technical assistance agreements
within thirty (30) days from execution and approval thereof.
287

SEC. 37. Filing and Evaluation of Financial or Technical Assistance Agreement

Proposals. All financial or technical assistance agreement proposals shall be
filed with the Bureau after payment of the required processing fees. If the

proposal is found to be sufficient and meritorious in form and substance after

evaluation, it shall be recorded with the appropriate government agency to give
the proponent the prior right to the area covered by such proposal: Provided, That
existing mineral agreements, financial or technical assistance agreements and
other mining rights are not impaired or prejudiced thereby. The Secretary shall
recommend its approval to the President.
288

SEC. 38. Term of Financial or Technical Assistance Agreement. A financial

or technical assistance agreement shall have a term not exceeding twenty-five
(25) years to start from the execution thereof, renewable for not more than
twenty-five (25) years under such terms and conditions as may be provided by
law.
289

SEC. 40. Assignment/Transfer. A financial or technical assistance agreement

may be assigned or transferred, in whole or in part, to a qualified person subject to
the prior approval of the President: Provided, That the President shall notify
Congress of every financial or technical assistance agreement assigned or
converted in accordance with this provision within thirty (30) days from the date
of the approval thereof.
290

SEC. 41. Withdrawal from Financial or Technical Assistance Agreement.

The contractor shall manifest in writing to the Secretary his intention to withdraw
from the agreement, if in his judgment the mining project is no longer
economically feasible, even after he has exerted reasonable diligence to remedy
the cause or the situation. The Secretary may accept the withdrawal: Provided,
That the contractor has complied or satisfied all his financial, fiscal or legal
obligations.
291

SEC. 81. Government Share in Other Mineral Agreements.x x x.

The Government share in financial or technical assistance agreement shall
consist of, among other things, the contractor's corporate 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 stockholder in case of a foreign national and all such other taxes,
duties and fees as provided for under existing laws.
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 pre-operating expenses,
exploration, and development expenditures, inclusive.

292

SEC. 90. Incentives.The contractors in mineral agreements, and financial or

technical assistance agreements shall be entitled to the applicable fiscal and nonfiscal incentives as provided for under Executive Order No. 226, otherwise known
as the Omnibus Investments Code of 1987: Provided, That holders of exploration
permits may register with the Board of Investments and be entitled to the fiscal
incentives granted under the said Code for the duration of the permits or
extensions thereof: Provided, further, That mining activities shall always be
included in the investment priorities plan.
293

Lidasan v. Commission on Elections, 21 SCRA 496 (1967).

294

Vide also WMCP FTAA, sec. 10.2 (a).

295

WMCP, sec. 10.2.

296

Id., sec. 11.

297

Id., sec. 10.1(a).

298

Id., sec. 10.1(c).

299

Id., sec. 6.4.

300

Rollo, pp. 563-564.

301

Civil Code, art. 8.

302

Const., art III, sec. 1.

303

Vide Note 223.

304

Rollo, p. 243.

305

Civil Liberties Union v. Executive Secretary, supra.

306

Automotive Parts & Equipment Company, Inc. v. Lingad, 30 SCRA 248

(1969).
307

Ibid.

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