Case Digest Natres

LA BUGAL BLAAN TRIBAL ASSOCIATION INC., et. al. v. VICTOR O.
RAMOS, Secretary
Department of Environment and Natural Resources; HORACIO RAMOS, Director, Mines
and Geosciences Bureau (MGB-DENR); RUBEN TORRES, Executive Secretary; and
WMC (PHILIPPINES) INC.
G.R. No. 127882, 27 January 2004, En Banc (Carpio-Morales, J.)
FACTS:
RA 7942 (The Philippine Mining Act) took effect on April 9, 1995. Before the effectivity of RA
7942, or on March 30, 1995, the President signed a Financial and Technical Assistance
Agreement (FTAA) with WMCP, a corporation organized under Philippine laws, covering close
to 100,000 hectares of land in South Cotabato, Sultan Kudarat, Davao del Sur and North
Cotabato. On August 15, 1995, the Environment Secretary Victor Ramos issued DENR
Administrative Order 95-23, which was later repealed by DENR Administrative Order 96-40,
adopted on December 20, 1996.
Petitioners prayed that RA 7942, its implementing rules, and the FTAA between the
government and WMCP be declared unconstitutional on ground that they allow fully foreign
owned corporations like WMCP to exploit, explore and develop Philippine mineral resources
in contravention of Article XII Section 2 paragraphs 2 and 4 of the Charter.
In January 2001, WMC - a publicly listed Australian mining and exploration company - sold its
whole stake in WMCP to Sagittarius Mines, 60% of which is owned by Filipinos while 40% of
which is owned by Indophil Resources, an Australian company. DENR approved the transfer
and registration of the FTAA in Sagittarius name but Lepanto Consolidated assailed the
same. The latter case is still pending before the Court of Appeals.
EO 279, issued by former President Aquino on July 25, 1987, authorizes the DENR to accept,
consider and evaluate proposals from foreign owned corporations or foreign investors for
contracts or agreements involving wither technical or financial assistance for large scale
exploration, development and utilization of minerals which upon appropriate recommendation
of the (DENR) Secretary, the President may execute with the foreign proponent. WMCP
likewise contended that the annulment of the FTAA would violate a treaty between the
Philippines and Australia which provides for the protection of Australian investments.
ISSUES:
1. Whether or not the Philippine Mining Act is unconstitutional for allowing fully foreignowned corporations to exploit the Philippine mineral resources.
2. Whether or not the FTAA between the government and WMCP is a service contract
that permits fully foreign owned companies to exploit the Philippine mineral resources.
HELD:
First Issue: RA 7942 is Unconstitutional
RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for permitting fully foreign
owned corporations to exploit the Philippine natural resources.
Article XII Section 2 of the 1987 Constitution retained the Regalian Doctrine which states that
All lands of the public domain, waters, minerals, coal, petroleum, and other minerals, coal,
petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are owned by the State. The same
section also states that, the exploration and development and utilization of natural
resources shall be under the full control and supervision of the State.
Conspicuously absent in Section 2 is the provision in the 1935 and 1973 Constitution
authorizing the State to grant licenses, concessions, or leases for the exploration,
exploitation, development, or utilization of natural resources. By such omission, the utilization
of inalienable lands of the public domain through license, concession or lease is no longer
allowed under the 1987 Constitution.
Under the concession system, the concessionaire makes a direct equity investment for the
purpose of exploiting a particular natural resource within a given area. The concession
amounts to complete control by the concessionaire over the countrys natural resource, for it
is given exclusive and plenary rights to exploit a particular resource at the point of extraction.
The 1987 Constitution, moreover, has deleted the phrase management or other forms of
assistance in the 1973 Charter. The present Constitution now allows only technical and
financial assistance. The management and the operation of the mining activities by foreign
contractors, the primary feature of the service contracts was precisely the evil the drafters of
the 1987 Constitution sought to avoid.
The constitutional provision allowing the President to enter into FTAAs is an exception to the
rule that participation in the nations natural resources is reserved exclusively to Filipinos.
Accordingly, such provision must be construed strictly against their enjoyment by nonFilipinos. Therefore, RA 7942 is invalid insofar as the said act authorizes service contracts.
Although the statute employs the phrase financial and technical agreements in
accordance with the 1987 Constitution, its pertinent provisions actually treat these
agreements as service contracts that grant beneficial ownership to foreign contractors
contrary to the fundamental law.
The underlying assumption in the provisions of the law is that the foreign contractor manages
the mineral resources just like the foreign contractor in a service contract. By allowing foreign
contractors to manage or operate all the aspects of the mining operation, RA 7942 has, in
effect, conveyed beneficial ownership over the nations mineral resources to these
contractors, leaving the State with nothing but bare title thereto.
The same provisions, whether by design or inadvertence, permit a circumvention of the
constitutionally ordained 60-40% capitalization requirement for corporations or associations
engaged in the exploitation, development and utilization of Philippine natural resources.
When parts of a statute are so mutually dependent and connected as conditions,
considerations, inducements or compensations for each other as to warrant a belief that the
legislature intended them as a whole, then if some parts are unconstitutional, all provisions
that are thus dependent, conditional or connected, must fail with them.
Under Article XII Section 2 of the 1987 Charter, foreign owned corporations are limited only to
merely technical or financial assistance to the State for large scale exploration, development
and utilization of minerals, petroleum and other mineral oils.
Second Issue: RP Government-WMCP FTAA is a Service Contract
The FTAA between he WMCP and the Philippine government is likewise unconstitutional
since the agreement itself is a service contract.
Section 1.3 of the FTAA grants WMCP a fully foreign owned corporation, the exclusive right to
explore, exploit, utilize and dispose of all minerals and by-products that may be produced
from the contract area. Section 1.2 of the same agreement provides that EMCP shall provide
all financing, technology, management, and personnel necessary for the Mining Operations.
These contractual stipulations and related provisions in the FTAA taken together, grant
WMCP beneficial ownership over natural resources that properly belong to the State and are
intended for the benefit of its citizens. These stipulations are abhorrent to the 1987
Constitution. They are precisely the vices that the fundamental law seeks to avoid, the evils
that it aims to suppress. Consequently, the contract from which they spring must be struck
down.
PYRO COPPER MINING CORPORATION, petitioner,

vs.
MINES ADJUDICATION BOARD-DEPARTMENT OF ENVIRONMENT AND NATURAL
RESOURCES, MINES
FACTS:
Private respondent is a corporation organized and existing under the laws of the Philippines
and engaged in the business of mining. On 12 September 2003, private respondent filed an
Application for Exploration Permit7with MGB. In turn, petitioner filed a Verified
Protest/Opposition to the Application for Exploration Permit of the private respondent. It was
allegedly filed with the Panel of Arbitrators on 30 August 2005 and was received by the latter
on 5 September 2005.
Prior, however, to petitioners filing of its Verified Protest/Opposition to the private
respondents Application for Exploration Permit, petitioners MPSA No. 153-2000-1 was
cancelled per DENR Memorandum Order (DMO) No. 2005-03. Petitioner moved for the
reconsideration of DMO No. 2005-03, which the DENR Secretary denied.
On 1 September 2005, the MGB issued EP No. 05-001 to private respondent.
In an Order dated 14 September 2005, the Panel of Arbitrators dismissed motu proprio the
Verified Protest/Opposition of petitioner,and among the grounds cited was, the the Panel of
Arbitrators had no authority/jurisdiction to cancel, deny and/or revoke EP No. 05-001 of
private respondent, the same being lodged with the MGB, the issuing authority;
ISSUE:
Whether the Panel of Arbitrators has jurisdiction to cancel, deny and/or revoke EP No. 05-001
issued by MGB to private respondent.
HELD:
YES.It is clear from the ruling of the Court in Olympic Mines and Celestial Nickel Mining that
the Panel of Arbitrators only has jurisdiction over adverse claims, conflicts, and oppositions
relating to applications for the grant of mineral rights, but not over cancellation of mineral
rights already granted and existing.
As to who has jurisdiction to cancel an existing exploration permit, Section 28 of DAO NO. 9640 explicitly provides:
Section 28. Cancellation of an Exploration Permit. The Director/concerned Regional
Director may cancel the Exploration Permit for failure of the Permittee to comply with any of
the requirements and for violation(s) of the terms and conditions under which the Permit is
issued. For renewed Exploration Permits, the Secretary upon the recommendation of the
Director shall cause the cancellation of the same.
According to Section 5 of DAO No. 96-40, "Director" means the Director of the MGB Central
Office, while "Regional Director" means the Regional Director of any MGB Regional Office. As
the authority to issue an Exploration Permit is vested in the MGB, then the same necessarily
includes the corollary power to revoke, withdraw or cancel the same.Indisputably, the
authority to deny, revoke, or cancel EP No. 05-001 of private respondent is already lodged
with the MGB, and not with the Panel of Arbitrators.

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LA BUGAL BLAAN TRIBAL ASSOCIATION INC., et. al. v. VICTOR O.

PYRO COPPER MINING CORPORATION, petitioner,

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