7/17/2019 La Bugal v Ramos Case Digest MR

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La Bugal v. DENRPetitioner: La Bugal B’laan Tribal Association, et al.Respondent: Victor O. Ramos, Sec. of DENR, et al.Date: December 1, !!" # $anganiban, %.

Summary: T&is case assails t&e constitutionalit' of RA ()" or t&e $&ili**ine +ining Act of 1)) an- its RR issue-b' t&e DENR. n a *re/ious case, S0 &el- RA ()" as in/ali- for aut&oriing ser/ice contract an- for allo2ing

management of mining o*erations b' foreign cor*orations, 2&ic& 2ere e3clu-e- from t&e 1)4( 0onstitution but 2eree3*ressl' allo2e- un-er t&e 1)(5 0onstitution. T&is is from an +R file- b' Res*on-ents. S0 &el- t&at t&e term6agreements in/ol/ing eit&er tec&nical or financial assistance7 un-er *ar. ", Sec. of Art 1 -oes not e3clu-e ot&ermo-es of assistance, li8e management assistance. Also, 9TAAs un-er t&e 1)4( 0onstitution are basicall' ser/icecontracts but 2it& safeguar-s. No2, foreign cor*orations are contractors 2&o *ro/i-e ca*ital, tec&nolog', tec&nical8no2:&o2, an- managerial e3*ertise in large scale e3*loration, -e/elo*ment, an- utiliation of minerals, *etroleum,an- ot&er mineral oils 2&ile t&e go/ernment is t&e o2ner 2&o e3ercises full control an- su*er/ision o/er t&e entireenter*rise. T&e grant of suc& ser/ice contracts is sub;ect to se/eral safeguar-s, among t&em< =1> t&at t&e ser/icecontract be crafte- in accor-ance 2it& a general la2 setting stan-ar- or uniform terms, con-itions an- re?uirements@=> t&e $resi-ent be t&e signator' for t&e go/ernment@ an- =5> t&e $resi-ent re*ort t&e e3ecute- agreement to0ongress 2it&in t&irt' -a's. 0ontrol an- su*er/ision b' t&e State means sufficient to enable it to -irect, restrain,regulate, an- go/ern t&e affairs of t&e e3tracti/e enter*rises, 2&ic& ma' be on a macro le/el, t&roug& t&eestablis&ment of *olicies, gui-elines, regulations, in-ustr' stan-ar-s, an- similar measures to restrain acti/ities-eeme- not -esirable or beneficial. T&e S0 conclu-e- t&at RA ()", its RR, an- t&e 9TAA entere- into 2it& +0$grant full control to t&e o/ernment o/er mining o*erations because go/ernment agencies are em*o2ere- to

a**ro/e or -isa**ro/e t&e /arious 2or8 *rograms an- ensure or monitor com*liance of t&e 0ontractor.

Facts:1. T&e $etition for $ro&ibition an- +an-amus before t&e 0ourt c&allenges t&e constitutionalit' of =1> RA ()"

=T&e $&ili**ine +ining Act of 1))>@ => its RR =DAO )C:"!>@ an- =5> t&e 9TAA e3ecute- b' t&e go/ernment2it& estern +ining 0or*oration =$&ili**ines>, nc. =+0$>.

. On %anuar' (, !!", t&e 0ourt en banc  *romulgate- its Decision granting t&e $etition an- -eclaring t&eunconstitutionalit' of certain *ro/isions of RA ()", DAO )C:"!, as 2ell as of t&e entire 9TAA e3ecute-bet2een t&e go/ernment an- +0$, mainl' on t&e fin-ing t&at 9TAAs are ser/ice contracts *ro&ibite- b't&e 1)4( 0onstitution.

a. T&e Decision struc8 -o2n t&e sub;ect 9TAA for being similar to ser/ice contracts, 2&ic&, t&oug&*ermitte- un-er t&e 1)(5 0onstitution, 2ere subse?uentl' -enounce- for being antit&etical to t&e*rinci*le of so/ereignt' o/er our natural resources, because t&e' allo2e- foreign control o/er t&ee3*loitation of our natural resources, to t&e *re;u-ice of t&e 9ili*ino nation.

Issue:1. &at is t&e *ro*er inter*retation of t&e *&rase 6agreements in/ol/ing eit&er tec&nical or financial assistance

containe- in *ar. ", Sec. of Art. of t&e 0onstitution

Held: HEREF!RE, t&e 0ourt RESOLVES to GRANT  t&e res*on-entsF an- t&e inter/enorsF +otions forReconsi-eration@ to REVERSE an- SET ASIDE t&is 0ourtFs %anuar' (, !!" Decision@ to DISMISS t&e $etition@ an-to issue t&is ne2 ;u-gment -eclaring CONSTITUTIONAL =1> Re*ublic Act No. ()" =t&e $&ili**ine +ining La2>, =>its m*lementing Rules an- Regulations containe- in DENR A-ministrati/e Or-er =DAO> No. )C"! :: insofar as t&e'relate to financial an- tec&nical assistance agreements referre- to in *aragra*& " of Section of Article of t&e0onstitution@ an- =5> t&e 9inancial an- Tec&nical Assistance Agreement =9TAA> -ate- +arc& 5!, 1)) e3ecute- b't&e go/ernment an- estern +ining 0or*oration $&ili**ines nc. =+0$>, e3ce*t Sections (.4 an- (.) of t&e sub;ect9TAA 2&ic& are &ereb' NVALDATED for being contrar' to *ublic *olic' an- for being grossl' -isa-/antageous tot&e go/ernment.Bac"grounder: The premise of the issue is the fact that MC!" at the time of the e#ecution of the $TAA" %as aforei&n'o%ne( corporation) The point is that un(er the *+,- Constitution" the &o.ernment %as a//o%e( to enter intoser.ice contracts %ith forei&n corporation for the e#p/oration" (e.e/opment" an( uti/i0ation of natura/ resources) No%"the *+1, Constitution states that forei&n corporations ma2 on/2 be in.o/.e( if it3s throu&h a&reements in.o/.in& eitherfinancia/ or technica/ assistance a&reements for the e#p/oitation of minera/s" petro/eum" an( other minera/ oi/s) The$TAA entere( into bet%een MC! an( the Go.ernment %as struc4 (o%n in the 5anuar2 Decision because the Court sai( that it %as 6ust /i4e a ser.ice contract" %hich it opine(" %as (isa//o%e( un(er the current Constitution) No% theCourt %i// comp/ete/2 re.erse its pronouncement for the fo//o%in& reasons) Note a/so the pen(in& the Reso/ution ofthis case" MC!" transferre( a// its shares to Sa&ittarius" Inc)" a (omestic corporation) 7ut Court sai( not moot)

Proper interpretation o# par. $% Sec. &% 'rt (&Verba Legis

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1. $irst , t&e -raftersF c&oice of 2or-s :: t&eir use of t&e *&rase a&reements # # # in.o/.in& either technica/ orfinancia/ assistance :: -oes not in-icate t&e intent to e#c/u(e ot&er mo-es of assistance. T&e -rafters o*te-to use in.o/.in&  2&en t&e' coul- &a/e sim*l' sai- a&reements for financia/ or technica/ assistance" if t&at2as t&eir intention to begin 2it&. n t&is case, t&e limitation 2oul- be /er' clear an- no furt&er -ebate 2oul-ensue. ntent to e3clu-e foreigners from t&e management of t&e enter*rises cannot be -efiniti/el' an-conclusi/el' establis&e- from t&e mere failure to carr' t&e same e3*ression or term o/er to t&e ne20onstitution, absent a more s*ecific, e3*licit an- une?ui/ocal statement to t&at effect.

ntent of t&e 9ramers1. $ertinent *ortions of t&e -eliberations of t&e members of t&e 0onstitutional 0ommission =0on0om>

conclusi/el' s&o2 t&at t&e' -iscusse- a&reements in.o/.in& either technica/ or financia/ assistance in t&esame brea-t& as ser.ice contracts an- use- t&e terms interc&angeabl'.

. As 2ritten b' t&e framers an- ratifie- an- a-o*te- b' t&e *eo*le, t&e 0onstitution allo2s t&e continue- useof ser/ice contracts 2it& foreign cor*orations :: as contractors 2&o 2oul- in/est in an- o*erate an- managee3tracti/e enter*rises, sub;ect to t&e full control an- su*er/ision of t&e State :: sans t&e abuses of t&e *astregime. T&e *ur*ose is clear< to -e/elo* an- utilie our mineral, *etroleum an- ot&er resources on a largescale for t&e imme-iate an- tangible benefit of t&e 9ili*ino *eo*le.

$TAAs are Ser.ice Contracts %ith Safe&uar(s1. 9rom t&e foregoing, 2e are im*elle- to conclu-e t&at t&e *&rase a&reements in.o/.in& either technica/ or

financia/ assistance" referre- to in *aragra*& ", are in fact ser.ice contracts) But unli8e t&ose of t&e 1)(5/ariet', t&e ne2 ones are bet2een foreign cor*orations acting as contractors on t&e one &an-@ an- on t&e

ot&er, t&e go/ernment as *rinci*al or Go2nerG of t&e 2or8s. n t&e ne2 ser/ice contracts, t&e foreigncontractors *ro/i-e ca*ital, tec&nolog' an- tec&nical 8no2:&o2, an- managerial e3*ertise in t&e creationan- o*eration of large:scale miningHe3tracti/e enter*rises@ an- t&e go/ernment, t&roug& its agencies=DENR, +B>, acti/el' e3ercises control an- su*er/ision o/er t&e entire o*eration.

. Suc& ser/ice contracts ma' be entere- into on/2 %ith respect to minera/s" petro/eum an( other minera/ oi/s.T&e grant t&ereof is sub;ect to se/eral safeguar-s, among 2&ic& are t&ese re?uirements<

a. T&e ser/ice contract s&all be crafte- in accor-ance 2it& a general la2 t&at 2ill set stan-ar- oruniform terms, con-itions an- re?uirements, *resumabl' to attain a certain uniformit' in *ro/isionsan- a/oi- t&e *ossible insertion of terms -isa-/antageous to t&e countr'.

b. T&e $resi-ent s&all be t&e signator' for t&e go/ernment because, su**ose-l' before an agreementis *resente- to t&e $resi-ent for signature, it 2ill &a/e been /ette- se/eral times o/er at -ifferentle/els to ensure t&at it conforms to la2 an- can 2it&stan- *ublic scrutin'.

c. it&in t&irt' -a's of t&e e3ecute- agreement, t&e $resi-ent s&all re*ort it to 0ongress to gi/e t&atbranc& of go/ernment an o**ortunit' to loo8 o/er t&e agreement an- inter*ose timel' ob;ections, ifan'.

U/timate Test8 State9s :Contro/: Determinati.e of Constitutiona/it2 1. G9ull control an- su*er/isionG cannot be ta8en literall' to mean t&at t&e State controls an-

su*er/ises e.er2thin& in.o/.e(" (o%n to the minutest (etai/s, an- ma8es a// (ecisions re?uire- in t&e miningo*erations. T&is straine- conce*t of control an- su*er/ision o/er t&e mining enter*rise 2oul- ren-erim*ossible t&e legitimate e3ercise b' t&e contractors of a reasonable -egree of management *rerogati/ean- aut&orit' necessar' an- in-is*ensable to t&eir *ro*er functioning.

. T&e conce*t of contro/  a-o*te- in Section of Article must be ta8en to mean less t&an -ictatorial, all:encom*assing control@ but ne/ert&eless sufficient to gi/e t&e State t&e *o2er to -irect, restrain, regulate an-go/ern t&e affairs of t&e e3tracti/e enter*rises. 0ontrol b' t&e State ma' be on a macro le/el, t&roug& t&eestablis&ment of *olicies, gui-elines, regulations, in-ustr' stan-ar-s an- similar measures t&at 2oul-enable t&e go/ernment to control t&e con-uct of affairs in /arious enter*rises an- restrain acti/ities -eeme-not -esirable or beneficial.

5. T&e en- in /ie2 is ensuring t&at t&ese enter*rises contribute to t&e economic -e/elo*ment an- general2elfare of t&e countr', conser/e t&e en/ironment, an- u*lift t&e 2ell:being of t&e affecte- local communities.Suc& a conce*t of control 2oul- be com*atible 2it& *ermitting t&e foreign contractor sufficient an-reasonable management aut&orit' o/er t&e enter*rise it in/este- in, in or-er to ensure t&at it is o*eratingefficientl' an- *rofitabl', to *rotect its in/estments an- to enable it to succee-.

R' )*$& and its IRR ena+le t,e -overnment to eercise #ull control and supervision1. T&e foregoing gamut of re?uirements, regulations, restrictions an- limitations im*ose- u*on t&e 9TAA

contractor b' t&e statute an- regulations easil' o/erturns *etitionersF contention. On t&e contrar', t&ego/ernment agencies concerne- are em*o2ere- to a**ro/e or -isa**ro/e :: &ence, to influence, -irect an-c&ange :: t&e /arious 2or8 *rograms an- t&e corres*on-ing minimum e3*en-iture commitments for eac& oft&e e3*loration, -e/elo*ment an- utiliation *&ases of t&e mining enter*rise.

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. Once t&ese *lans an- re*orts are a**ro/e-, t&e contractor is boun- to com*l' 2it& its commitments t&erein.9igures for mineral *ro-uction an- sales are regularl' monitore- an- sub;ecte- to go/ernment re/ie2, inor-er to ensure t&at t&e *ro-ucts an- b':*ro-ucts are -is*ose- of at t&e best *rices *ossible@ e/en co*ies of sales agreements &a/e to be submitte- to an- registere- 2it& +B. An- t&e contractor is man-ate- to o*enits boo8s of accounts an- recor-s for scrutin', so as to enable t&e State to -etermine if t&e go/ernments&are &as been full' *ai-.

5. T&e State ma' li8e2ise com*el t&e contractorFs com*liance 2it& man-ator' re?uirements on mine safet',

&ealt& an- en/ironmental *rotection, an- t&e use of anti:*ollution tec&nolog' an- facilities. +oreo/er, t&econtractor is also obligate- to assist in t&e -e/elo*ment of t&e mining communit' an- to *a' ro'alties to t&ein-igenous *eo*les concerne-.

". 0ancellation of t&e 9TAA ma' be t&e *enalt' for /iolation of an' of its terms an- con-itions an-Hornoncom*liance 2it& statutes or regulations. T&is general, all:aroun-, multi*ur*ose sanction is no triflingmatter, es*eciall' to a contractor 2&o ma' &a/e 'et to reco/er t&e tens or &un-re-s of millions of -ollarssun8 into a mining *ro;ect.

. Also, the MC! $TAA ta4en to&ether" far from constitutin& a surren(er of contro/ an( a &rant of beneficia/o%nership of minera/ resources to the contractor in ;uestion" besto2 u*on t&e State more t&an a-e?uatecontrol an- su*er/ision o/er t&e acti/ities of t&e contractor an- t&e enter*rise.

Bene#icial !/ners,ip1. One of t&e main reasons certain *ro/isions of RA ()" 2ere struc8 -o2n 2as t&e fin-ing mentione- in t&e

Decision t&at beneficial o2ners&i* of t&e mineral resources &a- been con/e'e- to t&e contractor. T&isfin-ing 2as base- on t&e un-erl'ing assum*tion, common to t&e sai- *ro/isions, t&at t&e foreign contractor

manages t&e mineral resources in t&e same 2a' t&at foreign contractors in ser/ice contracts use- to.. Beneficial o2ners&i* &as been -efine- as o2ners&i* recognie- b' la2 an- ca*able of being enforce- in

t&e courts at t&e suit of t&e beneficial o2ner. Blac8Fs La% Dictionar2 in-icates t&at t&e term is use- in t2osenses< first , to in-icate t&e interest of a beneficiar' in trust *ro*ert' =also calle- Ge?uitable o2ners&i*G>@an- secon( , to refer to t&e *o2er of a cor*orate s&are&ol-er to bu' or sell t&e s&ares, t&oug& t&es&are&ol-er is not registere- in t&e cor*orationFs boo8s as t&e o2ner. Isuall', beneficial o2ners&i* is-istinguis&e- from na8e- o2ners&i*, 2&ic& is t&e en;o'ment of all t&e benefits an- *ri/ileges of o2ners&i*,as against *ossession of t&e bare title to *ro*ert'.

5. An assi-uous e3amination of t&e +0$ 9TAA unco/ers no in-ication t&at it confers u*on +0$o2ners&i*, beneficial or ot&er2ise, of t&e mining *ro*ert' it is to -e/elo*, t&e minerals to be *ro-uce-, ort&e *rocee-s of t&eir sale, 2&ic& can be legall' asserte- an- enforce- as against t&e State.

". As *ublic res*on-ents correctl' *oint out, an' interest t&e contractor ma' &a/e in t&e *rocee-s of t&e miningo*eration is merel' t&e e?ui/alent of t&e consi-eration t&e go/ernment &as un-erta8en to *a' for itsser/ices. All la2ful contracts re?uire suc& mutual *restations, an- t&e +0$ 9TAA is no -ifferent. T&econtractor commits to *erform certain ser/ices for t&e go/ernment in res*ect of t&e mining o*eration, an- in

turn it is to be com*ensate- out of t&e net mining re/enues generate- from t&e sale of mineral *ro-ucts.&at 2oul- be ob;ectionable is a contractual *ro/ision t&at un-ul' benefits t&e contractor far in e3cess oft&e ser/ice ren-ere- or /alue -eli/ere-, if an', in e3c&ange t&erefor.

. On t&e contrar', DAO )):C, entitle- :Gui(e/ines Estab/ishin& the $isca/ Re&ime of $inancia/ or Technica/ Assistance A&reements:  aims to ensure an e?uitable s&aring of t&e benefits -eri/e- from mineral resources.T&ese benefits are to be e?uitabl' s&are- among t&e go/ernment =national an- local>, t&e 9TAA contractor,an- t&e affecte- communities. T&e *ur*ose is to ensure sustainable mineral resources -e/elo*ment@ an- afair, e?uitable, com*etiti/e an- stable in/estment regime for t&e large:scale e3*loration, -e/elo*ment an-commercial utiliation of minerals. The &enera/ frame%or4 or concept fo//o%e( in craftin& the fisca/ re&ime of the $TAA is base( on the princip/e that the &o.ernment e#pects rea/ contributions to the economic &ro%than( &enera/ %e/fare of the countr2" %hi/e the contractor e#pects a reasonab/e return on its in.estments inthe pro6ect) 

C. S*ecificall', un-er t&e fiscal regime, t&e go/ernmentFs e3*ectation is, inter a/ia" t&e recei*t of its s&are fromt&e ta3es an- fees normall' *ai- b' a mining enter*rise. On t&e ot&er &an-, t&e 9TAA contractor is grante-b' t&e go/ernment certain fiscal an- non:fiscal incenti/esC" to &el* su**ort t&e formerFs cas& flo2 -uring t&emost critical *&ase =cost reco/er'> an- to ma8e t&e $&ili**ines com*etiti/e 2it& ot&er mineral:*ro-ucingcountries. After t&e contractor &as reco/ere- its initial in/estment, it 2ill *a' all t&e normal ta3es an- feescom*rising t&e basic s&are of t&e go/ernment, *lus an a--itional s&are for t&e go/ernment base- on t&eo*tions an- formulae set fort& in DAO )):C.