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, (GF-WV), ENVIRONMENTAL 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 PARTNERSHIP 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. Marivic M.V.F. Leones Edgar Dl. Bernal Ingrid Rosalie L. Gorre & Emily L. Manuel for petitioners. Ma. Paz G. Luna for D. de Vera, et al. Magistrado A. Mendoza for KAISAHAN. The Solicitor General for public respondent. Mario C. Jalandoni for private respondent. SYNOPSIS The Petition for Prohibition and Mandamus before the Court challenges the constitutionality of (1) Republic Act No. [RA] 7942 (The Philippine Mining Act of 1995); (2) its implementing Rules and Regulations (DENR Administrative Order No. [DAO] 96-40); and (3) the Financial and Technical Assistance Agreement dated March 30, 1995, executed by the government with Western Mining Corporation (Philippines), Inc. (WMCP). As a background, the FTAA is for the exploration, development and commercial exploitation of the country's mineral deposits. At the time of execution of the subject FTAA in 1995, WMCP was 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." On Jan. 23, 2001, WMC sold all its shares in WMCP to Sagittarius Mines, Inc. (Sagittarius), a corporation organized under Philippine laws, 60% the equity of which is owned by Filipino citizens or Filipino-owned corporations and 40% by Indophil Resources, NL, an Australian company. WMCP was then renamed "Tampakan Mineral Resources Corporation." And now it claims that by virtue of the sale and transfer of shares, it has ceased to be connected in any way with WMC. On account of such sale and transfer of shares, the then DENR Secretary approved, by Order dated December 18, 2001, the transfer and registration of the subject FTAA from WMCP to Sagittarius (Tampakan). Lepanto Consolidated Mining Co., which was interested in acquiring the shares in WMCP, appealed this Order of the DENR Secretary, but the Office of the President, and subsequently, the Court of Appeals (CA), upheld said Order. On January 27, 2004, the Court en banc promulgated its Decision granting the Petition and declaring the unconstitutionality of certain provisions of RA 7942, DAO 96-40, as well as of the entire FTAA executed between the government and WMCP, mainly on the finding that FTAAs are service contracts prohibited by the 1987 Constitution. The Decision struck down the subject FTAA for being similar to service contracts, which, though permitted under the 1973 Constitution, were subsequently denounced for being antithetical to the principle of sovereignty over our natural resources, because they allowed foreign control over the exploitation of our natural resources, to the prejudice of the Filipino nation. SYLLABUS

1. REMEDIAL LAW; COURTS; MOOT CASE; CASE NOT RENDERED MOOT EITHER BY TRANSFER AND REGISTRATION OF THE FINANCIAL AND TECHNICAL ASSISTANCE AGREEMENT TO A FILIPINO-OWNED CORPORATION OR BY THE NON-ISSUANCE OF A TEMPORARY RESTRAINING ORDER OR A PRELIMINARY INJUNCTION. 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. 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. 2. CONSTITUTIONAL LAW; JUDICIARY; POWER OF 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. AHDaET 3. ID.; ID.; "JUDICIAL POWER", CONSTRUED; POWER OF JUDICIAL REVIEW LIMITED TO DETERMINATION OF ACTUAL CASES AND CONTROVERSIES. 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. An actual case or controversy means an existing case or controversy that is appropriate or ripe for determination, not conjectural or anticipatory, lest the decision of the court would amount to an advisory opinion. The power does not extend to hypothetical questions since any attempt at abstraction could only lead to dialectics and barren legal questions and to sterile conclusions unrelated to actualities. 4. REMEDIAL LAW; COURTS; "LOCUS STANDI", CONSTRUED. "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, alleging more than a generalized grievance. 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." Unless a person is injuriously affected in any of his constitutional rights by the operation of statute or ordinance, he has no standing. 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, as well as other residents of areas also affected by the mining activities of WMCP. 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" 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. SACTIH 5. ID.; ID.; ID.; PETITIONERS HAVE STANDING TO RAISE THE CONSTITUTIONALITY OF THE FINANCIAL AND TECHNICAL ASSISTANCE AGREEMENT AND TO ASSAIL THE VALIDITY OF EXECUTIVE ORDER NO. 279. 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. In other words, they contend that petitioners are not real parties in interest in an action for the annulment of contract. 6. ID.; ID.; ID.; WHERE THE CASE INVOLVES CONSTITUTIONAL QUESTIONS, THE ISSUE IS NOT WHETHER PETITIONERS ARE REAL PARTIES IN INTEREST, BUT WHETHER THEY HAVE LEGAL STANDING TO INSTITUTE THE SPECIAL CIVIL ACTION OF CERTIORARI AND MANDAMUS. 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. 7. CONSTITUTIONAL LAW; JUDICIAL REVIEW; ALTHOUGH R.A. NO. 7942 AND DAO NO. 96-40 WERE NOT IN FORCE WHEN THE FINANCIAL AND TECHNICAL ASSISTANCE AGREEMENT WAS ENTERED INTO, THE QUESTION AS TO THEIR VALIDITY IS RIPE FOR ADJUDICATION. 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. 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. TAaCED 8. ID.; ID.; CONSTITUTIONAL QUESTIONS, EVEN IF NOT RAISED AT THE EARLIEST OPPORTUNITY, CAN STILL BE RAISED LATER; RATIONALE. 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. 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. 9. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; PROHIBITION; CONCEPT; APPROPRIATE REMEDY TO

PREVENT FULFILLMENT OF OBLIGATIONS UNDER THE CONTRACT WHICH IS UNCONSTITUTIONAL AND VOID. Prohibition is a preventive remedy. It seeks a judgment ordering the defendant to desist from continuing with the commission of an act perceived to be illegal. 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. 10. COURTS; SUPREME COURT; HIERARCHY OF COURTS; NOT VIOLATED WITH FILING OF PETITION FOR PROHIBITION; EXCEPTIONAL AND COMPELLING CIRCUMSTANCES JUSTIFY DIRECT RESORT TO THE SUPREME COURT. The contention that the filing of this petition violated the rule on hierarchy of courts does not likewise lie. . . . 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. When the issues raised are of paramount importance to the public, this Court may brush aside technicalities of procedure. SDEHCc 11. LAND TITLES AND DEEDS; PUBLIC LANDS; REGALIAN DOCTRINE, BASIS AND COVERAGE. 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. The Regalian doctrine extends not only to land but also to "all natural wealth that may be found in the bowels of the earth. 12. ID.; ID.; ID.; DIFFERENCE BETWEEN THE REGALIAN DOCTRINE AND THE AMERICAN SYSTEM. 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. 13. ID.; ID.; CONCESSION SYSTEM, CONSTRUED. Section 21 [Phil. Bill of 1902] also made possible the concession (frequently styled "permit", "license" or "lease") system. 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.). Under the concession system, the concessionaire makes a direct equity investment for the purpose of exploiting a particular natural resource within a given area. 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. 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. Later statutory enactments by the legislative bodies set up in the Philippines adopted the contractual framework of the concession. For instance, Act No. 2932, 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, approved on May 14, 1917, which provided for the leasing and development of coal lands in the Philippines, both utilized the concession system. cADTSH 14. CONSTITUTIONAL LAW; 1935 CONSTITUTION; ADOPTED THE REGALIAN DOCTRINE. 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. 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. 15. ID.; PRESIDENTIAL DECREE NO. 87, THE OIL EXPLORATION AND DEVELOPMENT ACT OF 1972; SERVICE CONTRACTS, CONSTRUED. The promulgation on December 31, 1972 of Presidential Decree No. 87, 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." 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. 16. ID.; ID.; ID.; SERVICE CONTRACT WAS BASICALLY A CONCESSION REGIME. Ostensibly, the service contract system had certain advantages over the concession regime. 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. 17. ID.; 1987 CONSTITUTION; ARTICLE XII, SECTION 2, RETAINED THE REGALIAN DOCTRINE; ALIENATION OF NATURAL RESOURCES, EXCEPT AGRICULTURAL LANDS, PROHIBITED. 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. IHEaAc 18. ID.; ID.; PUBLIC LANDS; UTILIZATION OF INALIENABLE LANDS OF PUBLIC DOMAIN THROUGH LICENSE, CONCESSION OR LEASE, NO LONGER ALLOWED UNDER THE 1987 CONSTITUTION. 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. 19. ID.; ID.; ID.; LIMITATIONS OR CONDITIONS TO AGREEMENTS REGARDING EXPLORATION, DEVELOPMENT AND UTILIZATION OF NATURAL RESOURCES BY FOREIGNOWNED CORPORATIONS. 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 "largescale usually refers to very capital-intensive activities." 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. 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. CSaIAc 20. ID.; ID.; ID.; DIFFERENT MODES BY WHICH THE STATE UNDERTAKES 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: (1) The State may directly undertake such activities. (2) The State may enter into co-production, joint venture or productionsharing 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. 21. ID.; ID.; FINANCIAL AND TECHNICAL ASSISTANCE AGREEMENT (FTAA), CONSTRUED. 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." 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. 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) is deemed a "qualified person." 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. "Large-scale" under R.A. No. 7942 is determined by the size of the contract area, as opposed to the amount invested (US S50,000,000.00), which was the standard under E.O. 279. ECHSDc 22. STATUTES; EXECUTIVE ORDER NO. 200; EFFECTIVITY; APPLIES ONLY WHEN A STATUTE DOES NOT PROVIDE FOR ITS OWN DATE OF EFFECTIVITY. 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. 23. ID.; ID.; PUBLICATION THEREOF IS MANDATORY. What is mandatory under E.O. No. 200, and what due process requires, as this Court held in Taada v. Tuvera, 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. 24. ID.; ID.; EFFECTIVITY; WHILE THE EFFECTIVITY OF EXECUTIVE ORDER NO. 279 DOES NOT REQUIRE PUBLICATION, IT IS NOT A GROUND FOR ITS INVALIDATION; EXECUTIVE ORDER NO. 200 WHICH PROVIDES FOR PUBLICATION HAS SUPPLETORY APPLICATION. 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. Hence, the due process clause, 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 Gazette on August 3, 1987. 25. ID.; ID.; ID.; EXECUTIVE ORDER NO. 279 BECAME EFFECTIVE IMMEDIATELY UPON ITS PUBLICATION IN THE OFFICIAL GAZETTE ON AUGUST 3, 1987 AND A VALIDLY ENACTED STATUTE. 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. 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. aEHAIS 26. STATUTORY CONSTRUCTION; CONSTITUTIONS; IN THE INTERPRETATION OF CONSTITUTIONS, THE INSTRUMENT MUST BE SO CONSTRUED AS TO GIVE EFFECT TO THE INTENTION OF THE PEOPLE WHO ADOPTED IT. 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. 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. 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. 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. 27. CONSTITUTIONAL LAW; 1987 CONSTITUTION; ALLOWS ONLY TECHNICAL OR FINANCIAL ASSISTANCE; NO LONGER "MANAGEMENT OR OTHER FORMS OF ASSISTANCE." 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. 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. HESIcT 28. ID.; ID.; PHRASE "SERVICE CONTRACTS", DELETED IN THE 1987 CONSTITUTION; NOT SYNONYMOUS TO TECHNICAL OR FINANCIAL ASSISTANCE AGREEMENTS. 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. 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. As the following question of Commissioner Quexada and Commissioner Villegas' answer shows,

the drafters intended to do away with service contracts which were used to circumvent the capitalization (60%-40%) requirement. 29. ID.; ID.; CONSTITUTIONAL PROVISION ALLOWING THE PRESIDENT TO ENTER INTO FINANCIAL OR TECHNICAL ASSISTANCE AGREEMENTS WITH FOREIGNOWNED CORPORATIONS IS AN EXCEPTION TO THE RULE THAT PARTICIPATION IN THE NATION'S NATURAL RESOURCES IS RESERVED EXCLUSIVELY TO FILIPINOS. 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." 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." 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. cAaDHT 30. ID.; ID.; R.A. NO. 7942 WHICH AUTHORIZES SERVICE CONTRACTS IS INVALID; WHILE THE STATUTE EMPLOYS THE PHRASE "FINANCIAL AND TECHNICAL AGREEMENTS" IN ACCORDANCE WITH THE 1987 CONSTITUTION, THESE AGREEMENTS ARE ACTUALLY SERVICE CONTRACTS THAT GRANT BENEFICIAL OWNERSHIP TO FOREIGN CONTRACTORS CONTRARY TO THE FUNDAMENTAL LAW. 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. 31. ID.; ID.; ID.; R.A. 7942 PERMITS A CIRCUMVENTION OF THE CONSTITUTIONALLY ORDAINED 60%-40% CAPITALIZATION REQUIREMENT FOR CORPORATIONS OR ASSOCIATIONS ENGAGED IN THE EXPLOITATION, DEVELOPMENT AND UTILIZATION OF THE NATURAL RESOURCES. 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. 32. STATUTORY CONSTRUCTION; WHEN SOME PARTS OF A STATUTE ARE UNCONSTITUTIONAL, ALL THE PROVISIONS WHICH ARE DEPENDENT, CONDITIONAL OR CONNECTED, MUST FALL WITH THEM. 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. cEaACD 33. CONSTITUTIONAL LAW; 1987 CONSTITUTION; SERVICE CONTRACTS; THE FINANCIAL AND TECHNICAL ASSISTANCE AGREEMENT OF WESTERN MINING PHILIPPINES, INC., IS A SERVICE CONTRACT; CASE AT BAR. 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 mineral products and by-products thereof that may be produced from the Contract Area." 34. ID.; ID.; CONTRACTUAL STIPULATIONS WHICH GRANT FOREIGN CORPORATION BENEFICIAL OWNERSHIP OVER NATURAL RESOURCES THAT PROPERLY BELONG TO THE STATE AND ARE INTENDED FOR THE BENEFIT OF ITS CITIZENS ARE ABHORRENT TO THE 1987 CONSTITUTION. 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," and to "furnish all materials, labour, equipment and other installations that may be required for carrying on all Mining Operations." 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. 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. HCEcAa 35. ID.; ID.; INVALIDATION OF THE FINANCIAL AND TECHNICAL ASSISTANCE AGREEMENT DOES NOT CONSTITUTE BREACH OF THE TREATY ON THE PROMOTION AND PROTECTION OF INVESTMENTS BETWEEN THE PHILIPPINE AND AUSTRALIAN GOVERNMENTS. 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 sent 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. The equal protection clause 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.

36. STATUTORY CONSTRUCTION; WORDS "EITHER/OR" SHOULD NOT BE LITERALLY INTERPRETED AS IT WOULD RESULT IN ABSURD OR UNREASONABLE CONSEQUENCES. 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. 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. 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. That is a strong argument against its adoption. Accordingly, petitioners' interpretation must be rejected. aIcHSC VITUG, J., separate opinion: 1. CONSTITUTIONAL LAW; SERVICE CONTRACTS; DECLARATIONS OF CONCOM COMMISSIONERS DO NOT MEAN THAT THE GOVERNMENT MAY NO LONGER ENTER INTO SERVICE CONTRACTS WITH FOREIGN ENTITIES; FRAMERS OF CHARTER DID NOT INTEND TO LIMIT THE CONTRACTS WHICH THE PRESIDENT MAY ENTER INTO, TO MERE "AGREEMENTS FOR FINANCIAL AND TECHNICAL ASSISTANCE." The majority would cite the emphatic statements of Commissioners Villegas and Davide that the country's natural resources are exclusively reserved for Filipino citizens and that, according to Commissioner Villegas, "the deletion of the phrase 'service contracts' (is the) 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." These declarations do not necessarily mean that the Government may no longer enter into service contracts with foreign entities. In order to uphold and strengthen the national policy of preserving and developing the country's natural resources exclusively for the Filipino people, the present Constitution indeed has provided for safeguards to prevent the execution of service contracts of the old regime, but not of service contracts per se. It could not have been the object of the framers of the Charter to limit the contracts which the President may enter into, to mere "agreements for financial and technical assistance." One would take it that the usual terms and conditions recognized and stipulated in agreements of such nature have been contemplated. Basically, the financier and the owner of know-how would understandably satisfy itself with the proper implementation and the profitability of the project. It would be abnormal for the financier and owner of the know-how not to assure itself that all the activities needed to bring the project into fruition are properly implemented, attended to, and carried out. Needless to say, no foreign investor would readily lend financial or technical assistance without the proper incentives, including fair returns, therefor. 2. ID.; CONTRACTS; THE FUNDAMENTAL LAW IS DEEMED WRITTEN IN EVERY CONTRACT; THE PROVISIONS OF THE FOREIGN AND TECHNICAL ASSISTANCE AGREEMENT ENTERED INTO BY THE GOVERNMENT AND THE FOREIGN CORPORATION MUST

BE READ IN CONFORMITY WITH ARTICLE XII, SECTION 2, 1987 CONSTITUTION. The fundamental law is deemed written in every contract. The FTAA entered into by the government and WMCP recognizes this vital principle. The assailed contract or its provisions must then be read in conformity with abovementioned constitutional mandate. Hence, Section 10.2 (a) of the FTAA, for instance, which states that "the Contractor shall have the exclusive right to explore for, exploit, utilize, process, market, export and dispose of all minerals and products and by-products thereof that may be derived or produced from the Contract Area and to otherwise conduct Mining Operations in the Contract Area in accordance with the terms and conditions hereof," must be taken to mean that the foregoing rights are to be exercised by WMCP for and in behalf of the State and that WMCP, as the Contractor, would be bound to carry out the terms and conditions of the agreement acting for and in behalf of the State. In exchange for the financial and technical assistance, inclusive of its services, the Contractor enjoys an exclusivity of the contract and a corresponding compensation therefor. ASTcEa PANGANIBAN, J., separate opinion: 1. CONSTITUTIONAL LAW; JUDICIARY; POWER OF JUDICIAL REVIEW; SUPREME COURT DOES NOT DECIDE CONSTITUTIONAL ISSUES UNLESS THEY ARE THE VERY LIS MOTA OF THE CASE. Furthermore, there being no more justiciable controversy, the plea to nullify the Mining Law has become a virtual petition for declaratory relief, over which the Supreme Court has no original jurisdiction. At bottom, I rely on the well-settled doctrine that this Court does not decide constitutional issues, unless they are the very lis mota of the case. 2. CONSTITUTIONAL LAW; ARTICLE XII, SEC. 2, 1987 CONSTITUTION; USE OF THE PHRASE "AGREEMENTS . . . INVOLVING . . . TECHNICAL OR FINANCIAL ASSISTANCE" DOES NOT INDICATE THE INTENT TO EXCLUDE OTHER MODES OF ASSISTANCE BUT INCLUDES OTHER ACTIVITIES. First, the drafters' choice of words their use of the phrase "agreements . . . involving . . . technical or financial assistance" does not absolutely indicate the intent to exclude other modes of assistance. Rather, the phrase signifies the possibility of the inclusion of other activities, provided they bear some reasonable relationship to and compatibility with financial or technical assistance. 3. ID.; ID.; SERVICE CONTRACTS; RECOGNIZED AND ALLOWED UNDER THE PRESENT CONSTITUTION SUBJECT TO SEVERAL RESTRICTIONS AND MODIFICATIONS AIMED AT AVOIDING PITFALLS OF THE PAST. Second, I believe the foregoing position is supported by the fact that our present Constitution still recognizes and allows service contracts (and has not rendered them taboo), albeit subject to several restrictions and modifications aimed at avoiding the pitfalls of the past. Some excerpts from the deliberations of the Constitutional Commission (Concom), showed that its members discussed "technical or financial agreements" in the same breath as "service contracts" and used the terms interchangeably. aCHDAE 4. ID.; ID.; ID.; TECHNICAL AND FINANCIAL ASSISTANCE AGREEMENTS WERE UNDERSTOOD BY THE DELEGATES TO INCLUDE SERVICE CONTRACTS DULY MODIFIED TO PREVENT ABUSES. In any event, it would

appear that the members of the Concom actually had in mind the Marcos-era service contracts that they were familiar with (but which they duly modified and restricted so as to prevent abuses), when they were crafting and polishing the provisions dealing with financial and/or technical assistance agreements. These provisions ultimately became the fourth and the fifth paragraphs of Section 2 of Article XII of the 1987 Constitution. Put differently, "technical and financial assistance agreements" were understood by the delegates to include service contracts duly modified to prevent abuses. 5. ID.; ID.; ID.; CONCOM DRAFTERS REFER TO SERVICE CONTRACTS THAT MIGHT BE GIVEN TO FOREIGN-OWNED CORPORATIONS AS EXCEPTIONS TO THE GENERAL PRINCIPLE OF FILIPINO CONTROL OF THE ECONOMY. I respectfully submit that the statements of Commissioner Jose Nolledo, quoted above, are especially pertinent, since they refer specifically to service contracts in favor of aliens. From his perspective, it is clear to me that the Concom discussions in their entirety had to do with service contracts that might be given to foreign-owned corporations as exceptions to the general principle of Filipino control of the economy. 6. ID.; ID.; AGREEMENTS INVOLVING TECHNICAL OR FINANCIAL ASSISTANCE INCLUDE MANAGEMENT AND OTHER FORMS OF ASSISTANCE. Likewise, technical assistance, particularly in certain industries like mining and oil exploration, would likely be from the industry's leading players. It may involve the training of personnel and some form of supervision and oversight with respect to the correct and proper implementation of the technical assistance. The purpose is to ensure that the technical assistance rendered will not go to waste, and that the lender's business reputation and successful track record in the industry will be adequately safeguarded. Thus the technical assistance arrangements often necessarily include interface with the management process itself. ATDHSC DECISION CARPIO-MORALES, J p: 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. TAcSCH On July 25, 1987, then President Corazon C. Aquino issued Executive Order (E.O.) No. 279 6 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 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/transfer 11 and withdrawal, 12 and fixes their terms. 13 Similar provisions govern financial or technical assistance agreements. 14 The law prescribes the qualifications of contractors 15 and grants them certain rights, including timber, 16 water 17 and easement 18 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 quarry 23 and other 24 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. 96-40, 35 giving the DENR fifteen days from receipt 36 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 . . . in signing and promulgating DENR Administrative Order No. 9640 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 . . . in signing and promulgating DENR Administrative Order No. 9640 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 . . . in signing and promulgating DENR Administrative Order No. 9640 implementing Republic Act No. 7942, the latter being unconstitutional in that it violates Sec. 1, Art. III of the Constitution; IV . . . in signing and promulgating DENR Administrative Order No. 9640 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 . . . in signing and promulgating DENR Administrative Order No. 9640 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 . . . in signing and promulgating DENR Administrative Order No. 9640 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 . . . 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. cTSHaE 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 Filipinoowned 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 review 51 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 questions 62 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 . . . . "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].) DIcSHE 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. . . . 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 . . . 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

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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 to 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 . . .. 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 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. caSDCA 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.

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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 on 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 jurisprudence 90 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. . . . . xxx xxx xxx.

The discovery of minerals in the ground by one who has a valid mineral location, perfect his claim and his location, not only against third persons but also against the Government. . . .. [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

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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 limit of the grant. AaSIET 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. 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.

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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 for 116 or develop 117 petroleum within specified areas. Concessions may be granted only to duly qualified persons 118 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 may be required by the Secretary of Agriculture and Natural Resources, including reports of geological and geophysical examinations, as well as production reports. 125 Exploration 126 and exploitation 127 concessionaires were also required to submit work programs. 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. HCSEIT 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: . . . 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 in 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

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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 within 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 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.

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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 knowhow 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. aSDHCT 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. 704 170 (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. 705 172 (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

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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 capital-intensive activities." 183 Third, the natural resources subject of the activities is restricted to minerals, petroleum and other mineral oils, the intent being to limit service contracts to those areas where Filipino capital may not be sufficient. 184 Fourth, consistency with the provisions of statute. The agreements must be in accordance with the terms and conditions provided by law. Fifth, Section 2 prescribes certain standards for entering into such agreements. The agreements must be based on real contributions to economic growth and general welfare of the country. Sixth, the agreements must contain rudimentary stipulations for the promotion of the development and use of local scientific and technical resources.

Seventh, the notification requirement. The President shall notify Congress of every financial or technical assistance agreement entered into within thirty days from its execution. DcaCSE 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 natural resources, including renewal applications and applications for approval of operating agreements and mining service contracts, shall be accepted and processed and may be approved . . .. [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

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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. 7076 189 (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 contractor 192 the exclusive right to conduct mining operations within a contract area 193 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's 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 CA 202 or JVA 203 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 to 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 . . .. 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.] TCHEDA 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.

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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 15day 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 Gazette 220 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

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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. . . . 231 [Emphasis supplied.] xxx xxx xxx.

MR. GARCIA. Thank you. I vote no. . . .. 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 xxx xxx

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 has been introduced and this, of

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 or 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. TAIaHE xxx xxx xxx.

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.] xxx xxx xxx.

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

20

course can be refined is found in Section 3, lines 25 to 30, where Congress will have to concur with the President on any agreement entered into between a foreign-owned corporation and the government involving technical or financial assistance for large-scale exploration, development and utilization of natural resources. 237 [Emphasis supplied.] In a subsequent discussion, Commissioner Villegas allayed the fears of Commissioner Quesada regarding the participation of foreign interests in Philippine natural resources, which was supposed to be restricted to Filipinos. MS. QUESADA. Another point of clarification is the phrase "and utilization of natural resources shall be under the full control and supervision of the State." In the 1973 Constitution, this was limited to citizens of the Philippines; but it was removed and substituted by "shall be under the full control and supervision of the State." Was the concept changed so that these particular resources would be limited to citizens of the Philippines? Or would these resources only be under the full control and supervision of the State; meaning, noncitizens would have access to these natural resources? Is that the understanding? MR. VILLEGAS. No, Mr. Vice-President, if the Commissioner reads the next sentence, it states: Such activities may be directly undertaken by the State, or it may enter into co-production, joint venture, production-sharing agreements with Filipino citizens. So we are still limiting it only to Filipino citizens. xxx xxx xxx.

that have to be determined by law with the concurrence of Congress. So, it is very restrictive. If the Commissioner will remember, this removes the possibility for service contracts which we said yesterday were avenues used in the previous regime to go around the 60-40 requirement. 238 [Emphasis supplied.] The present Chief Justice, then a member of the CONCOM, also referred to this limitation in scope in proposing an amendment to the 60-40 requirement: MR. DAVIDE. May I be allowed to explain the proposal? MR. MAAMBONG. Subject to the 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. aCITEH 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 persuasive 240 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. . . ..

MS. QUESADA. Going back to Section 3, the section suggest that: The exploration, development, and utilization of natural resources . . . may be directly undertaken by the State, or it may enter into coproduction, joint venture, production-sharing agreements 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

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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: PROPOSED RESOLUTION NO. 496 DRAFT OF THE UP THE LAW CONSTITUTION 1987 CONSTITUTION PROJECT CONSTITUTIONAL OF THE ARTICLE XII OF

the State. With the exception all other natural resources shall State. With the exception of of agricultural lands, all other not be alienated. The exploration, agricultural lands, all other natural resources shall not be development, and utilization of natural resources shall not be alienated. The exploration, natural resources shall be under alienated. The exploration, development and utilization the full control and supervision development, and utilization of of natural resources shall be of the State. Such activities may natural resources shall be under under the full control and control and supervision be directly undertaken by the the full

supervision of the State. Such State, or it may enter into State. The State may activities may be directly undertake such activities

of the

co-production, joint venture, directly

undertaken by the state, or production-sharing agreements or it may enter into coit may enter into co-production, with Filipino citizens or production, joint venture, or joint venture, production corporations or associations at production-sharing agreements sharing agreements with Filipino citizens, or SEC. 3. All lands least sixty per cent of whose with

COMMISSION

of the

SEC. 1. All lands of the SEC. 2. All lands of the

Filipino citizens or corporations voting stock or controlling corporations or associations at or associations sixty per cent interest is owned by such sixty per centum of whose least

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

of whose voting stock or citizens. Such agreements shall capital is owned by such controlling interest is owned be for a period of twenty-five citizens. Such agreements may by such citizens for a period years, renewable for not more be for a period not exceeding of not more than twenty-five than twenty-five years, and five years, renewable for twenty-

years, renewable for not more under such term and conditions not more than twenty-five years, than twenty-five years and as may be provided by law. In and under such terms and

Philippines are owned by exception of agricultural lands, resources are owned by the

22

under such terms and cases of water rights for conditions as may be provided conditions as may be provided irrigation, water supply, fisheries by law. In case of water rights by law. In case as to water or industrial uses other than the for irrigation, water, supply, rights for irrigation, water development for water power, fisheries, or industrial uses supply, fisheries, or industrial beneficial use may be the than the development of uses other than the measure and limit of the grant. power, beneficial use may development of water power, be the measure and limit of the beneficial use may be the grant. measure and limit of the grant. The State shall protect the nations marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens. The National Assembly may The Congress may by law allow The Congress may, by by law allow small scale small-scale utilization of natural law, allow small-scale utilization utilization of natural resources resources by Filipino citizens, of natural resources by Filipino by Filipino citizens.as well as cooperative fish cooperative citizens, as well as other

the

The National Assembly, The President may

The President with

may by two-thirds vote of all concurrence of Congress, by enter into agreements with its members by special law owned corporations provide the terms and either technical or conditions under which a assistance for largeforeign-owned corporation exploration, development, special law, shall provide the foreign-

terms and conditions under

involving

which a foreign-owned

financial

water

corporation may enter into

scale

may enter into agreements agreements with the government and utilization of minerals, with the government involving involving either technical or petroleum, and other mineral either technical or financial according to the general financial assistance for large- oils

assistance for large-scale scale exploration, development, terms and conditions provided exploration, development, or and utilization of natural based on real by law,

utilization of natural resources. resources. [Emphasis supplied.] contributions to the economic [Emphasis supplied.] growth and general welfare of

the country. In such agreements,

the State shall promote the

development and use of local

scientific and technical

farming in rivers, lakes, bays, fish farming, with priority to and lagoons. subsistence fishermen and fish-

resources. [Emphasis supplied.] The President shall notify the Congress of every contract entered into in accordance with this

workers in rivers, lakes, bays,

and lagoons.

provision, within thirty days

23

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) aSEDHC 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 . . .. 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: . . . 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 or 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, productionsharing could still be utilized and adopted without violating constitutional provisions. In other words, we can adopt contract forms which recognize and assert our sovereignty and ownership over natural resources, and where the foreign entity is just a 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:

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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 constitution the 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 foreign-owned corporation, in cases of large-scale exploration, development, or utilization of natural resources through agreements involving either technical or financial assistance only. . . .. HAEIac 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."

25

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. 1990 257 of the Secretary of Justice, expressing the view that a financial or technical assistance agreement "is no different in concept" from the service contract allowed under the 1973 Constitution. This Court is not, however, bound by this interpretation. When an administrative or executive agency renders an opinion or issues a statement of policy, it merely interprets a pre-existing law; and the administrative interpretation of the law is at best advisory, for it is the courts that finally determine what the law means. 258 In any case, the constitutional provision allowing the President to enter into FTAAs with 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, trenching, 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 hiring, 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 rules 272 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

26

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 largescale 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. cAHDES 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 lands by surface owners and/or occupants thereof when prospecting, exploring and exploiting for minerals therein; xxx xxx xxx

27

(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 xxx xxx

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 clause 302 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: . . . such a theory of petitioners would compel the government (through the President) to enter into contract with two (2) foreignowned 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

(l) 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; xxx xxx xxx. 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. DSATCI . . . . 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

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is definitely not sanctioned under the canons of constitutional construction. 304 [Emphasis 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) (a) (b) (c) (d) (e) (f) The following provisions of Republic Act No. 7942: The proviso in Section 3 (aq), Section 23, Section 33 to 41, Section 56, The second and third paragraphs of Section 81, and Section 90.

96-40) issued by the Department of Environment and Natural Resources, and the Financial and Technical Assistance Agreement (FTAA) entered into pursuant to Executive Order (EO) No. 279, by the Republic of the Philippines and Western Mining Corporation (Philippines), Inc. (WMCP). WMCP is owned by WMC Resources International Pty., Ltd., a wholly owned subsidiary of Western Mining Corporation Holdings Limited, a publicly-listed major Australian mining and exploration company. HEDaTA The premise for the constitutional challenge is Section 2, Article XII, of the 1987 Constitution which provides: "All lands of public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wild life, 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. . . .. "xxx xxx xxx.

(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. aTCAcI 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., join J. Panganiban's separate opinion. Azcuna, J., took no part, one of the parties was a client. Separate Opinions VITUG, J .: Petitioners, in the instant petition for prohibition and mandamus, assail the constitutionality of Republic Act No. 7942, otherwise also known as the Philippine Mining Act of 1995, as well as its Implementing Rules and Regulations (Administrative Order [DAO]

"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." After a careful reading of the provisions of Republic Act No. 7942, I join the majority in invalidating the following portions of the law: a) Section 3 (aq) which considers a foreign-owned corporation itself qualified, not only to enter into financial or technical assistance agreements, but also for an exploration or mineral processing permit; b) Section 35 (g), (l), (m) which state the rights and obligations of a foreign-owned corporations pursuant to its "mining operations"; and c) Section 56 which provides that foreign-owned or controlled corporations are eligible to be granted a mineral processing permit. The ponencia, so eloquently expressed and so well ratiocinated, would also say that the Philippine Mining Act and its implementing rules or decrees contain provisions which, in effect, authorize the Government to enter into service contracts with foreign-owned corporations, thereby granting beneficial ownership over natural resources to foreign contractors in violation of the fundamental law. Thus, it would strike down Sections 3 (aq), 23, 33 to 41, 56, 81, and 90 of the statute and related sections in DAO 96-40. The FTAA executed between the Government and WMCP is being invalidated for being in the nature of a service contract. The ponencia posits that the adoption of the terms "agreements . . . involving either technical or financial assistance" in the 1987 Constitution, in lieu of "service

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contracts" found in the 1973 Charter, reflects the intention of the framers to disallow the execution of service contracts with foreign entities for the exploration, development, exploitation and utilization of the country's natural resources. SEHaDI The proposition is one that I, most respectfully, cannot fully share. The deliberations of the Constitutional Commission do not disclose, in any evident manner, such intention on the part of the drafters, viz: "MR. JAMIR. Yes, Madam President. With respect to the second paragraph of Section 3, my amendment by substitution reads: THE PRESIDENT MAY ENTER INTO AGREEMENTS WITH FOREIGN-OWNED CORPORATIONS INVOLVING EITHER TECHNICAL OR FINANCIAL ASSISTANCE FOR LARGESCALE EXPLORATION, DEVELOPMENT AND UTILIZATION OF NATURAL RESOURCES ACCORDING TO THE TERMS AND CONDITIONS PROVIDED BY LAW. "xxx "MR. SUAREZ. Thank you, Madam President. Will Commissioner Jamir answer a few clarificatory questions? "MR. JAMIR. Yes, Madam President. "MR. SUAREZ. This particular portion of the section has reference to what was popularly known before as service contracts, among other things; is that correct? "MR. JAMIR. Yes, Madam President. "MR. SUAREZ. As it is formulated, the President may enter into service contracts but subject to the guidelines that may be promulgated by Congress? "MR. JAMIR. That is correct. "MR. SUAREZ. Therefore, the aspect of negotiation and consummation will fall on the President, not upon Congress? "MR. JAMIR. That is also correct, Madam President. "MR. SUAREZ. xxx xxx

Except that all of these contracts, service or otherwise must be made strictly in accordance with guidelines prescribed by Congress? "MR. JAMIR. That is also correct." 1 The significance of the change in the terminology is clarified in the following exchanges during the deliberations: DaEATc "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." 2 The Constitutional Commission has also agreed to include the additional requirement that said agreements must be "based on real contributions to the economic growth and general welfare of the country." Upon the suggestion of then Commissioner Davide, the scope of "these service contracts" has likewise been limited to largescale exploration, development, and utilization of minerals, petroleum, and other mineral oils. The then Commissioner, explains: "And so, we believe that we should really, if we want to grant service contracts at all, limit the same to only those particular areas where Filipino capital may not be sufficient . . .." 3 The majority would cite the emphatic statements of Commissioners Villegas and Davide that the country's natural resources are exclusively reserved for Filipino citizens 4 and that, according to Commissioner Villegas, "the deletion of the phrase 'service contracts' (is the) 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". 5 These declarations do not necessarily mean that the Government may no longer enter into service contracts with foreign entities. In order to uphold and strengthen the national policy of preserving and developing the country's natural resources exclusively for the Filipino people, the present Constitution indeed has provided for safeguards to prevent the execution of service contracts of the old regime, but not of service contracts per se. It could not have been the object of the framers of the Charter to limit the contracts which the President may enter into, to mere "agreements for financial and technical assistance". One would take it that the usual terms and conditions recognized and stipulated in agreements of such nature have been contemplated. Basically, the financier and the owner of know-how would understandably satisfy itself with the proper implementation

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and the profitability of the project. It would be abnormal for the financier and owner of the know-how not to assure itself that all the activities needed to bring the project into fruition are properly implemented, attended to, and carried out. Needless to say, no foreign investor would readily lend financial or technical assistance without the proper incentives, including fair returns, therefor. TcHCDE The Constitution has not prohibited the State from itself exploring, developing, or utilizing the country's natural resources, and, for this purpose, it may, I submit, enter into the necessary agreements with individuals or entities in the pursuit of a feasible operation. The fundamental law is deemed written in every contract. The FTAA entered into by the government and WMCP recognizes this vital principle. Thus, two of the agreement's whereas clauses provide: "WHEREAS, the 1987 Constitution of the Republic of the Philippines provides in Article XII, Section 2 that all lands of the public domain, waters, minerals, coal, petroleum, and other natural resources are owned by the State, and that the exploration, development and utilization of natural resources shall be under the full control and supervision of the State; and "WHEREAS, the Constitution further provides that the Government may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large scale exploration, development and utilization of minerals." The assailed contract or its provisions must then be read in conformity with abovementioned constitutional mandate. Hence, Section 10.2 (a) of the FTAA, for instance, which states that "the Contractor shall have the exclusive right to explore for, exploit, utilize, process, market, export and dispose of all minerals and products and by-products thereof that may be derived or produced from the Contract Area and to otherwise conduct Mining Operations in the Contract Area in accordance with the terms and conditions hereof", must be taken to mean that the foregoing rights are to be exercised by WMCP for and in behalf of the State and that WMCP, as the Contractor, would be bound to carry out the terms and conditions of the agreement acting for and in behalf of the State. In exchange for the financial and technical assistance, inclusive of its services, the Contractor enjoys an exclusivity of the contract and a corresponding compensation therefor. Except as so expressed elsewhere above, I see, therefore, no constitutional impairment in the enactment of Republic Act No. 7942, as well as its implementing rules, and in the execution by the Government of the Financial and Technical Agreement with WMCP; and I so vote accordingly. Just a word. While I cannot ignore an impression of the business community that the Court is wont, at times, to interfere with the economic decisions of Congress and the government's economic managers, I must hasten to add, however, that in so voting as above, I have not been unduly overwhelmed by that perception. Quite the contrary, the Court has always proceeded with great caution, such as now, in resolving cases that could inextricably involve policy questions thought to be best left to the technical expertise of the legislative and executive departments. TacSAE PANGANIBAN, J .:

Petitioners challenge the constitutionality of (1) RA 7942 (The Philippine Mining Act of 1995), (2) its Implementing Rules and Regulations (DENR Administrative Order (DAO) 96-40); and (3) the Financial and Technical Assistance Agreement (FTAA) dated March 30, 1995, by and between the government and Western Mining Corporation (Phils.), Inc. (WMCP). Crux of the Controversy The crux of the controversy is the fact that WMCP, at the time it entered into the FTAA, was wholly owned by WMC Resources International Pty., Ltd. (WMC), which in turn was a wholly owned subsidiary of Western Mining Corporation Holdings, Ltd.; a publicly listed major Australian mining and exploration company. Petitioners thus argue that the FTAA was executed in violation of Section 2 of Article XII of the 1987 Constitution. Allegedly, according to the fourth paragraph thereof, FTAAs entered into by the government with foreign-owned corporations are limited to agreements involving merely technical or financial assistance to the State for large-scale exploration, development and utilization of minerals, petroleum and other mineral oils. The FTAA in question supposedly permits the foreign contractor to manage and control the mining operations fully, and is therefore no different from the "service contracts" that were prevalent under the martial law regime, and that are now disallowed by Section 2 of Article XII of the present Constitution. On January 23, 2001, all the shares of WMC in WMCP according to the latter's Manifestation subsequently filed with this Court had been sold to Sagittarius Mines, Inc., in which 60 percent of the equity is Filipino-owned. In the same Manifestation, the Court was further informed that the assailed FTAA had likewise been transferred from WMCP to Sagittarius. The well-researched ponencia of esteemed Justice Conchita CarpioMorales nevertheless declares that the instant case has not been rendered moot by the FTAA's transfer to and registration in the name of a Filipino-owned corporation, and that the validity of that transfer remains in dispute and awaits final judicial determination. 1 It then proceeds to decide the instant case on the assumption that WMCP remains a foreign corporation. IHCESD Controversy Now Moot With due respect, I believe that the Court should dismiss the Petition on the ground of mootness. I submit that a decision on the constitutionality issue should await the wisdom of a new day when the Court would have a live case before it. The nullity of the FTAA is unarguably premised upon the contractor being a foreign corporation. Had the FTAA been originally issued to a Filipino-owned corporation, we would have had no constitutionality issue to speak of. Upon the other hand, conveyance of the FTAA to a Filipino corporation can be likened to the sale of land to a foreigner who subsequently acquires Filipino citizenship, or who later re-sells the same land to a Filipino citizen. The conveyance would be validated, as the property in question would no longer be owned by a disqualified vendee. 2 Since the FTAA is now to be implemented by a Filipino corporation, how can the Court still declare it unconstitutional? The CA case is a

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dispute between two Filipino companies (Sagittarius and Lepanto) both claiming the right to purchase the foreign shares in WMCP. So regardless of which side eventually wins, the FTAA would still be in the hands of a qualified Filipino company. Furthermore, there being no more justiciable controversy, the plea to nullify the Mining Law has become a virtual petition for declaratory relief, over which the Supreme Court has no original jurisdiction. 3 At bottom, I rely on the well-settled doctrine that this Court does not decide constitutional issues, unless they are the very lis mota of the case. 4 Not Limited to Technical or Financial Assistance Only

Yes, Madam President. With respect to the second paragraph of Section 3, my amendment by substitution reads: THE PRESIDENT MAY ENTER INTO AGREEMENTS WITH FOREIGN-OWNED CORPORATIONS INVOLVING EITHER TECHNICAL OR FINANCIAL ASSISTANCE FOR LARGESCALE EXPLORATION, DEVELOPMENT AND UTILIZATION OF NATURAL RESOURCES ACCORDING TO THE TERMS AND CONDITIONS PROVIDED BY LAW. MR. VILLEGAS: The Committee accepts the amendment. Commissioner Suarez will give the background . . .. MR. SUAREZ:

At any rate, following the literal text of the present Constitution, 5 the ponencia limits to strict technical or financial only the assistance to be provided to the State by foreign-owned corporations for the largescale exploration, development and utilization of minerals, petroleum, and mineral oils. Such assistance may not include "management or other forms of assistance" or other activities associated with the "service contracts" of the past unlamented regime. Precisely, "the management or operation of mining activities by foreign contractors, which is the primary feature of service contracts, was . . . the evil that the drafters of the 1987 Constitution sought to eradicate." Again, because of the mootness problem, it would be risky to take a definitive position on this question. The Court would be speculating on the contents of the FTAA of a prospective foreign company. The requirements of "case and controversy" would be lacking. Suffice it to say, at this point, that the issue even in a live case is not quite that easy to tackle. SDcITH First, the drafters' choice of words their use of the phrase "agreements . . . involving . . . technical or financial assistance" does not absolutely indicate the intent to exclude other modes of assistance. Rather, the phrase signifies the possibility of the inclusion of other activities, provided they bear some reasonable relationship to and compatibility with financial or technical assistance. If the intention of the drafters were strictly to confine foreign corporations to financial or technical assistance and nothing more, I am certain that their language would have been unmistakably restrictive and stringent. They would have said, for example: "Foreign corporations are prohibited from providing management or other forms of assistance," or words to that effect. The conscious avoidance of restrictive wording bespeaks an intent not to employ in an exclusionary, inflexible and limiting manner the expression "agreements involving technical or financial assistance." Second, I believe the foregoing position is supported by the fact that our present Constitution still recognizes and allows service contracts (and has not rendered them taboo), albeit subject to several restrictions and modifications aimed at avoiding the pitfalls of the past. Below are some excerpts from the deliberations of the Constitutional Commission (Concom), showing that its members discussed "technical or financial agreements" in the same breath as "service contracts" and used the terms interchangeably: "MR. JAMIR:

Thank you, Madam President . . .. MR. JAMIR: Yes, Madam President. MR. SUAREZ: This particular portion of the section has reference to what was popularly known before as service contracts, among other things, is that correct? EITcaH MR. JAMIR: Yes, Madam President. MR. SUAREZ: As it is formulated, the President may enter into service contracts but subject to the guidelines that may be promulgated by Congress? MR. JAMIR: That is correct. MR. SUAREZ: Therefore, that aspect of negotiation and consummation will fall on the President, not upon Congress? MR. JAMIR: That is also correct, Madam President. MR. SUAREZ: Except that all of these contracts, service or otherwise, must be made strictly in accordance with guidelines prescribed by Congress? MR. JAMIR: That is also correct. MR. SUAREZ:

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And the Gentleman is thinking in terms of a law that uniformly covers situations of the same nature? MR. JAMIR: That is 100 percent correct . . . xxx xxx xxx

Filipinos of their interests with regard to the issue in Section 3 on all lands of the public domain. My alternative amendment, which we will discuss later, reads: THAT THE PRESIDENT SHALL ENTER INTO SUCH AGREEMENTS ONLY WITH THE CONCURRENCE OF TWO-THIRDS VOTE OF ALL THE MEMBERS OF CONGRESS SITTING SEPARATELY . . . MR. BENGZON: The reason we made that shift is that we realized the original proposal could breed corruption. By the way, this is not just confined to service contracts but also to financial assistance. If we are going to make every single contract subject to the concurrence of Congress which, according to the Commissioner's amendment is the concurrence of two-thirds of Congress voting separately then (1) there is a very great chance that each contract will be different from another; and (2) there is a great temptation that it would breed corruption because of the great lobbying that is going to happen. And we do not want to subject our legislature to that. . . .. MR. GASCON: But my basic problem is that we do not know as of yet the contents of such a general law as to how much constraints there will be in it. And to my mind, although the committee's contention that the regular concurrence from Congress would subject Congress to extensive lobbying, I think that is a risk we will have to take since Congress is a body of representatives of the people whose membership will be changing regularly as there will be changing circumstances every time certain agreements are made. It would be best then to keep in tab and attuned to the interest of the Filipino people, whenever the President enters into any agreement with regard to such an important matter as technical or financial assistance for large-scale exploration, development and utilization of natural resources or service contracts, the people's elected representatives should be on top of it . . .. TaEIAS xxx MR. OPLE: Madam President, we do not need to suspend the session. If Commissioner Gascon needs a few minutes, I can fill up the remaining time while he completes his proposed amendment. I just wanted to ask Commissioner Jamir whether he would entertain a minor amendment to his amendment, and it reads as follows: THE PRESIDENT SHALL SUBSEQUENTLY NOTIFY CONGRESS OF EVERY SERVICE CONTRACT ENTERED INTO IN ACCORDANCE WITH THE GENERAL LAW. I think the reason is, if I may state it briefly, as Commissioner Bengzon said, Congress can always change the general law later on to conform to new perceptions of standards that should be built into service contracts. But the only way Congress can do this is if there were a notification requirement from the Office of the President that such service contracts had been entered into, subject then to the scrutiny of the Members of Congress. This pertains to a situation where the service contracts are already entered into, and all that this amendment seeks is the reporting requirement from the Office of the President. Will Commissioner Jamir entertain that? MR. JAMIR: xxx xxx

THE PRESIDENT: The amendment has been accepted by the Committee. May we first vote on the last paragraph? MR. GASCON: Madam President, that is the point of my inquiry . . . Commissioner Jamir had proposed an amendment with regard to special service contracts which was accepted by the Committee. Since the Committee has accepted it, I would like to ask some questions . . . As it is proposed now, such service contracts will be entered into by the President with the guidelines of a general law on service contracts to be enacted by Congress. Is that correct? MR. VILLEGAS: The Commissioner is right, Madam President. MR. GASCON: According to the original proposal, if the President were to enter into a particular agreement, he would need the concurrence of Congress. Now that it has been changed by the proposal of Commissioner Jamir in that Congress will set the general law to which the President shall comply, the President will, therefore, not need the concurrence of Congress every time he enters into service contracts. Is that correct? ECTIcS MR. VILLEGAS: That is right. MR. GASCON: The proposed amendment of Commissioner Jamir is in direct contrast to my proposed amendment, so I would like to object and present my proposed amendment to the body . . .. xxx MR. GASCON: Yes, it will be up to the body. I feel that the general law to be set by Congress as regards service contract agreements which the President will enter into might be too general or since we do not know the content yet of such a law, it might be that certain agreements will be detrimental to the interest of the Filipinos. This is in direct contrast to my proposal which provides that there be effective constraints in the implementation of service contracts. So instead of a general law to be passed by Congress to serve as a guideline to the President when entering into service contract agreements, I propose that every service contract entered into by the President would need the concurrence of Congress, so as to assure the xxx xxx

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I will gladly do so, if it is still within my power. MR. VILLEGAS:

That is why it says, 'IT SHALL BE THE POLICY OF THE STATE' immediately following the statement about Congress. xxx xxx xxx

Yes, the Committee accepts the amendment. THE PRESIDENT: xxx SR. TAN: Madam President, may I ask a question? . . . 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 . . . xxx xxx xxx xxx xxx Does Commissioner Gascon insist on his proposed amendment? MR. GASCON: I objected to that amendment and after listening to it again, I feel that I still object on basic principles, that every service contract to be entered into by the President should be with the concurrence of Congress. I had earlier presented a proposed amendment of 'CONCURRENCE OF TWO-THIRDS VOTE OF ALL THE MEMBERS OF CONGRESS,' but at this point in time, perhaps to simplify choices, since basically the proposal of Commissioner Jamir is to set a general law with regard to service contracts, my proposal is to require concurrence of Congress every time a service contract is to be made. THE PRESIDENT: That is clear now. So can we proceed to vote? MR. NOLLEDO: . . . Madam President, I have the permission of the Acting Floor Leader to speak for only two minutes in favor of the amendment of Commissioner Gascon . . . With due respect to the members of the Committee and Commissioner Jamir, I am in favor of the objection of Commissioner Gascon. Madam President, I was one of those who refused to sign the 1973 Constitution, and one of the reasons is that there were many provisions in the Transitory Provisions therein that favored aliens. I was shocked when I read a provision authorizing service contracts while we, in this Constitutional Commission, provided for Filipino control of the economy. We are, therefore, providing for exceptional instances where aliens may circumvent Filipino control of our economy. And one way of circumventing the rule in favor of Filipino control of the economy is to recognize service contracts. As far as I am concerned, if I should have my own way, I am for the complete deletion of this provision, However, we are presenting a compromise in the sense that we are requiring a two-thirds vote of all the Members of Congress as a safeguard. I think we should not mistrust the future Members of Congress by saying that the purpose of this provision is to avoid corruption. We cannot claim that they are less patriotic than we are. I think the Members of this Commission should know 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. It seems to me that we are liberalizing the rules in favor of aliens. HSaEAD I say these things with a heavy heart, Madam President. I do not claim to be a nationalist, but I love my country. Although we need investments, we must adopt safeguards that are truly reflective of the sentiments of the people and not mere cosmetic safeguards as they now appear in the Jamir amendment. (Applause) . . ."

MR. SARMIENTO: Maybe we can simplify my proposed amendment, so that it will read: IT SHALL BE THE POLICY OF THE STATE TO PROMOTE, DEVELOP AND EMPLOY LOCAL SCIENTIFIC AND TECHNOLOGICAL RESOURCES . . . DAHaTc MR. DAVIDE: Could it not be properly, accommodated either in the Article on Declaration of Principles and State Policies or in the Article on Human Resources because it would not be germane to the Article on National Economy and Patrimony which we are now treating? MR. VILLEGAS: I think the intention here, if I understand the amendment to the amendment, is to make sure that when these technical and scientific services are rendered by foreigners there would be a deliberate attempt to develop local talents so that we are not forever dependent on these foreigners. Am I right? MR. DAVIDE: So it is in relation to the service contracts? . . . Can it not be stated that the general law providing for service contracts shall give priority to the adjective of Commissioner Sarmiento's amendment? It should be in the law itself. MR. VILLEGAS:

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The foregoing is but a small sampling of the lengthy discussions of the constitutional commissioners on the subject of service contracts and technical and financial assistance agreements. Quoting the rest of their discussions would have taken up several more pages, and these have thus been omitted for the sake of brevity. In any event, it would appear that the members of the Concom actually had in mind the Marcos-era service contracts that they were familiar with (but which they duly modified and restricted so as to prevent abuses), when they were crafting and polishing the provisions dealing with financial and/or technical assistance agreements. These provisions ultimately became the fourth and the fifth paragraphs of Section 2 of Article XII of the 1987 Constitution. Put differently, "technical and financial assistance agreements" were understood by the delegates to include service contracts duly modified to prevent abuses. I respectfully submit that the statements of Commissioner Jose Nolledo, quoted above, are especially pertinent, since they refer specifically to service contracts in favor of aliens. From his perspective, it is clear to me that the Concom discussions in their entirety had to do with service contracts that might be given to foreign-owned corporations as exceptions to the general principle of Filipino control of the economy. Commissioner Nolledo sums up these statements by saying: "We are, therefore, providing for exceptional instances where aliens may circumvent Filipino control of our economy. And one way of circumventing the rule in favor of Filipino control of the economy is to recognise service contracts. As far as I am concerned, if I should have my way, I am for the complete deletion of this provision. However, we are preventing a compromise in the sense that we are requiring a two-thirds vote of all the Members of Congress as a safeguard. . . . I think the Members of this Commission should know 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. It seems to me that we are liberalizing the rules in favor of aliens: . . ." Since the drafters were referring only to service contracts to be granted to foreigners and to nothing else, this fact necessarily implies that we ought not treat the idea of "agreements involving either technical or financial assistance" as having any significance or existence apart from service contracts. In other words, in the minds of the commissioners, the concept of technical and financial assistance agreements did not exist at all apart from the concept of service contracts duly modified to prevent abuses. DcCASI Interpretation of the Constitution in the Light of Present-Day Realities Tantamount to closing one's eyes to reality is the insistence that the term "agreements involving technical or financial assistance" refers only to purely technical or financial assistance to be rendered to the State by a foreign corporation (and must perforce exclude management and other forms of assistance). Nowadays, securing the kind of financial assistance required by large-scale explorations, which involve hundreds of millions of dollars, is not just a matter of signing a simple promissory note in favor of a lender. Current business practices often require borrowers seeking huge loans to allow creditors access to financial records and other data, and probably a seat or two on the former's board of directors; or at least

some participation in certain management decisions that may have an impact on the financial health or long-term viability of the debtor, which of course will directly affect the latter's capacity to repay its loans. Prudent lending practices necessitate a certain degree of involvement in the borrower's management process. Likewise, technical assistance, particularly in certain industries like mining and oil exploration, would likely be from the industry's leading players. It may involve the training of personnel and some form of supervision and oversight with respect to the correct and proper implementation of the technical assistance. The purpose is to ensure that the technical assistance rendered will not go to waste, and that the lender's business reputation and successful track record in the industry will be adequately safeguarded. Thus the technical assistance arrangements often necessarily include interface with the management process itself. The mining industry is in the doldrums, precisely because of lack of technical and financial resources in our country. If activated properly, the industry could meaningfully contribute to our economy and lead to the employment of many of our jobless compatriots. A hasty and premature decision on the constitutionality of the herein FTAA and the Philippine Mining Act could unnecessarily burden the recovery of the industry and the employment opportunities it would likely generate. Oral Argument Needed Given the modern-day reality that even the World Bank (WB) and the International Monetary Fund (IMF) do not lend on the basis merely of bare promissory notes, but on some conditionalities designed to assure the borrowers' financial viability, I would like to hear in an Oral Argument in a live, not a moot, case what these international practices are and how they impact on our constitutional restrictions. This is not to say that we should bend our basic law; rather, we should find out what kind of FTAA provisions are realistic vis-a-vis these international standards and our constitutional protection. Unless there is a live FTAA, the Court would not be able to analyze the provisions vis-a-vis the Constitution, the Mining Law and these modern day lending practices. EAaHTI I mentioned the WB and the IMF, not necessarily because I agree with their oftentimes stringent policies, but because they set the standards that international and multinational financial institutions often take bearings from. The WB and IMF are akin (though not equivalent) to the Bangko Sentral, which all Philippine banks must abide by. If this Court closes its doors to these international realities and unilaterally sets up its own concepts of strict technical and financial assistance, then it may unwittingly make the country a virtual hermit an economic isolationist in the real world of finance. I understand that a live case, challenging the Mining Law and an FTAA relevant thereto, is pending before the Second Division of this Court, where it is docketed as GR No. 157882 (Dipdio Earth Savers Multi-Purpose Association v. Hon. Elisea Gozun). Can we not consolidate that case with the current one, call an Oral Argument, and then decide the matter more definitively? During the Oral Argument, I believe that the Court should invite as amici curiae (1) a lawyer versed in international finance like retired Justice Florentino P. Feliciano, (2) a representative of the Banker's Association of the

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Philippines, and (3) a leader of the University of the Philippines Law Constitution Project. Constitutional Interpretation and the Vagaries of Contemporary Events Finally, I believe that the Concom did not mean to tie the hands of the President and restrict the latter only to agreements on rigid financial and technical assistance and nothing else. The commissioners fully realized that their work would have to withstand the test of time; that the Charter, though crafted with the wisdom born of past experiences and lessons painfully learned, would have to be a living document that would answer the needs of the nation well into the future. Thus, the unerring emphasis on flexibility and adaptability. Commissioner Joaquin Bernas stressed that he voted in favor of the Article, "because it is flexible enough to allow future legislators to correct whatever mistakes we may have made." 6 Commissioner Felicitas Aquino noted that "unlike the other articles of this Constitution, this article whether we like it or not would have to yield to flexibility and elasticity which inheres in the interpretation of this provision. Why? Precisely because the forces of economics are dynamic and are perpetually in motion." 7 Along the same line, the Court, in Taada v. Angara, 8 stressed the need to interpret the Constitution to cover "refreshing winds of change necessitated by unfolding events": ACTEHI ". . . . Constitutions are designed to meet not only the vagaries of contemporary events. They should be interpreted to cover even future and unknown circumstances. It is to the credit of its drafters that a Constitution can withstand the assaults of bigots and infidels but at the same time bend with the refreshing winds of change necessitated by unfolding events." Accordingly, I vote to DISMISS the Petition. Part 2 G.R. No. 127882. February 1, 2005.] LA BUGAL B'LAAN TRIBAL ASSOCIATION et al., petitioners, vs. RAMOS, et al., respondents. RESOLUTION Gentlemen: Quoted hereunder, for your information, is a resolution of the Court En Banc dated February 1, 2005 Before the Court is petitioners' 38-page Motion for Reconsideration praying for the reversal of this Court's Resolution promulgated on December 1, 2004, on the following grounds: "I The assumption that Filipino-owned corporations cannot put up the capital and that foreign-owned corporations are not willing to provide large amounts of financial assistance are belied by the very facts of this case. aIcCTA

"II The interpretation of paragraph four, section 2, article XII of the Constitution practically negates the operation of the first paragraph, section 2, article XII of the Constitution. "III The interpretation in the Decision violates the constitutional requirement of equitable sharing. "IV The 'control test' in the Decision is not in consonance with the requirement of 'full control and supervision' required of the state considering that the kind of service contracts during Martial Law has been reestablished and reinstated. "V The alleged transfer of the FTAA to TMRC is null and void because it violates the fourth paragraph, section 2, article XII of the Constitution. "VI The provisions of the FTAA which were invalidated by the Decision dated December 1, 2004 are not separable and are intrinsic to the agreements. "VII The 'closing out theory' of interpretation is not valid." A close perusal of the above issues and the discussions thereof shows that they are a mere rehash of arguments and positions already raised and discussed extensively in the 246-page Resolution of December 1, 2004, penned by Justice Artemio V. Panganiban; as well as in the 125-page Dissenting Opinion of Justice Antonio T. Carpio, the 100page Dissenting Opinion of Justice Conchita Carpio-Morales, the 29page Separate Opinion of Justice Dante O. Tinga, and the 10-page Concurring Opinion of Justice Minita V. Chico-Nazario. Further discussion of these issues would not serve any useful purpose, as it would merely repeat the same justifications and reasons already taken up in the foregoing Opinions, which tackled precisely those matters and even more; any further elucidations, disquisitions and disputations would merely reiterate the same points already passed upon. CSaITD In regard to the present Dissenting Opinion of Justice Carpio, which in the main attacks RA 7942 (the Mining Law), DAO 56-99 and the subject FTAA for allegedly limiting "the equitable share of the State from the mining profits of the foreign contractor" (p. 46), suffice it to reiterate that "the development of the mining industry [is] the responsibility of the political branches of government. And let not this Court interfere inordinately and unnecessarily." The issue of how much "profit" the nation should or could derive from the exploration, development and utilization of the country's mineral resources is a policy matter, over which we "must allow the President and Congress maximum discretion in using the resources of our country and in securing the assistance of foreign groups to eradicate the grinding

36

poverty of our people and answer their cry for viable employment opportunities in the country," (pp. 240-241, Resolution dated December 1, 2004). That the aforementioned law, executive issuance and contract had been declared constitutional will not prevent Congress or the President or the parties to the FTAA from amending or modifying them, if indeed, in their opinion they are unwise or wanting in any respect. In any event, after a thorough deliberation on the Motion, none of the members of this Court have changed their opinions or votes. Indeed, all the conceivable aspects of this litigation factual, constitutional, legal, philosophical, technical, financial, ecological, environmental and technological have all been extensively taken up and addressed during the Court's lengthy and purposeful debates and deliberations. WHEREFORE, the Motion is DENIED with finality. The prayer for oral argument is likewise DENIED. (Ynares-Santiago, CarpioMorales, and Callejo Sr., JJ., maintain their dissents; Azcuna, J, no part)

DAO 56-99 provides three formulae, namely Options A, B and C, for determining the State's share in the mining revenues of foreign contractors. The foreign contractor has the sole option 3 to choose which formula to use. I will examine Option B, the option that foreign contractors will most certainly choose. In providing for Option B, Section 3(g)(2)(b) of DAO 56-99 states: Additional Government Share. The Government shall collect an Additional Government Share from the Contractor based on twentyfive percent (25%) of the additional profits once the arithmetic average of the ratio of Net Income After Tax To Gross Output as defined in the National Internal Revenue Code, for the current and previous taxable years is 0.40 or higher rounded off to the nearest two decimal places. Computation. The computation of the Additional Government Share from additional profit shall commence immediately after the Recovery Period. If the computation covers a period of less than a year, the additional profit corresponding to this period shall be computed prorata wherein the total additional profit during the year shall be multiplied by the fraction of the year after recovery. aDECHI The additional profit shall be derived from the following formula: If the computed average ratio as derived from above is less than 0.40: Additional Profit = 0 If the computed average ratio is 0.40 or higher: [NIAT-(0.40xGO)] Additional Profit = (1-ITR) The Additional Government Share from the additional profit is computed using the following formula: Additional Government Share From Additional Profit = 25% x Additional Profit where: NIAT = Net Income After Tax for the particular taxable year under consideration. GO = Gross Output from operations during the same taxable year. ITR = Income Tax Rate applied by the Bureau of Internal Revenue in computing the income tax of the Contractor during the taxable year. Option B stipulates that the State's share shall consist of "twenty-five percent (25%) of the additional profits once the arithmetic average of the ratio" of the after-tax net income to gross output for "the current and previous taxable years is 0.40 or higher." This means four conditions must concur before the State can receive any share from the mining revenues of the foreign contractor. First, the foreign contractor's net income after tax must exceed 40% of its gross output or sales. 4 Second, this extraordinary high-income ratio must average more than 40% of gross output over two consecutive years. Third, the State's share shall come only from the excess of such

Separate Opinions CARPIO, J., dissenting:

In the Resolution of 1 December 2004, the majority assures the Filipino people that DAO 56-99 gives them an equitable share in the mining revenues of FTAA contractors under Section 81 of the Mining Act. 2 The majority further assures the Filipino people that this equitable share under DAO 56-99 is "more than the usual taxes, duties and fees." Thus, the majority guarantees the Filipino people, as the beneficial owner of the nation's mineral resources, that under the Resolution of 1 December 2004 they will receive a fair share of the revenues of foreigners who exploit the nation's mineral resources. I disagree. The Resolution of 1 December 2004 legitimizes DAO 56-99. However, DAO 56-99 makes it impossible for the State to receive any share from the mining revenues of foreign contractors. DAO 56-99 is like the WMCP FTAA, which "guarantees" the State a 60% share in the net mining proceeds of WMCP. However, on further scrutiny, the WMCP FTAA cleverly takes away the 60% guaranteed share without any compensation to the State. DAO 56-99 operates the same way. The conditions imposed by DAO 56-99 before the State can receive any share are simply impossible to fulfill. b. The Impossible Conditions in DAO 56-99

37

40% of gross output. Fourth, the State's share is only 25% of the excess of such 40% of gross output. The first two conditions are impossible to achieve while the last two conditions are grossly unfair to the State. An after-tax net income of 40% of gross sales means P40 of after tax net income for every P100 of gross sales. Only P60 is left to answer for all operating expenses, depreciation, interest expense, the 32% corporate income tax, the 2% excise tax, and all other expenses. A 40% after tax net income on gross sales, two years running, is highly extraordinary in the business world, and unheard of in the mining industry. DaTICE The net income after tax (NIAT), gross output (GO), and NIAT to GO ratio of the six largest Philippine mining companies 5 for the last nine years are as follows: APPLICATION OF OPTION B TO SIX LARGEST PHILIPPINE MINING COMPANIES 6 (NIAT to GO RATIOS) 2003 1997 Atlas -511 na 2002 1996 -345 -2.52 -1.49 -0.06 0.09 0.04 -41839 na 0.01 na 0.06 0.22 2001 1995 -9.50 -0.65 -2.15 0.01 0.07 0.10 -25302 na -0.45 na 0.10 0.23 2000 1999 1998

to mining companies operating in the Philippines in the last nine years, the State will receive no share whatsoever in the mining profits of the foreign contractor. Even if applied to mining companies operating in other countries, the trigger level in Option B is still impossible to achieve. For example, the 1995 to 2003 NIAT to GO ratios of WMC Resources Ltd, the Australian mining company that owns or used to own respondent WMCP, are as follows: APPLICATION OF OPTION B TO WMC RESOURCES LTD OF AUSTRALIA 7 (NIAT to GO RATIOS) 2003 1997 WMC 0.08 0.13 2002 1996 -0.03 0.16 2001 1995 0.14 0.14 2000 1999 1998

0.24

0.13

0.10

-10.14

-7.23

-9.08

Benguet -1.61 -1.43 Lepanto -0.07 0.20 Marcopper na Philex -0.14 na

-1.42

-1.37

-1.52

0.20

0.22

0.19

-14156 na 0.06

-31178

-22099

The average ratio of WMC Resources Ltd over the nine-year period is only 0.10, and its highest two-year average ratio is only 0.19 in 1999 and 2000. Thus, even the parent or former parent company of respondent WMCP could not meet the trigger level of 0.40 in Option B in any year during the last nine years. The highest two-year average ratio of 0.19 of WMC Resources Ltd. is less than the highest two-year average ratio of 0.25 of Rio Tuba Nickel Mining Corporation. The nineyear 0.10 average ratio of WMC Resources Ltd is even lower than the 0.16 average ratio of Rio Tuba Nickel Mining Corporation during the same period. WMC Resources Ltd. is the number one nickel producer in Australia while Rio Tuba Nickel Mining Corporation is the number one nickel producer in the Philippines. TcIHDa The 1995 to 2003 NIAT to GO ratios of four of the world's largest mining companies are as follows: APPLICATION OF OPTION B

-0.04

-0.39

Rio Tuba 0.23 0.27

0.17

0.00

0.17

TO WORLD'S LARGEST MINING COMPANIES (NIAT to GO RATIOS) 2003 1997 Rio Tinto 8 0.09 Newmont 9 -0.24 Placer Dome 10 na Phelps Dodge 11 0.06 2002 1996 0.16 0.16 0.15 0.04 0.13 na 0.02 0.10 2001 1995 0.07 0.15 0.05 na 0.10 na -0.09 na 2000 1999 1998

Over the last nine years, the highest ratio resulting from the application of Option B is 0.27 in 1997. The second highest ratio is 0.23 in 1995. Rio Tuba Nickel Mining Corporation, the most profitable mining company in the Philippines, accounted for both ratios which are, however, way below the trigger level of 0.40 in Option B. The highest two-year average ratio of Rio Tuba Nickel Mining Corporation is only 0.25 for 1996 and 1997, and its average ratio is only 0.16 over the nine-year period. Lepanto Consolidated Mining Company, the second most profitable mining company in the Philippines, attained its highest ratio at 0.22 in 1999. Lepanto Consolidated Mining Company had a highest two-year average ratio of only 0.21 in 1999 and 2000, and an average ratio of only 0.11 over the nine-year period. In short, in the last nine years no mining company in the Philippines could satisfy the first two conditions in Option B a trigger level of 0.40 for two consecutive years. The nine-year ratios of the six largest Philippine mining companies clearly show beyond any doubt that the 0.40 trigger level in Option B is impossible to attain. If the profit-sharing formula in Option B is applied

0.13 0.15 -0.03 na -0.10 na -0.08 na

0.19

0.17

0.00

0.01

-0.06

0.03

0.00

0.08

These four mining companies have worldwide mining operations spanning several continents. The average ratio of Rio Tinto plc, the world's largest mining company, is only 0.14 over a nine-year period. The highest ratio of Rio Tinto is

38

0.19 in 2000, and its highest two-year average ratio only 0.18 in 1999 and 2000. Newmont Mining Company, the largest gold producer in the world, has an average ratio of only 0.02 over a seven-year period. The highest ratio of Newmont Mining Company is only 0.15 in 2003, and its highest two-year average ratio is only 0.10 in 2002 and 2003. The average ratio of Placer Dome, Inc., one of the largest gold producers in the world, is only 0.02 over a five-year period. Placer Dome, Inc.'s highest ratio is only 0.13 in 2003, and its highest two-year average ratio is only 0.12 in 2002 and 2003. Phelps Dodge Mining Company, the largest publicly listed copper producer in the world, has an average ratio of only 0.01 over a seven-year period. The highest ratio of Phelps Dodge Mining Company is only 0.10 in 1997, and its highest two-year average ratio is only 0.08 in 1997 and 1998. This merely confirms that the trigger level of 0.40 in Option B is beyond the reach of any mining company of whatever size, whether local, foreign or with worldwide operations. Obviously, the trigger level of 0.40 in DAO 56-99 is a target intended never to be achieved so that the State will never receive any share in the foreign contractor's mining profits. EcIDaA Mr. Benjamin M. De Vera, one of the proponents 12 of the formulae in DAO 56-99, has written in a paper 13 that the 0.40 ratio in Option B is equivalent to a 20% return on investment (ROI). 14 Mr. De Vera explains: The trigger level of 0.40 is approximately equivalent to a 20% return on investment when computed based on the life of the project. Investors have indicated that their minimum return on investment before they would invest on a mining project in the Philippines is 15%. It was agreed upon that a return on investment below 20% but not lower than 15% is normal profit. If the project reaches 20% or better, then it shall be considered as additional or excess profits. The computation of the 0.40 trigger shall be based on a 2-year moving average which is the average of the previous year's ratio and the current year's ratio. . . . The proponents of DAO 56-99 consider profits not exceeding the trigger level of 0.40 as "normal profits." The proponents of DAO 56-99 have decreed that the State has no right to share in the foreign contractor's "normal profits." The proponents of DAO 56-99 allow the State a share only if the mining profits of the foreign contractor exceed the trigger level of 0.40. The proponents of DAO 56-99 claim that the trigger level of 0.40 is equivalent to a 20% ROI. In such event, the proponents of DAO 56-99 declare that the State's share is only onefourth of the profits in excess of the 0.40 trigger level or 20% ROI. The claim of Mr. Benjamin M. De Vera that a trigger level of 0.40 is equivalent to an ROI of 20% is not supported by data from the Audited Financial Statements of the six largest Philippine mining companies for the years 1995 to 2003. For example, the average ratio of Rio Tuba Nickel Mining Corporation over the nine-year period is 0.16, and its average ROI for the same period is 16%. Based on this, a NIAT to GO ratio of 0.40 for Rio Tuba Nickel Mining Corporation should translate to an ROI of at least 40.7%. Likewise, the average ratio of Lepanto Consolidated Mining Company over a seven-year period 15 is 0.11 while its average ROI for the same period is 6%. Based on this, a ratio of 0.40 for Lepanto Consolidated Mining Company should translate to an ROI of at least 21.8%. The industry data does not support Mr. De Vera's claim that a trigger level of 0.40 is equivalent to a 20% ROI, which is significantly understated.

What is apparent is that a ratio of 0.40 implies an ROI significantly higher than 20%. The admitted intent of the framers of DAO 56-99 is to prevent the State from receiving any share if the foreign contractor's ROI is "normal." Even if the foreign contractor's ROI is high or above normal, the intent of the framers of DAO 56-99 is still to deprive the State of any share of the mining revenues. The framers of DAO 56-99 intended to give the State a share only if the foreign contractor's ROI is extraordinarily high. In its official publication A Response to the Issues Raised against Mining, 16 the Mines and Geosciences Bureau (MGB) of the DENR has publicly admitted that the State is entitled to a share only if the foreign contractor's profits are extraordinarily high. Thus, the MGB states: On the other hand, during periods of extraordinary profitability, e.g., high metal prices, the Government is entitled to a portion of such profits determined in consultation with the Contractor. This share from the profits is the Additional Government Share. The sharing is determined taking into consideration the capital investment in the project, contribution to the economy, the community, the local government, and the technical complexity of the project. (Emphasis and underscoring supplied) EHSITc Clearly, the MGB, the creator of DAO 56-99, never intended to give the State any share if the foreign contractor's profits are normal or even high. Only if the foreign contractor's profits are extraordinarily high may the State share in the mining revenues of the foreign contractor. However, the extraordinarily high trigger level of 0.40, running for two consecutive years, is impossible to achieve based on the historical performance of mining companies in the Philippines and abroad. The MGB's categorical admission that the State would share in the mining revenues of the foreign contractor only in case of "extraordinary profitability" is the "smoking gun" that DAO 56-99 is grossly and manifestly disadvantageous to the government and the Filipino people. The raison d'tre of DAO 56-99 betrays a callous intent to deprive the State and Filipino people of their fair and rightful share in the mineral wealth of the nation. On this score alone, even without applying Option B to the financial results of mining companies in the Philippines and abroad, this Court should declare DAO 56-99 void for being manifestly and grossly disadvantageous to the government and the Filipino people. Was it the intent of the framers of the 1987 Constitution that the Filipino people should receive a share in the mining profits of the foreign contractor only in case of "extraordinary profitability"? Was it the intent of the framers of the 1987 Constitution that the Filipino people should forego any share in case the foreign contractor's mining profits are merely normal or even high? Obviously, this was never the intent of the framers of the 1987 Constitution for this would constitute betrayal of the national interest. What is the legal basis of the MGB in deciding that the Filipino people deserve a share in the mining profits of the foreign contractor only in case of "extraordinary profitability"? The MGB "conceived and developed" DAO 56-99 without considering the rights of the State as owner of the mineral resources. The MGB has placed the interest of foreign contractors above the interest of the Filipino people. In a betrayal of public trust, the MGB has deprived the Filipino people of any share from the normal and higher than normal profits of foreign

39

contractors. The MGB would concede to the Filipino people a share only if the profits of the foreign contractor are miraculously extraordinary, and even then at only one-fourth of every 1% percent of any extraordinary profit. Without doubt, DAO 56-99 is grossly and manifestly disadvantageous to the government and the Filipino people. DAO 56-99 assumes that the Filipino people are entitled to share in the mining profits of the foreign contractor only in case of "extraordinary profitability." The majority's Resolution of 1 December 2004 puts the stamp of approval and legitimacy on DAO 56-99. Is it also the intent of the majority of this Court that the Filipino people will share in the mining profits of the foreign contractor only in case of "extraordinary profitability"? ASEIDH The requirement of two consecutive years of extraordinary profitability makes it even harder for the State to receive any share given the historical volatility of metal prices. The following graph showing the annual average gold and copper prices from 1991 to 2000 illustrates this volatility: Free Market Metal Prices 1991 to 2000 17 Gold YEAR Copper Grade A LME

additional 40% of profits, in excess of the profits corresponding to the trigger level of 0.40, for the State to receive a 10% share in the excess mining profits. The excess profits over the trigger level of 0.40 refer to the profits in excess of the first 20% ROI if we follow the claim of Mr. Benjamin M. De Vera that a trigger level of 0.40 is equivalent to a 20% ROI. The ponente of the majority opinion has assured the En Banc that he has thoroughly studied DAO 56-99, and that under DAO 56-99 the State will receive at least a 10% share in the mining profits. For the State to receive a 10% share, the foreign contractor's ROI must reach at least 50% per annum 18 for two consecutive years, if the trigger level of 0.40 equals 20% ROI as Mr. Benjamin M. De Vera claims. For the State to receive a 10% share during the entire 50-year term of the FTAA a term the majority has ruled is valid the foreign contractor must attain at least 50% ROI every year during the entire 50-year term of the FTAA. Even an ordinary businessman with limited experience can tell that this is impossible to achieve. aIHSEc There is no mining company any where in the world that makes a 50% ROI every year. The highest ROI that investment managers of mining funds promise investors on a best efforts basis is an average of 20% ROI over a 10-year investment period. 19 This 20% ROI, however, includes income from trading of mining shares in the stock market. If the return is based solely on dividend income from equity investment, the rate of return is much lower. The historical global return on equity (ROE) in the mining industry in real terms is "just 5%" as stated in the World Mining Overview, thus: However defined, the industry as a whole needs to achieve returns that exceed the cost of capital. In a paper entitled, "The Economic Performance of an "Old" Industry: Mineral Extraction and Processing", Rob McDonald, Managing Director of NM Rothschild & Sons (Australia) Limited, states that the mining industry has generated an average compound real rate of return to shareholders of just 5% over the past 25 years (McDonald, 2000). The paper further discusses the real US dollar cost of capital for the mining industry over the past 25 years has been between 7% and 8% per annum. Our industry clearly needs to improve if it is to attract equity capital. 20 (Emphasis supplied) No mining company in the Philippines in the last nine years has achieved a 50% ROI even for one year. A 50% annual ROI during the 50-year term of an FTAA, as the majority assures the Filipino people, is a pipe dream. The majority's reliance on DAO 56-99 to insure an equitable share of the mining revenues for the Filipino people is a blunder of biblical scale. The majority praises the MGB and the DENR Secretary for their "admirable job of conceiving and developing" 21 DAO 56-99. The world must be turning upside down. The majority lavishes praise on those who formulate profit-sharing schemes designed to deprive the Filipino people of their fair and rightful share in the nation's mineral wealth. The majority even legally sanctifies such schemes and elevates them to statutory status just to correct a constitutional infirmity in the Mining Act. The Filipino people will never understand this. b. DAO 56-99 is Grossly Disadvantageous to the Government

London Final US$/oz US$/lb 1.06 1.03 0.87 1.05 1.33 1.04 1.03 0.75 0.75 0.82

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

362.18 343.73 359.77 384.00 383.98 387.70 331.10 294.16 278.77 279.77

US$ = United States dollars Source: British Columbia Ministry of Energy and Mines (MEM) Statistics Gold and copper prices swing up and down, often preventing metal prices from remaining extraordinarily high for two consecutive years. Gold and copper are two of the three principal mineral exports of the country, in addition to nickel. Assuming arguendo that the first two conditions happen a NIAT to GO ratio of 0.40 running for two consecutive years the third and fourth conditions still limit the State's share to 25% of the profits in excess of the 0.40 trigger level. In other words, for every 4% additional profits in excess of the 0.40 trigger level, the State receives only 1% share of the contractor's excess mining profits. Since it requires 4% additional profits for the State to receive a 1% share, it will take an

DAO 56-99 operates to deprive the State of its equitable share from mining revenues. As owner of the mineral resources, the State must receive an equitable share from mining revenues. The majority does

40

not dispute this. However, by imposing impossible conditions, DAO 5699 gives all the mining revenues to the foreign contractor. DAO 56-99 is grossly and manifestly disadvantageous to the State and the Filipino people. DAO 56-99 is contrary to public policy 22 and contravenes the Anti-Graft and Corrupt Practices Act. 23 DAO 56-99 is an insult to the Filipino people because it pretends to give the Filipino people a fair share in mining revenues but in reality deprives them of any share from such revenues. This Court must reject DAO 56-99 and declare it void. ATDHSC c. System DAO 56-99 Reinstates the "License, Concession or Lease"

56-99 cannot truncate the foreign contractor's statutory right to recover fully all its pre-operating expenses. SEIDAC The average return on capital employed of mining companies worldwide in the last four years is only 10.5%. 26 It will take the foreign contractor some 6 years 27 to recover fully all its pre-operating, exploration and development expenses. During this 6-year recovery period, the government cannot collect a single centavo of tax, duty or fee from the foreign contractor and its stockholders. If the usual threeyear pre-operating period 28 is counted, the total period that the government cannot collect any tax, duty or fee from the foreign contractor and its stockholders extends to 9 years from the signing of the FTAA. At least one President will have come and gone and still the State will not have collected a single centavo of tax, duty or fee from the foreign contractor and its stockholders. Definitely, no FTAA will contribute tax money to help solve the budget deficit of the government, not for the next 9 years at least. Those who trumpet the Mining Act as the solution to the current budget deficit have not studied thoroughly the Mining Act and DAO 56-99. During the recovery period, the government cannot collect even the State's share under DAO 56-99. The State's share under DAO 56-99 does not run during the recovery period, which can stretch to 9 years. When it does run, the collection of the State's share is subject to the four conditions in Option B, which conditions are impossible to meet. In sum, the State is deprived of any tax and revenue share during the 9-year recovery period. After the recovery period, the State starts to collect the usual taxes but still cannot collect any share from the mining revenues. This is the sad fate of the Filipino people under the Court's Resolution of 1 December 2004. The combined effect of Section 81 of the Mining Act and DAO 56-99 is to deprive the Filipino people of a fair share of their inheritance from the Creator the P47 trillion mineral wealth of the nation. This will impoverish further the Filipino people, many of whom live below the poverty line. This Court should never allow such a tragedy to befall on the Filipino people. e. Government Cannot Dispute Operating Expenses of Foreign Contractor under DAO 56-99 Under DAO 56-99, the recovery of the foreign contractor's "preoperating expenses" is expressly subject to the approval of the DENR Secretary. 29 This insures that the foreign contractor can deduct from the gross output or sales only actual, reasonable and necessary preoperating expenses. IcESDA However, DAO 56-99 does not require the DENR Secretary's approval of the foreign contractor's operating expenses once commercial production begins. The only exception is the amount of consulting fees incurred outside the Philippines, which requires the approval of the MGB Director. 30 Capital expenses incurred after the start of commercial production are not subject to approval if already included in the approved Mining Project Feasibility Study. 31 There is no provision in DAO 56-99 allowing the DENR Secretary, after the start of commercial production, to dispute the allowance of operating expenses or to submit such dispute to arbitration. 32 The foreign contractor is free to deduct from the gross output all operating expenses it wants to deduct. This will reduce the after tax net income of

DAO 56-99 implements the intent of the Mining Act to limit the State's share in mining operations only to taxes, duties and fees, the same taxes, duties and fees that taxpayers who do not exploit mineral resources pay the government. DAO 56-99 implements the intent, plan and structure of the Mining Act, under its Sections 39, 80, 81, 84 and 112, to revert to the old system of "license, concession or lease" under the 1935 and 1973 Constitutions. The 1987 Constitution has abolished this discredited system. 24 This Court must reject any attempt to resurrect the old "license, concession or lease" system. d. Nation Section 81 of Mining Act and DAO 56-99 Will Impoverish the

The combined effect of Section 81 of the Mining Act and DAO 56-99 will impoverish the Filipino people. The second and third paragraphs of Section 81 provide: 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. (Emphasis and underscoring supplied) Section 81 grants the foreign contractor the right to recover fully all its pre-operating, exploration and development expenses. During this recovery period, which has no time limit, the "collection of Government share" does not commence. During the recovery period, the foreign contractor does not pay any tax, duty or fee to the Government. The foreign contractor is exempt from corporate income tax, excise tax, "all . . . other taxes, duties and fees," and even withholding tax on dividend or interest payments to its stockholders! In short, during the recovery period, the Philippine government will not collect a single centavo of tax, duty or fee from the foreign contractor and its stockholders. DAO 56-99 attempts to limit the foreign contractor's recovery period to five years. 25 This violates the foreign contractor's statutory right to recover fully all its pre-operating, exploration and development expenses if after the fifth year the contractor still has not fully recovered such expenses. DAO 56-99 cannot amend Section 81. DAO

41

the foreign contractor, bringing down further the NIAT to GO ratio. DAO 56-99 does not protect the State from this eventuality. The State is left to the mercy of the foreign contractor. 2. Congress Exercises the Power to Prescribe the General Terms of the Fiscal Regime of FTAAs The 1987 Constitution vests in Congress the power to prescribe the "general terms and conditions" of FTAAs. The fourth paragraph of Section 2, Article XII of the 1987 Constitution provides: The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for largescale 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 1987 Constitution requires Congress to enact a law that prescribes the "general terms and conditions" of FTAAs. The most important term or condition is the fiscal regime of FTAAs, which must lay down clearly the share of the State in the mining revenues of the foreign contractor. As owner of the mineral resources, the State is entitled to a fair share in the mining revenues of the foreign contractor. Such share is separate and distinct from the usual taxes, duties and fees paid by taxpayers who do not exploit the State's mineral resources. The usual taxes duties and fees are exactions by the State arising from its taxing power. The share of the State in the mining revenues is the income of the State as owner of the mineral resources. The right to receive a fair share in the mining revenues is an attribute of ownership, not of the sovereign power to tax. In enacting the Mining Act, Congress prescribed a fiscal regime that is constitutionally deficient, both for FTAAs as well as for mineral production sharing agreements (MPSAs). Sections 80 and 81 of the Mining Act limit the share of the State in MPSAs and FTAAs to the usual taxes, duties and fees. The Mining Act does not require FTAA or MPSA holders to pay the State any share from their mining revenues. Thus, Sections 80 and 81 provide: Section 80. Government Share in Mineral Production Sharing Agreement. The total government share in a mineral production sharing agreement shall be the excise tax on mineral products as provided in Republic Act No. 7729, amending Section 151(a) of the National Internal Revenue Code, as amended. IASTDE Section 81. xxx xxx Government Share in Other Mineral Agreements.

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. (Emphasis supplied) Section 80 expressly states that the "total government share in a mineral production sharing agreement shall be the excise tax on mineral products." There are no ifs or buts. The State is limited solely to the usual taxes, duties and fees. The State has no share whatsoever in the mining revenues of MPSA holders. The Resolution of the majority, however, skirts this issue by saying that Section 80 on MPSAs is not in issue in the present case even though the WMCP FTAA is convertible to an MPSA any time at the sole option of WMCP. Section 81 of the Mining Act, which governs FTAAs, also limits the State's share to the usual taxes, duties and fees. However, the Resolution of the majority points to the phrase "among other things" in Section 81 as authority for the DENR Secretary to issue DAO 56-99 prescribing the State's share in FTAAs. Apparently realizing the flimsiness of this theory, the majority subsequently advanced the argument that the President has the power to prescribe the fiscal regime of FTAAs, and that the DENR Secretary issued DAO 56-99 in his capacity as the alter ego of the President. The majority argues that since the 1987 Constitution authorizes the President to enter into FTAAs, the President has the prerogative to specify certain terms and conditions of the FTAAs. The Resolution of 1 December 2004 states: . . . It is the President who is constitutionally mandated to enter into FTAAs with foreign corporations, and in doing so, it is within the President's prerogative to specify certain terms and conditions of the FTAAs, for example, the fiscal regime of FTAAs i.e., the sharing of the net revenues between the contractor and the State. (Emphasis in the original; italics supplied) IHTaCE This argument is patently baseless because the very provision of the 1987 Constitution authorizing the President to enter into FTAAs also states that the President must enter into FTAAs "according to the general terms and conditions provided by law." This particular phrase is rich in constitutional history. The 1986 Constitutional Commission debated at length the power of the President to enter into FTAAs in light of service contracts with foreign contractors entered into by former President Ferdinand E. Marcos. One group of Commissioners favored the concurrence of Congress to all FTAAs entered into by the President. Another group was against Congressional concurrence but wanted Congress to prescribe the terms and conditions governing FTAAs, with the understanding that President must strictly comply with such terms and conditions. The following exchanges in the deliberations of the Constitutional Commission are instructive: MR. GASCON: As it is proposed now, such service contracts will be entered into by the President with the guidelines of a general law on service contracts to be enacted by Congress. Is that correct? MR. VILLEGAS:

xxx

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.

42

The Commissioner is right, Madam President. MR. GASCON: According to the original proposal if the President were to enter into a particular agreement, he would need the concurrence of Congress. Now that it has been changed by the proposal of Commissioner Jamir in that Congress will set the general law to which the President shall comply, the President will, therefore, not need the concurrence of Congress every time he enters into service contracts. Is that correct? MR. VILLEGAS: That is right. xxx MR. BENGZON: The reason we made that shift is that we realized the original proposal could breed corruption. By the way, this is not just confined to service contracts but also to financial assistance. If we are going to make every single contract subject to the concurrence of Congress which, according to the Commissioner's amendment is the concurrence of two-thirds of Congress voting separately then (1) there is a very great chance that each contract will be different from another; and (2) there is a great temptation that it would breed corruption because of the great lobbying that is going to happen. And we do not want to subject our legislature to that. Now, to answer the Commissioners apprehension, by "general law," we do not mean statements of motherhood. Congress can build all the restrictions that it wishes into that general law so that every contract entered into by the President under that specific area will have to be uniform. The President has no choice but to follow all the guidelines that will be provided by law. aCHDAE xxx MR. GASCON: But my basic problem is that we do not know as of yet the contents of such a general law as to how much constraints there will be in it. And to my mind, although the Committee's contention that the regular concurrence from Congress would subject Congress to extensive lobbying, I think that is a risk we will have to take since Congress is a body of representatives of the people whose membership will be changing regularly as there will be changing circumstances every time certain agreements are made. It would be best that to keep in tab and attuned to the interest of the Filipino people, whenever the President enters into any agreement with regard to such an important matter as technical or financial assistance for large-scale exploration, development and utilization of natural resources or service contracts, the people's elected representatives should be on top xxx MR. COLAYCO: Thank you, Madam President. xxx xxx xxx xxx xxx xxx

I support in substance the position taken by Commissioners Gascon and Nolledo. Let me point out the original thinking of the Committee itself. The second paragraph of Section 3 reads: "The President with the concurrence of Congress, by special law . . ." In other words, the original thinking of the Committee here was really to put some safeguards, but it turned around and agreed to delete the safeguards. These special contracts will probably involve oil and mineral land explorations. These will, therefore, involve millions. One of the reasons given for the deletion of "the concurrence of Congress" is that it may open the system to payola. This fear can also be entertained the other way. The President acts only upon the advice of his advisers, and if Congress can be bribed, a group of people can be bribed much more easily. But I am not thinking of that; I am simply thinking of human error. Probably Congress can anticipate the period, say, that the exploration should not exceed a certain period, and set standards. But as to the share of our government, for instance, there can easily be a mistake of judgment. There is no way that Congress can anticipate the discretion that should be used or the guidelines that should govern the thinking or the decision of the President. And for this reason, I believe that some kind of a safeguard or mechanism should be inserted in the system to obviate or at least reduce the possibility that our government may be too negligent in accepting the terms of the explorer. That is why I agree with the thinking of the two Commissioners who spoke ahead of me that we should retain the original plan of the Committee. However, personally, I would put it at a MAJORITY of either the Lower House or the Upper House. HDTISa Those who were against Congressional concurrence to FTAAs won the argument. Thus, under the 1987 Constitution, Congress prescribes the general terms and conditions of FTAAs, and the President must strictly comply with such terms and conditions. Without a law prescribing the terms and conditions of FTAAs, the President cannot enter into any FTAA. The President on his own cannot prescribe the fiscal regime of FTAAs. The following exchanges in the deliberations of the Constitutional Commission clearly bring this out: THE PRESIDENT: Commissioner Tan is recognized. 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.

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SR. TAN: Thank you, Madam President. xxx MR. DAVIDE: To allow the execution of service contracts, there must be a law for said service contracts. MR. SUAREZ: There must be a general law providing for the terms and conditions under which particular service contracts can be entered into by the executive department, Madam President. MR. DAVIDE: Yes, Madam President. xxx MR. SUAREZ: As it is formulated, the President may enter into service contracts but subject to the guidelines that may be promulgated by Congress? SEIcAD MR. JAMIR: That is correct. MR. SUAREZ: Therefore, that aspect of negotiation and consummation will fall on the President, not upon Congress? MR. JAMIR: That is also correct, Madam President MR. SUAREZ: Except that all of these contracts, service or otherwise must be made strictly in accordance with guidelines prescribed by Congress? MR. JAMIR: That is also correct. MR. SUAREZ: And the Gentleman is thinking in terms of a law that uniformly covers situations of the same nature? MR. JAMIR: That is 100 percent correct. (Emphasis and italics supplied) Contrary to the claim of the majority, the prerogative to prescribe the fiscal regime of FTAAs does not belong to the President but to Congress. The clear intent of the framers of the 1987 Constitution was xxx xxx xxx xxx

to remove from the President the power to prescribe the terms and conditions of FTAAs, a power that former President Ferdinand E. Marcos exercised solely. The framers of the 1987 Constitution intentionally gave to Congress the power to prescribe the terms and conditions of FTAAs, and to deny the President the exercise of such powers. The President can enter into FTAAs only within the terms and conditions prescribed by Congress, in accordance with any delegated authority that Congress may include in the enabling law. This is clear from the following exchange in the deliberations of the Constitutional Commission: THE PRESIDENT: Commissioner Foz is recognized. MR. FOZ: May we just add the word GENERAL to describe "terms and conditions" because Congress cannot be expected to lay down detailed terms and conditions for the contracts to be entered into between the executive department and the foreign-owned corporation. Congress can only lay down general guidelines. MR. ROMULO: The Gentleman wants to add the word "GENERAL"? MR. FOZ: Yes, Madam President. MR. ROMULO: Does Commissioner Sarmiento accept that? We have no objection. DHEACI MR. SARMIENTO: May I hear the amendment. MR. FOZ: It merely consists of the insertion of the word GENERAL before "terms." MR. VILLEGAS: I think the Committee will accept the amendment to the amendment. MR. ROMULO: We accept the amendment. Plainly, based on the intent of the framers of the 1987 Constitution, and on the language the framers used in the fourth paragraph of Section 2, Article XII, the power to prescribe the terms and conditions of FTAAs, including their fiscal regime, rests with Congress and not with the President. Indeed, in enacting the Mining Act, Congress has stipulated the terms and conditions for FTAAs. Section 35 of the Mining Act provides that

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the "following terms, conditions, and warranties shall be incorporated in the financial or technical assistance agreement to wit: . . ." Section 38 of the Mining Act expressly limits an FTAA to a "term not exceeding twenty-five (25) years." The majority opinion claims that the President has the power to prescribe "the fiscal regime of FTAAs i.e., the sharing of the net mining revenues between the contractor and the State." This claim of the majority renders the entire Chapter XIV of the Mining Act, an act of usurpation by Congress of Presidential power. Chapter XIV entitled "Government Share" prescribes the fiscal regimes of MPSAs and FTAAs. The constitutionality of Sections 80 and 81 of Chapter XIV whether the fiscal regimes prescribed in these sections of the Mining Act comply with the 1987 Constitution is the threshold issue in this case. The majority seeks to uphold the constitutionality of Section 81 of the Mining Act, an enactment of Congress prescribing the fiscal regime of FTAAs. If it is the President who has the constitutional authority to prescribe the fiscal regime of FTAAs, then Section 81 is unconstitutional for being a usurpation by Congress of a Presidential power. The majority's argument is self-contradictory. By claiming that the President has the prerogative to prescribe the fiscal regime of FTAAs, the majority contradicts its basic argument that DAO 56-99 draws life from the phrase "among other things" in Section 81 of the Mining Act. Apparently, the majority is not confident of its position that DAO 56-99 draws life from the phrase "among other things." The majority now invokes a non-existent Presidential power that directly collides with the express constitutional power of Congress to prescribe the "general terms and conditions" of FTAAs. IHTASa In issuing DAO 56-99, the DENR Secretary usurped the power of Congress to prescribe the terms and conditions of FTAAs. The following provisions in DAO 56-99 reveal this blatant usurpation of legislative prerogative: SECTION 1. to: Scope. This Administrative Order is promulgated

that Congress does not prescribe in Section 81 of the Mining Act. DAO 56-99 is void because the DENR Secretary has clearly no power to prescribe the fiscal regime of FTAAs, particularly the government's non-tax share from mining revenues. 3. Conclusion

In Sections 80 and 81 of the Mining Act, Congress required holders of MPSAs and FTAAs to pay only the usual taxes, duties and fees. Nothing in Sections 80 and 81 requires holders of MPSAs and FTAAs to pay the State any share from their mining revenues. Section 84 reiterates that the State's share is limited to the 2% excise tax. 33 Section 112 places under the fiscal regime established in Section 80 all MPSAs and FTAAs executed prior to the Mining Act. Thus, holders of prior MPSAs and FTAAs shall pay only the 2% excise tax as the "total" share of the State. Section 39 grants holders of FTAAs, like respondent WMCP, the option to convert their FTAAs to MPSAs. The President cannot save the Mining Act from constitutional infirmity by requiring FTAA contractors to pay the State a share from their mining revenues. The power to prescribe the fiscal regime of FTAAs belongs to Congress, not to the President. Neither can this Court elevate DAO 56-99 to the status of a law to plug a fatal constitutional hole in the Mining Act. Like the President, this Court cannot legislate the fiscal regime of FTAAs. cTCADI This Court must simply do its solemn duty declare Sections 39, 80, 81, 84 and 112 of the Mining Act unconstitutional for violation of Section 2, Article XII of the 1987 Constitution. This Court must allow Congress to enact the remedial measures to correct the constitutional infirmities in the Mining Act. This Court cannot act as savior of the Mining Act by interpreting the phrase "among other things" as the source of authority for the DENR Secretary to correct a constitutional defect in the Mining Act. This Court cannot invest in the President the power to prescribe the fiscal regime of FTAAs just to save the Mining Act from constitutional infirmity. Such power clearly belongs to Congress, not the President. This Court must also declare void the 50-year term in Section 3.3 of the WMCP FTAA. FTAAs are mineral agreements that are subject to the 25year term limit in the first paragraph of Section 2, Article XII of the 1987 Constitution. The WMCP FTAA's 50-year term also violates Section 38 of the Mining Act, which expressly limits FTAAs to 25-year terms, thus: 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. (Emphasis and italics supplied) There is no escaping from the invalidity of the 50-year term of the WMCP FTAA. This violation is so glaring and blatant that the Court has no choice but to declare the 50-year term void. The majority cannot simply declare the 50-year term valid without any explanation why a 50-year term is valid considering the mandatory 25-year term limit in Section 38 of the Mining Act. To merit observance and respect a ruling of this Court must state clearly and distinctly the law which serves as basis of the ruling. 34 Likewise, the Resolution of 1 December 2004 ruled that Section 112 of the Mining Act "cannot be made to apply to FTAAs." Since Section 112 does not apply to FTAAs, the majority conclude that the provision in

a. Establish the fiscal regime for FTAAs which the Government and the FTAA Contractors shall adopt for the large-scale exploration, development and commercial utilization of mineral resources in the country; . . . xxx xxx xxx

SECTION 3. Fiscal Regime of a Financial or Technical Assistance Agreement. The Financial or Technical Assistance Agreement which the Government and the FTAA Contractor shall enter into shall have a Fiscal Regime embodying the following provisions: a. General Principles. The Government Share derived from Mining Operations after the Date of Commencement of Commercial Production shall be determined in accordance with this Section. xxx xxx xxx

(Emphasis supplied) DAO 56-99 purports to "establish the fiscal regime of FTAAs" without guidelines or standards from Congress, for there are none. DAO 56-99 fixes the non-tax "Government Share" from mining revenues, a share

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Section 112 placing all mineral agreements under the fiscal regime applicable to MPSAs "cannot be made to apply to FTAAs." The majority justified its ruling that Section 112 does not apply to FTAAs by stating that . . . Section 112 does not specifically mention or refer to FTAAs; the only reason it is being applied to them at all is the fact that it happens to use the word "contractor." Hence, it is a bit of a stretch to insist that it covers FTAAs as well. . . ." (Emphasis supplied) The majority's justification that Section 112 does not specifically mention or refer to FTAAs collides with the express language of Section 112, which provides: Section 112. Non-impairment of Existing Mining/Quarrying Rights. All valid and existing mining lease contracts, permits/licenses, leases pending renewal, mineral production-sharing agreements granted under Executive Order No. 279, at the date of effectivity of this Act, shall remain valid, shall not be impaired, and shall be recognized by the Government: Provided, 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: Provided, further, That no renewal of mining lease contracts shall be made after the expiration of its term: 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. (Emphasis and italics supplied) The last proviso of Section 112 categorically states that "financial or technical assistance agreements shall comply with the applicable provisions of this Act and its implementing rules and regulations." It is as clear as daylight that Section 112 specifically mentions and refers to FTAAs. aCcHEI There is no doubt whatsoever that Section 112 applies to FTAAs. There are no ifs or buts that Section 112, by its clear and unequivocal language, applies to FTAAs. The last proviso of Section 112 expressly mandates that FTAAs must comply with the applicable provisions of the Mining Act. One of the applicable provisions is Section 112 itself, which places "all" mineral agreements executed prior to the Mining Act under the fiscal regime governing MPSAs in Section 80 which limits the "total government share" to the 2% excise tax. This makes the last proviso of Section 112 unconstitutional because it limits the government share in FTAAs to the usual taxes, duties and fees. How the majority can proclaim that Section 112 does not specifically mention or refer to FTAAs defies the clear, physical and tangible written wording of Section 112. The majority has ruled that the words "financial or technical assistance agreements" do not appear in Section 112 when in reality and in fact these words appear in Section 112. The majority should explain why the last proviso in Section 112 does not apply to FTAAs despite its express reference to FTAAs, instead of saying that Section 112 does not contain any language mentioning or referring to FTAAs. This Court cannot rule that a word does not appear in the law when in fact the word is so obviously written in the law. What this Court can validly rule is that despite the express mention of a particular word, the intent of the law is otherwise. The majority must read the written words

in the law the way the public reads the written words in the law. No one can dispute what the written words are in the law. The written words are found in the enrolled bill enacted by Congress and approved by the President or allowed by the President to lapse into law. The majority can interpret the written words differently from the minority, but the majority cannot simply wish away the existence of certain words expressly written in the law. This Court, moreover, must declare unconstitutional Section 3(aq) of the Mining Act authorizing the issuance to foreign contractors of exploration permits. Section 2, Article XII of the 1987 Constitution reserves to Philippine citizens and 60% Filipino owned corporations the "exploration, development and utilization" of natural resources. In FTAAs, the State may authorize the foreign contractor to conduct the physical act of exploration as agent of the State but not as holder of the exploration permit. In FTAAs, the State itself directly undertakes the exploration and exploitation of minerals, petroleum, and other mineral oils with the foreign contractor providing the State assistance financial or technical or even both. The foreign contractor, as contracting agent of the State, may manage the contracted mining operations covered by the FTAA to the extent of the foreign contractor's financial and technical contribution. Such management, however, remains subject to the full control and supervision of the State. There is no dispute that the foreign contractor can engage in mining operations as the contracting agent of the State under an FTAA. The fourth paragraph of Section 2, Article XII of the 1987 Constitution expressly allows the State to enter into an FTAA with a "foreign-owned corporation." Thus, the issue is not whether a foreign contractor can engage in mining operations in the Philippines. Rather, the issue is the equitable share of the State from the mining profits of the foreign contractor. THaDAE The P47 trillion mineral wealth of the nation is the Filipino people's inheritance from the Creator. This mineral wealth is exhaustible and non-renewable. Once removed from the earth, this mineral wealth is gone forever. This mineral wealth is a major part of the patrimony of the nation. The 1987 Constitution mandates the State to "conserve and develop" the national patrimony for the benefit of the Filipino people. Sections 3(aq), 39, 80, 81, 84 and 112, as well as DAO 56-99, constitute a sell-out of the national patrimony to foreigners. Let it not be said that no one warned this Court of the tragedy about to strike the Filipino people as a result of the Resolution of 1 December 2004. One can just imagine the anger of the Filipino people once they realize they will not receive any share in the mining profits of foreign contractors. The Filipino people will inherit a land environmentally degraded before by forest denudation, and now by large-scale mining. The Filipino people did not receive any share in the profits of logging concessionaires. Now, the Filipino people will also not receive any share in the profits of mining contractors. To save themselves from the Filipino people's ire, the mining industry, the legislature and the executive will all point to this Court's Resolution of 1 December 2004. Sadly, the blame will fall squarely on this Court. By validating DAO 56-99, the Court's Resolution of 1 December 2004 legitimizes the plunder of the P47 trillion mineral wealth of the nation. This reminds us of the plunder by the Spanish conquistadores in the 16th century of the riches of the Aztecs, Mayans and Incas. The only difference is that the Aztecs, Mayans and Incas lost their wealth

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involuntarily by force of arms. Under the Resolution of 1 December 2004, the Filipino people will lose their mineral wealth voluntarily to foreigners by judicial fiat of this Court. The decision of this Court in the present case will determine largely whether this country will remain poor, or whether this country can parlay its P47 trillion mineral resources into developing the national economy. History will judge whether this Court has met in the present case the challenge of conserving and developing the national patrimony for the benefit of the Filipino people. I vote to grant petitioners' motion for reconsideration and to declare unconstitutional Section 3(aq), Section 39, Section 80, the second paragraph of Section 81, the proviso in Section 84, and the first proviso in Section 112 of the Mining Act. 35 The power to prescribe the fiscal regime of FTAAs is lodged in Congress, which must consider the following in prescribing the fiscal regime: a. The Constitutional mandate that the State shall "conserve and develop" the national patrimony for the benefit of the Filipino people; b. The Constitutional declaration that mineral resources are "owned" by the State; IaAHCE c. The Constitutional mandate that the State shall exercise "full control and supervision" in the exploration and exploitation of mineral resources; d. The Constitutional requirement that FTAAs shall "make real contributions to the economic growth and general welfare" of the Filipino people; e. The admissions by intervenor Chamber of Mines of the Philippines and respondent WMCP that in FTAAs the State stands in the place of the 60% Filipino owned company and that the State is entitled to 60% of the net mining revenues; f. The industry practice between mine claim owners and operators under the 1935 and 1973 Constitutions as exemplified in the Consolidated Mines case; 36 g. The precedent set in the Occidental-Shell FTAA involving the Malampaya offshore gas fields; 37 h. The cost of rehabilitating the environment degraded by the mining operations, and the share of the State in such cost. I also vote to declare void DAO 56-99 for being manifestly and grossly disadvantageous to the government and the Filipino people, aside from being a usurpation of the legislative power to prescribe the fiscal regime of FTAAs. In issuing DAO 56-99, the DENR Secretary gravely abused his discretion amounting to lack of jurisdiction. Lastly, I also vote to declare the WMCP FTAA void since its Sections 2.1, 3.3, 7.8, 7.9, 8.3 and 10.4(i) violate Section 2, Article XII of the 1987 Constitution. 38 Section 3.3 of the WMCP FTAA is also void for violation of Section 38 of the Mining Act. CARPIO-MORALES, J., dissenting: "Great cases, like hard cases, make bad law. For great cases are called great, not by reason of their real importance in shaping the law of the

future, but because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment. These immediate interests exercise a kind of hydraulic pressure which makes what previously was clear seem doubtful, and before which even well settled principles of law will bend." (Dissenting Opinion of Justice Oliver Wendell Homes in Northern Securities Company v. U.S., 193 U.S. 197, 400-401 [1904]) The issue of the constitutionality of Republic Act No. 7942 (the Mining Act of 1995) and its implementing rules an issue which has proven to be of "immediate overwhelming interest" is once again before this Court. CaAIES This time, petitioners seek a reconsideration of this Court's December 1, 2004 Resolution which granted the respondents' and intervenors' Motions for Reconsideration of its Decision of January 27, 2004. The dispositive portion of the December 1, 2004 Resolution reads: 1 WHEREFORE, the COURT RESOLVES to GRANT the respondents' and the intervenors' Motions for Reconsideration; to REVERSE and SET ASIDE this Court's January 27, 2004 Decision; to DISMISS the Petition; and to issue this new judgment declaring CONSTITUTIONAL (1) Republic Act No. 7942 (the Philippine Mining Law), (2) its Implementing Rules and Regulations contained in DENR Administrative Order (DAO) No. 9640 insofar as they relate to financial and technical assistance agreements referred to in paragraph 4 of Section 2 of Article XII of the Constitution; and (3) the Financial and Technical Assistance Agreement (FTAA) dated March 30, 1995 executed by the Government and Western Mining Corporation Philippines Inc. (WMCP), except Sections 7.8(e) and 7.9 of the subject FTAA which are hereby INVALIDATED for being contrary to public policy and for being grossly disadvantageous to the government. (Italics in the original) Arguing that the Mining Act and its implementing rules violate the provisions of Section 2, Article XII of the Constitution regarding "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," petitioners pray that: (a) Oral argumentation be set for the purpose of clarifying the new issues raised in the [Resolution] of December 1, 2004; (b) After notice and hearing:

1. the [Resolution] rendered on December 1, 2004 be set aside and vacated; 2. the WMCP FTAA deriving force and effect from it be declared unconstitutional, illegal and null and void; 3. Republic Act No. 7942 and its Implementing Rules and Regulations be declared unconstitutional and null and void. Such other relief as are just and equitable under the premises. Unfortunately, as noted in the majority Resolution on petitioners' Motion for Reconsideration at bar, "after a thorough deliberation on the Motion, none of the members of this Court have changed their opinions or votes." Petitioners are thus not afforded the opportunity to fully discuss, through oral argument, the new issues which have arisen in this case.

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However, at some future time, this Court may have the opportunity to re-examine and re-evaluate the pronouncements and conclusions made by the majority. I am thus compelled to underscore the following points in addition to those set forth in my Dissenting Opinion of December 1, 2004. cHDEaC As petitioners point out, the Court's December 1, 2004 Resolution makes much of the government's self-declared "fiscal crisis" and ultimately concludes that the State will never be in a position to directly explore, develop or utilize its own resources: However, it is of common knowledge, and of judicial notice as well, that the government is and has for many years been financially strapped, to the point that even the most essential services have suffered serious curtailments education and health care, for instance, not to mention judicial services have had to make do with inadequate budgetary allocations. Thus, government has had to resort to build-operate-transfer and similar arrangements with the private sector, in order to get vital infrastructure projects built without any governmental outlay. The very recent brouhaha over the gargantuan "fiscal crisis" or "budget deficit" merely confirms what the ordinary citizen has suspected all along. After the reality check, one will have to admit the implausibility of a direct undertaking by the State itself of large-scale exploration, development and utilization of minerals, petroleum and other mineral oils. Such an undertaking entails not only humongous capital require me, but also the attendant risk of never finding and developing economically viable quantities of minerals, petroleum and other mineral oils. 2 (Emphasis supplied) At the same time, the ponencia seems to have accepted the necessity of engaging in large scale mining activities in order to realize the projected riches, which are expected to materialize as a result: Whether we consider the near term or take the longer view, we cannot overemphasize the need for an appropriate balancing of interests and needs the need to develop our stagnating mining industry and extract what NEDA Secretary Romulo Neri estimates is some US$840 billion (approx. PhP47.04 trillion) worth of mineral wealth lying hidden in the ground, in order to jumpstart our floundering economy on the one hand, and on the other, the need to enhance our nationalistic aspirations, protect our indigenous communities, and prevent irreversible ecological damage. 3 (Emphasis supplied) Indeed, the majority appears to have taken a liking to the mining industry as a whole, affording economic woes a greater measure of sympathy than that accorded to the "big three" oil players in Tatad v. Secretary of the Department of Energy 4 or local cement producers in Southern Cross Cement Corp. v. Phil. Cement Manufacturers Corp. 5 Thus, in abandoning his original finding of mootness, the ponente states: But of equal if not greater significance is the cloud of uncertainty hanging over the mining industry, which is even now scaring away foreign investments. Attesting to this climate of anxiety is the fact that the Chamber of Mines of the Philippines saw the urgent need to intervene in the case and to present its position during the Oral Argument; and that Secretary General Romulo Neri of the National Economic Development Authority (NEDA) requested this Court to allow him to speak, during that Oral Argument, on the economic consequences of the Decision of January 27, 2004. EDaHAT

We are convinced. We now agree that the Court must recognize the exceptional character of the situation and the paramount public interest involved, as well as the necessity for a ruling to put an end to the uncertainties plaguing the mining industry and the affected communities as a result of doubts cast upon the constitutionality and validity of the Mining Act, the subject FTAA and future FTAAs, and the need to avert a multiplicity of suits. Paraphrasing Gonzales v. Commission on Elections, it is evident that strong reasons of public policy demand that the constitutionality issue be resolved now. 6 (Emphasis supplied; italics in the original) Not surprisingly, petitioners object to the foregoing economic considerations which are perceived to underpin this Court's December 1, 2004 Resolution. Thus, they argue: The main ponencia arrives at its conclusions with respect to determining what constitutes equitable sharing as well as reasonable control through the following assumptions which may have taken the form of judicial notice: First, in agreements with fully foreign owned corporations in the exploration, development and utilization of mineral resources, the government does not take any risk; Second, increasing investments in the commercial extraction of mineral resources would contribute positively to economic growth; Third, a more liberal investment friendly interpretation of the provisions of the constitution will result in increase in beneficial investments. These are assumptions expected of investors who are wishing to convince the state to make regulations friendlier to their operations. However, they do not necessarily redound to the benefit of the many more members of communities directly or indirectly affected 7 Instead, petitioners, advocate what they believe to be the better development paradigm: The main opinion opens with a desire to arrive at an interpretation of the constitution that does not "strangulate economic growth . . . to serve narrow parochial interests." It also assumes that encouraging the exploitation of mineral resources would "attract foreign investments and expertise" and that it would necessarily "secure for our people and our posterity the blessings of prosperity and peace." Besides simply asserting it to be a truism that restricting investments in extractive natural resources slows growth, the respondents have not presented any viable empirically proven causation between restricted investments in extractive natural resource industries and slower growth. In fact, study after study has shown that the opposite is empirically proven. cAaETS The natural resource curse is a phenomenon that is a demonstrable empirical fact. With few exceptions, countries which rely heaviest on their natural resources sector are the ones that exhibited the slowest growth. Empirical and analytic studies cited by economists Sachs and Warner . . . show that the natural resource curse is a demonstrable empirical fact, even after controlling for trends in commodity prices. There is little direct evidence that omitted geographical or climate variables explain the curse, or that there is bias resulting from some other unobserved growth deterrent. Resource-abundant countries

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tended to be high-priced economies and, consequently, tended to miss out on export-led growth. Natural resource abundance can crowd-out drivers of growth such as traded-manufacturing activities, education and even growth-promoting entrepreneurial activity. If, as the ponencia admonishes, we are to read the Constitution in broad, life-giving strokes in a manner that does not strangulate economic growth and gives justice to all, present and future generations we cannot close our eyes to this empirical reality: that dependence on our natural resources can ultimately lead to slower growth, if not a growth collapse. It should be cautious rather than embracing of very large investments into the exploration, development and utilization of natural resources. The fear expressed by the ponencia that our growth will stagnate has no empirical leg to stand on and therefore should not be the basis of any form of judicial assumption or judicial notice. 8 (Italics in the original; citations omitted) To my mind, both approaches, which articulate a desired economic result, are inappropriate and inapplicable to the determination of the constitutionality of the Mining Act. In my view, judicial decision making should not be influenced by a desired economic outcome, but should be the product of the application of established neutral legal principles to the facts and the law of the case. If, in deciding a question of constitutionality, a judicial decision should reflect a particular economic perspective, it should only be that adopted by the Constitution itself. As Aristotle put it, "Law is reason free from passion." And, since the authority of this Court possessed of neither the purse nor the sword ultimately rests on sustained public confidence in its moral sanction, 9 it must ultimately depend on the power of reason, its sole currency to paraphrase Justice Thurgood Marshall, 10 for sustained public confidence in the justness of its decisions. 11 It should be plain that judges do not engage in reason giving or opinion writing merely as an intellectual performance. . . . A judicial justification . . . is offered in order to justify to someone the decision or conclusion; a justification is directed to an audience. Perhaps the first person to whom the justification is directed is the losing litigant; and to this may be added all other people whose interests might be adversely affected by the result. These persons need to be assured that the administration of the law is not just a bald exercise of coercion, that it is not the might of the judge (the power of enforcement) that makes the decision right. Reasoned decisions, therefore, can be viewed as attempts at rational persuasion; and by means of such decisions, losing parties may be brought to accept the result as a legitimate exercise of authority. If this acceptance is achieved, the cause of social peace is also promoted, since every case has a loser. The system of administering justice through the courts is not likely to survive for very long if half the people whose disputes are resolved are convinced that judges arbitrarily decide questions of law. 12 (Italics in the original; emphasis and italics supplied) SAHITC Judicial decisions, however, do not merely serve the purpose of convincing people that judges do not act arbitrarily. Justice Oliver Wendell Holmes, Jr. correctly viewed case law as a prediction of what courts will do. 13 Judicial decisions supply guidance to other individuals on what the law is and on how their cases are likely to be decided should they end up in court, so that those individuals can adjust their conduct accordingly. 14 . . . But a decision can serve this function only if reasons are given, otherwise, all one has is an unconnected series of raw facts. One has to

know which facts are legally significant which is what the reasons indicate. (The fact that the man who went through the red light was named Smith is not legally significant, but the fact that he was on his way to a hospital may be crucial.) Second, appellate courts are supposed to supply legal guidance to lower courts, and because of considerations similar to those just mentioned, their decisions will not be very helpful unless they lay out the reasons for their rulings. And third, in the American system many decisions are justified by reference to precedent the decisions made in prior cases. Again, it is only because explicit reasons were given for these earlier decisions that they are of any use for later cases. Plainly, many of the functions that courts serve require reasoned decisions. 15 (Emphasis supplied) It goes without saying that certainty, predictability and stability in the law are the major objectives of the legal system, and judicial decisions serve the important purpose of providing stability to the law and to the society governed by that law. Hence, the doctrine of stare decisis 16 which Justice Sandra Day O' Connor described in State Oil Co. v. Khan 17 as "the preferred course because it promotes the evenhanded, predictable, and consistent development of legal principles, fosters reliance on judicial decisions, and contributes to the actual and perceived integrity of the judicial process." 18 This sentiment is echoed by Justice Benjamin Cardozo: . . . I must be logical, just as I must be impartial, and upon like grounds. It will not do to decide the same question one way between one set of litigants and the opposite way between another. "If a group of cases involves the same point, the parties expect the same decision. It would be a gross injustice to decide alternate cases on opposite principles. If a case was decided against me yesterday when I was defendant, I shall look for the same judgment today if I am plaintiff. To decide differently would raise a feeling of resentment and wrong in my breast; it would be an infringement, material and moral, of my rights." Everyone feels the force of this sentiment when two cases are the same. Adherence to precedent must then be the rule rather than the exception if litigants are to have faith in the even-handed administration of justice in the courts. 19 (Citations omitted; emphasis supplied) IESTcD And these desired objectives of certainty, predictability and stability can only be achieved if courts render decisions based on legal principles. The determination of the correctness of a judicial decision turns on far more than its outcome. 20 Rather, it turns primarily on whether its outcome evolved from principles of judicial methodology 21 since the Judiciary's function is not to bring about some desirable state of affairs but to find objectively the right decision by adhering to the established general system of rules. 22 The philosophy of "the end justifies the means" espoused by Niccolo Machiavelli simply has no place in decision making. As one judge puts it: These methodological constraints do mean that we judges sometimes sustain actions we think make little sense, invalidate programs we like, or apply precedents we believe were wrongly decided. . . . In all these cases, though, we may have been troubled by the outcomes, we knew that vindicating the rule of law was far more important to our constitutional system than the issues at stake in any particular case. Oliver Wendell Holmes, Jr. put it this way: "It has given me great pleasure to sustain the Constitutionality of laws that I believe to be as bad as possible, because I thereby helped to mark the difference between what I would forbid and what the Constitution permits." 23 (Citation omitted; emphasis and italics supplied).

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In his seminal article entitled Toward Neutral Principles of Constitutional Law, 24 Columbia law professor Herbert Wechsler popularized the phrase "principled decision" which he defined as "one that rests on reasons with respect to all the issues in the case, reasons that in their generality and their neutrality transcend any immediate result that is involved." 25 Consequently, to adopt a strained interpretation of a rule to achieve desired results is not a "neutral principle," and decisions that apply it are not genuinely principled decisions because they do not rest on analysis and reasons quite transcending the immediate result. 26 Wechsler further elaborates: When no sufficient reasons of this kind can be assigned for overturning value choices of the other branches of the Government . . . those choices must, of course, survive. xxx xxx xxx

centavos. More worthy of protection than the supra-normal profits of private corporations is the sanctity of the fundamental principles of the Constitution. Indeed when confronted by a law violating the Constitution, the Court has no option but to strike it down dead. Lest it is missed, the Constitution is a covenant that grants and guarantees both the political and economic rights of the people. The Constitution mandates this Court to be the guardian not only of the people's political rights but their economic rights as well. The protection of the economic rights of the poor and the powerless is of greater importance to them for they are concerned more with the esoterics of living and less with the esoterics of liberty. Hence, for as long as the Constitution reigns supreme so long will this Court be vigilant in upholding the economic rights of our people especially from the onslaught of the powerful. Our defense of the people's economic rights may appear heartless because it cannot be half-hearted. 33 (Italics in the original; emphasis supplied) DAHCaI In reversing this Court's January 27, 2004 Decision, I fear that the majority has retreated from its resolve in Tatad and, unwittingly, has been swayed by peripheral and ultimately irrelevant economic arguments in its well-intentioned desire to arrive at a result which it believes would encourage economic recovery and prop up the floundering mining industry. By doing so, however, the majority has given its imprimatur to an interpretation and application of the concepts of "verba legis," "full control and supervision," and "permissible legislative delegation," which are inconsistent with established "neutral principles" and incompatible with the letter and intent of the Constitution, 34 thus undermining the stability of our jurisprudence and making the administration of justice a constant subject of speculation. In both the questioned Resolution of December 1, 2004 and in the present Resolution denying petitioners' Motion for Reconsideration, the majority has continuously expressed its trust in the faithful exercise of discretion by both the President and her alter-ego, the Secretary of Environment and Natural Resources, in order to secure for all Filipinos, present and future, their just share in the nation's mineral resources: . . . The issue of how much "profit" the nation should or could derive from the exploration, development and utilization of the country's mineral resources is a policy matter, over which we "must allow the President and Congress maximum discretion in using the resources of our country and in securing the assistance of foreign groups to eradicate the grinding poverty of our people and answer their cry for viable employment opportunities in the country," (pp. 240-241, Resolution dated December 1, 2004). That the aforementioned law, executive issuance and contract had been declared constitutional will not prevent Congress or the President or the parties to the FTAA from amending or modifying them, if indeed, in their opinion they are unwise or wanting in any respect. While there can be no doubt that the political branches of government enjoy a wide discretion in enacting and implementing programs and policies for the common good, still the exercise of this discretion is subject to the limitations imposed by the Constitution. Thus, in my view, respect for the other co-equal branches of government can, and should, go hand-in-hand with a critical investigation of those limits. Indeed, behind every constitution is the premise of mistrust. Consider the insight of James Madison, widely regarded as the Father of the American Constitution:

The virtue or demerit of a judgment turns, therefore, entirely on the reasons that support it and their adequacy to maintain any choice of values it decrees, or, it is vital that we add, to maintain the rejection of a claim that any given choice should be decreed. 27 That said, it is readily apparent that this Court should not heed the apprehension of some foreign businessmen that this Court's January 27, 2004 Decision in La Bugal-B'Laan Tribal Association, Inc. v. Ramos 28 might hamper the government's efforts of resuscitating the mining industry and ultimately result in "the possible loss of billions of dollars of investments and exports and tens of thousands of jobs. . . ." 29 Nor should this Court be swayed by moves to fault Justices whose decisions are not to a party's liking. 30 As observed by Professor Aharon Barak, the President of the Supreme Court of Israel, criticism of the judiciary is unavoidable: . . . In performing [its] duty, the court must, inevitably, be in conflict with the other branches, especially so in modern times where more and more political questions present themselves as legal questions, and are brought to be adjudicated before the courts, and especially so where the scope of judicial review over the other branches is wider than in the past. A wider judicial review carries with it wider interest in the courts, and widening tension between the court and the other branches of government. If there will be no conflict and no tension, the court will not be fulfilling its constitutional role. Thus, criticism there will always be. 31 In Tatad v. Secretary of Department of Energy, 32 this Court, speaking through Justice (now Senior Associate Justice) Reynato S. Puno, put aside all consideration of the possible impact the invalidation of the Oil Deregularization Law might have on the profitability of the petroleum industry in favor of a principled interpretation of the Constitution: With this Decision, some circles will chide the Court for interfering with an economic decision of Congress. Such criticism is charmless for the Court is annulling R.A. No. 8180 not because it disagrees with deregulation as an economic policy but because as cobbled by Congress in its present form, the law violates the Constitution. The right call therefor should be for Congress to write a new oil deregulation law that conforms with the Constitution and not for this Court to shirk its duty of striking down a law that offends the Constitution. Striking down R.A. No. 8180 may cost losses in quantifiable terms to the oil oligopolists. But the loss in tolerating the tampering of our Constitution is not quantifiable in pesos and

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But what is government itself, but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions. 35 (Emphasis supplied) TcEaAS Our present Constitution is no exception. The 1987 is the product of our experience during martial law as elucidated by Justice Puno: . . . The serendipity of the 1935 Constitution was tested by the tumult of the 60's and the 70's. The writ of habeas corpus was suspended and when that remedy proved inadequate, President Marcos wielded the state's ultimate weapon by declaring martial law. The President's exercise of his commander-in-chief powers distorted the distribution and balance of state powers. The legislature was shut down; the executive became the dominant branch of government; and the exercise of certain political and civil rights was diminished. The rearrangement of powers and its effects on individual rights brought to the limelight the judiciary and its power of judicial review. Demand was made for the Highest Court of the land to exercise its power of review, to set aside the presidential proclamation of martial law, and to void the 1973 Constitution's ratification. . . . [T]he High Court decided these cases by following the traditional and prudential path in constitutional litigations. It declined to strike down the acts of the Chief Executive and the ratification by the people of the 1973 Constitution on the ground that they constitute political questions. Thus, the President continued to be the dominant force in the legal landscape. Under Amendment No. 1 of the 1973 Constitution, the president was further given the unusual power to make laws. Congress abdicated its lawmaking powers, the first time legislative power was surrendered to the executive. With the legislative and executive powers concentrated in the presidency, the judiciary became more passive in the exercise of its power of review. There was more resort to the doctrine of political question to justify non-interference in acts of government. Soon, the volume and velocity of the problems that confronted the Marcos government reached a disturbing level. . . . [J]udicial control of government wrongdoings weakened, proving to be critical to the administration's fate. The passivity with which the power of judicial review was wielded by the courts drove those who sought grievance for their complaints to take to the streets. Street sovereignty reigned over the sovereignty of the parliament; the people's tribunal determined what the rule of law ought to be and not the courts of justice. In the end, people power settled the issues which the courts declined to resolve. . . . 36 And "born out of the trauma of martial law, the 1987 Constitution relies on a strengthened judiciary not only to safeguard the liberties of the people but also to prevent the unwarranted assumption of power by the other two departments of government." 37

scope of judicial inquiry broadened into areas which the Court under previous constitutions would have normally left to the political departments to decide. 39 Included in this new found strength is the Court's power-duty to review economic measures implementing policy as Dean Pacifico A. Agabin, counsel for intervenor, Chamber of Mines, more than adequately explains: The 1987 Constitution follows the modern trend. It is not made out of the same mold as the American federal constitution. While the latter is almost silent on government intervention in the economy, our constitution is replete with provisions for regulation of the economy and of the state's positive obligation to promote social justice. As its framers like to put it, our present constitution is "pro-people, pro-poor, and pro-Filipino." This means that the Philippine Supreme Court, unlike the U.S. Supreme Court, cannot promote the development of capitalist institutions at the expense of the people. It cannot assume the function of protecting the market from various regulatory incursions if these conflicts with the economic policies incorporated in the constitution. While the constitutional tools which may be used to protect free enterprise have been copied in the present constitution, like the due process clause, the equal protection clause, the contracts clause, and the takings clause, these have been neutralized not only by the reversals by the Supreme Court but also by countervailing policies in the constitution itself. Unless we reduce the constitution to a mere imitation of its American counterpart, the Supreme Court cannot behave like the U.S. Supreme Court during the Gilded Age when it tilted the balance in favor of free markets over the sovereignty of the people. CAHaST Of course, the basic understanding behind our politico-legal culture is that the function of our electorally accountable legislative branch is to make policy choices; the function of our electorally accountable executive branch is to administer policy choices; and the function of our electorally unaccountable judicial branch is merely to enforce policy choices. Proceeding from this premise, it becomes clear that it is the duty of our Supreme Court to enforce policy choices especially if these are provided for in the fundamental law. While "originalists" think that it is illegitimate for the judiciary to go beyond the enforcement of policy to the making of policy, and while it is illegitimate for the judiciary to oppose itself to the democratic departments of government, it must now follow that it is the legitimate duty of the judiciary to enforce policy which has been constitutionalized by the people. It must be granted that policies constitutionalized by the people constitute valid delegations of power to the Supreme Court, which it cannot shirk to enforce if its members are to be true to their oath to support the constitution. To draw an analogy from the U.S. Constitution, it is like the ideals of liberty and equality which are enshrined in that constitution To paraphrase Justice Benjamin Cardozo, these "are preserved against the assaults of opportunism, the scorn and derision of those who have no patience with general principles, by enshrining them in constitutions, and consecrating to the task of their protection a body of defenders." Since the "body of defenders" referred to is the Supreme Court, it cannot shirk the defense of provisions embodied in the constitution without abdicating its duty, not to mention that of the individual justices to uphold the constitution. To quote Justice Felix Frankfurter in another context, "the course of constitutional history has cast responsibilities upon the Supreme Court which it would be 'stultification' for it to evade." 40

With the words "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," 38 the

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Critics of the Supreme Court are not really against judicial review of economic policy in principle. They are against judicial review only if the Court declares a law unconstitutional, or if it reverses administrative agency action implementing economic policy as grave abuse of discretion. In short, they are against the use of judicial review as a veto power, with the Supreme Court sitting as a super legislature or as super executive. But this depends, as one wag puts it, on "whose ox is being gored." xxx xxx xxx

This attack against judicial "intrusion" in economic policy is off-tangent in the Philippine context. This view of the limited role of the Court uses the American constitution as its frame of reference, and sees the Court as the counterpart of the American Supreme Court. Indeed, it is reminiscent of the American cultural bias for non-intervention in economic affairs. Perhaps in our day and age, with globalization and liberalization of trade and commerce as the pervasive buzzwords, this is the proper perspective. 41 But the historical fact is that the Philippine constitution is not completely carved out of the pattern of the American constitution. The Philippine constitution is cast in the modern mold which lists a number of economic, social, and educational policies which the Court is bound to enforce. This enforcement of economic policy, which necessarily carries with it the interpretation of words and phrases used in the constitution, gives the Court not only the opportunity but also the duty to review economic measures implementing policy. 42 (Citations omitted; emphasis and italics supplied). DAETcC Thus, I do not believe that the issue of whether the State receives a just share of the proceeds from the country's mineral wealth under the Mining Act and its implementing rules can be lightly rebuffed as a "policy question." Section 2, Article XII of the Constitution provides that agreements with foreign-owned corporations "for large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils" be, among other considerations, "based on real contributions to the economic growth and general welfare of the country." Thus, the discretion of the legislative and executive branches is clearly circumscribed by this constitutional limitation. 43 As discussed in my Dissenting Opinion of December 1, 2004, I do not believe that the Mining Act and its implementing rules comply with this constitutional requirement. Instead, I find that the Mining Act and its implementing rules provide for the unconstitutional transfer of the beneficial ownership of Philippine mineral resources to foreign hands. DTISaH In light of the foregoing, and for the specific reasons discussed fully in my Dissenting Opinion of December 1, 2004, I vote to grant petitioners' Motion for Reconsideration, qualified by this Court's Decision of January 27, 2004.

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