Constitutional Provisions on Economic Protectionism

CONSTITUTION
 the fundamental and paramount law of the nation*
 a system of fundamental laws for the governance and
administration of a nation**
 prescribes the permanent framework of a system of
government, assigns to the different departments their
respective powers and duties, and establishes certain
fixed principles on which government is founded**
 It is supreme, imperious, absolute and unalterable except
by the authority from which it emanates**
 it is a supreme law to which all other laws must conform
and in accordance with which all private rights must be
determined and all public authority administered**

*16 C.J.S., Constitutional Law, Sec. 48, p. 101
**Way v. Barney, 116 Minn. 285, 133 N.W. 801, 804 38 L.R.A. (N.S.) 648, Ann. Cas. 1913 A, 719 [1911]; Brice v. McDow,
supra, at 87; Morgan v. Board of Supervisors, 67 Ariz. 133, 192 P. 2d 236, 241 [1948]; Gonzales, supra..

Proposed Changes
 allowing 100% ownership of land by foreigners

 allowing foreigners to explore and exploit the country’s natural
resources

 allowing 100% foreign ownership of public utilities and educational
institutions by foreigners

 allowing foreigners ownership of mass media institutions and
control of advertising

 clipping the powers of the Supreme Court to intervene in
economic decisions and projects

 clipping the powers of the Senate by bestowing to the President
the full authority to enter into international agreement and
treaties
http://www.agham.org/cms/content/

1987 Constitution: Economic
Protectionism Provisions
 Overall declarations of nationalist economic
policy covering foreign economic relations
and domestic policy thrusts – Article II,
Sections 2, 7, 17, 19, & 20

 Restriction of foreign ownership and degree
of involvement in decision-making – Article
XII, Sections 1, 2, 3, 10, 11, 17, 18, & 19; Article
XIII, Section 7; Article XIV, Section 4; Article
XVI, Section 11

1987 Constitution: Economic
Protectionism Provisions
 Regulation of exploration, development and
use of national patrimony – Article XII,
Section 2

 Giving preference to Filipinos, regulating
trade, and stating responsibility to protect,
encourage and promote Filipino economic
activity – Article II, Section 9; Article XII,
Sections 1, 12, 13, & 14; Article XIV, Section 12;
Article XVI, Section 11

Garcia vs. BOI
G.R. No. 92024, 09 November 1990, En Banc

Issue:

Whether or not the foreign
investor has the right of final
choice under the 1987
Constitution and the Omnibus
Investment Code?

Garcia vs. BOI
Facts of the Case:

- First Case: 07 September 1989 and on 17 January 1990 (G.R.
No. 88637).
- LPC - change of plant site from Bataan to Batangas and shift
of feedstock for the plant from naphtha only to naphtha
and/or liquefied petroleum gas (LPG).
- Reason given: insurgency and unstable labor condition in
Bataan coupled with a huge LPG depot in Batangas owned
by Philippine Shell Corporation.
- formed by Taiwanese investors
- a joint venture with PNOC.

Garcia vs. BOI
Facts of the Case:
- part of the terms and conditions of its registration, it is
specifically stated that it will use “naphtha cracker” and
“naphtha” as feedstock or fuel for its plant. As such, it was
“given pioneer status and accorded fiscal and other incentives
by BOI, like: (1) exemption from taxes on raw materials, (2)
repatriation of the entire proceeds of liquidation investments
in currency originally made and at the exchange rate obtaining
at the time of repatriation; and (3) remittance of earnings on
investments.”
- petitioner pushed for the 48% ad valorem tax exemption if
and when naphtha will be used as raw materials for the plant.

Garcia vs. BOI
Constitutional provision in question:

Article XII, Section 1, 2nd par. The State shall promote
industrialization and full employment based on sound
agricultural development and agrarian reform, through
industries that make full and efficient use of human and
natural resources, and which are competitive in both
domestic and foreign markets. However, the State shall
protect Filipino enterprises against unfair foreign
competition and trade practices.
Article XII, Section 10, last par. The State shall regulate
and exercise authority over foreign investments within its
national jurisdiction and in accordance with its national
goals and priorities.

Garcia vs. BOI
Ruling:

“Every provision of the Constitution on the national
economy and patrimony is infused with the spirit of
national interest. The non-alienation of natural resources,
the State's full control over the development and
utilization of our scarce resources, agreements with
foreigners being based on real contributions to the
economic growth and general welfare of the country and
the regulation of foreign investments in accordance with
national goals and priorities are too explicit not to be
noticed and understood.”

Garcia vs. BOI
Background:

“In this particular BPC venture, not only has the Government given
unprecedented favors, among them:

(1) For an initial authorized capital of only P20 million, the Central Bank
gave an eligible relending credit or relending facility worth US $50
million and a debt to swap arrangement for US $30 million or a total
accommodation of US $80 million which at current exchange rates is
around P2080 million.

(2) A major part of the company's capitalization shall not come from
foreign sources but from loans, initially a Pl Billion syndicated loan, to be
given by both government banks and a consortium of Philippine private
banks or in common parlance, a case of 'guiniguisa sa sariling manteca.'

Garcia vs. BOI
Background:

(3) Tax exemptions and privileges were given as part of
its 'preferred pioneer status.'

(4) Loan applications of other Philippine firms will be
crowded out of the Asian Development Bank portfolio
because of the petrochemical firm's massive loan
request. (Taken from the proceedings before the Senate
Blue Ribbon Committee).

Garcia vs. BOI
Reason:

“…the plant site of the LPC should be in Bataan,
given the peculiar factual circumstances and
issues related to the proposed transfer, among
them the original choice of Bataan as plant site;
the intended partnership of LPC, a foreign
investor, with the PNOC; the fact that the Bataan
Refining Corporation can supply naphtha for the
petrochemical plant; and the importance of an
independent national economy. ..”

Garcia vs. BOI
Postscript:

“One can but remember the words of a great
Filipino leader who in part said he would not
mind having a government run like hell by
Filipinos than one subservient to foreign
dictation. In this case, it is not even a foreign
government but an ordinary investor whom the
BOI allows to dictate what we shall do with our
heritage.”

Garcia vs. BOI
After effects:

“With a project cost of $370 million, Luzon Petrochem
was the biggest direct foreign investment in the country
at that time. Unfortunately, the corporation closed shop
not too long after the high court ordered it to conduct
business in its less preferred site. According to Capuno,
the total net foreign exchange flows foregone as a result
amounted to about $1.32 billion—more than enough to
lift more than 5.6 million Filipinos out of poverty in
1998.”

Panao, Alicor L, The Economics of Law, http://www.up.edu.ph/upforum.php?issue=16&i=124

Garcia vs. BOI
After effects:

Currently, USI Far East Corporation, the major
investor in LPC/BPC, maintained its operations in
Taiwan and Hong Kong. In 2006, it has established
its Shanghai office. Its main business is on the
manufacture and sale of PE resins with its high-
quality LDPE and HDPE enjoying high market
share. It has diversified and invested in
electronics, materials, and finance and venture
capital industries.
www.usife.com.tw/dirEngAbout/frmEngAbout6

Garcia vs. JG Summit
G.R. No. 127925, 23 February 2007, Second Division

Issue:

Whether or not P.D. Nos. 949 and 1830
mandates the establishment of
petrochemical plant only in Limay, Bataan?

Facts of the Case:

JG Summit Petrochemical Corp. (JG Summit) was
registered by the BOI as a new domestic producer of
polyethylene and polypropylene resins. In May 1994, it
has manifested that it will established its plant in Negros
Oriental but two (2) years later, had advised the BOI that
it will locate in Batangas City.


Article XII, Section 10, last par. The State shall regulate
and exercise authority over foreign investments within
its national jurisdiction and in accordance with its
national goals and priorities.

Ruling:

“If only to lay the matter finally to rest, this Court now
reiterates that P.D. Nos. 949 and 1830 do not prohibit the
establishment of a petrochemical plant outside of Limay,
Bataan. A meticulous perusal of the two decrees reveals
that nowhere in their provisions is it stated or can it be
inferred that all petrochemical plants must be established
in Limay, Bataan or, stated differently, that Bataan is
intended to be the only site for all petrochemical plants.”

Postscript:

“Finally, it is not for this Court to rule on whether the national interest
would be served by allowing respondent to locate its plant in
Batangas, instead of Bataan. As the first Garcia case held, "[t]his Court
is not concerned with the economic, social, and political aspects of this
case for it does not possess the necessary technology and scientific
expertise to determine whether the transfer of the proposed BPC
petrochemical complex from Bataan to Batangas and the change of
fuel from naphtha only to ‘naphtha and/or LPG will be best for the
project and for our country. This Court is not about to delve into the
economics and politics of this case . . . ."

After effects:

JG Summit is currently operating in Simlong, Batangas City
and proud to claim as the first and only integrated
Polyethylene and Polypropylene resin manufacturer in the
country producing the EVALENE® brand of HDPE, LLDPE, and
Homopolymer and Random Copolymer Polypropylene. Its
plant’s annual production capacities are 200,000MT for
Polyethylene and 180,000MT for Polypropylene. JG Summit is
a joint venture between JG Summit Holdings, Inc. of the
Philippines and Marubeni Corporation of Japan.

http://www.jgspetrochem.com

Manila Prince Hotel vs. GSIS
G.R. No. 122156, 03 February 1997, En Banc
Issues:

1. Whether or not Article XII, Section 10, 2nd par., of
the 1987 Constitution is self-executing?
2. Whether or not Manila Hotel is part of our national
economy and patrimony? And 51% of the equity of
Manila Hotel is part of the national patrimony?
3. Whether or not GSIS is deemed an arm of the
State?
4. Whether or not petitioner is not estopped from
invoking the provisions of Article XII, Section 10 of
the 1987 Constitution?

Facts of the Case:

The Government Service Insurance System (GSIS) offered to
sell 30% to 51% of the issued and outstanding shares of Manila
Hotel Corporation (MHC) in line with the privatization
program of the national government under Proclamation No.
50 dated 08 December 1986. One of the integral
requirements for the offer to be considered is the fact that
“the winning bidder, or the eventual "strategic partner," is to
provide management expertise and/or an international
marketing/reservation system, and financial support to
strengthen the profitability and performance of the Manila
Hotel.”

Facts of the Case:

On 18 September 1995, two (2) bidders pre-qualified, namely:
herein petitioner, Manila Prince Hotel Corporation (MPHC), a
Filipino corporation, and Renong Berhad, a Malaysian firm
with ITT Sheraton as operator. Renong Berhad won with its
offer of Php44.00 per share or Php2.42 per share more than
MPHC’s offer of Php41.58 per share. MPHC subsequently
matched the offer of Renong Berhad and even sent a
manager’s check as its bid security. But GSIS did not accept
the offer. Thus, MPHC went to court in order to enjoin the
respondents from perfecting and consummating the sale to
Renong Berhad.


Article XII, Section 10, second paragraph. In
the grant of rights, privileges, and
concessions covering the national economy
and patrimony, the State shall give
preference to qualified Filipinos.

Ruling:

First Issue: Whether or not Article XII, Section 10, 2nd par., of the 1987
Constitution is self-executing?

“… a provision which is complete in itself and becomes
operative without the aid of supplementary or enabling
legislation, or that which supplies sufficient rule by means of
which the right it grants may be enjoyed or protected, is self-
executing. Thus a constitutional provision is self-executing if
the nature and extent of the right conferred and the liability
imposed are fixed by the constitution itself, so that they can
be determined by an examination and construction of its
terms, and there is no language indicating that the subject is
referred to the legislature for action.”

Ruling:

First Issue: Whether or not Article XII, Section 10, 2nd par., of the 1987
Constitution is self-executing?

“Sec. 10, second par., Art. XII of the of the 1987
Constitution is a mandatory, positive command
which is complete in itself and which needs no
further guidelines or implementing laws or rules
for its enforcement.”

Ruling:

Second Issue: Whether or not Manila Hotel is part of our national
economy and patrimony? And 51% of the equity of Manila Hotel is part
of the national patrimony?

“Manila Hotel has become part of our national
economy and patrimony. For sure, 51% of the
equity of the MHC comes within the purview of
the constitutional shelter for it comprises the
majority and controlling stock, so that anyone
who acquires or owns the 51% will have actual
control and management of the hotel.”

Ruling:

Third Issue: Whether or not GSIS is deemed an arm of the State?

“In constitutional jurisprudence, the acts of persons
distinct from the government are considered "state
action" covered by the Constitution
(1) when the activity it engages in is a "public
function;"
(2) when the government is so significantly
involved with the private actor as to make the
government responsible for his action; and,
(3) when the government has approved or
authorized the action.

Ruling:

Third Issue: Whether or not GSIS is deemed an arm of the State?

“It is evident that the act of respondent GSIS in
selling 51% of its share in respondent MHC comes
under the second and third categories of "state
action." Without doubt therefore the transaction,
although entered into by respondent GSIS, is in
fact a transaction of the State and therefore
subject to the constitutional command.

Ruling:

Fourth Issue: Whether or not petitioner is not estopped from invoking
the provisions of Article XII, Section 10 of the 1987 Constitution?

“In the instant case, where a foreign firm submits the
highest bid in a public bidding concerning the grant of
rights, privileges and concessions covering the national
economy and patrimony, thereby exceeding the bid of a
Filipino, there is no question that the Filipino will have to be
allowed to match the bid of the foreign entity. And if the
Filipino matches the bid of a foreign firm the award should
go to the Filipino. It must be so if we are to give life and
meaning to the Filipino First Policy provision of the 1987
Constitution.

Postscript:

“This Court does not discount the apprehension that this
policy may discourage foreign investors. But the
Constitution and laws of the Philippines are understood to
be always open to public scrutiny. These are given factors
which investors must consider when venturing into
business in a foreign jurisdiction. Any person therefore
desiring to do business in the Philippines or with any of its
agencies or instrumentalities is presumed to know his
rights and obligations under the Constitution and the laws
of the forum.

Postscript:

“… the second paragraph of section 10, Article XII of the
Constitution is pro-Pilipino but not anti-alien. It is pro-
Filipino for it gives preference to Filipinos. It is not,
however, anti-alien per se for it does not absolutely bar
aliens in the grant of rights, privileges and concessions
covering the national economy and patrimony. Indeed, in
the absence of qualified Filipinos, the State is not
prohibited from granting these rights, privileges and
concessions to foreigners if the act will promote the weal
of the nation.”
Justice Reynato Puno, dissenting

After effects:

To date, Manila Hotel is owned by MPHC after it
took over on May 7, 1997. It is currently being
pursued by GSIS for its unpaid obligations
amounting to Php8.7 billion, aside from unpaid
rentals of Php286 million. It has since been
opined that Manila Hotel has lost its grandeur
and magnificence and it reeks of commercialism
rather than history.
http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20090506-203379/Unpaid-Manila-Hotel-loans-soar-to-P17B
Roces, Alejandro R., Roses & Thorns, “We need to bring back the lost glory”, published by The Philippine Star on 23
November 2010. http://208.184.76.175/Article.aspx?articleid=29379

After effects:

Renong Berhad on the other hand filed for
bankruptcy in 1998 as a result of the Asian
financial crisis. It is Malaysia’s one of the biggest
and most diversified conglomerate and at the
same time Malaysia’s biggest corporate debtor.

http://bigdogdotcom.wordpress.com/2010/09/03/

Tanada vs. Angara
G.R. No. 118295, 02 May 1997, En Banc

Issue:

Whether or not the provisions of the
Agreement Establishing the World Trade
Organization (WTO Agreement) are violative
of Section 19, Article II, and Sections 10 & 12,
Article XII, of the 1987 Constitution?

Tanada vs. Angara
Facts of the Case:

On 15 April 1994, the Philippines, as represented by
then Secretary Rizalino Navarro of the Department of
Trade and Industry, signed the Final Act Embodying the
Results of the Uruguay Round of Multinational
Negotiations (Final Act). This Act, together with the
WTO Agreement, the Ministerial Declarations and
Decisions, and the Understanding on Commitments in
Financial Services were submitted to the Senate for its
concurrence as provided for in Article VII, Section 21 of
the 1987 Constitution. On 14 December 1994, the
Senate ratified the WTO Agreement and two days later,
or on 16 December 1994, then President Fidel V. Ramos
signed the Instrument of Ratification.

Tanada vs. Angara
Constitutional provisions in question:

Art. II, Sec. 19. The State shall develop a self-reliant and
independent national economy effectively controlled by
Filipinos.

Article XII, Sec. 10, 2nd par. In the grant of rights, privileges,
and concessions covering the national economy and
patrimony, the State shall give preference to qualified
Filipinos.

Article XII, Sec. 12. The State shall promote the preferential
use of Filipino labor, domestic materials and locally
produced goods, and adopt measures that help make them
competitive.

Tanada vs. Angara
Ruling:

“All told, while the Constitution indeed mandates a bias
in favor of Filipino goods, services, labor and
enterprises, at the same time, it recognizes the need
for business exchange with the rest of the world on the
bases of equality and reciprocity and limits protection
of Filipino enterprises only against foreign competition
and trade practices that are unfair. In other words, the
Constitution did not intend to pursue an
isolationist policy.”

Tanada vs. Angara
Ruling:

“It did not shut out foreign investments, goods
and services in the development of the
Philippine economy. While the Constitution
does not encourage the unlimited entry of
foreign goods, services and investments into
the country, it does not prohibit them either. In
fact, it allows an exchange on the
basis of equality and reciprocity,
frowning only on foreign competition
that is unfair.”

Tanada vs. Angara
Ruling:

“The WTO reliance on “most favored nation,” “national
treatment,” and “trade without discrimination” cannot be
struck down as unconstitutional as in fact they are rules of
equality and reciprocity that apply to all WTO
members. Aside from envisioning a trade policy based on
“equality and reciprocity,” the fundamental law
encourages industries that are “competitive in both
domestic and foreign markets,” thereby demonstrating a
clear policy against a sheltered domestic trade
environment, but one in favor of the gradual
development of robust industries that can
compete with the best in the foreign markets.”

Tanada vs. Angara
Postscript:

“…what the Senate did was a valid exercise of its
authority. As to whether such exercise was wise,
beneficial or viable is outside the realm of judicial inquiry
and review. That is a matter between the elected policy
makers and the people. As to whether the nation should
join the worldwide march toward trade liberalization and
economic globalization is a matter that our
people should determine in electing their
policy makers. After all, the WTO Agreement
allows withdrawal of membership, should
this be the political desire of a member.”

Tanada vs. Angara
Postscript:

“Increased participation in the
world economy has become the key
to domestic economic growth
and prosperity.”
Peter Drucker

Tanada vs. Angara
After effects:

 R.A. No. 9182, the Special Purpose Vehicle Act - providing
for 40% foreign equity limitation for private land
ownership;
 R.A. No. 8756 - establishes the rules and guidelines for the
maintenance of multinational companies’ Regional or Area
Headquarters, Regional Operating Headquarters, and
Regional Warehouses;
 R.A. No. 7942, the Mining Act of 1995 - defining foreign
ownership and participation in the exploration,
development, and utilization of our mineral resources;

Tanada vs. Angara
After effects:

 R.A. No. 8293, the Intellectual Property Code - protecting
patents, trademarks, service marks, tradenames, and
copyrights;
 R.A. No. 8752, the Anti-Dumping Law - strengthening
the government’s capability to provide remedies for,
and to counteract the practice of dumping products
in the country;
 and many others.

Espina vs. Zamora
G.R. No. 143855, 21 September 2010, En Banc

Issue:

Whether or not R.A. No. 8762 is
violative of Sections 9, 19, and 20 of
Article II of the 1987 Constitution?

Espina vs. Zamora
Facts of the Case:

Republic Act No. 8762, otherwise known as the
Retail Trade Liberalization Act of 2000 was
signed into law by then President Joseph E.
Estrada on 07 March 2000. It repealed R.A. No.
1180, which prohibits foreign nationals from
engaging in retail trade business. It also allowed
foreign equity participation in retail trade and
the same rights as Filipino citizens to former
Filipinos.

Espina vs. Zamora

Article II, Section 9. The State shall promote a just and dynamic
social order that will ensure the prosperity and independence
of the nation and free the people from poverty through policies
that provide adequate social services, promote full
employment, a rising standard of living, and an improved
quality of life for all.

Article II, Section 19. The State shall develop a self-reliant and
independent national economy effectively controlled by
Filipinos.

Article II, Section 20. The State recognizes the indispensable
role of the private sector, encourages private enterprise, and
provides incentives to needed investments.

Espina vs. Zamora

Article XII, Section 10. The Congress shall, upon recommendation of
the economic and planning agency, when the national interest
dictates, reserve to citizens of the Philippines or to corporations or
associations at least sixty per centum of whose capital is owned by
such citizens, or such higher percentage as Congress may prescribe,
certain areas of investments. The Congress shall enact measures that
will encourage the formation and operation of enterprises whose
capital is wholly owned by Filipinos.

xxx xxx xxx

The State shall regulate and exercise authority over foreign
investments within its national jurisdiction and in accordance
with its national goals and priorities.

Espina vs. Zamora

Article XII, Section 12. The State shall promote
the preferential use of Filipino labor, domestic
materials and locally produced goods, and adopt
measures that help make them competitive.

Article XII, Section 13. The State shall pursue a
trade policy that serves the general welfare and
utilizes all forms and arrangements of exchange
on the basis of equality and reciprocity.

Espina vs. Zamora
Ruling:

The Supreme Court reiterated its stand as
stated in Tanada vs. Angara that the provisions
of Article II of the 1987 Constitution are not self-
executing and that the provisions of Article XII
thereof laid down the ideals of economic
nationalism.

Espina vs. Zamora
Ruling:

“In other words, while Section 19, Article II of the
1987 Constitution requires the development of a
self-reliant and independent national economy
effectively controlled by Filipino entrepreneurs, it
does not impose a policy of Filipino monopoly of
the economic environment. The objective is simply
to prohibit foreign powers or interests from
maneuvering our economic policies and
ensure that Filipinos are given preference
in all areas of development. ”

Espina vs. Zamora
Ruling:

“In other words, the 1987 Constitution does not rule out
the entry of foreign investments, goods, and services.
While it does not encourage their unlimited entry into the
country, it does not prohibit them either. In fact, it allows
an exchange on the basis of equality and reciprocity,
frowning only on foreign competition that is unfair. The
key, as in all economies in the world, is to strike a balance
between protecting local businesses and allowing the
entry of foreign investments and services.”

Espina vs. Zamora
Postscript:

“the law itself provided strict safeguards on foreign
participation in retail trade, to wit:

“First, aliens can only engage in retail trade business
subject to the categories above-enumerated;

Second, only nationals from, or juridical entities formed
or incorporated in countries which allow the entry of
Filipino retailers shall be allowed to engage
in retail trade business; and

Espina vs. Zamora
Postscript:

Third, qualified foreign retailers shall not be allowed to
engage in certain retailing activities outside their
accredited stores through the use of mobile or rolling
stores or carts, the use of sales representatives, door-to-
door selling, restaurants and sari-sari stores and such
other similar retailing activities.”

Espina vs. Zamora
After effects:

To date, we see 7-11, Walmart, S&R Price,
Watsons, Makro, McDonald’s, and others
stores, which are owned fully or in part by
foreign nationals or companies, abound in
every corner.

La Bugal-B’laan vs. DENR
This case was initially
decided by the
Supreme Court on 27
January 2004.

On motion for
reconsideration, the
Supreme Court, on 01
December 2004
reversed itself.

Source: Global Metals News (2010)

Issue:

Whether or not R.A. No. 7942 is
unconstitutional?

Facts of the Case:

The petition was filed by the petitioners for
mandamus and prohibition with prayer for issuance
of a temporary restraining order assailing the
constitutionality of Republic Act No. 7942 (the
Philippine Mining Act of 1995), its Implementing Rules
and Regulations, DENR Administrative Order 96-40,
and the Financial and Technical Assistance Agreement
(FTAA) between the Philippines and WMC
(Philippines), Inc. (WMCP).

Facts of the Case:

The petitioners claim 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, 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.”


Article XII, Section 2, 4th paragraph. 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.

Ruling: January 27, 2004 Decision

“WHEREFORE, the petition is GRANTED. The Court hereby
declares unconstitutional and void:
(1) The following provisions of Republic Act No. 7942:
(a) The proviso in Section 3 (aq),
(b) Section 23,
(c) Section 33 to 41,
(d) Section 56,
(e) The second and third paragraphs of Section 81, and
(f) Section 90.
(2) All provisions of Department of Environment and Natural
Resources Administrative Order 96-40, s. 1996 which are not
in conformity with this Decision, and
(3) The Financial and Technical Assistance Agreement
between the Government of the Republic of the Philippines
and WMC Philippines, Inc.”

Ruling: 01 December 2004 Resolution

“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 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.”


In finding R.A. No. 7942 and its IRR to be constitutional, the Supreme
Court explained that:

“All mineral resources are owned by the State. Their exploration,
development and utilization (EDU) must always be subject to the full
control and supervision of the State. More specifically, given the
inadequacy of Filipino capital and technology in large-scale EDU activities,
the State may secure the help of foreign companies in all relevant
matters -- especially financial and technical assistance -- provided that, at
all times, the State maintains its right of full control. The foreign assistor
or contractor assumes all financial, technical and entrepreneurial risks in
the EDU activities; hence, it may be given reasonable management,
operational, marketing, audit and other prerogatives
to protect its investments and to enable the business
to succeed.


“The Constitution should be read in broad, life-giving strokes. It
should not be used to strangulate economic growth or to serve
narrow, parochial interests. Rather, it should be construed to grant
the President and Congress sufficient discretion and reasonable
leeway to enable them to attract foreign investments and expertise,
as well as to secure for our people and our posterity the blessings of
prosperity and peace.

On the basis of this control standard, this Court upholds the
constitutionality of the Philippine Mining Law, its Implementing Rules
and Regulations -- insofar as they relate to financial
and technical agreements -- as well as the subject
Financial and Technical Assistance Agreement (FTAA).”

Postscript:

“Verily, under the doctrine of separation of powers and
due respect for co-equal and coordinate branches of
government, this Court must restrain itself from
intruding into policy matters and 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.

Postscript:

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.

Postscript:

This Court cannot but be mindful that any decision
rendered in this case will ultimately impact not only the
cultural communities which lodged the instant Petition,
and not only the larger community of the Filipino
people now struggling to survive amidst a
fiscal/budgetary deficit, ever increasing prices of fuel,
food, and essential commodities and services, the
shrinking value of the local currency, and a government
hamstrung in its delivery of basic services by a severe
lack of resources, but also countless future generations
of Filipinos.

After effects:

In July this year(2007) , then DENR Secretary Angelo Reyes issued
Department Administrative Order (DAO) 2007-12 on the Revised Fiscal
Regime of FTAAs or foreign technical assistance agreements. In a
news report dated July 2, 2007, ABS-CBN Interactive stated:

Reyes, however, clarified that the scheme (revised fiscal regime) is
included in the three options given to foreign investors before they
are allowed to start mining operations. The three options are
cumulative face value of cash flows, profit based sharing and
cumulative net mining revenue.

J. Antonio Carpio, Closing the gaps between law and justice,
Keynote Speech, Regional Convention of Mindanao
Lawyers, 21-23 November 2007

After effects:

“Companies coming over would naturally choose the option that will be
most beneficial to them; and they will end up choosing one, that is the
second option,” he said.

He added: “(The) second option will be disadvantageous to the
government because it says that the additional government share … will
only kick in fi the profitability ratio net income over gross income is
higher than 40 percent.”

He said no mining company in the history of the industry achieves that
40 percent income. He said the probability of the government getting an
additional and fair share of its minerals from the mining companies is
“somewhere from zero to nil.”


After effects:

Let me repeat that: the DENR Secretary, doing his own arithmetic,
publicly admitted that, under the profit sharing formula in DAO 99-56
approved in La Bugal, the government will receive “somewhere from
zero to nil” in the mining revenues of foreign contractors. “Zero to
nil” means not even a pittance. The Filipino people will receive
nothing, zero, nil, ni sinkosin wala, in the profits from the estimated
P47 trillion mineral wealth of the country. This is the conclusion of
the DENR Secretary. The DENR Secretary therefore revised the profit
sharing formula in the net mining revenues into a 50-50 split between
the State and the FTAA contractor. This is ordained in the recently
issued DAO 2007-12.


After effects:

Should you now be jumping with joy? I believe that lawyers
should always have a healthy skepticism. The devil often lurks in
the details. I have not studied thoroughly DAO 2007-12. You, the
lawyers from Mindanao, where a substantial portion of the P47
trillion mineral wealth of the nation is found, should be the first
to study thoroughly DAO 2007-12. The P47 trillion mineral
wealth belongs to the State. You, your children, grandchildren
and great grandchildren are the primary beneficiaries of this
vast, God-given wealth. You have a tremendous stake in how
the mineral wealth of the nation is going to be carved out.

After effects:

Let me just cite two points about DAO 2007-12, and these should serve
as caveats. First, DAO 2007-12 by its express terms applies
prospectively. There are only two existing FTAAs, and both were
signed before the effectivity of DAO 2007-12. That means DAO 2007-
12 does not at present apply to any existing FTAA. That also means
that the two existing FTAAs will still be governed by the formula
approved by the majority of the Court in La Bugal, the formula in the
old DAO 99-56. That old formula, in the words of then DENR
Secretary Reyes, gives the Filipino people “somewhere from zero to
nil” in mining revenues. Ironically, this is the fate the DENR wants the
Filipino people to accept for the 49,373 hectares of mineral lands
covered by the two existing FTAAs.

After effects:

Second, DAO 2007-12 applies only to FTAAs and not to MPSAs or
mineral production sharing agreements. There is no law or DAO that
gives the Filipino people any share, not even a single centavo, in the
profits from MPSAs. And yet all the existing mining permits issued by
the government are MPSAs except for two FTAAs. In short, the two
FTAAs reveal only the tip of the iceberg, and what lies below the
surface of the waters are the more than 262 MPSAs approved as of
July 31, 2007 comprising a total of 422,804 hectares of mineral lands.
You can just imagine where the bulk, even all, of the profits from the
P47 trillion mineral wealth of the nation is now going—certainly not
to the coffers of the State, certainly not to the Filipino people,
certainly not for your benefit. To paraphrase then DENR Secretary
Reyes, ni sinkosin wala kayong parte sa kita.”

After effects:

“The 1987 Constitution has been in effect for 20 years now.
The 1987 Constitution discarded the “concession and lease”
system under the 1935 and 1973 Constitutions. Instead, the
1987 Constitution mandates the State to exploit our mineral
resources through direct undertaking, joint venture, or co-
production arrangements. The purpose is for the State, as
owner of the mineral resources, to receive its fair share in the
profits from the exploitation of our mineral resources. Sadly,
for the last 20 years the State has not received a single centavo
from the profits of mining companies.”


Conclusion
“…. the Supreme Court (SC) needs your trust. If it must be
true to its name and if its decisions must be obeyed, it
must have the continuing trust of the populace. True,
court decisions are not crafted on the basis of what is
popular. Rather, judges act only to weigh the logical
compatibility of the established facts with the applicable
law. That is, cases are won or lost, not because of popular
palatability or compromise or friendship or pecuniary
consideration, but because of reasoned arguments flowing
from legal principles and precedents.”

Justice Artemio V. Panganiban
Philippine Business Forum/
Economist Corporate Network
8 December 2004

Conclusion
“Suffice it to say for the present that the Supreme Court
does not interfere in policy judgments of the President and
Congress, even if these judgments may turn out to be
unwise or inconvenient. However, when the actions of any
official of the government blatantly violate the Constitution
or the law, or are otherwise done with grave abuse of
discretion, the Court is duty-bound to “interfere” and to
uphold the rule of law. Correctly understood therefore, the
Court does not render economic decisions. Rather it issues
judgments on how laws are applied to or interpreted in any
field of human endeavor—family matters, criminal
prosecutions or business activities.”
Justice Artemio V. Panganiban
Philippine Business Forum/
Economist Corporate Network
8 December 2004

Conclusion
Economic sovereignty is critical to economic
development. And sovereignty means
“liberalizing” when ready to do so and on terms
beneficial to domestic economy. Moreover, an
economy will only get net benefits if the State
exercises its sovereignty over foreign direct
investments (FDI) and requires real technology
transfers, controls the use and repatriation of
profits, and applies local content and other
performance requirements with strict limits on
foreign equity ownership.
http://www.bulatlat.com/main/2009/02/07/the-economic-folly-of-charter-change/

Conclusion
In the Philippines, the net result of the last two
decades of FDI is that foreign investors have been
able to make their profits without any real
contribution to domestic social and economic
development. Increasing FDI has actually been
accompanied by increasing unemployment, increasing
labor export, falling real wages, shrinking
manufacturing and more volatile growth. There have
also not been any real increases in domestic capital
formation or in government revenues which have
increasingly relied on regressive taxes on personal
consumption.
http://www.bulatlat.com/main/2009/02/07/the-economic-folly-of-charter-change/

Conclusion
"Let not our children be mere tenants and
trespassers in their own country. Let us
preserve and bequeath to them what is
rightfully theirs, free from all foreign liens
and encumbrances."
Jose P. Laurel, Proceedings of the Philippine
Constitutional Convention (1934-1935), p. 562

Conclusion
“With all these said, it is the undersigned’s
belief that a balanced between economic
progress and sovereignty can be attained only
if we trust our political leaders, if we are
confident of the independence of our judicial
system, and if there is stability in our peace and
order. In the end, it is only a people who truly
love their nation who can steer the same
towards a common goal:
sovereignty amidst progress.”

Constitutional Provisions on Economic Protectionism

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