Earl Anthony R.

Reyes
11684615, G05

Case Digest: La Bugal-B’Laan Tribal Association, Inc. v. Ramos (Dec. 1, 2004; 445
SCRA 1)
Facts:
On Jan. 27, 2004, the Supreme Court declared some provisions of RA 7942, DAO
96-40, and the entire FTAA executed between the government and WMCP as
unconstitutional because service contracts are prohibited by the 1987 Constitution and it
encroaches on the rights of Filipinos to exclusively utilize our natural resources.
Respondents filed separate Motions for Reconsiderations with the Supreme Court
assailing that the case has been rendered moot by the sale of WMC shares in WMCP to
Sagittarius (60% of shareholders are Filipinos,) that it is already irrelevant to resolve the
constitutionality of RA 7942, DAO 96-40 and the WMCP FTAA, if the case has been
rendered moot, and contests the proper interpretation of the phrase “Agreements
Involving Technical or Financial Assistance” contained in Art. XII, Sec. 2(4) of the 1987
Constitution
Issue:
(a) W/N the sale and transfer of the WMC shares to Sagittarius is valid, thus rendering
the case moot
(b) What is the proper interpretation of the phrase “Agreements Involving Either
Technical or Financial Assistance” contained in Art. XII, Sec. 2(4) of the 1987
Constitution
Ruling:
(a) Yes. The court stated that it is valid and that it is no longer possible for the court to
declare the FTAA as unconstitutional when the shares from the foreign company was
already transferred and sold to a Filipino-operated company. Anent the contention of the
petitioners that Art. XII, Sec. 2(4) of the Constitution does not allow the government to
enter into FTAAs with Filipino corporations, the court stated that nowhere in the
provisions show such limitation or restrictions and it would be hard to believe that the
framers of the 1987 Constitution would preclude such rights of Filipinos from exercising
our rights to fully develop and utilize our natural resources. Moreover, in the contention
by the petitioners assailing Sec. 4 of RA 7942 that there should be a separate case
regarding the sale of the shares to Sagittarius because such sale needs to be approved by
the president, the court pointed out that the aforementioned provision is only applicable
in transferring FTAAs and not for the sale of shares. Furthermore, the court also stated
that provided that the shares were transferred to a Filipino corporation, an approval from
the president is not critical to render the transfer invalid and that it was already affirmed
by the Court of Appeals that the President has already approved the assignment of the
WMCP FTAA to Saggitarius. To further strengthen the argument made by the Supreme
Court that the FTAA was not void, it cited the case of Halili v CA, wherein the foreigner
bought a piece of land from a Filipino, but subsequently sold the same to another
Filipino. In this case, the sale to the foreigner was void, but was cured when the foreigner
sold the said land to another Filipino. The acquisition of the Filipino of the land from the
foreigner is not void. In the case at bar, the sale and transfer of the shares to a Filipino
company should not render the sale void despite the acquisition of the foreign company
of the shares was void. Finally, despite finding the case moot, the court should still decide
on the constitutionality of RA 7942 for reasons of public policy.
(b) Using a verbal legis approach, the court stated that when the drafters used the word
“involving,” it can be implied that foreign corporations are not restricted to technical or
financial assistance. Hence, foreign companies can have a hand in the management and
operation of mining activities. It can also be implied that the drafters of the constitution
had substantial knowledge that foreign corporations would not be satisfied to just give
their investments without the assurance that such investments would not go to waste.
Hence, foreign investors would have to make sure that some of their staff or employees
would be part of the operations and management to make sure that their investments are
fully maximized. In using Ratio Legis Et Anima, on the other hand, the framers never
intended to ban or eradicate service contracts but they were plainly crafting provisions to
put in place safeguards that would eliminate or minimize the abuses prevalent during the
martial law regime. It can be safely inferred that the 60-40 rule was made to protect the
rights of Filipinos of exploration, development and utilization of natural resources, but
does not exempt foreign investors to take part of the operations and management thereof.
In the 1987 Constitution, the phrase “agreements involving either technical or financial
assistance” also refers to service contracts, but unlike in the 1973 constitution, the foreign
investors act as foreign contractors and the government, through its agencies, act as the
supervisors over the entire operation. In using Ut Magis Valeat Quam Pereat, it should be
noted that the constitution should be read and understood as a harmonious whole, thus,
full control and supervision by the State must be understood as one that does not preclude
the legitimate exercise of management prerogatives by the foreign contractor. However,
it should not be interpreted in a way that the State would have “full” control of such
operations for it will impede the foreign companies to invest in our country and will be
detrimental of our nations development. Moreover, the government should only set out
rules and regulations that the foreign investors will adhere to. Therefore, the Supreme
Court declared RA 7942, DAO No. 9640 (insofar as they relate to financial and technical
assistance agreements referred to in Art. XII, Sec. 2(4) of the 1987 Constitution,) and the
Financial and Technical Assistance Agreement dated March 30, 1995 (except sections
7.8 and 7.9) as constitutional.