RepubliSUPREME Manila EN BANC G.R. No.

127882 January 27, 2004

COURT

LA BUGAL-B LAAN TR!BAL ASSOC!AT!ON, !NC., r"#r"$"n%"& 'y (%$ C)a(r*an + LONG M!GUEL M. LUMA,ONG, -!GBERTO E. TA.A/A, PONC!ANO BENNAGEN, JA!ME TA/EO, RENATO R. CONSTANT!NO, JR., + LONG AGUST!N M. /AB!E, ROBERTO P. AMLO,, RA0!M L. /AB!E, S!MEON 1. /OLOJO, !MEL/A M. GAN/ON, LEN, B. GUSANAN, MARCELO L. GUSANAN, 0U!NTOL A. LABUA,AN, LOM!NGGES /. LA-A,, BEN!TA P. TACUA,AN, *(nor$ JOL, L. BUGO,, r"#r"$"n%"& 'y )($ 2a%)"r UN/ERO /. BUGO,, ROGER M. /A/!NG, r"#r"$"n%"& 'y )($ 2a%)"r ANTON!O L. /A/!NG, ROM, M. LAGARO, r"#r"$"n%"& 'y )($ 2a%)"r TOT!NG A. LAGARO, M!3EN, JONG B. LUMA,ONG, r"#r"$"n%"& 'y )($ 2a%)"r M!GUEL M. LUMA,ONG, RENE T. M!GUEL, r"#r"$"n%"& 'y )($ *o%)"r E/!T1A T. M!GUEL, AL/EMAR L. SAL, r"#r"$"n%"& 'y )($ 2a%)"r /ANN, M. SAL, /A!S, RECARSE, r"#r"$"n%"& 'y )"r *o%)"r L,/!A S. SANTOS, E/-AR/ M. EMU,, ALAN P. MAMPARA!R, MAR!O L. MANGCAL, AL/EN S. TUSAN, AMPARO S. ,AP, 4!RG!L!O CULAR, MAR4!C M.4.+. LEONEN, JUL!A REG!NA CULAR, G!AN CARLO CULAR, 4!RG!L!O CULAR, JR., r"#r"$"n%"& 'y %)"(r 2a%)"r 4!RG!L!O CULAR, PAUL ANTON!O P. 4!LLAMOR, r"#r"$"n%"& 'y )($ #ar"n%$ JOSE 4!LLAMOR an& EL!5ABET1 PUA-4!LLAMOR, ANA G!N!NA R. TALJA, r"#r"$"n%"& 'y )"r 2a%)"r MAR!O JOSE B. TALJA, S1ARMA!NE R. CUNANAN, r"#r"$"n%"& 'y )"r 2a%)"r AL+RE/O M. CUNANAN, ANTON!O JOSE A. 4!TUG !!!, r"#r"$"n%"& 'y )($ *o%)"r ANNAL!5A A. 4!TUG, LEAN /. NAR4A/E5, r"#r"$"n%"& 'y )($ 2a%)"r MANUEL E. NAR4A/E5, JR., ROSER!O MARALAG L!NGAT!NG, r"#r"$"n%"& 'y )"r 2a%)"r R!O OL!MP!O A. L!NGAT!NG, MAR!O JOSE B. TALJA, /A4!/ E. /E 4ERA, MAR!A M!LAGROS L. SAN JOSE, SR., SUSAN O. BOLAN!O, ON/, LOL!TA G. /EMONTE4ER/E, BENJ!E L. NE0U!NTO, 1 ROSE L!L!A S. ROMANO, ROBERTO S. 4ER5OLA, E/UAR/O AUREL!O C. RE,ES, LEAN LOUEL A. PER!A, r"#r"$"n%"& 'y )($ 2a%)"r ELP!/!O 4. PER!A,2 GREEN +ORUM P1!L!PP!NES, GREEN +ORUM -ESTERN 4!SA,AS, 6G+-47, EN4!RONMETAL LEGAL ASS!STANCE CENTER 6ELAC7, P1!L!PP!NE 3A!SA1AN TUNGO SA 3AUNLARAN NG 3ANA,UNAN AT REPORMANG PANSA3A1AN 63A!SA1AN7, 8 3A!SA1AN TUNGO SA 3AUNLARAN NG 3ANA,UNAN AT REPORMANG PANSA3A1AN 63A!SA1AN7, PARTNERS1!P +OR AGRAR!AN RE+ORM an& RURAL /E4ELOPMENT SER4!CES, !NC. 6PARR/S7, P1!L!PP!NE PART9NERS1!P +OR T1E /E4ELOPMENT O+ 1UMAN RESOURCES !N T1E RURAL AREAS, !NC. 6P1!L/1RRA7, -OMEN S LEGAL BUREAU 6-LB7, CENTER +OR ALTERNAT!4E /E4ELOPMENT !N!T!AT!4ES, !NC. 6CA/!7, UPLAN/ /E4ELOPMENT !NST!TUTE 6U/!7, 3!NA!,A1AN +OUN/AT!ON, !NC., SENTRO NG ALTERNAT!BONG L!NGAP PANL!GAL 6SAL!GAN7, LEGAL R!G1TS AN/ NATURAL RESOURCES CENTER, !NC. 6LRC7, petitioners, vs. 4!CTOR O. RAMOS, SECRETAR,, /EPARTMENT O+ EN4!RONMENT AN/ NATURAL RESOURCES 6/ENR7, 1ORAC!O RAMOS, /!RECTOR, M!NES AN/ GEOSC!ENCES BUREAU 6MGB-/ENR7, RUBEN TORRES, E:ECUT!4E SECRETAR,, an& -MC 6P1!L!PP!NES7, !NC. 4 respondents. DECISION CARP!O-MORALES, J.: The present petition or !anda!us and prohibition assails the "onstitutionalit# o Republi" A"t No. $%4&, ' other(ise )no(n as the *+I,I**INE MININ- ACT O. /%%', alon0 (ith the I!ple!entin0 Rules and Re0ulations issued pursuant thereto, Depart!ent o Environ!ent and Natural Resour"es 1DENR2 Ad!inistrative Order %3445, and o the .inan"ial and Te"hni"al Assistan"e A0ree!ent 1.TAA2 entered into on Mar"h 65, /%%' b# the Republi" o the *hilippines and 7MC 1*hilippines2, In". 17MC*2, a "orporation or0ani8ed under *hilippine la(s. On 9ul# &', /%:$, then *resident Cora8on C. A;uino issued E<e"utive Order 1E.O.2 No. &$% 3 authori8in0 the DENR Se"retar# to a""ept, "onsider and evaluate proposals ro! orei0n4o(ned "orporations or orei0n investors or "ontra"ts or a0ree!ents involvin0 either te"hni"al or inan"ial assistan"e or lar0e4s"ale e<ploration, develop!ent, and utili8ation o !inerals, (hi"h, upon appropriate re"o!!endation o the Se"retar#, the *resident !a# e<e"ute (ith the orei0n proponent. In enterin0 into su"h proposals, the *resident shall "onsider the real "ontributions to the e"ono!i" 0ro(th and 0eneral (el are o the "ountr# that (ill be reali8ed, as (ell as the develop!ent and use o lo"al s"ienti i" and te"hni"al resour"es that (ill be pro!oted b# the proposed "ontra"t or a0ree!ent. =ntil Con0ress shall deter!ine other(ise, lar0e4s"ale !inin0, or purpose o this Se"tion, shall !ean

those proposals or "ontra"ts or a0ree!ents or !ineral resour"es e<ploration, develop!ent, and utili8ation involvin0 a "o!!itted "apital invest!ent in a sin0le !inin0 unit pro>e"t o at least .i t# Million Dollars in =nited States Curren"# 1=S ?'5,555,555.552.$ On Mar"h 6, /%%', then *resident .idel @. Ra!os approved R.A. No. $%4& to A0overn the e<ploration, develop!ent, utili8ation and pro"essin0 o all !ineral resour"es.A : R.A. No. $%4& de ines the !odes o !ineral a0ree!ents or !inin0 operations, % outlines the pro"edure or their ilin0 and approval, /5 assi0n!entBtrans er // and (ithdra(al, /& and i<es their ter!s./6 Si!ilar provisions 0overn inan"ial or te"hni"al assistan"e a0ree!ents. /4 The la( pres"ribes the ;uali i"ations o "ontra"tors /' and 0rants the! "ertain ri0hts, in"ludin0 ti!ber, /3 (ater/$ and ease!ent/: ri0hts, and the ri0ht to possess e<plosives. /% Sur a"e o(ners, o""upants, or "on"essionaires are orbidden ro! preventin0 holders o !inin0 ri0hts ro! enterin0 private lands and "on"ession areas. &5 A pro"edure or the settle!ent o "on li"ts is li)e(ise provided or. &/ The A"t restri"ts the "onditions or e<ploration, && ;uarr#&6 and other&4 per!its. It re0ulates the transport, sale and pro"essin0 o !inerals,&' and pro!otes the develop!ent o !inin0 "o!!unities, s"ien"e and !inin0 te"hnolo0#, &3 and sa et# and environ!ental prote"tion.&$ The 0overn!entCs share in the a0ree!ents is spelled out and allo"ated, &: ta<es and ees are i!posed, &% in"entives 0ranted.65 Aside ro! penali8in0 "ertain a"ts, 6/ the la( li)e(ise spe"i ies 0rounds or the "an"ellation, revo"ation and ter!ination o a0ree!ents and per!its. 6& On April %, /%%', 65 da#s ollo(in0 its publi"ation on Mar"h /5, /%%' in Mala#a and Manila Ti!es, t(o ne(spapers o 0eneral "ir"ulation, R.A. No. $%4& too) e e"t. 66 Shortl# be ore the e e"tivit# o R.A. No. $%4&, ho(ever, or on Mar"h 65, /%%', the *resident entered into an .TAA (ith 7MC* "overin0 %%,6:$ he"tares o land in South Cotabato, Sultan Dudarat, Davao del Sur and North Cotabato. 64 On Au0ust /', /%%', then DENR Se"retar# @i"tor O. Ra!os issued DENR Ad!inistrative Order 1DAO2 No. %'4 &6, s. /%%', other(ise )no(n as the I!ple!entin0 Rules and Re0ulations o R.A. No. $%4&. This (as later repealed b# DAO No. %3445, s. /%%3 (hi"h (as adopted on De"e!ber &5, /%%3. On 9anuar# /5, /%%$, "ounsels or petitioners sent a letter to the DENR Se"retar# de!andin0 that the DENR stop the i!ple!entation o R.A. No. $%4& and DAO No. %3445, 6' 0ivin0 the DENR i teen da#s ro! re"eipt 63 to a"t thereon. The DENR, ho(ever, has #et to respond or a"t on petitionersC letter. 6$ *etitioners thus iled the present petition or prohibition and !anda!us, (ith a pra#er or a te!porar# restrainin0 order. The# alle0e that at the ti!e o the ilin0 o the petition, /55 .TAA appli"ations had alread# been iled, "overin0 an area o :.4 !illion he"tares, 6: 34 o (hi"h appli"ations are b# ull# orei0n4o(ned "orporations "overin0 a total o '.: !illion he"tares, and at least one b# a ull# orei0n4o(ned !inin0 "o!pan# over o shore areas.6% *etitioners "lai! that the DENR Se"retar# a"ted (ithout or in e<"ess o >urisdi"tionE I < < < in si0nin0 and pro!ul0atin0 DENR Ad!inistrative Order No. %3445 i!ple!entin0 Republi" A"t No. $%4&, the latter bein0 un"onstitutional in that it allo(s ull# orei0n o(ned "orporations to e<plore, develop, utili8e and e<ploit !ineral resour"es in a !anner "ontrar# to Se"tion &, para0raph 4, Arti"le FII o the ConstitutionG II < < < in si0nin0 and pro!ul0atin0 DENR Ad!inistrative Order No. %3445 i!ple!entin0 Republi" A"t No. $%4&, the latter bein0 un"onstitutional in that it allo(s the ta)in0 o private propert# (ithout the deter!ination o publi" use and or >ust "o!pensationG III < < < in si0nin0 and pro!ul0atin0 DENR Ad!inistrative Order No. %3445 i!ple!entin0 Republi" A"t No. $%4&, the latter bein0 un"onstitutional in that it violates Se". /, Art. III o the ConstitutionG I@

< < < in si0nin0 and pro!ul0atin0 DENR Ad!inistrative Order No. %3445 i!ple!entin0 Republi" A"t No. $%4&, the latter bein0 un"onstitutional in that it allo(s en>o#!ent b# orei0n "iti8ens as (ell as ull# orei0n o(ned "orporations o the nationCs !arine (ealth "ontrar# to Se"tion &, para0raph & o Arti"le FII o the ConstitutionG @ < < < in si0nin0 and pro!ul0atin0 DENR Ad!inistrative Order No. %3445 i!ple!entin0 Republi" A"t No. $%4&, the latter bein0 un"onstitutional in that it allo(s priorit# to orei0n and ull# orei0n o(ned "orporations in the e<ploration, develop!ent and utili8ation o !ineral resour"es "ontrar# to Arti"le FII o the ConstitutionG @I < < < in si0nin0 and pro!ul0atin0 DENR Ad!inistrative Order No. %3445 i!ple!entin0 Republi" A"t No. $%4&, the latter bein0 un"onstitutional in that it allo(s the ine;uitable sharin0 o (ealth "ontrar# to Se"tions Hsi"I /, para0raph /, and Se"tion &, para0raph 4H,I HArti"le FIII o the ConstitutionG @II < < < in re"o!!endin0 approval o and i!ple!entin0 the .inan"ial and Te"hni"al Assistan"e A0ree!ent bet(een the *resident o the Republi" o the *hilippines and 7estern Minin0 Corporation *hilippines In". be"ause the sa!e is ille0al and un"onstitutional.45 The# pra# that the Court issue an orderE 1a2 *er!anentl# en>oinin0 respondents ro! a"tin0 on an# appli"ation or .inan"ial or Te"hni"al Assistan"e A0ree!entsG 1b2 De"larin0 the *hilippine Minin0 A"t o /%%' or Republi" A"t No. $%4& as un"onstitutional and null and voidG 1"2 De"larin0 the I!ple!entin0 Rules and Re0ulations o the *hilippine Minin0 A"t "ontained in DENR Ad!inistrative Order No. %3445 and all other si!ilar ad!inistrative issuan"es as un"onstitutional and null and voidG and 1d2 Can"ellin0 the .inan"ial and Te"hni"al Assistan"e A0ree!ent issued to 7estern Minin0 *hilippines, In". as un"onstitutional, ille0al and null and void. 4/ I!pleaded as publi" respondents are Ruben Torres, the then E<e"utive Se"retar#, @i"tor O. Ra!os, the then DENR Se"retar#, and +ora"io Ra!os, Dire"tor o the Mines and -eos"ien"es Bureau o the DENR. Also i!pleaded is private respondent 7MC*, (hi"h entered into the assailed .TAA (ith the *hilippine -overn!ent. 7MC* is o(ned b# 7MC Resour"es International *t#., ,td. 17MC2, Aa (holl# o(ned subsidiar# o 7estern Minin0 Corporation +oldin0s ,i!ited, a publi"l# listed !a>or Australian !inin0 and e<ploration "o!pan#.A 4& B# 7MC*Cs in or!ation, Ait is a /55J o(ned subsidiar# o 7MC ,IMITED.A 46 Respondents, aside ro! !eetin0 petitionersC "ontentions, ar0ue that the re;uisites or >udi"ial in;uir# have not been !et and that the petition does not "o!pl# (ith the "riteria or prohibition and !anda!us. Additionall#, respondent 7MC* ar0ues that there has been a violation o the rule on hierar"h# o "ourts. A ter petitioners iled their repl#, this Court 0ranted due "ourse to the petition. The parties have sin"e iled their respe"tive !e!oranda. 7MC* subse;uentl# iled a Mani estation dated Septe!ber &', &55& alle0in0 that on 9anuar# &6, &55/, 7MC sold all its shares in 7MC* to Sa0ittarius Mines, In". 1Sa0ittarius2, a "orporation or0ani8ed under *hilippine la(s.44 7MC* (as subse;uentl# rena!ed ATa!pa)an Mineral Resour"es Corporation.A 4' 7MC* "lai!s that at least 35J o the e;uit# o Sa0ittarius is o(ned b# .ilipinos andBor .ilipino4o(ned "orporations (hile about 45J is o(ned b# Indophil Resour"es N,, an Australian "o!pan#. 43 It urther "lai!s that b# su"h sale and trans er o shares, A7MC* has "eased to be "onne"ted in an# (a# (ith 7MC.A4$ B# virtue o su"h sale and trans er, the DENR Se"retar#, b# Order o De"e!ber /:, &55/, 4: approved the trans er and re0istration o the sub>e"t .TAA ro! 7MC* to Sa0ittarius. Said Order, ho(ever, (as appealed b# ,epanto Consolidated Minin0 Co. 1,epanto2 to the O i"e o the *resident (hi"h upheld it b# De"ision o 9ul# &6, &55&. 4%

Its !otion or re"onsideration havin0 been denied b# the O i"e o the *resident b# Resolution o Nove!ber /&, &55&,'5 ,epanto iled a petition or revie( '/ be ore the Court o Appeals. In"identall#, t(o other petitions or revie( related to the approval o the trans er and re0istration o the .TAA to Sa0ittarius (ere re"entl# resolved b# this Court.'& It bears stressin0 that this "ase has not been rendered !oot either b# the trans er and re0istration o the .TAA to a .ilipino4o(ned "orporation or b# the non4issuan"e o a te!porar# restrainin0 order or a preli!inar# in>un"tion to sta# the above4said 9ul# &6, &55& de"ision o the O i"e o the *resident. '6 The validit# o the trans er re!ains in dispute and a(aits inal >udi"ial deter!ination. This assu!es, o "ourse, that su"h trans er "ures the .TAACs alle0ed un"onstitutionalit#, on (hi"h ;uestion >ud0!ent is reserved. 7MC* also points out that the ori0inal "lai!o(ners o the !a>or !inerali8ed areas in"luded in the 7MC* .TAA, na!el#, Sa0ittarius, Ta!pa)an Minin0 Corporation, and South"ot Minin0 Corporation, are all .ilipino4o(ned "orporations,'4 ea"h o (hi"h (as a holder o an approved Mineral *rodu"tion Sharin0 A0ree!ent a(arded in /%%4, albeit their respe"tive !ineral "lai!s (ere subsu!ed in the 7MC* .TAAG '' and that these three "o!panies are the sa!e "o!panies that "onsolidated their interests in Sa0ittarius to (ho! 7MC sold its /55J e;uit# in 7MC*.'3 7MC* "on"ludes that in the event that the .TAA is invalidated, the M*SAs o the three "orporations (ould be revived and the !ineral "lai!s (ould revert to their ori0inal "lai!ants. '$ These "ir"u!stan"es, (hile in or!ative, are hardl# si0ni i"ant in the resolution o this "ase, it involvin0 the validit# o the .TAA, not the possible "onse;uen"es o its invalidation. O the above4enu!erated seven 0rounds "ited b# petitioners, as (ill be sho(n later, onl# the irst and the last need be delved intoG in the latter, the dis"ussion shall d(ell onl# inso ar as it ;uestions the e e"tivit# o E. O. No. &$% b# virtue o (hi"h order the ;uestioned .TAA (as or0ed. I Be ore 0oin0 into the substantive issues, the pro"edural ;uestions posed b# respondents shall irst be ta")led. RE0U!S!TES +OR JU/!C!AL RE4!E7hen an issue o "onstitutionalit# is raised, this Court "an e<er"ise its po(er o >udi"ial revie( onl# i the ollo(in0 re;uisites are presentE 1/2 The e<isten"e o an a"tual and appropriate "aseG 1&2 A personal and substantial interest o the part# raisin0 the "onstitutional ;uestionG 162 The e<er"ise o >udi"ial revie( is pleaded at the earliest opportunit#G and 142 The "onstitutional ;uestion is the lis !ota o the "ase. ': Respondents "lai! that the irst three re;uisites are not present. Se"tion /, Arti"le @III o the Constitution states that A1>2udi"ial po(er in"ludes the dut# o the "ourts o >usti"e to settle a"tual "ontroversies involvin0 ri0hts (hi"h are le0all# de!andable and en or"eable.A The po(er o >udi"ial revie(, there ore, is li!ited to the deter!ination o a"tual "ases and "ontroversies. '% An a"tual "ase or "ontrovers# !eans an e<istin0 "ase or "ontrovers# that is appropriate or ripe or deter!ination, not "on>e"tural or anti"ipator#, 35 lest the de"ision o the "ourt (ould a!ount to an advisor# opinion. 3/ The po(er does not e<tend to h#potheti"al ;uestions 3& sin"e an# atte!pt at abstra"tion "ould onl# lead to diale"ti"s and barren le0al ;uestions and to sterile "on"lusions unrelated to a"tualities. 36 A,e0al standin0A or lo"us standi has been de ined as a personal and substantial interest in the "ase su"h that the part# has sustained or (ill sustain dire"t in>ur# as a result o the 0overn!ental a"t that is bein0 "hallen0ed, 34 alle0in0 !ore than a 0enerali8ed 0rievan"e. 3' The 0ist o the ;uestion o standin0 is (hether a part# alle0es Asu"h personal sta)e in the out"o!e o the "ontrovers# as to assure that "on"rete adverseness (hi"h sharpens the presentation o issues upon (hi"h the "ourt depends or illu!ination o di i"ult "onstitutional ;uestions.A 33 =nless a person is in>uriousl# a e"ted in an# o his "onstitutional ri0hts b# the operation o statute or ordinan"e, he has no standin0.3$

*etitioners traverse a (ide ran0e o se"tors. A!on0 the! are ,a Bu0al BClaan Tribal Asso"iation, In"., a ar!ers and indi0enous peopleCs "ooperative or0ani8ed under *hilippine la(s representin0 a "o!!unit# a"tuall# a e"ted b# the !inin0 a"tivities o 7MC*, !e!bers o said "ooperative, 3: as (ell as other residents o areas also a e"ted b# the !inin0 a"tivities o 7MC*.3% These petitioners have standin0 to raise the "onstitutionalit# o the ;uestioned .TAA as the# alle0e a personal and substantial in>ur#. The# "lai! that the# (ould su er Airre!ediable displa"e!entA$5 as a result o the i!ple!entation o the .TAA allo(in0 7MC* to "ondu"t !inin0 a"tivities in their area o residen"e. The# thus !eet the appropriate "ase re;uire!ent as the# assert an interest adverse to that o respondents (ho, on the other hand, insist on the .TAACs validit#. In vie( o the alle0ed i!pendin0 in>ur#, petitioners also have standin0 to assail the validit# o E.O. No. &$%, b# authorit# o (hi"h the .TAA (as e<e"uted. *ubli" respondents !aintain that petitioners, bein0 stran0ers to the .TAA, "annot sue either or both "ontra"tin0 parties to annul it.$/ In other (ords, the# "ontend that petitioners are not real parties in interest in an a"tion or the annul!ent o "ontra"t. *ubli" respondentsC "ontention ails. The present a"tion is not !erel# one or annul!ent o "ontra"t but or prohibition and !anda!us. *etitioners alle0e that publi" respondents a"ted (ithout or in e<"ess o >urisdi"tion in i!ple!entin0 the .TAA, (hi"h the# sub!it is un"onstitutional. As the "ase involves "onstitutional ;uestions, this Court is not "on"erned (ith (hether petitioners are real parties in interest, but (ith (hether the# have le0al standin0. As held in Dilosba#an v. MoratoE$& < < <. AIt is i!portant to note . . . that standin0 be"ause o its "onstitutional and publi" poli"# underpinnin0s, is ver# di erent ro! ;uestions relatin0 to (hether a parti"ular plainti is the real part# in interest or has "apa"it# to sue. Althou0h all three re;uire!ents are dire"ted to(ards ensurin0 that onl# "ertain parties "an !aintain an a"tion, standin0 restri"tions re;uire a partial "onsideration o the !erits, as (ell as broader poli"# "on"erns relatin0 to the proper role o the >udi"iar# in "ertain areas.HAI 1.RIEDENT+A,, DANE AND MI,,ER, CI@I, *ROCED=RE 6&: H/%:'I2 Standin0 is a spe"ial "on"ern in "onstitutional la( be"ause in so!e "ases suits are brou0ht not b# parties (ho have been personall# in>ured b# the operation o a la( or b# o i"ial a"tion ta)en, but b# "on"erned "iti8ens, ta<pa#ers or voters (ho a"tuall# sue in the publi" interest. +en"e, the ;uestion in standin0 is (hether su"h parties have Aalle0ed su"h a personal sta)e in the out"o!e o the "ontrovers# as to assure that "on"rete adverseness (hi"h sharpens the presentation o issues upon (hi"h the "ourt so lar0el# depends or illu!ination o di i"ult "onstitutional ;uestions.A 1Ba)er v. Carr, 63% =.S. /:3, $ ,.Ed.&d 366 H/%3&I.2 As earlier stated, petitioners !eet this re;uire!ent. The "hallen0e a0ainst the "onstitutionalit# o R.A. No. $%4& and DAO No. %3445 li)e(ise ul ills the re;uisites o >usti"iabilit#. Althou0h these la(s (ere not in or"e (hen the sub>e"t .TAA (as entered into, the ;uestion as to their validit# is ripe or ad>udi"ation. The 7MC* .TAA providesE /4.6 .uture ,e0islation An# ter! and "ondition !ore avourable to .inan"ial KTe"hni"al Assistan"e A0ree!ent "ontra"tors resultin0 ro! repeal or a!end!ent o an# e<istin0 la( or re0ulation or ro! the ena"t!ent o a la(, re0ulation or ad!inistrative order shall be "onsidered a part o this A0ree!ent. It is undisputed that R.A. No. $%4& and DAO No. %3445 "ontain provisions that are !ore avorable to 7MC*, hen"e, these la(s, to the e<tent that the# are avorable to 7MC*, 0overn the .TAA. In addition, R.A. No. $%4& e<pli"itl# !a)es "ertain provisions appl# to pre4e<istin0 a0ree!ents. SEC. //&. Non4i!pair!ent o E<istin0 Minin0BLuarr#in0 Ri0hts. M < < < That the provisions o Chapter FI@ on 0overn!ent share in !ineral produ"tion4sharin0 a0ree!ent and o Chapter F@I on in"entives o this A"t shall i!!ediatel# 0overn and appl# to a !inin0 lessee or "ontra"tor unless the !inin0 lessee or "ontra"tor indi"ates his intention to the se"retar#, in (ritin0, not to avail o said provisions < < < *rovided, inall#, That su"h leases, produ"tion4sharin0 a0ree!ents, inan"ial or te"hni"al assistan"e a0ree!ents shall "o!pl# (ith the appli"able provisions o this A"t and its i!ple!entin0 rules and re0ulations.

As there is no su00estion that 7MC* has indi"ated its intention not to avail o the provisions o Chapter F@I o R.A. No. $%4&, it "an sa el# be presu!ed that the# appl# to the 7MC* .TAA. Mis"onstruin0 the appli"ation o the third re;uisite or >udi"ial revie( M that the e<er"ise o the revie( is pleaded at the earliest opportunit# M 7MC* points out that the petition (as iled onl# al!ost t(o #ears a ter the e<e"ution o the .TAA, hen"e, not raised at the earliest opportunit#. The third re;uisite should not be ta)en to !ean that the ;uestion o "onstitutionalit# !ust be raised i!!ediatel# a ter the e<e"ution o the state a"tion "o!plained o . That the ;uestion o "onstitutionalit# has not been raised be ore is not a valid reason or re usin0 to allo( it to be raised later. $6 A "ontrar# rule (ould !ean that a la(, other(ise un"onstitutional, (ould lapse into "onstitutionalit# b# the !ere ailure o the proper part# to pro!ptl# ile a "ase to "hallen0e the sa!e. PROPR!ET, O+ PRO1!B!T!ON AN/ MAN/AMUS Be ore the e e"tivit# in 9ul# /%%$ o the Revised Rules o Civil *ro"edure, Se"tion & o Rule 3' readE SEC. &. *etition or prohibition. M 7hen the pro"eedin0s o an# tribunal, "orporation, board, or person, (hether e<er"isin0 un"tions >udi"ial or !inisterial, are (ithout or in e<"ess o its or his >urisdi"tion, or (ith 0rave abuse o dis"retion, and there is no appeal or an# other plain, speed#, and ade;uate re!ed# in the ordinar# "ourse o la(, a person a00rieved thereb# !a# ile a veri ied petition in the proper "ourt alle0in0 the a"ts (ith "ertaint# and pra#in0 that >ud0!ent be rendered "o!!andin0 the de endant to desist ro! urther pro"eedin0 in the a"tion or !atter spe"i ied therein. *rohibition is a preventive re!ed#. $4 It see)s a >ud0!ent orderin0 the de endant to desist ro! "ontinuin0 (ith the "o!!ission o an a"t per"eived to be ille0al. $' The petition or prohibition at bar is thus an appropriate re!ed#. 7hile the e<e"ution o the "ontra"t itsel !a# be ait a""o!pli, its i!ple!entation is not. *ubli" respondents, in behal o the -overn!ent, have obli0ations to ul ill under said "ontra"t. *etitioners see) to prevent the! ro! ul illin0 su"h obli0ations on the theor# that the "ontra"t is un"onstitutional and, there ore, void. The propriet# o a petition or prohibition bein0 upheld, dis"ussion o the propriet# o the !anda!us aspe"t o the petition is rendered unne"essar#. 1!ERARC1, O+ COURTS The "ontention that the ilin0 o this petition violated the rule on hierar"h# o "ourts does not li)e(ise lie. The rule has been e<plained thusE Bet(een t(o "ourts o "on"urrent ori0inal >urisdi"tion, it is the lo(er "ourt that should initiall# pass upon the issues o a "ase. That (a#, as a parti"ular "ase 0oes throu0h the hierar"h# o "ourts, it is shorn o all but the i!portant le0al issues or those o irst i!pression, (hi"h are the proper sub>e"t o attention o the appellate "ourt. This is a pro"edural rule borne o e<perien"e and adopted to i!prove the ad!inistration o >usti"e. This Court has "onsistentl# en>oined liti0ants to respe"t the hierar"h# o "ourts. Althou0h this Court has "on"urrent >urisdi"tion (ith the Re0ional Trial Courts and the Court o Appeals to issue (rits o "ertiorari, prohibition, !anda!us, ;uo (arranto, habeas "orpus and in>un"tion, su"h "on"urren"e does not 0ive a part# unrestri"ted reedo! o "hoi"e o "ourt oru!. The resort to this CourtCs pri!ar# >urisdi"tion to issue said (rits shall be allo(ed onl# (here the redress desired "annot be obtained in the appropriate "ourts or (here e<"eptional and "o!pellin0 "ir"u!stan"es >usti # su"h invo"ation. 7e held in *eople v. Cuares!a thatE A be"o!in0 re0ard or >udi"ial hierar"h# !ost "ertainl# indi"ates that petitions or the issuan"e o e<traordinar# (rits a0ainst irst level 1Ain eriorA2 "ourts should be iled (ith the Re0ional Trial Court, and those a0ainst the latter, (ith the Court o Appeals. A dire"t invo"ation o the Supre!e CourtCs ori0inal >urisdi"tion to issue these (rits should be allo(ed onl# (here there are spe"ial and i!portant reasons there or, "learl# and spe"i i"all# set out in the petition. This is established poli"#. It is a poli"# ne"essar# to prevent inordinate de!ands upon the CourtCs ti!e and attention (hi"h are better devoted to those !atters (ithin its e<"lusive >urisdi"tion, and to prevent urther over4"ro(din0 o the CourtCs do")et < < <. $3 HE!phasis supplied.I

The reper"ussions o the issues in this "ase on the *hilippine !inin0 industr#, i not the national e"ono!#, as (ell as the novelt# thereo , "onstitute e<"eptional and "o!pellin0 "ir"u!stan"es to >usti # resort to this Court in the irst instan"e. In all events, this Court has the dis"retion to ta)e "o0ni8an"e o a suit (hi"h does not satis # the re;uire!ents o an a"tual "ase or le0al standin0 (hen para!ount publi" interest is involved. $$ 7hen the issues raised are o para!ount i!portan"e to the publi", this Court !a# brush aside te"hni"alities o pro"edure. $: II *etitioners "ontend that E.O. No. &$% did not ta)e e e"t be"ause its supposed date o e e"tivit# "a!e a ter *resident A;uino had alread# lost her le0islative po(ers under the *rovisional Constitution. And the# li)e(ise "lai! that the 7MC .TAA, (hi"h (as entered into pursuant to E.O. No. &$%, violates Se"tion &, Arti"le FII o the Constitution be"ause, a!on0 other reasonsE 1/2 It allo(s orei0n4o(ned "o!panies to e<tend !ore than !ere inan"ial or te"hni"al assistan"e to the State in the e<ploitation, develop!ent, and utili8ation o !inerals, petroleu!, and other !ineral oils, and even per!its orei0n o(ned "o!panies to Aoperate and !ana0e !inin0 a"tivities.A 1&2 It allo(s orei0n4o(ned "o!panies to e<tend both te"hni"al and inan"ial assistan"e, instead o Aeither te"hni"al or inan"ial assistan"e.A To appre"iate the i!port o these issues, a visit to the histor# o the pertinent "onstitutional provision, the "on"epts "ontained therein, and the la(s ena"ted pursuant thereto, is in order. Se"tion &, Arti"le FII reads in ullE Se". &. All lands o the publi" do!ain, (aters, !inerals, "oal, petroleu!, and other !ineral oils, all or"es o potential ener0#, isheries, orests or ti!ber, (ildli e, lora and auna, and other natural resour"es are o(ned b# the State. 7ith the e<"eption o a0ri"ultural lands, all other natural resour"es shall not be alienated. The e<ploration, develop!ent, and utili8ation o natural resour"es shall be under the ull "ontrol and supervision o the State. The State !a# dire"tl# underta)e su"h a"tivities or it !a# enter into "o4produ"tion, >oint venture, or produ"tion4sharin0 a0ree!ents (ith .ilipino "iti8ens, or "orporations or asso"iations at least si<t# per "entu! o (hose "apital is o(ned b# su"h "iti8ens. Su"h a0ree!ents !a# be or a period not e<"eedin0 t(ent#4 ive #ears, rene(able or not !ore than t(ent#4 ive #ears, and under su"h ter!s and "onditions as !a# be provided b# la(. In "ases o (ater ri0hts or irri0ation, (ater suppl#, isheries, or industrial uses other than the develop!ent o (ater po(er, bene i"ial use !a# be the !easure and li!it o the 0rant. The State shall prote"t the nationCs !arine (ealth in its ar"hipela0i" (aters, territorial sea, and e<"lusive e"ono!i" 8one, and reserve its use and en>o#!ent e<"lusivel# to .ilipino "iti8ens. The Con0ress !a#, b# la(, allo( s!all4s"ale utili8ation o natural resour"es b# .ilipino "iti8ens, as (ell as "ooperative ish ar!in0, (ith priorit# to subsisten"e isher!en and ish4(or)ers in rivers, la)es, ba#s, and la0oons. The *resident !a# enter into a0ree!ents (ith orei0n4o(ned "orporations involvin0 either te"hni"al or inan"ial assistan"e or lar0e4s"ale e<ploration, develop!ent, and utili8ation o !inerals, petroleu!, and other !ineral oils a""ordin0 to the 0eneral ter!s and "onditions provided b# la(, based on real "ontributions to the e"ono!i" 0ro(th and 0eneral (el are o the "ountr#. In su"h a0ree!ents, the State shall pro!ote the develop!ent and use o lo"al s"ienti i" and te"hni"al resour"es. The *resident shall noti # the Con0ress o ever# "ontra"t entered into in a""ordan"e (ith this provision, (ithin thirt# da#s ro! its e<e"ution. T1E SPAN!S1 REG!ME AN/ T1E REGAL!AN /OCTR!NE The irst senten"e o Se"tion & e!bodies the Re0alian do"trine or >ura re0alia. Introdu"ed b# Spain into these Islands, this eudal "on"ept is based on the StateCs po(er o do!iniu!, (hi"h is the "apa"it# o the State to o(n or a";uire propert#. $%

In its broad sense, the ter! A>ura re0aliaA re ers to ro#al ri0hts, or those ri0hts (hi"h the Din0 has b# virtue o his prero0atives. In Spanish la(, it re ers to a ri0ht (hi"h the soverei0n has over an#thin0 in (hi"h a sub>e"t has a ri0ht o propert# or propriedad. These (ere ri0hts en>o#ed durin0 eudal ti!es b# the )in0 as the soverei0n. The theor# o the eudal s#ste! (as that title to all lands (as ori0inall# held b# the Din0, and (hile the use o lands (as 0ranted out to others (ho (ere per!itted to hold the! under "ertain "onditions, the Din0 theoreti"all# retained the title. B# i"tion o la(, the Din0 (as re0arded as the ori0inal proprietor o all lands, and the true and onl# sour"e o title, and ro! hi! all lands (ere held. The theor# o >ura re0alia (as there ore nothin0 !ore than a natural ruit o "on;uest.:5 The *hilippines havin0 passed to Spain b# virtue o dis"over# and "on;uest, :/ earlier Spanish de"rees de"lared that Aall lands (ere held ro! the Cro(n.A:& The Re0alian do"trine e<tends not onl# to land but also to Aall natural (ealth that !a# be ound in the bo(els o the earth.A:6 Spain, in parti"ular, re"o0ni8ed the uni;ue value o natural resour"es, vie(in0 the!, espe"iall# !inerals, as an abundant sour"e o revenue to inan"e its (ars a0ainst other nations. :4 Minin0 la(s durin0 the Spanish re0i!e re le"ted this perspe"tive.:' T1E AMER!CAN OCCUPAT!ON AN/ T1E CONCESS!ON REG!ME B# the Treat# o *aris o De"e!ber /5, /:%:, Spain "eded Athe ar"hipela0o )no(n as the *hilippine IslandsA to the =nited States. The *hilippines (as hen"e 0overned b# !eans o or0ani" a"ts that (ere in the nature o "harters servin0 as a Constitution o the o""upied territor# ro! /%55 to /%6'. :3 A!on0 the prin"ipal or0ani" a"ts o the *hilippines (as the A"t o Con0ress o 9ul# /, /%5&, !ore "o!!onl# )no(n as the *hilippine Bill o /%5&, throu0h (hi"h the =nited States Con0ress assu!ed the ad!inistration o the *hilippine Islands. :$ Se"tion &5 o said Bill reserved the disposition o !ineral lands o the publi" do!ain ro! sale. Se"tion &/ thereo allo(ed the ree and open e<ploration, o""upation and pur"hase o !ineral deposits not onl# to "iti8ens o the *hilippine Islands but to those o the =nited States as (ellE Se". &/. That all valuable !ineral deposits in publi" lands in the *hilippine Islands, both surve#ed and unsurve#ed, are hereb# de"lared to be ree and open to e<ploration, o""upation and pur"hase, and the land in (hi"h the# are ound, to o""upation and pur"hase, b# "iti8ens o the =nited States or o said IslandsE *rovided, That (hen on an# lands in said Islands entered and o""upied as a0ri"ultural lands under the provisions o this A"t, but not patented, !ineral deposits have been ound, the (or)in0 o su"h !ineral deposits is orbidden until the person, asso"iation, or "orporation (ho or (hi"h has entered and is o""up#in0 su"h lands shall have paid to the -overn!ent o said Islands su"h additional su! or su!s as (ill !a)e the total a!ount paid or the !ineral "lai! or "lai!s in (hi"h said deposits are lo"ated e;ual to the a!ount "har0ed b# the -overn!ent or the sa!e as !ineral "lai!s. =nli)e Spain, the =nited States "onsidered natural resour"es as a sour"e o (ealth or its nationals and sa( it to allo( both .ilipino and A!eri"an "iti8ens to e<plore and e<ploit !inerals in publi" lands, and to 0rant patents to private !ineral lands.:: A person (ho a";uired o(nership over a par"el o private !ineral land pursuant to the la(s then prevailin0 "ould e<"lude other persons, even the State, ro! e<ploitin0 !inerals (ithin his propert#. :% Thus, earlier >urispruden"e%5 held thatE A valid and subsistin0 lo"ation o !ineral land, !ade and )ept up in a""ordan"e (ith the provisions o the statutes o the =nited States, has the e e"t o a 0rant b# the =nited States o the present and e<"lusive possession o the lands lo"ated, and this e<"lusive ri0ht o possession and en>o#!ent "ontinues durin0 the entire li e o the lo"ation. < < <. < < <. The dis"over# o !inerals in the 0round b# one (ho has a valid !ineral lo"ation per e"ts his "lai! and his lo"ation not onl# a0ainst third persons, but also a0ainst the -overn!ent. < < <. HItali"s in the ori0inal.I The Re0alian do"trine and the A!eri"an s#ste!, there ore, di er in one essential respe"t. =nder the Re0alian theor#, !ineral ri0hts are not in"luded in a 0rant o land b# the stateG under the A!eri"an do"trine, !ineral ri0hts are in"luded in a 0rant o land b# the 0overn!ent. %/ Se"tion &/ also !ade possible the "on"ession 1 re;uentl# st#led Aper!itA, li"enseA or AleaseA2 %& s#ste!. %6 This (as the traditional re0i!e i!posed b# the "olonial ad!inistrators or the e<ploitation o natural resour"es in the e<tra"tive se"tor 1petroleu!, hard !inerals, ti!ber, et".2. %4

=nder the "on"ession s#ste!, the "on"essionaire !a)es a dire"t e;uit# invest!ent or the purpose o e<ploitin0 a parti"ular natural resour"e (ithin a 0iven area. %' Thus, the "on"ession a!ounts to "o!plete "ontrol b# the "on"essionaire over the "ountr#Cs natural resour"e, or it is 0iven e<"lusive and plenar# ri0hts to e<ploit a parti"ular resour"e at the point o e<tra"tion. %3 In "onsideration or the ri0ht to e<ploit a natural resour"e, the "on"essionaire either pa#s rent or ro#alt#, (hi"h is a i<ed per"enta0e o the 0ross pro"eeds. %$ ,ater statutor# ena"t!ents b# the le0islative bodies set up in the *hilippines adopted the "ontra"tual ra!e(or) o the "on"ession.%: .or instan"e, A"t No. &%6&,%% approved on Au0ust 6/, /%&5, (hi"h provided or the e<ploration, lo"ation, and lease o lands "ontainin0 petroleu! and other !ineral oils and 0as in the *hilippines, and A"t No. &$/%,/55 approved on Ma# /4, /%/$, (hi"h provided or the leasin0 and develop!ent o "oal lands in the *hilippines, both utili8ed the "on"ession s#ste!. /5/ T1E 1;8< CONST!TUT!ON AN/ T1E NAT!ONAL!5AT!ON O+ NATURAL RESOURCES B# the A"t o =nited States Con0ress o Mar"h &4, /%64, popularl# )no(n as the T#din0s4M"Du ie ,a(, the *eople o the *hilippine Islands (ere authori8ed to adopt a "onstitution. /5& On 9ul# 65, /%64, the Constitutional Convention !et or the purpose o dra tin0 a "onstitution, and the Constitution subse;uentl# dra ted (as approved b# the Convention on .ebruar# :, /%6'./56 The Constitution (as sub!itted to the *resident o the =nited States on Mar"h /:, /%6'./54 On Mar"h &6, /%6', the *resident o the =nited States "erti ied that the Constitution "on or!ed substantiall# (ith the provisions o the A"t o Con0ress approved on Mar"h &4, /%64. /5' On Ma# /4, /%6', the Constitution (as rati ied b# the .ilipino people. /53 The /%6' Constitution adopted the Re0alian do"trine, de"larin0 all natural resour"es o the *hilippines, in"ludin0 !ineral lands and !inerals, to be propert# belon0in0 to the State. /5$ As adopted in a republi"an s#ste!, the !edieval "on"ept o >ura re0alia is stripped o ro#al overtones and o(nership o the land is vested in the State. /5: Se"tion /, Arti"le FIII, on Conservation and =tili8ation o Natural Resour"es, o the /%6' Constitution providedE SECTION /. All a0ri"ultural, ti!ber, and !ineral lands o the publi" do!ain, (aters, !inerals, "oal, petroleu!, and other !ineral oils, all or"es o potential ener0#, and other natural resour"es o the *hilippines belon0 to the State, and their disposition, e<ploitation, develop!ent, or utili8ation shall be li!ited to "iti8ens o the *hilippines, or to "orporations or asso"iations at least si<t# per "entu! o the "apital o (hi"h is o(ned b# su"h "iti8ens, sub>e"t to an# e<istin0 ri0ht, 0rant, lease, or "on"ession at the ti!e o the inau0uration o the -overn!ent established under this Constitution. Natural resour"es, (ith the e<"eption o publi" a0ri"ultural land, shall not be alienated, and no li"ense, "on"ession, or lease or the e<ploitation, develop!ent, or utili8ation o an# o the natural resour"es shall be 0ranted or a period e<"eedin0 t(ent#4 ive #ears, e<"ept as to (ater ri0hts or irri0ation, (ater suppl#, isheries, or industrial uses other than the develop!ent o (ater po(er, in (hi"h "ases bene i"ial use !a# be the !easure and the li!it o the 0rant. The nationali8ation and "onservation o the natural resour"es o the "ountr# (as one o the i<ed and do!inatin0 ob>e"tives o the /%6' Constitutional Convention./5% One dele0ate relatesE There (as an over(hel!in0 senti!ent in the Convention in avor o the prin"iple o state o(nership o natural resour"es and the adoption o the Re0alian do"trine. State o(nership o natural resour"es (as seen as a ne"essar# startin0 point to se"ure re"o0nition o the stateCs po(er to "ontrol their disposition, e<ploitation, develop!ent, or utili8ation. The dele0ates o the Constitutional Convention ver# (ell )ne( that the "on"ept o State o(nership o land and natural resour"es (as introdu"ed b# the Spaniards, ho(ever, the# (ere not "ertain (hether it (as "ontinued and applied b# the A!eri"ans. To re!ove all doubts, the Convention approved the provision in the Constitution a ir!in0 the Re0alian do"trine. The adoption o the prin"iple o state o(nership o the natural resour"es and o the Re0alian do"trine (as "onsidered to be a ne"essar# startin0 point or the plan o nationali8in0 and "onservin0 the natural resour"es o the "ountr#. .or (ith the establish!ent o the prin"iple o state o(nership o the natural resour"es, it (ould not be hard to se"ure the re"o0nition o the po(er o the State to "ontrol their disposition, e<ploitation, develop!ent or utili8ation.//5 The nationali8ation o the natural resour"es (as intended 1/2 to insure their "onservation or .ilipino posterit#G 1&2 to serve as an instru!ent o national de ense, helpin0 prevent the e<tension to the "ountr# o orei0n "ontrol throu0h pea"e ul e"ono!i" penetrationG and 162 to avoid !a)in0 the *hilippines a sour"e o international "on li"ts (ith the "onse;uent dan0er to its internal se"urit# and independen"e. ///

The sa!e Se"tion /, Arti"le FIII also adopted the "on"ession s#ste!, e<pressl# per!ittin0 the State to 0rant li"enses, "on"essions, or leases or the e<ploitation, develop!ent, or utili8ation o an# o the natural resour"es. -rants, ho(ever, (ere li!ited to .ilipinos or entities at least 35J o the "apital o (hi"h is o(ned b# .ilipinos.lawph!l.ne+ The s(ell o nationalis! that su used the /%6' Constitution (as radi"all# diluted (hen on Nove!ber /%43, the *arit# A!end!ent, (hi"h "a!e in the or! o an AOrdinan"e Appended to the Constitution,A (as rati ied in a plebis"ite.//& The A!end!ent e<tended, ro! 9ul# 4, /%43 to 9ul# 6, /%$4, the ri0ht to utili8e and e<ploit our natural resour"es to "iti8ens o the =nited States and business enterprises o(ned or "ontrolled, dire"tl# or indire"tl#, b# "iti8ens o the =nited StatesE//6 Not(ithstandin0 the provision o se"tion one, Arti"le Thirteen, and se"tion ei0ht, Arti"le .ourteen, o the ore0oin0 Constitution, durin0 the e e"tivit# o the E<e"utive A0ree!ent entered into b# the *resident o the *hilippines (ith the *resident o the =nited States on the ourth o 9ul#, nineteen hundred and ort#4si<, pursuant to the provisions o Co!!on(ealth A"t Nu!bered Seven hundred and thirt#4three, but in no "ase to e<tend be#ond the third o 9ul#, nineteen hundred and sevent#4 our, the disposition, e<ploitation, develop!ent, and utili8ation o all a0ri"ultural, ti!ber, and !ineral lands o the publi" do!ain, (aters, !inerals, "oals, petroleu!, and other !ineral oils, all or"es and sour"es o potential ener0#, and other natural resour"es o the *hilippines, and the operation o publi" utilities, shall, i open to an# person, be open to "iti8ens o the =nited States and to all or!s o business enterprise o(ned or "ontrolled, dire"tl# or indire"tl#, b# "iti8ens o the =nited States in the sa!e !anner as to, and under the sa!e "onditions i!posed upon, "iti8ens o the *hilippines or "orporations or asso"iations o(ned or "ontrolled b# "iti8ens o the *hilippines. The *arit# A!end!ent (as subse;uentl# !odi ied b# the /%'4 Revised Trade A0ree!ent, also )no(n as the ,aurel4,an0le# A0ree!ent, e!bodied in Republi" A"t No. /6''. //4 T1E PETROLEUM ACT O+ 1;4; AN/ T1E CONCESS!ON S,STEM In the !eanti!e, Republi" A"t No. 6:$, //' also )no(n as the *etroleu! A"t o /%4%, (as approved on 9une /:, /%4%. The *etroleu! A"t o /%4% e!plo#ed the "on"ession s#ste! or the e<ploitation o the nationCs petroleu! resour"es. A!on0 the )inds o "on"essions it san"tioned (ere e<ploration and e<ploitation "on"essions, (hi"h respe"tivel# 0ranted to the "on"essionaire the e<"lusive ri0ht to e<plore or //3 or develop//$ petroleu! (ithin spe"i ied areas. Con"essions !a# be 0ranted onl# to dul# ;uali ied persons //: (ho have su i"ient inan"es, or0ani8ation, resour"es, te"hni"al "o!peten"e, and s)ills ne"essar# to "ondu"t the operations to be underta)en. //% Nevertheless, the -overn!ent reserved the ri0ht to underta)e su"h (or) itsel . /&5 This pro"eeded ro! the theor# that all natural deposits or o""urren"es o petroleu! or natural 0as in publi" andBor private lands in the *hilippines belon0 to the State./&/ E<ploration and e<ploitation "on"essions did not "on er upon the "on"essionaire o(nership over the petroleu! lands and petroleu! deposits. /&& +o(ever, the# did 0rant "on"essionaires the ri0ht to e<plore, develop, e<ploit, and utili8e the! or the period and under the "onditions deter!ined b# the la(. /&6 Con"essions (ere 0ranted at the "o!plete ris) o the "on"essionaireG the -overn!ent did not 0uarantee the e<isten"e o petroleu! or underta)e, in an# "ase, title (arrant#. /&4 Con"essionaires (ere re;uired to sub!it in or!ation as !a#be re;uired b# the Se"retar# o A0ri"ulture and Natural Resour"es, in"ludin0 reports o 0eolo0i"al and 0eoph#si"al e<a!inations, as (ell as produ"tion reports. /&' E<ploration/&3 and e<ploitation/&$ "on"essionaires (ere also re;uired to sub!it (or) pro0ra!s. lavvphi1.net E<ploitation "on"essionaires, in parti"ular, (ere obli0ed to pa# an annual e<ploitation ta<, /&: the ob>e"t o (hi"h is to indu"e the "on"essionaire to a"tuall# produ"e petroleu!, and not si!pl# to sit on the "on"ession (ithout developin0 or e<ploitin0 it. /&% These "on"essionaires (ere also bound to pa# the -overn!ent ro#alt#, (hi"h (as not less than /&NJ o the petroleu! produ"ed and saved, less that "onsu!ed in the operations o the "on"essionaire./65 =nder Arti"le 33, R.A. No. 6:$, the e<ploitation ta< !a# be "redited a0ainst the ro#alties so that i the "on"essionaire shall be a"tuall# produ"in0 enou0h oil, it (ould not a"tuall# be pa#in0 the e<ploitation ta<. /6/ .ailure to pa# the annual e<ploitation ta< or t(o "onse"utive #ears, /6& or the ro#alt# due to the -overn!ent (ithin one #ear ro! the date it be"o!es due, /66 "onstituted 0rounds or the "an"ellation o the "on"ession. In "ase o dela# in the pa#!ent o the ta<es or ro#alt# i!posed b# the la( or b# the "on"ession, a sur"har0e o /J per !onth is e<a"ted until the sa!e are paid./64

As a rule, title ri0hts to all e;uip!ent and stru"tures that the "on"essionaire pla"ed on the land belon0 to the e<ploration or e<ploitation "on"essionaire. /6' =pon ter!ination o su"h "on"ession, the "on"essionaire had a ri0ht to re!ove the sa!e./63 The Se"retar# o A0ri"ulture and Natural Resour"es (as tas)ed (ith "arr#in0 out the provisions o the la(, throu0h the Dire"tor o Mines, (ho a"ted under the Se"retar#Cs i!!ediate supervision and "ontrol. /6$ The A"t 0ranted the Se"retar# the authorit# to inspe"t an# operation o the "on"essionaire and to e<a!ine all the boo)s and a""ounts pertainin0 to operations or "onditions related to pa#!ent o ta<es and ro#alties. /6: The sa!e la( authori8ed the Se"retar# to "reate an Ad!inistration =nit and a Te"hni"al Board. /6% The Ad!inistration =nit (as "har0ed, inter alia, (ith the en or"e!ent o the provisions o the la(. /45 The Te"hni"al Board had, a!on0 other un"tions, the dut# to "he") on the per or!an"e o "on"essionaires and to deter!ine (hether the obli0ations i!posed b# the A"t and its i!ple!entin0 re0ulations (ere bein0 "o!plied (ith. /4/ @i"torio Mario A. Di!a0iba, Chie ,e0al O i"er o the Bureau o Ener0# Develop!ent, anal#8ed the bene its and dra(ba")s o the "on"ession s#ste! inso ar as it applied to the petroleu! industr#E Advanta0es o Con"ession. 7hether it e!phasi8es in"o!e ta< or ro#alt#, the !ost positive aspe"t o the "on"ession s#ste! is that the StateCs inan"ial involve!ent is virtuall# ris) ree and ad!inistration is si!ple and "o!parativel# lo( in "ost. .urther!ore, i there is a "o!petitive allo"ation o the resour"e leadin0 to substantial bonuses andBor 0reater ro#alt# "oupled (ith a relativel# hi0h level o ta<ation, revenue a""ruin0 to the State under the "on"ession s#ste! !a# "o!pare avorabl# (ith other inan"ial arran0e!ents. Disadvanta0es o Con"ession. There are, ho(ever, !a>or ne0ative aspe"ts to this s#ste!. Be"ause the -overn!entCs role in the traditional "on"ession is passive, it is at a distin"t disadvanta0e in !ana0in0 and developin0 poli"# or the nationCs petroleu! resour"e. This is true or several reasons. .irst, even thou0h !ost "on"ession a0ree!ents "ontain "ovenants re;uirin0 dili0en"e in operations and produ"tion, this establishes onl# an indire"t and passive "ontrol o the host "ountr# in resour"e develop!ent. Se"ond, and !ore i!portantl#, the a"t that the host "ountr# does not dire"tl# parti"ipate in resour"e !ana0e!ent de"isions inhibits its abilit# to train and e!plo# its nationals in petroleu! develop!ent. This a"tor "ould dela# or prevent the "ountr# ro! e e"tivel# en0a0in0 in the develop!ent o its resour"es. ,astl#, a dire"t role in !ana0e!ent is usuall# ne"essar# in order to obtain a )no(led0e o the international petroleu! industr# (hi"h is i!portant to an appre"iation o the host "ountr#Cs resour"es in relation to those o other "ountries. /4& Other liabilities o the s#ste! have also been notedE < < < there are un"tional i!pli"ations (hi"h 0ive the "on"essionaire 0reat e"ono!i" po(er arisin0 ro! its e<"lusive e;uit# holdin0. This in"ludes, irst, appropriation o the returns o the underta)in0, sub>e"t to a !odest ro#alt#G se"ond, e<"lusive !ana0e!ent o the pro>e"tG third, "ontrol o produ"tion o the natural resour"e, su"h as volu!e o produ"tion, e<pansion, resear"h and develop!entG and ourth, e<"lusive responsibilit# or do(nstrea! operations, li)e pro"essin0, !ar)etin0, and distribution. In short, even i no!inall#, the state is the soverei0n and o(ner o the natural resour"e bein0 e<ploited, it has been shorn o all ele!ents o "ontrol over su"h natural resour"e be"ause o the e<"lusive nature o the "ontra"tual re0i!e o the "on"ession. The "on"ession s#ste!, investin0 as it does o(nership o natural resour"es, "onstitutes a "onsistent in"onsisten"# (ith the prin"iple e!bodied in our Constitution that natural resour"es belon0 to the state and shall not be alienated, not to !ention the a"t that the "on"ession (as the bedro") o the "olonial s#ste! in the e<ploitation o natural resour"es. /46 Eventuall#, the "on"ession s#ste! ailed or reasons e<plained b# Di!a0ibaE Not(ithstandin0 the 0ood intentions o the *etroleu! A"t o /%4%, the "on"ession s#ste! "ould not have properl# spurred sustained oil e<ploration a"tivities in the "ountr#, sin"e it assu!ed that su"h a "apital4intensive, hi0h ris) venture "ould be su""ess ull# underta)en b# a sin0le individual or a s!all "o!pan#. In e e"t, "on"essionairesC unds (ere easil# e<hausted. Moreover, sin"e the "on"ession s#ste! pra"ti"all# "losed its doors to interested orei0n investors, lo"al "apital (as stret"hed to the li!its. The old s#ste! also ailed to "onsider the hi0hl# sophisti"ated te"hnolo0# and e<pertise re;uired, (hi"h (ould be available onl# to !ultinational "o!panies. /44 A shi t to a ne( re0i!e or the develop!ent o natural resour"es thus see!ed i!!inent. PRES!/ENT!AL /ECREE NO. 87, T1E 1;78 CONST!TUT!ON AN/ T1E SER4!CE CONTRACT S,STEM

The pro!ul0ation on De"e!ber 6/, /%$& o *residential De"ree No. :$, /4' other(ise )no(n as The Oil E<ploration and Develop!ent A"t o /%$& si0naled su"h a trans or!ation. *.D. No. :$ per!itted the 0overn!ent to e<plore or and produ"e indi0enous petroleu! throu0h Aservi"e "ontra"ts.A /43 AServi"e "ontra"tsA is a ter! that assu!es var#in0 !eanin0s to di erent people, and it has "arried !an# na!es in di erent "ountries, li)e A(or) "ontra"tsA in Indonesia, A"on"ession a0ree!entsA in A ri"a, Aprodu"tion4sharin0 a0ree!entsA in the Middle East, and Aparti"ipation a0ree!entsA in ,atin A!eri"a. /4$ A un"tional de inition o Aservi"e "ontra"tsA in the *hilippines is provided as ollo(sE A servi"e "ontra"t is a "ontra"tual arran0e!ent or en0a0in0 in the e<ploitation and develop!ent o petroleu!, !ineral, ener0#, land and other natural resour"es b# (hi"h a 0overn!ent or its a0en"#, or a private person 0ranted a ri0ht or privile0e b# the 0overn!ent authori8es the other part# 1servi"e "ontra"tor2 to en0a0e or parti"ipate in the e<er"ise o su"h ri0ht or the en>o#!ent o the privile0e, in that the latter provides inan"ial or te"hni"al resour"es, underta)es the e<ploitation or produ"tion o a 0iven resour"e, or dire"tl# !ana0es the produ"tive enterprise, operations o the e<ploration and e<ploitation o the resour"es or the disposition o !ar)etin0 or resour"es. /4: In a servi"e "ontra"t under *.D. No. :$, servi"e and te"hnolo0# are urnished b# the servi"e "ontra"tor or (hi"h it shall be entitled to the stipulated servi"e ee. /4% The "ontra"tor !ust be te"hni"all# "o!petent and inan"iall# "apable to underta)e the operations re;uired in the "ontra"t. /'5 .inan"in0 is supposed to be provided b# the -overn!ent to (hi"h all petroleu! produ"ed belon0s. /'/ In "ase the -overn!ent is unable to inan"e petroleu! e<ploration operations, the "ontra"tor !a# urnish servi"es, te"hnolo0# and inan"in0, and the pro"eeds o sale o the petroleu! produ"ed under the "ontra"t shall be the sour"e o unds or pa#!ent o the servi"e ee and the operatin0 e<penses due the "ontra"tor. /'& The "ontra"tor shall underta)e, !ana0e and e<e"ute petroleu! operations, sub>e"t to the 0overn!ent overseein0 the !ana0e!ent o the operations./'6 The "ontra"tor provides all ne"essar# servi"es and te"hnolo0# and the re;uisite inan"in0, per or!s the e<ploration (or) obli0ations, and assu!es all e<ploration ris)s su"h that i no petroleu! is produ"ed, it (ill not be entitled to rei!burse!ent. /'4 On"e petroleu! in "o!!er"ial ;uantit# is dis"overed, the "ontra"tor shall operate the ield on behal o the 0overn!ent. /'' *.D. No. :$ pres"ribed !ini!u! ter!s and "onditions or ever# servi"e "ontra"t. /'3 It also 0ranted the "ontra"tor "ertain privile0es, in"ludin0 e<e!ption ro! ta<es and pa#!ent o tari duties, /'$ and per!itted the repatriation o "apital and retention o pro its abroad./': Ostensibl#, the servi"e "ontra"t s#ste! had "ertain advanta0es over the "on"ession re0i!e. /'% It has been opined, thou0h, that, in the *hilippines, our "on"ept o a servi"e "ontra"t, at least in the petroleu! industr#, (as basi"all# a "on"ession re0i!e (ith a produ"tion4sharin0 ele!ent. /35 On 9anuar# /$, /%$6, then *resident .erdinand E. Mar"os pro"lai!ed the rati i"ation o a ne( Constitution. /3/ Arti"le FI@ on the National E"ono!# and *atri!on# "ontained provisions si!ilar to the /%6' Constitution (ith re0ard to .ilipino parti"ipation in the nationCs natural resour"es. Se"tion :, Arti"le FI@ thereo providesE Se". :. All lands o the publi" do!ain, (aters, !inerals, "oal, petroleu! and other !ineral oils, all or"es o potential ener0#, isheries, (ildli e, and other natural resour"es o the *hilippines belon0 to the State. 7ith the e<"eption o a0ri"ultural, industrial or "o!!er"ial, residential and resettle!ent lands o the publi" do!ain, natural resour"es shall not be alienated, and no li"ense, "on"ession, or lease or the e<ploration, develop!ent, e<ploitation, or utili8ation o an# o the natural resour"es shall be 0ranted or a period e<"eedin0 t(ent#4 ive #ears, rene(able or not !ore than t(ent#4 ive #ears, e<"ept as to (ater ri0hts or irri0ation, (ater suppl#, isheries, or industrial uses other than the develop!ent o (ater po(er, in (hi"h "ases bene i"ial use !a# be the !easure and the li!it o the 0rant. 7hile Se"tion % o the sa!e Arti"le !aintained the .ilipino4onl# poli"# in the en>o#!ent o natural resour"es, it also allo(ed .ilipinos, upon authorit# o the Batasan0 *a!bansa, to enter into servi"e "ontra"ts (ith an# person or entit# or the e<ploration or utili8ation o natural resour"es. Se". %. The disposition, e<ploration, develop!ent, e<ploitation, or utili8ation o an# o the natural resour"es o the *hilippines shall be li!ited to "iti8ens, or to "orporations or asso"iations at least si<t# per "entu! o (hi"h is o(ned b# su"h "iti8ens. The Batasan0 *a!bansa, in the national interest, !a# allo( su"h "iti8ens, "orporations or asso"iations to enter into servi"e "ontra"ts or inan"ial, te"hni"al, !ana0e!ent, or other or!s o assistan"e (ith an# person or entit# or the e<ploration, or utili8ation o an# o the natural resour"es. E<istin0 valid and bindin0 servi"e "ontra"ts or inan"ial, te"hni"al, !ana0e!ent, or other or!s o assistan"e are hereb# re"o0ni8ed as su"h. HE!phasis supplied.I

The "on"ept o servi"e "ontra"ts, a""ordin0 to one dele0ate, (as borro(ed ro! the !ethods ollo(ed b# India, *a)istan and espe"iall# Indonesia in the e<ploration o petroleu! and !ineral oils. /3& The provision allo(in0 su"h "ontra"ts, a""ordin0 to another, (as intended to Aenhan"e the proper develop!ent o our natural resour"es sin"e .ilipino "iti8ens la") the needed "apital and te"hni"al )no(4ho( (hi"h are essential in the proper e<ploration, develop!ent and e<ploitation o the natural resour"es o the "ountr#.A /36 The ori0inal idea (as to authori8e the 0overn!ent, not private entities, to enter into servi"e "ontra"ts (ith orei0n entities./34 As inall# approved, ho(ever, a "iti8en or private entit# "ould be allo(ed b# the National Asse!bl# to enter into su"h servi"e "ontra"t. /3' The prior approval o the National Asse!bl# (as dee!ed su i"ient to prote"t the national interest./33 Notabl#, none o the la(s allo(in0 servi"e "ontra"ts (ere passed b# the Batasan0 *a!bansa. Indeed, all o the! (ere ena"ted b# presidential de"ree. On Mar"h /6, /%$6, shortl# a ter the rati i"ation o the ne( Constitution, the *resident pro!ul0ated *residential De"ree No. /'/./3$ The la( allo(ed .ilipino "iti8ens or entities (hi"h have a";uired lands o the publi" do!ain or (hi"h o(n, hold or "ontrol su"h lands to enter into servi"e "ontra"ts or inan"ial, te"hni"al, !ana0e!ent or other or!s o assistan"e (ith an# orei0n persons or entit# or the e<ploration, develop!ent, e<ploitation or utili8ation o said lands./3: *residential De"ree No. 436,/3% also )no(n as The Mineral Resour"es Develop!ent De"ree o /%$4, (as ena"ted on Ma# /$, /%$4. Se"tion 44 o the de"ree, as a!ended, provided that a lessee o a !inin0 "lai! !a# enter into a servi"e "ontra"t (ith a ;uali ied do!esti" or orei0n "ontra"tor or the e<ploration, develop!ent and e<ploitation o his "lai!s and the pro"essin0 and !ar)etin0 o the produ"t thereo . *residential De"ree No. $54 /$5 1The .isheries De"ree o /%$'2, approved on Ma# /3, /%$', allo(ed .ilipinos en0a0ed in "o!!er"ial ishin0 to enter into "ontra"ts or inan"ial, te"hni"al or other or!s o assistan"e (ith an# orei0n person, "orporation or entit# or the produ"tion, stora0e, !ar)etin0 and pro"essin0 o ish and isher#Ba;uati" produ"ts./$/ *residential De"ree No. $5'/$& 1The Revised .orestr# Code o the *hilippines2, approved on Ma# /%, /%$', allo(ed A orest produ"ts li"ensees, lessees, or per!itees to enter into servi"e "ontra"ts or inan"ial, te"hni"al, !ana0e!ent, or other or!s o assistan"e . . . (ith an# orei0n person or entit# or the e<ploration, develop!ent, e<ploitation or utili8ation o the orest resour"es.A /$6 Oet another la( allo(in0 servi"e "ontra"ts, this ti!e or 0eother!al resour"es, (as *residential De"ree No. /44&,/$4 (hi"h (as si0ned into la( on 9une //, /%$:. Se"tion / thereo authori8ed the -overn!ent to enter into servi"e "ontra"ts or the e<ploration, e<ploitation and develop!ent o 0eother!al resour"es (ith a orei0n "ontra"tor (ho !ust be te"hni"all# and inan"iall# "apable o underta)in0 the operations re;uired in the servi"e "ontra"t. Thus, virtuall# the entire ran0e o the "ountr#Cs natural resour"es M ro! petroleu! and !inerals to 0eother!al ener0#, ro! publi" lands and orest resour"es to isher# produ"ts M (as (ell "overed b# apparent le0al authorit# to en0a0e in the dire"t parti"ipation or involve!ent o orei0n persons or "orporations 1other(ise dis;uali ied2 in the e<ploration and utili8ation o natural resour"es throu0h servi"e "ontra"ts. /$' T1E 1;87 CONST!TUT!ON AN/ TEC1N!CAL OR +!NANC!AL ASS!STANCE AGREEMENTS A ter the .ebruar# /%:3 Edsa Revolution, Cora8on C. A;uino too) the reins o po(er under a revolutionar# 0overn!ent. On Mar"h &', /%:3, *resident A;uino issued *ro"la!ation No. 6, /$3 pro!ul0atin0 the *rovisional Constitution, !ore popularl# re erred to as the .reedo! Constitution. B# authorit# o the sa!e *ro"la!ation, the *resident "reated a Constitutional Co!!ission 1CONCOM2 to dra t a ne( "onstitution, (hi"h too) e e"t on the date o its rati i"ation on .ebruar# &, /%:$./$$ The /%:$ Constitution retained the Re0alian do"trine. The irst senten"e o Se"tion &, Arti"le FII statesE AAll lands o the publi" do!ain, (aters, !inerals, "oal, petroleu!, and other !ineral oils, all or"es o potential ener0#, isheries, orests or ti!ber, (ildli e, lora and auna, and other natural resour"es are o(ned b# the State.A ,i)e the /%6' and /%$6 Constitutions be ore it, the /%:$ Constitution, in the se"ond senten"e o the sa!e provision, prohibits the alienation o natural resour"es, e<"ept a0ri"ultural lands. The third senten"e o the sa!e para0raph is ne(E AThe e<ploration, develop!ent and utili8ation o natural resour"es shall be under the ull "ontrol and supervision o the State.A The "onstitutional poli"# o the StateCs A ull "ontrol and supervisionA over natural resour"es pro"eeds ro! the "on"ept o >ura re0alia, as (ell as the re"o0nition o the i!portan"e o the "ountr#Cs natural resour"es, not onl# or national e"ono!i" develop!ent, but

also or its se"urit# and national de ense. /$: =nder this provision, the State assu!es Aa !ore d#na!i" roleA in the e<ploration, develop!ent and utili8ation o natural resour"es. /$% Conspi"uousl# absent in Se"tion & is the provision in the /%6' and /%$6 Constitutions authori8in0 the State to 0rant li"enses, "on"essions, or leases or the e<ploration, e<ploitation, develop!ent, or utili8ation o natural resour"es. B# su"h o!ission, the utili8ation o inalienable lands o publi" do!ain throu0h Ali"ense, "on"ession or leaseA is no lon0er allo(ed under the /%:$ Constitution. /:5 +avin0 o!itted the provision on the "on"ession s#ste!, Se"tion & pro"eeded to introdu"e Aun a!iliar lan0ua0eAE /:/ The State !a# dire"tl# underta)e su"h a"tivities or it !a# enter into "o4produ"tion, >oint venture, or produ"tion4 sharin0 a0ree!ents (ith .ilipino "iti8ens, or "orporations or asso"iations at least si<t# per "entu! o (hose "apital is o(ned b# su"h "iti8ens. Consonant (ith the StateCs A ull supervision and "ontrolA over natural resour"es, Se"tion & o ers the State t(o Aoptions.A/:& One, the State !a# dire"tl# underta)e these a"tivities itsel G or t(o, it !a# enter into "o4produ"tion, >oint venture, or produ"tion4sharin0 a0ree!ents (ith .ilipino "iti8ens, or entities at least 35J o (hose "apital is o(ned b# su"h "iti8ens. A third option is ound in the third para0raph o the sa!e se"tionE The Con0ress !a#, b# la(, allo( s!all4s"ale utili8ation o natural resour"es b# .ilipino "iti8ens, as (ell as "ooperative ish ar!in0, (ith priorit# to subsisten"e isher!en and ish4(or)ers in rivers, la)es, ba#s, and la0oons. 7hile the se"ond and third options are li!ited onl# to .ilipino "iti8ens or, in the "ase o the or!er, to "orporations or asso"iations at least 35J o the "apital o (hi"h is o(ned b# .ilipinos, a ourth allo(s the parti"ipation o orei0n4o(ned "orporations. The ourth and i th para0raphs o Se"tion & provideE The *resident !a# enter into a0ree!ents (ith orei0n4o(ned "orporations involvin0 either te"hni"al or inan"ial assistan"e or lar0e4s"ale e<ploration, develop!ent, and utili8ation o !inerals, petroleu!, and other !ineral oils a""ordin0 to the 0eneral ter!s and "onditions provided b# la(, based on real "ontributions to the e"ono!i" 0ro(th and 0eneral (el are o the "ountr#. In su"h a0ree!ents, the State shall pro!ote the develop!ent and use o lo"al s"ienti i" and te"hni"al resour"es. The *resident shall noti # the Con0ress o ever# "ontra"t entered into in a""ordan"e (ith this provision, (ithin thirt# da#s ro! its e<e"ution. Althou0h Se"tion & san"tions the parti"ipation o orei0n4o(ned "orporations in the e<ploration, develop!ent, and utili8ation o natural resour"es, it i!poses "ertain li!itations or "onditions to a0ree!ents (ith su"h "orporations. .irst, the parties to .TAAs. Onl# the *resident, in behal o the State, !a# enter into these a0ree!ents, and onl# (ith "orporations. B# "ontrast, under the /%$6 Constitution, a .ilipino "iti8en, "orporation or asso"iation !a# enter into a servi"e "ontra"t (ith a A orei0n person or entit#.A Se"ond, the si8e o the a"tivitiesE onl# lar0e4s"ale e<ploration, develop!ent, and utili8ation is allo(ed. The ter! Alar0e4s"ale usuall# re ers to ver# "apital4intensive a"tivities.A /:6 Third, the natural resour"es sub>e"t o the a"tivities is restri"ted to !inerals, petroleu! and other !ineral oils, the intent bein0 to li!it servi"e "ontra"ts to those areas (here .ilipino "apital !a# not be su i"ient./:4 .ourth, "onsisten"# (ith the provisions o statute. The a0ree!ents !ust be in a""ordan"e (ith the ter!s and "onditions provided b# la(. .i th, Se"tion & pres"ribes "ertain standards or enterin0 into su"h a0ree!ents. The a0ree!ents !ust be based on real "ontributions to e"ono!i" 0ro(th and 0eneral (el are o the "ountr#. Si<th, the a0ree!ents !ust "ontain rudi!entar# stipulations or the pro!otion o the develop!ent and use o lo"al s"ienti i" and te"hni"al resour"es.

Seventh, the noti i"ation re;uire!ent. The *resident shall noti # Con0ress o ever# inan"ial or te"hni"al assistan"e a0ree!ent entered into (ithin thirt# da#s ro! its e<e"ution. .inall#, the s"ope o the a0ree!ents. 7hile the /%$6 Constitution re erred to Aservi"e "ontra"ts or inan"ial, te"hni"al, !ana0e!ent, or other or!s o assistan"eA the /%:$ Constitution provides or Aa0ree!ents. . . involvin0 either inan"ial or te"hni"al assistan"e.A It bears notin0 that the phrases Aservi"e "ontra"tsA and A!ana0e!ent or other or!s o assistan"eA in the earlier "onstitution have been o!itted. B# virtue o her le0islative po(ers under the *rovisional Constitution, /:' *resident A;uino, on 9ul# /5, /%:$, si0ned into la( E.O. No. &// pres"ribin0 the interi! pro"edures in the pro"essin0 and approval o appli"ations or the e<ploration, develop!ent and utili8ation o !inerals. The o!ission in the /%:$ Constitution o the ter! Aservi"e "ontra"tsA not(ithstandin0, the said E.O. still re erred to the! in Se"tion & thereo E Se". &. Appli"ations or the e<ploration, develop!ent and utili8ation o !ineral resour"es, in"ludin0 rene(al appli"ations and appli"ations or approval o operatin0 a0ree!ents and !inin0 servi"e "ontra"ts, shall be a""epted and pro"essed and !a# be approved < < <. HE!phasis supplied.I The sa!e la( provided in its Se"tion 6 that the Apro"essin0, evaluation and approval o all !inin0 appli"ations . . . operatin0 a0ree!ents and servi"e "ontra"ts . . . shall be 0overned b# *residential De"ree No. 436, as a!ended, other e<istin0 !inin0 la(s, and their i!ple!entin0 rules and re0ulations. . . .A As earlier stated, on the &'th also o 9ul# /%:$, the *resident issued E.O. No. &$% b# authorit# o (hi"h the sub>e"t 7MC* .TAA (as e<e"uted on Mar"h 65, /%%'. On Mar"h 6, /%%', *resident Ra!os si0ned into la( R.A. No. $%4&. Se"tion /' thereo de"lares that the A"t Ashall 0overn the e<ploration, develop!ent, utili8ation, and pro"essin0 o all !ineral resour"es.A Su"h de"laration not(ithstandin0, R.A. No. $%4& does not a"tuall# "over all the !odes throu0h (hi"h the State !a# underta)e the e<ploration, develop!ent, and utili8ation o natural resour"es. The State, bein0 the o(ner o the natural resour"es, is a""orded the pri!ar# po(er and responsibilit# in the e<ploration, develop!ent and utili8ation thereo . As su"h, it !a# underta)e these a"tivities throu0h our !odesE The State !a# dire"tl# underta)e su"h a"tivities. 1&2 The State !a# enter into "o4produ"tion, >oint venture or produ"tion4sharin0 a0ree!ents (ith .ilipino "iti8ens or ;uali ied "orporations. 162 Con0ress !a#, b# la(, allo( s!all4s"ale utili8ation o natural resour"es b# .ilipino "iti8ens. 142 .or the lar0e4s"ale e<ploration, develop!ent and utili8ation o !inerals, petroleu! and other !ineral oils, the *resident !a# enter into a0ree!ents (ith orei0n4o(ned "orporations involvin0 te"hni"al or inan"ial assistan"e./:3 E<"ept to "har0e the Mines and -eos"ien"es Bureau o the DENR (ith per or!in0 resear"hes and surve#s, /:$ and a passin0 !ention o 0overn!ent4o(ned or "ontrolled "orporations, /:: R.A. No. $%4& does not spe"i # ho( the State should 0o about the irst !ode. The third !ode, on the other hand, is 0overned b# Republi" A"t No. $5$3 /:% 1the *eopleCs S!all4S"ale Minin0 A"t o /%%/2 and other pertinent la(s. /%5 R.A. No. $%4& pri!aril# "on"erns itsel (ith the se"ond and ourth !odes. Mineral produ"tion sharin0, "o4produ"tion and >oint venture a0ree!ents are "olle"tivel# "lassi ied b# R.A. No. $%4& as A!ineral a0ree!ents.A /%/ The -overn!ent parti"ipates the least in a !ineral produ"tion sharin0 a0ree!ent 1M*SA2. In an M*SA, the -overn!ent 0rants the "ontra"tor /%& the e<"lusive ri0ht to "ondu"t !inin0 operations (ithin a "ontra"t area /%6 and shares in the 0ross output. /%4 The M*SA "ontra"tor provides the inan"in0, te"hnolo0#, !ana0e!ent and personnel ne"essar# or the a0ree!entCs i!ple!entation. /%' The total 0overn!ent share in an M*SA is the e<"ise ta< on !ineral produ"ts under Republi" A"t No. $$&%, /%3 a!endin0 Se"tion /'/1a2 o the National Internal Revenue Code, as a!ended. /%$ In a "o4produ"tion a0ree!ent 1CA2, /%: the -overn!ent provides inputs to the !inin0 operations other than the !ineral resour"e,/%% (hile in a >oint venture a0ree!ent 19@A2, (here the -overn!ent en>o#s the 0reatest parti"ipation, the -overn!ent and the 9@A "ontra"tor or0ani8e a "o!pan# (ith both parties havin0 e;uit# shares.&55 Aside ro! earnin0s in e;uit#, the -overn!ent in a 9@A is also entitled to a share in the 0ross output. &5/

The -overn!ent !a# enter into a CA&5& or 9@A&56 (ith one or !ore "ontra"tors. The -overn!entCs share in a CA or 9@A is set out in Se"tion :/ o the la(E The share o the -overn!ent in "o4produ"tion and >oint venture a0ree!ents shall be ne0otiated b# the -overn!ent and the "ontra"tor ta)in0 into "onsideration theE 1a2 "apital invest!ent o the pro>e"t, 1b2 the ris)s involved, 1"2 "ontribution o the pro>e"t to the e"ono!#, and 1d2 other a"tors that (ill provide or a air and e;uitable sharin0 bet(een the -overn!ent and the "ontra"tor. The -overn!ent shall also be entitled to "o!pensations or its other "ontributions (hi"h shall be a0reed upon b# the parties, and shall "onsist, a!on0 other thin0s, the "ontra"torCs in"o!e ta<, e<"ise ta<, spe"ial allo(an"e, (ithholdin0 ta< due ro! the "ontra"torCs orei0n sto")holders arisin0 ro! dividend or interest pa#!ents to the said orei0n sto")holders, in "ase o a orei0n national and all su"h other ta<es, duties and ees as provided or under e<istin0 la(s. All !ineral a0ree!ents 0rant the respe"tive "ontra"tors the e<"lusive ri0ht to "ondu"t !inin0 operations and to e<tra"t all !ineral resour"es ound in the "ontra"t area. &54 A A;uali ied personA !a# enter into an# o the !ineral a0ree!ents (ith the -overn!ent. &5' A A;uali ied personA is an# "iti8en o the *hilippines (ith "apa"it# to "ontra"t, or a "orporation, partnership, asso"iation, or "ooperative or0ani8ed or authori8ed or the purpose o en0a0in0 in !inin0, (ith te"hni"al and inan"ial "apabilit# to underta)e !ineral resour"es develop!ent and dul# re0istered in a""ordan"e (ith la( at least si<t# per "entu! 135J2 o the "apital o (hi"h is o(ned b# "iti8ens o the *hilippines < < <. &53 The ourth !ode involves A inan"ial or te"hni"al assistan"e a0ree!ents.A An .TAA is de ined as Aa "ontra"t involvin0 inan"ial or te"hni"al assistan"e or lar0e4s"ale e<ploration, develop!ent, and utili8ation o natural resour"es.A&5$ An# ;uali ied person (ith te"hni"al and inan"ial "apabilit# to underta)e lar0e4s"ale e<ploration, develop!ent, and utili8ation o natural resour"es in the *hilippines !a# enter into su"h a0ree!ent dire"tl# (ith the -overn!ent throu0h the DENR.&5: .or the purpose o 0rantin0 an .TAA, a le0all# or0ani8ed orei0n4o(ned "orporation 1an# "orporation, partnership, asso"iation, or "ooperative dul# re0istered in a""ordan"e (ith la( in (hi"h less than '5J o the "apital is o(ned b# .ilipino "iti8ens2 &5% is dee!ed a A;uali ied person.A&/5 Other than the di eren"e in "ontra"torsC ;uali i"ations, the prin"ipal distin"tion bet(een !ineral a0ree!ents and .TAAs is the !a<i!u! "ontra"t area to (hi"h a ;uali ied person !a# hold or be 0ranted. &// A,ar0e4s"aleA under R.A. No. $%4& is deter!ined b# the si8e o the "ontra"t area, as opposed to the a!ount invested 1=S ?'5,555,555.552, (hi"h (as the standard under E.O. &$%. ,i)e a CA or a 9@A, an .TAA is sub>e"t to ne0otiation. &/& The -overn!entCs "ontributions, in the or! o ta<es, in an .TAA is identi"al to its "ontributions in the t(o !ineral a0ree!ents, save that in an .TAAE The "olle"tion o -overn!ent share in inan"ial or te"hni"al assistan"e a0ree!ent shall "o!!en"e a ter the inan"ial or te"hni"al assistan"e a0ree!ent "ontra"tor has ull# re"overed its pre4operatin0 e<penses, e<ploration, and develop!ent e<penditures, in"lusive.&/6 III +avin0 e<a!ined the histor# o the "onstitutional provision and statutes ena"ted pursuant thereto, a "onsideration o the substantive issues presented b# the petition is no( in order. T1E E++ECT!4!T, O+ E:ECUT!4E OR/ER NO. 27; *etitioners ar0ue that E.O. No. &$%, the la( in or"e (hen the 7MC .TAA (as e<e"uted, did not "o!e into e e"t. E.O. No. &$% (as si0ned into la( b# then *resident A;uino on 9ul# &', /%:$, t(o da#s be ore the openin0 o Con0ress on 9ul# &$, /%:$.&/4 Se"tion : o the E.O. states that the sa!e Ashall ta)e e e"t i!!ediatel#.A This provision, a""ordin0 to petitioners, runs "ounter to Se"tion / o E.O. No. &55, &/' (hi"h providesE SECTION /. ,a(s shall ta)e e e"t a ter i teen da#s ollo(in0 the "o!pletion o their publi"ation either in the O i"ial -a8ette or in a ne(spaper o 0eneral "ir"ulation in the *hilippines, unless it is other(ise provided. &/3 HE!phasis supplied.I On that pre!ise, petitioners "ontend that E.O. No. &$% "ould have onl# ta)en e e"t i teen da#s a ter its publi"ation at (hi"h ti!e Con0ress had alread# "onvened and the *residentCs po(er to le0islate had "eased.

Respondents, on the other hand, "ounter that the validit# o E.O. No. &$% (as settled in Miners Asso"iation o the *hilippines v. .a"toran, supra. This is o "ourse in"orre"t or the issue in Miners Asso"iation (as not the validit# o E.O. No. &$% but that o DAO Nos. '$ and :& (hi"h (ere issued pursuant thereto. Nevertheless, petitionersC "ontentions have no !erit. It bears notin0 that there is nothin0 in E.O. No. &55 that prevents a la( ro! ta)in0 e e"t on a date other than M even be ore M the /'4da# period a ter its publi"ation. 7here a la( provides or its o(n date o e e"tivit#, su"h date prevails over that pres"ribed b# E.O. No. &55. Indeed, this is the ver# essen"e o the phrase Aunless it is other(ise providedA in Se"tion / thereo . Se"tion /, E.O. No. &55, there ore, applies onl# (hen a statute does not provide or its o(n date o e e"tivit#. 7hat is !andator# under E.O. No. &55, and (hat due pro"ess re;uires, as this Court held in TaPada v. Tuvera, &/$ is the publi"ation o the la( or (ithout su"h noti"e and publi"ation, there (ould be no basis or the appli"ation o the !a<i! Ai0norantia le0is nHe!ine!I e<"usat.A It (ould be the hei0ht o in>usti"e to punish or other(ise burden a "iti8en or the trans0ression o a la( o (hi"h he had no noti"e (hatsoever, not even a "onstru"tive one. 7hile the e e"tivit# "lause o E.O. No. &$% does not re;uire its publi"ation, it is not a 0round or its invalidation sin"e the Constitution, bein0 Athe unda!ental, para!ount and supre!e la( o the nation,A is dee!ed (ritten in the la(.&/: +en"e, the due pro"ess "lause, &/% (hi"h, so TaPada held, !andates the publi"ation o statutes, is read into Se"tion : o E.O. No. &$%. Additionall#, Se"tion / o E.O. No. &55 (hi"h provides or publi"ation Aeither in the O i"ial -a8ette or in a ne(spaper o 0eneral "ir"ulation in the *hilippines,A inds suppletor# appli"ation. It is si0ni i"ant to note that E.O. No. &$% (as a"tuall# published in the O i"ial -a8ette &&5 on Au0ust 6, /%:$. .ro! a readin0 then o Se"tion : o E.O. No. &$%, Se"tion / o E.O. No. &55, and TaPada v. Tuvera, this Court holds that E.O. No. &$% be"a!e e e"tive i!!ediatel# upon its publi"ation in the O i"ial -a8ette on Au0ust 6, /%:$. That su"h e e"tivit# too) pla"e a ter the "onvenin0 o the irst Con0ress is irrelevant. At the ti!e *resident A;uino issued E.O. No. &$% on 9ul# &', /%:$, she (as still validl# e<er"isin0 le0islative po(ers under the *rovisional Constitution.&&/ Arti"le F@III 1Transitor# *rovisions2 o the /%:$ Constitution e<pli"itl# statesE Se". 3. The in"u!bent *resident shall "ontinue to e<er"ise le0islative po(ers until the irst Con0ress is "onvened. The "onvenin0 o the irst Con0ress !erel# pre"luded the e<er"ise o le0islative po(ers b# *resident A;uinoG it did not prevent the e e"tivit# o la(s she had previousl# ena"ted. There "an be no ;uestion, there ore, that E.O. No. &$% is an e e"tive, and a validl# ena"ted, statute. T1E CONST!TUT!ONAL!T, O+ T1E -MCP +TAA *etitioners sub!it that, in a""ordan"e (ith the te<t o Se"tion &, Arti"le FII o the Constitution, .TAAs should be li!ited to Ate"hni"al or inan"ial assistan"eA onl#. The# observe, ho(ever, that, "ontrar# to the lan0ua0e o the Constitution, the 7MC* .TAA allo(s 7MC*, a ull# orei0n4o(ned !inin0 "orporation, to e<tend !ore than !ere inan"ial or te"hni"al assistan"e to the State, or it per!its 7MC* to !ana0e and operate ever# aspe"t o the !inin0 a"tivit#. &&& *etitionersC sub!ission is (ell4ta)en. It is a "ardinal rule in the interpretation o "onstitutions that the instru!ent !ust be so "onstrued as to 0ive e e"t to the intention o the people (ho adopted it. &&6 This intention is to be sou0ht in the "onstitution itsel , and the apparent !eanin0 o the (ords is to be ta)en as e<pressin0 it, e<"ept in "ases (here that assu!ption (ould lead to absurdit#, a!bi0uit#, or "ontradi"tion. &&4 7hat the Constitution sa#s a""ordin0 to the te<t o the provision, there ore, "o!pels a""eptan"e and ne0ates the po(er o the "ourts to alter it, based on the postulate that the ra!ers and the people !ean (hat the# sa#. &&' A""ordin0l#, ollo(in0 the literal te<t o the Constitution, assistan"e a""orded b# orei0n4o(ned "orporations in the lar0e4s"ale e<ploration, develop!ent, and utili8ation o petroleu!, !inerals and !ineral oils should be li!ited to Ate"hni"alA or A inan"ialA assistan"e onl#. 7MC* nevertheless sub!its that the (ord Ate"hni"alA in the ourth para0raph o Se"tion & o E.O. No. &$% en"o!passes a Abroad nu!ber o possible servi"es,A perhaps, As"ienti i" andBor te"hnolo0i"al in basis.A &&3 It thus posits that it !a# also (ell in"lude Athe area o !ana0e!ent or operations . . . so lon0 as su"h assistan"e re;uires spe"iali8ed )no(led0e or s)ills, and are related to the e<ploration, develop!ent and utili8ation o !ineral resour"es.A&&$

This Court is not persuaded. As priorl# pointed out, the phrase A!ana0e!ent or other or!s o assistan"eA in the /%$6 Constitution (as deleted in the /%:$ Constitution, (hi"h allo(s onl# Ate"hni"al or inan"ial assistan"e.A Casus o!isus pro o!isso habendus est. A person, ob>e"t or thin0 o!itted ro! an enu!eration !ust be held to have been o!itted intentionall#. &&: As (ill be sho(n later, the !ana0e!ent or operation o !inin0 a"tivities b# orei0n "ontra"tors, (hi"h is the pri!ar# eature o servi"e "ontra"ts, (as pre"isel# the evil that the dra ters o the /%:$ Constitution sou0ht to eradi"ate. Respondents insist that Aa0ree!ents involvin0 te"hni"al or inan"ial assistan"eA is >ust another ter! or servi"e "ontra"ts. The# "ontend that the pro"eedin0s o the CONCOM indi"ate Athat althou0h the ter!inolo0# Cservi"e "ontra"tC (as avoided Hb# the ConstitutionI, the "on"ept it represented (as not.A The# add that AHtIhe "on"ept is e!bodied in the phrase Ca0ree!ents involvin0 inan"ial or te"hni"al assistan"e.CA &&% And point out ho( !e!bers o the CONCOM re erred to these a0ree!ents as Aservi"e "ontra"ts.A .or instan"eE SR. TAN. A! I "orre"t in thin)in0 that the onl# di eren"e bet(een these uture servi"e "ontra"ts and the past servi"e "ontra"ts under Mr. Mar"os is the 0eneral la( to be ena"ted b# the le0islature and the noti i"ation o Con0ress b# the *residentQ That is the onl# di eren"e, is it notQ MR. @I,,E-AS. That is ri0ht. SR. TAN. So those are the sa e0uardsHQI MR. @I,,E-AS. Oes. There (as no la( at all 0overnin0 servi"e "ontra"ts be ore. SR. TAN. Than) #ou, Mada! *resident.&65 HE!phasis supplied.I 7MC* also "ites the ollo(in0 state!ents o Co!!issioners -as"on, -ar"ia, Nolledo and Tadeo (ho alluded to servi"e "ontra"ts as the# e<plained their respe"tive votes in the approval o the dra t Arti"leE MR. -ASCON. Mr. *residin0 O i"er, I vote no pri!aril# be"ause o t(o reasonsE One, the provision on servi"e "ontra"ts. I elt that i (e (ould "onstitutionali8e an# provision on servi"e "ontra"ts, this should al(a#s be (ith the "on"urren"e o Con0ress and not 0uided onl# b# a 0eneral la( to be pro!ul0ated b# Con0ress. < < <.&6/ HE!phasis supplied.I < < <. MR. -ARCIA. Than) #ou. I vote no. < < <. Servi"e "ontra"ts are 0iven "onstitutional le0iti!i8ation in Se"tion 6, even (hen the# have been proven to be ini!i"al to the interests o the nation, providin0 as the# do the le0al loophole or the e<ploitation o our natural resour"es or the bene it o orei0n interests. The# "onstitute a serious ne0ation o .ilipino "ontrol on the use and disposition o the nationCs natural resour"es, espe"iall# (ith re0ard to those (hi"h are nonrene(able.&6& HE!phasis supplied.I <<< MR. NO,,EDO. 7hile there are ob>e"tionable provisions in the Arti"le on National E"ono!# and *atri!on#, 0oin0 over said provisions !eti"ulousl#, settin0 aside pre>udi"e and personalities (ill reveal that the arti"le "ontains a balan"ed set o provisions. I hope the orth"o!in0 Con0ress (ill i!ple!ent su"h provisions ta)in0 into a""ount that .ilipinos should have real "ontrol over our e"ono!# and patri!on#, and i orei0n e;uit# is per!itted, the sa!e !ust be subordinated to the i!perative de!ands o the national interest. < < <. It is also !# understandin0 that servi"e "ontra"ts involvin0 orei0n "orporations or entities are resorted to onl# (hen no .ilipino enterprise or .ilipino4"ontrolled enterprise "ould possibl# underta)e the e<ploration or e<ploitation o our natural resour"es and that "o!pensation under su"h "ontra"ts "annot and should not e;ual (hat should pertain to o(nership o "apital. In other (ords, the servi"e "ontra"t

should not be an instru!ent to "ir"u!vent the basi" provision, that the e<ploration and e<ploitation o natural resour"es should be trul# or the bene it o .ilipinos. Than) #ou, and I vote #es. &66 HE!phasis supplied.I < < <. MR. TADEO. Nais )o la!an0 ipali(ana0 an0 a)in0 boto. Matapos suriin an0 )ala0a#an n0 *ilipinas, an0 sali0an0 suliranin, pan0unahin an0 salitan0 Ai!per#alis!o.A An0 ibi0 sabihin nito a# an0 siste!a n0 lipunan0 pina0haharian n0 iilan0 !onopol#on0 )apitalista at an0 salitan0 Ai!per#alis!oA a# buha# na buha# sa National E"ono!# and *atri!on# na natin0 0ina(a. Sa pa!a!a0itan n0 salitan0 Abased on,A naroroon na an0 ree trade sapa0)at ta#o a# !ananatilin0 ta0apa0lu(as n0 hila( na san0)ap at ta0aan0)at n0 #arin0 produ)to. *an0ala(a, naroroon pa rin an0 parit# ri0hts, an0 servi"e "ontra"t, an0 35445 e;uit# sa natural resour"es. +aban0 na0hihirap an0 sa!ba#anan0 *ilipino, 0ina0alu0ad na!an n0 !0a da#uhan an0 atin0 li)as na #a!an. Dailan !an an0 Arti"le on National E"ono!# and *atri!on# a# hindi na0paalis sa pa0)aalipin n0 atin0 e)ono!i#a sa )a!a# n0 !0a da#uhan. An0 solus#on sa suliranin n0 bansa a# dala(a la!an0E an0 pa0papatupad n0 tuna# na repor!a sa lupa at an0 national industriali8ation. Ito an0 tinata(a0 na!in0 pa0si)at n0 ara( sa Silan0an. N0unit an0 !0a landlords and bi0 business!en at an0 !0a )o!prador a# na0sasabi na an0 ree trade na ito, an0 )ahulu0an para sa a!in, a# ipinipilit sa atin0 sa!ba#anan na an0 ara( a# sisi)at sa Danluran. Dailan !an hindi pu(eden0 su!i)at an0 ara( sa Danluran. I vote no. &64 HE!phasis supplied.I This Court is li)e(ise not persuaded. As earlier noted, the phrase Aservi"e "ontra"tsA has been deleted in the /%:$ ConstitutionCs Arti"le on National E"ono!# and *atri!on#. I the CONCOM intended to retain the "on"ept o servi"e "ontra"ts under the /%$6 Constitution, it "ould have si!pl# adopted the old ter!inolo0# 1Aservi"e "ontra"tsA2 instead o e!plo#in0 ne( and un a!iliar ter!s 1Aa0ree!ents . . . involvin0 either te"hni"al or inan"ial assistan"eA2. Su"h a di eren"e bet(een the lan0ua0e o a provision in a revised "onstitution and that o a si!ilar provision in the pre"edin0 "onstitution is vie(ed as indi"ative o a di eren"e in purpose. &6' I , as respondents su00est, the "on"ept o Ate"hni"al or inan"ial assistan"eA a0ree!ents is identi"al to that o Aservi"e "ontra"ts,A the CONCOM (ould not have bothered to it the sa!e do0 (ith a ne( "ollar. To uphold respondentsC theor# (ould redu"e the irst to a !ere euphe!is! or the se"ond and render the "han0e in phraseolo0# !eanin0less. An e<a!ination o the reason behind the "han0e "on ir!s that te"hni"al or inan"ial assistan"e a0ree!ents are not s#non#!ous to servi"e "ontra"ts. HTIhe Court in "onstruin0 a Constitution should bear in !ind the ob>e"t sou0ht to be a""o!plished b# its adoption, and the evils, i an#, sou0ht to be prevented or re!edied. A doubt ul provision (ill be e<a!ined in li0ht o the histor# o the ti!es, and the "ondition and "ir"u!stan"es under (hi"h the Constitution (as ra!ed. The ob>e"t is to as"ertain the reason (hi"h indu"ed the ra!ers o the Constitution to ena"t the parti"ular provision and the purpose sou0ht to be a""o!plished thereb#, in order to "onstrue the (hole as to !a)e the (ords "onsonant to that reason and "al"ulated to e e"t that purpose. &63 As the ollo(in0 ;uestion o Co!!issioner Luesada and Co!!issioner @ille0asC ans(er sho(s the dra ters intended to do a(a# (ith servi"e "ontra"ts (hi"h (ere used to "ir"u!vent the "apitali8ation 135J445J2 re;uire!entE MS. L=ESADA. The /%$6 Constitution used the (ords Aservi"e "ontra"ts.A In this parti"ular Se"tion 6, is there a sa e0uard a0ainst the possible "ontrol o orei0n interests i the .ilipinos 0o into "oprodu"tion (ith the!Q MR. @I,,E-AS. Oes. In a"t, the deletion o the phrase Aservi"e "ontra"tsA (as our irst atte!pt to avoid so!e o the abuses in the past re0i!e in the use o servi"e "ontra"ts to 0o around the 35445 arran0e!ent. The sa e0uard that has been introdu"ed M and this, o "ourse "an be re ined M is ound in Se"tion 6, lines &' to 65, (here Con0ress (ill have to "on"ur (ith the *resident on an# a0ree!ent entered into bet(een a orei0n4o(ned "orporation and the 0overn!ent involvin0 te"hni"al or inan"ial assistan"e or lar0e4s"ale e<ploration, develop!ent and utili8ation o natural resour"es. &6$ HE!phasis supplied.I

In a subse;uent dis"ussion, Co!!issioner @ille0as alla#ed the ears o Co!!issioner Luesada re0ardin0 the parti"ipation o orei0n interests in *hilippine natural resour"es, (hi"h (as supposed to be restri"ted to .ilipinos. MS. L=ESADA. Another point o "lari i"ation is the phrase Aand utili8ation o natural resour"es shall be under the ull "ontrol and supervision o the State.A In the /%$6 Constitution, this (as li!ited to "iti8ens o the *hilippinesG but it (as re!oved and substituted b# Ashall be under the ull "ontrol and supervision o the State.A 7as the "on"ept "han0ed so that these parti"ular resour"es (ould be li!ited to "iti8ens o the *hilippinesQ Or (ould these resour"es onl# be under the ull "ontrol and supervision o the StateG !eanin0, non"iti8ens (ould have a""ess to these natural resour"esQ Is that the understandin0Q MR. @I,,E-AS. No, Mr. @i"e4*resident, i the Co!!issioner reads the ne<t senten"e, it statesE Su"h a"tivities !a# be dire"tl# underta)en b# the State, or it !a# enter into "o4produ"tion, >oint venture, produ"tion4sharin0 a0ree!ents (ith .ilipino "iti8ens. So (e are still li!itin0 it onl# to .ilipino "iti8ens. < < <. MS. L=ESADA. -oin0 ba") to Se"tion 6, the se"tion su00ests thatE The e<ploration, develop!ent, and utili8ation o natural resour"esR !a# be dire"tl# underta)en b# the State, or it !a# enter into "o4produ"tion, >oint venture or produ"tion4sharin0 a0ree!ent (ith . . . "orporations or asso"iations at least si<t# per "ent o (hose votin0 sto") or "ontrollin0 interest is o(ned b# su"h "iti8ens. ,ines &' to 65, on the other hand, su00est that in the lar0e4s"ale e<ploration, develop!ent and utili8ation o natural resour"es, the *resident (ith the "on"urren"e o Con0ress !a# enter into a0ree!ents (ith orei0n4o(ned "orporations even or te"hni"al or inan"ial assistan"e. I (onder i this part o Se"tion 6 "ontradi"ts the se"ond part. I a! raisin0 this point or ear that orei0n investors (ill use their enor!ous "apital resour"es to a"ilitate the a"tual e<ploitation or e<ploration, develop!ent and e e"tive disposition o our natural resour"es to the detri!ent o .ilipino investors. I a! not sa#in0 that (e should not "onsider borro(in0 !one# ro! orei0n sour"es. 7hat I re er to is that orei0n interest should be allo(ed to parti"ipate onl# to the e<tent that the# lend us !one# and 0ive us te"hni"al assistan"e (ith the appropriate 0overn!ent per!it. In this (a#, (e "an insure the en>o#!ent o our natural resour"es b# our o(n people. MR. @I,,E-AS. A"tuall#, the se"ond provision about the *resident does not per!it orei0n investors to parti"ipate. It is onl# te"hni"al or inan"ial assistan"e M the# do not o(n an#thin0 M but on "onditions that have to be deter!ined b# la( (ith the "on"urren"e o Con0ress. So, it is ver# restri"tive. I the Co!!issioner (ill re!e!ber, this re!oves the possibilit# or servi"e "ontra"ts (hi"h (e said #esterda# (ere avenues used in the previous re0i!e to 0o around the 35445 re;uire!ent. &6: HE!phasis supplied.I The present Chie 9usti"e, then a !e!ber o the CONCOM, also re erred to this li!itation in s"ope in proposin0 an a!end!ent to the 35445 re;uire!entE MR. DA@IDE. Ma# I be allo(ed to e<plain the proposalQ MR. MAAMBON-. Sub>e"t to the three4!inute rule, Mada! *resident. MR. DA@IDE. It (ill not ta)e three !inutes. The Co!!ission had >ust approved the *rea!ble. In the *rea!ble (e "learl# stated that the .ilipino people are soverei0n and that one o the ob>e"tives or the "reation or establish!ent o a 0overn!ent is to "onserve and develop the national patri!on#. The i!pli"ation is that the national patri!on# or our natural resour"es are e<"lusivel# reserved or the .ilipino people. No alien !ust be allo(ed to en>o#, e<ploit and develop our natural resour"es. As a !atter o a"t, that prin"iple pro"eeds ro! the a"t that our natural resour"es are 0i ts ro! -od to the .ilipino people and it (ould be a brea"h o that spe"ial blessin0 ro! -od i (e (ill allo( aliens to e<ploit our natural resour"es.

I voted in avor o the 9a!ir proposal be"ause it is not reall# e<ploitation that (e 0ranted to the alien "orporations but onl# or the! to render inan"ial or te"hni"al assistan"e. It is not or the! to en>o# our natural resour"es. Mada! *resident, our natural resour"es are depletin0G our population is in"reasin0 b# leaps and bounds. .i t# #ears ro! no(, i (e (ill allo( these aliens to e<ploit our natural resour"es, there (ill be no !ore natural resour"es or the ne<t 0enerations o .ilipinos. It !a# last lon0 i (e (ill be0in no(. Sin"e /%6' the aliens have been allo(ed to en>o# to a "ertain e<tent the e<ploitation o our natural resour"es, and (e be"a!e vi"ti!s o orei0n do!inan"e and "ontrol. The aliens are interested in "o!in0 to the *hilippines be"ause the# (ould li)e to en>o# the bount# o nature e<"lusivel# intended or .ilipinos b# -od. And so I appeal to all, or the sa)e o the uture 0enerations, that i (e have to pra# in the *rea!ble Ato preserve and develop the national patri!on# or the soverei0n .ilipino people and or the 0enerations to "o!e,A (e !ust at this ti!e de"ide on"e and or all that our natural resour"es !ust be reserved onl# to .ilipino "iti8ens. Than) #ou.&6% HE!phasis supplied.I The opinion o another !e!ber o the CONCOM is persuasive &45 and leaves no doubt as to the intention o the ra!ers to eli!inate servi"e "ontra"ts alto0ether. +e (ritesE *ara0raph 4 o Se"tion & spe"i ies lar0e4s"ale, "apital4intensive, hi0hl# te"hnolo0i"al underta)in0s or (hi"h the *resident !a# enter into "ontra"ts (ith orei0n4o(ned "orporations, and enun"iates stri"t "onditions that should 0overn su"h "ontra"ts. < < <. This provision balan"es the need or orei0n "apital and te"hnolo0# (ith the need to !aintain the national soverei0nt#. It re"o0ni8es the a"t that as lon0 as .ilipinos "an or!ulate their o(n ter!s in their o(n territor#, there is no dan0er o relin;uishin0 soverei0nt# to orei0n interests. Are servi"e "ontra"ts allo(ed under the ne( ConstitutionQ No. =nder the ne( Constitution, orei0n investors 1 ull# alien4o(ned2 "an NOT parti"ipate in .ilipino enterprises e<"ept to provideE 1/2 Te"hni"al Assistan"e or hi0hl# te"hni"al enterprisesG and 1&2 .inan"ial Assistan"e or lar0e4s"ale enterprises. The intent o this provision, as (ell as other provisions on orei0n invest!ents, is to prevent the pra"ti"e 1prevalent in the Mar"os 0overn!ent2 o s)irtin0 the 35B45 e;uation usin0 the "over o servi"e "ontra"ts. &4/ HE!phasis supplied.I .urther!ore, it appears that *roposed Resolution No. 4%3, &4& (hi"h (as the dra t Arti"le on National E"ono!# and *atri!on#, adopted the "on"ept o Aa0ree!ents . . . involvin0 either te"hni"al or inan"ial assistan"eA "ontained in the ADra t o the /%:3 =.*. ,a( Constitution *ro>e"tA 1=.*. ,a( dra t2 (hi"h (as ta)en into "onsideration durin0 the deliberation o the CONCOM.&46 The or!er, as (ell as Arti"le FII, as adopted, e!plo#ed the sa!e ter!inolo0#, as the "o!parative table belo( sho(sE

DRA.T O. T+E =* ,A7 CONSTIT=TION *RO9ECT

*RO*OSED RESO,=TION NO. 4%3 O. T+E CONSTIT=TIONA, COMMISSION

ARTIC,E FII O. T+E /%:$ CONSTIT=TION

Se". /. All lands o the publi" do!ain, (aters, !inerals, "oal, petroleu! and other !ineral oils, all or"es o potential ener0#, isheries, lora and auna and other natural resour"es o the *hilippines are o(ned b# the State. 7ith the e<"eption o a0ri"ultural lands, all other natural resour"es shall not be alienated. The e<ploration, develop!ent and utili8ation o natural resour"es shall be under the ull "ontrol

Se". 6. All lands o the publi" do!ain, (aters, !inerals, "oal, petroleu! and other !ineral oils, all or"es o potential ener0#, isheries, orests, lora and auna, and other natural resour"es are o(ned b# the State. 7ith the e<"eption o a0ri"ultural lands, all other natural resour"es shall not be alienated. The e<ploration, develop!ent, and utili8ation o natural resour"es shall be under the ull "ontrol and supervision

Se". &. All lands o the publi" do!ain, (aters, !inerals, "oal, petroleu!, and other !ineral oils, all or"es o potential ener0#, isheries, orests or ti!ber, (ildli e, lora and auna, and other natural resour"es are o(ned b# the State. 7ith the e<"eption o a0ri"ultural lands, all other natural resour"es shall not be alienated. The e<ploration, develop!ent, and utili8ation o natural resour"es shall be under the ull "ontrol

and supervision o the State. Su"h a"tivities !a# be dire"tl# underta)en b# the state, or it !a# enter into "o4produ"tion, >oint venture, produ"tion sharin0 a0ree!ents (ith .ilipino "iti8ens or "orporations or asso"iations si<t# per "ent o (hose votin0 sto") or "ontrollin0 interest is o(ned b# su"h "iti8ens or a period o not !ore than t(ent#4 ive #ears, rene(able or not !ore than t(ent#4 ive #ears and under su"h ter!s and "onditions as !a# be provided b# la(. In "ase as to (ater ri0hts or irri0ation, (ater suppl#, isheries, or industrial uses other than the develop!ent o (ater po(er, bene i"ial use !a# be the !easure and li!it o the 0rant. The National Asse!bl# !a# b# la( allo( s!all s"ale utili8ation o natural resour"es b# .ilipino "iti8ens. The National Asse!bl#, !a#, b# t(o4thirds vote o all its !e!bers b# spe"ial la( provide the ter!s and "onditions under (hi"h a orei0n4o(ned "orporation !a# enter into a0ree!ents (ith the 0overn!ent involvin0 "(%)"r %"=)n(=a> or 2(nan=(a> a$$($%an=" or lar0e4 s"ale e<ploration, develop!ent, or utili8ation o natural resour"es. HE!phasis supplied.I

o the State. Su"h a"tivities !a# be dire"tl# underta)en b# the State, or it !a# enter into "o4 produ"tion, >oint venture, produ"tion4sharin0 a0ree!ents (ith .ilipino "iti8ens or "orporations or asso"iations at least si<t# per "ent o (hose votin0 sto") or "ontrollin0 interest is o(ned b# su"h "iti8ens. Su"h a0ree!ents shall be or a period o t(ent#4 ive #ears, rene(able or not !ore than t(ent#4 ive #ears, and under su"h ter! and "onditions as !a# be provided b# la(. In "ases o (ater ri0hts or irri0ation, (ater suppl#, isheries or industrial uses other than the develop!ent or (ater po(er, bene i"ial use !a# be the !easure and li!it o the 0rant. The Con0ress !a# b# la( allo( s!all4s"ale utili8ation o natural resour"es b# .ilipino "iti8ens, as (ell as "ooperative ish ar!in0 in rivers, la)es, ba#s, and la0oons. The *resident (ith the "on"urren"e o Con0ress, b# spe"ial la(, shall provide the ter!s and "onditions under (hi"h a orei0n4o(ned "orporation !a# enter into a0ree!ents (ith the 0overn!ent involvin0 "(%)"r %"=)n(=a> or 2(nan=(a> a$$($%an=" or lar0e4 s"ale e<ploration, develop!ent, and utili8ation o natural resour"es. HE!phasis supplied.I

and supervision o the State. The State !a# dire"tl# underta)e su"h a"tivities or it !a# enter into "o4produ"tion, >oint venture, or produ"tion4 sharin0 a0ree!ents (ith .ilipino "iti8ens, or "orporations or asso"iations at least si<t# per "entu! o (hose "apital is o(ned b# su"h "iti8ens. Su"h a0ree!ents !a# be or a period not e<"eedin0 t(ent#4 ive #ears, rene(able or not !ore than t(ent#4 ive #ears, and under su"h ter!s and "onditions as !a# be provided b# la(. In "ase o (ater ri0hts or irri0ation, (ater suppl#, isheries, or industrial uses other than the develop!ent o (ater po(er, bene i"ial use !a# be the !easure and li!it o the 0rant. The State shall prote"t the nationCs !arine (ealth in its ar"hipela0i" (aters, territorial sea, and e<"lusive e"ono!i" 8one, and reserve its use and en>o#!ent e<"lusivel# to .ilipino "iti8ens. The Con0ress !a#, b# la(, allo( s!all4s"ale utili8ation o natural resour"es b# .ilipino "iti8ens, as (ell as "ooperative ish ar!in0, (ith priorit# to subsisten"e isher!en and ish4 (or)ers in rivers, la)es, ba#s, and la0oons. The *resident !a# enter into a0ree!ents (ith orei0n4o(ned "orporations involvin0 "(%)"r %"=)n(=a> or 2(nan=(a> a$$($%an=" or lar0e4s"ale e<ploration, develop!ent, and utili8ation o !inerals, petroleu!, and other !ineral oils a""ordin0 to the 0eneral ter!s and "onditions provided b# la(, based on real "ontributions to the e"ono!i" 0ro(th and 0eneral (el are o the "ountr#. In su"h a0ree!ents, the State shall pro!ote the develop!ent and use o lo"al s"ienti i" and te"hni"al resour"es. HE!phasis supplied.I The *resident shall noti # the Con0ress o ever# "ontra"t entered into in a""ordan"e (ith this provision, (ithin thirt# da#s

ro! its e<e"ution.

The insi0hts o the proponents o the =.*. ,a( dra t are, there ore, instru"tive in interpretin0 the phrase Ate"hni"al or inan"ial assistan"e.A In his position paper entitled Servi"e Contra"tsE Old 7ine in Ne( BottlesQ, *ro essor *a"i i"o A. A0abin, (ho (as a !e!ber o the (or)in0 0roup that prepared the =.*. ,a( dra t, "riti"i8ed servi"e "ontra"ts or the# Alod0e e<"lusive !ana0e!ent and "ontrol o the enterprise to the servi"e "ontra"tor, (hi"h is re!inis"ent o the old "on"ession re0i!e. Thus, not(ithstandin0 the provision o the Constitution that natural resour"es belon0 to the State, and that these shall not be alienated, the servi"e "ontra"t s#ste! renders nu0ator# the "onstitutional provisions "ited.A&44 +e elaboratesE ,oo)in0 at the *hilippine !odel, (e "an dis"ern the ollo(in0 vesti0es o the "on"ession re0i!e, thusE /. Biddin0 o a sele"ted area, or leasin0 the "hoi"e o the area to the interested part# and then ne0otiatin0 the ter!s and "onditions o the "ontra"tG 1Se". ', *.D. :$2 &. Mana0e!ent o the enterprise vested on the "ontra"tor, in"ludin0 operation o the ield i petroleu! is dis"overedG 1Se". :, *.D. :$2 6. Control o produ"tion and other !atters su"h as e<pansion and develop!entG 1Se". :2 4. Responsibilit# or do(nstrea! operations M !ar)etin0, distribution, and pro"essin0 !a# be (ith the "ontra"tor 1Se". :2G '. O(nership o e;uip!ent, !a"hiner#, i<ed assets, and other properties re!ain (ith "ontra"tor 1Se". /&, *.D. :$2G 3. Repatriation o "apital and retention o pro its abroad 0uaranteed to the "ontra"tor 1Se". /6, *.D. :$2G and $. 7hile title to the petroleu! dis"overed !a# no!inall# be in the na!e o the 0overn!ent, the "ontra"tor has al!ost un ettered "ontrol over its disposition and sale, and even the do!esti" re;uire!ents o the "ountr# is rele0ated to a pro rata basis 1Se". :2. In short, our version o the servi"e "ontra"t is >ust a rehash o the old "on"ession re0i!e < < <. So!e people have pulled an old rabbit out o a !a0i"ianCs hat, and oisted it upon us as a ne( and di erent ani!al. The servi"e "ontra"t as (e )no( it here is antitheti"al to the prin"iple o soverei0nt# over our natural resour"es restated in the sa!e arti"le o the H/%$6I Constitution "ontainin0 the provision or servi"e "ontra"ts. I the servi"e "ontra"tor happens to be a orei0n "orporation, the "ontra"t (ould also run "ounter to the "onstitutional provision on nationali8ation or .ilipini8ation, o the e<ploitation o our natural resour"es. &4' HE!phasis supplied. =nders"orin0 in the ori0inal.I *ro essor Merlin M. Ma0allona, also a !e!ber o the (or)in0 0roup, (as harsher in his reproa"h o the s#ste!E < < < the nationalisti" phraseolo0# o the /%6' HConstitutionI (as retained b# the H/%$6I Charter, but the essen"e o nationalis! (as redu"ed to hollo( rhetori". The /%$6 Charter still provided that the e<ploitation or develop!ent o the "ountr#Cs natural resour"es be li!ited to .ilipino "iti8ens or "orporations o(ned or "ontrolled b# the!. +o(ever, the !artial4la( Constitution allo(ed the!, on"e these resour"es are in their na!e, to enter into servi"e "ontra"ts (ith orei0n investors or inan"ial, te"hni"al, !ana0e!ent, or other or!s o assistan"e. Sin"e orei0n investors have the "apital resour"es, the a"tual e<ploitation and develop!ent, as (ell as the e e"tive disposition, o the "ountr#Cs natural resour"es, (ould be under their dire"tion, and "ontrol, rele0atin0 the .ilipino investors to the role o se"ond4rate partners in >oint ventures. Throu0h the instru!entalit# o the servi"e "ontra"t, the /%$6 Constitution had le0iti!i8ed at the hi0hest level o state poli"# that (hi"h (as prohibited under the /%$6 Constitution, na!el#E the e<ploitation o the "ountr#Cs

natural resour"es b# orei0n nationals. The drasti" i!pa"t o HthisI "onstitutional "han0e be"o!es !ore pronoun"ed (hen it is "onsidered that the a"tive part# to an# servi"e "ontra"t !a# be a "orporation (holl# o(ned b# orei0n interests. In su"h a "ase, the "iti8enship re;uire!ent is "o!pletel# set aside, per!ittin0 orei0n "orporations to obtain a"tual possession, "ontrol, and Hen>o#!entI o the "ountr#Cs natural resour"es. &43 HE!phasis supplied.I A""ordin0l#, *ro essor A0abin re"o!!ends thatE Re"o0ni8in0 the servi"e "ontra"t or (hat it is, (e have to e<pun0e it ro! the Constitution and rea ir! o(nership over our natural resour"es. That is the onl# (a# (e "an e<er"ise e e"tive "ontrol over our natural resour"es. This should not !ean "o!plete isolation o the "ountr#Cs natural resour"es ro! orei0n invest!ent. Other "ontra"t or!s (hi"h are less dero0ator# to our soverei0nt# and "ontrol over natural resour"es M li)e te"hni"al assistan"e a0ree!ents, inan"ial assistan"e Ha0ree!entsI, "o4produ"tion a0ree!ents, >oint ventures, produ"tion4sharin0 M "ould still be utili8ed and adopted (ithout violatin0 "onstitutional provisions. In other (ords, (e "an adopt "ontra"t or!s (hi"h re"o0ni8e and assert our soverei0nt# and o(nership over natural resour"es, and (here the orei0n entit# is >ust a pure "ontra"tor instead o the bene i"ial o(ner o our e"ono!i" resour"es. &4$ HE!phasis supplied.I Still another !e!ber o the (or)in0 0roup, *ro essor Eduardo ,abita0, proposed thatE &. Servi"e "ontra"ts as pra"ti"ed under the /%$6 Constitution should be dis"oura0ed, instead the 0overn!ent !a# be allo(ed, sub>e"t to authori8ation b# spe"ial la( passed b# an e<traordinar# !a>orit# to enter into either te"hni"al or inan"ial assistan"e. This is >usti ied b# the a"t that as presentl# (orded in the /%$6 Constitution, a servi"e "ontra"t 0ives ull "ontrol over the "ontra"t area to the servi"e "ontra"tor, or hi! to (or), !ana0e and dispose o the pro"eeds or produ"tion. It (as a subter u0e to 0et around the nationalit# re;uire!ent o the "onstitution.&4: HE!phasis supplied.I In the annotations on the proposed Arti"le on National E"ono!# and *atri!on#, the =.*. ,a( dra t su!!ari8ed the rationale there or, thusE '. The last para0raph is a !odi i"ation o the servi"e "ontra"t provision ound in Se"tion %, Arti"le FI@ o the /%$6 Constitution as a!ended. This /%$6 provision shattered the ra!e(or) o nationalis! in our unda!ental la( 1see Ma0allona, ANationalis! and its Subversion in the ConstitutionA2. Throu0h the servi"e "ontra"t, the /%$6 Constitution had le0iti!i8ed that (hi"h (as prohibited under the /%6' "onstitutionSthe e<ploitation o the "ountr#Cs natural resour"es b# orei0n nationals. Throu0h the servi"e "ontra"t, a"ts prohibited b# the Anti4Du!!# ,a( (ere re"o0ni8ed as le0iti!ate arran0e!ents. Servi"e "ontra"ts lod0e e<"lusive !ana0e!ent and "ontrol o the enterprise to the servi"e "ontra"tor, not unli)e the old "on"ession re0i!e (here the "on"essionaire had "o!plete "ontrol over the "ountr#Cs natural resour"es, havin0 been 0iven e<"lusive and plenar# ri0hts to e<ploit a parti"ular resour"e and, in e e"t, havin0 been assured o o(nership o that resour"e at the point o e<tra"tion 1see A0abin, AServi"e Contra"tsE Old 7ine in Ne( BottlesA2. Servi"e "ontra"ts, hen"e, are antitheti"al to the prin"iple o soverei0nt# over our natural resour"es, as (ell as the "onstitutional provision on nationali8ation or .ilipini8ation o the e<ploitation o our natural resour"es. =nder the proposed provision, onl# te"hni"al assistan"e or inan"ial assistan"e a0ree!ents !a# be entered into, and onl# or lar0e4s"ale a"tivities. These are "ontra"t or!s (hi"h re"o0ni8e and assert our soverei0nt# and o(nership over natural resour"es sin"e the orei0n entit# is >ust a pure "ontra"tor and not a bene i"ial o(ner o our e"ono!i" resour"es. The proposal re"o0ni8es the need or "apital and te"hnolo0# to develop our natural resour"es (ithout sa"ri i"in0 our soverei0nt# and "ontrol over su"h resour"es b# the sa e0uard o a spe"ial la( (hi"h re;uires t(o4thirds vote o all the !e!bers o the ,e0islature. This (ill ensure that su"h a0ree!ents (ill be debated upon e<haustivel# and thorou0hl# in the National Asse!bl# to avert pre>udi"e to the nation. &4% HE!phasis supplied.I The =.*. ,a( dra t proponents vie(ed servi"e "ontra"ts under the /%$6 Constitution as 0rants o bene i"ial o(nership o the "ountr#Cs natural resour"es to orei0n o(ned "orporations. 7hile, in theor#, the State o(ns these natural resour"es M and .ilipino "iti8ens, their bene i"iaries M servi"e "ontra"ts a"tuall# vested orei0ners (ith the ri0ht to dispose, e<plore or, develop, e<ploit, and utili8e the sa!e. .orei0ners, not .ilipinos, be"a!e the bene i"iaries o *hilippine natural resour"es. This arran0e!ent is "learl# in"o!patible (ith the "onstitutional ideal o nationali8ation o natural resour"es, (ith the Re0alian do"trine, and on a broader perspe"tive, (ith *hilippine soverei0nt#.

The proponents nevertheless a")no(led0ed the need or "apital and te"hni"al )no(4ho( in the lar0e4s"ale e<ploitation, develop!ent and utili8ation o natural resour"es M the se"ond para0raph o the proposed dra t itsel bein0 an ad!ission o su"h s"ar"it#. +en"e, the# re"o!!ended a "o!pro!ise to re"on"ile the nationalisti" provisions datin0 ba") to the /%6' Constitution, (hi"h reserved all natural resour"es e<"lusivel# to .ilipinos, and the !ore liberal /%$6 Constitution, (hi"h allo(ed orei0ners to parti"ipate in these resour"es throu0h servi"e "ontra"ts. Su"h a "o!pro!ise "alled or the adoption o a ne( s#ste! in the e<ploration, develop!ent, and utili8ation o natural resour"es in the or! o te"hni"al a0ree!ents or inan"ial a0ree!ents (hi"h, ne"essaril#, are distin"t "on"epts ro! servi"e "ontra"ts. The repla"e!ent o Aservi"e "ontra"tsA (ith Aa0ree!entsR involvin0 either te"hni"al or inan"ial assistan"e,A as (ell as the deletion o the phrase A!ana0e!ent or other or!s o assistan"e,A assu!es 0reater si0ni i"an"e (hen note is ta)en that the =.*. ,a( dra t proposed other e;uall# "ru"ial "han0es that (ere obviousl# heeded b# the CONCOM. These in"lude the abro0ation o the "on"ession s#ste! and the adoption o ne( AoptionsA or the State in the e<ploration, develop!ent, and utili8ation o natural resour"es. The proponents dee!ed these "han0es to be !ore "onsistent (ith the StateCs o(nership o , and its A ull "ontrol and supervisionA 1a phrase also e!plo#ed b# the ra!ers2 over, su"h resour"es. The *ro>e"t e<plainedE 6. In line (ith the State o(nership o natural resour"es, the State should ta)e a !ore a"tive role in the e<ploration, develop!ent, and utili8ation o natural resour"es, than the present pra"ti"e o 0rantin0 li"enses, "on"essions, or leases M hen"e the provision that said a"tivities shall be under the ull "ontrol and supervision o the State. There are three !a>or s"he!es b# (hi"h the State "ould underta)e these a"tivitiesE irst, dire"tl# b# itsel G se"ond, b# virtue o "o4produ"tion, >oint venture, produ"tion sharin0 a0ree!ents (ith .ilipino "iti8ens or "orporations or asso"iations si<t# per "ent 135J2 o the votin0 sto") or "ontrollin0 interests o (hi"h are o(ned b# su"h "iti8ensG or third, (ith a orei0n4o(ned "orporation, in "ases o lar0e4s"ale e<ploration, develop!ent, or utili8ation o natural resour"es throu0h a0ree!ents involvin0 either te"hni"al or inan"ial assistan"e onl#. < < <. At present, under the li"ensin0 "on"ession or lease s"he!es, the 0overn!ent bene its ro! su"h bene its onl# throu0h ees, "har0es, ad valore! ta<es and in"o!e ta<es o the e<ploiters o our natural resour"es. Su"h bene its are ver# !ini!al "o!pared (ith the enor!ous pro its reaped b# theses li"ensees, 0rantees, "on"essionaires. Moreover, so!e o the! disre0ard the "onservation o natural resour"es and do not prote"t the environ!ent ro! de0radation. The proposed role o the State (ill enable it to a 0reater share in the pro its M it "an also a"tivel# husband its natural resour"es and en0a0e in develop!ental pro0ra!s that (ill be bene i"ial to the!. 4. Aside ro! the three !a>or s"he!es or the e<ploration, develop!ent, and utili8ation o our natural resour"es, the State !a#, b# la(, allo( .ilipino "iti8ens to e<plore, develop, utili8e natural resour"es in s!all4s"ale. This is in re"o0nition o the pli0ht o !ar0inal isher!en, orest d(ellers, 0old panners, and others si!ilarl# situated (ho e<ploit our natural resour"es or their dail# sustenan"e and survival. &'5 *ro essor A0abin, in parti"ular, a ter ta)in0 pains to illustrate the si!ilarities bet(een the t(o s#ste!s, "on"luded that the servi"e "ontra"t re0i!e (as but a ArehashA o the "on"ession s#ste!. AOld (ine in ne( bottles,A as he put it. The re>e"tion o the servi"e "ontra"t re0i!e, there ore, is in "onsonan"e (ith the abolition o the "on"ession s#ste!. In li0ht o the deliberations o the CONCOM, the te<t o the Constitution, and the adoption o other proposed "han0es, there is no doubt that the ra!ers "onsidered and shared the intent o the =.*. ,a( proponents in e!plo#in0 the phrase Aa0ree!ents . . . involvin0 either te"hni"al or inan"ial assistan"e.A 7hile "ertain "o!!issioners !a# have !entioned the ter! Aservi"e "ontra"tsA durin0 the CONCOM deliberations, the# !a# not have been ne"essaril# re errin0 to the "on"ept o servi"e "ontra"ts under the /%$6 Constitution. As noted earlier, Aservi"e "ontra"tsA is a ter! that assu!es di erent !eanin0s to di erent people. &'/ The "o!!issioners !a# have been usin0 the ter! loosel#, and not in its te"hni"al and le0al sense, to re er, in 0eneral, to a0ree!ents "on"ernin0 natural resour"es entered into b# the -overn!ent (ith orei0n "orporations. These loose state!ents do not ne"essaril# translate to the adoption o the /%$6 Constitution provision allo(in0 servi"e "ontra"ts. It is true that, as sho(n in the earlier ;uoted portions o the pro"eedin0s in CONCOM, in response to Sr. TanCs ;uestion, Co!!issioner @ille0as "o!!ented that, other than "on0ressional noti i"ation, the onl# di eren"e bet(een A utureA and ApastA Aservi"e "ontra"tsA is the re;uire!ent o a 0eneral la( as there (ere no la(s previousl# authori8in0 the sa!e. &'& +o(ever, su"h re!ar) is ar out(ei0hed b# his !ore "ate0ori"al state!ent in his e<"han0e (ith Co!!issioner Luesada that the dra t arti"le Adoes not per!it orei0n investors to parti"ipateA in the nationCs natural resour"es M (hi"h (as e<a"tl# (hat servi"e "ontra"ts did M e<"ept to provide Ate"hni"al or inan"ial assistan"e.A&'6

In the "ase o the other "o!!issioners, Co!!issioner Nolledo hi!sel "lari ied in his (or) that the present "harter prohibits servi"e "ontra"ts. &'4 Co!!issioner -as"on (as not totall# averse to orei0n parti"ipation, but avored stri"ter restri"tions in the or! o !a>orit# "on0ressional "on"urren"e. &'' On the other hand, Co!!issioners -ar"ia and Tadeo !a# have veered to the e<tre!e side o the spe"tru! and their ob>e"tions !a# be interpreted as votes a0ainst an# orei0n parti"ipation in our natural resour"es (hatsoever. 7MC* "ites Opinion No. $', s. /%:$, &'3 and Opinion No. /$', s. /%%5 &'$ o the Se"retar# o 9usti"e, e<pressin0 the vie( that a inan"ial or te"hni"al assistan"e a0ree!ent Ais no di erent in "on"eptA ro! the servi"e "ontra"t allo(ed under the /%$6 Constitution. This Court is not, ho(ever, bound b# this interpretation. 7hen an ad!inistrative or e<e"utive a0en"# renders an opinion or issues a state!ent o poli"#, it !erel# interprets a pre4 e<istin0 la(G and the ad!inistrative interpretation o the la( is at best advisor#, or it is the "ourts that inall# deter!ine (hat the la( !eans.&': In an# "ase, the "onstitutional provision allo(in0 the *resident to enter into .TAAs (ith orei0n4o(ned "orporations is an e<"eption to the rule that parti"ipation in the nationCs natural resour"es is reserved e<"lusivel# to .ilipinos. A""ordin0l#, su"h provision !ust be "onstrued stri"tl# a0ainst their en>o#!ent b# non4.ilipinos. As Co!!issioner @ille0as e!phasi8ed, the provision is Aver# restri"tive.A &'% Co!!issioner Nolledo also re!ar)ed that Aenterin0 into servi"e "ontra"ts is an e<"eption to the rule on prote"tion o natural resour"es or the interest o the nation and, there ore, bein0 an e<"eption, it should be sub>e"t, (henever possible, to strin0ent rules.A &35 Indeed, e<"eptions should be stri"tl# but reasonabl# "onstruedG the# e<tend onl# so ar as their lan0ua0e airl# (arrants and all doubts should be resolved in avor o the 0eneral provision rather than the e<"eption. &3/ 7ith the ore0oin0 dis"ussion in !ind, this Court inds that R.A. No. $%4& is invalid inso ar as said A"t authori8es servi"e "ontra"ts. Althou0h the statute e!plo#s the phrase A inan"ial and te"hni"al a0ree!entsA in a""ordan"e (ith the /%:$ Constitution, it a"tuall# treats these a0ree!ents as servi"e "ontra"ts that 0rant bene i"ial o(nership to orei0n "ontra"tors "ontrar# to the unda!ental la(. Se"tion 66, (hi"h is ound under Chapter @I 1.inan"ial or Te"hni"al Assistan"e A0ree!ent2 o R.A. No. $%4& statesE SEC. 66. Eli0ibilit#.SAn# ;uali ied person (ith te"hni"al and inan"ial "apabilit# to underta)e lar0e4s"ale e<ploration, develop!ent, and utili8ation o !ineral resour"es in the *hilippines !a# enter into a inan"ial or te"hni"al assistan"e a0ree!ent dire"tl# (ith the -overn!ent throu0h the Depart!ent. HE!phasis supplied.I AE<ploration,A as de ined b# R.A. No. $%4&, !eans the sear"hin0 or prospe"tin0 or !ineral resour"es b# 0eolo0i"al, 0eo"he!i"al or 0eoph#si"al surve#s, re!ote sensin0, test pittin0, trendin0, drillin0, sha t sin)in0, tunnelin0 or an# other !eans or the purpose o deter!inin0 the e<isten"e, e<tent, ;uantit# and ;ualit# thereo and the easibilit# o !inin0 the! or pro it. &3& A le0all# or0ani8ed orei0n4o(ned "orporation !a# be 0ranted an e<ploration per!it, &36 (hi"h vests it (ith the ri0ht to "ondu"t e<ploration or all !inerals in spe"i ied areas, &34 i.e., to enter, o""up# and e<plore the sa!e. &3' Eventuall#, the orei0n4o(ned "orporation, as su"h per!ittee, !a# appl# or a inan"ial and te"hni"al assistan"e a0ree!ent.&33 ADevelop!entA is the (or) underta)en to e<plore and prepare an ore bod# or a !ineral deposit or !inin0, in"ludin0 the "onstru"tion o ne"essar# in rastru"ture and related a"ilities. &3$ A=tili8ationA A!eans the e<tra"tion or disposition o !inerals.A &3: A stipulation that the proponent shall dispose o the !inerals and b#produ"ts produ"ed at the hi0hest pri"e and !ore advanta0eous ter!s and "onditions as provided or under the i!ple!entin0 rules and re0ulations is re;uired to be in"orporated in ever# .TAA. &3% A orei0n4o(nedB4"ontrolled "orporation !a# li)e(ise be 0ranted a !ineral pro"essin0 per!it. &$5 AMineral pro"essin0A is the !illin0, bene i"iation or up0radin0 o ores or !inerals and ro")s or b# si!ilar !eans to "onvert the sa!e into !ar)etable produ"ts.&$/ An .TAA "ontra"tor !a)es a (arrant# that the !inin0 operations shall be "ondu"ted in a""ordan"e (ith the provisions o R.A. No. $%4& and its i!ple!entin0 rules &$& and or (or) pro0ra!s and !ini!u! e<penditures and "o!!it!ents.&$6 And it obli0es itsel to urnish the -overn!ent re"ords o 0eolo0i", a""ountin0, and other relevant data or its !inin0 operation.&$4

AMinin0 operation,A as the la( de ines it, !eans !inin0 a"tivities involvin0 e<ploration, easibilit#, develop!ent, utili8ation, and pro"essin0. &$' The underl#in0 assu!ption in all these provisions is that the orei0n "ontra"tor !ana0es the !ineral resour"es, >ust li)e the orei0n "ontra"tor in a servi"e "ontra"t. .urther!ore, Chapter FII o the A"t 0rants orei0n "ontra"tors in .TAAs the sa!e au<iliar# !inin0 ri0hts that it 0rants "ontra"tors in !ineral a0ree!ents 1M*SA, CA and 9@2. &$3 *arentheti"all#, Se"tions $& to $' use the ter! A"ontra"tor,A (ithout distin0uishin0 bet(een .TAA and !ineral a0ree!ent "ontra"tors. And so does Aholders o !inin0 ri0htsA in Se"tion $3. A orei0n "ontra"tor !a# even "onvert its .TAA into a !ineral a0ree!ent i the e"ono!i" viabilit# o the "ontra"t area is ound to be inade;uate to >usti # lar0e4s"ale !inin0 operations, &$$ provided that it redu"es its e;uit# in the "orporation, partnership, asso"iation or "ooperative to ort# per"ent 145J2.&$: .inall#, under the A"t, an .TAA "ontra"tor (arrants that it Ahas or has a""ess to all the inan"in0, !ana0erial, and te"hni"al e<pertise. . . .A &$% This su00ests that an .TAA "ontra"tor is bound to provide so!e !ana0e!ent assistan"e M a or! o assistan"e that has been eli!inated and, there ore, pros"ribed b# the present Charter. B# allo(in0 orei0n "ontra"tors to !ana0e or operate all the aspe"ts o the !inin0 operation, the above4"ited provisions o R.A. No. $%4& have in e e"t "onve#ed bene i"ial o(nership over the nationCs !ineral resour"es to these "ontra"tors, leavin0 the State (ith nothin0 but bare title thereto. Moreover, the sa!e provisions, (hether b# desi0n or inadverten"e, per!it a "ir"u!vention o the "onstitutionall# ordained 35J445J "apitali8ation re;uire!ent or "orporations or asso"iations en0a0ed in the e<ploitation, develop!ent and utili8ation o *hilippine natural resour"es. In su!, the Court inds the ollo(in0 provisions o R.A. No. $%4& to be violative o Se"tion &, Arti"le FII o the ConstitutionE 1/2 The proviso in Se"tion 6 1a;2, (hi"h de ines A;uali ied person,A to (itE *rovided, That a le0all# or0ani8ed orei0n4o(ned "orporation shall be dee!ed a ;uali ied person or purposes o 0rantin0 an e<ploration per!it, inan"ial or te"hni"al assistan"e a0ree!ent or !ineral pro"essin0 per!it. 1&2 Se"tion &6,&:5 (hi"h spe"i ies the ri0hts and obli0ations o an e<ploration per!ittee, inso ar as said se"tion applies to a inan"ial or te"hni"al assistan"e a0ree!ent, 162 Se"tion 66, (hi"h pres"ribes the eli0ibilit# o a "ontra"tor in a inan"ial or te"hni"al assistan"e a0ree!entG 142 Se"tion 6',&:/ (hi"h enu!erates the ter!s and "onditions or ever# inan"ial or te"hni"al assistan"e a0ree!entG 1'2 Se"tion 6%,&:& (hi"h allo(s the "ontra"tor in a inan"ial and te"hni"al assistan"e a0ree!ent to "onvert the sa!e into a !ineral produ"tion4sharin0 a0ree!entG 132 Se"tion '3,&:6 (hi"h authori8es the issuan"e o a !ineral pro"essin0 per!it to a "ontra"tor in a inan"ial and te"hni"al assistan"e a0ree!entG The ollo(in0 provisions o the sa!e A"t are li)e(ise void as the# are dependent on the ore0oin0 provisions and "annot stand on their o(nE 1/2 Se"tion 6 102,&:4 (hi"h de ines the ter! A"ontra"tor,A inso ar as it applies to a inan"ial or te"hni"al assistan"e a0ree!ent. Se"tion 64,&:' (hi"h pres"ribes the !a<i!u! "ontra"t area in a inan"ial or te"hni"al assistan"e a0ree!entsG Se"tion 63,&:3 (hi"h allo(s ne0otiations or inan"ial or te"hni"al assistan"e a0ree!entsG

Se"tion 6$,&:$ (hi"h pres"ribes the pro"edure or ilin0 and evaluation o inan"ial or te"hni"al assistan"e a0ree!ent proposalsG Se"tion 6:,&:: (hi"h li!its the ter! o inan"ial or te"hni"al assistan"e a0ree!entsG Se"tion 45,&:% (hi"h allo(s the assi0n!ent or trans er o inan"ial or te"hni"al assistan"e a0ree!entsG Se"tion 4/,&%5 (hi"h allo(s the (ithdra(al o the "ontra"tor in an .TAAG The se"ond and third para0raphs o Se"tion :/, &%/ (hi"h provide or the -overn!entCs share in a inan"ial and te"hni"al assistan"e a0ree!entG and Se"tion %5,&%& (hi"h provides or in"entives to "ontra"tors in .TAAs inso ar as it applies to said "ontra"torsG 7hen the parts o the statute are so !utuall# dependent and "onne"ted as "onditions, "onsiderations, indu"e!ents, or "o!pensations or ea"h other, as to (arrant a belie that the le0islature intended the! as a (hole, and that i all "ould not be "arried into e e"t, the le0islature (ould not pass the residue independentl#, then, i so!e parts are un"onstitutional, all the provisions (hi"h are thus dependent, "onditional, or "onne"ted, !ust all (ith the!. &%6 There "an be little doubt that the 7MC* .TAA itsel is a servi"e "ontra"t. Se"tion /.6 o the 7MC* .TAA 0rants 7MC* Athe e<"lusive ri0ht to e<plore, e<ploit, utiliseH,I pro"ess and dispose o all Minerals produ"ts and b#4produ"ts thereo that !a# be produ"ed ro! the Contra"t Area.A &%4 The .TAA also i!bues 7MC* (ith the ollo(in0 ri0htsE 1b2 to e<tra"t and "arr# a(a# an# Mineral sa!ples ro! the Contra"t area or the purpose o "ondu"tin0 tests and studies in respe"t thereo G 1"2 to deter!ine the !inin0 and treat!ent pro"esses to be utilised durin0 the Develop!entBOperatin0 *eriod and the pro>e"t a"ilities to be "onstru"ted durin0 the Develop!ent and Constru"tion *eriodG 1d2 have the ri0ht o possession o the Contra"t Area, (ith ull ri0ht o in0ress and e0ress and the ri0ht to o""up# the sa!e, sub>e"t to the provisions o *residential De"ree No. '/& 1i appli"able2 and not be prevented ro! entr# into private ands b# sur a"e o(ners andBor o""upants thereo (hen prospe"tin0, e<plorin0 and e<ploitin0 or !inerals thereinG <<< 1 2 to "onstru"t road(a#s, !inin0, draina0e, po(er 0eneration and trans!ission a"ilities and all other t#pes o (or)s on the Contra"t AreaG 102 to ere"t, install or pla"e an# t#pe o i!prove!ents, supplies, !a"hiner# and other e;uip!ent relatin0 to the Minin0 Operations and to use, sell or other(ise dispose o , !odi #, re!ove or di!inish an# and all parts thereo G 1h2 en>o#, sub>e"t to pertinent la(s, rules and re0ulations and the ri0hts o third *arties, ease!ent ri0hts and the use o ti!ber, sand, "la#, stone, (ater and other natural resour"es in the Contra"t Area (ithout "ost or the purposes o the Minin0 OperationsG <<< 1i2 have the ri0ht to !ort0a0e, "har0e or en"u!ber all or part o its interest and obli0ations under this A0ree!ent, the plant, e;uip!ent and in rastru"ture and the Minerals produ"ed ro! the Minin0 OperationsG < < <. &%'

All !aterials, e;uip!ent, plant and other installations ere"ted or pla"ed on the Contra"t Area re!ain the propert# o 7MC*, (hi"h has the ri0ht to deal (ith and re!ove su"h ite!s (ithin t(elve !onths ro! the ter!ination o the .TAA.&%3 *ursuant to Se"tion /.& o the .TAA, 7MC* shall provide AHallI inan"in0, te"hnolo0#, !ana0e!ent and personnel ne"essar# or the Minin0 Operations.A The !inin0 "o!pan# binds itsel to Aper or! all Minin0 Operations . . . providin0 all ne"essar# servi"es, te"hnolo0# and inan"in0 in "onne"tion there(ith,A &%$ and to A urnish all !aterials, labour, e;uip!ent and other installations that !a# be re;uired or "arr#in0 on all Minin0 Operations.A&%:T 7MC* !a# !a)e e<pansions, i!prove!ents and repla"e!ents o the !inin0 a"ilities and !a# add su"h ne( a"ilities as it "onsiders ne"essar# or the !inin0 operations. &%% These "ontra"tual stipulations, ta)en to0ether, 0rant 7MC* bene i"ial o(nership over natural resour"es that properl# belon0 to the State and are intended or the bene it o its "iti8ens. These stipulations are abhorrent to the /%:$ Constitution. The# are pre"isel# the vi"es that the unda!ental la( see)s to avoid, the evils that it ai!s to suppress. Conse;uentl#, the "ontra"t ro! (hi"h the# sprin0 !ust be stru") do(n. In ar0uin0 a0ainst the annul!ent o the .TAA, 7MC* invo)es the A0ree!ent on the *ro!otion and *rote"tion o Invest!ents bet(een the *hilippine and Australian -overn!ents, (hi"h (as si0ned in Manila on 9anuar# &', /%%' and (hi"h entered into or"e on De"e!ber :, /%%'. < < <. Arti"le & 1/2 o said treat# states that it applies to invest!ents (henever !ade and thus the a"t that H7MC*CsI .TAA (as entered into prior to the entr# into or"e o the treat# does not pre"lude the *hilippine -overn!ent ro! prote"tin0 H7MC*CsI invest!ent in HthatI .TAA. ,i)e(ise, Arti"le 6 1/2 o the treat# provides that AEa"h *art# shall en"oura0e and pro!ote invest!ents in its area b# investors o the other *art# and shall Had!itI su"h invest!ents in a""ordan"e (ith its Constitution, ,a(s, re0ulations and invest!ent poli"iesA and in Arti"le 6 1&2, it states that AEa"h *art# shall ensure that invest!ents are a""orded air and e;uitable treat!ent.A The latter stipulation indi"ates that it (as intended to i!pose an obli0ation upon a *art# to a ord air and e;uitable treat!ent to the invest!ents o the other *art# and that a ailure to provide su"h treat!ent b# or under the la(s o the *art# !a# "onstitute a brea"h o the treat#. Si!pl# stated, the *hilippines "ould not, under said treat#, rel# upon the inade;ua"ies o its o(n la(s to deprive an Australian investor 1li)e H7MC*I2 o air and e;uitable treat!ent b# invalidatin0 H7MC*CsI .TAA (ithout li)e(ise nulli #in0 the servi"e "ontra"ts entered into be ore the ena"t!ent o RA $%4& su"h as those !entioned in *D :$ or EO &$%. This be"o!es !ore si0ni i"ant in the li0ht o the a"t that H7MC*CsI .TAA (as e<e"uted not b# a !ere .ilipino "iti8en, but b# the *hilippine -overn!ent itsel , throu0h its *resident no less, (hi"h, in enterin0 into said treat# is assu!ed to be a(are o the e<istin0 *hilippine la(s on servi"e "ontra"ts over the e<ploration, develop!ent and utili8ation o natural resour"es. The e<e"ution o the .TAA b# the *hilippine -overn!ent assures the Australian -overn!ent that the .TAA is in a""ordan"e (ith e<istin0 *hilippine la(s. 655 HE!phasis and itali"s b# private respondents.I The invalidation o the sub>e"t .TAA, it is ar0ued, (ould "onstitute a brea"h o said treat# (hi"h, in turn, (ould a!ount to a violation o Se"tion 6, Arti"le II o the Constitution adoptin0 the 0enerall# a""epted prin"iples o international la( as part o the la( o the land. One o these 0enerall# a""epted prin"iples is pa"ta sunt servanda, (hi"h re;uires the per or!an"e in 0ood aith o treat# obli0ations. Even assu!in0 ar0uendo that 7MC* is "orre"t in its interpretation o the treat# and its assertion that Athe *hilippines "ould not . . . deprive an Australian investor 1li)e H7MC*I2 o air and e;uitable treat!ent b# invalidatin0 H7MC*CsI .TAA (ithout li)e(ise nulli #in0 the servi"e "ontra"ts entered into be ore the ena"t!ent o RA $%4& . . .,A the annul!ent o the .TAA (ould not "onstitute a brea"h o the treat# invo)ed. .or this de"ision herein invalidatin0 the sub>e"t .TAA or!s part o the le0al s#ste! o the *hilippines. 65/ The e;ual prote"tion "lause65& 0uarantees that su"h de"ision shall appl# to all "ontra"ts belon0in0 to the sa!e "lass, hen"e, upholdin0 rather than violatin0, the A air and e;uitable treat!entA stipulation in said treat#. One other !atter re;uires "lari i"ation. *etitioners "ontend that, "onsistent (ith the provisions o Se"tion &, Arti"le FII o the Constitution, the *resident !a# enter into a0ree!ents involvin0 Aeither te"hni"al or inan"ial assistan"eA onl#. The a0ree!ent in ;uestion, ho(ever, is a te"hni"al and inan"ial assistan"e a0ree!ent. *etitionersC "ontention does not lie. To adhere to the literal lan0ua0e o the Constitution (ould lead to absurd "onse;uen"es.656 As 7MC* "orre"tl# put itE < < < su"h a theor# o petitioners (ould "o!pel the 0overn!ent 1throu0h the *resident2 to enter into "ontra"t (ith t(o 1&2 orei0n4o(ned "orporations, one or inan"ial assistan"e a0ree!ent and (ith the other, or te"hni"al assistan"e over one and the sa!e !inin0 area or landG or to e<e"ute t(o 1&2 "ontra"ts (ith onl# one orei0n4o(ned

"orporation (hi"h has the "apabilit# to provide both inan"ial and te"hni"al assistan"e, one or inan"ial assistan"e and another or te"hni"al assistan"e, over the sa!e !inin0 area. Su"h an absurd result is de initel# not san"tioned under the "anons o "onstitutional "onstru"tion.654 H=nders"orin0 in the ori0inal.I Surel#, the ra!ers o the /%:$ Charter did not "onte!plate su"h an absurd result ro! their use o AeitherBor.A A "onstitution is not to be interpreted as de!andin0 the i!possible or the i!pra"ti"ableG and unreasonable or absurd "onse;uen"es, i possible, should be avoided. 65' Courts are not to 0ive (ords a !eanin0 that (ould lead to absurd or unreasonable "onse;uen"es and a literal interpretation is to be re>e"ted i it (ould be un>ust or lead to absurd results.653 That is a stron0 ar0u!ent a0ainst its adoption. 65$ A""ordin0l#, petitionersC interpretation !ust be re>e"ted. The ore0oin0 dis"ussion has rendered unne"essar# the resolution o the other issues raised b# the petition. 7+ERE.ORE, the petition is -RANTED. The Court hereb# de"lares un"onstitutional and voidE 1/2 The ollo(in0 provisions o Republi" A"t No. $%4&E 1a2 The proviso in Se"tion 6 1a;2, 1b2 Se"tion &6, 1"2 Se"tion 66 to 4/, 1d2 Se"tion '3, 1e2 The se"ond and third para0raphs o Se"tion :/, and 1 2 Se"tion %5. 1&2 All provisions o Depart!ent o Environ!ent and Natural Resour"es Ad!inistrative Order %3445, s. /%%3 (hi"h are not in "on or!it# (ith this De"ision, and 162 The .inan"ial and Te"hni"al Assistan"e A0ree!ent bet(een the -overn!ent o the Republi" o the *hilippines and 7MC *hilippines, In". SO ORDERED. Davide, 9r., C.9., *uno, Luisu!bin0, Carpio, Corona, Calle>o, Sr., and Tin0a. 99., "on"ur. @itu0, 9., see Separate Opinion. *an0aniban, 9., see Separate Opinion. Onares4Santia0o, Sandoval4-utierre8 and Austria4Martine8, 99., >oins 9., *an0anibanCs separate opinion. A8"una, no part, one o the parties (as a "lient.

+oo%no%"$

Appears as ANe;uitoA in the "aption o the *etition but ANe;uintoA in the bod#. 1Rollo, p. /&.2

&

As appears in the bod# o the *etition. 1Id., at /6.2 The "aption o the petition does not in"lude ,ouel A. *eria as one o the petitioners but the na!e o his ather Elpidio @. *eria appears therein.
6

Appears as ADaisahan Tun0o sa Daunlaran n0 Dana#unan at Repor!an0 *ansa)ahan 1DAISA+AN2A in the "aption o the *etition b# A*hilippine Daisahan Tun0o sa Daunlaran n0 Dana#unan at Repor!an0 *ansa)ahan 1DAISA+AN2A in the bod#. 1Id., at /4.2

Erroneousl# desi0nated in the *etition as A7estern Minin0 *hilippines Corporation.A 1Id., at &/&.2 Subse;uentl#, 7MC 1*hilippines2, In". (as rena!ed ATa!pa)an Mineral Resour"es Corporation.A 1Id., at $$:.2
'

An A"t Institutin0 A Ne( S#ste! o Mineral Resour"es E<ploration, Develop!ent, =tili8ation and Conservation.
3

Authori8in0 the Se"retar# o Environ!ent and Natural Resour"es to Ne0otiate and Con"lude 9oint @enture, Co4*rodu"tion, or *rodu"tion4Sharin0 A0ree!ents or the E<ploration, Develop!ent and =tili8ation o Mineral Resour"es, and *res"ribin0 the -uidelines or su"h A0ree!ents and those A0ree!ents involvin0 Te"hni"al or .inan"ial Assistan"e b# .orei0n4O(ned Corporations or ,ar0e4 S"ale E<ploration, Develop!ent and =tili8ation o Minerals.
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E<e". Order No. &$% 1/%:$2, se". 4. Rep. A"t No. $%4& 1/%%'2, se". /'. Id., se". &3 1a241"2. Id., se". &%. Id., se". 65. Id., se". 6/. Id., se". 6&. Id., "h. @I. Id., se"s. &$ and 66 in relation to se". 6 1a;2. Id., se". $&. Id., se". $6. Id., se". $'. Id., se". $4. Id., se". $3. Id., "h. FIII. Id., se"s. &54&&. Id., se"s. 46, 4'. Id., se"s. 4344%, '/4'&. Id., "h. IF. Id., "h. F. Id., "h. FI. Id., "h. FI@. Id., "h. F@.

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Id., "h. F@I. Id., "h. FIF. Id., "h. F@II.

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6&

66

Se"tion //3, R.A. No. $%4& provides that the A"t Ashall ta)e e e"t thirt# 1652 da#s ollo(in0 its "o!plete publi"ation in t(o 1&2 ne(spapers o 0eneral "ir"ulation in the *hilippines.A
64

7MC* .TAA, se". 4./. Rollo, p. &&. Ibid. Ibid.

6'

63

6$

6:

Ibid. The nu!ber has sin"e risen to /&% appli"ations (hen the petitioners iled their Repl#. 1Rollo, p. 636.2
6%

Id., at &&. Id., at &64&4. Id., at '&4'6. E!phasis and unders"orin0 supplied. 7MC* .TAA, p. &. Rollo, p. &&5. Id., at $'4. @ide Note 4. Rollo, p. $'4. Id., at $''. Id., at $3/4$36. Id., at $344$$3. Id., at $:&4$:3. Do")eted as C.A.4-. R. No. $4/3/.

45

4/

4&

46

44

4'

43

4$

4:

4%

'5

'/

'&

-.R. No. /'6::', entitled ,epanto Consolidated Minin0 Co!pan# v. 7MC Resour"es International *t#. ,td., et al., de"ided Septe!ber &4, &556 and -.R. No. /'3&/4, entitled ,epanto Minin0 Co!pan# v. 7MC Resour"es International *t#. ,td., 7MC 1*hilippines2, In"., South"ot Minin0 Corporation, Ta!pa)an Minin0 Corporation and Sa0ittarius Mines, In"., de"ided Septe!ber &6, &556.
'6

Se"tion /&, Rule 46 o the Rules o Court, invo)ed b# private respondent, states, A The appeal shall not sta# the a(ard, >ud0!ent, inal order or resolution sou0ht to be revie(ed unless the Court o Appeals shall dire"t other(ise upon su"h ter!s as it !a# dee! >ust.A
'4

7MC*Cs Repl# 1dated Ma# 3, &5562 to *etitionersC Co!!ent 1to the Mani estation and Supple!ental Mani estation2, p. 6.

''

Ibid. Ibid.

'3

'$

7MC*Cs Repl# 1dated Ma# 3, &5562 to *etitionersC Co!!ent 1to the Mani estation and Supple!ental Mani estation2, p. 4.
':

*hilippine Constitution Asso"iation v. Enri;ue8, &6' SCRA '53 1/%%42G National E"ono!i" *rote"tionis! Asso"iation v. On0pin, /$/ SCRA 3'$ 1/%:%2G Du!lao v. COME,EC, %' SCRA 6%& 1/%:52.
'%

Du!lao v. COME,EC, supra. Board o Opto!etr# v. Colet, &35 SCRA :: 1/%%32. Du!lao v. COME,EC, supra. Subi" Ba# Metropolitan Authorit# v. Co!!ission on Ele"tions, &3& SCRA 4%& 1/%%32. An0ara v. Ele"toral Co!!ission, 36 *hil. /6% 1/%632.

35

3/

3&

36

34

Inte0rated Bar o the *hilippines v. Ua!ora, 66: SCRA :/, /55 1&5552G Du!lao v. COME,EC, supraG *eople v. @era, 3' *hil. '3 1/%6$2.
3'

Du!lao v. COME,EC, supra. Inte0rated Bar o the *hilippines v. Ua!ora, supra.

33

3$

Er!ita4Malate +otel and Motel Operators Asso"iation, In". v. Cit# Ma#or o ManilaV &/ SCRA 44% 1/%3$2.
3:

*etitioners Roberto *. A!lo#, Ra;i! ,. Dabie, Si!eon +. Dolo>o, I!elda -andon, ,en# B. -usanan, Mar"elo ,. -usanan, Luintol A. ,abua#an, ,o!in00es ,a(a#, and Benita *. Ta"ua#an.
3%

*etitioners .Clon0 A0utin M. Dabie, Mario ,. Man0"al, Alden S. Tusan, Sr. Susuan O. Bolanio, OND, ,olita -. De!onteverde, Ben>ie ,. Ne;uinto, Rose ,ilia S. Ro!ano and A!paro S. Oap.
$5

Rollo, p. 3. Id. at 66$, "itin0 Malabanan v. -a( Chin0, /:/ SCRA :4 1/%%52. &43 SCRA '45 1/%%'2. *eople v. @era, supra. Militante v. Court o Appeals, 665 SCRA 6/: 1&5552. Ibid.

$/

$&

$6

$4

$'

$3

Cru8 v. Se"retar# o Environ!ent and Natural Resour"es, 64$ SCRA /&: 1&5552, Dapunan, 9., Separate Opinion. HE!phasis supplied.I
$$

9o#a v. *residential Co!!ission on -ood -overn!ent, &&' SCRA '3: 1/%%62. Inte0rated Bar o the *hilippines v. Ua!ora, supra. 9. Bernas, S.9., The /%:$ Constitution o the *hilippinesE A Co!!entar# /55% 1/%%32.

$:

$%

:5

Cru8 v. Se"retar# o Environ!ent and Natural Resour"es, supra, Dapunan, 9., Separate Opinion. Id., *uno, 9., Separate Opinion, and *an0aniban, 9., Separate Opinion.

:/

:&

CariPo v. Insular -overn!ent, &/& =S 44%, '6 ,.Ed. '%' 1/%5%2. .or instan"e, ,a( /4, Title /&, Boo) 4 o the Re"opila"ion de ,e#es de las Indias pro"lai!edE 7e havin0 a";uired ull soverei0nt# over the Indies, and all lands, territories, and possessions not hereto ore "eded a(a# b# our ro#al prede"essors, or b# us, or in our na!e, still pertainin0 to the ro#al "ro(n and patri!on#, it is our (ill that all lands (hi"h are held (ithout proper and true deeds o 0rant be restored to us a""ordin0 as the# belon0 to us, in order that a ter reservin0 be ore all (hat to us or to our vi"ero#s, audien"ias, and 0overnors !a# see! ne"essar# or publi" s;uares, (a#s, pastures, and "o!!ons in those pla"es (hi"h are peopled, ta)in0 into "onsideration not onl# their present "ondition, but also their uture and their probable in"rease, and a ter distributin0 to the natives (hat !a# be ne"essar# or tilla0e and pastura0e, "on ir!in0 the! in (hat the# no( have and 0ivin0 the! !ore i ne"essar#, all the rest o said lands !a# re!ain ree and unen"u!bered or us to dispose o as (e !a# (ish.
:6

Republi" v. Court o Appeals, /35 SCRA &&: 1/%::2. It has been noted, ho(ever, that Athe prohibition in the H/%6'I Constitution a0ainst alienation b# the state o !ineral lands and !inerals is not properl# a part o the Re0alian do"trine but a separate national poli"# desi0ned to "onserve our !ineral resour"es and prevent the state ro! bein0 deprived o su"h !inerals as are essential to national de ense.A 1A. Noble>as, *hilippine ,a( on Natural Resour"es /&34/&$ H/%'% ed.I, "itin0 @. .ran"is"o, The Ne( Minin0 ,a(.2
:4

Cru8 v. Se"retar# o Environ!ent and Natural Resour"es, supra, Dapunan, 9., Separate Opinion, "itin0 A. Noble>as, *hilippine ,a( on Natural Resour"es 3 1/%3/2. Noble>as "ontinuesE Thus, the# asserted their ri0ht o o(nership over !ines and !inerals or pre"ious !etals, 0olds, and silver as distin"t ro! the ri0ht o o(nership o the land in (hi"h the !inerals (ere ound. Thus, (hen on a pie"e o land !inin0 (as !ore valuable than a0ri"ulture, the soverei0n retained o(nership o !ines althou0h the land has been alienated to private o(nership. -raduall#, the ri0ht to the o(nership o !inerals (as e<tended to base !etals. I the soverei0n did not e<ploit the !inerals, the# 0rant or sell it as a ri0ht separate ro! the land. 1Id., at 3.2
:'

In the unpublished "ase o ,a(ren"e v. -arduPo 1,4/5%4&, ;uoted in @. .ran"is"o, *hilippine ,a( on Natural Resour"es /44/' H/%'3I2, this Court observedE The prin"iple underl#in0 Spanish le0islation on !ines is that these are sub>e"t to the e!inent do!ain o the state. The Spanish la( o 9ul# $, /:3$, a!ended b# the la( o Mar"h 4, /:3:, in arti"le & sa#sE AThe o(nership o the substan"es enu!erated in the pre"edin0 arti"le 1a!on0 the! those o in la!!able nature2, belon0HsI to the state, and the# "annot be disposed o (ithout the 0overn!ent authorit#.A The irst Spanish !inin0 la( pro!ul0ated or these Islands 1De"ree o Superior Civil -overn!ent o 9anuar# &:, /:342, in its Arti"le I, sa#sE AThe supre!e o(nership o !ines throu0hout the )in0do! belon0HsI to the "ro(n and to the )in0. The# shall not be e<ploited e<"ept b# persons (ho obtained spe"ial 0rant ro! this superior 0overn!ent and b# those (ho !a# se"ure it therea ter, sub>e"t to this re0ulation.A Arti"le & o the ro#al de"ree on o(nership o !ines in the *hilippine Islands, dated Ma# /4, /:3$, (hi"h (as the la( in or"e at the ti!e o the "ession o these Islands to the -overn!ent o the =nited States, sa#sE AThe o(nership o the substan"es enu!erated in the pre"edin0 arti"le 1a!on0 the! those o in la!!able nature2 belon0s to the state, and the# "annot be disposed o (ithout an authori8ation issued b# the Superior Civil -overnor.A .urther!ore, all those la(s "ontained provisions re0ulatin0 the !anner o prospe"tin0, lo"atin0 and e<plorin0 !ines in private propert# b# persons other than the o(ner o the land as (ell as the 0rantin0 o "on"essions, (hi"h 0oes to sho( that private o(nership o the land did not in"lude, (ithout e<press 0rant, the !ines that !i0ht be ound therein. Analo0ous provisions are ound in the Civil Code o Spain deter!inin0 the o(nership o !ines. In its Arti"le 66% 1Arti"le 4&5, Ne( Civil Code2 enu!eratin0 properties o publi"

o(nership, the !ines are in"luded, until spe"iall# 0ranted to private individuals. In its arti"le 6'5 1Art. 46$, Ne( Civil Code2 de"larin0 that the proprietor o an# par"el o land is the o(ner o its sur a"e and o ever#thin0 under it, an e<"eption is !ade as ar as !inin0 la(s are "on"erned. Then in spea)in0 o !inerals, the Code in its arti"les 4&3 and 4&$ 1Art. '/%, Ne( Civil Code2 provides rules 0overnin0 the di00in0 o pits b# third persons on private4o(ned lands or the purpose o prospe"tin0 or !inerals.
:3

Ato) Bi047ed0e Minin0 Co. v. Inter!ediate Appellate Court, &3/ SCRA '&: 1/%%32. Ibid. Cru8 v. Se"retar# o Environ!ent and Natural Resour"es, supra, Dapunan, 9., Separate Opinion. Ibid. M"Daniel v. Apa"ible and Cuisia, 4& *hil. $4% 1/%&&2. Noble>as, supra, at '. @. M. A. Di!a0iba, Servi"e Contra"t Con"epts in Ener0#, '$ *hil. ,. 9. 65$, 6/6 1/%:&2.

:$

::

:%

%5

%/

%&

%6

*. A. A0abin, Servi"e Contra"tsE Old 7ine in Ne( BottlesQ, in II Dra t *roposal o the /%:3 =.*. ,a( Constitution *ro>e"t 6.
%4

Id., at &46. Id., at 6. Ibid. Ibid. Ibid.

%'

%3

%$

%:

%%

An A"t to *rovide or the E<ploration, ,o"ation and ,ease o ,ands Containin0 *etroleu! and other Mineral Oils and -as in the *hilippine Islands.
/55

An A"t to *rovide or the ,easin0 and Develop!ent o Coal ,ands in the *hilippine Islands. A0abin, supra, at 6. *eople v. ,insan0an, 3& *hil. 343 1/%6'2. Ibid. Ibid. Ibid. Ibid. Ato) Bi047ed0e Minin0 Co. v. Inter!ediate Appellate Court, supra. Bernas, S.9., supra, at /55%4/5/5, "itin0 ,ee +on0 +o) v. David, 4: SCRA 6$& 1/%$&2. II 9. Arue0o, The .ra!in0 o the *hilippine Constitution '%& 1/%4%2. Id., at 355435/.

/5/

/5&

/56

/54

/5'

/53

/5$

/5:

/5%

//5

///

Id., at 354. Dele0ate Arue0o e<poundsE At the ti!e o the ra!in0 o the *hilippine Constitution, .ilipino "apital had been )no(n to be rather sh#. .ilipinos hesitated as a 0eneral rule to invest a "onsiderable su! o their "apital or the develop!ent, e<ploitation, and utili8ation o the natural resour"es o the "ountr#. The# had not as #et been so used to "orporate enterprises as the peoples o the 7est. This 0eneral apath#, the dele0ates )ne(, (ould !ean the retardation o the develop!ent o the natural resour"es, unless orei0n "apital (ould be en"oura0ed to "o!e in and help in that develop!ent. The# )ne( that the nationali8ation o the natural resour"es (ould "ertainl# not en"oura0e the invest!ent o orei0n "apital into the!. But there (as a 0eneral eelin0 in the Convention that it (as better to have su"h develop!ent retarded or even postponed alto0ether until su"h ti!e (hen the .ilipinos (ould be read# and (illin0 to underta)e it rather than per!it the natural resour"es to be pla"ed under the o(nership or "ontrol o orei0ners in order that the# !i0ht be i!!ediatel# developed, (ith the .ilipinos o the uture servin0 not as o(ners but at !ost as tenants or (or)ers under orei0n !asters. B# all !eans, the dele0ates believed, the natural resour"es should be "onserved or .ilipino posterit#. The nationali8ation o natural resour"es (as also intended as an instru!ent o national de ense. The Convention elt that to per!it orei0ner to o(n or "ontrol the natural resour"es (ould be to (ea)en the national de ense. It (ould be !a)in0 possible the 0radual e<tension o orei0n in luen"e into our politi"s, thereb# in"reasin0 the possibilit# o orei0n "ontrol. < < <. Not onl# these. The nationali8ation o the natural resour"es, it (as believed, (ould prevent !a)in0 the *hilippines a sour"e o international "on li"ts (ith the "onse;uent dan0er to its internal se"urit# and independen"e. .or unless the natural resour"es (ere nationali8ed, (ith the nationals o orei0n "ountries havin0 the opportunit# to o(n or "ontrol the!, "on li"ts o interest a!on0 the! !i0ht arise invitin0 dan0er to the sa et# and independen"e o the nation. 1Id., at 35'4353.2

//&

*altin0 v. San 9ose *etroleu! In"., /: SCRA %&4 1/%332G Republi" v. Luasha, 43 SCRA /35 1/%$&2. Ato) Bi047ed0e Minin0 Co. v. Inter!ediate Appellate Court, supra. Arti"le @I thereo providedE /. The disposition, e<ploitation, develop!ent and utili8ation o all a0ri"ultural, ti!ber, and !ineral lands o the publi" do!ain, (aters, !inerals, "oal, petroleu! and other !ineral oils, all or"es and sour"es o potential ener0#, and other natural resour"es o either *art#, and the operation o publi" utilities, shall, i open to an# person, be open to "iti8ens o the other *art# and to all or!s o business enterprise o(ned or "ontrolled dire"tl# or indire"tl#, b# "iti8ens o su"h other *art# in the sa!e !anner as to and under the sa!e "onditions i!posed upon "iti8ens or "orporations or asso"iations o(ned or "ontrolled b# "iti8ens o the *art# 0rantin0 the ri0ht. &. The ri0hts provided or in *ara0raph / !a# be e<er"ised < < < in the "ase o "iti8ens o the =nited States, (ith respe"t to natural resour"es in the publi" do!ain in the *hilippines, onl# throu0h the !ediu! o a "orporation or0ani8ed under the la(s o the *hilippines and at least 35J o the "apital sto") o (hi"h is o(ned or "ontrolled b# "iti8ens o the =nited States < < <. 6. The =nited States o A!eri"a reserves the ri0hts o the several States o the =nited States to li!it the e<tent to (hi"h "iti8ens or "orporations or asso"iations o(ned or "ontrolled b# "iti8ens o the *hilippines !a# en0a0e in the a"tivities spe"i ied in this Arti"le. The Republi" o the *hilippines reserves the po(er to den# an# o the ri0hts spe"i ied in this Arti"le to "iti8ens o the =nited States (ho are "iti8ens o States, or to "orporations or asso"iations at least 35J o (hose "apital sto") or "apital is o(ned or "ontrolled b# "iti8ens o States, (hi"h den# li)e ri0hts to "iti8ens o the *hilippines, or to "orporations or asso"iations (hi"h ore o(ned or "ontrolled b# "iti8ens o the *hilippines < < <.

//6

//4

//'

An A"t to *ro!ote the E<ploration, Develop!ent, E<ploitation, and =tili8ation o the *etroleu! Resour"es o the *hilippinesG to En"oura0e the Conservation o su"h *etroleu! Resour"esG to Authori8e the Se"retar# o A0ri"ulture and Natural Resour"es to Create an Ad!inistration =nit and a Te"hni"al Board in the Bureau o MinesG to Appropriate .unds there orG and or other purposes.

//3

Rep. A"t No. 6:$ 1/%4%2, as a!ended, art. /5 1b2. Id., art. /5 1"2. Id., art. '.

//$

//:

//%

Id., art. 6/. The sa!e provision re"o0ni8ed the ri0hts o A!eri"an "iti8ens under the *arit# A!end!entE Durin0 the e e"tivit# and sub>e"t to the provisions o the ordinan"e appended to the Constitution o the *hilippines, "iti8ens o the =nited States and all or!s o business enterprises o(ned and "ontrolled, dire"tl# or indire"tl#, b# "iti8ens o the =nited States shall en>o# the sa!e ri0hts and obli0ations under the provisions o this A"t in the sa!e !anner as to, and under the sa!e "onditions i!posed upon, "iti8ens o the *hilippines or "orporations or asso"iations o(ned or "ontrolled b# "iti8ens o the *hilippines.
/&5

Id., art. /5. Id., art. 6. Id., art. %. Ibid. Rep. A"t No. 6:$ 1/%4%2, as a!ended, art. :. Id., art. &'. Id., art. 4$. Id., art. 35.

/&/

/&&

/&6

/&4

/&'

/&3

/&$

/&:

Id., art. 34. Arti"le 4%, R.A. No. 6:$ ori0inall# i!posed an annual e<ploration ta< on e<ploration "on"essionaires but this provision (as repealed b# Se"tion /, R.A. No. 4654.
/&%

.ran"is"o, supra, at /56. Rep. A"t No. 6:$ 1/%4%2, as a!ended, art. 3'. .ran"is"o, supra, at /56. Rep. A"t No. 6:$ 1/%4%2, as a!ended, art. %5 1b2 6. Id., art. %5 1b2 4. Id., art. %64A. Id., art. %6. Ibid. Rep. A"t No. 6:$ 1/%4%2, as a!ended, art. %4. Id., art. /53. Id., art. %'. Ibid.

/65

/6/

/6&

/66

/64

/6'

/63

/6$

/6:

/6%

/45

/4/

Rep. A"t No. 6:$ 1/%4%2, as a!ended, art. %' 1e2.

/4&

Di!a0iba, supra, at 6/', "itin0 .abri)ant, Oil Dis"over# and Te"hni"al Chan0e in Southeast Asia, ,e0al Aspe"ts o *rodu"tion Sharin0 Contra"ts in the Indonesian *etroleu! Industr#, /5/4/5&, se"tions /6C.&4 and /6C.&' 1/%$&2.
/46

A0abin, supra, at 4. Di!a0iba, supra, at 6/:.

/44

/4'

A!endin0 *residential De"ree No. : issued on O"tober &, /%$&, and *ro!ul0atin0 an A!ended A"t to *ro!ote the Dis"over# and *rodu"tion o Indi0enous *etroleu! and Appropriate .unds There or.
/43

*res. De"ree No. :$ 1/%$&2, se". 4. A0abin, supra, at 3. M. Ma0allona, Servi"e Contra"ts in *hilippine Natural Resour"es, % 7orld Bull. /, 4 1/%%62. *res. De"ree No. :$ 1/%$&2, se". 3. Id., se". 4. Id., se". 3. Id., se". $. Id., se". :. Ibid. Ibid. *res. De"ree No. :$ 1/%$&2, se". %. Id., se". /&. Id., se". /6.

/4$

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/'5

/'/

/'&

/'6

/'4

/''

/'3

/'$

/':

/'%

Di!a0iba dra(s the ollo(in0 "o!parison bet(een the servi"e "ontra"t s"he!e and the "on"ession s#ste!E In both the "on"ession s#ste! and the servi"e "ontra"t s"he!e, (or) and inan"ial obli0ations are re;uired o the developer. =nder Republi" A"t No. 6:$ and *residential De"ree No. :$, the "on"essionaire and the servi"e "ontra"tors are e<tra"ted "ertain ta<es in avor o the 0overn!ent. In both arran0e!ents, the e<plorationistBdeveloper is 0iven in"entives in the or! o ta< e<e!ptions in the i!portation or disposition o !a"hiner#, e;uip!ent, !aterials and spare parts needed in petroleu! operations. The "on"essionaire and the servi"e "ontra"tor are re;uired to )eep in their iles valuable data and in or!ation and !a# be re;uired to sub!it need te"hnolo0i"al or a""ountin0 reports to the -overn!ent. Dul# authori8ed representatives o the -overn!ent "ould, under the la(, inspe"t or audit the boo)s o a""ounts o the "ontra"t holder. In both s#ste!s, si0nature, dis"over# or produ"tion bonuses !a# be 0iven b# the developer to the host -overn!ent. The "on"ession s#ste!, ho(ever, di ers "onsiderabl# ro! the servi"e "ontra"t s#ste! in i!portant areas o the operations. In the "on"ession s#ste!, the -overn!ent !erel# re"eives

i<ed ro#alt# (hi"h is a "ertain per"enta0e o the "rude oil produ"ed or other units o !easure, re0ardless o (hether the "on"ession holder !a)es pro its or not. This is not so in the servi"e "ontra"t s#ste!. A "ertain per"enta0e o the 0ross produ"tion is set aside or re"overable e<penditures b# the "ontra"tor. O the net pro"eeds the parties are entitled per"enta0es o share that (ill a""rue to ea"h o the!. In the ro#alt# s#ste!, the "on"essionaire !a# be dis"oura0ed to produ"e !ore or the reason that sin"e the ro#alt# paid to the host "ountr# is "losel# lin)ed to the volu!e o produ"tion, the 0reater the produ"e, the !ore a!ount or ro#alt# (ould be allo"ated to the -overn!ent. This is not so in the produ"tion sharin0 s#ste!. The share o the -overn!ent depends lar0el# on the net pro"eeds o produ"tion a ter rei!bursin0 the servi"e "ontra"tor o its re"overable e<penses. As a 0eneral rule, the -overn!ent pla#s a passive role in the "on"ession s#ste!, !ore parti"ularl#, interested in re"eivin0 ro#alties ro! the "on"essionaire. In the produ"tion4 sharin0 arran0e!ent, the -overn!ent pla#s a !ore a"tive role in the !ana0e!ent and !onitorin0 o oil operations and re;uires the servi"e "ontra"tor entertain obli0ations desi0ned to brin0 !ore e"ono!i" and te"hnolo0i"al bene its to the host "ountr#. 1Di!a0iba, supra, at 665466/.2
/35

A0abin, supra, at 3.

/3/

The ante"edents leadin0 to the *ro"la!ation are narrated in 9avellana v. E<e"utive Se"retar#, '5 SCRA '' 1/%$62E On Mar"h /3, /%3$, Con0ress o the *hilippines passed Resolution No. &, (hi"h (as a!ended b# Resolution No. 4, o said bod#, adopted on 9une /$, /%3%, "allin0 a "onvention to propose a!end!ents to the Constitution o the *hilippines. Said Resolution No. &, as a!ended, (as i!ple!ented b# Republi" A"t No. 3/6& approved on Au0ust &4, /%$5, pursuant to the provisions o (hi"h the ele"tion o dele0ates to said "onvention (as held on Nove!ber /5, /%$5, and the /%$/ Convention be0an to per or! its un"tions on 9une /, /%$/. 7hile the Convention (as in session on Septe!ber &/, /%$&, the *resident issued *ro"la!ation No. /5:/ pla"in0 the entire *hilippines under Martial ,a(. On Nove!ber &%, /%$&, the *resident o the *hilippines issued *residential De"ree No. $6, sub!ittin0 to the .ilipino people or rati i"ation or re>e"tion the Constitution o the Republi" o the *hilippines proposed b# the /%$/ Constitutional Convention, and appropriatin0 unds there or, as (ell as settin0 the plebis"ite or su"h rati i"ation on 9anuar# /', /%$6. On 9anuar# /$, /%$6, the *resident issued *ro"la!ation No. //5& "erti #in0 and pro"lai!in0 that the Constitution proposed b# the /%$/ Constitutional Convention Ahas been rati ied b# an over(hel!in0 !a>orit# o all the votes "ast b# the !e!bers o all the Baran0a#s 1Citi8ens Asse!blies2 throu0hout the *hilippines, and has thereb# "o!e into e e"t.A
/3&

Bernas, S.9., supra, at /5/3, Note &:, "itin0 Session o Nove!ber &', /%$&.

/36

A0abin, supra, at /, ;uotin0 Sanvi"tores, The E"ono!i" *rovisions in the /%$6 Constitution, in Espiritu, /%$% *hil"onsa Reader on Constitutional and *oli"# Issues 44%.
/34

Bernas, S.9., supra, at /5/3, Note &:, "itin0 Session o Nove!ber &', /%$&. Ibid. Ibid.

/3'

/33

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Allo(in0 Citi8ens o the *hilippines or Corporations or Asso"iations at least Si<t# *er Centu! o the Capital o (hi"h is O(ned b# su"h Citi8ens to Enter into Servi"e Contra"ts (ith .orei0n *ersons, Corporations or the E<ploration, Develop!ent, E<ploitation or =tili8ation o ,ands o the *ubli" Do!ain, A!endin0 or the purpose "ertain provisions o Co!!on(ealth A"t No. /4/.
/3:

*res. De"ree No. /'/ 1/%$62, se". /.

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*rovidin0 or A Moderni8ed S#ste! o Ad!inistration and Disposition o Mineral ,ands and to *ro!ote and En"oura0e the Develop!ent and E<ploitation thereo .

/$5

Revisin0 and Consolidatin0 All ,a(s and De"rees A e"tin0 .ishin0 and .isheries. *res. De"ree No. $54 1/%$'2, se". &/.

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Revisin0 *residential De"ree No. 6:%, other(ise )no(n as The .orestr# Re or! Code o the *hilippines.
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*res. De"ree No. $5' 1/%$'2, se". 3&. An A"t to *ro!ote the E<ploration and Develop!ent o -eother!al Resour"es. Ma0allona, supra, at 3.

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De"larin0 a National *oli"# to I!ple!ent the Re or!s Mandated b# the *eople, *rote"tin0 their Basi" Ri0hts, Adoptin0 a *rovisional Constitution, and *rovidin0 or an Orderl# Transition to a -overn!ent under a Ne( Constitution.
/$$

Const., art. F@III, se". &$G De ,eon v. Es0uerra, /'6 SCRA 35& 1/%:$2. Miners Asso"iation o the *hilippines, In". v. .a"toran, 9r., &45 SCRA /55 1/%%'2. Ibid. Ibid. 9. Bernas, S.9., The Intent o the /%:3 Constitution 7riters :/& 1/%%'2. Miners Asso"iation o the *hilippines, In". v. .a"toran, 9r., supra. III Re"ords o the Constitutional Co!!ission &''. Id., at 6''46'3. Const. 1/%:32, art. II, se". /. Cru8 v. Se"retar# o Environ!ent and Natural Resour"es, supra, *uno, 9., Separate Opinion. Rep. A"t No. $%4& 1/%%'2, se". %.

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SEC. :&. Allo"ation o -overn!ent Share.SThe -overn!ent share as re erred to in the pre"edin0 se"tions shall be shared and allo"ated in a""ordan"e (ith Se"tions &%5 and &%& o Republi" A"t No. $/35 other(ise )no(n as the ,o"al -overn!ent Code o /%%/. In "ase the develop!ent and utili8ation o !ineral resour"es is underta)en b# a 0overn!ent4o(ned or 4"ontrolled "orporation, the sharin0 and allo"ation shall be in a""ordan"e (ith Se"tions &%/ and &%& o the said Code.
/:%

An A"t Creatin0 A *eopleCs S!all4S"ale Minin0 *ro0ra! and or other purposes. Rep. A"t No. $%4& 1/%%'2, se". 4&. Id., se"s. 6 1ab2 and &3.

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AContra"torA !eans a ;uali ied person a"tin0 alone or in "onsortiu! (ho is a part# to a !ineral a0ree!ent or to a inan"ial or te"hni"al assistan"e a0ree!ent. 1Id., se". 6H0I.2
/%6

AContra"t areaA !eans land or bod# (ater delineated or purposes o e<ploration, develop!ent, or utili8ation o the !inerals ound therein. 1Id., se". 6H I.2

/%4

A-ross outputA !eans the a"tual !ar)et value o !inerals or !ineral produ"ts ro! its !inin0 area as de ined in the National Internal Revenue Code 1Id., se". 6HvI2.
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Id., se". &3 1a2.

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An A"t Redu"in0 E<"ise Ta< Rates on Metalli" and Non4Metalli" Minerals and Luarr# Resour"es, a!endin0 or the purpose Se"tion /'/ 1a2 o the National Internal Revenue Code, as a!ended.
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Rep. A"t No. $%4& 1/%%'2, se". 1:52. Id., Se". &3 1b2.

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AMineral resour"eA !eans an# "on"entration o !ineralsBro")s (ith potential e"ono!i" value. 1Id., se". 6HadI.2
&55

Id., se". &3 1"2. Ibid. Id., se". 6 1h2. Id., se". 6 1<2. Id., se". &3, last par. Id., se". &$. Id., se". 6 1a;2. Id., se". 6 1r2. Id., se". 66. Id., se". 6 1t2. Id., se". 6 1a;2. The !a<i!u! areas in "ases o !ineral a0ree!ents are pres"ribed in Se"tion &: as ollo(sE SEC. &:. Ma<i!u! Areas or Mineral A0ree!ent. M The !a<i!u! area that a ;uali ied person !a# hold at an# ti!e under a !ineral a0ree!ent shall beE 1a2 Onshore, in an# one provin"e M 1/2 .or individuals, ten 1/52 blo")sG and 1&2 .or partnerships, "ooperatives, asso"iations, or "orporations, one hundred 1/552 blo")s. 1b2 Onshore, in the entire *hilippines M 1/2 .or individuals, t(ent# 1&52 blo")sG and 1&2 .or partnerships, "ooperatives, asso"iations, or "orporations, t(o hundred 1&552 blo")s. 1"2 O shore, in the entire *hilippines M

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1/2 .or individuals, i t# 1'52 blo")sG 1&2 .or partnerships, "ooperatives, asso"iations, or "orporations, ive hundred 1'552 blo")sG and 162 .or the e<"lusive e"ono!i" area, a lar0er area to be deter!ined b# the Se"retar#. The !a<i!u! areas !entioned above that a "ontra"tor !a# hold under a !ineral a0ree!ent shall not in"lude !inin0B;uarr# areas under operatin0 a0ree!ents bet(een the "ontra"tor and a "lai!o(nerBlesseeBper!itteeBli"ensee entered into under *residential De"ree No. 436. On the other hand, Se"tion 64, (hi"h 0overns the !a<i!u! area or .TAAs providesE SEC. 64. Ma<i!u! Contra"t Area. M The !a<i!u! "ontra"t area that !a# be 0ranted per ;uali ied person, sub>e"t to relin;uish!ent shall beE 1a2 /,555 !eridional blo")s onshoreG 1b2 4,555 !eridional blo")s o shoreG or 1"2 Co!binations o 1a2 and 1b2 provided that it shall not e<"eed the !a<i!u! li!its or onshore and o shore areas.
&/&

Id., se". 66. Id., se". :/. Dapatiran v. Tan, /36 SCRA 6$/ 1/%::2.

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*rovidin0 or the *ubli"ation o ,a(s either in the O i"ial -a8ette or in a Ne(spaper o -eneral Cir"ulation in the *hilippines as a Re;uire!ent or their E e"tivit#.
&/3

Se"tion /, E.O. No. &55 (as subse;uentl# in"orporated in the Ad!inistrative Code o /%:$ 1E<e"utive Order No. &%& as Se"tion /:, Chapter ' 1Operation and E e"t o ,a(s2, Boo) / 1Soverei0nt# and -eneral Ad!inistration2.
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/63 SCRA &$ 1/%:'2. Manila *rin"e +otel v. -overn!ent Servi"e Insuran"e S#ste!, &3$ SCRA 45: 1/%%$2. Const., art. 6, se". /. :6 O.-. 1Suppl.2 6'&:4//' to 6'&:4//$ 1Au0ust /%:$2. Miners Asso"iation o the *hilippines, In". v. .a"toran, 9r., supra. *etitioners note in their Me!orandu! that the .TAAE < < < 0uarantees that (holl# orei0n o(ned H7MC*I entered into the .TAA in order to a"ilitate Athe lar0e s"ale e<ploration, develop!ent and "o!!er"ial e<ploitation o !ineral deposits that !a# be ound to e<ist (ithin the Contra"t area.A HSe"tion /./I As a "ontra"tor it also has the Ae<"lusive ri0ht to e<plore, e<ploit, utili8e, pro"ess and dispose o all !ineral produ"ts and b#4produ"ts thereo that !a# be derived or produ"ed ro! the Contra"t Area.A HSe"tion /.6I Thus, it is divided into an Ae<ploration and easibilit# phaseA HSe"tion 6.& 1a2I and a A"onstru"tion, develop!ent and produ"tion phase.A HSe"tion 6. & 1b2.I Thus, it is this (holl# orei0n o(ned "orporation that, a!on0 other thin0sE

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1a2 operates (ithin a pres"ribed "ontra"t area HSe"tion 4I, 1b2 opts to appl# or a Minin0 *rodu"tion Sharin0 A0ree!ent HSe"tion 4.&I, 1"2 relin;uishes "ontrol over portions thereo at their o(n "hoi"e HSe"tion 4.3I, 1d2 sub!its (or) pro0ra!s, in"urs e<penditures, and !a)es reports durin0 the e<ploration period HSe"tion 'I, 1e2 sub!its a De"laration o Minin0 .easibilit# HSe"tions '.4 and '.'I, 1 2 durin0 the develop!ent period, deter!ines the ti!etable, sub!its (or) pro0ra!s, provides the reports and deter!ines and e<e"utes e<pansions, !odi i"ations, i!prove!ents and repla"e!ents o ne( !inin0 a"ilities (ithin the area HSe"tion 3I, 102 "o!plies (ith the "onditions or environ!ental prote"tion and industrial sa et#, posts the ne"essar# bonds and !a)es representations and (arranties to the 0overn!ent HSe"tion /5.'I. The "ontra"t subsists or an initial ter! o t(ent#4 ive 1&'2 #ears ro! the date o its e e"tivit# HSe"tion 6./I and rene(able or a urther period o t(ent#4 ive #ears under the sa!e ter!s and "onditions upon appli"ation b# private respondent HSe"tion 6.6I. 1Rollo, pp. 4':44'%.2
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+. C. Bla"), +andboo) on the Constru"tion and Interpretation o the ,a(s W :. Ibid. 9. M. Tuason K Co., In". v. ,and Tenure Asso"iation, 6/ SCRA 4/6 1/%$52. Rollo, p. ':5. Ibid. E!phasis supplied.

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*eople v. Manantan, //' *hil. 3'$ 1/%3&2G Co!!ission on Audit o the *rovin"e o Cebu v. *rovin"e o Cebu, 6$/ SCRA /%3 1&55/2.
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Rollo, p. '3%. III Re"ord o the Constitutional Co!!ission 6'/46'&. @ Re"ord o the Constitutional Co!!ission :44. Id., at :4/. Id., at :4&. Id. at :44.

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@ide Chere# v. ,on0 Bea"h, &:& NO 6:&, &3 NE &d %4', /&$ A,R /&/5 1/%452, "ited in /3 A! 9ur &d Constitutional ,a( W$%.
&63

Civil ,iberties =nion v. E<e"utive Se"retar#, /%4 SCRA 6/$, 6&' 1/%%/2. III Re"ord o the Constitutional Co!!ission &$:. Id., at 6/346/$. III Re"ord o the Constitutional Co!!ission 6':46'%.

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&45

@era v. Avelino, $$ *hil. /%& 1/%432. 9. Nolledo, The Ne( Constitution o the *hilippines Annotated %&44%&3 1/%%52. Resolution to In"orporate in the Ne( Constitution an Arti"le on National E"ono!# and *atri!on#.

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&46

The Chair o the Co!!ittee on National E"ono!# and *atri!on#, alluded to it in the dis"ussion on the "apitali8ation re;uire!entE MR. @I,,E-AS. 7e >ust had a lon0 dis"ussion (ith the !e!bers o the tea! ro! the =* ,a( Center (ho provided us a dra t. The phrase that is "ontained here (hi"h (e adopted ro! the =* dra t is A35 per"ent o votin0 sto").A 1III Re"ord o the Constitutional Co!!ission &''.2 ,i)e(ise, in e<plainin0 the reasons or the deletion o the ter! Ae<ploitationAE MR. @I,,E-AS. Mada! *resident, ollo(in0 the re"o!!endation in the =* dra t, (e o!itted Ae<ploitationA irst o all be"ause it is believed to be subsu!ed under Adevelop!entA and se"ondl# be"ause it has a dero0ator# "onnotation. 1Id., at 6':.2
&44

Id., at /&. Id., at /'4/3.

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M. Ma0allona, Nationalis! and Its Subversion in the Constitution ', in II Dra t *roposal o the /%:3 =.*. ,a( Constitution *ro>e"t.
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A0abin, supra, at /3.

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E. ,abita0, *hilippine Natural Resour"esE So!e *roble!s and *erspe"tives /$ in II Dra t *roposal o the /%:3 =.*. ,a( Constitution *ro>e"t.
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I Dra t *roposal o the /%:3 =.*. ,a( Constitution *ro>e"t //4/6. Id., at %4//. *ro essor ,abita0 also su00ests thatE < < <. The "on"ession re0i!e o natural resour"es disposition should be dis"ontinued. Instead the State shall enter into su"h arran0e!ents and a0ree!ents li)e "o4produ"tion, >oint ventures, et". as shall brin0 about e e"tive "ontrol and a lar0er share in the pro"eeds, harvest or produ"tion. 1,abita0, supra, at /$.2

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@ide Note /4$.

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@ide Note &65. The ;uestion (as posed be ore the 9a!ir a!end!ent and subse;uent proposals introdu"in0 other li!itations. Co!!. @ille0asC response that there (as no re;uire!ent in the /%$6 Constitution or a la( to 0overn servi"e "ontra"ts and that, in a"t, there (ere then no su"h la(s is ina""urate. The /%$6 Charter re;uired si!ilar le0islative approval, althou0h it did not spe"i # the or! it should ta)eE AThe Batasan0 *a!bansa, in the national interest, !a# allo( su"h "iti8ensR to enter into servi"e "ontra"tsR.A As previousl# noted, ho(ever, la(s authori8in0 servi"e "ontra"ts (ere a"tuall# ena"ted b# presidential de"ree.
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@ide Note &6:. @ide Note &4/. @ide Note &6/. Dated 9ul# &:, /%:$.

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Dated O"tober 6, /%%5. *eralta v. Civil Servi"e Co!!ission, &/& SCRA 4&' 1/%%&2. @ide Note &6:. III Re"ord o the Constitutional Co!!ission 6'4. Sala#sa# v. Castro, %: *hil. 634 1/%'32. Rep. A"t No. $%4& 1/%%'2, se". 6 1;2. Id., se". 6 1a;2. Id., se". &5. Id., se". &6, irst par. Id., se". &6, last par. Id., se". 6 1>2. Id., se". 6 1a82. Id., se". 6' 1!2. Id., se"s. 6 1a;2 and '3. Id., se". 6 1#2. Id., se". 6' 102. Id., se". 6' 1h2. Id., se". 6' 1l2. Id., se". 6 1a 2.

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SEC. $&. Ti!ber Ri0hts.SAn# provision o the la( to the "ontrar# not(ithstandin0, a "ontra"tor !a# be 0ranted a ri0ht to "ut trees or ti!ber (ithin his !inin0 area as !a# be ne"essar# or his !inin0 operations sub>e"t to orestr# la(s, rules and re0ulationsE *rovided, That i the land "overed b# the !inin0 area is alread# "overed b# e<itin0 ti!ber "on"essions, the volu!e o ti!ber needed and the !anner o "uttin0 and re!oval thereo shall be deter!ined b# the !ines re0ional dire"tor, upon "onsultation (ith the "ontra"tor, the ti!ber "on"essionaireBper!ittee and the .orest Mana0e!ent Bureau o the Depart!entE *rovided, urther, That in "ase o disa0ree!ent bet(een the "ontra"tor and the ti!ber "on"essionaire, the !atter shall be sub!itted to the Se"retar# (hose de"ision shall be inal. The "ontra"tor shall per or! re orestation (or) (ithin his !inin0 area in a""ordan"e (ith orestr# la(s, rules and re0ulations. HE!phasis supplied.I SEC. $6. 7ater Ri0hts.SA "ontra"tor shall have (ater ri0hts or !inin0 operations upon approval o appli"ation (ith the appropriate 0overn!ent a0en"# in a""ordan"e (ith e<istin0 (ater la(s, rules and re0ulations pro!ul0ated thereunderE *rovided, That (ater ri0hts alread# 0ranted or vested throu0h lon0 use, re"o0ni8ed and a")no(led0ed b# lo"al "usto!s, la(s and de"isions o "ourts shall not thereb# be i!pairedE *rovided, urther, That the -overn!ent reserves the ri0ht to re0ulate (ater ri0hts and the reasonable and e;uitable distribution o (ater suppl# so as to prevent the !onopol# o the use thereo . HE!phasis supplied.I SEC. $4. Ri0ht to *ossess E<plosives.SA "ontra"torBe<ploration per!ittee shall have the ri0ht to possess and use e<plosives (ithin his "ontra"tBper!it area as !a# be ne"essar# or his !inin0 operations upon approval o an appli"ation (ith the appropriate 0overn!ent a0en"# in

a""ordan"e (ith e<istin0 la(s, rules and re0ulations pro!ul0ated thereunderE *rovided, That the -overn!ent reserves the ri0ht to re0ulate and "ontrol the e<plosive a""essories to ensure sa e !inin0 operations. HE!phasis supplied.I SEC. $'. Ease!ent Ri0hts.S7hen !inin0 areas are so situated that or purposes o !ore "onvenient !inin0 operations it is ne"essar# to build, "onstru"t or install on the !inin0 areas or lands o(ned, o""upied or leased b# other persons, su"h in rastru"ture as roads, railroads, !ills, (aste du!p sites, tailin0s ponds, (arehouses, sta0in0 or stora0e areas and port a"ilities, tra!(a#s, run(a#s, airports, ele"tri" trans!ission, telephone or tele0raph lines, da!s and their nor!al lood and "at"h!ent areas, sites or (ater (ells, dit"hes, "anals, ne( river beds, pipelines, lu!es, "uts, sha ts, tunnels, or !ills, the "ontra"tor, upon pa#!ent o >ust "o!pensation, shall be entitled to enter and o""up# said !inin0 areas or lands. HE!phasis supplied.I SEC. $3. Entr# into *rivate ,ands and Con"ession Areas.SSub>e"t to prior noti i"ation, holders o !inin0 ri0hts shall not be prevented ro! entr# into private lands and "on"ession areas b# sur a"e o(ners, o""upants, or "on"essionaires (hen "ondu"tin0 !inin0 operations thereinE *rovided, That an# da!a0e done to the propert# o the sur a"e o(ner, o""upant, or "on"essionaire as a "onse;uen"e o su"h operations shall be properl# "o!pensated as !a# be bee provided or in the i!ple!entin0 rules and re0ulationsE *rovided, urther, That to 0uarantee su"h "o!pensation, the person authori8ed to "ondu"t !inin0 operation shall, prior thereto, post a bond (ith the re0ional dire"tor based on the t#pe o properties, the prevailin0 pri"es in and around the area (here the !inin0 operations are to be "ondu"ted, (ith suret# or sureties satis a"tor# to the re0ional dire"tor. HE!phasis supplied.I
&$$

Id., se". 6%, irst par. Id., se". 6%, se"ond par. Id., se". 6' 1e2. SEC. &6. Ri0hts and Obli0ations o the *er!ittee.S< < <. The per!ittee !a# appl# or a !ineral produ"tion sharin0 a0ree!ent, >oint venture a0ree!ent, "o4produ"tion a0ree!ent or inan"ial or te"hni"al assistan"e a0ree!ent over the per!it area, (hi"h appli"ation shall be 0ranted i the per!ittee !eets the ne"essar# ;uali i"ations and the ter!s and "onditions o an# su"h a0ree!entE *rovided, That the e<ploration period "overed b# the e<ploration period o the !ineral a0ree!ent or inan"ial or te"hni"al assistan"e a0ree!ent.

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SEC. 6'. Ter!s and Conditions. S The ollo(in0 ter!s, "onditions, and (arranties shall be in"orporated in the inan"ial or te"hni"al assistan"e a0ree!ent, to (itE 1a2 A ir! "o!!it!ent in the or! o a s(orn state!ent, o an a!ount "orrespondin0 to the e<penditure obli0ation that (ill be invested in the "ontra"t areaE *rovided, That su"h a!ount shall be sub>e"t to "han0es as !a# be provided or in the rules and re0ulations o this A"tG 1b2 A inan"ial 0uarantee bond shall be posted in avor o the -overn!ent in an a!ount e;uivalent to the e<penditure obli0ation o the appli"ant or an# #earG 1"2 Sub!ission o proo o te"hni"al "o!peten"e, su"h as, but not li!ited to, its tra") re"ord in !ineral resour"e e<ploration, develop!ent, and utili8ationG details o te"hnolo0# to be e!plo#ed in the proposed operationG and details o te"hni"al personnel to underta)e the operationG 1d2 Representations and (arranties that the appli"ant has all the ;uali i"ations and none o the dis;uali i"ations or enterin0 into the a0ree!entG 1e2 Representations and (arranties that the "ontra"tor has or has a""ess to all the inan"in0, !ana0erial and te"hni"al e<pertise and, i "ir"u!stan"es de!and, the te"hnolo0# re;uired to pro!ptl# and e e"tivel# "arr# out the ob>e"tives o the a0ree!ent (ith the understandin0 to ti!el# deplo# these resour"es under its supervision pursuant to the periodi" (or) pro0ra!s and related bud0ets, (hen proper, providin0 an e<ploration period up to t(o 1&2 #ears,

e<tendible or another t(o 1&2 #ears but sub>e"t to annual revie( b# the Se"retar# in a""ordan"e (ith the i!ple!entin0 rules and re0ulations o this A"t, and urther, sub>e"t to the relin;uish!ent obli0ationsG 1 2 Representations and (arranties that, e<"ept or pa#!ets or dispositions or its e;uit#, orei0n invest!ents in lo"al enterprises (hi"h are ;uali ied or repatriation, and lo"al supplierCs "redits and su"h other 0enerall# a""epted and per!issible inan"ial s"he!es or raisin0 unds or valid business purposes, the "onra"tor shall not raise an# or! o inan"in0 ro! do!esti" sour"es o unds, (hether in *hilippine or orei0n "urren"#, or "ondu"tin0 its !inin0 operations or and in the "ontra"t areaG 102 The !inin0 operations shall be "ondu"ted in a""ordan"e (ith the provisions o this A"t and its i!ple!entin0 rules and re0ulationsG 1h2 7or) pro0ra!s and !ini!u! e<penditures "o!!it!entsG 1i2 *re erential use o lo"al 0oods and servi"es to the !a<i!u! e<tent pra"ti"ableG 1>2 A stipulation that the "ontra"tors are obli0ated to 0ive pre eren"e to .ilipinos in all t#pes o !inin0 e!plo#!ent or (hi"h the# are ;uali ied and that te"hnolo0# shall be trans erred to the sa!eG 1)2 Re;uirin0 the proponent to e e"tivel# use appropriate anti4pollution te"hnolo0# and a"ilities to prote"t the environ!ent and to restore or rehabilitate !ined out areas and other areas a e"ted b# !ine tailin0s and other or!s o pollution or destru"tionG 1l2 The "ontra"tors shall urnish the -overn!ent re"ords o 0eolo0i", a""ountin0, and other relevant data or its !inin0 operations, and that boo) o a""ounts and re"ords shall be open or inspe"tion b# the 0overn!entG 1!2 Re;uirin0 the proponent to dispose o the !inerals and b#produ"ts produ"ed under a inan"ial or te"hni"al assistan"e a0ree!ent at the hi0hest pri"e and !ore advanta0eous ter!s and "onditions as provided or under the rules and re0ulations o this A"tG 1n2 *rovide or "onsultation and arbitration (ith respe"t to the interpretation and i!ple!entation o the ter!s and "onditions o the a0ree!entsG and 1o2 Su"h other ter!s and "onditions "onsistent (ith the Constitution and (ith this A"t as the Se"retar# !a# dee! to be or the best interest o the State and the (el are o the .ilipino people.
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SEC. 6%. Option to Convert into a Mineral A0ree!ent. S The "ontra"tor has the option to "onvert the inan"ial or te"hni"al assistan"e a0ree!ent to a !ineral a0ree!ent at an# ti!e durin0 the ter! o the a0ree!ent, i the e"ono!i" viabilit# o the "ontra"t area is ound to be inade;uate to >usti # lar0e4s"ale !inin0 operations, a ter proper noti"e to the Se"retar# as provided or under the i!ple!entin0 rules and re0ulationsG *rovided, That the !ineral a0ree!ent shall onl# be or the re!ainin0 period o the ori0inal a0ree!ent. In the "ase o a orei0n "ontra"tor, it shall redu"e its e;uit# to ort# per"ent 145J2 in the "orporation, partnership, asso"iation, or "ooperative. =pon "o!plian"e (ith this re;uire!ent b# the "ontra"tor, the Se"retar# shall approve the "onversion and e<e"ute the !ineral produ"tion4sharin0 a0ree!ent.
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SEC. '3. Eli0ibilit# o .orei0n4o(nedB4"ontrolled Corporation.SA orei0n o(nedB 4"ontrolled "orporation !a# be 0ranted a !ineral pro"essin0 per!it.
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SEC. 6. De inition o Ter!s. M As used in and or purposes o this A"t, the ollo(in0 ter!s, (hether in sin0ular or plural, shall !eanE <<<

102 AContra"torA !eans a ;uali ied person a"tin0 alone or in "onsortiu! (ho is a part# to a !ineral a0ree!ent or to a inan"ial or te"hni"al assistan"e a0ree!ent.
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SEC. 64. Ma<i!u! Contra"t Area. S The !a<i!u! "ontra"t area that !a# be 0ranted per ;uali ied person, sub>e"t to relin;uish!ent shall beE 1a2 /,555 !eridional blo")s onshoreG 1b2 4,555 !eridional blo")s o shoreG or 1"2 Co!binations o 1a2 and 1b2 provided that it shall not e<"eed the !a<i!u! li!its or onshore and o shore areas.
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SEC. 63. Ne0otiations. S A inan"ial or te"hni"al assistan"e a0ree!ent shall be ne0otiated b# the Depart!ent and e<e"uted and approved b# the *resident. The *resident shall noti # Con0ress o all inan"ial or te"hni"al assistan"e a0ree!ents (ithin thirt# 1652 da#s ro! e<e"ution and approval thereo .
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SEC. 6$. .ilin0 and Evaluation o .inan"ial or Te"hni"al Assistan"e A0ree!ent *roposals. S All inan"ial or te"hni"al assistan"e a0ree!ent proposals shall be iled (ith the Bureau a ter pa#!ent o the re;uired pro"essin0 ees. I the proposal is ound to be su i"ient and !eritorious in or! and substan"e a ter evaluation, it shall be re"orded (ith the appropriate 0overn!ent a0en"# to 0ive the proponent the prior ri0ht to the area "overed b# su"h proposalE *rovided, That e<istin0 !ineral a0ree!ents, inan"ial or te"hni"al assistan"e a0ree!ents and other !inin0 ri0hts are not i!paired or pre>udi"ed thereb#. The Se"retar# shall re"o!!end its approval to the *resident.
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SEC. 6:. Ter! o .inan"ial or Te"hni"al Assistan"e A0ree!ent. S A inan"ial or te"hni"al assistan"e a0ree!ent shall have a ter! not e<"eedin0 t(ent#4 ive 1&'2 #ears to start ro! the e<e"ution thereo , rene(able or not !ore than t(ent#4 ive 1&'2 #ears under su"h ter!s and "onditions as !a# be provided b# la(.
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SEC. 45. Assi0n!entBTrans er. S A inan"ial or te"hni"al assistan"e a0ree!ent !a# be assi0ned or trans erred, in (hole or in part, to a ;uali ied person sub>e"t to the prior approval o the *residentE *rovided, That the *resident shall noti # Con0ress o ever# inan"ial or te"hni"al assistan"e a0ree!ent assi0ned or "onverted in a""ordan"e (ith this provision (ithin thirt# 1652 da#s ro! the date o the approval thereo .
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SEC. 4/. 7ithdra(al ro! .inan"ial or Te"hni"al Assistan"e A0ree!ent. S The "ontra"tor shall !ani est in (ritin0 to the Se"retar# his intention to (ithdra( ro! the a0ree!ent, i in his >ud0!ent the !inin0 pro>e"t is no lon0er e"ono!i"all# easible, even a ter he has e<erted reasonable dili0en"e to re!ed# the "ause or the situation. The Se"retar# !a# a""ept the (ithdra(alE *rovided, That the "ontra"tor has "o!plied or satis ied all his inan"ial, is"al or le0al obli0ations.
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SEC. :/. -overn!ent Share in Other Mineral A0ree!ents.S< < <. The -overn!ent share in inan"ial or te"hni"al assistan"e a0ree!ent shall "onsist o , a!on0 other thin0s, the "ontra"torCs "orporate in"o!e ta<, e<"ise ta<, spe"ial allo(an"e, (ithholdin0 ta< due ro! the "ontra"torCs orei0n sto")holders arisin0 ro! dividend or interest pa#!ents to the said orei0n sto")holder in "ase o a orei0n national and all su"h other ta<es, duties and ees as provided or under e<istin0 la(s. The "olle"tion o -overn!ent share in inan"ial or te"hni"al assistan"e a0ree!ent shall "o!!en"e a ter the inan"ial or te"hni"al assistan"e a0ree!ent "ontra"tor has ull# re"overed its pre4operatin0 e<penses, e<ploration, and develop!ent e<penditures, in"lusive.

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SEC. %5. In"entives.SThe "ontra"tors in !ineral a0ree!ents, and inan"ial or te"hni"al assistan"e a0ree!ents shall be entitled to the appli"able is"al and non4 is"al in"entives as provided or under E<e"utive Order No. &&3, other(ise )no(n as the O!nibus Invest!ents Code o /%:$E *rovided, That holders o e<ploration per!its !a# re0ister (ith the Board o Invest!ents and be entitled to the is"al in"entives 0ranted under the said Code or the duration o the per!its or e<tensions thereo E *rovided, urther, That !inin0 a"tivities shall al(a#s be in"luded in the invest!ent priorities plan.
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,idasan v. Co!!ission on Ele"tions, &/ SCRA 4%3 1/%3$2.

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@ide also 7MC* .TAA, se". /5.& 1a2. 7MC*, se". /5.&. Id., se". //. Id., se". /5./1a2. Id., se". /5./1"2. Id., se". 3.4. Rollo, pp. '364'34. Civil Code, art. :. Const., art III, se". /. @ide Note &&6. Rollo, p. &46. Civil ,iberties =nion v. E<e"utive Se"retar#, supra. Auto!otive *arts K E;uip!ent Co!pan#, In". v. ,in0ad, 65 SCRA &4: 1/%3%2. Ibid.

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