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XIII.

NATIONAL ECONOMY AND PATRIMONY


A. Regalian doctrine
REGALIAN DOCTRINE
All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. [Art. XII, Sec. 2]
NOTES:
Regalian Doctrine [Jura Regalia]

The King had title to all the land in the Philippines except so far as it saw fit to permit
private titles to be acquired. [Cario v. Insular Government (1909)]
In present context, ownership of all lands of the public domain is vested in the State.The
classification of public lands is an exclusive prerogative of the Executive Department
through the Office of the President. [Republic v. Register of Deeds of Quezon (1994)]
Doctrine of Native Title Ownership over native land is already vested on natives even if
they do not have formal titles [Cario v. InsularGovernment (1909)]
B. Nationalist and citizenship requirement provisions

Exploitation of natural resources


1. Filipino citizens; or
2. Corporations incorporated in RP, with 60% Filipino ownership
Operation of Public Utilities
1. Filipino citizens; or
2. Corporations incorporated in RP, with 60% Filipino ownership
Acquisition of alienable lands of the public domain
1. Filipino citizens;
- lease: not more than 500 hectares
- purchase/ homestead/ grant: not more than 12 hectares
2. Corporations incorporated in RP, with 60% Filipino ownership;
- only by lease for a period not exceeding 25 years
- renewable for not more than 25 years.
- must not exceed 100 hectares in area.
Practice of ALL Professions
1. Filipino citizens only (natural persons)
*Congress may, by law, otherwise prescribe

Mass Media
1. Filipino citizens;
2. Corporations incorporated in RP, and 100% Filipino owned
Advertising
1. Filipino citizens;
2. Corporations incorporated in RP, and 70% Filipino owned.
Educational institution
1. Filipino citizens;
2. Corporations incorporated in RP, with 60% Filipino ownership
EXCEPT: Schools established by religious groups and mission boards. *Congress may,
by law, increase Filipino equity requirements for ALL educational institutions.
Other economic activities
*Congress may, by law, reserve it to Filipino citizens ir to corporations 60% Filipino owned
(or even higher) certain investment areas
NOTES:

A public utility is a business or service engaged in regularly supplying the public with
some commodity or service of public consequence. A joint venture falls within the
purview of an association pursuant to Sec. 11, Art. XII and must comply with the 60%40% Filipino-foreign capitalization requirement. [JG Summit Holdings v. CA (2001)]
What capital is covered- The 60% requirement applies to both the voting control and
the beneficial ownership of the public utility. Therefore, it shall apply uniformly,
separately,and across the board to all classes of shares, regardless of nomenclature or
category, comprising the capital of the corporation. (e.g. 60% of common stock, 60% of
preferred voting stock, and 60% of preferred non-voting stock.) [Gamboa v. Teves
(2012)]
Interpretation in line with Constitutions intent to ensure a self-reliant and independent
national economy effectivelycontrolledby Filipinos. [See Gamboa v. Teves (2011)]
In the original decision, only the voting stockwere subject to the 60% requirement. [Id.]
There is some controversy in the interpretation of the resolution on the motion for
reconsideration. (a) There is the question of whether the grandfather rule should be
applied. (b)The dispositive merely denied the MRs, but did not reiterate the newer
interpretation.
In any case, the released SEC guidelines comply with the strictest interpretation of
Gamboa v. Teves.
FILIPINO FIRST
In the grant of rights, privileges, and concessions covering the national economy and
patrimony, the State shall give preference to qualified Filipinos. The State shall regulate
and exercise authority over foreign investments within its national jurisdiction and in
accordance with its national goals and priorities. [Art. XII, Sec. 10]

The term patrimony pertains to heritage, and given the history of the Manila Hotel, it
has become a part of our national economy and patrimony. Thus, the Filipino First policy
provision of the Constitution is applicable. Such provision is per se enforceable, and
requires no further guidelines or implementing rules or laws for its operation. [Manila
Prince Hotel v. GSIS, (1990)]
The State shall promote the preferential use of Filipino labor, domestic materials and
ocally produced goods, and adopt measures that help make them competitive. [Art. XII,
Sec. 12]
C. Exploration, development and utilization of natural resources

EXPLORATION, DEVELOPMENT AND UTILIZATION OF NATURAL RESOURCES


The President may enter into agreements with foreign owned corporations involving
eithertechnical or financial assistance for large-scale exploration, development, and
utilization of minerals, petroleum, and other mineral oils according to the general terms
and conditions provided by law, based on real contributions to the economic growth and
general welfare of the country. In such agreements, the State shall promote the
development and use of local scientific and technical resources. [Art. XII, Sec. 2, par. 4]
NOTES:

The State, being the owner of the natural resources, is accorded the primary power and
responsibility in the exploration, development and utilization thereof. As such it may
undertake these activities through four modes:
(1) The State may directly undertake such activities;
(2) The State may enter into co-production, joint venture or production-sharing
agreements with Filipino citizens or qualified corporations;
(3) Congress may, by law, allow small-scale utilization of natural resources by Filipino
citizens; or
(4) For the large-scale exploration, development and utilization of minerals, petroleum
and other mineral oils, the President may enter into agreements with foreign-owned
corporations involving technical or
financial assistance. [La Bugal-BLaan Tribal Assn. v. Ramos, [Jan. 2004)]
Service Contracts not prohibited. Even supposing FTAAs are service contracts, the latter
are not prohibited under the Constitution. [Justification: A verba legis interpretation
does not support an intended prohibition. The members of the CONCOM used the terms
service contracts and financial and technical assistance interchangeably.] [La BugalBlaan Tribal Assn. v. Ramos, (Dec. 2004)]
The following are valid:
(1) Financial and Technical Assistance Agreements (FTAA) not a prohibited agreement
in the contemplation of the Constitution
(2) Philippine Mining Law (RA 7942)

(3) Its Implementing Rules and Regulations, insofar as they relate to financial and
technical agreements [La Bugal-Blaan Tribal Assn. v. Ramos (Dec. 2004)]
The Constitution should be construed to grant the President and Congress sufficient
discretion and reasonable leeway to enable them to attract foreign investments and
expertise, as well as to secure for our people and our posterity the blessings of prosperity
and peace.
It is not unconstitutional to allow a wide degree of discretion to the Chief Executive, given
the nature and complexity of such agreements, the humongous amounts of capital and
financing required for large-scale mining operations, the complicated technology
needed, and the intricacies of international trade, coupled with the States need to
maintain flexibility in its dealings, in order to preserve and enhance our countrys
competitiveness in world markets. [La Bugal-Blaan Tribal Assn. v. Ramos, id.]
D. Franchises, authority and certificates for public utilities

FRANCHISES, AUTHORITY AND CERTIFICATES FOR PUBLIC UTILITIES


Franchise, certificate or any other form of authorization for the operation of public utilities
ONLY to citizens of the Philippines, or corporations at least 60% of whose capital is
Filipino-owned. [Art. VII, Sec. 11]
NATURE OF THE FRANCHISE:
(1) It is a privilege not a right
(2) Shall NOT be exclusive;
(3) Shall NOT be for a period of more than 50 years;
(3) Shall be subject to amendment, alteration or repeal by Congress.
NOTES:
Jurisprudence:
(1) Congress does not have the exclusive power to issue franchises. Administrative
bodies (i.e. LTFRB, Energy Regulatory Board) may be empowered by law to do so.
[Albano v. Reyes (1989)]
(2) What constitutes a public utility is not the ownership but the use to the public. The
Constitution requires a franchise for the operation of public utilities. However, it
does not require a franchise before one can own the facilities needed to operate a
public utility so long as it does not operate them to serve the public. [Tatad v. Garcia
(1995)] E.g. X Company may own an airline without the need of a franchise. But in
operating an air transport business, franchise is required.
E. Acquisition, ownership and transfer of public and private lands
ACQUISITION, OWNERSHIP AND TRANSFER OF PUBLIC AND PRIVATE LANDS
Lands of the Public Domain are classified into:
(1) Agricultural Lands
(2) Forest or Timber Lands
(3) Mineral Lands
(4) National Park [Art. XII, Sec. 3]

NOTES:
The classification of public lands is a function of the executive branch, specifically the
Director of the Land Management Bureau (formerly Director of Lands). The decision of
the Director, when approved by the Secretary of the DENR, as to questions of fact, is
conclusive upon the courts. [Republic v. Imperial (1999)].
Alienable lands of the public domain shall be limited to agricultural lands. [Art. XII, Sec.
3]
To prove that the land subject of an application for registration is alienable, an applicant
must conclusively establish the existence of a positive act of the government such as a
presidential proclamation or an executive order or a legislative act or statute. [Republic
v. Candymaker, Inc.(2006)]
Foreshore land is that part of the land which is between the high and low water, and left
dry by the flux and reflux of the tides. It is part of the alienable land of the public domain
and may be disposed of only by lease and not otherwise. [Republic v. Imperial, supra]
Private corporations or associations may not hold such alienable lands of public domain
except by lease, for a period not exceeding 25 years, and not to exceed 1000 hectares in
area.
Citizens of the Philippines may lease not more than 500 ha., or acquire not more than 12
hectares thereof by purchase, homestead, or grant. [Art. XII, Sec. 3]
PRIVATE LANDS
General Rule: No private lands shall be transferred or conveyed except to individuals,
corporations, or associations qualified to acquire or hold lands of the public domain.
[Art. XII, Sec. 7]
Exceptions:
(1) Hereditary succession (art. XII, sec. 7)
(2) A natural-born citizen of the Philippines who has lost his Philippine citizenship
may be a transferee of private lands, subject to limitations provided by law. (art.
XII, sec. 8)
Consequence of sale to non-citizens:
Any sale or transfer in violation of the prohibition is null and void. [Ong Ching Po.
v. CA (1994)].
When a disqualified foreigner later sells it to a qualified owner (e.g. Filipino
citizen), the defect is cured. The qualified buyer owns the land. [See Halili v. CA
(1998)]

Can a former owner file an action to recover the property?


Yes. The Court in Philippine Banking Corp. v. Lui She, (1967) abandoned the application of
the principle of in pari delicto. Thus, the action will lie.
HOWEVER, land sold to an alien which was later transferred to a Filipino citizen OR
when the alien later becomes a Filipino citizen can no longer be recovered by the vendor,
because there is no longer any public policy involved. [Republic v. IAC (1989)]
F. Practice of professions
PRACTICE OF PROFESSIONS
The practice of all profession in the Philippines shall be limited to Filipino citizens, save
in the case prescribed by law. [Art. XII, Sec. 14]

G. Organization and regulation of corporations, private and public


ORGANIZATION AND REGULATION OF CORPORATIONS, PRIVATE AND PUBLIC
(Stewardship Concept)
The use of property bears a social function, and all economic agents shall contribute to
the common good. Individuals and private groups, including corporations, cooperatives,
and similar collective organizations, shall have the right to own, establish, and operate
economic enterprises, subject to the duty of the State to promote distributive justice and
to intervene when the common good so demands. [Art. XII, Sec. 6]
NOTES:
The State shall apply the principles of agrarian reform or stewardship, whenever
applicable in accordance with law, in the disposition or utilization of other natural
resources, including lands of the public domain under lease or concession suitable to
agriculture, subject to prior rights, homestead rights of small settlers, and the rights of
indigenous communities to their ancestral lands. [Art. XIII, Sec. 6]
Formation
(1) Private corporations
Congress can only provide for the formation, etc of private corporations through a
general law.
(2) GOCCs
They may be created by:
a) Special charters in the interest of the common good and subject to the test of
economic viability.
b) By incorporation under the general corporation law.

H. Monopolies, restraint of trade and unfair competition


MONOPOLIES
The State shall regulate or prohibit monopolies when the public interest so requires. No
combinations in restraint of trade or unfair competition shall be allowed. [Art. XII, Sec
19]
NOTES:
Although the Constitution enshrines free enterprise as a policy, it nevertheless reserves
to the Government the ower to intervene whenever necessary for the promotion of the
general welfare. [Philippine Coconut Dessicators v. PCA (1998)]
Monopolies are not per se prohibited by the Constitution but may be permitted to exist
to aid the government in carrying on an enterprise or to aid in the performance of
various services and functions in the interest of the public.Nonetheless, a determination
must first be made as to whether public interest requires a monopoly. As monopolies are
subject to abuses that can inflict severe prejudice to the public, they are subject to a
higher level of State regulation than an ordinary business undertaking. [Agan, Jr. v.
PIATCO (2003)]