G.R. No. 127882 . January 27, 2004
LA BUGAL-B’LAAN TRIBAL ASSOCIATION, INC., ET AL., petitioners, vs. VICTOR O. RAMOS, SECRETARY, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, ET AL., respondents.

FACTS

Petitioners, comprising indigenous cultural communities and various civil society organizations, filed a petition for prohibition and mandamus assailing the constitutionality of Republic Act No. 7942 (The Philippine Mining Act of 1995), its Implementing Rules and Regulations (DENR Administrative Order No. 96-40), and the Financial and Technical Assistance Agreement (FTAA) executed between the government and WMC (Philippines), Inc. (WMCP). The FTAA, signed on March 30, 1995, granted WMCP rights over a vast tract of land for large-scale mining. Petitioners argued that the law and the FTAA violated constitutional provisions on national economy and patrimony, particularly the grant of rights to foreign-owned corporations.
The core challenge centered on Section 81 of the Mining Act, which defined the government’s share in an FTAA to include taxes like the contractor’s corporate income tax. Petitioners contended this scheme, where taxes are considered part of the government’s share, effectively allowed full foreign control and ownership of mining enterprises, contravening the constitutional mandate that the State must undertake such activities either directly or through co-production, joint venture, or production-sharing agreements with Filipino citizens or corporations at least 60% Filipino-owned.

ISSUE

Whether or not Republic Act No. 7942 and the FTAA with WMCP are unconstitutional for violating the provisions of the 1987 Constitution on the national economy and patrimony, specifically by permitting foreign control over the exploration, development, and utilization of mineral resources.

RULING

The Supreme Court declared the subject FTAA and the relevant provisions of the Mining Act and its Implementing Rules UNCONSTITUTIONAL. The legal logic hinges on a strict interpretation of Article XII, Section 2 of the Constitution . The Court held that the constitutional framers deliberately intended to place full control and supervision over the nation’s mineral resources in the State. For large-scale mining, the fundamental law allows only four modalities: (1) direct State undertaking; (2) co-production; (3) joint venture; or (4) production-sharing agreements. Crucially, these agreements may only be entered into with Filipino citizens or corporations at least sixty percent (60%) owned by such citizens.
The Court ruled that an FTAA, as structured under the Mining Act, is not among these authorized modes. By allowing a foreign contractor to provide all financing, technology, and management in exchange for a share of production, with the government’s share defined to include taxes, the FTAA effectively grants beneficial ownership and control to a foreign entity. This arrangement circumvents the constitutional requirement for Filipino equity and control. The State’s primary role is reduced to that of a mere regulator and tax collector, abdicating its constitutional duty to be the active party exercising direct supervision and control over the exploitation of mineral resources. Therefore, the law and the agreement failed to adhere to the constitutionally prescribed framework for the development of national patrimony.