G.R. No. 244063 , June 21, 2022
LONE CONGRESSIONAL DISTRICT OF BENGUET PROVINCE, REPRESENTED BY HON. RONALD M. COSALAN, REPRESENTATIVE, PETITIONER, VS. LEPANTO CONSOLIDATED MINING COMPANY AND FAR SOUTHEAST GOLD RESOURCES, INC., RESPONDENTS. [G.R. No. 244216] REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE MINES AND GEOSCIENCES BUREAU OF THE DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (MGB-DENR), PETITIONER, VS. LEPANTO CONSOLIDATED MINING COMPANY AND FAR SOUTHEAST GOLD RESOURCES, INC., RESPONDENTS.

FACTS

Respondents sought to renew their Mineral Production Sharing Agreement (MPSA) for another 25 years. Petitioners referred the renewal application to the National Commission on Indigenous Peoples (NCIP) for the consultation, consent, and certification processes under Section 59 of the Indigenous Peoples Rights Act (IPRA). Respondents refused, arguing these processes were not requisites for renewal and would impair their contractual and vested rights under the MPSA. They submitted the dispute to arbitration. The Arbitral Tribunal rendered an award exempting respondents and the MPSA renewal from Section 59. Petitioners petitioned the Regional Trial Court (RTC) to vacate the arbitral award for violating public policy under Section 59. The RTC vacated the award, finding Section 59 a clear expression of public policy applicable to the renewal, especially since the MPSA covered parts of the ancestral domains of the Mankayan Indigenous Cultural Communities/Indigenous Peoples (ICCs/IPs). The Court of Appeals reversed, agreeing with the Arbitral Tribunal that respondents had a vested right to renew independent of Section 59’s consent requirement, and compliance would impair contractual rights and risk wastage of investments if consent was withheld.

ISSUE

Whether the requirement of Free and Prior Informed and Written Consent (FPIC) of the concerned ICCs/IPs under Section 59 of the IPRA is a condition for the renewal of the MPSA, notwithstanding claims of impairment of contractual rights.

RULING

The Court resolved to vacate the Final Award issued by the Arbitral Tribunal in favor of respondents, without prejudice to their full compliance with the requirement of FPIC of the Mankayan ICCs/IPs as a condition for the renewal of the MPSA. The concurring opinion emphasizes that: First, an MPSA, as a contract where the State grants mining rights, is not immune from modification by the State’s exercise of police power over contracts imbued with public interest. The non-impairment clause yields to police power, especially for contracts related to public welfare, such as those regulating labor or public utilities. Mining activities and contracts are imbued with public interest vital to national security and survival; thus, they are subject to police power. Section 59 of the IPRA, which expressly covers the renewal of agreements and requires certification from the NCIP only after obtaining FPIC, is deemed written into such contracts as an expression of public policy. Second, the arbitral award contravened this fundamental public policy for the protection of indigenous peoples’ rights. An arbitral award that violates an explicit, well-defined, and dominant public policy, such as that enshrined in Section 59 of the IPRA, may be vacated.