Supreme Court voids provisions of mining law

The Supreme Court ruled as unconstitutional yesterday an agreement signed by the government allowing an Australian firm 100 percent ownership of a mining project and junked several provisions of the law liberalizing the mining industry.

Since 1997, the year the petition seeking to void Republic Act No. 7942, or the Philippine Mining Act (PMA), was filed before the high court, 100 applications for financial and technical assistance agreements have been pending before the government. These FTAAs cover 8.4 million hectares of land and 64 are from foreign firms.

The FTAA application of the Australian company, Western Mining Corp. (WMCP), was approved in 1995, shortly after RA 7942 was passed.

In a 95-page decision penned by Justice Conchita Carpio-Morales, the court found the agreement between the government and WMCP invalid because the FTAA was similar to the service contracts allowed under RA 7942, but are prohibited under the 1987 Constitution.

The court said the new mining act "actually treats these agreements as service contracts that grant beneficial ownership to foreign contractors contrary to the fundamental law."

"By allowing foreign contractors to manage or operate all of the aspects of the mining operation, the provisions of RA 7942 have, in effect, conveyed beneficial ownership over the nation’s mineral resources to these contractors, leaving the State with nothing but bare title thereto."

The court said Section 2, Article 12 of the Constitution limits the participation of foreign firms in the large scale exploration, development and utilization of the country’s mineral, petroleum and mineral oil resources to "financial and technical assistance" in the strictest sense.

At the time the government entered into an FTAA with WMCP, now WMCP Philippines, this was still fully owned by WMCP International Pty., Ltd., a full subsidiary of WMCP holdings Ltd., a publicly-listed Australian mining and exploration company.

The court said some provisions in the Mining Act "whether by design or inadvertence, permit a circumvention of the constitutionally-ordained 60-40 percent capitalization requirement for corporations or associations engaged in the exploitation, development and utilization of Philippine natural resources."

Among the Mining Act provisions declared unconstitutional by the Supreme Court are:

• Section 3 (aq), defining qualified person, "to wit: Provided that a legally organized foreign-owned corporation shall be deemed a qualified person for purposes of granting an exploration permit, FTAA or mineral processing permit;

• Section 23, which specified the rights and obligations of an exploration permittee, insofar as said section applies to an FTAA;

• Section 33, prescribing the eligibility of a contractor in an FTAA;

• Section 35, enumerating terms and conditions for every FTAA;

• Section 39, allowing the contractor in an FTAA to convert the same into a mineral production-sharing agreement.

• Section 56, authorizing the issuance of a mineral processing permit to a contractor in an FTAA.

The court noted that the FTAA allows WMCP to manage and operate every aspect of the mining activity, in effect "granting WMCP beneficial ownership over natural resources that properly belong to the State and are intended for the benefit of its citizens."

The phrase "management or other forms of assistance" was present in the 1973 Constitution and was deleted from the 1987 Charter, allowing only technical and financial assistance.

The SC said the management or operation of mining activities by foreign contractors, which was the primary feature of the service contracts, was precisely the evil that the drafters of the 1987 Constitution sought to eradicate.

Concurring with Morales were Chief Justice Hilario Davide Jr., Associate Justices Reynato Puno, Leonardo Quisumbing, Antonio Carpio, Renato Corona, Romeo Callejo and Dante Tinga.

Associate Justices Jose Vitug, Artemio Panganiban, Consuelo Ynares-Santiago, Angelina Sandoval-Gutierrez and Alicia Austria-Martines dissented from the majority.

Associate Justice Adolfo Azcuna did not take part in the deliberations, since one of the parties involved was a former client of his.

The court acted on a petition by several tribal groups that challenged the Mining Act, which former President Fidel Ramos signed into law in 1995.

The government will file a motion for reconsideration of the Supreme Court’s decision to junk the PMA.

The government through the Department of Environment and Natural Resources (DENR) said it is now consulting with the Department of Trade and Industry (DTI), the Board of Investments (BOI) and the Mines and Geosciences Bureau (MGB) on how to craft their motion to be submitted to the SC, possibly by next week.

DENR Secretary Elisea Gozun said she has not yet been furnished a copy of the SC’s decision. She added that the private sector or leaders of the Chamber of Mines in the Philippines (CMP) will also be consulted for their inputs.

Gozun refused to comment on whether the DENR will void existing financial and technical assistance agreements (FTAA) with a number of foreign-controlled mining companies, among them, the Australian mining companies, Climax Arimco Mining Corporation and Sagittarius Mines.