Sounding Board

Once more, the Mining Act

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In 2003 several cases were filed challenging the constitutionality of Republic Act No. 7942 or the Mining Act. The principal target of the challenge was the provision allowing 100-percent foreign-owned corporations to participate in the exploration and development of natural resources through financial and/or technical agreements.

A principal focus of the controversy was the constitutional provision which says: “The President may enter into agreements with foreign-owned corporations involving either technical 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.” The reason of the 1987 Constitutional Commission for inserting this provision in the Constitution was the realization that the Philippines needed both financial and technical assistance to be able to explore, develop and utilize the rich mineral, petroleum and other oil resources of the country.

RA 7942 sought to implement the constitutional provision. The executive department followed up with executive orders elaborating on the manner of implementation. Thus, the challenge was against both parts of RA 7942 and of the executive orders.

In order to arrive at a conclusion the Supreme Court, among others, combed through the debates of the 1987 Constitutional Commission to determine what the framers intended by the provision. Among the issues debated was whether the provision was meant to allow a foreign corporation to enter into an agreement for both financial and technical assistance or only for either financial or technical assistance. And part of the problem was that the agreement envisioned a “service contract” which under the 1973 Constitution would be entered into in forms that practically nullify the nationalist provisions on natural resources.

In the end, after extended debate, the Court in early 2004 declared parts of RA 7942 unconstitutional, especially the implementation of the financial and technical agreement, for not satisfying the Filipino first spirit of the 1987 Constitution and for being disadvantageous to the State.  The decision was almost unanimous.

As would be expected, motions for reconsideration were filed. Practically a year later, the Court, in a sharply divided decision this time, reversed the earlier ruling. Principally the new decision firmly affirmed that the financial and technical agreement was a form of allowable service contract not prohibited by the Constitution and that the authorized financial and technical agreement  entailed not mere technical or financial assistance but also a limited degree of participation in management to the extent needed for financial and technical work. It would not mean control by foreign investors of the management of large-scale exploration, development and utilization of minerals, petroleum, and other mineral oils. What the framers intended was to permit service contracts but with safety measures to prevent abuses. This provision was prompted by the perceived insufficiency of Filipino capital and the felt need for foreign investments in the exploration, development and utilization of minerals and petroleum resources. In all of these, the agencies of the government would exercise control and supervision over the entire operation. The new decision saw State control as determinative of constitutionality. The majority saw that there was enough state control.  They also saw that financial benefits were not to be surrendered to the foreign contractor but rather there would be equitable sharing.

Expectedly the decision did not satisfy all the justices. The dissents were firm in reviving earlier objections. After all, they had expressed strong contrary opinions in the original decision. It is therefore no surprise that almost 10 years later the controversy over the Mining Act has resurfaced with old and new twists. How will it all end?

It is interesting that among the justices who were involved in the two decisions, only Justice Antonio Carpio remains. I doubt that he will change his views expressed in the two earlier decisions. How many of the current justices will go along with him? How many will oppose him?

Another interesting point about the current controversy is that it now involves an issue that was not, or at least was not, prominent in 2004. I refer to the matter of environmental degradation.  Philippine society is divided about this issue in relation to mining.

More importantly, will the current case put an end to the controversy? I seriously doubt that it will or that the controversy will end in the near future. Nor will there be an end to mining. The Constitution itself wants mining done.

As to safeguards which can ensure against abuse, against environmental degradation, and assure a more equitable sharing in the natural resources of the nation, I am not sure that the Supreme Court will be able to supply a complete answer. The controversy involves questions that are more than what the Constitution expects the judiciary to resolve. As far as the exploration, development and utilization of our natural resources are concerned, the bulk of the responsibility has been placed by the Constitution on the legislative and executive departments. Inevitably, the controversy will go to these policy bodies. In fact, there already are bills pending in Congress for the amendment of the Mining Act.

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  • mad_as_Hamlet

    * * * * *
    Very true. There’s no stopping mining. Mining is something natural—–whether viewed as an activity or disposition. It’s the youing and ouring aspects that we must focus on.
    – – -

    • rosaddiaq

      Yes. Civilization started with the discovery of farming and mining. If you can’t farm it, you mine it. Developed countries with large mining industries like Canada, US, and Australia do not restrict ownership. I’ve worked for Aussie companies majority owned by Americans and Canadians, followed by a stint with a large American company majority owned by a British company.

  • Joseph20112012

    Mining MUST be 100% foreign equity ownership allowed because it’s difficult for any local individuals or corporations to invest 60% of a particular foreign mining investment project. No wonder that the Mining Act of 1995 allow 100% foreign equity ownership for mining projects worth US$50 million or above FTAA even though it contract the Article XII, Section 2 of the 1987 constitution before no Filipino or few local mining companies could afford to invest 60% of a particular large-scale mining project.

    100% foreign equity ownership on large-scale below US$50 million FTAA, medium-scale, and especially, small-scale mining, should be allowed.

  • $31552910

    The Philippines is a resource-rich country. The estimated mineral reserves of the Philippines are about 15 billion metric tons of metallic minerals, mostly gold, copper, iron, chromite, nickel, cobalt, and platinum; and about 70 billion metric tons of non-metallic minerals, including gravel, limestone, and marble. The estimated worth of the country’s mineral reserves is $850 billion (37.4 trillion pesos) to $1 trillion (44 trillion pesos). Development of the country’s mineral resources can substantially improve the standard of living of the vast majority of Filipinos. The Philippine legislative and executive branches of government, which are dominated by powerful clans, cannot be expected to assure a more equitable sharing and more effective environmental protection of the country’s natural resources. The Philippines should acquire the technical knowledge and means for the exploration and development of its natural resources. Mining permits should only be issued with the approval of the government’s environmental agency and environmental non-governmental organizations and local communities. To benefit from the country’s mineral wealth, Filipinos have to put an end to the tyranny of the traditional political dynasties and the Philippine government should implement more equitable sharing of the country’s natural resources and inclusive economic growth policies.

  • WeAry_Bat

    On an upcoming article, the good father reflects that there are a lot of Chinese mining companies in the Phils, and what the 100% equity would mean, especially the flashpoint of West Philippine Sea.

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