Validity of LOI No. 1387 with the Privatization of the Philippine Smelting and Refining Corp. (PASAR)

DOJ OPINION NO. 092, s. 2014 December 3, 2014 Executive Director Efren V. Leano Board of Investments Department of Trade & Industry Industry & Investments Building 385 Sen. Gil J. Puyat Avenue, Makati City Dear Executive Director Leano : This refers to your request for opinion on the validity of Letter of Instruction (LOI) No. 1387. It appears that LOI No. 1387 was issued on 21 February 1984 by then President Ferdinand E. Marcos to provide sufficient and continuous supply of copper concentrates to the Philippines Smelting and Refining Corporation (PASAR); that to implement the said policy, the LOI requires that an export clearance for copper concentrate should first be secured from the Ministry of Trade and Industry (now Department of Trade & Industry), before a company can be allowed to export coppers; and that the issuance of such clearance is currently processed by the Office for Copper Export Clearance of the Board of Investments (BOI). It also appears that PASAR was formed in 1976 by the Philippine government intended to pave way for the country's industrialization; that one of its original incorporators was the Philippine government, through the National Development Company; that however, in June 1999, in view of the country's privatization program, the Philippine government's shareholdings were sold to a consortium of Philippine investors and Swiss trader, Glencore International AG; and that the acquisition of such shareholdings have transformed PASAR from a government-owned corporation into a privately-owned corporation. Specifically, you seek the opinion of the Department on two important issues, namely: 1) Whether LOI No. 1387 is still valid considering that PASAR is now a privately-owned enterprise; and 2) Whether LOI No. 1387 is a law or merely an administrative issuance issued by a higher authority for the guidance of its subordinates. It is your position, however, that LOI No. 1387 is merely an administrative issuance considering that it did not meet the parameters laid down by the Supreme Court in determining if a presidential issuance has the force and effect of a law. With due deference to the final determination of the Department of Trade and Industry, which has the supervisory authority over the Board of Investments, allow us to state our opinion and observations on the issues raised herein. Firstly, the relevant provisions of LOI No. 1387, which were also quoted in your letter, read as: HAIaEc Whereas, the copper smelter project being undertaken by the Philippine Associated Smelting and Refining Corporation (PASAR) has been identified by the government as one of the industrial projects necessary for the establishment of a sound foundation of the county's industrial development; xxx xxx xxx. Whereas, it is in the national interest to monitor copper export shipments and ensure that these do not hamper the sufficient and continuous supply of copper concentrates to PASAR; xxx xxx xxx. 1. The Ministry of Trade and Industry (MTI) shall require all copper exporters to obtain prior MTI clearance before making any copper export shipments. The MTI shall give such clearance only when the proposed export shipment does not adversely affect the supply and delivery of copper concentrates to PASAR. xxx xxx xxx. At this instance, it may be of importance to state that this Department, citing cases, had the occasion to discuss similar queries insofar as the category of a letter of instruction is concerned, thus: 1 . . . (T)he Supreme Court, in the case of Philippine Association of Service Exporters, Inc. vs. Torres , 2 stated: Letters of Instructions are the orders by the President to specific government officials directing or authorizing the doing of certain things, or laying guidelines to be complied with for the effective implementation of a law. xxx xxx xxx In the case of Garcia-Padilla vs. Enrile , the same Court, resolving the issue of whether a presidential issuance under the 1973 Constitution may be considered a law, also clarified, "to form part of the law of the land, the decree, order or LOI must be issued by the President in the exercise of his extraordinary power of legislation as contemplated in Section 6 of the 1976 Amendments to the Constitution, whenever in his judgment there exists a grave emergency or a threat or imminence thereof, or whenever the interim Batasan Pambansa or the regular National Assembly fails or is unable to act adequately on any matter for any reason that in his judgment requires immediate action . . . . Verily, not all LOI issued by the President should be dignified into forming part of the law of the land. xxx xxx xxx Moreover, in the earlier cited Philippine Association of Service Exporters, Inc. case, the Court even reiterated that "(u)nlike Presidential Decrees which by usage have gained acceptance as laws promulgated by the President, Letters of Instruction are presumed to be mere administrative issuances except when the conditions set out in Garcia-Padilla v. Enrile 3 exist." And, in the more recent consolidated case of Poliand Industrial Limited vs. National Development Company , 4 the Court stressed "Only when issued under any of the two circumstances will a decree, order or letter be qualified as having the force and effect of law. The decree or instruction should have been issued either when there existed a grave emergency or threat or imminence or when the Legislature failed or was unable to act adequately on the matter. The qualification that there exists a grave emergency or threat or imminence thereof must be interpreted to refer to the prevailing peace and order conditions because the particular purpose the President was authorized to assume legislative powers was to address the deteriorating peace and order situation during the martial law period. xxx xxx xxx. Taking into consideration the foregoing pronouncements, and in view of the absence of the two important conditions which would qualify LOI No. 1387 into a law, it is also our considered view that said LOI is only an administrative issuance. A careful reading of LOI No. 1387 would show that the said letter of instruction was issued primarily to ensure that the export of coppers will not adversely affect the supply and delivery of copper concentrates to PASAR. Such favorable treatment of PASAR comes from the fact that it is a government-owned corporation. It is identified by the government as one of its industrial projects aimed at contributing to the country's industrial development, with the end view of reflecting the country's pursuit to have a stable national economy. Moreover, from the time PASAR became a privately-owned entity, it loses the protection given by LOI No. 1387. A contrary rule would give PASAR, a privately-owned corporation, gain an undue or unfair advantage over other similar companies in the pursuit of their respective competing business. In other words, PASAR should be placed on equal footing with other companies of similar class. Such equal footing would give them the opportunity to have free competition such that if a certain advantage, privilege or favor is given, it must be enjoyed by all companies belonging to the same class. This is necessary so as not to violate the "equal protection clause" of the 1987 Philippine Constitution. cIECTH Presently, it can be seen that the government's policy is the reduction of barriers to commerce to promote trade in goods, services, and investments. Thus, the continued implementation of LOI No. 1387 would be contrary to the government's thrust on free competition and trade liberalization. Please be guided accordingly. Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Department of Justice Footnotes 1. DOJ Opinion No. 017 dated March 27, 2012; and No. 063 dated September 11, 2006. 2. Philippine Association of Service Exporters, Inc. vs. Torres , G.R. No. 98472, August 19, 1993. 3. Garcia-Padilla vs. Enrile , G.R. No. 61388, April 20, 1983. 4. Poliand Industrial Limited v. National Development Company , G.R. Nos. 143866 and 143877, August 22, 2005, 467 SCRA 500, 543.