DOJ Opinion No. 104, s. 1991

DOJ OPINION NO. 104 , s. 1991 July 8, 1991 Director Joel D. Muyco Mines and Geosciences Bureau North Avenue, Diliman Quezon City Sir : This has reference to your queries relative to the rule-making power of the Secretary of the Department of Environment and Natural Resources (DENR) under Section 6 of Executive Order No. 279 which was the subject of this Department's Opinion No. 175, s. 1990. Your said queries were endorsed to this Department by DENR Secretary Fulgencio S. Factoran, Jr. prcd In Opinion No. 175, s. 1990, we stated, among others, that the rule-making authority granted to the DENR Secretary under Secretary under Section 6 of E.O. No. 279 does not envision the issuance of guidelines by which the President shall execute financial and technical assistance agreements (FTAA) with the foreign proponents. However, the DENR Secretary may issue guidelines pertaining to the acceptance, processing and evaluation of such proposals by the Office of the Secretary, because under Section 4 of E.O. No. 279, the DENR Secretary is the official empowered to" accept, consider and evaluate" FTAA proposals. By way of clarification, you raise the following queries, to wit: "1) If the DENR Secretary can only formulate Guidelines by which his office shall 'accept, consider and evaluate' proposals for FTAA's, what precisely could be the DENR Secretary cover in his Guidelines? 2) To what extent may the recommendation of the DENR Secretary arising from his acceptance, consideration and evaluation of an FTAA proposal be overridden by the President? 3) What could constitute the objective indicators for such general standards as 'real contributions to the economic growth and general welfare of the country that will be realized' by which the President may enter into FTAA's?" In addition, you also request our comments on the Draft Guidelines on Financial or Technical Assistance Agreement Proposals formulated by the Committee created by the DENR Secretary, which are intended to guide the DENR Secretary in "accepting, considering and evaluating FTAA proposals". Regarding your first query, it is believed that in the exercise of his rule-making power under Section 6 of E.O. No. 279 vis-a-vis FTAA proposals, the DENR Secretary may promulgate guidelines which may include the following: (1) form and manner of filing proposals, specifying the documentary requirements; (2) payment of filing fees and other administrative charges; (3) procedure for evaluating proposals; (4) conditions for the grant; (5) contract period and sharing scheme; and (6) such other matters as will enable the DENR Secretary to make a judicious evaluation of the proposals taking into consideration constitutional and statutory limitations. In this connection, subject to the observations hereunder set forth, we find the coverage of the Draft Guidelines adequate. Anent your second query, it should be stressed that under Section 4 of E.O. No. 279, the DENR Secretary is authorized "to accept, consider and evaluate" FTAA proposals and to recommend the same to the President. On the basis of such recommendation, the President " may execute [the FTAA] with the foreign proponent". Note that the provision uses the word "may" which, in the absence of a provision indicating the contrary, should be taken in its literal sense, meaning that it is "permissive" and operates to confer discretion, and not "obligatory" or imposing a duty which may be enforced (Op., Sec. of Justice. No. 46, s. 1990, citing Bersabal vs. Salvador, 84 SCRA 176 and Vda. de De Mesa vs. Mencias, 18 SCRA 533). In other words, the recommendations of the DENR Secretary on FTAA proposals are not binding on the President who may accept in toto , modify, or completely disregard the same. prcd With respect to your third query, we do not feel competent to even suggest what could possibly be "objective indicators" of "real contributions to the economic growth and general welfare of the country" that may guide the President in entering into FTAAs. These matters are factual or technical in nature and involve the expertise of government economists and environmentalists and who may, therefore, be properly consulted by your Office for the needed inputs. With reference to the draft Guidelines on FTAA, we have a copy of the latest revision (7th draft) on which we have based our comments and recommendations, viz: 1. On Section 3.b dealing with the financial commitment of the FTAA Applicant Under this provision, the applicant would be required to commit the amount of $50,000,000.00 only if the exploration results justify the development of the mine. Since the exploration period is included in the term or duration of the FTAA (see Sec. 7), the applicant should at least be required to submit proof of his financial capability to invest the required $50,000,000.00 capital prior to the execution of the agreement. Otherwise, it might be as better strategy to limit the initial agreement to exploration, with option to enter into an FTAA if the exploration results justify the development of the mine. 2. On Section 4.4 requiring submission of documents pertaining to the juridical personality of the applicant This provision should specify the particular documents to be submitted by the applicant, such as Articles of Incorporation, By-Laws, SEC registration papers, BOI registration papers, and similar documents. 3. On Section 5.e which includes "private lands" among the areas available for FTAA In those cases where the applicant is not the owner of the private land covered by the proposed FTAA, the applicant should be made to secure the written consent of the owner. 4. On Section 6 prescribing the maximum areas allowed per project area This provision provides that the maximum area which may initially be granted for each project area shall be subject to relinquishment to the extent of 90% of the contract after four years of exploration. Since the prescribed allowable initial maximum grant is 100,000 hectares or 1,235 blocks for onshore mining, and 1,296,00 hectares or 16,000 blocks for onshore mining, and 1,296,000 hectares or 16,000 blocks for offshore mining, the maximum area to be retained after four years of exploration should be 10,000 hectares or 123.5 blocks for onshore and 129,600 hectares or 1,600 blocks for offshore, instead of 5,000 hectares or 62 blocks for onshore and 81,000 hectares or 1,000 blocks for offshore as provided for in said provision. 5. On Section 8 prescribing the procedure for filing and evaluation of FTAA proposals Under Section 8, all FTAA proposals shall be filed with the Central Office Technical Secretariat (COTS), "copy furnished the Regional Office (RO) concerned". The RO shall check/process the application and submit its recommendation to the COTS which shall, in turn, consolidate all comments and recommendations and forward the same to the FTAA Negotiating Panel for evaluation. Since the applications will be initially processed by the RO anyway, it may be more expeditious to require filing of the proposals directly with the RO, copy furnished the COTS. It is also suggested that the membership of the FTAA Negotiating Panel be specified. 6. On Section 10 enumerating the obligations of the Contractor Paragraph (1) would make it the contractor's obligation to "provide a provision on Consultation and Arbitration with respect to interpretation and implementation of the agreement". It is believed that the matter of consultation and arbitration should not be made to depend on the will of the contractor. Instead, there should be a standard provision on this matter in all FTAAs. 7. On Section 1 providing for conversion of the FTAA into MPSA This provision provides that if during the exploration period, the contractor finds that the contract area is not viable for large-scale mining, the contractor may opt to convert the FTAA to MOSA (mineral production sharing agreement). In line with our comments in No. 1 hereof, the Government may also consider entering into exploration agreements initially, after which the contractor shall have the option to enter into an FTAA or an MPSA, as the case may be, with the Government. 8. On Section 13 providing for revenue-sharing This provision would provide for a very generous sharing of net proceeds in favor of the contractor. While a 60-40 sharing of net proceeds is provided, the Government's share of 60 percent would be inclusive of the 35% corporate tax payable by the contractor. Likewise, the Government's share shall be collected only after full recovery by the contractor of its pre-operating expenses. prcd The provision is legally objectionable in that it would in effect allow the offsetting of taxes by an administrative agency without a law expressly authorizing it. Moreover, the proposed arrangement would effectively dilute the 60-40 sharing ratio and could be violative of the Constitution's nationalistic policy. 9. On Section 16 providing for disposal of property after contract period expires This provision should make it clear that only movable property or such materials, equipment, plant or installations erected or placed on the area as may be removed without causing damage to the works may be removed and exported by the contractor upon the termination of the agreement. Please be guided accordingly. Very truly yours, (SGD.) FRANKLIN M. DRILON Secretary