G.R. No. 244063 - Concurring Opinion

G.R. No. 244063, June 21, 2022,
♦ Decision, Inting, [J]
♦ Concurring and Dissenting Opinion, Leonen, [J]
♦ Concurring Opinion, Caguioa, [J]
♦ Concurrence, Lazaro-Javier, [J]
♦ Separate Concurring Opinion, Dimaampao, [J]

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.

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.

The instant consolidated petitions ask this paramount question: What are the effects of the requirements of Free and Prior Informed Consent (FPIC) and Certification of the National Commission on Indigenous Peoples (NCIP Certification) previewed by Republic Act No. (RA) 7942 or the Philippine Mining Act of 1995 (Philippine Mining Act) and embodied in RA 8321 or the Indigenous People's Rights Act of 1997 (IPRA) on a bid for the renewal of a Mineral Production Sharing Agreement (MPSA) first executed prior to the effectivity of said laws. Necessarily, the query here for the Court's determination is whether or not an MPSA may be renewed on its original terms without regard to or compliance with the additional policy-imbued conditions that have been straightforwardly required by laws that were legislated during the MPSA's original term.

I concur with the ponencia's granting of the petitions on the basis of the following findings: (i) the arbitral award in favor of respondents must be vacated; (ii) the rule on arbitral autonomy is not absolute as one notable exception to this is when it is against public policy; (iii) the arbitral award here was a clear violation of public policy of protecting the rights of the indigenous peoples; and that (iv) respondents have no vested right in the MPSA renewal since a mining agreement is a mere privilege.

In order to sufficiently elucidate the premises of the instant concurrence, a brief recollection of the factual history of the dispute is in order.

This controversy involves the 25-year term MPSA No. 001-90 (MPSA No. 001-90) dated March 3, 1990 wherein the Department of Environment and Natural Resources (DENR) authorized respondents Lepanto Consolidated Mining Company and Far Southeast Gold Resources, Inc. (collectively, respondents) to undertake mining operations on a tract of land in Mankayan, Benguet, which the ponencia itself acknowledges as one that covers part of the ancestral domains of the Mankayan Indigenous Cultural Communities/Indigenous Peoples (ICCs/IPs).1

The only determinative issue here pertains to the sought renewal of the MPSA, in light of new laws enacted after it was executed, particularly, the Philippine Mining Act which was enacted in 1995, and the IPRA, which was enacted in 1997. The Philippine Mining Act regulates the exploration, development and utilization of mineral resources, while the IPRA, for its part: (i) enjoins all departments and government agencies from granting, issuing, renewing concessions, licenses, leases or product-sharing agreements without prior NCIP Certification that the area subject of the same does not overlap with any ancestral domain, and (ii) requires the FPIC of the affected ICCs/IPs as a condition for the issuance of the NCIP Certification, among others.

The above dispute came to a head when, approaching the expiration of MPSA No. 001-90, respondents wrote the Mines and Geosciences Bureau-Cordillera Administrative Region (MGB-CAR) and expressed their intention to renew the same for another 25 years, pursuant to the renewal clause therein which provides that the same shall be renewable for another period of 25 years upon such terms and conditions as may be mutually agreed upon by the parties or as may be provided by law.2

The MGB-CAR replied that respondents' application for renewal would be endorsed to the NCIP for appropriate action, with particular attention to the requirements of FPIC and NCIP Certification. Respondents questioned the endorsement to the NCIP, argued that MPSA No. 001-90 was exempted from the FPIC and NCIP Certification requirements, and alleged that said conditions were an impairment of their vested rights. Respondents wrote to the DENR and later served it with a Demand for Arbitration. They also obtained a Writ of Preliminary Injunction from Branch 149, Regional Trial Court of Makati City (RTC) which enjoined the DENR, MGB and NCIP from disturbing their mining operations in the area pending resolution of the dispute.

When the dispute was brought before the Arbitral Tribunal pursuant to the arbitration clause in MPSA No. 001-90, the Arbitral Tribunal found that the issues brought to it were arbitrable and thereafter held that: (i) the FPIC and the NCIP Certification were "unfavorable future legislation requirement[s]"3 and were prejudicial to respondents; (ii) the renewability of the MPSA was a vested right of respondents, and that the imposition of the FPIC and the NCIP Certification which were not contained in MPSA No. 001-90, was an outright confiscation of respondents' investments; and that (iii) MPSA No. 001-90 was deemed renewed since the correspondence between parties showed that respondents already complied with all the requirements, except for the FPIC and the NCIP Certification.

When petitioners filed a petition to vacate the Arbitral Award before the RTC, the latter ordered the vacation of the same for the following reasons: (i) the Arbitral Tribunal exceeded its authority since the resolution of the controversy was not confined to the terms of the contract but involved the application of the IPRA and the Philippine Mining Act; (ii) the IPRA was an exercise of the State's police power in protecting IP rights, which is superior to respondents' principle of non-impairment of contracts; and (iii) the parties cannot dispense with the requirement without contravening the underlying public policy embodied in the IPRA on the promotion and protection of the rights of the ICCs/IPs.

On appeal before the Court of Appeals (CA), the CA set aside the RTC Resolution and reinstated the Arbitral Award, and ruled that: (i) the RTC committed grave abuse of discretion when it vacated the Arbitral Award and held that the dispute relates to the correct interpretation and enforceability of the MPSA's renewal provision; hence, it is a proper subject of arbitration; (ii) the Arbitral Tribunal has authority and jurisdiction to interpret and apply relevant laws in resolving the disputes presented before it; and (iii) the grounds for vacating an arbitral award are not concerned with the correctness of the award, but only with the validity of the arbitration agreement or the regularity of the arbitration proceedings.4

Ruling now on the consolidated petitions which challenge the CA's Decision, the ponencia grants them, reverses the CA, finds that the Arbitral Award in favor of respondents must be vacated5 and finds that: (i) the RTC can review the substantive merits of an arbitral award based on what it perceives as errors of law or fact committed by the arbitral tribunal; and (ii) the Arbitral Tribunal exceeded its authority when it determined that the FPIC and the NCIP Certification were violative of the principle of non-impairment of contracts.

The ponencia finds merit in petitioners' invocation of the Arbitral Award's violation of public policy, and rules that the Arbitral Tribunal's determination and exemption of respondents from the IPRA requirement of the FPIC and the NCIP Certification Precondition did not relate to a mere interpretation of law, but instead contravenes compelling public policy on the protection of the rights of the ICCs/IPs to their ancestral domains.6

In view of the above context, I join the ponencia, with the groundwork for the same outlined in the following discussions.

Preliminarily, it is perhaps worth articulating as a matter of framework that the instant controversy is not one which may be justly and sufficiently resolved by simply referring to the four corners of the MPSA in question.

At once, the Court must recognize, as it does, that the legal issue here presented reaches beyond the limited confines of contractual matters between parties and the oft-referred to principle of non-impairment of contracts, and more importantly rises to the level of constitutional proportions set in a complex balancing act and cross-section between and among the following: (i) a private contractor's interest in recovering investments; (ii) the Government's role as the grantor of permits for mining explorations and operations as well as the regulator thereof; and finally (iii) the State's duty to protect and preserve the rights of the ICCs/IPs who are evidently not party to the agreement between the private contractor and the Government, but whose self-determination and sense of integrity are irreversibly intertwined with the land that is subject of the same.

It is my considered view that given the above interaction of varying interests and duties, the Legislature, in its wisdom, stepped in when it enacted two pivotal and far-reaching laws in 1995 and 1997, i.e., the Philippine Mining Act and the IPRA, respectively, and categorically imposed by law what may have been impossible to achieve if left to the aspirations of voluntary altruism and self-denial. With two legislations, the law expressly provided for a mechanism to ensure the protection of the ICCs/IPs who previously and far too often had no say in matters of great import to the resilience of their culture of way of life.

Given that two important and unrepealed laws expressly impose a requirement pursuant to the protection of indigenous rights, I submit that it is therefore only incumbent upon the Court to remind that arbitral awards, however respected in their autonomy, do not enjoy unqualified deference when exercised imperfectly or in excess, or when otherwise are clearly violative of expressed public policy. In the same vein, the Court here must also caution, lest a belief to the contrary pervades, that there can be no inalienable or vested right on matters that are purely conditioned privileges granted by the government, especially when measured against overarching constitutional matters that are imbued with public interest.

The rationale for the above position is two-tiered, and will be discussed in seriatim.

In addition to the grounds under RA 876, the Special ADR Rules also govern the instant case, which adds another exceptional ground for vacatur of an arbitral award: clear affront to public policy

In addition to the grounds provided for under Section 24 of RA 876 or The Arbitration Law, also applicable to the instant controversy is A.M. No. 07-11-08-SC or the Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules). Made effective on October 30, 2009 pursuant to the country's policy to move towards a more arbitration friendly regime, Rule 1.1 of the Special ADR Rules enumerates the cases which the Special ADR Rules cover, which includes the vacation of domestic arbitration awards, to wit:

As mentioned in the ponencia, the Special ADR Rules bring to the table another exception to the general rule and policy of judicial restraint with respect to intervening or reviewing an arbitral award: violation of the State's public policy.

First articulated in Article 34 of the 1985 UNCITRAL Model Law,7 this exceptional ground for vacation or setting aside an award on account of conflict with the country's public policy was first carried over into the municipal context in Article 4.34, Rule 5, Chapter 48 of the Implementing Rules and Regulations (IRR) of the ADR Act of 2004, in relation to international commercial arbitration, and Rule 19.10 of the Special ADR Rules which applies also to domestic arbitration.

For the more specific interest of the instant case, Rule 19.10 of the Special ADR Rules provides:

Even in the en banc case of Global Medical Center of Laguna, Inc. v. Ross Systems International, Inc.,9 where the Court reaffirmed the policy of judicial non-interference in construction arbitral awards of the Construction Industry Arbitration Commission (CIAC), the Court there nevertheless clearly laid down that the preferred arbitral autonomy is circumscribed either by challenges to the very integrity of the arbitral tribunal or allegations that the arbitral award violates the Constitution or the law, in which cases the Court may revisit the entire arbitral award, viz.:

To my mind, therefore, the litmus test that is primarily called for in assessing whether the RTC had the authority to review and vacate the Arbitral Award in question was whether, as submitted by petitioners, the said Award violates public policy under Rule 19. 10 of the Special ADR Rules.

The facts and the law of case show that the only defensible conclusion of the Court must be in the affirmative.

The Arbitral Award in question, in its blanket exception of the MPSA from the coverage of IPRA, is a clear violation of public policy which allows for its review and vacatur

The factual milieu of this case, with particular focus on how the Arbitral Award found that MPSA No. 001-90 should be renewed without need to comply with the FPIC and NCIP Certification as required by the IPRA, qualifies as a notable exception, i.e., violation of public policy under Rule 19.10 of the Special ADR Rules — which therefore places the Arbitral Award within the scope of judicial review.

Once more, it bears repeating that the overarching exceptional ground under Article 34 of the 1985 UNCITRAL Model Law, as reproduced in Chapter 4 of the IRR of ADR Act of 2004 and Rule 19.10 of the Special ADR Rules, as quoted above, qualifies that no degree of arbitral autonomy can force the Court to give an imprimatur to an award that is demonstrably contrary not only to law but to public policy.

When the Arbitral Award in question made the legal conclusion that the expiring MPSA No. 001-90 may be renewed without giving any regard to legal requirements that have already been in place as early as five years into said MPSA's 25-year term, said Arbitral Award evidently fell within the sphere of those awards that may be argued as contrary to law, since it finds that the respondents here may completely carve themselves out of the application of existing legal requirements under the IPRA. On this point, alone, I am hard-pressed to find the RTC in error for holding that the Arbitral Tribunal's award may be vacated under Rule 19.10 of the Special ADR Rules for being contrary to law and the public policies that imbued these laws.

Specifically, the Arbitral Award created an exception from the Philippine Mining Act and the IPRA, where no such exceptions were provided for by these laws. In fact, and starkly to the contrary, these laws positively require mineral agreements and mining activities to be informed and undertaken with due regard to the very rights that respondents here pray they may be freed from having to reckon with. This, the Court cannot countenance either in sound law or good conscience, without tearing through the very fabric of the constitutional policy, as reflected in positive legislation and landmark jurisprudential rulings, of upholding the rights of the ICCs/IPs.

For one, the Philippine Mining Act enjoins that mineral resource exploration must be undertaken in a manner that ensures the protection of communities that may be affected by such activities. This much is unmistakable in the black letter of the law. For one, its policy declared under Section 2 thereof categorically situates the Philippine Mining Act within the aim of promoting rational exploration of the country's mineral resources in a manner that effectively protects the rights of the collocated11 affected communities, to wit:

More particularly, Section 4 thereof positively vests the State with the duty to uphold the constitutionally safeguarded protection of ICCs/IPs in the process of mineral resource utilization, thus:

Still more, even prior to the effectivity of the IPRA, the notion of requiring consent of the ICCs/IPs was already provided for in Section 16, in relation to Section 17, of the Philippine Mining Act, viz.:

Two years after the Philippine Mining Act took effect, the general requirement of consent on the part of ICCs/IPs whose communities may be affected by mining operations took on a more specific and concrete version, through the FPIC requirement.

Finding its roots mainly in the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), which the Philippines adopted in September 13, 2007, the FPIC is required in all decision-making processes that affect the ICCs/IPs or their territories, such as those that may involve relocation (Articles 10),12 the practice of their cultures and traditions (Article 11),13 and the implementation of legislative or administrative measures (Article 19).14

More specifically, Articles 28, 29 and 32 require the governments to obtain the FPIC of the ICCs/IPs on matters that affect the utilization and preservation of their territories, as well as empowers the latter to seek redress in case of non-compliance of the FPIC condition, thus:

Furthermore, the above UNDRIP pronouncements took on a more concrete and municipal version when the IPRA was passed into law on October 29, 1997, within the larger and constitutional policy structure of recognizing and promoting all the rights of the ICCs/IPs, as broadly provided for under Section 2 thereof, viz.:

Expressly, Section 3(g) of the IPRA adopted the UNDRIP definition of FPIC and defined it thus:

g) Free and Prior Informed Consent — as used in this Act shall mean the consensus of all members of the ICCs/IPs to be determined in accordance with their respective customary laws and practices, free from any external manipulation, interference and coercion, and obtained after fully disclosing the intent and scope of the activity, in a language and process understandable to the community;

Still more pertinently in the evaluation of the renewability of MPSA No. 001-90, Section 59 in relation to Section 57 of the IPRA enjoins all concerned government agencies and instrumentalities from granting or entering into product-sharing agreements, among others, without the compliance with the FPIC requirement, to wit:

As demonstrated in the phraseology of Section 59 of the IPRA as quoted above, the imposition of the FPIC as a requirement for product-sharing agreements includes the prayer for renewal of existing ones that are approaching the end of their terms. Therefore, respondents' submission that MPSA No. 001-90 may be automatically renewed without due regard for any new requirements under the law that did not exist when the MPSA was first granted suffers from much hubris and little support. Contradistinctively, upon the expiration of MPSA No. 001-90 in 2015, the requirements of the FPIC and the NCIP certification for all mineral agreements are already in place, to which the renewability of the expired MPSA must henceforth be subjected.

In addition, it is similarly precariously sweeping for respondents to operate under the presumption that the FPIC is but a singular technical requirement that they can opt out of in the name of non-impairment of contracts. As the Food and Agriculture Organization (FAO) of the United Nations succinctly puts it:

Even jurisprudentially, the FPIC has also long been held as an integral aspect of the precondition for lawful exploration and mining activities in a land that forms part of an ancestral domain. In the landmark case of Cruz v. Secretary of Environment and Natural Resources,16 then Associate Justice Reynato S. Puno elucidated on the weight of Section 59 of the IPRA, viz.:

More recently, in the 2019 case of Maddela v. Oxiana Philippines, Inc.,18 which similarly involved a mining exploration in a tract of land that is within an ancestral domain, the Court explained the import of an FPIC, thus:

I must also humbly take exception to the averment of the respondents that the renewability of MPSA No. 001-90 is a vested right, and that the additional requirements under the law may not be considered with respect to its renewal without confiscating their investments. For purposes of freeing this submission from dangerous inaccuracy, it must be recalled that an MPSA is defined under Section 26 of the Philippine Mining Act thus:

The phraseology of the definition of an MPSA clearly provides that it is not a vested right but a mere grant extended by the Government, that is limited in term and the conditions for the renewal of which, as MPSA No. 001-90 itself recognizes, are subject to mutual agreement or provisions of law. The nature of the MPSA as argued by the respondents to be "vested" is therefore belied by the fact that (i) the MPSA is a mere grant of a privilege which is term-bound; and (ii) the very MPSA in question itself admits that its renewal is not privileged but subject to mutual agreement or provisions of law. Respondents, under MPSA No. 001-90, therefore merely enjoy a privilege granted to it by the Government, and awarded in accordance with legal requirements and public policies. The unambiguous pronouncement of the need to review existing grants relating to mining rights wholly negates respondents' submission that the renewal of MPSA No. 001-90 has vested in their favor.

In addition, while it is true that Section 32 of the Philippine Mining Act provides that an MPSA may be renewable for another term not exceeding 25 years under the same terms and conditions thereof, without prejudice to changes mutually agreed upon by the parties, the same provision is deemed modified by the IPRA's later addition of conditions that must be complied with before a mineral agreement may be renewed.

Still more, neither does respondents' citation of Section 56 of the IPRA support their averment of an effective blanket guarantee of renewal of MPSA No. 001-90. Section 56 of the IPRA assures that upon IPRA's effectivity, existing property rights within the ancestral domains are to be recognized and respected, viz.:

SECTION 56. Existing Property Rights Regimes. — Property rights within the ancestral domains already existing and/or vested upon effectivity of this Act, shall be recognized and respected.

Section 56, however, only guarantees that existing property rights are to be recognized and respected. Section 56 does not, however, extend so far as to guarantee the renewal of property rights that have ceased to exist upon the expiration of a contract that grants the same. Section 56 of the IPRA, on respecting existing property rights on the ancestral domains, is not irreconcilable with the requirement of FPIC and NCIP Certification insofar as the property interests of respondents are concerned. Quite the contrary, Section 56 only provides that the enactment of the IPRA does not amount to an effective ground for displacement or abortion of existing property rights (e.g., MPSA rights) on the ancestral domains, but does not extend to any assurance that existing MPSAs, upon their expiration, may be renewed and carved out of the categorical requirements introduced by the new laws.

In other words, Section 56 of the IPRA, as applied to MPSA No. 001-90, only guarantees that throughout the duration of its original 25-year term, or from 1990-2015, respondents may not be denied the enjoyment of their property rights as granted by the same. This, as far as the records show, appears to be the case since despite the passing of the Philippine Mining Act and the IPRA in 1995 and 1997, respectively, the MPSA of the respondents continued to be respected on the subject property until its expiration in March 2015. So that when respondents sought the renewal of their MPSA in 2015, the Philippine Mining Act and the IPRA have already been in place for over 20 years and 18 years respectively, throughout said period respondents' MPSA was recognized and respected.

However, when MPSA No. 001-90 expired in March 2015, the renewal of the same is an entirely different consideration that has taken it outside of the contemplation of Section 56. Upon the expiration of the term of effectivity of MPSA No. 001-90, there was effectively no longer any existing property right to be respected within the provision of Section 56. Until and unless it is renewed in compliance of all the pertinent conditions that must bear upon its renewal pursuant to law and public policy. Stated differently, a question of a renewal of the same MPSA with the same terms for another 25 years can no longer be had with a complete disregard of new laws and concomitant new requirements and conditions that are clearly already in place.

This is clearly what is not only recognized but unequivocally provided for in the very renewal clause of MPSA No. 001-90 itself, under Section 3.1 thereof, which is cited by the ponencia, to wit:

Necessarily, contrary to respondents' submission, and as clearly provided in the text of the renewal clause of MPSA No. 001-90, the renewability of the said MPSA for another 25 years is not exempt from legal conditions that may be further provided by law, but instead shall be subject thereto.

Within the much larger context of the interplay between financial interests of investors in mineral agreements vis-à-vis the rights of the ICC/IPs in their ancestral domains, the "conditions x x x as may be provided by law" that the renewal clause of MPSA No. 001-90 speaks of undoubtedly includes the FPIC and the NCIP Certification, since they are the pertinent new requirements that have been added by legislation with respect to the grant and renewal of mineral agreements.

Consequently, as correctly held by the RTC, the question of whether the terms of the MPSA may be wholesale renewed without having to comply with the FPIC and the NCIP Certification is not only one which can be resolved with reference to the four corners of MPSA No. 001-90, but instead clearly goes into a legal issue on the reach of subsequently introduced laws that are imbued with public policy. Given this, the RTC did not overstep the bounds of its authority when it went into ruling on this legal question of the effects of the Philippine Mining Act and the IPRA on the plausibility of renewal of MPSA No. 001-90 for respondents, since such a pivotal question is within the competence of the courts.

More crucially, the RTC not only acted within its jurisdiction when it ordered that the Arbitral Award in question be vacated, but that it similarly acted well in accord with prevailing laws and jurisprudence when it did so. Certainly, the courts cannot be forced to affirm an arbitral award that is neither consistent with laws and public policy nor absolute and unqualified in its autonomy.

As the Court held in the case of Mabuhay Holdings Corporation v. Sembcorp Logistics Limited,21 public policy is the "safety valve" to be resorted to when a arbitral award may not be respected without abandoning fundamental precepts of the legal system, viz.:

In the 1916 case of Gsell, the Court ruled that the gravity of the public policy nature of the matter is determined by its source, which includes the Constitution, thus:

Still, in the 1941 case of Monte De Piedad, the Court held that although there was yet no clear-cut definition of public policy, a contract that is prohibited by express legislation, among others, may be considered contrary thereto, to wit:

The foregoing early definitions of what public policy entails clearly paint the picture of a policy that finds its roots in the Constitution, as well as its affirmation or support in subsequent express legislations.

To my mind, there are perhaps few national policies that can readily fit this operative profile than that of the rights of the ICCs/IPs over their ancestral domains, as recognized in black letter under Section 22, Article II,27 Section 5, Article XII,28 and Section 6, Article XIII29 of the 1987 Constitution, as well as affirmed by the Philippine Mining Act and the IPRA.

Finally, and if I may caution to add, it is perhaps not entirely labored to assume that the requirement of an FPIC on the part of the ICCs/IPs was generally introduced in the Philippine Mining Act, and thereafter pointedly required in the IPRA precisely because without such an expression of the same as a legal obligation, private contractors and other mining companies may not be reasonably expected to willingly act against their financial interests in order to ensure that their mining activities do not impair, neglect or defeat acknowledged indigenous rights.

Seeing, as the ponencia itself acknowledges30 the financial toll the FPIC will entail as far as the business interests of the respondents is concerned, I proffer hat that is conceivably why the coercive weight of an expressed legal imperative was called for, lest compliance with unpopular laws and financially costly public policies are easily done away with in the name of preserving optimum business opportunities. I am, therefore, unable to imagine any alternative but for the Court here to make the difficult but inevitable ruling that is underpinned by definite law and overriding public policy.1a⍵⍴h!1

For indeed the interlace of interests involving the mining industry is as complex as it is fragile, and while the Court must acknowledge the value of a more liberalized approach to the exploration of mineral resources in the country, the Court must also notice that said optimization is not an unalloyed benefit. And while the Court understands the financial reversals that respondents fear, the contours of which we can only dimly speculate on, what remains certain and clear as day is the Court's foremost duty to reject unconstitutional mechanisms and escape clauses that facilitate development aggressions on the indigenous communities which the Constitution itself as well as unaltered legislations are already positively guarding against.

Bearing the above in mind, I CONCUR with the ponencia and vote to GRANT the instant petitions.