XIII. NATIONAL ECONOMY AND PATRIMONY A. Regalian doctrine REGALIAN DOCTRINE All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all other natural resources shall not be alienated. [ Art. [ Art. XII, Sec. 2] 2] NOTES:
Regalian Doctrine [Jura Regalia] The King had title to all the land in the Philippines except so far as it saw fit to permit private titles to be acquired. [Cariño [Cariño v. Insular Government (1909)] (1909)] In present context, ownership of all lands of the public domain is vested in the State. The classification of public lands is an exclusive prerogative of the Executive Department through the Office of the President. [Republic [ Republic v. Register of Deeds of Quezon (1994) ] Doctrine of Native Title Ownership over native land is already vested on natives even if they do not have formal titles [Cariño [Cariño v. InsularGovernment InsularGovernment (1909)] (1909) ]
B. Nationalist and citizenship requirement provisions
Exploitation of natural resources 1. Filipino citizens; or 2. Corporations incorporated in RP, with 60% Filipino ownership Operation of Public Utilities 1. Filipino citizens; or 2. Corporations incorporated in RP, with 60% Filipino ownership Acquisition of alienable lands of the public domain 1. Filipino citizens; - lease: not more than 500 hectares - purchase/ homestead/ grant: not more than 12 hectares 2. Corporations incorporated in RP, with 60% Filipino ownership; - only by lease for a period not exceeding 25 years - renewable for not more than 25 years. - must not exceed 100 hectares in area. Practice of ALL Professions 1. Filipino citizens only (natural persons) *Congress may, by law, otherwise prescribe
Mass Media 1. Filipino citizens; 2. Corporations incorporated in RP, and 100% Filipino owned Advertising 1. Filipino citizens; 2. Corporations incorporated in RP, and 70% Filipino owned. Educational institution 1. Filipino citizens; 2. Corporations incorporated in RP, with 60% Filipino ownership EXCEPT: Schools established by religious groups and mission boards. *Congress may, by law, increase Filipino equity requirements for ALL educational institutions. Other economic activities *Congress may, by law, reserve it to Filipino citizens ir to corporations 60% Filipino owned (or even higher) certain investment areas NOTES:
A public utility is a business or service engaged in regularly supplying the public with some commodity or service of public consequence. A joint venture falls within the purview of an “association” pursuant to Sec. 11, Art. XII and must comply with the 60%40% Filipino-foreign capitalization requirement. [ JG Summit Holdings v. CA (2001)] What “ capital ” is covered - The 60% requirement applies to both the voting control and the beneficial ownership of the public utility. Therefore, it shall apply uniformly, separately,and across the board to all classes of shares, regardless of nomenclature or category , comprising the capital of the corporation. (e.g. 60% of common stock, 60% of preferred voting stock, and 60% of preferred non-voting stock.) [Gamboa v. Teves (2012)] Interpretation in line with Constitution’s intent to ensure a “self -reliant and independent national economy effectivelycontrolled by Filipinos.” [See Gamboa v. Teves (2011)] In the original decision, only the voting stock were subject to the 60% requirement. [Id.] There is some controversy in the interpretation of the resolution on the motion for reconsideration. (a) There is the question of whether the grandfather rule should be applied. (b)The dispositive merely denied the MRs, but did not reiterate the newer interpretation. In any case, the released SEC guidelines comply with the strictest interpretation of Gamboa v. Teves. FILIPINO FIRST In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities. [ Art. XII, Sec. 10]
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The term patrimony pertains to heritage, and given the history of the Manila Hotel, it has become a part of our national economy and patrimony. Thus, the Filipino First policy provision of the Constitution is applicable. Such provision is per se enforceable, and requires no further guidelines or implementing rules or laws for its operation. [ Manila Prince Hotel v. GSIS, (1990)] The State shall promote the preferential use of Filipino labor, domestic materials and ocally produced goods, and adopt measures that help make them competitive. [ Art. XII, Sec. 12]
C. Exploration, development and utilization of natural resources
EXPLORATION, DEVELOPMENT AND UTILIZATION OF NATURAL RESOURCES The President may enter into agreements with foreign owned corporations involving eithertechnical 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. In such agreements, the State shall promote the development and use of local scientific and technical resources. [ Art. XII, Sec. 2, par. 4] NOTES:
The State, being the owner of the natural resources, is accorded the primary power and responsibility in the exploration, development and utilization thereof. As such it may undertake these activities through four modes: (1) The State may directly undertake such activities; (2) The State may enter into co-production, joint venture or production-sharing agreements with Filipino citizens or qualified corporations; (3) Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens; or (4) For the large-scale exploration, development and utilization of minerals, petroleum and other mineral oils, the President may enter into agreements with foreign-owned corporations involving technical or financial assistance. [La Bugal-B’Laan Tribal Assn. v. Ramos, [Jan. 2004)] Service Contracts not prohibited. Even supposing FTAAs are service contracts, the latter are not prohibited under the Constitution. [Justification: A verba legis interpretation does not support an intended prohibition. The members of the CONCOM used the terms “service contracts” and “financial and technical assistance” interchangeably.] [La BugalB’laan Tribal Assn. v. Ramos, (Dec. 2004)] The following are valid: (1) Financial and Technical Assistance Agreements (FTAA)– not a prohibited agreement in the contemplation of the Constitution (2) Philippine Mining Law (RA 7942)
(3) Its Implementing Rules and Regulations, insofar as they relate to financial and technical agreements [La Bugal-B’laan Tribal Assn. v. Ramos (Dec. 2004) ]
The Constitution should be construed to grant the President and Congress sufficient discretion and reasonable leeway to enable them to attract foreign investments and expertise, as well as to secure for our people and our posterity the blessings of prosperity and peace. It is not unconstitutional to allow a wide degree of discretion to the Chief Executive, given the nature and complexity of such agreements, the humongous amounts of capital and financing required for large-scale mining operations, the complicated technology needed, and the intricacies of international trade, coupled with the State’s need to maintain flexibility in its dealings, in order to preserve and enhance our country’s competitiveness in world markets. [La Bugal-B’laan Tribal Assn. v. Ramos, id.]
D. Franchises, authority and certificates for public utilities
FRANCHISES, AUTHORITY AND CERTIFICATES FOR PUBLIC UTILITIES Franchise, certificate or any other form of authorization for the operation of public utilities – ONLY to citizens of the Philippines, or corporations at least 60% of whose capital is Filipino-owned. [ Art. VII, Sec. 11] NATURE OF THE FRANCHISE: (1) It is a privilege not a right (2) Shall NOT be exclusive; (3) Shall NOT be for a period of more than 50 years; (3) Shall be subject to amendment, alteration or repeal by Congress. NOTES: Jurisprudence: (1) Congress does not have the exclusive power to issue franchises. Administrative bodies (i.e. LTFRB, Energy Regulatory Board) may be empowered by law to do so. [ Albano v. Reyes (1989)] (2) What constitutes a public utility is not the ownership but the use to the public. The Constitution requires a franchise for the operation of public utilities. However, it does not require a franchise before one can own the facilities needed to operate a public utility so long as it does not operate them to serve the public. [Tatad v. Garcia (1995)] E.g. X Company may own an airline without the need of a franchise. But in operating an air transport business, franchise is required.
E. Acquisition, ownership and transfer of public and private lands ACQUISITION, OWNERSHIP AND TRANSFER OF PUBLIC AND PRIVATE LANDS Lands of the Public Domain are classified into: (1) Agricultural Lands (2) Forest or Timber Lands (3) Mineral Lands (4) National Park [ Art. XII, Sec. 3]
NOTES:
The classification of public lands is a function of the executive branch, specifically the Director of the Land Management Bureau (formerly Director of Lands). The decision of the Director, when approved by the Secretary of the DENR, as to questions of fact, is conclusive upon the courts. [Republic v. Imperial (1999)]. Alienable lands of the public domain shall be limited to agricultural lands. [ Art. XII, Sec. 3] To prove that the land subject of an application for registration is alienable, an applicant must conclusively establish the existence of a positive act of the government such as a presidential proclamation or an executive order or a legislative act or statute. [Republic v. Candymaker, Inc.(2006)] Foreshore land is that part of the land which is between the high and low water, and left dry by the flux and reflux of the tides. It is part of the alienable land of the public domain and may be disposed of only by lease and not otherwise. [Republic v. Imperial, supra] Private corporations or associations may not hold such alienable lands of public domain except by lease, for a period not exceeding 25 years, and not to exceed 1000 hectares in area. Citizens of the Philippines may lease not more than 500 ha., or acquire not more than 12 hectares thereof by purchase, homestead, or grant. [ Art. XII, Sec. 3] PRIVATE LANDS General Rule: No private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. [ Art. XII, Sec. 7 ] Exceptions: (1) Hereditary succession (art. XII, sec. 7) (2) A natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law. (art. XII, sec. 8)
Consequence of sale to non-citizens: Any sale or transfer in violation of the prohibition is null and void. [Ong Ching Po. v. CA (1994)]. When a disqualified foreigner later sells it to a qualified owner (e.g. Filipino citizen), the defect is cured. The qualified buyer owns the land. [See Halili v. CA (1998)]
Can a former owner file an action to recover the property? Yes. The Court in Philippine Banking Corp. v. Lui She, (1967) abandoned the application of the principle of in pari delicto. Thus, the action will lie. HOWEVER, land sold to an alien which was later transferred to a Filipino citizen OR when the alien later becomes a Filipino citizen can no longer be recovered by the vendor, because there is no longer any public policy involved. [Republic v. IAC (1989)]
F. Practice of professions PRACTICE OF PROFESSIONS The practice of all profession in the Philippines shall be limited to Filipino citizens, save in the case prescribed by law. [ Art. XII, Sec. 14]
G. Organization and regulation of corporations, private and public ORGANIZATION AND REGULATION OF CORPORATIONS, PRIVATE AND PUBLIC (Stewardship Concept) The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands. [ Art. XII, Sec. 6] NOTES:
The State shall apply the principles of agrarian reform or stewardship, whenever applicable in accordance with law, in the disposition or utilization of other natural resources, including lands of the public domain under lease or concession suitable to agriculture, subject to prior rights, homestead rights of small settlers, and the rights of indigenous communities to their ancestral lands. [ Art. XIII, Sec. 6] Formation (1) Private corporations Congress can only provide for the formation, etc of private corporations through a general law. (2) GOCC’s They may be created by: a) Special charters in the interest of the common good and subject to the test of economic viability. b) By incorporation under the general corporation law.
H. Monopolies, restraint of trade and unfair competition MONOPOLIES The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed. [ Art. XII, Sec 19] NOTES:
Although the Constitution enshrines free enterprise as a policy, it nevertheless reserves to the Government the ower to intervene whenever necessary for the promotion of the general welfare. [Philippine Coconut Dessicators v. PCA (1998)] Monopolies are not per se prohibited by the Constitution but may be permitted to exist to aid the government in carrying on an enterprise or to aid in the performance of various services and functions in the interest of the public .Nonetheless, a determination must first be made as to whether public interest requires a monopoly. As monopolies are subject to abuses that can inflict severe prejudice to the public, they are subject to a higher level of State regulation than an ordinary business undertaking. [ Agan, Jr. v. PIATCO (2003)]
