Atty. Julius Gregory Delgado
“LONE CONGRESSIONAL DISTRICT OF BENGUET PROVINCE VS. LEPANTO CONSOLIDATED MINING CO. AND FAR SOUTHEAST GOLD RESOURCES, INC.”, G.R. NOS. 244063 AND 244216 (JUNE 21, 2022):SUPREME COURT REINSTATES VACATUR OF ARBITRAL RULING ON THE GROUND OF PUBLIC POLICY TO PROTECT THE RIGHTS AND WELFARE OF INDIGENOUS PEOPLES
Lepanto Consolidated Mining Co. and Far Southeast Gold Resources, Inc. (“respondents”) are holders of Mineral Production Sharing Agreement (“MPSA”), a form of mineral agreement, with the National Government, through the Department of Environment and Natural Resources (“DENR”). Respondents’ MPSA has an initial term of 25 years 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 for by law”. Prior to the expiration of the initial term, respondents manifested that they wish to avail of the renewal clause. The Mines and Geosciences Bureau (“MGB”), the agency tasked to regulate large-scale mining in the country, found all requisites for renewal extant except that the MGB referred/indorsed the application for renewal to the National Commission on Indigenous Peoples (“NCIP”) for Free and Prior Informed Consent (“FPIC”) process and Certification Precondition requirement under Republic Act No. 8371, otherwise known as the Indigenous Peoples Rights Act of 1997 (“IPRA”), since the MPSA covers part of the Ancestral Domain of the Indigenous Cultural Communities/Indigenous Peoples (“ICCs/IPs”) of Mankayan, Benguet. Since respondents’ representation with the DENR that it is exempted from the FPIC process and Certification Precondition requirement of the IPRA, they sent a Demand for Arbitration to the Republic under the Arbitration Clause of its MPSA.
The Arbitral Tribunal issued a Final Award holding that the issue arising from the FPIC and Certification Precondition requirements for the renewal of MPSA is arbitrable and that the renewability of the MPSA under its original terms and conditions is a vested right in favor of the respondents. The Arbitral Tribunal also found the MPSA deemed renewed based on the correspondence between the Republic, through the MGB, as the respondents complied with all the requirements for renewal of the MPSA save for the FPIC and Certification Precondition requirements under the IPRA.
Disagreeing, the Republic filed a Petition to Vacate Arbitral Tribunal before the Regional Trial Court of Makati City, Branch 141 on the following grounds: 1) the matter of applicability of IPRA imposing FPIC and Certification Precondition requirements as an additional requirement of MPSA renewal is non-arbitrable; 2) the application of IPRA is a matter of public policy which cannot be subject to the will of the parties, or the determination of the Arbitral Tribunal, and this public policy on the protection and promotion of the interests of the ICCs/IPs is deemed written in the MPSA; 3) the renewal of MPSA is imbued with public interest and is thus subject to the inherent police power of the State to protect and promote interests of the ICCs/IPs; and 4) respondents do not have vested right to renew the MPSA since the same is contingent upon their full compliance with the requirements imposed by law. The trial court vacated the Arbitral Award. However, the Court of Appeals overturned the trial court’s ruling.
Before the Supreme Court, on the issue of intervention, the Supreme Court held that the Court of Appeals is correct in disallowing the intervention of the Lone Congressional District of Benguet, represented by then Cong. Ronald Cosalan. The Supreme Court held that the Special Alternative Dispute Resolution (“ADR”) Rules do not include a mechanism for intervention. Likewise, intervention under the Rules of Court, even in a suppletory manner, is not allowed as it is evident from Rule 22.1 of the Special ADR Rules, which explicitly states that “provisions of the Rules of Court that are applicable to the proceedings enumerated in Rule 1.1 of the Special ADR Rules have either been included and incorporated in the Special ADR Rules or specifically referred to therein. Rule 1.13 thereof provides that “in situations where no specific rule is provided under the Special ADR Rules, the court shall resolve such matter summarily and be guided by the spirit and intent of the Special ADR Rules and the ADR Laws.”
The Supreme Court applied the statutory construction principle of “ratio legis est anima”, which provides that “a thing which is within the intent of the lawmaker is as much within the statute as if within the letter; and that which is within the letter but not within the spirit is not within the statute.” The Court held that every interpretation of the Special ADR Rules and ADR Laws should be made consistent with their objectives, i.e., to respect the party autonomy or the freedom of the parties to achieve speedy and efficient resolution of disputes, and curb litigious culture.
On the substantive aspect, the Supreme Court reversed and set aside the Court of Appeals ruling and reinstated the trial court vacatur of the Arbitral Award. The Court held that there are grounds to vacate an arbitral award and one of these grounds is when the award conflicts with the public policy of the Philippines. The Supreme Court upheld the Republic’s invocation of public policy ruling that the “rights of indigenous cultural communities to their ancestral lands to ensure their economic, social, and cultural well-being,” is a Constitutionally declared policy of the State. The Court held that this State Policy is also reflected under the Philippine Mining Act of 1995, particularly Section 16 thereof, which states that “no ancestral land shall be opened for mining-operations without prior consent of the indigenous cultural community concerned.”
The Supreme Court went to the extent in ruling that the Arbitral Tribunal “exceeded its powers and so imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to it was not made.” The Court held that the Arbitral Tribunal’s determination on the non-application of the FPIC and Certification Precondition requirements mandated under Section 59 of the IPRA cannot be said to affect exclusively the parties of the MPSA only and the arbitration proceedings. The Court held that it has far reaching effects to the ICCs/IPs of Mankayan, Benguet whose rights to their ancestral domains recognized by the State would be prejudiced.
Further, the Court held that respondents do not have vested right for the renewal as a mineral agreement partakes of a mere privilege, license or permit granted by the State. The Court also underscored that its renewal clause is subject to “conditions as may be provided by law.” Finally, the Court held that the Arbitral Award is in a nature of a contract, it having proceeded from an arbitration agreement. In that light, the State’s exercise of police power in protecting the rights of the ICCs/IPs of Mankayan, Benguet is deemed written in the contract, in this case the Arbitral Award. The Court held that the Arbitral Tribunal sought to strike a balance between contending interests, on the one hand, the mining company, and on the other hand, the ICCs/IPs of Mankayan, Benguet. The Court held, however, that the Arbitral Tribunal has no factual and legal bases to arbitrate favorably to the former dispensing the FPIC and Certification Precondition requirements under the IPRA as it proceeds from public policy and social justice guaranteed under the Constitution.