Case Summary (G.R. No. 212687)
Factual Background
Congressman Enrique T. Garcia opposed the transfer of a planned petrochemical complex after Taiwanese investors organized the Bataan Petrochemical Corporation (BPC) to establish a petrochemical plant at Limay, Bataan, a site on 576 hectares reserved by P.D. No. 1803 for a petrochemical industrial zone; the original BOI registration dated February 24, 1988 specified Limay, Bataan as the plant site and naphtha from the government-owned Bataan Refining Corporation as feedstock, and granted pioneer incentives and tax privileges including exemptions later reinforced by Republic Act No. 6767; in January and February 1989 the major proponent, through A.T. Chong of USI Far East Corporation, sought BOI approval to amend the registration by moving the site to Batangas, increasing investment, and changing feedstock from naphtha only to naphtha and/or liquefied petroleum gas (LPG), citing security and labor concerns and proximity to a Shell LPG depot; despite opposition from the petitioner and expressions of preference for Bataan at the highest political levels, BOI approved the amendment on May 23, 1989 under Resolution No. 193, Series of 1989.
Procedural History
The petitioner first sought relief in G.R. No. 88637, where the Court on September 07, 1989 ordered BOI to publish the amended application, to permit petitioner access to BOI records subject to protection for trade secrets, and to set a ten-day hearing on the petitioner’s opposition; subsequent motions questioned the effect of P.D. Nos. 949 and 1803 and whether the investor had a right of final choice of plant site under the Constitution and the Omnibus Investments Code of 1987, and the Court’s resolutions of October 24, 1989 and January 17, 1990 observed that the presidential decrees did not preclude another petrochemical plant elsewhere and ruled that neither the Constitution nor the Omnibus Investments Code conferred upon the investor an unfettered right of final choice because the investor’s selection remained subject to BOI approval; the petitioner renewed his attack, and in the present petition the Court, sitting en banc, granted the petition, held that BOI committed grave abuse of discretion in approving the transfer and feedstock change, set aside BOI Resolution No. 193, Series of 1989, and ordered maintenance of the original certificate of registration of February 24, 1988.
Issues Presented
The principal questions were whether BOI committed a grave abuse of discretion in approving the amendment that transferred the plant site from Bataan to Batangas and authorized a change of feedstock from naphtha only to naphtha and/or LPG; whether the investor possessed a right of final choice that BOI must respect; whether the transfer contravened P.D. No. 1803, national economic policy expressed in the Constitution, and the objectives of the Omnibus Investments Code of 1987; and whether the BOI, by yielding to the investor’s preferences, abdicated its regulatory authority in a manner amounting to grave abuse.
Petitioner’s Contentions
The petitioner asserted that the BOI’s approval of the transfer and feedstock change repudiated established government policy and national interest because Limay, Bataan was the initially designated petrochemical zone under P.D. No. 1803, the site was suitable and allowed for expansion, the government-owned Bataan Refining Corporation produced sixty percent of the national naphtha output and could supply feedstock, the country faced an LPG shortage that would require imports and divert scarce foreign exchange, and Congress and the President had legislatively and administratively favored naphtha use by exempting it from ad valorem tax under Republic Act No. 6767 while LPG remained excluded; the petitioner argued that BOI effectively surrendered decision-making to the investor, contrary to the State’s duty under Section 10, Article XII, 1987 Constitution and the economic-nationalist objectives of the Omnibus Investments Code of 1987, and that such surrender amounted to grave abuse of discretion.
Respondents’ Contentions
The respondents maintained that an investor may amend its application and that the BOI may approve or disapprove such amendments; BOI officials acknowledged that while BOI preferred Bataan, the proponent presented justifications for transfer—security, labor stability, and access to an LPG depot—and BOI found the proponent’s reasons persuasive; BOI defended its decision as an exercise of its regulatory discretion informed by project viability considerations and noted that administrative appeal lay to the President under Section 36 of the Omnibus Investments Code of 1987 rather than to the Court; dissenting members argued that the Court lacked technical competence to substitute its judgment for that of the executive on economic and political issues and that no grave abuse of discretion had been shown.
Ruling of the Supreme Court
By a majority opinion delivered en banc, the Court granted the petition, held that BOI committed grave abuse of discretion in approving the amendment of the certificate of registration on May 23, 1989, set aside BOI Resolution No. 193, Series of 1989, and ordered that the original certificate of registration of February 24, 1988, reflecting Bataan as plant site and naphtha as feedstock, be maintained; Justices Cruz, Gancayco, Padilla, Bidin, Sarmiento, and Medialdea concurred; Justices Narvasa and Regalado joined Justice Grino‑Aquino in dissent; Justice Grino‑Aquino filed a dissenting opinion; Justice Melencio‑Herrera concurred in Justice Aquino’s dissent and filed a short separate dissent; Chief Justice Fernan and Justice Paras took no part; Justice Feliciano was on leave.
Legal Basis and Reasoning
The majority grounded jurisdiction in Section 1, Article VIII, 1987 Constitution to resolve actual controversies and to determine whether a grave abuse of discretion had occurred, and it found that BOI had effectively yielded essential regulatory choices to the investor in circumstances hostile to the national interest; the Court emphasized that Limay, Bataan was a preselected and suitable petrochemical zone under P.D. No. 1803, that reliance on local naphtha supply from Bataan Refining Corporation conserved foreign exchange and complied with a legislative and executive policy favoring naphtha as shown by Republic Act No. 6767, and that the proposed use of LPG would aggravate domestic scarcity and compel imports; the Court invoked Section 10, Article XII, and Section 1, Article XII of the 1987 Constitution and Article 2 of the Omnibus Investments Code of 1987 to stress the State’s duty to regulate foreign investments in accordance with national goals and economic nationalism, and it observed that the Government had
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Case Syllabus (G.R. No. 212687)
Parties and Procedural Posture
- Congressman Enrique T. Garcia was the petitioner who sought annulment of the BOI approval of an amended registration changing a petrochemical plant site and feedstock.
- The Board of Investments and the Department of Trade and Industry were respondents as the approving government agencies.
- Luzon Petrochemical Corporation formerly Bataan Petrochemical Corporation was the project proponent and respondent.
- Pilipinas Shell Corporation was a respondent identified as a local feedstock source and stakeholder.
- The petition was an original certiorari proceeding filed after an earlier related case, G.R. No. 88637, produced interlocutory orders and a contested BOI hearing process.
Key Facts
- P.D. No. 1803 reserved 576 hectares in Lamao, Limay, Bataan as a Petrochemical Industrial Zone under PNOC administration.
- Bataan Petrochemical Corporation (BPC) was organized with Bataan as its original plant site and obtained BOI registration on February 24, 1988 with pioneer incentives and a requirement to use naphtha cracker technology and naphtha feedstock.
- Bataan Refining Corporation (BRC), a government-owned firm in Bataan, produced sixty percent of the national naphtha output.
- The major investor, USI Far East Corporation, sought to amend BPC’s registration in 1989 to increase capitalization, expand capacity, change feedstock to “naphtha and/or liquefied petroleum gas,” and transfer the plant site from Limay, Bataan to Batangas.
- BOI approved the amended registration by Resolution No. 193, Series of 1989 dated May 23, 1989, despite public and legislative opposition and despite presidential expressions favoring Bataan.
Procedural History
- The Court previously decided G.R. No. 88637 on September 7, 1989 ordering BOI to publish the amended application, afford the petitioner access to records, and set a ten-day hearing on the amendment.
- A motion for partial reconsideration sought a ruling on the import of P.D. Nos. 949 and 1803 and on whether the foreign investor had a right of final choice of plant site.
- The Court on October 24, 1989 observed that P.D. Nos. 949 and 1803 did not make Limay the only petrochemical zone and did not prohibit establishment elsewhere, and denied reconsideration on waiver grounds.
- A subsequent January 17, 1990 resolution stated that neither the 1987 Constitution nor the Omnibus Investments Code granted an investor a right of final choice and that BOI has power to approve or disapprove site choices, and denied the petitioner’s motion for reconsideration.
- The present certiorari petition challenged BOI’s May 23, 1989 resolution approving the amendment and relied on the January 17, 1990 pronouncement that the investor had no right of final choice.
Issues Presented
- Whether the Court had jurisdiction to review BOI’s approval of the amended registration changing plant site and feedstock under Section 1, Article VIII, 1987 Constitution for grave abuse of discretion.
- Whether BOI committed grave abuse of discretion by effectively yielding final choice of plant site and feedstock to the investor contrary to national interest and existing policy.
- Whether the amended registration transferring the plant site from Bataan to Batangas and authorizing feedstock change from naphtha only to naphtha and/or LPG should be annulled.
Contentions
- The petitioner contended that BOI’s approval violated national policy and prior administrative designations, that the transfer harmed national interest by diverting scarce foreign