Case Summary (G.R. No. 195580)
Petitioners
Foreign‐controlled corporations that applied for Mineral Production Sharing Agreements (MPSAs) over contiguous nickel mining areas in Palawan.
Respondent
Redmont, applicant for overlapping exploration permits and rival FTAA/MPSA applications, challenged petitioners’ nationality and entitlement to MPSAs.
Key Dates
– Court of Appeals Decision (CA-G.R. SP No. 109703): October 1, 2010
– CA Resolution denying reconsideration: February 15, 2011
– Supreme Court Decision denying Rule 45 petition: April 21, 2014
– Petitioners’ Motion for Reconsideration: June 5, 2014
– Respondent’s Comment: September 2, 2014; Petitioners’ Reply: September 30, 2014
– Supreme Court Resolution denying motion for reconsideration with finality: January 28, 2015
Applicable Law
– 1987 Constitution, Article XII, Section 2 (Filipino ownership of natural resources; 60 percent minimum)
– Republic Act No. 7942 (Philippine Mining Act of 1995)
– Republic Act No. 8179 (Foreign Investments Act of 1991)
– Corporation Code (Batas Pambansa Blg. 68)
– SEC Rules and Memoranda (including “Grandfather Rule” application)
– DOJ Opinions on beneficial ownership and dummy arrangements
– BIR rulings on stock attribution in closely held corporations
Facts
- Petitioners’ share structures: each corporation’s 10,000 common shares were held 59.97 percent by a nominally Filipino intermediary and 39.98 percent directly by MBMI.
- Intermediary’s shares were in turn held 66.63 percent (or 65.96 percent) by another Filipino corporation and 33.31 percent (or 33.96 percent) by MBMI.
- The so‐called Filipino intermediaries contributed little or no paid‐up capital; MBMI funded virtually the entire paid‐up capital at each corporate tier.
- Petitioners’ MPSA applications were later converted to FTAA applications; FTAAs were granted but subsequently revoked by the Office of the President.
- Redmont filed petitions before the DENR POA challenging petitioners’ nationality, and parallel complaints before the SEC and the Regional Trial Court, and a petition to the Office of the President—actions deemed to constitute forum shopping.
Issues
- Whether the controversy is moot and academic by reason of FTAA conversion and share divestment.
- Whether the DENR Panel of Arbitrators had jurisdiction to determine petitioners’ nationality.
- Proper method to determine corporate nationality for MPSA eligibility—application of the Control Test versus the Grandfather Rule.
Ruling
The Supreme Court DENIED the motion for reconsideration and AFFIRMED its April 21, 2014 Decision: petitioners are foreign corporations not entitled to MPSAs.
Rationale
Mootness Doctrines:
– FTAA conversion and alleged share divestment are irrelevant: FTAAs have been revoked, and factual claims of share transfers are beyond certiorari scope.
– Even if moot, an exception applies because of an alleged grave constitutional violation, paramount public interest, need for controlling principles, and capacity for repetition yet evading review.Jurisdiction of the DENR POA:
– Under Section 77 of RA 7942, the POA has exclusive, original jurisdiction over disputes involving rights to mining areas and mineral agreements.
– Determination of a corporate applicant’s nationality is an indispensable incident to resolving a mining dispute over MPSA entitlement.Nationality Determination Methodology:
– Control Test (per Constitution and FIA) remains the primary measure: at least 60 percent of voting capital must be Filipino‐owned.
– Grandfather Rule serves as a supplementary tool when doubt exists about effective beneficial ownership and control.
– Consistent administrative and judicial authorities (SEC, DOJ, BIR, prior SC decisions) endorse using the Grandfather Rule to trace upstream ownership and reveal dummy arrangements.Application to Petitioners:
– Two‐tier corporate layering with minimal Filipino
Case Syllabus (G.R. No. 195580)
Procedural History and Parties’ Contentions
- Petitioners Narra Nickel Mining and Development Corp. (Narra), Tesoro Mining and Development, Inc. (Tesoro), and McArthur Mining, Inc. (McArthur) filed a Petition for Review on Certiorari under Rule 45, challenging the Court of Appeals’ October 1, 2010 Decision and February 15, 2011 Resolution in CA-G.R. SP No. 109703.
- The CA had sustained the Mines Adjudication Board’s earlier finding that petitioners are foreign corporations not entitled to Mineral Production Sharing Agreements (MPSAs) because MBMI Resources, Inc. (MBMI), a 100% Canadian-owned firm, effectively controls more than 40% of petitioners through layered shareholdings.
- On April 21, 2014, the Supreme Court denied the Rule 45 petition and affirmed the CA ruling, prompting petitioners to file a Motion for Reconsideration on June 5, 2014, arguing errors of law and logic.
- Respondent Redmont Consolidated Mines Corp. (Redmont) opposed the motion as a mere rehash of arguments. Petitioners replied on September 30, 2014.
Justiciability and Mootness Arguments
- Petitioners contended the case was moot because their MPSA applications were converted into Financial or Technical Assistance Agreements (FTAAs) and because MBMI divested its shares to DMCI Mining Corporation, a Filipino corporation.
- Redmont countered that the FTAA was revoked by the Office of the President and is subject of another petition in the Court’s First Division, and that share transfers raise questions of fact beyond Rule 45 proceedings.
- The Supreme Court held the case was neither moot nor academic, citing four recognized exceptions:
• A grave constitutional violation at stake;
• Exceptional character and paramount public interest;
• Need to formulate controlling principles;
• Capability of repetition yet evading review.
Constitutional and Statutory Framework
- Section 2, Article XII of the 1987 Constitution reserves exploration and development of natural resources to Filipino citizens or corporations “at least sixty per centum of whose capital is owned by such citizens.”
- Republic Act No. 7942 (Philippine Mining Act of 1995), Section 3(aq), similarly requires 60% Filipino equity in corporations undertaking mining.
- Republic Act No. 8179 (Foreign Investments Act of 1991), Section 3(a), defines a Philippine national as a corporation “of which at least sixty per cent (60%) of the capital stock outstanding and entitled to vote is ow