Title
Republic vs. Provincial Government of Palawan
Case
G.R. No. 170867
Decision Date
Dec 4, 2018
The Supreme Court ruled that Palawan is not entitled to 40% of the Camago-Malampaya project proceeds, as the gas reservoir lies outside its territorial jurisdiction, limited to land and 15km coastal waters.

Case Summary (G.R. No. 170867)

Local Government Entitlement to National Wealth

The 1987 Constitution, Art. X, § 7, guarantees LGUs “an equitable share in the proceeds of the utilization and development of the national wealth within their respective areas.” The Local Government Code implements this through §§ 289–290, granting LGUs 40% of government collections from mineral, forestry, fishery fees, and production‐sharing contracts within their territorial jurisdiction.

Province of Palawan’s Claim and RTC Ruling

Palawan asserted it was entitled to 40% of the National Government’s share from Camago–Malampaya under Section 290, arguing the reservoir fell “within [its] territorial jurisdiction.” The National Government contended the reservoir lay beyond Palawan’s land and municipal waters. Negotiations failed, and Palawan sued for declaratory relief in RTC Branch 95. On Dec. 16, 2005, the RTC held that decentralization principles and the Local Government Code empowered Palawan to protect and manage its environment, thus extending its jurisdiction offshore. The court declared Palawan entitled to its 40% share from project revenues since Oct. 16, 2001.

Regional Trial Court “Freeze” Order and Interim Agreement

On Jan. 16, 2006, the RTC froze Palawan’s share pending finality, ordering accounting and escrow. The Republic filed a Rule 45 petition (G.R. No. 170867) for review and to annul the freeze order. Meanwhile, DOE, DBM, and DoF secretaries—authorized by President Gloria Arroyo—executed an Interim Agreement (Feb. 9, 2005) and later a Provisional Implementation Agreement (July 25, 2007) to release 50% of the disputed share for Palawan’s projects, to await final court resolution. EO 683 (Dec. 1, 2007) authorized DBM to release these funds, subject to audit rules and without prejudice to Palawan’s ongoing claim.

Court of Appeals Proceedings on EO 683

Citizens and taxpayers (Arigo, et al.) filed certiorari (Rule 65) in CA-G.R. SP 102247 to annul EO 683 and PIA as unconstitutional. The CA dismissed for failure to submit petitions and related documents and for prematurity, noting that EO 683 anticipated SC review in G.R. No. 170867 and that judicial resolution might intrude on maritime–policy debates (UNCLOS baselines). A petition for review under Rule 45 (G.R. No. 185941) likewise failed.

Issues Before the Supreme Court

  1. Whether the Camago–Malampaya reservoir lies “within [Palawan’s] territorial jurisdiction” under Article X § 7 and § 290 of the Local Government Code, entitling Palawan to its 40% share.
  2. Whether a local government’s territorial jurisdiction refers only to its landmass (and 15 km municipal waters) or extends to offshore areas, seabed, subsoil, and continental shelf.
  3. Whether Executive Order No. 683 and related agreements are constitutional in light of LGU fiscal guarantees.

Rationale on Territorial Jurisdiction

– The Local Government Code defines LGU territory by metes and bounds of land area. Contiguity is required except when the unit comprises islands, then land area need not satisfy minimum contiguous‐area criteria. Offshore waters are not part of LGU territory unless expressly provided by law.
– Section 1 of PD 1596 included seabed, subsoil, and continental margin only for the Kalayaan Island Group, not the entire Province of Palawan.
– RA 7611’s environmental plan defined Palawan as islands/islets with surrounding sea up to open ocean for conservation purposes; it did not amend Palawan’s political boundaries nor grant administrative jurisdiction over the continental shelf.
– UNCLOS grants coastal States sovereign rights over the continental shelf but does not apportion maritime zones among political subdivisions. A local government’s equitable share under Section 7 Art. X cannot depend on UNCLOS baselines or continental‐shelf claims.
– The 15 km municipal‐waters definition under § 131(r) of the Code limits local police and regulatory powers but does not establish LGU ownership of offshore subsoil or seabed.
– Estoppel does not bind the State for mistaken administrative acts. Although Administrative Order No. 381 (1998), letters from DOE (1998), and Interim/Provisional Agreements acknowledged Palawan’s claim, they were based on erroneous assumptions of jurisdiction, not legislative delineation of boundaries.

Contemporaneous Executive Construction

– The Executive Branch consistently recognized Palawan’s claim—even negotiating and authorizing provisional release of funds—reflec






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