Law Summary

Introduction

Executive Order No. 556, issued on June 17, 2006, by President Gloria Macapagal-Arroyo, amends Executive Order No. 473 and establishes protocols for the exploration, development, and production of crude oil from the Camago-Malampaya Reservoir through a bidding process.

Section 1: Prohibition on "Farm-In" or "Farm-Out" Contracts

• Legal Principle: This section prohibits any government agency, including the Philippine National Oil Company (PNOC), from awarding "farm-in" or "farm-out" contracts related to the Camago-Malampaya Reservoir.
• Key Definitions:
  • "Farm-in" or "farm-out" contracts: Agreements where parties exchange rights or interests in a project.
• Important Requirements: None specified beyond the prohibition itself.

Section 2: Strict Bidding Procedure

• Legal Principle: All government agencies, including PNOC, must adhere to a strict bidding procedure when partnering with interested parties for the Camago-Malampaya Reservoir venture.
• Important Procedures:
  • Partnerships must be established through a competitive bidding process.

Section 3: Corporate Identity of Partners

• Legal Principle: Any partner engaged by government agencies must have a credible corporate identity.
• Key Definitions:
  • "Corporate identity": The legal standing and reputation of the partnering entity.
• Important Requirements:
  • Verification of corporate identity is mandatory prior to engagement.

Section 4: Financial Capability of Partners

• Legal Principle: Partners must demonstrate adequate financial capability to undertake the venture.
• Important Requirements:
  • Paid-up capital must be clearly indicative of the financial capability required.

Section 5: Restrictions on Jurisdiction

• Legal Principle: Contracts cannot be awarded to companies registered in jurisdictions known for facilitating money laundering.
• Key Definitions:
  • "Money laundering haven": Jurisdictions with lax regulations on financial transactions.
• Important Requirements: Due diligence on the jurisdiction of registration is required.

Section 6: Awarding Contracts to True Principal Groups

• Legal Principle: Contracts for the venture must be awarded only to true principal groups, excluding traders or brokers.
• Important Requirements:
  • Verification of the nature of the entity (i.e., whether they are the principal party).

Section 7: Cancellation of Violating Agreements

• Legal Principle: Any negotiations or arrangements that contravene this Executive Order must be immediately discontinued or cancelled.
• Consequences:
  • Immediate cessation of any non-compliant arrangements.

Section 8: Repeal of Inconsistent Issuances

• Legal Principle: Executive Order 556 repeals, amends, or modifies any prior executive issuances or rules that conflict with its provisions.
• Cross-References: Specifically mentions Executive Order 473.

Section 9: Effectivity

• Legal Principle: The Executive Order takes effect immediately upon publication in the Official Gazette or a newspaper of general circulation.
• Timeframe: Immediate effectivity upon publication.

Key Takeaways

• Executive Order No. 556 mandates a transparent bidding process for the exploration and production of crude oil from the Camago-Malampaya Reservoir.
• Prohibitions against certain types of contracts and jurisdictions aim to prevent corruption and ensure financial integrity.
• Strict requirements are set for the corporate identity and financial capability of partners involved in the project.
• The Order seeks to replace any conflicting prior regulations, ensuring clarity and compliance in future engagements.