The Supreme Court (SC) has upheld the decision to bar three mining firms from operating in the Philippines for violating the 60-40 ownership limit dictated by the law.
The high tribunal’s Third Division ruled that Narra Nickel Mining and Development Corp., Tesoro Mining and Development Inc., and McArthur Mining Inc. were not Filipino corporations because MBMI Resources Inc., a Canadian firm, owned 60 percent or more of their equity interests.
Under the law, companies engaged in exploration and development of natural resources should be 60 percent Filipino-owned.
The Supreme Court applied the “grandfather rule” to examine the nationality of stockholders. “Obviously, the instant case presents a situation which exhibits a scheme employed by stockholders to circumvent the law, creating a cloud of doubt in the Court’s mind. To determine, therefore, the actual participation, direct or indirect of MBMI, the grandfather rule must be used,” the high court said.
The Supreme Court also looked into the corporate structure of all three mining firms and found that “company layering” was utilized by MBMI to gain control of McArthur, Tesoro, and Narra.
“We of this court note that a grave violation of the Constitution, specifically Section 2 of Article XII, is being committed by a foreign corporation right under our country’s nose through a myriad of corporate layering under different, allegedly, Filipino corporations,” the SC said.
“The intricate corporate layering utilized by the Canadian company, MBMI, is of exceptional character and involves paramount public interest since it undeniably affects the exploitation of our country’s natural resources,” the high tribunal added.
“Finally, the instant case is capable of repetition yet evading review, since the Canadian company, MBMI, can keep on utilizing dummy Filipino corporations through various schemes of corporate layering and conversion of applications to skirt the constitutional prohibition against foreign mining on Philippines soil,” the ruling said.
The case originated when Redmont Consolidated Mines Corp sought exertion concessions in Palawan in 2006 and found out that the three companies had Mineral Production Sharing Agreement (MPSA) applications with the Department of Environment and Natural Resources (DENR).
Redmont questioned the mining company’s ownership and lodged a case before DENR’s panel of arbitrators and sought the revocation of the firms’ MPSAs. The arbitrators, in a December 2007 ruling, revoked the MPSAs granted to the three firms for “being foreign corporations.”
But Mines and Adjudication Board (MAB) reversed the arbitrators’ ruling, which led Redmont to seek a review of the MAB decision before the Court of Appeals (CA).
The CA granted Redmont’s plea, ruling the MBMI “owned majority of the common stocks of the three firms as well as at least 60% equity interest of other majority shareholders of petitioners through joint venture agreements.”
The three mining firms elevated the case to the high court in 2008.