Lepanto Consolidated Mining Co. vs. WMC Resources Int’l. Pty. Ltd.

A statute requiring presidential approval for the transfer of an FTAA cannot be applied retroactively to an agreement executed prior to the statute's effectivity if it substantially impairs the contractual obligation that only required the DENR Secretary's consent.

On March 22, 1995, the Philippine Government and WMC Philippines executed the Columbio FTAA (No. 02-95-XI) for large-scale exploration of mineral resources, pursuant to Executive Order No. 279 and Department Administrative Order No. 63. Section 14.1 of the FTAA allowed transfer to a third party provided the DENR Secretary consents. WMC Philippines' parent company, WMC Resources, later decided to divest its shareholdings. Lepanto entered a Sale and Purchase Agreement (SPA) with WMC Resources on July 12, 2000, subject to the Tampakan Companies' right of first refusal. The Tampakan Companies exercised this right, leading to WMC Resources executing a new SPA with Sagittarius Mines, Inc. (a Tampakan Company) in January 2001. The DENR Secretary approved the transfer to Sagittarius.

• Execution of the Columbio FTAA: On March 22, 1995, the Philippine Government and WMC Philippines executed the Columbio FTAA for large-scale exploration of mineral resources, pursuant to Executive Order No. 279 and DAO No. 63. Section 14.1 of the FTAA stipulated that the contractor may transfer its interest to a third party provided the DENR Secretary consents, which consent shall not be unreasonably withheld.
• The Divestment and Sale Agreements: WMC Resources decided to divest its shareholdings in WMC Philippines. On July 12, 2000, WMC Resources executed an SPA with petitioner Lepanto, subject to the Tampakan Companies' right of first refusal. The Tampakan Companies exercised this right on October 6, 2000. On January 10, 2001, WMC Resources and the Tampakan Companies executed another SPA, designating Sagittarius Mines, Inc. as the assignee. A Deed of Absolute Sale of Shares of Stocks was executed on January 23, 2001.
• Administrative and Judicial Proceedings: Lepanto sought DENR approval for its July 12, 2000 SPA while simultaneously filing an RTC case for injunction and specific performance against WMC and the Tampakan Companies. The CA dismissed the RTC case for forum shopping, which was affirmed by the SC. Meanwhile, the DENR Secretary approved the transfer of the FTAA to Sagittarius Mines, Inc. on December 18, 2001, finding it met qualification requirements under DAO No. 96-40.
• Appeals: Lepanto appealed the DENR Secretary's Order to the Office of the President, which dismissed the petition on July 23, 2002, citing primary jurisdiction and the non-impairment of existing mining rights. Lepanto then appealed to the CA, which dismissed the petition on November 21, 2003, holding that Section 40 of RA 7942 cannot apply retroactively.

• Applicability of Section 40 of RA 7942: Petitioner maintained that Section 40 of the Philippine Mining Act of 1995 expressly requires the approval of the President for the transfer or assignment of an FTAA, and this requirement applies to the Columbio FTAA.
• Due Process and Preemption: Petitioner argued that the DENR Secretary's order violated Lepanto's constitutional right to due process and preempted the resolution of crucial legal issues pending in regular courts.
• Violation of the Mining Act: Petitioner contended that the transfer blatantly violated Section 40 of the Mining Act due to the lack of Presidential approval.

• Non-Impairment of Contracts: Respondents countered that applying Section 40 retroactively would impair the obligation of the Columbio FTAA, which only required the DENR Secretary's consent for transfer.
• Prospective Application of Laws: Respondents argued that RA 7942 should apply prospectively, and the Columbio FTAA, executed before the law's effectivity, is governed by its own terms and EO 279.
• Primary Jurisdiction: Respondents asserted that the DENR has primary jurisdiction over the technical and financial qualifications of the transferee, and Lepanto is estopped from assailing this jurisdiction after actively participating in the proceedings.

• Retroactivity and Impairment of Contracts: Whether Section 40 of the Philippine Mining Act of 1995, requiring Presidential approval for the transfer of an FTAA, can be applied retroactively to the Columbio FTAA which only required the DENR Secretary's consent.

• Retroactivity and Impairment of Contracts: Section 40 of RA 7942 cannot be applied retroactively to the Columbio FTAA. Statutes are construed prospectively unless expressly or impliedly declared retroactive by the legislature. Applying Section 40 retroactively would impose a new condition on the transfer, effectively modifying the original contract and substantially impairing the obligation of contracts in violation of the Constitution. Moreover, even assuming retroactivity, the lack of prior Presidential approval was cured by the Office of the President's affirmance of the DENR Secretary's order. Petitioner is also estopped from demanding Presidential approval after seeking only DENR Secretary approval for its own SPA.

• Prospective Application of Laws — Laws shall have no retroactive effect unless expressly provided. A statute operates prospectively only unless legislative intent for retroactivity is manifest either by express terms or necessary implication.
• Impairment of Obligation of Contracts — A law that changes the terms of a legal contract, imposes new conditions, or dispenses with those expressed impairs the obligation of a contract. The change must be substantial to fall within the constitutional prohibition.

• "A law which changes the terms of a legal contract between parties, either in the time or mode of performance, or imposes new conditions, or dispenses with those expressed, or authorizes for its satisfaction something different from that provided in its terms, is law which impairs the obligation of a contract and is therefore null and void."
• "Section 40 of the Philippine Mining Act of 1995 requiring the approval of the President with respect to assignment or transfer of FTAAs, if made applicable retroactively to the Columbio FTAA, would be tantamount to an impairment of the obligations under said contract as it would effectively restrict the right of the parties thereto to assign or transfer their interests in the said FTAA."

• La Bugal-B’Laan Tribal Association, Inc. v. Ramos, G.R. No. 127882, 1 December 2004 — Cited regarding the requirement of Presidential approval for FTAA transfer to a foreign corporation, but distinguishing transfers to Filipino corporations where the safeguard is not critical, and noting that Presidential approval was effectively present via the OP's affirmance.
• Segovia v. Noel, 47 Phil. 543 (1925) — Cited for the canon of statutory construction that statutes operate prospectively only.
• Clemons v. Nolting, 42 Phil. 702 (1922) — Cited for the definition of substantial impairment of contracts.

• Section 40, Republic Act No. 7942 (Philippine Mining Act of 1995) — Requires prior approval of the President for assignment or transfer of an FTAA. Held inapplicable retroactively to FTAAs executed before the law's effectivity.
• Section 14.1, Columbio FTAA No. 02-95-XI — Allows assignment to a third party provided the DENR Secretary consents. Upheld as the governing provision for the transfer.
• Article 4, Civil Code — Provides that laws shall not have a retroactive effect unless otherwise provided. Applied to mandate prospective application of RA 7942.
• Section 10, Article III, 1987 Constitution — Prohibits the passage of laws impairing the obligation of contracts. Applied to invalidate the retroactive imposition of the Presidential approval requirement.

Panganiban (CJ, Chairperson), Ynares-Santiago, Austria-Martinez, Callejo, Sr.