The allocation of seats for party-list representatives under R.A. No. 7941 must adhere to four inviolable parameters: (1) the twenty percent allocation of the total House membership for party-list representatives is a ceiling, not a mandatory number to be filled at all times; (2) the two percent threshold of total valid votes cast for the party-list system is a valid requirement for a party to qualify for a seat; (3) each qualified party is entitled to a maximum of three seats; and (4) additional seats for qualified parties must be computed based on proportional representation.

The 1987 Constitution introduced the party-list system of representation in the House of Representatives to enable marginalized and underrepresented sectors to participate in lawmaking. Section 5, Article VI of the Constitution mandates that party-list representatives shall constitute twenty percent of the total number of representatives. Congress enacted R.A. No. 7941 (The Party-List System Act) to implement this constitutional provision, outlining the procedure for the election and allocation of seats for party-list representatives. The May 11, 1998 elections were the first time party-list representatives were elected under this system.

• Following the May 11, 1998 elections, the COMELEC initially proclaimed 13 party-list representatives from 12 parties/organizations that each garnered at least 2% of the total votes cast for the party-list system; APEC received two seats, and 11 others received one seat each. Later, COCOFED was proclaimed, bringing the total to 14 representatives.
• PAG-ASA, a party-list organization, filed a petition with the COMELEC arguing that the 20% constitutional allocation for party-list representatives (equivalent to 52 seats) was mandatory and should be filled.
• The COMELEC Second Division, on October 15, 1998, granted PAG-ASA's petition and ordered the proclamation of 38 additional party-list representatives from parties that did not meet the 2% threshold, to complete the 52 seats. The Division reasoned that the system was conceived to enable marginalized sectors, represent the broadest sectors, and encourage a multi-party system.
• The COMELEC en banc, on January 7, 1999, affirmed the Second Division's resolution by a narrow majority, asserting that a strict application of the 2% threshold would prevent compliance with the 20% constitutional allocation and would not serve the essence of the party-list system.
• Petitioners, who were among the initially proclaimed winners meeting the 2% threshold, challenged these COMELEC resolutions before the Supreme Court, arguing that COMELEC gravely abused its discretion by disregarding the 2% threshold and the principle of proportional representation mandated by R.A. 7941.

• The twenty percent allocation for party-list representatives in the Constitution is a ceiling, not a mandatory number to be filled at all times; the mechanics for filling these seats are left to Congress.
• R.A. 7941 validly prescribes a two percent threshold of total votes cast for a party-list to qualify for a seat.
• If an insufficient number of parties hurdle the two percent threshold, then the full twenty percent allocation cannot be completely filled, and COMELEC cannot be faulted for this.
• Only parties garnering at least two percent of the votes are entitled to seats, and additional seats (up to the three-seat limit) should be allocated proportionally among these qualified parties.
• The COMELEC gravely abused its discretion by disregarding the clear provisions of R.A. 7941, particularly the two percent threshold and the requirement of proportional representation for additional seats.

• The twenty percent allocation for party-list lawmakers in the Constitution is mandatory and all 52 seats must be filled.
• The two percent vote requirement in R.A. 7941 is unconstitutional because its strict application would make it mathematically impossible to fill up the House party-list complement.
• Allocating remaining seats only to those who hurdled the two percent threshold would concentrate representation in a few organizations and defeat the purpose of attaining the broadest possible representation and developing a full, free, and open party system.
• The COMELEC considered three "elements" of the party-list system: enabling marginalized sectors, representing the broadest sectors, and encouraging a multi-party system, which justified disregarding the two percent threshold to fill all 52 seats.

• Whether the twenty percent allocation for party-list representatives mentioned in Section 5(2), Article VI of the Constitution is mandatory or merely a ceiling.
• Whether the two percent threshold requirement and the three-seat limit provided in Section 11(b) of R.A. 7941 are constitutional.
• If the two percent threshold and three-seat limit are constitutional, how should the additional seats of a qualified party be determined?

• The twenty percent allocation for party-list representatives in the Constitution is a ceiling, not a mandatory number that must be filled at all times. Congress, through R.A. 7941, prescribed the mechanics for filling these seats, including the two percent threshold.
• The two percent threshold requirement and the three-seat limit in Section 11(b) of R.A. 7941 are constitutional. The two percent threshold ensures meaningful representation by parties with sufficient constituent support, and the three-seat limit promotes a multi-party system by preventing domination by a single group.
• Additional seats for qualified parties (those meeting the 2% threshold) are determined as follows:
  • Step One: Rank all participating parties from highest to lowest based on votes received. Compute the ratio of votes for each party to the total votes cast for the party-list system. Parties with at least 2% are guaranteed one seat.
  • Step Two (Formula for First Party): The first party (highest number of votes) gets additional seats based on its proportion of votes. If its proportion is >= 6%, it gets two additional seats (total 3). If >= 4% but < 6%, it gets one additional seat (total 2). If < 4%, it gets no additional seat.
  • Step Three (Formula for Other Qualified Parties): Additional seats for other qualified parties are computed by the formula: (Number of votes of concerned party / Number of votes of first party) x Number of additional seats allocated to the first party. Fractions are not rounded off to whole numbers.
• Applying this formula, APEC (the first party with 5.5% of votes) is entitled to one additional seat (total of two seats). The other 12 qualified parties are not entitled to any additional seats beyond their initial one seat, as their computations result in fractions less than one.
• The COMELEC gravely abused its discretion in disregarding the two percent threshold and proportional representation, and its assailed Resolutions were nullified. The proclamation of the 14 incumbent party-list representatives (2 for APEC, 1 each for the 12 others based on the Court's formula) was affirmed.

• Twenty Percent Allocation as a Ceiling — The constitutional provision that party-list representatives shall constitute twenty percent of the total number of representatives is merely a maximum limit, not a mandatory number to be filled under all circumstances. The Court held that Congress was vested with the power to define the mechanics, and R.A. 7941, by imposing a qualifying threshold, implies that not all allocated seats may be filled if not enough parties qualify.
• Two Percent Threshold — A statutory requirement under R.A. 7941, Section 11(b), that a party, organization, or coalition must receive at least two percent of the total valid votes cast for the party-list system to be entitled to one seat in the House of Representatives. The Court upheld its constitutionality, reasoning it ensures meaningful representation and prevents proliferation of small, insignificant groups.
• Three-Seat Limit — A statutory limitation under R.A. No. 7941, Section 11(b), that each qualified party, organization, or coalition, regardless of the number of votes it obtains, is entitled to a maximum of three seats. The Court upheld its constitutionality, stating it promotes a multi-party system and prevents any single group from dominating party-list seats.
• Proportional Representation — A principle mandated by R.A. No. 7941, Section 11(b), requiring that additional seats (beyond the first qualifying seat) for qualified parties shall be computed "in proportion to their total number of votes." The Court established a specific multi-step formula to implement this, emphasizing that it must be applied within the constraints of the two percent threshold and three-seat limit, and without rounding off fractions for additional seats for parties other than the first party.
• Grave Abuse of Discretion — Such capricious or whimsical exercise of judgment equivalent to lack or excess of jurisdiction. The Court found COMELEC committed grave abuse of discretion by disregarding the clear statutory provisions of R.A. 7941, specifically the two percent threshold and the principle of proportional representation, thereby arrogating legislative power.
• Rule of Law — The principle that statutes, unless declared unconstitutional by the proper tribunal, remain valid commands of sovereignty that must be respected and obeyed. The Court emphasized its duty to apply the law as found, not to reinvent or second-guess it, underscoring that COMELEC, as an implementing body, cannot judge the wisdom of an act of Congress.
• Judicial Review — The power of the courts to review the constitutionality or legality of acts of other branches of government. The Court exercised this power to strike down the COMELEC resolutions for being contrary to statute.

• "Because the Comelec violated these legal parameters, the assailed Resolutions must be struck down for having been issued in grave abuse of discretion. The poll body is mandated to enforce and administer election-related laws. It has no power to contravene or amend them. Neither does it have authority to decide the wisdom, propriety or rationality of the acts of Congress."
• "Indeed, the function of the Supreme Court, as well as of all judicial and quasi-judicial agencies, is to apply the law as we find it, not to reinvent or second-guess it. Unless declared unconstitutional, ineffective, insufficient or otherwise void by the proper tribunal, a statute remains a valid command of sovereignty that must be respected and obeyed at all times. This is the essence of the rule of law."
• "All in all, we hold that the statutory provision on this two percent requirement is precise and crystalline. When the law is clear, the function of courts is simple application, not interpretation or circumvention."
• "The Comelec, which is tasked merely to enforce and administer election-related laws, cannot simply disregard an act of Congress exercised within the bounds of its authority. As a mere implementing body, it cannot judge the wisdom, propriety or rationality of such act."

• Guingona Jr. v. Gonzales (214 SCRA 789; 219 SCRA 329) — Cited to support the principle that a fractional membership cannot be converted into a whole membership if it deprives another party's fractional membership, emphasizing that "no party can claim more than what it is entitled to." This was relevant to the Court's decision not to round off fractions in allocating additional seats.
• Tañada v. Angara (272 SCRA 18) — Cited generally in the context that the wisdom and propriety of legislative impositions, absent clear constitutional transgression or grave abuse of discretion, are beyond judicial review.
• Santiago v. Guingona (298 SCRA 756) — Cited generally for the principle of judicial review and the definition of grave abuse of discretion.
• Quijano v. Development Board (35 SCRA 270) — Cited in relation to the principle that when the law is clear, the function of courts is simple application, not interpretation or circumvention.
• Luzon Surety v. de Garcia (30 SCRA 111) — Cited alongside Quijano for the same principle of applying clear laws without interpretation.
• Garcia v. Commission on Elections (227 SCRA 100) — Cited for the principle that to strike down a law as unconstitutional, there must be a clear and unequivocal showing that what the Constitution prohibits, the statute permits.

• 1987 Constitution, Article VI, Section 5(1) and (2) — This provision mandates the composition of the House of Representatives, including members elected through a party-list system, and states that party-list representatives shall constitute twenty per centum of the total number of representatives. The Court interpreted the 20% as a ceiling and that Congress has the power to provide the mechanics for election.
• Republic Act No. 7941 (The Party-List System Act), Section 11 — This section details the number of party-list representatives and the procedure for allocating seats, including the 2% threshold for one seat, entitlement to additional seats in proportion to total votes, and the three-seat limit per party. The Court upheld its constitutionality and based its seat allocation formula on its provisions.
• Republic Act No. 7941, Section 18 — This section authorizes the COMELEC to promulgate rules and regulations to carry out the purposes of the Act. The Court noted COMELEC promulgated Resolution No. 2847 under this authority but later inconsistently applied it.
• 1987 Constitution, Article IX-C, Section 2(1) — This provision outlines COMELEC's power to enforce and administer all laws and regulations relative to the conduct of an election. The Court emphasized that this power does not include contravening or amending laws passed by Congress.

• Justice Puno — Concurred with the majority, emphasizing that the 2% threshold requirement in R.A. 7941 is constitutional and intended by the framers to ensure meaningful representation. He argued that the 20% allocation for party-list seats is a ceiling, not a mandatory number to be filled, and that the party-list system is not synonymous with reserved seats for sectors, as sectors must earn their seats through election. He also discussed the legislative history supporting the 2% threshold and the 3-seat limit.

• Justice Mendoza — Disagreed with the majority's computation for allocating additional seats. He argued for the application of the Niemeyer formula, as adopted by R.A. No. 7941, which would result in more parties receiving additional seats up to the three-seat limit, leading to a total of 39 party-list representatives. He contended that the majority's formula is not found in the law, is iniquitous, and effectively deprives party-list representatives of the intended representation by making it very difficult to reach the 20% ceiling. He believed the goal should be to fill as many of the 52 seats as possible within the statutory limits.