CASE DIGEST : NARRA NICKEL MINING AND DEVELOPMENT CORP. VS REDMONT CONSOLIDATED MINES CORP G.R. No. 195580 April 21, 2014

FACTS : Redmont Consolidated Mines Corporation sought to engage in mining activities in Palawan but discovered that the areas it intended to explore were already covered by the Mineral Production Sharing Agreement (MPSA) applications of McArthur Mining, Tesoro Mining, and Narra Nickel. Redmont filed separate petitions before the DENR Panel of Arbitrators (POA) seeking the denial of the MPSA applications, alleging that the petitioners were effectively foreign corporations because at least 60% of their capital was allegedly owned and controlled by MBMI Resources, Inc., a 100% Canadian corporation. The petitioners countered that they were "qualified persons" under Section 3(aq) of Republic Act No. 7942 (Philippine Mining Act of 1995) since at least 60% of their capital stock was Filipino-owned. They further argued that the control test under Section 3 of Republic Act No. 7042 (Foreign Investments Act of 1991) should govern the determination of corporate nationality, and that they had already converted their MPSA applications into Financial or Technical Assistance Agreement (FTAA) applications, which foreign-owned corporations are allowed to obtain.

The POA ruled in favor of Redmont, holding that petitioners were effectively controlled by MBMI and were therefore foreign corporations disqualified from holding MPSAs. It declared their MPSAs null and void and gave due course to Redmont's exploration permit applications. On appeal, however, the Mines Adjudication Board (MAB) reversed the POA, finding the petitioners qualified and dismissing Redmont's petitions. Redmont thereafter pursued several remedies, including filing complaints before the SEC and RTC and seeking injunctive relief to suspend the MAB proceedings. Ultimately, the Court of Appeals reversed the MAB and reinstated the POA's finding that petitioners were foreign corporations. Applying the grandfather rule pursuant to DOJ Opinion No. 020, Series of 2005, the CA looked beyond the petitioners' immediate shareholders and traced the nationality of their corporate owners, concluding that MBMI effectively controlled the petitioners through a web of corporate layering and joint venture arrangements. While the CA held that the POA had jurisdiction to determine the nationality of mining applicants as an incident of resolving mining disputes, it ruled that only the DENR Secretary has the authority to approve or reject MPSA applications, rendering the POA's declaration that the MPSAs were void improper.

During the pendency of the CA proceedings, Redmont also sought the cancellation of petitioners' FTAAs before the Office of the President (OP). The OP revoked the FTAAs, finding that petitioners violated the 1987 Constitution, the Philippine Mining Act, the Foreign Investments Act, the Small-Scale Mining Law, and other applicable regulations by misrepresenting themselves as Filipino corporations and using domestic corporations as vehicles for foreign participation in mining activities. The OP considered the conversion of the MPSA applications into FTAAs as an implied admission that petitioners were foreign-owned entities requiring foreign technical and financial assistance. The CA subsequently affirmed the OP's ruling, which the petitioners elevated to the Supreme Court in a separate pending case.

ISSUE :  WON the CA is Correct

HELD : The Supreme Court denied the petition and held that the case was not moot and academic, despite the petitioners' repeated attempts to convert their Mineral Production Sharing Agreement (MPSA) applications into Financial or Technical Assistance Agreement (FTAA) applications and later transfer MBMI's shares to DMCI. The Court ruled that these actions did not erase the constitutional issues surrounding the petitioners' nationality and appeared to be strategic attempts to avoid judicial review. The Court emphasized that the case fell within the recognized exceptions to the mootness doctrine because it involved grave constitutional violations, issues of paramount public interest, and matters capable of repetition yet evading review.

On the principal issue, the Court ruled that the grandfather rule should apply, rather than relying solely on the control test, because there was substantial doubt regarding the true Filipino ownership of the corporations. Although the petitioners appeared to satisfy the 60-40 ownership requirement on paper, evidence showed that the Canadian corporation MBMI Resources, Inc. exercised actual control through complex corporate layering, funding arrangements, and joint venture agreements. By tracing ownership through several corporate levels, the Court found that MBMI effectively owned or controlled at least 60% of the equity interests in Narra, McArthur, and Tesoro, making them foreign corporations constitutionally disqualified from engaging in the exploration, development, and utilization of Philippine mineral resources.

The Court likewise upheld the admissibility of MBMI's corporate documents and statements, ruling that the relationships between MBMI and the petitioners resembled partnerships or joint ventures, thereby allowing the application of the exceptions to the res inter alios acta rule. It also affirmed that the Panel of Arbitrators (POA) had exclusive and original jurisdiction over disputes involving mining rights and MPSA applications, although the authority to approve or reject mining agreements ultimately rests with the DENR Secretary. Consequently, the Court sustained the findings of the POA and the Court of Appeals that the petitioners were foreign corporations and were therefore ineligible to obtain MPSAs. Accordingly, the Court affirmed the Court of Appeals' decision in full and denied the petition.