Philippines to appeal court decision

The Philippine government will challenge a Supreme Court ruling that threatens millions of dollars in foreign investment in the mining industry.

The Natural Resources Department, the presidential palace and the mining industry are preparing a motion to ask the Supreme Court to reconsider its ruling.

Last month, the Philippine Supreme Court cancelled a mining contract with an Australian company in a landmark ruling that nullifies several provisions of the country’s Mining Act. Government officials said the ruling will affect at least $350 million in existing mining investment.

The ruling, in effect, says the government does not have the power to grant contracts allowing foreign companies to own and manage mining concessions.

The court said the law allows foreigners to manage all the aspects of mining operations, in effect making them owners of the nation’s mineral resources and “leaving the state with nothing but bare title.”

The court said a provision in the 1995 law allowed the “circumvention” of a constitutional requirement for companies that explore, develop and use the country’s natural resources to be at least 60%-owned by Filipinos or a Philippine company.

As a consequence, the Supreme Court said a 1995 agreement between the government and Australia’s WMC Resources to develop and operate a copper and gold mine in the southern region of Mindanao must also be cancelled for violating the constitution.

The WMC contract had been considered a test case on whether the government could allow full-foreign ownership of mining claims.

WMC Resources invested about US$30 million in the project. However, it pulled out in 2000 following complaints from local residents and environmental groups. It subsequently sold its shares in the project to Sagittarius Mines, a company 60%-owned by Filipinos, and the remainder, by Aussie miner Indophil Resources.

The court ruled that the subsequent contract was also invalid because it was based on the 1995 agreement.

Benjamin Philip Romualdez, president of the Chamber of Mines of the Philippines, told Dow Jones news service that the Supreme Court decision is a “setback to the country . . . and sends a negative signal to investors.”