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Property, Property Cases, Property Law, Civil Law
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Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
[G.R. No. 122156. February 3, 1997]
MANILA PRINCE HOTEL, petitioner, vs. GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL CORPORATION,
COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE COUNSEL, respondents.
D E C I S I O N
BELLOSILLO, J.:
The Filipino First Policy enshrined in the 1987 Constitution, i.e., in the grant of rights, privileges, and concessions covering the
national economy and patrimony, the State shall give preference to qualified Filipinos,[1] is invoked by petitioner in its bid to
acquire 51% of the shares of the Manila Hotel Corporation (MHC) which owns the historic Manila Hotel. Opposing,
respondents maintain that the provision is not self-executing but requires an implementing legislation for its
enforcement. Corollarily, they ask whether the 51% shares form part of the national economy and patrimony covered by the
protective mantle of the Constitution.
The controversy arose when respondent Government Service Insurance System (GSIS), pursuant to the privatization program
of the Philippine Government under Proclamation No. 50 dated 8 December 1986, decided to sell through public bidding 30%
to 51% of the issued and outstanding shares of respondent MHC. The winning bidder, or the eventual strategic partner, is to
provide management expertise and/or an international marketing/reservation system, and financial support to strengthen the
profitability and performance of the Manila Hotel.[2] In a close bidding held on 18 September 1995 only two (2) bidders
participated: petitioner Manila Prince Hotel Corporation, a Filipino corporation, which offered to buy 51% of the MHC or
15,300,000 shares at P41.58 per share, and Renong Berhad, a Malaysian firm, with ITT-Sheraton as its hotel operator, which
bid for the same number of shares at P44.00 per share, or P2.42 more than the bid of petitioner.
Pertinent provisions of the bidding rules prepared by respondent GSIS state -
I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC -
1. The Highest Bidder must comply with the conditions set forth below by October 23, 1995 (reset to November 3, 1995) or
the Highest Bidder will lose the right to purchase the Block of Shares and GSIS will instead offer the Block of Shares to the other
Qualified Bidders:
a. The Highest Bidder must negotiate and execute with the GSIS/MHC the Management Contract, International
Marketing/Reservation System Contract or other type of contract specified by the Highest Bidder in its strategic plan for the
Manila Hotel x x x x
b. The Highest Bidder must execute the Stock Purchase and Sale Agreement with GSIS x x x x
K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER -
The Highest Bidder will be declared the Winning Bidder/Strategic Partner after the following conditions are met:
a. Execution of the necessary contracts with GSIS/MHC not later than October 23, 1995 (reset to November 3, 1995); and
b. Requisite approvals from the GSIS/MHC and COP (Committee on Privatization)/ OGCC (Office of the Government Corporate
Counsel) are obtained.[3]
Pending the declaration of Renong Berhard as the winning bidder/strategic partner and the execution of the necessary
contracts, petitioner in a letter to respondent GSIS dated 28 September 1995 matched the bid price of P44.00 per share
tendered by Renong Berhad.[4] In a subsequent letter dated 10 October 1995 petitioner sent a managers check issued by
Philtrust Bank for Thirty-three Million Pesos (P33,000,000.00) as Bid Security to match the bid of the Malaysian Group, Messrs.
Renong Berhad x x x x[5] which respondent GSIS refused to accept.
On 17 October 1995, perhaps apprehensive that respondent GSIS has disregarded the tender of the matching bid and that the
sale of 51% of the MHC may be hastened by respondent GSIS and consummated with Renong Berhad, petitioner came to this
Court on prohibition and mandamus. On 18 October 1995 the Court issued a temporary restraining order enjoining
respondents from perfecting and consummating the sale to the Malaysian firm.
On 10 September 1996 the instant case was accepted by the Court En Banc after it was referred to it by the First Division. The
case was then set for oral arguments with former Chief Justice Enrique M. Fernando and Fr. Joaquin G. Bernas, S.J., as amici
curiae.
In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and submits that the Manila Hotel has
been identified with the Filipino nation and has practically become a historical monument which reflects the vibrancy of
Philippine heritage and culture. It is a proud legacy of an earlier generation of Filipinos who believed in the nobility and
sacredness of independence and its power and capacity to release the full potential of the Filipino people. To all intents and
purposes, it has become a part of the national patrimony.[6]Petitioner also argues that since 51% of the shares of the MHC
carries with it the ownership of the business of the hotel which is owned by respondent GSIS, a government-owned and
controlled corporation, the hotel business of respondent GSIS being a part of the tourism industry is unquestionably a part of
the national economy. Thus, any transaction involving 51% of the shares of stock of the MHC is clearly covered by the term
national economy, to which Sec. 10, second par., Art. XII, 1987 Constitution, applies.[7]
It is also the thesis of petitioner that since Manila Hotel is part of the national patrimony and its business also unquestionably
part of the national economy petitioner should be preferred after it has matched the bid offer of the Malaysian firm. For the
bidding rules mandate that if for any reason, the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to
the other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders are willing to match the
highest bid in terms of price per share.[8]
Respondents except. They maintain that: First, Sec. 10, second par., Art. XII, of the 1987 Constitution is merely a statement of
principle and policy since it is not a self-executing provision and requires implementing legislation(s) x x x x Thus, for the said
provision to operate, there must be existing laws to lay down conditions under which business may be done.[9]
Second, granting that this provision is self-executing, Manila Hotel does not fall under the term national patrimony which only
refers to lands of the public domain, waters, minerals, coal, petroleum and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna and all marine wealth in its territorial sea, and exclusive marine zone as
cited in the first and second paragraphs of Sec. 2, Art. XII, 1987 Constitution. According to respondents, while petitioner
speaks of the guests who have slept in the hotel and the events that have transpired therein which make the hotel historic,
these alone do not make the hotel fall under the patrimony of the nation. What is more, the mandate of the Constitution is
addressed to the State, not to respondent GSIS which possesses a personality of its own separate and distinct from the
Philippines as a State.
Third, granting that the Manila Hotel forms part of the national patrimony, the constitutional provision invoked is still
inapplicable since what is being sold is only 51% of the outstanding shares of the corporation, not the hotel building nor the
land upon which the building stands. Certainly, 51% of the equity of the MHC cannot be considered part of the national
Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
patrimony. Moreover, if the disposition of the shares of the MHC is really contrary to the Constitution, petitioner should have
questioned it right from the beginning and not after it had lost in the bidding.
Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the bidding rules which provides that if for any reason, the Highest
Bidder cannot be awarded the Block of Shares, GSIS may offer this to the other Qualified Bidders that have validly submitted
bids provided that these Qualified Bidders are willing to match the highest bid in terms of price per share, is
misplaced. Respondents postulate that the privilege of submitting a matching bid has not yet arisen since it only takes place if
for any reason, the Highest Bidder cannot be awarded the Block of Shares. Thus the submission by petitioner of a matching bid
is premature since Renong Berhad could still very well be awarded the block of shares and the condition giving rise to the
exercise of the privilege to submit a matching bid had not yet taken place.
Finally, the prayer for prohibition grounded on grave abuse of discretion should fail since respondent GSIS did not exercise its
discretion in a capricious, whimsical manner, and if ever it did abuse its discretion it was not so patent and gross as to amount
to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law. Similarly, the petition for mandamus
should fail as petitioner has no clear legal right to what it demands and respondents do not have an imperative duty to
perform the act required of them by petitioner.
We now resolve. A constitution is a system of fundamental laws for the governance and administration of a nation. It is
supreme, imperious, absolute and unalterable except by the authority from which it emanates. It has been defined as the
fundamental and paramount law of the nation.[10] It prescribes the permanent framework of a system of government, assigns
to the different departments their respective powers and duties, and establishes certain fixed principles on which government
is founded. The fundamental conception in other words is that it is a supreme law to which all other laws must conform and in
accordance with which all private rights must be determined and all public authority administered.[11] Under the doctrine of
constitutional supremacy, if a law or contract violates any norm of the constitution that law or contract whether promulgated
by the legislative or by the executive branch or entered into by private persons for private purposes is null and void and
without any force and effect. Thus, since the Constitution is the fundamental, paramount and supreme law of the nation, it is
deemed written in every statute and contract.
Admittedly, some constitutions are merely declarations of policies and principles. Their provisions command the legislature to
enact laws and carry out the purposes of the framers who merely establish an outline of government providing for the
different departments of the governmental machinery and securing certain fundamental and inalienable rights of citizens.[12] A
provision which lays down a general principle, such as those found in Art. II of the 1987 Constitution, is usually not self-
executing. But a provision which is complete in itself and becomes operative without the aid of supplementary or enabling
legislation, or that which supplies sufficient rule by means of which the right it grants may be enjoyed or protected, is self-
executing. Thus a constitutional provision is self-executing if the nature and extent of the right conferred and the liability
imposed are fixed by the constitution itself, so that they can be determined by an examination and construction of its terms,
and there is no language indicating that the subject is referred to the legislature for action.[13]
As against constitutions of the past, modern constitutions have been generally drafted upon a different principle and have
often become in effect extensive codes of laws intended to operate directly upon the people in a manner similar to that of
statutory enactments, and the function of constitutional conventions has evolved into one more like that of a legislative
body. Hence, unless it is expressly provided that a legislative act is necessary to enforce a constitutional mandate, the
presumption now is that all provisions of the constitution are self-executing. If the constitutional provisions are treated as
requiring legislation instead of self-executing, the legislature would have the power to ignore and practically nullify the
mandate of the fundamental law.[14] This can be cataclysmic. That is why the prevailing view is, as it has always been, that -
x x x x in case of doubt, the Constitution should be considered self-executing rather than non-self-executing x x x x Unless the
contrary is clearly intended, the provisions of the Constitution should be considered self-executing, as a contrary rule would
give the legislature discretion to determine when, or whether, they shall be effective. These provisions would be subordinated
to the will of the lawmaking body, which could make them entirely meaningless by simply refusing to pass the needed
implementing statute.[15]
Respondents argue that Sec. 10, second par., Art. XII, of the 1987 Constitution is clearly not self-executing, as they quote from
discussions on the floor of the 1986 Constitutional Commission -
MR. RODRIGO. Madam President, I am asking this question as the Chairman of the Committee on Style. If the wording of
PREFERENCE is given to QUALIFIED FILIPINOS, can it be understood as a preference to qualified Filipinos vis-a-vis Filipinos
who are not qualified. So, why do we not make it clear? To qualified Filipinos as against aliens?
THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it to remove the word QUALIFIED?
MR. RODRIGO. No, no, but say definitely TO QUALIFIED FILIPINOS as against whom? As against aliens or over aliens ?
MR. NOLLEDO. Madam President, I think that is understood. We use the word QUALIFIED because the existing laws or
prospective laws will always lay down conditions under which business may be done. For example, qualifications on capital,
qualifications on the setting up of other financial structures, et cetera (underscoring supplied by respondents).
MR. RODRIGO. It is just a matter of style.
MR. NOLLEDO. Yes.[16]
Quite apparently, Sec. 10, second par., of Art XII is couched in such a way as not to make it appear that it is non-self-executing
but simply for purposes of style. But, certainly, the legislature is not precluded from enacting further laws to enforce the
constitutional provision so long as the contemplated statute squares with the Constitution. Minor details may be left to the
legislature without impairing the self-executing nature of constitutional provisions.
In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the exercise of powers directly
granted by the constitution, further the operation of such a provision, prescribe a practice to be used for its enforcement,
provide a convenient remedy for the protection of the rights secured or the determination thereof, or place reasonable
safeguards around the exercise of the right. The mere fact that legislation may supplement and add to or prescribe a penalty
for the violation of a self-executing constitutional provision does not render such a provision ineffective in the absence of such
legislation. The omission from a constitution of any express provision for a remedy for enforcing a right or liability is not
necessarily an indication that it was not intended to be self-executing. The rule is that a self-executing provision of the
constitution does not necessarily exhaust legislative power on the subject, but any legislation must be in harmony with the
constitution, further the exercise of constitutional right and make it more available.[17] Subsequent legislation however does
not necessarily mean that the subject constitutional provision is not, by itself, fully enforceable.
Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art. XII is implied from the tenor of the
first and third paragraphs of the same section which undoubtedly are not self-executing.[18] The argument is flawed. If the first
and third paragraphs are not self-executing because Congress is still to enact measures to encourage the formation and
operation of enterprises fully owned by Filipinos, as in the first paragraph, and the State still needs legislation to regulate and
exercise authority over foreign investments within its national jurisdiction, as in the third paragraph, then a fortiori, by the
same logic, the second paragraph can only be self-executing as it does not by its language require any legislation in order to
give preference to qualified Filipinos in the grant of rights, privileges and concessions covering the national economy and
patrimony. A constitutional provision may be self-executing in one part and non-self-executing in another.[19]
Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
Even the cases cited by respondents holding that certain constitutional provisions are merely statements of principles and
policies, which are basically not self-executing and only placed in the Constitution as moral incentives to legislation, not as
judicially enforceable rights - are simply not in point. Basco v. Philippine Amusements and Gaming Corporation[20] speaks of
constitutional provisions on personal dignity,[21] the sanctity of family life,[22] the vital role of the youth in nation-building,[23] the
promotion of social justice,[24] and the values of education.[25]Tolentino v. Secretary of Finance[26] refers to constitutional
provisions on social justice and human rights[27] and on education.[28] Lastly, Kilosbayan, Inc. v. Morato[29] cites provisions on the
promotion of general welfare,[30] the sanctity of family life,[31] the vital role of the youth in nation-building[32] and the promotion
of total human liberation and development.[33] A reading of these provisions indeed clearly shows that they are not judicially
enforceable constitutional rights but merely guidelines for legislation. The very terms of the provisions manifest that they are
only principles upon which legislations must be based. Res ipsa loquitur.
On the other hand, Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive command which is complete
in itself and which needs no further guidelines or implementing laws or rules for its enforcement. From its very words the
provision does not require any legislation to put it in operation. It is per se judicially enforceable. When our Constitution
mandates that[i]n the grant of rights, privileges, and concessions covering national economy and patrimony, the State shall give
preference to qualified Filipinos, it means just that - qualified Filipinos shall be preferred. And when our Constitution declares
that a right exists in certain specified circumstances an action may be maintained to enforce such right notwithstanding the
absence of any legislation on the subject; consequently, if there is no statute especially enacted to enforce such constitutional
right, such right enforces itself by its own inherent potency and puissance, and from which all legislations must take their
bearings. Where there is a right there is a remedy. Ubi jus ibi remedium.
As regards our national patrimony, a member of the 1986 Constitutional Commission[34] explains -
The patrimony of the Nation that should be conserved and developed refers not only to our rich natural resources but also to
the cultural heritage of our race. It also refers to our intelligence in arts, sciences and letters. Therefore, we should develop
not only our lands, forests, mines and other natural resources but also the mental ability or faculty of our people.
We agree. In its plain and ordinary meaning, the term patrimony pertains to heritage.[35] When the Constitution speaks
of national patrimony, it refers not only to the natural resources of the Philippines, as the Constitution could have very well
used the term natural resources, but also to the cultural heritage of the Filipinos.
Manila Hotel has become a landmark - a living testimonial of Philippine heritage. While it was restrictively an American hotel
when it first opened in 1912, it immediately evolved to be truly Filipino. Formerly a concourse for the elite, it has since then
become the venue of various significant events which have shaped Philippine history. It was called the Cultural Center of the
1930s. It was the site of the festivities during the inauguration of the Philippine Commonwealth. Dubbed as the Official Guest
House of the Philippine Government it plays host to dignitaries and official visitors who are accorded the traditional Philippine
hospitality.[36]
The history of the hotel has been chronicled in the book The Manila Hotel: The Heart and Memory of a City.[37] During World
War II the hotel was converted by the Japanese Military Administration into a military headquarters. When the American
forces returned to recapture Manila the hotel was selected by the Japanese together with Intramuros as the two (2) places for
their final stand. Thereafter, in the 1950s and 1960s, the hotel became the center of political activities, playing host to
almost every political convention. In 1970 the hotel reopened after a renovation and reaped numerous international
recognitions, an acknowledgment of the Filipino talent and ingenuity. In 1986 the hotel was the site of a failed coup
d etat where an aspirant for vice-president was proclaimed President of the Philippine Republic.
For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and failures, loves and frustrations of the
Filipinos; its existence is impressed with public interest; its own historicity associated with our struggle for sovereignty,
independence and nationhood. Verily, Manila Hotel has become part of our national economy and patrimony. For sure, 51%
of the equity of the MHC comes within the purview of the constitutional shelter for it comprises the majority and controlling
stock, so that anyone who acquires or owns the 51% will have actual control and management of the hotel. In this instance,
51% of the MHC cannot be disassociated from the hotel and the land on which the hotel edifice stands. Consequently, we
cannot sustain respondents claim that the Filipino First Policy provision is not applicable since what is being sold is only 51% of
the outstanding shares of the corporation, not the Hotel building nor the land upon which the building stands.[38]
The argument is pure sophistry. The term qualified Filipinos as used in our Constitution also includes corporations at least 60%
of which is owned by Filipinos. This is very clear from the proceedings of the 1986 Constitutional Commission -
THE PRESIDENT. Commissioner Davide is recognized.
MR. DAVIDE. I would like to introduce an amendment to the Nolledo amendment. And the amendment would consist in
substituting the words QUALIFIED FILIPINOS with the following: CITIZENS OF THE PHILIPPINES OR CORPORATIONS OR
ASSOCIATIONS WHOSE CAPITAL OR CONTROLLING STOCK IS WHOLLY OWNED BY SUCH CITIZENS.
x x x x
MR. MONSOD. Madam President, apparently the proponent is agreeable, but we have to raise a question. Suppose it is a
corporation that is 80-percent Filipino, do we not give it preference?
MR. DAVIDE. The Nolledo amendment would refer to an individual Filipino. What about a corporation wholly owned by
Filipino citizens?
MR. MONSOD. At least 60 percent, Madam President.
MR. DAVIDE. Is that the intention?
MR. MONSOD. Yes, because, in fact, we would be limiting it if we say that the preference should only be 100-percent Filipino.
MR. DAVIDE. I want to get that meaning clear because QUALIFIED FILIPINOS may refer only to individuals and not to juridical
personalities or entities.
MR. MONSOD. We agree, Madam President.[39]
x x x x
MR. RODRIGO. Before we vote, may I request that the amendment be read again.
MR. NOLLEDO. The amendment will read: IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS COVERING THE
NATIONAL ECONOMY AND PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS. And the word
Filipinos here, as intended by the proponents, will include not only individual Filipinos but also Filipino-controlled entities or
entities fully-controlled by Filipinos.[40]
The phrase preference to qualified Filipinos was explained thus -
MR. FOZ. Madam President, I would like to request Commissioner Nolledo to please restate his amendment so that I can ask a
question.
Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
MR. NOLLEDO. IN THE GRANT OF RIGHTS, PRIVILEGES AND CONCESSIONS COVERING THE NATIONAL ECONOMY AND
PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO QUALIFIED FILIPINOS.
MR. FOZ. In connection with that amendment, if a foreign enterprise is qualified and a Filipino enterprise is also qualified, will
the Filipino enterprise still be given a preference?
MR. NOLLEDO. Obviously.
MR. FOZ. If the foreigner is more qualified in some aspects than the Filipino enterprise, will the Filipino still be preferred?
MR. NOLLEDO. The answer is yes.
MR. FOZ. Thank you.[41]
Expounding further on the Filipino First Policy provision Commissioner Nolledo continues
MR. NOLLEDO. Yes, Madam President. Instead of MUST, it will be SHALL - THE STATE SHALL GIVE PREFERENCE TO
QUALIFIED FILIPINOS. This embodies the so-called Filipino First policy. That means that Filipinos should be given
preference in the grant of concessions, privileges and rights covering the national patrimony.[42]
The exchange of views in the sessions of the Constitutional Commission regarding the subject provision was still further
clarified by Commissioner Nolledo[43] -
Paragraph 2 of Section 10 explicitly mandates the Pro-Filipino bias in all economic concerns. It is better known as the
FILIPINO FIRST Policy x x x x This provision was never found in previous Constitutions x x x x
The term qualified Filipinos simply means that preference shall be given to those citizens who can make a viable contribution
to the common good, because of credible competence and efficiency. It certainly does NOT mandate the pampering and
preferential treatment to Filipino citizens or organizations that are incompetent or inefficient, since such an indiscriminate
preference would be counterproductive and inimical to the common good.
In the granting of economic rights, privileges, and concessions, when a choice has to be made between a qualified foreigner
and a qualified Filipino, the latter shall be chosen over the former.
Lastly, the word qualified is also determinable. Petitioner was so considered by respondent GSIS and selected as one of
the qualified bidders. It was pre-qualified by respondent GSIS in accordance with its own guidelines so that the sole inference
here is that petitioner has been found to be possessed of proven management expertise in the hotel industry, or it has
significant equity ownership in another hotel company, or it has an overall management and marketing proficiency to
successfully operate the Manila Hotel.[44]
The penchant to try to whittle away the mandate of the Constitution by arguing that the subject provision is not self-executory
and requires implementing legislation is quite disturbing. The attempt to violate a clear constitutional provision - by the
government itself - is only too distressing. To adopt such a line of reasoning is to renounce the duty to ensure faithfulness to
the Constitution. For, even some of the provisions of the Constitution which evidently need implementing legislation have
juridical life of their own and can be the source of a judicial remedy. We cannot simply afford the government a defense that
arises out of the failure to enact further enabling, implementing or guiding legislation. In fine, the discourse of Fr. Joaquin G.
Bernas, S.J., on constitutional government is apt -
The executive department has a constitutional duty to implement laws, including the Constitution, even before Congress acts -
provided that there are discoverable legal standards for executive action. When the executive acts, it must be guided by its
own understanding of the constitutional command and of applicable laws. The responsibility for reading and understanding
the Constitution and the laws is not the sole prerogative of Congress. If it were, the executive would have to ask Congress, or
perhaps the Court, for an interpretation every time the executive is confronted by a constitutional command. That is not how
constitutional government operates.[45]
Respondents further argue that the constitutional provision is addressed to the State, not to respondent GSIS which by itself
possesses a separate and distinct personality. This argument again is at best specious. It is undisputed that the sale of 51% of
the MHC could only be carried out with the prior approval of the State acting through respondent Committee on
Privatization. As correctly pointed out by Fr. Joaquin G. Bernas, S.J., this fact alone makes the sale of the assets of respondents
GSIS and MHC a state action. In constitutional jurisprudence, the acts of persons distinct from the government are
considered state action covered by the Constitution (1) when the activity it engages in is a public function; (2) when the
government is so significantly involved with the private actor as to make the government responsible for his action; and, (3)
when the government has approved or authorized the action. It is evident that the act of respondent GSIS in selling 51% of its
share in respondent MHC comes under the second and third categories of state action. Without doubt therefore the
transaction, although entered into by respondent GSIS, is in fact a transaction of the State and therefore subject to the
constitutional command.[46]
When the Constitution addresses the State it refers not only to the people but also to the government as elements of the
State. After all, government is composed of three (3) divisions of power - legislative, executive and judicial. Accordingly, a
constitutional mandate directed to the State is correspondingly directed to the three (3) branches of government. It is
undeniable that in this case the subject constitutional injunction is addressed among others to the Executive Department and
respondent GSIS, a government instrumentality deriving its authority from the State.
It should be stressed that while the Malaysian firm offered the higher bid it is not yet the winning bidder. The bidding rules
expressly provide that the highest bidder shall only be declared the winning bidder after it has negotiated and executed the
necessary contracts, and secured the requisite approvals. Since the Filipino First Policy provision of the Constitution bestows
preference on qualified Filipinos the mere tending of the highest bid is not an assurance that the highest bidder will be
declared the winning bidder. Resultantly, respondents are not bound to make the award yet, nor are they under obligation to
enter into one with the highest bidder. For in choosing the awardee respondents are mandated to abide by the dictates of the
1987 Constitution the provisions of which are presumed to be known to all the bidders and other interested parties.
Adhering to the doctrine of constitutional supremacy, the subject constitutional provision is, as it should be, impliedly written
in the bidding rules issued by respondent GSIS, lest the bidding rules be nullified for being violative of the Constitution. It is a
basic principle in constitutional law that all laws and contracts must conform with the fundamental law of the land. Those
which violate the Constitution lose their reason for being.
Paragraph V. J. 1 of the bidding rules provides that [i]f for any reason the Highest Bidder cannot be awarded the Block of
Shares, GSIS may offer this to other Qualified Bidders that have validly submitted bids provided that these Qualified Bidders are
willing to match the highest bid in terms of price per share.[47] Certainly, the constitutional mandate itself is reason enough not
to award the block of shares immediately to the foreign bidder notwithstanding its submission of a higher, or even the highest,
bid. In fact, we cannot conceive of a stronger reason than the constitutional injunction itself.
In the instant case, where a foreign firm submits the highest bid in a public bidding concerning the grant of rights, privileges
and concessions covering the national economy and patrimony, thereby exceeding the bid of a Filipino, there is no question
that the Filipino will have to be allowed to match the bid of the foreign entity. And if the Filipino matches the bid of a foreign
firm the award should go to the Filipino. It must be so if we are to give life and meaning to the Filipino First Policy provision of
Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
the 1987 Constitution. For, while this may neither be expressly stated nor contemplated in the bidding rules, the constitutional
fiat is omnipresent to be simply disregarded. To ignore it would be to sanction a perilous skirting of the basic law.
This Court does not discount the apprehension that this policy may discourage foreign investors. But the Constitution and laws
of the Philippines are understood to be always open to public scrutiny. These are given factors which investors must consider
when venturing into business in a foreign jurisdiction. Any person therefore desiring to do business in the Philippines or with
any of its agencies or instrumentalities is presumed to know his rights and obligations under the Constitution and the laws of
the forum.
The argument of respondents that petitioner is now estopped from questioning the sale to Renong Berhad since petitioner was
well aware from the beginning that a foreigner could participate in the bidding is meritless. Undoubtedly, Filipinos and
foreigners alike were invited to the bidding. But foreigners may be awarded the sale only if no Filipino qualifies, or if the
qualified Filipino fails to match the highest bid tendered by the foreign entity. In the case before us, while petitioner was
already preferred at the inception of the bidding because of the constitutional mandate, petitioner had not yet matched the
bid offered by Renong Berhad. Thus it did not have the right or personality then to compel respondent GSIS to accept its
earlier bid. Rightly, only after it had matched the bid of the foreign firm and the apparent disregard by respondent GSIS of
petitioners matching bid did the latter have a cause of action.
Besides, there is no time frame for invoking the constitutional safeguard unless perhaps the award has been finally made. To
insist on selling the Manila Hotel to foreigners when there is a Filipino group willing to match the bid of the foreign group is to
insist that government be treated as any other ordinary market player, and bound by its mistakes or gross errors of judgment,
regardless of the consequences to the Filipino people. The miscomprehension of the Constitution is regrettable. Thus we
would rather remedy the indiscretion while there is still an opportunity to do so than let the government develop the habit of
forgetting that the Constitution lays down the basic conditions and parameters for its actions.
Since petitioner has already matched the bid price tendered by Renong Berhad pursuant to the bidding rules, respondent GSIS
is left with no alternative but to award to petitioner the block of shares of MHC and to execute the necessary agreements and
documents to effect the sale in accordance not only with the bidding guidelines and procedures but with the Constitution as
well. The refusal of respondent GSIS to execute the corresponding documents with petitioner as provided in the bidding rules
after the latter has matched the bid of the Malaysian firm clearly constitutes grave abuse of discretion.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987 Constitution not merely to be used as
a guideline for future legislation but primarily to be enforced; so must it be enforced. This Court as the ultimate guardian of
the Constitution will never shun, under any reasonable circumstance, the duty of upholding the majesty of the Constitution
which it is tasked to defend. It is worth emphasizing that it is not the intention of this Court to impede and diminish, much less
undermine, the influx of foreign investments. Far from it, the Court encourages and welcomes more business opportunities
but avowedly sanctions the preference for Filipinos whenever such preference is ordained by the Constitution. The position of
the Court on this matter could have not been more appropriately articulated by Chief Justice Narvasa -
As scrupulously as it has tried to observe that it is not its function to substitute its judgment for that of the legislature or the
executive about the wisdom and feasibility of legislation economic in nature, the Supreme Court has not been spared criticism
for decisions perceived as obstacles to economic progress and development x x x x in connection with a temporary injunction
issued by the Courts First Division against the sale of the Manila Hotel to a Malaysian Firm and its partner, certain statements
were published in a major daily to the effect that that injunction again demonstrates that the Philippine legal system can be a
major obstacle to doing business here.
Let it be stated for the record once again that while it is no business of the Court to intervene in contracts of the kind referred
to or set itself up as the judge of whether they are viable or attainable, it is its bounden duty to make sure that they do not
violate the Constitution or the laws, or are not adopted or implemented with grave abuse of discretion amounting to lack or
excess of jurisdiction. It will never shirk that duty, no matter how buffeted by winds of unfair and ill-informed criticism.[48]
Privatization of a business asset for purposes of enhancing its business viability and preventing further losses, regardless of the
character of the asset, should not take precedence over non-material values. A commercial, nay even a budgetary, objective
should not be pursued at the expense of national pride and dignity. For the Constitution enshrines higher and nobler non-
material values. Indeed, the Court will always defer to the Constitution in the proper governance of a free society; after all,
there is nothing so sacrosanct in any economic policy as to draw itself beyond judicial review when the Constitution is
involved.[49]
Nationalism is inherent in the very concept of the Philippines being a democratic and republican state, with sovereignty
residing in the Filipino people and from whom all government authority emanates. In nationalism, the happiness and welfare
of the people must be the goal. The nation-state can have no higher purpose. Any interpretation of any constitutional
provision must adhere to such basic concept. Protection of foreign investments, while laudible, is merely a policy. It cannot
override the demands of nationalism.[50]
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to the highest bidder solely for the
sake of privatization. We are not talking about an ordinary piece of property in a commercial district. We are talking about a
historic relic that has hosted many of the most important events in the short history of the Philippines as a nation. We are
talking about a hotel where heads of states would prefer to be housed as a strong manifestation of their desire to cloak the
dignity of the highest state function to their official visits to the Philippines. Thus the Manila Hotel has played and continues to
play a significant role as an authentic repository of twentieth century Philippine history and culture. In this sense, it has
become truly a reflection of the Filipino soul - a place with a history of grandeur; a most historical setting that has played a
part in the shaping of a country.[51]
This Court cannot extract rhyme nor reason from the determined efforts of respondents to sell the historical landmark -
this Grand Old Dame of hotels in Asia - to a total stranger. For, indeed, the conveyance of this epic exponent of the Filipino
psyche to alien hands cannot be less than mephistophelian for it is, in whatever manner viewed, a veritable alienation of a
nations soul for some pieces of foreign silver. And so we ask: What advantage, which cannot be equally drawn from a
qualified Filipino, can be gained by the Filipinos if Manila Hotel - and all that it stands for - is sold to a non-Filipino? How much
of national pride will vanish if the nations cultural heritage is entrusted to a foreign entity? On the other hand, how much
dignity will be preserved and realized if the national patrimony is safekept in the hands of a qualified, zealous and well-
meaning Filipino? This is the plain and simple meaning of the Filipino First Policy provision of the Philippine Constitution. And
this Court, heeding the clarion call of the Constitution and accepting the duty of being the elderly watchman of the nation, will
continue to respect and protect the sanctity of the Constitution.
WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL CORPORATION, COMMITTEE ON
PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE COUNSEL are directed to CEASE and DESIST from selling 51% of
the shares of the Manila Hotel Corporation to RENONG BERHAD, and to ACCEPT the matching bid of petitioner MANILA PRINCE
HOTEL CORPORATION to purchase the subject 51% of the shares of the Manila Hotel Corporation at P44.00 per share and
thereafter to execute the necessary agreements and documents to effect the sale, to issue the necessary clearances and to do
such other acts and deeds as may be necessary for the purpose.
SO ORDERED.
Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
[G.R. No. 118295. May 2, 1997]
WIGBERTO E. TAADA and ANNA DOMINIQUE COSETENG, as members of the Philippine Senate and as taxpayers;
GREGORIO ANDOLANA and JOKER ARROYO as members of the House of Representatives and as taxpayers; NICANOR P.
PERLAS and HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES UNION, NATIONAL ECONOMIC PROTECTIONISM
ASSOCIATION, CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, LIKAS-KAYANG KAUNLARAN FOUNDATION, INC.,
PHILIPPINE RURAL RECONSTRUCTION MOVEMENT, DEMOKRATIKONG KILUSAN NG MAGBUBUKID NG PILIPINAS, INC., and
PHILIPPINE PEASANT INSTITUTE, in representation of various taxpayers and as non-governmental organizations, petitioners,
vs. EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON ALVAREZ, AGAPITO AQUINO, RODOLFO
BIAZON, NEPTALI GONZALES, ERNESTO HERRERA, JOSE LINA, GLORIA MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS
OPLE, JOHN OSMEA, SANTANINA RASUL, RAMON REVILLA, RAUL ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their
respective capacities as members of the Philippine Senate who concurred in the ratification by the President of the
Philippines of the Agreement Establishing the World Trade Organization; SALVADOR ENRIQUEZ, in his capacity as Secretary
of Budget and Management; CARIDAD VALDEHUESA, in her capacity as National Treasurer; RIZALINO NAVARRO, in his
capacity as Secretary of Trade and Industry; ROBERTO SEBASTIAN, in his capacity as Secretary of Agriculture; ROBERTO DE
OCAMPO, in his capacity as Secretary of Finance; ROBERTO ROMULO, in his capacity as Secretary of Foreign Affairs; and
TEOFISTO T. GUINGONA, in his capacity as Executive Secretary,respondents.
D E C I S I O N
PANGANIBAN, J.:
The emergence on January 1, 1995 of the World Trade Organization, abetted by the membership thereto of the vast majority
of countries has revolutionized international business and economic relations amongst states. It has irreversibly propelled the
world towards trade liberalization and economic globalization. Liberalization, globalization, deregulation and privatization, the
third-millennium buzz words, are ushering in a new borderless world of business by sweeping away as mere historical relics the
heretofore traditional modes of promoting and protecting national economies like tariffs, export subsidies, import quotas,
quantitative restrictions, tax exemptions and currency controls. Finding market niches and becoming the best in specific
industries in a market-driven and export-oriented global scenario are replacing age-old beggar-thy-neighbor policies that
unilaterally protect weak and inefficient domestic producers of goods and services. In the words of Peter Drucker, the well-
known management guru, Increased participation in the world economy has become the key to domestic economic growth
and prosperity.
Brief Historical Background
To hasten worldwide recovery from the devastation wrought by the Second World War, plans for the establishment of three
multilateral institutions -- inspired by that grand political body, the United Nations -- were discussed at Dumbarton Oaks and
Bretton Woods. The first was the World Bank (WB) which was to address the rehabilitation and reconstruction of war-ravaged
and later developing countries; the second, the International Monetary Fund (IMF) which was to deal with currency problems;
and the third, the International Trade Organization (ITO), which was to foster order and predictability in world trade and to
minimize unilateral protectionist policies that invite challenge, even retaliation, from other states. However, for a variety of
reasons, including its non-ratification by the United States, the ITO, unlike the IMF and WB, never took off. What remained
was only GATT -- the General Agreement on Tariffs and Trade. GATT was a collection of treaties governing access to the
economies of treaty adherents with no institutionalized body administering the agreements or dependable system of dispute
settlement.
After half a century and several dizzying rounds of negotiations, principally the Kennedy Round, the Tokyo Round and the
Uruguay Round, the world finally gave birth to that administering body -- the World Trade Organization -- with the signing of
the Final Act in Marrakesh, Morocco and the ratification of the WTO Agreement by its members.[1]
Like many other developing countries, the Philippines joined WTO as a founding member with the goal, as articulated by
President Fidel V. Ramos in two letters to the Senate (infra), of improving Philippine access to foreign markets, especially its
major trading partners, through the reduction of tariffs on its exports, particularly agricultural and industrial products. The
President also saw in the WTO the opening of new opportunities for the services sector x x x, (the reduction of) costs and
uncertainty associated with exporting x x x, and (the attraction of) more investments into the country. Although the Chief
Executive did not expressly mention it in his letter, the Philippines - - and this is of special interest to the legal profession - - will
benefit from the WTO system of dispute settlement by judicial adjudication through the independent WTO settlement bodies
called (1) Dispute Settlement Panels and (2) Appellate Tribunal. Heretofore, trade disputes were settled mainly through
negotiations where solutions were arrived at frequently on the basis of relative bargaining strengths, and where naturally,
weak and underdeveloped countries were at a disadvantage.
The Petition in Brief
Arguing mainly (1) that the WTO requires the Philippines to place nationals and products of member-countries on the same
footing as Filipinos and local products and (2) that the WTO intrudes, limits and/or impairs the constitutional powers of
both Congress and the Supreme Court, the instant petition before this Court assails the WTO Agreement for violating the
mandate of the 1987 Constitution to develop a self-reliant and independent national economy effectively controlled by
Filipinos x x x (to) give preference to qualified Filipinos (and to) promote the preferential use of Filipino labor, domestic
materials and locally produced goods.
Simply stated, does the Philippine Constitution prohibit Philippine participation in worldwide trade liberalization and economic
globalization? Does it prescribe Philippine integration into a global economy that is liberalized, deregulated and
privatized? These are the main questions raised in this petition for certiorari, prohibition and mandamus under Rule 65 of the
Rules of Court praying (1) for the nullification, on constitutional grounds, of the concurrence of the Philippine Senate in the
ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization (WTO Agreement,
for brevity) and (2) for the prohibition of its implementation and enforcement through the release and utilization of public
funds, the assignment of public officials and employees, as well as the use of government properties and resources by
respondent-heads of various executive offices concerned therewith. This concurrence is embodied in Senate Resolution No.
97, dated December 14, 1994.
The Facts
On April 15, 1994, Respondent Rizalino Navarro, then Secretary of the Department of Trade and Industry (Secretary
Navarro, for brevity), representing the Government of the Republic of the Philippines, signed in Marrakesh, Morocco, the Final
Act Embodying the Results of the Uruguay Round of Multilateral Negotiations (Final Act, for brevity).
By signing the Final Act,[2] Secretary Navarro on behalf of the Republic of the Philippines, agreed:
(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities, with a
view to seeking approval of the Agreement in accordance with their procedures; and
(b) to adopt the Ministerial Declarations and Decisions.
Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
On August 12, 1994, the members of the Philippine Senate received a letter dated August 11, 1994 from the President of the
Philippines,[3] stating among others that the Uruguay Round Final Act is hereby submitted to the Senate for its concurrence
pursuant to Section 21, Article VII of the Constitution.
On August 13, 1994, the members of the Philippine Senate received another letter from the President of the
Philippines[4] likewise dated August 11, 1994, which stated among others that the Uruguay Round Final Act, the Agreement
Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on
Commitments in Financial Services are hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of
the Constitution.
On December 9, 1994, the President of the Philippines certified the necessity of the immediate adoption of P.S. 1083, a
resolution entitled Concurring in the Ratification of the Agreement Establishing the World Trade Organization.[5]
On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which Resolved, as it is hereby resolved, that the
Senate concur, as it hereby concurs, in the ratification by the President of the Philippines of the Agreement Establishing the
World Trade Organization.[6] The text of the WTO Agreement is written on pages 137 et seq. of Volume I of the 36-
volumeUruguay Round of Multilateral Trade Negotiations and includes various agreements and associated legal instruments
(identified in the said Agreement as Annexes 1, 2 and 3 thereto and collectively referred to as Multilateral Trade Agreements,
for brevity) as follows:
ANNEX 1
Annex 1A: Multilateral Agreement on Trade in Goods
General Agreement on Tariffs and Trade 1994
Agreement on Agriculture
Agreement on the Application of Sanitary and
Phytosanitary Measures
Agreement on Textiles and Clothing
Agreement on Technical Barriers to Trade
Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994
Agreement on Implementation of Article VII of the General on Tariffs and Trade 1994
Agreement on Pre-Shipment Inspection
Agreement on Rules of Origin
Agreement on Imports Licensing Procedures
Agreement on Subsidies and Coordinating Measures
Agreement on Safeguards
Annex 1B: General Agreement on Trade in Services and Annexes
Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights
ANNEX 2
Understanding on Rules and Procedures Governing the Settlement of Disputes
ANNEX 3
Trade Policy Review Mechanism
On December 16, 1994, the President of the Philippines signed[7] the Instrument of Ratification, declaring:
NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of the Philippines, after having seen and
considered the aforementioned Agreement Establishing the World Trade Organization and the agreements and associated
legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts thereof, signed
at Marrakesh, Morocco on 15 April 1994, do hereby ratify and confirm the same and every Article and Clause thereof.
To emphasize, the WTO Agreement ratified by the President of the Philippines is composed of the Agreement Proper and the
associated legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts
thereof.
On the other hand, the Final Act signed by Secretary Navarro embodies not only the WTO Agreement (and its integral annexes
aforementioned) but also (1) the Ministerial Declarations and Decisions and (2) the Understanding on Commitments in
Financial Services. In his Memorandum dated May 13, 1996,[8] the Solicitor General describes these two latter documents as
follows:
The Ministerial Decisions and Declarations are twenty-five declarations and decisions on a wide range of matters, such as
measures in favor of least developed countries, notification procedures, relationship of WTO with the International Monetary
Fund (IMF), and agreements on technical barriers to trade and on dispute settlement.
The Understanding on Commitments in Financial Services dwell on, among other things, standstill or limitations and
qualifications of commitments to existing non-conforming measures, market access, national treatment, and definitions of
non-resident supplier of financial services, commercial presence and new financial service.
On December 29, 1994, the present petition was filed. After careful deliberation on respondents comment and petitioners
reply thereto, the Court resolved on December 12, 1995, to give due course to the petition, and the parties thereafter filed
their respective memoranda. The Court also requested the Honorable Lilia R. Bautista, the Philippine Ambassador to the
United Nations stationed in Geneva, Switzerland, to submit a paper, hereafter referred to as Bautista Paper,[9] for brevity, (1)
providing a historical background of and (2) summarizing the said agreements.
During the Oral Argument held on August 27, 1996, the Court directed:
(a) the petitioners to submit the (1) Senate Committee Report on the matter in controversy and (2) the transcript of
proceedings/hearings in the Senate; and
Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
(b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine treaties signed prior to the Philippine
adherence to the WTO Agreement, which derogate from Philippine sovereignty and (2) copies of the multi-volume WTO
Agreement and other documents mentioned in the Final Act, as soon as possible.
After receipt of the foregoing documents, the Court said it would consider the case submitted for resolution. In a Compliance
dated September 16, 1996, the Solicitor General submitted a printed copy of the 36-volume Uruguay Round of Multilateral
Trade Negotiations, and in another Compliance dated October 24, 1996, he listed the various bilateral or multilateral treaties
or international instruments involving derogation of Philippine sovereignty. Petitioners, on the other hand, submitted their
Compliance dated January 28, 1997, on January 30, 1997.
The Issues
In their Memorandum dated March 11, 1996, petitioners summarized the issues as follows:
A. Whether the petition presents a political question or is otherwise not justiciable.
B. Whether the petitioner members of the Senate who participated in the deliberations and voting leading to the concurrence
are estopped from impugning the validity of the Agreement Establishing the World Trade Organization or of the validity of the
concurrence.
C. Whether the provisions of the Agreement Establishing the World Trade Organization contravene the provisions of Sec. 19,
Article II, and Secs. 10 and 12, Article XII, all of the 1987 Philippine Constitution.
D. Whether provisions of the Agreement Establishing the World Trade Organization unduly limit, restrict and impair Philippine
sovereignty specifically the legislative power which, under Sec. 2, Article VI, 1987 Philippine Constitution is vested in the
Congress of the Philippines;
E. Whether provisions of the Agreement Establishing the World Trade Organization interfere with the exercise of judicial
power.
F. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of
jurisdiction when they voted for concurrence in the ratification of the constitutionally-infirm Agreement Establishing the World
Trade Organization.
G. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of
jurisdiction when they concurred only in the ratification of the Agreement Establishing the World Trade Organization, and not
with the Presidential submission which included the Final Act, Ministerial Declaration and Decisions, and the Understanding on
Commitments in Financial Services.
On the other hand, the Solicitor General as counsel for respondents synthesized the several issues raised by petitioners into
the following:[10]
1. Whether or not the provisions of the Agreement Establishing the World Trade Organization and the Agreements and
Associated Legal Instruments included in Annexes one (1), two (2) and three (3) of that agreement cited by petitioners directly
contravene or undermine the letter, spirit and intent of Section 19, Article II and Sections 10 and 12, Article XII of the 1987
Constitution.
2. Whether or not certain provisions of the Agreement unduly limit, restrict or impair the exercise of legislative power by
Congress.
3. Whether or not certain provisions of the Agreement impair the exercise of judicial power by this Honorable Court in
promulgating the rules of evidence.
4. Whether or not the concurrence of the Senate in the ratification by the President of the Philippines of the Agreement
establishing the World Trade Organization implied rejection of the treaty embodied in the Final Act.
By raising and arguing only four issues against the seven presented by petitioners, the Solicitor General has effectively ignored
three, namely: (1) whether the petition presents a political question or is otherwise not justiciable; (2) whether petitioner-
members of the Senate (Wigberto E. Taada and Anna Dominique Coseteng) are estopped from joining this suit; and (3)
whether the respondent-members of the Senate acted in grave abuse of discretion when they voted for concurrence in the
ratification of the WTO Agreement. The foregoing notwithstanding, this Court resolved to deal with these three issues thus:
(1) The political question issue -- being very fundamental and vital, and being a matter that probes into the very jurisdiction
of this Court to hear and decide this case -- was deliberated upon by the Court and will thus be ruled upon as the first issue;
(2) The matter of estoppel will not be taken up because this defense is waivable and the respondents have effectively waived
it by not pursuing it in any of their pleadings; in any event, this issue, even if ruled in respondents favor, will not cause the
petitions dismissal as there are petitioners other than the two senators, who are not vulnerable to the defense of estoppel;
and
(3) The issue of alleged grave abuse of discretion on the part of the respondent senators will be taken up as an integral part of
the disposition of the four issues raised by the Solicitor General.
During its deliberations on the case, the Court noted that the respondents did not question the locus standi of
petitioners. Hence, they are also deemed to have waived the benefit of such issue. They probably realized that grave
constitutional issues, expenditures of public funds and serious international commitments of the nation are involved here, and
that transcendental public interest requires that the substantive issues be met head on and decided on the merits, rather than
skirted or deflected by procedural matters.[11]
To recapitulate, the issues that will be ruled upon shortly are:
(1) DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY? OTHERWISE STATED, DOES THE PETITION INVOLVE A
POLITICAL QUESTION OVER WHICH THIS COURT HAS NO JURISDICTION?
(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES CONTRAVENE SEC. 19, ARTICLE II, AND SECS. 10
AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION?
(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT, RESTRICT, OR IMPAIR THE EXERCISE OF LEGISLATIVE
POWER BY CONGRESS?
(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE OF JUDICIAL POWER BY THIS COURT IN
PROMULGATING RULES ON EVIDENCE?
Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND ITS ANNEXES SUFFICIENT AND/OR VALID,
CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT, MINISTERIAL DECLARATIONS AND DECISIONS, AND THE
UNDERSTANDING ON COMMITMENTS IN FINANCIAL SERVICES?
The First Issue: Does the Court Have Jurisdiction Over the Controversy?
In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt
raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have infringed the
Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute. The question thus posed
is judicial rather than political. The duty (to adjudicate) remains to assure that the supremacy of the Constitution is
upheld.[12] Once a controversy as to the application or interpretation of a constitutional provision is raised before this Court
(as in the instant case), it becomes a legal issue which the Court is bound by constitutional mandate to decide.[13]
The jurisdiction of this Court to adjudicate the matters[14] raised in the petition is clearly set out in the 1987 Constitution,[15] as
follows:
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of any branch or instrumentality of the government.
The foregoing text emphasizes the judicial departments duty and power to strike down grave abuse of discretion on the part
of any branch or instrumentality of government including Congress. It is an innovation in our political law.[16] As explained by
former Chief Justice Roberto Concepcion,[17] the judiciary is the final arbiter on the question of whether or not a branch of
government or any of its officials has acted without jurisdiction or in excess of jurisdiction or so capriciously as to constitute an
abuse of discretion amounting to excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on
matters of this nature.
As this Court has repeatedly and firmly emphasized in many cases,[18] it will not shirk, digress from or abandon its sacred duty
and authority to uphold the Constitution in matters that involve grave abuse of discretion brought before it in appropriate
cases, committed by any officer, agency, instrumentality or department of the government.
As the petition alleges grave abuse of discretion and as there is no other plain, speedy or adequate remedy in the ordinary
course of law, we have no hesitation at all in holding that this petition should be given due course and the vital questions
raised therein ruled upon under Rule 65 of the Rules of Court. Indeed, certiorari, prohibition and mandamus are appropriate
remedies to raise constitutional issues and to review and/or prohibit/nullify, when proper, acts of legislative and executive
officials. On this, we have no equivocation.
We should stress that, in deciding to take jurisdiction over this petition, this Court will not review the wisdom of the decision of
the President and the Senate in enlisting the country into the WTO, or pass upon the merits of trade liberalization as a policy
espoused by said international body. Neither will it rule on the propriety of the governments economic policy of
reducing/removing tariffs, taxes, subsidies, quantitative restrictions, and other import/trade barriers. Rather, it will only
exercise its constitutional duty to determine whether or not there had been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the Senate in ratifying the WTO Agreement and its three annexes.
Second Issue: The WTO Agreement and Economic Nationalism
This is the lis mota, the main issue, raised by the petition.
Petitioners vigorously argue that the letter, spirit and intent of the Constitution mandating economic nationalism are
violated by the so-called parity provisions and national treatment clauses scattered in various parts not only of the WTO
Agreement and its annexes but also in the Ministerial Decisions and Declarations and in the Understanding on Commitments in
Financial Services.
Specifically, the flagship constitutional provisions referred to are Sec. 19, Article II, and Secs. 10 and 12, Article XII, of the
Constitution, which are worded as follows:
Article II
DECLARATION OF PRINCIPLES AND STATE POLICIES
xx xx xx xx
Sec. 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.
xx xx xx xx
Article XII
NATIONAL ECONOMY AND PATRIMONY
xx xx xx xx
Sec. 10. x x x. The Congress shall enact measures that will encourage the formation and operation of enterprises whose
capital is wholly owned by Filipinos.
In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference
to qualified Filipinos.
xx xx xx xx
Sec. 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and
adopt measures that help make them competitive.
Petitioners aver that these sacred constitutional principles are desecrated by the following WTO provisions quoted in their
memorandum:[19]
a) In the area of investment measures related to trade in goods (TRIMS, for brevity):
Article 2
National Treatment and Quantitative Restrictions.
1. Without prejudice to other rights and obligations under GATT 1994. no Member shall apply any TRIM that is inconsistent
with the provisions of Article III or Article XI of GATT 1994.
Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
2. An Illustrative list of TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions
provided for in paragraph I of Article XI of GATT 1994 is contained in the Annex to this Agreement. (Agreement on Trade-
Related Investment Measures, Vol. 27, Uruguay Round, Legal Instruments, p.22121, emphasis supplied).
The Annex referred to reads as follows:
ANNEX
Illustrative List
1. TRIMS that are inconsistent with the obligation of national treatment provided for in paragraph 4 of Article III of GATT
1994 include those which are mandatory or enforceable under domestic law or under administrative rulings, or compliance
with which is necessary to obtain an advantage, and which require:
(a) the purchase or use by an enterprise of products of domestic origin or from any domestic source, whether specified in
terms of particular products, in terms of volume or value of products, or in terms of proportion of volume or value of its local
production; or
(b) that an enterprises purchases or use of imported products be limited to an amount related to the volume or value of local
products that it exports.
2. TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions provided for in paragraph
1 of Article XI of GATT 1994 include those which are mandatory or enforceable under domestic laws or under administrative
rulings, or compliance with which is necessary to obtain an advantage, and which restrict:
(a) the importation by an enterprise of products used in or related to the local production that it exports;
(b) the importation by an enterprise of products used in or related to its local production by restricting its access to foreign
exchange inflows attributable to the enterprise; or
(c) the exportation or sale for export specified in terms of particular products, in terms of volume or value of products, or in
terms of a preparation of volume or value of its local production. (Annex to the Agreement on Trade-Related Investment
Measures, Vol. 27, Uruguay Round Legal Documents, p.22125, emphasis supplied).
The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows:
The products of the territory of any contracting party imported into the territory of any other contracting party shall be
accorded treatment no less favorable than that accorded to like products of national origin in respect of laws, regulations
and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. the provisions of
this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on
the economic operation of the means of transport and not on the nationality of the product. (Article III, GATT 1947, as
amended by the Protocol Modifying Part II, and Article XXVI of GATT, 14 September 1948, 62 UMTS 82-84 in relation to
paragraph 1(a) of the General Agreement on Tariffs and Trade 1994, Vol. 1, Uruguay Round, Legal Instruments p.177, emphasis
supplied).
b) In the area of trade related aspects of intellectual property rights (TRIPS, for brevity):
Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own
nationals with regard to the protection of intellectual property... (par. 1, Article 3, Agreement on Trade-Related Aspect of
Intellectual Property rights, Vol. 31, Uruguay Round, Legal Instruments, p.25432 (emphasis supplied)
(c) In the area of the General Agreement on Trade in Services:
National Treatment
1. In the sectors inscribed in its schedule, and subject to any conditions and qualifications set out therein, each Member shall
accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of
services, treatment no less favourable than it accords to its own like services and service suppliers.
2. A Member may meet the requirement of paragraph I by according to services and service suppliers of any other Member,
either formally identical treatment or formally different treatment to that it accords to its own like services and service
suppliers.
3. Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of
completion in favour of services or service suppliers of the Member compared to like services or service suppliers of any other
Member. (Article XVII, General Agreement on Trade in Services, Vol. 28, Uruguay Round Legal Instruments, p.22610 emphasis
supplied).
It is petitioners position that the foregoing national treatment and parity provisions of the WTO Agreement place
nationals and products of member countries on the same footing as Filipinos and local products, in contravention of the
Filipino First policy of the Constitution. They allegedly render meaningless the phrase effectively controlled by
Filipinos. The constitutional conflict becomes more manifest when viewed in the context of the clear duty imposed on the
Philippines as a WTO member to ensure the conformity of its laws, regulations and administrative procedures with its
obligations as provided in the annexed agreements.[20] Petitioners further argue that these provisions contravene
constitutional limitations on the role exports play in national development and negate the preferential treatment accorded to
Filipino labor, domestic materials and locally produced goods.
On the other hand, respondents through the Solicitor General counter (1) that such Charter provisions are not self-executing
and merely set out general policies; (2) that these nationalistic portions of the Constitution invoked by petitioners should not
be read in isolation but should be related to other relevant provisions of Art. XII, particularly Secs. 1 and 13 thereof; (3) that
read properly, the cited WTO clauses do not conflict with the Constitution; and (4) that the WTO Agreement contains sufficient
provisions to protect developing countries like the Philippines from the harshness of sudden trade liberalization.
We shall now discuss and rule on these arguments.
Declaration of Principles Not Self-Executing
By its very title, Article II of the Constitution is a declaration of principles and state policies. The counterpart of this article in
the 1935 Constitution[21] is called the basic political creed of the nation by Dean Vicente Sinco.[22] These principles in Article II
are not intended to be self-executing principles ready for enforcement through the courts.[23] They are used by the judiciary as
aids or as guides in the exercise of its power of judicial review, and by the legislature in its enactment of laws. As held in the
leading case of Kilosbayan, Incorporated vs. Morato,[24] the principles and state policies enumerated in Article II and some
sections of Article XII are not self-executing provisions, the disregard of which can give rise to a cause of action in the
courts. They do not embody judicially enforceable constitutional rights but guidelines for legislation.
Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
In the same light, we held in Basco vs. Pagcor[25] that broad constitutional principles need legislative enactments to implement
them, thus:
On petitioners allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12 (Family) and 13 (Role of Youth) of Article II;
Section 13 (Social Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it to
state also that these are merely statements of principles and policies. As such, they are basically not self-executing, meaning a
law should be passed by Congress to clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be self-executing principles ready for enforcement through
the courts. They were rather directives addressed to the executive and to the legislature. If the executive and the legislature
failed to heed the directives of the article, the available remedy was not judicial but political. The electorate could express
their displeasure with the failure of the executive and the legislature through the language of the ballot. (Bernas, Vol. II, p. 2).
The reasons for denying a cause of action to an alleged infringement of broad constitutional principles are sourced from basic
considerations of due process and the lack of judicial authority to wade into the uncharted ocean of social and economic
policy making. Mr. Justice Florentino P. Feliciano in his concurring opinion in Oposa vs. Factoran, Jr.,[26] explained these
reasons as follows:
My suggestion is simply that petitioners must, before the trial court, show a more specific legal right -- a right cast in language
of a significantly lower order of generality than Article II (15) of the Constitution -- that is or may be violated by the actions, or
failures to act, imputed to the public respondent by petitioners so that the trial court can validly render judgment granting all
or part of the relief prayed for. To my mind, the court should be understood as simply saying that such a more specific legal
right or rights may well exist in our corpus of law, considering the general policy principles found in the Constitution and the
existence of the Philippine Environment Code, and that the trial court should have given petitioners an effective opportunity so
to demonstrate, instead of aborting the proceedings on a motion to dismiss.
It seems to me important that the legal right which is an essential component of a cause of action be a specific, operable legal
right, rather than a constitutional or statutory policy, for at least two (2) reasons. One is that unless the legal right claimed to
have been violated or disregarded is given specification in operational terms, defendants may well be unable to defend
themselves intelligently and effectively; in other words, there are due process dimensions to this matter.
The second is a broader-gauge consideration -- where a specific violation of law or applicable regulation is not alleged or
proved, petitioners can be expected to fall back on the expanded conception of judicial power in the second paragraph of
Section 1 of Article VIII of the Constitution which reads:
Section 1. x x x
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of any branch or instrumentality of the Government. (Emphases supplied)
When substantive standards as general as the right to a balanced and healthy ecology and the right to health are combined
with remedial standards as broad ranging as a grave abuse of discretion amounting to lack or excess of jurisdiction, the result
will be, it is respectfully submitted, to propel courts into the uncharted ocean of social and economic policy making. At least in
respect of the vast area of environmental protection and management, our courts have no claim to special technical
competence and experience and professional qualification. Where no specific, operable norms and standards are shown to
exist, then the policy making departments -- the legislative and executive departments -- must be given a real and effective
opportunity to fashion and promulgate those norms and standards, and to implement them before the courts should
intervene.
Economic Nationalism Should Be Read with Other Constitutional Mandates to Attain Balanced Development of Economy
On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down general principles relating to the national
economy and patrimony, should be read and understood in relation to the other sections in said article, especially Secs. 1 and
13 thereof which read:
Section 1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a
sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all, especially the underprivileged.
The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform,
through industries that make full and efficient use of human and natural resources, and which are competitive in both
domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair foreign competition and
trade practices.
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to
develop. x x x
x x x x x x x x x
Sec. 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of
exchange on the basis of equality and reciprocity.
As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national economic development, as follows:
1. A more equitable distribution of opportunities, income and wealth;
2. A sustained increase in the amount of goods and services provided by the nation for the benefit of the people; and
3. An expanding productivity as the key to raising the quality of life for all especially the underprivileged.
With these goals in context, the Constitution then ordains the ideals of economic nationalism (1) by expressing preference in
favor of qualified Filipinos in the grant of rights, privileges and concessions covering the national economy and
patrimony[27] and in the use of Filipino labor, domestic materials and locally-produced goods; (2) by mandating the State to
adopt measures that help make them competitive;[28] and (3) by requiring the State to develop a self-reliant and independent
national economy effectively controlled by Filipinos.[29] In similar language, the Constitution takes into account the realities of
the outside world as it requires the pursuit of a trade policy that serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality and reciprocity;[30] and speaks of industries which are competitive in both
domestic and foreign markets as well as of the protection of Filipino enterprises against unfair foreign competition and trade
practices.
It is true that in the recent case of Manila Prince Hotel vs. Government Service Insurance System, et al.,[31] this Court held that
Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive command which is complete in itself and which
needs no further guidelines or implementing laws or rules for its enforcement. From its very words the provision does not
require any legislation to put it in operation. It is per se judicially enforceable. However, as the constitutional provision itself
Constitutional Law (Full Text Cases) First 25 Cases Compiled by: Regina Via G. Garcia
states, it is enforceable only in regard to the grants of rights, privileges and concessions covering national economy and
patrimony and not to every aspect of trade and commerce. It refers to exceptions rather than the rule. The issue here is not
whether this paragraph of Sec. 10 of Art. XII is self-executing or not. Rather, the issue is whether, as a rule, there are enough
balancing provisions in the Constitution to allow the Senate to ratify the Philippine concurrence in the WTO Agreement. And