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In the landmark consolidated cases of Lone Congressional District of Benguet Province v Lepanto Consolidated Mining Co (Lepanto) and Far Southeast Gold Resources Inc (FSGR) and Republic v Lepanto and FSGR, the Philippine Supreme Court reasserted the primacy of indigenous rights over commercial mining interests. The ruling clarifies that the protection of ancestral domains is a matter of public policy that cannot be circumvented through private arbitration. The court’s ruling is anchored in the constitutional and statutory framework governing mining projects that affect ancestral domains.

FPIC as a constitutional safeguard in Philippine mining regulation

Section 59 of the Indigenous Peoples’ Rights Act of 1997 (IPRA) requires mining proponents to secure a certification from the National Commission on Indigenous Peoples (NCIP).

The constitution as the bedrock. Under article II, section 22 of the 1987 constitution, the state is bound to “recognise and promote the rights of indigenous cultural communities within the framework of national unity and development”. This is further reinforced by article XII, section 5, which protects the rights of Indigenous Cultural Communities/Indigenous Peoples (ICCs/IPs) to their ancestral lands to ensure their economic, social and cultural well-being.

The Indigenous Peoples’ Rights Act (IPRA) of 1997. Two specific provisions were central to the Lepanto case.

1. 1. Section 59 (certification precondition). No department or government agency shall issue, renew or grant any concession, licence or lease without a prior certification from the NCIP; and
   2. Free, prior and informed consent (FPIC). This certification can only be issued if the ICCs/IPs have given their FPIC, ensuring they are not coerced and are fully informed of the project’s impact in their own language and process.

The Philippine Mining Act of 1995. Section 16 explicitly prohibits mining operations in ancestral lands without the prior informed consent of the concerned indigenous community.

MPSA renewal dispute in the Philippines

The dispute began when the government, through the Department of Environment and Natural Resources, entered into a Mineral Production Sharing Agreement (MPSA) with Lepanto Consolidated Mining Company and FSGR. The mining area overlapped with the ancestral domains of local ICCs/IPs. When the 25-year agreement came up for renewal, the government insisted on compliance with the FPIC requirement under the IPRA. The mining companies argued that:

1. 1. The MPSA was signed in 1990, before the IPRA was enacted (1997);
   2. The renewal was a “vested right” that should not be subject to “unfavourable future legislation”; and
   3. The dispute should be settled via arbitration, as provided in their contract.

Philippine Supreme Court ruling: Public policy prevails over arbitration

The Supreme Court vacated the arbitral award that had favoured the mining companies. The court’s decision established several critical legal doctrines.

Arbitration cannot override public policy. While the court generally respects the autonomy of arbitral tribunals, it held that an award may be vacated if it violates public policy. Therefore, an arbitral body cannot “exempt” a company from securing FPIC.

No vested right to violate the law. The court clarified that mining permits are not “contracts” in the strict sense but are licences granted by the state.

The “non-negotiable” FPIC. The court ruled that the NCIP certification precondition is mandatory for the renewal of an MPSA. The respondents were ordered to comply with the FPIC process.

Impact on mining tenements, MPSA renewals in the Philippines

This ruling draws a definitive line between private contractual expectations and non-negotiable constitutional policy. It establishes that while arbitration is a favoured means of dispute resolution, it cannot serve as a “legal vacuum” where statutory mandates are suspended.

For the mining sector, the Lepanto decision underscores that obtaining the certification precondition and FPIC is a substantive, constitutional obligation, even to MPSAs executed before the IPRA. The Lepanto decision carries three heavy implications for current and future mining tenements in the Philippines.

1. 1. The “retroactive” reach of the IPRA. The most significant impact is the rejection of the “vested rights” argument. Many mining companies believed that because their original MPSAs predated the IPRA, they were “grandfathered” into renewals without needing new consent.
   2. Arbitration is no longer a “shield”. Historically, companies used arbitration clauses to resolve disputes behind closed doors, often focusing strictly on the letter of the contract; and
   3. Increased social risk and cost of capital. For investors, the “regulatory certainty” of a 25-year renewal is now contingent on the social licence granted by the ICCs/IPs.

Enrique V Dela Cruz Jr is a senior partner, Ciselie Marie T Gamo-Sisayan is a partner, and Kristina Mae C Durana is a senior associate at DivinaLaw in Metro Manila

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Email: enrique.delacruz@divinalaw.com
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