A recent conference on “mining’s impact on the Philippine economy and ecology” has become one of the hottest, if not the hottest, topics in the business world. During that confab, the country’s business sector conceded that the government must regulate the mining industry.
While arguing that we can’t live without mining, famous businessman Manny V. Pangilinan said that “the mining industry was not perfect”, thus it must be regulated by both national and local governments.
A former government official said he was in favor of mining but under very strict parameters.
In effect, what these influential people were saying is: “OK. Mining is good, but it must be regulated and it must be for the good of society.”
These statements, if carefully evaluated, operate on the premise that the country’s mining lands or mineral resources are owned by the state. Thus, nobody owns them. They can only be given by the state through license, contract, or grant. They cannot be expropriated. This gives the state, which is the sole owner of lands of public dominion, the authority to regulate the mining sector pursuant to the Constitution and to the laws enacted or to be enacted by our lawmakers.
The primitive, colonial Regalian Doctrine
But… such a statist notion is founded on a single primitive, royalist concept, which has all the trappings of European collectivism or statism. This concept is called the Regalian Doctrine first introduced to our political system by the Spaniards through the Royal Decree of 13 February 1894 or the Maura Law. According to this doctrine, all lands of the public domain belong to the State.
This system is enshrined in the 1987 Constitution under Article 12, Section 2, which states:
“All 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 other natural resources are owned by the State.”
The above-mentioned Constitutional provision is the main reason why the country’s mining industry is one of the most regulated industries in the world. In fact, almost all mining countries of the world, except the United States, follow this Regalian Doctrine.
To understand the evil of this doctrine, as well as its impact on the country’s mining sector and on the concept of property rights, it is imperative to look at its historical background and how free countries, particularly the United States, rejected its conceptual and political basis.
As already stated, the Regalian Doctrine, which was apparently a colonial instrument, is the principle that all natural resources belong to the state. Under this system, the Philippine islands were considered Crown properties or possessions. Through this colonial tool the entire territory was practically owned by the Spanish Crown, and all lands therein could only be disposed of or granted to individuals or entities through the will of the Crown.
The doctrine and the feudal system
In effect, it was this colonial principle that established and helped propagate the feudal system in the 18th century, wherein most of the lands were owned by the Catholic Church and by early feudal lords.
Historian Samuel Tan wrote:
“Under the Regalian Doctrine, the Philippine Islands were Spanish possessions and all lands therein were Crown lands disposable to individual, institutions, or corporations as the Crown willed in the form of encomiendas and/or landed estates called haciendas, together with the services and tributes of the native inhabitants who had lived in the lands as their ancestral homelands.”
The first victims of the doctrine were the early settlers who owned and occupied their lands since time immemorial.
As Owen Lynch and Kirk Talbott correctly observed:
“The Maura Act highlighted the colonial regime’s insensitivity to the plight and potential of the colony’s poor rural majority. By empowering the colonial officials to deny legal recognition of community-based property rights, the Maura act reneged on Spain’s thre-centuries-old (albeit largely ignored) commitment to respect such traditions, thus disenfranchising several millions of rural farmers.”
This feudal system favored a few lucky men— the caciques— who acquired legal titles through collaboration with the colonial regime. This government-sponsored injustice, caused by inequitable allocation of legal rights to natural resources, led to the first revolt against colonial rule in the country two years after the Maura rule was implemented in 1894. However in 1898 Spain lost to the United States, which ended its three-centuries-old rule in the Philippines.
Mythical doctrine as a convenient legal pretext
Following the fall of the Spanish rule, the United States reinvented the Regalian Doctrine as a “convenient legal pretext”. According to Lynch and Talbott, the U.S. colonial regime, under the rule of the Democrats, concocted and promoted a legal myth now called the “Regalian Doctrine” in order to “justify and perpetuate the expropriations based on the Maura Act of 1894”. This new lie asserted that Ferdinand Magellan acquired the early settlers’ property rights and sovereignty when he planted a cross on a small island known as Mactan in 1521.
Lynch and Talbott argued:
“The mythical Regalian Doctrine provided the new colonial regime with a convenient legal pretext for claiming ownership of more than 90 percent of the Philippines’ total land mass. It likewise nurtured the largely unrealized hope of senior U.S. colonial officials who believe that they could lure U.S. corporations— especially sugar-cane-growing enterprises— to the Philippines by providing them with legal rights over large tracts of fertile land.”
Certainly those “senior U.S. colonial officials” were part of the then dominant Democratic party in the United States. It must be noted that the American society, from 1890s up to 1930s, had been undergoing drastic political changes now known as the ‘progressive era’. During that dark period, the United States dramatically departed from its founding principles— the Republican principles of limited government, free market capitalism, and non-intervention.
Doctrine repugnant to property right
In 1909, a ruling of the U.S. Supreme Court (Carino v. Insular Government) rejected the Regalian Doctrine; however, the Manila-based government largely ignored said ruling.
In the landmark case Carino v. Insular Government, the Court declared that the land occupied by the Philippines since time immemorial was never legally public land. Justice Holmes, who penned the ponencia, stressed that even if Spanish Crown refused to recognize the property rights of the early inhabitants, it did “not follow that, in the view of the United States, [they] had lost all rights and [were] merely trespasser[s].” However, contrary to the general notion that the Maura Law mandated “the confiscation of a right”, Holmes clarified that the Spanish law merely “withdraw the privilege to register rights.”
The U.S. Court considered the doctrine repugnant, noting that the argument “seems to amount to a denial of native titles for the want of ceremonies which the Spaniards would not have permitted and had not the power to enforce.”
Nealy 100 years later the ruling in Carino became the ‘philosophical’ basis of the Indigenous People’s Rights Act (IPRA) of 1997.
The Carino doctrine states: “Every presumption is and ought to be against the Government in a case like the present. It might, perhaps, be proper and sufficient to say that when, as far back as testimony or memory goes, the land has been held by individuals under a claim of private ownership, it will be presumed to have been held in the same way from before the Spanish conquest, and never to have been public land.”
Regalian doctrine the philosophical basis of IPRA
My understanding is that the controlling principle laid down in Carino repudiated the Regalian Doctrine and empowered and affirmed the American concept of individualism and property rights. In fact, the case’s ratio decidendi is antithetical to the doctrine, and what is clear is that the Carino ruling considered it repugnant to people’s property rights, a principle that should have served as a philosophical guide to the then Manila-based regime to reject, destroy, and repudiate this colonial, statist system. However, as stated above, the country’s early political leaders in Manila simply ignore Carino’s ruling strongly founded on the principle of individuals’ property rights.
The problem with IPRA is that the well-intentioned idea of protecting indigenous communities institutionalizes preferential treatment of so-called minority communities. The law should be applied to all. If these so-called indigenous people had the right to own ancestral lands and natural resources, then other communities should also be allowed by law to enjoy the same right— or privileges (if that’s how its proponents call it).
I repeat: the Carino ruling simply affirmed and empowered the property rights of every individual, not merely of so-called indigenous community people, and strongly repudiated the statist idea that all lands of public domain belong to the state.
The legality or constitutionality of IPRA was challenged before the Court in Cruz v. DENR. The petitioner argued that the Act unlawfully deprived the State of ownership over lands of the public domain as well as of minerals and other natural resources therein, in violation of the Regalian Doctrine still embodied in Section 2, Article XII of the Constitution. In ruling in favor of indigenous people’s right to their ancestral lands and ancestral domain, the Supreme Court, in effect, parodied King Philip’s royal mandate in 1594, wherein the latter specified that “Grants of land to Spaniards be without injury to the natives and those which have been granted to their loss and injury be returned to their lawful owners.”
American historians Montgomery and Glazer critiqued the doctrine in the following manner:
“First, it vests ownership and control of land— and the resources therein— in the hand of the State, to the prejudice of the same communities [indigenous people]. The only generally recognized exceptions to this general rule are lands which are already covered by documents of titles. Lands which are not so titled are treated as part of the public or government lands, or of the public domain.
“Secondly, as a corollary to the above, the natural resources within these public lands are consequently under the control of the State.”
Filipino nationalists maintained the status quo
Since Philippine independence, the nationalist politicians chose to maintain the same system of land ownership and classification based on the Regalian Doctrine. This political choice largely maintained the status quo, albeit with a few modifications, since 1894, as land in the Philippines was either considered of private ownership or of public domain. Only agricultural lands were classified as disposable and inalienable. The Regalian Doctrine was largely emphasized in all the three constitutions adopted for the Philippine Republic in 1935, 1973, and 1987.
If during the Spanish rule the entire Philippine territory was considered property of the Spanish Crown, today a reinvented Regalian Doctrine makes the State the property owner of all lands of the public domain, and this is the reason why the entire Philippine economy and almost all economic activities are heavily regulated. This is the reason why the new and previous constitutions heavily restricted foreign ownership of land and business. This royalist, colonial doctrine—along with its allied principles, namely, social justice, social equality, egalitarianism, national patrimony, and public welfare— is the reason why this country remains poor. In fact, as most formerly socialistic countries in Asia embark on economic openness and liberalization, the Philippines is moving backwards, as its leaders refuse to give up these primitive, tribal principles.
The case of La Bugal-B’laan
The paramount- or evil- influence of the Regalian Doctrine was clearly demonstrated in La Bugal-B’laan v. DENR. In this landmark case, the Court asserted the authority of the Regalian Doctrine enshrined in Article XII Section 2 of the 1987 Constitution and declared that RA 7942 or the Philippine Mining Act of 1995 is unconstitutional for allowing fully foreign owned corporations to exploit Philippine natural resources. Unlike the 1935 and 1973 Constitutions that authorized the State to grant licenses, concessions, or leases for the exploration, exploitation, development or utilization of natural resources, the 1987 Constitution merely permits foreign owned corporations to provide technical or financial assistance to the State for large scale exploration, development and utilization of minerals, petroleum and other mineral oils.
The Supreme Court held: “In any case, the constitutional provision allowing the President to enter into FTAAs with foreign-owned corporations is an exception to the rule that participation in the nation’s natural resources is reserved exclusively to Filipinos. Accordingly, such provision must be construed strictly against their enjoyment by non-Filipinos.”
However, on December 1, 2004, the Supreme Court reversed its earlier ruling (Jan. 17, 2004), by a vote of 10-4 with one abstention. The Court justified its reversal by arguing that the “Constitution should be read in broad life-giving strokes; it should not be used to strangulate economic growth or to serve narrow parochial interest. This ruling, in effect upheld the constitutionality of the Mining Act.
Now as a result, the limitation on foreign equity is removed for development, utilization and large exploration of petroleum, minerals, and other mineral oils. This particular exemption to the general rule is imposed through the Financial or Technical Assistance Agreement (“FTAA”) in the minerals sector.
But still in this age of globalization and technological innovation, we arbitrarily, capriciously limit foreign participation in our ailing economy and industries when most governments the world over allow Filipinos to invest and buy lands in their respective countries. Without a doubt, Philippine protectionism is in violation of the principle of reciprocity in international law. It is our mediocre, anti-reality, anti-economics protectionism anchored on the statist principles of egalitarianism, Regalian dogma, and social justice that have been driving our economy into the ground.
Freedom for the mining sector
The mining industry, including all other industries, in this country should be free from the shackles of these instruments of statism or collectivism.
With all due to respect to some of our industrialists and businessmen in the mining industry who have clear conscience and who have honestly achieved their economic success, the only solution is economic freedom under a free market system— and the only way to achieve this goal is through constitutional revision.
Contrary to views and advocacy of some of the country’s business elites, the idea of public-private partnership will only give coercive political power to politicians, both in the national and local government, to use the same power against unarmed businessmen.
There is a big distinction between political power and economic power. Political power in business is that which empowers or authorizes any politician to arbitrarily regulate economic activities and to crackdown on what some potential ‘central planners’ deem as ‘activities’ inimical to the interest of the whole society. On the other hand, economic power is that power held by any businessman who engages in business or any kind of economic activity. It is the power to persuade or to convince the people— who are essentially the consumers— to buy or patronize one’s product or service. Under a free market system, consumers vote with their money, and every dollar spent on any product or service constitutes a separate vote. That’s the only power held and enjoyed by every businessman.
The evil idea of public-private partnership
It is the idea of public-private partnership that destroys freedom in the markets and that paves the way for the road to serfdom, wherein any favored or politically connected businessman, also called a ‘crony’, acquires economic monopoly or cartel through government help and protection. History has it that all coercive, destructive monopolies were caused and created by governments.
To understand why economic freedom is the best and only moral solution to our mining industry and to the country’s current economic ills, it is necessary to look at the history of mining and of mining law and to know the unintended consequences of political regulation of mining industry.
How freedom led to mining boom in the U.S.
In the early years of the United States, which is the birthplace of free market capitalism, some of its ceded states were acquired from Mexico and France— both of which had long-established mining laws, which carried the influence of the Regalian Doctrine. The sway of this colonial doctrine, which was paramount in these countries, had been said to be at odds with the United States’ Anglo-Saxon common-law system. The American common-law system gives a landowner a right to the minerals beneath the surface of his land property.
According to Jesse Hoover, who wrote a compelling book titled ‘The Economics of Mining’:
“The Regalian Doctrine did not prevail, and therefore a patent from the federal government has ordinarily carried with it the right both to hold the surface of the property and to mine all minerals beneath the surface. Title vests in the patentee absolutely, and under most conditions the land becomes private property.”
Mining claims and statist regulations of the mining industry were virtually non-existent in the early free market years of the United States. Such mining claims and regulations first existed in Europe and in Latin America, wherein the Regalian Doctrine, or the notion that mineral wealth pertains to the Crown, prevailed.
In 1807 the U.S. Congress started leasing mining lands, however, the results were disappointing that it decided to abandon the system in 1847.
Hoover said that miners began to search for a mining sanctuary that guaranteed them freedom from government restriction and intervention. He wrote:
“When miners from all parts of the world flocked to the Pacific Coast the mineral lands were unsurveyed and there was no federal administration or restriction of mining in the public domain. Regulations were worked out by small groups of miners in the various districts. These men, ignorant of precedents and principles, met together and passed rules which were the outgrowth of the needs of the hour in rude times and were based merely upon expediency. These early codes have been termed by R.W. Raymond, a writer of greatest authority, the “law of lariat.”
Hoover then quoted Raymond as saying:
“With the lariat they measures the distance and assigned to each miner along the gold-bearing gulch— a double portion to the discoverer, and a single portion to his successors, in the order of their coming. With the lariat, they hung, after such due process of law as was available, the rascal who stole a horse, or a bag of gold-dust, or a mining claim, or killed another man without giving him a fair notice and a fair notice and a chance to defend himself.”
Objective law, not regulations
However, I strongly disagree with Hoover’s description of these early miners as having “an imperfect knowledge of law and history.” In my own opinion, these men who loved freedom clearly understood the proper concept of law. That the law is all about human survival and self-preservation. That is, a law should not be against human nature and survival— it should not be against man’s mind and reality. A law that is anti-mind and anti-reality is not a law, but an anti-law. Nevertheless, Hoover correctly observed that these early miners had “a strong sense of justice”, as they “keenly felt that labor and pains of discovering a gold deposit should be generously rewarded. They therefore gave priority to the discoverer, and allowed him a double claim along the gulch.”
That statement reminds me of how the Philippine government and the anti-mining, anti-mind, anti-reality mob treat people in the mining industry, particularly foreign investors who are willing to share their technical know-how, technologies, and wealth with Filipinos. These technical people are being publicly criticized by Filipino throwbacks who just can’t understand the crucial, indispensable role of mining in human life.
Yet what these clueless anti-mining leftists do not understand is that their lives and survival on earth largely depend upon the people in the mining industry. Yes, the future lies in the ability and willingness of some people to mine earth’s hidden resource and then transform the same into an actual wealth.
America’s early mining industry did not succeed through government help or government regulations. It succeeded by searching— and then valuing— freedom, which was unfortunately eroded during America’s progressive era. It’s no surprise that America became the most economically prosperous nation on earth. All credit must go to America’s Founding Fathers who understood and valued the concepts of limited government, individual rights, and economic freedom.
The real enemy is this Regalian principle, which is one of the root causes of injustice, poverty, and statism in the Philippines.