Legal and Constitutional Disputes and the Philippine Economy
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A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Sicat, Gerardo P. Working Paper Legal and constitutional disputes and the Philippine economy UPSE Discussion Paper, No. 2007,03 Provided in Cooperation with: University of the Philippines School of Economics (UPSE) Suggested Citation: Sicat, Gerardo P. (2007) : Legal and constitutional disputes and the Philippine economy, UPSE Discussion Paper, No. 2007,03, University of the Philippines, School of Economics (UPSE), Quezon City This Version is available at: http://hdl.handle.net/10419/46621 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Legal and Constitutional Disputes and the Philippine Economy By Gerardo P. Sicat∗ Abstract 0 I. Introduction..........................................................................................................1 II. The Constitutional framework of Philippine economic development policy since 1935 3 III. The Courts of Justice as Statistics .....................................................................7 New cases, caseloads, and backlogs ......................................................................7 Backlogs: high courts vs. lower courts ................................................................10 De-clogging the court dockets .............................................................................12 IV. Complex constitutional provisions cause difficulties in policy making and in business operation .....................................................................................................................14 Increasingly detailed and complex provisions.....................................................22 Clogged court dockets and their economic effects ..............................................24 V. Restraints on legislation and executive action.................................................27 VI. Impact on the operations of the courts of justice............................................32 VII. Doing Business indicators and how other countries do business..................35 VIII. Impact on the national economy .....................................................................42 A. Economic regime under the parity rights amendment ....................................43 B. Economic regime under the 1987 Constitution...............................................45 C. The grand missed opportunity: a progressive economy ahead of the rest of developing East Asia ..................................................................................................................48 Appendix 1. The plunder cases.................................................................................53 Appendix 2. Statistical Appendix 55 I. Introduction The starting point of this essay is the observation that many rulings of the courts of law in the country affect the economy, some of them slowing down the nation’s economic performance thereby causing loss of economic welfare for many citizens. Since all decisions are based in the law, there is need to understand what types of law lead to these interpretations. ∗Professor Emeritus of Economics, University of the Philippines. In much of this essay, the author puts forward his observations and reflections on the country’s long term economic performance, viewed from a career perspective: as former government economic policy maker, as a long time economic professional who has worked on Philippine economic development, and as a citizen committed to the improvement of the living standards and future wellbeing of the succeeding generations. G.P. Sicat, Legal and Constitutional Disputes and the Economy Page 2 of 56 Last printed 2/28/2007 A dramatic example of this problem is the constitutionality decision of the Supreme Court on mining contract that permitted 100% foreign owned mining firms to participate in a production sharing contract with the Philippine government. Initially, the Supreme Court ruled this contract as being in violation of the Constitution. In the early ruling, the court invoked many principles regarding the issue, one of which is the issue of patrimony of the nation over the exploitation of natural resources – a principle invoked in the constitution. The other principles included laws about the rights of local and indigenous communities and environmental care. In the appeal of its own ruling, the Supreme Court reversed itself. 1 This recent and more final ruling was greeted with general approval in many sectors of the economy. At last, by its decision, the court recognized indirectly the vehicle that was already in use concerning service contract arrangements that the government had undertaken to promote greater exploration and exploitation of country’s natural resources. Such a principle was adopted during the 1970s in relation with the encouragement of energy exploration and exploitation of offshore mineral resources that had led to discoveries of petroleum and gas fields in the country. Facing the same problems of natural resource exploitation issues, other developing countries have adopted the same principle to encourage foreign capital to discover and exploit the finds for to raise their energy supplies. The Supreme Court ruling in 2005 simply demonstrates how far behind the country had been in encouraging foreign capital to help the country in realizing the economic benefits from its large endowment of natural resources. Section II discusses the constitutional restrictions on the nationality of capital in specific areas of the economy. By putting the economic protection clauses in the constitution and not in ordinary legislation, the economic restrictions take the form of laws that are almost immutable – they are iron laws of economic protection. Section III examines statistics of legal cases filed in the country’s courts and the backlog of cases in court are examined. It is a general discussion and covers all kinds of cases, including the burden derived from criminal and civil cases that sum up the work of the judicial system. The main body of the essay discusses three major impacts of these provisions on the branches of principal branches of government. Section IV discusses consequences of the economic provisions on the work of the executive and legislative branches of the government. Section V discusses the implications on the work of the courts and the administration of justice. Section VI relates these provisions on the business processes that affect the investment and business climate. 1 In the majority decision that Chief Justice Panganiban penned concerning the constitutionality petition filed by the La Bugal-B’laan Tribal Association, Inc. against the mining law, the Supreme Court stated: “All mineral resources are owned by the State. Their exploration, development and utilization (EDU) must always be subject to the full control and supervision of the State. More specifically, given the inadequacy of Filipino capital and technology in large-scale EDU activities, the State may secure the help of foreign companies in all relevant matters -- especially financial and technical assistance -- provided that, at all times, the State maintains its right of full control….The Constitution should be read in broad, life-giving strokes. It should not be used to strangulate economic growth or to serve narrow, parochial interests. Rather, it should be construed to grant the President and Congress sufficient discretion and reasonable leeway to enable them to attract foreign investments and expertise, as well as to secure for our people and our posterity the blessings of prosperity and peace. On the basis of this control standard, this Court upholds the constitutionality of the Philippine Mining Law, its Implementing Rules and Regulations….” G.R. No. 127882. December 1, 2004. G.P. Sicat, Legal and Constitutional Disputes and the Economy Page 3 of 56 Last printed 2/28/2007 With the use of the Doing Business surveys of the World Bank, the Philippines is placed in comparative context with other countries in its immediate region and the world at large. The final section (section VII) deals with the overall assessment of the various effects of the legal framework on the national economy. This last section is divided into three parts. In part A, a historical perspective is provided on the implications of the economic restrictions especially in the context of the special economic relations with the United States that led to the parity rights amendments