G.R. No.

L-32266 February 27, 1989

THE DIRECTOR OF FORESTRY, petitioner vs. RUPERTO A. VILLAREAL, respondent.

Regalian Doctrine:
The Solicitor General for petitioner
All lands of the public
Quasha, Asperilla, Ancheta, Valmonte, Pena & Marcos for respondents. domain belong to the
State

CRUZ, J.:

The basic question before the Court is the legal classification of mangrove swamps, or manglares, as they are
commonly known. If they are part of our public forest lands, they are not alienable under the Constitution. If they are
considered public agricultural lands, they may be acquired under private ownership. The private respondent's claim to
the land in question must be judged by these criteria.

The said land consists of 178,113 square meters of mangrove swamps located in the municipality of Sapian, Capiz.
Ruperto Villareal applied for its registration on January 25, 1949, alleging that he and his predecessors-in-interest had
been in possession of the land for more than forty years. He was opposed by several persons, including the petitioner on
behalf of the Republic of the Philippines. After trial, the application was approved by the Court of First Instance. of Capiz.
1 The decision was affirmed by the Court of Appeals. 2 The Director of Forestry then came to this Court in a petition for
review on certiorari claiming that the land in dispute was forestal in nature and not subject to private appropriation.
He asks that the registration be reversed.

It should be stressed at the outset that both the petitioner and the private respondent agree that the land is mangrove
land. There is no dispute as to this. The bone of contention between the parties is the legal nature of mangrove swamps
or manglares. The petitioner claims, it is forestal and therefore not disposable and the private respondent insists it is
alienable as agricultural land. The issue before us is legal, not factual.

For a proper background of this case, we have to go back to the Philippine Bill of 1902, one of the earlier American
organic acts in the country. By this law, lands of the public domain in the Philippine Islands were classified into three
grand divisions, to wit, 1. agricultural, 2. mineral and 3. timber or forest lands. This classification was maintained in the
Constitution of the Commonwealth, promulgated in 1935, until it was superseded by the Constitution of 1973. That new
charter expanded the classification of public lands to include industrial or commercial, residential, resettlement, and
grazing lands and even permitted the legislature to provide for other categories. 3 This provision has been reproduced,
but with substantial modifications, in the present Constitution. 4

Under the Commonwealth Constitution, which was the charter in force when this case arose, only agricultural lands
were allowed to be alienated. 5 Their disposition was provided for under C.A. No. 141. Mineral and timber or forest
lands were not subject to private ownership unless they were first reclassified as agricultural lands and so released for
alienation.

In the leading case of Montano v. Insular Government, 6 promulgated in 1909, mangrove swamps or manglares were
defined by the Court as:

... mud flats, alternately washed and exposed by the tide, in which grows various kindred plants which will not live
except when watered by the sea, extending their roots deep into the mud and casting their seeds, which also germinate
there. These constitute the mangrove flats of the tropics, which exist naturally, but which are also, to some extent
cultivated by man for the sake of the combustible wood of the mangrove and like trees as well as for the useful nipa
palm propagated thereon. Although these flats are literally tidal lands, yet we are of the opinion that they cannot be so
regarded in the sense in which that term is used in the cases cited or in general American jurisprudence. The waters
flowing over them are not available for purpose of navigation, and they may be disposed of without impairment of the
public interest in what remains.
xxx

Under this uncertain and somewhat unsatisfactory condition of the law, the custom had grown of converting manglares
and nipa lands into fisheries which became a common feature of settlement along the coast and at the same time of the
change of sovereignty constituted one of the most productive industries of the Islands, the abrogation of which would
destroy vested interests and prove a public disaster.

Mangrove swamps were thus considered agricultural lands and so susceptible of private ownership.

Subsequently, the Philippine Legislature categorically declared, despite the above-cited case, that mangrove swamps
form part of the public forests of this country. This it did in the Administrative Code of 1917, which became effective on
October 1 of that year, thus:

Section 1820. Words and phrase defined. - For the purpose of this chapter 'public forest' includes, except as otherwise
specially indicated, all unreserved public land, including nipa and mangrove swamps, and all forest reserves of whatever
character.

It is noteworthy, though, that notwithstanding this definition, the Court maintained the doctrine in the Montano case
when two years later it held in the case of Jocson v. Director of Forestry: 7

...the words timber land are always translated in the Spanish translation of that Act (Act of Congress) as terrenos
forestales. We think there is an error in this translation and that a better translation would be 'terrenos madereros.'
Lumber land in English means land with trees growing on it. The mangler plant would never be called a tree in English
but a bush, and land which has only bushes, shrubs or aquatic plants growing on it cannot be called 'timber land.

xxx xxx xxx

The fact that there are a few trees growing in a manglare or nipa swamps does not change the general character of the
land from manglare to timber land.

More to the point, addressing itself directly to above-quoted Section 1820, the Court declared:

'In the case of Mapa vs. Insular Government (10 Phil. Rep., 175), this Court said that the phrase agricultural lands as used
in Act No. 926 means those public lands acquired from Spain which are not timber or mineral lands.

Whatever may have been the meaning of the term 'forestry' under the Spanish law, the Act of Congress of July 1st 1902,
classifies the public lands in the Philippine Islands as timber, mineral or agricultural lands, and all public lands that are
not timber or mineral lands are necessarily agricultural public lands, whether they are used as nipa swamps, manglares,
fisheries or ordinary farm lands.

The definition of forestry as including manglares found in the Administrative Code of 1917 cannot affect rights which
vested prior to its enactment.
These lands being neither timber nor mineral lands, the trial court should have considered them agricultural lands. If
they are agricultural lands, then the rights of appellants are fully established by Act No. 926.

The doctrine was reiterated still later in Garchitorena Vda. de Centenera v. Obias, 8 promulgated on March 4, 1933,
more than fifteen years after the effectivity of the Administrative Code of 1917. Justice Ostrand declared for a
unanimous Court:

The opposition rests mainly upon the proposition that the land covered by the application there are mangrove lands as
shown in his opponent's Exh. 1, but we think this opposition of the Director of Forestry is untenable, inasmuch as it has
been definitely decided that mangrove lands are not forest lands in the sense in which this phrase is used in the Act of
Congress.

No elaboration was made on this conclusion which was merely based on the cases of Montano and Jocson. And in 1977,
the above ruling was reaffirmed in Tongson v. Director of Forestry, 9 with Justice Fernando declaring that the mangrove
lands in litis were agricultural in nature. The decision even quoted with approval the statement of the trial court that:

... Mangrove swamps where only trees of mangrove species grow, where the trees are small and sparse, fit only for
firewood purposes and the trees growing are not of commercial value as lumber do not convert the land into public
land. Such lands are not forest in character. They do not form part of the public domain.

Only last year, in Republic v. De Porkan, 10 the Court, citing Krivenko v. Register of Deeds, 11 reiterated the ruling in the
Mapa case that "all public lands that are not timber or mineral lands are necessarily agricultural public lands, whether
they are used as nipa swamps, manglares, fisheries or ordinary farm lands.

But the problem is not all that simple. As it happens, there is also a line of decisions holding the contrary view.

In Yngson v. Secretary of Agriculture and Natural Resources, 12 promulgated in 1983, the Court ruled "that the Bureau
of Fisheries has no jurisdiction to dispose of swamp lands or mangrove lands forming part of the public domain while
such lands are still classified as forest lands.

Four months later, in Heirs of Amunategui v. Director of Forestry, 13 the Court was more positive when it held, again
through Justice Gutierrez:

The Heirs of Jose Amunategui maintain that Lot No. 885 cannot be classified as forest land because it is not thickly
forested but is a 'mangrove swamps.' Although conceding that 'mangrove swamp' is included in the classification of
forest land in accordance with Section 1820 of the Revised Administrative Code, the petitioners argue that no big trees
classified in Section 1821 of the said Code as first, second and third groups are found on the land in question.
Furthermore, they contend that Lot 885, even if it is a mangrove swamp, is still subject to land registration proceedings
because the property had been in actual possession of private persons for many years, and therefore, said land was
already 'private land' better adapted and more valuable for agricultural than for forest purposes and not required by the
public interests to be kept under forest classification.

The petition is without merit.

A forested area classified as forest land of the public domain does not lose such classification simply because loggers
or settlers may have stripped it of its forest cover. Parcels of land classified as forest land may actually be covered with
grass or planted to crops by kaingin cultivators or other farmers. 'Forested lands' do not have to be on mountains or in
out-of-the-way places. Swampy areas covered by mangrove trees, nipa palms, and other trees growing in brackish or
sea water may also be classified as forest land. The classification is descriptive of its legal nature or status and does not
have to be descriptive of what the land actually looks like. Unless and until the land classsified as 'forest' is released in an
official proclamation to that effect so that it may form part of the disposable agricultural lands of the public domain, the
rules on confirmation of imperfect titles do not apply.'

The view was maintained in Vallarta v. Intermediate Appellate Court, 14 where this Court agreed with the Solicitor
General's submission that the land in dispute, which he described as "swamp mangrove or forestal land," were not
private properties and so not registerable. This case was decided only twelve days after the De Porkan case.

Faced with these apparent contradictions, the Court feels there is a need for a categorical pronouncement that should
resolve once and for all the question of whether mangrove swamps are agricultural lands or forest lands.

The determination of this question is a function initially belonging to the legislature, which has the authority to
implement the constitutional provision classifying the lands of the public domain (and is now even permitted to provide
for more categories of public lands). The legislature having made such implementation, the executive officials may then,
in the discharge of their own role, administer our public lands pursuant to their constitutional duty " to ensure that the
laws be faithfully executed' and in accordance with the policy prescribed. For their part, the courts will step into the
picture if the rules laid down by the legislature are challenged or, assuming they are valid, it is claimed that they are not
being correctly observed by the executive. Thus do the three departments, coordinating with each other, pursue and
achieve the objectives of the Constitution in the conservation and utilization of our natural resources.

In C.A. No. 141, the National Assembly delegated to the President of the Philippines the function of making periodic
classifications of public lands, thus:

Sec. 6. The President, upon the recommendation of the Secretary of Agriculture and Natural Resources, shall from time
to time classify the lands of the public domain into:

(a) Alienable or disposable,

(b) Lumber, and

(c) Mineral lands,

and may at any time and in a like manner transfer such lands from one class to another, for the purposes of their
administration and disposition.

Sec. 7. For the purposes of the administration and disposition of alienable or disposable lands, the President, upon
recommendation by the Secretary of Agriculture and Natural Resources, shall from time to time declare what lands are
open to disposition or concession under this Act.

With particular regard to alienable public lands, Section 9 of the same law provides:

For the purpose of their administration and disposition, the lands of the public domain alienable or open to disposition
shall be classified, according to the use or purposes to which such lands are destined, as follows:

(a) Agricultural;

(b) Residential, commercial, industrial, or for similar productive purposes;

(c) Educational, charitable, or other similar purposes; and

(d) Reservations for townsites and for public and quasi-public uses.

The President, upon recommendation by the Secretary of Agriculture and Natural Resources, shall from time to time
make the classifications provided for in this section, and may, at any time and in a similar manner, transfer lands from
one class to another.

As for timber or forest lands, the Revised Administrative Code states as follows:

Sec. 1826. Regulation setting apart forest reserves- Revocation of same. - Upon there commendation of the Director of
Forestry, with the approval of the Department Head, the President of the Philippines may set apart forest reserves from
the public lands and he shall by proclamation declare the establishment of such reserves and the boundaries thereof,
and thereafter such forest reserves shall not be entered, sold, or otherwise disposed of, but shall remain as such for
forest uses, and shall be administered in the same manner as public forest.

The President of the Philippines may in like manner by proclamation alter or modify the boundaries of any forest reserve
from time to time, or revoke any such proclamation, and upon such revocation such forest reserve shall be and become
part of the public lands as though such proclamation had never been made.
Sec. 1827. Assignment of forest land for agricultural purposes. - Lands in public forest, not including forest reserves,
upon the certification of the Director of Forestry that said lands are better adapted and more valuable for agricultural
than for forest purposes and not required by the public interests to be kept under forest, shall be declared by the
Department Head to be agricultural lands.

With these principles in mind, we reach the following conclusion:

Mangrove swamps or manglares should be understood as comprised within the public forests of the Philippines as
defined in the aforecited Section 1820 of the Administrative Code of 1917. The legislature having so determined, we
have no authority to ignore or modify its decision, and in effect veto it, in the exercise of our own discretion. The
statutory definition remains unchanged to date and, no less noteworthy, is accepted and invoked by the executive
department. More importantly, the said provision has not been challenged as arbitrary or unrealistic or unconstitutional
assuming the requisite conditions, to justify our judicial intervention and scrutiny. The law is thus presumed valid and so
must be respected. We repeat our statement in the Amunategui case that the classification of mangrove swamps as
forest lands is descriptive of its legal nature or status and does not have to be descriptive of what the land actually
looks like. That determination having been made and no cogent argument having been raised to annul it, we have no
duty as judges but to apply it. And so we shall.

Our previous description of the term in question as pertaining to our agricultural lands should be understood as covering
only those lands over which ownership had already vested before the Administrative Code of 1917 became effective.
Such lands could not be retroactively legislated as forest lands because this would be violative of a duly acquired
property right protected by the due process clause. So we ruled again only two months ago in Republic of the
Philippines vs. Court of Appeals, 15 where the possession of the land in dispute commenced as early as 1909, before it
was much later classified as timberland.

It follows from all this that the land under contention being admittedly a part of the mangrove swamps of Sapian, and
for which a minor forest license had in fact been issued by the Bureau of Forestry from 1920 to 1950, it must be
considered forest land. It could therefore not be the subject of the adverse possession and consequent ownership
claimed by the private respondent in support of his application for registration. To be so, it had first to be released as
forest land and reclassified as agricultural land pursuant to the certification the Director of Forestry may issue under
Section 1827 of the Revised Administrative Code.

The private respondent invokes the survey plan of the mangrove swamps approved by the Director of Lands, 16 to prove
that the land is registerable. It should be plain, however, that the mere existence of such a plan would not have the
effect of converting the mangrove swamps, as forest land, into agricultural land. Such approval is ineffectual because it is
clearly in officious. The Director of Lands was not authorized to act in the premises. Under the aforecited law, it is the
Director of Forestry who has the authority to determine whether forest land is more valuable for agricultural rather than
forestry uses, as a basis for its declaration as agricultural land and release for private ownership.

Thus we held in the Yngson case:

It is elementary in the law governing the disposition of lands of the public domain that until timber or forest lands are
released as disposable and alienable neither the Bureau of Lands nor the Bureau of Fisheries has authority to lease,
grant, sell or otherwise dispose of these lands for homesteads, sales patents, leases for grazing or other purposes,
fishpond leases and other modes of utilization.
The Bureau of Fisheries has no jurisdiction to administer and dispose of swamp lands or mangrove lands forming part of
the public domain while such lands are still classified as forest land or timber land and not released for fishery or other
purposes.

The same rule was echoed in the Vallarta case, thus:

It is elementary in the law governing natural resources that forest land cannot be owned by private persons. It is not
registerable. The adverse possession which can be the basis of a grant of title in confirmation of imperfect title cases
cannot commence until after the forest land has been declared alienable and disposable. Possession of forest land, no
matter bow long cannot convert it into private property.'

We find in fact that even if the land in dispute were agricultural in nature, the proof the private respondent offers of
prescriptive possession thereof is remarkably meager and of dubious persuasiveness. The record contains no convincing
evidence of the existence of the informacion posesoria allegedly obtained by the original transferor of the property, let
alone the fact that the conditions for acquiring title thereunder have been satisfied. Nowhere has it been shown that the
informacion posesoria has been inscribed or registered in the registry of property and that the land has been under the
actual and adverse possession of the private respondent for twenty years as required by the Spanish Mortgage Law. 17
These matters are not presumed but must be established with definite proof, which is lacking in this case.

Significantly, the tax declarations made by the private respondent were practically the only basis used by the appellate
court in sustaining his claim of possession over the land in question. Tax declarations are, of course, not sufficient to
prove possession and much less vest ownership in favor of the declarant, as we have held in countless cases. 18

We hold, in sum, that the private respondent has not established his right to the registration of the subject land in his
name. Accordingly, the petition must be granted.

It is reiterated for emphasis that, conformably to the legislative definition embodied in Section 1820 of the Revised
Administrative Code of 1917, which remains unamended up to now, mangrove swamps or manglares form part of the
public forests of the Philippines. As such, they are not alienable under the Constitution and may not be the subject of
private ownership until and unless they are first released as forest land and classified as alienable agricultural land.

WHEREFORE, the decision of the Court of Appeals is SET ASIDE and the application for registration of title of private
respondent is DISMISSED, with cost against him. This decision is immediately executory.

SO ORDERED.
ARTICLE XII PHILIPPINE CONSTITUTION

Section 2. 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. With the exception of
agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may
enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at
least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five
years, renewable for not more than twenty-five years, and under such terms and conditions as may be provided by law. In cases
of water rights for irrigation, water supply fisheries, or industrial uses other than the development of water power, beneficial use
may be the measure and limit of the grant.

The State shall protect the nation’s marine wealth in its archipelagic waters, territorial sea, and exclusive economic zone, and
reserve its use and enjoyment exclusively to Filipino citizens.

The Congress may, by law, allow small-scale utilization of natural resources by Filipino citizens, as well as cooperative fish
farming, with priority to subsistence fishermen and fishworkers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for
large-scale exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general
terms and conditions provided by law, based on real contributions to the economic growth and general welfare of the country. In
such agreements, the State shall promote the development and use of local scientific and technical resources.

The President shall notify the Congress of every contract entered into in accordance with this provision, within thirty days from
its execution.
Initiatives for Dialogue and Empowerment Through Alternative Legal Services, Inc. et al vs Power Sector Assets and
Liabilities Management corporation et Al, En Banc,

GR No. 192088, October 9, 2012.

VILLARAMA, J.:

Before us is a petition for certiorari and prohibition seeking to permanently enjoin the sale of the Angat Hydro-Electric
Power Plant (AHEPP) to Korea Water Resources Corporation (K-Water) which won the public bidding conducted by the
Power Sector Assets and Liabilities Management Corporation (PSALM).

The Facts

Respondent PSALM is a government-owned and controlled corporation created by virtue of Republic Act No. 9136,
otherwise known as the "Electric Power Industry Reform Act of 2001" (EPIRA). The EPIRA provided a framework for the
restructuring of the electric power industry, including the privatization of the assets of the National Power Corporation
(NPC), the transition to the desired competitive structure, and the definition of the responsibilities of the various
government agencies and private entities. Said law mandated PSALM to manage the orderly sale, disposition, and
privatization of NPC generation assets, real estate and other disposable assets, and Independent Power Producer (IPP)
contracts with the objective of liquidating all NPC financial obligations and stranded contract costs in an optimal manner,
which liquidation is to be completed within PSALMs 25-year term of existence.

Sometime in August 2005, PSALM commenced the privatization of the 246-megawatt (MW) AHEPP located in San
Lorenzo, Norzagaray, Bulacan. AHEPPs main units built in 1967 and 1968, and 5 auxiliary units, form part of the Angat
Complex which includes the Angat Dam, Angat Reservoir and the outlying watershed area. A portion of the AHEPP - the
10 MW Auxiliary Unit No. 4 completed on June 16, 1986 and the 18 MW Auxiliary Unit No. 5 completed on January 14,
1993 - is owned by respondent Metropolitan Waterworks and Sewerage System (MWSS). The main units produce a total
of 200 MW of power while the auxiliary units yield the remaining 46 MW of power. The Angat Dam and AHEPP are
utilized for power generation, irrigation, water supply and flood control purposes. Because of its multi-functional design,
the operation of the Angat Complex involves various government agencies, namely: (1) NPC; (2) National Water
Resources Board (NWRB); (3) MWSS; (4) respondent National Irrigation Administration (NIA); and (5) Philippine
Atmospheric, Geophysical and Astronomical Services Administration (PAG-ASA).

On December 15, 2009, PSALMs Board of Directors approved the Bidding Procedures for the privatization of the AHEPP.
An Invitation to Bid was published on January 11, 12 and 13, 2010 in three major national newspapers. Subject of the bid
was the AHEPP consisting of 4 main units and 3 auxiliary units with an aggregate installed capacity of 218 MW. The two
auxiliary units owned by MWSS were excluded from the bid.

The following terms and conditions for the purchase of AHEPP were set forth in the Bidding Package:

IB-05 CONDITION OF THE SALE

The Asset shall be sold on an "AS IS, WHERE IS" basis.

The Angat Dam (which is part of the Non-Power Components) is a multi-purpose hydro facility which currently supplies
water for domestic use, irrigation and power generation. The four main units of the Angat Plant release water to an
underground trailrace that flows towards the Bustos Dam which is owned and operated by the National Irrigation
Administration ("NIA") and provides irrigation requirements to certain areas in Bulacan. The water from the auxiliary
units 1, 2 and 3 flows to the Ipo Dam which is owned and operated by MWSS and supplies domestic water to Metro
Manila and other surrounding cities.

The priority of water usage under Philippine Law would have to be observed by the Buyer/Operator.

The Winning Bidder/Buyer shall be requested to enter into an operations and maintenance agreement with PSALM for
the Non-Power Components in accordance with the terms and conditions of the O & M Agreement to be issued as part
of the Final Transaction Documents. The Buyer, as Operator, shall be required to operate and maintain the Non-Power
Components at its own cost and expense. PSALM is currently negotiating a water protocol agreement with various
parties which are currently the MWSS, NIA, the National Water Resources Board and NPC. If required by PSALM, the
Buyer will be required to enter into the said water protocol agreement as a condition to the award of the Asset.

The Buyer shall be responsible for securing the necessary rights to occupy the land underlying the Asset.4ςrνll
(Emphasis supplied.)

All participating bidders were required to comply with the following:chanroblesvirtuallawlibrary

(a) submission of a Letter of Interest; (b) execution of Confidentiality Agreement and Undertaking; and (c) payment of a
non-refundable fee of US$ 2,500 as Participation Fee.5ςrνll After holding pre-bid conferences and forum discussions
with various stakeholders, PSALM received the following bids from six competing firms:

K-Water US$ 440,880,000.00

First Gen Northern Energy 365,000,678.00

Corporation

San Miguel Corporation 312,500,000.00

SNAboitiz Power-Pangasinan, Inc. 256,000,000.00

Trans-Asia Oil & Energy 237,000,000.00

Development Corporation

DMCI Power Corporation 188,890,000.00

On May 5, 2010, and after a post-bid evaluation, PSALMs Board of Directors approved and confirmed the issuance of a
Notice of Award to the highest bidder, K-Water.6ςrνll
On May 19, 2010, the present petition with prayer for a temporary restraining order (TRO) and/or writ of preliminary
injunction was filed by the Initiatives for Dialogue and Empowerment Through Alternative Legal Services, Inc. (IDEALS),
Freedom from Debt Coalition (FDC), AKBAYAN Citizens Action Party (AKBAYAN) and Alliance of Progressive Labor.

On May 24, 2010, this Court issued a Status QuoAnte Order directing the respondents to maintain the status quo
prevailing before the filing of the petition and to file their respective Comments on the petition.7ςrνll

Arguments of the Parties

Petitioners contend that PSALM gravely abused its discretion when, in the conduct of the bidding it disregarded and
violated the peoples right to information guaranteed under the Constitution, as follows: (1) the bidding process was
commenced by PSALM without having previously released to the public critical information such as the terms and
conditions of the sale, the parties qualified to bid and the minimum bid price, as laid down in the case of Chavez v. Public
Estates Authority ; (2) PSALM refused to divulge significant information requested by petitioners, matters which are of
public concern; and (3) the bidding was not conducted in an open and transparent manner, participation was
indiscriminately restricted to the private sectors in violation of the EPIRA which provides that its provisions shall be
"construed in favor of the establishment, promotion, preservation of competition and people empowerment so that the
widest participation of the people, whether directly or indirectly, is ensured."9ςrνll

Petitioners also assail the PSALM in not offering the sale of the AHEPP to MWSS which co-owned the Angat Complex
together with NPC and NIA. Being a mere co-owner, PSALM cannot sell the AHEPP without the consent of co-owners
MWSS and NIA, and being an indivisible thing, PSALM has a positive obligation to offer its undivided interest to the other
co-owners before selling the same to an outsider. Hence, PSALMs unilateral disposition of the said hydro complex facility
violates the Civil Code rules on co-ownership (Art. 498) and Sec. 47 (e) of the EPIRA which granted PSALM the legal
option of transferring possession, control and operation of NPC generating assets like the AHEPP to another entity in
order "to protect potable water, irrigation and all other requirements imbued with public interest."

As to the participation in the bidding of and award of contract to K-Water which is a foreign corporation, petitioners
contend that PSALM clearly violated the constitutional provisions on the appropriation and utilization of water as a
natural resource, as implemented by the Water Code of the Philippines limiting water rights to Filipino citizens and
corporations which are at least 60% Filipino-owned. Further considering the importance of the Angat Dam which is the
source of 97% of Metro Manilas water supply, as well as irrigation for farmlands in 20 municipalities and towns in
Pampanga and Bulacan, petitioners assert that PSALM should prioritize such domestic and community use of water over
that of power generation.

They maintain that the Philippine Government, along with its agencies and subdivisions, have an obligation under
international law, to recognize and protect the legally enforceable human right to water of petitioners and the public in
general.

Petitioners cite the Advisory on the "Right to Water in Light of the Privatization of the Angat Hydro-Electric Power Plant"
dated November 9, 2009 issued by the Commission on Human Rights (CHR) urging the Government to revisit and
reassess its policy on water resources vis-vis its concurrent obligations under international law to provide, and ensure
and sustain, among others, "safe, sufficient, affordable and convenient access to drinking water." Since investment in
hydropower business is primarily driven by generation of revenues both for the government and private sector, the CHR
warns that once the AHEPP is privatized, there will be less accessible water supply, particularly for those living in Metro
Manila and the Province of Bulacan and nearby areas which are currently benefited by the AHEPP. The CHR believes that
the management of AHEPP is better left to MWSS being a government body and considering the public interest involved.
However, should the decision to privatize the AHEPP become inevitable, the CHR strongly calls for specific and concrete
safeguards to ensure the right to water of all, as the domestic use of water is more fundamental than the need for
electric power.

Petitioners thus argue that the protection of their right to water and of public interest requires that the bidding process
initiated by PSALM be declared null and void for violating such right, as defined by international law and by domestic law
establishing the States obligation to ensure water security for its people.

In its Comment With Urgent Motion to Lift Status Quo Ante Order, respondent PSALM prayed for the dismissal of the
petition on the following procedural grounds: (a) a petition for certiorari is not the proper remedy because PSALM was
not acting as a tribunal or board exercising judicial or quasi-judicial functions when it commenced the privatization of
AHEPP; (b) the present petition is rendered moot by the issuance of a Notice of Award in favor of K-Water; (c) assuming
the petition is not mooted by such contract award, this Court has no jurisdiction over the subject matter of the
controversy involving a political question, and also because if it were the intent of Congress to exclude the AHEPP in the
privatization of NPC assets, it should have clearly expressed such intent as it did with the Agus and Pulangui power
plants under Sec. 47 of the EPIRA; (d) petitioners lack of standing to question the bidding process for failure to show any
injury as a result thereof, while Rep. Walden Bello likewise does not have such legal standing in his capacity as a duly
elected member of the House of Representatives as can be gleaned from the rulings in David v. Arroyo11ςrνll and
Philippine Constitutional Association v. Enriquez.12ςrνll

On the alleged violation of petitioners right to information, PSALM avers that it conducted the bidding in an open and
transparent manner, through a series of events in accordance with the governing rules on public bidding. The non-
disclosure of certain information in the invitation to bid was understandable, such as the minimum or reserve price
which are still subject to negotiation and approval of PSALMs Board of Directors. The ruling in Chavez v. Public Estates
Authority13ςrνll is inapplicable since it involved government property which has become unserviceable or was no
longer needed and thus fell under Sec. 79 of the Government Auditing Code whereas the instant case concerns a
hydroelectric power plant adjacent to a dam which still provides water supply to Metro Manila. In the bidding for the
AHEPP, PSALM claims that it relied on the Rules and Regulations Implementing the EPIRA, as well as COA Circular No. 89-
296 on the general procedures for bidding by government agencies and instrumentalities of assets that will be divested
or government property that will be disposed of. PSALM likewise avers that it was constrained to deny petitioner IDEALS
letter dated April 20, 2010 requesting documents relative to the privatization of Angat Dam due to non-submission of a
Letter of Interest, Confidentiality and Undertaking and non-payment of the Participation Fee. With regard to IDEALS
request for information about the winning bidder, as contained in its letter dated May 14, 2010, the same was already
referred to respondent K-Waters counsel for appropriate action.

In any case, PSALM maintains that not all details relative to the privatization of the AHEPP can be readily disclosed; the
confidentiality of certain matters was necessary to ensure the optimum bid price for the property.

PSALM further refutes the assertion of petitioners that the Angat Complex is an indivisible system and co-owned with
MWSS and NIA. It contends that MWSSs contribution in the funds used for the construction of the AHEPP did not give
rise to a regime of co-ownership as the said funds were merely in exchange for the supply of water that MWSS would
get from the Angat Dam, while the Umiray-AngatTransbasin Rehabilitation Project the improvement and repair of which
were funded by MWSS, did not imply a co-ownership as these facilities are located in remote places. Moreover, PSALM
points out that PSALM, MWSS and NIA each was issued a water permit, and are thus holders of separate water rights.

On the alleged violation of petitioners and the peoples right to water, PSALM contends that such is baseless and
proceeds from the mistaken assumption that the Angat Dam was sold and as a result thereof, the continuity and
availability of domestic water supply will be interrupted. PSALM stresses that only the hydroelectric facility is being sold
and not the Angat Dam which remains to be owned by PSALM, and that the NWRB still governs the water allocation
therein while the NPC-FFWSDO still retains exclusive control over the opening of spillway gates during rainy season. The
foregoing evinces the continued collective control by government agencies over the Angat Dam, which in the meantime,
is in dire need of repairs, the cost of which cannot be borne by the Government.

PSALM further debunks the nationality issue raised by petitioners, citing previous opinions rendered by the Department
of Justice (DOJ) consistently holding that the utilization of water by a hydroelectric power plant does not constitute
appropriation of water from its natural source considering that the source of water (dam) that enters the intake gate of
the power plant is an artificial structure. Moreover, PSALM is mindful of the States duty to protect the publics right to
water when it sold the AHEPP. In fact, such concern as taken into consideration by PSALM in devising a privatization
scheme for the AHEPP whereby the water allocation is continuously regulated by the NWRB and the dam and its spillway
gates remain under the ownership and control of NPC.

In its Comment,14ςrνll respondent MWSS asserts that by virtue of its various statutory powers since its creation in
1971, which includes the construction, maintenance and operation of dams, reservoir and other waterworks within its
territorial jurisdiction, it has supervision and control over the Angat Dam given that the Angat Reservoir supplies
approximately 97% of the water requirements of Metro Manila. Over the course of its authority over the Angat Dam,
Dykes and Reservoir, MWSS has incurred expenses to maintain their upkeep, improve and upgrade their facilities. Thus,
in 1962, MWSS contributed about 20% for the construction cost of the Angat Dam and Dykes (then equivalent to about
P 21 million); in 1992, MWSS contributed about P 218 million for the construction of Auxiliary Unit No. 5; in 1998, MWSS
contributed P 73.5 million for the construction cost of the low level outlet; and subsequently, MWSS invested P 3.3
billion to build the Umiray-AngatTransbasin Tunnel to supplement the water supply available from the Angat Dam,
which tunnel contributes a minimum of about 9 cubic meters per second to the Angat Reservoir, thus increasing power
generation. MWSS argues that its powers over waterworks are vested upon it by a special law (MWSS Charter) which
prevails over the EPIRA which is a general law, as well as other special laws, issuances and presidential edicts. And as
contained in Sec. 1 of the MWSS Charter, which remains valid and effective, it is expressly provided that the
establishment, operation and maintenance of waterworks systems must always be supervised by the State.

MWSS further alleges that after the enactment of EPIRA, it had expressed the desire to acquire ownership and control of
the AHEPP so as not to leave the operation of the Angat Reservoir to private discretion that may prejudice the water
allocation to MWSS as dictated by NWRB rules.

Representations were thereafter made with the Office of the President (OP) for the turn over of the management of
these facilities to MWSS, and joint consultation was also held with PSALM officials for the possibility of a Management
Committee to manage and control the Angat Dam Complex under the chairmanship of the water sector, which position
was supported by former Secretary HermogenesEbdane of the Department of Public Works and Highways (DPWH). In
March 2008, PSALM proposed the creation of an inter-agency technical working group (TWG) to draft the Operations
and Maintenance (O & M) Agreement for the AHEPP that will be in effect after its privatization. PSALM likewise sought
the view of the Office of the Government Corporate Counsel (OGCC) which opined that PSALM may turn over the facility
to a qualified entity such as MWSS without need of public bidding. In 2009, various local governments supported the
transfer of the control and management of the AHEPP to MWSS, while the League of Cities and Municipalities
interposed its opposition to the privatization of the AHEPP fearing that it might increase the cost of water in Metro
Manila, and also because it will be disadvantageous to the national government since the AHEPP only contributes 246
MW of electricity to the Luzon Grid. Even the CHR has advised the Government to reassess its privatization policy and to
always consider paramount the most basic resources necessary and indispensable for human survival, which includes
water.

MWSS further avers that upon the facilitation of the OGCC and participated in by various stakeholders, including its two
concessionaires, Manila Water Company, Inc. and Maynilad Water Services, Inc., various meetings and conferences were
held relative to the drafting of the

Memorandum of Agreement on the Angat Water Protocol. On April 20, 2010, the final draft of the Angat Water Protocol
was finally complete. However, as of June 18, 2010, only MWSS and NIA signed the said final draft. MWSS thus contends
that PSALM failed to institute any safeguards as prescribed in Sec. 47 of the EPIRA when it proceeded with the
privatization of the AHEPP.

As to the issue of nationality requirement in the appropriation of water resources under the Constitution, MWSS cites
the case of Manila Prince Hotel v. Government Service Insurance System15ςrνll which interpreted paragraph 2, Sec. 10,
Art. XII of the 1987 Constitution providing that "in the grant of rights, privileges, and concessions covering the national
economy and patrimony, the State shall give preference to qualified Filipinos" to imply "a mandatory, positive command
which is complete in itself and which needs no further guidelines or implementing laws or rules for its enforcement x xx
and is per se judicially enforceable." In this case, the AHEPP is in dire danger of being wholly-owned by a Korean
corporation which probably merely considers it as just another business opportunity, and as such cannot be expected to
observe and ensure the smooth facilitation of the more critical purposes of water supply and irrigation.

Respondent First Gen Northern Energy Corporation (FGNEC) also filed a Comment16ςrνll disagreeing with the
contentions of petitioners and respondent MWSS on account of the following: (1) the NPC charter vested upon it
complete jurisdiction and control over watersheds like the Angat Watershed surrounding the reservoir of the power
plants, and hence Art. 498 of the Civil Code is inapplicable; (2) NPC, MWSS and NIA are not co-owners of the various
rights over the Angat Dam as in fact each of them holds its own water rights; (3) the State through the EPIRA expressly
mandates PSALM to privatize all NPC assets, which necessarily includes the AHEPP; (4) the privatization of the AHEPP will
not affect the priority of water for domestic and municipal uses as there are sufficient safeguards to ensure the same,
and also because the Water Code specifically mandates that such use shall take precedence over other uses, and even
the EPIRA itself gives priority to use of water for domestic and municipal purposes over power generation; (5) the Water
Protocol also safeguards priority of use of water for domestic purposes; (6) the bidding procedure for the AHEPP was
valid, and the bidding was conducted by PSALM in an open and transparent manner; and (7) the right to information of
petitioners and the public in general was fully satisfied, and PSALM adopted reasonable rules and regulations for the
orderly conduct of its functions pursuant to its mandate under the EPIRA.

FGNEC nevertheless prays of this Court to declare the nationality requirements for the ownership, operation and
maintenance of the AHEPP as prescribed by the Constitution and pertinent laws. Considering the allegation of
petitioners that K-Water is owned by the Republic of South Korea, FGNEC asserts that PSALM should not have allowed
said entity to participate in the bidding because under our Constitution, the exploration, development and utilization of
natural resources are reserved to Filipino citizens or to corporations with 60% of their capital being owned by Filipinos.

Respondent NIA filed its Comment17ςrνll stating that its interest in this case is limited only to the protection of its
water allocation drawn from the Angat Dam as determined by the NWRB. Acknowledging that it has to share the meager
water resources with other government agencies in fulfilment of their respective mandate, NIA submits that it is willing
to sit down and discuss issues relating to water allocation, as evidenced by the draft Memorandum of Agreement on the
Angat Water Protocol. Since the reliefs prayed for in the instant petition will not be applicable to NIA which was not
involved in the bidding conducted by PSALM, it will thus not be affected by the outcome of the case.

Respondents San Miguel Corporation (SMC), DMCI Power Corporation, Trans-Asia Oil and Energy Development
Corporation and SNAboitiz Power-Pangasinan, Inc. filed their respective Comments18ςrνll with common submission
that they are not real parties-in-interest and should be excluded from the case. They assert that PSALM acted pursuant
to its mandate to privatize the AHEPP when it conducted the bidding, and there exists no reason for them to take any
action to invalidate the said bidding wherein they lost to the highest bidder K-Water.

On its part, respondent K-Water filed a Manifestation In Lieu of Comment19ςrνll stating that it is not in a position to
respond to petitioners allegations, having justifiably relied on the mandate and expertise of PSALM in the conduct of
public bidding for the privatization of the AHEPP and had no reason to question the legality or constitutionality of the
privatization process, including the bidding. K-Water submits that its participation in the bidding for the AHEPP was
guided at all times by an abiding respect for the Constitution and the laws of the Philippines, and hopes for a prompt
resolution of the present petition to further strengthen and enhance the investment environment considering the level
of investment entailed, not only in financial terms by providing a definitive resolution and reliable guidance for
investors, whether Filipino or foreign, as basis for effective investment and business decisions.

In their Consolidated Reply,20ςrνll petitioners contend that the instant petition is not mooted with the issuance of a
Notice of Award to K-Water because the privatization of AHEPP is not finished until and unless the deed of absolute sale
has been executed. They cite the ruling in David v. Arroyo,21ςrνll that courts will decide cases, otherwise moot and
academic, if:chanroblesvirtuallawlibrary

first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the paramount
public interest is involved; third, when constitutional issue raised requires formulation of controlling principles to guide
the bench, the bar and the public; and fourth, the case is capable of repetition yet evading review.

Petitioners reiterate their legal standing to file the present suit in their capacity as taxpayers, or as Filipino citizens
asserting the promotion and protection of a public right, aside from being directly injured by the proceedings of PSALM.
As to the absence of Certification and Verification of Non-Forum Shopping from petitioner Bello in the file copy of
PSALM, the same was a mere inadvertence in photocopying the same.
On the matter of compliance with an open and transparent bidding, petitioners also reiterate as held in Chavez v. Public
Estates Authority,22ςrνll that the Courts interpretation of public bidding applies to any law which requires public
bidding, especially since Sec. 79 of the Government Auditing Code does not enumerate the data that must be disclosed
to the public. PSALM should have followed the minimum requirements laid down in said case instead of adopting the
"format generally used by government entities in their procurement of goods, infrastructure and consultancy services,"
considering that what was involved in Chavez is an amended Joint Venture Agreement which seeks to transfer title and
ownership over government property. Petitioners point out that the requirement under COA Circular 89-296 as regards
confidentiality covers only sealed proposals and not all information relating to the AHEPP privatization. PSALMs simple
referral of IDEALS request letter to the counsel of K-Water is very telling, indicating PSALMs limited knowledge about a
company it allowed to participate in the bidding and which even won the bidding.

On the transfer of water rights to K-Water, petitioners reiterate that this violates the Water Code, and contrary to
PSALMs statements, once NPC transfers its water permit to K-Water, in accordance with the terms of the Asset
Purchase Agreement, NPC gives up its authority to extract or utilize water from the Angat River. Petitioners further
assert that the terms of the sale of AHEPP allowing the buyer the operation and management of the Non-Power
Components, constitutes a relinquishment of government control over the Angat Dam, in violation of Art. XII, Sec. 2
of the Constitution. PSALM likewise has not stated that all stakeholders have signed the Water Protocol. Such
absence of a signed Water Protocol is alarming in the light of PSALMs pronouncement that the terms of the sale to K-
Water would still subject to negotiation. Is PSALMs refusal to sign the Water Protocol part of its strategy to negotiate
the terms of the sale with the bidders? If so, then PSALM is blithely and cavalierly bargaining away the Filipinos right
to water.

Responding to the claims of MWSS in its Comment, PSALM contends that MWSSs allegations regarding the bidding
process is belied by MWSSs own admission that it held discussions with PSALM to highlight the important points and
issues surrounding the AHEPP privatization that needed to be threshed out. Moreover, MWSS also admits having
participated, along with other agencies and stakeholders, various meetings and conferences relative to the drafting of a
Memorandum of Agreement on the Angat Water Protocol.

As regards the Angat Dam, PSALM emphasizes that MWSS never exercised jurisdiction and control over the said facility.
PSALM points out that the Angat Dam was constructed in 1967, or four years before the enactment of Republic Act No.
6234, upon the commissioning thereof by the NPC and the consequent construction by Grogun, Inc., a private
corporation. MWSS attempt to base its claim of jurisdiction over the Angat Dam upon its characterization of EPIRA as a
general law must likewise fail. PSALM explains that EPIRA cannot be classified as a general law as it applies to a
particular portion of the State, i.e., the energy sector. The EPIRA must be deemed an exception to the provision in the
Revised MWSS Charter on MWSSs general jurisdiction over waterworks systems.

PSALM stresses that pursuant to the EPIRA, PSALM took ownership of all existing NPC generation assets, liabilities, IPP
contracts, real estate and other disposable assets, which necessarily includes the AHEPP Complex, of which the Angat
Dam is part. As to the OGCC opinion cited by MWSS to support its position that control and management of the Angat
Dam Complex should be turned over to MWSS, the OGCC had already issued a second opinion dated August 20, 2008
which clarified the tenor of its earlier Opinion No. 107, s. 2008, stating that "the disposal of the Angat HEPP by sale
through public bidding the principal mode of disposition under EPIRA remains PSALMs primary option." Moreover, as
pointed out by the National Economic Development Authority (NEDA) in its letter dated September 16, 2009, the
ownership and operation of a hydropower plant goes beyond the mandate of MWSS. This view is consistent with the
provisions of EPIRA mandating the transfer of ownership and control of NPC generation assets, IPP Contracts, real estate
and other disposable assets to a private person or entity. Consequently, a transfer to another government entity of the
said NPC assets would be a clear violation of the EPIRA. Even assuming such is allowed by EPIRA, it would not serve the
objective of the EPIRA, i.e., that of liquidating all NPCs financial obligations and would merely transfer NPCs debts from
the hands of one government entity to another, the funds that would be utilized by MWSS in the acquisition of the
AHEPP would doubtless come from the pockets of the Filipino people.

As regards the opposition of various local government units to the sale of the AHEPP, PSALM said that a forum was held
specifically to address their concerns. After the said forum, these LGUs did not anymore raise the same concerns; such
inaction on their part could be taken as an acquiescence to, and acceptance of, the explanations made by PSALM during
the forum.

PSALM had made it clear that it is only the AHEPP and not the Angat Dam which was being privatized. The same wrong
premise underpinned the position of the CHR with its erroneous allegation that MWSS is allowed, under its Revised
Charter, to operate and maintain a power plant.

PSALM further contends that the sale of AHEPP to K-Water did not violate the Constitutions provision on the States
natural resources and neither is the ruling in Manila Prince Hotel applicable as said case was decided under different
factual circumstances. It reiterates that the AHEPP, being a generation asset, can be sold to a foreign entity, under the
EPIRA, in accordance with the policy reforms said law introduced in the power sector; the EPIRA aims to enable open
access in the electricity market and then enable the government to concentrate more fully on the supply of basic needs
to the Filipino people. Owing to the competitive and open nature of the generation sector, foreign corporation may own
generation assets.

Issues

The present controversy raised the following issues:

1) Legal standing of petitioners;

2) Mootness of the petition;

3) Violation of the right to information;

4) Ownership of the AHEPP;

5) Violation of Sec. 2, Art. XII of the Constitution;

6) Violation of the Water Code provisions on the grant of water rights; and

7) Failure of PSALM to comply with Sec. 47 (e) of EPIRA.

Mootness and Locus Standi

PSALMs contention that the present petition had already been mooted by the issuance of the Notice of Award to K-
Water is misplaced. Though petitioners had sought the immediate issuance of injunction against the bidding
commenced by PSALM -- specifically enjoining it from proceeding to the next step of issuing a notice of award to any of
the bidders -- they further prayed that PSALM be permanently enjoined from disposing of the AHEPP through
privatization. The petition was thus filed not only as a means of enforcing the States obligation to protect the citizens
"right to water" that is recognized under international law and legally enforceable under our Constitution, but also to
bar a foreign corporation from exploiting our water resources in violation of Sec. 2, Art. XII of the 1987 Constitution. If
the impending sale of the AHEPP to K-Water indeed violates the Constitution, it is the duty of the Court to annul the
contract award as well as its implementation. As this Court held in Chavez v. Philippine Estates Authority,23ςrνll
"supervening events, whether intended or accidental, cannot prevent the Court from rendering a decision if there is a
grave violation of the Constitution."

We also rule that petitioners possess the requisite legal standing in filing this suit as citizens and taxpayers.

"Legal standing" or locus standi has been defined as a personal and substantial interest in the case such that the party
has sustained or will sustain direct injury as a result of the governmental act that is being challenged, alleging more than
a generalized grievance. The gist of the question of standing is whether a party alleges "such personal stake in the
outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon
which the court depends for illumination of difficult constitutional questions."24ςrνll This Court, however, has adopted
a liberal attitude on the locus standi of a petitioner where the petitioner is able to craft an issue of transcendental
significance to the people, as when the issues raised are of paramount importance to the public.25ςrνll Thus, when the
proceeding involves the assertion of a public right, the mere fact that the petitioner is a citizen satisfies the requirement
of personal interest.26ςrνll
There can be no doubt that the matter of ensuring adequate water supply for domestic use is one of paramount
importance to the public. That the continued availability of potable water in Metro Manila might be compromised if
PSALM proceeds with the privatization of the hydroelectric power plant in the Angat Dam Complex confers upon
petitioners such personal stake in the resolution of legal issues in a petition to stop its implementation.

Moreover, we have held that if the petition is anchored on the peoples right to information on matters of public
concern, any citizen can be the real party in interest. The requirement of personal interest is satisfied by the mere fact
that the petitioner is a citizen, and therefore, part of the general public which possesses the right. There is no need to
show any special interest in the result. It is sufficient that petitioners are citizens and, as such, are interested in the
faithful execution of the laws.27ςrνll

Violation of Right to Information

The peoples right to information is provided in Section 7, Article III of the Constitution, which reads:

Sec. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records,
and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research
data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided
by law. (Emphasis supplied.)

The peoples constitutional right to information is intertwined with the governments constitutional duty of full public
disclosure of all transactions involving public interest.28ςrνll Section 28, Article II of the Constitution declares the State
policy of full transparency in all transactions involving public interest, to wit:

Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public
disclosure of all its transactions involving public interest. (Italics supplied.)

The foregoing constitutional provisions seek to promote transparency in policy-making and in the operations of the
government, as well as provide the people sufficient information to exercise effectively other constitutional rights. They
are also essential to hold public officials "at all times x xx accountable to the people," for unless citizens have the proper
information, they cannot hold public officials accountable for anything. Armed with the right information, citizens can
participate in public discussions leading to the formulation of government policies and their effective implementation.
An informed citizenry is essential to the existence and proper functioning of any democracy.29ςrνll
Consistent with this policy, the EPIRA was enacted to provide for "an orderly and transparent privatization" of NPCs
assets and liabilities.30ςrνll Specifically, said law mandated that "all assets of NPC shall be sold in an open and
transparent manner through public bidding."31ςrνll

In Chavez v. Public Estates Authority32ςrνll involving the execution of an Amended Joint Venture Agreement on the
disposition of reclaimed lands without public bidding, the Court held:

x x xBefore the consummation of the contract, PEA must, on its own and without demand from anyone, disclose to the
public matters relating to the disposition of its property. These include the size, location, technical description and
nature of the property being disposed of, the terms and conditions of the disposition, the parties qualified to bid, the
minimum price and similar information. PEA must prepare all these data and disclose them to the public at the start of
the disposition process, long before the consummation of the contract, because the Government

Auditing Code requires public bidding. If PEA fails to make this disclosure, any citizen can demand from PEA this
information at any time during the bidding process.

Information, however, on on-going evaluation or review of bids or proposals being undertaken by the bidding or review
committee is not immediately accessible under the right to information. While the evaluation or review is still on-going,
there are no "official acts, transactions, or decisions" on the bids or proposals. However, once the committee makes its
official recommendation, there arises a "definite proposition" on the part of the government. From this moment, the
publics right to information attaches, and any citizen can access all the non-proprietary information leading to such
definite proposition. In Chavez v. PCGG, the Court ruled as follows:

"Considering the intent of the framers of the Constitution, we believe that it is incumbent upon the PCGG and its
officers, as well as other government representatives, to disclose sufficient public information on any proposed
settlement they have decided to take up with the ostensible owners and holders of ill-gotten wealth. Such information,
though, must pertain to definite propositions of the government not necessarily to intra-agency or inter-agency
recommendations or communications during the stage when common assertions are still in the process of being
formulated or are in the "exploratory" stage. There is need, of course, to observe the same restrictions on disclosure of
information in general, as discussed earlier such as on matters involving national security, diplomatic or foreign
relations, intelligence and other classified information." (Emphasis supplied.)

Chavez v. Public Estates Authority thus laid down the rule that the constitutional right to information includes official
information on on-going negotiations before a final contract. The information, however, must constitute definite
propositions by the government and should not cover recognized exceptions like privileged information, military and
diplomatic secrets and similar matters affecting national security and public order. In addition, Congress has prescribed
other limitations on the right to information in several legislations.33ςrνll
In this case, petitioners first letter dated April 20, 2010 requested for documents such as Terms of Reference and
proposed bids submitted by the bidders. At that time, the bids were yet to be submitted at the bidding scheduled on
April 28, 2010. It is also to be noted that PSALMs website carried news and updates on the sale of AHEPP, providing
important information on bidding activities and clarifications regarding the terms and conditions of the Asset Purchase
Agreement (APA) to be signed by PSALM and the winning bidder (Buyer).34ςrνll

In Chavez v. National Housing Authority,35ςrνll the Court held that pending the enactment of an enabling law, the
release of information through postings in public bulletin boards and government websites satisfies the constitutional
requirement, thus:

It is unfortunate, however, that after almost twenty (20) years from birth of the 1987 Constitution, there is still no
enabling law that provides the mechanics for the compulsory duty of government agencies to disclose information on
government transactions. Hopefully, the desired enabling law will finally see the light of day if and when Congress
decides to approve the proposed "Freedom of Access to Information Act." In the meantime, it would suffice that
government agencies post on their bulletin boards the documents incorporating the information on the steps and
negotiations that produced the agreements and the agreements themselves, and if finances permit, to upload said
information on their respective websites for easy access by interested parties. Without any law or regulation governing
the right to disclose information, the NHA or any of the respondents cannot be faulted if they were not able to disclose
information relative to the SMDRP to the public in general.36ςrνll (Emphasis supplied.)

The Court, however, distinguished the duty to disclose information from the duty to permit access to information on
matters of public concern under Sec. 7, Art. III of the Constitution. Unlike the disclosure of information which is
mandatory under the Constitution, the other aspect of the peoples right to know requires a demand or request for one
to gain access to documents and paper of the particular agency. Moreover, the duty to disclose covers only transactions
involving public interest, while the duty to allow access has a broader scope of information which embraces not only
transactions involving public interest, but any matter contained in official communications and public documents of the
government agency.37ςrνll Such relief must be granted to the party requesting access to official records, documents
and papers relating to official acts, transactions, and decisions that are relevant to a government contract.

Here, petitioners second letter dated May 14, 2010 specifically requested for detailed information regarding the winning
bidder, such as company profile, contact person or responsible officer, office address and Philippine registration. But
before PSALM could respond to the said letter, petitioners filed the present suit on May 19, 2010. PSALMs letter-reply
dated May 21, 2010 advised petitioners that their letter-re quest was referred to the counsel of K-Water. We find such
action insufficient compliance with the constitutional requirement and inconsistent with the policy under EPIRA to
implement the privatization of NPC assets in an "open and transparent" manner. PSALMs evasive response to the
request for information was unjustified because all bidders were required to deliver documents such as company profile,
names of authorized officers/representatives, financial and technical experience.

Consequently, this relief must be granted to petitioners by directing PSALM to allow petitioners access to the papers and
documents relating to the company profile and legal capacity of the winning bidder. Based on PSALMs own press
releases, K-Water is described as a Korean firm with extensive experience in implementing and managing water
resources development projects in South Korea, and also contributed significantly to the development of that countrys
heavy and chemical industries and the modernization of its national industrial structure.

AngatHEPP is Under the Jurisdiction of the Department of Energy Through NPC

It must be clarified that though petitioners had alleged a co-ownership by virtue of the joint supervision in the operation
of the Angat Complex by MWSS, NPC and NIA, MWSS actually recognized the ownership and jurisdiction of NPC over the
hydroelectric power plant itself. While MWSS had initially sought to acquire ownership of the AHEPP without public
bidding, it now prays that PSALM be ordered to turn over the possession and control of the said facility to MWSS. MWSS
invokes its own authority or "special powers" by virtue of its general jurisdiction over waterworks systems, and in
consideration of its substantial investments in the construction of two auxiliary units in the AHEPP, as well as the
construction of the Umiray-AngatTransbasin Tunnel to supplement the water intake at the Angat Reservoir which
resulted in increased power generation.

Records disclosed that as early as December 2005, following the decision of PSALMs Board of Directors to commence
the sale process of the AHEPP along with Magat and AmlanHEPPs in August 2005, MWSS was actively cooperating and
working with PSALM regarding the proposed Protocol for the Privatization of the AHEPP, specifically on the terms and
conditions for the management, control and operation of the Angat Dam Complex taking into consideration the
concerns of its concessionaires. A Technical Working Group (TWG) similar to that formed for the Operation and
Management Agreement of Pantabangan and Magat dams was created, consisting of representatives from PSALM,
MWSS and other concerned agencies, to formulate strategies for the effective implementation of the privatization of
AHEPP and appropriate structure for the operation and management of the Angat Dam Complex.38ςrνll

In March 2008, PSALM sought legal advice from the OGCC on available alternatives to a sale structure for the AHEPP. On
May 27, 2008, then Government Corporate Counsel Alberto C. Agra issued Opinion No. 107, s. 200839ςrνll stating that
PSALM is not limited to "selling" as a means of fulfilling its mandate under the EPIRA, and that in dealing with the
AHEPP, PSALM has the following options:

1. Transfer the ownership, possession, control, and operation of the Angat Facility to another entity, which may or may
not be a private enterprise, as specifically provided under Section 47 (e) of RA 9136;

2. Transfer the Angat Facility, through whatever form, to another entity for the purpose of protecting the public
interest.40ςrνll

The OGCC cited COA Circular No. 89-296 which provides that government property or assets that are no longer
serviceable or needed "may be transferred to other government entities/agencies without cost or at an appraised value
upon authority of the head or governing body of the agency or corporation, and upon due accomplishment of an Invoice
and Receipt of Property." Pointing out the absence of any prohibition under R.A. No. 9136 and its IRR for PSALM to
transfer the AHEPP to another government instrumentality, and considering that MWSS is allowed under its charter to
acquire the said facility, the OGCC expressed the view that PSALM may, "in the interest of stemming a potential water
crisis, turn over the ownership, operations and management of the Angat Facility to a qualified entity, such as the
MWSS, without need of public bidding as the latter is also a government entity."41ςrνll

Consequently, MWSS requested the Office of the President (OP) to exclude the AHEPP from the list of NPC assets to be
privatized under the EPIRA. Said request was endorsed to the Department of Finance (DOF) which requested the
National Economic Development Authority (NEDA) to give its comments. Meanwhile, on August 20, 2008, the OGCC
issued a Clarification42ςrνll on its Opinion No. 107, s. 2008 stating that the tenor of the latter issuance was
"permissive" and "necessarily, the disposal of the AHEPP by sale through public bidding the principal mode of disposition
under x xx R.A. 9136 remains PSALMs primary option." The OGCC further explained its position, thus:

If, in the exercise of PSALMs discretion, it determines that privatization by sale through public bidding is the best mode
to fulfill its mandate under R.A. 9136, and that this mode will not contravene the States declared policy on water
resources, then the same is legally permissible.

Finally, in OGCC Opinion No. 107 s. 2008, this Office underscored "the overriding policy of the State x xx recognizing that
water is vital to national development x xx and the crucial role which the Angat Facility plays in the uninterrupted and
adequate supply and distribution of potable water to residents of Metro Manila." This Office reiterates "the primacy of
the States interest in mitigating the possible deleterious effects of an impending "water crisis" encompassing areas even
beyond Metro Manila." Any transfer of the AHEPP to be undertaken by PSALM whether to a private or public entity
must not contravene the States declared policy of ensuring the flow of clean, potable water under RA 6395 and 9136,
and Presidential Decree 1067. Hence, said transfer and/or privatization scheme must ensure the preservation of the
AHEPP as a vital source of water for Metro Manila and the surrounding provinces.43ςrνll (Emphasis supplied.)

On September 16, 2009, NEDA Deputy Director General Rolando G. Tungpalan, by way of comment to MWSSs position,
wrote the DOF stating that MWSSs concern on ensuring an uninterrupted and adequate supply of water for domestic
use is amply protected and consistently addressed in the EPIRA. Hence, NEDA concluded that there appears to be no
basis to exclude AHEPP from the list of NPC generation assets to be privatized and no compelling reason to transfer its
management, operations and control to MWSS.44ςrνll NEDA further pointed out that:

Ownership and operation of a hydropower plant, however, goes beyond the mandate of MWSS. To operate a power
generation plant, given the sectors legislative setup would require certification and permits that has to be secured by
the operator. MWSS does not have the technical capability to undertake the operation and maintenance of the AHEPP
nor manage the contract of a contracted private party to undertake the task for MWSS. While MWSS may tap NPC to
operate and maintain the AHEPP, this, similar to contracting out a private party, may entail additional transaction costs,
and ultimately result to higher generation rates.45ςrνll (Emphasis supplied.)
Thereafter, MWSS sought the support of the DPWH in a letter dated September 24, 2009 addressed to then Secretary
Hermogenes E. Ebdane, Jr., for the exclusion of the AHEPP from the list of NPC assets to be privatized and instead
transfer the ownership, possession and control thereof to MWSS with reasonable compensation. Acting on the said
request, Secretary Ebdane, Jr. wrote a memorandum for the President recommending that "the Angat Dam be excluded
from the list of NPC assets to be privatized, and that the ownership, management and control of the Dam be transferred
from NPC to MWSS, with reasonable compensation."46ςrνll

Based on the foregoing factual backdrop, there seems to be no dispute as to the complete jurisdiction of NPC over the
government-owned Angat Dam and AHEPP.

The Angat Reservoir and Dam were constructed from 1964 to 1967 and have become operational since 1968. They have
multiple functions:

1) To provide irrigation to about 31,000 hectares of land in 20 municipalities and towns in Pampanga and Bulacan;

2) To supply the domestic and industrial water requirements of residents in Metro Manila;

3) To generate hydroelectric power to feed the Luzon Grid; and

4) To reduce flooding to downstream towns and villages.47ςrνll

The Angat Dam is a rockfill dam with a spillway equipped with three gates at a spilling level of 219 meters and has
storage capacity of about 850 million cubic meters. Water supply to the MWSS is released through five auxiliary turbines
where it is diverted to the two tunnels going to the Ipo Dam.48ςrνll The Angat Dam is one of the dams under the
management of NPC while the La Mesa and Ipo dams are being managed by MWSS. MWSS is a government corporation
existing by virtue of R.A. No. 6234.49Ï‚ NAPOCOR or NPC is also a government-owned corporation created under
Commonwealth Act (C.A.) No. 120,50ςrνll which, among others, was vested with the following powers under Sec. 2,
paragraph (g):

(g) To construct, operate and maintain power plants, auxiliary plants, dams, reservoirs, pipes, mains, transmission lines,
power stations and substations, and other works for the purpose of developing hydraulic power from any river, creek,
lake, spring and waterfall in the Philippines and supplying such power to the inhabitants thereof; to acquire, construct,
install, maintain, operate and improve gas, oil, or steam engines, and/or other prime movers, generators and other
machinery in plants and/or auxiliary plants for the production of electric power; to establish, develop, operate, maintain
and administer power and lighting system for the use of the Government and the general public; to sell electric power
and to fix the rates and provide for the collection of the charges for any service rendered: Provided, That the rates of
charges shall not be subject to revision by the Public Service Commission;

x x x x (Emphasis supplied.)

On September 10, 1971, R.A. No. 6395 was enacted which revised the charter of NPC, extending its corporate life to the
year 2036. NPC thereafter continued to exercise complete jurisdiction over dams and power plants including the Angat
Dam, Angat Reservoir and AHEPP. While the NPC was expressly granted authority to construct, operate and maintain
power plants, MWSS was not vested with similar function. Section 3 (f), (o) and (p) of R.A. No. 6234 provides that
MWSSs powers and attributes include the following

(f) To construct, maintain, and operate dams, reservoirs, conduits, aqueducts, tunnels, purification plants, water mains,
pipes, fire hydrants, pumping stations, machineries and other waterworks for the purpose of supplying water to the
inhabitants of its territory, for domestic and other purposes; and to purify, regulate and control the use, as well as
prevent the wastage of water;

xxxx

(o) To assist in the establishment, operation and maintenance of waterworks and sewerage systems within its
jurisdiction under cooperative basis;

(p) To approve and regulate the establishment and construction of waterworks and sewerage systems in privately
owned subdivisions within its jurisdiction; x xx. (Emphasis supplied.)

On December 9, 1992, by virtue of R.A. No. 7638,51ςrνll NPC was placed under the Department of Energy (DOE) as one
of its attached agencies.

Aside from its ownership and control of the Angat Dam and AHEPP, NPC was likewise mandated to exercise complete
jurisdiction and control over its watershed, pursuant to Sec. 2 (n) and (o) of R.A. No. 6395 for development and
conservation purposes:

(n) To exercise complete jurisdiction and control over watersheds surrounding the reservoirs of plants and/or projects
constructed or proposed to be constructed by the Corporation. Upon determination by the Corporation of the areas
required for watersheds for a specific project, the Bureau of Forestry, the Reforestation Administration and the Bureau
of Lands shall, upon written advice by the Corporation, forthwith surrender jurisdiction to the Corporation of all areas
embraced within the watersheds, subject to existing private rights, the needs of waterworks systems, and the
requirements of domestic water supply;

(o) In the prosecution and maintenance of its projects, the Corporation shall adopt measures to prevent environmental
pollution and promote the conservation, development and maximum utilization of natural resources; and

x x x x (Emphasis supplied.)

On December 4, 1965, Presidential Proclamation No. 505 was issued amending Proclamation No. 71 by transferring the
administration of the watersheds established in Montalban, San Juan del Monte, Norzagaray, Angat, San Rafael, Peranda
and Infanta, Provinces of Rizal, Bulacan, Nueva Ecija and Quezon, to NPC. Subsequent executive issuances Presidential
Decree (P.D.) No. 1515 which was signed in June 1978 and amended by P.D. No. 1749 in December 1980 led to the
creation of the NPC Watershed Management Division which presently has 11 watershed areas under its
management.52ςrνll

Privatization of AHEPP Mandatory Under EPIRA

With the advent of EPIRA in 2001, PSALM came into existence for the principal purpose of managing the orderly sale,
privatization and disposition of generation assets, real estate and other disposable assets of the NPC including IPP
Contracts. Accordingly, PSALM was authorized to take title to and possession of, those assets transferred to it. EPIRA
mandated that all such assets shall be sold through public bidding with the exception of Agus and Pulangui complexes in
Mindanao, the privatization of which was left to the discretion of PSALM in consultation with Congress,53ςrνll thus:

Sec. 47. NPC Privatization. Except for the assets of SPUG, the generation assets, real estate, and other disposable assets
as well as IPP contracts of NPC shall be privatized in accordance with this Act. Within six (6) months from the effectivity
of this Act, the PSALM Corp. shall submit a plan for the endorsement by the Joint Congressional Power Commission and
the approval of the President of the Philippines, on the total privatization of the generation assets, x xx of NPC and
thereafter, implement the same, in accordance with the following guidelines, except as provided for in paragraph (f)
herein:chanroblesvirtuallawlibrary

x xxx

(d) All assets of NPC shall be sold in an open and transparent manner through public bidding, x xx;
x xxx

(f) The Agus and the Pulangui complexes in Mindanao shall be excluded from among the generation companies that will
be initially privatized. Their ownership shall be transferred to the PSALM Corp. and both shall continue to be operated by
the NPC. Said complexes may be privatized not earlier than ten (10) years from the effectivity of this Act, x xx.The
privatization of Agus and Pulangui complexes shall be left to the discretion of PSALM Corp. in consultation with
Congress;

x xxx (Emphasis supplied.)

The intent of Congress not to exclude the AHEPP from the privatization of NPC generation assets is evident from the
express provision exempting only the aforesaid two power plants in Mindanao. Had the legislature intended that PSALM
should likewise be allowed discretion in case of NPC generation assets other than those mentioned in Sec. 47, it could
have explicitly provided for the same. But the EPIRA exempted from privatization only those two plants in Mindanao and
the Small Power Utilities Group (SPUG).54ςrνll Expressiouniusestexclusioalterius, the express inclusion of one implies
the exclusion of all others.55ςrνll

It is a settled rule of statutory construction that the express mention of one person, thing, or consequence implies the
exclusion of all others. The rule is expressed in the familiar maxim, expressiouniusestexclusioalterius.

The rule of expressiouniusestexclusioalterius is formulated in a number of ways. One variation of the rule is principle
that what is expressed puts an end to that which is implied. Expressiumfacitcessaretacitum. Thus, where a statute, by its
terms, is expressly limited to certain matters, it may not, by interpretation or construction, be extended to other
matters.

x xxx

The rule of expressiouniusestexclusioalterius and its variations are canons of restrictive interpretation. They are based
on the rules of logic and the natural workings of the human mind. They are predicated upon ones own voluntary act and
not upon that of others. They proceed from the premise that the legislature would not have made specified
enumeration in a statute had the intention been not to restrict its meaning and confine its terms to those expressly
mentioned.56ςrνll

The Court therefore cannot sustain the position of petitioners, adopted by respondent MWSS, that PSALM should have
exercised the discretion not to proceed with the privatization of AHEPP, or at least the availability of the option to
transfer the said facility to another government entity such as MWSS. Having no such discretion in the first place, PSALM
committed no grave abuse of discretion when it commenced the sale process of AHEPP pursuant to the EPIRA.

In any case, the Court finds that the operation and maintenance of a hydroelectric power plant is not among the
statutorily granted powers of MWSS. Although MWSS was granted authority to construct and operate dams and
reservoirs, such was for the specific purpose of supplying water for domestic and other uses, and the treatment,
regulation and control of water usage, and not power generation.57ςrνll Moreover, since the sale of AHEPP by PSALM
merely implements the legislated reforms for the electric power industry through schemes that aim "to enhance the
inflow of private capital and broaden the ownership base of the power generation, transmission and distribution
sectors,"58ςrνll the proposed transfer to MWSS which is another government entity contravenes that State policy. COA
Circular No. 89-296 likewise has no application to NPC generating assets which are still serviceable and definitely needed
by the Government for the purpose of liquidating NPCs accumulated debts amounting to billions in US Dollars. Said
administrative circular cannot prevail over the EPIRA, a special law governing the disposition of government properties
under the jurisdiction of the DOE through NPC.

Sale of Government-Owned AHEPP

to a Foreign Corporation Not Prohibited

But Only Filipino Citizens and Corporations

60% of whose capital is owned by Filipinos

May be Granted Water Rights

The core issue concerns the legal implications of the acquisition by K-Water of the AHEPP in relation to the
constitutional policy on our natural resources.

Sec. 2, Art. XII of the 1987 Constitution provides in part:

SEC.2. 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. With
the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and
utilization of natural resources shall be under the full control and supervision of the State. The State may directly
undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with
Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens. Such
agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and
under such terms and conditions as may be provided by law. In case of water rights for irrigation, water supply, fisheries,
or industrial uses other than the development of water power, beneficial use may be the measure and limit of the grant.
x xxx (Emphasis supplied.)

The States policy on the management of water resources is implemented through the regulation of water rights.
Presidential Decree No. 1067, otherwise known as "The Water Code of the Philippines" is the basic law governing the
ownership, appropriation utilization, exploitation, development, conservation and protection of water resources and
rights to land related thereto. The National Water Resources Council (NWRC) was created in 1974 under P.D. No. 424
and was subsequently renamed as National Water Resources Board (NWRB) pursuant to Executive Order No. 124-A.59
The NWRB is the chief coordinating and regulating agency for all water resources management development activities
which is tasked with the formulation and development of policies on water utilization and appropriation, the control and
supervision of water utilities and franchises, and the regulation and rationalization of water rates.60ςrνll

The pertinent provisions of Art. 3, P.D. No. 1067 provide:

Art. 3. The underlying principles of this code are:chanroblesvirtuallawlibrary

a. All waters belong to the State.

b. All waters that belong to the State can not be the subject to acquisitive prescription.

c. The State may allow the use or development of waters by administrative concession.

d. The utilization, exploitation, development, conservation and protection of water resources shall be subject to the
control and regulation of the government through the National Water Resources Council x xx

e. Preference in the use and development of waters shall consider current usages and be responsive to the changing
needs of the country.

x xxx

Art. 9. Waters may be appropriated and used in accordance with the provisions of this Code.
Appropriation of water, as used in this Code, is the acquisition of rights over the use of waters or the taking or diverting
of waters from a natural source in the manner and for any purpose allowed by law.

Art. 10. Water may be appropriated for the following purposes:chanroblesvirtuallawlibrary

x xxx

(d) Power generation

x xxx

Art. 13. Except as otherwise herein provided, no person including government instrumentalities or government-owned
or controlled corporations, shall appropriate water without a water right, which shall be evidenced by a document
known as a water permit.

Water right is the privilege granted by the government to appropriate and use water.

x xxx

Art. 15. Only citizens of the Philippines, of legal age, as well as juridical persons, who are duly qualified by law to exploit
and develop water resources, may apply for water permits. (Emphasis supplied.)

It is clear that the law limits the grant of water rights only to Filipino citizens and juridical entities duly qualified by
law to exploit and develop water resources, including private corporations with sixty percent of their capital owned
by Filipinos. In the case of Angat River, the NWRB has issued separate water permits to MWSS, NPC and NIA.61ςrνll

Under the EPIRA, the generation of electric power, a business affected with public interest, was opened to private sector
and any new generation company is required to secure a certificate of compliance from the Energy Regulatory
Commission (ERC), as well as health, safety and environmental clearances from the concerned government agencies.
Power generation shall not be considered a public utility operation,62ςrνll and hence no franchise is necessary. Foreign
investors are likewise allowed entry into the electric power industry. However, there is no mention of water rights in the
privatization of multi-purpose hydropower facilities. Section 47 (e) addressed the issue of water security, as follows:
(e) In cases of transfer of possession, control, operation or privatization of multi-purpose hydro facilities, safeguards
shall be prescribed to ensure that the national government may direct water usage in cases of shortage to protect
potable water, irrigation, and all other requirements imbued with public interest;

x xxx (Emphasis supplied.)

This provision is consistent with the priority accorded to domestic and municipal uses of water63ςrνll under the Water
Code, thus:

Art. 22. Between two or more appropriators of water from the same sources of supply, priority in time of appropriation
shall give the better right, except that in times of emergency the use of water for domestic and municipal purposes shall
have a better right over all other uses; Provided, That, where water shortage is recurrent and the appropriator for
municipal use has a lower priority in time of appropriation, then it shall be his duty to find an alternative source of
supply in accordance with conditions prescribed by the Board. (Emphasis supplied.)

Rule 23, Section 6 of the Implementing Rules and Regulations (IRR) of the EPIRA provided for the structure of
appropriation of water resources in multi-purpose hydropower plants which will undergo privatization, as follows:

Section 6. Privatization of Hydroelectric Generation Plants.

(a) Consistent with Section 47(e) of the Act and Section 4(f) of this Rule, the Privatization of hydro facilities of NPC shall
cover the power component including assignable long-term water rights agreements for the use of water, which shall be
passed onto and respected by the buyers of the hydroelectric power plants.

(b) The National Water Resources Board (NWRB) shall ensure that the allocation for irrigation, as indicated by the NIA
and requirements for domestic water supply as provided for by the appropriate Local Water District(s) are recognized
and provided for in the water rights agreements. NPC or PSALM may also impose additional conditions in the
shareholding agreement with the winning bidders to ensure national security, including, but not limited to, the use of
water during drought or calamity.

(c) Consistent with Section 34(d) of the Act, the NPC shall continue to be responsible for watershed rehabilitation and
management and shall be entitled to the environmental charge equivalent to one-fourth of one centavo per kilowatt-
hour sales (P0.0025/kWh), which shall form part of the Universal Charge. This environmental fund shall be used solely
for watershed rehabilitation and management and shall bemanaged by NPC under existing arrangements. NPC shall
submit an annual report to the DOE detailing the progress of the water shed rehabilitation program.
(d) The NPC and PSALM or NIA, as the case may be, shall continue to be responsible for the dam structure and all other
appurtenant structures necessary for the safe and reliable operation of the hydropower plants. The NPC and PSALM or
NIA, as the case may be, shall enter into an operations and maintenance agreement with the private operator of the
power plant to cover the dam structure and all other appurtenant facilities. (Emphasis supplied.)

In accordance with the foregoing implementing regulations, and in furtherance of the Asset Purchase
Agreement64ςrνll (APA), PSALM, NPC and K-Water executed on April 28, 2010 an Operations and Maintenance
Agreement65ςrνll (O & M Agreement) for the administration, rehabilitation, operation, preservation and maintenance,
by K-Water as the eventual owner of the AHEPP, of the Non-Power Components meaning the Angat Dam, non-power
equipment, facilities, installations, and appurtenant devices and structures, including the water sourced from the Angat
Reservoir.

It is the position of PSALM that as the new owner only of the hydroelectric power plant, K-Water will be a mere operator
of the Angat Dam. In the power generation activity, K-Water will have to utilize the waters already extracted from the
river and impounded on the dam. This process of generating electric power from the dam water entering the power
plant thus does not constitute appropriation within the meaning of natural resource utilization in the Constitution and
the Water Code.

The operation of a typical hydroelectric power plant has been described as follows:

Hydroelectric energy is produced by the force of falling water. The capacity to produce this energy is dependent on both
the available flow and the height from which it falls. Building up behind a high dam, water accumulates potential energy.
This is transformed into mechanical energy when the water rushes down the sluice and strikes the rotary blades of
turbine. The turbine's rotation spins electromagnets which generate current in stationary coils of wire. Finally, the
current is put through a transformer where the voltage is increased for long distance transmission over power
lines.66ςrνll

Foreign ownership of a hydropower facility is not prohibited under existing laws. The construction, rehabilitation and
development of hydropower plants are among those infrastructure projects which even wholly-owned foreign
corporations are allowed to undertake under the Amended Build-Operate-Transfer (Amended BOT) Law (R.A. No.
7718).67ςrνll

Beginning 1987, the policy has been openness to foreign investments as evident in the fiscal incentives provided for the
restructuring and privatization of the power industry in the Philippines, under the Power Sector Restructuring Program
(PSRP) of the Asian Development Bank.
The establishment of institutional and legal framework for the entry of private sector in the power industry began with
the issuance by President Corazon C. Aquino of Executive Order No. 215 in 1987. Said order allowed the entry of private
sector the IPPs to participate in the power generation activities in the country. The entry of IPPs was facilitated and
made attractive through the first BOT Law in 1990 (R.A. No. 6957) which aimed to "minimize the burden of
infrastructure projects on the national government budget, minimize external borrowing for infrastructure projects, and
use the efficiency of the private sector in delivering a public good." In 1993, the Electric Power Crisis Act was passed
giving the President emergency powers to urgently address the power crisis in the country.68ςrνll The full
implementation of the restructuring and privatization of the power industry was achieved when Congress passed the
EPIRA in 2001.

With respect to foreign investors, the nationality issue had been framed in terms of the character or nature of the power
generation process itself, i.e., whether the activity amounts to utilization of natural resources within the meaning of Sec.
2, Art. XII of the Constitution. If so, then foreign companies cannot engage in hydropower generation business; but if
not, then government may legally allow even foreign-owned companies to operate hydropower facilities.

The DOJ has consistently regarded hydropower generation by foreign entities as not constitutionally proscribed based
on the definition of water appropriation under the Water Code, thus:

Opinion No. 173, 1984

This refers to your request for opinion on the possibility of granting water permits to foreign corporations authorized to
do business in the Philippines x xx

x xxx

x xx while the Water Code imposes a nationality requirement for the grant of water permits, the same refers to the
privilege "to appropriate and use water." This should be interpreted to mean the extraction of water from its natural
source (Art. 9, P.D. No. 1067). Once removed therefrom, they cease to be a part of the natural resources of the country
and are the subject of ordinary commerce and may be acquired by foreigners (Op. No. 55, series of 1939). x xx in case of
a contract of lease, the water permit shall be secured by the lessor and included in the lease as an improvement. The
water so removed from the natural source may be appropriated/used by the foreign corporation leasing the property.

Opinion No. 14, S. 1995

The nationality requirement imposed by the Water Code refers to the privilege "to appropriate and use water." This, we
have consistently interpreted to mean the extraction of water directly from its natural source. Once removed from its
natural source the water ceases to be a part of the natural resources of the country and may be subject of ordinary
commerce and may even be acquired by foreigners. (Secretary of Justice Op. No. 173, s. 1984; No. 24, s. 1989; No. 100 s.
1994)

In fine, we reiterate our earlier view that a foreign entity may legally process or treat water after its removal from a
natural source by a qualified person, natural or juridical.

Opinion No. 122, s. 1998

The crucial issue at hand is the determination of whether the utilization of water by the power plant to be owned and
operated by a foreign-owned corporation (SRPC) will violate the provisions of the Water Code.

As proposed, the participation of SRPC to the arrangement commences upon construction of the power station,
consisting of a dam and a power plant. After the completion of the said station, its ownership and control shall be turned
over to NPC. However, SRPC shall remain the owner of the power plant and shall operate it for a period of twenty-five
(25) years.

It appears that the dam, which will be owned and controlled by NPC, will block the natural flow of the river. The power
plant, which is situated next to it, will entirely depend upon the dam for its water supply which will pass through an
intake gate situated one hundred (100) meters above the riverbed. Due to the distance from the riverbed, water could
not enter the power plant absent the dam that traps the flow of the river. It appears further that no water shall enter
the power tunnel without specific dispatch instructions from NPC, and such supplied water shall be used only by SRPC
for power generation and not for any other purpose. When electricity is generated therein, the same shall be supplied to
NPC for distribution to the public. These facts x xx viewed in relation to the Water Code, specifically Article 9 thereof, x
xx clearly show that there is no circumvention of the law.

This Department has declared that the nationality requirement imposed by the Water Code refers to the privilege "to
appropriate and use water" and has interpreted this phrase to mean the extraction of water directly from its natural
source (Secretary of Justice Opinion No. 14, s. 1995). "Natural" is defined as that which is produced without aid of stop,
valves, slides, or other supplementary means (see Websters New International Dictionary, Second Edition, p. 1630). The
water that is used by the power plant could not enter the intake gate without the dam, which is a man-made structure.
Such being the case, the source of the water that enters the power plant is of artificial character rather than natural. This
Department is consistent in ruling, that once water is removed from its natural source, it ceases to be a part of the
natural resources of the country and may be the subject of ordinary commerce and may even be acquired by foreigners.
(Ibid., No. 173, s. 1984; No. 24, s. 1989; No. 100, s. 1994).
It is also significant to note that NPC, a government-owned and controlled corporation, has the effective control over all
elements of the extraction process, including the amount and timing thereof considering that x xx the water will flow out
of the power tunnel and through the power plant, to be used for the generation of electricity, only when the
Downstream Gates are opened, which occur only upon the specific water release instructions given by NPC to SRPC. This
specific feature of the agreement, taken together with the above-stated analysis of the source of water that enters the
plant, support the view that the nationality requirement embodied in Article XII, Section 2 of the present Constitution
and in Article 15 of the Water Code, is not violated.69ςrνll

(Emphasis supplied.)

The latest executive interpretation is stated in DOJ Opinion No. 52, s. 2005 which was rendered upon the request of
PSALM in connection with the proposed sale structure for the privatization of hydroelectric and geothermal generation
assets (Gencos) of NPC. PSALM sought a ruling on the legality of its proposed privatization scheme whereby the non-
power components (dam, reservoir and appurtenant structures and watershed area) shall be owned by the State
through government entities like NPC or NIA which shall exercise control over the release of water, while the ownership
of the power components (power plant and related facilities) is open to both Filipino citizens/corporations and 100%
foreign-owned corporations.

Sustaining the position of PSALM, then Secretary Raul M. Gonzalez opined:

Premised on the condition that only the power components shall be transferred to the foreign bidders while the non-
power components/structures shall be retained by state agencies concerned, we find that both PSALMs proposal and
position are tenable.

x xxx

x xx as ruled in one case by a U.S. court:chanroblesvirtuallawlibrary

Where the State of New York took its natural resources consisting of Saratoga Spring and, through a bottling process,
put those resources into preserved condition where they could be sold to the public in competition with private waters,
the state agencies were not immune from federal taxes imposed upon bottled waters on the theory that state was
engaged in the sale of "natural resources."

Applied to the instant case, and construed in relation to the earlier-mentioned constitutional inhibition, it would appear
clear that while both waters and geothermal steam are, undoubtedly "natural resources", within the meaning of Section
2 Article XII of the present Constitution, hence, their exploitation, development and utilization should be limited to
Filipino citizens or corporations or associations at least sixty per centum of the capital of which is owned by Filipino
citizens, the utilization thereof can be opened even to foreign nationals, after the same have been extracted from the
source by qualified persons or entities. The rationale is because, since they no longer form part of the natural resources
of the country, they become subject to ordinary commerce.

A contrary interpretation, i.e., that the removed or extracted natural resources would remain inalienable especially to
foreign nationals, can lead to absurd consequences, e.g. that said waters and geothermal steam, and any other
extracted natural resources, cannot be acquired by foreign nationals for sale within or outside the country, which could
not have been intended by the framers of the Constitution.

The fact that under the proposal, the non-power components and structures shall be retained and maintained by the
government entities concerned is, to us, not only a sufficient compliance of constitutional requirement of "full control
and supervision of the State" in the exploitation, development and utilization of natural resources. It is also an enough
safeguard against the evil sought to be avoided by the constitutional reservation x xx.70ςrνll (Italics in the original,
emphasis supplied.)

Appropriation of water, as used in the Water Code refers to the "acquisition of rights over the use of waters or the
taking or diverting of waters from a natural source in the manner and for any purpose allowed by law."71ςrνll This
definition is not as broad as the concept of appropriation of water in American jurisprudence:

An appropriation of water flowing on the public domain consists in the capture, impounding, or diversion of it from its
natural course or channel and its actual application to some beneficial use private or personal to the appropriator, to the
entire exclusion (or exclusion to the extent of the water appropriated) of all other persons. x xx72ςrνll

On the other hand, "water right" is defined in the Water Code as the privilege granted by the government to appropriate
and use water.73ςrνll Blacks Law Dictionary defined "water rights" as "a legal right, in the nature of a corporeal
hereditament, to use the water of a natural stream or water furnished through a ditch or canal, for general or specific
purposes, such as irrigation, mining, power, or domestic use, either to its full capacity or to a measured extent or during
a defined portion of the time," or "the right to have the water flow so that some portion of it may be reduced to
possession and be made private property of individual, and it is therefore the right to divert water from natural stream
by artificial means and apply the same to beneficial use."74ςrνll

Under the Water Code concept of appropriation, a foreign company may not be said to be "appropriating" our natural
resources if it utilizes the waters collected in the dam and converts the same into electricity through artificial devices.
Since the NPC remains in control of the operation of the dam by virtue of water rights granted to it, as determined under
DOJ Opinion No. 122, s. 1998, there is no legal impediment to foreign-owned companies undertaking the generation of
electric power using waters already appropriated by NPC, the holder of water permit. Such was the situation of
hydropower projects under the BOT contractual arrangements whereby foreign investors are allowed to finance or
undertake construction and rehabilitation of infrastructure projects and/or own and operate the facility constructed.
However, in case the facility requires a public utility franchise, the facility operator must be a Filipino corporation or at
least 60% owned by Filipino.75ςrνll

With the advent of privatization of the electric power industry which resulted in its segregation into four sectors --
generation, transmission, distribution and supply NPCs generation and transmission functions were unbundled. Power
generation and transmission were treated as separate sectors governed by distinct rules under the new regulatory
framework introduced by EPIRA. The National Transmission Corporation (TRANSCO) was created to own and operate the
transmission assets and perform the transmission functions previously under NPC. While the NPC continues to
undertake missionary electrification programs through the SPUG, PSALM was also created to liquidate the assets and
liabilities of NPC.

Under the EPIRA, NPCs generation function was restricted as it was allowed to "generate and sell electricity only from
the undisposed generating assets and IPP contracts of PSALM" and was prohibited from incurring "any new obligations
to purchase power through bilateral contracts with generation companies or other suppliers."76ςrνll PSALM, on the
other hand, was tasked "to structure the sale, privatization or disposition of NPC assets and IPP contracts and/or their
energy output based on such terms and conditions which shall optimize the value and sale prices of said assets."77ςrνll
In the case of multi-purpose hydropower plants, the IRR of R.A. No. 9136 provided that their privatization would extend
to water rights which shall be transferred or assigned to the buyers thereof, subject to safeguards mandated by Sec.
47(e) to enable the national government to direct water usage in cases of shortage to protect water requirements
imbued with public interest.

Accordingly, the Asset Purchase Agreement executed between PSALM and K-Water stipulated:

2.04 Matters Relating to the Non-Power Component

x xxx

Matters relating to Water Rights

NPC has issued a certification (the "Water Certification") wherein NPC consents, subject to Philippine Law, to the (i)
transfer of the Water Permit to the BUYER or its Affiliate, and (ii) use by the BUYER or its Affiliate of the water covered
by the Water Permit from Closing Date up to a maximum period of one (1) year thereafter to enable the BUYER to
appropriate and use water sourced from Angat reservoir for purposes of power generation; provided, that should the
consent or approval of any Governmental Body be required for either (i) or (ii), the BUYER must secure such consent or
approval. The BUYER agrees and shall fully comply with the Water Permit and the Water Certification. x xx
x xxx

Multi-Purpose Facility

The BUYER is fully aware that the Non-Power Components is a multi-purpose hydro-facility and the water is currently
being appropriated for domestic use, municipal use, irrigation and power generation. Anything in this Agreement
notwithstanding, the BUYER shall, at all times even after the Payment Date, fully and faithfully comply with Philippine
Law, including the Instructions, the Rule Curve and Operating Guidelines and the Water Protocol.78ςrνll (Emphasis
supplied.)

Lease or transfer of water rights is allowed under the Water Code, subject to the approval of NWRB after due notice and
hearing.79ςrνll However, lessees or transferees of such water rights must comply with the citizenship requirement
imposed by the Water Code and its IRR. But regardless of such qualification of water permit holders/transferees, it is to
be noted that there is no provision in the EPIRA itself authorizing the NPC to assign or transfer its water rights in case of
transfer of operation and possession of multi-purpose hydropower facilities. Since only the power plant is to be sold and
privatized, the operation of the non-power components such as the dam and reservoir, including the maintenance of the
surrounding watershed, should remain under the jurisdiction and control of NPC which continue to be a government
corporation. There is therefore no necessity for NPC to transfer its permit over the water rights to K-Water. Pursuant to
its purchase and operation/management contracts with K-Water, NPC may authorize the latter to use water in the dam
to generate electricity.

NPCs water rights remain an integral aspect of its jurisdiction and control over the dam and reservoir. That the
EPIRAitselfdid not ordain any transfer of water rights leads us to infer that Congress intended NPC to continue exercising
full supervision over the dam, reservoir and, more importantly, to remain in complete control of the extraction or
diversion of water from the Angat River. Indeed, there can be no debate that the best means of ensuring that
PSALM/NPC can fulfill the duty to prescribe "safeguards to enable the national government to direct water usage to
protect potable water, irrigation, and all other requirements imbued with public interest" is for it to retain the water
rights over those water resources from where the dam waters are extracted. In this way, the States full supervision and
control over the countrys water resources is also assured notwithstanding the privatized power generation business.

Section 6 (a) of the IRR of R.A. No. 9136 insofar as it directs the transfer of water rights in the privatization of multi-
purpose hydropower facilities, is thus merely directory.

It is worth mentioning that the Water Code explicitly provides that Filipino citizens and juridical persons who may apply
for water permits should be "duly qualified by law to exploit and develop water resources."
Thus, aside from the grant of authority to construct and operate dams and power plants, NPCs Revised Charter
specifically authorized it

(f) To take water from any public stream, river, creek, lake, spring or waterfall in the Philippines, for the purposes
specified in this Act; to intercept and divert the flow of waters from lands of riparian owners and from persons owning
or interested in waters which are or may be necessary for said purposes, upon payment of just compensation therefor;
to alter, straighten, obstruct or increase the flow of water in streams or water channels intersecting or connecting
therewith or contiguous to its works or any part thereof: Provided, That just compensation shall be paid to any person or
persons whose property is, directly or indirectly, adversely affected or damaged thereby.80ςrνll

The MWSS is likewise vested with the power to construct, maintain and operate dams and reservoirs for the purpose of
supplying water for domestic and other purposes, as well to construct, develop, maintain and operate such artesian
wells and springs as may be needed in its operation within its territory.81ςrνll On the other hand, NIA, also a water
permit holder in Angat River, is vested with similar authority to utilize water resources, as follows:

(b) To investigate all available and possible water resources in the country for the purpose of utilizing the same for
irrigation, and to plan, design and construct the necessary projects to make the ten to twenty-year period following the
approval of this Act as the Irrigation Age of the Republic of the Philippines;82ςrνll

(c) To construct multiple-purpose water resources projects designed primarily for irrigation, and secondarily for
hydraulic power development and/or other uses such as flood control, drainage, land reclamation, domestic water
supply, roads and highway construction and reforestation, among others, provided, that the plans, designs and the
construction thereof, shall be undertaken in coordination with the agencies concerned;83ςrνll

To reiterate, there is nothing in the EPIRAwhich declares that it is mandatory for PSALM or NPC to transfer or assign
NPCs water rights to buyers of its multi-purpose hydropower facilities as part of the privatization process. While PSALM
was mandated to transfer the ownership of all hydropower plants except those mentioned in Sec. 47 (f), any transfer of
possession, operation and control of the multi-purpose hydropower facilities, the intent to preserve water resources
under the full supervision and control of the State is evident when PSALM was obligated to prescribe safeguards to
enable the national government to direct water usage to domestic and other requirements "imbued with public
interest." There is no express requirement for the transfer of water rights in all cases where the operation of
hydropower facilities in a multi-purpose dam complex is turned over to the private sector.

As the new owner of the AHEPP, K-Water will have to utilize the waters in the Angat Dam for hydropower generation.
Consistent with the goals of the EPIRA, private entities are allowed to undertake power generation activities and acquire
NPCs generation assets. But since only the hydroelectric power plants and appurtenances are being sold, the
privatization scheme should enable the buyer of a hydroelectric power plant in NPCs multi-purpose dam complex to
have beneficialuse of the waters diverted or collected in the Angat Dam for its hydropower generation activities, and at
the same time ensure that the NPC retains full supervision and control over the extraction and diversion of waters from
the Angat River.

In fine, the Court rules that while the sale of AHEPP to a foreign corporation pursuant to the privatization mandated by
the EPIRA did not violate Sec. 2, Art. XII of the 1987 Constitution which limits the exploration, development and
utilization of natural resources under the full supervision and control of the State or the States undertaking the same
through joint venture, co-production or production sharing agreements with Filipino corporations 60% of the capital of
which is owned by Filipino citizens, the stipulation in the Asset Purchase Agreement and Operations and Maintenance
Agreement whereby NPC consents to the transfer of water rights to the foreign buyer, K-Water, contravenes the
aforesaid constitutional provision and the Water Code.

Section 6, Rule 23 of the IRR of EPIRA, insofar as it ordered NPCs water rights in multi-purpose hydropower facilities to
be included in the sale thereof, is declared as merely directoryand not an absolute condition in the privatization scheme.
In this case, we hold that NPC shall continue to be the holder of the water permit even as the operational control and
day-to-day management of the AHEPP is turned over to K-Water under the terms and conditions of their APA and O & M
Agreement, whereby NPC grants authority to K-Water to utilize the waters diverted or collected in the Angat Dam for
hydropower generation. Further, NPC and K-Water shall faithfully comply with the terms and conditions of the
Memorandum of Agreement on Water Protocol, as well as with such other regulations and issuances of the NWRB
governing water rights and water usage.

WHEREFORE, the present petition for certiorari and prohibition with prayer for injunctive relief/s is PARTLY GRANTED.

The following DISPOSITIONS are in ORDER:

1) The bidding conducted and the Notice of Award issued by PSALM in favor of the winning bidder, KOREA WATER
RESOURCES CORPORATION (K-WATER), are declared VALID and LEGAL;

2) PSALM is directed to FURNISH the petitioners with copies of all documents and records in its files pertaining to K-
Water;

3) Section 6 (a), Rule 23, IRR of the EPIRA, is hereby declared as merely DIRECTORY, and not an absolute condition in all
cases where NPC-owned hydropower generation facilities are privatized;

4) NPC shall CONTINUE to be the HOLDER of Water Permit No. 6512 issued by the National Water Resources Board. NPC
shall authorize K-Water to utilize the waters in the Angat Dam for hydropower generation, subject to the NWRBs rules
and regulations governing water right and usage. The Asset Purchase Agreement and Operation & Management
Agreement between NPC/PSALM and K- Water are thus amended accordingly.

Except for the requirement of securing a water permit, K-Water remains BOUND by its undertakings and warranties
under the APA and O & M Agreement;

5) NPC shall be a CO-PARTY with K-Water in the Water Protocol Agreement with MWSS and NIA, and not merely as a
conforming authority or agency; and

6) The Status Quo Ante Order issued by this Court on May 24, 2010 is hereby LIFTED and SET ASIDE.

No pronouncement as to costs

SO ORDERED.