Article XII (Bernas & Syllabus)

Noted by: E.M.S. Aurea

1. ARTICLE XII b. By mandating the state to adopt

National Economy and Patrimony measures that help make them
competitive
SECTION 1. The goals of the national economy c. By requiring the state to develop a self-
are a more equitable distribution of reliant and independent national
opportunities, income, and wealth; a sustained economy effectively controlled by
increase in the amount of goods and services Filipinos
produced by the nation for the benefit of the
people; and an expanding productivity as the Three basic directions:
key to raising the quality of life for all, especially 1. It sets the dual goal of dynamic
the underprivileged. productivity and a more equitable
distribution of what is produced.
The State shall promote industrialization and full 2. It seeks complementarity between
employment based on sound agricultural industrialization and agricultural
development and agrarian reform, through development.
industries that make full and efficient use of 3. It is protective of things Filipino.
human and natural resources, and which are
competitive in both domestic and foreign It should also be pointed out that the equitable
markets. However, the State shall protect distribution refers not just to the sharing among
Filipino enterprises against unfair foreign people and sectors of the economy but also to
competition and trade practices. the distribution among geographic regions.
- What is envisioned by the provision is
In the pursuit of these goals, all sectors of the not necessarily agriculturally-related
economy and all regions of the country shall be industrialization but rather
given optimum opportunity to develop. Private industrialization that is the result of
enterprises, including corporations, releasing locked up capital through
cooperatives, and similar collective agrarian reform.
organizations, shall be encouraged to broaden - What is envisioned is a flexible and
the base of their ownership. rational relationship between the two as
dictated by the common good.
Section 1 can be seen as expressing some
general economic of the Constitution. It is National patrimony - natural resources and
packed with principles that shall serve as cultural heritage of the Filipino people
constitutional guidelines for the various
branches of government for the promotion of The Filipino consumer must be protected against
the common good in the economic sphere. a flood of low quality products. The Filipino
producer, in turn, must be protected from
Ideals of economic nationalism: "unfair foreign competition and trade practices.
a. By expressing a preference in favor of - The protection can come in the form of
qualified Filipinos in the grant of rights, tariffs, quantitative restrictions, or even
privileges, and concessions covering the total ban of imports
national economy and patrimony and in - However, there is no intention to protect
the use of Filipino labor, domestic Filipino industries from foreign
materials and locally produced goods competition at the expense of
consumers.
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

While the Constitution mandates a bias in favor priority to subsistence fishermen and
of Filipino goods, services, labor and enterprises, fishworkers in rivers, lakes, bays, and lagoons.
it also recognizes the need for business
exchange with the rest of the world on the The President may enter into agreements with
bases of equality and reciprocity and limits foreign-owned corporations involving either
protection of Filipino enterprises only against technical or financial assistance for large-scale
foreign competition and trade practices that are exploration, development, and utilization of
unfair. minerals, petroleum, and other mineral oils
- A balance between protecting local according to the general terms and conditions
businesses and allowing the entry of provided by law, based on real contributions to
foreign investments and services the economic growth and general welfare of the
country. In such agreements, the State shall
SECTION 2. All lands of the public domain, promote the development and use of local
waters, minerals, coal, petroleum, and other scientific and technical resources.
mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and The President shall notify the Congress of every
fauna, and other natural resources are owned contract entered into in accordance with this
by the State. With the exception of agricultural provision, within thirty days from its execution.
lands, all other natural resources shall not be
alienated. The exploration, development, and Jura regalia and limits on dominium
utilization of natural resources shall be under Imperium - government authority possessed by
the full control and supervision of the State. The the state expressed in the concept of
State may directly undertake such activities, or it sovereignty
may enter into co-production, joint venture, or
production-sharing agreements with Filipino Dominum - capacity of the state to own or
citizens, or corporations or associations at least acquire property
sixty per centum of whose capital is owned by
such citizens. Such agreements may be for a Jura regalia - all lands were held from the
period not exceeding twenty-five years, Crown; is also the foundation of the first
renewable for not more than twenty-five years, sentence of Section 2; ownership is vested in
and under such terms and conditions as may be the State.
provided by law. In cases of water rights for - Any person claiming ownership of a
irrigation, water supply, fisheries, or industrial portion of the public domain must be
uses other than the development of water able to show title from the state
power, beneficial use may be the measure and according to any of the recognized
limit of the grant. modes of acquisition of title.

The State shall protect the nation’s marine One significant application of the regalian
wealth in its archipelagic waters, territorial sea, doctrine is that, if a person is the owner of
and exclusive economic zone, and reserve its agricultural land in which minerals are
use and enjoyment exclusively to Filipino discovered, the person's ownership of such land
citizens. does not give him the right to extract or utilize
the said minerals without the permission of the
The Congress may, by law, allow small-scale State.
utilization of natural resources by Filipino - Once minerals are discovered on land,
citizens, as well as cooperative fish farming, with the State can stop its current use to
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

extract those minerals as part of its Two levels of control to be considered:

sovereign authority. The land is then 1. Control over the corporation which may
classified as mineral land. The owner is engage with the State in "co-production,
entitled to compensation, either under joint venture, or production-sharing
the Mining Law or through expropriation agreements”.
proceedings. - If individuals, they must be
- The person applying for registration has Filipino citizens; if corporations,
the burden of proof to overcome the the ownership must be 60%
presumption of ownership of lands of Filipino.
the public domain 2. Control of the "co-production, joint
venture, or production-sharing"
To prove that land is alienable, a positive act of operation.
government is required: - This must be under the "full
1. Presidential proclamation or EO control and supervision of the
2. Administrative action State
3. Investigation reports
4. Legislative act or statute *"Control" in this regard meant control as it
operates in the corporate world
Limits on dominium
Section 2, following the lead of earlier The new rule is not retroactive. Executive Order
constitutions, limits the power of the State to No. 211, issued by President Aquino, respects
alienate the natural resources of the public this by applying only to future agreements.
domain. Executive Order No. 279 allows the Secretary of
- Only agricultural lands of the public Natural Resources to enter joint ventures, co-
domain can be sold or transferred production, or production-sharing agreements
(alienated); other natural resources for mineral resources, but only for contracts
cannot. made after the 1987 Constitution took effect.

*To alienate = To transfer ownership or rights Assistance accorded by foreign-owned

of property to another person. corporations in the large-scale exploration,
development, and utilization of minerals,
Exploration, development and utilization of petroleum, and other mineral oils should be
inalienable resources limited to “technical/financial” assistance (forms
Only Filipinos and Filipino corporations may of service contracts) only. The State retains its
engage in the development and utilization of right to full control.
these natural resources - The President exercises this power of
- so that it may neither be the subject of control on behalf of the State
barter nor be impaired in the give and - Congress may review the action of the
take of politics. President once it is notified
- Courts may intervene only if there is
The 1987 Constitution no longer speaks of grave abuse of discretion
"grant, lease, or concession" but of either direct
undertaking of activities by the State or "co- ● The service contract must be in
production, joint venture, or production-sharing accordance with a general law setting
agreements" with the State and all" under the standard or uniform terms and
full control and supervision of the State.” conditions
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

● The President may be the signatory for These agreements must follow legal terms,
the government contribute to economic growth, and benefit the
● The President reports to Congress country’s welfare. The State must also prioritize
within 30 days the agreement is using local scientific and technical resources.
executed. - The President must notify Congress of
any such contract within 30 days of its
Other limitations signing.
Agreements for the exploitation of the natural - “Alter-ego” principle cannot apply
resources can have a life of only twenty-five
years. SECTION 3. Lands of the public domain are
- considered to be a reasonable time to classified into agricultural, forest or timber,
attract capital, local and foreign, and to mineral lands, and national parks. Agricultural
enable them to recover their investment lands of the public domain may be further
and make a profit classified by law according to the uses which
they may be devoted. Alienable lands of the
The 25-year limit on natural resource public domain shall be limited to agricultural
exploitation does not apply to water rights used lands. Private corporations or associations may
for irrigation, water supply, fisheries, or not hold such alienable lands of the public
industrial purposes (excluding waterpower domain except by lease, for a period not
development). In these cases, the grant is exceeding twenty-five years, renewable for not
measured and limited by beneficial use. more than twenty-five years, and not to exceed
one thousand hectares in area. Citizens of the
For water rights involving waterpower Philippines may lease not more than five
development, the 25-year limit does apply. hundred hectares, or acquire not more than
twelve hectares thereof by purchase,
A stricter rule applies to the nation's marine homestead, or grant.
wealth in its archipelagic waters, territorial sea,
and exclusive economic zone. These resources Taking into account the requirements of
are reserved solely for Filipino citizens. conservation, ecology, and development, and
- Only natural-born Filipinos can use subject to the requirements of agrarian reform,
them. the Congress shall determine, by law, the size of
- Aliens are not allowed, even if they offer lands of the public domain which may be
to pay rent or fishing fees. acquired, developed, held, or leased and the
conditions therefor.
Congress may allow small-scale use of natural
resources by Filipino citizens, including Classification of lands of the public domain
cooperative fish farming, focusing on rivers, Land is the single biggest major resource of the
lakes, bays, and lagoons. nation. In the absence of such classification, the
- This aligns with the Social Justice article, land remains as unclassified land until it is
emphasizing that "small-scale" refers to released therefrom and rendered open to
individual proprietorships. disposition.

The President may enter agreements with Classification of lands:

foreign-owned corporations for large-scale 1. Agricultural
exploration, development, and utilization of 2. Forest or timber
minerals, petroleum, and other mineral oils. 3. Mineral
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

4. National parks* Disposition of lands of the public domain

Rules established by Section 3:
Regalian doctrine: all lands of the public 1. Only agricultural lands of the public
domain belong to the State, and that the State domain can be alienated. All other lands
is the source of any asserted right to ownership are inalienable and can only be
in the land and charged with the conservation of developed or used according to the
such patrimony. rules in Section 2. Until public land is
classified as alienable, it remains
The classification of public lands is the inalienable.
responsibility of administrative agencies 2. Only public corporations and qualified
designated by law (executive department of individuals can acquire alienable lands of
government). Courts will not interfere in the public domain. Private corporations
decisions made by these agencies, as they rely can only hold these lands through
on specialized knowledge and discretion in leases.
regulating such matters. 3. The size of land that may be acquired or
- Although the executive’s power is leased by individuals or corporations is
exclusive, it is not inherent; it is a limited.
delegated power and the President 4. Congress's discretion to open public
exercises it upon the recommendation lands for lease or acquisition by setting
of the pertinent department head (CA specific guidelines and conditions is
No. 141) limited.
- The President has the power to
withdraw forest reserves that are more Disqualification of private corporations
valuable for minerals than for their The ban on acquiring alienable public lands
original purpose and convert them into applies to private corporations, but not to public
non-forest reserves. Unlike previous corporations. Only public corporations and
laws, only the recommendation of the qualified natural persons can now acquire
DENR Secretary is required, not alienable public lands.
approval from the legislative body. - to promote fair land ownership
- To segregate portions of public domain distribution, encourage owner-
as reservations for the use of the State, cultivatorship, and support small family
all that is needed is a presidential farms, thereby preventing the
proclamation to that effect; a court concentration of large land holdings by
judgment is not necessary. corporations or private individuals.
- aimed against undue exploitation of our
The classification, moreover, is descriptive of the public lands and natural resources by
legal nature of the land and not of what it looks large corporations.
like. Classifications, besides, must be
categorical: that is, land is either completely Private corporations or associations may not
agricultural or completely mineral or completely hold such alienable lands of the public domain
forest or park. except by lease.

Agricultural lands may be further classified by From public agricultural land to private land
law according to the uses to which they may be While corporations cannot acquire land of the
devoted. public domain, they can acquire private land.
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

Area limits on leases and acquisitions Forest lands and parks

1. Private corporations are allowed to lease This section addresses two types of public land:
no more than one thousand hectares. forests and parks, focusing on their
2. The allowable limit for lease by preservation. However, it gives Congress the
individuals is five hundred hectares. discretion to decide how to define areas and set
3. Acquisition by individuals is limited to time limits for their use.
twelve hectares.
Once forest lands are converted into parks,
The reduction in the allowable land size aims to logging may no longer be permitted in the area.
allow more beneficiaries to acquire land.
However, applications for larger areas that were Reclaimed land is public land. Before it can be
already completed before the new size limit was registered as private property it must be
ratified will not be affected. classified as alienable.

Once title to alienable public land passes to a SECTION 5. The State, subject to the
private individual, it is segregated from lands of provisions of this Constitution and national
the public domain and becomes private land development policies and programs, shall
subject to the rights of private ownership. protect the rights of indigenous cultural
communities to their ancestral lands to ensure
Discretion of Congress in development of their economic, social, and cultural well-being.
alienable lands
Congress has the discretion to decide how much The Congress may provide for the applicability
alienable public land can be opened for private of customary laws governing property rights or
acquisition or lease, but this decision must relations in determining the ownership and
comply with conservation, ecological, extent of ancestral domain.
development, and agrarian reform requirements.
Ancestral lands and ancestral domain
Citizen limitation Native land - held by Filipinos from time
The use of alienable land is only allowed for immemorial and excluded from the coverage of
those qualified under Section 2 and in the jura regalia since it is private and belonged to
manner prescribed by it. While corporations indigenous people
cannot lease inalienable lands, Section 2 allows
qualified corporations to lease alienable lands, See: RA No. 8371, or the Indigenous People’s
as clearly stated in Section 3. Rights Act of 1997 (p. 556, Syllabus)

SECTION 4. The Congress shall, as soon as Ancestral domains - covers lands, inland waters,
possible, determine by law the specific limits of coastal areas, and their natural resources,
forest lands and national parks, marking clearly including ancestral lands, forests, pastures,
their boundaries on the ground. Thereafter, agricultural lands, residential areas, hunting
such forest lands and national parks shall be grounds, burial sites, worship areas, bodies of
conserved and may not be increased nor water, and other resources. It also includes
diminished, except by law. The Congress shall lands no longer exclusively occupied by
provide, for such period as it may determine, indigenous communities but traditionally used by
measures to prohibit logging in endangered them for subsistence and cultural activities
forests and watershed areas.
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

Ancestral land - lands used by cultural Private land - any land of private ownership;
communities under individual or traditional Includes both lands owned by private individuals
group ownership. They include residential lots, and lands which are patrimonial property of the
rice terraces, private forests, farms, and tree State or of municipal corporation
lots, provided they are occupied, possessed, and
utilized. *Patrimonial property refers to property that
forms part of a person’s or entity’s estate and is
Ancestral lands in Section 5 of the Constitution capable of private ownership, transfer, or
cover areas both inside and outside autonomous disposal.
regions.
Private agricultural land meant any private land
To protect indigenous communities, Congress is which was neither timber nor mineral land.
authorized to decide how to prioritize civil law
and customary law in case of conflicts. Who may acquire private land?
The capacity to acquire private land is made
SECTION 6. The use of property bears a social dependent upon the capacity to acquire or hold
function, and all economic agents shall lands of the public domain. Private land may be
contribute to the common good. Individuals and transferred or conveyed only to individuals or
private groups, including corporations, entities "qualified to acquire or hold lands of the
cooperatives, and similar collective public domain."
organizations, shall have the right to own,
establish, and operate economic enterprises, Because aliens were disqualified from acquiring
subject to the duty of the State to promote or in any way holding lands of the public
distributive justice and to intervene when the domain, aliens, whether individuals or
common good so demands. corporations, were also disqualified from
acquiring private lands.
Lands and the common good
The Section, in general, rejects laissez-faire and The prohibition applies even to a regime of
adopts the principle of solidarity. conjugal partnership in a marriage.

Laissez-fair - a policy or attitude of letting things A person's qualification to acquire land is

take their course without interfering. determined at the time the right to own it is
● abstention by governments from acquired, not at the time of registration.
interfering in the workings of the free - When foreign nationals who are still
market. Filipino citizens acquire the land, they
can validly register the title if the seller
Right of property may be relinquished upon the has met the requirements under the
command of the State for the promotion of Public Land Act before the sale.
public good.
Aliens may acquire private land in cases of
SECTION 7. Save in cases of hereditary hereditary succession. The exception applies
succession, no private lands shall be transferred only to intestate succession.
or conveyed except to individuals, corporations, - Exception to the exception: When,
or associations qualified to acquire or hold lands however, an alien acquires land by
of the public domain. hereditary succession, such an alien
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

cannot renounce the right to inherit in A corporation sole or juridical person, is

favor of one who is not qualified. disqualified to acquire or hold alienable lands of
the public domain since it is not entitled to avail
The ban on aliens owning land aims to preserve itself of the benefits which applies only to
it for future generations of Filipinos. This goal is Filipino citizens or natural persons. A corporation
upheld by allowing naturalized Filipino citizens to sole has no nationality.
lawfully acquire real estate.
Consequences of conveyances made in violation
The Constitution only prohibits giving land of this Section
ownership to aliens. It does not ban leasing The sale of private land made in violation of
private land to them. Similarly, a usufruct (the Section 7 is null and void.
right to use and enjoy land) can be given to
aliens because it doesn’t make them the owner. In pari delicto - "in equal fault."; used to
describe a situation where two parties are
The Constitution only stops aliens and foreign equally at fault in a wrongdoing or illegal act.
companies from owning land. It doesn’t ban - In such cases, the court generally will
them from owning other immovable things like not provide relief to either party
buildings or structures attached to the land. because both are equally responsible for
the illegal activity.
A foreign corporation may buy shares in excess
of 40% of the shares of the corporation, but the The Court has reiterated the doctrine if land
effect would be that the corporation would lose illegally acquired by an alien is transferred to a
its capacity to hold private land. Filipino, the previous illegality is fixed.
- The sale of land to aliens is prohibited
Can a Filipino corporation acquire land? - The sale of land to an alien can no
A Filipino citizen may acquire private land longer be annulled if it has been
through any of the modes of acquiring private conveyed to a Filipino citizen
property.
SECTION 8. Notwithstanding the provisions of
Private corporations can still buy private land Section 7 of this Article, a natural-born citizen of
because Section 7 says they only need the the Philippines who has lost his Philippine
ability to either own or hold public land. Since citizenship may be a transferee of private lands,
corporations can "hold" public land through subject to limitations provided by law.
leases, they qualify to own private land. This is
different from aliens, who aren’t allowed to Exception for former Philippine citizens
lease public land at all. Any former natural-born Filipino citizen with the
- the corporation must be a Filipino legal ability to enter contracts under Philippine
corporation. In the absence of capital law can acquire private land.
stock, the controlling membership - They can own up to 5,000 square
should be composed of Filipinos. meters of urban land or 3 hectares of
rural land for business or other uses.
A change in the rules about private corporations - If both spouses want to use this
owning public land doesn’t mean the rules for privilege, the total land they acquire
owning private land also changed. The together cannot exceed these limits.
Constitution doesn’t say that.
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

A transferee who already owns urban or rural Congress. It operates independently from
land for business can acquire additional land, as Congress but is under the President, who chairs
long as the total area doesn't exceed the it.
allowed limits.
- They can acquire up to two lots in SECTION 10. The Congress shall, upon
different municipalities or cities, with a recommendation of the economic and planning
total area of no more than 5,000 square agency, when the national interest dictates,
meters for rural land. reserve to citizens of the Philippines or to
corporations or associations at least sixty per
If the transferee owns urban land, they cannot centum of whose capital is owned by such
acquire rural land, and vice versa. citizens, or such higher percentage as Congress
may prescribe, certain areas of investments. The
If aliens cannot acquire private land, a lease for Congress shall enact measures that will
a reasonable period is valid. encourage the formation and operation of
enterprises whose capital is wholly owned by
SECTION 9. The Congress may establish an Filipinos.
independent economic and planning agency
headed by the President, which shall, after In the grant of rights, privileges, and
consultations with the appropriate public concessions covering the national economy and
agencies, various private sectors, and local patrimony, the State shall give preference to
government units, recommend to Congress, and qualified Filipinos.
implement continuing integrated and
coordinated programs and policies for national The State shall regulate and exercise authority
development. over foreign investments within its national
jurisdiction and in accordance with its national
Until the Congress provides otherwise, the goals and priorities.
National Economic and Development Authority
shall function as the independent planning Filipinization of areas of investment
agency of the government. Congress has the authority to limit certain
investment areas to Filipinos, as long as it
The National Economic and Development follows the standard rules for valid classification.
Authority (NEDA)
The new Constitution has made the creation of The phrase "upon the recommendation of the
such an agency optional. economic and planning agency" was meant to
- An economic planning agency should limit Congress's power, requiring their action to
not be constitutionalized since formal be based on the agency's advice.
economic planning is not an
indispensable part of managing the The second paragraph directs the state to
national economy prioritize qualified Filipinos when granting rights
- If the focus shifts to less government and privileges, even if a foreigner may be more
and more private sector involvement, qualified.
having a planning agency might not be - It is a clear, mandatory command that is
necessary in the future. self-executing and doesn’t need
additional laws or rules to be enforced;
Until Congress decides otherwise, NEDA will enforceable on its own through the
remain the central planning agency, advising courts.
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

- The provision is mandatory and organized "for hire or compensation" to

enforceable only for granting rights, serve the public
privileges, and concessions related to
the national economy and patrimony, Whether a utility is public or private depends on
not for all areas of trade and commerce. whether it is available to serve all people who
Some aspects of trade and commerce need it, not how many people use it. It is a
may not be part of the national business or service that regularly provides the
economy. public with essential services like electricity, gas,
- the Senate may play around with a water, transportation, or communication.
mandatory provision through a
balancing of values. Public service - any person or entity that owns
or operates services in the Philippines for hire,
The third paragraph of Section 10 has reference whether for a general or limited clientele. This
both to the regulation of the entry of foreign includes common carriers, railways, buses,
investments and to regulation of foreign ferries, shipyards, utilities like water, electricity,
investments already in place. gas, telecommunications, and other similar
services.
SECTION 11. No franchise, certificate, or any - However, a person in agriculture who
other form of authorization for the operation of owns a vehicle for personal use or offers
a public utility shall be granted except to citizens it for hire for limited, specific agricultural
of the Philippines or to corporations or purposes is not considered a public
associations organized under the laws of the service.
Philippines at least sixty per centum of whose
capital is owned by such citizens, nor shall such A franchise includes authorizations issued
franchise, certificate, or authorization be directly from Congress in the form of a statute
exclusive in character or for a longer period than and granted by administrative agencies to which
fifty years. Neither shall any such franchise or the power to grant has been delegated.
right be granted except under the condition that
it shall be subject to amendment, alteration, or Capital - shares of stock that can vote in the
repeal by the Congress when the common good election of directors
so requires. The State shall encourage equity
participation in public utilities by the general Philippine national means:
public. The participation of foreign investors in a. A citizen of the Philippines
the governing body of any public utility b. Domestic partnership/association wholly
enterprise shall be limited to their proportionate owned by citizens of the Philippines
share in its capital, and all the executive and c. Corporation organized under the laws of
managing officers of such corporation or the Philippines of which 60% of capital
association must be citizens of the Philippines. stock is owned and held by Filipinos
d. Corporation organized abroad and
Public utility - a utility corporation that renders registered as doing business in the
service to the general public for compensation. Philippines which 100% of the capital
Its essential feature is that its service is not stock is wholly owned by Filipinos
confined to privileged individuals but is open to
an indefinite public. Public utilities do not always need a franchise
- a public utility under the Constitution from Congress to operate. Instead, certain
and the Public Service Law is one administrative agencies are authorized to grant
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

licenses or permits for the operation of some materials and locally produced goods, and adopt
public utilities. measures that help make them competitive.

The issuance of a franchise, certificate, or Filipino First Policy

authorization for a public utility can be changed 1. Giving native products and domestic
or revoked by Congress, but this does not imply entities preference in government
automatic action. purchases
2. Prescribing the use of Philippine-made
The law requires that public utility operations materials
can only be authorized for Filipinos or 3. Governing procurement contracts of the
corporations with at least 60% Filipino-owned government
capital. This is to protect the national economy *The policy, however, can extend beyond
and security, recognizing the importance of Filipino-first in government transactions and into
public utilities. private transactions.
- a corporation or association is
considered Filipino if (1) it is organized SECTION 13. The State shall pursue a trade
under Philippine laws and (2) Filipino policy that serves the general welfare and
citizens own at least sixty percent of its utilizes all forms and arrangements of exchange
capital on the basis of equality and reciprocity.

It should be noted, however, that the Forms and arrangements in economic exchange.
Constitution does not prohibit the mere The goal is not to commit to one specific
formation of a public utility corporation without approach. These arrangements must serve the
the required proportion of Filipino capital. general welfare, including health, safety,
- It prohibits granting a franchise or security, and protection of local businesses.
authorization to operate a public utility if
the utility already exists but does not They should also be based on reciprocity and
meet the required proportion of Filipino equality, ensuring mutual benefit.
capital.
SECTION 14. The sustained development of a
The moment for determining whether a reservoir of national talents consisting of Filipino
corporation is entitled to operate as a public scientists, entrepreneurs, professionals,
utility is when it applies for a franchise, managers, high-level technical manpower and
certificate, or any other form of authorization for skilled workers and craftsmen in all fields shall
that purpose. be promoted by the State. The State shall
encourage appropriate technology and regulate
A franchise cannot be exclusive, and it must be its transfer for the national benefit.
subject to amendment, alteration, or repeal by
the legislature if the common good requires it. The practice of all professions in the Philippines
shall be limited to Filipino citizens, save in cases
While foreigners may be members of boards of prescribed by law.
directors, they may not be executive or
managing officers. The aim is to develop a skilled workforce of
Filipino professionals, scientists, and workers
SECTION 12. The State shall promote the while protecting their welfare. While there are
preferential use of Filipino labor, domestic
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

limits on practicing certain professions, The President can take over public utilities only
exceptions exist under reciprocity laws. if Congress grants emergency powers under
Article VI, Section 23.
The provision also promotes technological - Section 17 gives power to the State, not
independence and controls on technology the President, who only gains
transfers for the nation's benefit. emergency powers if granted by
Congress during a state of emergency.
SECTION 15. The Congress shall create an
agency to promote the viability and growth of The phrase "business affected with public
cooperatives as instruments for social justice interest" was explained as any business with
and economic development. significant public impact.
- This includes public utilities or
SECTION 16. The Congress shall not, except businesses with similar characteristics,
by general law, provide for the formation, even if not officially classified as such,
organization, or regulation of private and those serving large, especially low-
corporations. Government-owned or controlled income, consumer groups.
corporations may be created or established by
special charters in the interest of the common SECTION 18. The State may, in the interest of
good and subject to the test of economic national welfare or defense, establish and
viability. operate vital industries and, upon payment of
just compensation, transfer to public ownership
Allowing the legislature to create or regulate utilities and other private enterprises to be
private corporations could lead to favoritism, operated by the Government.
harming certain groups or the country's
interests. Nationalization of industries
Section 18 should be understood as giving the
Public enterprises must serve the common good state authority for total or near-total
and be economically viable. They should operate nationalization, not just partial. While the state
efficiently, avoid competing with the private can engage in business without explicit
sector, and generate both profit and broader constitutional permission, total nationalization is
benefits. a significant step and should be clearly
authorized by the Constitution, which Section 18
SECTION 17. In times of national emergency, provides.
when the public interest so requires, the State
may, during the emergency and under Section 18 does not differ from Section 9 of the
reasonable terms prescribed by it, temporarily Bill of Rights.
take over or direct the operation of any privately
owned public utility or business affected with SECTION 19. The State shall regulate or
public interest. prohibit monopolies when the public interest so
National emergency - encompassing threat from requires. No combinations in restraint of trade or
external aggression, calamities, or natural unfair competition shall be allowed.
disasters, but not strikes; the duration of the
emergency is the measure of the duration of the Section 19 promotes fair competition, which is
takeover. essential for a healthy economy. It believes that
competition encourages producers to meet
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

consumer needs at the lowest price and use coming from the private sector. Congress will
resources efficiently. set their term and tenure to secure their
- The goal is to create a competitive independence.
environment where the market system
decides production, resource allocation, While not as independent as Constitutional
and distribution based on consumer Commissions, the quality of the people
demand and producer competition. appointed is crucial.

The Constitution does not necessarily prohibit Qualifications of the members of the governing
monopolies. The State must still decide whether board:
public interest demands that monopolies be 1. Natural-born Filipino citizens
regulated or prohibited. 2. Of known probity, integrity and
patriotism
On the other hand, combinations in restraint of 3. Majority shall come from the private
trade and unfair competition are prohibited by sector
the Constitution. 4. Additional qualifications may be set by
law*
The existing penal law on monopolies and
combinations in restraint of trade is Article 186 Role of an independent central monetary
of the Revised Penal Code. authority:
1. Provide guidance on money, banking,
SECTION 20. The Congress shall establish an and credit policies.
independent central monetary authority, the 2. Oversee the operations of banks.
members of whose governing board must be 3. Exercise regulatory powers over finance
natural-born Filipino citizens, of known probity, companies and similar institutions as
integrity, and patriotism, the majority of whom provided by law.
shall come from the private sector. They shall *Central Bank of the Philippines
also be subject to such other qualifications and
disabilities as may be prescribed by law. The SECTION 21. Foreign loans may only be
authority shall provide policy direction in the incurred in accordance with law and the
areas of money, banking, and credit. It shall regulation of the monetary authority.
have supervision over the operations of banks Information on foreign loans obtained or
and exercise such regulatory powers as may be guaranteed by the Government shall be made
provided by law over the operations of finance available to the public.
companies and other institutions performing
similar functions. Two things are covered: (1) foreign loans, public
or private, must follow laws and regulations, and
Until the Congress otherwise provides, the (2) information on public foreign loans and
Central Bank of the Philippines, operating under government-guaranteed loans must be made
existing laws, shall function as the central public.
monetary authority.
The provision emphasizes the importance of the
Independence nation's ability to pay and recognizes that
This provision ensures that the central monetary foreign borrowings affect everyone who will
authority remains free from influence, especially ultimately pay. The country must focus on
from the executive branch, with most members becoming more self-reliant.
Article XII (Bernas & Syllabus)
Noted by: E.M.S. Aurea

the President may incur or guarantee foreign

loans only with the concurrence of the Monetary
Board.

SECTION 22. Acts which circumvent or negate

any of the provisions of this Article shall be
considered inimical to the national interest and
subject to criminal and civil sanctions, as may be
provided by law.

Congress should penalize acts which seek to

circumvent the goals set down by the economic
provisions of the Constitution.