My partner, David, is a Swede. We want to build a small-scale mining firm in Albay. Is it possible for us to do so? If not, what are the possible sanctions or penalties that may be imposed on David?
Republic Act 7042, as amended by RA 8179, the Foreign Investment Act of 1991, enumerates areas of activities reserved for Filipino citizens. As defined by Section 3 of this law, small-scale miners only refer to Filipino citizens, individually or in the company of Filipino citizens who are duly licensed by the Department of Environment and Resources to engage in the extraction or removal of mineral or ore-bearing materials from the ground.
The provision is quoted below:
“Section 3. Definitions. – For purposes of this Act, the following terms shall be defined as follows:
(c) “Small-scale miners” refer to Filipino citizens who, individually or in the company of other Filipino citizens, voluntarily form a cooperative duly licensed by the Department of Environment and Natural Resources to engage, under the terms and conditions of a contract, in the extraction or removal of minerals or ore-bearing materials from the ground;
Also, Section 8(a) of the law as revised by Executive Order 184, Series of 2015, provides for formulation of a Regular Investment Negative List covering investment areas/activities that are open to foreign investors and/or reserved for Filipino citizens and prohibits foreign ownership particularly in small-scale mining pursuant to Section 3 of RA 7076 or the People’s Small-Scale Mining Act of 1991, to wit:
“Tenth Regular Foreign Investment Negative List
List A: Foreign Ownership Limited by the Mandate of the Constitution and Specific Laws
No Foreign Equity
6. small-scale mining (Sec. 3 of RA 7076)
7. xxx” (Emphasis supplied)
Furthermore, Section 14 of RA 7042 provides an administrative sanction that may be imposed for person who violates any provisions of the Act, to wit:
“Section 14. Administrative Sanctions. – A person who violates any provision of this Act or of the terms and conditions of registration or of the rules and regulations issued pursuant thereto, or aids or abets in any manner any violation shall be subject to a fine not exceeding One hundred thousand pesos (P100,000).
If the offense is committed by a juridical entity, it shall be subject to a fine in an amount not exceeding ½ of 1 percent of total paid-in capital but not more than Five million pesos (P5,000,000). The president and/or officials responsible therefor shall also be subject to a fine not exceeding Two hundred thousand pesos (P200,000).
In addition to the foregoing, any person, firm or juridical entity involved shall be subject to forfeiture of all benefits granted under this Act.
The SEC [Securities and Exchange Commission] shall have the power to impose administrative sanctions as provided herein for any violation of this Act or its implementing rules and regulations.”
Based on the foregoing provisions of law, a small mining company may only be set up by either a Filipino citizen or a domestic corporation, partnership or association wholly owned by the citizens of the Philippines. Therefore, it is worthy to mention that David may not be able to set up a small mining company in Albay, considering that he is a foreigner. Should he violate this provision, David may be penalized by fine of One Hundred Thousand Pesos (P100,000.00) or an amount not exceeding one half (½) of one percent (1 percent) of total paid-in capital but not more than Five million pesos (P5,000,000.00), in case of juridical entity.
We find it necessary to mention that this opinion is solely based on the facts you have narrated and our appreciation of the same. The opinion may vary when the facts are changed or elaborated. We hope that we were able to enlighten you on the matter.
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