6 john hay vs lim

8/12/2019 6 John Hay vs Lim

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[G.R. No. 119775. March 29, 2005]

JOHN HAY vs . LIM

EN BANC

Sirs/Mesdames:

Quoted hereunder, for your information, is a resolution of this Court dated MAR 29 2005.

G.R. No. 119775 ( JOHN HAY PEOPLES ALTERNATIVE COALITION, MATEO CARIO FOUNDATION INC., CEN ALTERNATIVE SYSTEMS FOUNDATION INC., REGINA VICTORIA A. BENAFIN REPRESENTED AND JOINED BY HEMRS. ELISA BENAFIN, IZABEL M. LUYK REPRESENTED AND JOINED BY HER MOTHER MRS. REBECCA MOKATHERINE PE REPRESENTED AND JOINED BY HER MOTHER ROSEMARIE G. PE, SOLEDAD S. CAMILO, ALICIA C

ALIAS "KEVAB," BETTY I. STRASSER, RUBY C. GIRON, URSULA C. PEREZ ALIAS "BA-YAY," EDILBERTO T. CLCARMEN CAROMINA, LILIA G. YARANON,DIANE MONDOC vs. VICTOR LIM, PRESIDENT, BASES CONVERSION DEV

AUTHORITY; JOHN HAY PORO POINT DEVELOPMENT CORPORATION, CITY OF BAGUIO, TUNTEX (B.V.I.) C ASIAWORLD INTERNATIONALE GROUP, INC., DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES.)

By their separate motions for reconsideration, public respondents Bases Conversion Development Authority (BCDA) John HayManagement Corporation (JHMC ) [1] crala w and Victor Lim, and respondent-in-intervention CJH Development Corporation (CJHDC)seek the reconsideration of this Court's Decision of October 24, 200 3 [2] crala w` which invalidated the second sentence of Section 3of Proclamation No. 420 insofar as it granted tax exemptions and incentives to the John Hay Special Economic Zone (SEZ).

It may be recalled that on March 13, 1992, Republic Act No. 7227 , [3] cralaw otherwise known as the "Bases Conversion andDevelopment Act of 1992," was enacted with the declared policy of accelerating "the sound and balanced conversion intoalternative productive uses of the Clark and Subic military reservations and their extensions" -including the John HayStation . [4] crala w

To this end, R.A. No. 7227 created public respondent BCDA , [5] cralaw the Subic SE Z[6] crala w and the Subic Bay MetropolitanAuthority . [7] crala w

R.A. No. 7227 likewise authorized the President, subject to the concurrence of the local government units directly affected, tocreate through executive proclamation other SEZs in the areas covered respectively by the Clark military reservation, theWallace Air Station in San Fernando, La Union, and the Camp John Hay in Baguio. And upon recommendation by the BCDA,the law also authorized the President to create SEZs in the municipalities of Morong, Hermosa, Dinalupihan, Castillejos, andSan Marcelino . [8] cralaw

On July 5, 1994, then President Ramos, on the request of the Sangguniang Panlungsod of Baguio City , [9] cralaw issuedProclamation No. 420 establishing the John Hay SEZ:

PROCLAMATION NO. 420

CREATING AND DESIGNATING A PORTION OF THE AREA COVERED BY THE FORMER CAMP JOHN [HAY] AS THEJOHN HAY SPECIAL ECONOMIC ZONE PURSUANT TO REPUBLIC ACT NO. 7227

Pursuant to the powers vested in me by the law and the resolution of concurrence by the City Council of Baguio, I, FIDEL V.RAMOS, President of the Philippines, do hereby create and designate a portion of the area covered by the former John Hayreservation as embraced, covered, and defined by the 1947 Military Bases Agreement between the Philippines and the UnitedStates of America, as amended, as the John Hay Special Economic Zone, and accordingly order:

SECTION 1. Coverage of John Hay Special Economic Zone . - The John Hay Special Economic Zone shall cover the areaconsisting of Two Hundred Eighty Eight and one/tenth (288.1) hectares, more or less, of the total of Six Hundred Seventy-Seven (677) hectares of the John Hay Reservation, more or less, which have been surveyed and verified by the Departmentof Environment and Natural Resources (DENR) as defined by the following technical description:

A parcel of land, situated in the City of Baguio, Province of Benguet, Island of Luzon, and particularly described in surveyplans Psd-131102-002639 and Ccs-131102-000030 as approved on 16 August 1993 and 26 August 1993, respectively, bythe Department of Environment and Natural Resources, in detail containing :

Lot 1, Lot 2, Lot 3, Lot 4, Lot 5, Lot 6, Lot 7, Lot 13, Lot 14, Lot 15, and Lot 20 of Ccs-131102-000030
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- and-

Lot 3, Lot 4, Lot 5, Lot 6, Lot 7, Lot 8, Lot 9, Lot 10, Lot 11, Lot 14, Lot 15, Lot 16, Lot 17, and Lot 18 ofPsd-131102-002639 being portions of TCT No. T-3812, LRC Rec. No. 87.

With a combined area of TWO HUNDRED EIGHTY EIGHT AND ONE/TENTH HECTARES (288.1 hectares); Provided that thearea consisting of approximately Six and two/tenth (6.2) hectares, more or less, presently occupied by the VOA and theresidence of the Ambassador of the United States, shall be considered as part of the SEZ only upon turnover of theproperties to the government of the Republic of the Philippines.

Sec. 2. Governing Body of the John Hay Special Economic Zone . - Pursuant to Section 15 of Republic Act No. 7227, the BasesConversion and Development Authority is hereby established as the governing body of the John Hay Special Economic Zoneand, as such, authorized to determine the utilization and disposition of the lands comprising it, subject to private rights, ifany, and in consultation and coordination with the City Government of Baguio after consultation with its inhabitants, and topromulgate the necessary policies, rules, and regulations to govern and regulate the zone thru the John Hay Poro PointDevelopment Corporation, which is its implementing arm for its economic development and optimum utilization.

Sec. 3. Investment Climate in John Hay Special Economic Zone . - Pursuant to Section 5(m) and Section 15 of Republic ActNo. 7227, the John Hay Poro Point Development Corporation shall implement all necessary policies, rules, and regulationsgoverning the zone, including investment incentives, in consultation with pertinent government departments. Among others,the zone shall have all the applicable incentives of the Special Economic Zone under Section 12 of Republic Act No. 7227 andthose applicable incentives granted in the Export Processing Zones, the Omnibus Investment Code of 1987, the ForeignInvestment Act of 1991, and new investment laws that may hereinafter be enacted.

Sec. 4. Role of Departments, Bureaus, Offices, Agencies and Instrumentalities. - All Heads of departments, bureaus, offices,agencies, and instrumentalities of the government are hereby directed to give full support to Bases Conversion andDevelopment Authority and/or its implementing subsidiary or joint venture to facilitate the necessary approvals to expeditethe implementation of various projects of the conversion program.

Sec. 5. Local Authority . - Except as herein provided, the affected local government units shall retain their basic autonomyand identity.

Sec. 6. Repealing Clause . - All orders, rules, and regulations, or parts thereof, which are inconsistent with the provisions ofthis Proclamation, are hereby repealed, amended, or modified accordingly.

Sec. 7. Effectivity . This proclamation shall take effect immediately.

Done in the City of Manila, this 5th

day of July, in the year of Our Lord, nineteen hundred and ninety-four.

On April 25, 1995, petitioners filed their Petition for prohibition, mandamus and declaratory relief assailing (1) theconstitutionality of Proclamation No. 420 and (2) the legality of the Memorandum of Agreement and Joint Venture Agreementpreviously entered int o [10] crala w between public respondent BCDA and private respondents Tuntex (B.V.I.) Co., Ltd. (TUNTEX) andAsiaworld Internationale Group, Inc. (ASIAWORLD).

The questions regarding the validity of the agreements between BCDA and TUNTEX and ASIAWORLD were rendered mootand academi c [11] crala wby BCDA's revocation of these agreements by letter of November 21, 1995 . [12] cralaw

On October 24, 2003, this Court promulgated its Decision, which disposed as follows:

WHEREFORE, the second sentence of Section 3 of Proclamation No. 420 is hereby declared NULL AND VOID and isaccordingly declared of no legal force and effect. Public respondents are hereby enjoined from implementing the aforesaidvoid provision.

Proclamation No. 420, without the invalidated portion, remains valid and effective.

SO ORDERED.

In their Motion for Reconsideration with Manifestation filed on December 29, 2003, public respondents, through the Office ofthe Government Corporate Counsel, submit the following grounds for reconsideration:

I
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THE HONORABLE COURT ERRED IN RULING THAT SECTION 3 OF PROCLAMATION NO. 420 IS NULL AND VOID AS THE JOHNHAY SPECIAL ECONOMIC ZONE ENJOYS EXEMPTION FOR (sic) TAXES, AS WELL AS OTHER FINANCIAL INCENTIVESGRANTED TO THE SUBIC SPECIAL ECONOMIC ZONE, IN THAT:

A. THE LAW, CONSIDERED IN ITS ENTIRETY SUPPORTS THE CONCLUSION THAT THE JOHN HAY SPECIALECONOMIC ZONE ENJOYS THE SAME PRIVILEGES AS THE SUBIC SPECIAL ECONOMIC ZONE.

B. THE GRANT OF TAX EXEMPTION AND OTHER FINANCIAL INCENTIVES IS INHERENT IN "SPECIAL ECONOMICZONES."

II

ASSUMING ARGUENDO THAT REPUBLIC ACT NO. 7227 DOES NOT GRANT TAX EXEMPTIONS TO SPECIAL ECONOMIC ZONES,THE SECOND SENTENCE OF SECTION THREE OF PROCLAMATION NO. 420 IS SUSCEPTIBLE OF OTHER PLAUSIBLEINTERPRETATIONS WHICH WOULD ADDRESS THE ALLEGED CONSTITUTIONAL INFIRMITY.

Ill

THE JOHN HAY SPECIAL ECONOMIC ZONE MAY BE GRANTED FINANCIAL INCENTIVES UNDER OTHER LAWS, ASIMPLEMENTED BY THE EXECUTIVE.

IV

THE HONORABLE COURT ERRED IN RULING THAT PETITIONERS HAVE LEGAL STANDING TO SUE.

Intervenor CJHDC filed on March 5, 2004 a Motion for Leave to Intervene alleging that it, together with its consortiumpartners Fil-Estate Management Inc. and Penta Capital Investment Corporation, entered into a Lease Agreement datedOctober 19, 199 6 [13] crala w with respondent BCDA for the development of the John Hay SEZ; and that it "stands to be mostaffected" by this Court's Decision "invalidating the grant of tax exemption and other financial incentives" in the John Hay SEZsince "[i]ts financial obligations and development and investment commitments under the Lease Agreement were enteredinto upon the premise that these incentives are valid and subsisting."

CJHDC, proffering grounds parallel to those of public respondents , [14] cralaw thus prays that: (1) it be granted leave to intervenein this case; (2) its attached Motion for Reconsideration in Intervention be admitted; and (3) this Court's Decision of October24, 2003 be reconsidered and petitioners' petition dismissed.

By Order of May 25, 2004, this Court granted CJHDC's Motion for leave to Intervene and noted its Motion for Reconsiderationin Intervention . [15] cralaw

At bottom, the controversy centers on whether the tax exemptions and other financial incentives granted to the Subic SEZunder Section 12 of R.A. No. 7227 are applicable to the John Hay SEZ.

Section 12 of R.A. No. 7227, which provides for the "policies" to govern and regulate the Subic SEZ, reads as follows:

SECTION 12. Subic Special Economic Zone. - Subject to the concurrence by resolution of the sangguniang panlungsod of theCity of Olongapo and the sangguniang bayan of the Municipalities of Subic, Morong and Hermosa, there is hereby createda Special Economic and Free-port Zone consisting of the City of Olongapo and the Municipality of Subic, Province ofZambales, the lands occupied by the Subic Naval Base and its contiguous extensions as embraced, covered, and defined bythe 1947 Military Bases Agreement between the Philippines and the United States of America as amended, and within theterritorial jurisdiction of the Municipalities of Morong and Hermosa, Province of Bataan, hereinafter referred to as the Subic

Special Economic Zone whose metes and bounds shall be delineated in a proclamation to be issued by the President of thePhilippines. Within thirty (30) days after the approval of this Act, each local government unit shall submit its resolution ofconcurrence to join the Subic Special Economic Zone to the office of the President. Thereafter, the President of thePhilippines shall issue a proclamation defining the metes and bounds of the Zone as provided herein.

The abovementioned zone shall be subject to the following policies:

(a) Within the framework and subject to the mandate and limitations of the Constitution and the pertinent provisions of theLocal Government Code, the Subic Special Economic Zone shall be developed into a self-sustaining, industrial,commercial, financial and investment center to generate employment opportunities in and around the zone and toattract and promote productive foreign investments;
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b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring freeflow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as wellas provide incentives such as tax and duty free importations of raw materials, capital and equipment . However,exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippineterritory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of thePhilippines;

(c) The provisions of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national,shall be imposed within the Subic Special Economic Zone. In lieu of paying taxes, three percent (3%) of thegross income earned by all businesses and enterprises within the Subic Special Economic Zone shall be remitted to the

National Government, one percent (1%) each to the local government units affected by the declaration of the zonein proportion to their population area, and other factors. In addition, there is hereby established a developmentfund of one percent (1%) of the gross income earned by all businesses and enterprises within the Subic SpecialEconomic Zone to be utilized for the Municipality of Subic, and other municipalities contiguous to [the] baseareas. In case of conflict between national and local laws with respect to tax exemption privileges in the Subic SpecialEconomic Zone, the same shall be resolved in favor of the latter;

(d) No exchange control policy shall be applied and free markets for foreign exchange, gold, securities andfutures shall be allowed and maintained in the Subic Special Economic Zone;

(e) The Central Bank, through the Monetary Board, shall supervise and regulate the operations of banks andother financial institutions within the Subic Special Economic Zone;

(f) Banking and Finance shall be liberalized with the establishment of foreign currency depository units of local

commercial banks and offshore banking units of foreign banks with minimum Central Bank regulation;

(g) Any investor within the Subic Special Economic Zone whose continuing investment shall not be less than TwoHundred fifty thousand dollars ($250,000), his/her spouse and dependent children under twenty-one (21) yearsof age, shall be granted permanent resident status within the Subic Special Economic Zone. They shall havefreedom of ingress and egress to and from the Subic Special Economic Zone without any need of special authorization fromthe Bureau of Immigration and Deportation. The Subic Bay Metropolitan Authority referred to in Section 13 of thisAct may also issue working visas renewable every two (2) years to foreign executives and other alienspossessing highly-technical skills which no Filipino within the Subic Special Economic Zone possesses, ascertified by the Department of Labor and Employment. The names of aliens granted permanent residence status andworking visas by the Subic Bay Metropolitan Authority shall be reported to the Bureau of Immigration and Deportation withinthirty (30) days after issuance thereof;

(h) The defense of the zone and the security of its perimeters shall be the responsibility of the National Government in

coordination with the Subic Bay Metropolitan Authority. The Subic Bay Metropolitan Authority shall provide and establish itsown internal security and firefighting forces; and

(i) Except as herein provided, the local government units comprising the Subic Special Economic Zone shall retain their basicautonomy and identity. The cities shall be governed by their respective charters and the municipalities shall operate andfunction in accordance with Republic Act No. 7160, otherwise known as the Local Government Code of 1991. (Emphasissupplied)

In their first line of argument, respondents allege that the foregoing "policies" or incentives, while enumerated in reference tothe Subic SEZ, are nonetheless expressly made applicable to the other SEZs subsequently created by presidentialproclamation, including the John Hay SEZ, by Section 15 of R.A. No. 7227. Thus, public respondents argue:

That the privileges of tax exemption and other financial incentives were expressly provided under Section 12, constituting theSSEZ, is merely a result of the then reality that it is (sic) was only in Subic Bay where the precise metes and bounds of theSSEZ, as well as other relevant information, were then available to the Senate. But the intention of the Senate wasclearly to empower the President, who would then have the luxury of time and further studies, to constitutespecial economic zones in the former Clark Air Base and its extensions, including Camp John Hay. This power toproclaim the other base areas as special economic zones, including all privileged appurtenant thereto, wasinstead delegated to the President in Section 15 of the law.

x x x

Republic Act No. 7227 authorizes the President to delineate Special Economic Zones in the former base areas.True, section 12 of the said law enumerating the tax exemptions and the financial incentives of the SubicSpecial Economic Zone, is expressly made applicable to the former Subic Bay Naval Base. However, there is no


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showing that the term "special economic zones", used to denote what the President can establish in John Hay,does not have the same definition and characteristics as the SSEZ. (Emphasis supplied; underscoring in the original)

A reading of Section 15 of R.A. No. 7227 does not, however, support this proposition. There is no doubt that under Section15 (as in Section 12) the President has the power to delineate, by proclamation, the metes and bounds of SEZs which maybe created in the other former base lands. However, there is neither an express reference to Section 12 nor to the incentivesgranted to the Subic SEZ:

SECTION 15. Clark and Other Special Economic Zones. -Subject to the concurrence by resolution of the local governmentunits directly affected, the President is hereby authorized to create by executive proclamation a Special Economic

Zone covering the lands occupied by the Clark military reservations and its contiguous extensions as embraced, covered anddefined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended,located within the territorial jurisdiction of Angeles City, Municipalities of Mabalacat and Porac, Province of Pampanga, andthe Municipality of Capas, Province of Tarlac, in accordance with the policies as hereinprovided insofar asapplicable to the Clark military reservations.

The governing body of the Clark Special Economic Zone shall likewise be established by executive proclamation with suchpowers and functions exercised by the Export Processing Zone Authority pursuant to Presidential Decree No. 66 as amended.

The policies to govern and regulate the Clark Special Economic Zone shall be determined upon consultation withthe inhabitants of the local government units directly affected which shall be conducted within six (6) monthsupon approval of this Act.

Similarly, subject to the concurrence by resolution of the local government units directly affected, the Presidentshall create other Special Economic Zones, in the base areas of Wallace Air Station in San Fernando, La Union(excluding areas designated for communications, advance warning and radar requirements of the Philippine Air Force to bedetermined by the Conversion Authority) and Camp John Hay in the City of Baguio.

Upon recommendation of the Conversion Authority, the President is likewise authorized to create Special Economic Zonescovering the Municipalities of Morong, Hermosa, Dinalupihan, Castillejos, and San Marcelino. (Emphasis supplied)

Respondent-in-intervention CJHDC submits that by authorizing the President to create SEZs "in accordance with the policiesas herein provided insofar as applicable," the first paragraph of Section 15 refers to the policies enumerated in Section 12,including exemption from local and national taxes.

This allusion to "the policies as herein provided" can by no means be considered an explicit or unequivocal conferment of thetax exemptions and other incentives set forth in Section 12 on other SEZs. Notably, the preceding portions of R.A. No. 7227make mention of two sets of "policies:" (1) the general "policies" that the law is intended to further, viz:

Sec. 2. Declaration of Policies. - It is hereby declared the policy of the Government to accelerate the sound and balancedconversion into alternative productive uses of the Clark and Subic military reservations and their extensions (John HayStation, Wallace Air Station, O'Donnell Transmitter Station, San Miguel Naval Communications Station and Capas RelayStation), to raise funds by the sale of portions of Metro Manila military camps, and to apply said funds as provided herein forthe development and conversion to productive civilian use of the lands covered under the 1947 Military Bases Agreementbetween the Philippines and the United States of America, as amended.

It is likewise the declared policy of the Government to enhance the benefits to be derived from said properties in order topromote the economic and social development of Central Luzon in particular and the country in general.,

and (2) the above-quoted "policies" governing the Subic SEZ.

Considering that the subject matter of the first paragraph of Section 15 is the authority of the President to create other SEZsin the former base lands, it stands to reason that the same should beexercised "in accordance with the policies" whichprovide the rationale for the law as laid down in Section 2 of R.A. No. 7227.

In contradistinction, a provision authorizing the President to define the metes and bounds of other SEZs "in accordance with"the tax and financial incentives of the Subic SEZ would be nonsensical. These tax and financial incentives provide neitherdirection nor guidance to the President in his determination (subject to the concurrence of the affected local governmentunits) of the geographic composition of the SEZs.

Moreover, the third and fourth paragraphs of Section 15 explicitly provide that the "policies to govern and regulate" the JohnHay SEZ "shall be determined upon consultation with the inhabitants of the local government units directly affected," thereby


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implying that the governing policies of the John Hay SEZ, unlike that of the Subic SEZ, were yet to be specified and, thus,not provided for by R.A. No. 7227 itself.

In any event, whether it is Section 12 or Section 15 of R.A. No. 7227 which is scrutinized, the result is the same. There isno express extension of the incentives or benefits granted to the Subic SEZ to the other SEZs still to be created viapresidential proclamation.

As for respondent-in-intervention CJHDC's argument that the President's "power to create Special Economic Zones carrieswith it the power to provide for tax and financial incentives," it does not lie. It is the legislative branch which has theinherent power not only to select the subjects of taxation but to grant exemptions . [16] Paragraph 4, Section 28 of

Article VI of the Constitution is crystal clear: "[n]o law granting any tax exemption shall be passed without the concurrenceof a majority of all the Members of the Congress."

Hence, it is only the legislature, as limited by the provisions of the Constitution, which has full power to exempt any personor corporation or class of property from taxation. The Constitution itself may provide for specific tax exemption s [17] cralaw or localgovernments may pass ordinances providing for exemption from local taxes , [18] cralaw but, otherwise, it is only the legislativebranch which has the power to grant tax exemptions, its power to exempt being as broad as its power to tax . [19] cralaw

Perhaps realizing that R.A. No. 7227 does not contain an express grant of tax exemptions and financial incentives coveringthe John Hay SEZ, respondents, as a second line of argument, implore the Court to construe the existence of such a grantpursuant to what they claim to be the legislative intent of the law. To this end, they posit that the Court should not apply thedeeply-entrenched rule that tax exemptions cannot be implied but must be categorically and unmistakably expressed [20] cralaw in alanguage too clear to be mistaken . [21] crala w

In this vein, respondent-in-intervention CJHDC, although acknowledging that "the law frowns against exemptions fromtaxation, "[22] crala w nevertheless argues that "[t]he grant of tax exemption privileges to the [John Hay SEZ] was addressedprimarily to public respondent BCDA" in order "to achieve its mandate for an accelerated conversion of the former baselandsinto economically productive uses, at the least cost and exposure to the government." Thus, it contends that the Courtshould "apply, at least by analogy, the principle that strict construction is not applicable where the grantee of the exemptionis a political subdivision or instrumentality."

The Court is not persuaded.

True, it is a recognized principle that the rule on strictissimi juris does not apply in the case of exemptions in favor of agovernment political subdivision or instrumentality , [23] cralaw the rationale for which has been identified as follows:

"The basis for applying the rule of strict construction to statutory provisions granting tax exemptions or deductions, evenmore obvious than with reference to the affirmative or levying provisions of tax statutes, is to minimize differential treatmentand foster impartiality, fairness, and equality of treatment among tax payers.

The reason for the rule does not apply in the case of exemptions running to the benefit of the government itselfor its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money thathas to be handled by government in the course of its operations. For these reasons, provisions grantingexemptions to government agencies may be construed liberally, in favor of non tax liability of suchagencies. " [24] (Emphasis supplied; italics in the original)

However, the foregoing finds no application to the present case.

First, there is absolutely nothing in R.A. No. 7227 which can be considered a grant of tax exemption in favor of publicrespondent BCDA. Rather, the beneficiaries of the tax exemptions and other incentives in Section 12 (the only provision inR.A. No. 7227 which expressly grants tax exemptions) are clearly the business enterprises located within the Subic SEZ.

To be sure, nowhere in any of respondents' pleadings is it pretended that the legislature exempted the BCDA from taxation inorder to accomplish its mandate. On the contrary, the alleged tax exemptions and financial incentives are plainly asserted tobe in favor of private enterprises doing business in the John Hay SEZ.

Second, as noted above, the liberal construction of tax exemptions in favor of the government is premised on their resultingonly in a reduction in infra-governmental fund transfers, but not government revenue. Evidently, this rationale does notapply, whether by analogy or otherwise, in favor of private business enterprises, such as respondent-in-intervention CJHDC.

Consequently, respondents' arguments for a liberal construction of R.A. 7227 in favor of tax exemptions and incentives tobusiness enterprises in the John Hay SEZ must necessarily fail. As the Court, speaking through Mr. Justice Vicente V.
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Senator Paterno: Yes.

Senator Shahani : So, to show that we are still interested in Clark and its development, and to avoid this very long processof legislating every detail of what a special economic zone should be, I thought it was agreed last night that we shouldauthorize the President to create special economic zones with specific reference to Clark. This is why this appears in thisform, Mr. President.

Senator Paterno : Yes. Without going into the crafting of the text, Mr. President, it was my thought that,perhaps, there could be a section which specifies the policies which shall apply to all special economic zones.Then there would be another section which, in effect, will create the Subic economic zone which would refer to

those unique activities in Subic. Then there would be another section which would authorize the President tocreate other special economic zones, with particular reference to Clark, in which special economic zones, thestandards set up in the first section would apply.

Senator Shahani : I take it that, that is just a matter of reordering this section.

Senator Paterno: Yes. In other words, I would like to suggest that the bill contain the features of any specialeconomic zone, and then another section would contain the features unique to Subic as a special economiczone . [28] (Emphasis supplied)

However, as respondent CJHDC itself admits, "Senator Paterno's proposal that 'the policies applicable to all special economiczones be specified here (in what would eventually be Section 15) and those which relate only to Subic be put in a standardfor the Subic economic zone' was not carried out, as Section 15 as finally passed does not contain an enumeration of policiesspecific only to non-Subic SEZs." (Underscoring supplied)

Instead, as previously noted, Section 15 of R.A. No. 7227 provides that the "policies to govern and regulate" the John HaySEZ "shall be determined upon consultation with the inhabitants of the local government units directly affected."

Significantly, these policies need not be identical to those implemented in the Subic SEZ since there may be real andsubstantial differences in development priorities, local conditions and other relevant matters, as the consultations mayreveal. However, insofar as these policies may include tax exemptions, paragraph 4, Section 28 of Article VI of theConstitution requires that any such exemptions must be in the form of legislation passed with the concurrence of a majorityof all the Members of the Congress.

Finally, contrary to public respondents' interpretation, the Decision of October 24, 2003 does not "tie the hands" of executiveor administrative agencies from implementing any present or future legislation which affords tax or other financial incentivesto qualified persons doing business in the John Hay SEZ or elsewhere.The second sentence of Section 3 of Proclamation No.420 was declared null and void only insofar as it purported to grant, by executive proclamation and without statutory basis,tax exemptions and other financial incentives to business enterprises located in John Hay SEZ. However, where there isstatutory basis for exemptions or incentives, there is nothing to prevent qualified persons from applying for and availingthereof. As stated in the dispositive portion of the decision, Proclamation No. 420, without the invalidated portion, remainsvalid and effective.

WHEREFORE , the motions for reconsideration are hereby DENIED with FINALITY.

Very truly yours.

(Sgd.) LUZVIMINDA D. PUNO Clerk of Court
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J O H N H AY P E O P L E S A LT E R N AT I V E C O A L I T I O N , M AT E O C A R I O F O U N D AT I O N I N C . , NT E R FO R ALTERNATIVE SYSTEMS FOUNDATION INC., REGINA VICTORIA A. BENAFIN REPRESENTED AJOINEDBY HER MOTHER MRS. ELISA BENAFIN, IZABEL M. LUYK REPRESENTED AND JOINED BY HERMOTHERMRS. REBECCA MOLINA LUYK, KATHERINE PE REPRESENTED AND JOINED BY HER MOTHERROSEMARIEG. PE, SOLEDAD S. CAMILO, ALICIA C. PACALSO ALIAS "KEVAB," BETTY I. STRASSER, RUBY CGIRON,URSULA C. PEREZ ALIAS "BA-YAY," EDILBERTO T. CLARAVALL, CARMEN CAROMINA, LILIA G.YARANON,DIA N E MON DOC, pe t i t i on e r s , v s . V ICTO R L I M , P RES IDENT , B A S E S CO NVERSI D E V E L O P M E NT AUTHORITY; JOHN HAY PORO POINT DEVELOPMENT CORPORATION, CITY OF BAGUITUNTEX (B.V.I.)CO. LTD., ASIAWORLD INTERNATIONALE GROUP, INC., DEPARTMENT OF ENVIRONMENT ANATURALRESOURCES, respondents.

Facts:The controversy stemmed from the issuance of Proclamation No. 420 by then President Ramos declaring a

portionof Camp John Hay as a Special Economic Zone (SEZ) and creating a regime of tax exemption withinthe John HaySpecial Economic Zone. In the present petition, petitioners assailed the constitutionality of the proclamation. TheCourt also held that it is the legislature, unless limited by a provision of the Constitution, that has the full powerto exempt anyperson or corporation or class of property from taxation, its power to exempt being as broad as itspower to tax.The challenged grant of tax exemption would circumvent the Constitution's imposition that a lawgranting any taxexemption must have the concurrence of a majority of all the members of Congress. Moreover, theclaimed statutoryexemption of the John Hay SEZ from taxation should be manifest and unmistakable from thelanguage of thelaw on which it is based. Thus, the Court declared that the grant by Proclamation No. 420 of taxexemption andother privileges to the John Hay SEZ was void for being violative of the Constitution. However, theentireassailed proclamation cannot be declared unconstitutional, the other parts thereof not being repugnant tothe lawor the Constitution. The delineation and declaration of a portion of the area covered by Camp John Hay as aSEZ was wellwithin the powers of the President to do so by means of a proclamation. Where part of a statute isvoid ascontrary to the Constitution, while another part is valid, the valid portion, if separable from the invalid, as inthe case at bar, maystand and be enforced.

Issue:WON the petitioners have legal standing to bring the petition

Ruling:YESRationale:R.A. No. 7227 expressly requires the concurrence of the affected local government units to the creation of SEZs outof all thebase areas in the country. The grant by the law on local government units of the right of concurrence onthebases' conversion is equivalent to vesting a legal standing on them, for it is in effect a recognition of therealinterests that communities nearby or surrounding a particular base area have in its utilization. Thus, the interest ofpetitioners, being inhabitants of Baguio, in assailing the legality of Proclamation No. 420, ispersonal andsubstantial such that they have sustained or will sustain direct injury as a result of the government actbeing challenged. Theirsis a material interest, an interest in issue affected by the proclamation and not merely aninterest in the questioninvolved or an incidental interest, for what is at stake in the enforcement of ProclamationNo. 420 is the veryeconomic and social existence of the people of Baguio City. ... Moreover, petitioners Edilberto T.Claravall and LiliaG. Yaranon were duly elected councilors of Baguio at the time, engaged in the local governanceof Baguio Cityand whose duties included deciding for and on behalf of their constituents the question of whether toconcur with the declaration of aportion of the area covered by Camp John Hay as a SEZ. Certainly then, petitionersClaravall and Yaranon, as cityofficials who voted against the sanggunian Resolution No. 255 (Series of 1994)supporting theissuance of the now challenged Proclamation No. 420, have legal standing to bring the presentpetition.

6 john hay vs lim

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