Revised Free and Prior Informed Consent Rules – New Obstacles for Resource Developers

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Wednesday, 22 August 2012

Revised Free and Prior

Informed Consent (“FPIC”) Guidelines of 2006 also known as NCIP Administrative Order 1, Series of 2006 in accordance with the Indigenous Peoples Rights Act of 1997(“IPRA”). In drafting the new guidelines, the NCIP is reportedly assisted by an anti-mining interest group. Without the benefit of consultations between the NCIP and private industry, the proposed revised FPIC guidelines are basically part of the three-pronged strategy of anti-mining advocates to block mining with the amendment of the Philippine Mining Act of 1995 and empowering local government units to assert their autonomy and veto mining operations in their territorial jurisdiction. Initially identified new provisions under the draft FPIC guidelines will definitely be bothersome not only to mining industry but to other resource developers as well.

The definition of large-scale activities that need to go through an FPIC process has been expanded to include: exploration, development, exploitation, utilization of land, energy, mineral, forest, water, marine, air, and other natural resources requiring permits, licenses, lease, contracts, concession, or agreements e.g. production-sharing agreement, from the appropriate national or local government agencies, including feasibility studies related thereto; and issuance of land tenure instrument or resource use instrument by any government agency and related activities.  A new provision concerning areas closed to FPIC applications has been included and these areas are to be unilaterally identified by indigenous peoples (“IPs”).

To process FPIC applications, the proponent is required to submit among others, documents like budget and latest audited financial statements. During the pre-FPIC conference, the applicant must also submit an undertaking that it shall commit itself to full disclosure of records and information relevant to the plan, program, project or activity, that would allow the community full access to records, documents, material information and facilities.  More importantly at a very early stage in exploration, the applicant will be required to submit an Environmental and Socio-cultural Impact Statement (“EIS”), detailing all the possible impact of the plan, program, project or activity upon the ecological, economic, social and cultural aspect of the community as a whole. Submitting an EIS during the early stages of an exploration application is clearly impractical.  Also there are major problems in communicating scientific studies and financial information to communities where people are not highly educated and where their understandings of their natural environment may not be commensurate with scientific and economic explanations.

I also see very contentious provisions related to IP community dynamics, which will practically prevent the FPIC process from proceeding. Representatives of the IPs are already part of the initial field-based investigation (“FBI”) team.  When the area applied for has an existing boundary conflict with another domain, as determined by the FBI team, the FPIC Process shall be suspended in the conflict area until the boundary conflict is settled or resolved with finality.  A group or a community of IPs occupying a portion of public domain, whether as a result of a resettlement or relocation project of the government or as a result of displacement, has the right not to be treated as migrants and can likewise exercise their right to FPIC.  While the identification of the group that will give consent is defined in terms of residential status, customary rights and legally recognized rights according to the national law or genealogical connection to the original customary owners, the resource developers have to wait for the outcome of these contentious issues before even commencing their FPIC process.  Thus, unnecessary delays are brought about by the failure of IPs to settle leadership and boundary disputes which can be exploited by anti-development groups to prevent IPs in giving their consent to natural resources projects, in effect closing the area to resource development

Notwithstanding that a Certificate of Non-Overlap has been issued, the applicant shall execute an undertaking for the conduct of FPIC should it be discovered later that there is, in fact, an overlap with an ancestral domain.   A provision was likewise added that the content of the Memorandum of Understanding (“MOA”) between the IPs and the applicant must include a clause on the non-transferability of the MOA. Thus, the concerned IPs shall require another FPIC to be conducted in case of merger, reorganization, transfer of rights, and acquisition by another entity, or joint venture.  The proposed rules also call for a deposit of cash or surety bond by the applicant unless the IPs allow a notarized undertaking in writing by the applicant to answer for damages which the former may suffer on account of the plan, program, project or activity in substitute to said bond.

The proposed rules also states that Corporate Social Responsibility or Social Development and Management Projects required under existing laws shall not be considered as part of benefits given to IPs.  Complaints involving the implementation of the FPIC process or the interpretation or implementation of the MOA shall be resolved using traditional conflict resolution process and all conflicts shall be under the exclusive jurisdiction of the NCIP Hearing Officer.

The provisions mentioned are tantamount to exercise by the IPs of ownership over natural resources within ancestral domains, which the Supreme Court declared in Cruz v Secretary of Environment and Natural Resources, et al. [2000], IPRA does not confer or recognize. The Supreme Court further held that the rights given to the IPs regarding the exploitation of natural resources under IPRA only amplified what has been granted to them under existing laws but the State retains full control over the exploration, development and utilization of natural resources. Any provision in the proposed FPIC guidelines that will give veto powers to IPs infringes upon the State’s ownership over natural resources within the ancestral domains.

The rights given to the IPs are limited only to the following: ‘to manage and conserve natural resources within territories and uphold it for future generations; to benefit and share the profits from allocation and utilization of the natural resources found therein; to negotiate the terms and conditions for the exploration of natural resources in the areas for the purpose of ensuring ecological, environmental protection and the conservation measures, pursuant to national and customary laws; to an informed and intelligent participation in the formulation and implementation of any project, government or private, that will affect or impact upon the ancestral domains and to receive just and fair compensation for any damages which may sustain as a result of the project, and the right to effective measures by the government to prevent any interference with, alienation and encroachment of these rights.

The Court interpreted IPRA as only granting to IPs ‘priority rights’ in the utilization of natural resources, not absolute ownership nor exclusive rights but only the right of preference or first consideration in the award of privileges provided by existing laws and regulations, with due regard to the needs and welfare of indigenous peoples living in the area.

There is also an added provision in the proposed rules to undertake a new FPIC process in case of mining activities after the exploration stage.  However, the Supreme Court in Cruz v Secretary of Environment and Natural Resources noted that the right to negotiate terms and conditions granted under IPRA pertains only to the exploration of natural resources, which is merely a preliminary activity and cannot be equated with the entire process of ‘exploration, development and utilization’ of natural resources which under the Constitution belong to the State.

‘Free and prior informed consent’ in all legal jurisdictions is often very hard to implement faithfully. Needless to say, the implications of a commitment to FPIC are financially costly for the resources company. Providing information is always an expensive operation and assessing whether consent has been given will be similarly difficult and costly.

The legal repercussions of the proposed amendments are clear – indigenous communities will now effectively have veto power over resources project design and implementation. Could it be that this proposed amendments are nothing but an unreasonable regulation that would effectively kill the resources industry? Where then is the so-called “systematic, rational, transparent, participatory and fair decision-making process that will result in everyone winning” if the private industry is not allowed to be engaged in the drafting of these new rules.  Having been involved in numerous FPIC process for resource companies, I am of the opinion that the proposed rules are impractical and unworkable.Philippine Resources will continue to keep its readers updated on new developments related to these proposed FPIC rules.

Fernando “Ronnie” Peñarroyo (photo taken at the summit of Mt. Pulag, Benguet) is the Managing Partner of Puno and Peñarroyo Law Offices (www.punopenalaw.com). He specializes in Energy and Resources Law, Project Finance and Business Development.

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