Saturday, August 21, 2010

Hacienda Luisita Controversy

s, S.J.

First, a bit of abbreviated history.

President Marcos initiated land reform in earnest in 1972 through Presidential Decree No. 27 which authorized the distribution of land holdings in favor of tenants. The Marcos program covered only rice and corn lands. It had very limited success in meeting the goal of land redistribution..

During the election campaign in 1986, land reform figured prominently. Candidate Cory Aquino made a more aggressive land reform program an important aspect of her campaign. She declared that she would make land to the tiller a reality. Seen against the background of the Cojuangco control of the sprawling Hacienda Luisita, it was an eloquent statement.

In July 1987 while she still possessed legislative power, she formed a land reform commission. Congress assumed legislative power the same month and eventually passed the Comprehensive Land Reform Program in 1988. It is under this law that the Hacienda Luisita controversy is being debated. The debate is about the enforcement of the Comprehensive Land Reform Law as applied to large corporate landholdings.

The Land Reform Law does not treat all landowners in the same way. For smaller land holdings what is prescribed is outright distribution of the land to farmers and regular farm workers. For corporate land holdings, however, the option of giving to farmers shares of stock instead is made possible. This option, granted by Congress, to which the Constitution has given the responsibility of implementing the details of agrarian reform, grew out of the constitutional policy on land reform. The constitutional policy allows some flexibility. It says: “To this end the State shall encourage and undertake the just distribution of agricultural lands, and subject to the payment of just compensation just distribution of all agricultural lands subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental or equity considerations, and subject to the payment of just compensation.”

Under this policy allowing Congress to set “priorities and retention limits . . . taking into account ecological, developmental or equity considerations,” the Comprehensive Land Reform Law sets down differing distribution schemes for smaller land holdings and for corporate land holdings. Smaller landowners are required in general to distribute all and retain only seven hectares whereas corporate land holdings are given other options.

One option is the “stock distribution option” availed of by Hacienda Luisita and initially approved by the Department of Agrarian Reform. The pertinent stock option provision says: Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the company's total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time the shares of stocks are distributed be reduced. The same principle shall be applied to associations, with respect to their equity or participation.”

The law further says that if the stock distribution option is chosen and the conditions for their validity are fulfilled, corporations or associations which choose this option “shall be deemed to have complied with the provisions of this Act.” This means that the corporations or associations can then retain their landholdings.

Hacienda Luisita chose this option. It offered to farmers thirty percent of its stocks, retained seventy percent and as a result retained its land holdings. And since Hancienda Luisita retained seventy percent of its stocks, it also retained control of the corporation. This was approved by the Department of Agrarian Reform in 1989.

I am in no position to discuss what happened between 1989 and 2005. All I know is that in 2005 DAR changed its mind and revoked the scheme approved for Luisita. (I have not seen the revocation order.) DAR denied reconsideration; Luisita went to the Supreme Court; the Supreme Court temporarily restrained the implementation of the DAR order. For the past five years this has been the situation and this is now before the Supreme Court for resolution.

What can the Supreme Court examine? We are beginning to see the issues unfold as the oral arguments before the Court continues. Certainly, for instance, the Supreme Court can examine whether the scheme entered into by Hacienda Luisita satisfies the conditions imposed by law. What are some of these conditions non-fulfillment of which can be ground for cancellation of the scheme? The law requires transparency of the books of the corporation, representation of the farmers in the board of the corporation, and equality of the features of the farmers’ shares with those of all other shares.

A more difficult problem is also whether the Court can reject the discretion exercised by Congress in allowing the stock transfer option. The problem has been made more complicated by the recent compromise entered into between the farmers and Luisita. We will be waiting for the Court’s decision.

23 August 2010

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