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

The Truth Commission

In my column last week I concluded with what in effect were two questions: (1) Does the creation of the Truth Commission have a legal foundation? (2) Does anybody now have standing to challenge its validity?

First, on the issue of standing. Standing, of course, is an issue which the Supreme Court approaches with a certain degree of flexibility. On that understanding I would probably say that a legislator like Congressman Lagman would have standing to challenge an act that might encroach into the power of Congress.

A more crucial question, however, is whether indeed the creation of the Commission is an encroachment on the power of the legislature. It would be if its creation has no legal basis at all. An executive order, after all, as the Administrative Code defines it, is an implementation of a constitutional or a statutory provision.

Executive Order No. 1 (which I would prefer to call an administrative order) relies on the power of the President to reorganize the Office of the President. This power is recognized in Book III, Chapter 10, Section 31 of the 1987 Revised Administrative Code of the Philippines. This is cited in Executive Order No 1. Is this enough to empower the President to create a commission?

Reorganization, according to jurisprudence, can involve the reduction of personnel, consolidation of offices, or even abolition of positions by reason of economy or redundancy of functions. All of these, however, presuppose the existence of something to reorganize. But E. O. No. 1 admits that there is as yet nothing to reorganize. Hence, what it does is create.

E.O. No. 1 clearly involves the creation of a new position. It says “There is hereby created the PHILIPPINE TRUTH COMMISSION, hereinafter referred to as the ‘COMMISSION’, which shall primarily seek and find the truth on, and toward this end, investigate reports of graft and corruption of such scale and magnitude that shock and offend the moral and ethical sensibilities of the people, committed by public officers and employees, their co-principals, accomplices and accessories from the private sector, if any, during the previous administration; and thereafter recommend the appropriate action or measure to be taken thereon to ensure that the full measure of justice shall be served without fear or favor.”

It is an ambitious creation which is also described as “independent” even if it is not clear from whom or from what it would be independent. Certainly, not from the President, because the President constitutionally has control over all executive offices.

I and some of my colleagues, because one of our colleagues is in danger of being appointed to the truth Commission, have been trying to look for ways of laying a legal foundation for the executive order. The closest we could find were provisions found in the Administrative Code regarding the elements that constitute the Office of the President Proper. Book III, Title II, Chapter 8, Section 22 of the Code says “The President Special Assistants/Advisers System includes such special assistants or advisers as may be needed by the President.” And Book III, Title III, Chapter 9, Section 29 says “Functions of Presidential Assistants/Advisers Systems. - The Special Assistants/Advisers System shall provide advisory or consultative services to the President in such fields and under such conditions as the President may determine.”

Is that all that the Truth Commission is – a body of “Special Assistants and Advisers” strung together as a toothless tiger? I remember a line from the Latin poet Horace which said ”Montes laborant et nascitur ridiculus mus.” (The mountains heaved in labor and gave birth to a tiny mouse)! But the Truth commission, far from being a ridiculous mouse, is supposed to be the centerpiece of the Aquino administration’s fight against corruption!

Indeed, if one looks at the powers it is supposed to exercise, they are powers which a mere tiny mouse cannot do. Mighty Mouse, perhaps, but not a ridiculus mus. If the Truth Commission is expected to perform a herculean task, the mouse, if I may mix meats, must be beefed up!

Of course, the Truth Commission, according to E.O. No. 1, may “Call upon any government investigative or prosecutorial agency such as the Department of Justice or any of the agencies under it, and the Presidential Anti-Graft Commission, for such assistance and cooperation as it may require in the discharge of its functions and duties.” I suspect, in fact, that the staffing will be drawn from already existing investigative bodies. They will be the “beef” in the mix. (Recall, e.g., that the Melo Commission included as members the Chief Prosecutor and the Head of NBI.) In fact, too, these bodies could have been made the investigative body through “reorganization.” Unfortunately, mere reorganization of the Department of Justice or of the Presidential Anti-Graft Commission would not have made the eloquent and ambitious statement the Truth Commission is trying to make against the past administration. Rhetoric can have its value if it does not backfire.

16 August 2010

A History of Commissions; A Note on PAL

First there was the Davide Commission charged with the responsibility of looking into the failed coups of 1989. It was created by President Aquino. Sensing perhaps that there was some legal defect in the creation, Congress passed R.A. 6832 re-creating the Commission.

Next was the Narvasa Commission created by President Estrada to study and recommend possible changes in the Constitution. It was challenged in Court but the challenge came too late – after the Commission had made its report. Moreover, the Court ruled that the challenger had no standing to raise the issue of validity as a taxpayer. Commission saved!

There followed the Feliciano Commission to look into the truth behind the Oakwood mutiny. It was headed by former Justice Feliciano and I was one of the members.

The Melo Commission came next to investigate extrajudicial killings. It was headed by former Jutice Jose Melo and assisted by top NBI officials.

Both the Feliciano Commission and the Melo Commission were created by President Gloria Macapagal Arroyo. To my recollection, nobody with appropriate standing challenged the validity of the creation of these commissions.

Now we have the second Davide Commission but I see no Republic Act coming up to bolster it. Meanwhile it is being challenged by allies of former President Gloria Macapagal Arroyo who had created two unchallenged commissions.

One question being asked is whether under separation of powers the President can create offices. It is best that the matter be brought to the Supreme Court in a manner that will not be dismissed on the technicality of lack of “standing.” At the moment I cannot yet identify anyone who would have standing to challenge it.

• • • • •

Takeover PAL Operations?

In the face of the walkout of two dozen pilots from PAL, government started thinking what it could do. A Senator expressed that takeover of PAL operations was possible under the Constitution. Takeover was also mentioned by the Secretary of Justice as a possible last resort but the Malacañang Spokesperson was quick to say that they were not thinking takeover thoughts. Now both Malacañang and DOJ seem to have decided to keep their hands off PAL. But let us talk about takeover in the Constitution.

There are two ways in which the state can take over the operation of a public utility. The more radical mode is found in Article XII, Section 18 which says: “The State may, in the interest of national welfare or defense, establish and operate vital industries and, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government.” Eminent domain, in other words.

One key obstacle to resort to this mode of takeover is the requirement of “payment of just compensation.” The state becomes the owner of the public utility but only after payment of just compensation. Recent jurisprudence has emphasized that compensation is just when it is given promptly. This should present a big problem to a cash-strapped government especially if its agencies will also have to help farmers compensate Hacienda Luisita for the sugar lands. Moreover, it was not too long ago that the government decided to rid itself of PAL problems by privatizing it. Expropriation must be farthest from the mind of government now.

A milder mode of takeover is the assumption of responsibility for the operation of the public utility but without assuming ownership. This is the police power mode authorized in Article XII, Section 17: “In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately-owned public utility or business affected with public interest.”

Last 2006 the Supreme Court said a mouthful about this power when President Gloria Macapagal Arroyo, confronted by what she saw as a tactical alliance among the political opposition, the authoritarians of the extreme Left represented by the NDF-CPP-NPA, and the extreme Right, represented by military adventurists, declared a state of emergency and threatened to takeover the operation of certain public utilities. To her credit, she never did.

Probably it was because of the long sermon delivered by the Supreme Court explaining the meaning of Article XII, Section 17.

In brief, the Court said: “Section 17, Article XII must be understood as an aspect of the emergency powers clause. The taking over of private business affected with public interest is just another facet of the emergency powers generally reposed upon Congress. Thus, when Section 17 states that the ‘the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected with public interest,’ it refers to Congress, not the President. Now, whether or not the President may exercise such power is dependent on whether Congress may delegate it to him pursuant to a law prescribing the reasonable terms thereof.”

The “emergency powers clause” the Court is referring to is the clause which authorizes Congress to grant emergency powers to the President “in times of war or other national emergency.” What is probably obvious is that Congress does not now see the PAL controversy as a problem approximating the severity of war or similar national emergency serious enough to justify the grant of emergency powers to the President.

9 August 2010