HULSE OF REPRESENTATIVES:

RECEIVED
SEVENTEENTH CONGRESS OF THE REPUBLIC _) 01 AUG 2016
OF THE PHILIPPINES ) DATE:
First Regular Session ) _—
HOUSE OF REPRESENTATI ov__ fe
H.B.No. 2279 _

REGISTRATION UNIT
| BILLS AND iNDEX SERVICE
Introduced by Representative Herminio Harry L. Roque Jr

EXPLANATORY NOTE

‘The peremptory and non-derogable status of the right to self-determination of peoples has

been recognized in international law. As held in the Zi

s¢ Timor case, such right gives rise to erga
omnes omnium (universal) obligations binding on all members of the international community,
both state and non-state parties. This is of high relevance to our claims in the South China Sea.
In its July 12, 2016 landmark ruling, the Permanent Court of Arbitration held that the Chinese
Nine-Dash Line Claim cannot co-exist with the maritime entitlements of a coastal state under the

UN Law of the Sea.

Once and for all, the Arbitral Court clarified in favor of the Philippines the status of many
features in the contested Spratly islands and Scarborough Shoal with both scientific and legal

criteria, in relation to a resource-rich Exclusive Economic Zone (EEZ) and Continental Shelf.

In particular, in the Spratly islands, Mischief Reef (Panganiban Reef) and Second
‘Thomas Shoal (Ayungin) ~these being low-tide elevations as we had argued are part of the
Philippines’ Exclusive Economic Zone and Continental Shelf. Thus, China cannot prevent the

Philippines from exercising its sovereign rights over waters and features found within its EEZ.

The other features in the Spratlys, namely Fiery Cross Reef, Johnson Reef, McKeenan
Reef, and Gaven Reef (North) were held to be rocks unable to independently sustain human
habitation or economic life and entitled only to a 12-nautical mile territorial sea. Meanwhile,
Hughes Reef, Gaven Reef (South) and Subi Reef were held to be low-tide elevations not capable
of appropriation by China. Thus, both sets of reefs do not and cannot generate any EEZ for

China. The Arbitral Court also ruled that none of the high-tide features in the Spratlys —including
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our Pag-asa (Thitu) island in the Kalayaan island group — can sustain human habituation or

economic life on their own in their natural condition.

The Court rejected the Chinese position that the Spratlys is one archipelago generating as
a whole its own territorial sea, contiguous zone, continental shelf and EEZ. This may prove to be
an important factor if and when the question of who owns which island in the island chain is
actually submitted to another international arbitration proceeding, this time, under principles of
general international law. It bears noting that in its 2009 Baselines Law, Republic Act 9522, the
Philippines also treated the islands in the Spratlys under its control as belonging to a regime of

islands under Art. 121 of the UNCLOS.

There is in fact, a double aspect to the international legal obligations that arise from the
PCA ruling, both complementing and reinforcing each other. Under the law on state
responsibility, a jus cogens or peremptory norm such as the right to determination is binding on
and opposable to all states. This binding obligation includes the recognition of a state’s as
sovereign rights to the EEZ and the Continental Shelf, as these are part and parcel of the right to

self-determination, in particular to the exclusive use of natural resources pertaining to it.

States not party to the dispute in question have an obligation to respect the sovereign
rights of the Philippines; they are legally bound to refuse to recognize the Chinese Nine-Dash
Line as lawful, and to refrain from recognizing or entering into any agreements with China for

the unlawful exploitation of natural resources in the Philippine EEZ and the Continental Shelf.

‘There is also the positive duty on the part of all states to cooperate to put a stop to such
unlawful acts. Even non-parties to the UNCLOS are bound by such an obligation, given its
peremptory and non-derogable status. Indeed, the Philippines’ entitlement to the fruits of its
sovereign rights to the EEZ and the Continental Shelf have already been confirmed and upheld
by the landmark judgment of the Permanent Court of Arbitration in the South China Sea
Arbitration case. There is, of course, the treaty obligations of all parties to the UNCLOS to
recognize the holding of the PCA ruling in the arbitral case, which obligations mirror those

arising from the right to self-determination.


‘There is an urgent need for the Philippines to appropriate the fruits of this singular

international legal victory, if only to further bolster its position on maritime areas and features in

the Spratly group of islands covered by the PCA ruling as well as those that pertain to its

territorial claim itself. One of the best ways to realize thi

s through a legislative measure as an

unequivocal exercise of a State’s sovereign prerogatives

This is one among a series of bills filed in order to strengthen the Philippines’ claim of

sovereignty and sovereign rights over the Spratly group of islands, a region that contains vast
amounts of natural resources ~ including oil and gas and fisheries — vital to the growth and

development of the Philippines. ‘To maximize the use and conservation of such resource

development authority should be tasked to administer the area, following the success of the

various conversion authorities under Republic Act 7227. As such, this bill is based heavily on
such law, cognizant of the efficiency of a separate corporate personality in administering and

developing new territories,

HERMINIO HARRY L. ROQUE JR.


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NTEENTH CONGRESS OF TE )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

HB. No. _99"19_

Introduced by Representative Herminio Harry L. Roque, Jr.

AN ACT
SPRATLY ISLANDS DEVELOPMENT AUTHORITY

CREATING THI

Be it enacted by the Senate and House of Representatives of the Philippines in Congr
assembled:

SECTION I. Short Title. - This Act shall be known as the “Spratly Islands Development
Authority Act”

SECTION 2. Declaration of Policy. ~ It is hereby declared the policy of the Government
to explore, exploit, and protect the Spratly group of islands consistent with its Constitutional
mandate and rights under intemational law. It is likewise the policy of the Government to
maximize the resources within the Spratly group of islands to enhance the benefits derived from
such lands in order to promote the economic and social development of the country in general.

SECTION. 3. Creation of the Spratly Islands Development Authority. There is
hereby created a body corporate to be known as the Spratly Islands Development Authority,
Which shall have the attribute of perpetual succession and shall be vested with the powers of a

corporation.

It shall be organized within thirty (30) days after approval of this Act. It shall have a term
of fifty (50) years from its organization: provided, that Congress, by a joint resolution, may
dissolve the Spratly Islands Conversion Authority whenever in its judgment the primary purpose
for its creation has been accomplished. It shall establish its principal office in Metropolitan
Manila unless otherwise provided by the Spratly Islands Conversion Authority and may put up

such branches as may be necessary


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Sec. Purposes of the Spratly Islands Conversion Authority. — The Spratly Islands

Conversion Authority shall have the following purposes:

(a) To own, hold and/or administer the Spratly group of islands which shall be

transferred to it by the President;

(b) To adopt, prepare and implement a comprehensive and detailed development plan
embodying a list of projects for a sound and balanced development consistent with ecological
and environmental standards, into other productive uses to promote the economic and social

development of the country in general:

(©) To encourage the active participation of the private sector in transforming the

Spratly group of islands into other productive uses:

(4) To establish a mechanism in coordination with the appropriate local government
units to effect meaningful consultation regarding the plans, programs and projects within the

regions; and

(ec) To plan, program and undertake the readjustment, relocation, or resettlement of
population within the Spratly group of islands as may be deemed necessary and beneficial by the
Spratly Islands Conversion Authority, in coordination with the appropriate government agencies

and local government units.

Sec. 5. Powers of the Spratly Islands Conversion Authority. — To carry out its
objectives under this Act, the Spratly Islands Conversion Authority is hereby vested with the

following powers:

(a) To succeed in its corporate name, to sue and be sued in such corporate name and to

adopt, alter and use a corporate seal which shall be judicially noticed;

(b) To adopt, amend and repeal its bylaws;


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(©) To enter into, make, perform and carry out contracts of every class, kind and
description which are necessary or incidental to the realization of its purposes with any person,

firm or corporation, private or public, and with foreign government entities;

(d) To contract foans, indebtedness, credit and issue commercial papers and bonds, in
any local or convertible foreign currency from any international financial institutions, foreign
government entities, and local or foreign private commercial banks or similar institutions under

terms and conditions prescribed by law, rules and regulations:

(e) To execute any deed of guarantee, mortgage, pledge, trust or assignment of any
property for the purpose of financing the programs and projects deemed vital for the carly
attainment of its goals and objectives, subject to the provisions of Article VIL, Sec. 20, and

Article XII, Sec. 2, paragraphs (4) and (5) of the Constitution;

(f) To construct, own, lease, operate and maintain public utilities as well as

infrastructure facilities;

(g) To reclaim or undertake reclamation projects as it may deem necessary in areas

adjacent or contiguous to the Spratly Islands Conversion Authority's lands described in Sec. 7 of

this Act either by itself or in collaboration with the Public Estates Authority (PEA) established

under Presidential Decree No. 1084 as amended;

(h) To acquire, own, hold, administer, and lease real and personal properties, including
agricultural lands, property rights and interests and encumber, lease, mortgage, sell, alienate or

otherwise dispose of the same at fair market value it may deem appropriate;

(i) To receive donations, grants, bequests and assistance of all kinds from local and

foreign governments and private sectors and utilize the same:

G) To invest its funds and other assets under Section 12 and 15 of this Act in such areas

it may deem wise;

(k) To exercise the right of eminent domain;
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(To exercise oversight functions over the Spratly group of islands declared under this
Act and by subsequent presidential proclamations within the framework of the declared policies

of this Act;

(m) To promulgate all necessary rules and regulations; and

(n) To perform such other powers as may be necessary and proper to carry out the

purposes of this Act.

Sec. 6. Capitalization, — The Spratly Islands Conversion Authority shall have an
authorized capital of One hundred billion pesos (P100,000,000,000) which may be fully
subscribed by the Republic of the Philippines and shall either be paid up from the proceeds of the

sales of its land assets as provided for in Sec. 8 of this Act or by transferring to the Spratl

Islands Conversion Authority properties valued in such amount.

An initial operating capital in the amount of Seventy million pesos (P70,000,000) is
hereby authorized to be appropriated out of any funds in the National Treasury not otherwise
appropriated which shall be covered by preferred shares of the Spratly Islands Conversion

Authority retireable within two (2) years.

Sec. 7. ‘Transfer of Properties. — Pursuant to paragraph (a), Sec. 4 hereof, the President

shall transfer forthwith to the Spratly Islands Conversion Authority the Spratly group of islands,

the technical descriptions provided hereunder based on Presidential Decree
ground survey and verification to be conducted by the DENR, for which additional funds are to

be requested for the purpose from the Department of Budget and Management:

ds

The Spratly group of

From a point fon the Philippine Treaty Limits] at latitude 7°40’ North and
longitude 116°00’ East of Greenwich, thence due West along the parallel of 7° 40°

thence due north

N to its intersection with the meridian of longitude 112°10'
along the meridian of 112°10’ E to its intersection with the parallel of 9°00" N,

thence northeastward to the inter-section of the parallel of 12°00’ N with the
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meridian of longitude 114° 30' E, thence, due East along the parallel of 12°00’ N
to its intersection with the meridian of 118°00' E, thence, due South along the

meridian of longitude 118° 00" E to its intersection with the para

lel of 10°00" N,
thence Southwestwards (o the point of beginning al 7°40" N, latitude and 116° 00°

E longitude.

Sec. 8. Funding Scheme. — The capital of the Spratly Islands Conversion Authority

shall come from the budget of the national government.

Sec. 9. Board of Directors: Composition. — The powers and functions of the Spratly

Islands Conversion Authority shall be exercised by a Board of Directors to be composed of nine

(9) members, as follows:

(a) A full-time chairman who shall also be the president of the Spratly Islands

Conversion Authority: and

(b) Hight (8) other members from the private sector, two (2) of whom coming from the

labor sector.

The chairman and members shall be appointed by the President with the consent of the
Commission on Appointments. Of the initial members of the Board, three (3) including the
chairman, a representative from the private sector and a representative from the labor sector shall
be appointed for a term of six (6) years, three (3) for a term of four (4) years and the other three
(3) for a term of two (2) years. In case of vacancy in the Board, the appointee shall serve the

unexpired term of the predecessor.

No person shall be appointed or designated unless he is a natural-born Filipino citizen, of
good moral character, of unquestionable integrity, and of recognized competence in relevant
fields including, but not limited to, economics, management, international relations, law or

engineering, preferably naval or aeronautical.

The chairman and president of the Spratly Islands Conversion Authority shall have a

fixed term of six (6) years.


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All procedural matters in the conduct of board meetings shall be prescribed in its internal

rules.

Members of the Board shall receive a per diem of not more than Five thousand pesos
(P5,000) for every board meeting: provided, however, that the per diem collected per month does
not exceed the equivalent of four (4) meetings: provided further, that the amount of per diem for

every board meeting may be increased by the President but such amount shall not be increased

within two (2) years after its last increase.

SECTION 10. Functions of the Board. — The Board of Directors shall be the policy-
making body of the Spratly Islands Conversion Authority and shall perform the following

functions

(a) Determine the organizational structure of the Spratly Islands Conversion Authority,
define the duties and responsibilities of all officials and employees and adopt a compensation

and benefit scheme at least equivalent to that of the Central Bank of the Philippines;

(b) Appoint all officials down to the third level and authorize the president of the
Spratly Islands Conversion Authority to appoint all others: provided, that all appointments shall
be on the basis of merit and fitness and all personnel action shall be in pursuance of Civil Service
es of the members of the Board:

Laws, rules and regulations, except those coterminous employ

(©) Prepare the annual and supplemental budgets of the Spratly Islands Conversion

Authority;

(d) Submit an annual report of the operation of the Spratly Islands Conversion

Authority to the President of the Philippines, President of the Senate and Speaker of the House of

Representativ

(©) Carry out the purposes of the Spratly Islands Conversion Authority with the

following terms and references:

(1) As much as possible, major conversion projects shall be undertaken under
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the complete project turnkey or build-operate-transfer (BOT) scheme, as provided under

Republic Act Numbered Sixty-nine hundred and fifty-seven (RA 6957); and

(2) Starting the fourth year of the Spratly Islands Conversion Authority's full

operation, a privatization or divestment program of its projects and subsidiaries shall

begin under general guidelines prescribed by the Pr

ident of the Philippines.

SECTION 11. Duties and Responsibilities of the President of the Spratly Islands
Conversion Authority. — The president of the Spratly Islands Conversion Authority shall have

the following duties and responsibilities:

(a) To act as Chief Executive Officer of the Spratly Islands Conversion Authority;

(b) Toe:

ute, administer and implement the policies and measures approved by the

Board;

(©) To direct and supervise the operations and administration of the Spratly Islands

Conversion Authority:

(4) To represent the Spratly Islands Conversion Authority in all dealings with offices,
agencies and instrumentalities of the Goverment and with all persons and entities, public or

private, domestic or foreign:

(e) To direct and supervise the preparation of the agenda for the meeting of the Board,
and to submit for the consideration of the Board such policies and measures as he believes

necessary (o carry out the purposes and objectives of this Act; and

(DT exercise such other powers and functions provided in the bylaws and as may be

vested in him by the Board

SECTION 13. The Spratly Islands Metropolitan Authority.

(a) Creation of the Spratly Islands Metropolitan Authority. — A body corporate to be

known as the Spratly Islands Metropolitan Authority, is hereby created as an operating and

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implementing arm of the Spratly Islands Conversion Authority.

(b) Powers and Functions of the Spratly Islands Metropolitan Authority. — The Spratly

Islands Metropolitan Authority, otherwise known as the Spratly Islands Metropolitan Authority,

shall have the following powers and functions:

(1) To accept any local or foreign investment, business or enterprise, subject
only to such rules and regulations to be promulgated by the Spratly Islands Metropolitan
Authority in conformity with the policies of the Spratly Islands Conversion Authority

Without prejudice to the nationalization requirements provided for in the Constitution:

(2) To undertake and regulate the establishment, operation and maintenance of
utilities, other services and infrastructure in the Spratly group of islands including
shipping and related business, stevedoring and port terminal services or concessions,
incidental thereto and airport operations in coordination with the Civil Aeronautics

Board, and to fix just and reasonable rates, fares, charges and other prices therefore:

(3) To construct, acquire, own, lease, operate and maintain on its own or

through contract, franchise, license permits bulk purchase from the private sector and

build-operate-transfer scheme or joint-venture the required utilities and infrastructure in
coordination with local government units and appropriate government agencies

concerned and in conformity with existing applicable laws therefore:

(4) To adopt, alter and use a corporate seal, to contract, lease, sell, dispose,

acquire and own properties; to sue and be sued in order to carry out its duties and

functions as provided for in this Act and to exercise the power of eminent domain for

public use and public purpose;

(3) Within the limitation provided by law, to raise and/or borrow the necessary
funds from local and international financial institutions and to issue bonds, promissory
notes and other securities for that purpose and to secure the same by guarantee, pledge,

mortgage, deed of trust, or assignment of its properties held by the Spratly Islands
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Metropolitan Authority for the purpose of financing its projects and programs within the

framework and limitations of this Act;

(6) To authorize the establishment of appropriate educational and medical

institutions;

(7) To protect, maintain and develop the virgin forests within the islands which
Will be proclaimed as a national park and subject to a permanent total log ban, and for
this purpose, the rules and regulations of the Department of Environment and Natural
Resources and other government agencies directly involved in the above functions shall

be implemented by the Spratly Islands Metropolitan Authority;

(8) To adopt and implement measures and standards for environmental pollution
control of all areas within its territory, including, but not limited to all bodies of water
and to enforce the same. For which purpose the Spratly Islands Metropolitan Authority

shall create an Ecology Center: and

(c) Board of Directors. — The powers of the Spratly Islands Metropolitan Authority

ied in and exercised by a Board of Directors, hereinafter referred to as the Board,

which shall be composed of fifteen (15) members, to wit:

(1) Representatives of the local government units that govern the Spratly group

of islands;

(2) Two (2) representatives from the National Government;

(3) Five (5) representatives from the private sector coming from the present

naval stations, public works center, ship repair facility, naval supply depot and naval air

station; and

(4) The remaining balance to complete the Board shall be composed of

representatives from the business and investment sectors.


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‘The chairman and the members of the Board shall be appointed by the President to serve

for a term of six (6) years, unless sooner removed for cause except for the representatives of the
local government units who shall serve for a term of three (3) years. In case of removal for cause,

the replacement shall serve only the unexpired portion of the term.

No person shall be appointed as a member of the Board unless he is a Filipino citizen, of
g00d moral character, and of recognized competence in relevant fields including, but not limited

to economics, management, international relations, law or engineering. Preference in the

appointment of the members of the Board shall be given to residents within the Subic Special

Economic Zone.

Members of the Board shall receive a per diem of not more than Five thousand pesos
(P5,000.00) for every board meeting: provided, however, that the per diem collected per month

does not exceed the equivalent of four (4) meetings: provided, further, that the amount of per

diem for every board meeting may be increased by the President: provided finally, that the

amount of per diem shall not be increased within two (2) years after its last increase.

(4) Chairman/Administrator. — The President shall appoint a professional manager as
administrator of the Spratly Islands Metropolitan Authority with a compensation to be
determined by the Board subject to the approval of the Secretary of Budget, who shall be the ex
officio chairman of the Board and who shall serve as the chief executive officer of the Spratly

Islands Metropolitan Authority.

(©) Capitalization. — The Spratly Islands Metropolitan Authority shall have an
authorized capital stock of Twenty billion pesos (P20,000,000,000) divided into twenty thousand

(P20,000) no-par shares fully subscribed and paid up by the Republic of the Philippines with:

(1) All lands embraced, covered and defined in Section 12 hereof, as well as
permanent improvements and fixtures upon proper inventory not otherwise alienated,
conveyed, or transferred to another government agency;

(2) All other assets which the President may transfer to the Spratly Islands
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Metropolitan Authority as part of the equity contribution of the Government; and

(3) Cash contribution by the Government in the amount of Three hundred
million pesos (P300,000,000) a year for the next three (3) years, which is hereby

appropriated out of any fund in the National Treasury not otherwise appropriated,

:CTION 14. Relationship with the Spratly Islands Conversion Authority and the

Local Government Units.

(a) The provisions of existing laws, rules and regulations to the contrary
notwithstanding, the Spratly Islands Metropolitan Authority shall exercise administrative

powers, rule-making and disbursement of funds over the Spratly group of islands in conformity

with the oversight function of the Spratly Islands Conversion Authority.

(b) In case of conflict between the Spratly Islands Metropolitan Authority and the loc:
government units concerned on matters affecting the Spratly group of islands other than defense

and security, the decision of the Spratly Islands Metropolitan Authority shall prevail

SECTION 15. Subsidiaries. — The Spratly Is

ands Conversion Authority shall have the
power to form, establish, organize and maintain a subsidiary corporation or corporations. Such
subsidiary or subsidiaries shall be formed in accordance with the Philippine Corporation Law
and existing rules and regulations promulgated by the Securities and Exchange Commission,
unless otherwise provided in this Act. In all cases, the Spratly Islands Conversion Authority shall
own initially at least fifty-one per centum (51%) of the capital stock of a subsidiary. ‘The Spratly

Islands Conversion Authority shall also initially have the majority of the Board of Directors of

the subsidiaries, of which at least one (1) director shall be the chairman of the Spratly Islands

Conversion Authority and a second director shall be the president of the Spratly Islands

Conversion Authority or his designated representative.

Such subsidiaries shall be exempt from the coverage of the Civil Service Laws, rules and

regulations.

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SECTION 16, Supervision. — The Spratly Islands Conversion Authority shall be under
the direct control and supervision of the Office of the President for purposes of policy direction

and coordination.

SECTION 17. L

al Counsel. — Without prejudice to the hiring of an outside counsel,
the Government Corporate Counsel shall be the ex officio legal counsel of the Spratly Islands
Conversion Authority and the subsidiaries wherein the Spratly Islands Conversion Authority
owns the majority of the shares of stocks, and for this purpose he may designate a full time

representative whose compensation shall be approved by the Board.

SECTION 18. Auditor. — The Commission on Audit shall appoint a representative

Who shall be the full time auditor of the Spratly Islands Conversion Authority and such personnel

as may be necessary to assist said representative in the performance of his duties. He is mandated
to impose pre-audit within thirty (30) days after submission of all proposed substantial sales,
transfers, and alicnations of property. He shall likewise render a full report thereof to Congress

every sixty (60) days. The salaries of the auditor and his staff shall be approved by the Board.

See. 19. Interim Capacity. — Except for the chairman of the Spratly Islands
Metropolitan Authority, the chairman and other members of the Board of the Spratly Islands
Conversion Authority and the Spratly Islands Metropolitan Authority shall act in an interim

capacity and shall serve until the 31st of July 2017 or until such time that their sucs rs shall

have been duly appointed.

Sec. 20, Injunction and Restraining Order. — The implementation of the projects for
the conversion and development of the Spratly group of islands are urgent and necessary and
shall not be restrained or enjoined except by an order issued by the Supreme Court of the

Philippines.

Sec. 21.  Separability Clause. — If any provision of this Act shall be held

unconstitutional or invalid, the other provisions not otherwise affected shall remain in full force
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and effect.

Sec. 22. Repealing Clause. — All laws, executive issuances or parts thereof which are

stent herewith are hereby repealed or amended accordingly.

ffect upon its publication in at least

ec. 24. Effectivity Clause. — This Act shall take

one (1) newspaper of general circulation.

Approved,

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