Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

SIXTEENTH CONGRESS |
Second Regular Session

House Bitt No. 01.1

INDEX

I

Introduced by REP. TEDDY BRAWNER BAGUILAT

EXPLANATORY NOTE

From February to April 2014, the House of Representatives Committee on
Cooperatives Development and the Committee on Agrarian Reform conducted joint
hearings to investigate the alleged onerous contract on the agri-business venture
arrangement (AVA) between the Hijo Agrarian Reform Beneficiaries Cooperative
(HARBCO) and Lapanday Foods, Inc. in Davao Oriental.

The HARBCO members, Comprehensive Agrarian Reform Program (CARP) beneficiaries
managing their banana plantation, filed a petition with the two House Committees to
recommend the revocation of their AVA contract with Lapanday Foods, Inc. to the
Presidential Agrarian Reform Council (PARC). HARBCO reportedly incurred debts with
Lapanday of at least Php 290 Million owing to controversial provisions in their AVA
contract.

In 1998, HARBCO executed a 10-year Banana Sales and Marketing Agreement (BSMA)
with its former landowner, Hijo Plantations, Inc. (HPI). In 1999, HPI transferred its
rights over the BSMA to Lapanday. In 2008, Lapanday took over the operations of
HARBCO on the basis of the BSMA. At that time, HARBCO had debts of Php 115
million with Lapanday which eventually ballooned to Php 290.8 million in 2012.

HARBCO’s contract with HPI/Lapanday is similar with contracts of other ARBs with
some local agribusiness corporations in the Davao Region, such as the
Marsman/MEPI vs. Davao Marsman Agrarian Reform Beneficiaries Development
Cooperative. Other ARBs, mostly banana growers who are in a similar situation with
HARBCO, also attended the congressional inquiry held in Tagum, Davao Oriental and
requested for the Congress’ and the Department of Agrarian Reform’s (DAR)
intervention on their respective concerns.

The case of HARBCO reveals the plight of many ARBs who may still own the land
awarded to them on paper, but in actual practice, have lost control and access to it by
the takeover of their land’s management by supposed partner agribusiness
corporation.


In the midst of recurring calls to cease CARP implementation and give way to
agricultural investments by private corporations, there is mounting concern that ARBs
must retain possession and ownership of the lands awarded to them under the
program and contribute to rural development. The pressure comes from domestic and
foreign agribusinesses, which are directly leasing and/or managing agricultural lands
at the risk of the ARBs losing control over their land.

‘The HARBCO case further validates the need to strengthen the existing policies on
AVAs to address and prevent similar cases that compromise the tenure security of
ARBs from occurring in the future.

‘The DAR originally initiated the amendment of their Administrative Order (AO) on
AVAs, or AO 9, series of 2006. However, DAR officials opined to the House Committee
on Agrarian Reform that they needed a stronger mandate to regulate the
implementation of these agri-business ventures and ensure that the rights and
interests of ARBs are protected in these business transactions.

‘The advent of increasing interest on land investments in the Philippines fuelled by the
rising global demand for food and raw materials for agro-fuel production, tourism and
mining calls for a strong regulatory mechanism to govern land investments. This is
highlighted by the fact that in the last 5 years our government has been involved in
numerous transactions involving the lease of large tracts of land nationwide for the
production of biofuel feedstocks, food crops and mariculture investments. The influx
of both local and foreign investments in our country has exposed the basic sectors,
particularly the farmers, fisher folk and indigenous peoples, to the threat of
displacement and loss of control, ownership and possession over their lands.

It is in this regard that this bill is being proposed. It seeks to institutionalize the
establishment and implementation of AVAs, particularly in agrarian reform areas, to
promote productive and collaborative ventures between the private sector and the
ARBs and transform them into farmer-entrepreneurs as well as maximize distributed
agrarian lands without compromising the famers’ tenure rights.

‘The provisions in this bill emphasize the principle of agrarian reform of providing
“farmers and farm workers with the opportunity to enhance their dignity and improve
the quality of their lives through greater productivity of agricultural lands.” AVAs
should not be a threat to the ARBs’ land rights but should give incentive to develop
their lands and improve their productivity.

Moreover, the bill likewise ensures that there are social preparation, capacity building,
and assistance provided to ARBs to better equip them in the negotiation for and
evaluation of the agreement they are entering into,

In view of the foregoing, the immediate passage of the till is earnestly sought.

Hon. TEDDY
Representati

\WNER BAGUILAT..
, Lone District of Ifugao


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

SIXTEENTH CONGRESS
Second Regular Session

House Bill No.0 J.C 1

Introduced by REP. TEDDY BRAWNER BAGUILAT

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress Assembled:

An Act Regulating the Establishment and Implementation of
Agribusiness Ventures Arrangements (AVAs) in Agrarian Reform Lands

Article 1. This Act shall be entitled as Agribusiness Ventures Arrangements in
Agrarian Reform Lands Act.

Article 2. Governing Principles and Policies, The agrarian reform program is founded
on the right of farmers and regular farmworkers, who are landless, to own directly or
collectively the lands they till or, in the case of other farm workers, to receive a just
share of the fruits thereof. The State shall ensure that control over the lands awarded
under the agrarian reform program shall remain always with the agrarian reform
beneficiaries so that they can plan, organize and manage their farmlands
independently and productively with adequate support services from the State and
investors.

‘To provide support services to the ARBs, the State shall encourage the participation of
the private sector in order to enhance the development and productivity of the
awarded lands under the agrarian reform program. In providing such support services,
the State shall take utmost consideration of the following, to wit:

Ensure the security of ownership, tenure and income of all agrarian reform

beneficiaries;

b, Optimize the use of distributed lands for agricultural production;

¢. Facilitate the development of ARBs or Cooperatives/Associations into viable
agricultural entrepreneurs or enterprises ;

d. Encourage responsible private sector investments in developing agrarian
reform areas;

¢. Address the concerns on food security of the Philippines;


f. Enhance and sustain the productivity and profitability of agrarian reform
lands; and
g. Transform the local agriculture sector into a globally competitive industry.

Article 3. Definition of Terms. For purposes of this Act, the following terms are
hereunder defined:

A. Agrarian Reform Beneficiaries (ARBs) refer to qualified individual beneficiaries
under Presidential Decree (P.D.) No. 27 or R.A. No. 6657, as amended, or
their cooperative or association duly registered with the Cooperative
Development Authority (CDA), the Securities and Exchange Commission
(SEC) or the Bureau of Rural Workers (BRW) of the Department of Labor and
Employment (DOLE).

B. Agrarian Reform Lands refer to lands awarded under P.D. No. 27 and R.A. No.
6657, and their amendments.

, Agribusiness Venture Arrangement (AVA) refers to the entrepreneurial
collaboration between ARBs and private investors in the implementation of
an agriculturally-related business venture involving lands distributed under
CARP.

D. Arbitration is a voluntary dispute resolution process where the parties submit
their dispute to an arbitral committee who, in turn, conducts hearings and
makes final decisions binding upon the parties,

BE. Association refers to ARBs who voluntarily form a group duly recognized by
the SEC or DOLE, and organized for the purpose of, but not limited to,
entering into an AVA with a common investor.

F. Build-Operate-Transfer (BOT) is an AVA scheme where the investor builds,
rehabilitates or upgrades, at his own cost, capital assets, infrastructure and
facilities applied to the production, processing and marketing of agricultural
products and operates the same for a fixed period after which ownership
thereof is conveyed to the ARBs.

G. Contract Growing is an AVA scheme where the investor provides farm inputs
and technology at reasonable cost in exchange for the ARBs’ commitment to
produce certain crops at pre-arranged agreement involving volume, quality
standards, selling price, delivery and other terms and conditions.

H. Control refers to the power of ARBs to direct the whole operation of the farm.

I. Cooperative refers to a group of ARBs, duly registered under R.A. No. 9520,
otherwise known as the "Philippine Cooperative Code of 2008", who have
voluntarily (i) pooled their land, human, technological, financial and/or
economic resources to achieve social and economic ends, {ii) made equitable
contributions to the capital required and (iii) accepted a fair share of the risks
and benefits of the group’s undertakings.



J.

Fquity is the value of the shares subscribed to and paid for by each party in
relation to the authorized capital stock of a joint venture corporation.

Growership is an AVA scheme where the investor supplies all the inputs and
required technology for the production of certain crops, with no cost to the
ARBs, in exchange for the latter’s commitment to produce particular crops at
pre-arranged agreement involving volume, quality standards, growership fee,
delivery and other terms and conditions.

Investors refer to the former landowners, private individuals, corporations,
non-government organizations, ARB cooperatives/associations, government
owned and/or controlled corporations or any entity duly authorized by law,
who are willing and able to contribute their capital, equipment and facilities,
technology, and/or management services in an AVA.

|. Joint Venture Agreement (JVA) is an AVA scheme where the ARBs and

investors form a joint venture corporation (JVC) for the purpose of managing
the farm operations.

Lease Agreement is an AVA scheme where the ARBs bind themselves to give
the investor general control over the use and management of the land for a
certain amount and for a definite period.

Management Contract is an AVA scheme where the ARBs contract the services
of an individual, partnership or corporation in order to assist in the
management and operation of the farm in exchange for a fixed wage or
commission.

Marketing Agreement is an AVA scheme where the ARBs engage the investor
to promote their produce in exchange for commission on actual sales.

Mediation is a voluntary dispute resolution process where a neutral facilitator
assists the parties in reaching a settlement regarding a dispute.

Service Contract is an AVA scheme where the ARBs engage the services of a
contractor for mechanized land preparation, cultivation, harvesting,
processing, post-harvest operations and/or other farm activities for a fee.

Voluntary Dispute Resolution is a mode of resolving disputes other than by
adjudication of a presiding judge of a court or an officer of a government
agency, in which a neutral third party assists in the resolution of issues.

Take-over ~ is an act of the investor in controlling the operation of the farm
and/or
assuming any of the responsibilities of the ARBs in an AVA.

. Transfer is the conveyance of the use and possession of CARP awarded lands

from one person or entity to another.


Article 4. Coverage. This Act shall apply to all awarded lands distributed under the
Comprehensive Agrarian Reform Program (CARP) and other agrarian reform laws.

Former landowners (LO) with respect to their untenanted retained areas, and ARBs,
who have completely paid their land amortizations and tenants in certain cases, shall
be covered should they opt to place the said landholdings under this Act.

Article 5. Agribusiness Venture Arrangements. Individual ARBs and ARB cooperatives
or associations, who are bonafide holders of Emancipation Patent (EP), Certificate of

Land

Ownership Award (CLOA) or similar tenurial instruments issued by the

Department of Agrarian Reform (DAR) or its predecessor may enter into any of the
following Agribusiness Venture Arrangements, namely:

Growership

. Contract Growing

Marketing Contract
Management Contract
Service Contracts
Build-Operate-Transfer
Joint Venture Agreements

|. Lease Agreements; and

Any combination of the foregoing AVAs without violating any provisions of this
Act.

Article 6, Contracting Parties and their Qualifications. The parties to an agribusiness
venture agreement shall have the following qualifications, namely:

A.

ic

ARBs (whether individual or organized) should be holders of an Emancipation
Patent (EP), a Certificate of Land Ownership Award (CLOA) or similar tenurial
instruments and are in possession of their land. In no case shall potential
ARBs be allowed to enter into an AVA or any interim agreement prior to the
award of such tenurial instrument and prior to the actual possession of the
land.

ARB cooperatives or associations shall have the legal personality to transact
or enter into any contract. For ARB cooperatives or associations with CLOAs
in the name of the organization, the Board of Directors/Trustees of such
cooperative or association shall secure the vote of approval by the general
membership in accordance with their articles of cooperation /association and
by laws. In the absence thereof, a vote of approval of at least 2/3 of the
general membership shall be secured.

Prospective investors must have the following qualifications, namely:

1. Must be registered with the appropriate regulatory agencies, such as
Securities and Exchange Commission, Department of Trade and
Industry.

2. Good financial standing for the past three (3) years;

3. Good track record in food and agribusiness;

4. Stable business relations;

5. Capable of managing and operating the AVA undertaking;


6. Shall not have violated any laws, rules and regulations, and contracts
as the case may be.

Article 7. Mandatory provisions of the AVAs. Agribusiness Venture Arrangements
entered into under this Act, being imbued with public interest, shall have the
following mandatory provisions, to wit:

A.

B.

‘The landholding subject of the AVA shall be used for agricultural purposes;
The contract shall require the participation of the ARB/s in the farm
management operations and shall include, among others, capacity building
programs aimed to facilitate transfer of technology and management
techniques to the ARBs;

‘The AVA shall include provisions for workers’ productivity and quality
incentives for the employed ARBs over and above the compensation they shall
receive as employees of the AVA.

For the duration of the contract, the investor shall provide funds necessary to
ensure ecological protection of the farm and safety of its workers, particularly
for the conservation and maintenance of land quality, proper handling, storage
and disposal of hazardous residues and waste products, and proper protective
and acceptable safe methods of application of fertilizers and other chemicals.

There shall be a periodic review and/or renegotiation of the critical terms of
the contract by the contracting parties to allow for some changes in the
economic assumptions and/or the prevailing economic conditions at the time
of AVA application and processing as well as changes on the physical
attributes of the land,

The review and/or renegotiation shall also be undertaken upon request or
petition of any of the parties on any of the following grounds: (1) extraordinary
increase of inflation rate; (2) drastic change in price fluctuation on both input
and output; (3) declaration of the area where the land is located as calamity
or disaster area; and (4) other meritorious grounds to be determined by the
DAR Secretary.

‘The AVAs shall be subject to the approval of the PARC. Otherwise, it shall
become void and unenforceable.

All renegotiated/renewed/extended contracts and their effectivity shall be
subject to the same process of review and approval by the PARC in accordance
with the rules and regulations issued therefor.

‘The duration of the AVA shall be mutually agreed upon by all parties, but not
more than 10 years subject to renewal. It shall take into consideration the
following parameters: (i) crop or production cycle; (ii) gestation period of the
crop; (iii) economic lifespan of existing major and essential facilities or
infrastructure; and (iv) payback or recoup period of investments.


H. In addressing the food security concerns of the country, the parties should
agree that, in case of food shortage in the country, at least fifty percent (50%)
of the produce in investment involving staple crops will automatically be set
aside for the domestic market. For purposes of its enforcement, the DAR may
invoke said provision, if and when necessary.

lL The roles and responsibilities of DAR, the ARBs (individual or
cooperatives/ associations) and the investor shall be clearly identified in the
contract as well as the expected output from each party. It must be clear that
successors-in-interest of both the investors and the ARBs are bound by the
terms of the contract.

J. Consent of the other party in cases of transfer of rights and responsibilities
shall be secured.

K. An alternative dispute resolution mechanism in resolving disputes between
the parties shall be established.

L. Terms and conditions of the AVA contract shall be made known to all parties.
‘The contract shall be translated to the language known to the ARBs.

M. Terms and conditions for pre-termination of contracts shall be clearly
stipulated in the AVA contract.

N. In case of lease agreements, the rental shall be at least ten per cent (10%) of
the gross sales per harvest.

Article 8. Control over agrarian reform lands. In any AVA, control over the agrarian
reform land shall always remain with the agrarian reform beneficiaries. For this
purpose, joint venture agreements between agrarian reform beneficiaries and investors
which result to a minority equity of the agrarian reform beneficiaries shall not be
allowed or approved by PARC. Also, any provision of permanent take-over in the AVAs
that takes away the management of the agricultural production in growership contract
or contract growing agreement shall be void.

Temporary takeover may be allowed provided that all of the following conditions are
present:

A. Upon mutual agreement of the parties;

B. The takeover shall only be for one (1) cropping cycle;

C. When both parties mutually determine that the agreed quantity and/or quality
of production cannot be delivered by the ARBs.

Temporary takeover shall not take place during the transition to a new production
technology.

Article 9. Approval of Agribusiness Ventures Agreements. All AVAs entered into
between ARBs and any other person under this Act shall be approved by the
Presidential Agrarian Reform Council (PARC) as established under Proclamation No.
129-A. For this purpose, the PARC, through the Department of Agrarian Reform (DAR)

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shall issue policies, rules and regulations relative to such approval taking into
consideration of the following, namely: a) economic viability; b) legal enforceability; c)
ARB control over the land/or business operation; d) ARB skill development; (c)
ecological soundness; f) non-transferability of ownership over the land to investor; and
other considerations which PARC may deem proper under the circumstances.

Article 10. Resolution of Disputes. As a general rule, voluntary conciliation methods
shall be preferred in resolving disputes arising from the execution of AVA contracts.
Any dispute arising from the execution of the AVA contract shall be resolved first
through mediation. If the parties fail to arrive at an agreement through mediation,
the parties shall/may submit their dispute for arbitration in accordance with R.A.
No. 876, also known as the “Arbitration Law," as amended by R.A. No. 9285 or the
Alternative Dispute Resolution System Act of 2004 or other pertinent arbitration laws,
as the case may be. For this purpose, the AVA contract shall contain prior consent
by both parties to submit themselves to arbitration when the need arises. The
contract shall already identify the number of arbitrators to be appointed jointly by
the parties as well as the venue for the hearing.

The decision of the arbitral committee shall be final and binding. Judgment thereon
may be entered in any of the proper fora enumerated under Article 12 of this Act.

Article 11. Revocation of AVA Contracts. — AVA contracts may be revoked by the PARC
based on the following grounds:

A. Gross violation or non-compliance of the terms and conditions of the contract
such as, but not limited to:

1. Non-implementation of the human resources development plan
provisions;

2. Non-employment of the ARBs;

3. Concealment of the true financial status of the enterprise; and

a Commission of fraud in the application or implementation of the AVA;

5. Other analogous cases.

B. When, without justifiable reasons, the AVA fails to provide benefits and
incentives stipulated in the approved AVA contracts, such as, but not limited
to, dividends accruing to ARB's equity shares, production and quality
incentives. For this purpose, situations beyond the control of the investor such
as force majeure are considered justifiable reasons;

C. When the AVA is no longer financially and economically viable;

D. When a portion of the commercial farm subject of the AVA is converted or

fragmented into non-agricultural use without prior written consent of the ARBs
and the DAR;

E. Any action resulting to the transfer of ownership of the landholding subject of
AVA to the investors;


F. In cases of permanent take-over or temporary take over when the conditions
set forth under Article 8 are not present;

G. Acquisition or approval of AVA through fraud, intimidation, coercion, deceit, ete
H. Other analogous or meritorious grounds.
Article 12. Jurisdiction. — The PARC shall have primary and exclusive jurisdiction over
the approval and revocation of AVAs. :
‘The DAR Adjudication Board (DARAB) shall have jurisdiction over disputes involving

the interpretation and enforcement of agribusiness agreements or
agrarian disputes as defined in Sec. 3 (d) of 6657;

The DAR Secretary, in his/her capacity as Chairperson of the PARC Executive
Committee, may issue orders, as may be appropriate, to maintain the status quo and
preserve peace and order in the farm subject of AVAs, particularly in the following
cases pursuant to Sec. 5 (b) in relation to Sec. 7 of E.O. No. 129-A:

A. Where there is clear and imminent threat to life or property;

B. Where the dispute will cause serious and irreparable damage to either party
or to the AVA; or

C. Where, in the Secretary's judgment, there is an urgent need to protect the
national interest.

Art. 13. Penal Provision. - Any act that wrests control over the agricultural land from
agrarian reform beneficiaries not constituting a temporary take-over as defined in this
Act shall be punishable by imprisonment of not less than three (3) years and one day
but not more than six (6) years.

Article 14. Repealing Clause. — All other laws, decrees, executive orders, issuances,
rules and regulations, or part thereof inconsistent with this Act are hereby likewise
repealed or amended accordingly.

Article 15. Separability Clause. ~ If, for any reason, any section or provisions of this
Act is declared unconstitutional or invalid, the other sections or provisions not
affected thereby shall remain in full force and effect.

Article 16. Transitory Provision. - All existing AVAs without PARC approval shall be
subject for review and approval of the PARC. Parties to existing AVAs shall submit
their contracts to PARC within 60 days from the effectivity of this Act. Failure to
comply with this requirement within the given period shall render the AVAs void.

Acticle 17. Effectivity Clause. - This Act shall take effect after fifteen (15) days upon
publication in at least two (2) newspapers of general circulation.

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