KAPUNAN, J., concurring and dissenting:



Brought before us are the motion for reconsideration of public respondents and the partial motions for reconsideration of petitioner Enrique T. Garcia and the movants-in-intervention.  The majority, acting on the motions, resolves to deny the same for lack of merit.  With due respect, I concur in part and dissent in part.


At the outset let me clarify that, although I concurred with the enlightened ponencia of Mr.  Justice Reynato S. Puno in the decision sought to be reconsidered, I did not go along with his conclusion declaring the Downstream Oil Industry Deregulation Act (R.A. No. 8180) unconstitutional in its entirety.  In the dispositive portion of my separate opinion, I explicitly stated that only the three anti-competition provisions of the said law should be deemed unconstitutional.  The rest of the law, free from the taint of unconstitutionality, should remain in force and effect in view of the separability clause contained therein.1


Let me explain.  A separability clause states that if for any reason, any section or provision of the statute is held to unconstitutional or (invalid), the other section(s) or provision(s) of the law shall not be affected thereby.2  It is a legislative expression of intent that the nullity of one provision shall not invalidate the other provisions of the act.  Such a clause is not, however, controlling and the court may, in spite of it, invalidate the whole statute where what is left, after the void part, is not complete and workable.3


The rules on statutory construction, thus, prescribe that:


The general rule is that where part of a statute is void as repugnant to the Constitution, while another part is valid, the valid portion, if separable from the invalid, may stand and be enforced.  The presence of a separability clause in a statute creates the presumption that the legislature intended separability, rather than complete nullity, of the statute.  To justify this result, the valid portion must be so far independent of the invalid portion that it is fair to presume that the legislature would have enacted it by itself if it had supposed that it could not constitutionally enact the other.  Enough must remain to make a complete, intelligible, and valid statute, which carriers out the legislative intent.  The void provisions must be eliminated without causing results affecting the main purpose of the act in a manner contrary to the intention of the legislature.  The language used in the invalid part of the statute can have no legal effect or efficacy for any purpose whatsoever, and what remains must express the legislative will independently of the void part, since the court has no power to legislate.


The exception to the general rule is that when the parts of a statute are so mutually dependent and connected, as conditions, considerations, inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a whole the nullity of one part will vitiate the rest.  In making the parts of the statute dependent, conditional, or connected with one another, the legislature intended the statute to be carried out as a whole and would not have enacted it if one part is void, in which case if some parts are unconstitutional, all the other provisions thus dependent, conditional, or connected must fall with them.4


However, in the instant case, the exception rather than the general rule was applied.  The majority opinion enunciated, thus:


...This separability clause not withstanding, we hold that the offending provisions of R.A. No. 8180 so permeate its essence that the entire law has to be struck down.  The provisions on tariff differential, inventory and predatory pricing are among the principal props of R.A. No. 8180.  Congress could not have deregulated the downstream oil industry without these provisions.  Unfortunately, contrary to their intent, these provisions on tariff differential, inventory and predatory pricing inhibit fair competition, encourage monopolistic power and interfere with the free interaction of market forces....5


I beg to disagree.


The three provisions declared void are severable from the main statute and their removal therefrom would not affect the validity and enforceability of the remaining provisions of the said law R.A. No. 8180, sans the constitutionally infirmed portions, remains “complete in itself, sensible, capable of being executed and wholly independent of (those) which (are) rejected.6  In other words, despite the elimination of some of its parts, the law can still stand on its own.


The crucial test is to determine if expulsion of the assailed provisions cripples the whole statute, so much so, that it is no longer expressive of the legislative will and could no longer carry out the legislative purpose.


The principal intent of R.A. No. 8180 is to open the country’s oil market to fair and free competition and the three provisions are assailed precisely because they are anti-competition and they obstruct the entry of new players.  Therefore, in order to make the deregulation law work, it is imperative that the anti-competition provisions found therein be taken out.  In other words, it is only through the “separation” of these provisions that the deregulation law be able to fully realize its objective.


Take the tariff provision for instance.  The repudiation of the tariff differential will not revive the 10% and 20% tariff rates.  What is being discarded is the differential not the tariff itself, hence, the removal of the 4% differential would result in the imposition of a single uniform tariff rate on the importation of both crude oil and refined petroleum products at 3% as distinctly and deliberately set in Sec. 5 (b) of R.A. No. 8180 itself.  The tariff provision which, admittedly, is among the “principal props” of R.A. No. 8180 remains intact in substance and the elimination of the tariff differential would, in effect, transform it into one of the statute’s “vouchsafing provisions,” a tool to effectively carry out the legislative intent of fostering a truly competitive market.


There is no question that the legislature intended a single uniform tariff rate for imported crude oil and imported petroleum products.  This is obvious from the proviso contained in Sec. 5 (b)7 of R.A. No. 8180 which specifically states that:


...Provided, That beginning on January 1, 2004 the tariff rate on imported crude oil and refined petroleum products shall be the same:  Provided, further, That this provision may be amended only by an Act of Congress.


although said proviso equalizing the tariff rate takes effect on January 1, 2004.  However, the nullification of the tariff differential renders the prospective effectivity of the rate equalization irrelevant and superfluous.  Naturally, there would no longer be any basis for postponing the leveling of the tariff rate to a later date.  The provision that the tariff rate shall be equalized on January 1, 2004 is premised on the validity of the tariff differential, without which there is nothing to equalize.  Stated differently, the imposition of a single uniform tariff rate on imported crude oil and imported petroleum products is to take effect immediately.  A different way of interpreting the law would be less than faithful to the legislative intent to enhance free competition in the oil industry for the purpose of obtaining fair prices for high-quality petroleum products.


The provision requiring a minimum inventory was similarly found by the majority to be anti-competition.  Its exclusion, therefore, would not have any deleterious effect on the oil deregulation law.  On the contrary, the essence of R.A. No. 8180, which is free and fair competition, is preserved.


The same rationale applies to the provision concerning predatory pricing and may be subsumed (at least in the meantime pending the amendment of the law) under Sec. 9 (a):


SEC. 9.  Prohibited Acts.  — To ensure fair competition and prevent cartels and monopolies in the downstream oil industry, the following acts are hereby prohibited:


a) Cartelization which means any agreement, combination or concerted action by refiners and/or importers or their representatives to fix prices, restrict outputs or divide markets, either by products or by areas, or allocating markets, either by products or by areas, in restraint of trade or free competition; and


xxx xxx xxx


The answer is not the wholesale rejection of R.A. No. 8180.  To strike down the whole statute would go against the very ideal that our country is striving for.  The goal is to unshackle the oil industry from the restraints of regulation.  To declare R.A. No. 8180 void in its entirety would bring us back to where we started.  Worse, as pointed out by the eminent constitutionalist, Joaquin G. Bernas, SJ, the hardest hit would be the few new players who have entered the oil business and have begun investing in our country under the deregulated regime.  He expounds, thus:


...Under the regulated regime, importation of oil was controlled by the Energy Industry Administrative Bureau (EIAB).  The procedure followed was that, whenever there was an application to import oil products, the EIAB was required to inform the oil companies of the proposed importation in order to give them the option to match the desired importation with locally available products.  Equivalently, therefore, the large oil companies could block imports by the smaller players.


xxx xxx xxx


Another barrier to equalization concerns the expansion of services of small players.  Under the regulated regime, expansion of facilities was also under the control of the EIAB.  Any person wishing to build and establish or operate, remodel or refurbish any retail outlet for petroleum products had to obtain approval from the EIAB.  Copies of applications filed with the EIAB had to be given to competing oil companies which, under the rules, were allowed to file their opposition.  The EIAB was duty bound to evaluate the application against the opposition.  This rule made it possible for the big players to block the expansion of competing facilities.8


These barriers were eradicated by R.A. No. 8180, as expressly mandated in Sec. 5 (a) thereof:


SEC. 5.  Liberalization of Downstream Oil Industry and Tariff Treatment. — a) Any law to the contrary notwithstanding, any person or entity may import or purchase any quantity of crude oil and petroleum products from a foreign or domestic source, lease or own and operate refineries and other downstream oil facilities and market such crude oil and petroleum products either in a generic name or its own trade name, or use the same for his own requirement:  Provided, That any person or entity who shall engage in any such activity shall give prior notice thereof to the DOE for monitoring purposes:  Provided further, That such notice shall not exempt such person or entity from securing certificates of quality, health and safety and environmental clearance from the proper governmental agencies:  Provided, furthermore, That such person or entity shall, for monitoring purposes, report to the DOE his or its every importation/exportation:  Provided, finally, That all oil importations shall be in accordance with the Basel Convention.


xxx xxx xxx


The nullification of the whole law would, therefore, considerably jeopardize the chances of the new entrants to survive and remain competitive in the market.


As a consequence thereof, Eastern Petroleum Corp., Seaoil Petroleum Corp., Subic Bay Distribution, Inc., TWA, Inc. and Dubphil Gas, which are some of the oil industry’s new entrants, filed a motion for intervention on 18 November 1997 urging the Court to reconsider its decision declaring the whole R.A. No. 8180 unconstitutional.  The intervenors raise similar apprehensions concerning the power of the existing oil firms, under the regulated industry, to block the importation of petroleum products by the small oil companies and likewise impede their expansion and growth.9


Even the public respondents in their motion for reconsideration concede that if R.A. No. 8180 should be declared unconstitutional, the unconstitutionality is partial, that is, only the three (3) anti-competition provisions should be declared void.  Public respondents, thus, opine:


Thus, even assuming that the assailed provisions are constitutionally defective, they cannot be that contagious as to infect or contaminate the other valid parts of the law which are complete in themselves, or capable of bringing about the full deregulation of the oil industry.


To apply the exception to the general rule of separability will require a clear and overwhelming demonstration which will erase any and all doubts on the unconstitutionality of R.A. 8180.


Moreover, the separable and independent character of the assailed provisions may be inferred from the various bills filed by leading legislators which, as noted by the Honorable Court, seek “the repeal of this odious and offensive provisions in R.A. No. 8180.”  In fact, the original as well as the final versions of the House Bill 5264 and Senate Bill No. 1253, which later became R.A. No. 8180, did not contain any tariff differential.


The foregoing instances clearly demonstrate that the assailed provisions were indeed separable and independent of the other provisions of R.A. 8180 and Congress did not consider the same to be that indispensable, without which Congress would not have passed R.A. 8180 into law.10


The public need not fear that prices of petroleum products, particularly gasoline, will soar if R.A. No. 8180 is declared only partially unconstitutional.  The Oil Deregulation Law itself provides adequate safeguards that would effectively avert and preclude such a dire scenario.  For instance, Sec. 8 of the said law provides that:


xxx                              xxx                              xxx


Any report from any person of an unreasonable rise in the prices of petroleum products shall be immediately acted upon. For this purpose, the creation of a Department of Energy (DOE) Department of Justice (DOJ) Task Force is hereby mandated to determine the merits of the report and the initiate the necessary actions warranted under the circumstances to prevent cartelization, among others.


The law also tasks the Department of Energy (DOE) to “take all measures to promote fair trade and to prevent cartelization, monopolies and combinations in restraint of trade and any unfair competition, as defined in Articles 186, 188 and 189 of the Revised Penal Code, in the downstreams oil industry. The DOE shall continue to encourage certain practices in the oil industry which serve the public interest and are intended to achieve efficiency and cost reduction, ensure continuous supply of petroleum products, or enhance environmental protection. These practices may include borrow-and-loan agreements, rationalized deport operations, hospitality agreements, joint tanker and pipeline utilization, and joint actions on oil spill control and fire prevention.”11


Likewise, the DOE is endowed with monitoring powers as amended in Sec. 6 of R.A. No. 8180:


SEC. 8.  Monitoring.  — The DOE shall monitor and publish daily international oil prices to enable the public to determine whether current market oil prices are reasonable.  It shall likewise monitor the quality of petroleum products and stop the operation of businesses involved in the sale of petroleum products which do not comply with the national standards of quality.  The Bureau of Product Standards (BPS), in coordination with DOE, shall set national standards of quality that are aligned with the international standards/protocols of quality.


The DOE shall monitor the refining and manufacturing processes of local petroleum products to ensure that clean and safe (environment and worker-benign) technologies are applied.  This shall also apply to the process of marketing local and imported petroleum products.


The DOE shall maintain in a periodic schedule of present and future total industry inventory of petroleum products for the purpose of determining the level of supply.  To implement this, the importers, refiners, and marketers are hereby required to submit monthly to the DOE their actual and projected importations, local purchases, sales and/or consumption, and inventory on a per crude/product basis.


xxx xxx xxx


Reverting to a regulated oil industry, even if only for a short period while the legislature “fast tracks” the passage of a new oil deregulation law (the feasibility of which remains a big “if”) defeats the whole purpose and only succeeds in retarding the country’s economic growth.


R.A. No. 8180 is a bold and progressive piece of legislation.  It must be given a chance to work and prove its worth.  Thus, the better solution is to retain the foundations of the law and leave it to Congress to pass the necessary amendments and enact the appropriate supporting legislation to fortify R.A. No. 8180.


In view of the foregoing, I find myself unable to concur with the majority’s thesis that the three assailed provisions “cannot be struck down alone for they were the ones intended to carry out the policy of (R.A. No. 8180)” and that “without these provisions in place.  Congress could not have deregulated the downstream oil industry.”  As I have previously pointed out, the aforementioned provisions were declared unconstitutional precisely because they were found to be anti-competition.  How can anti-competition provisions, therefore, have any place in a law whose goal is to promote and achieve fair and free competition?


The Oil Deregulation Law was not built upon and does not center on the provisions on tariff differential, minimum inventory requirement and predatory pricing.  These are not the only provisions of R.A. No. 8180 intended to implement the legislative intent as expressed in Sec. 2 thereof.  The heart and soul of R.A. No. 8180 is embodied is Sec. 5 (a) aptly entitled “Liberalization of Downstream Oil Industry and Tariff Treatment.”  It is this provision which does away with the burdensome requirements and procedures for the importation of petroleum products (the main impediments to the entry of new players in the oil market).  With this provision the “entry and exit of competitors” is made relatively easy and from this the competitive market is established.


The other remaining provisions are, likewise, sufficient to serve the legislative will.  There is among others, Sec. 7 mandating the promotion of fair trade practices and Sec. 9 (a) on the prevention of cartels and monopolies.


The point is, even without the subject three provisions what remains is a comprehensible and workable law.  The infirmities of some parts of the statute should not taint the whole when these parts could successfully be incised.


I also take exception to the majority’s observation that “...a partial declaration of unconstitutionality of R.A. No. 8180 will bring about a fully deregulated downstream oil industry where government will be impotent to regulate run away prices, where the oil oligopolists can engage in cartelization without competition, where prospective players cannot come in, and where new players will close shop...”  As I have earlier discussed, R.A. No. 8180 has armed the government with adequate measures to deal with the above problems, should any of these arise.  The implementation, therefore, of R.A. No. 8180 (sans the void provisions) is not an absurdity, on the contrary as shown above, it is the sensible thing to do.


ACCORDINGLY, resolving the pending motion for reconsideration and partial motions for reconsideration, I CONCUR with the majority insofar as it maintains the opinion to strike down as unconstitutional the three (3) anti-competition provisions of R.A. No. 8180, but I register my DISSENT to its ruling declaring the entire law as unconstitutional.




1Sec. 23. Separability Clause.  — If for any reason, any section or provision of this Act is declared unconstitutional or invalid, such parts not affected thereby shall remain in full force and effect.


2Rolando Suarez, Statutory Construction, 1993, p.  51.


3Ruben E. Agpalo, Statutory Construction, 1990, p.  15.


4Id., at 27-28.


5Decision, p.  29.


673 Am Jur 2d, Patents, Sec. 114.


7Sec. 5(b) states in full:


(b) Any law to the contrary notwithstanding and starting with the effectivity of this Act, tariff duty shall be imposed and collected on imported crude oil at the rate of three percent (3%) and imported refined petroleum products at the rate of seven percent (7%), except fuel oil and LPG, the rate for which shall be same as that for the imported crude oil:  Provided, That beginning January 1, 2004 the tariff rate on imported crude oil and refined petroleum products shall be the same:  Provided, further, That this provision may be amended only by an Act of Congress;


8Joaquin G. Bernas, SJ, Ironics in Oil Deregulation Decision, Today, 19 November 1997.


9Motion for Reconsideration in Intervention, pp. 7-11.


10Public Respondents’ Motion for Reconsideration, 18 November 1997, pp. 39-40.


11Sec. 7 R.A. No. 8180.


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