Reclamation and scarcity of land

The rapid urbanization now engulfing the metropolis and other developing cities and municipalities has given rise to a scheme addressing the scarcity of land for urban development or expansion. Some cities and municipalities have resorted to land reclamation, or the process of piling earth onto submerged marine areas.

In the Manila Bay area, there are about 25 reclamation projects that will cover more than 10,000 hectares, or 100 square kilometers, of a submerged marine area stretching from Navotas City to Cavite province. The shorelines of Coron, Palawan, and Dumaguete City, Negros Oriental, are likewise not spared. These projects are initiated by local government units (LGUs), oftentimes in joint ventures with private developers that bankroll the reclamation activity. The scheme enables big businesses to skirt the constitutional limitation on foreign ownership of land because portions of reclaimed land allotted to private developers can be converted into business and residential enclaves affordable only to foreign investors.

Under Republic Act No. 1899, LGUs were authorized to undertake reclamation of foreshore land only. Such authority, however, was withdrawn under Presidential Decree No. 3 which vested the exclusive powers to reclaim submerged marine areas to the Public Estates Authority (PEA), now renamed Philippine Reclamation Authority (PRA). In Chavez v. PEA (2002), the Supreme Court struck down as void ab initio (from the start) the joint venture agreement (JVA) between PEA and Amari, a private land developer, because the object of the JVA was a property of the public domain, thus beyond the commerce of man. Another reason for the nullification of the PEA-Amari JVA was the fact that the land sharing agreement violated the Regalian doctrine enshrined in the 1987 Constitution.

Under the current legal framework, LGUs can only undertake land reclamation upon prior approval by PRA. Section 17 of the Local Government Code of 1991 also limits an LGU’s authority to reclaim land only for infrastructure facilities intended to service the needs of the residents of the locality. The creation of new central business districts that would accommodate commercial and residential development is not within the conferred powers of an LGU to undertake. LGU-initiated land reclamation is likewise outside the pale of the public-private partnership (PPP) legal framework because PPP projects are limited to public infrastructure facilities only. Thus, an LGU and private developer that want to cash in on a potentially lucrative land reclamation for commercial and residential development can avail themselves only of the joint venture legal framework under the Civil Code.

The joint venture scheme between an LGU and a private developer is simple. The developer submits an unsolicited proposal to the LGU to undertake and finance the land reclamation of a submerged marine area within the LGU’s territorial jurisdiction, an area seaward from the shoreline’s low-water mark not exceeding 15 kilometers, which is the limit of municipal waters. Beyond this radius, the LGU would have no authority to undertake the reclamation project. The LGU then subjects the unsolicited proposal to a Swiss challenge to comply with public bidding requirements.

Basically, the Swiss challenge is a procurement procedure that allows the government to publish for three consecutive weeks an invitation for comparative or competitive proposals to an unsolicited proposal for a qualified project. If no proposal is received within 60 working days, the project is awarded to the original proponent. Should a lower price proposal be submitted however, the original proponent is allowed to match that price within 30 working days.

The typical arrangement in a land reclamation JVA obliges the LGU to secure approval from the PRA to conduct land reclamation, subject to a land sharing agreement. The private developer undertakes and finances the land reclamation subject to another land sharing agreement, a convenient circumvention of the ruling in Chavez v. PEA. Such type of JVA, however, suffers from the same constitutional infirmity as did the Amari-PEA JVA, in addition to being an ultra vires act of the LGU. Ultra vires is an act that requires legal authority but is done without it. Neither Section 302 of the Local Government Code nor Section 11 of PRA’s Administrative Order No. 2019-4 can justify the land sharing agreement because such legal provisions contravene the Constitution.

Land reclamation is certainly a big-ticket legal and constitutional issue that awaits the incoming Marcos Jr. administration and the secretary of justice.

Frank E. Lobrigo is a retired judge of the regional trial court. Before joining the bench, he practiced law for 20 years.