G.R. No.

L-35131 November 29, 1972 When petitioner Verstuyft's personal effects contained in twelve (12) crates entered the
Philippines as unaccompanied baggage on January 10, 1972, they were accordingly
THE WORLD HEALTH ORGANIZATION and DR. LEONCE VERSTUYFT, petitioners, allowed free entry from duties and taxes. The crates were directly stored at the Eternit
Corporation's warehouse at Mandaluyong, Rizal, "pending his relocation into permanent
vs.
HON. BENJAMIN H. AQUINO, as Presiding Judge of Branch VIII, Court of First quarters upon the offer of Mr. Berg, Vice President of Eternit who was once a patient of Dr.
Instance of Rizal, MAJOR WILFREDO CRUZ, MAJOR ANTONIO G. RELLEVE, and Verstuyft in the Congo." 2
CAPTAIN PEDRO S. NAVARRO of the Constabulary Offshore Action Center
(COSAC), respondents. Nevertheless, as above stated, respondent judge issued on March 3, 1972 upon
application on the same date of respondents COSAC officers search warrant No. 72-138
Sycip, Salazar, Luna, Manalo and Feliciano for petitioners. for alleged violation of Republic Act 4712 amending section 3601 of the Tariff and
Customs Code 3 directing the search and seizure of the dutiable items in said crates.

Emilio L. Baldia for respondents.

Upon protest of March 6, 1972 of Dr. Francisco Dy, WHO Regional Director for the
Western Pacific with station in Manila, Secretary of Foreign Affairs Carlos P. Romulo,
personally wired on the same date respondent Judge advising that "Dr. Verstuyft is entitled
to immunity from search in respect of his personal baggage as accorded to members of
TEEHANKEE, J.:p diplomatic missions" pursuant to the Host Agreement and requesting suspension of the
search warrant order "pending clarification of the matter from the ASAC."
An original action for certiorari and prohibition to set aside respondent judge's refusal to
quash a search warrant issued by him at the instance of respondents COSAC Respondent judge set the Foreign Secretary's request for hearing and heard the same on
(Constabulary Offshore Action Center) officers for the search and seizure of the personal March 16, 1972, but notwithstanding the official plea of diplomatic immunity interposed by
effects of petitioner official of the WHO (World Health Organization) notwithstanding his a duly authorized representative of the Department of Foreign Affairs who furnished the
being entitled to diplomatic immunity, as duly recognized by the executive branch of the respondent judge with a list of the articles brought in by petitioner Verstuyft, respondent
Philippine Government and to prohibit respondent judge from further proceedings in the judge issued his order of the same date maintaining the effectivity of the search warrant
matter. issued by him, unless restrained by a higher court. 4

Upon filing of the petition, the Court issued on June 6, 1972 a restraining order enjoining Petitioner Verstuyft's special appearance on March 24, 1972 for the limited purpose of
respondents from executing the search warrant in question. pleading his diplomatic immunity and motion to quash search warrant of April 12, 1972
failed to move respondent judge.
Respondents COSAC officers filed their answer joining issue against petitioners and
seeking to justify their act of applying for and securing from respondent judge the warrant At the hearing thereof held on May 8, 1972, the Office of the Solicitor General appeared
for the search and seizure of ten crates consigned to petitioner Verstuyft and stored at the and filed an extended comment stating the official position of the executive branch of the
Eternit Corporation warehouse on the ground that they "contain large quantities of highly Philippine Government that petitioner Verstuyft is entitled to diplomatic immunity, he did
dutiable goods" beyond the official needs of said petitioner "and the only lawful way to not abuse his diplomatic immunity, 5 and that court proceedings in the receiving or host
reach these articles and effects for purposes of taxation is through a search warrant." 1 State are not the proper remedy in the case of abuse of diplomatic immunity. 6

The Court thereafter called for the parties' memoranda in lieu of oral argument, which were The Solicitor General accordingly joined petitioner Verstuyft's prayer for the quashal of the
filed on August 3, 1972 by respondents and on August 21, 1972 by petitioners, and the search warrant. Respondent judge nevertheless summarily denied quashal of the search
case was thereafter deemed submitted for decision. warrant per his order of May 9, 1972 "for the same reasons already stated in (his)
aforesaid order of March 16, 1972" disregarding Foreign Secretary Romulo's plea of
diplomatic immunity on behalf of Dr. Verstuyft.
It is undisputed in the record that petitioner Dr. Leonce Verstuyft, who was assigned on
December 6, 1971 by the WHO from his last station in Taipei to the Regional Office in
Manila as Acting Assistant Director of Health Services, is entitled to diplomatic immunity, Hence, the petition at bar. Petitioner Verstuyft has in this Court been joined by the World
pursuant to the Host Agreement executed on July 22, 1951 between the Philippine Health Organization (WHO) itself in full assertion of petitioner Verstuyft's being entitled "to
Government and the World Health Organization. all privileges and immunities, exemptions and facilities accorded to diplomatic envoys in
accordance with international law" under section 24 of the Host Agreement.
Such diplomatic immunity carries with it, among other diplomatic privileges and immunities,
personal inviolability, inviolability of the official's properties, exemption from local The writs of certiorari and prohibition should issue as prayed for.
jurisdiction, and exemption from taxation and customs duties.
1. The executive branch of the Philippine Government has expressly recognized that
petitioner Verstuyft is entitled to diplomatic immunity, pursuant to the provisions of the Host
Agreement. The Department of Foreign Affairs formally advised respondent judge of the possible for a small unit, the COSAC, to which respondents officers belong, seemingly to
Philippine Government's official position that accordingly "Dr. Verstuyft cannot be the disregard and go against the authoritative determination and pronouncements of both the
subject of a Philippine court summons without violating an obligation in international law of Secretaries of Foreign Affairs and of Finance that petitioner Verstuyft is entitled to
the Philippine Government" and asked for the quashal of the search warrant, since his diplomatic immunity, as confirmed by the Solicitor-General as the principal law officer of
personal effects and baggages after having been allowed free entry from all customs the Government. Such executive determination properly implemented should have
duties and taxes, may not be baselessly claimed to have been "unlawfully imported" in normally constrained respondents officers themselves to obtain the quashal of the search
violation of the tariff and customs code as claimed by respondents COSAC officers. The warrant secured by them rather than oppose such quashal up to this Court, to the
Solicitor-General, as principal law officer of the Government, 7 likewise expressly affirmed embarrassment of said department heads, if not of the Philippine Government itself vis a
said petitioner's right to diplomatic immunity and asked for the quashal of the search vis the petitioners. 15
warrant.
The seriousness of the matter is underscored when the provisions of Republic Act 75
It is a recognized principle of international law and under our system of separation of enacted since October 21, 1946 to safeguard the jurisdictional immunity of diplomatic
powers that diplomatic immunity is essentially a political question and courts should refuse officials in the Philippines are taken into account. Said Act declares as null and void writs
to look beyond a determination by the executive branch of the government, 8 and where or processes sued out or prosecuted whereby inter alia the person of an ambassador or
the plea of diplomatic immunity is recognized and affirmed by the executive branch of the public minister is arrested or imprisoned or his goods or chattels are seized or attached
government as in the case at bar, it is then the duty of the courts to accept the claim of and makes it a penal offense for "every person by whom the same is obtained or
immunity upon appropriate suggestion by the principal law officer of the government, the prosecuted, whether as party or as attorney, and every officer concerned in executing it" to
Solicitor General in this case, or other officer acting under his direction.9 Hence, in obtain or enforce such writ or process. 16
adherence to the settled principle that courts may not so exercise their jurisdiction by
seizure and detention of property, as to embarrass the executive arm of the government in The Court, therefore, holds that respondent judge acted without jurisdiction and with grave
conducting foreign relations, it is accepted doctrine that "in such cases the judicial abuse of discretion in not ordering the quashal of the search warrant issued by him in
department of (this) government follows the action of the political branch and will not disregard of the diplomatic immunity of petitioner Verstuyft.
embarrass the latter by assuming an antagonistic jurisdiction." 10

ACCORDINGLY, the writs of certiorari and prohibition prayed for are hereby granted, and
2. The unfortunate fact that respondent judge chose to rely on the suspicion of the temporary restraining order heretofore issued against execution or enforcement of the
respondents COSAC officers "that the other remaining crates unopened contain questioned search warrant, which is hereby declared null and void, is hereby made
contraband items" 11 rather than on the categorical assurance of the Solicitor-General that permanent. The respondent court is hereby commanded to desist from further proceedings
petitioner Verstuyft did not abuse his diplomatic immunity, 12 which was based in turn on in the matter. No costs, none having been prayed for.
the official positions taken by the highest executive officials with competence and authority
to act on the matter, namely, the Secretaries of Foreign Affairs and of Finance, could not
justify respondent judge's denial of the quashal of the search warrant. The clerk of court is hereby directed to furnish a copy of this decision to the Secretary of
Justice for such action as he may find appropriate with regard to the matters mentioned in
paragraph 3 hereof. So ordered.
As already stated above, and brought to respondent court's attention, 13 the Philippine
Government is bound by the procedure laid down in Article VII of the Convention on the
Privileges and Immunities of the Specialized Agencies of the United Nations 14 for Concepcion, C.J., Makalintal, Zaldivar, Fernando, Barredo, Makasiar, Antonio and
consultations between the Host State and the United Nations agency concerned to Esguerra, JJ., concur.
determine, in the first instance the fact of occurrence of the abuse alleged, and if so, to
ensure that no repetition occurs and for other recourses. This is a treaty commitment Castro, J., reserves his vote.
voluntarily assumed by the Philippine Government and as such, has the force and effect of
law.

Hence, even assuming arguendo as against the categorical assurance of the executive
branch of government that respondent judge had some ground to prefer respondents
COSAC officers' suspicion that there had been an abuse of diplomatic immunity, the
continuation of the search warrant proceedings before him was not the proper remedy. He
should, nevertheless, in deference to the exclusive competence and jurisdiction of the
executive branch of government to act on the matter, have acceded to the quashal of the
search warrant, and forwarded his findings or grounds to believe that there had been such
abuse of diplomatic immunity to the Department of Foreign Affairs for it to deal with, in
accordance with the aforementioned Convention, if so warranted.

3. Finally, the Court has noted with concern the apparent lack of coordination between the
various departments involved in the subject-matter of the case at bar, which made it
G.R. No. 85750 September 28, 1990 Committee of the Red Cross (ICRC) [DOLE Records of BLR Case No. A-2-62-87, ICMC v. Calleja, Vol.
1].
INTERNATIONAL CATHOLIC IMMIGRATION COMMISSION, petitioner
vs On 14 July 1986, Trade Unions of the Philippines and Allied Services (TUPAS) filed with the then
HON. PURA CALLEJA IN HER CAPACITY AS DIRECTOR OF THE BUREAU OF LABOR Ministry of Labor and Employment a Petition for Certification Election among the rank and file
RELATIONS AND TRADE UNIONS OF THE PHILIPPINES AND ALLIED SERVICES (TUPAS) members employed by ICMC The latter opposed the petition on the ground that it is an international
WFTU respondents. organization registered with the United Nations and, hence, enjoys diplomatic immunity.

G.R. No. 89331 September 28, 1990 On 5 February 1987, Med-Arbiter Anastacio L. Bactin sustained ICMC and dismissed the petition for
lack of jurisdiction.
KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-ORGANIZED LABOR ASSOCIATION IN LINE
INDUSTRIES AND AGRICULTURE, petitioner, On appeal by TUPAS, Director Pura Calleja of the Bureau of Labor Relations (BLR), reversed the Med-
vs Arbiter's Decision and ordered the immediate conduct of a certification election. At that time, ICMC's
SECRETARY OF LABOR AND EMPLOYMENT AND INTERNATIONAL RICE RESEARCH request for recognition as a specialized agency was still pending with the Department of Foreign Affairs
INSTITUTE, INC., respondents. (DEFORAF).

Araullo, Zambrano, Gruba, Chua Law Firm for petitioner in 85750. Subsequently, however, on 15 July 1988, the Philippine Government, through the DEFORAF, granted
ICMC the status of a specialized agency with corresponding diplomatic privileges and immunities, as
evidenced by a Memorandum of Agreement between the Government and ICMC (Annex "E",
Dominguez, Armamento, Cabana & Associates for petitioner in G.R. No. 89331. Petition, Rollo, pp. 41-43), infra.

Jimenez & Associates for IRRI. ICMC then sought the immediate dismissal of the TUPAS Petition for Certification Election invoking the
immunity expressly granted but the same was denied by respondent BLR Director who, again, ordered
Alfredo L. Bentulan for private respondent in 85750. the immediate conduct of a pre-election conference. ICMC's two Motions for Reconsideration were
denied despite an opinion rendered by DEFORAF on 17 October 1988 that said BLR Order violated
ICMC's diplomatic immunity.

Thus, on 24 November 1988, ICMC filed the present Petition for Certiorari with Preliminary Injunction
MELENCIO-HERRERA, J.: assailing the BLR Order.

Consolidated on 11 December 1989, these two cases involve the validity of the claim of immunity by On 28 November 1988, the Court issued a Temporary Restraining Order enjoining the holding of the
the International Catholic Migration Commission (ICMC) and the International Rice Research Institute, certification election.
Inc. (IRRI) from the application of Philippine labor laws.

On 10 January 1989, the DEFORAF, through its Legal Adviser, retired Justice Jorge C. Coquia of the
I Court of Appeals, filed a Motion for Intervention alleging that, as the highest executive department with
the competence and authority to act on matters involving diplomatic immunity and privileges, and
tasked with the conduct of Philippine diplomatic and consular relations with foreign governments and
Facts and Issues
UN organizations, it has a legal interest in the outcome of this case.

A. G.R. No. 85750 — the International Catholic Migration Commission (ICMC) Case.
Over the opposition of the Solicitor General, the Court allowed DEFORAF intervention.

As an aftermath of the Vietnam War, the plight of Vietnamese refugees fleeing from South Vietnam's
On 12 July 1989, the Second Division gave due course to the ICMC Petition and required the submittal
communist rule confronted the international community.
of memoranda by the parties, which has been complied with.

In response to this crisis, on 23 February 1981, an Agreement was forged between the Philippine
As initially stated, the issue is whether or not the grant of diplomatic privileges and immunites to ICMC
Government and the United Nations High Commissioner for Refugees whereby an operating center for
extends to immunity from the application of Philippine labor laws.
processing Indo-Chinese refugees for eventual resettlement to other countries was to be established in
Bataan (Annex "A", Rollo, pp. 22-32).
ICMC sustains the affirmative of the proposition citing (1) its Memorandum of Agreement with the
Philippine Government giving it the status of a specialized agency, (infra); (2) the Convention on the
ICMC was one of those accredited by the Philippine Government to operate the refugee processing
Privileges and Immunities of Specialized Agencies, adopted by the UN General Assembly on 21
center in Morong, Bataan. It was incorporated in New York, USA, at the request of the Holy See, as a
November 1947 and concurred in by the Philippine Senate through Resolution No. 91 on 17 May 1949
non-profit agency involved in international humanitarian and voluntary work. It is duly registered with
(the Philippine Instrument of Ratification was signed by the President on 30 August 1949 and
the United Nations Economic and Social Council (ECOSOC) and enjoys Consultative Status, Category
deposited with the UN on 20 March 1950) infra; and (3) Article II, Section 2 of the 1987 Constitution,
II. As an international organization rendering voluntary and humanitarian services in the Philippines, its
which declares that the Philippines adopts the generally accepted principles of international law as part
activities are parallel to those of the International Committee for Migration (ICM) and the International
of the law of the land.
Intervenor DEFORAF upholds ICMC'S claim of diplomatic immunity and seeks an affirmance of the Presidential Decree No. 1620 which grants to the IRRI the status, prerogatives,
DEFORAF determination that the BLR Order for a certification election among the ICMC employees is privileges and immunities of an international organization is clear and explicit. It
violative of the diplomatic immunity of said organization. provides in categorical terms that:

Respondent BLR Director, on the other hand, with whom the Solicitor General agrees, cites State Art. 3 — The Institute shall enjoy immunity from any penal, civil and
policy and Philippine labor laws to justify its assailed Order, particularly, Article II, Section 18 and administrative proceedings, except insofar as immunity has been expressly
Article III, Section 8 of the 1987 Constitution, infra; and Articles 243 and 246 of the Labor Code, as waived by the Director-General of the Institution or his authorized representative.
amended, ibid. In addition, she contends that a certification election is not a litigation but a mere
investigation of a non-adversary, fact-finding character. It is not a suit against ICMC its property, funds
or assets, but is the sole concern of the workers themselves. Verily, unless and until the Institute expressly waives its immunity, no summons,
subpoena, orders, decisions or proceedings ordered by any court or
administrative or quasi-judicial agency are enforceable as against the Institute. In
B. G.R. No. 89331 — (The International Rice Research Institute [IRRI] Case). the case at bar there was no such waiver made by the Director-General of the
Institute. Indeed, the Institute, at the very first opportunity already vehemently
questioned the jurisdiction of this Department by filing an ex-parte motion to
Before a Decision could be rendered in the ICMC Case, the Third Division, on 11 December 1989, dismiss the case.
resolved to consolidate G.R. No. 89331 pending before it with G.R. No. 85750, the lower-numbered
case pending with the Second Division, upon manifestation by the Solicitor General that both cases
involve similar issues. Hence, the present Petition for Certiorari filed by Kapisanan alleging grave abuse of discretion by
respondent Secretary of Labor in upholding IRRI's diplomatic immunity.
The facts disclose that on 9 December 1959, the Philippine Government and the Ford and Rockefeller
Foundations signed a Memorandum of Understanding establishing the International Rice Research The Third Division, to which the case was originally assigned, required the respondents to comment on
Institute (IRRI) at Los Baños, Laguna. It was intended to be an autonomous, philanthropic, tax-free, the petition. In a Manifestation filed on 4 August 1990, the Secretary of Labor declared that it was "not
non-profit, non-stock organization designed to carry out the principal objective of conducting "basic adopting as his own" the decision of the BLR Director in the ICMC Case as well as the Comment of the
research on the rice plant, on all phases of rice production, management, distribution and utilization Solicitor General sustaining said Director. The last pleading was filed by IRRI on 14 August 1990.
with a view to attaining nutritive and economic advantage or benefit for the people of Asia and other
major rice-growing areas through improvement in quality and quantity of rice."
Instead of a Comment, the Solicitor General filed a Manifestation and Motion praying that he be
excused from filing a comment "it appearing that in the earlier case of International Catholic Migration
Initially, IRRI was organized and registered with the Securities and Exchange Commission as a private Commission v. Hon. Pura Calleja, G.R. No. 85750. the Office of the Solicitor General had sustained
corporation subject to all laws and regulations. However, by virtue of Pres. Decree No. 1620, the stand of Director Calleja on the very same issue now before it, which position has been
promulgated on 19 April 1979, IRRI was granted the status, prerogatives, privileges and immunities of superseded by respondent Secretary of Labor in G.R. No. 89331," the present case. The Court
an international organization. acceded to the Solicitor General's prayer.

The Organized Labor Association in Line Industries and Agriculture (OLALIA), is a legitimate labor The Court is now asked to rule upon whether or not the Secretary of Labor committed grave abuse of
organization with an existing local union, the Kapisanan ng Manggagawa at TAC sa IRRI (Kapisanan, discretion in dismissing the Petition for Certification Election filed by Kapisanan.
for short) in respondent IRRI.
Kapisanan contends that Article 3 of Pres. Decree No. 1620 granting IRRI the status, privileges,
On 20 April 1987, the Kapisanan filed a Petition for Direct Certification Election with Region IV, prerogatives and immunities of an international organization, invoked by the Secretary of Labor, is
Regional Office of the Department of Labor and Employment (DOLE). unconstitutional in so far as it deprives the Filipino workers of their fundamental and constitutional right
to form trade unions for the purpose of collective bargaining as enshrined in the 1987 Constitution.
IRRI opposed the petition invoking Pres. Decree No. 1620 conferring upon it the status of an
international organization and granting it immunity from all civil, criminal and administrative A procedural issue is also raised. Kapisanan faults respondent Secretary of Labor for entertaining
proceedings under Philippine laws. IRRI'S appeal from the Order of the Director of the Bureau of Labor Relations directing the holding of a
certification election. Kapisanan contends that pursuant to Sections 7, 8, 9 and 10 of Rule V 2 of the
Omnibus Rules Implementing the Labor Code, the Order of the BLR Director had become final and
On 7 July 1987, Med-Arbiter Leonardo M. Garcia, upheld the opposition on the basis of Pres. Decree unappeable and that, therefore, the Secretary of Labor had no more jurisdiction over the said appeal.
No. 1620 and dismissed the Petition for Direct Certification.

On the other hand, in entertaining the appeal, the Secretary of Labor relied on Section 25 of Rep. Act.
On appeal, the BLR Director, who is the public respondent in the ICMC Case, set aside the Med- No. 6715, which took effect on 21 March 1989, providing for the direct filing of appeal from the Med-
Arbiter's Order and authorized the calling of a certification election among the rank-and-file employees Arbiter to the Office of the Secretary of Labor and Employment instead of to the Director of the Bureau
of IRRI. Said Director relied on Article 243 of the Labor Code, as amended, infra and Article XIII, of Labor Relations in cases involving certification election orders.
Section 3 of the 1987 Constitution, 1 and held that "the immunities and privileges granted to IRRI do
not include exemption from coverage of our Labor Laws." Reconsideration sought by IRRI was denied.
III
On appeal, the Secretary of Labor, in a Resolution of 5 July 1989, set aside the BLR Director's Order,
dismissed the Petition for Certification Election, and held that the grant of specialized agency status by Findings in Both Cases.
the Philippine Government to the IRRI bars DOLE from assuming and exercising jurisdiction over IRRI
Said Resolution reads in part as follows:
There can be no question that diplomatic immunity has, in fact, been granted ICMC and IRRI.
Article II of the Memorandum of Agreement between the Philippine Government and ICMC provides business in which the member states have an interest. 7 The United Nations, for instance, is an
that ICMC shall have a status "similar to that of a specialized agency." Article III, Sections 4 and 5 of international organization dedicated to the propagation of world peace.
the Convention on the Privileges and Immunities of Specialized Agencies, adopted by the UN General
Assembly on 21 November 1947 and concurred in by the Philippine Senate through Resolution No. 19
on 17 May 1949, explicitly provides: "Specialized agencies" are international organizations having functions in particular fields. The term
appears in Articles 57 8 and 63 9 of the Charter of the United Nations:

Art. III, Section 4. The specialized agencies, their property and assets, wherever
located and by whomsoever held, shall enjoy immunity from every form of legal The Charter, while it invests the United Nations with the general task of
process except insofar as in any particular case they have expressly waived their promoting progress and international cooperation in economic, social, health,
immunity. It is, however, understood that no waiver of immunity shall extend to cultural, educational and related matters, contemplates that these tasks will be
any measure of execution. mainly fulfilled not by organs of the United Nations itself but by autonomous
international organizations established by inter-governmental agreements
outside the United Nations. There are now many such international agencies
Sec. 5. — The premises of the specialized agencies shall be inviolable. The having functions in many different fields, e.g. in posts, telecommunications,
property and assets of the specialized agencies, wherever located and by railways, canals, rivers, sea transport, civil aviation, meteorology, atomic energy,
whomsoever held shall be immune from search, requisition, confiscation, finance, trade, education and culture, health and refugees. Some are virtually
expropriation and any other form of interference, whether by executive, world-wide in their membership, some are regional or otherwise limited in their
administrative, judicial or legislative action. (Emphasis supplied). membership. The Charter provides that those agencies which have "wide
international responsibilities" are to be brought into relationship with the United
Nations by agreements entered into between them and the Economic and Social
IRRI is similarly situated, Pres. Decree No. 1620, Article 3, is explicit in its grant of immunity, thus: Council, are then to be known as "specialized agencies." 10

Art. 3. Immunity from Legal Process. — The Institute shall enjoy immunity from The rapid growth of international organizations under contemporary international law has paved the
any penal, civil and administrative proceedings, except insofar as that immunity way for the development of the concept of international immunities.
has been expressly waived by the Director-General of the Institute or his
authorized representatives.
It is now usual for the constitutions of international organizations to contain
provisions conferring certain immunities on the organizations themselves,
Thus it is that the DEFORAF, through its Legal Adviser, sustained ICMC'S invocation of immunity when representatives of their member states and persons acting on behalf of the
in a Memorandum, dated 17 October 1988, it expressed the view that "the Order of the Director of the organizations. A series of conventions, agreements and protocols defining the
Bureau of Labor Relations dated 21 September 1988 for the conduct of Certification Election within immunities of various international organizations in relation to their members
ICMC violates the diplomatic immunity of the organization." Similarly, in respect of IRRI, the DEFORAF generally are now widely in force; . . . 11
speaking through The Acting Secretary of Foreign Affairs, Jose D. Ingles, in a letter, dated 17 June
1987, to the Secretary of Labor, maintained that "IRRI enjoys immunity from the jurisdiction of DOLE in
this particular instance." There are basically three propositions underlying the grant of international immunities to international
organizations. These principles, contained in the ILO Memorandum are stated thus: 1) international
institutions should have a status which protects them against control or interference by any one
The foregoing opinions constitute a categorical recognition by the Executive Branch of the Government government in the performance of functions for the effective discharge of which they are responsible to
that ICMC and IRRI enjoy immunities accorded to international organizations, which determination has democratically constituted international bodies in which all the nations concerned are represented; 2)
been held to be a political question conclusive upon the Courts in order not to embarrass a political no country should derive any national financial advantage by levying fiscal charges on common
department of Government. international funds; and 3) the international organization should, as a collectivity of States members, be
accorded the facilities for the conduct of its official business customarily extended to each other by its
It is a recognized principle of international law and under our system of individual member States. 12 The theory behind all three propositions is said to be essentially
separation of powers that diplomatic immunity is essentially a political question institutional in character. "It is not concerned with the status, dignity or privileges of individuals, but with
and courts should refuse to look beyond a determination by the executive branch the elements of functional independence necessary to free international institutions from national
of the government, and where the plea of diplomatic immunity is recognized and control and to enable them to discharge their responsibilities impartially on behalf of all their
affirmed by the executive branch of the government as in the case at bar, it is members. 13 The raison d'etre for these immunities is the assurance of unimpeded performance of their
then the duty of the courts to accept the claim of immunity upon appropriate functions by the agencies concerned.
suggestion by the principal law officer of the government . . . or other officer
acting under his direction. Hence, in adherence to the settled principle that courts The grant of immunity from local jurisdiction to ICMC and IRRI is clearly necessitated by their
may not so exercise their jurisdiction . . . as to embarrass the executive arm of international character and respective purposes. The objective is to avoid the danger of partiality and
the government in conducting foreign relations, it is accepted doctrine that in interference by the host country in their internal workings. The exercise of jurisdiction by the
such cases the judicial department of (this) government follows the action of the Department of Labor in these instances would defeat the very purpose of immunity, which is to shield
political branch and will not embarrass the latter by assuming an antagonistic the affairs of international organizations, in accordance with international practice, from political
jurisdiction. 3 pressure or control by the host country to the prejudice of member States of the organization, and to
ensure the unhampered performance of their functions.
A brief look into the nature of international organizations and specialized agencies is in order. The term
"international organization" is generally used to describe an organization set up by agreement between ICMC's and IRRI's immunity from local jurisdiction by no means deprives labor of its basic rights, which
two or more states. 4 Under contemporary international law, such organizations are endowed with are guaranteed by Article II, Section 18, 14 Article III, Section 8, 15 and Article XIII, Section 3 (supra), of
some degree of international legal personality 5 such that they are capable of exercising specific rights, the 1987 Constitution; and implemented by Articles 243 and 246 of the Labor Code, 16 relied on by the
duties and powers. 6 They are organized mainly as a means for conducting general international BLR Director and by Kapisanan.
For, ICMC employees are not without recourse whenever there are disputes to be settled. Section 31 cases either from the order or the results of the election itself, was already in effect, specifically since
of the Convention on the Privileges and Immunities of the Specialized Agencies of the United 21 March 1989. Hence, no grave abuse of discretion may be imputed to respondent Secretary of Labor
Nations 17 provides that "each specialized agency shall make provision for appropriate modes of in his assumption of appellate jurisdiction, contrary to Kapisanan's allegations. The pertinent portion of
settlement of: (a) disputes arising out of contracts or other disputes of private character to which the that law provides:
specialized agency is a party." Moreover, pursuant to Article IV of the Memorandum of Agreement
between ICMC the the Philippine Government, whenever there is any abuse of privilege by ICMC, the
Government is free to withdraw the privileges and immunities accorded. Thus: Art. 259. — Any party to an election may appeal the order or results of the
election as determined by the Med-Arbiter directly to the Secretary of Labor and
Employment on the ground that the rules and regulations or parts thereof
Art. IV. Cooperation with Government Authorities. — 1. The Commission shall established by the Secretary of Labor and Employment for the conduct of the
cooperate at all times with the appropriate authorities of the Government to election have been violated. Such appeal shall be decided within 15 calendar
ensure the observance of Philippine laws, rules and regulations, facilitate the days (Emphasis supplied).
proper administration of justice and prevent the occurrences of any abuse of the
privileges and immunities granted its officials and alien employees in Article III of
this Agreement to the Commission. En passant, the Court is gratified to note that the heretofore antagonistic positions assumed by two
departments of the executive branch of government have been rectified and the resultant
embarrassment to the Philippine Government in the eyes of the international community now,
2. In the event that the Government determines that there has been an abuse of hopefully, effaced.
the privileges and immunities granted under this Agreement, consultations shall
be held between the Government and the Commission to determine whether any
such abuse has occurred and, if so, the Government shall withdraw the privileges WHEREFORE, in G.R. No. 85750 (the ICMC Case), the Petition is GRANTED, the Order of the
and immunities granted the Commission and its officials. Bureau of Labor Relations for certification election is SET ASIDE, and the Temporary Restraining
Order earlier issued is made PERMANENT.

Neither are the employees of IRRI without remedy in case of dispute with management as, in fact,
there had been organized a forum for better management-employee relationship as evidenced by the In G.R. No. 89331 (the IRRI Case), the Petition is Dismissed, no grave abuse of discretion having been
formation of the Council of IRRI Employees and Management (CIEM) wherein "both management and committed by the Secretary of Labor and Employment in dismissing the Petition for Certification
employees were and still are represented for purposes of maintaining mutual and beneficial Election.
cooperation between IRRI and its employees." The existence of this Union factually and tellingly belies
the argument that Pres. Decree No. 1620, which grants to IRRI the status, privileges and immunities of No pronouncement as to costs.
an international organization, deprives its employees of the right to self-organization.

SO ORDERED.
The immunity granted being "from every form of legal process except in so far as in any particular case
they have expressly waived their immunity," it is inaccurate to state that a certification election is
beyond the scope of that immunity for the reason that it is not a suit against ICMC. A certification Padilla, Sarmiento and Regalado, JJ., concur.
election cannot be viewed as an independent or isolated process. It could tugger off a series of events
in the collective bargaining process together with related incidents and/or concerted activities, which
Paras, J., is on leave.
could inevitably involve ICMC in the "legal process," which includes "any penal, civil and administrative
proceedings." The eventuality of Court litigation is neither remote and from which international
organizations are precisely shielded to safeguard them from the disruption of their functions. Clauses
on jurisdictional immunity are said to be standard provisions in the constitutions of international
Organizations. "The immunity covers the organization concerned, its property and its assets. It is
equally applicable to proceedings in personam and proceedings in rem." 18

We take note of a Manifestation, dated 28 September 1989, in the ICMC Case (p. 161, Rollo), wherein
TUPAS calls attention to the case entitled "International Catholic Migration Commission v. NLRC, et
als., (G.R. No. 72222, 30 January 1989, 169 SCRA 606), and claims that, having taken cognizance of
that dispute (on the issue of payment of salary for the unexpired portion of a six-month probationary
employment), the Court is now estopped from passing upon the question of DOLE jurisdiction petition
over ICMC.

We find no merit to said submission. Not only did the facts of said controversy occur between 1983-
1985, or before the grant to ICMC on 15 July 1988 of the status of a specialized agency with
corresponding immunities, but also because ICMC in that case did not invoke its immunity and,
therefore, may be deemed to have waived it, assuming that during that period (1983-1985) it was
tacitly recognized as enjoying such immunity.

Anent the procedural issue raised in the IRRI Case, suffice it to state that the Decision of the BLR
Director, dated 15 February 1989, had not become final because of a Motion for Reconsideration filed
by IRRI Said Motion was acted upon only on 30 March 1989 when Rep. Act No. 6715, which provides
for direct appeals from the Orders of the Med-Arbiter to the Secretary of Labor in certification election
 [G.R. No. 113191. September 18, 1996] controversy within its (the Commission) jurisdiction' obviously referring to a labor dispute within the
ambit of Art. 217 (on jurisdiction of Labor Arbiters and the Commission over labor cases).

"The procedure, in the adjudication of labor cases, including raising of defenses, is prescribed by law. The
DEPARTMENT OF FOREIGN AFFAIRS, petitioner, vs. NATIONAL LABOR RELATIONS defense of immunity could have been raised before the Labor Arbiter by a special appearance which,
COMMISSION, HON. LABOR ARBITER NIEVES V. DE CASTRO and JOSE C. naturally, may not be considered as a waiver of the very defense being raised. Any decision thereafter is
MAGNAYI, respondents. subject to legal remedies, including appeals to the appropriate division of the Commission and/or a
petition for certiorari with the Supreme Court, under Rule 65 of the Rules of Court. Except where an
appeal is seasonably and properly made, neither the Commission nor the undersigned may review, or even
DECISION question, the propriety of any decision by a Labor Arbiter. Incidentally, the Commission sits en banc (all
fifteen Commissioners) only to promulgate rules of procedure or to formulate policies (Art. 213, Labor
VITUG, J.: Code).

The questions raised in the petition for certiorari are a few coincidental matters relative to "On the other hand, while the undersigned exercises 'administrative supervision over the Commission and
the diplomatic immunity extended to the Asian Development Bank ("ADB"). its regional branches and all its personnel, including the Executive Labor Arbiters and Labor Arbiters'
(penultimate paragraph, Art. 213, Labor Code), he does not have the competence to investigate or review
On 27 January 1993, private respondent initiated NLRC-NCR Case No. 00-01-0690-93 for any decision of a Labor Arbiter. However, on the purely administrative aspect of the decision-making
his alleged illegal dismissal by ADB and the latter's violation of the "labor-only" contracting process, he may cause that an investigation be made of any misconduct, malfeasance or misfeasance, upon
law. Two summonses were served, one sent directly to the ADB and the other through the complaint properly made.
Department of Foreign Affairs ("DFA"), both with a copy of the complaint. Forthwith, the ADB and
the DFA notified respondent Labor Arbiter that the ADB, as well as its President and Officers, were
covered by an immunity from legal process except for borrowings, guaranties or the sale of "If the Department of Foreign Affairs feels that the action of Labor Arbiter Nieves de Castro constitutes
securities pursuant to Article 50(1) and Article 55 of the Agreement Establishing the Asian misconduct, malfeasance or misfeasance, it is suggested that an appropriate complaint be lodged with the
Development Bank (the "Charter") in relation to Section 5 and Section 44 of the Agreement Office of the Ombudsman.
Between The Bank And The Government Of The Philippines Regarding The Bank's
Headquarters (the "Headquarters Agreement").
"Thank you for your kind attention."[2]
The Labor Arbiter took cognizance of the complaint on the impression that the ADB had
waived its diplomatic immunity from suit. In time, the Labor Arbiter rendered his decision, dated 31 Dissatisfied, the DFA lodged the instant petition for certiorari. In this Court's resolution of 31
August 1993, that concluded: January 1994, respondents were required to comment. Petitioner was later constrained to make
an application for a restraining order and/or writ of preliminary injunction following the issuance,
"WHEREFORE, above premises considered, judgment is hereby rendered declaring the complainant as a on 16 March 1994, by the Labor Arbiter of a writ of execution. In a resolution, dated 07 April 1994,
regular employee of respondent ADB, and the termination of his services as illegal. Accordingly, the Court issued the temporary restraining order prayed for.
respondent Bank is hereby ordered:
The Office of the Solicitor General (OSG), in its comment of 26 May 1994, initially assailed
the claim of immunity by the ADB. Subsequently, however, it submitted a Manifestation (dated 20
"1. To immediately reinstate the complainant to his former position effective September 16, 1993; June 1994) stating, among other things, that "after a thorough review of the case and the records,"
it became convinced that ADB, indeed, was correct in invoking its immunity from suit under the
Charter and the Headquarters Agreement.
"2. To pay complainant full backwages from December 1, 1992 to September 15, 1993 in the amount
of P42,750.00 (P4,500.00 x 9 months); The Court is of the same view.

Article 50(1) of the Charter provides:

"3. And to pay complainants other benefits and without loss of seniority rights and other privileges and
benefits due a regular employee of Asian Development Bank from the time he was terminated on
December 31, 1992; The Bank shall enjoy immunity from every form of legal process, except in cases arising out of or in
connection with the exercise of its powers to borrow money, to guarantee obligations, or to buy and sell or
underwrite the sale of securities.[3]
"4. To pay 10% attorney's fees of the total entitlements."[1]

Under Article 55 thereof -

The ADB did not appeal the decision. Instead, on 03 November 1993, the DFA referred the
matter to the National Labor Relations Commission ("NLRC"); in its referral, the DFA sought a
"formal vacation of the void judgment." Replying to the letter, the NLRC Chairman, wrote: All Governors, Directors, alternates, officers and employees of the Bank, including experts performing
missions for the Bank:
"The undersigned submits that the request for the 'investigation' of Labor Arbiter Nieves de Castro, by the
National Labor Relations Commission, has been erroneously premised on Art. 218(c) of the Labor Code, (1) shall be immune from legal process with respect of acts performed by them in their official capacity,
as cited in the letter of Secretary Padilla, considering that the provision deals with 'a question, matter or except when the Bank waives the immunity.[4]
Like provisions are found in the Headquarters Agreement. Thus, its Section 5 reads: government may interfere in their operations or even influence or control its policies and decisions of the
organization; besides, such subjection to local jurisdiction would impair the capacity of such body to
discharge its responsibilities impartially on behalf of its member-states."[13]
"The Bank shall enjoy immunity from every form of legal process, except in cases arising out of, or in
connection with, the exercise of its powers to borrow money, to guarantee obligations, or to buy and sell
or underwrite the sale of securities.[5] Contrary to private respondent's assertion, the claim of immunity is not here being raised
for the first time; it has been invoked before the forum of origin through communications sent by
petitioner and the ADB to the Labor Arbiter, as well as before the NLRC following the rendition of
And, with respect to certain officials of the bank, Section 44 of the agreement states:
the questioned judgment by the Labor Arbiter, but evidently to no avail.

Governors, other representatives of Members, Directors, the President, Vice-President and executive In its communication of 27 May 1993, the DFA, through the Office of Legal Affairs, has
officers as may be agreed upon between the Government and the Bank shall enjoy, during their stay in the advised the NLRC:
Republic of the Philippines in connection with their official duties with the Bank:
"Respectfully returned to the Honorable Domingo B. Mabazza, Labor Arbitration Associate, National
xxxxxxxxx Labor Relations Commission, National Capital Judicial Region, Arbitration Branch, Associated bank
Bldg., T.M. Kalaw St., Ermita, Manila, the attached Notice of Hearing addressed to the Asian
Development Bank, in connection with the aforestated case, for the reason stated in the Department's 1st
(b) Immunity from legal process of every kind in respect of words spoken or written and all acts done by Indorsement dated 23 March 1993, copy attached, which is self-explanatory.
them in their official capacity.[6]
"In view of the fact that the Asian Development Bank (ADB) invokes its immunity which is sustained by
The above stipulations of both the Charter and Headquarters Agreement should be able, nay well the Department of Foreign Affairs, a continuous hearing of this case erodes the credibility of the
enough, to establish that, except in the specified cases of borrowing and guarantee operations, Philippine government before the international community, let alone the negative implication of such a
as well as the purchase, sale and underwriting of securities, the ADB enjoys immunity from legal suit on the official relationship of the Philippine government with the ADB.
process of every form. The Banks officers, on their part, enjoy immunity in respect of all acts
performed by them in their official capacity. The Charter and the Headquarters Agreement
granting these immunities and privileges are treaty covenants and commitments voluntarily "For the Secretary of Foreign Affairs
assumed by the Philippine government which must be respected.
(Sgd.)
In World Health Organization vs. Aquino,[7] we have declared:
"SIME D. HIDALGO
Assistant Secretary"[14]
It is a recognized principle of international law and under our system of separation of powers that
diplomatic immunity is essentially a political question and courts should refuse to look beyond a
The Office of the President, likewise, has issued on 18 May 1993 a letter to the Secretary of
determination by the executive branch of the government, and where the plea of diplomatic immunity is
Labor, viz:
recognized and affirmed by the executive branch of the government x x x it is then the duty of the courts
to accept the claim of immunity upon appropriate suggestion by the principal law officer of the
government, x x x or other officer acting under his direction. Hence, in adherence to the settled principle "Dear Secretary Confesor,
that courts may not so exercise their jurisdiction x x x as to embarrass the executive arm of the
government in conducting foreign relations, it is accepted doctrine that `in such cases the judicial
"I am writing to draw your attention to a case filed by a certain Jose C. Magnayi against the Asian
department of government follows the action of the political branch and will not embarrass the latter by
Development Bank and its President, Kimimasa Tarumizu, before the National Labor Relations
assuming an antagonistic jurisdiction.'"[8]
Commission, National Capital Region Arbitration Board (NLRC NCR Case No. 00-01690-93).

To the same effect is the decision in International Catholic Migration Commission vs.
"Last March 8, the Labor Arbiter charged with the case, Ms. Nieves V. de Castro, addressed a Notice of
Calleja,[9] which has similarly deemed the Memoranda of the Legal Adviser of the Department of
Resolution/Order to the Bank which brought it to the attention of the Department of Foreign Affairs on the
Foreign Affairs to be "a categorical recognition by the Executive Branch of Government that ICMC
ground that the service of such notice was in violation of the RP-ADB Headquarters Agreement which
x x x enjoy(s) immunities accorded to international organizations" and which determination must
provided, inter-alia, for the immunity of the Bank, its President and officers from every form of legal
be held "conclusive upon the Courts in order not to embarrass a political department of
process, except only, in cases of borrowings, guarantees or the sale of securities.
Government. In the instant case, the filing of the petition by the DFA, in behalf of ADB, is itself an
affirmance of the government's own recognition of ADB's immunity.
"The Department of Foreign Affairs, in turn, informed Labor Arbiter Nieves V. de Castro of this fact by
Being an international organization that has been extended a diplomatic status, the ADB is letter dated March 22, copied to you.
independent of the municipal law.[10] In Southeast Asian Fisheries Development Center vs.
Acosta,[11] the Court has cited with approval the opinion[12] of the then Minister of Justice; thus -
"Despite this, the labor arbiter in question persisted to send summons, the latest dated May 4, herewith
attached, regarding the Magnayi case.
"One of the basic immunities of an international organization is immunity from local jurisdiction, i.e., that
it is immune from the legal writs and processes issued by the tribunals of the country where it is
found. (See Jenks, Id., pp. 37-44). The obvious reason for this is that the subjection of such an
organization to the authority of the local courts would afford a convenient medium thru which the host
"The Supreme Court has long settled the matter of diplomatic immunities. In WHO vs. Aquino, SCRA 48, "In Public International Law, when a state or international agency wishes to plead sovereign or diplomatic
it ruled that courts should respect diplomatic immunities of foreign officials recognized by the Philippine immunity in a foreign court, it requests the Foreign Office of the state where it is sued to convey to the
government. Such decision by the Supreme Court forms part of the law of the land. court that said defendant is entitled to immunity.

"Perhaps you should point out to Labor Arbiter Nieves V. de Castro that ignorance of the law is a ground "In the United States, the procedure followed is the process of 'suggestion,' where the foreign state or the
for dismissal. international organization sued in an American court requests the Secretary of State to make a
determination as to whether it is entitled to immunity. If the Secretary of State finds that the defendant is
immune from suit, he, in turn, asks the Attorney General to submit to the court a 'suggestion' that the
"Very truly yours,
defendant is entitled to immunity.In England, a similar procedure is followed, only the Foreign Office
issues a certification to that effect instead of submitting a 'suggestion' (O'Connell, I International Law 130
(Sgd.) [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and Obligations, 50 Yale Law
JOSE B. ALEJANDRINO Journal 1088 [1941]).
Chairman, PCC-ADB"[15]
"In the Philippines, the practice is for the foreign government or the international organization to first
Private respondent argues that, by entering into service contracts with different private secure an executive endorsement of its claim of sovereign or diplomatic immunity. But how the Philippine
companies, ADB has descended to the level of an ordinary party to a commercial transaction Foreign Office conveys its endorsement to the courts varies. In International Catholic Migration
giving rise to a waiver of its immunity from suit. In the case of Holy See vs. Hon. Rosario, Jr.,[16] the Commission vs. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly
Court has held: to the Secretary of Labor and Employment, informing the latter that the respondent-employer could not be
sued because it enjoyed diplomatic immunity. In World Health Organization vs. Aquino, 48 SCRA 242
(1972), the Secretary of Foreign Affairs sent the trial court a telegram to that effect. In Baer vs. Tizon, 57
There are two conflicting concepts of sovereign immunity, each widely held and firmly SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs to request the Solicitor General
established. According to the classical or absolute theory, a sovereign cannot, without its consent, be made to make, in behalf of the Commander of the United States Naval Base at Olongapo City, Zambales, a
a respondent in the Courts of another sovereign. According to the newer or restrictive theory, the 'suggestion' to respondent Judge. The Solicitor General embodied the 'suggestion' in a manifestation and
immunity of the sovereign is recognized only with regard to public acts or acts jure imperii of a state, but memorandum as amicus curiae.
not with regard to private act or acts jure gestionis.

"In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs moved with
xxxxxxxxx this Court to be allowed to intervene on the side of petitioner. The Court allowed the said Department to
file its memorandum in support of petitioner's claim of sovereign immunity.
Certainly, the mere entering into a contract by a foreign state with a private party cannot be the ultimate
test. Such an act can only be the start of the inquiry. The logical question is whether the foreign state is "In some cases, the defense of sovereign immunity was submitted directly to the local courts by the
engaged in the activity in the regular course of business. If the foreign state is not engaged regularly in a respondents through their private counsels (Raquiza vs. Bradford, 75 Phil. 50 [1945]; Miquiabas vs.
business or trade, the particular act or transaction must then be tested by its nature. If the act is in pursuit Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America vs. Guinto, 182 SCRA 644
of a sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it is not [1990] and companion cases). In cases where the foreign states bypass the Foreign Office, the courts can
undertaken for gain or profit.[17] inquire into the facts and make their own determination as to the nature of the acts and transactions
involved."[20]
The service contracts referred to by private respondent have not been intended by the ADB for
profit or gain but are official acts over which a waiver of immunity would not attach. Relative to the propriety of the extraordinary remedy of certiorari, the Court has, under
With regard to the issue of whether or not the DFA has the legal standing to file the present special circumstances, so allowed and entertained such a petition when (a) the questioned order
petition, and whether or not petitioner has regarded the basic rule that certiorari can be availed of or decision is issued in excess of or without jurisdiction,[21] or (b) where the order or decision is a
only when there is no appeal nor plain, speedy and adequate remedy in the ordinary course of patent nullity,[22] which, verily, are the circumstances that can be said to obtain in the present
law, we hold both in the affirmative. case. When an adjudicator is devoid of jurisdiction on a matter before him, his action that assumes
otherwise would be a clear nullity.
The DFA's function includes, among its other mandates, the determination of persons and
institutions covered by diplomatic immunities, a determination which, when challenged, entitles it WHEREFORE, the petition for certiorari is GRANTED, and the decision of the Labor Arbiter,
to seek relief from the court so as not to seriously impair the conduct of the country's foreign dated 31 August 1993 is VACATED for being NULL AND VOID. The temporary restraining order
relations. The DFA must be allowed to plead its case whenever necessary or advisable to enable issued by this Court on 07 April 1994 is hereby made permanent. No costs.
it to help keep the credibility of the Philippine government before the international SO ORDERED.
community. When international agreements are concluded, the parties thereto are deemed to
have likewise accepted the responsibility of seeing to it that their agreements are duly regarded. In
our country, this task falls principally on the DFA as being the highest executive department with
the competence and authority to so act in this aspect of the international arena.[18] In Holy See vs.
Hon. Rosario, Jr.,[19] this Court has explained the matter in good detail; viz:
 [G.R. No. 118295. May 2, 1997] Arguing mainly (1) that the WTO requires the Philippines to place nationals and products of member-countries on the
same footing as Filipinos and local products and (2) that the WTO intrudes, limits and/or impairs the constitutional powers of both
Congress and the Supreme Court, the instant petition before this Court assails the WTO Agreement for violating the mandate of
the 1987 Constitution to develop a self-reliant and independent national economy effectively controlled by Filipinos x x x (to) give
preference to qualified Filipinos (and to) promote the preferential use of Filipino labor, domestic materials and locally produced
goods.
WIGBERTO E. TAADA and ANNA DOMINIQUE COSETENG, as members of the Philippine Senate and as taxpayers;
GREGORIO ANDOLANA and JOKER ARROYO as members of the House of Representatives and as Simply stated, does the Philippine Constitution prohibit Philippine participation in worldwide trade liberalization and
taxpayers; NICANOR P. PERLAS and HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES UNION, economic globalization? Does it prescribe Philippine integration into a global economy that is liberalized, deregulated and
NATIONAL ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR ALTERNATIVE DEVELOPMENT privatized? These are the main questions raised in this petition for certiorari, prohibition and mandamus under Rule 65 of the Rules
INITIATIVES, LIKAS-KAYANG KAUNLARAN FOUNDATION, INC., PHILIPPINE RURAL RECONSTRUCTION of Court praying (1) for the nullification, on constitutional grounds, of the concurrence of the Philippine Senate in the ratification by
MOVEMENT, DEMOKRATIKONG KILUSAN NG MAGBUBUKID NG PILIPINAS, INC., and PHILIPPINE the President of the Philippines of the Agreement Establishing the World Trade Organization (WTO Agreement, for brevity) and
PEASANT INSTITUTE, in representation of various taxpayers and as non-governmental (2) for the prohibition of its implementation and enforcement through the release and utilization of public funds, the assignment of
organizations, petitioners, vs. EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, public officials and employees, as well as the use of government properties and resources by respondent-heads of various
HEHERSON ALVAREZ, AGAPITO AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO HERRERA, executive offices concerned therewith. This concurrence is embodied in Senate Resolution No. 97, dated December 14, 1994.
JOSE LINA, GLORIA MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS OPLE, JOHN OSMEA,
SANTANINA RASUL, RAMON REVILLA, RAUL ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their
respective capacities as members of the Philippine Senate who concurred in the ratification by the President
of the Philippines of the Agreement Establishing the World Trade Organization; SALVADOR ENRIQUEZ, in
his capacity as Secretary of Budget and Management; CARIDAD VALDEHUESA, in her capacity as National The Facts
Treasurer; RIZALINO NAVARRO, in his capacity as Secretary of Trade and Industry; ROBERTO SEBASTIAN,
in his capacity as Secretary of Agriculture; ROBERTO DE OCAMPO, in his capacity as Secretary of Finance;
ROBERTO ROMULO, in his capacity as Secretary of Foreign Affairs; and TEOFISTO T. GUINGONA, in his
capacity as Executive Secretary, respondents. On April 15, 1994, Respondent Rizalino Navarro, then Secretary of the Department of Trade and Industry (Secretary
Navarro, for brevity), representing the Government of the Republic of the Philippines, signed in Marrakesh, Morocco, the Final Act
Embodying the Results of the Uruguay Round of Multilateral Negotiations (Final Act, for brevity).
DECISION
By signing the Final Act,[2] Secretary Navarro on behalf of the Republic of the Philippines, agreed:
PANGANIBAN, J.:

(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities, with a view to seeking
The emergence on January 1, 1995 of the World Trade Organization, abetted by the membership thereto of the vast approval of the Agreement in accordance with their procedures; and
majority of countries has revolutionized international business and economic relations amongst states. It has irreversibly propelled
the world towards trade liberalization and economic globalization. Liberalization, globalization, deregulation and privatization, the
third-millennium buzz words, are ushering in a new borderless world of business by sweeping away as mere historical relics the (b) to adopt the Ministerial Declarations and Decisions.
heretofore traditional modes of promoting and protecting national economies like tariffs, export subsidies, import quotas,
quantitative restrictions, tax exemptions and currency controls. Finding market niches and becoming the best in specific industries
in a market-driven and export-oriented global scenario are replacing age-old beggar-thy-neighbor policies that unilaterally protect On August 12, 1994, the members of the Philippine Senate received a letter dated August 11, 1994 from the President of
weak and inefficient domestic producers of goods and services. In the words of Peter Drucker, the well-known management guru, the Philippines,[3] stating among others that the Uruguay Round Final Act is hereby submitted to the Senate for its concurrence
Increased participation in the world economy has become the key to domestic economic growth and prosperity. pursuant to Section 21, Article VII of the Constitution.

On August 13, 1994, the members of the Philippine Senate received another letter from the President of the
Philippines[4] likewise dated August 11, 1994, which stated among others that the Uruguay Round Final Act, the Agreement
Establishing the World Trade Organization, the Ministerial Declarations and Decisions, and the Understanding on Commitments
Brief Historical Background in Financial Services are hereby submitted to the Senate for its concurrence pursuant to Section 21, Article VII of the Constitution.

On December 9, 1994, the President of the Philippines certified the necessity of the immediate adoption of P.S. 1083, a
resolution entitled Concurring in the Ratification of the Agreement Establishing the World Trade Organization. [5]
To hasten worldwide recovery from the devastation wrought by the Second World War, plans for the establishment of
three multilateral institutions -- inspired by that grand political body, the United Nations -- were discussed at Dumbarton Oaks and On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which Resolved, as it is hereby resolved, that
Bretton Woods. The first was the World Bank (WB) which was to address the rehabilitation and reconstruction of war-ravaged and the Senate concur, as it hereby concurs, in the ratification by the President of the Philippines of the Agreement Establishing the
later developing countries; the second, the International Monetary Fund (IMF) which was to deal with currency problems; and the World Trade Organization.[6] The text of the WTO Agreement is written on pages 137 et seq. of Volume I of the 36-volume Uruguay
third, the International Trade Organization (ITO), which was to foster order and predictability in world trade and to minimize Round of Multilateral Trade Negotiations and includes various agreements and associated legal instruments (identified in the said
unilateral protectionist policies that invite challenge, even retaliation, from other states. However, for a variety of reasons, including Agreement as Annexes 1, 2 and 3 thereto and collectively referred to as Multilateral Trade Agreements, for brevity) as follows:
its non-ratification by the United States, the ITO, unlike the IMF and WB, never took off. What remained was only GATT -- the
General Agreement on Tariffs and Trade. GATT was a collection of treaties governing access to the economies of treaty adherents
with no institutionalized body administering the agreements or dependable system of dispute settlement. ANNEX 1

After half a century and several dizzying rounds of negotiations, principally the Kennedy Round, the Tokyo Round and the
Uruguay Round, the world finally gave birth to that administering body -- the World Trade Organization -- with the signing of the Annex 1A: Multilateral Agreement on Trade in Goods
Final Act in Marrakesh, Morocco and the ratification of the WTO Agreement by its members. [1]

Like many other developing countries, the Philippines joined WTO as a founding member with the goal, as articulated by General Agreement on Tariffs and Trade 1994
President Fidel V. Ramos in two letters to the Senate (infra), of improving Philippine access to foreign markets, especially its major
trading partners, through the reduction of tariffs on its exports, particularly agricultural and industrial products. The President also
saw in the WTO the opening of new opportunities for the services sector x x x, (the reduction of) costs and uncertainty associated Agreement on Agriculture
with exporting x x x, and (the attraction of) more investments into the country.Although the Chief Executive did not expressl y
mention it in his letter, the Philippines - - and this is of special interest to the legal profession - - will benefit from the WTO system
of dispute settlement by judicial adjudication through the independent WTO settlement bodies called (1) Dispute Settlement Panels Agreement on the Application of Sanitary and
and (2) Appellate Tribunal. Heretofore, trade disputes were settled mainly through negotiations where solutions were arrived at
frequently on the basis of relative bargaining strengths, and where naturally, weak and underdeveloped countries were at a
disadvantage. Phytosanitary Measures

Agreement on Textiles and Clothing

The Petition in Brief

 Agreement on Technical Barriers to Trade stationed in Geneva, Switzerland, to submit a paper, hereafter referred to as Bautista Paper,[9] for brevity, (1) providing a historical
background of and (2) summarizing the said agreements.

Agreement on Trade-Related Investment Measures During the Oral Argument held on August 27, 1996, the Court directed:

Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (a) the petitioners to submit the (1) Senate Committee Report on the matter in controversy and (2) the transcript of proceedings/hearings in the
Senate; and

Agreement on Implementation of Article VII of the General on Tariffs and Trade 1994
(b) the Solicitor General, as counsel for respondents, to file (1) a list of Philippine treaties signed prior to the Philippine adherence to the
WTO Agreement, which derogate from Philippine sovereignty and (2) copies of the multi-volume WTO Agreement and other documents
Agreement on Pre-Shipment Inspection mentioned in the Final Act, as soon as possible.

Agreement on Rules of Origin After receipt of the foregoing documents, the Court said it would consider the case submitted for resolution. In a
Compliance dated September 16, 1996, the Solicitor General submitted a printed copy of the 36-volume Uruguay Round of
Multilateral Trade Negotiations, and in another Compliance dated October 24, 1996, he listed the various bilateral or multilateral
Agreement on Imports Licensing Procedures treaties or international instruments involving derogation of Philippine sovereignty. Petitioners, on the other hand, submitted their
Compliance dated January 28, 1997, on January 30, 1997.

Agreement on Subsidies and Coordinating Measures

Agreement on Safeguards The Issues

Annex 1B: General Agreement on Trade in Services and Annexes

In their Memorandum dated March 11, 1996, petitioners summarized the issues as follows:

Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights

A. Whether the petition presents a political question or is otherwise not justiciable.

ANNEX 2
B. Whether the petitioner members of the Senate who participated in the deliberations and voting leading to the concurrence are
estopped from impugning the validity of the Agreement Establishing the World Trade Organization or of the validity of the
Understanding on Rules and Procedures Governing the Settlement of Disputes concurrence.

ANNEX 3 C. Whether the provisions of the Agreement Establishing the World Trade Organization contravene the provisions of Sec. 19, Article
II, and Secs. 10 and 12, Article XII, all of the 1987 Philippine Constitution.

Trade Policy Review Mechanism

D. Whether provisions of the Agreement Establishing the World Trade Organization unduly limit, restrict and impair Philippine
sovereignty specifically the legislative power which, under Sec. 2, Article VI, 1987 Philippine Constitution is vested in the
On December 16, 1994, the President of the Philippines signed [7] the Instrument of Ratification, declaring: Congress of the Philippines;

NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of the Philippines, after having seen and considered E. Whether provisions of the Agreement Establishing the World Trade Organization interfere with the exercise of judicial power.
the aforementioned Agreement Establishing the World Trade Organization and the agreements and associated legal instruments included in
Annexes one (1), two (2) and three (3) of that Agreement which are integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do
hereby ratify and confirm the same and every Article and Clause thereof. F. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of jurisdiction when
they voted for concurrence in the ratification of the constitutionally-infirm Agreement Establishing the World Trade
Organization.
To emphasize, the WTO Agreement ratified by the President of the Philippines is composed of the Agreement Proper and
the associated legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts
thereof. G. Whether the respondent members of the Senate acted in grave abuse of discretion amounting to lack or excess of jurisdiction
when they concurred only in the ratification of the Agreement Establishing the World Trade Organization, and not with the
On the other hand, the Final Act signed by Secretary Navarro embodies not only the WTO Agreement (and its integral Presidential submission which included the Final Act, Ministerial Declaration and Decisions, and the Understanding on
annexes aforementioned) but also (1) the Ministerial Declarations and Decisions and (2) the Understanding on Commitments in Commitments in Financial Services.
Financial Services. In his Memorandum dated May 13, 1996,[8] the Solicitor General describes these two latter documents as
follows:
On the other hand, the Solicitor General as counsel for respondents synthesized the several issues raised by petitioners
into the following:[10]
The Ministerial Decisions and Declarations are twenty-five declarations and decisions on a wide range of matters, such as measures in favor
of least developed countries, notification procedures, relationship of WTO with the International Monetary Fund (IMF), and agreements on
technical barriers to trade and on dispute settlement. 1. Whether or not the provisions of the Agreement Establishing the World Trade Organization and the Agreements and Associated Legal
Instruments included in Annexes one (1), two (2) and three (3) of that agreement cited by petitioners directly contravene or undermine the
letter, spirit and intent of Section 19, Article II and Sections 10 and 12, Article XII of the 1987 Constitution.
The Understanding on Commitments in Financial Services dwell on, among other things, standstill or limitations and qualificat ions of
commitments to existing non-conforming measures, market access, national treatment, and definitions of non-resident supplier of financial
services, commercial presence and new financial service. 2. Whether or not certain provisions of the Agreement unduly limit, restrict or impair the exercise of legislative power by Congress.

On December 29, 1994, the present petition was filed. After careful deliberation on respondents comment and petitioners 3. Whether or not certain provisions of the Agreement impair the exercise of judicial power by this Honorable Court in promulgating the rules
reply thereto, the Court resolved on December 12, 1995, to give due course to the petition, and the parties thereafter filed their of evidence.
respective memoranda. The Court also requested the Honorable Lilia R. Bautista, the Philippine Ambassador to the United Nations
4. Whether or not the concurrence of the Senate in the ratification by the President of the Philippines of the Agreement establishing the World abuse of discretion amounting to excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on matters of
Trade Organization implied rejection of the treaty embodied in the Final Act. this nature.

As this Court has repeatedly and firmly emphasized in many cases,[18] it will not shirk, digress from or abandon its sacred
By raising and arguing only four issues against the seven presented by petitioners, the Solicitor General has effectively duty and authority to uphold the Constitution in matters that involve grave abuse of discretion brought before it in appropriate
ignored three, namely: (1) whether the petition presents a political question or is otherwise not justiciable; (2) whether petitioner- cases, committed by any officer, agency, instrumentality or department of the government.
members of the Senate (Wigberto E. Taada and Anna Dominique Coseteng) are estopped from joining this suit; and (3) whether
the respondent-members of the Senate acted in grave abuse of discretion when they voted for concurrence in the ratification of As the petition alleges grave abuse of discretion and as there is no other plain, speedy or adequate remedy in the ordinary
the WTO Agreement. The foregoing notwithstanding, this Court resolved to deal with these three issues thus: course of law, we have no hesitation at all in holding that this petition should be given due course and the vital questions raised
therein ruled upon under Rule 65 of the Rules of Court. Indeed, certiorari, prohibition and mandamus are appropriate remedies to
raise constitutional issues and to review and/or prohibit/nullify, when proper, acts of legislative and executive officials. On this, we
(1) The political question issue -- being very fundamental and vital, and being a matter that probes into the very jurisdiction of this Court to have no equivocation.
hear and decide this case -- was deliberated upon by the Court and will thus be ruled upon as the first issue;
We should stress that, in deciding to take jurisdiction over this petition, this Court will not review the wisdom of the decision
of the President and the Senate in enlisting the country into the WTO, or pass upon the merits of trade liberalization as a policy
(2) The matter of estoppel will not be taken up because this defense is waivable and the respondents have effectively waived it by not espoused by said international body. Neither will it rule on the propriety of the governments economic policy of reducing/removing
pursuing it in any of their pleadings; in any event, this issue, even if ruled in respondents favor, will not cause the petitions dismissal as there tariffs, taxes, subsidies, quantitative restrictions, and other import/trade barriers. Rather, it will only exercise its constitutional duty
are petitioners other than the two senators, who are not vulnerable to the defense of estoppel; and to determine whether or not there had been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of
the Senate in ratifying the WTO Agreement and its three annexes.

(3) The issue of alleged grave abuse of discretion on the part of the respondent senators will be taken up as an integral part of the disposition
of the four issues raised by the Solicitor General.

Second Issue: The WTO Agreement and Economic Nationalism

During its deliberations on the case, the Court noted that the respondents did not question the locus standi of
petitioners. Hence, they are also deemed to have waived the benefit of such issue.They probably realized that grave constitutional
issues, expenditures of public funds and serious international commitments of the nation are involved here, and that transcendental
public interest requires that the substantive issues be met head on and decided on the merits, rather than skirted or deflected by This is the lis mota, the main issue, raised by the petition.
procedural matters.[11]
Petitioners vigorously argue that the letter, spirit and intent of the Constitution mandating economic nationalism are violated
To recapitulate, the issues that will be ruled upon shortly are: by the so-called parity provisions and national treatment clauses scattered in various parts not only of the WTO Agreement and its
annexes but also in the Ministerial Decisions and Declarations and in the Understanding on Commitments in Financial Services.
(1) DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY? OTHERWISE STATED, DOES THE
PETITION INVOLVE A POLITICAL QUESTION OVER WHICH THIS COURT HAS NO JURISDICTION? Specifically, the flagship constitutional provisions referred to are Sec. 19, Article II, and Secs. 10 and 12, Article XII, of the
Constitution, which are worded as follows:
(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE ANNEXES CONTRAVENE SEC. 19,
ARTICLE II, AND SECS. 10 AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION?
Article II
(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES LIMIT, RESTRICT, OR IMPAIR THE
EXERCISE OF LEGISLATIVE POWER BY CONGRESS?
DECLARATION OF PRINCIPLES AND STATE POLICIES
(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE EXERCISE OF JUDICIAL POWER
BY THIS COURT IN PROMULGATING RULES ON EVIDENCE?
xx xx xx xx
(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT AND ITS ANNEXES SUFFICIENT
AND/OR VALID, CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT, MINISTERIAL
DECLARATIONS AND DECISIONS, AND THE UNDERSTANDING ON COMMITMENTS IN FINANCIAL Sec. 19. The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.
SERVICES?

xx xx xx xx

The First Issue: Does the Court Have Jurisdiction Over the Controversy? Article XII

NATIONAL ECONOMY AND PATRIMONY

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt
raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have infringed the Constitution, it
becomes not only the right but in fact the duty of the judiciary to settle the dispute. The question thus posed is judicial rather than xx xx xx xx
political. The duty (to adjudicate) remains to assure that the supremacy of the Constitution is upheld.[12] Once a controversy as to
the application or interpretation of a constitutional provision is raised before this Court (as in the instant case), it becomes a legal
issue which the Court is bound by constitutional mandate to decide. [13] Sec. 10. x x x. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly
owned by Filipinos.
[14]
The jurisdiction of this Court to adjudicate the matters raised in the petition is clearly set out in the 1987
Constitution,[15] as follows:
In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified
Filipinos.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part
of any branch or instrumentality of the government. xx xx xx xx

The foregoing text emphasizes the judicial departments duty and power to strike down grave abuse of discretion on the Sec. 12. The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and adopt measures
part of any branch or instrumentality of government including Congress. It is an innovation in our political law. [16] As explained by that help make them competitive.
former Chief Justice Roberto Concepcion,[17] the judiciary is the final arbiter on the question of whether or not a branch of
government or any of its officials has acted without jurisdiction or in excess of jurisdiction or so capriciously as to constitute an
 Petitioners aver that these sacred constitutional principles are desecrated by the following WTO provisions quoted in their Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own
memorandum:[19] nationals with regard to the protection of intellectual property... (par. 1, Article 3, Agreement on Trade-Related Aspect of Intellectual
Property rights, Vol. 31, Uruguay Round, Legal Instruments, p.25432 (emphasis supplied)

a) In the area of investment measures related to trade in goods (TRIMS, for brevity):
(c) In the area of the General Agreement on Trade in Services:

Article 2
National Treatment

National Treatment and Quantitative Restrictions.

1. In the sectors inscribed in its schedule, and subject to any conditions and qualifications set out therein, each Member shall
accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of
1. Without prejudice to other rights and obligations under GATT 1994. no Member shall apply any TRIM that is services, treatment no less favourable than it accords to its own like services and service suppliers.
inconsistent with the provisions of Article III or Article XI of GATT 1994.

2. A Member may meet the requirement of paragraph I by according to services and service suppliers of any other Member,
2. An Illustrative list of TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions either formally identical treatment or formally different treatment to that it accords to its own like services and service
provided for in paragraph I of Article XI of GATT 1994 is contained in the Annex to this Agreement. (Agreement on suppliers.
Trade-Related Investment Measures, Vol. 27, Uruguay Round, Legal Instruments, p.22121, emphasis supplied).

3. Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of
The Annex referred to reads as follows: completion in favour of services or service suppliers of the Member compared to like services or service suppliers of
any other Member. (Article XVII, General Agreement on Trade in Services, Vol. 28, Uruguay Round Legal
Instruments, p.22610 emphasis supplied).
ANNEX

It is petitioners position that the foregoing national treatment and parity provisions of the WTO Agreement place nationals
Illustrative List and products of member countries on the same footing as Filipinos and local products, in contravention of the Filipino First policy
of the Constitution. They allegedly render meaningless the phrase effectively controlled by Filipinos. The constitutional conflict
becomes more manifest when viewed in the context of the clear duty imposed on the Philippines as a WTO member to ensure the
1. TRIMS that are inconsistent with the obligation of national treatment provided for in paragraph 4 of Article III of GATT conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed
1994 include those which are mandatory or enforceable under domestic law or under administrative rulings, or agreements.[20] Petitioners further argue that these provisions contravene constitutional limitations on the role exports play in
compliance with which is necessary to obtain an advantage, and which require: national development and negate the preferential treatment accorded to Filipino labor, domestic materials and locally produced
goods.

(a) the purchase or use by an enterprise of products of domestic origin or from any domestic source, whether specified in On the other hand, respondents through the Solicitor General counter (1) that such Charter provisions are not self-
terms of particular products, in terms of volume or value of products, or in terms of proportion of volume or value executing and merely set out general policies; (2) that these nationalistic portions of the Constitution invoked by petitioners should
of its local production; or not be read in isolation but should be related to other relevant provisions of Art. XII, particularly Secs. 1 and 13 thereof; (3) that
read properly, the cited WTO clauses do not conflict with the Constitution; and (4) that the WTO Agreement contains sufficient
provisions to protect developing countries like the Philippines from the harshness of sudden trade liberalization.
(b) that an enterprises purchases or use of imported products be limited to an amount related to the volume or value of local
products that it exports. We shall now discuss and rule on these arguments.

2. TRIMS that are inconsistent with the obligations of general elimination of quantitative restrictions provided for in paragraph 1 of
Article XI of GATT 1994 include those which are mandatory or enforceable under domestic laws or under administrative
rulings, or compliance with which is necessary to obtain an advantage, and which restrict: Declaration of Principles Not Self-Executing

(a) the importation by an enterprise of products used in or related to the local production that it exports;
By its very title, Article II of the Constitution is a declaration of principles and state policies. The counterpart of this article
in the 1935 Constitution[21] is called the basic political creed of the nation by Dean Vicente Sinco.[22] These principles in Article II
(b) the importation by an enterprise of products used in or related to its local production by restricting its access to foreign are not intended to be self-executing principles ready for enforcement through the courts. [23] They are used by the judiciary as aids
exchange inflows attributable to the enterprise; or or as guides in the exercise of its power of judicial review, and by the legislature in its enactment of laws. As held in the leading
case of Kilosbayan, Incorporated vs. Morato,[24] the principles and state policies enumerated in Article II and some sections of
Article XII are not self-executing provisions, the disregard of which can give rise to a cause of action in the courts. They do not
(c) the exportation or sale for export specified in terms of particular products, in terms of volume or value of products, or in embody judicially enforceable constitutional rights but guidelines for legislation.
terms of a preparation of volume or value of its local production. (Annex to the Agreement on Trade-Related
Investment Measures, Vol. 27, Uruguay Round Legal Documents, p.22125, emphasis supplied). In the same light, we held in Basco vs. Pagcor[25] that broad constitutional principles need legislative enactments to
implement them, thus:

The paragraph 4 of Article III of GATT 1994 referred to is quoted as follows:

On petitioners allegation that P.D. 1869 violates Sections 11 (Personal Dignity) 12 (Family) and 13 (Role of Youth) of Article II; Section 13
(Social Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution, suffice it to state also that these
The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment are merely statements of principles and policies. As such, they are basically not self-executing, meaning a law should be passed by Congress
no less favorable than that accorded to like products of national origin in respect of laws, regulations and requirements affecting their to clearly define and effectuate such principles.
internal sale, offering for sale, purchase, transportation, distribution or use. the provisions of this paragraph shall not prevent the application
of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the
nationality of the product. (Article III, GATT 1947, as amended by the Protocol Modifying Part II, and Article XXVI of GATT, 14 In general, therefore, the 1935 provisions were not intended to be self-executing principles ready for enforcement through the courts. They
September 1948, 62 UMTS 82-84 in relation to paragraph 1(a) of the General Agreement on Tariffs and Trade 1994, Vol. 1, Uruguay Round, were rather directives addressed to the executive and to the legislature. If the executive and the legislature failed to heed the directives of the
Legal Instruments p.177, emphasis supplied). article, the available remedy was not judicial but political. The electorate could express their displeasure with the failure of the executive and
the legislature through the language of the ballot. (Bernas, Vol. II, p. 2).

b) In the area of trade related aspects of intellectual property rights (TRIPS, for brevity):
The reasons for denying a cause of action to an alleged infringement of broad constitutional principles are sourced from
basic considerations of due process and the lack of judicial authority to wade into the uncharted ocean of social and economi c
policy making. Mr. Justice Florentino P. Feliciano in his concurring opinion in Oposa vs. Factoran, Jr.,[26] explained these reasons 2. A sustained increase in the amount of goods and services provided by the nation for the benefit of the people; and
as follows:
3. An expanding productivity as the key to raising the quality of life for all especially the underprivileged.

My suggestion is simply that petitioners must, before the trial court, show a more specific legal right -- a right cast in language of a With these goals in context, the Constitution then ordains the ideals of economic nationalism (1) by expressing preference
significantly lower order of generality than Article II (15) of the Constitution -- that is or may be violated by the actions, or failures to act, in favor of qualified Filipinos in the grant of rights, privileges and concessions covering the national economy and patrimony[27] and
imputed to the public respondent by petitioners so that the trial court can validly render judgment granting all or part of the relief prayed in the use of Filipino labor, domestic materials and locally-produced goods; (2) by mandating the State to adopt measures that
for. To my mind, the court should be understood as simply saying that such a more specific legal right or rights may well exist in our corpus help make them competitive;[28] and (3) by requiring the State to develop a self-reliant and independent national economy
of law, considering the general policy principles found in the Constitution and the existence of the Philippine Environment Code, and that the effectively controlled by Filipinos.[29] In similar language, the Constitution takes into account the realities of the outside world as it
trial court should have given petitioners an effective opportunity so to demonstrate, instead of aborting the proceedings on a motion to requires the pursuit of a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the
dismiss. basis of equality and reciprocity;[30] and speaks of industries which are competitive in both domestic and foreign markets as well
as of the protection of Filipino enterprises against unfair foreign competition and trade practices.

It seems to me important that the legal right which is an essential component of a cause of action be a specific, operable legal right, rather It is true that in the recent case of Manila Prince Hotel vs. Government Service Insurance System, et al.,[31] this Court held
than a constitutional or statutory policy, for at least two (2) reasons. One is that unless the legal right claimed to have been violated or that Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive command which is complete in itself and which
disregarded is given specification in operational terms, defendants may well be unable to defend themselves intelligently and effectively; in needs no further guidelines or implementing laws or rules for its enforcement. From its very words the provision does not require
other words, there are due process dimensions to this matter. any legislation to put it in operation. It is per se judicially enforceable. However, as the constitutional provision itself states, it is
enforceable only in regard to the grants of rights, privileges and concessions covering national economy and patrimony and not to
every aspect of trade and commerce. It refers to exceptions rather than the rule. The issue here is not whether this paragraph of
The second is a broader-gauge consideration -- where a specific violation of law or applicable regulation is not alleged or proved, petitioners Sec. 10 of Art. XII is self-executing or not. Rather, the issue is whether, as a rule, there are enough balancing provisions in the
can be expected to fall back on the expanded conception of judicial power in the second paragraph of Section 1 of Article VIII of the Constitution to allow the Senate to ratify the Philippine concurrence in the WTO Agreement. And we hold that there are.
Constitution which reads:
All told, while the Constitution indeed mandates a bias in favor of Filipino goods, services, labor and enterprises, at the
same time, it recognizes the need for business exchange with the rest of the world on the bases of equality and reciprocity and
Section 1. x x x limits protection of Filipino enterprises only against foreign competition and trade practices that are unfair. [32] In other words, the
Constitution did not intend to pursue an isolationist policy. It did not shut out foreign investments, goods and services in the
development of the Philippine economy. While the Constitution does not encourage the unlimited entry of foreign goods, services
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and and investments into the country, it does not prohibit them either. In fact, it allows an exchange on the basis of equality and
enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part reciprocity, frowning only on foreign competition that is unfair.
of any branch or instrumentality of the Government. (Emphases supplied)

When substantive standards as general as the right to a balanced and healthy ecology and the right to health are combined with remedial
standards as broad ranging as a grave abuse of discretion amounting to lack or excess of jurisdiction, the result will be, it is respectfully WTO Recognizes Need to Protect Weak Economies
submitted, to propel courts into the uncharted ocean of social and economic policy making. At least in respect of the vast area of
environmental protection and management, our courts have no claim to special technical competence and experience and professional
qualification. Where no specific, operable norms and standards are shown to exist, then the policy making departments -- the legislative and
executive departments -- must be given a real and effective opportunity to fashion and promulgate those norms and standards, and to Upon the other hand, respondents maintain that the WTO itself has some built-in advantages to protect weak and
implement them before the courts should intervene. developing economies, which comprise the vast majority of its members. Unlike in the UN where major states have permanent
seats and veto powers in the Security Council, in the WTO, decisions are made on the basis of sovereign equality, with each
members vote equal in weight to that of any other. There is no WTO equivalent of the UN Security Council.

Economic Nationalism Should Be Read with Other Constitutional Mandates to Attain Balanced Development of WTO decides by consensus whenever possible, otherwise, decisions of the Ministerial Conference and the General Council shall be taken by
Economy the majority of the votes cast, except in cases of interpretation of the Agreement or waiver of the obligation of a member which would require
three fourths vote. Amendments would require two thirds vote in general. Amendments to MFN provisions and the Amendments provision
will require assent of all members. Any member may withdraw from the Agreement upon the expiration of six months from the date of notice
of withdrawals.[33]
On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down general principles relating to the national
economy and patrimony, should be read and understood in relation to the other sections in said article, especially Secs. 1 and 13
thereof which read: Hence, poor countries can protect their common interests more effectively through the WTO than through one-on-one
negotiations with developed countries. Within the WTO, developing countries can form powerful blocs to push their economic
agenda more decisively than outside the Organization. This is not merely a matter of practical alliances but a negotiating strategy
Section 1. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in rooted in law. Thus, the basic principles underlying the WTO Agreement recognize the need of developing countries like the
the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the Philippines to share in the growth in international trade commensurate with the needs of their economic development. These basic
quality of life for all, especially the underprivileged. principles are found in the preamble[34] of the WTO Agreement as follows:

The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through The Parties to this Agreement,
industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign
markets. However, the State shall protect Filipino enterprises against unfair foreign competition and trade practices.
Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living,
ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and
In the pursuit of these goals, all sectors of the economy and all regions of the country shall be given optimum opportunity to develop. x x x trade in goods and services, while allowing for the optimal use of the worlds resources in accordance with the objective of sustainable
development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their
respective needs and concerns at different levels of economic development,
xxxxxxxxx

Recognizing further that there is need for positive efforts designed to ensure that developing countries, and especially the least developed
Sec. 13. The State shall pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis among them, secure a share in the growth in international trade commensurate with the needs of their economic development,
of equality and reciprocity.

Being desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the
As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national economic development, as follows: substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations,

1. A more equitable distribution of opportunities, income and wealth;

Resolved, therefore, to develop an integrated, more viable and durable multilateral trading system encompassing the General Agreement on The Constitution has not really shown any unbalanced bias in favor of any business or enterprise, nor does it contain any
Tariffs and Trade, the results of past trade liberalization efforts, and all of the results of the Uruguay Round of Multilateral Trade specific pronouncement that Filipino companies should be pampered with a total
Negotiations, proscription of foreign competition. On the other hand, respondents claim that WTO/GATT aims to make available to the Filipino
consumer the best goods and services obtainable anywhere in the world at the most reasonable prices. Consequently, the question
boils down to whether WTO/GATT will favor the general welfare of the public at large.
Determined to preserve the basic principles and to further the objectives underlying this multilateral trading system, x x x. (underscoring
supplied.) Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to reality?

Will WTO/GATT succeed in promoting the Filipinos general welfare because it will -- as promised by its promoters --
expand the countrys exports and generate more employment?

Specific WTO Provisos Protect Developing Countries Will it bring more prosperity, employment, purchasing power and quality products at the most reasonable rates to the
Filipino public?

The responses to these questions involve judgment calls by our policy makers, for which they are answerable to our people
So too, the Solicitor General points out that pursuant to and consistent with the foregoing basic principles, the WTO during appropriate electoral exercises. Such questions and the answers thereto are not subject to judicial pronouncements based
Agreement grants developing countries a more lenient treatment, giving their domestic industries some protection from the rush on grave abuse of discretion.
of foreign competition. Thus, with respect to tariffs in general, preferential treatment is given to developing countries in terms of
the amount of tariff reduction and the period within which the reduction is to be spread out. Specifically, GATT requires an average
tariff reduction rate of 36% for developed countries to be effected within a period of six (6) years while developing countries --
including the Philippines -- are required to effect an average tariff reduction of only 24% within ten (10) years.
Constitution Designed to Meet Future Events and Contingencies
In respect to domestic subsidy, GATT requires developed countries to reduce domestic support to agricultural products
by 20% over six (6) years, as compared to only 13% for developing countries to be effected within ten (10) years.

In regard to export subsidy for agricultural products, GATT requires developed countries to reduce their budgetary outlays No doubt, the WTO Agreement was not yet in existence when the Constitution was drafted and ratified in 1987. That does
for export subsidy by 36% and export volumes receiving export subsidy by 21% within a period of six (6) years. For developing not mean however that the Charter is necessarily flawed in the sense that its framers might not have anticipated the advent of a
countries, however, the reduction rate is only two-thirds of that prescribed for developed countries and a longer period of ten (10) borderless world of business. By the same token, the United Nations was not yet in existence when the 1935 Constitution became
years within which to effect such reduction. effective. Did that necessarily mean that the then Constitution might not have contemplated a diminution of the absoluteness of
sovereignty when the Philippines signed the UN Charter, thereby effectively surrendering part of its control over its foreign relations
Moreover, GATT itself has provided built-in protection from unfair foreign competition and trade practices including anti- to the decisions of various UN organs like the Security Council?
dumping measures, countervailing measures and safeguards against import surges. Where local businesses are jeopardized by
unfair foreign competition, the Philippines can avail of these measures. There is hardly therefore any basis for the statement that It is not difficult to answer this question. Constitutions are designed to meet not only the vagaries of contemporary
under the WTO, local industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the events. They should be interpreted to cover even future and unknown circumstances. It is to the credit of its drafters that a
economy. Quite the contrary, the weaker situations of developing nations like the Philippines have been taken into account; thus, Constitution can withstand the assaults of bigots and infidels but at the same time bend with the refreshing winds of change
there would be no basis to say that in joining the WTO, the respondents have gravely abused their discretion. True, they have necessitated by unfolding events. As one eminent political law writer and respected jurist [38] explains:
made a bold decision to steer the ship of state into the yet uncharted sea of economic liberalization. But such decision cannot be
set aside on the ground of grave abuse of discretion, simply because we disagree with it or simply because we believe only in
other economic policies. As earlier stated, the Court in taking jurisdiction of this case will not pass upon the advantages and The Constitution must be quintessential rather than superficial, the root and not the blossom, the base and framework only of the edifice that
disadvantages of trade liberalization as an economic policy. It will only perform its constitutional duty of determining whether the is yet to rise. It is but the core of the dream that must take shape, not in a twinkling by mandate of our delegates, but slowly in the crucible of
Senate committed grave abuse of discretion. Filipino minds and hearts, where it will in time develop its sinews and gradually gather its strength and finally achieve its substance. In fine,
the Constitution cannot, like the goddess Athena, rise full-grown from the brow of the Constitutional Convention, nor can it conjure by mere
fiat an instant Utopia. It must grow with the society it seeks to re-structure and march apace with the progress of the race, drawing from the
vicissitudes of history the dynamism and vitality that will keep it, far from becoming a petrified rule, a pulsing, living law attuned to the
heartbeat of the nation.
Constitution Does Not Rule Out Foreign Competition

Furthermore, the constitutional policy of a self-reliant and independent national economy [35] does not necessarily rule out Third Issue: The WTO Agreement and Legislative Power
the entry of foreign investments, goods and services. It contemplates neither economic seclusion nor mendicancy in the
international community. As explained by Constitutional Commissioner Bernardo Villegas, sponsor of this constitutional policy:

The WTO Agreement provides that (e)ach Member shall ensure the conformity of its laws, regulations and administrative
Economic self-reliance is a primary objective of a developing country that is keenly aware of overdependence on external assistance for even procedures with its obligations as provided in the annexed Agreements. [39]Petitioners maintain that this undertaking unduly limits,
its most basic needs. It does not mean autarky or economic seclusion; rather, it means avoiding mendicancy in the international restricts and impairs Philippine sovereignty, specifically the legislative power which under Sec. 2, Article VI of the 1987 Philippine
community. Independence refers to the freedom from undue foreign control of the national economy, especially in such strategic industries as Constitution is vested in the Congress of the Philippines. It is an assault on the sovereign powers of the Philippines because this
in the development of natural resources and public utilities. [36] means that Congress could not pass legislation that will be good for our national interest and general welfare if such legislation
will not conform with the WTO Agreement, which not only relates to the trade in goods x x x but also to the flow of investments and
money x x x as well as to a whole slew of agreements on socio-cultural matters x x x.[40]
The WTO reliance on most favored nation, national treatment, and trade without discrimination cannot be struck down as
unconstitutional as in fact they are rules of equality and reciprocity that apply to all WTO members. Aside from envisioning a trade More specifically, petitioners claim that said WTO proviso derogates from the power to tax, which is lodged in the
policy based on equality and reciprocity, [37] the fundamental law encourages industries that are competitive in both domestic and Congress.[41] And while the Constitution allows Congress to authorize the President to fix tariff rates, import and export quotas,
foreign markets, thereby demonstrating a clear policy against a sheltered domestic trade environment, but one in favor of the tonnage and wharfage dues, and other duties or imposts, such authority is subject to specified limits and x x x such limitations and
gradual development of robust industries that can compete with the best in the foreign markets. Indeed, Filipino managers and restrictions as Congress may provide,[42] as in fact it did under Sec. 401 of the Tariff and Customs Code.
Filipino enterprises have shown capability and tenacity to compete internationally. And given a free trade environment, Filipino
entrepreneurs and managers in Hongkong have demonstrated the Filipino capacity to grow and to prosper against the best offered
under a policy of laissez faire.

Sovereignty Limited by International Law and Treaties

Constitution Favors Consumers, Not Industries or Enterprises

This Court notes and appreciates the ferocity and passion by which petitioners stressed their arguments on this
issue. However, while sovereignty has traditionally been deemed absolute and all-encompassing on the domestic level, it is
however subject to restrictions and limitations voluntarily agreed to by the Philippines, expressly or impliedly, as a member of the
family of nations.Unquestionably, the Constitution did not envision a hermit-type isolation of the country from the rest of the world. In
its Declaration of Principles and State Policies, the Constitution adopts the generally accepted principles of international law as (g) Bilateral air service agreement with Belgium where the Philippines granted Belgian air carriers the same privileges as those
part of the law of the land, and adheres to the policy of peace, equality, justice, freedom, cooperation and amity, with all granted to Japanese and Korean air carriers under separate air service agreements.
nations."[43] By the doctrine of incorporation, the country is bound by generally accepted principles of international law, which are
considered to be automatically part of our own laws. [44] One of the oldest and most fundamental rules in international law is pacta
sunt servanda -- international agreements must be performed in good faith. A treaty engagement is not a mere moral obligation (h) Bilateral notes with Israel for the abolition of transit and visitor visas where the Philippines exempted Israeli nationals fro m the
but creates a legally binding obligation on the parties x x x. A state which has contracted valid international obligations is bound to requirement of obtaining transit or visitor visas for a sojourn in the Philippines not exceeding 59 days.
make in its legislations such modifications as may be necessary to ensure the fulfillment of the obligations undertaken. [45]

By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By their voluntary act, nations may (I) Bilateral agreement with France exempting French nationals from the requirement of obtaining transit and visitor visa for a
surrender some aspects of their state power in exchange for greater benefits granted by or derived from a convention or pact. After sojourn not exceeding 59 days.
all, states, like individuals, live with coequals, and in pursuit of mutually covenanted objectives and benefits, they also commonly
agree to limit the exercise of their otherwise absolute rights. Thus, treaties have been used to record agreements between States
concerning such widely diverse matters as, for example, the lease of naval bases, the sale or cession of territory, the termination (j) Multilateral Convention on Special Missions, where the Philippines agreed that premises of Special Missions in the Philippines
of war, the regulation of conduct of hostilities, the formation of alliances, the regulation of commercial relations, the settling of are inviolable and its agents can not enter said premises without consent of the Head of Mission concerned. Special Missions
claims, the laying down of rules governing conduct in peace and the establishment of international organizations. [46] The are also exempted from customs duties, taxes and related charges.
sovereignty of a state therefore cannot in fact and in reality be considered absolute. Certain restrictions enter into the picture: (1)
limitations imposed by the very nature of membership in the family of nations and (2) limitations imposed by treaty stipulations. As
aptly put by John F. Kennedy, Today, no nation can build its destiny alone. The age of self-sufficient nationalism is over. The age (k) Multilateral Convention on the Law of Treaties. In this convention, the Philippines agreed to be governed by the Vienna
of interdependence is here.[47] Convention on the Law of Treaties.

(l) Declaration of the President of the Philippines accepting compulsory jurisdiction of the International Court of Justice. The
International Court of Justice has jurisdiction in all legal disputes concerning the interpretation of a treaty, any question of
UN Charter and Other Treaties Limit Sovereignty international law, the existence of any fact which, if established, would constitute a breach of international obligation.

In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its sovereign powers of taxation,
Thus, when the Philippines joined the United Nations as one of its 51 charter members, it consented to restrict its sovereign eminent domain and police power. The underlying consideration in this partial surrender of sovereignty is the reciprocal
rights under the concept of sovereignty as auto-limitation.47-A Under Article 2 of the UN Charter, (a)ll members shall give the United commitment of the other contracting states in granting the same privilege and immunities to the Philippines, its officials and its
Nations every assistance in any action it takes in accordance with the present Charter, and shall refrain from giving assistance to citizens. The same reciprocity characterizes the Philippine commitments under WTO-GATT.
any state against which the United Nations is taking preventive or enforcement action. Such assistance includes payment of its
corresponding share not merely in administrative expenses but also in expenditures for the peace-keeping operations of the
organization. In its advisory opinion of July 20, 1961, the International Court of Justice held that money used by the United Nations International treaties, whether relating to nuclear disarmament, human rights, the environment, the law of the sea, or trade, constrain domestic
Emergency Force in the Middle East and in the Congo were expenses of the United Nations under Article 17, paragraph 2, of the political sovereignty through the assumption of external obligations. But unless anarchy in international relations is preferred as an
UN Charter. Hence, all its members must bear their corresponding share in such expenses. In this sense, the Philippine Congress alternative, in most cases we accept that the benefits of the reciprocal obligations involved outweigh the costs associated with any loss of
is restricted in its power to appropriate. It is compelled to appropriate funds whether it agrees with such peace-keeping expenses political sovereignty. (T)rade treaties that structure relations by reference to durable, well-defined substantive norms and objective dispute
or not. So too, under Article 105 of the said Charter, the UN and its representatives enjoy diplomatic privileges and immunities, resolution procedures reduce the risks of larger countries exploiting raw economic power to bully smaller countries, by subjecting power
thereby limiting again the exercise of sovereignty of members within their own territory. Another example: although sovereign relations to some form of legal ordering. In addition, smaller countries typically stand to gain disproportionately from trade
equality and domestic jurisdiction of all members are set forth as underlying principles in the UN Charter, such provisos are liberalization. This is due to the simple fact that liberalization will provide access to a larger set of potential new trading relationship than in
however subject to enforcement measures decided by the Security Council for the maintenance of international peace and security case of the larger country gaining enhanced success to the smaller countrys market. [48]
under Chapter VII of the Charter. A final example: under Article 103, (i)n the event of a conflict between the obligations of the
Members of the United Nations under the present Charter and their obligations under any other international agreement, their
obligation under the present charter shall prevail, thus unquestionably denying the Philippines -- as a member -- the sovereign The point is that, as shown by the foregoing treaties, a portion of sovereignty may be waived without violating the
power to make a choice as to which of conflicting obligations, if any, to honor. Constitution, based on the rationale that the Philippines adopts the generally accepted principles of international law as part of the
law of the land and adheres to the policy of x x x cooperation and amity with all nations.
Apart from the UN Treaty, the Philippines has entered into many other international pacts -- both bilateral and multilateral
-- that involve limitations on Philippine sovereignty. These are enumerated by the Solicitor General in his Compliance dated
October 24, 1996, as follows:

Fourth Issue: The WTO Agreement and Judicial Power

(a) Bilateral convention with the United States regarding taxes on income, where the Philippines agreed, among others, to exempt
from tax, income received in the Philippines by, among others, the Federal Reserve Bank of the United States, the
Export/Import Bank of the United States, the Overseas Private Investment Corporation of the United States. Likewise, in
said convention, wages, salaries and similar remunerations paid by the United States to its citizens for labor and personal Petitioners aver that paragraph 1, Article 34 of the General Provisions and Basic Principles of the Agreement on Trade-
services performed by them as employees or officials of the United States are exempt from income tax by the Philippines. Related Aspects of Intellectual Property Rights (TRIPS) [49] intrudes on the power of the Supreme Court to promulgate rules
concerning pleading, practice and procedures.[50]

(b) Bilateral agreement with Belgium, providing, among others, for the avoidance of double taxation with respect to taxes on To understand the scope and meaning of Article 34, TRIPS, [51] it will be fruitful to restate its full text as follows:
income.

Article 34
(c) Bilateral convention with the Kingdom of Sweden for the avoidance of double taxation.

Process Patents: Burden of Proof

(d) Bilateral convention with the French Republic for the avoidance of double taxation.

1. For the purposes of civil proceedings in respect of the infringement of the rights of the owner referred to in paragraph 1(b) of
(e) Bilateral air transport agreement with Korea where the Philippines agreed to exempt from all customs duties, inspection fees and Article 28, if the subject matter of a patent is a process for obtaining a product, the judicial authorities shall have the authority to
other duties or taxes aircrafts of South Korea and the regular equipment, spare parts and supplies arriving with said aircrafts. order the defendant to prove that the process to obtain an identical product is different from the patented process. Therefore,
Members shall provide, in at least one of the following circumstances, that any identical product when produced without the consent
of the patent owner shall, in the absence of proof to the contrary, be deemed to have been obtained by the patented process:
(f) Bilateral air service agreement with Japan, where the Philippines agreed to exempt from customs duties, excise taxes, inspect ion
fees and other similar duties, taxes or charges fuel, lubricating oils, spare parts, regular equipment, stores on board Japanese
aircrafts while on Philippine soil. (a) if the product obtained by the patented process is new;
 (b) if there is a substantial likelihood that the identical product was made by the process and the owner of the patent has (b) to adopt the Ministerial Declarations and Decisions."
been unable through reasonable efforts to determine the process actually used.

The assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final Act required from its signatories,
2. Any Member shall be free to provide that the burden of proof indicated in paragraph 1 shall be on the alleged infringer only if the namely, concurrence of the Senate in the WTO Agreement.
condition referred to in subparagraph (a) is fulfilled or only if the condition referred to in subparagraph (b) is fulfilled.
The Ministerial Declarations and Decisions were deemed adopted without need for ratification. They were approved by
the ministers by virtue of Article XXV: 1 of GATT which provides that representatives of the members can meet to give effect to
3. In the adduction of proof to the contrary, the legitimate interests of defendants in protecting their manufacturing and business those provisions of this Agreement which invoke joint action, and generally with a view to facilitating the operation and furthering
secrets shall be taken into account. the objectives of this Agreement.[56]

The Understanding on Commitments in Financial Services also approved in Marrakesh does not apply to the Philippines. It
From the above, a WTO Member is required to provide a rule of disputable (note the words in the absence of proof to the applies only to those 27 Members which have indicated in their respective schedules of commitments on standstill, elimination of
contrary) presumption that a product shown to be identical to one produced with the use of a patented process shall be deemed monopoly, expansion of operation of existing financial service suppliers, temporary entry of personnel, free transfer and processing
to have been obtained by the (illegal) use of the said patented process, (1) where such product obtained by the patented product of information, and national treatment with respect to access to payment, clearing systems and refinancing available in the normal
is new, or (2) where there is substantial likelihood that the identical product was made with the use of the said patented process course of business.[57]
but the owner of the patent could not determine the exact process used in obtaining such identical product. Hence, the burden of
proof contemplated by Article 34 should actually be understood as the duty of the alleged patent infringer to overthrow such On the other hand, the WTO Agreement itself expresses what multilateral agreements are deemed included as its integral
presumption. Such burden, properly understood, actually refers to the burden of evidence (burden of going forward) placed on the parts,[58] as follows:
producer of the identical (or fake) product to show that his product was produced without the use of the patented process.

The foregoing notwithstanding, the patent owner still has the burden of proof since, regardless of the presumption provided Article II
under paragraph 1 of Article 34, such owner still has to introduce evidence of the existence of the alleged identical product, the
fact that it is identical to the genuine one produced by the patented process and the fact of newness of the genuine product or the
fact of substantial likelihood that the identical product was made by the patented process. Scope of the WTO

The foregoing should really present no problem in changing the rules of evidence as the present law on the subject,
Republic Act No. 165, as amended, otherwise known as the Patent Law, provides a similar presumption in cases of infringement 1. The WTO shall provide the common institutional framework for the conduct of trade relations among its Members in matters to
of patented design or utility model, thus: the agreements and associated legal instruments included in the Annexes to this Agreement.

SEC. 60. Infringement. - Infringement of a design patent or of a patent for utility model shall consist in unauthorized copying of the patented 2. The Agreements and associated legal instruments included in Annexes 1, 2, and 3 (hereinafter referred to as Multilateral
design or utility model for the purpose of trade or industry in the article or product and in the making, using or selling of the article or product Agreements) are integral parts of this Agreement, binding on all Members.
copying the patented design or utility model. Identity or substantial identity with the patented design or utility model shall constitute evidence
of copying. (underscoring supplied)
3. The Agreements and associated legal instruments included in Annex 4 (hereinafter referred to as Plurilateral Trade Agreements)
are also part of this Agreement for those Members that have accepted them, and are binding on those Members. The Plurilateral
Moreover, it should be noted that the requirement of Article 34 to provide a disputable presumption applies only if (1) the Trade Agreements do not create either obligation or rights for Members that have not accepted them.
product obtained by the patented process is NEW or (2) there is a substantial likelihood that the identical product was made by
the process and the process owner has not been able through reasonable effort to determine the process used. Where either of
these two provisos does not obtain, members shall be free to determine the appropriate method of implementing the provisions of 4. The General Agreement on Tariffs and Trade 1994 as specified in annex 1A (hereinafter referred to as GATT 1994) is legally
TRIPS within their own internal systems and processes. distinct from the General Agreement on Tariffs and Trade, dated 30 October 1947, annexed to the Final Act adopted at the
conclusion of the Second Session of the Preparatory Committee of the United Nations Conference on Trade and Employment, as
By and large, the arguments adduced in connection with our disposition of the third issue -- derogation of legislative power subsequently rectified, amended or modified (hereinafter referred to as GATT 1947).
- will apply to this fourth issue also. Suffice it to say that the reciprocity clause more than justifies such intrusion, if any actually
exists. Besides, Article 34 does not contain an unreasonable burden, consistent as it is with due process and the concept of
adversarial dispute settlement inherent in our judicial system. It should be added that the Senate was well-aware of what it was concurring in as shown by the members deliberation on
August 25, 1994. After reading the letter of President Ramos dated August 11, 1994, [59] the senators of the Republic minutely
So too, since the Philippine is a signatory to most international conventions on patents, trademarks and copyrights, the dissected what the Senate was concurring in, as follows: [60]
adjustment in legislation and rules of procedure will not be substantial. [52]

THE CHAIRMAN: Yes. Now, the question of the validity of the submission came up in the first day hearing of this Committee
yesterday. Was the observation made by Senator Taada that what was submitted to the Senate was not the agreement on establishing the
World Trade Organization by the final act of the Uruguay Round which is not the same as the agreement establishing the World Trade
Fifth Issue: Concurrence Only in the WTO Agreement and Not in Other Documents Contained in the Final Act Organization? And on that basis, Senator Tolentino raised a point of order which, however, he agreed to withdraw upon understanding that
his suggestion for an alternative solution at that time was acceptable. That suggestion was to treat the proceedings of the Committee as being
in the nature of briefings for Senators until the question of the submission could be clarified.

Petitioners allege that the Senate concurrence in the WTO Agreement and its annexes -- but not in the other documents
referred to in the Final Act, namely the Ministerial Declaration and Decisions and the Understanding on Commitments in Financial And so, Secretary Romulo, in effect, is the President submitting a new... is he making a new submission which improves on the clarity of the
Services -- is defective and insufficient and thus constitutes abuse of discretion. They submit that such concurrence in the WTO first submission?
Agreement alone is flawed because it is in effect a rejection of the Final Act, which in turn was the document signed by Secretary
Navarro, in representation of the Republic upon authority of the President. They contend that the second letter of the President to
the Senate[53] which enumerated what constitutes the Final Act should have been the subject of concurrence of the Senate. MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there should be no misunderstanding, it was his intention to clarify all
matters by giving this letter.
A final act, sometimes called protocol de clture, is an instrument which records the winding up of the proceedings of a
diplomatic conference and usually includes a reproduction of the texts of treaties, conventions, recommendations and other acts
agreed upon and signed by the plenipotentiaries attending the conference. [54] It is not the treaty itself. It is rather a summary of the THE CHAIRMAN: Thank you.
proceedings of a protracted conference which may have taken place over several years. The text of the Final Act Embodying the
Results of the Uruguay Round of Multilateral Trade Negotiations is contained in just one page [55] in Vol. I of the 36-
volume Uruguay Round of Multilateral Trade Negotiations. By signing said Final Act, Secretary Navarro as representative of the Can this Committee hear from Senator Taada and later on Senator Tolentino since they were the ones that raised this question yesterday?
Republic of the Philippines undertook:

Senator Taada, please.

"(a) to submit, as appropriate, the WTO Agreement for the consideration of their respective competent authorities with a view to
seeking approval of the Agreement in accordance with their procedures; and
SEN. TAADA: Thank you, Mr. Chairman.
Based on what Secretary Romulo has read, it would now clearly appear that what is being submitted to the Senate for ratification is not the cogent reason to impute grave abuse of discretion to the Senates exercise of its power of concurrence in the WTO Agreement
Final Act of the Uruguay Round, but rather the Agreement on the World Trade Organization as well as the Ministerial Declarations and granted it by Sec. 21 of Article VII of the Constitution.[64]
Decisions, and the Understanding and Commitments in Financial Services.
It is true, as alleged by petitioners, that broad constitutional principles require the State to develop an independent national
economy effectively controlled by Filipinos; and to protect and/or prefer Filipino labor, products, domestic materials and locally
I am now satisfied with the wording of the new submission of President Ramos. produced goods. But it is equally true that such principles -- while serving as judicial and legislative guides -- are not in themselves
sources of causes of action. Moreover, there are other equally fundamental constitutional principles relied upon by the Senate
which mandate the pursuit of a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange
SEN. TAADA. . . . of President Ramos, Mr. Chairman. on the basis of equality and reciprocity and the promotion of industries which are competitive in both domestic and foreign markets,
thereby justifying its acceptance of said treaty. So too, the alleged impairment of sovereignty in the exercise of legislative and
judicial powers is balanced by the adoption of the generally accepted principles of international law as part of the law of the land
THE CHAIRMAN. Thank you, Senator Taada. Can we hear from Senator Tolentino? And after him Senator Neptali Gonzales and Senator and the adherence of the Constitution to the policy of cooperation and amity with all nations.
Lina.
That the Senate, after deliberation and voting, voluntarily and overwhelmingly gave its consent to the WTO Agreement
thereby making it a part of the law of the land is a legitimate exercise of its sovereign duty and power. We find no patent and gross
SEN TOLENTINO, Mr. Chairman, I have not seen the new submission actually transmitted to us but I saw the draft of his earlier, and I think arbitrariness or despotism by reason of passion or personal hostility in such exercise. It is not impossible to surmise that this Court,
it now complies with the provisions of the Constitution, and with the Final Act itself. The Constitution does not require us to ratify the Final or at least some of its members, may even agree with petitioners that it is more advantageous to the national interest to strike
Act. It requires us to ratify the Agreement which is now being submitted. The Final Act itself specifies what is going to be submitted to with down Senate Resolution No. 97. But that is not a legal reason to attribute grave abuse of discretion to the Senate and to nullify
the governments of the participants. its decision. To do so would constitute grave abuse in the exercise of our own judicial power and duty. Ineludably, what the Senate
did was a valid exercise of its authority. As to whether such exercise was wise, beneficial or viable is outside the realm of judicial
inquiry and review. That is a matter between the elected policy makers and the people.As to whether the nation should join the
In paragraph 2 of the Final Act, we read and I quote: worldwide march toward trade liberalization and economic globalization is a matter that our people should determine in electi ng
their policy makers. After all, the WTO Agreement allows withdrawal of membership, should this be the political desire of a member.

By signing the present Final Act, the representatives agree: (a) to submit as appropriate the WTO Agreement for the consideration of the The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an Asian Renaissance[65] where the East
respective competent authorities with a view to seeking approval of the Agreement in accordance with their procedures. will become the dominant region of the world economically, politically and culturally in the next century. He refers to the free market
espoused by WTO as the catalyst in this coming Asian ascendancy. There are at present about 31 countries including China,
Russia and Saudi Arabia negotiating for membership in the WTO. Notwithstanding objections against possible limitations on
In other words, it is not the Final Act that was agreed to be submitted to the governments for ratification or acceptance as whatever their national sovereignty, the WTO remains as the only viable structure for multilateral trading and the veritable forum for the
constitutional procedures may provide but it is the World Trade Organization Agreement. And if that is the one that is being submitted now, I development of international trade law. The alternative to WTO is isolation, stagnation, if not economic self-destruction. Duly
think it satisfies both the Constitution and the Final Act itself. enriched with original membership, keenly aware of the advantages and disadvantages of globalization with its on-line experience,
and endowed with a vision of the future, the Philippines now straddles the crossroads of an international strategy for economic
prosperity and stability in the new millennium. Let the people, through their duly authorized elected officers, make their free choice.
Thank you, Mr. Chairman.
WHEREFORE, the petition is DISMISSED for lack of merit.

THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator Gonzales. SO ORDERED.

SEN. GONZALES. Mr. Chairman, my views on this matter are already a matter of record. And they had been adequately reflected in the
journal of yesterdays session and I dont see any need for repeating the same.

Now, I would consider the new submission as an act ex abudante cautela.

THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you want to make any comment on this?

SEN. LINA. Mr. President, I agree with the observation just made by Senator Gonzales out of the abundance of question. Then the new
submission is, I believe, stating the obvious and therefore I have no further comment to make.

Epilogue

In praying for the nullification of the Philippine ratification of the WTO Agreement, petitioners are invoking this Courts
constitutionally imposed duty to determine whether or not there has been grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of the Senate in giving its concurrence therein via Senate Resolution No. 97. Procedurally, a writ
of certiorari grounded on grave abuse of discretion may be issued by the Court under Rule 65 of the Rules of Court when it is
amply shown that petitioners have no other plain, speedy and adequate remedy in the ordinary course of law.

By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction.[61] Mere abuse of discretion is not enough. It must be grave abuse of discretion as when the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, and must be so patent and so gross as to amount to an
evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.[62] Failure on
the part of the petitioner to show grave abuse of discretion will result in the dismissal of the petition. [63]

In rendering this Decision, this Court never forgets that the Senate, whose act is under review, is one of two sovereign
houses of Congress and is thus entitled to great respect in its actions. It is itself a constitutional body independent and coordinate,
and thus its actions are presumed regular and done in good faith. Unless convincing proof and persuasive arguments are
presented to overthrow such presumptions, this Court will resolve every doubt in its favor. Using the foregoing well-accepted
definition of grave abuse of discretion and the presumption of regularity in the Senates processes, this Court cannot find any
G.R. No. 88052 December 14, 1989 Mecenas; to pay said plaintiff's the sum of P15.000,00 as and for attorney's fees;
plus costs of the suit.
JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. MECENAS, ORLANDO P. MECENAS,
VIOLETA M. ACERVO, LUZVIMINDA P. MECENAS; and OFELIA M. JAVIER, petitioners, b) Each of the defendants Negros Navigation Co Inc. and Philippine National Oil
vs. Company/PNOC Shipping and Transportation Company, to pay the plaintiff in
HON. COURT OF APPEALS, CAPT. ROGER SANTISTEBAN and NEGROS NAVIGATION CO., Civil Case No. Q-33932, the sum of P100,000.00 for the death of Manuel Ciocon,
INC., respondents. to pay said plaintiff jointly and severally, the sum of P1 5,000.00 as and for
attorney's fees, plus costs of the suit. 1
Benito P. Favie and Jose Dario Magno for petitioners.
Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed the trial court's decision
to the Court of Appeals. Later, PNOC and PNOC Shipping withdrew their appeal citing a compromise
Hernandez, Velicaria, Vibar & Santiago for private respondents. agreement reached by them with Negros Navigation; the Court of Appeals granted the motion by a
resolution dated 5 September 1988, subject to the reservation made by Lilia Ciocon that she could not
be bound by the compromise agreement and would enforce the award granted her by the trial court.

FELICIANO, J.: In time, the Court of Appeals rendered a decision dated 26 January 1989 which decreed the following:

At 6:20 o'clock in the morning of 22 April 1980, the M/T "Tacloban City," a barge-type oil tanker of WHEREFORE, in view of the foregoing, the decision of the court a quo is hereby affirmed as modified
Philippine registry, with a gross tonnage of 1,241,68 tons, owned by the Philippine National Oil with respect to Civil Case No. 31525, wherein defendant appellant Negros Navigation Co. Inc. and
Company (PNOC) and operated by the PNOC Shipping and Transport Corporation (PNOC Shipping), Capt. Roger Santisteban are held jointly and severally liable to pay the plaintiffs the amount of
having unloaded its cargo of petroleum products, left Amlan, Negros Occidental, and headed towards P100,000. 00 as actual and compensatory damages and P15,000.00 as attorney's fees and the cost of
Bataan. At about 1:00 o'clock in the afternoon of that same day, the M/V "Don Juan," an interisland the suit. 2
vessel, also of Philippine registry, of 2,391.31 tons gross weight, owned and operated by the Negros
Navigation Co., Inc. (Negros Navigation) left Manila bound for Bacolod with seven hundred fifty (750) The issue to be resolved in this Petition for Review is whether or not the Court of Appeals had erred in
passengers listed in its manifest, and a complete set of officers and crew members. reducing the amount of the damages awarded by the trial court to the petitioners from P400,000.00 to
P100,000.00.
On the evening of that same day, 22 April 1980, at about 10:30 o'clock, the "Tacloban City" and the
"Don Juan" collided at the Talbas Strait near Maestra de Ocampo Island in the vicinity of the island of We note that the trial court had granted petitioners the sum of P400,000,00 "for the death of [their
Mindoro. When the collision occurred, the sea was calm, the weather fair and visibility good. As a parents]" plus P15,000.00 as attorney's fees, while the Court of Appeals awarded them P100,000.00
result of this collision, the M/V "Don Juan" sank and hundreds of its passengers perished. Among the "as actual and compensatory damages" and P15,000.00 as attorney's fees. To determine whether
ill-fated passengers were the parents of petitioners, the spouses Perfecto Mecenas and Sofia such reduction of the damages awarded was proper, we must first determine whether petitioners were
Mecenas, whose bodies were never found despite intensive search by petitioners. entitled to an award of damages other than actual or compensatory damages, that is, whether they
were entitled to award of moral and exemplary damages.
On 29 December 1980, petitioners filed a complaint in the then Court- of First Instance of Quezon City,
docketed as Civil Case No. Q-31525, against private respondents Negros Navigation and Capt. Roger We begin by noting that both the trial court and the Court of Appeals considered the action (Civil Case
Santisteban, the captain of the "Don Juan" without, however, impleading either PNOC or PNOC No. Q-31525) brought by the sons and daughters of the deceased Mecenas spouses against Negros
Shipping. In their complaint, petitioners alleged that they were the seven (7) surviving legitimate Navigation as based on quasi-delict. We believed that action is more appropriately regarded as
children of Perfecto Mecenas and Sofia Mecenas and that the latter spouses perished in the collision grounded on contract, the contract of carriage between the Mecenas spouses as regular passengers
which had resulted from the negligence of Negros Navigation and Capt. Santisteban. Petitioners who paid for their boat tickets and Negros Navigation; the surviving children while not themselves
prayed for actual damages of not less than P100,000.00 as well as moral and exemplary damages in passengers are in effect suing the carrier in representation of their deceased parents. 3 Thus, the suit
such amount as the Court may deem reasonable to award to them. (Civil Case No. Q-33932) filed by the widow Lilia Ciocon was correctly treated by the trial and appellate
courts as based on contract (vis-a-vis Negros Navigation) and as well on quasi-delict (vis-a-vis PNOC
Another complaint, docketed as Civil Case No. Q-33932, was filed in the same court by Lilia Ciocon and PNOC Shipping). In an action based upon a breach of the contract of carriage, the carrier under
claiming damages against Negros Navigation, PNOC and PNOC Shipping for the death of her our civil law is liable for the death of passengers arising from the negligence or willful act of the
husband Manuel Ciocon, another of the luckless passengers of the "Don Juan." Manuel Ciocon's body, carrier's employees although such employees may have acted beyond the scope of their authority or
too, was never found. even in violation of the instructions of the carrier, 4 which liability may include liability for moral
damages. 5 It follows that petitioners would be entitled to moral damages so long as the collision with
the "Tacloban City" and the sinking of the "Don Juan" were caused or attended by negligence on the
The two (2) cases were consolidated and heard jointly by the Regional Trial Court of Quezon City, part of private respondents.
Branch 82. On 17 July 1986, after trial, the trial court rendered a decision, the dispositive of which read
as follows:
In respect of the petitioners' claim for exemplary damages, it is only necessary to refer to Article 2232
of the Civil Code:
WHEREFORE, the Court hereby renders judgment ordering:

Article 2332. In contracts and quasi-contracts, the court may exemplary damages
a) The defendant Negros Navigation Co., Inc. and Capt. Roger Santisteban if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent
jointly and severally liable to pay plaintiffs in Civil Case No Q-31525, the sum of manner. 6
P400,000.00 for the death of plaintiffs' parents, Perfecto A. Mecenas and Sofia P.
Thus, whether petitioners are entitled to exemplary damages as claimed must depend upon whether or Upon seeing Tacloban's red and green lights, Don Juan executed hard starboard
not private respondents acted recklessly, that is, with gross negligence. (TSN, p. 4, Ibid.) This maneuver is in conformity with the rule that 'when both
vessels are head on or nearly head on, each vessel must turn to the right in order
to avoid each other. (p. 5, Ibid). Nonetheless, Tacloban appeared to be heading
We turn, therefore, to a consideration of whether or not Negros Navigation and Capt. Santisteban were towards Don Juan (p. 6, Ibid),
grossly negligent during the events which culminated in the collision with "Tacloban City" and the
sinking of the "Don Juan" and the resulting heavy loss of lives.
When Don Juan executed hard starboard, Tacloban was about 1,500 feet away
(TSN, May 24,1983, p. 6). Don Juan, after execution of hard starboard, will move
The then Commandant of the Philippine Coast Guard, Commodore B.C. Ochoco, in a decision dated 2 forward 200 meters before the vessel will respond to such maneuver (p. 7, Ibid).
March 1981, held that the "Tacloban City" was "primarily and solely [sic] at fault and responsible for the The speed of Don Juan at that time was 17 knits; Tacloban City 6.3 knots. t
collision." 7 Initially, the Minister of National Defense upheld the decision of Commodore Ochoco. 8 On "Between 9 to 15 seconds from execution of hard starboard, collision occurred
Motion for Reconsideration, however, the Minister of National Defense reversed himself and held that (p. 8, Ibid). (pp. 3-4 Decision). 10
both vessels had been at fault:

The trial court concluded:

It is therefore evident from a close and thorough review of the evidence that fault
is imputable to both vessels for the collision. Accordingly, the decision dated
March 12, 1982, subject of the Motion for Reconsideration filed by counsel of M/T M/ V Don Juan and Tacloban City became aware of each other's presence in the
Tacloban City, is hereby reversed. However, the administrative penalties area by visual contact at a distance of something like 6 miles from each
imposed oil both vessels and their respective crew concerned are hereby other. They were fully aware that if they continued on their course, they will meet
affirmed. 9 head on. Don Juan - steered to the right; Tacloban City continued its course to
the left. There can be no excuse for them not to realize that, with such
maneuvers, they will collide. They executed maneuvers inadequate, and too late,
The trial court, after a review of the evidence submitted during the trial, arrived at the same conclusion to avoid collision.
that the Minister of National Defense had reached that both the "Tacloban City" and the "Don Juan"
were at fault in the collision. The trial court summarized the testimony and evidence of PNOC and
PNOC Shipping as well as of Negros Navigation in the following terms: The Court is of the considered view that the defendants are equally negligent and
are liable for damages. (p. 4, decision). 11
Defendant PNOC's version of the incident:
The Court of Appeals, for its part, reached the same conclusion. 12
M/V Don Juan was first sighted at about 5 or 6 miles from Tacloban City (TSN,
January 21, 1985, p. 13); it was on the starboard (right) side of Tacloban City. There is, therefore, no question that the "Don Juan" was at least as negligent as the M/T "Tacloban
This was a visual contact; not picked up by radar (p. 15, Ibid). Tacloban City was City" in the events leading up to the collision and the sinking of the "Don Juan." The remaining question
travelling 310 degrees with a speed of 6 knots, estimated speed of Don Juan of is whether the negligence on the part of the "Don Juan" reached that level of recklessness or gross
16 knots (TSN, May 9, pp. 5-6). As Don Juan approached, Tacloban City gave a negligence that our Civil Code requires for the imposition of exemplary damages. Our own review of
leeway of 1 0 degrees to the left. 'The purpose was to enable Tacloban to see the record in the case at bar requires us to answer this in the affirmative.
the direction of Don Juan (p. 19, Ibid). Don Juan switched to green light,
signifying that it will pass Tacloban City's right side; it will be a starboard to
starboard passing (p. 21, Ibid) Tacloban City's purpose in giving a leeway of 10 In the first place, the report of the Philippine Coast Guard Commandant (Exhibit "l 0"), while holding the
degrees at this point, is to give Don Juan more space for her passage (p. 22, "Tacloban City" as "primarily and solely [sic] at fault and responsible for the collision," did itself set out
Ibid). This was increased by Tacloban City to an additional 15 degrees towards that there had been fault or negligence on the part of Capt. Santisteban and his officers and crew
the left (p. 22, Ibid). The way was clear and Don Juan has not changed its course before the collision and immediately after contact of the two (2) vessels. The decision of Commodore
(TSN, May 9,1985, p. 39). Ochoco said:

When Tacloban City altered its course the second time, from 300 degrees to 285 xxxxxxxxx
degrees, Don Juan was about 4.5 miles away (TSN, May 9,1985, p. 7).
M/S Don Juan's Master, Capt. Rogelio Santisteban, was playing mahjong before
Despite executing a hardport maneuver, the collision nonetheless occurred. Don and up to the time of collision. Moreover, after the collision, he failed to institute
Juan rammed the Tacloban City near the starboard bow (p. 7, Ibid)." appropriate measures to delay the sinking MS Don Juan and to supervise
properly the execution of his order of abandonship. As regards the officer on
watch, Senior 3rd Mate Rogelio Devera, he admitted that he failed or did not call
NENACO's [Negros Navigation] version. or inform Capt. Santisteban of the imminent danger of collision and of the actual
collision itself Also, he failed to assist his master to prevent the fast sinking of the
ship. The record also indicates that Auxiliary Chief Mate Antonio Labordo
Don Juan first sighted Tacloban City 4 miles away, as shown by radar (p. 13, displayed laxity in maintaining order among the passengers after the collision.
May 24, 1983). Tacloban City showed its red and green lights twice; it proceeded
to, and will cross, the path of Don Juan. Tacloban was on the left side of Don
Juan (TSN, April 20,1983, p. 4). x x x x x x x x x. 13
We believe that the behaviour of the captain of the "Don Juan" in tills instance-playing mahjong "before 6.3. knots. 19 Secondly, the "Don Juan" carried the full complement of officers and crew members
and up to the time of collision constitutes behaviour that is simply unacceptable on the part of the specified for a passenger vessel of her class. Thirdly, the "Don Juan" was equipped with radar which
master of a vessel to whose hands the lives and welfare of at least seven hundred fifty (750) was functioning that night. Fourthly, the "Don Juan's" officer on-watch had sighted the "Tacloban City"
passengers had been entrusted. Whether or not Capt. Santisteban was "off-duty" or "on-duty" at or on his radar screen while the latter was still four (4) nautical miles away. Visual confirmation of radar
around the time of actual collision is quite immaterial; there is, both realistically speaking and in contact was established by the "Don Juan" while the "Tacloban City" was still 2.7 miles away. 20In the
contemplation of law, no such thing as "off-duty" hours for the master of a vessel at sea that is a total set of circumstances which existed in the instant case, the "Don Juan," had it taken seriously its
common carrier upon whom the law imposes the duty of extraordinary diligence- duty of extraordinary diligence, could have easily avoided the collision with the "Tacloban City," Indeed,
the "Don Juan" might well have avoided the collision even if it had exercised ordinary diligence merely.
[t]he duty to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of the Road which
for all the circumstances. 14 requires two (2) power- driven vessels meeting end on or nearly end on each to alter her course to
starboard (right) so that each vessel may pass on the port side (left) of the other. 21 The "Tacloban
City," when the two (2) vessels were only three-tenths (0.3) of a mile apart, turned (for the second time)
The record does not show that was the first or only time that Capt. Santisteban had entertained himself 150 to port side while the "Don Juan" veered hard to starboard. This circumstance, while it may have
during a voyage by playing mahjong with his officers and passengers; Negros Navigation in permitting, made the collision immediately inevitable, cannot, however, be viewed in isolation from the rest of the
or in failing to discover and correct such behaviour, must be deemed grossly negligent. factual circumstances obtaining before and up to the collision. In any case, Rule 18 like all other
International Rules of the Road, are not to be obeyed and construed without regard to all the
Capt. Santisteban was also faulted in the Philippine Coast Guard decision for failing after the collision, circumstances surrounding a particular encounter between two (2) vessels. 22 In ordinary
"to institute appropriate measures to delay the sinking of M/V Don Juan." This appears to us to be a circumstances, a vessel discharges her duty to another by a faithful and literal observance of the Rules
euphemism for failure to maintain the sea-worthiness or the water-tight integrity of the "Don Juan." The of Navigation, 23 and she cannot be held at fault for so doing even though a different course would
record shows that the "Don Juan" sank within ten (10) to fifteen (15) minutes after initial contact with have prevented the collision. This rule, however, is not to be applied where it is apparent, as in the
the "Tacloban City. 15 While the failure of Capt. Santisteban to supervise his officers and crew in the instant case, that her captain was guilty of negligence or of a want of seamanship in not perceiving the
process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of necessity for, or in so acting as to create such necessity for, a departure from the rule and acting
his vessel after collision, did not cause the collision by themselves, such failures doubtless contributed accordingly. 24 In other words, "route observance" of the International Rules of the Road will not relieve
materially to the consequent loss of life and, moreover, were indicative of the kind and level of a vessel from responsibility if the collision could have been avoided by proper care and skill on her part
diligence exercised by Capt. Santisteban in respect of his vessel and his officers and men prior to or even by a departure from the rules. 25
actual contact between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted that he
had failed to inform Capt. Santisteban not only of the "imminent danger of collision" but even of "the In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was still a long way off
actual collision itself " was negligent in failing to take early preventive action and in allowing the two (2) vessels to come to
such close quarters as to render the collision inevitable when there was no necessity for passing so
There is also evidence that the "Don Juan" was carrying more passengers than she had been certified near to the "Tacloban City" as to create that hazard or inevitability, for the "Don Juan" could choose its
as allowed to carry. The Certificate of Inspection 16 dated 27 August 1979, issued by the Philippine own distance. 26, It is noteworthy that the "Tacloban City," upon turning hard to port shortly before the
Coast Guard Commander at Iloilo City, the Don Juan's home port, states: moment of collision, signalled its intention to do so by giving two (2) short blasts with horn. 26A The
"Don Juan " gave no answering horn blast to signal its own intention and proceeded to turn hatd to
starboard. 26B
Passengers allowed : 810
We conclude that Capt. Santisteban and Negros Navigation are properly held liable for gross
Total Persons Allowed : 864 negligence in connection with the collision of the "Don Juan" and "Tacloban City" and the sinking of the
"Don Juan" leading to the death of hundreds of passengers. We find no necessity for passing upon the
degree of negligence or culpability properly attributable to PNOC and PNOC Shipping or the master of
The report of the Philippine Coast Guard (Exhibit "10") stated that the "Don Juan" had been "officially
the "Tacloban City," since they were never impleaded here.
cleared with 878 passengers on board when she sailed from the port of Manila on April 22, 1980 at
about 1:00 p.m." This head-count of the passengers "did not include the 126 crew members, children
below three (3) years old and two (2) half-paying passengers" which had been counted as one adult It will be recalled that the trial court had rendered a lump sum of P400,000.00 to petitioners for the
passenger. 17 Thus, the total number of persons on board the "Don Juan" on that ill-starred night of 22 death of their parents in the "Don Juan" tragedy. Clearly, the trial court should have included a
April 1 980 was 1,004, or 140 persons more than the maximum lumber that could be safely carried by breakdown of the lump sum award into its component parts: compensatory damages, moral damages
the "Don Juan," per its own Certificate of Inspection. 18 We note in addition, that only 750 passengers and exemplary damages. On appeal, the Court of Appeals could have and should have itself broken
had been listed in its manifest for its final voyage; in other words, at least 128 passengers on board down the lump sum award of the trial court into its constituent parts; perhaps, it did, in its own mind. In
had not even been entered into the "Don Juan's" manifest. The "Don Juan's" Certificate of Inspection any case, the Court of Appeals apparently relying upon Manchester Development Corporation V. Court
showed that she carried life boat and life raft accommodations for only 864 persons, the maximum of Appeals 27 reduced the P400,000.00 lump sum award into a P100,000.00 for actual and
number of persons she was permitted to carry; in other words, she did not carry enough boats and life compensatory damages only.
rafts for all the persons actually on board that tragic night of 22 April 1980.

We believe that the Court of Appeals erred in doing so, It is true that the petitioners' complaint before
We hold that under these circumstances, a presumption of gross negligence on the part of the vessel the trial court had in the body indicated that the petitioner-plaintiffs believed that moral damages in the
(her officers and crew) and of its ship-owner arises; this presumption was never rebutted by Negros amount of at least P1,400,000.00 were properly due to them (not P12,000,000.00 as the Court of
Navigation. Appeals erroneously stated) as well as exemplary damages in the sum of P100,000.00 and that in the
prayer of their complaint, they did not specify the amount of moral and exemplary damages sought
from the trial court. We do not believe, however, that theManchester doctrine, which has been modified
The grossness of the negligence of the "Don Juan" is underscored when one considers the foregoing
and clarified in subsequent decision by the Court in Sun Insurance Office, Ltd. (SIOL), et al. v.
circumstances in the context of the following facts: Firstly, the "Don Juan" was more than twice as fast
Asuncion, et al. 28 can be applied in the instant case so as to work a striking out of that portion of the
as the "Tacloban City." The "Don Juan's" top speed was 17 knots; while that of the "Tacloban City" was
trial court's award which could be deemed nationally to constitute an award of moral and exemplary take adequate care of human beings and their property. The Court will take judicial notive of the
damages. Manchester was promulgated by the Court on 7 May 1987. Circular No. 7 of this Court, dreadful regularity with which grievous maritime disasters occur in our waters with massive loss of life.
which embodied the doctrine in Manchester, is dated 24 March 1988. Upon the other hand, the The bulk of our population is too poor to afford domestic air transportation. So it is that notwithstanding
complaint in the case at bar was filed on 29 December 1980, that is, long before either Manchester or the frequent sinking of passenger vessels in our waters, crowds of people continue to travel by sea.
Circular No. 7 of 24 March 1988 emerged. The decision of the trial court was itself promulgated on 17 This Court is prepared to use the instruments given to it by the law for securing the ends of law and
July 1986, again, before Manchester and Circular No. 7 were promulgated. We do not believe that public policy. One of those instruments is the institution of exemplary damages; one of those ends, of
Manchester should have been applied retroactively to this case where a decision on the merits had special importance in an archipelagic state like the Philippines, is the safe and reliable carriage of
already been rendered by the trial court, even though such decision was then under appeal and had people and goods by sea. Considering the foregoing, we believe that an additional award in the
not yet reached finality. There is no indication at all that petitioners here sought simply to evade amount of P200,000.00 as exmplary damages, is quite modest.
payment of the court's filing fees or to mislead the court in the assessment of the filing fees. In any
event, we apply Manchester as clarified and amplified by Sun Insurance Office Ltd. (SIOL), by holding
that the petitioners shall pay the additional filing fee that is properly payable given the award specified The Court is aware that petitioners here merely asked for the restoration of the P 400.000.00 award of
below, and that such additional filing fee shall constitute a lien upon the judgment. the trial court. We underscore once more, however, the firmly settled doctrine that this Court may
consider and resolved all issues which must be decided in order to render substantial justice to the
parties, including issues not explicity raised by the party affected. In the case at bar, as in Kapalaran
We consider, finally, the amount of damages-compensatory, moral and exemplary-properly imposable Bus Line v. Coronado, et al., 30 both the demands of sustantial justice and the imperious requirements
upon private respondents in this case. The original award of the trial court of P400,000.00 could well of public policy compel us to the conclusion that the trial court's implicit award of moral and exemplary
have been disaggregated by the trial court and the Court of Appeals in the following manner: damages was erronoeusly deledted and must be restored and augmented and brought more nearely to
the level required by public policy and substantial justice.
1. actual or compensatory damages proved in the course of trial consisting of actual
expenses WHEREFORE, the Petition for Review on certiorari is hereby GRANTED and the Decision of the Court
of Appeals insofar as it redurce the amount of damages awarded to petitioners to P100,000.00 is
hereby REVERSED and SET ASIDE. The award granted by the trial court is hereby RESTORED and
incurred by petitioners AUGMENTED as follows:

in their search for their (a) P 126,000.00 for actual damages;

parents' bodies- -P126,000.00 (b) P 60,000.00 as compensatory damages for wrongful death;

2. actual or compensatory (c) P 307,000.00 as moral damages;

damages in case of (d) P 307,000.00 as exemplary damages making a total of P 800,000.00; and

wrongful death (e) P 15,000.00 as attorney's fees.

(P30,000.00 x 2) -P60,000.00 29 Petitioners shall pay the additional filing fees properly due and payable in view of the award here
made, which fees shall be computed by the Clerks of Court of the trial court, and shall constitute a lien
(3) moral damages -P107,000.00 upon the judgment here awarded. Cost against private respondents.

(4) exemplary damages -P107,000.00 SO ORDERED.

Total -P400,000.00

Considering that petitioners, legitimate children of the deceased spouses Mecenas, are seven (7) in
number and that they lost both father and mothe in one fell blow of fate, and considering the pain and
anxiety they doubtless experienced while searching for their parents among the survivors and the
corpses recovered from the sea or washed ashore, we believe that an additional amount of
P200,000.00 for moral damages, making a total of P307,000.00 for moral damages, making a total of
P307,000.00 as moral damages, would be quite reasonable.

Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is
socially deleterious in its consequence by creating negative incentives or deterrents against such
behaviour. In requiring compliance with the standard which is in fact that of the highest possible degree
of diligence, from common carriers and in creating a presumption of negligence against them, the law
seels to compel them to control their employees, to tame their reckless instincts and to force them to
G.R. No. 165544 October 2, 2009 On August 22, 2001, the petitioner filed a petition for relief from judgment on the ground that the public
respondent made serious and prejudicial mistakes in appreciating the evidence presented. He argued that a
corporation had a personality separate and distinct from that of its officers and therefore, he cannot be held
ROMEO SAMONTE, Petitioner, solidarily liable for obligations contracted by corporation. The petition was opposed by the private respondent.
vs.
S.F. NAGUIAT, INC., Respondents.
On December 21, 2001, the public respondent issued the first assailed order denying the petitioner's petition
for relief from judgment for lack of merit. The petitioner moved for reconsideration of the said order but the
DECISION same was denied in the second assailed order dated February 12, 2002 on the grounds that the motion failed
to comply with the mandatory requirements of sections 4 and 5 of Rule 15 of the 1997 Rules of Civil procedure
and that it failed to raise an issue which would warrant a modification or reversal of the order dated December
PERALTA, J.:
21, 2001.4

Before the Court is a petition for review on certiorari filed by Romeo Samonte which seeks to set aside the
Petitioner filed with the CA a petition for certiorari with prayer for the issuance of a temporary restraining order
Decision1 dated March 26, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 70213, dismissing his
and/or writ of preliminary injunction reiterating the grounds stated in his petition for relief from judgment filed
petition for certiorari of the Order2 dated December 21, 2001 of the Regional Trial Court (RTC), Malolos,
with the RTC. Respondent filed its Comment. The parties subsequently filed their respective memoranda.
Bulacan, in Civil Case No. 585-M-2000, denying his petition for relief from judgment. Also assailed is the CA
Resolution3 dated September 28, 2004, denying petitioner’s motion for reconsideration.
On March 26, 2004, the CA issued its assailed Decision dismissing the petition.
The antecedent facts, as narrated by the Court of Appeals, are as follows:
In so ruling, the CA found that the records showed that petitioner failed to file a motion for reconsideration or
an appeal from the RTC Decision dated May 25, 2001 causing the said decision to become final and
Petitioner Romeo Samonte is the President and General Manager of S.B. Commercial Traders, Inc. (SB
executory; that when petitioner filed the petition for relief from judgment, petitioner did not offer any reason for
Traders, for brevity), a corporation engaged in the business of retailing motor oils and lubricants. It (sic)
his failure to appeal; there was no assertion that the RTC decision was entered against him through fraud,
purchases Mobil products on credit basis from one of Mobil Oil Philippines' authorized dealers in Bulacan,
accident, mistake or excusable negligence. The CA noted that the petition was not accompanied by an
herein private respondent S.F. Naguiat, Inc., with an express agreement to pay within a period of 60 days from
affidavit of merit showing the fraud, accident, mistake or excusable negligence relied upon and the facts
date of delivery.
constituting petitioner's good and substantial defense as required by law. It also agreed with the RTC's
observation that petitioner did not assail the proceedings conducted below, but merely questioned the validity
On September 4, 2000, the private respondent filed a complaint for collection of sum of money against SB of the dispositive portion of the RTC decision, thus, the petition for relief from judgment was fatally flawed and
Traders and the petitioner with Branch 9 of the Regional Trial Court (RTC) of Malolos, Bulacan. The private should have been dismissed outright.
respondent alleged that SB Traders incurred an obligation to pay the total sum of ₱1,105,143.27 arising from
the sale of Mobil Oil products. It further averred that SB Traders was merely an alter ego of the petitioner and
The CA added that notwithstanding such defect, the RTC proceeded with hearing the petition perhaps as an
that it was operating for his sole benefit.. Therefore, the petitioner and SB Traders must be held solidarily
act of grace giving petitioner one last chance to protect his interest and present evidence in support of his
liable for the subject amount.
arguments, but petitioner opted to dispense with the presentation of evidence in support of the said petition;
that petitioner could not claim that he was denied his day in court or claim that the RTC committed grave
The petitioner filed an answer denying all the material averments of the complaint, As special and affirmative abuse of discretion. The CA then said that once a judgment becomes final, executory and unappealable, the
defenses, he claimed that he was not acting in his personal capacity and was merely acting for and in behalf prevailing party shall not be deprived of the fruits of victory by some subterfuge devised by the losing party.
of SB Traders; that SB Traders never denied its obligation to pay for the purchases it made with the private
respondent but was merely requesting for more time to settle its accounts; and that to effect payment for the
Petitioner's motion for reconsideration was denied in a Resolution dated September 28, 2004.
subject amount, it had already issued postdated checks of ₱25,000.00 per month covering the period from
June to December 1999 to the private respondent.
Petitioner is now before the Court raising the following grounds:
Despite due notice, the petitioner and his counsel failed to appear at the scheduled pre-trial conference on
April 20, 2001. Hence, trial ensued where the public respondent allowed the ex parte presentation of the The Honorable Court committed an irreversible error in dismissing herein Petitioner's Petition for Certiorari and
private respondent's evidence before the Branch Clerk of Court. subsequently thereafter, in denying his Motion for Reconsideration thereto for lack of merit.

On May 25, 2001, the public respondent rendered judgment in favor of the private respondent, the dispositive The Honorable Court gravely erred in strictly applying the rules of procedure at the expense of substantial
portion of which reads: justice.

WHEREFORE, premises considered, judgment is hereby rendered ordering defendants S.B. Commercial The Honorable Court committed an irreversible error in not ruling on the merits of the case.5
Traders, Inc. and Romeo G. Samonte to pay, jointly and severally, unto plaintiff S.F. Naguiat, Incorporated the
following amounts: ₱1,105,143.27 as prayed for in the complaint representing the value of the oil products
reflected in the Invoices marked as Exhibits 'B' to ' O' and 'O-1'-and 'P', with interest thereon at the rate of 18% The petition has no merit.
per annum from the filing of the complaint on September 4, 2000 until the same shall have been paid in full;
₱10,000.00 as exemplary damages; and 20% of the entire amount due and demandable from the defendants
as and for attorney's fees, plus the costs of the suit. The Court of Appeals did not err in ruling that no grave abuse of discretion was committed by the RTC in
dismissing the petition for relief from judgment filed by petitioner therewith.

SO ORDERED.
Sections 1 and 3 of Rule 38 of the Rules of Court provide the requirements for a petition for relief from
judgment, thus:
The petitioner failed to appeal the said decision. Thereafter, on motion by the private respondent, the public
respondent ordered the issuance of a writ of execution on July 30, 2001.
SEC. 1. Petition for relief from judgment, order, or other proceedings. – When a judgment or final order is erroneous judicial decision. To reiterate, petition for relief is an equitable remedy that is allowed only in
entered, or any other proceeding is thereafter taken against a party in any court through fraud, accident, exceptional cases where there is no other available or adequate remedy11 which is not present in petitioner’s
mistake, or excusable negligence, he may file a petition in such court and in the same case praying that the case. Thus, petitioner's resort to a petition for relief under Rule 38 was not proper and the CA correctly ruled
judgment, order or proceeding be set aside. that the RTC did not commit grave abuse of discretion in denying the petition for relief from judgment.

SEC. 3. Time for filing of petition; contents and verification.— A petition for in either of the preceding sections Petitioner argues that the CA erred in finding that an affidavit of merit is an essential requirement in filing a
of this rule must be verified, filed within sixty (60) days after the petitioner learns of the judgment, order, or petition for relief from judgment and that without said affidavit the same would be denied.
other proceeding to be set aside, and not more than six (6) months after such judgment or order was entered,
or such proceeding was taken; and must be accompanied with affidavits showing the fraud, accident, mistake,
or excusable negligence relied upon, and the facts constituting the petitioner's good and substantial cause of The Court does not agree.
action or defense, as the case may be.
Section 3, Rule 38 of the Rules of Court requires that the petition must be accompanied with affidavits of
Relief from judgment under Rule 38 of the Rules of Court is a remedy provided by law to any person against merits showing the fraud, accident, mistake, or excusable negligence relied upon by petitioner and the facts
whom a decision or order is entered into through fraud, accident, mistake or excusable negligence. The relief constituting the petitioner's good and substantial cause of action or defense as the case maybe. While a
provided for is of equitable character, allowed only in exceptional cases as where there is no other available or petition for relief without a separate affidavit of merit is sufficient where facts constituting petitioner’s
adequate remedy.6 When a party has another remedy available to him, which may either be a motion for new substantial cause of action or defense, as the case may be, are alleged in a verified petition since the oath
trial or appeal from an adverse decision of the lower court, and he was not prevented by fraud, accident, elevates the petition to the same category as a separate affidavit,12 the petition for relief filed by petitioner was
mistake or excusable negligence from filing such motion or taking the appeal, he cannot avail himself of the not even verified. Thus, the CA did not err in no longer considering the merits of the case.
relief provided in Rule 38. The rule is that relief will not be granted to a party who seeks avoidance from the
effects of the judgment when the loss of the remedy at law was due to his own negligence or a mistaken mode
Petitioner now contends that the CA should have considered that it was petitioner's former counsel who has
of procedure, otherwise the petition for relief will be tantamount to reviving the right of appeal which has
the implied authority to determine what procedural steps to take which in his judgment will best serve the
already been lost either because of inexcusable negligence or due to a mistake in the mode of procedure by
interest of his client; that petitioner, being not knowledgeable of the laws, ought not to be blamed by the
counsel.7
incompetence, ignorance and inexperience of his counsel; and that rules of procedure should give way for a
liberal construction if the same will hinder, impede or sacrifice the demands of substantial justice.
In his Petition for Relief from Judgment filed before the RTC, petitioner alleged that the petition was filed on
the ground that the RTC made serious and prejudicial mistakes in appreciating the evidence presented. He
There is no rule more settled than that a client is bound by his counsel’s conduct, negligence and mistake in
then proceeded to discuss the errors of judgment committed by the RTC in rendering its decision.
handling the case.13 To allow a party to disown his counsel’s conduct would render proceedings indefinite,
tentative, and subject to reopening by the mere subterfuge of replacing counsel.14 Petitioner failed to show that
The mistake contemplated by Rule 38 of the Rules of Court pertains generally to mistake of fact, not of law, his counsel’s negligence was so gross and palpable as to call for the exercise of this Court’s equity
which relates to the case.8 The word "mistake" which grants relief from judgment, does not apply and was jurisdiction. While it is true that rules of procedure are not cast in stone, it is equally true that strict compliance
never intended to apply to a judicial error which the court might have committed in the trial.9 Such error may with the Rules is indispensable for the prevention of needless delays and for the orderly and expeditious
be corrected by means of an appeal. dispatch of judicial business.15

The arguments raised by petitioner in his petition for relief from judgment, i.e., he cannot be held civilly liable In Saint Louis University v. Cordero,16 the Court said:
for obligations he, as corporate president thereof, has incurred in behalf of the corporation which is vested with
a personality separate and distinct from its officers and stockholders; and that he cannot be held jointly and
Thus, while regretful that the petitioners may have had meritorious defenses against the trial court’s 17
solidarily liable for the obligations, are proper issues which petitioner could have raised in a motion for
December 1998 Order, we must likewise weigh such defenses against the need to halt an abuse of the
reconsideration which he did not. The RTC, in its Order denying the petition for relief, ruled:
flexibility of procedural rules. Additionally, it should be pointed out that in petitions for relief from judgment,
orders, or other proceedings; relief from denial of appeals; or annulment of judgments, final orders and
Going by the tenor of the aforequoted Rule, it is the sense of this Court that the petition under consideration resolutions, where meritorious defenses must be adduced, they must accompany the grounds cited therein,
cannot prosper, given the grounds therefor which should have been raised, more appropriately, in a simple whether it is fraud, accident, mistake, excusable negligence, extrinsic fraud or lack of jurisdiction. Where, as
motion for reconsideration. It must be noted that the petitioner does not assail the proceedings conducted by here, there is neither excusable nor gross negligence amounting to a denial of due process, meritorious
this Court which culminated in the rendition of the judgment and issuance of the writ of execution rather; he defenses cannot alone be considered.

questions only the validity of the dispositive portion of the decision, an issue which, as already adverted to, It has long been recognized that strict compliance with the Rules of Court is indispensable for the prevention
should have been ventilated via a motion for reconsideration.101avvphi1 of needless delays and for the orderly and expeditious dispatch of judicial business. For the Court to allow the
reopening or remand of the case after such a display of indifference to the requirements of the Rules of Court
would put a strain on the orderly administration of justice.17
In fact, the alleged errors committed by the RTC could also be corrected by means of an appeal from the RTC
decision. Petitioner did not also file an appeal causing the RTC decision to become final and executory and
the subsequent issuance of a writ of execution. Notably, petitioner never made any allegation in his petition for WHEREFORE, the petition is DENIED. The Decision dated March 26, 2004 and the Resolution dated
relief from judgment that the RTC decision was entered against him through fraud, accident, mistake, or September 28, 2004 of the Court of Appeals in CA-G.R. SP No. 70213 are AFFIRMED.
excusable negligence. The petition for relief did not also show any reason for petitioner's failure to file an
appeal after the receipt of the RTC decision which the CA correctly observed in its assailed decision.
SO ORDERED.

Petitioner’s claim that Section 1, Rule 38 of the Rules of Court does not require that petitioner should state the
reason why he did not avail of the remedy of appeal deserves scant consideration. His failure to avail of the
remedy of appeal within the reglementary period despite receipt of the RTC decision rendered the same final
and executory. He cannot be allowed to assail the RTC decision which had become final in a petition for relief
from judgment when there was no allegations of fraud, accident, mistake, or excusable negligence which
prevented him from interposing an appeal. Such appeal could have corrected what he believed to be an
DEUTSCHE GESELLSCHAFT FR G.R. No. 152318 - project assistants/guest students as required, who shall work on the project as part of
TECHNISCHE ZUSAMMENARBEIT, their basic and further training and assume specific project tasks under the separately
also known as GERMAN AGENCY Present: financed junior staff promotion programme of the Deutsche Gesellschaft fr
FOR TECHNICAL COOPERATION, Technische Zusammenarbeit (GTZ);
(GTZ) HANS PETER PAULENZ and QUISUMBING, J.,
ANNE NICOLAY, Chairperson, (b) provide in situ
Petitioners, CARPIO MORALES,
TINGA, - short-term experts to deal with diverse special tasks for a total of up to 27
VELASCO, and expert/months,
- versus - BRION, JJ.
Promulgated: - five local experts in health economy, health insurance, community health systems,
HON. COURT OF APPEALS, HON. information technology, information systems, training and community mobilization
ARIEL CADIENTE SANTOS, Labor April 16, 2009 for a total of up to 240 expert/months,
Arbiter of the Arbitration Branch,
National Labor Relations Commission, - local and auxiliary personnel for a total of up to 120 months;
and BERNADETTE CARMELLA
MAGTAAS, CAROLINA DIONCO, (c) supply inputs, in particular
CHRISTOPHER RAMOS, MELVIN
DELA PAZ, RANDY TAMAYO and - two cross-country vehicles,
EDGARDO RAMILLO,
Respondents. - ten computers with accessories,

x----------------------------------------------------------------------------x - office furnishings and equipment

DECISION up to a total value of DM 310,000 (three hundred and ten thousand Deutsche Mark);

TINGA, J.: (c) meet

- the cost of accommodation for the seconded experts and their families in so far as
On 7 September 1971, the governments of the Federal Republic of Germany and the Republic of this cost is not met by the seconded experts themselves,
the Philippines ratified an Agreement concerning Technical Co-operation (Agreement) in Bonn, capital of what
was then West Germany. The Agreement affirmed the countries common interest in promoting the technical and - the cost of official travel by the experts referred to in sub-paragraph (a) above within
economic development of their States, and recogni[zed] the benefits to be derived by both States from closer and outside the Republic of the Philippines,
technical co-operation, and allowed for the conclusion of arrangements concerning individual projects of technical
co-operation.[1] While the Agreement provided for a limited term of effectivity of five (5) years, it nonetheless was - the cost of seminars and courses,
stated that [t]he Agreement shall be tacitly extended for successive periods of one year unless either of the two
Contracting Parties denounces it in writing three months prior to its expiry, and that even upon the Agreements - the cost of transport and insurance to the project site of inputs to be supplied pursuant
expiry, its provisions would continue to apply to any projects agreed upon x x x until their completion.[2] to sub-paragraph (c) above, excluding the charges and storage fees referred to in
paragraph 4(d) below,
On 10 December 1999, the Philippine government, through then Foreign Affairs Secretary Domingo Siazon, and
the German government, agreed to an Arrangement in furtherance of the 1971 Agreement. This Arrangement - a proportion of the operating and administrative costs;
affirmed the common commitment of both governments to promote jointly a project called, Social Health
InsuranceNetworking and Empowerment (SHINE), which was designed to enable Philippine familiesespecially xxx
poor onesto maintain their health and secure health care of sustainable quality.[3] It appears that SHINE had already
been in existence even prior to the effectivity of the Arrangement, though the record does not indicate when exactly 4. The Government of the Republic of the Philippines shall make the following
SHINE was constituted. Nonetheless, the Arrangement stated the various obligations of the Filipino and German contributions to the project:
governments. The relevant provisions of the Arrangement are reproduced as follows:
It shall
3. The Government of the Federal Republic of Germany shall make the
following contributions to the project. (a) provide the necessary Philippine experts for the project, in particular one project
coordinator in the Philippine Health Insurance Corporation (Philhealth), at least three further
It shall experts and a sufficient number of administrative and auxiliary personnel, as well as health
personnel in the pilot provinces and in the other project partners, in particular one
(a) second responsible expert for each pilot province and for each association representing the various
target groups,
- one expert in health economy, insurance and health systems for up to 48
expert/months, - release suitably qualified experts from their duties for attendance at the envisaged
basic and further training activities; it shall only nominate such candidates as have given an
- one expert in system development for up to 10 expert/months undertaking to work on the project for at least five years after completing their training and
shall ensure that these Philippine experts receive appropriate remuneration,
- short-term experts to deal with special tasks for a total of up to 18 expert/months, - ensure that the project field offices have sufficient expendables,
- make available the land and buildings required for the project;
 (b) assume an increasing proportion of the running and operating costs of the The letter ended with these ominous words:
project;
(c) afford the seconded experts any assistance they may require in carrying out the The issues that we [the private respondents] have stated here are very crucial to
tasks assigned to them and place at their disposal all necessary records and documents; us in working for the project. We could no longer find any reason to stay with the project
(d) guarantee that unless ALL of these issues be addressed immediately and appropriately.[15]

- the project is provided with an itemized budget of its own in order to ensure smooth
continuation of the project. In response, Nicolay wrote each of the private respondents a letter dated 21 June 2000, all similarly worded except
for their respective addressees. She informed private respondents that the projects orientations and evolution were
- the necessary legal and administrative framework is created for the project, decided in consensus with partner institutions, Philhealth and the DOH, and thus no longer subject to modifications.
More pertinently, she stated:
- the project is coordinated in close cooperation with other national and international
agencies relevant to implementation, You have firmly and unequivocally stated in the last paragraph of your 8th June
2000 letter that you and the five other staff could no longer find any reason to stay with the
- the inputs supplied for the project on behalf of the Government of the Federal project unless ALL of these issues be addressed immediately and appropriately. Under the
Republic of Germany are exempted from the cost of licenses, harbour dues, import and foregoing premises and circumstances, it is now imperative that I am to accept your
export duties and other public charges and fees, as well as storage fees, or that any costs resignation, which I expect to receive as soon as possible.[16]
thereof are met, and that they are cleared by customs without delay. The aforementioned
exemptions shall, at the request of the implementing agencies also apply to inputs procured
in the Republic of the Philippines, Taken aback, private respondents replied with a common letter, clarifying that their earlier letter was not intended
as a resignation letter, but one that merely intended to raise attention to what they perceived as vital
- the tasks of the seconded experts are taken over as soon as possible by Philippine issues.[17] Negotiations ensued between private respondents and Nicolay, but for naught. Each of the private
experts, respondents received a letter from Nicolay dated 11 July 2000, informing them of the pre-termination of their
contracts of employment on the grounds of serious and gross insubordination, among others, resulting to loss of
- examinations passed by Philippine nationals pursuant to this Arrangement are confidence and trust.[18]
recognized in accordance with their respective standards and that the persons concerned are
afforded such opportunities with regard to careers, appointments and advancement as are On 21 August 2000, the private respondents filed a complaint for illegal dismissal with the NLRC. Named as
commensurate with their training.[4] respondents therein where GTZ, the Director of its Manila office Hans Peter Paulenz, its Assistant Project Manager
Christian Jahn, and Nicolay.

In the arraignment, both governments likewise named their respective implementing organizations for On 25 October 2005, GTZ, through counsel, filed a Motion to Dismiss, on the ground that the Labor Arbiter had no
SHINE. The Philippines designated the Department of Health (DOH) and the Philippine Health Insurance jurisdiction over the case, as its acts were undertaken in the discharge of the governmental functions and sovereign
Corporation (Philhealth) with the implementation of SHINE. For their part, the German government charge[d] the acts of the Government of the Federal Republic of Germany. This was opposed by private respondents with the
Deustche Gesellschaft fr Technische Zusammenarbeit[[5]] (GTZ[[6]]) GmbH, Eschborn, with the implementation of arguments that GTZ had failed to secure a certification that it was immune from suit from the Department of Foreign
its contributions.[7] Affairs, and that it was GTZ and not the German government which had implemented the SHINE Project and
entered into the contracts of employment.
Private respondents were engaged as contract employees hired by GTZ to work for SHINE on various
dates between December of 1998 to September of 1999. Bernadette Carmela Magtaas was hired as an information On 27 November 2000, the Labor Arbiter issued an Order[19] denying the Motion to Dismiss. The Order cited,
systems manager and project officer of SHINE;[8] Carolina Dionco as a Project Assistant of SHINE;[9] Christopher among others, that GTZ was a private corporation which entered into an employment contract; and that GTZ had
Ramos as a project assistant and liason personnel of NHI related SHINE activities by GTZ; [10] Melvin Dela Paz failed to secure from the DFA a certification as to its diplomatic status.
and Randy Tamayo as programmers;[11] and Edgardo Ramilo as driver, messenger and multipurpose service
man.[12] The employment contracts of all six private respondents all specified Dr. Rainer Tollkotter, identified as
an adviser of GTZ, as the employer. At the same time, all the contracts commonly provided that [i]t is mutually
agreed and understood that [Dr. Tollkotter, as employer] is a seconded GTZ expert who is hiring the Employee on
behalf of GTZ and for a Philippine-German bilateral project named Social Health InsuranceNetworking and On 7 February 2001, GTZ filed with the Labor Arbiter a Reiterating Motion to Dismiss, again praying that the
Empowerment (SHINE) which will end at a given time.[13] Motion to Dismiss be granted on the jurisdictional ground, and reprising the arguments for dismissal it had earlier
raised.[20] No action was taken by the Labor Arbiter on this new motion. Instead, on 15 October 2001, the Labor
In September of 1999, Anne Nicolay (Nicolay), a Belgian national, assumed the post of SHINE Project Manager. Arbiter rendered a Decision[21]granting the complaint for illegal dismissal. The Decision concluded that respondents
Disagreements eventually arose between Nicolay and private respondents in matters such as proposed salary were dismissed without lawful cause, there being a total lack of due process both substantive and procedural
adjustments, and the course Nicolay was taking in the implementation of SHINE different from her predecessors. [sic].[22] GTZ was faulted for failing to observe the notice requirements in the labor law. The Decision likewise
The dispute culminated in a letter[14] dated 8 June 2000, signed by the private respondents, addressed to Nicolay, proceeded from the premise that GTZ had treated the letter dated 8 June 2000 as a resignation letter, and devoted
and copies furnished officials of the DOH, Philheath, and the director of the Manila office of GTZ. The letter raised some focus in debunking this theory.
several issues which private respondents claim had been brought up several times in the past, but have not been
given appropriate response. It was claimed that SHINE under Nicolay had veered away from its original purpose The Decision initially offered that it need not discuss the jurisdictional aspect considering that the same had already
to facilitate the development of social health insurance by shoring up the national health insurance program and been lengthily discussed in the Order de[n]ying respondents Motion to Dismiss. [23] Nonetheless, it proceeded to
strengthening local initiatives, as Nicolay had refused to support local partners and new initiatives on the premise discuss the jurisdictional aspect, in this wise:
that community and local government unit schemes were not sustainablea philosophy that supposedly betrayed
Nicolays lack of understanding of the purpose of the project. Private respondents further alleged that as a result of
Nicolays new thrust, resources have been used inappropriately; that the new management style was not congruent
with the original goals of the project; that Nicolay herself suffered from cultural insensitivity that consequently
failed to sustain healthy relations with SHINEs partners and staff.
 Under pain of being repetitious, the undersigned Labor Arbiter has jurisdiction
to entertain the complaint on the following grounds: The OSG points out, citing Heirs of Mayor Nemencio Galvez v. Court of Appeals,[31] that even when appeal is
available, the Court has nonetheless allowed a writ of certiorari when the orders of the lower court were issued
Firstly, under the employment contract entered into between complainants and either in excess of or without jurisdiction. Indeed, the Court has ruled before that the failure to employ available
respondents, specifically Section 10 thereof, it provides that contract partners agree that his intermediate recourses, such as a motion for reconsideration, is not a fatal infirmity if the ruling assailed is a patent
contract shall be subject to the LAWS of the jurisdiction of the locality in which the service nullity. This approach suggested by the OSG allows the Court to inquire directly into what is the main issuewhether
is performed. GTZ enjoys immunity from suit.

Secondly, respondent having entered into contract, they can no longer invoke The arguments raised by GTZ and the OSG are rooted in several indisputable facts. The SHINE project
the sovereignty of the Federal Republic of Germany. was implemented pursuant to the bilateral agreements between the Philippine and German governments. GTZ was
tasked, under the 1991 agreement, with the implementation of the contributions of the German government. The
Lastly, it is imperative to be immune from suit, respondents should have secured activities performed by GTZ pertaining to the SHINE project are governmental in nature, related as they are to the
from the Department of Foreign Affairs a certification of respondents diplomatic status and promotion of health insurance in the Philippines. The fact that GTZ entered into employment contracts with the
entitlement to diplomatic privileges including immunity from suits. Having failed in this private respondents did not disqualify it from invoking immunity from suit, as held in cases such as Holy See
regard, respondents cannot escape liability from the shelter of sovereign immunity.[sic][24] v. Rosario, Jr.,[32] which set forth what remains valid doctrine:

Notably, GTZ did not file a motion for reconsideration to the Labor Arbiters Decision or elevate said decision for
appeal to the NLRC. Instead, GTZ opted to assail the decision by way of a special civil action for certiorari filed
with the Court of Appeals.[25] On 10 December 2001, the Court of Appeals promulgated a Resolution[26] dismissing
GTZs petition, finding that judicial recourse at this stage of the case is uncalled for[,] [t]he appropriate remedy of
the petitioners [being] an appeal to the NLRC x x x. [27] A motion for reconsideration to this Resolution proved
fruitless for GTZ.[28] Certainly, the mere entering into a contract by a foreign state with a private party
cannot be the ultimate test. Such an act can only be the start of the inquiry. The logical
Thus, the present petition for review under Rule 45, assailing the decision and resolutions of the Court of Appeals question is whether the foreign state is engaged in the activity in the regular course of
and of the Labor Arbiter. GTZs arguments center on whether the Court of Appeals could have entertained its petition business. If the foreign state is not engaged regularly in a business or trade, the particular
for certiorari despite its not having undertaken an appeal before the NLRC; and whether the complaint for illegal act or transaction must then be tested by its nature. If the act is in pursuit of a sovereign
dismissal should have been dismissed for lack of jurisdiction on account of GTZs insistence that it enjoys immunity activity, or an incident thereof, then it is an act jure imperii, especially when it is not
from suit. No special arguments are directed with respect to petitioners Hans Peter Paulenz and Anne Nicolay, undertaken for gain or profit.[33]
respectively the then Director and the then Project Manager of GTZ in the Philippines; so we have to presume that
the arguments raised in behalf of GTZs alleged immunity from suit extend to them as well.
Beyond dispute is the tenability of the comment points raised by GTZ and the OSG that GTZ was not
The Court required the Office of the Solicitor General (OSG) to file a Comment on the petition. In its performing proprietary functions notwithstanding its entry into the particular employment contracts. Yet there is an
Comment dated 7 November 2005, the OSG took the side of GTZ, with the prayer that the petition be granted on equally fundamental premise which GTZ and the OSG fail to address, namely: Is GTZ, by conception, able to enjoy
the ground that GTZ was immune from suit, citing in particular its assigned functions in implementing the SHINE the Federal Republics immunity from suit?
programa joint undertaking of the Philippine and German governments which was neither proprietary nor
commercial in nature. The principle of state immunity from suit, whether a local state or a foreign state, is reflected in Section
9, Article XVI of the Constitution, which states that the State may not be sued without its consent. Who or what
The Court of Appeals had premised the dismissal of GTZs petition on its procedural misstep in bypassing an appeal consists of the State? For one, the doctrine is available to foreign States insofar as they are sought to be sued in the
to NLRC and challenging the Labor Arbiters Decision directly with the appellate courts of the local State,[34] necessary as it is to avoid unduly vexing the peace of nations.
court by way of a Rule 65 petition. In dismissing the petition, the

If the instant suit had been brought directly against the Federal Republic of Germany, there would be
Court of Appeals relied on our ruling in Air Service Cooperative v. Court of Appeals.[29] The central issue in that no doubt that it is a suit brought against a State, and the only necessary inquiry is whether said State had consented
case was whether a decision of a Labor Arbiter rendered without jurisdiction over the subject matter may be annulled to be sued. However, the present suit was brought against GTZ. It is necessary for us to understand what precisely
in a petition before a Regional Trial Court. That case may be differentiated from the present case, since the Regional are the parameters of the legal personality of GTZ.
Trial Court does not have original or appellate jurisdiction to review a decision rendered by a Labor Arbiter. In
contrast, there is no doubt, as affirmed by jurisprudence, that the Court of Appeals has jurisdiction to review, by Counsel for GTZ characterizes GTZ as the implementing agency of the Government of the Federal
way of its original certiorari jurisdiction, decisions ruling on complaints for illegal dismissal. Republic of Germany, a depiction similarly adopted by the OSG. Assuming that characterization is correct, it does
not automatically invest GTZ with the ability to invoke State immunity from suit. The distinction lies in whether
Nonetheless, the Court of Appeals is correct in pronouncing the general rule that the proper recourse the agency is incorporated or unincorporated. The following lucid discussion from Justice Isagani Cruz is pertinent:
from the decision of the Labor Arbiter is to first appeal the same to the NLRC. Air Services is in fact clearly
detrimental to petitioners position in one regard. The Court therein noted that on account of the failure to correctly
appeal the decision of the Labor Arbiter to the NLRC, such judgment consequently became final and Where suit is filed not against the government itself or its officials but against
executory.[30] GTZ goes as far as to request that the Court re-examine Air Services, a suggestion that is needlessly one of its entities, it must be ascertained whether or not the State, as the principal that may
improvident under the circumstances. Air Services affirms doctrines grounded in sound procedural rules that have ultimately be held liable, has given its consent to be sued. This ascertainment will depend
allowed for the considered and orderly disposition of labor cases. in the first instance on whether the government agency impleaded is incorporated or
unincorporated.
 An incorporated agency has a charter of its own that invests it with a Is GTZ an incorporated agency of the German government? There is some mystery surrounding that question.
separate juridical personality, like the Social Security System, the University of Neither GTZ nor the OSG go beyond the claim that petitioner is the implementing agency of the Government of the
the Philippines, and the City of Manila. By contrast, the unincorporated agency is so called Federal Republic of Germany. On the other hand, private respondents asserted before the Labor Arbiter that GTZ
because it has no separate juridical personality but is merged in the general machinery of the was a private corporation engaged in the implementation of development projects.[42] The Labor Arbiter accepted
government, like the Department of Justice, the Bureau of Mines and the Government that claim in his Order denying the Motion to Dismiss, [43] though he was silent on that point in his Decision.
Printing Office. Nevertheless, private respondents argue in their Comment that the finding that GTZ was a private corporation was
never controverted, and is therefore deemed admitted.[44] In its Reply, GTZ controverts that finding, saying that it
If the agency is incorporated, the test of its suability is found in its charter. is a matter of public knowledge that the status of petitioner GTZ is that of the implementing agency, and not that of
The simple rule is that it is suable if its charter says so, and this is true regardless of a private corporation.[45]
the functions it is performing. Municipal corporations, for example, like provinces and
cities, are agencies of the State when they are engaged in governmental functions and In truth, private respondents were unable to adduce any evidence to substantiate their claim that GTZ was a private
therefore should enjoy the sovereign immunity from suit. Nevertheless, they are corporation, and the Labor Arbiter acted rashly in accepting such claim without explanation. But neither has GTZ
subject to suit even in the performance of such functions because their charter provides supplied any evidence defining its legal nature beyond that of the bare descriptive implementing agency. There is
that they can sue and be sued.[35] no doubt that the 1991 Agreement designated GTZ as the implementing agency in behalf of the German
government. Yet the catch is that such term has no precise definition that is responsive to our concerns. Inherently,
an agent acts in behalf of a principal, and the GTZ can be said to act in behalf of the German state. But that is as far
State immunity from suit may be waived by general or special law. [36] The special law can take the form of the as implementing agency could take us. The term by itself does not supply whether GTZ is incorporated or
original charter of the incorporated government agency. Jurisprudence is replete with examples of incorporated unincorporated, whether it is owned by the German state or by private interests, whether it has juridical personality
government agencies which were ruled not entitled to invoke immunity from suit, owing to provisions in their independent of the German government or none at all.
charters manifesting their consent to be sued. These include the National Irrigation Administration, [37] the former
Central Bank,[38] and the National Power Corporation.[39] In SSS v. Court of Appeals,[40] the Court through Justice GTZ itself provides a more helpful clue, inadvertently, through its own official Internet website. [46] In the Corporate
Melencio-Herrera explained that by virtue of an express provision in its charter allowing it to sue and be sued, Profile section of the English language version of its site, GTZ describes itself as follows:
the Social Security System did not enjoy immunity from suit:
As an international cooperation enterprise for sustainable development with
We come now to the amendability of the SSS to judicial action and legal worldwide operations, the federally owned Deutsche Gesellschaft fr Technische
responsibility for its acts. To our minds, there should be no question on this score considering Zusammenarbeit (GTZ) GmbH supports the German Government in achieving its
that the SSS is a juridical entity with a personality of its own. It has corporate powers development-policy objectives. It provides viable, forward-looking solutions for political,
separate and distinct from the Government. SSS' own organic act specifically provides that economic, ecological and social development in a globalised world. Working under difficult
it can sue and be sued in Court. These words "sue and be sued" embrace all civil process conditions, GTZ promotes complex reforms and change processes. Its corporate objective is
incident to a legal action. So that, even assuming that the SSS, as it claims, enjoys immunity to improve peoples living conditions on a sustainable basis.
from suit as an entity performing governmental functions, by virtue of the explicit provision
of the aforecited enabling law, the Government must be deemed to have waived immunity GTZ is a federal enterprise based in Eschborn near Frankfurt am Main. It was
in respect of the SSS, although it does not thereby concede its liability. That statutory law founded in 1975 as a company under private law. The German Federal Ministry for
has given to the private citizen a remedy for the enforcement and protection of his rights. Economic Cooperation and Development (BMZ) is its major client. The company also
The SSS thereby has been required to submit to the jurisdiction of the Courts, subject to its operates on behalf of other German ministries, the governments of other countries and
right to interpose any lawful defense. Whether the SSS performs governmental or international clients, such as the European Commission, the United Nations and the World
proprietary functions thus becomes unnecessary to belabor. For by that waiver, a private Bank, as well as on behalf of private enterprises. GTZ works on a public-benefit basis. All
citizen may bring a suit against it for varied objectives, such as, in this case, to obtain surpluses generated are channeled [sic] back into its own international cooperation projects
compensation in damages arising from contract, and even for tort. for sustainable development.[47]

A recent case squarely in point anent the principle, involving the National Power
Corporation, is that of Rayo v. Court of First Instance of Bulacan, 110 SCRA 457 (1981), GTZs own website elicits that petitioner is federally owned, a federal enterprise, and founded in 1975 as a company
wherein this Court, speaking through Mr. Justice Vicente Abad Santos, ruled: under private law. GTZ clearly has a very meaningful relationship with the Federal Republic of Germany, which
apparently owns it. At the same time, it appears that GTZ was actually organized not through a legislative public
"It is not necessary to write an extended dissertation on whether or not the charter, but under private law, in the same way that Philippine corporations can be organized under the Corporation
NPC performs a governmental function with respect to the management and Code even if fully owned by the Philippine government.
operation of the Angat Dam. It is sufficient to say that the government has
organized a private corporation, put money in it and has allowed it to sue and This self-description of GTZ in its own official website gives further cause for pause in adopting petitioners
be sued in any court under its charter. (R.A. No. 6395, Sec. 3[d]). As a argument that GTZ is entitled to immunity from suit because it is an implementing agency. The above-quoted
government, owned and controlled corporation, it has a personality of its own, statement does not dispute the characterization of GTZ as an implementing agency of the Federal Republic of
distinct and separate from that of the Government. Moreover, the charter Germany, yet it bolsters the notion that as a company organized under private law, it has a legal personality
provision that the NPC can 'sue and be sued in any court' is without independent of that of the Federal Republic of Germany.
qualification on the cause of action and accordingly it can include a tort claim
such as the one instituted by the petitioners."[41] The Federal Republic of Germany, in its own official website,[48] also makes reference to GTZ and describes it in
this manner:
It is useful to note that on the part of the Philippine government, it had designated two entities, the Department of
Health and the Philippine Health Insurance Corporation (PHIC), as the implementing agencies in behalf of
the Philippines. The PHIC was established under Republic Act No. 7875, Section 16(g) of which grants the
corporation the power to sue and be sued in court. Applying the previously cited jurisprudence, PHIC would not
enjoy immunity from suit even in the performance of its functions connected with SHINE, however, governmental
in nature as they may be. x x x Going by the principle of sustainable development, the German Technical
Cooperation (Deutsche Gesellschaft fr Technische Zusammenarbeit GmbH, GTZ) takes on
 non-profit projects in international technical cooperation. The GTZ is a private company have been highly prudential for GTZ to obtain the same after the Labor Arbiter had denied the motion to dismiss.
owned by the Federal Republic of Germany.[49] Still, even at this juncture, we do not see any evidence that the DFA, the office of the executive branch in charge of
our diplomatic relations, has indeed endorsed GTZs claim of immunity. It may be possible that GTZ tried, but failed
to secure such certification, due to the same concerns that we have discussed herein.
Again, we are uncertain of the corresponding legal implications under German law surrounding a private company
owned by the Federal Republic of Germany. Yet taking the description on face value, the apparent equivalent under Would the fact that the Solicitor General has endorsed GTZs claim of States immunity from suit before this Court
Philippine law is that of a corporation organized under the Corporation Code but owned by the Philippine sufficiently substitute for the DFA certification? Note that the rule in public international law quoted in Holy
government, or a government-owned or controlled corporation without original charter. And it bears notice that See referred to endorsement by the Foreign Office of the State where the suit is filed, such foreign office in
Section 36 of the Corporate Code states that [e]very corporation incorporated under this Code has the power and the Philippines being the Department of Foreign Affairs. Nowhere in the Comment of the OSG is it manifested that
capacity x x x to sue and be sued in its corporate name.[50] the DFA has endorsed GTZs claim, or that the OSG had solicited the DFAs views on the issue. The arguments
raised by the OSG are virtually the same as the arguments raised by GTZ without any indication of any special and
It is entirely possible that under German law, an entity such as GTZ or particularly GTZ itself has not been vested distinct perspective maintained by the Philippine government on the issue. The Comment filed by the OSG does
or has been specifically deprived the power and capacity to sue and/or be sued. Yet in the proceedings below and not inspire the same degree of confidence as a certification from the DFA would have elicited.
before this Court, GTZ has failed to establish that under German law, it has not consented to be sued despite it being
owned by the Federal Republic of Germany. We adhere to the rule that in the absence of evidence to the contrary, Holy See made reference to Baer v. Tizon,[55] and that in the said case, the United States Embassy asked the
foreign laws on a particular subject are presumed to be the same as those of the Philippines,[51] and following the Secretary of Foreign Affairs to request the Solicitor General to make a suggestion to the trial court, accomplished
most intelligent assumption we can gather, GTZ is akin to a governmental owned or controlled corporation without by way of a Manifestation and Memorandum, that the petitioner therein enjoyed immunity as the Commander of
original charter which, by virtue of the Corporation Code, has expressly consented to be sued. At the very least, like the Subic Bay Naval Base. Such circumstance is actually not narrated in the text of Baer itself and was likely
the Labor Arbiter and the Court of Appeals, this Court has no basis in fact to conclude or presume that GTZ enjoys supplied in Holy See because its author, Justice Camilio Quiason, had appeared as the Solicitor in behalf of the OSG
immunity from suit. in Baer. Nonetheless, as narrated in Holy See, it was the Secretary of Foreign Affairs which directed the OSG to
intervene in behalf of the United States government in the Baer case, and such fact is manifest enough of the
This absence of basis in fact leads to another important point, alluded to by the Labor Arbiter in his rulings. Our endorsement by the Foreign Office. We do not find a similar circumstance that bears here.
ruling in Holy See v. Del Rosario[52] provided a template on how a foreign entity desiring to invoke State immunity
from suit could duly prove such immunity before our local courts. The principles enunciated in that case were The Court is thus holds and so rules that GTZ consistently has been unable to establish with satisfaction that it
derived from public international law. We stated then: enjoys the immunity from suit generally enjoyed by its parent country, the Federal Republic of Germany.
Consequently, both the Labor Arbiter and the Court of Appeals acted within proper bounds when they refused to
In Public International Law, when a state or international agency wishes to plead acknowledge that GTZ is so immune by dismissing the complaint against it. Our finding has additional ramifications
sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of the on the failure of GTZ to properly appeal the Labor Arbiters decision to the NLRC. As pointed out by the OSG, the
state where it is sued to convey to the court that said defendant is entitled to immunity. direct recourse to the Court of Appeals while bypassing the NLRC could have been sanctioned had the Labor
Arbiters decision been a patent nullity. Since the Labor Arbiter acted properly in deciding the complaint,
In the United States, the procedure followed is the process of "suggestion," notwithstanding GTZs claim of immunity, we cannot see how the decision could have translated into a patent nullity.
where the foreign state or the international organization sued in an American court requests
the Secretary of State to make a determination as to whether it is entitled to immunity. If the As a result, there was no basis for petitioners in foregoing the appeal to the NLRC by filing directly with the Court
Secretary of State finds that the defendant is immune from suit, he, in turn, asks the Attorney of Appeals the petition for certiorari. It then follows that the Court of Appeals acted correctly in dismissing the
General to submit to the court a "suggestion" that the defendant is entitled to immunity. petition on that ground. As a further consequence, since petitioners failed to perfect an appeal from the Labor
In England, a similar procedure is followed, only the Foreign Office issues a certification to Arbiters Decision, the same has long become final and executory. All other questions related to this case, such as
that effect instead of submitting a "suggestion" (O'Connell, I International Law 130 [1965]; whether or not private respondents were illegally dismissed, are no longer susceptible to review, respecting as we
Note: Immunity from Suit of Foreign Sovereign Instrumentalities and Obligations, 50 Yale do the finality of the Labor Arbiters Decision.
Law Journal 1088 [1941]).
A final note. This decision should not be seen as deviation from the more common methodology employed in
In the Philippines, the practice is for the foreign government or the international ascertaining whether a party enjoys State immunity from suit, one which focuses on the particular functions
organization to first secure an executive endorsement of its claim of sovereign or diplomatic exercised by the party and determines whether these are proprietary or sovereign in nature. The nature of the acts
immunity. But how the Philippine Foreign Office conveys its endorsement to the courts performed by the entity invoking immunity remains the most important barometer for testing whether the privilege
varies. In International Catholic Migration Commission v. Calleja, 190 SCRA 130 (1990), of State immunity from suit should apply. At the same time, our Constitution stipulates that a State immunity from
the Secretary of Foreign Affairs just sent a letter directly to the Secretary of Labor and suit is conditional on its withholding of consent; hence, the laws and circumstances pertaining to the creation and
Employment, informing the latter that the respondent-employer could not be sued because legal personality of an instrumentality or agency invoking immunity remain relevant. Consent to be sued, as
it enjoyed diplomatic immunity. In World Health Organization v. Aquino, 48 SCRA 242 exhibited in this decision, is often conferred by the very same statute or general law creating the instrumentality or
(1972), the Secretary of Foreign Affairs sent the trial court a telegram to that effect. In Baer agency.
v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs to
request the Solicitor General to make, in behalf of the Commander of the United States WHEREFORE, the petition is DENIED. No pronouncement as to costs.
Naval Base at Olongapo City, Zambales, a "suggestion" to respondent Judge. The Solicitor
General embodied the "suggestion" in a Manifestation and Memorandum as amicus SO ORDERED.
curiae.[53]

It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was imperative for petitioners to secure
from the Department of Foreign Affairs a certification of respondents diplomatic status and entitlement to
diplomatic privileges including immunity from suits.[54] The requirement might not necessarily be imperative.
However, had GTZ obtained such certification from the DFA, it would have provided factual basis for its claim of
immunity that would, at the very least, establish a disputable evidentiary presumption that the foreign party is indeed
immune which the opposing party will have to overcome with its own factual evidence. We do not see why GTZ
could not have secured such certification or endorsement from the DFA for purposes of this case. Certainly, it would