Department of Foreign Affairs vs. NLRC (G.R. No. 113191) (G.R. No. 113191, 18 September 1996; J. VITUG, Ponente; First i!

ision" Facts: A complaint for illegal dismissal was filed against the Asian Development Bank ("ADB"). Upon receipt of summonses, both the ADB and the D A notified the !abor Arbiter that the ADB, as well as its "resident and #fficers, were covered b$ an immunit$ from legal process e%cept for borrowings, guaranties or the sale of securities pursuant to Article &'(() and Article && of the Agreement )stablishing the Asian Development Bank (the "*harter") in relation to +ection & and +ection ,, of the Agreement Between -he Bank And -he .overnment #f -he "hilippines /egarding -he Bank0s 1ead2uarters (the "1ead2uarters Agreement"). -he !abor Arbiter took cogni3ance of the complaint on the impression that the ADB had waived its diplomatic immunit$ from suit, and issued a 4udgment in favor of the complainant. -he ADB did not file an appeal, but the D A sought a nullification with the 5!/*. -he latter denied the re2uest. Iss e: 6hether or not ADB is immune from suit7 R !ing: 5o. Under the *harter and 1ead2uarters Agreement, the ADB en4o$s immunit$ from legal process of ever$ form, e%cept in the specified cases of borrowing and guarantee operations, as well as the purchase, sale and underwriting of securities. -he Bank8s officers, on their part, en4o$ immunit$ in respect of all acts performed b$ them in their official capacit$. -he *harter and the 1ead2uarters Agreement granting these immunities and privileges are treat$ covenants and commitments voluntaril$ assumed b$ the "hilippine government which must be respected. Being an international organi3ation that has been e%tended a diplomatic status, the ADB is independent of the municipal law. #ne of the basic immunities of an international organi3ation is immunit$ from local 4urisdiction, i.e., that it is immune from the legal writs and processes issued b$ the tribunals of the countr$ where it is found. -he obvious reason for this is that the sub4ection of such an organi3ation to the authorit$ of the local courts would afford a convenient medium thru which the host government ma$ interfere in their operations or even influence or control its policies and decisions of the organi3ation9 besides, such sub4ection to local 4urisdiction would impair the capacit$ of such bod$ to discharge its responsibilities impartiall$ on behalf of its member:states." -he ADB didn0t descend to the level of an ordinar$ part$ to a commercial transaction, which should have constituted a waiver of its immunit$ from suit, b$ entering into service contracts with different private companies. -here are two conflicting concepts of sovereign immunit$, each widel$ held and firml$ established. According to the classical or absolute theor$, a sovereign cannot, without its consent, be made a respondent in the *ourts of another sovereign. According to the newer or restrictive theor$, the immunit$ of the sovereign is recogni3ed onl$ with regard to public acts or acts 4ure imperii of a state, but not with regard to private act or acts 4ure gestionis. *ertainl$, the mere entering into a contract b$ a foreign state with a private part$ cannot be the ultimate test. +uch an

.f the foreign state is not engaged regularl$ in a business or trade. the particular act or transaction must then be tested b$ its nature. . this task falls principall$ on the D A as being the highest e%ecutive department with the competence and authorit$ to so act in this aspect of the international arena. or an incident thereof. Iss e: 6hether or not the D A has the legal standing to file the present petition7 R !ing: -he D A0s function includes. 6hen international agreements are concluded. entitles it to seek relief from the court so as not to seriousl$ impair the conduct of the countr$0s foreign relations. a determination which.act can onl$ be the start of the in2uir$. then it is an act 4ure imperii. especiall$ when it is not undertaken for gain or profit.n our countr$. the determination of persons and institutions covered b$ diplomatic immunities. . among its other mandates. . -he logical 2uestion is whether the foreign state is engaged in the activit$ in the regular course of business. -he service contracts referred to b$ private respondent have not been intended b$ the ADB for profit or gain but are official acts over which a waiver of immunit$ would not attach. -he D A must be allowed to plead its case whenever necessar$ or advisable to enable it to help keep the credibilit$ of the "hilippine government before the international communit$. when challenged.f the act is in pursuit of a sovereign activit$. the parties thereto are deemed to have likewise accepted the responsibilit$ of seeing to it that their agreements are dul$ regarded.