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Republic of Indonesia vs.

Vinzon
[G.R. No. 154705. June 26, 2003]

FACTS:
1. ROI entered into a Maintenance Agreement with respondent James Vinzon,
sole proprietor of Vinzon Trade and Services.
2. Petitioners: prior to the date of expiration, informed respondent that the
renewal shall be at the discretion of the incoming Chief of Administration,
Minister Counsellor Azhari Kasim.
i. Minister Counsellor Kasim terminated the agreement because he
allegedly found respondents work and services unsatisfactory
and not in compliance with the standards set in the Maintenance
Agreement.
ii. Petitioners claim, moreover, that they had earlier verbally
informed respondent of their decision to terminate the
agreement.
3. Respondent filed a complaint against petitioners in the RTC of Makati
4. Petitioner: MTD:
i. ROI, as a foreign sovereign State, has sovereign immunity from
suit and cannot be sued as a party-defendant in the Philippines.
ii. That Ambassador Soeratmin and Minister Counsellor Kasim are
diplomatic agents as defined under the Vienna Convention on
Diplomatic Relations and therefore enjoy diplomatic immunity.
5. Respondent: Opposition, ROI has expressly waived its immunity from
suit. He based this claim upon the following provision in the Maintenance
Agreement:
“Any legal action arising out of this Maintenance Agreement shall be
settled according to the laws of the Philippines and by the proper court
of Makati City, Philippines.”
6. Respondents Opposition likewise alleged that Ambassador Soeratmin and
Minister Counsellor Kasim can be sued and held liable in their private
capacities for tortious acts done with malice and bad faith.
7. RTC ruled in favor of the Respondent.
8. CA affirmed.

ISSUE: WON the CA erred in sustaining the trial court’s decision that petitioners
have waived their immunity from suit by using as its basis the abovementioned
provision in the Maintenance Agreement.

HELD: NO.

International law is founded largely upon the principles of reciprocity, comity,


independence, and equality of States which were adopted as part of the law of our
land under Article II, Section 2 of the 1987 Constitution. The rule that a State may
not be sued without its consent is a necessary consequence of the principles of
independence and equality of States.
As enunciated in Sanders v. Veridiano II, the practical justification for the doctrine
of sovereign immunity is that there can be no legal right against the authority that
makes the law on which the right depends. In the case of foreign States, the rule is
derived from the principle of the sovereign equality of States, as expressed in the
maxim par in parem non habet imperium. All states are sovereign equals and
cannot assert jurisdiction over one another. A contrary attitude would unduly vex
the peace of nations.

Hence, the existence alone of a paragraph in a contract stating that any legal
action arising out of the agreement shall be settled according to the laws of the
Philippines and by a specified court of the Philippines is not necessarily a waiver of
sovereign immunity from suit. The aforesaid provision contains language not
necessarily inconsistent with sovereign immunity. On the other hand, such
provision may also be meant to apply where the sovereign party elects to sue in the
local courts, or otherwise waives its immunity by any subsequent act. The
applicability of Philippine laws must be deemed to include Philippine laws in its
totality, including the principle recognizing sovereign immunity. Hence, the proper
court may have no proper action, by

On the matter of whether or not petitioners Ambassador Soeratmin and Minister


Counsellor Kasim may be sued herein in their private capacities, Article 31 of the
Vienna Convention on Diplomatic Relations provides:
xxx
1. A diplomatic agent shall enjoy immunity from the criminal jurisidiction of the
receiving State. He shall also enjoy immunity from its civil and administrative
jurisdiction, except in the case of:

(a) a real action relating to private immovable property situated in the territory of
the receiving State, unless he holds it on behalf of the sending State for the
purposes of the mission;

(b) an action relating to succession in which the diplomatic agent is involved as


executor, administrator, heir or legatee as a private person and not on behalf of the
sending State;

(c) an action relating to any professional or commercial activity exercised by the


diplomatic agent in the receiving State outside his official functions.
xxx
The act of petitioners Ambassador Soeratmin and Minister Counsellor Kasim in
terminating the Maintenance Agreement is not covered by the exceptions provided
in the abovementioned provision.
LYONS vs. USA
G.R. No. L-11786, September 26, 1958

Complaint: action to collect several sums of money from a contract


Contract: stevedoring service at the U.S. Naval Base, Subic Bay, Philippines
Plaintiff: USA

Facts:
1. Plaintiff : CFI Manila: action to collect several sums of money from a contract
entered into between plaintiff and defendant
- This contract was entered provisions of Section 2 (c) (1) of the Armed
Services Procurement Act of 1947 of the United States of America (Public
Law 413, 80th Congress).
2. Defendant: MTD: court has no jurisdiction over defendant and over the
subject matter of the action.
3. CFI: sustained MTD: grounds (a) the court lacks jurisdiction over defendant,
it being a sovereign state which cannot be sued without its consent; and (b)
plaintiff failed to exhaust the administrative remedies provided for in Article
XXI of the contract.

Issue: WON USA, being a sovereign state, cannot be sued without its consent.

Held: NO.

It is however contended that when a sovereign state enters into a contract with a
private person the state can be sued upon the theory that it has descended to the
level of an individual from which it can be implied that it has given its consent to be
sued under the contract. Thus, appellant cites the case of Santos vs. Santos, 92
Phil. 281; 48 Off. Gaz., 4815, wherein this Court made the following
pronouncement:

... If, where and when the state or its government enters into a contract,
through its officers or agents, in furtherance of a legitimate aim and purpose
and pursuant to constitutional legislative authority, whereby mutual or
reciprocal benefits accrue and rights and obligations arise therefrom, and if
the law granting the authority to enter into such contract does not provide
for or name the officer against whom action may be brought in the event of a
breach thereof, the state itself may be sued even without its consent,
because by entering into a contract the sovereign state has descended to the
level of the citizen and consent to be sued is implied from the very act
entering into such contract. If the dignity of the state, the sacredness of the
institution, the respect for the government are to be preserved and the
dragging of its name in a suit to be prevented, the legislative department
should name the officer or agent against whom the action may be brought in
the event of breach of the contract entered into under its name and
authority. And the omission or failure of the legislative department to do so is
no obstacle or impediment for an individual or citizen, who is aggrieved by
the breach of the contract, to bring an action against the state itself for the
reasons already adverted to, to wit: the descent of the sovereign state to the
level of the individual or citizen with whom it entered into a contract and its
consent to be sued implied from the act of entering into such contract.

Considering that the United States Government, through its agency at Subic Bay,
entered into a contract with appellant for stevedoring and miscellaneous labor
services within the Subic Bay area, a U. S. Navy Reservation, it is evident that it
can bring an action before our court for any contractual liability that political entity
may assume under the contract. The trial court, therefore, has jurisdiction to
entertain this case in so far as appellee is concerned.

CONSTANTINO VS CUISIA

Petitioner in their capacity as taxpayers

Respondent: Governor of the Bangko Sentral ng Pilipinas, the Secretary of Finance,


the National Treasurer, and the Philippine Debt Negotiation Chairman Emmanuel V.
Pelaez. All respondents were members of the Philippine panel tasked to negotiate
with the countrys foreign creditors pursuant to the Financing Program.

Facts:

The Financing Program was the culmination of efforts that began during the
term of former President Corazon Aquino to manage the country’s external debt
problem through a negotiation-oriented debt strategy involving cooperation and
negotiation with foreign creditors.

1. Aquino government entered into three restructuring agreements with


representatives of foreign creditor governments during the period of
1986 to 1991.
2. During the same period, three similarly-oriented restructuring
agreements were executed with commercial bank creditors.
3. In 1992, the Philippine Debt Negotiating Team, chaired by respondent
Pelaez, negotiated an agreement with the country’s Bank Advisory
Committee, representing all foreign commercial bank creditors, on the
Financing Program which respondents characterized as a multi-option
financing package.
4. The Program was scheduled to be executed on 24 July 1992 by
respondents in behalf of the Republic.
5. Nonetheless, petitioners alleged that even prior to the execution of the
Program respondents had already implemented its buyback component
when on 15 May 1992, the Philippines bought back P1.26 billion of
external debts pursuant to the Program.
6. The petition sought to enjoin the ratification of the Program, but the
Court did not issue any injunctive relief.
7. Hence, it came to pass that the Program was signed in London as
scheduled. The petition still has to be resolved though as petitioners
seek the annulment of any and all acts done by respondents, their
subordinates and any other public officer pursuant to the agreement
and program in question.
8. Even after the signing of the Program, respondents themselves
acknowledged that the remaining principal objective of the petition is
to set aside respondents actions.
9. Petitioners characterize the Financing Program as a package offered to
the country’s foreign creditors consisting of two debt-relief options.

a. The first option was a cash buyback of portions of the Philippine


foreign debt at a discount.
b. The second option allowed creditors to convert existing
Philippine debt instruments into any of three kinds of
bonds/securities:
i. new money bonds with a five-year grace period and 17
years final maturity, the purchase of which would allow
the creditors to convert their eligible debt papers into
bearer bonds with the same terms;
ii. interest-reduction bonds with a maturity of 25 years; and
iii. principal-collateralized interest-reduction bonds with a
maturity of 25 years.
10. Program carried three basic options from which foreign bank lenders
could choose, namely:
a. to lend money,
b. to exchange existing restructured Philippine debts with an
interest reduction bond; or
c. to exchange the same Philippine debts with a principal
collateralized interest reduction bond

ISSUE:

WON the debt-relief contracts entered into pursuant to the Financing


Program as beyond the powers granted to the President under Section 20, Article
VII of the Constitution

Held:

The language of the Constitution is simple and clear as it is broad. It allows the
President to contract and guarantee foreign loans. It makes no prohibition on the
issuance of certain kinds of loans or distinctions as to which kinds of debt
instruments are more onerous than others.

The only restriction that the Constitution provides, aside from the prior concurrence
of the Monetary Board, is that the loans must be subject to limitations provided by
law. In this regard, we note that Republic Act (R.A.) No. 245 as amended by Pres.
Decree (P.D.) No. 142, s. 1973, entitled An Act Authorizing the Secretary of Finance
to Borrow to Meet Public Expenditures Authorized by Law, and for Other Purposes,
allows foreign loans to be contracted in the form of, inter alia, bonds.