Commissioner of Customs v.

Eastern Sea Trading, 3 SCRA 351

NATURE OF THE CASE This is a petition for review of a decision of the Court of Tax
Appeals, which reversed a decision of the Commissioner of Customs

FACTS: Several onion and garlic shipments imported by respondent consignee from
Hongkong and Japan were seized and subjected to forfeiture proceedings for alleged
violations of Section 1363 of the Revised Administrative Code. Allegedly, none of the
shipments had the certificate required by Central Bank Circulars 44 and 45 (requiring a
Central Bank license and a certificate authorizing the importation or release of the subject
good ) for their release. The Collector of Customs of Manila rendered judgment declaring the
forfeiture of the goods in favor of the Government. Upon appeal, the Commissioner of
Customs upheld the Collector’s decision. Respondent filed a petition for review with the
Court of Tax Appeals. The CTA reversed the Commissioner’s decision. Hence, this present
petition.

ISSUES 1. Whether the seizure and forfeiture of the goods imported from Japan can be
justified under EO 328 (which implements an executive agreement extending the effectivity
of the Trades and Financial Agreements of the Philippines with Japan) ---YES.
2. Whether the executive agreement sought to be implemented by EO 328 is legal and
valid, considering that the Senate has not concurred in the making of said executive
agreement ---NO.

RULING Treaties are different from executive agreements. While treaties are formal
documents which require ratification by the Senate, executive agreements become binding
through executive action without the need of a vote by the Senate or Congress. Further,
international agreements involving political issues or changes of national policy and those
involving international arrangements of a permanent character usually take the form of
treaties; on the other hand, international agreements embodying adjustments of detail
carrying out well-established national policies and traditions and those

involving arrangements of a more or less temporary nature usually take the form of
executive agreements. The right of the Executive to enter into binding agreements without
the necessity of subsequent Congressional approval has been confirmed by long usage.
From the earliest days of our history we have entered into executive agreements covering
such subjects as commercial and consular relations, most-favored-nation rights, patent
rights, trademark and copyright protection, postal and navigation arrangements and the
settlement of claims. The validity of these has never been seriously questioned by our
courts. Francis Saye, former US High Commissioner to the Philippines, further states that
xxx it would seem to be sufficient, in order to show that the trade agreements under the act
of 1934 are not anomalous in character, that they are not treaties, and that they have
abundant precedent in our history, to refer to certain classes of agreements entered into by
the Executive without the approval of the Senate. They cover such subjects as the
inspection of vessels, navigation dues, income tax on shipping profits, the admission of civil
aircraft, customs matters, and commercial relations generally, international claims, postal
matters, the registration of trademarks and copyrights, etcetera. Some of them were
concluded not by specific congressional authorization but in conformity with policies declared
in acts of Congress with respect to the general subject matter, such as tariff acts; while still
others, particularly those with respect of the settlement of claims against foreign
governments, were concluded independently of any legislation The Parity Rights Agreement,
which was provided for in the Ordinance Appended to the Constitution was the subject of an
executive agreement, made without the concurrence of 2/3 of the Senate of the US. Hence,
the validity of the executive agreement in question in this case is patent. The authority to
issue import licenses was not vested exclusively upon the Import Control Commission or
Administration. EO 328 provided for export or import licenses "from the Central Bank of the
Philippines or the Import Control Administration" or Commission. Indeed, the latter was
created only to perform the task of implementing certain objectives of the Monetary Board
and the Central Bank, which otherwise had to be undertaken by these two (2) agencies.
Upon the abolition of said Commission, the duty to provide means and ways for the
accomplishment of said objectives had merely to be discharged directly by the Monetary
Board and the Central Bank, even if the aforementioned Executive Order had been silent
thereon. The decision of the CTA is reversed.

Pimentel v. Executive Secretary, G.R. No. 158088, July 6, 2005

Facts: The Rome Statute established the International Criminal Court which "shall have the
power to exercise its jurisdiction over persons for the most serious crimes of international
concern xxx and shall be complementary to the national criminal jurisdictions." Its jurisdiction
covers the crime of genocide, crimes against humanity, war crimes and the crime of
aggression as defined in the Statute. The Statute was opened for signature by all states in
Rome on July 17, 1998 and had remained open for signature until December 31, 2000 at the
United Nations Headquarters in New York. The Philippines signed the Statute on December
28, 2000 through Charge d’ Affairs Enrique A. Manalo of the Philippine Mission to the United
Nations. Its provisions, however, require that it be subject to ratification, acceptance or
approval of the signatory states. Petitioners filed the instant petition to compel the
respondents — the Office of the Executive Secretary and the Department of Foreign Affairs
— to transmit the signed text of the treaty to the Senate of the Philippines for ratification. It is
the theory of the petitioners that ratification of a treaty, under both domestic law and
international law, is a function of the Senate. Hence, it is the duty of the executive
department to transmit the signed copy of the Rome Statute to the Senate to allow it to
exercise its discretion with respect to ratification of treaties. Moreover, petitioners submit that
the Philippines has a ministerial duty to ratify the Rome Statute under treaty law and
customary international law.

ISSUES: 1. WON the petitioners have legal standing to file the suit.
2. WON the Executive Secretary and the Department of Foreign Affairs have a
ministerial duty to transmit to the Senate the copy of the Rome Statute signed by a member
of the Philippine Mission to the United Nations even without the signature of the President.

HELD: 1. Only Senator Pimentel, as a member of the senate, has the legal standing to file
the instant suit. The other petitioners maintain their standing as advocates and defenders of
human rights, and as citizens of the country. They have not shown, however, that they have
sustained or will sustain a direct injury from the non-transmittal of the signed text of the
Rome Statute to the Senate. "Legal standing" means a personal and substantial interest in
the case such that the party has sustained or will sustain direct injury as a result of the
government act that is being challenged. The term "interest" is material interest, an interest
in issue and to be affected by the decree, as distinguished from mere interest in the question
involved, or a mere incidental interest. Legislators have the standing to maintain inviolate the
prerogatives, powers and privileges vested by the Constitution in their office and are allowed
to sue to question the validity of any official action which they claim infringes their
prerogatives as legislators.

2. No. The President is vested with the authority to deal with foreign states and
governments, extend or withhold recognition, maintain diplomatic relations, enter into
treaties, and otherwise transact the business of foreign relations. In the realm of
treaty-making, the President has the sole authority to negotiate with other states.
Nonetheless, while the President has the sole authority to negotiate and enter treaties, the
Constitution provides a limitation to his power by requiring the concurrence of 2/3 of all the
members of the Senate for the validity of the treaty entered into by him. Section 21, Article
VII of the 1987 Constitution provides that "no treaty or international agreement shall be valid
and effective unless concurred in by at least two-thirds of all the Members of the Senate."

The participation of the legislative branch in the treaty-making process was deemed
essential to provide a check on the executive in the field of foreign relations. Treaty Making
Process by Isagani Cruz The usual steps in the treaty-making process are: negotiation,
signature, ratification, and exchange of the instruments of ratification. The treaty may then
be submitted for registration and publication under the U.N. Charter, although this step is not
essential to the validity of the agreement as between the parties. Negotiation may be
undertaken directly by the head of state but he now usually assigns this task to his
authorized representatives. These representatives are provided with credentials known as
full powers, which they exhibit to the other negotiators at the start of the formal discussions.
It is standard practice for one of the parties to submit a draft of the proposed treaty which,
together with the counter-proposals, becomes the basis of the subsequent negotiations. If
and when the negotiators finally decide on the terms of the treaty, the same is opened for
signature. This step is primarily intended as a means of authenticating the instrument and for
the purpose of symbolizing the good faith of the parties; but, significantly, it does not indicate
the final consent of the state in cases where ratification of the treaty is required. The
document is ordinarily signed in accordance with the alternat, that is, each of the several
negotiators is allowed to sign first on the copy which he will bring home to his own state.
Ratification, which is the next step, is the formal act by which a state confirms and accepts
the provisions of a treaty concluded by its representatives. The purpose of ratification is to
enable the contracting states to examine the treaty more closely and to give them an
opportunity to refuse to be bound by it should they find it inimical to their interests. It is for
this reason that most treaties are made subject to the scrutiny and consent of a department
of the government other than that which negotiated them. The last step in the treaty-making
process is the exchange of the instruments of ratification, which usually also signifies the
effectivity of the treaty unless a different date has been agreed upon by the parties. Where
ratification is dispensed with and no effectivity clause is embodied in the treaty, the
instrument is deemed effective upon its signature.

Petitioners’ arguments equate the signing of the treaty by the Philippine representative with
ratification. It should be underscored that the signing of the treaty and the ratification are two
separate and distinct steps in the treaty-making process. As discussed, the signature is
primarily intended as a means of authenticating the instrument and as a symbol of the good
faith of the parties. It is usually performed by the state’s authorized representative in the
diplomatic mission. Ratification, on the other hand, is the formal act by which a state
confirms and accepts the provisions of a treaty concluded by its representative. It is
generally held to be an executive act, undertaken by the head of the state or of the
government. Thus, Executive Order No. 459 issued by President Fidel V. Ramos on
November 25, 1997 provides the guidelines in the negotiation of international agreements
and its ratification. It mandates that after the treaty has been signed by the Philippine
representative, the same shall be transmitted to the Department of Foreign Affairs. The
Department of Foreign Affairs shall then prepare the ratification papers and forward the
signed copy of the treaty to the President for ratification. After the President has ratified the
treaty, the Department of Foreign Affairs shall submit the same to the Senate for
concurrence. Upon receipt of the concurrence of the Senate, the Department of Foreign
Affairs shall comply with the provisions of the treaty to render it effective. It should be
emphasized that under our Constitution, the power to ratify is vested in the President,
subject to the concurrence of the Senate. The role of the Senate, however, is limited only to
giving or withholding its consent, or concurrence, to the ratification. Hence, it is within the
authority of the President to refuse to submit a treaty to the Senate or, having secured its
consent for its ratification, refuse to ratify it.

The petition for mandamus is dismissed because the Court has no jurisdiction over actions
seeking to enjoin the President in the performance of his official duties. The Court, therefore,
cannot issue the writ of mandamus prayed for by the petitioners as it is beyond its
jurisdiction to compel the executive branch of the government to transmit the signed text of
Rome Statute to the Senate.

Tanada v. Angara, 272 SCRA 18

FACTS: Petitioners prayed for the nullification, on constitutional grounds, of the concurrence
of the Philippine Senate in the ratification by the President of the Philippines of the
Agreement Establishing the World Trade Organization (WTO Agreement, for brevity) and for
the prohibition of its implementation and enforcement through the release and utilization of
public funds, the assignment of public officials and employees, as well as the use of
government properties and resources by respondent-heads of various executive offices
concerned therewith.
They contended that WTO agreement violates 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” as (1) 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.

ISSUE: 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 Congress of the
Philippines.

HELD: No, the WTO agreement does not unduly limit, restrict, and impair the Philippine
sovereignty, particularly the legislative power granted by the Philippine Constitution. The
Senate was acting in the proper manner when it concurred with the President’s ratification of
the agreement.
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 part of the law of the land, and adheres
to the policy of peace, equality, justice, freedom, cooperation and amity, with all nations.” 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. 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 but creates a legally binding obligation on the parties x x x. A state
which has contracted valid international obligations is bound to make in its legislations such
modifications as may be necessary to ensure the fulfillment of the obligations undertaken.”
By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By
their voluntary act, nations may surrender some aspects of their state power in exchange for
greater benefits granted by or derived from a convention or pact. After 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 of war, the regulation of conduct of hostilities, the formation of alliances, the
regulation of commercial relations, the settling of claims, the laying down of rules governing
conduct in peace and the establishment of international organizations. The 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 of interdependence is here.”
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 policy based
on “equality and reciprocity,” the fundamental law encourages industries that are
“competitive in both domestic and foreign markets,” thereby demonstrating a clear policy
against a sheltered domestic trade environment, but one in favor of the gradual development
of robust industries that can compete with the best in the foreign markets. Indeed, Filipino
managers and 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. PETITION DISMISSED.

Inchong v. Hernandez, 101 Phil. 1156

FACTS: A law, RA No. 1180 entitled "An Act to Regulate the Retail Business" was enacted
with an effect of nationalizing the retail trade business. The main provisions of the Act are:
 (1) a prohibition against persons, not citizens of the Philippines, and against
associations, partnerships, or corporations the capital of which are not wholly
owned by citizens of the Philippines, from engaging directly or indirectly in the
retail trade;
(2) an exception from the above prohibition in favor of aliens actually engaged
in said business on May 15, 1954, who are allowed to continue to engaged therein,
unless their licenses are forfeited in accordance with the law, until their death or
voluntary retirement in case of natural persons, and for ten years after the approval
of the Act or until the expiration of term in case of juridical persons;
(3) an exception therefrom in favor of citizens and juridical entities of the
United States; (4) a provision for the forfeiture of licenses (to engage in the
retail business) for violation
of the laws on nationalization, control weights and measures and labor and other
laws relating to trade, commerce and industry;
(5) a prohibition against the establishment or opening by aliens actually
engaged in the retail business of additional stores or branches of retail business;
(6) a provision requiring aliens actually engaged in the retail business to
present for registration with the proper authorities a verified statement concerning
their businesses, giving, among other matters, the nature of the business, their
assets and liabilities and their offices and principal offices of judicial entities; and
(7) a provision allowing the heirs of aliens now engaged in the retail business
who die, to continue such business for a period of six months for purposes of
liquidation.

Petitioner Inchong, for and in his own behalf and on behalf of other alien resident
corporations and partnerships adversely affected by the provisions of Republic Act. No.
1180, brought this action to obtain a judicial declaration that said Act is unconstitutional, and
to enjoin the Secretary of Finance and all other persons acting under him, particularly city
and municipal treasurers, from enforcing its provisions. Inchong attacks the constitutionality
of the Act, contending that: (1) it denies to alien residents the equal protection of the laws
and deprives of their liberty and property without due process of law ; (2) the subject of the
Act is not expressed or comprehended in the title thereof; (3) the Act violates international
and treaty obligations of the Republic of the Philippines; (4) the provisions of the Act against
the transmission by aliens of their retail business thru hereditary succession, and those
requiring 100% Filipino capitalization for a corporation or entity to entitle it to engage in the
retail business, violate the spirit of Sections 1 and 5, Article XIII and Section 8 of Article XIV
of the Constitution.

In answer, the Solicitor-General and the Fiscal of the City of Manila contend that: (1)
the Act was passed in the valid exercise of the police power of the State, which exercise is
authorized in the Constitution in the interest of national economic survival; (2) the Act has
only one subject embraced in the title; (3) no treaty or international obligations are infringed;
(4) as regards hereditary succession, only the form is affected but the value of the property
is not impaired, and the institution of inheritance is only of statutory origin.

ISSUE: WON RA 1180 is unconstitutional since its exercise violates one’s right to due
process and equal protection as guaranteed by the Constitutio
HELD: NO. The Court finds the enactment of RA 1180 to clearly fall within the scope of
police power of the State. It is clear that the law in question was enacted to remedy a real
and actual threat and danger to the national economy posed by alien dominance and control
of retail business and free citizens and country from the said dominance and control.

It has been said the police power is so far - reaching in scope, that it has become
almost impossible to limit its sweep. As it derives its existence from the very
existence of the State itself, it does not need to be expressed or defined in its
scope; it is said to be co-extensive with self-protection and survival, and as
such it is the most positive and active of all governmental processes, the most
essential, insistent and illimitable. Especially is it so under a modern
democratic framework where the demands of society and of nations have
multiplied to almost unimaginable proportions; the field and scope of police
power has become almost boundless, just as the fields of public interest and
public welfare have become almost all-embracing and have transcended
human foresight. However, the Constitution has set forth limitations thereof
and the most important of these are: the due process clause and the equal
protection clause.

The conflict, therefore, between police power and the guarantees of due process and
equal protection of the laws is more apparent than real. Properly related, the
power and the guarantees are supposed to coexist. The balancing is the
essence or, shall it be said, the indispensable means for the attainment of
legitimate aspirations of any democratic society. There can be no absolute
power, whoever exercise it, for that would be tyranny. Yet there can neither be
absolute liberty, for that would mean license and anarchy. So the State can
deprive persons of life, liberty and property, provided there is due process of
law; and persons may be classified into classes and groups, provided
everyone is given the equal protection of the law. The test or standard, as
always, is reason. The police power legislation must be firmly grounded on
public interest and welfare, and a reasonable relation must exist between
purposes and means. And if distinction and classification has been made,
there must be a reasonable basis for said distinction.

The best evidence to determine the alien dominance in retail business are the
statistics on the retail trade, which put down the figures in black and white.
Between the constitutional convention year (1935), when the fear of alien
domination and control of the retail trade already filled the minds of our
leaders with fears and misgivings, and the year of the enactment of the
nationalization of the retail trade act (1954), official statistics unmistakably
point out to the ever-increasing dominance and control by the alien of the
retail trade. Statistical figures reveal that in percentage distribution of assets
and gross sales, alien participation has steadily increased during the years. It
is true, of course, that Filipinos have the edge in the number of retailers, but
aliens more than make up for the numerical gap through their assets and
gross sales which average between six and seven times those of the very
many Filipino retailers.
 The Court finds that law does not also violate the equal protection clause of the
Constitution because sufficient grounds exist for the distinction between alien
and citizen in the exercise of the occupation regulated, nor the due process of
law clause, because the law is prospective in operation and recognizes the
privilege of aliens already engaged in the occupation and reasonably protects
their privilege. The wisdom and efficacy of the law to carry out its objectives
appear to us to be plainly evident — as a matter of fact it seems not only
appropriate but actually necessary — and that in any case such matter falls
within the prerogative of the Legislature, with whose power and discretion the
Judicial department of the Government may not interfere

Deutsche Bank v. CIR, August 19, 2013

The Supreme Court gave its decision on 19 August 2013 in the case of Deutsche Bank AG
Manila Branch v. Commissioner of Internal Revenue (G.R. No. 188550). Details of the
decision are summarized below.
FACTS: Deutsche Bank AG Manila Branch (DB Philippines) withheld 15% branch profit
remittance tax (BPRT) on its regular banking unit net income remitted to Deutsche Bank
Germany (DB Germany) for 2002 and prior taxable years. This amounted to approximately
PHP 68 million.
DB Philippines later believed that it made an overpayment of the withholding tax, and filed
an administrative claim for refund or issuance of its tax credit certificate amounting to
approximately PHP 22.5 million. On the same date, DB Philippines requested from the
International Tax Affairs Division (ITAD) a confirmation of its entitlement to the preferential
tax rate of 10% under the Germany - Philippines Income and Capital Tax Agreement (1983)
(the Treaty). Alleging the inaction of the Bureau of Internal Revenue (BIR) on the
administrative claim, DB Philippines then filed a petition for review with the Court of Tax
Appeals (CTA).
The CTA Second Division rejected DB Philippines' claim for the refund, on the grounds that
the application for tax treaty relief was not filed with the ITAD prior to its payment of the
BPRT and actual remittance of its branch profits to DB Germany, or prior to the availment of
the preferential tax rate under the Treaty. They further held that DB Philippines had violated
the 15-day period mandated under Revenue Memorandum Order (RMO) No. 1-2000. They
also relied on a previous case known as the Mirant case, where it was held that before the
benefits of the tax treaty may be extended to a foreign corporation wishing to avail itself
thereof, the foreign corporation should first invoke the provisions of the tax treaty and prove
that they indeed apply to the corporation. This decision was affirmed by the CTA En Banc.

ISSUE: whether the failure to strictly comply with the 15-day period stipulated in RMO No.
1-2000 will deprive persons or corporations of the benefit of a tax treaty.

HELD: The Supreme Court held that DB Philippines was eligible for the benefits under the
Treaty and disagreed with the CTA in that non-compliance with RMO No. 1-2000 negated
the availability of treaty benefits to a taxpayer. The salient points of the decision are as
follows:
The Philippine Constitution provides for the adherence to the general principles of
international law as the law of the land and treaties must be performed by the parties
involved in good faith. Tax treaties are entered into to minimize, if not eliminate double
taxation and laws and issuances of the states must ensure that the reliefs granted under tax
treaties are accorded to the entitled parties. The BIR must therefore not impose additional
requirements that would negate the availment of reliefs provided under the international
agreements. This is especially given that the Treaty does not contain any pre-requisites for
the availment of the benefits contained therein. Furthermore, there is nothing in RMO No.
1-2000 which would indicate the deprivation of treaty benefits for failure to comply with the
15-day period. Bearing in mind the rationale of tax treaties, this requirement should not
divest entitlement to treaty relief as it would be in violation of the duty required by good faith
in complying with a tax treaty. The Supreme Court decision in the Mirant case is not a
binding precedent due to the fact that there are differences in parties, taxes, taxable periods
and treaties involved, and most importantly because the disposition of the case was made
only through minute resolution. The requirement that the application for the treaty rate
should have been made prior to the refund application is moot since the tax was paid
erroneously at the first instance (i.e. the BPRT was erroneously paid not on the basis of the
preferential rate under the Treaty but at the regular rate as per domestic legislation). As
such, DB Philippines could not be faulted for not complying with RMO No. 1-2000 prior to the
transaction. The refund claim was therefore allowed. It should be noted that the BIR is
expected to file a motion for reconsideration of the decision. Further details will be reported
subsequently.

Reagan v. CIR, G.R. No. L-226379, December 27, 1969

FACTS: The petitioner William C. Reagan, a citizen of the United Stated and was a civilian
employee of an American corporation providing technical assistance to the United States Air
Force in the Philippines. He opposes to pay the income tax assessed on him by respondent
Commissioner of Internal Revenue on an amount realized by him on a sale of his automobile
to a member of the United States Marine Corps (in 1960), the transaction having taken place
at the Clark Field Air Base at Pampanga. It is his contention, seriously and earnestly
expressed, that in legal contemplation the sale was made outside Philippine territory and
therefore beyond our jurisdictional power to tax. "The areas covered by the United States
Military Bases are not foreign territories both in the political and geographical sense."
Decision of the Court of Tax Appeals: The sale having taken place on what indisputably is
Philippine territory, petitioner's liability for the income tax due as a result thereof was
unavoidable. As a result of the transaction thus made, respondent Commissioner of Internal
Revenue, after deducting the landed cost of the car as well as the personal exemption to
which petitioner was entitled, fixed as his net taxable income arising from such transaction
the amount of P17,912.34, rendering him liable for income tax in the sum of P2,979.00. After
paying the sum, he wanted to have a refund from respondent claiming that he was exempt,
but pending action on his request for refund, he filed the case with the Court of Tax Appeals
seeking recovery of the sum of P2,979.00 plus the legal rate of interest. Obiter dictum – a
judge's incidental expression of opinion, not essential to the decision and not establishing
precedent. Fictio juris - a legal assumption that a thing is true which is either not true or
which is as probably false as true.

ISSUE: Whether or not the said income tax of P2,979.00 was legally collected by respondent
for petitioner.
HELD: Foreigners are still subject to the Philippine authority. Its jurisdiction may be
diminished, but it does not disappear. However, it is with the bases under lease to the
American armed forces by virtue of the Military Bases Agreement of 1947 – they are not and
cannot be foreign territory. Chief Justice Marshall, announced in the leading case of
Schooner Exchange v. M'Faddon: "The jurisdiction of the nation within its own territory is
necessarily exclusive and absolute. It is susceptible of no limitation not imposed by itself.
Any restriction upon it, deriving validity from an external source, would imply a diminution of
its sovereignty to the extent of the restriction, and an investment of that sovereignty to the
same extent in that power which could impose such restriction. All exceptions, therefore, to
the full and complete power of a nation within its own territories, must be traced up to the
consent of the nation itself. They can flow from no other legitimate source." According to
Justice Tuason, “an emphatic recognition and reaffirmation of Philippine sovereignty over the
bases and of the truth that all jurisdictional rights granted to the United States and not
exercised by the latter are reserved by the Philippines for itself”. We hold, as announced at
the outset, that petitioner was liable for the income tax arising from a sale of his automobile
in the Clark Field Air Base, which clearly is and cannot otherwise be other than, within our
territorial jurisdiction to tax. The law does not look with favor on tax exemptions and that he
who would seek to be thus privileged must justify it by words too plain to be mistaken and
too categorical to be misinterpreted. WHEREFORE, the decision of the Court of Tax Appeals
of May 12, 1966 denying the refund of P2,979.00 as the income tax paid by petitioner is
affirmed. With costs against petitioner.

Guerrero Transport v. Blaylock, 71 SCRA 621

In 1972, the US Naval Base authorities in Subic conducted a public bidding for a 5-year
contract for the right to operate and/or manage the transportation services inside the naval
base. This bidding was won by Santiago Guerrero, owner-operator of Guerrero’s Transport
Services, Inc. (Guerrero), over Concepcion Blayblock, the then incumbent concessionaire
doing business under the name of Blayblock Transport Services Blayblock. Blayblock’s 395
employees are members of the union BTEA-KILUSAN (the Union).

When Guererro commenced its operations, it refused to employ the members of the Union.
Thus, the Union filed a complaint w/ the NLRC against Guerrero to compel it to employ its
members, pursuant to Art. 1, Sec. 2 of the RP-US Base Agreement. The case was
dismissed by the NLRC upon Guerrero’s MTD on jurisdictional grounds, there being no
employer-employee relationship between the parties. Upon appeal, the Sec. of Labor
remanded the case to the NLRC. The NLRC issued a Resolution ordering Guererro to
“absorb all complainants who filed their applications on or before the deadline” set by
Guerrero, except those who may have derogatory records w/ the US Naval Authorities in
Subic. The Sec. of Labor affirmed.

Guerrero claims that it substantially complied w/ the decision of the Sec. of Labor affirming
the NLRC Resolution, & that any non-compliance was attributable to the individual
complainants who failed to submit themselves for processing & examination. The Labor
Arbiter ordered the reinstatement of 129 individuals. The Union filed a Motion for Issuance of
Writ of Execution. The order wasn’t appealed so it was declared final & executory
Subsequently, the parties arrived at a Compromise Agreement wherein they agreed to
submit to the Sec. of Labor the determination of members of the Union who shall be
reinstated by Guerrero, w/c determination shall be final. The agreement is deemed to have
superseded the Resolution of the NLRC. The Sec. of Labor ordered the absorption of 175
members of the Union subject to 2 conditions.

ISSUE: Whether or not the said members of the Union were entitled to be reinstated by
Guerrero.

HELD: YES. Pursuant to Sec. 6 of Art. I of the RP-US Labor Agreement, the US Armed
Forces undertook, consistent w/ military requirements, "to provide security for employment,
and, in the event certain services are contracted out, the US Armed Forces shall require the
contractor or concessioner to give priority consideration to affected employees for
employment.

A treaty has 2 aspects — as an international agreement between states, and as municipal

law for the people of each state to observe. As part of the municipal law, the aforesaid
provision of the treaty enters into and forms part of the contract between Guerrero and the
US Naval Base authorities. In view of said stipulation, the new contractor (Guerrero) is,
therefore, bound to give "priority" to the employment of the qualified employees of the
previous contractor (Blaylock). It is obviously in recognition of such obligation that Guerrero
entered into the aforementioned Compromise Agreement.

Under the Compromise Agreement, the parties agreed to submit to the Sec. of Labor the
determination as to who of the members of the Union shall be absorbed or employed by
Guerrero, and that such determination shall be considered as final. The Sec. of Labor issued
an Order directing the NLRC, through Labor Arbiter Francisco de los Reyes, to implement
the absorption of the 175 members into Guerrero's Transport Services, subject to the
following conditions:

a) that they were bona fide employees of the Blaylock Transport Service at the time its
concession expired; and
b) that they should pass final screening and approval by the appropriate authorities of the
U.S. Naval Base concerned.

For this purpose, Guerrero is ordered to submit to and secure from the appropriate
authorities of the U.S. naval Base at Subic, Zambales the requisite screening and approval,
the names of the members of the Union.

Considering that the Compromise Agreement of the parties is more than a mere contract
and has the force and effect of any other judgment, it is, therefore, conclusive upon the
parties and their privies. For it is settled that a compromise has, upon the parties, the effect
and authority of res judicata and is enforceable by execution upon approval by the court.
U.S.A. v. Purganan, G.R. No. 148571, December 17, 2002
FACTS: Pursuant to the existing RP-US Extradition Treaty, the United States Government,
through diplomatic channels, sent to the Philippine Government Note Verbale No. 0522
requesting the extradition of Mark B. Jimenez, also known as Mario Batacan Crespo.
Upon learning of the request for his extradition, Jimenez sought and was granted a
Temporary Restraining Order (TRO) by the RTC of Manila, Branch 25. The TRO prohibited
the Department of Justice (DOJ) from filing with the RTC a petition for his extradition. The
validity of the TRO was, however, assailed by the SOJ in a Petition before this Court in the
said GR No. 139465. Initially, the Court -- by a vote of 9-6 -- dismissed the Petition. The SOJ
was ordered to furnish private respondent copies of the extradition request and its
supporting papers and to grant the latter a reasonable period within which to file a comment
and supporting evidence.
Acting on the Motion for Reconsideration filed by the SOJ, this Court issued its October 17,
2000, Resolution.By an identical vote of 9-6 -- after three justices changed their votes -- it
reconsidered and reversed its earlier Decision. It held that private respondent was bereft of
the right to notice and hearing during the evaluation stage of the extradition process. This
Resolution has become final and executory.
Finding no more legal obstacle, the Government of the United States of America,
represented by the Philippine DOJ, filed with the RTC on May 18, 2001, the appropriate
Petition for Extradition which was docketed as Extradition Case No. 01192061.
Before the RTC could act on the Petition, Respondent Jimenez filed before it an Urgent
Manifestation/Ex-Parte Motion, which prayed that petitioners application for an arrest warrant
be set for hearing.
In its assailed May 23, 2001 Order, the RTC granted the Motion of Jimenez and set the case
for hearing on June 5, 2001. In that hearing, petitioner manifested its reservations on the
procedure adopted by the trial court allowing the accused in an extradition case to be heard
prior to the issuance of a warrant of arrest.
After the hearing, the court a quo required the parties to submit their respective memoranda.
In his Memorandum, Jimenez sought an alternative prayer: that in case a warrant should
issue, he be allowed to post bail in the amount of P100,000.
The alternative prayer of Jimenez was also set for hearing on June 15, 2001. Thereafter, the
court below issued its questioned July 3, 2001 Order, directing the issuance of a warrant for
his arrest and fixing bail for his temporary liberty at one million pesos in cash. After he had
surrendered his passport and posted the required cash bond, Jimenez was granted
provisional liberty via the challenged Order dated July 4, 2001.

ISSUE: WON an extraditee is entitled to notice and hearing before issuance of warrant of
arrest
WON the right to bail is available in extradition proceedings

HELD: 1. NO. It is significant to note that Section 6 of PD 1069, our Extradition Law, uses
the word ”immediate” to qualify the arrest of the accused. This qualification would be
rendered nugatory by setting for hearing the issuance of the arrest warrant. Hearing entails
sending notices to the opposing parties, receiving facts and arguments from them, and
giving them time to prepare and present such facts and arguments. Arrest subsequent to a
hearing can no longer be considered immediate.The law could not have intended the word
as a mere superfluity but, on the whole, as a means of imparting a sense of urgency and
swiftness in the determination of whether a warrant of arrest should be issued.By using the
phrase if it appears,the law further conveys that accuracy is not as important as speed at
such early stage. The trial court is not expected to make an exhaustive determination to
ferret out the true and actual situation, immediately upon the filing of the petition. From the
knowledge and the material then available to it, the court is expected merely to get a good
first impression -- a prima facie finding -- sufficient to make a speedy initial determination as
regards the arrest and detention of the accused.

Even Section 2 of Article III of our Constitution, which is invoked by Jimenez, does not
require a notice or a hearing before the issuance of a warrant of arrest. It provides:
“Sec. 2. The right of the people to be secure in their persons, houses, papers, and effects
against unreasonable searches and seizures of whatever nature and for any purpose shall
be inviolable, and no search warrant or warrant of arrest shall issue except upon probable
cause to be determined personally by the judge after examination under oath or affirmation
of the complainant and the witnesses he may produce, and particularly describing the place
to be searched and the persons orthings to be seized.”

To determine probable cause for the issuance of arrest warrants, the Constitution itself
requires only the examination -- under oath or affirmation -- of complainants and the
witnesses they may produce. There is no requirement to notify and hear the accused before
the issuance of warrants of arrest.
At most, in cases of clear insufficiency of evidence on record, judges merely further examine
complainants and their witnesses. In the present case, validating the act of the respondent
judge and instituting the practice of hearing the accused and his witnesses at this early stage
would be discordant with the rationale for the entire system. If the accused were allowed to
be heard and necessarily to present evidence during the prima facie determination for the
issuance of a warrant of arrest, what would stop him from presenting his entire plethora of
defenses at this stage -- if he so desires -- in his effort to negate a prima facie finding? Such
a procedure could convert the determination of a prima facie case into a full-blown trial of the
entire proceedings and possibly make trial of the main case superfluous. This scenario is
also anathema to the summary nature of extraditions.
That the case under consideration is an extradition and not a criminal action is not sufficient
to justify the adoption of a set of procedures more protective of the accused. If a different
procedure were called for at all, a more restrictive one -- not the opposite -- would be
justified in view of respondent’s demonstrated predisposition to flee.

2. NO. The court agrees with petitioner. As suggested by the use of the word “conviction,”
the constitutional provision on bail quoted above, as well as Section 4 of Rule 114 of the
Rules of Court, applies only when a person has been arrested and detained for violation of
Philippine criminal laws. It does not apply to extradition proceedings because extradition
courts do not render judgments of conviction or acquittal.
It is also worth noting that before the US government requested the extradition of the
respondent, proceedings had already been conducted in that country. But because he left
the jurisdiction of the requesting state before those proceedings could be completed, it was
hindered from continuing with the due processes prescribed under its laws. His invocation of
due process now has thus become hollow. He already had that opportunity in the requesting
state; yet, instead of taking it, he ran away.
Gonzales v. Hechanova, G.R. No. L-21897, October 22, 1963

No treaty or international agreement shall be valid and effective unless

concurred in by at least two-thirds of all the Members of the Senate. (Sec. 21,
Art. VII, 1987 Constitution)

Facts:

Executive Secretary Hechanova authorized the importation of foreign rice to be

purchased from private sources. Gonzales, a rice planter, and president of the Iloilo
Palay and Corn Planters Association, filed a petition questioning said act because
Republic Act No. 3452 which allegedly repeals or amends Republic Act No. 2207 —
explicitly prohibits the importation of foreign rice by the Rice and Corn Administration or
any other government agency.

Hechanova countered that the importation is authorized by the President for military
stock pile purposes (the president is duty-bound to prepare for the challenge of threats
of war or emergency without waiting for special authority). He also contends that there
is no prohibition on importation made by the “Government itself”. He also further that the
Government has already entered into 2 contracts with Vietnam and Burma; that these
contracts constitute valid executive agreements under international law; and, that such
agreements became binding and effective upon signing thereof by the representatives of
both parties. Hechanova also maintains that the status of petitioner as a rice planter
does not give him sufficient interest to file the petition herein and secure the relief
therein prayed for and that Gonzales has not exhausted all administrative remedies
available to him before coming to court".

ISSUES: 1. Does Gonzales have sufficient interest to file the case?

2. Whether exhaustion of administrative remedies is required in this case
3. What is the nature of the government contracts with Vietnam and Burma? Are they
valid?
4. May an international agreement be invalidated by our courts?

HELD: 1. Yes. Apart from prohibiting the importation of rice and corn, RA 3452 declares
that "the policy of the Government" is to "engage in the purchase of these basic foods
directly from those tenants, farmers, growers, producers and landowners in the
Philippines who wish to dispose of their products at a price that will afford them a fair
and just return for their labor and capital investment. ... ." Pursuant to this provision,
petitioner, as a planter with a rice land of substantial proportion, is entitled to a chance
to sell to the Government the rice it now seeks to buy abroad. Moreover, since the
purchase of said commodity will have to be effected with public funds mainly raised by
taxation, and as a rice producer and landowner petitioner must necessarily be a taxpayer,
it follows that he has sufficient personality and interest to seek judicial assistance with a
view to restraining what he believes to be an attempt to unlawfully disburse said funds.
2. No. The principle requiring the previous exhaustion of administrative remedies is not
applicable where the question in dispute is purely a legal one", or where the controverted
act is "patently illegal" or was performed without jurisdiction or in excess of jurisdiction,
or where the respondent is a department secretary, whose acts as an alter-ego of the
President bear the implied or assumed approval of the latter, unless actually disapproved
by him, or where there are circumstances indicating the urgency of judicial intervention.
The case at bar fails under each one of the foregoing exceptions to the general rule.

3. The parties to said contracts do not appear to have regarded the same as executive
agreements. But, even assuming that said contracts may properly considered as
executive agreements, the same are unlawful, as well as null and void, from a
constitutional viewpoint, said agreements being inconsistent with the provisions of
Republic Acts Nos. 2207 and 3452. Although the President may, under the American
constitutional system enter into executive agreements without previous legislative
authority, he may not, by executive agreement, enter into a transaction which is
prohibited by statutes enacted prior thereto. Under the Constitution, the main function of
the Executive is to enforce laws enacted by Congress. The former may not interfere in
the performance of the legislative powers of the latter, except in the exercise of his veto
power. He may not defeat legislative enactments that have acquired the status of law, by
indirectly repealing the same through an executive agreement providing for the
performance of the very act prohibited by said laws.
Under Commonwealth Act No. 138, in all purchases by the Government, including those
made by and/or for the armed forces, preference shall be given to materials produced in
the Philippines. The importation involved in the case at bar violates this general policy of
our Government, aside from the provisions of Republic Acts Nos. 2207 and 3452.

4. Yes. The Constitution of the Philippines has clearly settled it in the affirmative, by
providing, in Section 2 of Article VIII thereof, that the Supreme Court may not be deprived
"of its jurisdiction to review, revise, reverse, modify, or affirm on appeal, certiorari, or writ
of error as the law or the rules of court may provide, final judgments and decrees of
inferior courts in — (1) All cases in which the constitutionality or validity of any treaty,
law, ordinance, or executive order or regulation is in question". In other words, our
Constitution authorizes the nullification of a treaty, not only when it conflicts with the
fundamental law, but, also, when it runs counter to an act of Congress.

USAFFE v. Treasurer of the Philippines, G.R. No 1-10500 June 30, 1959

FACTS: The central issue in this litigation concerns the validity of the Romulo-Snyder
Agreement (1950) whereby the Philippine Government undertook to return to the United
States Government in ten annual installments, a total of about 35million dollars advanced by
the United States to, but unexpended by, the National Defense Forces of the Philippines.
July 1941: Pres Roosevelt, foreseeing the War in the Pacific, called into the service of the
Armed Forces of the United States, all the organized military forces of the Philippine
Commonwealth. Money was appropriated by US Congress ( in Appropriation Act of
December 17, 1941 - Public Law No. 353) for the expenses of the operation, mobilization
and maintenance of the Philippine Army. Expenditures from funds allocated in Ph Treasury
will be made by disbursing officers of the Army of the Philippines on the approval of authority
of the Commanding General, United States Army Forces in the Far East P570,863,000.00
was transferred directly to the Philippines Armed Forces by means of vouchers which stated
"Advance of Funds under Public law 353-77th Congress and Executive Order No. 9011" As
of December 31, 1949, Of the millions so transferred, there remained unexpended and
uncommitted in the possession of the Philippine Armed Forces of about 35 million dollars. At
that time, the Philippine Government badly needed funds for its activities. President Quirino,
through Governor Miguel Cuaderno of the Central Bank proposed to the corresponding
officials of the U.S. Government the retention of the 35-million dollars as a loan.

Romulo-Snyder Agreement was signed in Washington stating that The Government of the
Republic of the Philippines further agrees to pay the unexpended amt by 9 payments of 3.5
M USD + Final payment to be determined
Oct 1954: United States Army Forces in the Far East (USAFFE) complaint before the Manila
court of first instance Agreement be annulled, that payments thereunder be declared illegal
and that defendants as officers of the Philippine Republic be restrained from disbursing any
funds in the National Treasury.
USAFFE Veterans said that funds should be turned over to the Finance Service of the
Armed Forces of the Philippines for the payment of all pending claims of the veterans
represented by plaintiff.Pet Assailing the Validity of Romulo- Snyder Agreement

ISSUE: 1. WN the money delivered to the Armed Forces of the Philippine Islands were
straight payments for military services; ownership thereof vested in the Philippine
Government upon delivery, and consequently, there was nothing to return, nothing to
consider as a loan
2. W/N the Romulo-Snyder Agreement was void/ not binding for lack of authority of the
officers who concluded the same.

HELD: PETITION DENIED. 1. NO, Funds not property of PH Court: Amounts were not under
absolute control of PH GOV, funds were advanced not directly paid to PH and unexpended
balance should be returned Appropriation (Public law 353) states that money is to be handed
to the Philippine Government either in advance of expenditures or in reimbursement thereof.
In any system of accounting, advances of funds for expenditures contemplate disbursements
to be reported, and credited if approved, against such advances, the unexpended sums to
be returned later.
2. NO, Agreement was valid. Court: There is no doubt that President Quirino approved the
negotiations. And he had power to contract budgetary loans.
The Romulo-Snyder Agreement is an Executive Agreement and is valid. “Even granting,
arguendo, that there was no legislative authorization, it is hereby maintained that the
Romulo-Snyder Agreement was legally and validly entered into to conform to the second
category of Executive Agreements” (**See “Other Details” for 2 Classes of Exec
Agreements) September 18, 1946, Congress of the Philippines specifically authorized the
President of the Philippines to obtain such loans or incur such indebtedness with the
Government of the United States, its agencies or instrumentalities Although the agreement is
not a "treaty" as that term is used in the Constitution because it was never submitted to the
Senate for concurrence (Art. VII, Sec. 10 (7). However, it must be noted that treaty is not the
only form that an international agreement may assume. There are now various forms of such
pacts or agreements entered into by and between sovereign states which do not necessarily
come under the strict sense of a treaty and which do not require ratification or consent of the
legislative body of the State, but nevertheless, are considered valid international
agreements.
** Executive Agreements fall into two classes: (1) agreements made purely as executive acts
affecting external relations and independent of or without legislative authorization, which
may be termed as presidential agreements and (2) agreements entered into in pursuants of
acts of Congress, which have been designated as Congressional-Executive Agreements

Module 14

US (Alexander Tellech) v. Austria and Hungary Case, Tripartite Claims Commission,

1928, Decisions and Opinions (1929), p.71.
JURISDICTION: DUAL NATIONALITY, DETERMINATION OF NATIONALITY BY
MUNICIPAL LAW.—RESPONSIBILITY FOR ACTS OF CIVIL, MILITARY AUTHORITIES:
ARREST, INTERNMENT, IMPRESSMENT INTO MILITARY SERVICE. Arrest in August,
1914, of claimant, a national of Austria and United States, residing in Austria, as an agitator,
followed by his internment and his being impressed into service in Austro-Hungarian army.
Held that claim for compensation for lost time, suffering and privation falls outside terms of
Treaty of Vienna (Budapest) : citizenship is determined by municipal law, and since under
Austrian law, to which claimant voluntarily subjected himself, he was Austrian citizen,
Austrian and Austro-Hungarian authorities were within their rights. Cross-reference:
Friedensrecht, VII. Jahr Nr. 6 (1928), pp. 49-50. Bibliography: Prossinagg. p. 22 ; Bonynge,
p. 28. This claim is put forward by the United States on behalf of Alexander Tellech for
compensation for time lost and for alleged suffering and privation to which he was subjected,
first through internment in Austria, and then through enforced military service in the
Austro-Hungarian army. The claimant was born in the United States of Austrian parents on
May 14, 1895. Under the Constitution and laws of the United States he was bv birth an
American national. Under he acquired the bonds which are the subject-matter of the claim in
Docket No. 1103-A, United States of America on behalf of Edward Cucuel, claimant, v.
Austria. The Commissioner held that the claimant's affidavit is admissible and makes a prima
facie case and in the absence of rebutting evidence will sustain an interlocutory judgment
and that this rule will be applied generally in all such cases but that each respondent Agent
shall be permitted to propound to the claimant (to be transmitted by the American Agent)
interrogatories for the purpose of searching the conscience and testing the credibility of the
claimant as a witness in his own behalf and ascertaining the facts, in any case in which such
Agent entertains doubt as to the truth of the testimony in the record." the laws of Austria he
also possessed Austrian nationality by parentage. This created a conflict in citizenship,
frequently described as "dual nationality". When the claimant was five years of age he
accompanied his parents to Austria, where he continued to reside. In August, 1914, the
claimant, while residing in Austria a short distance from the Russian border, was subjected
to preventive arrest as an agitator engaged in propaganda in favor of Russia. After
investigation he was interned and confined in internment camps for 16 months. He then took
the oath of allegiance to the Emperor of Austria and King of Hungary and was impressed
into service in the Austro-Hungarian army. A decision of the sharply controverted claim that
this oath was taken under duress and that he protested that he was an American citizen is
not necessary to a disposition of this case. It appears that in 1915 and later representatives
of the Government of the United States in Austria interested themselves in securing his
release, but the application was denied. In July, 1916, the claimant deserted from the
Austro-Hungarian army and escaped into Russia, where he was arrested and held by the
Russian army authorities as a prisoner of war until the outbreak of the Kerensky revolution,
when he was released and thereupon returned to Prague, where he still lives and where he
is practicing medicine. The action taken by the Austrian civil authorities in the exercise of
their police powers and by the Austro-Hungarian military authorities, of which complaint is
made, was taken in Austria, where claimant was voluntarily residing, against claimant as an
Austrian citizen. Citizenship is determined by rules prescribed by municipal law. Under the
law of Austria, to which claimant had voluntarily subjected himself, he was an Austrian
citizen. The Austrian and the Austro-Hungarian authorities were well within their rights in
dealing with him as such. Possessing as he did dual nationality, he voluntarily took the risk
incident to residing in Austrian territory and subjecting himself to the duties and obligations of
an Austrian citizen arising under the municipal laws of Austria. Assuming that the claimant
suffered the loss and injury alleged and had not lost his American citizenship by taking the
Austrian Army oath, the Commissioner finds no provision of the Treaty of Vienna or of
Budapest obligating Austria and/or Hungary to make compensation therefor. Wherefore the
Commission decrees that under the Treaty of Vienna and the Treaty of Budapest the
Government of Austria and the Government of Hungary are not obligated to pay to the
Government of the United States any amount on behalf of the claimant herein.

The Canevaro Case, Tribunal of the Permanent Court of Arbitration, 1912; Scott,
Hague Court Reports, 284
https://pcacases.com/web/sendAttach/516

The Nottebohm Case, ICJ Reports, 1955, p.4 Judg. April 6, 1955
Brief Fact Summary. A month after the start of World War II, Nottebohn (P), a German citizen
who had lived in Guatemala (D) for 34 years, applied for Liechtenstein (P) citizenship.
Synopsis of Rule of Law. Nationality may be disregarded by other states where it is clear that
it was a mere device since the nationality conferred on a party is normally only the concerns
of that nation

FACTS: Nottebohn (P), a German by birth, lived in Guatemala (D) for 34 years, retaining his
German citizenship and family and business ties with it. He however applied for
Liechtenstein (P) citizenship a month after the outbreak of World War II. Nottebohm (P) had
no ties with Liechtenstein but intended to remain in Guatemala. The naturalization
application was approved by Liechtenstein and impliedly waived its three-year. After this
approval, Nottebohm (P) travelled to Liechtenstein and upon his return to Guatemala (D), he
was refused entry because he was deemed to be a German citizen. His Liechtenstein
citizenship was not honored. Liechtenstein (P) thereby filed a suit before the International
Court to compel Guatemala (D) to recognize him as one of its national. Guatemala (D)
challenged the validity of Nottebohm’s (P) citizenship, the right of Liechtenstein (P) to bring
the action and alleged its belief that Nottebohm (P) remained a German national.

ISSUE: Must nationality be disregarded by other states where it is clear that it was a mere
device since the nationality conferred on a party is normally the concerns of that nation?

HELD: NO. issues relating to citizenship are solely the concern of the granting nation. This
is the general rule. But it does not mean that other states will automatically accept the
conferring state’s designation unless it has acted in conformity with the general aim of
forging a genuine bond between it and its national aim. In this case, there was no
relationship between Liechtenstein (P) and Nottebohm (P). the change of nationality was
merely a subterfuge mandated by the war. Under this circumstance, Guatemala (D) was not
forced to recognize it. Dismissed.

Discussion. A state putting forth a claim must establish a locus standi for that purpose.
Without interruption and continuously from the time of the injury to the making of an award
been a national of the state making the claim and must not have been a national of the state
against whom the claim has been filed. International law 347 (8th Ed. 1955) Vol.1.