DEUTSCHE GESELLSCHAFT FÜR TECHNISCHE ZUSAMMENARBEIT GTZ v.

COURT OF
APPEALS
GR No. 152318, 2009-04-16
Facts:
On 7 September 1971, the governments of the Federal Republic of Germany and the
Republic of the Philippines ratified an Agreement concerning Technical Co-operation
(Agreement) in Bonn, capital of what was then West Germany.
The case involved Deustche Gesellschaft für Technische Zusammenarbeit (GTZ), a
German government-owned corporation, that entered into an Agreement with the
Philippine government to implement the Social Health Insurance Networking and
Empowerment (SHINE) project. Disagreements arose between GTZ and its Filipino
employees, leading to their dismissal and a subsequent complaint for illegal dismissal.
On October 25, 2005, GTZ filed a motion to dismiss on the ground of lack of jurisdiction
over the case, because its acts were undertaken in the discharge of their duties and
therefore has immunity from suit. The activities performed by GTZ pertaining to the
SHINE project are governmental in nature, related as they are to the promotion of
health insurance in the Philippines.
Issues:
Whether or not GTZ, as a government-owned corporation, could claim immunity from
suit.
Ruling:
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.” The principle is applicable to international nations when
they are being pursued for legal action within the jurisdiction of the host nation, and this
is essential to prevent any excessive disruption to global peace.
The Court held that GTZ, despite being a government-owned corporation, did not
automatically enjoy immunity from suit. The key distinction was whether the entity was
incorporated or unincorporated. Incorporated agencies have a separate juridical
personality and may be sued if their charter allows it. Unincorporated agencies are
merged within the government's machinery and may enjoy sovereign immunity.
In GTZ's case, it was described as a "federally owned" entity but organized under private
law. It had a legal personality independent of the German government, similar to a
government-owned or controlled corporation under Philippine law. Without evidence
that the Department of Foreign Affairs endorsed GTZ's claim of immunity, the Court ruled
that GTZ had not satisfactorily established its immunity from suit.
The decision emphasized that the nature of the entity's acts and the laws governing its
creation and legal personality were relevant in determining whether State immunity
from suit should apply. Consent to be sued, as conferred by statute or general law, was a
crucial factor in establishing immunity from suit.

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