DFA vs NLRC

DFA vs. NLRC

G.R. No. 113191, 18 September 1996

Facts:

On 27 January 1993, private respondent Magnayi filed an illegal dismissal case against ADB.  Two summonses were served, one sent directly to the ADB and the other through the Department of Foreign Affairs ("DFA").  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 securities pursuant to Article 50(1) and Article 55 of the Agreement Establishing the Asian Development Bank (the "Charter") in relation to Section 5 and Section 44 of the Agreement Between The Bank And The Government Of The Philippines Regarding The Bank's Headquarters (the "Headquarters Agreement").

The Labor Arbiter took cognizance of the complaint on the impression that the ADB had waived its diplomatic immunity from suit and, in time, rendered a decision in favour Magnayi.  

The ADB did not appeal the decision.  Instead, on 03 November 1993, the DFA referred the matter to the NLRC; in its referral, the DFA sought a "formal vacation of the void judgment." When DFA failed to obtain a favorable decision from the NLRC, it filed a petition for certiorari.

Issues:

1. Whether or not ADB is immune from suit

2. Whether or not by entering into service contracts with different private companies, ADB has descended to the level of an ordinary party to a commercial transaction giving rise to a waiver of its immunity from suit

3. Whether or not the DFA has the legal standing to file the present petition

4. Whether or not the extraordinary remedy of certiorari is proper in this case

Held:

1. Under the Charter and Headquarters Agreement, the ADB enjoys immunity from legal process of every form, except in the specified cases of borrowing and guarantee operations, as well as the purchase, sale and underwriting of securities.  The Bank’s 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 assumed by the Philippine government which must be respected.

  

Being an international organization that has been extended a diplomatic status, the ADB is independent of the municipal law.

"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.  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 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."

2. No. The ADB didn't descend to the level of an ordinary party to a commercial transaction, which should have constituted a waiver of its immunity from suit, by entering into service contracts with different private companies. “There are two conflicting concepts of sovereign immunity, each widely held and firmly established.  According to the classical or absolute theory, a sovereign cannot, without its consent, be made a respondent in the Courts of another sovereign.  According to the newer or restrictive theory, the immunity of the sovereign is recognized only with regard to public acts or acts jure imperii of a state, but not with regard to private act or acts jure gestionis.

 “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 engaged in the activity in the regular course of business.  If the foreign state is not engaged regularly in a business or trade, the particular act or transaction must then be tested by its nature.  If the act is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii, especially when it is not undertaken for gain or profit.”

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.

3. Yes. 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 to seek relief from the court so as not to seriously impair the conduct of the country's foreign relations.  The DFA must be allowed to plead its case whenever necessary or advisable to enable it to help keep the credibility of the Philippine government before the international 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. In Holy See vs. Hon. Rosario, Jr., this Court has explained the matter in good detail; viz:

"In Public International Law, when a state or international agency wishes to plead sovereign or diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is sued to convey to the court that said defendant is entitled to immunity.

"In the United States, the procedure followed is the process of 'suggestion,' 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 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 defendant is entitled to immunity.  

"In the Philippines, the practice is for the foreign government or the international organization to first secure an executive endorsement of its claim of sovereign or diplomatic immunity.  But how the Philippine Foreign Office conveys its endorsement to the courts varies.  In International Catholic Migration Commission vs. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly 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 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 Naval Base at Olongapo City, Zambales, a 'suggestion' to respondent Judge.  The Solicitor General embodied the 'suggestion' in a manifestation and memorandum as amicus curiae.

"In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs moved with 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.

"In some cases, the defense of sovereign immunity was submitted directly to the local courts by the respondents through their private counsels.  In cases where the foreign states bypass the Foreign Office, the courts can inquire into the facts and make their own determination as to the nature of the acts and transactions involved."

4. Yes. Relative to the propriety of the extraordinary remedy of certiorari, the Court has, under special circumstances, so allowed and entertained such a petition when (a) the questioned order or decision is issued in excess of or without jurisdiction, or (b) where the order or decision is a patent nullity, which, verily, are the circumstances that can be said to obtain in the present case.  When an adjudicator is devoid of jurisdiction on a matter before him, his action that assumes otherwise would be a clear nullity.

Petition for certiorari is GRANTED, and the decision of the Labor Arbiter, dated 31 August 1993 is VACATED for being NULL AND VOID.