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.