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ACT OF STATE DOCTRINE

Category: Constitutional Law

On 7 April 1986, in connection with criminal proceedings initiated in the Philippines to locate, se
quester and seek restitution of alleged ill-gotten wealth amassed by the Marcoses and other acc
used from the Philippine Government, the Office of the Solicitor General (OSG) wrote the Feder
al Office for Police Matters in Berne, Switzerland, requesting assistance for the latter office to: (a
) ascertain and provide the OSG with information as to where and in which cantons the ill -gott
en fortune of the Marcoses and other accused are located, the names of the depositors and th
e banks and the amounts involved; and (b) take necessary precautionary measures, such as sequ
estration, to freeze the assets in order to preserve their existing value and prevent any further t
ransfer thereof (herein referred as the IMAC request).

On 29 May 1986, the Office of the District Attorney in Zurich, pursuant to the OSG’s reques
t, issued an Order directing the Swiss Banks in Zurich to freeze the accounts of the accused in
PCGG I.S. No. 1 and in the “List of Companies and Foundations”. In compliance with said Order,
Bankers Trust A.G. (BTAG) of Zurich froze the accounts of Officeco Holdings, N.V. (Officeco).

Officeco appealed the Order of the District Attorney to the Attorney General of the Canton
of Zurich. The Attorney General affirmed the Order of the District Attorney. Officeco further app
ealed to the Swiss Federal Court which likewise dismissed the appeal on 31 May 1989.

Officeco made representations with the OSG and the PCGG for them to officially advise the
Swiss Federal Office for Police Matters to unfreeze Officeco’s assets. The PCGG required Officeco
to present countervailing evidence to support its request, but instead of complying with the PC
GG requirement for it to submit countervailing evidence, Officeco filed the complaint with the S
B praying for the PCGG and the OSG to officially advise the Swiss government to exclude from
the freeze or sequestration order the account of Officeco with BTAG and to unconditionall y rele
ase the said account to Officeco.

A motion to dismiss was filed but it was denied hence, a petition was brought to the SC cl
aiming that the civil action in effect seeks a judicial review of the legality or illegality of the acts
of the Swiss government since the Sandiganbayan would inevitably examine and review the fre
eze orders of Swiss officials in resolving the case. This would be in violation of the “act of state
” doctrine which states that courts of one country will not sit in judgment on the acts of the g
overnment of another in due deference to the independence of sovereignty of every sovereign
state.

Furthermore, if the Sandiganbayan allowed the complaint to prosper, this would place the P
hilippine government in an uncompromising position as it would be constrained to take a positi
on contrary to that contained in the IMAC request. Is the contention correct?

No. The parameters of the use of the act of state doctrine were clarified in Banco Nacional de
Cuba v. Sabbatino, 376 U.S. 398; 84 S. Ct. 923 (1964). There, the U.S. Supreme Court held that
international law does not require the application of this doctrine nor does it forbid the applicat
ion of the rule even if it is claimed that the act of state in question violated international l aw.
moreover, due to the doctrine’s peculiar nation-to-nation character, in practice the usual method
for an individual to seek relief is to exhaust local remedies and then repair to the executive au
thorities of his own state to persuade them to champion his claim in diplomacy or before an in
ternational tribunal.

Even assuming that international law requires the application of the act of state doctrine, it
bears stressing that the Sandiganbayan will not examine and review the freeze orders of the co
ncerned Swiss officials in Civil Case No. 0164. The Sandiganbayan will not require the Swiss offici
als to submit to its adjudication nor will it settle a dispute involving said officials. In fact, as pra
yed for in the complaint, the Sandiganbayan will only review and examine the propriety of main
taining PCGG’s position with respect to Officeco’s accounts with BTAG for the purpose of further
determining the propriety of issuing a writ against the PCGG and the OSG. Everything consider
ed, the act of state doctrine finds no application in this case and petitioners’ resort to it is utter
ly mislaid. (PCGG, et al. v. SB, et al., G.R. No. 124772, August 14, 2007, Tinga, J).

The classic American statement of the act of state doctrine, which appears to have taken ro
ot in England as early as 1674 (Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S. Ct. 9
23 (1964), citing Blad v. Bamfield, 3 Swans. 604, 36 Eng. Rep. 992), and began to emerge in A
merican jurisprudence in the late eighteenth and early nineteenth centuries, is found in Underhill
v. Hernandez, 168 U.S. 250, 18 S. Ct. 83, 42 L. Ed. 456 (1897), where Chief Justice Fuller said fo
r a unanimous Court:

Every sovereign state is bound to respect the independence of every other state, and the courts
of one country will not sit in judgment on the acts of the government of another, done within
its territory, redress of grievances by reason of such acts must be obtained through the means
open to be availed of by sovereign powers as between themselves. (Banco Nacional de Cuba v
. Sabbatino, 376 U.S. 398, 84 S. Ct. 923 (1964), citing Underhill v. Hernandez, 168 U.S. 250, 18 S.
Ct. 83, 42 L. Ed. 456 (1897)).

The act of state doctrine is one of the methods by which States prevent their national cour
ts from deciding disputes which relate to the internal affairs of another State, the other two bei
ng immunity and non-justiciability. (EVANS, M.D. (ED.), International Law (First Edition), Oxford U
niversity Press, p. 357). It is an avoidance technique that is directly related to a State’s obligatio
n to respect the independence and equality of other States by not requiring them to submit to
adjudication in a national court or to settlement of their disputes without their consent. It requir
es the forum court to exercise restraint in the adjudication of disputes relating to legislative or
other governmental acts which a foreign State has performed within its territorial limits.

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