United States of America and Others v Ruiz de Guzman

• Jurisdiction: Filipinas
• Date: 22 May 1985
• Court: Supreme Court (Philippines)

Philippines, Supreme Court (en banc).

(Abad Santos, Teehankee, Aquino, Conception, Melencio-Herrera, Plana, Escolin, Relova, Gutierrez, De la Fuente, Cuevas, Alampay and Makasiar, Judges)

United States of America and Others

and

Ruiz and De Guzman and Co

State immunity Jurisdictional immunity Construction contract United States naval base in the Philippines Tender by private company for repairs to shore installations Claim against United States for breach of contract Whether United States entitled to jurisdictional immunity Restrictive doctrine of State immunity Distinction between acts performed jure imperii and jure gestionis Whether contract relating to exercise of sovereign functions Whether conclusion of contract by United States Government constituting waiver of immunity Philippines-United States Military Bases Agreement, 1947 The law of the Philippines

Summary: The facts:In May 1972 the United States invited tenders for the repair of various shore installations at its naval base in Subic Bay, established under a Military Bases Agreement concluded with the Philippine Government. De Guzman and Co (the Company) submitted a tender and subsequently received a request from the United States to confirm its price proposals. In June 1972 the Company received a letter from the Director of the Contracts Division of the United States Naval Department stating that the Company was not being awarded the contract because of unsatisfactory performance on a previous repair contract at Subic Bay. The Company instituted proceedings in the Philippine courts, arguing that its bid had been accepted and claiming specific performance or damages. The United States invoked jurisdictional immunity as a foreign sovereign and petitioned for the proceedings to be dismissed. The trial court rejected the plea of immunity and the United States appealed to the Supreme Court.

Held (Makasiar J dissenting):The appeal was allowed and the proceedings were dismissed for lack of jurisdiction.

(1) According to the traditional rule of State immunity, a State was exempt from being sued in the courts of another State without its consent or waiver. This rule was a necessary consequence of the principles of independence and equality of States. However, the rules of international law were constantly developing and evolving. Because the activities of States had multiplied, it had been necessary to distinguish between sovereign and governmental acts (jure imperii) and private, commercial and proprietary acts (jure gestionis). The result was that State immunity now extended only to acts performed jure imperii. The restrictive application of State immunity was now the rule in the United States, the United Kingdom and other States in Western Europe (pp. 1245).

(2) State immunity should therefore be denied where the proceedings arose out of commercial transactions of the foreign sovereign. In other words, a State could be said to have descended to the level of an individual, and could thus be deemed tacitly to have given its consent to be sued only when it entered into business contracts, as opposed to contracts related to the exercise of its sovereign functions. In the case at issue the projects were an integral part of the naval base which was devoted to the defence of both the United States and the Philippines, which was indisputably a function of the Government of the highest order. The installations in question were not utilized for or dedicated to commercial or business purposes (pp. 1267).

Dissenting judgment of Makasiar J: When the United States Government, through its agency at Subic Bay, confirmed the acceptance of a bid of a private company for the repair of the shoreline in the Subic Bay area, it was deemed to have entered into a contract, waived its sovereign immunity from suit and descended to the level of an ordinary citizen. Its consent to be sued was therefore implied from its act of entering into such a contract. The majority decision in this case appeared to ignore a joint statement by President Marcos and Vice-President Mondale of the United States of 4 May 1978 in which it had been stated that the United States re-affirms that Philippine sovereignty extends over the bases (pp. 1289, 131).

The following is the text of the judgment of the Court:

Abad Santos J: This is a petition to review, set aside certain orders and restrain the respondent judge from trying Civil Case No 779-M of the defunct Court of First Instance of Rizal.

The factual background is as follows:

At times material to this case, the United States of America had a naval base in Subic, Zambales. The base was one of those provided in the Military Bases Agreement between the Philippines and the United States.

Sometime in May 1972, the United States invited the submission of bids for the following projects:

1. Repair fender system, Alava...