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SC rules against German firm’s immunity from suit

By Benjamin B. Pulta

05/24/2009

The Supreme Court (SC) has ruled that a German firm implementing projects in the Philippines does not enjoy immunity from suit here.

In a 29-page decision by Justice Dante Tinga, the SC’s Second Division ruled that the German Agency for Technical Cooperation (GTZ) is not entitled to immunity from suit in the Philippines as GTZ, being the equivalent of a government-owned and-controlled corporation, has the power and capacity to sue and be sued under the Corporation Code. The SC thus dismissed GTZ’s petition to overturn the decision of the Labor Arbiter which found GTZ guilty of illegal dismissal on the ground of lack of jurisdiction.

Concurring with the decision are Senior Justice Leonardo Quisumbing and Justices Conchita Carpio Morales, Presbitero Velasco Jr. and Arturo Brion.

The high court also upheld the Court of Appeal’s dismissal of GTZ’s petition for the latter’s direct recourse to it instead of properly appealing the Labor Arbiter’s decision before the National Labor Relations Commission (NLRC).

Aside from claiming to be the agency designated by the German government to implement the contributions of Germany to a joint project with the Philippines, the Court noted that GTZ failed to establish that under German law, it has not consented to be sued despite its being owned by the Federal Republic of Germany. Thus, even though the activities performed by GTZ are governmental in nature, related as they are to the promotion of health insurance in the Philippines, it is necessary to define the legal nature of GTZ to determine if it is entitled to immunity from suit, the court held.

As GTZ simply defined itself as an “implementing agency” of the Federal Republic of Germany, the court, in determining GTZ’s legal personality, looked into the agency’s profile provided in its website which defines GTZ as a federally-owned “international cooperation enterprise for sustainable development with worldwide operations.”

The Federal Republic of Germany’s own website also provides a description of GTZ as a “private company owned by the Federal Republic of Germany.” Thus, “following the most intelligent assumption we can gather, GTZ is akin to a government-owned or -controlled corporation without original charter which, by virtue of the Corporation Code, has expressly consented to be sued,” held the court.

In addition, the court stressed that it has no basis in fact to conclude or presume that GTZ enjoys immunity from suit in the absence of a certification from the Department of Foreign Affairs that GTZ has diplomatic status and thus is entitled to immunity from suit. The court held that while a certification may not necessaily be imperative for a foreign party to enjoy such diplomatic privileges, an endorsement from the DFA supporting GTZ’s claim of diplomatic status would have provided factual basis in establishing the company’s entitlement to immunity from suit. The court also noted that while the Office of the Solicitor General shares the same view as GTZ, the endorsement of OSG “does not inspire the same degree of confidence as a certification from the DFA, the office of the Executive Branch in charge of our diplomatic relations, would have elicited.”

The court stressed, however, “this decision should not be seen as deviation from the more common methodology employed in ascertaining whether a party enjoys State immunity from suit, one which focuses on the particular functions exercised by the party and determines whether these are proprietary or sovereign in nature. The nature of the acts performed by the entity invoking immunity remains the most important barometer for testing whether the privilege of State immunity from suit should apply. At the same time, our Constitution stipulates that a State immunity from suit is conditional on its withholding consent; hence, the laws and circumstances pertaining to the creation and legal personality of an instrumentality or agency invoking immunity remain relevant. Consent to be sued, as exhibited in this decision, is often conferred by the very same statute or general law creating the instrumentality or agency.”

The Court also noted that there was no basis for GTZ in foregoing the appeal to the NLRC by filing directly with the Court of Appeals the petition for certiorari. Consequently, since GTZ failed to perfect an appeal from the Labor Arbiter’s decision, its finding of GTZ’s guilt for illegal dismissal has long become final and executory, no longer susceptible to review.

In August 2000, six contractual employees hired by GTZ to work for the implementation of the Social Health Insurance Networking and Empowerment (SHINE), a joint health insurance project of the Philippine and German governments under an agreement forged between the two states in 1991, filed a complaint before the Labor Arbiter against GTZ and its officials for illegal dismissal of the employees as committed by the SHINE project manager. Claiming that the Labor Arbiter does not have jurisdiction over the case as GTZ’s acts were undertaken in the discharge of the governmental functions and sovereign acts of the German government, GTZ filed a motion to dismiss. The Labor Arbiter denied the motion and eventually ruled that GTZ was guilty of illegal dismissal.

Instead of filing a motion of reconsideration or elevating the decision for appeal to the NLRC, however, GTZ brought the case before the CA which also dismissed the petition noting that “judicial recourse at this stage of the case is uncalled for, the appropriate remedy of the petitioners being an appeal to the NLRC.”