China National Machinery & Equipment Corporation (Group) vs.
Cesar
D. Santamaria, [ GR No. 185572, Feb 07, 2012 ]
Doctrine:
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 acts or acts jure gestionis.
Facts:
Petitioner China National Machinery & Equipment Corp. (Group) (CNMEG), entered into
a Memorandum of Understanding with the North Luzon Railways Corporation (Northrail),
for the conduct of a feasibility study on a possible railway line from Manila to San
Fernando, La Union (the Northrail Project).
On 30 August 2003, the Export Import Bank of China (EXIM Bank) and the Department
of Finance of the Philippines (DOF) entered into a Memorandum of Understanding,
wherein China agreed to extend Preferential Buyer's Credit to the Philippine government
to finance the Northrail Project and designated EXIM Bank as the lender, while the
Philippine government named the DOF as the borrower, and CNMEG's designation as
the Prime Contractor.
On 30 December 2003, Northrail and CNMEG executed a Contract Agreement for the
construction of Section I, Phase I of the North Luzon Railway System from Caloocan to
Malolos on a turnkey basis (the Contract Agreement).
Respondents filed a Complaint alleging that the Contract Agreement and the Loan
Agreement were void for being contrary to (a) the Constitution; (b) Republic Act No. 9184
(R.A. No. 9184), otherwise known as the Government Procurement Reform Act; (c)
Presidential Decree No. 1445, otherwise known as the Government Auditing Code; and
(d) Executive Order No. 292, otherwise known as the Administrative Code.
CNMEG filed a Motion to Dismiss, arguing that the trial court did not have jurisdiction
over its person, as it was an agent of the Chinese government, making it immune from
suit
Issue/s:
Whether CNMEG is entitled to immunity, precluding it from being sued before a local
court?
Ruling:
No, CNMEG is not entitled to immunity from suit.
The mantle of state immunity cannot be extended to commercial, private and proprietary acts
(jure gestionis). A thorough examination of the basic facts of the case would show that CNMEG
is engaged in a proprietary activity.
