Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 169815

August 13, 2008

BUREAU OF FISHERIES AND AQUATIC RESOURCES (BFAR) EMPLOYEES UNION, REGIONAL OFFICE NO. VII, CEBU CITY, petitioner,
vs.
COMMISSION ON AUDIT, respondent.
DECISION
PUNO, C.J.:
On appeal are the Decision1 dated April 8, 2005 of respondent Commission on Audit (COA) in LAO-N-2005-119 upholding the disallowance by the COA Legal and
Adjudication Office (COA-LAO), Regional Office No. VII, Cebu City of the P10,000.00 Food Basket Allowance granted by BFAR to each of its employees in 1999,
and COA Resolution2 dated August 5, 2005, denying petitioners motion for reconsideration of said Decision.
First, the facts:
On October 18, 1999, petitioner Bureau of Fisheries and Aquatic Resources (BFAR) Employees Union, Regional Office No. VII, Cebu City issued Resolution No. 01,
series of 1999 requesting the BFAR Central Office for a Food Basket Allowance. It justified its request on the high cost of living, i.e., "the increase in prices of
petroleum products which catapulted the cost of food commodities, has greatly affected the economic conditions and living standard of the government
employees of BFAR Region VII and could hardly sustain its need to cope up with the four (4) basic needs, i.e., food, shelter, clothing and education."3 It also relied
on the Employees Suggestions and Incentive Awards System (ESIAS), pursuant to Book V of Executive Order No. 292, or the Administrative Code of 1987, and
approved by the Civil Service Commission on December 3, 1996. The ESIAS "includes the granting of incentives that will help employees overcome present
economic difficulties, boost their morale, and further commitment and dedication to public service."4 Regional Director Corazon M. Corrales of BFAR Region VII
indorsed the Resolution, and Malcolm I. Sarmiento, Jr., Director of BFAR recommended its approval. Honorable Cesar M. Drilon, Jr., Undersecretary for Fisheries
and Livestock of the Department of Agriculture, approved the request for Authority to Grant a Gift Check or the Food Basket Allowance at the rate of P10,000.00
each to the 130 employees of BFAR Region VII, or in the total amount of P1,322,682.00.5 On the strength of the approval, Regional Director Corrales released the
allowance to the BFAR employees.
On post audit, the Commission on Audit Legal and Adjudication Office (COA-LAO) Regional Office No. VII, Cebu City disallowed the grant of Food Basket
Allowance under Notice of Disallowance No. 2003-022-101 (1999) dated September 19, 2003. It ruled that the allowance had no legal basis and that it violated:
a) Sec. 15(d) of the General Appropriations Act of 1999, prohibiting the payment of honoraria, allowances, or other forms of compensation to any government
official or employee, except those specifically authorized by law; b) par. 4.5 of Budget Circular No. 16 dated November 28, 1998, prohibiting the grant of food,
rice, gift checks, or any other form of incentives/allowances, except those authorized via Administrative Order by the Office of the President; and c) Sec. 12 of
Republic Act (R.A.) No. 6758, or the Salary Standardization Law of 1989, which includes all allowances in the standardized salary rates, subject to certain
exceptions.

On February 26, 2004, BFAR Regional Office No. VII, through Regional Director Corrales, moved for reconsideration and prayed for the lifting of the disallowance.
It argued that the grant of Food Basket Allowance would enhance the welfare and productivity of the employees. Further, it contended that the approval by the
Honorable Drilon, Undersecretary for Fisheries and Livestock, of the said benefit was the law itself which vested the specific authority for its release. The
Commission on Audit Legal and Adjudication Office (COA-LAO) Regional Office No. VII, Cebu City denied the motion.
Petitioner appealed to the Commission on Audit Legal and Adjudication Office (COA-LAO) National, Quezon City. The appeal was denied in a Decision dated
April 8, 2005. Petitioners motion for reconsideration was likewise denied in a Resolution dated August 5, 2005.
Hence, this appeal.
Petitioner cites the following grounds for its appeal:
1. The disallowance in question is unconstitutional as it contravenes the fundamental principle of the State enshrined under Sections 9 and 10, Article II of the
1987 Constitution, which provide as follows:
SEC. 9. The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty
through policies that provide adequate social services, promote full employment, a rising standard of living, and an improved quality of life for all.
SEC. 10. The State shall promote social justice in all phases of national development.6
2. The Undersecretary for Fisheries and Livestock is an extension of the Secretary of Agriculture who is an alter-ego of the President. His approval was
tantamount to the authority from the Office of the President, as contemplated in DBM Budget Circular No. 16, dated November 28, 1998.7
3. The grant of the Food Basket Allowance is in conformity with Sec. 12 of the Salary Standardization Law.8
We deny the petition.
First, we rule on the issue of constitutionality. Petitioner invokes the provisions of the 1987 Constitution on social justice to warrant the grant of the Food Basket
Allowance. Time and again, we have ruled that the social justice provisions of the Constitution are not self-executing principles ready for enforcement through
the courts. They are merely statements of principles and policies. To give them effect, legislative enactment is required. As we held in Kilosbayan, Incorporated
v. Morato,9the principles and state policies enumerated in Article II and some sections of Article XII are "not self-executing provisions, the disregard of which can
give rise to a cause of action in the courts. They do not embody judicially enforceable constitutional rights but guidelines for legislation."10
Second, petitioner contends that the approval of the Department of Agriculture (DA) Undersecretary for Fisheries and Livestock of the Food Basket Allowance is
the law which authorizes its release. It is crystal clear that the DA Undersecretary has no authority to grant any allowance to the employees of BFAR. Section 4.5
of Budget Circular No. 16 dated November 28, 1998 states:
All agencies are hereby prohibited from granting any food, rice, gift checks, or any other form of incentives/allowances except those authorized via
Administrative Order by the Office of the President.
In the instant case, no Administrative Order has been issued by the Office of the President to exempt BFAR from the express prohibition against the grant of any
food, rice, gift checks, or any other form of incentive/allowance to its employees.

Petitioner argues that the grant of the Food Basket Allowance does not violate Sec. 12 of R.A. No. 6758 or the Salary Standardization Law. This law was passed to
standardize salary rates among government personnel and do away with multiple allowances and other incentive packages and the resulting differences in
compensation among them.11 Sec. 12 of the law provides:
Consolidation of Allowances and Compensation. All allowances, except for representation and transportation allowances; clothing and laundry allowances;
subsistence allowance of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign service personnel
stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM [Department of Budget and
Management], shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind,
being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.
Existing additional compensation of any national government official or employee paid from local funds of a local government unit shall be absorbed into the
basic salary of said official or employee and shall be paid by the National Government.
Under Sec. 12, as quoted, all kinds of allowances are integrated in the standardized salary rates. The exceptions are:
1. representation and transportation allowance (RATA); 2. clothing and laundry allowance; 3. subsistence allowance of marine officers and crew on board
government vessels; 4. subsistence allowance of hospital personnel; 5. hazard pay; 6. allowances of foreign service personnel stationed abroad; and 7. such
other additional compensation not otherwise specified herein as may be determined by the DBM.
Petitioner contends that the Food Basket Allowance falls under the 7th category above, that of "other additional compensation not otherwise specified herein as
may be determined by the DBM."
The Court has had the occasion to interpret Sec. 12 of R.A. No. 6758. In National Tobacco Administration v. Commission on Audit,12 we held that under the first
sentence of Section 12, the benefits excluded from the standardized salary rates are the "allowances" or those which are usually granted to officials and
employees of the government to defray or reimburse the expenses incurred in the performance of their official functions. These are the RATA, clothing and
laundry allowance, subsistence allowance of marine officers and crew on board government vessels and hospital personnel, hazard pay, and others, as
enumerated in the first sentence of Section 12. We further ruled that the phrase "and such other additional compensation not otherwise specified herein as may
be determined by the DBM" is a catch-all proviso for benefits in the nature of allowances similar to those enumerated. In Philippine Ports Authority v.
Commission on Audit,13 we explained that if these allowances were consolidated with the standardized salary rates, then government officials or employees
would be compelled to spend their personal funds in attending to their duties.
In the instant case, the Food Basket Allowance is definitely not in the nature of an allowance to reimburse expenses incurred by officials and employees of the
government in the performance of their official functions. It is not payment in consideration of the fulfillment of official duty. It is a form of financial assistance
to all officials and employees of BFAR. Petitioner itself stated that the Food Basket Allowance has the purpose of alleviating the economic condition of BFAR
employees.
Next, petitioner relies on National Compensation Circular No. 59 dated September 30, 1989, issued by the DBM, which is the "List of Allowances/Additional
Compensation of Government Officials and Employees which shall be Deemed Integrated into the Basic Salary." The list enumerates the following
allowances/additional compensation which shall be incorporated in the basic salary, hence, may no longer be granted to government employees:
14. Incentive allowance/fee/pay except those authorized under the General Appropriations Act and Section 33 of P.D. No. 807.

Petitioner invokes the rule of statutory construction that "what is not included is excluded." Inclusio unius est exclusio alterius. Petitioner claims that the Food
Basket Allowance is distinct and separate from the specific allowances/additional compensation listed in the circular.
Again, we reject petitioners contention. The Food Basket Allowance falls under the 14th category, that of incentive allowance/fee/pay. Petitioner itself justified
the Food Basket Allowance as an incentive to the employees to encourage them to be more productive and efficient.14 Under National Compensation Circular
No. 59, exceptions to the incentive allowance/fee/pay category are those authorized under the General Appropriations Act (GAA) and Section 33 of Presidential
Decree (P.D.) No. 807. Sec. 15(d) of the GAA for Fiscal Year 1999 or R.A. No. 8745 clearly prohibits the payment of honoraria, allowances or other forms of
compensation to any government official or employee, except those specifically authorized by law. There is no law authorizing the grant of the subject Food
Basket Allowance. Further, Sec. 33 of P.D. No. 807 or the Civil Service Decree of the Philippines does not exempt the Food Basket Allowance from the general
rule. Sec. 33 states:
Section 33. Employee Suggestions and Incentive Award System. There shall be established a government-wide employee suggestions and incentive awards
system which shall be administered under such rules, regulations, and standards as may be promulgated by the Commission.
In accordance with rules, regulations, and standards promulgated by the Commission, the President or the head of each department or agency is authorized to
incur whatever necessary expenses involved in the honorary recognition of subordinate officers and employees of the government who by their suggestions,
inventions, superior accomplishment, and other personal efforts contribute to the efficiency, economy, or other improvement of government operations, or
who perform such other extraordinary acts or services in the public interest in connection with, or in relation to, their official employment.
We are not convinced that the Food Basket Allowance falls under the incentive award system contemplated above. The decree speaks of suggestions,
inventions, superior accomplishments, and other personal efforts contributed by an employee to the efficiency, economy, or other improvement of government
operations, or other extraordinary acts or services performed by an employee in the public interest in connection with, or in relation to, his official employment.
In the instant case, the Food Basket Allowance was granted to all BFAR employees, without distinction. It was not granted due to any extraordinary contribution
or exceptional accomplishment by an employee. The Food Basket Allowance was primarily an economic monetary assistance to the employees.
Lastly, we note, as the Office of the Solicitor General, on behalf of respondent did, that petitioner failed to exhaust its administrative remedies. It stopped
seeking remedies at the level of respondents Legal and Adjudication Office. It failed to appeal the latters adverse decision to the Commission on Audit proper.
The consequence for failure to exhaust administrative remedies is clear: the disallowance, as ruled by the Commission on Audit Legal and Adjudication Office
Regional Office No. VII, Cebu City and upheld by the Commission on Audit Legal and Adjudication Office National, Quezon City, became final and executory.
Sections 48 and 51 of Presidential Decree No. 1445, or the Government Auditing Code of the Philippines provide:
Section 48. Appeal from decision of auditors. Any person aggrieved by the decision of an auditor of any government agency in the settlement of an account or
claim may, within six months from receipt of a copy of the decision, appeal in writing to the Commission.
Section 51. Finality of decisions of the Commission or any auditor. A decision of the Commission or of any auditor upon any matter within its or his jurisdiction,
if not appealed as herein provided, shall be final and executory.
IN VIEW WHEREOF, the petition is DENIED. The Decision and Resolution of the Commission on Audit Legal and Adjudication Office dated April 8, 2005 and
August 5, 2005, respectively, in LAO-N-2005-119, are AFFIRMED.
SO ORDERED.

G.R No. 187167

August 16, 2011

PROF. MERLIN M. MAGALLONA

vs.
HON. EDUARDO ERMITA, IN HIS CAPACITY AS EXECUTIVE SECRETARY
DECISION
CARPIO, J.:
The Case
This original action for the writs of certiorari and prohibition assails the constitutionality of Republic Act No. 95221(RA 9522) adjusting the countrys archipelagic
baselines and classifying the baseline regime of nearby territories.
The Antecedents
In 1961, Congress passed Republic Act No. 3046 (RA 3046)2 demarcating the maritime baselines of the Philippines as an archipelagic State.3 This law followed the
framing of the Convention on the Territorial Sea and the Contiguous Zone in 1958 (UNCLOS I),4 codifying, among others, the sovereign right of States parties over
their "territorial sea," the breadth of which, however, was left undetermined. Attempts to fill this void during the second round of negotiations in Geneva in
1960 (UNCLOS II) proved futile. Thus, domestically, RA 3046 remained unchanged for nearly five decades, save for legislation passed in 1968 (Republic Act No.
5446 [RA 5446]) correcting typographical errors and reserving the drawing of baselines around Sabah in North Borneo.
In March 2009, Congress amended RA 3046 by enacting RA 9522, the statute now under scrutiny. The change was prompted by the need to make RA 3046
compliant with the terms of the United Nations Convention on the Law of the Sea (UNCLOS III),5 which the Philippines ratified on 27 February 1984.6 Among
others, UNCLOS III prescribes the water-land ratio, length, and contour of baselines of archipelagic States like the Philippines7 and sets the deadline for the filing
of application for the extended continental shelf.8 Complying with these requirements, RA 9522 shortened one baseline, optimized the location of some
basepoints around the Philippine archipelago and classified adjacent territories, namely, the Kalayaan Island Group (KIG) and the Scarborough Shoal, as "regimes
of islands" whose islands generate their own applicable maritime zones.
Petitioners, professors of law, law students and a legislator, in their respective capacities as "citizens, taxpayers or x x x legislators,"9 as the case may be, assail
the constitutionality of RA 9522 on two principal grounds, namely: (1) RA 9522 reduces Philippine maritime territory, and logically, the reach of the Philippine
states sovereign power, in violation of Article 1 of the 1987 Constitution,10 embodying the terms of the Treaty of Paris11 and ancillary treaties,12 and (2) RA 9522
opens the countrys waters landward of the baselines to maritime passage by all vessels and aircrafts, undermining Philippine sovereignty and national security,
contravening the countrys nuclear-free policy, and damaging marine resources, in violation of relevant constitutional provisions.13
In addition, petitioners contend that RA 9522s treatment of the KIG as "regime of islands" not only results in the loss of a large maritime area but also prejudices
the livelihood of subsistence fishermen.14 To buttress their argument of territorial diminution, petitioners facially attack RA 9522 for what it excluded and
included its failure to reference either the Treaty of Paris or Sabah and its use of UNCLOS IIIs framework of regime of islands to determine the maritime zones
of the KIG and the Scarborough Shoal.

Commenting on the petition, respondent officials raised threshold issues questioning (1) the petitions compliance with the case or controversy requirement for
judicial review grounded on petitioners alleged lack of locus standiand (2) the propriety of the writs of certiorari and prohibition to assail the constitutionality of
RA 9522. On the merits, respondents defended RA 9522 as the countrys compliance with the terms of UNCLOS III, preserving Philippine territory over the KIG or
Scarborough Shoal. Respondents add that RA 9522 does not undermine the countrys security, environment and economic interests or relinquish the Philippines
claim over Sabah.
Respondents also question the normative force, under international law, of petitioners assertion that what Spain ceded to the United States under the Treaty of
Paris were the islands and all the waters found within the boundaries of the rectangular area drawn under the Treaty of Paris.
We left unacted petitioners prayer for an injunctive writ.
The Issues
The petition raises the following issues:
1. Preliminarily
1. Whether petitioners possess locus standi to bring this suit; and
2. Whether the writs of certiorari and prohibition are the proper remedies to assail the constitutionality of RA 9522.
2. On the merits, whether RA 9522 is unconstitutional.
The Ruling of the Court
On the threshold issues, we hold that (1) petitioners possess locus standi to bring this suit as citizens and (2) the writs of certiorari and prohibition are proper
remedies to test the constitutionality of RA 9522. On the merits, we find no basis to declare RA 9522 unconstitutional.
On the Threshold Issues
Petitioners Possess Locus
Standi as Citizens
Petitioners themselves undermine their assertion of locus standi as legislators and taxpayers because the petition alleges neither infringement of legislative
prerogative15 nor misuse of public funds,16 occasioned by the passage and implementation of RA 9522. Nonetheless, we recognize petitioners locus standi as
citizens with constitutionally sufficient interest in the resolution of the merits of the case which undoubtedly raises issues of national significance necessitating
urgent resolution. Indeed, owing to the peculiar nature of RA 9522, it is understandably difficult to find other litigants possessing "a more direct and specific
interest" to bring the suit, thus satisfying one of the requirements for granting citizenship standing.17
The Writs of Certiorari and Prohibition
Are Proper Remedies to Test
the Constitutionality of Statutes

In praying for the dismissal of the petition on preliminary grounds, respondents seek a strict observance of the offices of the writs of certiorari and prohibition,
noting that the writs cannot issue absent any showing of grave abuse of discretion in the exercise of judicial, quasi-judicial or ministerial powers on the part of
respondents and resulting prejudice on the part of petitioners.18
Respondents submission holds true in ordinary civil proceedings. When this Court exercises its constitutional power of judicial review, however, we have, by
tradition, viewed the writs of certiorari and prohibition as proper remedial vehicles to test the constitutionality of statutes,19 and indeed, of acts of other
branches of government.20 Issues of constitutional import are sometimes crafted out of statutes which, while having no bearing on the personal interests of the
petitioners, carry such relevance in the life of this nation that the Court inevitably finds itself constrained to take cognizance of the case and pass upon the issues
raised, non-compliance with the letter of procedural rules notwithstanding. The statute sought to be reviewed here is one such law.
RA 9522 is Not Unconstitutional
RA 9522 is a Statutory Tool
to Demarcate the Countrys
Maritime Zones and Continental
Shelf Under UNCLOS III, not to
Delineate Philippine Territory
Petitioners submit that RA 9522 "dismembers a large portion of the national territory"21 because it discards the pre-UNCLOS III demarcation of Philippine
territory under the Treaty of Paris and related treaties, successively encoded in the definition of national territory under the 1935, 1973 and 1987 Constitutions.
Petitioners theorize that this constitutional definition trumps any treaty or statutory provision denying the Philippines sovereign control over waters, beyond the
territorial sea recognized at the time of the Treaty of Paris, that Spain supposedly ceded to the United States. Petitioners argue that from the Treaty of Paris
technical description, Philippine sovereignty over territorial waters extends hundreds of nautical miles around the Philippine archipelago, embracing the
rectangular area delineated in the Treaty of Paris.22
Petitioners theory fails to persuade us.
UNCLOS III has nothing to do with the acquisition (or loss) of territory. It is a multilateral treaty regulating, among others, sea-use rights over maritime zones
(i.e., the territorial waters [12 nautical miles from the baselines], contiguous zone [24 nautical miles from the baselines], exclusive economic zone [200 nautical
miles from the baselines]), and continental shelves that UNCLOS III delimits.23 UNCLOS III was the culmination of decades-long negotiations among United
Nations members to codify norms regulating the conduct of States in the worlds oceans and submarine areas, recognizing coastal and archipelagic States
graduated authority over a limited span of waters and submarine lands along their coasts.
On the other hand, baselines laws such as RA 9522 are enacted by UNCLOS III States parties to mark-out specific basepoints along their coasts from which
baselines are drawn, either straight or contoured, to serve as geographic starting points to measure the breadth of the maritime zones and continental shelf.
Article 48 of UNCLOS III on archipelagic States like ours could not be any clearer:
Article 48. Measurement of the breadth of the territorial sea, the contiguous zone, the exclusive economic zone and the continental shelf. The breadth of the
territorial sea, the contiguous zone, the exclusive economic zone and the continental shelf shall be measured from archipelagic baselines drawn in accordance
with article 47. (Emphasis supplied)
Thus, baselines laws are nothing but statutory mechanisms for UNCLOS III States parties to delimit with precision the extent of their maritime zones and
continental shelves. In turn, this gives notice to the rest of the international community of the scope of the maritime space and submarine areas within which

States parties exercise treaty-based rights, namely, the exercise of sovereignty over territorial waters (Article 2), the jurisdiction to enforce customs, fiscal,
immigration, and sanitation laws in the contiguous zone (Article 33), and the right to exploit the living and non-living resources in the exclusive economic zone
(Article 56) and continental shelf (Article 77).
Even under petitioners theory that the Philippine territory embraces the islands and all the waters within the rectangular area delimited in the Treaty of Paris,
the baselines of the Philippines would still have to be drawn in accordance with RA 9522 because this is the only way to draw the baselines in conformity with
UNCLOS III. The baselines cannot be drawn from the boundaries or other portions of the rectangular area delineated in the Treaty of Paris, but from the
"outermost islands and drying reefs of the archipelago."24
UNCLOS III and its ancillary baselines laws play no role in the acquisition, enlargement or, as petitioners claim, diminution of territory. Under traditional
international law typology, States acquire (or conversely, lose) territory through occupation, accretion, cession and prescription,25 not by executing multilateral
treaties on the regulations of sea-use rights or enacting statutes to comply with the treatys terms to delimit maritime zones and continental shelves. Territorial
claims to land features are outside UNCLOS III, and are instead governed by the rules on general international law.26
RA 9522s Use of the Framework
of Regime of Islands to Determine the
Maritime Zones of the KIG and the
Scarborough Shoal, not Inconsistent
with the Philippines Claim of Sovereignty
Over these Areas
Petitioners next submit that RA 9522s use of UNCLOS IIIs regime of islands framework to draw the baselines, and to measure the breadth of the applicable
maritime zones of the KIG, "weakens our territorial claim" over that area.27 Petitioners add that the KIGs (and Scarborough Shoals) exclusion from the
Philippine archipelagic baselines results in the loss of "about 15,000 square nautical miles of territorial waters," prejudicing the livelihood of subsistence
fishermen.28 A comparison of the configuration of the baselines drawn under RA 3046 and RA 9522 and the extent of maritime space encompassed by each law,
coupled with a reading of the text of RA 9522 and its congressional deliberations, vis--vis the Philippines obligations under UNCLOS III, belie this view.1avvphi1
The configuration of the baselines drawn under RA 3046 and RA 9522 shows that RA 9522 merely followed the basepoints mapped by RA 3046, save for at least
nine basepoints that RA 9522 skipped to optimize the location of basepoints and adjust the length of one baseline (and thus comply with UNCLOS IIIs limitation
on the maximum length of baselines). Under RA 3046, as under RA 9522, the KIG and the Scarborough Shoal lie outside of the baselines drawn around the
Philippine archipelago. This undeniable cartographic fact takes the wind out of petitioners argument branding RA 9522 as a statutory renunciation of the
Philippines claim over the KIG, assuming that baselines are relevant for this purpose.
Petitioners assertion of loss of "about 15,000 square nautical miles of territorial waters" under RA 9522 is similarly unfounded both in fact and law. On the
contrary, RA 9522, by optimizing the location of basepoints, increasedthe Philippines total maritime space (covering its internal waters, territorial sea and
exclusive economic zone) by 145,216 square nautical miles, as shown in the table below:29
Extent of maritime
area using RA 3046,
as amended, taking
into account the

Extent of maritime
area using RA 9522,
taking into account
UNCLOS III (in square

Treaty of Paris
delimitation (in
square nautical
miles)

nautical miles)

Internal or
archipelagic
waters

166,858

171,435

Territorial Sea

274,136

32,106

Exclusive
Economic Zone
TOTAL

382,669
440,994

586,210

Thus, as the map below shows, the reach of the exclusive economic zone drawn under RA 9522 even extends way beyond the waters covered by the rectangular
demarcation under the Treaty of Paris. Of course, where there are overlapping exclusive economic zones of opposite or adjacent States, there will have to be a
delineation of maritime boundaries in accordance with UNCLOS III.30

Further, petitioners argument that the KIG now lies outside Philippine territory because the baselines that RA 9522 draws do not enclose the KIG is negated by
RA 9522 itself. Section 2 of the law commits to text the Philippines continued claim of sovereignty and jurisdiction over the KIG and the Scarborough Shoal:

SEC. 2. The baselines in the following areas over which the Philippines likewise exercises sovereignty and jurisdiction shall be determined as "Regime of
Islands" under the Republic of the Philippines consistent with Article 121 of the United Nations Convention on the Law of the Sea (UNCLOS):
a) The Kalayaan Island Group as constituted under Presidential Decree No. 1596 and
b) Bajo de Masinloc, also known as Scarborough Shoal. (Emphasis supplied)
Had Congress in RA 9522 enclosed the KIG and the Scarborough Shoal as part of the Philippine archipelago, adverse legal effects would have ensued. The
Philippines would have committed a breach of two provisions of UNCLOS III. First, Article 47 (3) of UNCLOS III requires that "[t]he drawing of such baselines shall
not depart to any appreciable extent from the general configuration of the archipelago." Second, Article 47 (2) of UNCLOS III requires that "the length of the
baselines shall not exceed 100 nautical miles," save for three per cent (3%) of the total number of baselines which can reach up to 125 nautical miles.31
Although the Philippines has consistently claimed sovereignty over the KIG32 and the Scarborough Shoal for several decades, these outlying areas are located at
an appreciable distance from the nearest shoreline of the Philippine archipelago,33 such that any straight baseline loped around them from the nearest
basepoint will inevitably "depart to an appreciable extent from the general configuration of the archipelago."
The principal sponsor of RA 9522 in the Senate, Senator Miriam Defensor-Santiago, took pains to emphasize the foregoing during the Senate deliberations:
What we call the Kalayaan Island Group or what the rest of the world call[] the Spratlys and the Scarborough Shoal are outside our archipelagic baseline
because if we put them inside our baselines we might be accused of violating the provision of international law which states: "The drawing of such baseline shall
not depart to any appreciable extent from the general configuration of the archipelago." So sa loob ng ating baseline, dapat magkalapit ang mga islands. Dahil
malayo ang Scarborough Shoal, hindi natin masasabing malapit sila sa atin although we are still allowed by international law to claim them as our own.
This is called contested islands outside our configuration. We see that our archipelago is defined by the orange line which [we] call[] archipelagic baseline.
Ngayon, tingnan ninyo ang maliit na circle doon sa itaas, that is Scarborough Shoal, itong malaking circle sa ibaba, that is Kalayaan Group or the Spratlys. Malayo
na sila sa ating archipelago kaya kung ilihis pa natin ang dating archipelagic baselines para lamang masama itong dalawang circles, hindi na sila magkalapit at
baka hindi na tatanggapin ng United Nations because of the rule that it should follow the natural configuration of the archipelago.34 (Emphasis supplied)
Similarly, the length of one baseline that RA 3046 drew exceeded UNCLOS IIIs limits.1avvphi1 The need to shorten this baseline, and in addition, to optimize the
location of basepoints using current maps, became imperative as discussed by respondents:
[T]he amendment of the baselines law was necessary to enable the Philippines to draw the outer limits of its maritime zones including the extended continental
shelf in the manner provided by Article 47 of [UNCLOS III]. As defined by R.A. 3046, as amended by R.A. 5446, the baselines suffer from some technical
deficiencies, to wit:
1. The length of the baseline across Moro Gulf (from Middle of 3 Rock Awash to Tongquil Point) is 140.06 nautical miles x x x. This exceeds the maximum length
allowed under Article 47(2) of the [UNCLOS III], which states that "The length of such baselines shall not exceed 100 nautical miles, except that up to 3 per cent
of the total number of baselines enclosing any archipelago may exceed that length, up to a maximum length of 125 nautical miles."
2. The selection of basepoints is not optimal. At least 9 basepoints can be skipped or deleted from the baselines system. This will enclose an additional 2,195
nautical miles of water.

3. Finally, the basepoints were drawn from maps existing in 1968, and not established by geodetic survey methods. Accordingly, some of the points, particularly
along the west coasts of Luzon down to Palawan were later found to be located either inland or on water, not on low-water line and drying reefs as prescribed
by Article 47.35
Hence, far from surrendering the Philippines claim over the KIG and the Scarborough Shoal, Congress decision to classify the KIG and the Scarborough Shoal as
"Regime*s+ of Islands under the Republic of the Philippines consistent with Article 121"36 of UNCLOS III manifests the Philippine States responsible observance
of its pacta sunt servanda obligation under UNCLOS III. Under Article 121 of UNCLOS III, any "naturally formed area of land, surrounded by water, which is above
water at high tide," such as portions of the KIG, qualifies under the category of "regime of islands," whose islands generate their own applicable maritime
zones.37
Statutory Claim Over Sabah under
RA 5446 Retained
Petitioners argument for the invalidity of RA 9522 for its failure to textualize the Philippines claim over Sabah in North Borneo is also untenable. Section 2 of RA
5446, which RA 9522 did not repeal, keeps open the door for drawing the baselines of Sabah:
Section 2. The definition of the baselines of the territorial sea of the Philippine Archipelago as provided in this Actis without prejudice to the delineation of the
baselines of the territorial sea around the territory of Sabah, situated in North Borneo, over which the Republic of the Philippines has acquired dominion and
sovereignty. (Emphasis supplied)
UNCLOS III and RA 9522 not
Incompatible with the Constitutions
Delineation of Internal Waters
As their final argument against the validity of RA 9522, petitioners contend that the law unconstitutionally "converts" internal waters into archipelagic waters,
hence subjecting these waters to the right of innocent and sea lanes passage under UNCLOS III, including overflight. Petitioners extrapolate that these passage
rights indubitably expose Philippine internal waters to nuclear and maritime pollution hazards, in violation of the Constitution.38
Whether referred to as Philippine "internal waters" under Article I of the Constitution39 or as "archipelagic waters" under UNCLOS III (Article 49 [1]), the
Philippines exercises sovereignty over the body of water lying landward of the baselines, including the air space over it and the submarine areas underneath.
UNCLOS III affirms this:
Article 49. Legal status of archipelagic waters, of the air space over archipelagic waters and of their bed and subsoil.
1. The sovereignty of an archipelagic State extends to the waters enclosed by the archipelagic baselines drawn in accordance with article 47, described as
archipelagic waters, regardless of their depth or distance from the coast.
2. This sovereignty extends to the air space over the archipelagic waters, as well as to their bed and subsoil, and the resources contained therein.
xxxx

4. The regime of archipelagic sea lanes passage established in this Part shall not in other respects affect the status of the archipelagic waters, including the sea
lanes, or the exercise by the archipelagic State of its sovereignty over such waters and their air space, bed and subsoil, and the resources contained therein.
(Emphasis supplied)
The fact of sovereignty, however, does not preclude the operation of municipal and international law norms subjecting the territorial sea or archipelagic waters
to necessary, if not marginal, burdens in the interest of maintaining unimpeded, expeditious international navigation, consistent with the international law
principle of freedom of navigation. Thus, domestically, the political branches of the Philippine government, in the competent discharge of their constitutional
powers, may pass legislation designating routes within the archipelagic waters to regulate innocent and sea lanes passage.40 Indeed, bills drawing nautical
highways for sea lanes passage are now pending in Congress.41
In the absence of municipal legislation, international law norms, now codified in UNCLOS III, operate to grant innocent passage rights over the territorial sea or
archipelagic waters, subject to the treatys limitations and conditions for their exercise.42 Significantly, the right of innocent passage is a customary international
law,43 thus automatically incorporated in the corpus of Philippine law.44 No modern State can validly invoke its sovereignty to absolutely forbid innocent passage
that is exercised in accordance with customary international law without risking retaliatory measures from the international community.
The fact that for archipelagic States, their archipelagic waters are subject to both the right of innocent passage and sea lanes passage45 does not place them in
lesser footing vis--vis continental coastal States which are subject, in their territorial sea, to the right of innocent passage and the right of transit passage
through international straits. The imposition of these passage rights through archipelagic waters under UNCLOS III was a concession by archipelagic States, in
exchange for their right to claim all the waters landward of their baselines,regardless of their depth or distance from the coast, as archipelagic waters subject to
their territorial sovereignty. More importantly, the recognition of archipelagic States archipelago and the waters enclosed by their baselines as one cohesive
entity prevents the treatment of their islands as separate islands under UNCLOS III.46 Separate islands generate their own maritime zones, placing the waters
between islands separated by more than 24 nautical miles beyond the States territorial sovereignty, subjecting these waters to the rights of other States under
UNCLOS III.47
Petitioners invocation of non-executory constitutional provisions in Article II (Declaration of Principles and State Policies)48 must also fail. Our present state of
jurisprudence considers the provisions in Article II as mere legislative guides, which, absent enabling legislation, "do not embody judicially enforceable
constitutional rights x x x."49 Article II provisions serve as guides in formulating and interpreting implementing legislation, as well as in interpreting executory
provisions of the Constitution. Although Oposa v. Factoran50 treated the right to a healthful and balanced ecology under Section 16 of Article II as an exception,
the present petition lacks factual basis to substantiate the claimed constitutional violation. The other provisions petitioners cite, relating to the protection of
marine wealth (Article XII, Section 2, paragraph 251 ) and subsistence fishermen (Article XIII, Section 752 ), are not violated by RA 9522.
In fact, the demarcation of the baselines enables the Philippines to delimit its exclusive economic zone, reserving solely to the Philippines the exploitation of all
living and non-living resources within such zone. Such a maritime delineation binds the international community since the delineation is in strict observance of
UNCLOS III. If the maritime delineation is contrary to UNCLOS III, the international community will of course reject it and will refuse to be bound by it.
UNCLOS III favors States with a long coastline like the Philippines. UNCLOS III creates a sui generis maritime space the exclusive economic zone in waters
previously part of the high seas. UNCLOS III grants new rights to coastal States to exclusively exploit the resources found within this zone up to 200 nautical
miles.53 UNCLOS III, however, preserves the traditional freedom of navigation of other States that attached to this zone beyond the territorial sea before UNCLOS
III.
RA 9522 and the Philippines Maritime Zones

Petitioners hold the view that, based on the permissive text of UNCLOS III, Congress was not bound to pass RA 9522.54 We have looked at the relevant provision
of UNCLOS III55 and we find petitioners reading plausible. Nevertheless, the prerogative of choosing this option belongs to Congress, not to this Court.
Moreover, the luxury of choosing this option comes at a very steep price. Absent an UNCLOS III compliant baselines law, an archipelagic State like the Philippines
will find itself devoid of internationally acceptable baselines from where the breadth of its maritime zones and continental shelf is measured. This is recipe for a
two-fronted disaster: first, it sends an open invitation to the seafaring powers to freely enter and exploit the resources in the waters and submarine areas
around our archipelago; and second, it weakens the countrys case in any international dispute over Philippine maritime space. These are consequences
Congress wisely avoided.
The enactment of UNCLOS III compliant baselines law for the Philippine archipelago and adjacent areas, as embodied in RA 9522, allows an internationallyrecognized delimitation of the breadth of the Philippines maritime zones and continental shelf. RA 9522 is therefore a most vital step on the part of the
Philippines in safeguarding its maritime zones, consistent with the Constitution and our national interest.
WHEREFORE, we DISMISS the petition.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:

Professional Video v. Technical Education and Skills Development Authority, G.R. No. 155504, June 26, 2009
BRION, J.:

We resolve the petition filed by Professional Video, Inc. (PROVI)[1] to annul and set aside the Decision[2] of the Court of Appeals (CA) in CA-G.R. SP No.
67599, and its subsequent Order denying PROVIs motion for reconsideration.[3] The assailed CA decision nullified:
a.
the Order[4] dated July 16, 2001 of the Regional Trial Court (RTC), Pasig City, in Civil Case No. 68527, directing the attachment/garnishment of the
properties of respondent Technical Education and Skills Development
Authority
(TESDA) amounting to Thirty Five Million Pesos
(P35,000,000.00); and
b.

the RTCs August 24, 2001 Order[5] denying respondent TESDAs motion to discharge/quash writ of attachment.

THE FACTUAL BACKGROUND

PROVI is an entity engaged in the sale of high technology equipment, information technology products and broadcast devices, including the supply of plastic card
printing and security facilities.
TESDA is an instrumentality of the government established under Republic Act (R.A.) No. 7796 (the TESDA Act of 1994) and attached to the Department of Labor
and Employment (DOLE) to develop and establish a national system of skills standardization, testing, and certification in the country.[6] To fulfill this mandate,
it sought to issue security-printed certification and/or identification polyvinyl (PVC) cards to trainees who have passed the certification process.
TESDAs Pre-Qualification Bids Award Committee (PBAC) conducted two (2) public biddings on June 25, 1999 and July 22, 1999 for the printing and encoding of
PVC cards. A failure of bidding resulted in both instances since only two (2) bidders PROVI and Sirex Phils. Corp. submitted proposals.
Due to the failed bidding, the PBAC recommended that TESDA enter into a negotiated contract with PROVI. On December 29, 1999, TESDA and PROVI signed and
executed their Contract Agreement Project: PVC ID Card Issuance (the Contract Agreement) for the provision of goods and services in the printing and
encoding of PVC cards.[7] Under this Contract Agreement, PROVI was to provide TESDA with the system and equipment compliant with the specifications defined
in the Technical Proposal. In return, TESDA would pay PROVI the amount of Thirty-Nine Million Four Hundred and Seventy-Five Thousand Pesos (P39,475,000)
within fifteen (15) days after TESDAs acceptance of the contracted goods and services.
On August 24, 2000, TESDA and PROVI executed an Addendum to the Contract Agreement Project: PVC ID Card Issuance (Addendum),[8] whose terms bound
PROVI to deliver one hundred percent (100%) of the enumerated supplies to TESDA consisting of five hundred thousand (500,000) pieces of security foil; five (5)
pieces of security die with TESDA seal; five hundred thousand (500,000) pieces of pre-printed and customized identification cards; one hundred thousand
(100,000) pieces of scannable answer sheets; and five hundred thousand (500,000) customized TESDA holographic laminate. In addition, PROVI would install and
maintain the following equipment: one (1) unit of Micropoise, two (2) units of card printer, three (3) units of flatbed scanner, one (1) unit of OMR scanner, one
(1) unit of Server, and seven (7) units of personal computer.

TESDA in turn undertook to pay PROVI thirty percent (30%) of the total cost of the supplies within thirty (30) days after receipt and acceptance of the contracted
supplies, with the balance payable within thirty (30) days after the initial payment.
According to PROVI, it delivered the following items to TESDA on the dates indicated:

Date

Particulars

Amount

26 April 2000

48,500 pre-printed cards

07 June 2000

330,000 pre-printed cards

18,810,000.00

07 August 2000

121,500 pre-printed cards

6,925,500.00

26 April 2000

100,000 scannable answer sheets

06 June 2000

5 Micro-Poise customized die

13 June 2000

35 boxes @ 15,000 imp/box

P 2,764,500.00

600,000.00
375,000.00

10,000,000.00

Custom hologram Foil

Total

P 39,475,000.00

PROVI further alleged that out of TESDAs liability of P39,475,000.00, TESDA paid PROVI only P3,739,500.00, leaving an outstanding balance of P35,735,500.00,
as evidenced by PROVIs Statement of Account.[9] Despite the two demand letters dated March 8 and April 27, 2001 that PROVI sent TESDA,[10] the outstanding
balance remained unpaid.
On July 11, 2001, PROVI filed with the RTC a complaint for sum of money with damages against TESDA. PROVI additionally prayed for the issuance of a writ of
preliminary attachment/garnishment against TESDA. The case was docketed as Civil Case No. 68527. In an Order dated July 16, 2001, the RTC granted PROVIs
prayer and issued a writ of preliminary attachment against the properties of TESDA not exempt from execution in the amount of P35,000,000.00.[11]
TESDA responded on July 24, 2001 by filing a Motion to Discharge/Quash the Writ of Attachment, arguing mainly that public funds cannot be the subject of
garnishment.[12] The RTC denied TESDAs motion, and subsequently ordered the manager of the Land Bank of the Philippines to produce TESDAs bank statement
for the garnishment of the covered amount.[13]

Faced with these rulings, TESDA filed a Petition for Certiorari with the CA to question the RTC orders, imputing grave abuse of discretion amounting to lack or
excess of jurisdiction on the trial court for issuing a writ of preliminary attachment against TESDAs public funds.[14]
The CA set aside the RTCs orders after finding that: (a) TESDAs funds are public in nature and, therefore, exempt from garnishment; and (b) TESDAs purchase
of the PVC cards was a necessary incident of its governmental function; consequently, it ruled that there was no legal basis for the issuance of a writ of
preliminary attachment/garnishment.[15] The CA subsequently denied PROVIs motion for reconsideration;[16] hence, the present petition.
THE PETITION
The petition submits to this Court the single issue of whether or not the writ of attachment against TESDA and its funds, to cover PROVIs claim against
TESDA, is valid. The issue involves a pure question of law and requires us to determine whether the CA was correct in ruling that the RTC gravely abused its
discretion in issuing a writ of attachment against TESDA.
PROVI argues that the CA should have dismissed TESDAs petition for certiorari as the RTC did not commit any grave abuse of discretion when it issued the
Orders datedJuly 16, 2001 and August 24, 2001. According to PROVI, the RTC correctly found that when TESDA entered into a purely commercial contract with
PROVI, TESDA went to the level of an ordinary private citizen and could no longer use the defense of state immunity from suit. PROVI further contends that it
has alleged sufficient ultimate facts in the affidavit it submitted to support its application for a writ of preliminary attachment. Lastly, PROVI maintains that
sufficient basis existed for the RTCs grant of the writ of preliminary attachment, since TESDA fraudulently misapplied or embezzled the money earmarked for
the payment of the contracted supplies and services, as evidenced by the Certification as to Availability of Funds.
TESDA claims that it entered the Contract Agreement and Addendum in the performance of its governmental function to develop and establish a national
system of skills standardization, testing, and certification; in the performance of this governmental function, TESDA is immune from suit. Even assuming that it
had impliedly consented to be sued by entering into a contract with PROVI, TESDA posits that the RTC still did not have the power to garnish or attach its funds
since these are public funds. Lastly, TESDA points out that PROVI failed to comply with the elements for the valid issuance of a writ of preliminary attachment, as
set forth in Section 1, Rule 57 of the 1997 Rules of Civil Procedure.

THE COURTS RULING

We find, as the CA did, that the RTCs questioned order involved a gross misreading of the law and jurisprudence amounting to action in excess of its
jurisdiction. Hence, we resolve to DENY PROVIs petition for lack of merit.
TESDA is an instrumentality
of the government undertaking governmental functions.

R.A. No. 7796 created the Technical Education and Skills Development Authority or TESDA under the declared policy of the State to provide relevant, accessible,
high quality and efficient technical education and skills development in support of the development of high quality Filipino middle-level manpower responsive to
and in accordance with Philippine development goals and priorities.[17] TESDA replaced and absorbed the National Manpower and Youth Council, the Bureau of
Technical and Vocational Education and the personnel and functions pertaining to technical-vocational education in the regional offices of the Department of

Education, Culture and Sports and the apprenticeship program of the Bureau of Local Employment of the DOLE.[18] Thus, TESDA is an unincorporated
instrumentality of the government operating under its own charter.

Among others, TESDA is empowered to: approve trade skills standards and trade tests as established and conducted by private industries; establish and
administer a system of accreditation of both public and private institutions; establish, develop and support the institutions' trainors' training and/or programs;
exact reasonable fees and charges for such tests and trainings conducted, and retain such earnings for its own use, subject to guidelines promulgated by the
Authority; and perform such other duties and functions necessary to carry out the provisions of the Act, consistent with the purposes of the creation of
TESDA.[19]

Within TESDAs structure, as provided by R.A. No. 7769, is a Skills Standards and Certification Office expressly tasked, among others, to develop and establish a
national system of skills standardization, testing and certification in the country; and to conduct research and development on various occupational areas in
order to recommend policies, rules and regulations for effective and efficient skills standardization, testing and certification system in the country.[20] The law
likewise mandates that *T+here shall be national occupational skills standards to be established by TESDA-accredited industry committees. The TESDA shall
develop and implement a certification and accreditation program in which private groups and trade associations are accredited to conduct approved trade tests,
and the local government units to promote such trade testing activities in their respective areas in accordance with the guidelines to be set by the TESDA. The
Secretary of Labor and Employment shall determine the occupational trades for mandatory certification. All certificates relating to the national trade skills
testing and certification system shall be issued by the TESDA through its Secretariat.[21]
All these measures are undertaken pursuant to the constitutional command that *T+he State affirms labor as a primary social economic force, and shall
protect the rights of workers and promote their welfare;[22] that *T+he State shall protect and promote the right of all citizens to quality education at all levels,
and shall take appropriate steps to make such education accessible to all;[23] in order to afford protection to labor and promote full employment and equality
of employment opportunities for all.[24]
Under these terms, both constitutional and statutory, we do not believe that the role and status of TESDA can seriously be contested: it is an unincorporated
instrumentality of the government, directly attached to the DOLE through the participation of the Secretary of Labor as its Chairman, for the performance of
governmental functions i.e., the handling of formal and non-formal education and training, and skills development. As an unincorporated instrumentality
operating under a specific charter, it is equipped with both express and implied powers,[25] and all State immunities fully apply to it.[26]
TESDA, as an agency of the State, cannot be sued without its consent.
The rule that a state may not be sued without its consent is embodied in Section 3, Article XVI of the 1987 Constitution and has been an established principle
that antedates this Constitution.[27] It is as well a universally recognized principle of international law that exempts a state and its organs from the jurisdiction of
another state.[28] The principle is based on the very essence of sovereignty, and on the practical ground that there can be no legal right as against the authority
that makes the law on which the right depends.[29] It also rests on reasons of public policy that public service would be hindered, and the public endangered, if
the sovereign authority could be subjected to law suits at the instance of every citizen and, consequently, controlled in the uses and dispositions of the means
required for the proper administration of the government.[30]

The proscribed suit that the state immunity principle covers takes on various forms, namely: a suit against the Republic by name; a suit against an
unincorporated government agency; a suit against a government agency covered by a charter with respect to the agencys performance of governmental
functions; and a suit that on its face is against a government officer, but where the ultimate liability will fall on the government. In the present case, the writ of
attachment was issued against a government agency covered by its own charter. As discussed above, TESDA performs governmental functions, and the issuance
of certifications is a task within its function of developing and establishing a system of skills standardization, testing, and certification in the country. From the
perspective of this function, the core reason for the existence of state immunity applies i.e., the public policy reason that the performance of governmental
function cannot be hindered or delayed by suits, nor can these suits control the use and disposition of the means for the performance of governmental
functions. In Providence Washington Insurance Co. v. Republic of the Philippines,[31] we said:
[A] continued adherence to the doctrine of non-suability is not to be deplored for as against the inconvenience that may be caused private parties, the loss of
governmental efficiency and the obstacle to the performance of its multifarious functions are far greater if such a fundamental principle were abandoned and
the availability of judicial remedy were not thus restricted. With the well known propensity on the part of our people to go to court, at the least provocation, the
loss of time and energy required to defend against law suits, in the absence of such a basic principle that constitutes such an effective obstacle, could very well
be imagined.

PROVI argues that TESDA can be sued because it has effectively waived its immunity when it entered into a contract with PROVI for a commercial purpose.
According to PROVI, since the purpose of its contract with TESDA is to provide identification PVC cards with security seal which TESDA will thereafter sell to
TESDA trainees, TESDA thereby engages in commercial transactions not incidental to its governmental functions.

TESDAs response to this position is to point out that it is not engaged in business, and there is nothing in the records to show that its purchase of the PVC
cards from PROVI is for a business purpose. While TESDA admits that it will charge the trainees with a fee for the PVC cards, it claims that this fee is only to
recover their costs and is not intended for profit.

We agree with TESDA. As the appellate court found, the PVC cards purchased by TESDA from PROVI are meant to properly identify the trainees who passed
TESDAs National Skills Certification Program the program that immediately serves TESDAs mandated function of developing and establishing a national
system of skills standardization, testing, and certification in the country.[32] Aside from the express mention of this function in R.A. No. 7796, the details of this
function are provided under DOLE Administrative Order No. 157, S. 1992, as supplemented by Department Order Nos. 3 thru 3-F, S. 1994 and Department Order
No. 13, S. 1994.[33]

Admittedly, the certification and classification of trainees may be undertaken in ways other than the issuance of identification cards, as the RTC stated in its
assailed Order.[34] How the mandated certification is to be done, however, lies within the discretion of TESDA as an incident of its mandated function, and is a
properly delegated authority that this Court cannot inquire into, unless its exercise is attended by grave abuse of discretion.

That TESDA sells the PVC cards to its trainees for a fee does not characterize the transaction as industrial or business; the sale, expressly authorized by the TESDA
Act,[35] cannot be considered separately from TESDAs general governmental functions, as they are undertaken in the discharge of these functions. Along this line
of reasoning, we held in Mobil Philippines v. Customs Arrastre Services:[36]

Now, the fact that a non-corporate government entity performs a function proprietary in nature does not necessarily result in its being suable. If said nongovernmental function is undertaken as an incident to its governmental function, there is no waiver thereby of the sovereign immunity from suit extended to
such government entity
TESDAs funds are public in character, hence exempt from attachment or garnishment.

Even assuming that TESDA entered into a proprietary contract with PROVI and thereby gave its implied consent to be sued, TESDAs funds are still public in
nature and, thus, cannot be the valid subject of a writ of garnishment or attachment. Under Section 33 of the TESDA Act, the TESDA budget for the
implementation of the Act shall be included in the annual General Appropriation Act; hence, TESDA funds, being sourced from the Treasury, are moneys
belonging to the government, or any of its departments, in the hands of public officials.[37] We specifically spoke of the limits in dealing with this fund in Republic
v. Villasor[38] when we said:

This fundamental postulate underlying the 1935 Constitution is now made explicit in the revised charter. It is therein expressly provided, The State may not be
sued without its consent. A corollary, both dictated by logic and sound sense, from such a basic concept, is that public funds cannot be the object of
garnishment proceedings even if the consent to be sued had been previously granted and the state liability adjudged. Thus in the recent case of Commissioner
of Public Highways vs. San Diego, such a well-settled doctrine was restated in the opinion of Justice Teehankee:

The universal rule that where the State gives its consent to be sued by private parties either by general or special law, it may limit claimant's action 'only up to
the completion of proceedings anterior to the stage of execution' and that the power of the Courts ends when the judgment is rendered, since government
funds and properties may not be seized under writs of execution or garnishment to satisfy such judgments, is based on obvious considerations of public
policy. Disbursements of public funds must be covered by the corresponding appropriation as required by law. The functions and public services rendered by
the State cannot be allowed to be paralyzed or disrupted by the diversion of public funds from their legitimate and specific objects, as appropriated by
law. [Emphasis supplied.]

We reiterated this doctrine in Traders Royal Bank v. Intermediate Appellate Court,[39] where we said:
The NMPCs implied consent to be sued notwithstanding, the trial court did not have the power to garnish NMPC deposits to answer for any eventual judgment
against it. Being public funds, the deposits are not within the reach of any garnishment or attachment proceedings. [Emphasis
supplied.]

As pointed out by TESDA in its Memorandum,[40] the garnished funds constitute TESDAs lifeblood in government parlance, its MOOE[41] whose
withholding via a writ of attachment, even on a temporary basis, would paralyze TESDAs functions and services. As well, these funds also include TESDAs
Personal Services funds from which salaries of TESDA personnel are sourced. Again and for obvious reasons, the release of these funds cannot be delayed.
PROVI has not shown that it is entitled to the writ of attachment.

Even without the benefit of any immunity from suit, the attachment of TESDA funds should not have been granted, as PROVI failed to prove that TESDA
fraudulently misapplied or converted funds allocated under the Certificate as to Availability of Funds. Section 1, Rule 57 of the Rules of Court sets forth the
grounds for issuance of a writ of preliminary attachment, as follows:
SECTION 1. Grounds upon which attachment may issue. A plaintiff or any proper party may, at the commencement of the action or at any time thereafter, have
the property of the adverse party attached as security for the satisfaction of any judgment that may be recovered in the following cases:

(a)
In an action for recovery of a specified amount of money or damages, other than moral and exemplary, on a cause of action arising from law, contract,
quasi-contract, delict or quasi-delict against a party who is about to depart from the Philippines with intent to defraud his creditors;
(b)
In an action for money or property embezzled or fraudulently misapplied or converted to his use by a public officer, or an officer of a corporation, or
an attorney, factor, broker, agent or clerk, in the course of his employment as such, or by any other person in a fiduciary capacity, or for a willful violation of
duty;
(c)
In an action to recover the possession of property unjustly or fraudulently taken, detained or converted, when the property or any part thereof, has
been concealed, removed or disposed of to prevent its being found or taken by the applicant or an authorized person;
(d)
In an action against a party who has been guilty of fraud in contracting the debt or incurring the obligation upon which the action is brought, or in
concealing or disposing of the property for the taking, detention or conversion of which the action is brought;
(e)

In an action against a party who has removed or disposed of his property, or is about to do so, with intent to defraud his creditors;

(f)
In an action against a party who does not reside and is not found in the Philippines, or on whom summons may be served by publication. [Emphasis
supplied.]
Jurisprudence teaches us that the rule on the issuance of a writ of attachment must be construed strictly in favor of the defendant. Attachment, a harsh remedy,
must be issued only on concrete and specific grounds and not on general averments merely quoting the words of the pertinent rules.[42] Thus, the applicants
affidavit must contain statements clearly showing that the ground relied upon for the attachment exists.
Section 1(b), Rule 57 of the Rules of Court, that PROVI relied upon, applies only where money or property has been embezzled or converted by a public officer,
an officer of a corporation, or some other person who took advantage of his fiduciary position or who willfully violated his duty.

PROVI, in this case, never entrusted any money or property to TESDA. While the Contract Agreement is supported by a Certificate as to Availability of Funds
(Certificate) issued by the Chief of TESDAs Accounting Division, this Certificate does not automatically confer ownership over the funds to PROVI. Absent any
actual disbursement, these funds form part of TESDAs public funds, and TESDAs failure to pay PROVI the amount stated in the Certificate cannot be construed
as an act of fraudulent misapplication or embezzlement. In this regard, Section 86 of Presidential Decree No. 1445 (The Accounting Code) provides:
Section 86. Certificate showing appropriation to meet contract. Except in a case of a contract for personal service, for supplies for current consumption or to
be carried in stock not exceeding the estimated consumption for three months, or banking transactions of government-owned or controlled banks, no contract
involving the expenditure of public funds by any government agency shall be entered into or authorized unless the proper accounting official or the agency
concerned shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and that the amount necessary
to cover the proposed contract for the current fiscal year is available for expenditure on account thereof, subject to verification by the auditor concerned. The
certification signed by the proper accounting official and the auditor who verified it, shall be attached to and become an integral part of the proposed contract,
and the sum so certified shall not thereafter be available for expenditure for any other purpose until the obligation of the government agency concerned
under the contract is fully extinguished. [Emphasis supplied.]
By law, therefore, the amount stated in the Certification should be intact and remains devoted to its purpose since its original appropriation. PROVI can rebut
the presumption that necessarily arises from the cited provision only by evidence to the contrary. No such evidence has been adduced.
Section 1 (d), Rule 57 of the Rules of Court applies where a party is guilty of fraud in contracting a debt or incurring an obligation, or in concealing or disposing
of the property for the taking, detention or conversion of which the action is brought. In Wee v. Tankiansee,[43] we held that for a writ of attachment to issue
under this Rule, the applicant must sufficiently show the factual circumstances of the alleged fraud because fraudulent intent cannot be inferred from the
debtors mere non-payment of the debt or failure to comply with his obligation. The affidavit, being the foundation of the writ, must contain particulars showing
how the imputed fraud was committed for the court to decide whether or not to issue the writ. To reiterate, a writ of attachment can only be granted on
concrete and specific grounds and not on general averments merely quoting the words of the rules.[44]
The affidavit filed by PROVI through Elmer Ramiro, its President and Chief Executive Officer, only contained a general allegation that TESDA had fraudulent
misapplied or converted the amount of P10,975,000.00 that was allotted to it. Clearly, we cannot infer any finding of fraud from PROVIs vague assertion, and
the CA correctly ruled that the lower court acted with grave abuse of discretion in granting the writ of attachment despite want of any valid ground for its
issuance.
For all these reasons, we support the appellate courts conclusion that no valid ground exists to support the grant of the writ of attachment against TESDA. The
CAs annulment and setting aside of the Orders of the RTC were therefore fully in order.

WHEREFORE, premises considered, we hereby DENY the petition filed by petitioner Professional Video, Inc., and AFFIRM the Court of Appeals Decision
dated July 23, 2002, and Resolution of September 27, 2002, in CA-G.R. SP No. 67599. Costs against the petitioner.

SO ORDERED.

G.R. No. 152318

April 16, 2009

DEUTSCHE GESELLSCHAFT FR TECHNISCHE ZUSAMMENARBEIT, also known as GERMAN AGENCY FOR TECHNICAL COOPERATION, (GTZ) HANS PETER
PAULENZ and ANNE NICOLAY, Petitioners,
vs.
HON. COURT OF APPEALS, HON. ARIEL CADIENTE SANTOS, Labor Arbiter of the Arbitration Branch, National Labor Relations Commission, and BERNADETTE
CARMELLA MAGTAAS, CAROLINA DIONCO, CHRISTOPHER RAMOS, MELVIN DELA PAZ, RANDY TAMAYO and EDGARDO RAMILLO, Respondents.
DECISION
TINGA, J.:
On 7 September 1971, the governments of the Federal Republic of Germany and the Republic of the Philippines ratified an Agreement concerning Technical Cooperation (Agreement) in Bonn, capital of what was then West Germany. The Agreement affirmed the countries "common interest in promoting the technical
and economic development of their States, and recogni[zed] the benefits to be derived by both States from closer technical co-operation," and allowed for the
conclusion of "arrangements concerning individual projects of technical co-operation."1 While the Agreement provided for a limited term of effectivity of five (5)
years, it nonetheless was stated that "[t]he Agreement shall be tacitly extended for successive periods of one year unless either of the two Contracting Parties
denounces it in writing three months prior to its expiry," and that even upon the Agreements expiry, its provisions would "continue to apply to any projects
agreed upon x x x until their completion."2
On 10 December 1999, the Philippine government, through then Foreign Affairs Secretary Domingo Siazon, and the German government, agreed to an
Arrangement in furtherance of the 1971 Agreement. This Arrangement affirmed the common commitment of both governments to promote jointly a project
called, Social Health InsuranceNetworking and Empowerment (SHINE), which was designed to "enable Philippine familiesespecially poor onesto maintain
their health and secure health care of sustainable quality."3 It appears that SHINE had already been in existence even prior to the effectivity of the Arrangement,
though the record does not indicate when exactly SHINE was constituted. Nonetheless, the Arrangement stated the various obligations of the Filipino and
German governments. The relevant provisions of the Arrangement are reproduced as follows:
3. The Government of the Federal Republic of Germany shall make the following contributions to the project.
It shall
(a) second
- one expert in health economy, insurance and health systems for up to 48 expert/months,
- one expert in system development for up to 10 expert/months
- short-term experts to deal with special tasks for a total of up to 18 expert/months,
- project assistants/guest students as required, who shall work on the project as part of their basic and further training and assume specific project tasks under
the separately financed junior staff promotion programme of the Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ);
(b) provide in situ

- short-term experts to deal with diverse special tasks for a total of up to 27 expert/months,
- five local experts in health economy, health insurance, community health systems, information technology, information systems, training and community
mobilization for a total of up to 240 expert/months,
- local and auxiliary personnel for a total of up to 120 months;
(c) supply inputs, in particular
- two cross-country vehicles,
- ten computers with accessories,
- office furnishings and equipment
up to a total value of DM 310,000 (three hundred and ten thousand Deutsche Mark);
(c) meet
- the cost of accommodation for the seconded experts and their families in so far as this cost is not met by the seconded experts themselves,
- the cost of official travel by the experts referred to in sub-paragraph (a) above within and outside the Republic of the Philippines,
- the cost of seminars and courses,
- the cost of transport and insurance to the project site of inputs to be supplied pursuant to sub-paragraph (c) above, excluding the charges and storage fees
referred to in paragraph 4(d) below,
- a proportion of the operating and administrative costs;
xxx
4. The Government of the Republic of the Philippines shall make the following contributions to the project:
It shall
(a) provide the necessary Philippine experts for the project, in particular one project coordinator in the Philippine Health Insurance Corporation (Philhealth), at
least three further experts and a sufficient number of administrative and auxiliary personnel, as well as health personnel in the pilot provinces and in the other
project partners, in particular one responsible expert for each pilot province and for each association representing the various target groups,
- release suitably qualified experts from their duties for attendance at the envisaged basic and further training activities; it shall only nominate such candidates
as have given an undertaking to work on the project for at least five years after completing their training and shall ensure that these Philippine experts receive
appropriate remuneration,
- ensure that the project field offices have sufficient expendables,

- make available the land and buildings required for the project;
(b) assume an increasing proportion of the running and operating costs of the project;
(c) afford the seconded experts any assistance they may require in carrying out the tasks assigned to them and place at their disposal all necessary records and
documents;
(d) guarantee that
- the project is provided with an itemized budget of its own in order to ensure smooth continuation of the project.
- the necessary legal and administrative framework is created for the project,
- the project is coordinated in close cooperation with other national and international agencies relevant to implementation,
- the inputs supplied for the project on behalf of the Government of the Federal Republic of Germany are exempted from the cost of licenses, harbour dues,
import and export duties and other public charges and fees, as well as storage fees, or that any costs thereof are met, and that they are cleared by customs
without delay. The aforementioned exemptions shall, at the request of the implementing agencies also apply to inputs procured in the Republic of the
Philippines,
- the tasks of the seconded experts are taken over as soon as possible by Philippine experts,
- examinations passed by Philippine nationals pursuant to this Arrangement are recognized in accordance with their respective standards and that the persons
concerned are afforded such opportunities with regard to careers, appointments and advancement as are commensurate with their training.4
In the arraignment, both governments likewise named their respective implementing organizations for SHINE. The Philippines designated the Department of
Health (DOH) and the Philippine Health Insurance Corporation (Philhealth) with the implementation of SHINE. For their part, the German government "charge[d]
the Deustche Gesellschaft fr Technische Zusammenarbeit[5 ] (GTZ[6 ]) GmbH, Eschborn, with the implementation of its contributions."7
Private respondents were engaged as contract employees hired by GTZ to work for SHINE on various dates between December of 1998 to September of 1999.
Bernadette Carmela Magtaas was hired as an "information systems manager and project officer of SHINE;"8 Carolina Dionco as a "Project Assistant of
SHINE;"9 Christopher Ramos as "a project assistant and liason personnel of NHI related SHINE activities by GTZ;"10 Melvin Dela Paz and Randy Tamayo as
programmers;11 and Edgardo Ramilo as "driver, messenger and multipurpose service man."12 The employment contracts of all six private respondents all
specified Dr. Rainer Tollkotter, identified as an adviser of GTZ, as the "employer." At the same time, all the contracts commonly provided that "[i]t is mutually
agreed and understood that [Dr. Tollkotter, as employer] is a seconded GTZ expert who is hiring the Employee on behalf of GTZ and for a Philippine-German
bilateral project named Social Health InsuranceNetworking and Empowerment (SHINE) which will end at a given time."13
In September of 1999, Anne Nicolay (Nicolay), a Belgian national, assumed the post of SHINE Project Manager. Disagreements eventually arose between Nicolay
and private respondents in matters such as proposed salary adjustments, and the course Nicolay was taking in the implementation of SHINE different from her
predecessors. The dispute culminated in a letter14 dated 8 June 2000, signed by the private respondents, addressed to Nicolay, and copies furnished officials of
the DOH, Philheath, and the director of the Manila office of GTZ. The letter raised several issues which private respondents claim had been brought up several
times in the past, but have not been given appropriate response. It was claimed that SHINE under Nicolay had veered away from its original purpose to facilitate
the development of social health insurance by shoring up the national health insurance program and strengthening local initiatives, as Nicolay had refused to

support local partners and new initiatives on the premise that community and local government unit schemes were not sustainablea philosophy that
supposedly betrayed Nicolays lack of understanding of the purpose of the project. Private respondents further alleged that as a result of Nicolays "new thrust,
resources have been used inappropriately;" that the new management style was "not congruent with the original goals of the project;" that Nicolay herself
suffered from "cultural insensitivity" that consequently failed to sustain healthy relations with SHINEs partners and staff.
The letter ended with these ominous words:
The issues that we [the private respondents] have stated here are very crucial to us in working for the project. We could no longer find any reason to stay with
the project unless ALL of these issues be addressed immediately and appropriately.15
In response, Nicolay wrote each of the private respondents a letter dated 21 June 2000, all similarly worded except for their respective addressees. She informed
private respondents that the "projects orientations and evolution" were decided in consensus with partner institutions, Philhealth and the DOH, and thus no
longer subject to modifications. More pertinently, she stated:
You have firmly and unequivocally stated in the last paragraph of your 8th June 2000 letter that you and the five other staff "could no longer find any reason to
stay with the project unless ALL of these issues be addressed immediately and appropriately." Under the foregoing premises and circumstances, it is now
imperative that I am to accept your resignation, which I expect to receive as soon as possible.16
Taken aback, private respondents replied with a common letter, clarifying that their earlier letter was not intended as a resignation letter, but one that merely
intended to raise attention to what they perceived as vital issues.17Negotiations ensued between private respondents and Nicolay, but for naught. Each of the
private respondents received a letter from Nicolay dated 11 July 2000, informing them of the pre-termination of their contracts of employment on the grounds
of "serious and gross insubordination, among others, resulting to loss of confidence and trust."18
On 21 August 2000, the private respondents filed a complaint for illegal dismissal with the NLRC. Named as respondents therein where GTZ, the Director of its
Manila office Hans Peter Paulenz, its Assistant Project Manager Christian Jahn, and Nicolay.
On 25 October 2005, GTZ, through counsel, filed a Motion to Dismiss, on the ground that the Labor Arbiter had no jurisdiction over the case, as its acts were
undertaken in the discharge of the governmental functions and sovereign acts of the Government of the Federal Republic of Germany. This was opposed by
private respondents with the arguments that GTZ had failed to secure a certification that it was immune from suit from the Department of Foreign Affairs, and
that it was GTZ and not the German government which had implemented the SHINE Project and entered into the contracts of employment.
On 27 November 2000, the Labor Arbiter issued an Order19 denying the Motion to Dismiss. The Order cited, among others, that GTZ was a private corporation
which entered into an employment contract; and that GTZ had failed to secure from the DFA a certification as to its diplomatic status.
On 7 February 2001, GTZ filed with the Labor Arbiter a "Reiterating Motion to Dismiss," again praying that the Motion to Dismiss be granted on the jurisdictional
ground, and reprising the arguments for dismissal it had earlier raised.20 No action was taken by the Labor Arbiter on this new motion. Instead, on 15 October
2001, the Labor Arbiter rendered a Decision21 granting the complaint for illegal dismissal. The Decision concluded that respondents were dismissed without
lawful cause, there being "a total lack of due process both substantive and procedural [sic]."22 GTZ was faulted for failing to observe the notice requirements in
the labor law. The Decision likewise proceeded from the premise that GTZ had treated the letter dated 8 June 2000 as a resignation letter, and devoted some
focus in debunking this theory.

The Decision initially offered that it "need not discuss the jurisdictional aspect considering that the same had already been lengthily discussed in the Order
de*n+ying respondents Motion to Dismiss."23 Nonetheless, it proceeded to discuss the jurisdictional aspect, in this wise:
Under pain of being repetitious, the undersigned Labor Arbiter has jurisdiction to entertain the complaint on the following grounds:
Firstly, under the employment contract entered into between complainants and respondents, specifically Section 10 thereof, it provides that "contract partners
agree that his contract shall be subject to the LAWS of the jurisdiction of the locality in which the service is performed."
Secondly, respondent having entered into contract, they can no longer invoke the sovereignty of the Federal Republic of Germany.
Lastly, it is imperative to be immune from suit, respondents should have secured from the Department of Foreign Affairs a certification of respondents
diplomatic status and entitlement to diplomatic privileges including immunity from suits. Having failed in this regard, respondents cannot escape liability from
the shelter of sovereign immunity.[sic]24
Notably, GTZ did not file a motion for reconsideration to the Labor Arbiters Decision or elevate said decision for appeal to the NLRC. Instead, GTZ opted to assail
the decision by way of a special civil action for certiorari filed with the Court of Appeals.25 On 10 December 2001, the Court of Appeals promulgated a
Resolution26 dismissing GTZs petition, finding that "judicial recourse at this stage of the case is uncalled for[,] [t]he appropriate remedy of the petitioners [being]
an appeal to the NLRC x x x."27 A motion for reconsideration to this Resolution proved fruitless for GTZ.28
Thus, the present petition for review under Rule 45, assailing the decision and resolutions of the Court of Appeals and of the Labor Arbiter. GTZs arguments
center on whether the Court of Appeals could have entertained its petition for certiorari despite its not having undertaken an appeal before the NLRC; and
whether the complaint for illegal dismissal should have been dismissed for lack of jurisdiction on account of GTZs insistence that it enjoys immunity from suit.
No special arguments are directed with respect to petitioners Hans Peter Paulenz and Anne Nicolay, respectively the then Director and the then Project Manager
of GTZ in the Philippines; so we have to presume that the arguments raised in behalf of GTZs alleged immunity from suit extend to them as well.
The Court required the Office of the Solicitor General (OSG) to file a Comment on the petition. In its Comment dated 7 November 2005, the OSG took the side of
GTZ, with the prayer that the petition be granted on the ground that GTZ was immune from suit, citing in particular its assigned functions in implementing the
SHINE programa joint undertaking of the Philippine and German governments which was neither proprietary nor commercial in nature.
The Court of Appeals had premised the dismissal of GTZs petition on its procedural misstep in bypassing an appeal to NLRC and challenging the Labor Arbiters
Decision directly with the appellate court by way of a Rule 65 petition. In dismissing the petition, the
Court of Appeals relied on our ruling in Air Service Cooperative v. Court of Appeals.29 The central issue in that case was whether a decision of a Labor Arbiter
rendered without jurisdiction over the subject matter may be annulled in a petition before a Regional Trial Court. That case may be differentiated from the
present case, since the Regional Trial Court does not have original or appellate jurisdiction to review a decision rendered by a Labor Arbiter. In contrast, there is
no doubt, as affirmed by jurisprudence, that the Court of Appeals has jurisdiction to review, by way of its original certiorari jurisdiction, decisions ruling on
complaints for illegal dismissal.
Nonetheless, the Court of Appeals is correct in pronouncing the general rule that the proper recourse from the decision of the Labor Arbiter is to first appeal the
same to the NLRC. Air Services is in fact clearly detrimental to petitioners position in one regard. The Court therein noted that on account of the failure to
correctly appeal the decision of the Labor Arbiter to the NLRC, such judgment consequently became final and executory.30 GTZ goes as far as to "request" that

the Court re-examine Air Services, a suggestion that is needlessly improvident under the circumstances. Air Services affirms doctrines grounded in sound
procedural rules that have allowed for the considered and orderly disposition of labor cases.
The OSG points out, citing Heirs of Mayor Nemencio Galvez v. Court of Appeals,31 that even when appeal is available, the Court has nonetheless allowed a writ of
certiorari when the orders of the lower court were issued either in excess of or without jurisdiction. Indeed, the Court has ruled before that the failure to employ
available intermediate recourses, such as a motion for reconsideration, is not a fatal infirmity if the ruling assailed is a patent nullity. This approach suggested by
the OSG allows the Court to inquire directly into what is the main issuewhether GTZ enjoys immunity from suit.
The arguments raised by GTZ and the OSG are rooted in several indisputable facts. The SHINE project was implemented pursuant to the bilateral agreements
between the Philippine and German governments. GTZ was tasked, under the 1991 agreement, with the implementation of the contributions of the German
government. The activities performed by GTZ pertaining to the SHINE project are governmental in nature, related as they are to the promotion of health
insurance in the Philippines. The fact that GTZ entered into employment contracts with the private respondents did not disqualify it from invoking immunity
from suit, as held in cases such as Holy See v. Rosario, Jr.,32 which set forth what remains valid doctrine:
Certainly, the mere entering into a contract by a foreign state with a private party cannot be the ultimate test. Such an act can only be the start of the inquiry.
The logical question is whether the foreign state is engaged in the activity in the regular course of business. If the foreign state is not engaged regularly in a
business or trade, the particular act or transaction must then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it
is an act jure imperii, especially when it is not undertaken for gain or profit.33
Beyond dispute is the tenability of the comment points raised by GTZ and the OSG that GTZ was not performing proprietary functions notwithstanding its entry
into the particular employment contracts. Yet there is an equally fundamental premise which GTZ and the OSG fail to address, namely: Is GTZ, by conception,
able to enjoy the Federal Republics immunity from suit?
The principle of state immunity from suit, whether a local state or a foreign state, is reflected in Section 9, Article XVI of the Constitution, which states that "the
State may not be sued without its consent." Who or what consists of "the State"? For one, the doctrine is available to foreign States insofar as they are sought to
be sued in the courts of the local State,34 necessary as it is to avoid "unduly vexing the peace of nations."
If the instant suit had been brought directly against the Federal Republic of Germany, there would be no doubt that it is a suit brought against a State, and the
only necessary inquiry is whether said State had consented to be sued. However, the present suit was brought against GTZ. It is necessary for us to understand
what precisely are the parameters of the legal personality of GTZ.
Counsel for GTZ characterizes GTZ as "the implementing agency of the Government of the Federal Republic of Germany," a depiction similarly adopted by the
OSG. Assuming that characterization is correct, it does not automatically invest GTZ with the ability to invoke State immunity from suit. The distinction lies in
whether the agency is incorporated or unincorporated. The following lucid discussion from Justice Isagani Cruz is pertinent:
Where suit is filed not against the government itself or its officials but against one of its entities, it must be ascertained whether or not the State, as the principal
that may ultimately be held liable, has given its consent to be sued. This ascertainment will depend in the first instance on whether the government agency
impleaded is incorporated or unincorporated.
An incorporated agency has a charter of its own that invests it with a separate juridical personality, like the Social Security System, the University of the
Philippines, and the City of Manila. By contrast, the unincorporated agency is so called because it has no separate juridical personality but is merged in the
general machinery of the government, like the Department of Justice, the Bureau of Mines and the Government Printing Office.

If the agency is incorporated, the test of its suability is found in its charter. The simple rule is that it is suable if its charter says so, and this is true regardless of
the functions it is performing. Municipal corporations, for example, like provinces and cities, are agencies of the State when they are engaged in governmental
functions and therefore should enjoy the sovereign immunity from suit. Nevertheless, they are subject to suit even in the performance of such functions because
their charter provides that they can sue and be sued.35
State immunity from suit may be waived by general or special law.36 The special law can take the form of the original charter of the incorporated government
agency. Jurisprudence is replete with examples of incorporated government agencies which were ruled not entitled to invoke immunity from suit, owing to
provisions in their
charters manifesting their consent to be sued. These include the National Irrigation Administration,37 the former Central Bank,38 and the National Power
Corporation.39 In SSS v. Court of Appeals,40 the Court through Justice Melencio-Herrera explained that by virtue of an express provision in its charter allowing it
to sue and be sued, the Social Security System did not enjoy immunity from suit:
We come now to the amendability of the SSS to judicial action and legal responsibility for its acts. To our minds, there should be no question on this score
considering that the SSS is a juridical entity with a personality of its own. It has corporate powers separate and distinct from the Government. SSS' own organic
act specifically provides that it can sue and be sued in Court. These words "sue and be sued" embrace all civil process incident to a legal action. So that, even
assuming that the SSS, as it claims, enjoys immunity from suit as an entity performing governmental functions, by virtue of the explicit provision of the
aforecited enabling law, the Government must be deemed to have waived immunity in respect of the SSS, although it does not thereby concede its liability. That
statutory law has given to the private citizen a remedy for the enforcement and protection of his rights. The SSS thereby has been required to submit to the
jurisdiction of the Courts, subject to its right to interpose any lawful defense. Whether the SSS performs governmental or proprietary functions thus becomes
unnecessary to belabor. For by that waiver, a private citizen may bring a suit against it for varied objectives, such as, in this case, to obtain compensation in
damages arising from contract, and even for tort.
A recent case squarely in point anent the principle, involving the National Power Corporation, is that of Rayo v. Court of First Instance of Bulacan, 110 SCRA 457
(1981), wherein this Court, speaking through Mr. Justice Vicente Abad Santos, ruled:
"It is not necessary to write an extended dissertation on whether or not the NPC performs a governmental function with respect to the management and
operation of the Angat Dam. It is sufficient to say that the government has organized a private corporation, put money in it and has allowed it to sue and be sued
in any court under its charter. (R.A. No. 6395, Sec. 3[d]). As a government, owned and controlled corporation, it has a personality of its own, distinct and
separate from that of the Government. Moreover, the charter provision that the NPC can 'sue and be sued in any court' is without qualification on the cause of
action and accordingly it can include a tort claim such as the one instituted by the petitioners."41
It is useful to note that on the part of the Philippine government, it had designated two entities, the Department of Health and the Philippine Health Insurance
Corporation (PHIC), as the implementing agencies in behalf of the Philippines. The PHIC was established under Republic Act No. 7875, Section 16(g) of which
grants the corporation the power "to sue and be sued in court." Applying the previously cited jurisprudence, PHIC would not enjoy immunity from suit even in
the performance of its functions connected with SHINE, however, governmental in nature as they may be.
Is GTZ an incorporated agency of the German government? There is some mystery surrounding that question. Neither GTZ nor the OSG go beyond the claim that
petitioner is "the implementing agency of the Government of the Federal Republic of Germany." On the other hand, private respondents asserted before the
Labor Arbiter that GTZ was "a private corporation engaged in the implementation of development projects."42 The Labor Arbiter accepted that claim in his Order
denying the Motion to Dismiss,43 though he was silent on that point in his Decision. Nevertheless, private respondents argue in their Comment that the finding

that GTZ was a private corporation "was never controverted, and is therefore deemed admitted."44 In its Reply, GTZ controverts that finding, saying that it is a
matter of public knowledge that the status of petitioner GTZ is that of the "implementing agency," and not that of a private corporation.45
In truth, private respondents were unable to adduce any evidence to substantiate their claim that GTZ was a "private corporation," and the Labor Arbiter acted
rashly in accepting such claim without explanation. But neither has GTZ supplied any evidence defining its legal nature beyond that of the bare descriptive
"implementing agency." There is no doubt that the 1991 Agreement designated GTZ as the "implementing agency" in behalf of the German government. Yet the
catch is that such term has no precise definition that is responsive to our concerns. Inherently, an agent acts in behalf of a principal, and the GTZ can be said to
act in behalf of the German state. But that is as far as "implementing agency" could take us. The term by itself does not supply whether GTZ is incorporated or
unincorporated, whether it is owned by the German state or by private interests, whether it has juridical personality independent of the German government or
none at all.
GTZ itself provides a more helpful clue, inadvertently, through its own official Internet website.46 In the "Corporate Profile" section of the English language
version of its site, GTZ describes itself as follows:
As an international cooperation enterprise for sustainable development with worldwide operations, the federally owned Deutsche Gesellschaft fr Technische
Zusammenarbeit (GTZ) GmbH supports the German Government in achieving its development-policy objectives. It provides viable, forward-looking solutions for
political, economic, ecological and social development in a globalised world. Working under difficult conditions, GTZ promotes complex reforms and change
processes. Its corporate objective is to improve peoples living conditions on a sustainable basis.
GTZ is a federal enterprise based in Eschborn near Frankfurt am Main. It was founded in 1975 as a company under private law. The German Federal Ministry for
Economic Cooperation and Development (BMZ) is its major client. The company also operates on behalf of other German ministries, the governments of other
countries and international clients, such as the European Commission, the United Nations and the World Bank, as well as on behalf of private enterprises. GTZ
works on a public-benefit basis. All surpluses generated are channeled [sic] back into its own international cooperation projects for sustainable development.47
GTZs own website elicits that petitioner is "federally owned," a "federal enterprise," and "founded in 1975 as a company under private law." GTZ clearly has a
very meaningful relationship with the Federal Republic of Germany, which apparently owns it. At the same time, it appears that GTZ was actually organized not
through a legislative public charter, but under private law, in the same way that Philippine corporations can be organized under the Corporation Code even if
fully owned by the Philippine government.
This self-description of GTZ in its own official website gives further cause for pause in adopting petitioners argument that GTZ is entitled to immunity from suit
because it is "an implementing agency." The above-quoted statement does not dispute the characterization of GTZ as an "implementing agency of the Federal
Republic of Germany," yet it bolsters the notion that as a company organized under private law, it has a legal personality independent of that of the Federal
Republic of Germany.
The Federal Republic of Germany, in its own official website,48 also makes reference to GTZ and describes it in this manner:
x x x Going by the principle of "sustainable development," the German Technical Cooperation (Deutsche Gesellschaft fr Technische Zusammenarbeit GmbH,
GTZ) takes on non-profit projects in international "technical cooperation." The GTZ is a private company owned by the Federal Republic of Germany.49
Again, we are uncertain of the corresponding legal implications under German law surrounding "a private company owned by the Federal Republic of Germany."
Yet taking the description on face value, the apparent equivalent under Philippine law is that of a corporation organized under the Corporation Code but owned

by the Philippine government, or a government-owned or controlled corporation without original charter. And it bears notice that Section 36 of the Corporate
Code states that "[e]very corporation incorporated under this Code has the power and capacity x x x to sue and be sued in its corporate name."50
It is entirely possible that under German law, an entity such as GTZ or particularly GTZ itself has not been vested or has been specifically deprived the power and
capacity to sue and/or be sued. Yet in the proceedings below and before this Court, GTZ has failed to establish that under German law, it has not consented to
be sued despite it being owned by the Federal Republic of Germany. We adhere to the rule that in the absence of evidence to the contrary,
foreign laws on a particular subject are presumed to be the same as those of the Philippines,51 and following the most intelligent assumption we can gather, GTZ
is akin to a governmental owned or controlled corporation without original charter which, by virtue of the Corporation Code, has expressly consented to be
sued. At the very least, like the Labor Arbiter and the Court of Appeals, this Court has no basis in fact to conclude or presume that GTZ enjoys immunity from
suit.
This absence of basis in fact leads to another important point, alluded to by the Labor Arbiter in his rulings. Our ruling in Holy See v. Del Rosario52 provided a
template on how a foreign entity desiring to invoke State immunity from suit could duly prove such immunity before our local courts. The principles enunciated
in that case were derived from public international law. We stated then:
In Public International Law, when a state or international agency wishes to plead sovereign or diplomatic immunity in a foreign court, it requests the Foreign
Office of the state where it is sued to convey to the court that said defendant is entitled to immunity.
In the United States, the procedure followed is the process of "suggestion," where the foreign state or the international organization sued in an American court
requests the Secretary of State to make a determination as to whether it is entitled to immunity. If the Secretary of State finds that the defendant is immune
from suit, he, in turn, asks the Attorney General to submit to the court a "suggestion" that the defendant is entitled to immunity. In England, a similar procedure
is followed, only the Foreign Office issues a certification to that effect instead of submitting a "suggestion" (O'Connell, I International Law 130 [1965]; Note:
Immunity from Suit of Foreign Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088 [1941]).
In the Philippines, the practice is for the foreign government or the international organization to first secure an executive endorsement of its claim of sovereign
or diplomatic immunity. But how the Philippine Foreign Office conveys its endorsement to the courts varies. In International Catholic Migration Commission v.
Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter directly to the Secretary of Labor and Employment, informing the latter that the
respondent-employer could not be sued because it enjoyed diplomatic immunity. In World Health Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of
Foreign Affairs sent the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs to request
the Solicitor General to make, in behalf of the Commander of the United States Naval Base at Olongapo City, Zambales, a "suggestion" to respondent Judge. The
Solicitor General embodied the "suggestion" in a Manifestation and Memorandum as amicus curiae.53
It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was imperative for petitioners to secure from the Department of Foreign Affairs "a
certification of respondents diplomatic status and entitlement to diplomatic privileges including immunity from suits."54 The requirement might not necessarily
be imperative. However, had GTZ obtained such certification from the DFA, it would have provided factual basis for its claim of immunity that would, at the very
least, establish a disputable evidentiary presumption that the foreign party is indeed immune which the opposing party will have to overcome with its own
factual evidence. We do not see why GTZ could not have secured such certification or endorsement from the DFA for purposes of this case. Certainly, it would
have been highly prudential for GTZ to obtain the same after the Labor Arbiter had denied the motion to dismiss. Still, even at this juncture, we do not see any
evidence that the DFA, the office of the executive branch in charge of our diplomatic relations, has indeed endorsed GTZs claim of immunity. It may be possible
that GTZ tried, but failed to secure such certification, due to the same concerns that we have discussed herein.

Would the fact that the Solicitor General has endorsed GTZs claim of States immunity from suit before this Court sufficiently substitute for the DFA
certification? Note that the rule in public international law quoted in Holy See referred to endorsement by the Foreign Office of the State where the suit is filed,
such foreign office in the Philippines being the Department of Foreign Affairs. Nowhere in the Comment of the OSG is it manifested that the DFA has endorsed
GTZs claim, or that the OSG had solicited the DFAs views on the issue. The arguments raised by the OSG are virtually the same as the arguments raised by GTZ
without any indication of any special and distinct perspective maintained by the Philippine government on the issue. The Comment filed by the OSG does not
inspire the same degree of confidence as a certification from the DFA would have elicited.1avvphi1
Holy See made reference to Baer v. Tizon,55 and that in the said case, the United States Embassy asked the Secretary of Foreign Affairs to request the Solicitor
General to make a "suggestion" to the trial court, accomplished by way of a Manifestation and Memorandum, that the petitioner therein enjoyed immunity as
the Commander of the Subic Bay Naval Base. Such circumstance is actually not narrated in the text of Baer itself and was likely supplied in Holy See because its
author, Justice Camilio Quiason, had appeared as the Solicitor in behalf of the OSG in Baer. Nonetheless, as narrated in Holy See, it was the Secretary of Foreign
Affairs which directed the OSG to intervene in behalf of the United States government in the Baer case, and such fact is manifest enough of the endorsement by
the Foreign Office. We do not find a similar circumstance that bears here.
The Court is thus holds and so rules that GTZ consistently has been unable to establish with satisfaction that it enjoys the immunity from suit generally enjoyed
by its parent country, the Federal Republic of Germany. Consequently, both the Labor Arbiter and the Court of Appeals acted within proper bounds when they
refused to acknowledge that GTZ is so immune by dismissing the complaint against it. Our finding has additional ramifications on the failure of GTZ to properly
appeal the Labor Arbiters decision to the NLRC. As pointed out by the OSG, the direct recourse to the Court of Appeals while bypassing the NLRC could have
been sanctioned had the Labor Arbiters decision been a "patent nullity." Since the Labor Arbiter acted properly in deciding the complaint, notwithstanding
GTZs claim of immunity, we cannot see how the decision could have translated into a "patent nullity."
As a result, there was no basis for petitioners in foregoing the appeal to the NLRC by filing directly with the Court of Appeals the petition for certiorari. It then
follows that the Court of Appeals acted correctly in dismissing the petition on that ground. As a further consequence, since petitioners failed to perfect an appeal
from the Labor Arbiters Decision, the same has long become final and executory. All other questions related to this case, such as whether or not private
respondents were illegally dismissed, are no longer susceptible to review, respecting as we do the finality of the Labor Arbiters Decision.
A final note. 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 of 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.
WHEREFORE, the petition is DENIED. No pronouncement as to costs.
SO ORDERED.