II. 1 What is the nature of the above-mentioned provision in the Code of Commerce?

Answer:
Although the aforestated provision is incorporated in the Code of Commerce which is part of the
commercial laws of the Philippines, it, however, partakes of the nature of a political law as it regulates
the relationship between the government and certain public officers and employees, like justices and
judges.
II.2
What is the effect of the subsequent transfer of sovereignty from Spain to the US and later on
from the US to the Republic of the Philippines on the said provision? Explain.
Answer:
Upon the transfer of sovereignty from Spain to the United States and later on from the United
States to the Republic of the Philippines, Art. 14 of the Code of Commerce must be deemed to
have been abrogated because where there is a change of sovereignty, the political laws of
the former sovereign, whether compatible or not with those of the new sovereign, are
automatically abrogated, unless they are expressly re-enacted by affirmative act of the
new sovereign. (Macariola vs. Asuncion, 114 SCRA 77)

III. A.
The operative act that gives validity to the proposed amendments to the
Constitution is RA No. 6735, known as the Initiative and Referendum Act.
III. B

Compare and differentiate one from the other.

Answer:
INITIATIVE is the power of the people to propose amendments to the Constitution or to
propose and enact legislations through an election called for the purpose. REFERENDUM is the
power of the electorate to approve or reject a legislation through an election called for the
purpose. (Sec. 3, R.A. No. 6735).

III. C1 In constitutions with initiative clause, like the Philippine Constitution, which allow amendments but
not revision, courts develop two-part test. What are the tests? Explain.
Answer:
These are quantitative and qualitative tests.
The quantitative test asks whether the proposed change is so extensive in its provision as
to change directly the substance entirety of the constitution by the deletion or alteration
of numerous provisions. The court examines only the number of provisions affected and
does not consider the degree of the change.
The qualitative test inquires into the qualitative effects of the proposed change in the constitution.
The main inquiry is whether the change will accomplish such far reaching

III. C2
If there is a change in the structure of the government, is there revision of the
Constitution? Explain using the two-part test.
Answer:
Under both the quantitative and qualitative tests, the initiative is a revision and not merely
an amendment. Quantitatively, the proposed changes overhaul two articles - Article VI on the
Legislature and Article VII on the Executive - affecting a total of 105 provisions in the entire
Constitution. Qualitatively, the proposed changes alter substantially the basic plan of government,
from presidential to parliamentary, and from a bicameral to a unicameral legislature. (Lambino vs.
COMELEC, Oct. 25, 2006).
IV. A
The rules of International Law are neither unyielding nor impervious to change. The
increasing need of sovereign States to enter into purely commercial activities remotely connected
with the discharge of their governmental functions brought about a new concept of sovereign
immunity, the restrictive theory. Explain fully what this recent concept is.
Answer:
This concept, the restrictive theory, holds that the immunity of the sovereign is recognized only
with regard to public acts or acts jure imperii, but not with regard to private acts or acts jure
gestionis. (Republic of Indonesia vs. Vinzon, June 26, 2003).

IV. B
China National Machinery & Equipment Corp. (CNMEG) entered into a Memorandum of
Understanding with the North Luzon Railways Corporation (Northrail) for the conduct of a feasibility study
on a possible railway line (the Northrail Project). Thereafter, the Export Import Bank of China (EXIM Bank)
and the Department of Finance of the Philippines (DOF) entered into a Memorandum of Understanding,
wherein China agreed to extend Preferential Buyers Credit to the Philippine government to finance the
Northrail Project. The Chinese government designated EXIM Bank as the lender, while the Philippine
government named the DOF as the borrower. The Chinese Ambassador to the Philippines wrote a letter
to DOF Secretary informing him of CNMEGs designation as the Prime Contractor for the Northrail
Project. Northrail and CNMEG executed a Contract Agreement for the construction of Section I, Phase I
of the North Luzon Railway System (the Contract Agreement). Then, the Philippine government and EXIM
Bank entered into a counterpart financial agreement (the Loan Agreement). In the Loan Agreement, EXIM
Bank agreed to extend Preferential Buyers Credit in the amount of USD 400,000,000 in favor of the
Philippine government in order to finance the construction of Phase I of the Northrail Project. A Complaint
for Annulment of Contract and Injunction was filed against CNMEG, the Executive Secretary, the DOF, the
DBM, the NEDA and Northrail.
1. Is CNMEG entitled to immunity, precluding it from being sued before a local court?
Answer:
No. A threshold question that must be answered is whether CNMEG performs governmental or
proprietary functions. A thorough examination of the basic facts of the case would show that
CNMEG is engaged in a proprietary activity.
Even assuming arguendo that CNMEG performs governmental functions, such claim does not
automatically vest it with immunity. This view finds support in Malong vs. PNR, in which this Court
held that "(i)mmunity from suit is determined by the character of the objects for which the
entity was organized." Although CNMEG claims to be a government-owned corporation, it
failed to adduce evidence that it has not consented to be sued under Chinese law. Thus, in
the absence of evidence to the contrary, CNMEG is to be presumed to be a government-

owned and -controlled corporation without an original charter. As a result, it has the capacity
to sue and be sued under Section 36 of the Corporation Code.
Moreover, CNMEG also claims that its immunity from suit has the executive endorsement of both
the OSG and the Office of the Government Corporate Counsel (OGCC), which must be respected
by the courts. However, this determination by the OSG, or by the OGCC for that matter, does
not inspire the same degree of confidence as a DFA certification. Even with a DFA
certification, however, it must be remembered that this Court is not precluded from making an
inquiry into the intrinsic correctness of such certification.
2. CNMEG offers the Certification executed by the Economic and Commercial Office of the
Embassy of the Peoples Republic of China, stating that the Northrail Project is in pursuit of a
sovereign activity. Further, it also claims that its immunity from suit has the executive endorsement of
both the OSG and the Office of the Government Corporate Counsel (OGCC), which must be
respected by the courts. What are the intrinsic values of the earlier mentioned certifications? Are the
said documents binding upon our courts?
Answer:
First, the Certification executed by the Economic and Commercial Office of the Embassy of the
Peoples Republic of China is not the kind of certification that can establish CNMEGs entitlement
to immunity from suit, as Holy See unequivocally refers to the determination of the "Foreign Office
of the state where it is sued." Further, the executive endorsement of both the OSG and the Office
of the Government Corporate Counsel (OGCC) does not inspire the same degree of confidence
as a DFA certification. Even with a DFA certification, however, it must be remembered that this
Court is not precluded from making an inquiry into the intrinsic correctness of such certification.
3. May an agreement to submit any dispute to arbitration be construed as an implicit waiver of
immunity from suit?
Answer:
In the United States, the Foreign Sovereign Immunities Act of 1976 provides for a waiver by
implication of state immunity. In the said law, the agreement to submit disputes to arbitration
in a foreign country is construed as an implicit waiver of immunity from suit. Although there
is no similar law in the Philippines, there is reason to apply the legal reasoning behind the
waiver in this case.
a. Is the Contract Agreement an executive agreement?
Answer:
To be considered an executive agreement, the following three requisites provided under the
Vienna Convention must concur: (a) the agreement must be between states; (b) it must be
written; and (c) it must governed by international law. The first and the third requisites do not
obtain in the case at bar.
First, the Contract Agreement was not concluded between the Philippines and China, but
between Northrail and CNMEG. Both Northrail and CNMEG entered into the Contract Agreement
as entities with personalities distinct and separate from the Philippine and Chinese governments,
respectively.
Moreover, since the Contract Agreement explicitly provides that Philippine law shall be
applicable, the parties have effectively conceded that their rights and obligations thereunder
are not governed by international law. (CNMEG vs. Hon. Santamaria, Feb. 7, 2012).

V.B
Broadly speaking, there is a violation of the separation of powers principle when one branch of
government unduly encroaches on the domain of another. US Supreme Court decisions instruct that the
principle of separation of powers may be violated in two (2) ways. Enumerate the ways where there is a
violation of the earlier mentioned principle.
Answer:
Firstly, "one branch may interfere impermissibly with the others performance of its constitutionally
assigned function"; and "alternatively, the doctrine may be violated when one branch assumes a
function that more properly is entrusted to another." In other words, there is a violation of the principle
when there is impermissible (a) interference with and/or (b) assumption of another departments
functions. (ibid).

V.C
Over the decades, "pork" funds in the Philippines have increased tremendously, owing in no small
part to previous Presidents who reportedly used the "Pork Barrel" in order to gain congressional support.
Recently, the National Bureau of Investigation (NBI) began its probe into allegations that "the government
has been defrauded of some P10 Billion over the past 10 years by a syndicate using funds from the pork
barrel of lawmakers and various government agencies for scores of ghost projects. Are the 2013 PDAF
Article and all other Congressional Pork Barrel Laws similar thereto unconstitutional considering that they
violate the principle of/constitutional provisions on:
(a) Separation of powers?
(b) Non-delegability of legislative power?
(c) Checks and balances?
Answer:
Separation of Powers
Under the 2013 PDAF Article, it cannot be seriously doubted that legislators have been accorded
post-enactment authority to identify PDAF projects. Aside from the area of project identification,
legislators have also been accorded post-enactment authority in the areas of fund release and
realignment.
Clearly, these post-enactment measures which govern the areas of project identification, fund
release and fund realignment are not related to functions of congressional oversight and,
hence, allow legislators to intervene and/or assume duties that properly belong to the sphere
of budget execution. The fundamental rule, as categorically articulated in Abakada, cannot be
overstated from the moment the law becomes effective, any provision of law that empowers
Congress or any of its members to play any role in the implementation or enforcement of the
law violates the principle of separation of powers and is thus unconstitutional. That the said
authority is treated as merely recommendatory in nature does not alter its unconstitutional
tenor since the prohibition, to repeat, covers any role in the implementation or enforcement of
the law. Towards this end, the Court must therefore abandon its ruling in Philconsa which sanctioned
the conduct of legislator identification on the guise that the same is merely recommendatory and such
reliance on the same falters altogether. Besides, it must be pointed out that they failed to substantiate
their position that the identification authority of legislators is only of recommendatory import. Quite the
contrary, they have admitted that the identification of the legislator constitutes a mandatory
requirement before his PDAF can be tapped as a funding source, thereby highlighting the
indispensability of the said act to the entire budget execution process.
Non-delegability of Legislative Power

Insofar as it confers post-enactment identification authority to individual legislators, violates the

principle of non-delegability since said legislators are effectively allowed to individually exercise
the power of appropriation, which is lodged in Congress. That the power to appropriate must be
exercised only through legislation is clear from Section 29(1), Article VI of the 1987 Constitution which
states that: "No money shall be paid out of the Treasury except in pursuance of an appropriation
made by law." Essentially, under the 2013 PDAF Article, individual legislators are given a personal
lump-sum fund from which they are able to dictate (a) how much from such fund would go to (b) a
specific project or beneficiary that they themselves also determine. As these two (2) acts comprise
the exercise of the power of appropriation as described in Bengzon, and given that the 2013 PDAF
Article authorizes individual legislators to perform the same, undoubtedly, said legislators have been
conferred the power to legislate which the Constitution does not, however, allow.
Checks and Balances
Under the 2013 PDAF Article, the amount of P24.79 Billion only appears as a collective allocation limit
since the said amount would be further divided among individual legislators who would then receive
personal lump-sum allocations and could, after the GAA is passed, effectively appropriate PDAF funds
based on their own discretion. As these intermediate appropriations are made by legislators only after the
GAA is passed and hence, outside of the law, it necessarily means that the actual items of PDAF
appropriation would not have been written into the General Appropriations Bill and thus effectuated
without veto consideration. This kind of lump-sum/post-enactment legislative identification
budgeting system fosters the creation of a budget within a budget" which subverts the prescribed
procedure of presentment and consequently impairs the Presidents power of item veto. The lumpsum amount of P24.79 Billion would be treated as a mere funding source allotted for multiple purposes of
spending, i.e., scholarships, medical missions, assistance to indigents, preservation of historical
materials, construction of roads, flood control, etc. This setup connotes that the appropriation law
leaves the actual amounts and purposes of the appropriation for further determination and,
therefore, does not readily indicate a discernible item which may be subject to the Presidents
power of item veto

VI.B
The GSIS seeks exemption from the payment of legal fees imposed on GOCCs. The GSIS
anchors its petition on Section 39 of its charter, which provides that [t]axes imposed on the GSIS tend to
impair the actuarial solvency of its funds and increase the contribution rate necessary to sustain the
benefits of this Act. Accordingly, notwithstanding any laws to the contrary, the GSIS, its assets, revenues
including accruals thereto, and benefits paid, shall be exempt from all taxes, assessments, fees, charges
or duties of all kinds. xxx.
a. What is the basis of the Supreme Court in imposing legal fees to litigants (including the GSIS)?
Answer:
Rule 141 (on Legal Fees) of the Rules of Court was promulgated by this Court in the exercise of
its rule-making powers under Section 5(5), Article VIII of the Constitution:
Sec. 5. The Supreme Court shall have the following powers:
xxx
(5) Promulgate rules concerning the protection and enforcement of constitutional
rights, pleading, practice, and procedure in all courts, xxx.

b. May the legislature exempt the Government Service Insurance System (GSIS) from legal fees
imposed by the Court on government-owned and controlled corporations and local government
units?
Answer:
The separation of powers among the three co-equal branches of our government has erected
an impregnable wall that keeps the power to promulgate rules of pleading, practice and
procedure within the sole province of this Court. The other branches trespass upon this
prerogative if they enact laws or issue orders that effectively repeal, alter or modify any of the
procedural rules promulgated by this Court. Viewed from this perspective, the claim of a
legislative grant of exemption from the payment of legal fees necessarily fails.
Congress could not have carved out an exemption for the GSIS from the payment of legal fees
without transgressing another equally important institutional safeguard of the Courts
independence fiscal autonomy. Fiscal autonomy recognizes the power and authority of
the Court to levy, assess and collect fees, including legal fees. (Re: Petition for Recognition
of the Exemption of the Government Service Insurance System from Payment of Legal Fees, 612
SCRA 193).

IX. B
In the case of Atong Paglaum, Inc. vs. COMELEC, the court held that the party-list
system is composed of three different groups. What are these groups? Are these
groups required to be economically marginalized and underrepresented?
Answer:
The party-list system is composed of three different groups: (1) national parties or
organizations; (2) regional parties or organizations; and (3) sectoral parties or
organizations. National and regional parties or organizations are different from
sectoral parties or organizations. National and regional parties or organizations
need not be organized along sectoral lines and need not represent any particular
sector. R.A. No. 7941 does not require national and regional parties or organizations
to represent the "marginalized and underrepresented" sectors. (Atong Paglaum, Inc.
vs. COMELEC, April 2, 2013).