(3) Private respondents were engaged as contract employees hired by GTZ to
work for SHINE on various dates between Dec. 1998 to Sept. 1999. The
GTZ v CA
Petitioner: German Agency for Technical Cooperation
Respondent: Court of Appeals
NATURE: Petition for review on certiorari of the decision and resolution
(4) In Sept. 1999, Anne Nicolay (Belgian national) assumed the post as SHINE
of the CA
PONENTE: Tinga, J.
DOCTRINE: Manner by which consent is given: A claim of immunity by
PETITIONERS (GTZ/Nicolay)
a foreign entity
RULING FORMAT:
LA- Issued an order denying Motion to Dismisss.
CA- Affirmed dismissal.
SC- Petition Denied. Affirmed dismissal of the CA.
FACTS:
(1) On Sept 7, 1971, the governments of Federal Republic of Germany and
Republic of the Philippines ratified an Agreement concerning
Technical Co-operation in Bonn, West Germany. The Agreement,
aimed at promoting the technical and economic development by both
States, allowed for the conclusion of “arrangements concerning
individual projects of technical co-operation.” The agreement was
limited to an effectivity term of 5 years, however, tacitly extending for
successive periods of 1 year unless either party denounces so. Upon the
agreement’s expiry, its provisions would “continue to apply to any
projects agreed upon until their completion.”
(2) On Dec 10, 1999, the Philippine government, through the DFA, agreed
to an Arrangement with the German government to jointly promote a
project called Social Health Insurance-Networking and Empowerment
(SHINE), which was designated to “enable Philippine families—
especially the poor ones—to maintain their health and secure health
care of sustainable quality.” The Arrangement stated the various
obligations of the Filipino and German governments.
Both governments named their respective implementing
organizations for SHINE: The Philippines designated the
DOH and the Philippine Health Insurance Corp. (Philhealth)
and German government charged the Deustche Gesellschaft
für Technische Zusammenarbeit (or the GTZ) with the
implementation of its contributions.
employment contracts of all 6 private respondents all specified Dr.
Tollkotter, adviser of GTZ, as the “employer.” All contracts also provide that
“it 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
SHINE, which will end at a given time.”
Project Manager. Disagreements arose between Nicolay and private
respondents regarding proposed salary adjustments and course of the project.
(1) In response, Nicolay wrote each of the private respondents a letter dated
July 21, 2000, informing them:
- The project’s “orientations and evolution” were decided in consensus
with partner institutions, Philhealth and the DOH, and thus no longer
subject to modifications.
- She stated that pursuant to what respondents have “firmly and
unequivocally stated in the last paragraph of the letter, it is imperative
that I am to accept your resignation, which I expect to receive as soon as
possible.”
(2) In a letter dated July 11, 2000, Nicolay informed private respondents 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.”
(3) On Oct 25, 2005, GTZ filed a Motion to Dismiss on the ground that LA had
no jurisdiction over the case as its acts were undertaken in discharge of the
governmental functions and sovereign acts of the German government.
(4) Following the decision of the LA, GTZ filed a special civil action for
certiorari with the CA. Upon being denied, GTZ filed a petition for review
under Rule 45, assailing the decision and resolution of the CA and the LA;
arguing that:
- The CA could have entertained its petition for certiorari despite its not
having undertaken an appeal before the NLRC
- That the complaint for illegal dismissal should have been dismissed for
lack of jurisdiction as GTZ enjoys immunity from suit
(5) Argued that:
- GTZ was tasked, under the 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
private respondents did not disqualify it from invoking immunity from
suit.
-
- GTZ and OSG argue that GTZ was not performing proprietary
functions despite entering into particular employment contracts.
Invoked the doctrine of Holy See v Rosario Jr.
“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.”
(6) In its reply to respondent’s allegation #5, GTZ controverts the
finding stating that it is a matter of public knowledge that the
status of petitioner is that of an “implementing agency” and not
that of a private person.
(7) GTZ website states that it is “Federally owned,” a “Federal
enterprise,” and “founded in 1975 as a company under private
law.” German government owns it.
RESPONDENT (including private respondents)
(1) On June 8, 2000, private respondents wrote a letter to Nicolay raising
several issues:
- SHINE under Nicolay 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 sustainable—a philosophy that supposedly
betrayed Nicolay’s lack of understanding of the purpose of the
project.
- As a result of Nicolay’s new thrust, resources have been used
inappropriately.
- New management style was not congruent with the original goals of
the project
- Nicolay herself suffered from cultural insensitivity that
consequently failed to sustain healthy relations with SHINE’s
partners and staff.
- At the end of the letter, respondents wrote that the issues stated are
very crucial in working for the project; that they could no longer
find any reason to stay with the project unless ALL of the issues be
addressed immediately and appropriately.
(2) Taken aback, respondents replied with a common letter clarifying
that earlier letter was not intended as a resignation letter, but one to
raise attention to what they perceive as vital issues.
(3) On August 21, 2000, respondents filed a complaint for illegal
dismissal with the NLRC against GTZ, Director of its Manila
office, Assistant Project Manager, and Nicolay; stating they were
dismissed without lawful cause, there being a “total lack of due
process both substantive and procedural.” GTZ failed to observe the
notice requirements in the Labor Law and letter should not have
been treated as a resignation letter.
(4) Respondents opposed argument, stating that GTZ had failed to
secure a certification that it was immune from suit from the DFA,
and it was GTZ and no the German government which had
implemented the SHINE Project and entered into the contracts of
employment.
(5) Asserted before the LA that GTZ was a “private corporation in the
implementation of development projects.” The finding that it was a
“private corporation” was never controverted, and therefore deemed
admitted.
LA:
- Issued a Motion to Dismiss, stating 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.
- In petitioner’s Reiterating Motion to Dismiss, LA granted complaint for
illegal dismissal.
- LA has jurisdiction to entertain complaint on the ff grounds:
a. Under the employment contract entered into between the
complainants and respondents, it provides that contract is subject to
the laws of the jurisdiction of the locality where service is performed.
b. Respondent having entered into contract, can no longer invoke
sovereignty of the German government.
c. To be immune from suit, respondent should have secured from the
DFA 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.
CA:
- Dismissed GTZ’s petition finding that “judicial recourse at this stage of the
case is uncalled for. The appropriate remedy is an appeal to the NLRC.
- GTZ took a procedural misstep in bypassing an appeal to the NLRC.
OSG:
In its Comment, took the side of GTZ; stating that its functions in implementing the
SHINE program was neither proprietary nor commercial in nature. Regarding the
procedural misstep, OSG (citing Heirs of Mayor Nemencio Galvez) stated that even
when appeal is available, the Court nonetheless allowed a writ of certiorari when
the orders of the lower court were issued either in excess of or without jurisdiction.
Therefore, Court is allowed to inquire directly into what is the main issue—whether
GTZ enjoys immunity from the suit.
SC:
(1) Sec 9, Art 16 of the Constitution addresses the principle of state
immunity from suit, whether a local state or a foreign state. It states that
the State may not be sued without its consent.
- 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.
(2) Counsel for GTZ characterizes GTZ as the implementing agency of the
German government, 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.
According to Justice Isagani Cruz,
- An incorporated agency has a charter of its own that invests it with a
separate juridical personality.
- 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.
(3) Philippines designated 2 entities, DOH and Philhealth, as implementing
agencies in behalf of the Philippines.
- Philhealth was established under RA 7875, sec 16(g) grants the
corporation power “to sue and be sued in court;” therefore, it would
not be immune from suit even in performance of its functions
connected with SHINE.
(4) Although respondents were unable to adduce any evidence to
substantiate their claim that GTZ is a “private corporation,” neither GTZ
nor OSG was also able to submit evidence defining its legal nature other
than the description “implementing agency” supplied. Term has no
precise definition; it does not supply whether GTZ is incorporated or
unincorporated, owned by German state or public interests, or has
juridical personality independent of German govn. or none at all.
(5) GTZ website states that it is “Federally owned,” a “Federal enterprise,”
and “founded in 1975 as a company under private law.” German
government owns it. At the same time, it was organized not through
legislative public charter, but under private law. As a company organized
under private law, it has legal personality independent of that of the
German government. Further, in the website of the German govn, it
states that GTZ is a private company owned by the Federal Republic of
Germany.
 (6) Taking the description on face value, the apparent equivalent under
Important Notes:
Philippine law is that of a corporation organized under the Corporation
Code but owned by the Philippine government, or a government-owned or
This decision should not be seen as deviation from the more common methodology
controlled corporation without original charter.
employed in ascertaining whether a party enjoys State immunity from suit, one
which focuses on the particular functions exercised by the party and determines
Sec 36 of the Corporate Code states that every corporation
whether these are proprietary or sovereign in nature. The nature of the acts
incorporated under this Code has the power and capacity to sue and be
performed by the entity invoking immunity remains the most important barometer
sued in its corporate name.
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
GTZ has failed to establish that under German law, it has not consented to on its withholding of consent; hence, the laws and circumstances pertaining to the
be sued despite it being owned by the Federal Republic of Germany. We creation and legal personality of an instrumentality or agency invoking immunity
adhere to the rule that in the absence of evidence to the contrary, foreign
remain relevant. Consent to be sued, as exhibited in this decision, is often conferred
laws on a particular subject are presumed to be the same as those of the
by the very same statute or general law creating the instrumentality or agency.
Philippines, 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.

(7) The ruling in Holy See provided a template on how a foreign entity
desiring to invoke State immunity from suit could duly prove immunity
before our local courts. The LA has reiterated that petitioners must secure
from DFA a certification of respondents’ diplomatic status and entitlement
to diplomatic privileges including immunity from suits. 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.

Therefore, the Court finds no basis to conclude or presume that GTZ enjoys
immunity from suit as it was unable to establish with satisfaction that it enjoys the
immunity from suit generally enjoyed by its parent country.