REPUBLIC OF INDONESIA VS.

VINZON
G.R. No. 154705, 2003 June 26

FACTS

Petitioner, Republic of Indonesia, represented by its Counsellor, entered into Maintenance

Agreement with respondent. The agreement stated that the respondent shall, for a
consideration, maintain specified equipment at the Embassy buildings and the official
residence of petitioner. Petitioners claim that sometime prior to the date of expiration of
the said argument, they informed respondent that the renewal of the agreement shall be of
the discretion of the incoming Chief of Administration, Minister Consellor Azhari Kasim.
When the latter assumed the position, he allegedly found respondent's work and services
unsatisfactory and not in compliance with the standards set in the Maintenance Agreement,
Hence, the Indonesian embassy terminated the agreement, The respondent claims that the
aforesaid termination was arbitrary and unlawful, hence, filing a complaint before the RTC.

ISSUE

1. Whether the petitioners have waived their immunity from suit by using as its basis the
Maintenance Agreement

2. Whether the actual physic maintenance of the premises of the diplomatic mission is no
longer a sovereign function of the State

3. Whether the petitioners may be sued herein in their private capacities

RULING

1. No. The mere entering into a contract by a foreign State with a private party cannot be
construed as the ultimate test of whether or not it is an act jure imperii or jure gestionis. If
the foreign State is not engaged regularly in a business or commercial activity, and in this
case it has not been shown to be engaged, 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. Hence, the existence alone of a paragraph in a contract stating
that any legal action arising out of the agreement shall be settled according tot he laws of
the Philippines and by a specified court is not necessarily a waiver of sovereign immunity
from suit. Submission of a foreign state must be clear and equivocal. It must be given
explicitly or by necessary implication, The Court finds no such waiver herein.
2. No. There is no dispute that the establishment of a diplomatic mission is an act jure
imperii. A sovereign State establishes a diplomatic mission which necessarily include its
maintenance and upkeep. Hence, the State may enter into contracts with private entities for
the same purpose. It is therefore clear that the petitioner was acting in pursuit of a sovereign
activity when it entered into contract with respondent.

3. Under Article 31 of the Vienna Convention on Diplomatic Relations, a diplomat shall

enjoy immunity from criminal jurisdiction, except in case of: (a) a real action relating to
private immovable property situated in the territory of the recovering State; (b) an action
relating to succession which the diplomatic agent is involved as executor, administrator,
heir or legatee as a private person; or (c) action relating to any professional or commercial
activity exercised by the diplomatic agent in the receiving State outside his official
functions. The act of the petitioners in terminating the Maintenance Agreement is not
covered by the exceptions.