File E. c.
  Docket XI 
Judgment No. 8
 26 July 1927
 
PERMANENT COURT OF INTERNATIONAL JUSTICE
Twelfth (Ordinary) Session
 
Case Concerning the Factory at Chorzów (Claim for Indemnity) (Jurisdiction).
 
Germany v. Poland
Judgment
 
BEFORE: President:Huber
Former
Loder
President:
Lord Finlay, Nyholm, Moore, de Bustamante, Altamira, Oda,
Judges:
Anzilotti, Pessôa,
Deputy
Yovanovitch,
Judge(s):
National
Rabel, Ehrlich
Judge:
 
Represented
Germany:Dr. Erich Kaufmann, Professor at Bonn
By:
Dr. Thadeus Sobolewski, Agent for the Polish Government
Poland:
before the Polish-German Mixed Arbitral Tribunal
    
Perm. Link: http://www.worldcourts.com/pcij/eng/decisions/1927.07.26_chorzow.htm
  
Citation: Factory at Chorzow (Germ. v. Pol.), 1927 P.C.I.J. (ser. A) No. 9 (July 26)
Publication: Publications of the Permanent Court of International Justice, Series A -
No. 9, Collection of Judgments, A.W. Sijthoff’s Publishing Company,
Leyden, 1927
  
 

  
[1] [p5] The Court,
composed as above,
having heard the observations and conclusions of the Parties,
delivers the following judgment:

[2] The Government of the German Reich, by an Application instituting proceedings

filed with the Registry of the Court on February 8th, 1927, in conformity with Article
40 of the Statute and Article 35 of the Rules of Court, has submitted to the Permanent
Court of International Justice a suit concerning the reparation which, in the contention
of the Government of the Reich, is due by the Polish Government to the
Oberschlesische Stickstoffwerke A.-G. (hereinafter designated as the
Oberschlesische) and Bayerische Stickstoffwerke A.-G. (hereinafter designated as the
Bayerische), by reason of the attitude adopted by that Government towards those
Companies at the time when it took possession of the nitrate factory situated at
Chorzów, which attitude had been declared by the Court in Judgment No. 7 (May
25th, 1926) not to have been in conformity with the provisions of Article 6 and the
following articles of the Convention concerning Upper Silesia concluded at Geneva
on May 15th, 1922, between Germany and Poland (hereinafter described as the
Geneva Convention).

[3] It is submitted in the Application:

(1) that by reason of its attitude in respect of the Oberschlesische Stickstoffwerke and
Bayerische Stickstoffwerke Companies, which attitude has been declared by the Court
not to have been in conformity with the provisions of Article 6 and the following
articles of the Geneva Convention, the Polish Government is under an obligation to
make good the consequent injury sustained by the aforesaid Companies from July 3rd,
1922, until the date of the judgment sought;
(2) that the amount of the compensation to be paid by the Polish Government is
59.400.000 Reichsmarks for the injury caused to the Oberschlesische Stickstoffwerke
Company and 16.775.200 Reichsmarks for the injury to the Bayerische
Stickstoffwerke Company;
(3) in regard to the method of payment:

(a) that the Polish Government should pay within one month from the date of
judgment, the compensation due to the Oberschlesische Stickstoffwerke Company for
the taking [p6] possession of the working capital (raw material, finished and half-
manufactured products, stores, etc.) and the compensation due to the Bayerische
Stickstoffwerke Company for the period of exploitation from July 3rd, 1922, to the
date of judgment;
(b) that the Polish Government should pay the sums remaining unpaid by April 15th,
1928, at latest;
(c) that, from the date of judgment, interest at 6% per annum should be paid by the
Polish Government;
(d) that, the payments mentioned under (a)-(c) should be made without deduction to
the account of the two Companies with the Deutsche Bank at Berlin;
(e) that, until June 30th, 1931, no nitrated lime and no nitrate of ammonia should be
exported to Germany, to the United States of America, to France or to Italy.

[4] In the Case filed with the Court on March 2nd, 1927, in accordance with Article
35 of the Rules, the Applicant amended his conclusions as follows:

(1) that by reason of its attitude in respect of the Oberschlesische Stickstoffwerke and
Bayerische Stickstoffwerke Companies, which attitude has been declared by the Court
not to have been in conformity with the provisions of Article 6 and the following
articles of the Geneva Convention, the Polish Government is under an obligation to
make good the consequent injury sustained by the aforesaid Companies from July 3rd,
1922, until the date of the judgment sought;
(2) that the amount of the compensation to be paid by the Polish Government is
75.920.000 Reichsmarks, plus the present value of the working capital (raw materials,
finished and half-manufactured products, stores, etc.) taken over on July 3rd, 1922,
for the injury caused to the Oberschlesische Stickstoffwerke Company and 20.179.000
Reichsmarks for the injury caused to the Bayerische Stickstoffwerke Company;
(3) that until June 30th, T93i, no nitrated lime and no nitrate of ammonia should be
exported to Germany, to the United States of America, to France or to Italy;
(4) in regard to the method of payment:

(a) that the Polish Government should pay, within one month from the date of
judgment, the compensation due to the Oberschlesische Stickstoffwerke Company for
the taking [p7] possession of the working capital and the compensation due to the
Bayerische Stickstoffwerke Company for the period of exploitation from July 3rd,
1922, to the date of judgment;
(b) that the Polish Government should pay the remaining sums by April 15th, 1928, at
latest;
in the alternative, that, in so far as the payment may be effected in instalments, the
Polish Government shall deliver, within one month from the date of judgment, bills of
exchange for the amounts of the instalments, including interest, payable on the
respective dates on which they fall due to the Oberschlesische Stickstoffwerke
Company and to the Bayerische Stickstoffwerke Company;
(c) that from the date of judgment, interest at 6 % per annum should be paid by the
Polish Government;
(d) that the Polish Government is not entitled to set off, against the above mentioned
claim for indemnity of the German Government, its claim in respect of social
insurances in Upper Silesia; that it may not make use of any other set-off against the
above-mentioned claim for indemnity; and that the payments mentioned under (a)-(c)
should be made without any deduction to the account of the two Companies with the
Deutsche Bank at Berlin.

[5] The Application instituting proceedings was, in accordance with Article 40 of the
Statute, communicated to the Polish Government on February 8th, 1927; whereupon
that Government, after having received on March 3rd, 1927, the German Case in the
suit, on April 14th, 1927, filed with the Registry of the Court in conformity with
Articles 34 and 38 of the Rules, a Preliminary Objection, accompanied by a
Preliminary Counter-Case in the suit concerning the factory at Chorzów (indemnities).

[6] The Preliminary Objection denying the Court's jurisdiction to hear the suit brought
before it, submitted that the Court should, "without entering into the merits, declare
that it had, no jurisdiction".
[7] In accordance with Article 38 of the Rules, the German Government was invited
to present, before June 1st, 1927, a written statement setting out its observations and
conclusions in regard to the objection to the jurisdiction.

[8] On April 25th, however, the German Government transmitted to the Polish
Government a memorandum in which the former Government – arguing that, even if
the Court declined jurisdiction [p8] on the basis of Article 23 of the Geneva
Convention, it would have jurisdiction under Article 1 of the Germano-Polish
Arbitration Treaty initialled at Locarno on October 16th, 1925-suggested that the five
following questions concerning the case of the factory at Chorzów should be referred
by mutual consent and by means of a special agreement to the Court:

(1) Up to what amount is the Polish Government bound to make compensation for the
injury caused by its attitude to the Oberschlesische and Bayerische Companies?
(2) Is the German Government justified in claiming, over and above the pecuniary
compensation, that the exportation of nitrate of lime, nitrate of ammonia, etc., to
Germany, the United States of America, France and Italy, should cease?
(3) What are the appropriate methods of payment for the settlement of the indemnity
fixed in accordance with (1)?
(4) At what rate should the sums in question bear interest until paid in full?
(5) Can the Polish Government set off against these sums claims in respect of social
insurances in Upper Silesia, or any other claim; must the sums to be paid by the Polish
Government under (1), (3) and (4), be paid in ready money and without deduction?

[9] The text of this memorandum was transmitted on April 29th by the German
Minister at The Hague to the Registrar of the Court.

[10] The Polish Government replied to it by a memorandum dated May 14th, of which
the text was communicated to the Registrar of the Court both by the German Minister
(note of June 1st, 1927) and by the Polish Minister at The Hague (note of June 2nd,
1927). In this memorandum, the Polish Government, observing amongst. other things,
that it was unable to share the opinion of the German Government as to the relevance
of the Germano-Polish Treaty of arbitration in regard to the present case, declined the
proposal made on behalf of the German Government.

[11] The German Government, therefore, filed on June 1st a reply to the Preliminary
Objection of the Polish Government.

[12] Since, under Article 38 of the Rules, the further proceedings had to be oral, the
Court, in the course of public sittings held on June 22nd, 24th and 25th, 1927, heard
the statements, replies and rejoinder presented by Messrs. Sobolewski and Politis,
Agent and [p9] Counsel respectively for the Polish Government, and Kaufmann,
Agent for the German Government.

The Facts
[13] The facts relevant to the present case are set out as follows in Judgment No. 6
given by the Court on August 25th, 1925:

[14] On March 5th, 1915, a contract was concluded between the Chancellor of the
German Empire, on behalf of the Reich, and the Bayerische Stickstoffwerke A.-G. of
Trostberg, Upper Bavaria, by which contract this Company undertook "to establish for
the Reich and to begin forthwith the construction of", amongst other things, a nitrate
factory at Chorzów in Upper Silesia. The necessary lands were to be acquired on
behalf of the Reich and entered in its name in the land register. The machinery and
equipment were to be in accordance with the patents and licences of the Company and
the experience gained by it, and the Company undertook to manage the factory until
March 31st, 1941, making use of all patents, licences, experience gained, innovations
and improvements, as also of all supply and delivery contracts of which it had the
benefit. For this purpose a special section of the Company was to be formed, which
was, to a certain extent, to be subject to the supervision of the Reich which had the
right to a share of the surplus resulting from the working of the factory during each
financial year. The Reich had the right, commencing on March 31st, 1926, to
terminate the contract for the management of the factory by the Company on March
31st of any year upon giving fifteen month's notice. The contract could be terminated
as early as March 31st, 1921, always on condition of fifteen month's notice being
given, if the Reich's share of the surplus did not reach a fixed level.

[15] On December 24th, 1919, a series of legal instruments were signed and legalized
at Berlin with a view to the formation of a new Company, the Oberschlesische
Stickstoffwerke A.-G., and the sale by the Reich to that Company of the factory at
Chorzów, that is to say, the whole of the land, buildings and installations belonging
thereto, with all accessories, reserves, raw material, equipment and stocks. The
management and working were to remain in the hands of the Bayerische
Stickstoffwerke Company, which, for this purpose, was to utilize its patents, licences,
experience gained and contracts. These relations between the two Companies were
confirmed by means of letters dated December 24th and 28th, 1919, exchanged
between them. The Oberschlesische Stickstoffwerke Company was duly entered on
January 29th, 1920, at the Amtsgericht of Königshütte, in the Chorzów land register,
as owner of the landed property constituting the nitrate factory of Chorzów. [p10]

[16] On July 1st, 1922, this Court, which had become Polish, gave a decision to the
effect that the registration in question was null and void and was to be cancelled, the
pre-existing position being restored, and that the property rights of the lands in
question were to be registered in the name of the Polish Treasury. This decision,
which cited Article 256 of the Treaty of Versailles and the Polish law and decree of
July 14th, 1920, and June 16th, 1922, was put into effect the same day.

[17] On July 3rd, 1922, M. Ignatz Moscicki, who was delegated with full powers to
take charge of the factory at Chorzów by a Polish ministerial decree of June 24th,
1922, took possession of the factory and took over the management in accordance
with the terms of the decree. The German Government contends and the Polish
Government admits that the said delegate, in undertaking the control of the working of
the factory, at the same time took possession of the movable property, patents,
licences, etc.

[18] On November 10th, 1922, the Oberschlesische Stickstoffwerke Company

brought an action before the Germano-Polish Mixed Arbitral Tribunal at Paris. It
called upon that Court
"to allow the claim submitted by the Oberschlesische Stickstoffwerke
Aktiengesellschaft, and to order the Polish Government, the Respondent in the suit, to
restore the factory, to make any other reparation which the Court may see fit to fix
and to pay the costs of the action".

[19] In its reply to this application, the Polish Government asked the Court to declare
that it had no jurisdiction (in the alternative to non-suit the Applicant).

[20] The suit was admitted to be ready for hearing on October 15th, 1923. It is,
however, still pending.

[21] Furthermore, the Oberschlesische Stickstoffwerke Company brought an action

before the Civil Court of Kattowitz. It asked that Court "to order the Respondent to
inform the Applicant as to the movable property found at the Chorzów nitrate
factories at 11 a.m. on the morning of July 3rd, 1922, when the working of those
factories was resumed by the Respondent; to state what debts it had collected; to
restore to the Applicant or to the Bayerische Stickstoffwerke Company such movable
property, or, should this be impossible, the equivalent value, and also to repay to the
Applicant or to the Bayerische Stickstoffwerke Company the amount of the debts
collected".

[22] This action is still before that Court, which, however, decided on December 7th,
1923, that there was no pendency, as notice of the action had not yet been served on
the Procurature générale at Warsaw. [p11]

[23] In regard to this suit, the German Government stated in its "Observations" filed
on July 9th, 1925, that the application made to the Court of Katovice was mainly
intended to serve as a basis for claiming, under Article 588 of the Geneva Convention,
the reference of the suit to the Upper Silesian Arbitral Tribunal, but that the Court
rejected this claim.

[24] These suits were pending, when, on May 15th, 1925, Germany filed in the
Permanent Court of International Justice an Application praying the Court to adjudge
(1) that Articles 2 and 5 of the Polish law of July 14th, 1920, constituted a measure of
liquidation of the property, rights and interests involved, (2) that this liquidation was
not in conformity with Articles 92 and 297 of the Peace Treaty of Versailles, (3) that
it was contrary to Article 6 and subsequent articles of the German-Polish Convention
concluded at Geneva on May 15th, 1922 ; and finally to state (4) what the attitude of
Poland should have been under the Treaties mentioned.
[25] Article 297 of the Versailles Treaty relates to the liquidation by the Allied and
Associated Powers of property, rights and interests belonging at the date of the
coming into force of the Treaty to German nationals, or companies controlled by
them, within the territories, colonies, possessions and protectorates of such Powers,
including territories ceded to them by the Treaty, and, while stipulating that the
liquidation shall be carried out in accordance with the laws of the Allied or Associated
State concerned, Article 297 lays down certain rules. which connect the subject with
that of reparations.

[26] Article 92 of the Treaty of Versailles, however, in accordance with Article 297h
of that Treaty, expressly provides that the property, rights and interests of German
nationals shall not be liquidated under Article 297 by the Polish Government, except
on condition (1) that the proceeds of the liquidation shall be paid direct to the owner,
and (2) that if, on the owner's application, the Mixed Arbitral Tribunal ... or an
arbitrator appointed by it, is satisfied that the conditions of the sale or measures taken
by the Polish Government outside its general legislation were unfairly prejudicial to
the price obtained, they shall have discretion to award to the owner equitable
compensation to be paid by the Polish Government. [p12]

[27] Poland, in answer to the German Application, asked the Court to hold either (1)
that it had no jurisdiction of the suit, or (2) that the Application could not be
entertained until the German-Polish Mixed Arbitral Tribunal, at Paris, had given
judgment.

[28] Without repeating provisions of the Statute relating to the jurisdiction of the
Court, it suffices to say that the Court's jurisdiction was, in the present instance,
invoked upon the stipulations of Article 23 of the Geneva Convention. This article,
consisting of two paragraphs, reads:

“1. Si des divergences d'opinion, résultant de l'interprétation et de l'application des

articles 6 à 22, s'élevaient entre le Gouvernement allemand et le Gouvernement
polonais, elles seraient soumises à la décision de la Cour permanente de Justice
internationale.
“2. Il n'est porté aucune atteinte à la compétence du Tribunal arbitral mixte germano-
polonais résultant des dispositions du Traité de paix de Versailles [FN1]."

-------------------------------------------------------------------------------------------------------
--------------
[FN1] This text, which is the sole and authoritative text of the article, may be
translated into English as follows:

"1. Should differences of opinion, resulting from the interpretation and the application
of Articles 6 to 22, arise between the German and the Polish Governments, they
should be submitted to the decision of the Permanent Court of International Justice.
"2. The jurisdiction of the German-Polish Mixed Arbitral Tribunal under the
provisions of the Peace Treaty of Versailles is in no way impaired."
-------------------------------------------------------------------------------------------------------
--------------

[29] On the objection taken by Poland to the Court's jurisdiction, the Court, in its
Judgment No. 6, August 23th, 1925, held:

(1) That the Court's jurisdiction under Article 23 was not affected by the fact that the
rights claimed were contested on the strength of provisions of other treaties as well as
on those of Articles 6 to 22 of the Geneva Convention.
(2) That the suits pending before the German-Polish Mixed Arbitral Tribunal at Paris
and the Civil Court at Katovice, did not prevent the Court from exercising its
jurisdiction under Article 23.
(3) That the plea to the jurisdiction should be dismissed.
Judgment on the merits was reserved.

[30] Before proceeding to the judgment later rendered by the Court on the merits, it is
essential briefly to summarize the provisions [p13] of Articles 6 to 22 of the Geneva
Convention so far as they are involved in the pending case.

[31] Article 6 provides that Poland may expropriate in Upper Silesia major industrial
undertakings, conformably to the provisions of Articles 7 to 23 of the Convention; but
that, with this exception, the property, rights and interests of German nationals, or of
companies controlled by them, cannot be liquidated. By Article 7 this right of
expropriation may be exercised, in accordance with the provisions of Articles 92 and
297 of the Versailles Treaty, during fifteen years from the date of the transfer of
sovereignty, "if, on the request of the Polish Government, this measure has been
recognized by the Mixed Commission as being indispensable to the maintenance of
the exploitation", the Mixed Commission thus referred to being an international
tribunal for the establishment of which provision is made by Article 562 of the
Convention. Article 8 deals with the subject of expropriation after the fifteen-year
period above mentioned. The stipulations of Articles 9 to 11 it is unnecessary here to
particularize. Articles 12 to 16 relate to the expropriation of large rural estates. Article
19, paragraph 1, assures to the Polish Government the right from time to time to
inquire into the real ownership of a major industry or a large rural estate, and into the
real control of a company appearing as owner. If the Polish Government reaches the
conclusion that the owner is really a German national, or that the Company is really
controlled by such nationals, and if, after receiving notice, the interested Party
contends that the facts are not as stated, the latter, during a month after the date of the
notice, may appeal to the German-Polish Mixed Arbitral Tribunal which may
provisionally suspend the procedure for expropriation.

[32] After the delivery by the Court of Judgment No. 6, the German Government
amended the submissions made in its Application, so that, as the submissions finally
stood, the Court was asked to give judgment:
(1) That the application of the Polish law of July 14th, 1920, in Polish Upper Silesia,
decreed by the law of June 16th, 1922, constituted a measure of liquidation within the
meaning of Article 6 and the following articles of the Geneva Convention, and that,
[p14] as it did not conform to those articles, any more than to Articles 92 and 297 of
the Versailles Treaty, to which the Convention expressly referred, such application
was illegal.
(2) That the attitude of the Polish Government towards the Oberschlesische and the
Bayerische was not in conformity with the above-mentioned articles of the Geneva
Convention, and, should this be held to be so, that the Court would state what attitude
would have been in conformity with them.

[33] In reply, the Polish Government asked the Court

(1) To non-suit the Applicant as regarded submission No. 1.

(2) To find that it was not necessary to decide as to the conformity or non-conformity
of the attitude of the Polish Government with Article 6 and the following articles of
the Geneva Convention, since no measure of liquidation had been taken by that
Government.

[34] Issue being thus joined, the Court, at its tenth (extraordinary) session, heard the
case on the merits, and rendered judgment.

[35] In this Judgment – No.7 (May 25th, 1926) – the provisions of the Polish law of
July 14th, 1920, are analyzed and set forth in detail. The subject matter of this law is
the "transfer of the rights of the German Treasury and of members of reigning
German houses to the Treasury of the State of Poland". Article 1 directs the Polish
Courts automatically to substitute in the land registers of the former Prussian
provinces the name of the Polish Treasury for that of "the Crown, the German Reich,
the States of Germany, the ex-Emperor of Germany or other members of reigning
houses", entered after November 11th, 1918, as owners or as possessors of real rights.
Article 2, paragraph 1, directs the Polish Courts, where such persons or institutions
had, after November 11th, 1918, alienated or charged the landed property, or
requested or consented to the cession, cancellation or modification of real rights, to
restore the registers to their condition on that date. Article 5 authorizes the Polish
Treasury to require the eviction of persons who, as the result of a contract concluded
with one of the persons or institutions mentioned in Article 1 remained in occupation
of the property after the law came into force. [p15]

[36] The Court held:

(1) That Articles 2 and 5 were incompatible with the provisions of the Geneva
Convention, and that Poland had invoked no title of international law which would
permit Articles 2 and 5 of the law of July 14th to be regarded as constituting the
exercise of a right overcoming the obligations ensuing from Head III of the Geneva
Convention;
(2) That, in the transfer of the factory to the Oberschlesische, there was no misuse by
Germany of the right of alienation of property in the plebiscite area; that the alienation
was a genuine transaction effected in good faith and was not designed to be
detrimental to Poland's rights and that the Oberschlesische's right of ownership must
be regarded as established, and could have been disputed only before a competent
tribunal;
(3) That the property and operating rights claimed by the Bayerische were also valid',
and had been violated by Poland's action ;
(4) That expropriation without compensation was contrary to Head III of the Geneva
Convention; and that the application of the law of July 14th, 1920, was contrary to
Article 6 and subsequent articles of the Geneva Convention, and that the Court had
express and definite jurisdiction of the subject matter by Article 23 of that
Convention.

[37] In conclusion, the Court held:

(1) That the application of Articles 2 and 5 of the law of July 14th, 1920, decreed by
the law of June 16th, 1922, constituted, as to German nationals or companies
controlled by them, within Part I, Head III, of the Geneva Convention, an infraction of
Article 6 and the following articles of that Convention;
(2) That the attitude of the Polish Government toward both Companies was not in
conformity with those articles, but that the Court was not called upon to state what
attitude would have been in conformity with them.

[38] It was on the basis of this decision of the Court that negotiations were undertaken
by the two Governments for an amicable settlement of the claims of both Companies
by the payment of pecuniary damages. [p16]

[39] Following upon the judgment of May 25th, 1926, the German Government, on
June 25th of the same year, sent to the Polish Government a note in which it requested
that Government "to take the steps necessary to establish a situation conforming to the
judgment both in fact and in law". These steps should, in the view of the German
Government, comprise three different features:

(1) the re-entry in the land registers of the Court of K6nigshiitte of the
Oberschlesische as owners of the real estate constituting the Chorzów factory;
(2) the restoration of the factory as an industrial enterprise to the Bayerische;
(3) the payment to these two Companies of an indemnity, the amount of which to be
fixed by direct negotiations between the two Governments.

[40] The Polish Government replied to this note on September 9th, 1926, the German
Government having in the meantime asked the Polish Government whether it did not
intend to reply and whether it would prefer that the question should be settled by the
institution of new proceedings before the Court. The Polish reply was to the effect that
the Warsaw Government was disposed "to settle by means of an agreement with the
Berlin Government all questions in dispute with regard to the Chorzów factory". But
the Polish Government stated in regard to the claim for the restoration of the factory
that it was unable to comply for reasons of fact and of law; it also made reservations
as regards the validity, in municipal law, of the entry of the Oberschlesische in the
land register. Finally, it suggested that it would be better "having regard to the nature
of the matter" that representatives of the interested Companies should directly
approach the management of the factory and that the two Governments should only
intervene if agreement could not be reached in this manner. In a subsequent note,
dated October 18th, the Polish Government, whilst, maintaining that the disputed
questions were questions of private law, agreed that delegates of the two Governments
should also take part in the negotiations.

[41] In these circumstances, the German Government proposed in a note dated

October 30th, that the negotiations should be begun at Berlin on November 15th.
Believing that it could be said that differences of opinion still existed between the two
Governments "in regard to the legal principles established by the Court's
judg[17]ment" of May 25th, 1926, the German Government reserved the right to
appeal to the Court in regard to the execution of that judgment, should these
differences of opinion subsist during the negotiations and make such appeal
necessary.

[42] The Polish Government, whilst agreeing to enter into negotiations at Berlin on
November 22nd, maintained the standpoint taken in its previous notes.

[43] The negotiations had been in progress since November 22nd, 1926, when, on
January 19th, 1977, the German Delegation sent to the Polish Delegation a note
setting out two alternative proposals for a compromise, which proposals, leaving aside
the question of restitution, solely related to the amount of the indemnities and the
method of payment: payment was to be effected by the issue on the date of signature
of the agreement, it concluded, of bills of exchange payable at different dates; in the
event of the payments not being made within the times specified, the German
Government reserved the right once more to have recourse to the Court Should one of
the two proposals be accepted, the existing differences of opinion would be regarded
as disposed of. But if not, the German Government declared itself ready to reopen
negotiations, but the possibility of further negotiations would not prevent the German
Government from referring the existing differences of opinion to the Court; in the
judicial proceedings that Government would not of course be bound by the proposals
for a compromise which it had made. To the note was attached a memorandum in
regard to the position of negotiations on January 14th, 1927; this memorandum made
it clear, amongst other things, that the reason why the German Government had
abandoned its original claim for the restitution of the factory was that it had come to
the conclusion that the Chorzów factory, in its present condition, no longer
corresponded to the factory as it was before the taking over in 1922, and that the
German Government reserved the right, should the Polish reply to the German
proposals be too long delayed, to bring the matter before the Court so that it might be
included in the list for the Court's twelfth session, it being always possible to
withdraw the Application, should an agreement be reached within a relatively short
time. The reply of the Polish Government, dated February 1st, accepted more or less
completely the amounts suggested by the German Government for the indemnities-the
Polish Government proposing for the amounts to be paid subsequently to the
Bayeri[18]sche, bills of exchange issued by the Chorzów factory-but it stated that the
Polish Government was not willing to meet the wishes of the German Government in
regard to the issue of bills of exchange for the Oberschlesische, particularly for the
reason that, as it contended, it possessed claims on the German Government for
various amounts, one of which, in respect of social insurances in Upper Silesia, had
been fixed by the League of Nations at 25 million Reichsmarks, and that, this being
so, in the view of the Polish Government, it was essential to set off the respective
claims against each other. It should be noted that, in its reply, the Polish Government
proposed the resumption of negotiations in regard, amongst other things, to the
"possible filing of an Application with the Court", a point which, according to that
Government, "had not yet been discussed". Should the German Government not
accept the Polish proposals, the Polish Government would not consider itself bound
by them.

[44] The German Government, by a note dated February 8th, 1927, then informed the
Polish Government that the points of view of the two Governments seemed so
different that it appeared impossible to avoid recourse to an international tribunal, and
that therefore the German Minister at The Hague had received instructions to file an
Application with the Court. In its note, the German Government also drew attention to
the fact that, throughout the whole of the negotiations, the German Delegation had
emphasized that, failing an agreement, appeal to the Court would be inevitable.

The Law

[45] As has already been indicated, the Applicant has, in his Case on the merits, made
submissions which constitute an amendment of the submissions made in the
Application.

[46] Since this amendment has been effected in the first document of the written
proceedings, in a suit brought by Application-i.e. at a time when, in accordance with
Article 38 of the Rules, the Respondent still retains a completely free hand to file
preliminary objections-no exception can be taken to it. Moreover, the Respondent, in
his preliminary plea, has referred to the Applicant's submissions as formulated in the
Case and not as formulated in the Application. It is, therefore, the submissions as
formulated in the Case that the Court has now before it. [p19]

[47] The submissions formulated in the Application were based, is apart from the
above-mentioned provisions of the Statute and Rules of Court, exclusively upon the
jurisdictional clause contained in Article 23 of the Geneva Convention. The basis of
the amended submissions set out in the Case remains unchanged.

[48] It is true that, in this document, the German Government has referred to the
Germano-Polish, Arbitration Treaty initialled at Locarno on October 16th, 1925. The
only object, however, of this reference is, as shown by the context, to establish that, in
the contention of the German Government, a certain claim which Poland may have
against Germany cannot, without the consent of the other Party, be set off
extrajudicially against any indemnities which may be awarded by the Court in the
present case, especially having regard to the procedure instituted by the above-
mentioned Treaty. This reference therefore cannot serve to modify the source from
which, according to the Application, the Court derives jurisdiction.

[49] The same reasoning applies a fortiori with regard to the statement made in Court
by the Agent for the German Government to the effect that even if the arbitration
clause contained in Article 23 of the Geneva Convention does not apply in the present
case, the Court would have jurisdiction under the Arbitration Treaty of Locarno "if it
were applicable in this case"; for this statement which was, moreover, made at a very
late stage, can hardly have been intended to do more than affirm a more or less
theoretical opinion in regard to the interpretation of that Treaty.

[50] The Court, therefore, holds that the submissions set out above have been laid
before it solely under Article 23 of the Geneva Convention.

[51] Before proceeding to set out the reasons for which it must overrule the
preliminary objection taken by Poland to its jurisdiction to deal with these
submissions, the Court would observe that, for the purposes of this statement of
reasons, as also for the purposes of its future judgment on the merits, it cannot take
account of declarations, admissions or proposals which the Parties may have made in
the course of direct negotiations which have taken place between them, declarations
which, moreover, have been made without prejudice in the event of the points under
discussion forming the subject of judicial proceedings. For the negotiations in
question have not, as acknowledged by the representatives before the Court of the
Parties themselves, led to an agreement between them. [p20]

***

[52] It is common ground that the Application of February 8th, 1927, and the
submissions of the German Case of March 2nd, 1927, relate to reparations alleged to
be due by the Polish Government for acts set out in the German Application of May
15th, 1925, and which the Court, in Judgment No.7, has declared not to be in
conformity with Articles 6 to 22 of the Geneva Convention. Poland denies that the
jurisdiction, which the Court, by Judgment No. 6, decided that it possessed in regard
to the above-mentioned Application of May 15th, 1925, also covers the new
Application of February 8th, 1927, and the submissions in the Case of March 2nd,
1927.

[53] The position of the Polish Government is mainly based on the two following
contentions:

1. that Article 23, paragraph 1, of the Geneva Convention, which gives the Court
jurisdiction for "differences of opinion, resulting from the interpretation and the
application of Articles 6 to 22", which may arise between the German Government
and the Polish Government, does not contemplate differences in regard to reparations
claimed for violation of those articles;
2. that the Geneva Convention has instituted special jurisdictions for claims which
private persons might assert in the event of the suppression or diminution of their
rights, and that the existence of these jurisdictions would affect that of the Court even
if Article 23, paragraph 1, of the Geneva Convention could be construed as including
differences of opinion in regard to reparations amongst those relating to the
application of Articles 6 to 22; therefore, the interested Parties should themselves
have recourse to the jurisdictions in question.

[54] In the first place, the meaning and scope of paragraph 1 of Article 23 must be
considered, for it is upon this clause – and upon this clause only – that the Court's
jurisdiction in the present case rests.

[55] The Court, by Judgments Nos. 6 and 7, has recognized that differences relating to
the application of Articles 6 to 22 include not only those relating to the question
whether the application of a [p21] particular clause has or has not been correct, but
also those bearing upon the applicability of these articles, that is to say, upon any act
or omission creating a situation contrary to the said articles. It is a principle of
international law that the breach of an engagement involves an obligation to make
reparation in an adequate form. Reparation therefore is the indispensable complement
of a failure to apply a convention and there is no necessity for this to be stated in the
convention itself. Differences relating to reparations, which may be due by reason of
failure to apply a convention, are consequently differences relating to its application.

[56] Now, Poland maintains that the words "differences of opinion, resulting from . . .
the application" in Article 23 cannot have the meaning just indicated, but that they
must be construed as covering merely the question whether, in a given case, the
application of Articles 6 to 22 is or is not correct, to the exclusion of any differences
in regard to reparations.

[57] In this connection, the Polish Government, in support of its contention that
paragraph 1 of Article 23 of the Geneva Convention should be restrictively construed,
has traced the development of general treaties of arbitration during the last fifty years,
comprising (1) the so-called clause compromissoire (arbitration clause) introduced
into commercial and other treaties during the last twenty-five years of the XIXth
century and subsequently, by which the contracting Parties agreed to submit to
arbitration any differences as to the interpretation or application of the particular
treaties; (2) general treaties for the compulsory arbitration of certain specified
categories of disputes, concluded since 1900, and (3) treaties and clauses for the
arbitration of pecuniary claims. It is needless to say that paragraph 1 of Article 23 is
an example of the first of these three classes of agreements.
[58] Counsel for Poland admitted in Court, for the sake of the argument, that the
clause compromissoire was originally interpreted as including claims for reparation;
but he maintained that, because of later developments, the clause must now be
interpreted as excluding such claims. The Court is unable to share this view. By the
Convention for the Pacific Settlement of International Disputes, concluded at The
Hague in 1899, although no exceptions [p22] were made in the provisions relative to
"arbitral justice" included in the first Chapter of Head IV of that Convention,
arbitration was not in any case made obligatory. An active movement was then begun
for the conclusion of treaties by which the submission of differences would be made
obligatory, treaties already foreshadowed by Article 19 of the said Convention. The
attainment of this object, so far as concerns general questions of legal right and
obligation, was found to be feasible by including only certain classes of questions, and
subjecting even these to reservations. On the other hand, it had, ever since the end of
the XVIIIth century, been found to be possible to conclude agreements for the
submission of pecuniary claims to arbitration without reserve. These facts appear to
be logically fatal to the inference sought to be drawn from them, for they clearly show
that, in the opinion of governments, the differences concerning which reserves were
deemed to be necessary were those relating to legal rights and obligations and not
those relating to pecuniary reparation. To say, therefore, that the clause
compromissoire, while confessedly providing for the submission of questions of right
and obligation, must now be restrictively interpreted as excluding pecuniary
reparation, would be contrary to the fundamental conceptions by which the movement
in favour of general arbitration has been characterized.

[59] Moreover, apart from the question whether expressions used in conventions
between other Powers and at different periods can be taken into account in
interpreting the intention of the signatories of the Geneva Convention, the Court holds
that, in view of the fundamental difference between the nature of arbitration clauses
(clauses compromissoire) and the object of the classification of disputes in general
arbitration agreements, no conclusion can be drawn from the terminology of the one
class of provisions in respect of the other.

[60] The classification of international disputes which would be most in point in the
present case is undoubtedly the classification adopted in Article 13 of the Covenant of
the League of Nations, and reappearing in Article 36 of the Court's Statute. For these
instruments, which are very close to the Geneva Convention in point of time,
constitute collective treaties of peculiar importance as they mark [p22] a step forward
towards the realization of compulsory arbitration. But the classification which they
contain would, in the Court’s opinion, lead to the conclusion that the expression
"differences of opinion resulting from the interpretation and application" in Article 23
of the Geneva Convention, should be construed as including questions relating to
reparations. It is true that the Covenant and the Statute mention separately, in the first
place, "disputes as to the interpretation of a treaty" and, in the fourth place, those
relating to "the nature or extent of the reparation" ; but they also mention, in the third
place, as a separate category, disputes relating to "the existence of any fact which, if
established, would constitute a breach of an international obligation". Now it is
established by Judgments Nos. 6 and 7 that the Court has jurisdiction to decide
whether a breach of Articles 6 to 22, has taken place or not. The decision whether
there has been a breach of an engagement involves no doubt a more important
jurisdiction than a decision as to the nature or extent of reparation due for a breach of
an international engagement the existence of which is already established. If Article
23, paragraph 1, covers the disputes mentioned in the first and third categories by the
two provisions above mentioned, it would be difficult to understand why – failing an
express provision to that effect – it should not cover the less important disputes
mentioned in the fourth category.

[61] Poland has, also drawn the Court's attention to the Convention which, acting also
in the name of the Free City of Danzig, she concluded with Germany in 1921, - i.e. at
a time not far removed from the conclusion of the Geneva Convention – in regard to
freedom of transit between Eastern Prussia and the rest of Germany. Articles 11 and
12 of this Convention provide for the establishment of an arbitral tribunal to which
each High Contracting Party may refer "disputes which may arise either in the
interpretation or in the application" of the Convention. Poland observes that Article
11, the first paragraph of which establishes the jurisdiction just referred to, contains a
special paragraph to the effect that the tribunal will have jurisdiction if necessary, to
decide as to the reparation to be made by the Party which may have been responsible
for a breach of the provisions of the Convention. Whatever may have been the reasons
which led the Parties expressly to mention jurisdiction in regard to reparations in
addition to that respecting interpretation and application, the fact that a convention
explicitly [p24] confirms the conception generally adopted in regard to arbitration
clauses, cannot be construed to mean that the same Parties, when employing in
another convention the wording ordinarily used in conventions of this kind, have, by
so doing, given evidence of an intention contrary to that which is to be presumed
when interpreting an arbitration clause in a convention.

[62] It follows from the above that Article 23, paragraph 1, which constitutes a typical
arbitration clause (clause compromissoire), contemplates all differences of opinion
resulting from the interpretation and application of a certain number of articles of a
convention. In using the expression "differences of opinion resulting from the
interpretation and application", the contracting Parties seem to have had in mind not
so much the subject of such differences as their source, and this would justify the
inclusion of differences relating to reparations amongst those concerning the
application, even if the notion of the application of a convention did not cover
reparations for possible violation.

[63] Having regard to the fact that Counsel for the Polish Government has laid stress
on the literal meaning of the word "application", the Court thinks it well to remark
that in judgment No. 5 -which has been cited before it in this connection by the said
Counsel – it observed not only that "application" is a wider, more elastic and less rigid
term than "execution", but also that "execution .... is a form of application". It follows
that Judgment No. 5 cannot be cited to support a restrictive interpretation of the term
"application".
[64] For the interpretation of Article 23, account must be taken not only of the
historical development of arbitration treaties, as well as of the terminology of such
treaties, and of the grammatical and logical meaning of the words used, but also and
more especially of the function which, in the intention of the contracting Parties, is to
be attributed to this provision. The Geneva Convention provides numerous means of
redress to secure the observation of its clauses and it does so in ways varying
according to the subjects dealt with under the different Heads, Parts or other
subdivisions of the Convention. Article 23 contains provisions of this kind in so far as
concerns Articles 6 to 22 which form the greater portion of Head III of the First Part.
[p25]

[65] The object of these methods of obtaining redress-and that of Article 23 in

particular-seems to be to avert the possibility that, in consequence of the existence of
a persistent difference of opinion between the contracting Parties as to the
interpretation or application of the Convention, the interests respect for which it is
designed to ensure, may be compromised. An interpretation which would confine the
Court simply to recording that the Convention had been incorrectly applied or that it
had not been applied, without being able to lay down the conditions for the re-
establishment of the treaty rights affected, would be contrary to what would, prima
facie, be the natural object of the clause; for a jurisdiction of this kind, instead of
settling a dispute once and for all, would leave open the possibility of further disputes.

[66] This conclusion, which is deduced from the object of a clause like Article 23,
and, in general, of any arbitration clause, could only be defeated, either by the
employment of terms sufficiently clear to show a contrary intention on the part of the
contracting Parties, or by the tact that the Convention had established a special
jurisdiction for claims in respect of reparation due for the violation of the provisions
in question, or had made some other arrangement regarding them.

[67] It follows from what has been said in regard to the meaning and scope of the
words "differences of opinion resulting from the interpretation and application of
Articles 6 to 22" that the terms of Article 23, first paragraph, do not establish the
existence of any such contrary intention. It now remains to consider the scope of
Article 23, paragraph 2, and Article 22 of the Geneva Convention.

[68] The Polish Government contends in the second place that there are other
tribunals before which the injured companies could assert their right to an indemnity
and that, in these circumstances, the German Government cannot, by substituting
itself for these companies, disturb the jurisdictional system established by the Geneva
Convention.

[69] The Court feels that it must consider this point, not only because Counsel for
Poland have cited the general principle with regard to recourse to tribunals accessible
to private persons, but also and more especially in relation to the terms of Article 23,
paragraph 2, of the Geneva Convention. [p26]

[70] It must first of all be observed that any Jurisdiction which the Polish Courts may
have does not enter into account. For the act on the part of the Polish Government,
which the Court has held not to be in conformity with the Geneva Convention,
consisted in the application of Articles 2 and 5 of the Polish law of July 14th, 1920,
introduced into Polish Upper Silesia by the law of June 16th, 1922, which application,
in the opinion of the Court (Judgment No. 7), is in itself a measure contrary to Article
6 and the following articles of the Convention. The Court of Huta Krolewska
(Königshütte) effected this application by ordering the entry in the land register of the
Polish Treasury as owner of the factory in place of the Oberschlesische. Accordingly,
Poland has not argued that the Polish Courts have jurisdiction in regard to reparation.

[71] The tribunals to be taken into account are therefore those contemplated by the
Geneva Convention itself, namely, the Upper Silesian Arbitral Tribunal and the
Germano-Polish Mixed Arbitral Tribunal. The Agent and Counsel for the Polish
Government spoke sometimes of the one and sometimes of the other of these
tribunals, without specifying which of them would be competent in the particular case
nor whether both of them would be so competent.

[72] The question whether the jurisdiction of these tribunals might prevent the
exercise of the jurisdiction bestowed upon the Court by paragraph 1 of Article 23 of
the Geneva Convention was brought up before the Court during the proceedings in
regard to the jurisdiction in the suit submitted to the Court by the German
Government's Application of May 15th, 1925. The Polish Government indeed
submitted that that Application could not be entertained until the Germano-Polish
Mixed Arbitral Tribunal had delivered judgment in the case concerning the same
factory of Chorzów brought by the Oberschlesische on November 10th, 1922, before
that Tribunal. The Polish Government also argued that, as it was a question of an
alleged destruction of vested rights, the Upper Silesian Tribunal might have
jurisdiction under Article 5 of the Convention.

[73] Some of the reasons for which the Court, in Judgment No. 6, overruled this plea
that the suit could not be entertained-for instance the argument relating to the fact that
the Parties are not the same-might to some extent be applicable also in the present
case. It should however be observed that the position is not the same,[p27] more
especially in view of the fact that the German Application ,of May 15th, 1925, only
asked the Court for a declaratory judgment between States, which only the Court
could give, whereas the present Application seeks an indemnity which is not
necessarily different from that which the Companies on whose behalf it is ,claimed,
might obtain from another tribunal, assuming that there was one which was
competent. For this reason, the Court will not be content merely to refer to Judgment
No. 6 and will once more examine the question in relation to the special conditions in
which it presents itself on this occasion.
[74] Before undertaking this examination, the Court feels called upon to call to mind
the following: In Judgment No. 7 it held that, as the expropriation allowed under Head
III of the Geneva Convention, is a derogation from the rules generally applied as
regards the treatment of foreigners and from the principle of respect for vested rights,
and this derogation is itself of a strictly exceptional character, -any other measure
affecting the property, rights and interests of German nationals contemplated in Head
III and not supported by some special authority having precedence over the
Convention, and which oversteps the limits of generally accepted international law, is
incompatible with the regime established by the Convention. The seizure of the
property, rights and interests belonging to the Oberschlesische and Bayerische was
precisely a measure of this kind. It is in this sense that the measures taken by the
Polish Government in respect of the above-mentioned Companies are, in the Court's
opinion, contrary to Head III of the Geneva Convention, and this in spite of the fact
that they do not, properly speaking, fall within the expropriations or liquidations
regulated under that Head. The measures in question are therefore of a special nature;
and it is only in relation to those measures, thus ,qualified, and to the regime
established in Upper Silesia, that it must be considered whether the dispossessed
Companies could apply either to the Upper Silesian Arbitral Tribunal or to the
German Polish Mixed Arbitral Tribunal for reparation of the injury sustained.

[75] The Polish Government argues that the Upper Silesian Tribunal has jurisdiction
on the basis of Article 3 of the Geneva Convention. This article, which is the last of
Head II of the Convention, is as follows: [p28]

“La question de savoir si et dans queue mesure une indemnité pour la suppression ou
la diminution de droits acquis doit être payée par l'État, sera directement tranchée par
le Tribunal arbitral sur plainte de l'ayant droit. [FN1]”

-------------------------------------------------------------------------------------------------------
--------------
[FN1] This text, which is the sole and authoritative text of the article, may ¬be
translated into English as follows:

"The question whether and to what extent an indemnity for the suppression or
diminution of vested rights must be paid by the State, will be directly decided by the
Arbitral Tribunal upon the complaint of the interested Party."
-------------------------------------------------------------------------------------------------------
--------------

[76] In the Court's opinion, it is impossible to accept this proposition. Whatever the
scope and limits of the jurisdiction conferred on the Upper Silesian Tribunal by this
article may be in other respects, the fact remains that this jurisdiction relates to the
subject matter dealt with in Head II of the Convention which concerns the protection
of vested rights. Now the Court, in Judgment No. 7, has decided that the dispossession
of the Oberschlesische and Bayerische was a violation of Head III and it has decided
thus even though it may be true that any violation of this Head, which constitutes an
exception to the general principle of respect for vested rights, is at the same time
necessarily a violation of Head II also. It follows that the competent tribunals can only
be those provided for by Head Ill. This is also borne out by the fact that the Upper
Silesian Arbitral Tribunal, under Article 5, can only allow pecuniary indemnities; now
it is certain that Head Ill of the Convention is mainly designed to preserve the status
quo in Polish Upper Silesia and therefore that, whenever possible, restitutio in
pristinum is the natural redress of any violation of, or failure to observe, the
provisions therein contained.

[77] The jurisdiction of the Germano-Polish Mixed Arbitral Tribunal derived from the
Treaty of Peace of Versailles, is expressly reserved by Article 23, paragraph 2.

[78] In order to understand this provision, it should be remembered that Head Ill of
the Geneva Convention has not abolished, although it limits in several respects, the
liquidation regime instituted by the Treaty of Versailles, and that some provisions of
that Treaty concerning that regime have been expressly declared applicable in Polish
Upper Silesia. Thus Articles 7 and 8 of the Geneva Convention refer to Articles 92
and 297 of the Treaty. [p29]

[79] These articles, amongst other things, allow private persons to appeal to the Mixed
Arbitral Tribunal. The right to do so is given to the interested Party in the event of the
conditions of sale or measures taken by the liquidating government outside its
ordinary legislation being unfairly prejudicial to the price ; the Tribunal may then
grant the interested Party a reasonable indemnity which is to be paid by the liquidating
government.

[80] As the Geneva Convention was intended to secure to German nationals in Polish
Upper Silesia treatment more favourable than that resulting from the Treaty of
Versailles, there could be no question of abolishing or diminishing the guarantees
given by the Treaty to persons liable to have their property liquidated. Again, the
jurisdiction bestowed upon the Court by Article 23, paragraph 1, which has no
equivalent under the liquidation regime of the Treaty of Versailles, might have left
some doubt as to whether the means of obtaining redress open to interested Parties
under the Treaty of Versailles would remain open notwithstanding. Cases of the same
kind as those contemplated by the provisions of that Treaty concerning the regime of
liquidation are certainly possible, even in connection with the expropriations or
liquidations authorized by the Geneva Convention. It was therefore natural expressly
to reserve the right possessed by private persons to appeal in such cases to the Mixed
Arbitral Tribunal : this is what paragraph 2 of Article 23 does.

[81] The Court has also not omitted to examine Article 22 of the Geneva Convention,
in so far as it bestows jurisdiction upon the Germano-Polish Mixed Arbitral Tribunal.
It is however clear that this article also contemplates regular expropriations effected
within the limits fixed by the preceding articles. That this is the case is proved by,
amongst other things, the fact that the contingency contemplated in the article is that
of a claim for damages greater than the indemnity fixed; the case is therefore one of
expropriation, in the proper sense of the term, and the jurisdiction given to the Mixed
Arbitral Tribunal does not differ from that bestowed upon it by Articles 92 and 297 of
the Treaty of Versailles.

[82] This being so, there would seem to be no doubt that neither this provision nor
Article 23, paragraph 2, expressly contemplates acts of the kind for which the German
Government claims an indemnity on behalf of the dispossessed Companies. As has
already been stated, these acts constitute special measures [p30] which fall outside the
normal operation of Articles 6 to 22 of the Geneva Convention, whereas the
jurisdiction reserved by Article 23, paragraph 2, assumes the application of those
articles. In the present case reparation is the outcome, not of the application of
Articles 6 to 22, but of acts contrary to the provisions of those articles.

[83] It has not escaped the Court that the Oberschlesische supported the action
brought by it before the Germano-Polish Mixed Arbitral Tribunal upon, amongst
other things, Article 305 of the Treaty of Versailles. This cannot, however, affect the
conclusion just arrived at by the Court, The aim of Article 305 – to which, besides,
neither the Agent nor Counsel for the Polish Government have made any allusion – is
to secure to interested Parties the possibility of having recourse to the Mixed Arbitral
Tribunal, even if measures contrary to the terms of the Treaty of Versailles have been
embodied in a judgment. Whatever construction in other respects the Mixed Arbitral
Tribunals have placed or may place upon this article, with which construction the
Court wishes in no way to interfere, the Court, when it has to define its jurisdiction in
relation to that of another tribunal, cannot allow its own competency to give way
unless confronted with a clause which it considers sufficiently clear to prevent the.
possibility of a negative conflict of jurisdiction involving the danger of a denial of
justice. The Court does not consider that, in regard to the applicability of Article 305
to the situation of the Oberschlesische, all possible doubt is eliminated ; it would
observe, however, that it is not called upon to decide this point. Furthermore, it should
be noted that the Polish Government, in regard to the action brought by the
Oberschlesische before the Germano-Polish Mixed Arbitral Tribunal on November
10th, 1922, filed a plea to the jurisdiction on the ground, amongst others, that Article
305 was not considered as applicable in that case.

[84] There is, moreover, another reason which the Court feels called upon to invoke in
order to show that the jurisdiction of the Mixed Arbitral Tribunal cannot be urged in
this case in opposition to the jurisdiction conferred on the Court by Article 23 of the
Geneva Convention.

[85] A careful examination of the provisions of Head III of the Geneva Convention
brings out-as the Court has already had occasion to point out in Judgment No. 7 – that
one of the fundamental principles [p31] upon which this Head is based, as regards
procedure, is that no dispossession may be effected without previous notice to the real
or apparent owner, affording him an opportunity of being heard before the competent
tribunal. It is certain – having regard to the promulgation by the Polish Government of
the laws of July 14th, 1920, and of June 16th, 1922, and to the application given to
those laws-that in this case such a procedure has not been adopted, for the
dispossession of the Companies concerned had, in the Polish Government's
contention, taken place outside the framework of the Geneva Convention.
Consequently, the Polish Government cannot in this particular case require the
interested Parties to look for redress of the injury sustained by them to the tribunals
which might have been open to them if the Convention had been applied. For,
thereafter, the utmost that the interested Parties could obtain from these tribunals
would be reparation for the wrong, whereas, if that procedure had been followed out,
the wrong would perhaps never have occurred.

[86] From what has been said, it follows that once dispossession has taken place
without previous investigation of the right of ownership, the possible undertaking of
this investigation in order to justify such dispossession after it has taken place, cannot
undo the fact that a breach of the Geneva Convention has already taken place, or
affect the Court's jurisdiction.

[87] It is, moreover, a principle generally accepted in the jurisprudence of

international arbitration, as well as by municipal courts, that one Party cannot avail
himself of the fact that the other has not fulfilled some obligation or has not had
recourse to some means of redress, if the former Party has, by some illegal act,
prevented the latter from fulfilling the obligation in question, or from having recourse
to the tribunal which would have been open, to him.

[88] If, against what has just been stated by the Court, it were contended that the
measures taken by the Polish Government in regard to the Oberschlesische and
Bayerische did not constitute expropriation within the meaning of Head III of the
Geneva Convention, the Court would be called upon to repeat what it has already had
occasion to say not only in Judgment No. 7, but also in the present Judgment, namely,
that if expropriation in consideration of an indemnity is prohibited by that Head, a
fortiori is a seizure, without compensation to the interested Parties, prohibited. [p32]

[89] It has been argued repeatedly in the course of the present proceedings that in case
of doubt the Court should decline jurisdiction. It is true that the Court's Jurisdiction is
always a limited one, existing only in so far as States have accepted it; consequently,
the Court will, in the event of an objection - or when it has automatically to consider
the question – only affirm its jurisdiction provided that the force of the arguments
militating in favour of it is preponderant. The fact that weighty arguments can be
advanced to support the contention that it has no jurisdiction cannot of itself create a
doubt calculated to upset its jurisdiction. When considering whether it has jurisdiction
or not, the Court's aim is always to ascertain whether an intention on the part of the
Parties exists to confer jurisdiction upon it. The question as to the existence of a doubt
nullifying its jurisdiction need not be considered when, as in the present case, this
intention can be demonstrated in a manner convincing to the Court.

****
[90] It follows from the foregoing considerations that the Court affirms its jurisdiction
and reserves the suit for judgment on the merits in so far as the first of the
submissions of the Case of March 2nd, 1927, is concerned, that is to say, as regards
the question whether, "by reason of its attitude in respect of the Oberschlesische and
Bayerische, which attitude has been declared by the Court not to have been in
conformity with the provisions of Article 6 and the following articles of the Geneva
Convention, the Polish Government is under an obligation to make good the
consequent injury sustained by the aforesaid Companies from July 3rd, 1922, until the
date of the judgment sought".

[91] The other submissions (Nos. 2-4) of the Case relate to the amount of the
indemnities to be paid by Poland, a prohibition of export affecting certain products
and, finally, the method of payment. The Court's right to deal with these points and to
grant or refuse the German Government's claim, follows from the fact of its
jurisdiction to hear the claim for reparation.

[92] Whilst denying that the Court has jurisdiction to deal with claims seeking
reparation for a breach of Articles 6 to 22 of the Geneva Convention, Poland, in her
preliminary Counter-Gase, has in the alternative submitted certain objections in
regard, particularly, to [p33] the German submission concerning a prohibition of
export and to the other submission to the effect that Poland should not be allowed to
set off, against any amount which may be due as reparation, a claim which she has
against Germany under the decision of the Council of the League of Nations of
December 9th, 1924. The Court is not called upon to give a decision on these points at
this stage of the proceedings; they belong to the merits of the suit.

[93] Consideration of the question of the forms of reparation which are admissible in
this case and of the methods of payment indicated would presuppose that the Court
had satisfied itself of the existence of an obligation to make reparation and of the
existence, nature and extent of the injury resulting from an attitude contrary to
Articles 6 to 22.

[94] As regards conclusion No. 4 (d) of the German Case, the question whether
Poland could, if the case arise, assert a claim to set off against her debt to Germany
any debt due to her by Germany remains therefore entirely reserved.

[95] For These Reasons, the Court, having heard both Parties, by ten votes to three,

1. dismisses the plea made by the Polish Government requesting the Court to declare
that it has no jurisdiction to deal with the suit brought by the German Government on
February 8th, 1927, and reserves this suit for judgment on the merits;
2. instructs the President to fix the times for the deposit of the Counter-Case, Reply
and Rejoinder on the merits.

[96] Done in French and English, the French text being authoritative, at the Peace
Palace, The Hague, this twenty-sixth day of [p34] July, nineteen hundred and twenty-
seven, in three copies, one of which is to be placed in the archives of the Court, and
the others to be forwarded to the Agents of the applicant and respondent Parties
respectively.

(Signed) Max Huber,

President.
(Signed) Å. Hammarskjöld,
Registrar.

[97] M. Ehrlich, Polish National judge, availing himself of the right conferred on him
by Article 57 of the Statute, has delivered the separate opinion which follows
hereafter.

(Initialled) M. H.
(Initialled) A. H. [p35]

Dissenting Opinion By M. Ehrlich

[98] I, regret to find myself in disagreement with certain aspects of the judgment
which has just been delivered.

I. [Jurisdiction Over Submission 1]

[99] While the Court has, in principle, jurisdiction to decide on submission No. 1, I do
not think that the Court can consider that submission in the present case.

[100] It followed from Judgment No. 7, without the necessity of an explicit statement,
that the Polish Government was bound to make reparation for any damage which may
actually and unlawfully have been inflicted; is a result of the attitude of the Polish
Government declared by that judgment not to have been in conformity with certain
stipulations of the Geneva Convention. This is a consequence of the principle that the
violation of an international obligation entails the duty of reparation, a principle so
generally accepted that in the classification of international disputes of a legal
character, embodied in Article 13 of the Covenant of the League of Nations, and in
Article 36 of the Statute of the Court (of which classification more will be said
presently), there is no special class of disputes as to the duty of making reparation for
a breach of an international obligation, as distinguished from disputes concerning the
existence of a fact which, if established, would constitute a breach of an international
obligation: this latter class of disputes obviously includes the former. Both the
applicant and the respondent Governments appear to have understood Judgment No. 7
in the sense just outlined, and, as the Case sets out they actually entered into
negotiations with a view to determining the reparation due to the two Companies; the
Polish Government even suggested that the negotiations be carried on directly with
the Companies concerned.

[101] Since the jurisdiction of the Court in the present case is based on Article 23,
paragraph 1, of the Geneva Convention which stipulates that: [p36]

[Translation]
"Should divergences of opinion resulting from the interpretation and from the
application of Articles 6 to 22 arise between the German Government and the Polish
Government, they should be submitted to the decision of the Permanent Court of
International Justice.[FN1]"',

it follows that the Court has no jurisdiction where there is no divergence of opinion.
Now, the Case says:

[Translation]
"Thus there is no more a divergence of opinion between the two Governments that the
reparation should be made, in principle, by way of a pecuniary indemnity.[FN2]"

-------------------------------------------------------------------------------------------------------
--------------
[FN1] "Si des divergences d'opinion, résultant de l’interprétation et de l'application
des articles 6 à 22, s'élevaient entre le Gouvernement allemand et le Gouvernement
polonais, elles seraient soumises à la décision de la Cour permanente de Justice
internationale."
[FN2] "Ainsi, il n'existe plus de divergence d'opinion entre les deux Gouvernements
que la réparation doit être faite, en principe, par la voie d'une indemnisation
pécuniaire."
-------------------------------------------------------------------------------------------------------
--------------

[102] The principle of reparation seems, therefore, admitted; for there is not even a
divergence of opinion as to the further question, what form reparation should take.

[103] The jurisdiction of the Court in any given case cannot be taken to rest on facts
contrary to what is alleged by the Applicant. In the present case, a lack of such a
divergence in the matter of submission No. 1 appears from the statements of the
applicant Government.

[104] The conclusion to be drawn is not weakened by the fact that submission No. 1
asks for the determination of the time limits of the damage; for these are the logical
time limits within which the damage must lie, whether or not the Court has
jurisdiction to estimate it. Nobody can be made responsible for any damage before it
has arisen, and a court in estimating damage will consider those of its aspects which,
at the time of estimating, it will be in a position to appreciate.

II. [Jurisdiction Over Submissions 2-4]

[105] The judgment which has just been delivered holds that the jurisdiction of the
Court to entertain submissions Nos. 2-4 of the [p37] Case, follows from the
jurisdiction to decide upon the demand for reparation.

[106] Yet in international law jurisdiction to decide, in principle, that a violation of an

international engagement has taken place and that, consequently, reparation is due, is
distinct from jurisdiction to determine the nature and extent of reparation in general
and the amount of a pecuniary indemnity in particular.

[107] I agree that the classification of international disputes (of a legal character)
which would be of most importance in the present case, is the classification adopted in
Article 13 of the Covenant of the League of Nations, and reappearing in Article 36 of
the Statute of the Court. Article 36 of the Statute provides that a State may accept the
jurisdiction of the Court:

... in all or any of the classes of legal disputes concerning:

(a) the interpretation of a treaty ;

(b) any question of international law;
(c) the existence of any fact which, if established, would constitute a breach of an
international obligation;
(d) the nature or extent of the reparation to be made for the breach of an international
obligation."

[108] It is quite possible that a State should accept the optional clause, for instance, as
to disputes belonging to class (c) only, or to classes (a) and (c). The State in question
would not thereby accept, and would not be presumed to accept, the jurisdiction of the
Court as to class (d). The classes were understood to be distinct, and jurisdiction to
decide disputes belonging to one class cannot be assumed to imply jurisdiction to
decide disputes belonging to another class. In the present case, jurisdiction under
Article 23, paragraph 1, of the Geneva Convention, relates only to disputes which
would fall, as was submitted by the respondent Government, into classes (a) and (c).

[109] Neither can jurisdiction to decide disputes belonging to one class be deduced
from jurisdiction to decide disputes belonging to another class, by estimating the
relative importance of both classes; for the estimate will depend, like every question
of the relative importance of things, on the criterion adopted as basis of the
comparison. And even if a comparison could be made with [p38] the help of a
universally accepted criterion, it could still not be inferred that jurisdiction concerning
the more important class of disputes implies jurisdiction concerning a different,
though less important class. For the Parties might purposely have conferred on a
court-and most of all on this Court-the competence to settle the most important
disputes, without wishing to burden the Court with disputes of less importance,
particularly since, by deciding on the interpretation of a treaty stipulation or on the
correctness of its application, the Court could probably point the way for the solution,
or prevention, of a number of disputes, while the question of reparation might have to
be considered in each individual case.
[110] It seems, indeed, to have been an established practice long before the adoption
of the Covenant of the League of Nations and of the Statute of the Court, in cases in
which an arbitral tribunal was to deal with the questions of the amount of reparation
or the mode of payment, as distinguished from or in addition to a divergence of
opinion as to the interpretation of a treaty or as to a violation of a treaty or of a rule of
general international law, to specify such powers of the tribunal in the compromis.

III. [Jurisdiction To Assess Damages And Mode of Payment]

[111] While jurisdiction to assess the damages and to fix the mode of payment does
not, in international law, follow automatically from jurisdiction to establish the fact
that a treaty has not been applied, although it should have been applied, it is necessary
to consider whether the Parties to the Geneva Convention did not intend to confer
upon the Court that jurisdiction.

[112] Two preliminary remarks must be made.

[113] First, the answer to the question just formulated turns, not on the interpretation
of any of Articles 6 to 22 of the Geneva Convention, but on the interpretation of
Article 23 itself ; for the question is, whether Article 23, paragraph 1, should be read
as conferring on the Court jurisdiction to decide what reparation is due to individuals
from the Polish State (this is the correct term used in Article 3 of the Convention) if
the Polish Government fails to act in conformity with Articles 6 to 22. [p39]

[114] Secondly, the intention to confer upon the Court such a jurisdiction must be
ascertainable either from the wording of the compromise clause or at least from the
circumstances in which the clause was drawn up, and it must be ascertainable in a way
which demonstrates that the force of the arguments militating in favour of the Court's
jurisdiction is preponderant.

[115] No affirmative answer to the question of the Court's jurisdiction in the matter of
submissions 2-4 can be gleaned from Article 23. The words "interpretation and
application" do not, by themselves, imply such an affirmative answer. They refer to
processes, of which one, interpretation, is that of determining the meaning of a rule,
while the other, application, is, in one sense, that of determining the consequences
which the rule attaches to the occurrence of a given fact; in another sense, application
is the action of bringing about the consequences which, according to a rule, should
follow a fact. Disputes concerning interpretation or application are, therefore, disputes
as to the meaning of a rule or as to whether the, consequences which the rule attaches
to a fact, should follow in a given case. Now, Articles 6 to 22 of the Geneva
Convention do not prescribe any specific consequences which should follow if the
Polish Government were to disregard the rule laid down in Article 6. Therefore,
although such a disregard would be a violation of the. Convention, yet the
determination of the nature and the extent of the reparation would not be the
settlement of a dispute concerning the interpretation or application of Articles 6 to 22.
[116] The word "resulting from", used in Article 23, although different from the
words "concerning", "in the matter of", generally used in compromise clauses in
connection with the words "interpretation and application", does not give to Article 23
a different meaning, which would prevent it from remaining a typical compromise
clause. For every divergence of opinion "in the matter of" interpretation or application
is, in a sense, a divergence of opinion "resulting from" interpretation or application,
since, until each side has arrived at an opinion as a result of the process of
interpretation 'or application of the treaty (application in the sense of determining the
consequences which the treaty attaches to the occurrence of a fact), there can be no
divergence of opinion in the matter of interpretation or application. The word
"resulting" connects [p40] the divergence of opinion with its nearest cause, i.e. the
process of interpretation or application.

[117] One might be tempted to maintain that since non-application, i.e., failure to
bring about the consequences which a rule attaches to a fact, is bad application, and
since bad application is a kind of application (in the second sense), therefore
divergences of opinion, in the matter of reparation to be made for such non-
application are divergences of opinion resulting from application. Yet non-application
is not application. If the treaty contains rules concerning such reparation, the
determination of such reparation is clearly application (in the first sense) of the treaty.
But if the treaty does not contain such rules, divergences of opinion in the matter of
reparation due for violations of the treaty are divergences of opinion in the matter of
general, as distinguished from conventional, international law.

[118] Since, therefore, the words "interpretation and application" do not necessarily
relate to the determination of the nature and extent of reparation for the violation of a
treaty, it follows that to base such a jurisdiction on Article 23 would require an
extensive interpretation, where as not to deduce such a jurisdiction from that article
would imply the natural and not a restrictive interpretation. In other words, a
presumption must be taken to exist, not for, but against deducing that jurisdiction
from Article 23. The presumption would, of course, be defeated if it could be shown
that at the time of the Geneva Convention, or shortly before that time, the meaning of
the compromise clause was generally understood to be such as the clause has now
been declared to have. But nothing has been brought to the attention of the Court to
prove conclusively that the clause "interpretation and application" was considered in
the practice of nations, during the last quarter of the nineteenth or in the twentieth
century, up to the time of the Geneva Convention, to comprise jurisdiction in the
matter of the determination of the nature and extent of reparation for the violation of
the treaty in question. In particular, no such deduction can be made from the Postal
Convention, to which reference was made, but which establishes a specific case of
responsibility of the postal administrations. [p41]

[119] On the other hand, it is not easy to defeat the inference from the Russian
Explanatory Memorandum which accompanied the Russian project for an arbitration
convention in 1899 and which divides all possible international conflicts into two
groups, one of them comprising cases in which
[Translation]
"one State demands from another an indemnity of a material kind for damages and
losses caused to itself or to its nationals by the acts of the defendant State or of its
nationals, which it considers not to be in conformity with the law”,[FN1]

while the other group comprises cases in which

[Translation]
"one State demands from the other that it exercise or do not exercise certain specified
attributes of the Sovereign Power, that it do or do not do certain specified acts which
do not relate to material interests". [FN2]

-------------------------------------------------------------------------------------------------------
--
[FN1] “Un Etat demande a un autre une indemnisation matérielle pour dommages et
pertes causes a lui-même ou a ses ressortissants par des actes de l’Etat défendeur ou
de ses ressortissants qu’il juge n’être pas conformes au droit.”
[FN2] “Un Etat demande a un autre d’exercer ou de ne pas exercer certaines
attributions déterminées du Pouvoir souverain, de faire ou de ne pas faire certains
actes détermines ne touchant pas a des intérêts d’ordre matériel.”
-------------------------------------------------------------------------------------------------------
--

[120] It is to the latter group that belong, among other disputes, the disputes
concerning the interpretation and application of treaties, some of which were
enumerated in the Russian project itself. While ultimately the Conference of 1899 did
not adopt the principle of obligatory arbitration, even for the cases originally
suggested by the Russian project, the Committee proposals accepted, in principle, the
Russian division, and in all the history of the proceedings of the committees of the
Conference, there seems to be nothing to suggest that the division outlined in the
Russian explanatory note was not considered correct. It is difficult, therefore, to admit
that the group of disputes concerning interpretation and application of treaties was
supposed to include ipso facto disputes concerning the amount of damages to be paid
in case of the violation of such treaties. [p42]

[121] In view, however, of the judgment now delivered, any treaty henceforward
concluded, containing a compromise clause similar to that of Article 23 of the Geneva
Convention, will have to be interpreted in the light of this judgment.

IV. [Jurisdiction to Interpret an Article and a Consequence of a Fact]

[122] The question arises whether it is permissible to interpret Article 23, paragraph 1,
of the Geneva Convention as conferring upon the Court jurisdiction to decide only (1)
how an article should be interpreted and (2) whether, in a given case, the
consequences which should follow from a given fact have followed, without giving
the Court the further power of deciding what reparation is due and in what way it
should be made. The answer to this question was given by the Court in Judgment No.
7, when it dealt with the question of declaratory judgments. Moreover, while in the
law of various countries it is possible to observe the development of the institution of
declaratory judgments, in international relations a judgment of this Court, establishing
the fact that a violation of a treaty has occurred, has no less power of settling a dispute
than a subsequent judgment determining the amount of damages to be paid.

V. [Exclusive Jurisdiction]

[123] Next it must be considered whether the general construction of Part I of the
Geneva Convention does not make it imperative to assume that the Court, and no
other tribunal, has jurisdiction in cases like the present. The decision contained in
Judgment No. 6 is of course binding, so far as the question, which was then before the
Court, is concerned. As to the question which has now been raised, it seems that
Heads I - III of Part I of the Convention form one whole. Head Il lays down the
general principle of respect for acquired rights. Head III, while maintaining the
principle, permits of certain exceptions. It is possible, but it is not a priori necessary to
suppose that the general remedies under Head II, which lays down the rule, should not
be available in cases falling under Head III, which, while admitting exceptions,
confirms the same rule. [p43]

[124] Both interpretations being admissible, it seems that there is a presumption in

favour of that interpretation which (1) allows the individual to apply to a tribunal for
the protection of his rights, without making that protection depend on a decision of the
government, and (2) diminishes the amount of litigation, and therefore of disputes,
between States.

[125] Of course, from now on, the judgment now passed must be considered as
determining the question in a way which could only be changed by a new agreement
of both Parties.

VI. [Jurisdiction Inferred From Contemporanea Expositio]

[126] It remains to consider whether an intention of the Parties to the Geneva

Convention to confer the jurisdiction in question on the Court may not be inferred
from a contemporanea expositio, to be gathered, in the words of Sir Robert
Phillimore, from the acts of the Parties which preceded, accompanied, and followed
soon after the making of the treaty.

[127] On behalf of the respondent Government, attention was drawn to Article II of a

Convention concluded by Poland with Germany on April 21st, 1921, i.e. about a year
before the conclusion of the Geneva Convention. That article provides that:

"Each High Contracting Party shall be entitled to refer any disputes which may arise
either as to the interpretation or the application of the present Convention, to the
decision of a permanent tribunal of arbitration ....
"The Tribunal shall decide all disputes on the basis of the provisions of this
Convention, and on the general principles of law, and of equity.
"It shall be competent to decide the amount, if any, of compensation to be made to the
injured Party by the Party found guilty of any infraction of the provisions of this
Convention."

[128] Since both Conventions were concluded by the same Parties within a short
space of time, the fact of the omission in the later Convention of a clause which, in the
earlier, supplemented the statement of the jurisdiction conferred on the tribunal in
question, [p44] seems to convey an indication that the omission was intentional and
that it was not desired to produce the effects which the clause inserted in the earlier,
but not in the later Convention, was to produce.

[129] As to the attitude of the Parties after the conclusion of the Geneva Convention,
which is valuable as an indication of the views of the Parties regarding the clause in
question and as calculated to throw light on the intention of the Parties at the time of
the conclusion of the Convention, an inference may be drawn from the fact that the
action which was brought by the German Government against the Polish Government
in 1925 and which led to judgments Nos. 6 and 7, was stated, on behalf of the German
Government, in the pleadings, not to demand restitution or indemnity and to have
been limited to a demand for a declaration, for this reason, among others, that doubts
might possibly arise whether the Jurisdiction under Article 23 relative to divergences
of opinion "concerning" the interpretation and application of certain stipulations
would also comprise reparation on account of an interpretation or application not in
conformity with those stipulations. It was added that while the German Government
believed that in principle such a jurisdiction should be considered as established, it did
not desire to burden its Application with this delicate problem.

[130] It would appear, therefore, that as late as 1925 the German Government was not
convinced of the undeniable correctness of the interpretation now suggested. Nothing
has been alleged before the Court in the present proceedings to suggest that the Polish
Government has admitted the correctness of such an interpretation of Article 23. The
inference from this attitude of both Parties is that they had at the time of the
conclusion of the Geneva Convention no intention to give to Article 23 a meaning
such as is now suggested.

[131] I agree, however, that in the question of the jurisdiction of the Court and of the
tribunals of the Geneva Convention, the present judgment will henceforth be binding,

(Signed) Ludwik Ehrlich.

Principle: It is a general principle of law  as well as

International law, that any breach of agreement creates an
obligation to make reparation.
Fact: There was an agreement between Germany and Poland
and that bilateral treaty was known as the Geneva Upper
Silesia convention 1922. It had been provided in that treaty
that on transfer of sovereignty of certain territories from
Germany to Poland after the 1  world war, existing
st

proprietary right were to be maintained except that the

Polish Government was granted a right of expropriation
under certain condition with respects of all property
belonging to German nationals in Upper Silesia. The present
dispute arose when Poland seized to companies there in
breach of its international obligation under the Upper Silesia
convention of 1922. The Germany demanded compensation
from the Poland.
Issues:
1. Whether a state can be held responsible for expropriation of
alien property.
2. Whether a state can be made responsible at International Law,
for acts of Government organs or officers
3. Whether it is a basic rule of international law that reparation is
to be made for violations of international law
Decision: The reparation of wrong may consist in an
indemnity corresponding to the damage which is contrary of
International Law. Right or interests of an individual the
violation of which rights cause damages are always in a
different plain to rights belonging to a state, which rights
may also be infringed by the same act.
Reasoning: The action of Poland was not expropriation in its
real sense, it was rather a seizure of property, right and
interest which could not be expropriated even against
compensation, save under the special conditions fixed by
Art. 7 of the Upper Silesia convention of 1922. in doing so,
therefore, Poland acted contrary to its obligations. It is
general principle of international law and even a general
concept of law that a breach of an agreement involves a
duty to make reparation. Reparation is the expendable
complement of a failure to apply a convention and there is
no necessity for this to be stated in the convention itself.
This case is one of an unlawful expropriation and in such
cases expropriating sates must in addition to paying the
compensation due in respect of lawful expropriation, pay
also damages for any loss continued by the injured party.

G.R. No. 118295 May 2, 1997

WIGBERTO E. TAÑADA and ANNA DOMINIQUE COSETENG, as members of the

Philippine Senate and as taxpayers; GREGORIO ANDOLANA and JOKER ARROYO
as members of the House of Representatives and as taxpayers; NICANOR P.
PERLAS and HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES UNION,
NATIONAL ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR
ALTERNATIVE DEVELOPMENT INITIATIVES, LIKAS-KAYANG KAUNLARAN
FOUNDATION, INC., PHILIPPINE RURAL RECONSTRUCTION MOVEMENT,
DEMOKRATIKONG KILUSAN NG MAGBUBUKID NG PILIPINAS, INC., and
PHILIPPINE PEASANT INSTITUTE, in representation of various taxpayers and as
non-governmental organizations, petitioners,
vs.
EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON
ALVAREZ, AGAPITO AQUINO, RODOLFO BIAZON, NEPTALI GONZALES,
ERNESTO HERRERA, JOSE LINA, GLORIA. MACAPAGAL-ARROYO, ORLANDO
MERCADO, BLAS OPLE, JOHN OSMEÑA, SANTANINA RASUL, RAMON REVILLA,
RAUL ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their respective
capacities as members of the Philippine Senate who concurred in the ratification
by the President of the Philippines of the Agreement Establishing the World Trade
Organization; SALVADOR ENRIQUEZ, in his capacity as Secretary of Budget and
Management; CARIDAD VALDEHUESA, in her capacity as National Treasurer;
RIZALINO NAVARRO, in his capacity as Secretary of Trade and Industry;
ROBERTO SEBASTIAN, in his capacity as Secretary of Agriculture; ROBERTO DE
OCAMPO, in his capacity as Secretary of Finance; ROBERTO ROMULO, in his
capacity as Secretary of Foreign Affairs; and TEOFISTO T. GUINGONA, in his
capacity as Executive Secretary, respondents.

PANGANIBAN, J.:

The emergence on January 1, 1995 of the World Trade Organization, abetted by the
membership thereto of the vast majority of countries has revolutionized international
business and economic relations amongst states. It has irreversibly propelled the world
towards trade liberalization and economic globalization. Liberalization, globalization,
deregulation and privatization, the third-millennium buzz words, are ushering in a new
borderless world of business by sweeping away as mere historical relics the heretofore
traditional modes of promoting and protecting national economies like tariffs, export
subsidies, import quotas, quantitative restrictions, tax exemptions and currency controls.
Finding market niches and becoming the best in specific industries in a market-driven
and export-oriented global scenario are replacing age-old "beggar-thy-neighbor" policies
that unilaterally protect weak and inefficient domestic producers of goods and services. In
the words of Peter Drucker, the well-known management guru, "Increased participation in
the world economy has become the key to domestic economic growth and prosperity."

Brief Historical Background

To hasten worldwide recovery from the devastation wrought by the Second World War,
plans for the establishment of three multilateral institutions — inspired by that grand
political body, the United Nations — were discussed at Dumbarton Oaks and Bretton
Woods. The first was the World Bank (WB) which was to address the rehabilitation and
reconstruction of war-ravaged and later developing countries; the second, the
International Monetary Fund (IMF) which was to deal with currency problems; and
the third, the International Trade Organization (ITO), which was to foster order and
predictability in world trade and to minimize unilateral protectionist policies that invite
challenge, even retaliation, from other states. However, for a variety of reasons, including
its non-ratification by the United States, the ITO, unlike the IMF and WB, never took off.
What remained was only GATT — the General Agreement on Tariffs and Trade. GATT
was a collection of treaties governing access to the economies of treaty adherents with
no institutionalized body administering the agreements or dependable system of dispute
settlement.

After half a century and several dizzying rounds of negotiations, principally the Kennedy
Round, the Tokyo Round and the Uruguay Round, the world finally gave birth to that
administering body — the World Trade Organization — with the signing of the "Final Act"
in Marrakesh, Morocco and the ratification of the WTO Agreement by its members. 1

Like many other developing countries, the Philippines joined WTO as a founding member
with the goal, as articulated by President Fidel V. Ramos in two letters to the Senate
(infra), of improving "Philippine access to foreign markets, especially its major trading
partners, through the reduction of tariffs on its exports, particularly agricultural and
industrial products." The President also saw in the WTO the opening of "new
opportunities for the services sector . . . , (the reduction of) costs and uncertainty
associated with exporting . . . , and (the attraction of) more investments into the country."
Although the Chief Executive did not expressly mention it in his letter, the Philippines —
and this is of special interest to the legal profession — will benefit from the WTO system
of dispute settlement by judicial adjudication through the independent WTO settlement
bodies called (1) Dispute Settlement Panels and (2) Appellate Tribunal. Heretofore, trade
disputes were settled mainly through negotiations where solutions were arrived at
frequently on the basis of relative bargaining strengths, and where naturally, weak and
underdeveloped countries were at a disadvantage.

The Petition in Brief

Arguing mainly (1) that the WTO requires the Philippines "to place nationals and products
of member-countries on the same footing as Filipinos and local products" and (2) that the
WTO "intrudes, limits and/or impairs" the constitutional powers of both Congress and the
Supreme Court, the instant petition before this Court assails the WTO Agreement for
violating the mandate of the 1987 Constitution to "develop a self-reliant and independent
national economy effectively controlled by Filipinos . . . (to) give preference to qualified
Filipinos (and to) promote the preferential use of Filipino labor, domestic materials and
locally produced goods."

Simply stated, does the Philippine Constitution prohibit Philippine participation in

worldwide trade liberalization and economic globalization? Does it proscribe Philippine
integration into a global economy that is liberalized, deregulated and privatized? These
are the main questions raised in this petition for certiorari, prohibition
and mandamus under Rule 65 of the Rules of Court praying (1) for the nullification, on
constitutional grounds, of the concurrence of the Philippine Senate in the ratification by
the President of the Philippines of the Agreement Establishing the World Trade
Organization (WTO Agreement, for brevity) and (2) for the prohibition of its
implementation and enforcement through the release and utilization of public funds, the
assignment of public officials and employees, as well as the use of government
properties and resources by respondent-heads of various executive offices concerned
therewith. This concurrence is embodied in Senate Resolution No. 97, dated December
14, 1994.

The Facts

On April 15, 1994, Respondent Rizalino Navarro, then Secretary of The Department of
Trade and Industry (Secretary Navarro, for brevity), representing the Government of the
Republic of the Philippines, signed in Marrakesh, Morocco, the Final Act Embodying the
Results of the Uruguay Round of Multilateral Negotiations (Final Act, for brevity).

By signing the Final Act,  Secretary Navarro on behalf of the Republic of the Philippines,
2

agreed:

(a) to submit, as appropriate, the WTO Agreement for the consideration of

their respective competent authorities, with a view to seeking approval of
the Agreement in accordance with their procedures; and

(b) to adopt the Ministerial Declarations and Decisions.

On August 12, 1994, the members of the Philippine Senate received a letter dated
August 11, 1994 from the President of the Philippines,  stating among others that "the
3

Uruguay Round Final Act is hereby submitted to the Senate for its concurrence pursuant
to Section 21, Article VII of the Constitution."

On August 13, 1994, the members of the Philippine Senate received another letter from
the President of the Philippines  likewise dated August 11, 1994, which stated among
4

others that "the Uruguay Round Final Act, the Agreement Establishing the World Trade
Organization, the Ministerial Declarations and Decisions, and the Understanding on
Commitments in Financial Services are hereby submitted to the Senate for its
concurrence pursuant to Section 21, Article VII of the Constitution."

On December 9, 1994, the President of the Philippines certified the necessity of the
immediate adoption of P.S. 1083, a resolution entitled "Concurring in the Ratification of
the Agreement Establishing the World Trade Organization." 5

On December 14, 1994, the Philippine Senate adopted Resolution No. 97 which
"Resolved, as it is hereby resolved, that the Senate concur, as it hereby concurs, in the
ratification by the President of the Philippines of the Agreement Establishing the World
Trade Organization."  The text of the WTO Agreement is written on pages 137 et seq. of
6

Volume I of the 36-volume Uruguay Round of Multilateral Trade Negotiations and

includes various agreements and associated legal instruments (identified in the said
Agreement as Annexes 1, 2 and 3 thereto and collectively referred to as Multilateral
Trade Agreements, for brevity) as follows:

ANNEX 1

Annex 1A: Multilateral Agreement on Trade in Goods

General Agreement on Tariffs and Trade 1994
Agreement on Agriculture
Agreement on the Application of Sanitary and
Phytosanitary Measures
Agreement on Textiles and Clothing
Agreement on Technical Barriers to Trade
Agreement on Trade-Related Investment Measures
Agreement on Implementation of Article VI of he
General Agreement on Tariffs and Trade
1994
Agreement on Implementation of Article VII of the
General on Tariffs and Trade 1994
Agreement on Pre-Shipment Inspection
Agreement on Rules of Origin
Agreement on Imports Licensing Procedures
Agreement on Subsidies and Coordinating
Measures
Agreement on Safeguards

Annex 1B: General Agreement on Trade in Services and Annexes

Annex 1C: Agreement on Trade-Related Aspects of Intellectual

Property Rights

ANNEX 2

Understanding on Rules and Procedures Governing

the Settlement of Disputes

ANNEX 3

Trade Policy Review Mechanism

On December 16, 1994, the President of the Philippines signed  the Instrument of
7

Ratification, declaring:

NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of

the Republic of the Philippines, after having seen and considered the
aforementioned Agreement Establishing the World Trade Organization
and the agreements and associated legal instruments included in
Annexes one (1), two (2) and three (3) of that Agreement which are
integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do
 hereby ratify and confirm the same and every Article and Clause thereof.

To emphasize, the WTO Agreement ratified by the President of the Philippines is

composed of the Agreement Proper and "the associated legal instruments included in
Annexes one (1), two (2) and three (3) of that Agreement which are integral parts
thereof."

On the other hand, the Final Act signed by Secretary Navarro embodies not only the
WTO Agreement (and its integral annexes aforementioned) but also (1) the Ministerial
Declarations and Decisions and (2) the Understanding on Commitments in Financial
Services. In his Memorandum dated May 13, 1996,  the Solicitor General describes these
8

two latter documents as follows:

The Ministerial Decisions and Declarations are twenty-five declarations

and decisions on a wide range of matters, such as measures in favor of
least developed countries, notification procedures, relationship of WTO
with the International Monetary Fund (IMF), and agreements on technical
barriers to trade and on dispute settlement.

The Understanding on Commitments in Financial Services dwell on,

among other things, standstill or limitations and qualifications of
commitments to existing non-conforming measures, market access,
national treatment, and definitions of non-resident supplier of financial
services, commercial presence and new financial service.

On December 29, 1994, the present petition was filed. After careful deliberation on
respondents' comment and petitioners' reply thereto, the Court resolved on December
12, 1995, to give due course to the petition, and the parties thereafter filed their
respective memoranda. The court also requested the Honorable Lilia R. Bautista, the
Philippine Ambassador to the United Nations stationed in Geneva, Switzerland, to submit
a paper, hereafter referred to as "Bautista Paper,"  for brevity, (1) providing a historical
9

background of and (2) summarizing the said agreements.

During the Oral Argument held on August 27, 1996, the Court directed:

(a) the petitioners to submit the (1) Senate Committee Report on the
matter in controversy and (2) the transcript of proceedings/hearings in the
Senate; and

(b) the Solicitor General, as counsel for respondents, to file (1) a list of
Philippine treaties signed prior to the Philippine adherence to the WTO
Agreement, which derogate from Philippine sovereignty and (2) copies of
the multi-volume WTO Agreement and other documents mentioned in the
Final Act, as soon as possible.

After receipt of the foregoing documents, the Court said it would consider the case
submitted for resolution. In a Compliance dated September 16, 1996, the Solicitor
General submitted a printed copy of the 36-volume Uruguay Round of Multilateral Trade
Negotiations, and in another Compliance dated October 24, 1996, he listed the various
"bilateral or multilateral treaties or international instruments involving derogation of
Philippine sovereignty." Petitioners, on the other hand, submitted their Compliance dated
January 28, 1997, on January 30, 1997.

The Issues

In their Memorandum dated March 11, 1996, petitioners summarized the issues as
follows:

A. Whether the petition presents a political question or is otherwise not

justiciable.

B. Whether the petitioner members of the Senate who participated in the

deliberations and voting leading to the concurrence are estopped from
impugning the validity of the Agreement Establishing the World Trade
Organization or of the validity of the concurrence.

C. Whether the provisions of the Agreement Establishing the World Trade

Organization contravene the provisions of Sec. 19, Article II, and Secs. 10
and 12, Article XII, all of the 1987 Philippine Constitution.

D. Whether provisions of the Agreement Establishing the World Trade

Organization unduly limit, restrict and impair Philippine sovereignty
specifically the legislative power which, under Sec. 2, Article VI, 1987
Philippine Constitution is "vested in the Congress of the Philippines";

E. Whether provisions of the Agreement Establishing the World Trade

Organization interfere with the exercise of judicial power.

F. Whether the respondent members of the Senate acted in grave abuse

of discretion amounting to lack or excess of jurisdiction when they voted
for concurrence in the ratification of the constitutionally-infirm Agreement
Establishing the World Trade Organization.

G. Whether the respondent members of the Senate acted in grave abuse

of discretion amounting to lack or excess of jurisdiction when they
concurred only in the ratification of the Agreement Establishing the World
Trade Organization, and not with the Presidential submission which
included the Final Act, Ministerial Declaration and Decisions, and the
Understanding on Commitments in Financial Services.

On the other hand, the Solicitor General as counsel for respondents "synthesized the
several issues raised by petitioners into the following": 
10

1. Whether or not the provisions of the "Agreement Establishing the World

Trade Organization and the Agreements and Associated Legal
Instruments included in Annexes one (1), two (2) and three (3) of that
agreement" cited by petitioners directly contravene or undermine the
letter, spirit and intent of Section 19, Article II and Sections 10 and 12,
Article XII of the 1987 Constitution.
 2. Whether or not certain provisions of the Agreement unduly limit, restrict
or impair the exercise of legislative power by Congress.

3. Whether or not certain provisions of the Agreement impair the exercise

of judicial power by this Honorable Court in promulgating the rules of
evidence.

4. Whether or not the concurrence of the Senate "in the ratification by the
President of the Philippines of the Agreement establishing the World
Trade Organization" implied rejection of the treaty embodied in the Final
Act.

By raising and arguing only four issues against the seven presented by petitioners, the
Solicitor General has effectively ignored three, namely: (1) whether the petition presents
a political question or is otherwise not justiciable; (2) whether petitioner-members of the
Senate (Wigberto E. Tañada and Anna Dominique Coseteng) are estopped from joining
this suit; and (3) whether the respondent-members of the Senate acted in grave abuse of
discretion when they voted for concurrence in the ratification of the WTO Agreement. The
foregoing notwithstanding, this Court resolved to deal with these three issues thus:

(1) The "political question" issue — being very fundamental and vital, and being a matter
that probes into the very jurisdiction of this Court to hear and decide this case — was
deliberated upon by the Court and will thus be ruled upon as the first issue;

(2) The matter of estoppel will not be taken up because this defense is waivable and the
respondents have effectively waived it by not pursuing it in any of their pleadings; in any
event, this issue, even if ruled in respondents' favor, will not cause the petition's dismissal
as there are petitioners other than the two senators, who are not vulnerable to the
defense of estoppel; and

(3) The issue of alleged grave abuse of discretion on the part of the respondent senators
will be taken up as an integral part of the disposition of the four issues raised by the
Solicitor General.

During its deliberations on the case, the Court noted that the respondents did not
question the locus standi of petitioners. Hence, they are also deemed to have waived the
benefit of such issue. They probably realized that grave constitutional issues,
expenditures of public funds and serious international commitments of the nation are
involved here, and that transcendental public interest requires that the substantive issues
be met head on and decided on the merits, rather than skirted or deflected by procedural
matters. 11

To recapitulate, the issues that will be ruled upon shortly are:

(1) DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY?

OTHERWISE STATED, DOES THE PETITION INVOLVE A POLITICAL
QUESTION OVER WHICH THIS COURT HAS NO JURISDICTION?

(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS

THREE ANNEXES CONTRAVENE SEC. 19, ARTICLE II, AND SECS. 10
 AND 12, ARTICLE XII, OF THE PHILIPPINE CONSTITUTION?

(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES

LIMIT, RESTRICT, OR IMPAIR THE EXERCISE OF LEGISLATIVE
POWER BY CONGRESS?

(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH

THE EXERCISE OF JUDICIAL POWER BY THIS COURT IN
PROMULGATING RULES ON EVIDENCE?

(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO

AGREEMENT AND ITS ANNEXES SUFFICIENT AND/OR VALID,
CONSIDERING THAT IT DID NOT INCLUDE THE FINAL ACT,
MINISTERIAL DECLARATIONS AND DECISIONS, AND THE
UNDERSTANDING ON COMMITMENTS IN FINANCIAL SERVICES?

The First Issue: Does the Court

Have Jurisdiction Over the Controversy?

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the
Constitution, the petition no doubt raises a justiciable controversy. Where an action of the
legislative branch is seriously alleged to have infringed the Constitution, it becomes not
only the right but in fact the duty of the judiciary to settle the dispute. "The question thus
posed is judicial rather than political. The duty (to adjudicate) remains to assure that the
supremacy of the Constitution is upheld."   Once a "controversy as to the application or
12

interpretation of a constitutional provision is raised before this Court (as in the instant
case), it becomes a legal issue which the Court is bound by constitutional mandate to
decide." 13

The jurisdiction of this Court to adjudicate the matters   raised in the petition is clearly set
14

out in the 1987 Constitution,   as follows:

15

Judicial power includes the duty of the courts of justice to settle actual
controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part
of any branch or instrumentality of the government.

The foregoing text emphasizes the judicial department's duty and power to strike down
grave abuse of discretion on the part of any branch or instrumentality of government
including Congress. It is an innovation in our political law.   As explained by former Chief
16

Justice Roberto Concepcion,   "the judiciary is the final arbiter on the question of whether
17

or not a branch of government or any of its officials has acted without jurisdiction or in
excess of jurisdiction or so capriciously as to constitute an abuse of discretion amounting
to excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on
matters of this nature."

As this Court has repeatedly and firmly emphasized in many cases,   it will not shirk,
18

digress from or abandon its sacred duty and authority to uphold the Constitution in
matters that involve grave abuse of discretion brought before it in appropriate cases,
committed by any officer, agency, instrumentality or department of the government.

As the petition alleges grave abuse of discretion and as there is no other plain, speedy or
adequate remedy in the ordinary course of law, we have no hesitation at all in holding
that this petition should be given due course and the vital questions raised therein ruled
upon under Rule 65 of the Rules of Court. Indeed, certiorari, prohibition
and mandamus are appropriate remedies to raise constitutional issues and to review
and/or prohibit/nullify, when proper, acts of legislative and executive officials. On this, we
have no equivocation.

We should stress that, in deciding to take jurisdiction over this petition, this Court will not
review the wisdom of the decision of the President and the Senate in enlisting the country
into the WTO, or pass upon the merits of trade liberalization as a policy espoused by said
international body. Neither will it rule on the propriety of the government's economic
policy of reducing/removing tariffs, taxes, subsidies, quantitative restrictions, and other
import/trade barriers. Rather, it will only exercise its constitutional duty "to determine
whether or not there had been a grave abuse of discretion amounting to lack or excess of
jurisdiction" on the part of the Senate in ratifying the WTO Agreement and its three
annexes.

Second Issue: The WTO Agreement

and Economic Nationalism

This is the lis mota, the main issue, raised by the petition.

Petitioners vigorously argue that the "letter, spirit and intent" of the Constitution
mandating "economic nationalism" are violated by the so-called "parity provisions" and
"national treatment" clauses scattered in various parts not only of the WTO Agreement
and its annexes but also in the Ministerial Decisions and Declarations and in the
Understanding on Commitments in Financial Services.

Specifically, the "flagship" constitutional provisions referred to are Sec 19, Article II, and
Secs. 10 and 12, Article XII, of the Constitution, which are worded as follows:

Article II

DECLARATION OF PRINCIPLES
AND STATE POLICIES

x x x           x x x          x x x

Sec. 19. The State shall develop a self-reliant and independent national
economy effectively controlled by Filipinos.

x x x           x x x          x x x

Article XII

NATIONAL ECONOMY AND PATRIMONY

 x x x           x x x          x x x

Sec. 10. . . . The Congress shall enact measures that will encourage the
formation and operation of enterprises whose capital is wholly owned by
Filipinos.

In the grant of rights, privileges, and concessions covering the national

economy and patrimony, the State shall give preference to qualified
Filipinos.

x x x           x x x          x x x

Sec. 12. The State shall promote the preferential use of Filipino labor,
domestic materials and locally produced goods, and adopt measures that
help make them competitive.

Petitioners aver that these sacred constitutional principles are desecrated by the
following WTO provisions quoted in their memorandum:  19

a) In the area of investment measures related to trade in goods (TRIMS,

for brevity):

Article 2

National Treatment and Quantitative Restrictions.

1. Without prejudice to other rights and obligations under

GATT 1994, no Member shall apply any TRIM that is
inconsistent with the provisions of Article II or Article XI of
GATT 1994.

2. An illustrative list of TRIMS that are inconsistent with

the obligations of general elimination of quantitative
restrictions provided for in paragraph I of Article XI of
GATT 1994 is contained in the Annex to this Agreement."
(Agreement on Trade-Related Investment Measures, Vol.
27, Uruguay Round, Legal Instruments, p. 22121,
emphasis supplied).

The Annex referred to reads as follows:

ANNEX

Illustrative List

1. TRIMS that are inconsistent with the obligation of national treatment

provided for in paragraph 4 of Article III of GATT 1994 include those
which are mandatory or enforceable under domestic law or under
administrative rulings, or compliance with which is necessary to obtain an
advantage, and which require:

(a) the purchase or use by an enterprise of products of

domestic origin or from any domestic source, whether
specified in terms of particular products, in terms of
volume or value of products, or in terms of proportion of
volume or value of its local production; or

(b) that an enterprise's purchases or use of imported

products be limited to an amount related to the volume or
value of local products that it exports.

2. TRIMS that are inconsistent with the obligations of general elimination

of quantitative restrictions provided for in paragraph 1 of Article XI of
GATT 1994 include those which are mandatory or enforceable under
domestic laws or under administrative rulings, or compliance with which is
necessary to obtain an advantage, and which restrict:

(a) the importation by an enterprise of products used in or

related to the local production that it exports;

(b) the importation by an enterprise of products used in or

related to its local production by restricting its access to
foreign exchange inflows attributable to the enterprise; or

(c) the exportation or sale for export specified in terms of

particular products, in terms of volume or value of
products, or in terms of a preparation of volume or value
of its local production. (Annex to the Agreement on Trade-
Related Investment Measures, Vol. 27, Uruguay Round
Legal Documents, p. 22125, emphasis supplied).

The paragraph 4 of Article III of GATT 1994 referred to is quoted as

follows:

The products of the territory of any contracting party

imported into the territory of any other contracting
party shall be accorded treatment no less favorable than
that accorded to like products of national origin in respect
of laws, regulations and requirements affecting their
internal sale, offering for sale, purchase, transportation,
distribution or use, the provisions of this paragraph shall
not prevent the application of differential internal
transportation charges which are based exclusively on the
economic operation of the means of transport and not on
the nationality of the product." (Article III, GATT 1947, as
amended by the Protocol Modifying Part II, and Article
XXVI of GATT, 14 September 1948, 62 UMTS 82-84 in
relation to paragraph 1(a) of the General Agreement on
Tariffs and Trade 1994, Vol. 1, Uruguay Round, Legal
 Instruments p. 177, emphasis supplied).

(b) In the area of trade related aspects of intellectual property rights

(TRIPS, for brevity):

Each Member shall accord to the nationals of other

Members treatment no less favourable than that it accords
to its own nationals with regard to the protection of
intellectual property. . . (par. 1 Article 3, Agreement on
Trade-Related Aspect of Intellectual Property rights, Vol.
31, Uruguay Round, Legal Instruments, p. 25432
(emphasis supplied)

(c) In the area of the General Agreement on Trade in Services:

National Treatment

1. In the sectors inscribed in its schedule, and subject to

any conditions and qualifications set out therein, each
Member shall accord to services and service suppliers of
any other Member, in respect of all measures affecting the
supply of services, treatment no less favourable than it
accords to its own like services and service suppliers.

2. A Member may meet the requirement of paragraph I by

according to services and service suppliers of any other
Member, either formally suppliers of any other Member,
either formally identical treatment or formally different
treatment to that it accords to its own like services and
service suppliers.

3. Formally identical or formally different treatment shall

be considered to be less favourable if it modifies the
conditions of completion in favour of services or service
suppliers of the Member compared to like services or
service suppliers of any other Member. (Article XVII,
General Agreement on Trade in Services, Vol. 28,
Uruguay Round Legal Instruments, p. 22610 emphasis
supplied).

It is petitioners' position that the foregoing "national treatment" and "parity provisions" of
the WTO Agreement "place nationals and products of member countries on the same
footing as Filipinos and local products," in contravention of the "Filipino First" policy of the
Constitution. They allegedly render meaningless the phrase "effectively controlled by
Filipinos." The constitutional conflict becomes more manifest when viewed in the context
of the clear duty imposed on the Philippines as a WTO member to ensure the conformity
of its laws, regulations and administrative procedures with its obligations as provided in
the annexed agreements.   Petitioners further argue that these provisions contravene
20

constitutional limitations on the role exports play in national development and negate the
preferential treatment accorded to Filipino labor, domestic materials and locally produced
goods.

On the other hand, respondents through the Solicitor General counter (1) that such
Charter provisions are not self-executing and merely set out general policies; (2) that
these nationalistic portions of the Constitution invoked by petitioners should not be read
in isolation but should be related to other relevant provisions of Art. XII, particularly Secs.
1 and 13 thereof; (3) that read properly, the cited WTO clauses do not conflict with
Constitution; and (4) that the WTO Agreement contains sufficient provisions to protect
developing countries like the Philippines from the harshness of sudden trade
liberalization.

We shall now discuss and rule on these arguments.

Declaration of Principles
Not Self-Executing

By its very title, Article II of the Constitution is a "declaration of principles and state
policies." The counterpart of this article in the 1935 Constitution   is called the "basic
21

political creed of the nation" by Dean Vicente Sinco.   These principles in Article II are not
22

intended to be self-executing principles ready for enforcement through the courts.   They
23

are used by the judiciary as aids or as guides in the exercise of its power of judicial
review, and by the legislature in its enactment of laws. As held in the leading case
of Kilosbayan, Incorporated vs. Morato,   the principles and state policies enumerated in
24

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."

In the same light, we held in Basco vs. Pagcor   that broad constitutional principles need
25

legislative enactments to implement the, thus:

On petitioners' allegation that P.D. 1869 violates Sections 11 (Personal

Dignity) 12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social
Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of
the 1987 Constitution, suffice it to state also that these are merely
statements of principles and policies. As such, they are basically not self-
executing, meaning a law should be passed by Congress to clearly define
and effectuate such principles.

In general, therefore, the 1935 provisions were not

intended to be self-executing principles ready for
enforcement through the courts. They were rather
directives addressed to the executive and to the
legislature. If the executive and the legislature failed to
heed the directives of the article, the available remedy
was not judicial but political. The electorate could express
their displeasure with the failure of the executive and the
legislature through the language of the ballot. (Bernas,
Vol. II, p. 2).

The reasons for denying a cause of action to an alleged infringement of board

constitutional principles are sourced from basic considerations of due process and the
lack of judicial authority to wade "into the uncharted ocean of social and economic policy
making." Mr. Justice Florentino P. Feliciano in his concurring opinion in Oposa
vs. Factoran, Jr.,   explained these reasons as follows:
26

My suggestion is simply that petitioners must, before the trial court, show
a more specific legal right — a right cast in language of a significantly
lower order of generality than Article II (15) of the Constitution — that is or
may be violated by the actions, or failures to act, imputed to the public
respondent by petitioners so that the trial court can validly render
judgment grating all or part of the relief prayed for. To my mind, the court
should be understood as simply saying that such a more specific legal
right or rights may well exist in our corpus of law, considering the general
policy principles found in the Constitution and the existence of the
Philippine Environment Code, and that the trial court should have given
petitioners an effective opportunity so to demonstrate, instead of aborting
the proceedings on a motion to dismiss.

It seems to me important that the legal right which is an essential

component of a cause of action be a specific, operable legal right, rather
than a constitutional or statutory policy, for at least two (2) reasons. One
is that unless the legal right claimed to have been violated or disregarded
is given specification in operational terms, defendants may well be unable
to defend themselves intelligently and effectively; in other words, there
are due process dimensions to this matter.

The second is a broader-gauge consideration — where a specific

violation of law or applicable regulation is not alleged or proved,
petitioners can be expected to fall back on the expanded conception of
judicial power in the second paragraph of Section 1 of Article VIII of the
Constitution which reads:

Sec. 1. . . .

Judicial power includes the duty of the courts of justice to

settle actual controversies involving rights which are
legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of
any branch or instrumentality of the Government.
(Emphasis supplied)

When substantive standards as general as "the right to a balanced and

healthy ecology" and "the right to health" are combined with remedial
standards as broad ranging as "a grave abuse of discretion amounting to
lack or excess of jurisdiction," the result will be, it is respectfully
submitted, to propel courts into the uncharted ocean of social and
economic policy making. At least in respect of the vast area of
environmental protection and management, our courts have no claim to
special technical competence and experience and professional
qualification. Where no specific, operable norms and standards are
shown to exist, then the policy making departments — the legislative and
 executive departments — must be given a real and effective opportunity
to fashion and promulgate those norms and standards, and to implement
them before the courts should intervene.

Economic Nationalism Should Be Read with

Other Constitutional Mandates to Attain
Balanced Development of Economy

On the other hand, Secs. 10 and 12 of Article XII, apart from merely laying down general
principles relating to the national economy and patrimony, should be read and
understood in relation to the other sections in said article, especially Secs. 1 and 13
thereof which read:

Sec. 1. The goals of the national economy are a more equitable

distribution of opportunities, income, and wealth; a sustained increase in
the amount of goods and services produced by the nation for the benefit
of the people; and an expanding productivity as the key to raising the
quality of life for all especially the underprivileged.

The State shall promote industrialization and full employment based on

sound agricultural development and agrarian reform, through industries
that make full and efficient use of human and natural resources, and
which are competitive in both domestic and foreign markets. However, the
State shall protect Filipino enterprises against unfair foreign competition
and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of
the country shall be given optimum opportunity to develop. . . .

xxx xxx xxx

Sec. 13. The State shall pursue a trade policy that serves the general
welfare and utilizes all forms and arrangements of exchange on the basis
of equality and reciprocity.

As pointed out by the Solicitor General, Sec. 1 lays down the basic goals of national
economic development, as follows:

1. A more equitable distribution of opportunities, income and wealth;

2. A sustained increase in the amount of goods and services provided by the nation for
the benefit of the people; and

3. An expanding productivity as the key to raising the quality of life for all especially the
underprivileged.

With these goals in context, the Constitution then ordains the ideals of economic
nationalism (1) by expressing preference in favor of qualified Filipinos "in the grant of
rights, privileges and concessions covering the national economy and patrimony"   and in
27

the use of "Filipino labor, domestic materials and locally-produced goods"; (2) by
mandating the State to "adopt measures that help make them competitive;   and (3) by
28

requiring the State to "develop a self-reliant and independent national economy

effectively controlled by Filipinos."   In similar language, the Constitution takes into
29

account the realities of the outside world as it requires the pursuit of "a trade policy that
serves the general welfare and utilizes all forms and arrangements of exchange on the
basis of equality ad reciprocity";   and speaks of industries "which are competitive in both
30

domestic and foreign markets" as well as of the protection of "Filipino enterprises

against unfair foreign competition and trade practices."

It is true that in the recent case of Manila Prince Hotel vs. Government Service Insurance
System, et al.,   this Court held that "Sec. 10, second par., Art. XII of the 1987
31

Constitution is a mandatory, positive command which is complete in itself and which

needs no further guidelines or implementing laws or rule for its enforcement. From its
very words the provision does not require any legislation to put it in operation. It is per
se judicially enforceable." However, as the constitutional provision itself states, it is
enforceable only in regard to "the grants of rights, privileges and concessions covering
national economy and patrimony" and not to every aspect of trade and commerce. It
refers to exceptions rather than the rule. The issue here is not whether this paragraph of
Sec. 10 of Art. XII is self-executing or not. Rather, the issue is whether, as a rule, there
are enough balancing provisions in the Constitution to allow the Senate to ratify the
Philippine concurrence in the WTO Agreement. And we hold that there are.

All told, while the Constitution indeed mandates a bias in favor of Filipino goods, services,
labor and enterprises, at the same time, it recognizes the need for business exchange
with the rest of the world on the bases of equality and reciprocity and limits protection of
Filipino enterprises only against foreign competition and trade practices that are
unfair.   In other words, the Constitution did not intend to pursue an isolationist policy. It
32

did not shut out foreign investments, goods and services in the development of the
Philippine economy. While the Constitution does not encourage the unlimited entry of
foreign goods, services and investments into the country, it does not prohibit them either.
In fact, it allows an exchange on the basis of equality and reciprocity, frowning only on
foreign competition that is unfair.

WTO Recognizes Need to

Protect Weak Economies

Upon the other hand, respondents maintain that the WTO itself has some built-in
advantages to protect weak and developing economies, which comprise the vast majority
of its members. Unlike in the UN where major states have permanent seats and veto
powers in the Security Council, in the WTO, decisions are made on the basis of
sovereign equality, with each member's vote equal in weight to that of any other. There is
no WTO equivalent of the UN Security Council.

WTO decides by consensus whenever possible, otherwise, decisions of

the Ministerial Conference and the General Council shall be taken by the
majority of the votes cast, except in cases of interpretation of the
Agreement or waiver of the obligation of a member which would require
three fourths vote. Amendments would require two thirds vote in general.
Amendments to MFN provisions and the Amendments provision will
require assent of all members. Any member may withdraw from the
Agreement upon the expiration of six months from the date of notice of
 withdrawals.  33

Hence, poor countries can protect their common interests more effectively through the
WTO than through one-on-one negotiations with developed countries. Within the WTO,
developing countries can form powerful blocs to push their economic agenda more
decisively than outside the Organization. This is not merely a matter of practical alliances
but a negotiating strategy rooted in law. Thus, the basic principles underlying the WTO
Agreement recognize the need of developing countries like the Philippines to "share in
the growth in international trade commensurate with the needs of their economic
development." These basic principles are found in the preamble   of the WTO Agreement
34

as follows:

The Parties to this Agreement,

Recognizing that their relations in the field of trade and economic

endeavour should be conducted with a view to raising standards of living,
ensuring full employment and a large and steadily growing volume of real
income and effective demand, and expanding the production of and trade
in goods and services, while allowing for the optimal use of the world's
resources in accordance with the objective of sustainable development,
seeking both to protect and preserve the environment and to enhance the
means for doing so in a manner consistent with their respective needs
and concerns at different levels of economic development,

Recognizing further that there is need for positive efforts designed to

ensure that developing countries, and especially the least developed
among them, secure a share in the growth in international trade
commensurate with the needs of their economic development,

Being desirous of contributing to these objectives by entering into

reciprocal and mutually advantageous arrangements directed to the
substantial reduction of tariffs and other barriers to trade and to
the elimination of discriminatory treatment in international trade relations,

Resolved, therefore, to develop an integrated, more viable and durable

multilateral trading system encompassing the General Agreement on
Tariffs and Trade, the results of past trade liberalization efforts, and all of
the results of the Uruguay Round of Multilateral Trade Negotiations,

Determined to preserve the basic principles and to further the objectives

underlying this multilateral trading system, . . . (emphasis supplied.)

Specific WTO Provisos

Protect Developing Countries

So too, the Solicitor General points out that pursuant to and consistent with the foregoing
basic principles, the WTO Agreement grants developing countries a more lenient
treatment, giving their domestic industries some protection from the rush of foreign
competition. Thus, with respect to tariffs in general, preferential treatment is given to
developing countries in terms of the amount of tariff reduction and the period within
which the reduction is to be spread out. Specifically, GATT requires an average
tariff reduction rate of 36% for developed countries to be effected within a period of six
(6) years while developing countries — including the Philippines — are required to effect
an average tariff reduction of only 24% within ten (10) years.

In respect to domestic subsidy, GATT requires developed countries to reduce domestic

support to agricultural products by 20% over six (6) years, as compared to only 13% for
developing countries to be effected within ten (10) years.

In regard to export subsidy for agricultural products, GATT requires developed countries
to reduce their budgetary outlays for export subsidy by 36% and export volumes
receiving export subsidy by 21% within a period of six (6) years. For developing
countries, however, the reduction rate is only two-thirds of that prescribed for developed
countries and a longer period of ten (10) years within which to effect such reduction.

Moreover, GATT itself has provided built-in protection from unfair foreign competition and
trade practices including anti-dumping measures, countervailing measures and
safeguards against import surges. Where local businesses are jeopardized by unfair
foreign competition, the Philippines can avail of these measures. There is hardly
therefore any basis for the statement that under the WTO, local industries and
enterprises will all be wiped out and that Filipinos will be deprived of control of the
economy. Quite the contrary, the weaker situations of developing nations like the
Philippines have been taken into account; thus, there would be no basis to say that in
joining the WTO, the respondents have gravely abused their discretion. True, they have
made a bold decision to steer the ship of state into the yet uncharted sea of economic
liberalization. But such decision cannot be set aside on the ground of grave abuse of
discretion, simply because we disagree with it or simply because we believe only in other
economic policies. As earlier stated, the Court in taking jurisdiction of this case will not
pass upon the advantages and disadvantages of trade liberalization as an economic
policy. It will only perform its constitutional duty of determining whether the Senate
committed grave abuse of discretion.

Constitution Does Not

Rule Out Foreign Competition

Furthermore, the constitutional policy of a "self-reliant and independent national

economy"   does not necessarily rule out the entry of foreign investments, goods and
35

services. It contemplates neither "economic seclusion" nor "mendicancy in the

international community." As explained by Constitutional Commissioner Bernardo
Villegas, sponsor of this constitutional policy:

Economic self-reliance is a primary objective of a developing country that

is keenly aware of overdependence on external assistance for even its
most basic needs. It does not mean autarky or economic seclusion;
rather, it means avoiding mendicancy in the international community.
Independence refers to the freedom from undue foreign control of the
national economy, especially in such strategic industries as in the
development of natural resources and public utilities. 36

The WTO reliance on "most favored nation," "national treatment," and "trade without
discrimination" cannot be struck down as unconstitutional as in fact they are rules of
equality and reciprocity that apply to all WTO members. Aside from envisioning a trade
policy based on "equality and reciprocity,"   the fundamental law encourages industries
37

that are "competitive in both domestic and foreign markets," thereby demonstrating a
clear policy against a sheltered domestic trade environment, but one in favor of the
gradual development of robust industries that can compete with the best in the foreign
markets. Indeed, Filipino managers and Filipino enterprises have shown capability and
tenacity to compete internationally. And given a free trade environment, Filipino
entrepreneurs and managers in Hongkong have demonstrated the Filipino capacity to
grow and to prosper against the best offered under a policy of laissez faire.

Constitution Favors Consumers,

Not Industries or Enterprises

The Constitution has not really shown any unbalanced bias in favor of any business or
enterprise, nor does it contain any specific pronouncement that Filipino companies
should be pampered with a total proscription of foreign competition. On the other hand,
respondents claim that WTO/GATT aims to make available to the Filipino consumer the
best goods and services obtainable anywhere in the world at the most reasonable prices.
Consequently, the question boils down to whether WTO/GATT will favor the general
welfare of the public at large.

Will adherence to the WTO treaty bring this ideal (of favoring the general welfare) to
reality?

Will WTO/GATT succeed in promoting the Filipinos' general welfare because it will — as
promised by its promoters — expand the country's exports and generate more
employment?

Will it bring more prosperity, employment, purchasing power and quality products at the
most reasonable rates to the Filipino public?

The responses to these questions involve "judgment calls" by our policy makers, for
which they are answerable to our people during appropriate electoral exercises. Such
questions and the answers thereto are not subject to judicial pronouncements based on
grave abuse of discretion.

Constitution Designed to Meet

Future Events and Contingencies

No doubt, the WTO Agreement was not yet in existence when the Constitution was
drafted and ratified in 1987. That does not mean however that the Charter is necessarily
flawed in the sense that its framers might not have anticipated the advent of a borderless
world of business. By the same token, the United Nations was not yet in existence when
the 1935 Constitution became effective. Did that necessarily mean that the then
Constitution might not have contemplated a diminution of the absoluteness of sovereignty
when the Philippines signed the UN Charter, thereby effectively surrendering part of its
control over its foreign relations to the decisions of various UN organs like the Security
Council?

It is not difficult to answer this question. Constitutions are designed to meet not only the
vagaries of contemporary events. They should be interpreted to cover even future and
unknown circumstances. It is to the credit of its drafters that a Constitution can withstand
the assaults of bigots and infidels but at the same time bend with the refreshing winds of
change necessitated by unfolding events. As one eminent political law writer and
respected jurist   explains:
38

The Constitution must be quintessential rather than superficial, the root

and not the blossom, the base and frame-work only of the edifice that is
yet to rise. It is but the core of the dream that must take shape, not in a
twinkling by mandate of our delegates, but slowly "in the crucible of
Filipino minds and hearts," where it will in time develop its sinews and
gradually gather its strength and finally achieve its substance. In fine, the
Constitution cannot, like the goddess Athena, rise full-grown from the
brow of the Constitutional Convention, nor can it conjure by mere fiat an
instant Utopia. It must grow with the society it seeks to re-structure and
march apace with the progress of the race, drawing from the vicissitudes
of history the dynamism and vitality that will keep it, far from becoming a
petrified rule, a pulsing, living law attuned to the heartbeat of the nation.

Third Issue: The WTO Agreement and Legislative Power

The WTO Agreement provides that "(e)ach Member shall ensure the conformity of its
laws, regulations and administrative procedures with its obligations as provided in the
annexed Agreements."   Petitioners maintain that this undertaking "unduly limits, restricts
39

and impairs Philippine sovereignty, specifically the legislative power which under Sec. 2,
Article VI of the 1987 Philippine Constitution is vested in the Congress of the Philippines.
It is an assault on the sovereign powers of the Philippines because this means that
Congress could not pass legislation that will be good for our national interest and general
welfare if such legislation will not conform with the WTO Agreement, which not only
relates to the trade in goods . . . but also to the flow of investments and money . . . as
well as to a whole slew of agreements on socio-cultural matters . . .  40

More specifically, petitioners claim that said WTO proviso derogates from the power to
tax, which is lodged in the Congress.   And while the Constitution allows Congress to
41

authorize the President to fix tariff rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts, such authority is subject to "specified limits and . . .
such limitations and restrictions" as Congress may provide,   as in fact it did under Sec.
42

401 of the Tariff and Customs Code.

Sovereignty Limited by
International Law and Treaties

This Court notes and appreciates the ferocity and passion by which petitioners stressed
their arguments on this issue. However, while sovereignty has traditionally been deemed
absolute and all-encompassing on the domestic level, it is however subject to restrictions
and limitations voluntarily agreed to by the Philippines, expressly or impliedly, as a
member of the family of nations. Unquestionably, the Constitution did not envision a
hermit-type isolation of the country from the rest of the world. In its Declaration of
Principles and State Policies, the Constitution "adopts the generally accepted principles
of international law as part of the law of the land, and adheres to the policy of peace,
equality, justice, freedom, cooperation and amity, with all nations."   By the doctrine of
43
incorporation, the country is bound by generally accepted principles of international law,
which are considered to be automatically part of our own laws.   One of the oldest and
44

most fundamental rules in international law is pacta sunt servanda — international

agreements must be performed in good faith. "A treaty engagement is not a mere moral
obligation but creates a legally binding obligation on the parties . . . A state which has
contracted valid international obligations is bound to make in its legislations such
modifications as may be necessary to ensure the fulfillment of the obligations
undertaken."  45

By their inherent nature, treaties really limit or restrict the absoluteness of sovereignty. By
their voluntary act, nations may surrender some aspects of their state power in exchange
for greater benefits granted by or derived from a convention or pact. After all, states, like
individuals, live with coequals, and in pursuit of mutually covenanted objectives and
benefits, they also commonly agree to limit the exercise of their otherwise absolute rights.
Thus, treaties have been used to record agreements between States concerning such
widely diverse matters as, for example, the lease of naval bases, the sale or cession of
territory, the termination of war, the regulation of conduct of hostilities, the formation of
alliances, the regulation of commercial relations, the settling of claims, the laying down of
rules governing conduct in peace and the establishment of international
organizations.   The sovereignty of a state therefore cannot in fact and in reality be
46

considered absolute. Certain restrictions enter into the picture: (1) limitations imposed by
the very nature of membership in the family of nations and (2) limitations imposed by
treaty stipulations. As aptly put by John F. Kennedy, "Today, no nation can build its
destiny alone. The age of self-sufficient nationalism is over. The age of interdependence
is here." 
47

UN Charter and Other Treaties

Limit Sovereignty

Thus, when the Philippines joined the United Nations as one of its 51 charter members, it
consented to restrict its sovereign rights under the "concept of sovereignty as auto-
limitation." -A Under Article 2 of the UN Charter, "(a)ll members shall give the United
47

Nations every assistance in any action it takes in accordance with the present Charter,
and shall refrain from giving assistance to any state against which the United Nations is
taking preventive or enforcement action." Such assistance includes payment of its
corresponding share not merely in administrative expenses but also in expenditures for
the peace-keeping operations of the organization. In its advisory opinion of July 20, 1961,
the International Court of Justice held that money used by the United Nations Emergency
Force in the Middle East and in the Congo were "expenses of the United Nations" under
Article 17, paragraph 2, of the UN Charter. Hence, all its members must bear their
corresponding share in such expenses. In this sense, the Philippine Congress is
restricted in its power to appropriate. It is compelled to appropriate funds whether it
agrees with such peace-keeping expenses or not. So too, under Article 105 of the said
Charter, the UN and its representatives enjoy diplomatic privileges and immunities,
thereby limiting again the exercise of sovereignty of members within their own territory.
Another example: although "sovereign equality" and "domestic jurisdiction" of all
members are set forth as underlying principles in the UN Charter, such provisos are
however subject to enforcement measures decided by the Security Council for the
maintenance of international peace and security under Chapter VII of the Charter. A final
example: under Article 103, "(i)n the event of a conflict between the obligations of the
Members of the United Nations under the present Charter and their obligations under any
other international agreement, their obligation under the present charter shall prevail,"
thus unquestionably denying the Philippines — as a member — the sovereign power to
make a choice as to which of conflicting obligations, if any, to honor.

Apart from the UN Treaty, the Philippines has entered into many other international pacts
— both bilateral and multilateral — that involve limitations on Philippine sovereignty.
These are enumerated by the Solicitor General in his Compliance dated October 24,
1996, as follows:

(a) Bilateral convention with the United States regarding taxes on income,
where the Philippines agreed, among others, to exempt from tax, income
received in the Philippines by, among others, the Federal Reserve Bank
of the United States, the Export/Import Bank of the United States, the
Overseas Private Investment Corporation of the United States. Likewise,
in said convention, wages, salaries and similar remunerations paid by the
United States to its citizens for labor and personal services performed by
them as employees or officials of the United States are exempt from
income tax by the Philippines.

(b) Bilateral agreement with Belgium, providing, among others, for the
avoidance of double taxation with respect to taxes on income.

(c) Bilateral convention with the Kingdom of Sweden for the avoidance of
double taxation.

(d) Bilateral convention with the French Republic for the avoidance of
double taxation.

(e) Bilateral air transport agreement with Korea where the Philippines
agreed to exempt from all customs duties, inspection fees and other
duties or taxes aircrafts of South Korea and the regular equipment, spare
parts and supplies arriving with said aircrafts.

(f) Bilateral air service agreement with Japan, where the Philippines
agreed to exempt from customs duties, excise taxes, inspection fees and
other similar duties, taxes or charges fuel, lubricating oils, spare parts,
regular equipment, stores on board Japanese aircrafts while on Philippine
soil.

(g) Bilateral air service agreement with Belgium where the Philippines
granted Belgian air carriers the same privileges as those granted to
Japanese and Korean air carriers under separate air service agreements.

(h) Bilateral notes with Israel for the abolition of transit and visitor visas
where the Philippines exempted Israeli nationals from the requirement of
obtaining transit or visitor visas for a sojourn in the Philippines not
exceeding 59 days.

(i) Bilateral agreement with France exempting French nationals from the
requirement of obtaining transit and visitor visa for a sojourn not
 exceeding 59 days.

(j) Multilateral Convention on Special Missions, where the Philippines

agreed that premises of Special Missions in the Philippines are inviolable
and its agents can not enter said premises without consent of the Head of
Mission concerned. Special Missions are also exempted from customs
duties, taxes and related charges.

(k) Multilateral convention on the Law of Treaties. In this convention, the

Philippines agreed to be governed by the Vienna Convention on the Law
of Treaties.

(l) Declaration of the President of the Philippines accepting compulsory

jurisdiction of the International Court of Justice. The International Court of
Justice has jurisdiction in all legal disputes concerning the interpretation
of a treaty, any question of international law, the existence of any fact
which, if established, would constitute a breach "of international
obligation."

In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its
sovereign powers of taxation, eminent domain and police power. The underlying
consideration in this partial surrender of sovereignty is the reciprocal commitment of the
other contracting states in granting the same privilege and immunities to the Philippines,
its officials and its citizens. The same reciprocity characterizes the Philippine
commitments under WTO-GATT.

International treaties, whether relating to nuclear disarmament, human

rights, the environment, the law of the sea, or trade, constrain domestic
political sovereignty through the assumption of external obligations. But
unless anarchy in international relations is preferred as an alternative, in
most cases we accept that the benefits of the reciprocal obligations
involved outweigh the costs associated with any loss of political
sovereignty. (T)rade treaties that structure relations by reference to
durable, well-defined substantive norms and objective dispute resolution
procedures reduce the risks of larger countries exploiting raw economic
power to bully smaller countries, by subjecting power relations to some
form of legal ordering. In addition, smaller countries typically stand to gain
disproportionately from trade liberalization. This is due to the simple fact
that liberalization will provide access to a larger set of potential new
trading relationship than in case of the larger country gaining enhanced
success to the smaller country's market.  48

The point is that, as shown by the foregoing treaties, a portion of sovereignty may be
waived without violating the Constitution, based on the rationale that the Philippines
"adopts the generally accepted principles of international law as part of the law of the
land and adheres to the policy of . . . cooperation and amity with all nations."

Fourth Issue: The WTO Agreement and Judicial Power

Petitioners aver that paragraph 1, Article 34 of the General Provisions and Basic
Principles of the Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS)   intrudes on the power of the Supreme Court to promulgate rules concerning
49

pleading, practice and procedures.  50

To understand the scope and meaning of Article 34, TRIPS,   it will be fruitful to restate
51

its full text as follows:

Article 34

Process Patents: Burden of Proof

1. For the purposes of civil proceedings in respect of the infringement of

the rights of the owner referred to in paragraph 1 (b) of Article 28, if the
subject matter of a patent is a process for obtaining a product, the judicial
authorities shall have the authority to order the defendant to prove that
the process to obtain an identical product is different from the patented
process. Therefore, Members shall provide, in at least one of the following
circumstances, that any identical product when produced without the
consent of the patent owner shall, in the absence of proof to the contrary,
be deemed to have been obtained by the patented process:

(a) if the product obtained by the patented process is new;

(b) if there is a substantial likelihood that the identical

product was made by the process and the owner of the
patent has been unable through reasonable efforts to
determine the process actually used.

2. Any Member shall be free to provide that the burden of proof indicated
in paragraph 1 shall be on the alleged infringer only if the condition
referred to in subparagraph (a) is fulfilled or only if the condition referred
to in subparagraph (b) is fulfilled.

3. In the adduction of proof to the contrary, the legitimate interests of

defendants in protecting their manufacturing and business secrets shall
be taken into account.

From the above, a WTO Member is required to provide a rule of disputable (not the
words "in the absence of proof to the contrary") presumption that a product shown to be
identical to one produced with the use of a patented process shall be deemed to have
been obtained by the (illegal) use of the said patented process, (1) where such product
obtained by the patented product is new, or (2) where there is "substantial likelihood" that
the identical product was made with the use of the said patented process but the owner
of the patent could not determine the exact process used in obtaining such identical
product. Hence, the "burden of proof" contemplated by Article 34 should actually be
understood as the duty of the alleged patent infringer to overthrow such presumption.
Such burden, properly understood, actually refers to the "burden of evidence" (burden of
going forward) placed on the producer of the identical (or fake) product to show that his
product was produced without the use of the patented process.

The foregoing notwithstanding, the patent owner still has the "burden of proof" since,
regardless of the presumption provided under paragraph 1 of Article 34, such owner still
has to introduce evidence of the existence of the alleged identical product, the fact that it
is "identical" to the genuine one produced by the patented process and the fact of
"newness" of the genuine product or the fact of "substantial likelihood" that the identical
product was made by the patented process.

The foregoing should really present no problem in changing the rules of evidence as the
present law on the subject, Republic Act No. 165, as amended, otherwise known as the
Patent Law, provides a similar presumption in cases of infringement of patented design
or utility model, thus:

Sec. 60. Infringement. — Infringement of a design patent or of a patent for

utility model shall consist in unauthorized copying of the patented design
or utility model for the purpose of trade or industry in the article or product
and in the making, using or selling of the article or product copying the
patented design or utility model. Identity or substantial identity with the
patented design or utility model shall constitute evidence of copying.
(emphasis supplied)

Moreover, it should be noted that the requirement of Article 34 to provide a disputable

presumption applies only if (1) the product obtained by the patented process in NEW or
(2) there is a substantial likelihood that the identical product was made by the process
and the process owner has not been able through reasonable effort to determine the
process used. Where either of these two provisos does not obtain, members shall be free
to determine the appropriate method of implementing the provisions of TRIPS within their
own internal systems and processes.

By and large, the arguments adduced in connection with our disposition of the third issue
— derogation of legislative power — will apply to this fourth issue also. Suffice it to say
that the reciprocity clause more than justifies such intrusion, if any actually exists.
Besides, Article 34 does not contain an unreasonable burden, consistent as it is with due
process and the concept of adversarial dispute settlement inherent in our judicial system.

So too, since the Philippine is a signatory to most international conventions on patents,

trademarks and copyrights, the adjustment in legislation and rules of procedure will not
be substantial. 52

Fifth Issue: Concurrence Only in the WTO Agreement and

Not in Other Documents Contained in the Final Act

Petitioners allege that the Senate concurrence in the WTO Agreement and its annexes —
but not in the other documents referred to in the Final Act, namely the Ministerial
Declaration and Decisions and the Understanding on Commitments in Financial Services
— is defective and insufficient and thus constitutes abuse of discretion. They submit that
such concurrence in the WTO Agreement alone is flawed because it is in effect a
rejection of the Final Act, which in turn was the document signed by Secretary Navarro, in
representation of the Republic upon authority of the President. They contend that the
second letter of the President to the Senate   which enumerated what constitutes the
53

Final Act should have been the subject of concurrence of the Senate.

"A final act, sometimes called protocol de cloture, is an instrument which records the

winding up of the proceedings of a diplomatic conference and usually includes a
reproduction of the texts of treaties, conventions, recommendations and other acts
agreed upon and signed by the plenipotentiaries attending the conference."   It is not the
54

treaty itself. It is rather a summary of the proceedings of a protracted conference which

may have taken place over several years. The text of the "Final Act Embodying the
Results of the Uruguay Round of Multilateral Trade Negotiations" is contained in just one
page   in Vol. I of the 36-volume Uruguay Round of Multilateral Trade Negotiations. By
55

signing said Final Act, Secretary Navarro as representative of the Republic of the
Philippines undertook:

(a) to submit, as appropriate, the WTO Agreement for the consideration of

their respective competent authorities with a view to seeking approval of
the Agreement in accordance with their procedures; and

(b) to adopt the Ministerial Declarations and Decisions.

The assailed Senate Resolution No. 97 expressed concurrence in exactly what the Final
Act required from its signatories, namely, concurrence of the Senate in the WTO
Agreement.

The Ministerial Declarations and Decisions were deemed adopted without need for
ratification. They were approved by the ministers by virtue of Article XXV: 1 of GATT
which provides that representatives of the members can meet "to give effect to those
provisions of this Agreement which invoke joint action, and generally with a view to
facilitating the operation and furthering the objectives of this Agreement." 
56

The Understanding on Commitments in Financial Services also approved in Marrakesh

does not apply to the Philippines. It applies only to those 27 Members which "have
indicated in their respective schedules of commitments on standstill, elimination of
monopoly, expansion of operation of existing financial service suppliers, temporary entry
of personnel, free transfer and processing of information, and national treatment with
respect to access to payment, clearing systems and refinancing available in the normal
course of business."57

On the other hand, the WTO Agreement itself expresses what multilateral agreements
are deemed included as its integral parts,   as follows:
58

Article II

Scope of the WTO

1. The WTO shall provide the common institutional frame-work for the
conduct of trade relations among its Members in matters to the
agreements and associated legal instruments included in the Annexes to
this Agreement.

2. The Agreements and associated legal instruments included in Annexes

1, 2, and 3, (hereinafter referred to as "Multilateral Agreements") are
integral parts of this Agreement, binding on all Members.
 3. The Agreements and associated legal instruments included in Annex 4
(hereinafter referred to as "Plurilateral Trade Agreements") are also part
of this Agreement for those Members that have accepted them, and are
binding on those Members. The Plurilateral Trade Agreements do not
create either obligation or rights for Members that have not accepted
them.

4. The General Agreement on Tariffs and Trade 1994 as specified in

annex 1A (hereinafter referred to as "GATT 1994") is legally distinct from
the General Agreement on Tariffs and Trade, dated 30 October 1947,
annexed to the Final Act adopted at the conclusion of the Second Session
of the Preparatory Committee of the United Nations Conference on Trade
and Employment, as subsequently rectified, amended or modified
(hereinafter referred to as "GATT 1947").

It should be added that the Senate was well-aware of what it was concurring in as shown
by the members' deliberation on August 25, 1994. After reading the letter of President
Ramos dated August 11, 1994,   the senators
59

of the Republic minutely dissected what the Senate was concurring in, as follows:  60

THE CHAIRMAN: Yes. Now, the question of the validity of the submission
came up in the first day hearing of this Committee yesterday. Was the
observation made by Senator Tañada that what was submitted to the
Senate was not the agreement on establishing the World Trade
Organization by the final act of the Uruguay Round which is not the same
as the agreement establishing the World Trade Organization? And on that
basis, Senator Tolentino raised a point of order which, however, he
agreed to withdraw upon understanding that his suggestion for an
alternative solution at that time was acceptable. That suggestion was to
treat the proceedings of the Committee as being in the nature of briefings
for Senators until the question of the submission could be clarified.

And so, Secretary Romulo, in effect, is the President submitting a new . . .

is he making a new submission which improves on the clarity of the first
submission?

MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and there
should be no misunderstanding, it was his intention to clarify all matters
by giving this letter.

THE CHAIRMAN: Thank you.

Can this Committee hear from Senator Tañada and later on Senator
Tolentino since they were the ones that raised this question yesterday?

Senator Tañada, please.

SEN. TAÑADA: Thank you, Mr. Chairman.

Based on what Secretary Romulo has read, it would now clearly appear
that what is being submitted to the Senate for ratification is not the Final
Act of the Uruguay Round, but rather the Agreement on the World Trade
Organization as well as the Ministerial Declarations and Decisions, and
the Understanding and Commitments in Financial Services.

I am now satisfied with the wording of the new submission of President

Ramos.

SEN. TAÑADA. . . . of President Ramos, Mr. Chairman.

THE CHAIRMAN. Thank you, Senator Tañada. Can we hear from

Senator Tolentino? And after him Senator Neptali Gonzales and Senator
Lina.

SEN. TOLENTINO, Mr. Chairman, I have not seen the new submission

actually transmitted to us but I saw the draft of his earlier, and I think it
now complies with the provisions of the Constitution, and with the Final
Act itself . The Constitution does not require us to ratify the Final Act. It
requires us to ratify the Agreement which is now being submitted. The
Final Act itself specifies what is going to be submitted to with the
governments of the participants.

In paragraph 2 of the Final Act, we read and I quote:

By signing the present Final Act, the representatives agree: (a) to submit

as appropriate the WTO Agreement for the consideration of the
respective competent authorities with a view to seeking approval of the
Agreement in accordance with their procedures.

In other words, it is not the Final Act that was agreed to be submitted to
the governments for ratification or acceptance as whatever their
constitutional procedures may provide but it is the World Trade
Organization Agreement. And if that is the one that is being submitted
now, I think it satisfies both the Constitution and the Final Act itself .

Thank you, Mr. Chairman.

THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator

Gonzales.

SEN. GONZALES. Mr. Chairman, my views on this matter are already a

matter of record. And they had been adequately reflected in the journal of
yesterday's session and I don't see any need for repeating the same.

Now, I would consider the new submission as an act ex abudante cautela.

THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you

want to make any comment on this?

SEN. LINA. Mr. President, I agree with the observation just made by

 Senator Gonzales out of the abundance of question. Then the new
submission is, I believe, stating the obvious and therefore I have no
further comment to make.

Epilogue

In praying for the nullification of the Philippine ratification of the WTO Agreement,
petitioners are invoking this Court's constitutionally imposed duty "to determine whether
or not there has been grave abuse of discretion amounting to lack or excess of
jurisdiction" on the part of the Senate in giving its concurrence therein via Senate
Resolution No. 97. Procedurally, a writ of certiorari grounded on grave abuse of
discretion may be issued by the Court under Rule 65 of the Rules of Court when it is
amply shown that petitioners have no other plain, speedy and adequate remedy in the
ordinary course of law.

By grave abuse of discretion is meant such capricious and whimsical exercise of

judgment as is equivalent to lack of jurisdiction.   Mere abuse of discretion is not enough.
61

It must be grave abuse of discretion as when the power is exercised in an arbitrary or

despotic manner by reason of passion or personal hostility, and must be so patent and so
gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the
duty enjoined or to act at all in contemplation of law.   Failure on the part of the petitioner
62

to show grave abuse of discretion will result in the dismissal of the petition. 63

In rendering this Decision, this Court never forgets that the Senate, whose act is under
review, is one of two sovereign houses of Congress and is thus entitled to great respect
in its actions. It is itself a constitutional body independent and coordinate, and thus its
actions are presumed regular and done in good faith. Unless convincing proof and
persuasive arguments are presented to overthrow such presumptions, this Court will
resolve every doubt in its favor. Using the foregoing well-accepted definition of grave
abuse of discretion and the presumption of regularity in the Senate's processes, this
Court cannot find any cogent reason to impute grave abuse of discretion to the Senate's
exercise of its power of concurrence in the WTO Agreement granted it by Sec. 21 of
Article VII of the Constitution. 
64

It is true, as alleged by petitioners, that broad constitutional principles require the State to
develop an independent national economy effectively controlled by Filipinos; and to
protect and/or prefer Filipino labor, products, domestic materials and locally produced
goods. But it is equally true that such principles — while serving as judicial and legislative
guides — are not in themselves sources of causes of action. Moreover, there are other
equally fundamental constitutional principles relied upon by the Senate which mandate
the pursuit of a "trade policy that serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality and reciprocity" and the promotion of
industries "which are competitive in both domestic and foreign markets," thereby
justifying its acceptance of said treaty. So too, the alleged impairment of sovereignty in
the exercise of legislative and judicial powers is balanced by the adoption of the generally
accepted principles of international law as part of the law of the land and the adherence
of the Constitution to the policy of cooperation and amity with all nations.

That the Senate, after deliberation and voting, voluntarily and overwhelmingly gave its
consent to the WTO Agreement thereby making it "a part of the law of the land" is a
legitimate exercise of its sovereign duty and power. We find no "patent and gross"
arbitrariness or despotism "by reason of passion or personal hostility" in such exercise. It
is not impossible to surmise that this Court, or at least some of its members, may even
agree with petitioners that it is more advantageous to the national interest to strike down
Senate Resolution No. 97. But that is not a legal reason to attribute grave abuse of
discretion to the Senate and to nullify its decision. To do so would constitute grave abuse
in the exercise of our own judicial power and duty. Ineludably, what the Senate did was a
valid exercise of its authority. As to whether such exercise was wise, beneficial or viable
is outside the realm of judicial inquiry and review. That is a matter between the elected
policy makers and the people. As to whether the nation should join the worldwide march
toward trade liberalization and economic globalization is a matter that our people should
determine in electing their policy makers. After all, the WTO Agreement allows withdrawal
of membership, should this be the political desire of a member.

The eminent futurist John Naisbitt, author of the best seller Megatrends, predicts an
Asian Renaissance   where "the East will become the dominant region of the world
65

economically, politically and culturally in the next century." He refers to the "free market"
espoused by WTO as the "catalyst" in this coming Asian ascendancy. There are at
present about 31 countries including China, Russia and Saudi Arabia negotiating for
membership in the WTO. Notwithstanding objections against possible limitations on
national sovereignty, the WTO remains as the only viable structure for multilateral trading
and the veritable forum for the development of international trade law. The alternative to
WTO is isolation, stagnation, if not economic self-destruction. Duly enriched with original
membership, keenly aware of the advantages and disadvantages of globalization with its
on-line experience, and endowed with a vision of the future, the Philippines now straddles
the crossroads of an international strategy for economic prosperity and stability in the
new millennium. Let the people, through their duly authorized elected officers, make their
free choice.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

SECOND DIVISION

[G.R. NO. 139325 : April 12, 2005]

PRISCILLA C. MIJARES, LORETTA ANN P. ROSALES, HILDA B. NARCISO, SR.

MARIANI DIMARANAN, SFIC, and JOEL C. LAMANGAN in their behalf and on
behalf of the Class Plaintiffs in Class Action No. MDL 840, United States District
Court of Hawaii, Petitioner, v. HON. SANTIAGO JAVIER RANADA, in his capacity as
Presiding Judge of Branch 137, Regional Trial Court, Makati City, and the ESTATE
OF FERDINAND E. MARCOS, through its court appointed legal representatives in
Class Action MDL 840, United States District Court of Hawaii, namely: Imelda R.
Marcos and Ferdinand Marcos, Jr., Respondents.
 DECISION

TINGA, J.:

Our martial law experience bore strange unwanted fruits, and we have yet to finish
weeding out its bitter crop. While the restoration of freedom and the fundamental
structures and processes of democracy have been much lauded, according to a significant
number, the changes, however, have not sufficiently healed the colossal damage wrought
under the oppressive conditions of the martial law period. The cries of justice for the
tortured, the murdered, and the desaparecidos arouse outrage and sympathy in the hearts
of the fair-minded, yet the dispensation of the appropriate relief due them cannot be
extended through the same caprice or whim that characterized the ill-wind of martial rule.
The damage done was not merely personal but institutional, and the proper rebuke to the
iniquitous past has to involve the award of reparations due within the confines of the
restored rule of law.

The petitioners in this case are prominent victims of human rights violations1 who, deprived
of the opportunity to directly confront the man who once held absolute rule over this
country, have chosen to do battle instead with the earthly representative, his estate. The
clash has been for now interrupted by a trial court ruling, seemingly comported to legal
logic, that required the petitioners to pay a whopping filing fee of over Four Hundred
Seventy-Two Million Pesos (P472,000,000.00) in order that they be able to enforce a
judgment awarded them by a foreign court.   There is an understandable temptation to
cast the struggle within the simplistic confines of a morality tale, and to employ short-cuts
to arrive at what might seem the desirable solution. But easy, reflexive resort to the equity
principle all too often leads to a result that may be morally correct, but legally wrong.

Nonetheless, the application of the legal principles involved in this case will comfort those
who maintain that our substantive and procedural laws, for all their perceived ambiguity
and susceptibility to myriad interpretations, are inherently fair and just. The relief sought
by the petitioners is expressly mandated by our laws and conforms to established legal
principles. The granting of this petition for certiorari is warranted in order to correct the
legally infirm and unabashedly unjust ruling of the respondent judge.

The essential facts bear little elaboration. On 9 May 1991, a complaint was filed with the
United States District Court (US District Court), District of Hawaii, against the Estate of
former Philippine President Ferdinand E. Marcos (Marcos Estate). The action was brought
forth by ten Filipino citizens2 who each alleged having suffered human rights abuses such
as arbitrary detention, torture and rape in the hands of police or military forces during the
Marcos regime.3 The Alien Tort Act was invoked as basis for the US District Court's
jurisdiction over the complaint, as it involved a suit by aliens for tortious violations of
international law.4 These plaintiffs brought the action on their own behalf and on behalf of
a class of similarly situated individuals, particularly consisting of all current civilian citizens
of the Philippines, their heirs and beneficiaries, who between 1972 and 1987 were
tortured, summarily executed or had disappeared while in the custody of military or
paramilitary groups. Plaintiffs alleged that the class consisted of approximately ten
thousand (10,000) members; hence, joinder of all these persons was impracticable.

The institution of a class action suit was warranted under Rule 23(a) and (b)(1)(B) of the
US Federal Rules of Civil Procedure, the provisions of which were invoked by the plaintiffs.
Subsequently, the US District Court certified the case as a class action and created three
(3) sub-classes of torture, summary execution and disappearance victims.5 Trial ensued,
and subsequently a jury rendered a verdict and an award of compensatory and exemplary
damages in favor of the plaintiff class.   Then, on 3 February 1995, the US District Court,
presided by Judge Manuel L. Real, rendered a Final Judgment (Final Judgment) awarding
the plaintiff class a total of One Billion Nine Hundred Sixty Four Million Five Thousand Eight
Hundred Fifty Nine Dollars and Ninety Cents ($1,964,005,859.90). The Final Judgment was
eventually affirmed by the US Court of Appeals for the Ninth Circuit, in a decision rendered
on 17 December 1996.6

On 20 May 1997, the present petitioners filed Complaint with the Regional Trial Court, City
of Makati (Makati RTC) for the enforcement of the Final Judgment.   They alleged that they
are members of the plaintiff class in whose favor the US District Court awarded
damages.7 They argued that since the Marcos Estate failed to file a petition
for certiorari with the US Supreme Court after the Ninth Circuit Court of Appeals had
affirmed the Final Judgment, the decision of the US District Court had become final and
executory, and hence should be recognized and enforced in the Philippines, pursuant to
Section 50, Rule 39 of the Rules of Court then in force.8

On 5 February 1998, the Marcos Estate filed a motion to dismiss, raising, among others,
the non-payment of the correct filing fees.   It alleged that petitioners had only paid Four
Hundred Ten Pesos (P410.00) as docket and filing fees, notwithstanding the fact that they
sought to enforce a monetary amount of damages in the amount of over Two and a
Quarter Billion US Dollars (US$2.25 Billion).   The Marcos Estate cited Supreme Court
Circular No. 7, pertaining to the proper computation and payment of docket fees.   In
response, the petitioners claimed that an action for the enforcement of a foreign judgment
is not capable of pecuniary estimation; hence, a filing fee of only Four Hundred Ten Pesos
(P410.00) was proper, pursuant to Section 7(c) of Rule 141.9

On 9 September 1998, respondent Judge Santiago Javier Ranada10 of the Makati RTC
issued the subject Order dismissing the complaint without prejudice. Respondent judge
opined that contrary to the petitioners' submission, the subject matter of the complaint
was indeed capable of pecuniary estimation, as it involved a judgment rendered by a
foreign court ordering the payment of definite sums of money, allowing for easy
determination of the value of the foreign judgment. On that score, Section 7(a) of Rule
141 of the Rules of Civil Procedure would find application, and the RTC estimated the
proper amount of filing fees was approximately Four Hundred Seventy Two Million Pesos,
which obviously had not been paid.

Not surprisingly, petitioners filed a Motion for Reconsideration, which Judge Ranada denied
in an Order dated 28 July 1999. From this denial, petitioners filed a Petition for
Certiorari under Rule 65 assailing the twin orders of respondent judge.11 They prayed for
the annulment of the questioned orders, and an order directing the reinstatement of Civil
Case No. 97-1052 and the conduct of appropriate proceedings thereon.

Petitioners submit that their action is incapable of pecuniary estimation as the subject
matter of the suit is the enforcement of a foreign judgment, and not an action for the
collection of a sum of money or recovery of damages.   They also point out that to require
the class plaintiffs to pay Four Hundred Seventy Two Million Pesos (P472,000,000.00) in
filing fees would negate and render inutile the liberal construction ordained by the Rules of
Court, as required by Section 6, Rule 1 of the Rules of Civil Procedure, particularly the
inexpensive disposition of every action.

Petitioners invoke Section 11, Article III of the Bill of Rights of the Constitution, which
provides that "Free access to the courts and quasi-judicial bodies and adequate legal
assistance shall not be denied to any person by reason of poverty," a mandate which is
essentially defeated by the required exorbitant filing fee. The adjudicated amount of the
filing fee, as arrived at by the RTC, was characterized as indisputably unfair, inequitable,
and unjust.

The Commission on Human Rights (CHR) was permitted to intervene in this case.12 It urged
that the petition be granted and a judgment rendered, ordering the enforcement and
execution of the District Court judgment in accordance with Section 48, Rule 39 of the
1997 Rules of Civil Procedure. For the CHR, the Makati RTC erred in interpreting the action
for the execution of a foreign judgment as a new case, in violation of the principle that
once a case has been decided between the same parties in one country on the same issue
with finality, it can no longer be relitigated again in another country.13 The CHR likewise
invokes the principle of comity, and of vested rights.

The Court's disposition on the issue of filing fees will prove a useful jurisprudential
guidepost for courts confronted with actions enforcing foreign judgments, particularly
those lodged against an estate. There is no basis for the issuance a limited pro hac
vice ruling based on the special circumstances of the petitioners as victims of martial law,
or on the emotionally-charged allegation of human rights abuses.

An examination of Rule 141 of the Rules of Court readily evinces that the respondent judge
ignored the clear letter of the law when he concluded that the filing fee be computed based
on the total sum claimed or the stated value of the property in litigation.

In dismissing the complaint, the respondent judge relied on Section 7(a), Rule 141 as basis
for the computation of the filing fee of over P472 Million.   The provision states:

SEC. 7. Clerk of Regional Trial Court. -

(a) For filing an action or a permissive counterclaim or money claim against an estate

not based on judgment, or for filing with leave of court a third-party, fourth-party, etc.,

complaint, or a complaint in intervention, and for all clerical services in the same time, if

the total sum claimed, exclusive of interest, or the started value of the property in

litigation, is:

1. Less than P 100,00.00 ' P 500.00

2. P 100,000.00 or more but less than P 150,000.00 ' P 800.00

3. P 150,000.00 or more but less than P 200,000.00 ' P 1,000.00

4. P 200,000.00 or more but less than P 250,000.00 ' P 1,500.00

5. P 250,000.00 or more but less than P 300,00.00 ' P 1,750.00

6. P 300,000.00 or more but not more than P 400,000.00 ' P 2,000.00

7. P 350,000.00 or more but not more than P400,000.00 ' P 2,250.00

 8. For each P 1,000.00 in excess of P 400,000.00 ' P 10.00

(Emphasis supplied) ςrαlαωlιbrαrÿ

Obviously, the above-quoted provision covers, on one hand, ordinary actions, permissive
counterclaims, third-party, etc. complaints and complaints-in-interventions, and on the
other, money claims against estates which are not based on judgment.   Thus, the relevant
question for purposes of the present petition is whether the action filed with the lower
court is a "money claim against an estate not based on judgment."

Petitioners' complaint may have been lodged against an estate, but it is clearly based on a
judgment, the Final Judgment of the US District Court. The provision does not make any
distinction between a local judgment and a foreign judgment, and where the law does not
distinguish, we shall not distinguish.

A reading of Section 7 in its entirety reveals several instances wherein the filing fee is
computed on the basis of the amount of the relief sought, or on the value of the property
in litigation. The filing fee for requests for extrajudicial foreclosure of mortgage is based on
the amount of indebtedness or the mortgagee's claim.14 In special proceedings involving
properties such as for the allowance of wills, the filing fee is again based on the value of
the property.15 The aforecited rules evidently have no application to petitioners' complaint.

Petitioners rely on Section 7(b), particularly the proviso on actions where the value of the
subject matter cannot be estimated. The provision reads in full:

SEC. 7. Clerk of Regional Trial Court. -

(b) For filing

1.           Actions where the value

of the subject matter

cannot be estimated                 - - -             P 600.00

2.           Special civil actions except

judicial foreclosure which

shall be governed by

paragraph (a) above           - - -             P 600.00

3.           All other actions not

involving property           - - -             P 600.00

In a real action, the assessed value of the property, or if there is none, the estimated
value, thereof shall be alleged by the claimant and shall be the basis in computing the
fees.
It is worth noting that the provision also provides that in real actions, the assessed value
or estimated value of the property shall be alleged by the claimant and shall be the basis in
computing the fees. Yet again, this provision does not apply in the case at bar. A real
action is one where the plaintiff seeks the recovery of real property or an action affecting
title to or recovery of possession of real property.16 Neither the complaint nor the award of
damages adjudicated by the US District Court involves any real property of the Marcos
Estate.

Thus, respondent judge was in clear and serious error when he concluded that the filing
fees should be computed on the basis of the schematic table of Section 7(a), as the action
involved pertains to a claim against an estate based on judgment. What provision, if any,
then should apply in determining the filing fees for an action to enforce a foreign
judgment? chanroblesvirtualawlibrary

To resolve this question, a proper understanding is required on the nature and effects of a
foreign judgment in this jurisdiction.

The rules of comity, utility and convenience of nations have established a usage among
civilized states by which final judgments of foreign courts of competent jurisdiction are
reciprocally respected and rendered efficacious under certain conditions that may vary in
different countries.17 This principle was prominently affirmed in the leading American case
of Hilton v. Guyot18 and expressly recognized in our jurisprudence beginning with Ingenholl
v. Walter E. Olsen & Co.19 The conditions required by the Philippines for recognition and
enforcement of a foreign judgment were originally contained in Section 311 of the Code of
Civil Procedure, which was taken from the California Code of Civil Procedure which, in turn,
was derived from the California Act of March 11, 1872.20 Remarkably, the procedural rule
now outlined in Section 48, Rule 39 of the Rules of Civil Procedure has remained
unchanged down to the last word in nearly a century. Section 48 states:

SEC. 48.           Effect of foreign judgments. 'The effect of a judgment of a tribunal of a

foreign country, having jurisdiction to pronounce the judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title

to the thing;

(b) In case of a judgment against a person, the judgment is presumptive evidence of a

right as between the parties and their successors in interest by a subsequent title;

In either case, the judgment or final order may be repelled by evidence of a want of

jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.

There is an evident distinction between a foreign judgment in an action in rem and one in

personam. For an action in rem, the foreign judgment is deemed conclusive upon the title
to the thing, while in an action in personam,  the foreign judgment is presumptive, and not
conclusive, of a right as between the parties and their successors in interest by a
subsequent title.21 However, in both cases, the foreign judgment is susceptible to
impeachment in our local courts on the grounds of want of jurisdiction or notice to the
party,22 collusion, fraud,23 or clear mistake of law or fact.24 Thus, the party aggrieved by the
foreign judgment is entitled to defend against the enforcement of such decision in the local
forum. It is essential that there should be an opportunity to challenge the foreign
judgment, in order for the court in this jurisdiction to properly determine its efficacy.25
It is clear then that it is usually necessary for an action to be filed in order to enforce a
foreign judgment26, even if such judgment has conclusive effect as in the case of in
rem actions, if only for the purpose of allowing the losing party an opportunity to challenge
the foreign judgment, and in order for the court to properly determine its
efficacy.27 Consequently, the party attacking a foreign judgment has the burden of
overcoming the presumption of its validity.28

The rules are silent as to what initiatory procedure must be undertaken in order to enforce
a foreign judgment in the Philippines. But there is no question that the filing of a civil
complaint is an appropriate measure for such purpose. A civil action is one by which a
party sues another for the enforcement or protection of a right,29 and clearly an action to
enforce a foreign judgment is in essence a vindication of a right prescinding either from a
"conclusive judgment upon title" or the "presumptive evidence of a right."30 Absent perhaps
a statutory grant of jurisdiction to a quasi-judicial body, the claim for enforcement of
judgment must be brought before the regular courts.31

There are distinctions, nuanced but discernible, between the cause of action arising from
the enforcement of a foreign judgment, and that arising from the facts or allegations that
occasioned the foreign judgment.   They may pertain to the same set of facts, but there is
an essential difference in the right-duty correlatives that are sought to be vindicated. For
example, in a complaint for damages against a tortfeasor, the cause of action emanates
from the violation of the right of the complainant through the act or omission of the
respondent. On the other hand, in a complaint for the enforcement of a foreign judgment
awarding damages from the same tortfeasor, for the violation of the same right through
the same manner of action, the cause of action derives not from the tortious act but from
the foreign judgment itself.

More importantly, the matters for proof are different. Using the above example, the
complainant will have to establish before the court the tortious act or omission committed
by the tortfeasor, who in turn is allowed to rebut these factual allegations or prove
extenuating circumstances.   Extensive litigation is thus conducted on the facts, and from
there the right to and amount of damages are assessed. On the other hand, in an action to
enforce a foreign judgment, the matter left for proof is the foreign judgment itself, and not
the facts from which it prescinds.

As stated in Section 48, Rule 39, the actionable issues are generally restricted to a review
of jurisdiction of the foreign court, the service of personal notice, collusion, fraud, or
mistake of fact or law.   The limitations on review is in consonance with a strong and
pervasive policy in all legal systems to limit repetitive litigation on claims and
issues.32 Otherwise known as the policy of preclusion, it seeks to protect party expectations
resulting from previous litigation, to safeguard against the harassment of defendants, to
insure that the task of courts not be increased by never-ending litigation of the same
disputes, and - in a larger sense - to promote what Lord Coke in the Ferrer's Case of 1599
stated to be the goal of all law: "rest and quietness."33 If every judgment of a foreign court
were reviewable on the merits, the plaintiff would be forced back on his/her original cause
of action, rendering immaterial the previously concluded litigation.34

Petitioners appreciate this distinction, and rely upon it to support the proposition that the
subject matter of the complaintthe enforcement of a foreign judgmentis incapable of
pecuniary estimation. Admittedly the proposition, as it applies in this case, is counter-
intuitive, and thus deserves strict scrutiny. For in all practical intents and purposes, the
matter at hand is capable of pecuniary estimation, down to the last cent. In the
assailed Order, the respondent judge pounced upon this point without equivocation:

The Rules use the term "where the value of the subject matter cannot be estimated." The

subject matter of the present case is the judgment rendered by the foreign court ordering
defendant to pay plaintiffs definite sums of money, as and for compensatory damages. The

Court finds that the value of the foreign judgment can be estimated; indeed, it can even be

easily determined. The Court is not minded to distinguish between the enforcement of a

judgment and the amount of said judgment, and separate the two, for purposes of

determining the correct filing fees. Similarly, a plaintiff suing on promissory note for P1

million cannot be allowed to pay only P400 filing fees (sic), on the reasoning that the

subject matter of his suit is not the P1 million, but the enforcement of the promissory note,

and that the value of such "enforcement" cannot be estimated.35

The jurisprudential standard in gauging whether the subject matter of an action is capable
of pecuniary estimation is well-entrenched. The Marcos Estate cites Singsong v. Isabela
Sawmill and Raymundo v. Court of Appeals, which ruled:

[I]n determining whether an action is one the subject matter of which is not capable of

pecuniary estimation this Court has adopted the criterion of first ascertaining the nature of

the principal action or remedy sought.   If it is primarily for the recovery of a sum of

money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is

in the municipal courts or in the courts of first instance would depend on the amount of the

claim.   However, where the basic issue is something other than the right to recover a sum

of money, where the money claim is purely incidental to, or a consequence of, the principal

relief sought, this Court has considered such actions as cases where the subject of the

litigation may not be estimated in terms of money, and are cognizable exclusively by

courts of first instance (now Regional Trial Courts).

On the other hand, petitioners cite the ponencia of Justice JBL Reyes in Lapitan v.
Scandia,36 from which the rule in Singsong and Raymundo actually derives, but which
incorporates this additional nuance omitted in the latter cases:

xxx However, where the basic issue is something other than the right to recover a sum of

money, where the money claim is purely incidental to, or a consequence of, the principal

relief sought, like in suits to have the defendant perform his part of the contract

(specific performance) and in actions for support, or for annulment of judgment

or to foreclose a mortgage, this Court has considered such actions as cases where the

subject of the litigation may not be estimated in terms of money, and are cognizable

exclusively by courts of first instance.37

Petitioners go on to add that among the actions the Court has recognized as being
incapable of pecuniary estimation include legality of conveyances and money
deposits,38 validity of a mortgage,39 the right to support,40 validity of documents,41 rescission
of contracts,42 specific performance,43 and validity or annulment of judgments.44 It is urged
that an action for enforcement of a foreign judgment belongs to the same class.

This is an intriguing argument, but ultimately it is self-evident that while the subject
matter of the action is undoubtedly the enforcement of a foreign judgment, the effect of a
providential award would be the adjudication of a sum of money. Perhaps in theory, such
an action is primarily for "the enforcement of the foreign judgment," but there is a certain
obtuseness to that sort of argument since there is no denying that the enforcement of the
foreign judgment will necessarily result in the award of a definite sum of money.

But before we insist upon this conclusion past beyond the point of reckoning, we must
examine its possible ramifications. Petitioners raise the point that a declaration that an
action for enforcement of foreign judgment may be capable of pecuniary estimation might
lead to an instance wherein a first level court such as the Municipal Trial Court would have
jurisdiction to enforce a foreign judgment. But under the statute defining the jurisdiction of
first level courts, B.P. 129, such courts are not vested with jurisdiction over actions for the
enforcement of foreign judgments.

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal

Circuit Trial Courts in civil cases. - Metropolitan Trial Courts, Municipal Trial Courts, and

Municipal Circuit Trial Courts shall exercise:

(1) Exclusive original jurisdiction over civil actions and probate proceedings, testate and

intestate, including the grant of provisional remedies in proper cases, where the value of

the personal property, estate, or amount of the demand does not exceed One hundred

thousand pesos (P100,000.00) or, in Metro Manila where such personal property, estate,

or amount of the demand does not exceed Two hundred thousand pesos (P200,000.00)

exclusive of interest damages of whatever kind, attorney's fees, litigation expenses, and

costs, the amount of which must be specifically alleged: Provided, That   where there are

several claims or causes of action between the same or different parties, embodied in the

same complaint, the amount of the demand shall be the totality of the claims in all the

causes of action, irrespective of whether the causes of action arose out of the same or

different transactions;

(2) Exclusive original jurisdiction over cases of forcible entry and unlawful

detainer: Provided, That when, in such cases, the defendant raises the question of

ownership in his pleadings and the question of possession cannot be resolved without

deciding the issue of ownership, the issue of ownership shall be resolved only to determine

the issue of possession.

(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of,

real property, or any interest therein where the assessed value of the property or interest
therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions in Metro

Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.00)

exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses and

costs: Provided, That value of such property shall be determined by the assessed value of

the adjacent lots.45

Section 33 of B.P. 129 refers to instances wherein the cause of action or subject matter
pertains to an assertion of rights and interests over property or a sum of money. But as
earlier pointed out, the subject matter of an action to enforce a foreign judgment is the
foreign judgment itself, and the cause of action arising from the adjudication of such
judgment.

An examination of Section 19(6), B.P. 129 reveals that the instant complaint for
enforcement of a foreign judgment, even if capable of pecuniary estimation, would fall
under the jurisdiction of the Regional Trial Courts, thus negating the fears of the
petitioners. Indeed, an examination of the provision indicates that it can be relied upon as
jurisdictional basis with respect to actions for enforcement of foreign judgments, provided
that no other court or office is vested jurisdiction over such complaint:

Sec. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive original

jurisdiction:

xxx

(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body

exercising jurisdiction or any court, tribunal, person or body exercising judicial or quasi-

judicial functions.

Thus, we are comfortable in asserting the obvious, that the complaint to enforce the US
District Court judgment is one capable of pecuniary estimation. But at the same time, it is
also an action based on judgment against an estate, thus placing it beyond the ambit of
Section 7(a) of Rule 141. What provision then governs the proper computation of the filing
fees over the instant complaint? For this case and other similarly situated instances, we
find that it is covered by Section 7(b)(3), involving as it does, "other actions not involving
property."

Notably, the amount paid as docket fees by the petitioners on the premise that it was an
action incapable of pecuniary estimation corresponds to the same amount required for
"other actions not involving property." The petitioners thus paid the correct amount of
filing fees, and it was a grave abuse of discretion for respondent judge to have applied
instead a clearly inapplicable rule and dismissed the complaint.

There is another consideration of supreme relevance in this case, one which should
disabuse the notion that the doctrine affirmed in this decision is grounded solely on the
letter of the procedural rule.   We earlier adverted to the the internationally recognized
policy of preclusion,46 as well as the principles of comity, utility and convenience of
nations47 as the basis for the evolution of the rule calling for the recognition and
enforcement of foreign judgments. The US Supreme Court in Hilton v. Guyot48 relied
heavily on the concept of comity, as especially derived from the landmark treatise of
Justice Story in his Commentaries on the Conflict of Laws of 1834.49 Yet the notion of
"comity" has since been criticized as one "of dim contours"50 or suffering from a number of
fallacies.51 Other conceptual bases for the recognition of foreign judgments have evolved
such as the vested rights theory or the modern doctrine of obligation.52

There have been attempts to codify through treaties or multilateral agreements the
standards for the recognition and enforcement of foreign judgments, but these have not
borne fruition. The members of the European Common Market accede to the Judgments
Convention, signed in 1978, which eliminates as to participating countries all of such
obstacles to recognition such as reciprocity and révision au fond.53 The most ambitious of
these attempts is the Convention on the Recognition and Enforcement of Foreign
Judgments in Civil and Commercial Matters, prepared in 1966 by the Hague Conference of
International Law.54 While it has not received the ratifications needed to have it take
effect,55 it is recognized as representing current scholarly thought on the topic.56 Neither the
Philippines nor the United States are signatories to the Convention.

Yet even if there is no unanimity as to the applicable theory behind the recognition and
enforcement of foreign judgments or a universal treaty rendering it obligatory force, there
is consensus that the viability of such recognition and enforcement is essential. Steiner and
Vagts note:

.   .   . The notion of unconnected bodies of national law on private international law, each

following a quite separate path, is not one conducive to the growth of a transnational

community encouraging travel and commerce among its members. There is a

contemporary resurgence of writing stressing the identity or similarity of the values that

systems of public and private international law seek to further - a community interest in

common, or at least reasonable, rules on these matters in national legal systems. And such

generic principles as reciprocity play an important role in both fields.57

Salonga, whose treatise on private international law is of worldwide renown, points out:

Whatever be the theory as to the basis for recognizing foreign judgments, there can be

little dispute that the end is to protect the reasonable expectations and demands of the

parties. Where the parties have submitted a matter for adjudication in the court of one

state, and proceedings there are not tainted with irregularity, they may fairly be expected

to submit, within the state or elsewhere, to the enforcement of the judgment issued by the

court.58

There is also consensus as to the requisites for recognition of a foreign judgment and the
defenses against the enforcement thereof. As earlier discussed, the exceptions enumerated
in Section 48, Rule 39 have remain unchanged since the time they were adapted in this
jurisdiction from long standing American rules. The requisites and exceptions as delineated
under Section 48 are but a restatement of generally accepted principles of international
law. Section 98 of The Restatement, Second, Conflict of Laws, states that "a valid
judgment rendered in a foreign nation after a fair trial in a contested proceeding will be
recognized in the United States," and on its face, the term "valid" brings into play
requirements such notions as valid jurisdiction over the subject matter and
parties.59 Similarly, the notion that fraud or collusion may preclude the enforcement of a
foreign judgment finds affirmation with foreign jurisprudence and commentators,60 as well
as the doctrine that the foreign judgment must not constitute "a clear mistake of law or
fact."61 And finally, it has been recognized that "public policy" as a defense to the
recognition of judgments serves as an umbrella for a variety of concerns in international
practice which may lead to a denial of recognition.62

The viability of the public policy defense against the enforcement of a foreign judgment
has been recognized in this jurisdiction.63 This defense allows for the application of local
standards in reviewing the foreign judgment, especially when such judgment creates only
a presumptive right, as it does in cases wherein the judgment is against a person.64 The
defense is also recognized within the international sphere, as many civil law nations adhere
to a broad public policy exception which may result in a denial of recognition when the
foreign court, in the light of the choice-of-law rules of the recognizing court, applied the
wrong law to the case.65 The public policy defense can safeguard against possible abuses to
the easy resort to offshore litigation if it can be demonstrated that the original claim is
noxious to our constitutional values.

There is no obligatory rule derived from treaties or conventions that requires the
Philippines to recognize foreign judgments, or allow a procedure for the enforcement
thereof.   However, generally accepted principles of international law, by virtue of the
incorporation clause of the Constitution, form part of the laws of the land even if they do
not derive from treaty obligations.66 The classical formulation in international law sees
those customary rules accepted as binding result from the combination two elements: the
established, widespread, and consistent practice on the part of States; and a psychological
element known as the opinion juris sive necessitates (opinion as to law or necessity).
Implicit in the latter element is a belief that the practice in question is rendered obligatory
by the existence of a rule of law requiring it.67

While the definite conceptual parameters of the recognition and enforcement of foreign
judgments have not been authoritatively established, the Court can assert with certainty
that such an undertaking is among those generally accepted principles of international
law.68 As earlier demonstrated, there is a widespread practice among states accepting in
principle the need for such recognition and enforcement, albeit subject to limitations of
varying degrees. The fact that there is no binding universal treaty governing the practice is
not indicative of a widespread rejection of the principle, but only a disagreement as to the
imposable specific rules governing the procedure for recognition and enforcement.

Aside from the widespread practice, it is indubitable that the procedure for recognition and
enforcement is embodied in the rules of law, whether statutory or jurisprudential, adopted
in various foreign jurisdictions. In the Philippines, this is evidenced primarily by Section 48,
Rule 39 of the Rules of Court which has existed in its current form since the early 1900s.
Certainly, the Philippine legal system has long ago accepted into its jurisprudence and
procedural rules the viability of an action for enforcement of foreign judgment, as well as
the requisites for such valid enforcement, as derived from internationally accepted
doctrines.   Again, there may be distinctions as to the rules adopted by each particular
state,69 but they all prescind from the premise that there is a rule of law obliging states to
allow for, however generally, the recognition and enforcement of a foreign judgment. The
bare principle, to our mind, has attained the status of opinio juris in international practice.

This is a significant proposition, as it acknowledges that the procedure and requisites

outlined in Section 48, Rule 39 derive their efficacy not merely from the procedural rule,
but by virtue of the incorporation clause of the Constitution.   Rules of procedure are
promulgated by the Supreme Court,70 and could very well be abrogated or revised by the
high court itself. Yet the Supreme Court is obliged, as are all State components, to obey
the laws of the land, including generally accepted principles of international law which form
part thereof, such as those ensuring the qualified recognition and enforcement of foreign
judgments.71
Thus, relative to the enforcement of foreign judgments in the Philippines, it emerges that
there is a general right recognized within our body of laws, and affirmed by the
Constitution, to seek recognition and enforcement of foreign judgments, as well as a right
to defend against such enforcement on the grounds of want of jurisdiction, want of notice
to the party, collusion, fraud, or clear mistake of law or fact.

The preclusion of an action for enforcement of a foreign judgment in this country merely
due to an exhorbitant assessment of docket fees is alien to generally accepted practices
and principles in international law. Indeed, there are grave concerns in conditioning the
amount of the filing fee on the pecuniary award or the value of the property subject of the
foreign decision. Such pecuniary award will almost certainly be in foreign denomination,
computed in accordance with the applicable laws and standards of the forum.72 The
vagaries of inflation, as well as the relative low-income capacity of the Filipino, to date may
very well translate into an award virtually unenforceable in this country, despite its integral
validity, if the docket fees for the enforcement thereof were predicated on the amount of
the award sought to be enforced. The theory adopted by respondent judge and the Marcos
Estate may even lead to absurdities, such as if applied to an award involving real property
situated in places such as the United States or Scandinavia where real property values are
inexorably high. We cannot very well require that the filing fee be computed based on the
value of the foreign property as determined by the standards of the country where it is
located.

As crafted, Rule 141 of the Rules of Civil Procedure avoids unreasonableness, as it

recognizes that the subject matter of an action for enforcement of a foreign judgment is
the foreign judgment itself, and not the right-duty correlatives that resulted in the foreign
judgment.   In this particular circumstance, given that the complaint is lodged against an
estate and is based on the US District Court's Final Judgment, this foreign judgment may,
for purposes of classification under the governing procedural rule, be deemed as subsumed
under Section 7(b)(3) of Rule 141, i.e., within the class of "all other actions not involving
property." Thus, only the blanket filing fee of minimal amount is required.

Finally, petitioners also invoke Section 11, Article III of the Constitution, which states that
"[F]ree access to the courts and quasi-judicial bodies and adequate legal assistance shall
not be denied to any person by reason of poverty." Since the provision is among the
guarantees ensured by the Bill of Rights, it certainly gives rise to a demandable right.
However, now is not the occasion to elaborate on the parameters of this constitutional
right. Given our preceding discussion, it is not necessary to utilize this provision in order to
grant the relief sought by the petitioners. It is axiomatic that the constitutionality of an act
will not be resolved by the courts if the controversy can be settled on other grounds73 or
unless the resolution thereof is indispensable for the determination of the case.74

One more word.   It bears noting that Section 48, Rule 39 acknowledges that the Final
Judgment is not conclusive yet, but presumptive evidence of a right of the petitioners
against the Marcos Estate. Moreover, the Marcos Estate is not precluded to present
evidence, if any, of want of jurisdiction, want of notice to the party, collusion, fraud, or
clear mistake of law or fact. This ruling, decisive as it is on the question of filing fees and
no other, does not render verdict on the enforceability of the Final Judgment before the
courts under the jurisdiction of the Philippines, or for that matter any other issue which
may legitimately be presented before the trial court.   Such issues are to be litigated
before the trial court, but within the confines of the matters for proof as laid down in
Section 48, Rule 39. On the other hand, the speedy resolution of this claim by the trial
court is encouraged, and contumacious delay of the decision on the merits will not be
brooked by this Court.

WHEREFORE, the petition is GRANTED. The assailed orders are NULLIFIED and SET
ASIDE, and a new order REINSTATING Civil Case No. 97-1052 is hereby issued. No costs.
 SO ORDERED.

POE-LLAMANZARES vs COMELEC Case Digest

(G.R. Nos. 221697 & 221698-700)
POE-LLAMANZARES vs COMELEC
G.R. Nos. 221697
& 221698-700

THE PETITION:
The petition is composed of two consolidated petitions under Rule 64 in relation to
Rule 65 of the Rules of Court with extremely urgent application for an ex
parte issuance of temporary restraining order/status quo ante order and/or writ of
preliminary injunction assailing the following:

    DECEMBER  1, 2015 RESOLUTION OF THE COMMISSION ON

ELECTIONS SECOND DIVISION (Cancelled petitioner’s certificate of
candidacy);

    DECEMBER 23, 2015 RESOLUTION OF THE COMELEC EN BANC

(Denied petitioner’s motion for reconsideration); and

    DECEMBER 11, 2015 RESOLUTION OF THE COMELEC FIRST DIVISION

(Declared that petitioner is not a natural-born citizen, that she failed to complete the
ten (10) year residency requirement, and that she committed material
misrepresentation in her COC when she declared therein that she has been a resident
of the Philippines for a period of ten 10 years and 11 months as of the day of the
elections on 9 May 2016)

FACTS OF THE CASE:

September 3, Mary Grace Natividad S. Poe-Llamanzares
1968 (petitioner) was found abandoned as a
newborn infant in the Parish Church of Jaro,
Iloilo by a certain Edgardo Militar. Custody
over petitioner was passed on by Edgardo to
his relatives, Emiliano Militar and his wife.

September 6, Emiliano Militar reported and registered

1968  petitioner as a foundling with the Office of
the Civil Registrar of Iloilo City (OCR-