CHINA NATIONAL MACHINERY v. CESAR D. SANTAMARIA, GR No.

185572, 2012-
02-07

FACTS:

CNMEG filed a Motion to Dismiss... arguing that the trial court did not have jurisdiction over (a)
its person, as it was an agent of the Chinese government, making it immune from suit, and (b)
the subject matter, as the Northrail Project was a product... of an executive agreement.

CNMEG claims immunity on the ground that the Aug 30 MOU on the financing of the Northrail
Project was signed by the Philippine and Chinese governments, and its assignment as the
Primary Contractor meant that it was bound to perform a governmental function on behalf of
China

ISSUES:

Whether CNMEG is entitled to immunity

RULING:

As it stands now, the application of the doctrine of immunity from suit has been restricted to
sovereign or governmental activities (jure imperii).
The Memorandum of Understanding dated 14 September 2002 shows that CNMEG sought the
construction of the Luzon Railways as a proprietary venture.
it was CNMEG that initiated the undertaking, and not the Chinese government. The Feasibility
Study was conducted not because of any diplomatic gratuity from or exercise of sovereign
functions by the Chinese government, but was plainly a business strategy employed by CNMEG
with a view to securing this commercial enterprise.

However, the Loan Agreement, which... belies this reasoning,... The execution and delivery of
this Agreement by the Borrower constitute, and the Borrower's performance of and compliance
with its obligations under this Agreement will constitute, private and commercial acts done and...
performed for commercial purposes under the laws of the Republic of the Philippines and neither
the Borrower nor any of its assets is entitled to any immunity or privilege (sovereign or
otherwise) from suit, execution or any other legal process with respect to its obligations... under
this Agreement, as the case may be, in any jurisdiction.
it is readily apparent that CNMEG cannot claim immunity from suit, even if it contends that it
performs governmental functions. Its designation as the Primary Contractor does not
automatically grant it immunity, just as the term
"implementing agency" has no precise definition for purposes of ascertaining whether GTZ was
immune from suit. Although CNMEG claims to be a government-owned corporation, it failed to
adduce evidence that it has not consented to be sued under Chinese law. In the absence of
evidence to the contrary, CNMEG is to be presumed to be a government-owned and -controlled
corporation without an original charter. As a result, it has the capacity to sue and be sued under
Section 36 of the

Corporation Code.

CNMEG offers the Certification executed by the Economic and Commercial Office of the
Embassy of the People's Republic of China, stating that the Northrail Project is in pursuit of a
sovereign activity.[47] Surely, this is not the kind of... certification that can establish CNMEG's
entitlement to immunity from suit, as Holy See unequivocally refers to the determination of the
"Foreign Office of the state where it is sued."

Principles:

the immunity of the sovereign is recognized only with regard to public acts or acts jure imperii of
a state, but not with regard to private acts or acts jure gestionis

(i)mmunity from suit is determined by the... character of the objects for which the entity was
organized.

An agreement to submit any dispute to... arbitration may be construed as an implicit... waiver of
immunity from suit.