REPUBLIC OF INDONESIA vs. JAMES VINZON

THE REPUBLIC OF INDONESIA, HIS EXCELLENCY AMBASSADOR SOERATMIN, and MINISTER COUNSELLOR AZHARI KASIM, petitioners, vs. JAMES VINZON

 

FACTS:

Petitioner, Republic of Indonesia, represented by its Counsellor, Siti Partinah, entered into a Maintenance Agreement in August 1995 with respondent James Vinzon, sole proprietor of Vinzon Trade and Services. The equipment covered by the Maintenance Agreement are air conditioning units and was to take effect in a period of four years. When Indonesian Minister Counsellor Kasim assumed the position of Chief of Administration in March 2000, he allegedly found respondent’s work and services unsatisfactory and not in compliance with the standards set in the Maintenance Agreement. Hence, the Indonesian Embassy terminated the agreement in a letter dated August 31, 2000. Respondent filed a complaint claiming that the aforesaid termination was arbitrary and unlawful. Petitioners filed a Motion to Dismiss assailing that Republic of Indonesia, as a foreign sovereign State, has sovereign immunity from suit and cannot be sued as a party-defendant in the Philippines.

 

ISSUE:

whether or not the Court of Appeals erred in sustaining the trial court’s decision that petitioners have waived their immunity from suit by using as its basis the abovementioned provision in the Maintenance Agreement.

 

RULING:

The SC GRANTED the petition.

The rule that a State may not be sued without its consent is a necessary consequence of the principles of independence and equality of States. The mere entering into a contract by a foreign State with a private party cannot be construed as the ultimate test of whether or not it is an act jure imperii or jure gestionis. Such act is only the start of the inquiry. A sovereign State does not merely establish a diplomatic mission and leave it at that; the establishment of a diplomatic mission encompasses its maintenance and upkeep. Hence, the State may enter into contracts with private entities to maintain the premises, furnishings and equipment of the embassy and the living quarters of its agents and officials. It is therefore clear that petitioner Republic of Indonesia was acting in pursuit of a sovereign activity when it entered into a contract with respondent for the upkeep or maintenance of the air conditioning units, generator sets, electrical facilities, water heaters, and water motor pumps of the Indonesian Embassy and the official residence of the Indonesian ambassador.