GR No. L-35645; May 22, 1985
Sometime in May 1972, the United States invited the submission of bids for certain naval projects. Eligio de Guzman & Co. Inc. responded to the invitation and submitted bids. Subsequently, the company received two telegrams requesting it to confirm its price. In June 1972, the company received a letter which said that the company did not qualify to receive an award for the projects. The company then sued the United States of America and individual petitioners demanding that the company perform the work on the projects, or for the petitioners to pay damages and to issue a writ of preliminary injunction to restrain the petitioners from entering into contracts with third parties concerning the project.
1) Do the petitioners exercise governmental or proprietary functions?
2) Does the Court have jurisdiction over the case?
The rule of State immunity exempts a State from being sued in the courts of another state without its consent or waiver. This is a necessary consequence of the principles of independence and equality of states. However, state immunity now extends only to governmental acts of the state. The restrictive application of State immunity is proper only when the proceedings arise out of commercial transactions of the foreign sovereign. In this case, the projects are an integral part of the naval base which is devoted to the defense of the USA and Philippines which is, indisputably, a function of the government. As such, by virtue of state immunity, the courts of the Philippines have no jurisdiction over the case for the US government has not given consent to the filing of this suit.