Summary of the Summary of the Judgment of 25 September 1997

Case concerning Gabckovo-Nagymaros Project (Hungary/Slovakia)

Summary of the Judgment of 25 September 1997
Review of the proceedings and statement of claims (paras. 1-14)
The Court begins by recalling that proceedings had been instituted on 2 July 1993 by a joint notification, by Hungary and Slovakia, of
a Special Agreement, signed at Brussels on 7 April 1993. After setting out the text of the Agreement, the Court recites the successive
stages of the proceedings, referring, among other things, to its visit, on the invitation of the parties, to the area, from 1 to 4 April
1997. It further sets out the submissions of the Parties.
History of the dispute (paras. 15-25)
The Court recalls that the present case arose out of the signature, on 16 September 1977, by the Hungarian People's Republic and
the Czechoslovak People's Republic, of a treaty "concerning the construction and operation of the Gabckovo-Nagymaros System
of Locks" (hereinafter called the "1977 Treaty"). The names of the two contracting States have varied over the years; they are
referred to as Hungary and Czechoslovakia. The 1977 Treaty entered into force on 30 June 1978. It provides for the construction
and operation of a System of Locks by the parties as a "joint investment". According to its Preamble, the system was designed to
attain "the broad utilization of the natural resources of the Bratislava-Budapest section of the Danube river for the development of
water resources, energy, transport, agriculture and other sectors of the national economy of the Contracting Parties". The joint
investment was thus essentially aimed at the production of hydroelectricity, the improvement of navigation on the relevant section of
the Danube and the protection of the areas along the banks against flooding. At the same time, by the terms of the Treaty, the
contracting parties undertook to ensure that the quality of water in the Danube was not impaired as a result of the Project, and that
compliance with the obligations for the protection of nature arising in connection with the construction and operation of the System of
Locks would be observed.
The sector of the Danube river with which this case is concerned is a stretch of approximately 200 kilometres, between Bratislava in
Slovakia and Budapest in Hungary. Below Bratislava, the river gradient decreases markedly, creating an alluvial plain of gravel and
sand sediment. The boundary between the two States is constituted, in the major part of that region, by the main channel of the
river. Cunovo and, further downstream, Gabckovo, are situated in this sector of the river on Slovak territory, Cunovo on the right
bank and Gabckovo on the left. Further downstream, after the confluence of the various branches, the river enters Hungarian
territory. Nagymaros lies in a narrow valley at a bend in the Danube just before it turns south, enclosing the large river island of
Szentendre before reaching Budapest (see sketch-map No. 1 (85 Kb) ).
The 1977 Treaty describes the principal works to be constructed in pursuance of the Project. It provided for the building of two series
of locks, one at Gabckovo (in Czechoslovak territory) and the other at Nagymaros (in Hungarian territory), to constitute "a single
and indivisible operational system of works" (see sketch-map No. 2, (85 Kb) ). The Treaty further provided that the technical
specifications concerning the system would be included in the "Joint Contractual Plan" which was to be drawn up in accordance with
the Agreement signed by the two Governments for this purpose on 6 May 1976. It also provided for the construction, financing and
management of the works on a joint basis in which the Parties participated in equal measure.
The Joint Contractual Plan, set forth, on a large number of points, both the objectives of the system and the characteristics of the
works. It also contained "Preliminary Operating and Maintenance Rules", Article 23 of which specified that "The final operating rules
[should] be approved within a year of the setting into operation of the system."
The Court observes that the Project was thus to have taken the form of an integrated joint project with the two contracting parties on
an equal footing in respect of the financing, construction and operation of the works. Its single and indivisible nature was to have
been realized through the Joint Contractual Plan which complemented the Treaty. In particular, Hungary would have had control of
the sluices at Dunakiliti and the works at Nagymaros, whereas Czechoslovakia would have had control of the works at Gabckovo.
*
The schedule of work had for its part been fixed in an Agreement on mutual assistance signed by the two parties on 16 September
1977, at the same time as the Treaty itself. The Agreement made some adjustments to the allocation of the works between the
parties as laid down by the Treaty. Work on the Project started in 1978. On Hungary's initiative, the two parties first agreed, by two
Protocols signed on 10 October 1983 to slow the work down and to postpone putting into operation the power plants, and then, by a
Protocol signed on 6 February 1989 to accelerate the Project.
As a result of intense criticism which the Project had generated in Hungary, the Hungarian Government decided on 13 May 1989 to
suspend the works at Nagymaros pending the completion of various studies which the competent authorities were to finish before 31
July 1989. On 21 July 1989, the Hungarian Government extended the suspension of the works at Nagymaros until 31 October 1989,
and, in addition, suspended the works at Dunakiliti until the same date. Lastly, on 27 October 1989, Hungary decided to abandon the
works at Nagymaros and to maintain the status quo at Dunakiliti.
During this period, negotiations took place between the parties. Czechoslovakia also started investigating alternative solutions. One
of them, an alternative solution subsequently known as "Variant C", entailed a unilateral diversion of the Danube by Czechoslovakia
on its territory some 10 kilometres upstream of Dunakiliti (see sketch-map No. 3, (90 Kb) ). In its final stage, Variant C included the
construction at Cunovo of an overflow dam and a levee linking that dam to the south bank of the bypass canal. Provision was made
for ancillary works.
On 23 July 1991, the Slovak Government decided "to begin, in September 1991, construction to put the Gabckovo Project into
operation by the provisional solution". Work on Variant C began in November 1991. Discussions continued between the two parties
but to no avail, and, on 19 May 1992, the Hungarian Government transmitted to the Czechoslovak Government a Note Verbale
terminating the 1977 Treaty with effect from 25 May 1992. On 15 October 1992, Czechoslovakia began work to enable the Danube
to be closed and, starting on 23 October, proceeded to the damming of the river.

The Court finally takes note of the fact that on 1 January 1993 Slovakia became an independent State; that in the Special
Agreement thereafter concluded between Hungary and Slovakia the Parties agreed to establish and implement a temporary water
management rgime for the Danube; and that finally they concluded an Agreement in respect of it on 19 April 1995, which would
come to an end 14 days after the Judgment of the Court. The Court also observes that not only the 1977 Treaty, but also the "related
instruments" are covered in the preamble to the Special Agreement and that the Parties, when concentrating their reasoning on the
1977 Treaty, appear to have extended their arguments to the "related instruments".
Suspension and abandonment by Hungary, in 1989, of works on the Project (paras. 27-59)
In terms of Article 2, paragraph 1 (a), of the Special Agreement, the Court is requested to decide first
"whether the Republic of Hungary was entitled to suspend and subsequently abandon, in 1989, the works on the Nagymaros Project
and on the part of the Gabckovo Project for which the Treaty attributed responsibility to the Republic of Hungary".
The Court observes that it has no need to dwell upon the question of the applicability or non-applicability in the present case of the
Vienna Convention of 1969 on the Law of Treaties, as argued by the Parties. It needs only to be mindful of the fact that it has several
times had occasion to hold that some of the rules laid down in that Convention might be considered as a codification of existing
customary law. The Court takes the view that in many respects this applies to the provisions of the Vienna Convention concerning
the termination and the suspension of the operation of treaties, set forth in Articles 60 to 62. Neither has the Court lost sight of the
fact that the Vienna Convention is in any event applicable to the Protocol of 6 February 1989 whereby Hungary and Czechoslovakia
agreed to accelerate completion of the works relating to the Gabckovo-Nagymaros Project.
Nor does the Court need to dwell upon the question of the relationship between the law of treaties and the law of State responsibility,
to which the Parties devoted lengthy arguments, as those two branches of international law obviously have a scope that is distinct. A
determination of whether a convention is or is not in force, and whether it has or has not been properly suspended or denounced, is
to be made pursuant to the law of treaties. On the other hand, an evaluation of the extent to which the suspension or denunciation of
a convention, seen as incompatible with the law of treaties, involves the responsibility of the State which proceeded to it, is to be
made under the law of State responsibility.
The Court cannot accept Hungary's argument to the effect that, in 1989, in suspending and subsequently abandoning the works for
which it was still responsible at Nagymaros and at Dunakiliti, it did not suspend the application of the 1977 Treaty itself or then reject
that Treaty. The conduct of Hungary at that time can only be interpreted as an expression of its unwillingness to comply with at least
some of the provisions of the Treaty and the Protocol of 6 February 1989, as specified in the Joint Contractual Plan. The effect of
Hungary's conduct was to render impossible the accomplishment of the system of works that the Treaty expressly described as
"single and indivisible".
The Court then considers the question of whether there was, in 1989, a state of necessity which would have permitted Hungary,
without incurring international responsibility, to suspend and abandon works that it was committed to perform in accordance with the
1977 Treaty and related instruments.
The Court observes, first of all, that the state of necessity is a ground recognized by customary international law for precluding the
wrongfulness of an act not in conformity with an international obligation. It considers moreover that such ground for precluding
wrongfulness can only be accepted on an exceptional basis. The following basic conditions set forth in Article 33 of the Draft Article
on the International Responsibility of States by the International Law Commission are relevant in the present case: it must have
been occasioned by an "essential interest" of the State which is the author of the act conflicting with one of its international
obligations; that interest must have been threatened by a "grave and imminent peril"; the act being challenged must have been the
"only means" of safeguarding that interest; that act must not have "seriously impair[ed] an essential interest" of the State towards
which the obligation existed; and the State which is the author of that act must not have "contributed to the occurrence of the state of
necessity". Those conditions reflect customary international law.
The Court has no difficulty in acknowledging that the concerns expressed by Hungary for its natural environment in the region
affected by the Gabckovo-Nagymaros Project related to an "essential interest" of that State.
It is of the view, however, that, with respect to both Nagymaros and Gabckovo, the perils invoked by Hungary, without prejudging
their possible gravity, were not sufficiently established in 1989, nor were they "imminent"; and that Hungary had available to it at that
time means of responding to these perceived perils other than the suspension and abandonment of works with which it had been
entrusted. What is more, negotiations were under way which might have led to a review of the Project and the extension of some of
its time-limits, without there being need to abandon it.
The Court further notes that Hungary when it decided to conclude the 1977 Treaty, was presumably aware of the situation as then
known; and that the need to ensure the protection of the environment had not escaped the parties. Neither can it fail to note the
positions taken by Hungary after the entry into force of the 1977 Treaty. Slowly, speeded up. The Court infers that, in the present
case, even if it had been established that there was, in 1989, a state of necessity linked to the performance of the 1977 Treaty,
Hungary would not have been permitted to rely upon that state of necessity in order to justify its failure to comply with its treaty
obligations, as it had helped, by act or omission to bring it about.
In the light of the conclusions reached above, the Court finds that Hungary was not entitled to suspend and subsequently abandon,
in 1989, the works on the Nagymaros Project and on the part of the Gabckovo Project for which the 1977 Treaty and related
instruments attributed responsibility to it.
Czechoslovakia's proceeding, in November 1991, to "Variant C" and putting into operation, from October 1992, this
Variant (paras. 60-88)
By the terms of Article 2, paragraph 1 (b), of the Special Agreement, the Court is asked in the second place to decide
"(b)whether the Czech and Slovak Federal Republic was entitled to proceed, in November 1991, to the 'provisional solution' and to
put into operation from October 1992 this system".
Czechoslovakia had maintained that proceeding to Variant C and putting it into operation did not constitute internationally wrongful

acts; Slovakia adopted this argument. During the proceedings before the Court Slovakia contended that Hungary's decision to
suspend and subsequently abandon the construction of works at Dunakiliti had made it impossible for Czechoslovakia to carry out
the works as initially contemplated by the 1977 Treaty and that the latter was therefore entitled to proceed with a solution which was
as close to the original Project as possible. Slovakia invoked what it described as a "principle of approximate application" to justify
the construction and operation of Variant c. It explained that this was the only possibility remaining to it "of fulfilling not only the
purposes of the 1977 Treaty, but the continuing obligation to implement it in good faith".
The Court observes that it is not necessary to determine whether there is a principle of international law or a general principle of law
of "approximate application" because, even if such a principle existed, it could by definition only be employed within the limits of the
treaty in question. In the view of the Court, Variant C does not meet that cardinal condition with regard to the 1977 Treaty.
As the Court has already observed, the basic characteristic of the 1977 Treaty is, according to Article 1, to provide for the
construction of the Gabckovo-Nagymaros System of Locks as a joint investment constituting a single and indivisible operational
system of works. This element is equally reflected in Articles 8 and 10 of the Treaty providing for joint ownership of the most
important works of the Gabckovo-Nagymaros project and for the operation of this joint property as a co-ordinated single unit. By
definition all this could not be carried out by unilateral action. In spite of having a certain external physical similarity with the original
Project, Variant C thus differed sharply from it in its legal characteristics. The Court accordingly concludes that Czechoslovakia, in
putting Variant C into operation, was not applying the 1977 Treaty but, on the contrary, violated certain of its express provisions, and,
in so doing, committed an internationally wrongful act.
The Court notes that between November 1991 and October 1992, Czechoslovakia confined itself to the execution, on its own
territory, of the works which were necessary for the implementation of Variant C, but which could have been abandoned if an
agreement had been reached between the parties and did not therefore predetermine the final decision to be taken. For as long as
the Danube had not been unilaterally dammed, Variant C had not in fact been applied. Such a situation is not unusual in
international law or, for that matter, in domestic law. A wrongful act or offence is frequently preceded by preparatory actions which
are not to be confused with the act or offence itself. It is as well to distinguish between the actual commission of a wrongful act
(whether instantaneous or continuous) and the conduct prior to that act which is of a preparatory character and which "does not
qualify as a wrongful act".
Slovakia also maintained that it was acting under a duty to mitigate damages when it carried out Variant c. It stated that "It is a
general principle of international law that a party injured by the non-performance of another contract party must seek to mitigate the
damage he has sustained." But the Court observes that, while this principle might thus provide a basis for the calculation of
damages, it could not, on the other hand, justify an otherwise wrongful act. The Court further considers that the diversion of the
Danube carried out by Czechoslovakia was not a lawful countermeasure because it was not proportionate.
In the light of the conclusions reached above, the Court finds that Czechoslovakia was entitled to proceed, in November 1991, to
Variant C in so far as it then confined itself to undertaking works which did not predetermine the final decision to be taken by it. On
the other hand, Czechoslovakia was not entitled to put that Variant into operation from October 1992.
Notification by Hungary, on 19 May 1992, of the termination of the 1977 Treaty and related instruments (paras. 89-115)
By the terms of Article 2, paragraph 1 (c), of the Special Agreement, the Court is asked, thirdly, to determine
"what are the legal effects of the notification, on 19 May 1992, of the termination of the Treaty by the Republic of Hungary".
During the proceedings, Hungary presented five arguments in support of the lawfulness, and thus the effectiveness, of its notification
of termination. These were the existence of a state of necessity; the impossibility of performance of the Treaty; the occurrence of a
fundamental change of circumstances; the material breach of the Treaty by Czechoslovakia; and, finally, the development of new
norms of international environmental law. Slovakia contested each of these grounds.
State of necessity
The Court observes that, even if a state of necessity is found to exist, it is not a ground for the termination of a treaty. It may only be
invoked to exonerate from its responsibility a State which has failed to implement a treaty.
Impossibility of performance
The Court finds that it is not necessary to determine whether the term "object" in Article 61 of the Vienna Convention of 1969 on the
Law of Treaties (which speaks of "permanent disappearance or destruction of an object indispensable for the execution of the treaty"
as a ground for terminating or withdrawing from it) can also be understood to embrace a legal rgime as in any event, even if that
were the case, it would have to conclude that in this instance that rgime had not definitively ceased to exist. The 1977 Treaty
and in particular its Articles 15, 19 and 20 actually made available to the parties the necessary means to proceed at any time, by
negotiation, to the required readjustments between economic imperatives and ecological imperatives.
Fundamental change of circumstances
In the Court's view, the prevalent political conditions were not so closely linked to the object and purpose of the Treaty that they
constituted an essential basis of the consent of the parties and, in changing, radically altered the extent of the obligations still to be
performed. The same holds good for the economic system in force at the time of the conclusion of the 1977 Treaty. Nor does the
Court consider that new developments in the state of environmental knowledge and of environmental law can be said to have been
completely unforeseen. What is more, the formulation of Articles 15, 19 and 20 is designed to accommodate change. The changed
circumstances advanced by Hungary are thus, in the Court's view, not of such a nature, either individually or collectively, that their
effect would radically transform the extent of the obligations still to be performed in order to accomplish the Project.
Material breach of the Treaty
Hungary's main argument for invoking a material breach of the Treaty was the construction and putting into operation of Variant c.
The Court pointed out that it had already found that Czechoslovakia violated the Treaty only when it diverted the waters of the
Danube into the bypass canal in October 1992. In constructing the works which would lead to the putting into operation of Variant C,
Czechoslovakia did not act unlawfully. In the Court's view, therefore, the notification of termination by Hungary on 19 May 1992 was
premature. No breach of the Treaty by Czechoslovakia had yet taken place and consequently Hungary was not entitled to invoke

any such breach of the Treaty as a ground for terminating it when it did.
Development of new norms of international environmental law
The Court notes that neither of the Parties contended that new peremptory norms of environmental law had emerged since the
conclusion of the 1977 Treaty; and the Court will consequently not be required to examine the scope of Article 64 of the Vienna
Convention on the Law of Treaties (which treats of the voidance and termination of a treaty because of the emergence of a new
peremptory norm of general international law (jus cogens)). On the other hand, the Court wishes to point out that newly developed
norms of environmental law are relevant for the implementation of the Treaty and that the parties could, by agreement, incorporate
them through the application of Articles 15, 19 and 20 of the Treaty. These articles do not contain specific obligations of performance
but require the parties, in carrying out their obligations to ensure that the quality of water in the Danube is not impaired and that
nature is protected, to take new environmental norms into consideration when agreeing upon the means to be specified in the Joint
Contractual Plan. By inserting these evolving provisions in the Treaty, the parties recognized the potential necessity to adapt the
Project. Consequently, the Treaty is not static, and is open to adapt to emerging norms of international law. By means of Articles 15
and 19, new environmental norms can be incorporated in the Joint Contractual Plan. The awareness of the vulnerability of the
environment and the recognition that environmental risks have to be assessed on a continuous basis have become much stronger in
the years since the Treaty's conclusion. These new concerns have enhanced the relevance of Articles 15, 19 and 20. The Court
recognizes that both Parties agree on the need to take environmental concerns seriously and to take the required precautionary
measures, but they fundamentally disagree on the consequences this has for the joint Project. In such a case, third-party
involvement may be helpful and instrumental in finding a solution, provided each of the Parties is flexible in its position.
Finally, the Court is of the view that although it has found that both Hungary and Czechoslovakia failed to comply with their
obligations under the 1977 Treaty, this reciprocal wrongful conduct did not bring the Treaty to an end nor justify its termination.
In the light of the conclusions it has reached above, the Court finds that the notification of termination by Hungary of 19 May 1992
did not have the legal effect of terminating the 1977 Treaty and related instruments.
Dissolution of Czechoslovakia (paras. 117-124)
The Court then turns to the question whether Slovakia became a party to the 1977 Treaty as successor to Czechoslovakia. As an
alternative argument, Hungary contended that, even if the Treaty survived the notification of termination, in any event it ceased to be
in force as a treaty on 31 December 1992, as a result of the "disappearance of one of the parties" On that date Czechoslovakia
ceased to exist as a legal entity, and on 1 January 1993 the Czech Republic and the Slovak Republic came into existence.
The Court does not find it necessary for the purposes of the present case to enter into a discussion of whether or not Article 34 of
the 1978 Vienna Convention on Succession of States in respect of treaties (in which a rule of automatic succession to all treaties is
provided for) reflects the state of customary international law. More relevant to its present analysis is the particular nature and
character of the 1977 Treaty. An examination of this Treaty confirms that, aside from its undoubted nature as a joint investment, its
major elements were the proposed construction and joint operation of a large, integrated and indivisible complex of structures and
installations on specific parts of the respective territories of Hungary and Czechoslovakia along the Danube. The Treaty also
established the navigational rgime for an important sector of an international waterway, in particular the relocation of the main
international shipping lane to the bypass canal. In so doing, it inescapably created a situation in which the interests of other users of
the Danube were affected. Furthermore, the interests of third States were expressly acknowledged in Article 18, whereby the parties
undertook to ensure "uninterrupted and safe navigation on the international fairway" in accordance with their obligations under the
Convention of 18 August 1948 concerning the Rgime of Navigation on the Danube.
The Court then refers to Article 12 of the 1978 Vienna Convention on Succession of States in respect of Treaties, which reflects the
principle that treaties of a territorial character have been regarded both in traditional doctrine and in modern opinion as unaffected by
a succession of States. The Court considers that Article 12 reflects a rule of customary international law; and notes that neither of
the Parties disputed this. It concludes that the content of the 1977 Treaty indicates that it must be regarded as establishing a
territorial rgime within the meaning of Article 12 of 1978 Vienna Convention. It created rights and obligations "attaching to" the
parts of the Danube to which it relates; thus the Treaty itself could not be affected by a succession of States. The Court therefore
concludes that the 1977 Treaty became binding upon Slovakia on 1 January 1993.
Legal consequences of the Judgment (paras. 125-154)
The Court observes that the part of its Judgment which answers the questions in Article 2, paragraph 1, of the Special Agreement
has a declaratory character. It deals with the past conduct of the Parties and determines the lawfulness or unlawfulness of that
conduct between 1989 and 1992 as well as its effects on the existence of the Treaty. Now the Court has, on the basis of the
foregoing findings, to determine what the future conduct of the Parties should be. This part of the Judgment is prescriptive rather
than declaratory because it determines what the rights and obligations of the Parties are. The Parties will have to seek agreement
on the modalities of the execution of the Judgment in the light of this determination, as they agreed to do in Article 5 of the Special
Agreement.
In this regard it is of cardinal importance that the Court has found that the 1977 Treaty is still in force and consequently governs the
relationship between the Parties. That relationship is also determined by the rules of other relevant conventions to which the two
States are party, by the rules of general international law and, in this particular case, by the rules of State responsibility; but it is
governed, above all, by the applicable rules of the 1977 Treaty as a lex specialis. The Court observes that it cannot, however,
disregard the fact that the Treaty has not been fully implemented by either party for years, and indeed that their acts of commission
and omission have contributed to creating the factual situation that now exists. Nor can it overlook that factual situation or the
practical possibilities and impossibilities to which it gives rise when deciding on the legal requirements for the future conduct of
the Parties. What is essential, therefore, is that the factual situation as it has developed since 1989 shall be placed within the context
of the preserved and developing treaty relationship, in order to achieve its object and purpose in so far as that is feasible. For it is
only then that the irregular state of affairs which exists as the result of the failure of both Parties to comply with their treaty
obligations can be remedied.

The Court points out that the 1977 Treaty is not only a joint investment project for the production of energy, but it was designed to
serve other objectives as well: the improvement of the navigability of the Danube, flood control and regulation of ice-discharge, and
the protection of the natural environment. In order to achieve these objectives the parties accepted obligations of conduct,
obligations of performance, and obligations of result. The Court is of the opinion that the Parties are under a legal obligation, during
the negotiations to be held by virtue of Article 5 of the Special Agreement, to consider, within the context of the 1977 Treaty, in what
way the multiple objectives of the Treaty can best be served, keeping in mind that all of them should be fulfilled.
It is clear that the Project's impact upon, and its implications for, the environment are of necessity a key issue. In order to evaluate
the environmental risks, current standards must be taken into consideration. This is not only allowed by the wording of Articles 15
and 19, but even prescribed, to the extent that these articles impose a continuing and thus necessarily evolving obligation on
the parties to maintain the quality of the water of the Danube and to protect nature. The Court is mindful that, in the field of
environmental protection, vigilance and prevention are required on account of the often irreversible character of damage to the
environment and of the limitations inherent in the very mechanism of reparation of this type of damage. New norms and standards
have been developed, set forth in a great number of instruments during the last two decades. Such new norms have to be taken into
consideration, and such new standards given proper weight, not only when States contemplate new activities but also when
continuing with activities begun in the past. For the purposes of the present case, this means that the Parties together should look
afresh at the effects on the environment of the operation of the Gabckovo power plant. In particular they must find a satisfactory
solution for the volume of water to be released into the old bed of the Danube and into the side-arms on both sides of the river.
What is required in the present case by the rule pacta sunt servanda, as reflected in Article 26 of the Vienna Convention of 1969 on
the Law of Treaties, is that the Parties find an agreed solution within the co-operative context of the Treaty. Article 26 combines two
elements, which are of equal importance. It provides that "Every treaty in force is binding upon the parties to it and must be
performed by them in good faith". This latter element, in the Court's view, implies that, in this case, it is the purpose of the Treaty,
and the intentions of the parties in concluding it, which should prevail over its literal application. The principle of good faith obliges
the Parties to apply it in a reasonable way and in such a manner that its purpose can be realized.
The 1977 Treaty not only contains a joint investment programme, it also establishes a rgime. According to the Treaty, the main
structures of the System of Locks are the joint property of the Parties; their operation will take the form of a co-ordinated single unit;
and the benefits of the project shall be equally shared. Since the Court has found that the Treaty is still in force and that, under its
terms, the joint rgime is a basic element, it considers that, unless the Parties agree otherwise, such a rgime should be restored.
The Court is of the opinion that the works at Cunovo should become a jointly operated unit within the meaning of Article 10,
paragraph 1, in view of their pivotal role in the operation of what remains of the Project and for the water-management rgime. The
dam at Cunovo has taken over the role which was originally destined for the works at Dunakiliti, and therefore should have a similar
status. The Court also concludes that Variant C, which it considers operates in a manner incompatible with the Treaty, should be
made to conform to it. It observes that re-establishment of the joint rgime will also reflect in an optimal way the concept of
common utilization of shared water resources for the achievement of the several objectives mentioned in the Treaty.
Having thus far indicated what in its view should be the effects of its finding that the 1977 Treaty is still in force, the Court turns to the
legal consequences of the internationally wrongful acts committed by the Parties, as it had also been asked by both Parties to
determine the consequences of the Judgment as they bear upon payment of damages.
The Court has not been asked at this stage to determine the quantum of damages due, but to indicate on what basis they should be
paid. Both Parties claimed to have suffered considerable financial losses and both claim pecuniary compensation for them.
In the Judgment, the Court has concluded that both Parties committed internationally wrongful acts, and it has noted that those acts
gave rise to the damage sustained by the Parties; consequently, Hungary and Slovakia are both under an obligation to pay
compensation and are both entitled to obtain compensation. The Court observes, however, that given the fact, that there have been
intersecting wrongs by both Parties, the issue of compensation could satisfactorily be resolved in the framework of an overall
settlement if each of the Parties were to renounce or cancel all financial claims and counter-claims. At the same time, the Court
wishes to point out that the settlement of accounts for the construction of the works is different from the issue of compensation, and
must be resolved in accordance with the 1977 Treaty and related instruments. If Hungary is to share in the operation and benefits of
the Cunovo complex, it must pay a proportionate share of the building and running costs.
The operative paragraphs reads as follows:
"155. For these reasons,
THE COURT,
(1) Having regard to Article 2, paragraph 1, of the Special Agreement,
A. Finds, by fourteen votes to one, that Hungary was not entitled to suspend and subsequently abandon, in 1989, the works on the
Nagymaros Project and on the part of the Gabckovo Project for which the Treaty of 16 September 1977 and related instruments
attributed responsibility to it;
IN FAVOUR: President Schwebel; Vice-President Weeramantry; Judges Oda, Bedjaoui, Guillaume, Ranjeva, Shi, Fleischhauer,
Koroma, Vereshchetin, Parra-Aranguren, Kooijmans, Rezek; Judge ad hoc Skubiszewski;
AGAINST: Judge Herczegh;
B. Finds, by nine votes to six, that Czechoslovakia was entitled to proceed, in November 1991, to the "provisional solution" as
described in the terms of the Special Agreement;
IN FAVOUR: Vice-President Weeramantry; Judges Oda, Guillaume, Shi, Koroma, Vereshchetin, Parra-Aranguren,
Kooijmans; Judge ad hoc Skubiszewski;
AGAINST: President Schwebel; Judges Bedjaoui, Ranjeva, Herczegh, Fleischhauer, Rezek;
C. Finds, by ten votes to five, that Czechoslovakia was not entitled to put into operation, from October 1992, this "provisional
solution";

IN FAVOUR: President Schwebel; Vice-President Weeramantry; Judges Bedjaoui, Guillaume, Ranjeva, Herczegh, Shi, Fleischhauer,
Kooijmans, Rezek;
AGAINST: Judges Oda, Koroma, Vereshchetin, Parra-Aranguren; Judge ad hoc Skubiszewski;
D. Finds, by eleven votes to four, that the notification, on 19 May 1992, of the termination of the Treaty of 16 September 1977 and
related instruments by Hungary did not have the legal effect of terminating them;
IN FAVOUR: Vice-President Weeramantry; Judges Oda, Bedjaoui, Guillaume, Ranjeva, Shi, Koroma, Vereshchetin, ParraAranguren, Kooijmans; Judge ad hoc Skubiszewski;
AGAINST: President Schwebel; Judges Herczegh, Fleischhauer, Rezek;
(2) Having regard to Article 2, paragraph 2, and Article 5 of the Special Agreement,
A. Finds, by twelve votes to three, that Slovakia, as successor to Czechoslovakia, became a party to the Treaty of 16 September
1977 as from 1 January 1993;
IN FAVOUR: President Schwebel; Vice-President Weeramantry; Judges Oda, Bedjaoui, Guillaume, Ranjeva, Shi, Koroma,
Vereshchetin, Parra-Aranguren, Kooijmans; Judge ad hoc Skubiszewski;
AGAINST: Judges Herczegh, Fleischhauer, Rezek;
B. Finds, by thirteen votes to two, that Hungary and Slovakia must negotiate in good faith in the light of the prevailing situation, and
must take all necessary measures to ensure the achievement of the objectives of the Treaty of 16 September 1977, in accordance
with such modalities as they may agree upon;
IN FAVOUR: President Schwebel; Vice-President Weeramantry; Judges Oda, Bedjaoui, Guillaume, Ranjeva, Shi, Koroma,
Vereshchetin, Parra-Aranguren, Kooijmans, Rezek; Judge ad hoc Skubiszewski;
AGAINST: Judges Herczegh, Fleischhauer;
C. Finds, by thirteen votes to two, that, unless the Parties otherwise agree, a joint operational rgime must be established in
accordance with the Treaty of 16 September 1977;
IN FAVOUR: President Schwebel; Vice-President Weeramantry; Judges Oda, Bedjaoui, Guillaume, Ranjeva, Shi, Koroma,
Vereshchetin, Parra-Aranguren, Kooijmans, Rezek; Judge ad hoc Skubiszewski;
AGAINST: Judges Herczegh, Fleischhauer;
D. Finds, by twelve votes to three, that, unless the Parties otherwise agree, Hungary shall compensate Slovakia for the damage
sustained by Czechoslovakia and by Slovakia on account of the suspension and abandonment by Hungary of works for which it was
responsible; and Slovakia shall compensate Hungary for the damage it has sustained on account of the putting into operation of the
"provisional solution" by Czechoslovakia and its maintenance in service by Slovakia;
IN FAVOUR: President Schwebel; Vice-President Weeramantry; Judges Bedjaoui, Guillaume, Ranjeva, Herczegh, Shi, Fleischhauer,
Parra-Aranguren, Kooijmans, Rezek; Judge ad hoc Skubiszewski;
AGAINST: Judges Oda, Koroma, Vereshchetin;
E. Finds, by thirteen votes to two, that the settlement of accounts for the construction and operation of the works must be effected in
accordance with the relevant provisions of the Treaty of 16 September 1977 and related instruments, taking due account of such
measures as will have been taken by the Parties in application of points 2 B and C of the present operative paragraph.
IN FAVOUR: President Schwebel; Vice-President Weeramantry; Judges Oda, Bedjaoui, Guillaume, Ranjeva, Shi, Koroma,
Vereshchetin, Parra-Aranguren, Kooijmans, Rezek; Judge ad hoc Skubiszewski;
AGAINST: Judges Herczegh, Fleischhauer."
*
President SCHWEBEL and Judge REZEK append declarations to the Judgment of the Court.
Vice-President WEERAMANTRY, Judges BEDJAOUI and KOROMA append separate opinions to the Judgment of the Court.
Judges ODA, RANJEVA, HERCZEGH, FLEISCHHAUER, VERESHCHETIN and PARRA-ARANGUREN, and
Judge ad hoc SKUBISZEWSKI append dissenting opinions to the Judgment of the Court.
(A summary of the declarations and of the opinions is attached.)
*
**
The above summary of the Judgment has been prepared by the Registry for the use of the Press and in no way involves the
responsibility of the Court. It cannot be quoted against the text of the Judgment, of which it does not constitute an interpretation.
__________
Annex to Press Communiqu No. 97/10bis
Declaration of President Schwebel
I am largely in agreement with the Court's Judgment and accordingly I have voted for most of its operative paragraphs. I have voted
against operative paragraph 1 B essentially because I view the construction of "Variant C", the "provisional solution", as inseparable
from its being put into operation. I have voted against operative paragraph 1 D essentially because I am not persuaded that
Hungary's position as the Party initially in breach deprived it of a right to terminate the Treaty in response to Czechoslovakia's
material breach, a breach which in my view (as indicated by my vote on paragraph 1 B) was in train when Hungary gave notice of
termination.
At the same time, I fully support the conclusions of the Court as to what should be the future conduct of the Parties and as to
disposition of issues of compensation.
__________
Declaration of Judge Rezek

Judge Rezek considers that the 1977 Treaty is no longer in existence, since it has been abrogated by the attitude of the two Parties.
From that conclusion, however, he infers consequences very similar to those which the majority infers from the continued existence
of the treaty. First, there is what has been accomplished, and accomplished in good faith. There is, also and above all, the very
principle of good faith which must lead here to the fulfilment of reciprocal duties remaining from a treaty which has not been
implemented through the reciprocal fault of the two Parties.
__________
Separate opinion of Vice-President Weeramantry
Judge Weeramantry agreed with the majority of the Court in all their conclusions.
However, in his separate opinion, he addressed three questions dealing with aspects of environmental law the principle of
sustainable development in balancing the competing demands of development and environmental protection, the principle of
continuing environmental impact assessment, and the question of the appropriateness of the use of an inter partes legal principle
such as estoppel in the resolution of issues witherga omnes implications such as a claim that environmental damage is involved.
On the first question, his opinion states that both the right to development and the right to environmental protection are principles
currently forming part of the corpus of international law. They could operate in collision with each other unless there was a principle
of international law which indicated how they should be reconciled. That principle is the principle of sustainable development which,
according to this opinion, is more than a more concept, but is itself a recognized principle of contemporary international law.
In seeking to develop this principle, the Court should draw upon prior human experience, for humanity has lived for millennia with the
need to reconcile the principles of development and care for the environment. Sustainable development is therefore not a new
concept and, for developing it today, a rich body of global experience is available. The opinion examines a number of ancient
irrigation civilizations for this purpose. The Court, as representing the main forms of civilization, needs to draw upon the wisdom of
all cultures, especially in regard to areas of international law which are presently in a developmental phase. Among the principles
that can be so derived from these cultures are the principles of trusteeship of earth resources, intergenerational rights, protection of
flora and fauna, respect for land, maximization of the use of natural resources while preserving their regenerative capacity, and the
principle that development and environmental protection should go hand in hand.
In his opinion, Judge Weeramantry stresses the importance of continuous environmental impact assessment of a project as long as
it continues in operation. The duty of environmental impact assessment is not discharged merely by resort to such a procedure
before the commencement of a project. The standards to be applied in such continuous monitoring are the standards prevalent at
the time of assessment and not those in force at the commencement of the project.
The third aspect of environmental law referred to is the question whether principles of estoppel which might operate between parties
are appropriate in matters such as those relating to the environment, which are of concern not merely to the two Parties, but to a
wider circle. Questions involving duties of an erga omnes nature may not always be appropriately resolved by rules of procedure
fashioned for inter partes disputes. Judge Weeramantry draws attention to this aspect as one which will need careful consideration.
__________
Separate opinion of Judge Bedjaoui
Judge Bedjaoui considers that the majority of the Court has not sufficiently clarified the question of applicable law and that of the
nature of the 1977 Treaty. On the first point, he states that an "evolutionary interpretation" of the 1977 Treaty can only be applied if
the general rule of interpretation in Article 31 of the Vienna Convention on the Law of Treaties is respected, and that the "definition"
of a concept must not be confused with the "law" applicable to that concept, nor should the "interpretation" of a treaty be confused
with its "revision". Judge Bedjaoui recommends that subsequent law be taken into account only in very special situations. This
applies in the present case. It is the first major case brought before the Court in which the ecological background is so sensitive that
it has moved to centre stage, threatening to divert attention from treaty law. International opinion would not have understood had the
Court disregarded the new law, the application of which was demanded by Hungary. Fortunately, the Court has been able to graft the
new law on to the stock of Articles 15, 19 and 20 of the 1977 Treaty. Nor was Slovakia opposed to taking this law into consideration.
However, in applying the so-called principle of the evolutionary interpretation of a treaty in the present case, the Court should have
clarified the issue more and should have recalled that the general rule governing the interpretation of a treaty remains that set out in
Article 31 of the 1969 Vienna Convention.
As for the nature of the 1977 Treaty and its related instruments, in Judge Bedjaoui's view this warranted more attention from the
majority of the Court. It is a crucial question. The nature of the Treaty largely conditions the succession of Slovakia to this
instrument, which constitutes the substance of the applicable law, and which remains in force despite intersecting violations by both
Parties.
The 1977 Treaty (including related instruments) has the threefold characteristic
of being a territorial treaty,
of being a treaty to which Slovakia validly succeeded, and
of being a treaty which is still in force to day.
In substance, Judge Bedjaoui does not share the opinion of the majority of the Court as to the legal characterization of Variant C,
which he considers to be an offence, the unlawfulness of which affects each of the acts of the construction of this variant. The
construction could be neither innocent nor neutral; it bore the stamp of the end purpose of Variant C, which was the diversion of the
waters of the river. It is therefore not possible to separate construction on the one hand and diversion on the other; Variant C as a
whole is unlawful.
On a different subject, Judge Bedjaoui considers that both Parties, Hungary just as much as Slovakia, have breached the 1977
Treaty. The situation created by them is characterized by intersecting violations countering each other. However it is not easy to
determine the links of cause and effect in each case with certainty. The acts and conduct of the Parties sometimes intercut. A deep
mutual distrust has unfortunately characterized relations between the parties for many years.
On the ground, these intersecting violations gave rise to a reality which the majority of the Court did not deem it useful to

characterize. For Judge Bedjaoui it seemed necessary and important to note that these intersecting violations created two
effectivits which will continue to mark the landscape of the region in question.
Judge Bedjaoui indicated the significance to be attached to taking account of the effectivit s. In this case, taking account of the
effectivits is not tantamount to a negation of the title. The title does not disappear; it merely adapts and does so, moreover,
through involving the responsibility of the authors of these effectivits, who will be liable for all the necessary compensation.
These effectivits, adapted as they have been or will be to fit the mould of a new treaty, may have breached and exceeded the
existing law, but the law reins them in and governs them again in three ways:
these effectivits do not kill the Treaty, which survives them;
these effectivits do not go unpunished and entail sanctions and compensation;
and above all, these effectivits will be "recast", or inserted into the Treaty, whose new content to be negotiated will serve as
alegitimizing text for them.
Judge Bedjaoui finally turns to the necessity for the Parties to negotiate again and to do so in good faith. The renegotiation must be
seen as a strict obligation, exactly like the good faith conduct it implies. This obligation flows not only from the Treaty itself, but also
from general international law as it has developed in the spheres of international watercourses and the environment.
__________
Separate opinion of Judge Koroma
In his separate opinion, Judge Koroma stated that he supported the Court's findings that Hungary was not entitled to suspend and
subsequently to abandon the works on the Project for which the Treaty had attributed responsibility to it, and that the Treaty
continues to be in force. These findings, in his view, were not only in accordance with the Treaty but with the principle of pacta sunt
servanda, one of the foremost principles of international law and indeed an integral part of it. In Judge Koroma's view a contrary
finding would have suggested that at any time a State might unilaterally repudiate any treaty when it found its obligation to be
inconvenient; this, he maintained, would seriously undermine the principle of pacta sunt servanda and the whole treaty relationship.
While he shares the Court's understanding of Hungary's concern about the effects of the Project on its natural environment, he
agreed that the material before the Court could not justify the unilateral repudiation of the Treaty.
Judge Koroma, however, disagreed with the finding of the Court that Czechoslovakia was not entitled to put Variant C into operation.
He felt that this finding did not give sufficient weight to the provisions of the Treaty, nor to the financial damage and environmental
harm that Czechoslovakia would have incurred and endured had the Project been left uncompleted as Hungary's action dictated. He
regarded Variant C as a genuine attempt to implement the Treaty so as to realize its aim and objective.
He also did not agree that the Court appeared to treat the consequences of the Parties' "wrongful conduct" as if they were
equivalent.
__________
Dissenting opinion of Judge Oda
Judge Oda has voted against operative paragraph 1 C, since, in his view, not only the construction, but also the operation of the
Cunovo dam was simply the execution of the Project as described in the 1977 Treaty between Czechoslovakia and Hungary
concerning the Gabckovo-Nagymaros System of Locks. He considers that the provisional solution, Variant C, was the only
possible option for fulfilment of the original Project on the river Danube. Judge Oda does not understand why the Court decided that,
while the construction of Variant C that is to say, the Cunovo dam is lawful, the operation of it is a wrongful act.
Judge Oda made a clear distinction between the Joint Contractual Plan (JCP), as the execution of the Project, and the 1977 Treaty,
which underlies the whole Project and which had been worked out over a period of several decades. The JCP, which is similar to a
"partnership" contract should have been subject to amendment and revision, as proved necessary, in a more flexible manner.
The fundamental purpose of the 1977 Treaty was, in his view, to carry out the construction of the bypass canal and of the power
plants at the dams of Gabckovo and Nagymaros. Firstly, Hungary's failure to perform its treaty obligations cannot be justified on
the basis of the new international norm of environmental protection. The whole Project and the 1977 Treaty, in particular, were
undoubtedly sketched out in the 1970s with due consideration for the environment of the river Danube. There is no proof with which
to overturn this assumption. Secondly, it was not a violation of the Treaty for Czechoslovakia to proceed to the provisional solution
Variant C as the only option open to it in order to carry out the basic Project in the event of Hungary failing to fulfil its obligation to
construct the Dunakiliti dam.
With regard to future negotiations between the Parties on the modalities of the execution of the Judgment, as agreed upon in the
Special Agreement, Judge Oda suggests that the JCP be modified in order to include the work on the Cunovo dam which enabled
the whole Project to be accomplished. As far as the environment is concerned, the Parties should proceed to an assessment of the
environment of the river Danube in an effort to seek out technological solutions limiting or remedying any environmental damage
caused by Czechoslovakia's construction of the bypass canal and Hungary's abandonment of the Nagymaros dam.
The damages and losses suffered by Czechoslovakia owing to Hungary's failure to fulfil its Treaty obligations must be compensated.
However, Hungary's abandonment of the Nagymaros dam, though that dam formed a part of the whole Project, did not cause any
practical damage to Czechoslovakia. Hungary must bear a part of the cost of construction of the Cunovo dam, as that work gave life
to the whole Project. It may well be admitted, however, that the whole Project (that is, the bypass canal and the Gabckovo power
plant on that canal) are simply of benefit to Czechoslovakia and Slovakia, and that Hungary has nothing to gain from it. This point
should be taken into account when the matter of compensation for loss and damage to be paid by Hungary to Slovakia is
considered.
__________
Dissenting opinion of Judge Ranjeva
Judge Ranjeva disagreed with the majority of the Court in that in paragraph 155 1 C the Judgment restricts the unlawfulness of
Variant C to its being put into operation and maintained in service to date. Judge Ranjeva first remarks that there is a contradiction in
terms of logic between subparagraphs B and C of this same paragraph of the operative part. How can the construction of this

Variant C be acknowledged to be lawful at the same time as putting it into operation is declared to be unlawful? The Judgment, in his
opinion, came to this conclusion because it restricted the significance of the reciprocal wrongs ascribable to Hungary and to
Czechoslovakia and Slovakia to the sole issue of the obligation to compensate for the consequences of the damage; in so doing, the
Court resurrected a rule of Roman law, the rule of Pomponius. However the Court failed to examine the significance of these
intersecting wrongs on another point: the causality in the sequence of events leading to the situation which is the subject of the
dispute before the Court. For Judge Ranjeva, the circumstances of fact against a background of chaotic relations marked by distrust
and suspicion not only made it difficult to identify the original cause of this situation but above all resulted in the fact that a wrong
committed by one of the Parties triggered off a wrong committed by the other. Taking a position counter to the linear analysis of the
Court, for the author it is not a matter of several wrongs which merely succeed each other but of distinct wrongs which gradually
contributed to creating the situation which is the subject of the present dispute. The conclusion drawn by Judge Ranjeva is that the
unlawfulness of the Hungarian decision, a decision which was undeniably unlawful, was not the cause but the ground or motive
taken into consideration by Czechoslovakia then by Slovakia in order to justify their subsequent conduct. The second conclusion
reached by the author relates to the lawfulness of Variant c. In his opinion, the distinction made between proceeding to the
provisional solution and putting into operation is in fact an artificial one; it would have been plausible if there had been true
equipollence between these two elements and if one of the elements could not absorb the other. Proceeding to the provisional
solution was significant only if it was carried through. Thus the unlawfulness of Variant C, for Judge Ranjeva, resided not so much in
its construction or commissioning, or even in the diversion of the Danube, but in replacing an international project by a national
project; Variant C could not be related to any obligation under the 1977 Treaty once the Court rightly dismissed the idea of an
approximate application or of an obligation to limit damage in treaty law.
__________
Dissenting opinion of Judge Herczegh
The dissenting opinion exhaustively presents the case for the existence of a state of necessity on the part of Hungary with regard to
the construction of the Nagymaros dam. It holds that not only the putting into operation by Czechoslovakia of the "provisional
solution", called "Variant C", but also the proceeding to this solution constituted a serious breach of the 1977 Treaty. Hungary was
therefore justified in terminating the Treaty. Judge Herczegh consequently voted against the points of the operative part which refer
expressly to the Treaty, but voted for mutual compensation by Slovakia and by Hungary for the damage each sustained on account
of the construction of the system of locks forming the subject of the dispute.
__________
Dissenting opinion of Judge Fleischhauer
Judge Fleischhauer dissents on the Court's central finding that Hungary's notification of 19 May 1992 of the termination of the 1977
Treaty did not have the effect of terminating it, as the notification is found to have been premature and as Hungary is said to have
forfeited its right to terminate by its own earlier violation of the Treaty. The Judge shares the finding of the Court that Hungary has
violated its obligations under the 1977 Treaty when it suspended, in 1989, and later abandoned, its share in the works on the
Nagymaros and on part of the Gabckovo Project. He also agrees with the conclusion that Czechoslovakia was not entitled to put
into operation, as from October 1992, Variant C, a unilateral solution which implies the appropriation by Czechoslovakia and later
Slovakia, essentially for own use, of 80 to 90 per cent of the waters of the Danube in the Treaty area, and is therefore not
proportionate. However, he is of the view that when Czechoslovakia, in November 1991, moved into construction of Variant C, the
point of no return was passed on both sides; at that point in time it was certain that neither would Hungary come back to the Treaty
nor would Czechoslovakia agree to further delaying the damming of the Danube. The internationally wrongful act therefore was not
confined to the actual damming of the river, but started in November 1991, more than six months prior to Hungary's notification of
termination. Judge Fleischhauer thinks, moreover, that Hungary, although it had breached the Treaty first, had not forfeited its right
to react to Variant C by termination of the Treaty, because international law does not condone retaliation that goes beyond the limits
of proportionality. In situations like this, the corrective element rather lies in a limitation of the first offender's right to claim redress. As
he considers the validity of the Treaty as having lapsed, he has voted against the conclusions of the Court on the consequences of
the Judgment inasmuch as they are based on the continuing validity of the Treaty (2 A, B, C, E). In his view the installations on
Slovak territory do not have to be dismantled, but in order to lawfully continue to use them Slovakia will have to negotiate with
Hungary a water-management rgime. Hungary does not have to construct Nagymaros any more, but Slovakia is no longer
committed to the joint running of the Project.
__________
Dissenting opinion of Judge Vereshchetin
Judge Vereshchetin takes the view that Czechoslovakia was fully entitled in international law to put into operation from October 1992
the "provisional solution" (Variant C) as a countermeasure so far as its partner in the Treaty persisted in violating its obligations.
Therefore, he could not associate himself with paragraph 155 1 C of the Judgment, nor fully with paragraph 155 2 D.
According to the Court's jurisprudence, established wrongful acts justify "proportionate countermeasures on the part of the State
which ha[s] been the victim of these acts ..." (Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United
States of America), Judgment, I.C.J. Reports 1986, p. 127, para. 249). In the view of the Judge Vereshchetin, all the basic conditions
for a countermeasure to be lawful were met when Czechoslovakia put Variant C into operation in October 1992. These conditions
include: (1) the presence of a prior illicit act, committed by the State at which the countermeasure is targeted; (2) the necessity of the
countermeasure; and (3) its proportionality in the circumstances of the case.
Recognizing that the test of proportionality is very important in the rgime of countermeasures, Judge Vereshchetin believes the
Court should have assessed and compared separately: (1) the economic and financial effects of the breach as against the economic
and financial effects of the countermeasure; (2) the environmental effects of the breach as against the environmental effects of the
countermeasure; and (3) the effects of the breach on the exercise of the right to use commonly shared water resources as against
the effects of the countermeasure on the exercise of this right.

Judge Vereshchetin makes his assessment of those effects and observes in conclusion that even assuming that Czechoslovakia, as
a matter of equity, should have discharged more water than it actually did into the old river bed, this assumption would have related
to only one of the many aspects of the proportionality of the countermeasure, which could not in itself warrant the general conclusion
of the Court that Czechoslovakia was not entitled to put Variant C into operation from October 1992.
__________
Dissenting opinion of Judge Parra-Aranguren
My vote against paragraph 1 C of the operative part of the Judgment is the consequence of the recognition that Hungary was not
entitled to suspend and subsequently abandon, in 1989, the works which were its responsibility, in accordance with the Treaty of 16
September 1977 and related instruments. Because of that the position of Czechoslovakia was extremely difficult, not only for the
huge sums invested so far but also for the environmental consequences of leaving unfinished and useless the constructions already
in place, almost complete in some sections of the Gabckovo Project. Faced with that situation, in my opinion, Czechoslovakia was
entitled to take all necessary action and for that reason the construction and putting into operation of the "provisional solution"
(Variant C) cannot be considered an internationally wrongful act. Therefore, in principle, Slovakia shall not compensate Hungary on
the account of the construction and putting into operation of "the provisional solution" (Variant C) and its maintenance in service by
Slovakia, unless a manifest abuse of rights on its part is clearly evidenced.
In my opinion, paragraph 2 A, of the operative part of the Judgment should not have been included, because the succession of
Slovakia to the 1977 Treaty was neither a question submitted to the Court in the Special Agreement, nor is it a legal consequence
arising out of the decision of the questions submitted by the Parties in its Article 2, paragraph 1. Furthermore, the answer of the
Court is incomplete, since nothing is said in respect to the "related instruments" to the 1977 Treaty; and it does not take into
consideration the position adopted by the dissenting judges who maintained that the 1977 Treaty was no longer in force.
__________
Dissenting opinion of Judge ad hoc Skubiszewski
While agreeing with the Court in all its other holdings, Judge ad hoc Skubiszewski is unable to concur in the broad finding that
Czechoslovakia was not entitled to put Variant C into operation from October 1992 (Judgment, para. 155, point 1 C). The finding is
too general. In his view the Court should have distinguished between, on the one hand, Czechoslovakia's right to take steps to
execute and operate certain works on her territory and, on the other, her responsibility (and, subsequently, that of Slovakia) towards
Hungary resulting from the diversion of most of the waters of the Danube into Czechoslovak territory, especially in the period
preceding the conclusion of the Hungarian-Slovak Agreement of 19 April 1995.
The withdrawal of Hungary from the Project left Czechoslovakia with the legal possibility of doing on her territory what she was
allowed to do by general law on international rivers. As a whole, the "provisional solution" was and is lawful. That evaluation is not
changed by one element of it, i.e., sharing of the waters of the Danube, which called for redress and remedy. Having recognized the
serious problems with which Czechoslovakia was confronted as a result of Hungary's action, the Court should have applied equity
as part of international law. It would then arrive at a holding that would have given more nuance to its decision.
Notwithstanding the Parties' mutual legal claims for compensation much speaks in favour of a "zero option" (Judgment, para. 153).
That option should facilitate the settlement of the dispute.

Bayan vs. Zamora, G.R. No. 138570, October 10, 2000,

342 SCRA 449.

ase Digest: G.R. No. 138570. October 10, 2000.

342 SCRA 449
BAYAN (Bagong Alyansang Makabayan), a Junk VFA Movement, Bishop Tomas
Millamena (Iglesia Filipina Independiente), Bishop Elmer Bolocan (United Church of
Christ of the Phil.), Dr. Reynaldo Legasca, Md, Kilusang Mambubukid Ng Pilipinas,
Kilusang Mayo Uno, Gabriela, Prolabor, and The Public Interest Law Center, petitioners,
vs. Executive Secretary Ronaldo Zamora, Foreign Affairs Secretary Domingo Siazon,
Defense Secretary Orlando Mercado, Brig. Gen. Alexander Aguirre, Senate President
Marcelo Fernan, Senator Franklin Drilon, Senator Blas Ople, Senator Rodolfo Biazon,
And Senator Francisco Tatad, respondents.

Facts: On March 14, 1947, the Philippines and the United States of America forged a
Military Bases Agreement which formalized, among others, the use of installations in the

Philippine territory by United States military personnel. In view of the impending

expiration of the RP-US Military Bases Agreement in 1991, the Philippines and the
United States negotiated for a possible extension of the military bases agreement. On
September 16, 1991, the Philippine Senate rejected the proposed RP-US Treaty of
Friendship, Cooperation and Security which, in effect, would have extended the
presence of US military bases in the Philippines. On July 18, 1997, the United States
panel, headed by US Defense Deputy Assistant Secretary for Asia Pacific Kurt
Campbell, met with the Philippine panel, headed by Foreign Affairs Undersecretary
Rodolfo Severino Jr., to exchange notes on the complementing strategic interests of the
United States and the Philippines in the Asia-Pacific region. Both sides discussed,
among other things, the possible elements of the Visiting Forces Agreement (VFA for
brevity). Thereafter, then President Fidel V. Ramos approved the VFA, which was
respectively signed by public respondent Secretary Siazon and Unites States
Ambassador Thomas Hubbard. On October 5, 1998, President Joseph E. Estrada,
through respondent Secretary of Foreign Affairs, ratified the VFA. On October 6, 1998,
the President, acting through respondent Executive Secretary Ronaldo Zamora, officially
transmitted to the Senate of the Philippines, the Instrument of Ratification, the letter of
the President and the VFA, for concurrence pursuant to Section 21, Article VII of the
1987 Constitution
Issues (justiciable controversy): (1) Whether or not petitioners have legal standing as
concerned citizens, taxpayers, or legislators to question the constitutionality of the VFA;
(2) whether the VFA is governed by the provisions of Section 21, Article VII or of Section
25, Article XVIII of the Constitution; (3) and whether or not the Supreme Court has
jurisdiction.

Ruling: (1) No. Petitioners failed to show that they have sustained, or are in danger of
sustaining any direct injury as a result of the enforcement of the VFA. As taxpayers,
petitioners have not established that the VFA involves the exercise by Congress of its
taxing or spending powers. On this point, it bears stressing that a taxpayers suit refers
to a case where the act complained of directly involves the illegal disbursement of public
funds derived from taxation.

(2) Yes.The fact that the President referred the VFA to the Senate under Section 21,
Article VII, and that the Senate extended its concurrence under the same provision, is
immaterial. For in either case, whether under Section 21, Article VII or Section 25, Article
XVIII, the fundamental law is crystalline that the concurrence of the Senate is mandatory
to comply with the strict constitutional requirements.

(3) No. In fine, absent any clear showing of grave abuse of discretion on the part of
respondents, the Court as the final arbiter of legal controversies and staunch sentinel of
the rights of the people is then without power to conduct an incursion and meddle with
such affairs purely executive and legislative in character and nature. For the Constitution
no less, maps out the distinct boundaries and limits the metes and bounds within which

each of the three political branches of government may exercise the powers exclusively
and essentially conferred to it by law.

Salonga vs. Smith, G.R. No. 176051, February 11, 2009

EN BANC

SUZETTE NICOLAS y SOMBILON, G.R. No. 175888

Petitioner,

Present:

PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
- versus - CORONA,
CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION, and
PERALTA, JJ.
ALBERTO ROMULO, in his capacity as Secretary of Foreign Affairs; RAUL
GONZALEZ, in his capacity as Secretary of Justice; EDUARDO ERMITA, in his
capacity as Executive Secretary; RONALDO PUNO, in his capacity as

Secretary of the Interior and Local Government; SERGIO APOSTOL, in his

capacity as Presidential Legal Counsel; and L/CPL. DANIEL SMITH,
Respondents.

X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X

JOVITO R. SALONGA, WIGBERTO G.R. No. 176051

E. TAADA, JOSE DE LA RAMA,
EMILIO C. CAPULONG, H. HARRY
L. ROQUE, JR., FLORIN HILBAY,
and BENJAMIN POZON,
Petitioners,

- versus -

DANIEL SMITH, SECRETARY RAUL GONZALEZ, PRESIDENTIAL LEGAL COUNSEL

SERGIO APOSTOL, SECRETARY RONALDO PUNO, SECRETARY ALBERTO
ROMULO, The Special 16th Division of the COURT OF APPEALS, and all
persons acting in their capacity,
Respondents.

X - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X

BAGONG ALYANSANG MAKABAYAN G.R. No. 176222

(BAYAN), represented by Dr. Carol Araullo; GABRIELA, represented by
Emerenciana de Jesus; BAYAN MUNA, represented by Rep. Satur Ocampo;
GABRIELA WOMENS PARTY, represented by Rep. Liza Maza; KILUSANG MAYO
UNO (KMU), represented by Elmer Labog; KILUSANG MAGBUBUKID NG
PILIPINAS (KMP), represented by Willy Marbella; LEAGUE OF FILIPINO
STUDENTS (LFS), represented by Vencer Crisostomo; and THE PUBLIC
INTEREST LAW CENTER, represented by Atty. Rachel Pastores,
Petitioners,

- versus -

PRESIDENT GLORIA MACAPAGAL-ARROYO, in her capacity as concurrent

Defense Secretary, EXECUTIVE SECRETARY EDUARDO ERMITA, FOREIGN
AFFAIRS SECRETARY ALBERTO ROMULO, JUSTICE SECRETARY RAUL
GONZALEZ, AND INTERIOR AND LOCAL GOVERNMENT SECRETARY RONALDO
PUNO,
Respondents. Promulgated:
February 11, 2009

X ---------------------------------------------------------------------------------------- X

DECISION

AZCUNA, J.:

These are petitions for certiorari, etc. as special civil actions and/or for review
of the Decision of the Court of Appeals in Lance Corporal Daniel J. Smith v.
Hon. Benjamin T. Pozon, et al., in CA-G.R. SP No. 97212, dated January 2,
2007.

The facts are not disputed.

Respondent Lance Corporal (L/CPL) Daniel Smith is a member of the United

States Armed Forces. He was charged with the crime of rape committed
against a Filipina, petitioner herein, sometime on November 1, 2005, as
follows:

The undersigned accused LCpl. Daniel Smith, Ssgt. Chad Brian Carpentier,
Dominic Duplantis, Keith Silkwood and Timoteo L. Soriano, Jr. of the crime of
Rape under Article 266-A of the Revised Penal Code, as amended by Republic
Act 8353, upon a complaint under oath filed by Suzette S. Nicolas, which is
attached hereto and made an integral part hereof as Annex A, committed as
follows:

That on or about the First (1st) day of November 2005, inside the Subic Bay
Freeport Zone, Olongapo City and within the jurisdiction of this Honorable
Court, the above-named accuseds (sic), being then members of the United
States Marine Corps, except Timoteo L. Soriano, Jr., conspiring, confederating
together and mutually helping one another, with lewd design and by means
of force, threat and intimidation, with abuse of superior strength and taking
advantage of the intoxication of the victim, did then and there willfully,
unlawfully and feloniously sexually abuse and have sexual intercourse with or
carnal knowledge of one Suzette S. Nicolas, a 22-year old unmarried woman
inside a Starex Van with Plate No. WKF-162, owned by Starways Travel and
Tours, with Office address at 8900 P. Victor St., Guadalupe, Makati City, and
driven by accused Timoteo L. Soriano, Jr., against the will and consent of the
said Suzette S. Nicolas, to her damage and prejudice.

CONTRARY TO LAW.[1]

Pursuant to the Visiting Forces Agreement (VFA) between the Republic of the
Philippines and the United States, entered into on February 10, 1998, the
United States, at its request, was granted custody of defendant Smith
pending the proceedings.

During the trial, which was transferred from the Regional Trial Court (RTC) of
Zambales to the RTC of Makati for security reasons, the United States
Government faithfully complied with its undertaking to bring defendant Smith
to the trial court every time his presence was required.

On December 4, 2006, the RTC of Makati, following the end of the trial,
rendered its Decision, finding defendant Smith guilty, thus:

WHEREFORE, premises considered, for failure of the prosecution to adduce

sufficient evidence against accused S/SGT. CHAD BRIAN CARPENTER, L/CPL.
KEITH SILKWOOD AND L/CPL. DOMINIC DUPLANTIS, all of the US Marine Corps
assigned at the USS Essex, are hereby ACQUITTED to the crime charged.

The prosecution having presented sufficient evidence against accused L/CPL.

DANIEL J. SMITH, also of the US Marine Corps at the USS Essex, this Court
hereby finds him GUILTY BEYOND REASONABLE DOUBT of the crime of RAPE
defined under Article 266-A, paragraph 1 (a) of the Revised Penal Code, as
amended by R.A. 8353, and, in accordance with Article 266-B, first paragraph
thereof, hereby sentences him to suffer the penalty of reclusion perpetua
together with the accessory penalties provided for under Article 41 of the
same Code.

Pursuant to Article V, paragraph No. 10, of the Visiting Forces Agreement

entered into by the Philippines and the United States, accused L/CPL. DANIEL
J. SMITH shall serve his sentence in the facilities that shall, thereafter, be
agreed upon by appropriate Philippine and United States authorities. Pending
agreement on such facilities, accused L/CPL. DANIEL J. SMITH is hereby
temporarily committed to the Makati City Jail.

Accused L/CPL. DANIEL J. SMITH is further sentenced to indemnify

complainant SUZETTE S. NICOLAS in the amount of P50,000.00 as
compensatory damages plus P50,000.00 as moral damages.

SO ORDERED.[2]

As a result, the Makati court ordered Smith detained at the Makati jail until
further orders.

On December 29, 2006, however, defendant Smith was taken out of the
Makati jail by a contingent of Philippine law enforcement agents, purportedly
acting under orders of the Department of the Interior and Local Government,
and brought to a facility for detention under the control of the United States
government, provided for under new agreements between the Philippines
and the United States, referred to as the Romulo-Kenney Agreement of
December 19, 2006 which states:

The Government of the Republic of the Philippines and the Government of the
United States of America agree that, in accordance with the Visiting Forces
Agreement signed between our two nations, Lance Corporal Daniel J. Smith,
United States Marine Corps, be returned to U.S. military custody at the U.S.
Embassy in Manila.

(Sgd.) KRISTIE A. KENNEY (Sgd.) ALBERTO G. ROMULO

Representative of the United States Representative of the Republic
of America of the Philippines

DATE: 12-19-06 DATE: December 19, 2006__

and the Romulo-Kenney Agreement of December 22, 2006 which states:

The Department of Foreign Affairs of the Republic of the Philippines and the
Embassy of the United States of America agree that, in accordance with the
Visiting Forces Agreement signed between the two nations, upon transfer of
Lance Corporal Daniel J. Smith, United States Marine Corps, from the Makati
City Jail, he will be detained at the first floor, Rowe (JUSMAG) Building, U.S.
Embassy Compound in a room of approximately 10 x 12 square feet. He will
be guarded round the clock by U.S. military personnel. The Philippine police
and jail authorities, under the direct supervision of the Philippine Department
of Interior and Local Government (DILG) will have access to the place of
detention to ensure the United States is in compliance with the terms of the
VFA.

The matter was brought before the Court of Appeals which decided on
January 2, 2007, as follows:

WHEREFORE, all the foregoing considered, we resolved to DISMISS the

petition for having become moot.[3]

Hence, the present actions.

The petitions were heard on oral arguments on September 19, 2008, after
which the parties submitted their memoranda.

Petitioners contend that the Philippines should have custody of defendant

L/CPL Smith because, first of all, the VFA is void and unconstitutional.

This issue had been raised before, and this Court resolved in favor of the
constitutionality of the VFA. This was in Bayan v. Zamora,[4] brought by
Bayan, one of petitioners in the present cases.

Against the barriers of res judicata vis--vis Bayan, and stare decisis vis--vis all
the parties, the reversal of the previous ruling is sought on the ground that
the issue is of primordial importance, involving the sovereignty of the
Republic, as well as a specific mandate of the Constitution.

The provision of the Constitution is Art. XVIII, Sec. 25 which states:

Sec. 25. After the expiration in 1991 of the Agreement between the
Philippines and the United States of America concerning Military Bases,
foreign military bases, troops, or facilities shall not be allowed in the
Philippines except under a treaty duly concurred in by the Senate and, when
the Congress so requires, ratified by a majority of the votes cast by the

people in a national referendum held for that purpose, and recognized as a

treaty by the other contracting State.

The reason for this provision lies in history and the Philippine experience in
regard to the United States military bases in the country.

It will be recalled that under the Philippine Bill of 1902, which laid the basis
for the Philippine Commonwealth and, eventually, for the recognition of
independence, the United States agreed to cede to the Philippines all the
territory it acquired from Spain under the Treaty of Paris, plus a few islands
later added to its realm, except certain naval ports and/or military bases and
facilities, which the United States retained for itself.

This is noteworthy, because what this means is that Clark and Subic and the
other places in the Philippines covered by the RP-US Military Bases
Agreement of 1947 were not Philippine territory, as they were excluded from
the cession and retained by the US.

Accordingly, the Philippines had no jurisdiction over these bases except to the
extent allowed by the United States. Furthermore, the RP-US Military Bases
Agreement was never advised for ratification by the United States Senate, a
disparity in treatment, because the Philippines regarded it as a treaty and
had it concurred in by our Senate.

Subsequently, the United States agreed to turn over these bases to the
Philippines; and with the expiration of the RP-US Military Bases Agreement in
1991, the territory covered by these bases were finally ceded to the
Philippines.

To prevent a recurrence of this experience, the provision in question was

adopted in the 1987 Constitution.

The provision is thus designed to ensure that any agreement allowing the
presence of foreign military bases, troops or facilities in Philippine territory
shall be equally binding on the Philippines and the foreign sovereign State

involved. The idea is to prevent a recurrence of the situation in which the

terms and conditions governing the presence of foreign armed forces in our
territory were binding upon us but not upon the foreign State.

Applying the provision to the situation involved in these cases, the question is
whether or not the presence of US Armed Forces in Philippine territory
pursuant to the VFA is allowed under a treaty duly concurred in by the Senate
xxx and recognized as a treaty by the other contracting State.

This Court finds that it is, for two reasons.

First, as held in Bayan v. Zamora,[5] the VFA was duly concurred in by the
Philippine Senate and has been recognized as a treaty by the United States
as attested and certified by the duly authorized representative of the United
States government.

The fact that the VFA was not submitted for advice and consent of the United
States Senate does not detract from its status as a binding international
agreement or treaty recognized by the said State. For this is a matter of
internal United States law. Notice can be taken of the internationally known
practice by the United States of submitting to its Senate for advice and
consent agreements that are policymaking in nature, whereas those that
carry out or further implement these policymaking agreements are merely
submitted to Congress, under the provisions of the so-called CaseZablocki
Act, within sixty days from ratification.[6]

The second reason has to do with the relation between the VFA and the RP-US
Mutual Defense Treaty of August 30, 1951. This earlier agreement was signed
and duly ratified with the concurrence of both the Philippine Senate and the
United States Senate.

The RP-US Mutual Defense Treaty states:[7]

MUTUAL DEFENSE TREATY BETWEEN THE REPUBLIC OF THE PHILIPPINES AND

THE UNITED STATES OF AMERICA. Signed at Washington, August 30, 1951.

The Parties of this Treaty

Reaffirming their faith in the purposes and principles of the Charter of the
United Nations and their desire to live in peace with all peoples and all
governments, and desiring to strengthen the fabric of peace in the Pacific
area.

Recalling with mutual pride the historic relationship which brought their two
peoples together in a common bond of sympathy and mutual ideals to fight
side-by-side against imperialist aggression during the last war.

Desiring to declare publicly and formally their sense of unity and their
common determination to defend themselves against external armed attack,
so that no potential aggressor could be under the illusion that either of them
stands alone in the Pacific area.

Desiring further to strengthen their present efforts for collective defense for
the preservation of peace and security pending the development of a more
comprehensive system of regional security in the Pacific area.

Agreeing that nothing in this present instrument shall be considered or

interpreted as in any way or sense altering or diminishing any existing
agreements or understandings between the Republic of the Philippines and
the United States of America.

Have agreed as follows:

ARTICLE I. The parties undertake, as set forth in the Charter of the United
Nations, to settle any international disputes in which they may be involved by
peaceful means in such a manner that international peace and security and
justice are not endangered and to refrain in their international relation from
the threat or use of force in any manner inconsistent with the purposes of the
United Nations.

ARTICLE II. In order more effectively to achieve the objective of this Treaty,
the Parties separately and jointly by self-help and mutual aid will maintain
and develop their individual and collective capacity to resist armed attack.

ARTICLE III. The Parties, through their Foreign Ministers or their deputies, will
consult together from time to time regarding the implementation of this
Treaty and whenever in the opinion of either of them the territorial integrity,
political independence or security of either of the Parties is threatened by
external armed attack in the Pacific.

ARTICLE IV. Each Party recognizes that an armed attack in the Pacific area on
either of the parties would be dangerous to its own peace and safety and
declares that it would act to meet the common dangers in accordance with its
constitutional processes.

Any such armed attack and all measures taken as a result thereof shall be
immediately reported to the Security Council of the United Nations. Such
measures shall be terminated when the Security Council has taken the
measures necessary to restore and maintain international peace and security.

ARTICLE V. For the purpose of Article IV, an armed attack on either of the
Parties is deemed to include an armed attack on the metropolitan territory of
either of the Parties, or on the island territories under its jurisdiction in the
Pacific Ocean, its armed forces, public vessels or aircraft in the Pacific.

ARTICLE VI. This Treaty does not affect and shall not be interpreted as
affecting in any way the rights and obligations of the Parties under the
Charter of the United Nations or the responsibility of the United Nations for
the maintenance of international peace and security.

ARTICLE VII. This Treaty shall be ratified by the Republic of the Philippines and
the United Nations of America in accordance with their respective
constitutional processes and will come into force when instruments of
ratification thereof have been exchanged by them at Manila.

ARTICLE VIII. This Treaty shall remain in force indefinitely. Either Party may
terminate it one year after notice has been given to the other party.

IN WITHNESS WHEREOF the undersigned Plenipotentiaries have signed this

Treaty.

DONE in duplicate at Washington this thirtieth day of August, 1951.

For the Republic of the Philippines:

(Sgd.) CARLOS P. ROMULO
(Sgd.) JOAQUIN M. ELIZALDE
(Sgd.) VICENTE J. FRANCISCO
(Sgd.) DIOSDADO MACAPAGAL

For the United States of America:

(Sgd.) DEAN ACHESON

(Sgd.) JOHN FOSTER DULLES
(Sgd.) TOM CONNALLY
(Sgd.) ALEXANDER WILEY[8]

Clearly, therefore, joint RP-US military exercises for the purpose of developing
the capability to resist an armed attack fall squarely under the provisions of
the RP-US Mutual Defense Treaty. The VFA, which is the instrument agreed
upon to provide for the joint RP-US military exercises, is simply an
implementing agreement to the main RP-US Military Defense Treaty. The
Preamble of the VFA states:

The Government of the United States of America and the Government of the
Republic of the Philippines,

Reaffirming their faith in the purposes and principles of the Charter of the
United Nations and their desire to strengthen international and regional
security in the Pacific area;

Reaffirming their obligations under the Mutual Defense Treaty of August 30,
1951;

Noting that from time to time elements of the United States armed forces
may visit the Republic of the Philippines;

Considering that cooperation between the United States and the Republic of
the Philippines promotes their common security interests;

Recognizing the desirability of defining the treatment of United States

personnel visiting the Republic of the Philippines;

Have agreed as follows:[9]

Accordingly, as an implementing agreement of the RP-US Mutual Defense

Treaty, it was not necessary to submit the VFA to the US Senate for advice
and consent, but merely to the US Congress under the CaseZablocki Act
within 60 days of its ratification. It is for this reason that the US has certified
that it recognizes the VFA as a binding international agreement, i.e., a treaty,
and this substantially complies with the requirements of Art. XVIII, Sec. 25 of
our Constitution.[10]

The provision of Art. XVIII, Sec. 25 of the Constitution, is complied with by

virtue of the fact that the presence of the US Armed Forces through the VFA is
a presence allowed under the RP-US Mutual Defense Treaty. Since the RP-US
Mutual Defense Treaty itself has been ratified and concurred in by both the
Philippine Senate and the US Senate, there is no violation of the
Constitutional provision resulting from such presence.

The VFA being a valid and binding agreement, the parties are required as a
matter of international law to abide by its terms and provisions.

The VFA provides that in cases of offenses committed by the members of the
US Armed Forces in the Philippines, the following rules apply:

Article V

Criminal Jurisdiction

xxx
6. The custody of any United States personnel over whom the Philippines is to
exercise jurisdiction shall immediately reside with United States military
authorities, if they so request, from the commission of the offense until
completion of all judicial proceedings. United States military authorities shall,
upon formal notification by the Philippine authorities and without delay, make
such personnel available to those authorities in time for any investigative or
judicial proceedings relating to the offense with which the person has been
charged. In extraordinary cases, the Philippine Government shall present its
position to the United States Government regarding custody, which the
United States Government shall take into full account. In the event Philippine
judicial proceedings are not completed within one year, the United States
shall be relieved of any obligations under this paragraph. The one year period
will not include the time necessary to appeal. Also, the one year period will
not include any time during which scheduled trial procedures are delayed
because United States authorities, after timely notification by Philippine
authorities to arrange for the presence of the accused, fail to do so.

Petitioners contend that these undertakings violate another provision of the

Constitution, namely, that providing for the exclusive power of this Court to
adopt rules of procedure for all courts in the Philippines (Art. VIII, Sec. 5[5]).
They argue that to allow the transfer of custody of an accused to a foreign
power is to provide for a different rule of procedure for that accused, which
also violates the equal protection clause of the Constitution (Art. III, Sec. 1.).

Again, this Court finds no violation of the Constitution.

The equal protection clause is not violated, because there is a substantial

basis for a different treatment of a member of a foreign military armed forces
allowed to enter our territory and all other accused.[11]

The rule in international law is that a foreign armed forces allowed to enter
ones territory is immune from local jurisdiction, except to the extent agreed
upon. The Status of Forces Agreements involving foreign military units around
the world vary in terms and conditions, according to the situation of the
parties involved, and reflect their bargaining power. But the principle
remains, i.e., the receiving State can exercise jurisdiction over the forces of
the sending State only to the extent agreed upon by the parties.[12]

As a result, the situation involved is not one in which the power of this Court
to adopt rules of procedure is curtailed or violated, but rather one in which,
as is normally encountered around the world, the laws (including rules of
procedure) of one State do not extend or apply except to the extent agreed
upon to subjects of another State due to the recognition of extraterritorial
immunity given to such bodies as visiting foreign armed forces.

Nothing in the Constitution prohibits such agreements recognizing immunity

from jurisdiction or some aspects of jurisdiction (such as custody), in relation
to long-recognized subjects of such immunity like Heads of State, diplomats
and members of the armed forces contingents of a foreign State allowed to
enter another States territory. On the contrary, the Constitution states that
the Philippines adopts the generally accepted principles of international law
as part of the law of the land. (Art. II, Sec. 2).

Applying, however, the provisions of VFA, the Court finds that there is a
different treatment when it comes to detention as against custody. The
moment the accused has to be detained, e.g., after conviction, the rule that
governs is the following provision of the VFA:

Article V
Criminal Jurisdiction

xxx
Sec. 10. The confinement or detention by Philippine authorities of United
States personnel shall be carried out in facilities agreed on by appropriate
Philippines and United States authorities. United States personnel serving
sentences in the Philippines shall have the right to visits and material
assistance.

It is clear that the parties to the VFA recognized the difference between
custody during the trial and detention after conviction, because they
provided for a specific arrangement to cover detention. And this specific
arrangement clearly states not only that the detention shall be carried out in
facilities agreed on by authorities of both parties, but also that the detention
shall be by Philippine authorities. Therefore, the Romulo-Kenney Agreements

of December 19 and 22, 2006, which are agreements on the detention of the
accused in the United States Embassy, are not in accord with the VFA itself
because such detention is not by Philippine authorities.
Respondents should therefore comply with the VFA and negotiate with
representatives of the United States towards an agreement on detention
facilities under Philippine authorities as mandated by Art. V, Sec. 10 of the
VFA.
Next, the Court addresses the recent decision of the United States Supreme
Court in Medellin v. Texas ( 552 US ___ No. 06-984, March 25, 2008), which
held that treaties entered into by the United States are not automatically part
of their domestic law unless these treaties are self-executing or there is an
implementing legislation to make them enforceable.
On February 3, 2009, the Court issued a Resolution, thus:
G.R. No. 175888 (Suzette Nicolas y Sombilon v. Alberto Romulo, et al.); G.R.
No. 176051 (Jovito R. Salonga, et al. v. Daniel Smith, et al.); and G.R. No.
176222 (Bagong Alyansang Makabayan [BAYAN], et al. v. President Gloria
Macapagal-Arroyo, et al.).
The parties, including the Solicitor General, are required to submit within
three (3) days a Comment/Manifestation on the following points:
1.
What is the implication on the RP-US Visiting Forces Agreement
of the recent US Supreme Court decision in Jose Ernesto Medellin v. Texas,
dated March 25, 2008, to the effect that treaty stipulations that are not selfexecutory can only be enforced pursuant to legislation to carry them into
effect; and that, while treaties may comprise international commitments,
they are not domestic law unless Congress has enacted implementing
statutes or the treaty itself conveys an intention that it be self-executory and
is ratified on these terms?
2.
Whether the VFA is enforceable in the US as domestic law,
either because it is self-executory or because there exists legislation to
implement it.
3.
Whether the RP-US Mutual Defense Treaty of August 30, 1951
was concurred in by the US Senate and, if so, is there proof of the US Senate
advice and consent resolution? Peralta, J., no part.
After deliberation, the Court holds, on these points, as follows:
First, the VFA is a self-executing Agreement, as that term is defined in
Medellin itself, because the parties intend its provisions to be enforceable,
precisely because the Agreement is intended to carry out obligations and
undertakings under the RP-US Mutual Defense Treaty. As a matter of fact, the
VFA has been implemented and executed, with the US faithfully complying
with its obligation to produce L/CPL Smith before the court during the trial.

Secondly, the VFA is covered by implementing legislation, namely, the CaseZablocki Act, USC Sec. 112(b), inasmuch as it is the very purpose and intent
of the US Congress that executive agreements registered under this Act
within 60 days from their ratification be immediately implemented. The
parties to these present cases do not question the fact that the VFA has been
registered under the Case-Zablocki Act.
In sum, therefore, the VFA differs from the Vienna Convention on Consular
Relations and the Avena decision of the International Court of Justice (ICJ),
subject matter of the Medellin decision. The Convention and the ICJ decision
are not self-executing and are not registrable under the Case-Zablocki Act,
and thus lack legislative implementing authority.
Finally, the RP-US Mutual Defense Treaty was advised and consented to by
the US Senate on March 20, 1952, as reflected in the US Congressional
Record, 82nd Congress, Second Session, Vol. 98 Part 2, pp. 2594-2595.
The framers of the Constitution were aware that the application of
international law in domestic courts varies from country to country.
As Ward N. Ferdinandusse states in his Treatise, DIRECT APPLICATION OF
INTERNATIONAL CRIMINAL LAW IN NATIONAL COURTS, some countries require
legislation whereas others do not.
It was not the intention of the framers of the 1987 Constitution, in adopting
Article XVIII, Sec. 25, to require the other contracting State to convert their
system to achieve alignment and parity with ours. It was simply required that
the treaty be recognized as a treaty by the other contracting State. With that,
it becomes for both parties a binding international obligation and the
enforcement of that obligation is left to the normal recourse and processes
under international law.
Furthermore, as held by the US Supreme Court in Weinberger v. Rossi,[13] an
executive agreement is a treaty within the meaning of that word in
international law and constitutes enforceable domestic law vis--vis the United
States. Thus, the US Supreme Court in Weinberger enforced the provisions of
the executive agreement granting preferential employment to Filipinos in the
US Bases here.
Accordingly, there are three types of treaties in the American system:
1.
Art. II, Sec. 2 treaties These are advised and consented to by the
US Senate in accordance with Art. II, Sec. 2 of the US Constitution.
2.
ExecutiveCongressional Agreements: These are joint
agreements of the President and Congress and need not be submitted to the
Senate.
3.
Sole Executive Agreements. These are agreements entered into
by the President. They are to be submitted to Congress within sixty (60) days

of ratification under the provisions of the Case-Zablocki Act, after which they
are recognized by the Congress and may be implemented.
As regards the implementation of the RP-US Mutual Defense Treaty, military
aid or assistance has been given under it and this can only be done through
implementing legislation. The VFA itself is another form of implementation of
its provisions.
WHEREFORE, the petitions are PARTLY GRANTED, and the Court of Appeals
Decision in CA-G.R. SP No. 97212 dated January 2, 2007 is MODIFIED. The
Visiting Forces Agreement (VFA) between the Republic of the Philippines and
the United States, entered into on February 10, 1998, is UPHELD as
constitutional, but the Romulo-Kenney Agreements of December 19 and 22,
2006 are DECLARED not in accordance with the VFA, and respondent
Secretary of Foreign Affairs is hereby ordered to forthwith negotiate with the
United States representatives for the appropriate agreement on detention
facilities under Philippine authorities as provided in Art. V, Sec. 10 of the VFA,
pending which the status quo shall be maintained until further orders by this
Court.
The Court of Appeals is hereby directed to resolve without delay the related
matters pending therein, namely, the petition for contempt and the appeal of
L/CPL Daniel Smith from the judgment of conviction.
No costs.
SO ORDERED.

ADOLFO S. AZCUNA
Associate Justice

Bayan Muna v. Romulo, G.R. No. 159618, 1 February 2011

Case Digest: BAYAN MUNA vs. Romulo

G.R. NO. 159618: February 1, 2011

BAYAN MUNA, Represented by Rep. SATUR OCAMPO, Rep. CRISPIN BELTRAN,

Rep. LIZA L. MAZA, Petitioner

v.

ALBERTO ROMULO, in his capacity as Executive Secretary , and BLAS F. OPLE,

in his capacity as Secretary of Foreign Affairs, Respondents.

FACTS:

In 2000, the RP, through Charge dAffaires Enrique A. Manalo, signed the
Rome Statute which, by its terms, is subject to ratification, acceptance or
approval by the signatory states.

In 2003, via Exchange of Notes with the US government, the RP, represented
by then DFA Secretary Ople, finalized a non-surrender agreement which
aimed to protect certain persons of the RP and US from frivolous and
harassment suits that might be brought against them in international
tribunals.

Petitioner imputes grave abuse of discretion to respondents in concluding and

ratifying the Agreement and prays that it be struck down as unconstitutional,
or at least declared as without force and effect.

ISSUE:

Whether the Respondents abused their discretion amounting to lack or

excess of jurisdiction for concluding the RP-US Non Surrender Agreement in
contravention of the Rome Statute.

Whether the agreement is valid, binding and effective without the

concurrence by at least 2/3 of all the members of the Senate.

HELD: The petition is bereft of merit.

INTERNATIONAL LAW: Rome Statute

First issue

The Agreement does not contravene or undermine, nor does it differ from,
the Rome Statute. Far from going against each other, one complements the
other. As a matter of fact, the principle of complementarity underpins the
creation of the ICC. According to Art. 1 of the Statute, the jurisdiction of the
ICC is to be complementary to national criminal jurisdictions [of the
signatory states]. the Rome Statute expressly recognizes the primary
jurisdiction of states, like the RP, over serious crimes committed within their
respective borders, the complementary jurisdiction of the ICC coming into
play only when the signatory states are unwilling or unable to prosecute.

Also, under international law, there is a considerable difference between a

State-Party and a signatory to a treaty. Under the Vienna Convention on the
Law of Treaties, a signatory state is only obliged to refrain from acts which
would defeat the object and purpose of a treaty. The Philippines is only a
signatory to the Rome Statute and not a State-Party for lack of ratification by
the Senate. Thus, it is only obliged to refrain from acts which would defeat
the object and purpose of the Rome Statute. Any argument obliging the
Philippines to follow any provision in the treaty would be premature. And
even assuming that the Philippines is a State-Party, the Rome Statute still
recognizes the primacy of international agreements entered into between
States, even when one of the States is not a State-Party to the Rome Statute.

CONSTITUTIONAL LAW: 2/3 concurrence

Second issue

The right of the Executive to enter into binding agreements without the
necessity of subsequent Congressional approval has been confirmed by long
usage. From the earliest days of our history, we have entered executive
agreements covering such subjects as commercial and consular relations,
most favored-nation rights, patent rights, trademark and copyright
protection, postal and navigation arrangements and the settlement of claims.
The validity of these has never been seriously questioned by our courts.

Executive agreements may be validly entered into without such concurrence.

As the President wields vast powers and influence, her conduct in the
external affairs of the nation is, as Bayan would put it, executive altogether.

The right of the President to enter into or ratify binding executive agreements
has been confirmed by long practice.

Petition is DISMISSED.

China National Machinery & Equipment Corp. v. Hon.

Santamaria, G.R. No. 185572, February 7, 2012

Republic of the Philippines

Supreme Court
Manila
EN BANC

CHINA NATIONAL MACHINERY &

EQUIPMENT CORP. (GROUP),

G.R. No. 185572

Petitioner,
Present:
versus

CORONA, C.J.,
CARPIO,

HON. CESAR D. SANTAMARIA,

in his official capacity as
Presiding Judge of Branch 145,
Regional Trial Court of Makati
City,
HERMINIO
HARRY
L.
ROQUE, JR., JOEL R. BUTUYAN,
ROGER R. RAYEL, ROMEL R.
BAGARES,
CHRISTOPHER
FRANCISCO
C.
BOLASTIG,
LEAGUE OF URBAN POOR FOR
ACTION (LUPA), KILUSAN NG
MARALITA
SA
MEYCAUAYAN
(KMM-LUPA CHAPTER), DANILO
M. CALDERON, VICENTE C.
ALBAN,
MERLYN
M.
VAAL,
LOLITA S. QUINONES, RICARDO
D. LANOZO, JR., CONCHITA G.
GOZO, MA. TERESA D. ZEPEDA,
JOSEFINA A. LANOZO, and
SERGIO
C.
LEGASPI,
JR.,
KALIPUNAN
NG
DAMAYANG
MAHIHIRAP (KADAMAY), EDY
CLERIGO,
RAMMIL
DINGAL,
NELSON B. TERRADO, CARMEN

VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.

x-------------------------------------------- - - - - - -x

DECISION
SERENO, J.:
This is a Petition for Review on Certiorari with Prayer for
the Issuance of a Temporary Restraining Order (TRO)
and/or Preliminary Injunction assailing the 30 September
2008 Decision and 5 December 2008 Resolution of the
Court of Appeals (CA) in CAG.R. SP No. 103351. [1]
On 14 September 2002, petitioner China National Machinery
& Equipment Corp. (Group) (CNMEG), represented by its
chairperson, Ren Hongbin, entered into a Memorandum of
Understanding with the North Luzon Railways Corporation
(Northrail), represented by its president, Jose L. Cortes, Jr. for
the conduct of a feasibility study on a possible railway line
from Manila to San Fernando, La Union (the Northrail
Project).[2]
On 30 August 2003, the Export Import Bank of China
(EXIM Bank) and the Department of Finance of the
Philippines (DOF) entered into a Memorandum of
Understanding (Aug 30 MOU), wherein China agreed to
extend Preferential Buyers Credit to the Philippine
government to finance the Northrail Project. [3] The Chinese
government designated EXIM Bank as the lender, while the
Philippine government named the DOF as the borrower.
[4]
Under the Aug 30 MOU, EXIM Bank agreed to extend an
amount not exceeding USD 400,000,000 in favor of the DOF,
payable in 20 years, with a 5-year grace period, and at the
rate of 3% per annum.[5]

On 1 October 2003, the Chinese Ambassador to the

Philippines, Wang Chungui (Amb. Wang), wrote a letter to
DOF Secretary Jose Isidro Camacho (Sec. Camacho)
informing him of CNMEGs designation as the Prime
Contractor for the Northrail Project.[6]
On 30 December 2003, Northrail and CNMEG executed a
Contract Agreement for the construction of Section I, Phase I
of the North Luzon Railway System from Caloocan to Malolos
on a turnkey basis (the Contract Agreement). [7] The contract
price for the Northrail Project was pegged at USD
421,050,000.[8]
On 26 February 2004, the Philippine government and
EXIM Bank entered into a counterpart financial agreement
Buyer Credit Loan Agreement No. BLA 04055 (the Loan
Agreement).[9] In the Loan Agreement, EXIM Bank agreed to
extend Preferential Buyers Credit in the amount of USD
400,000,000 in favor of the Philippine government in order
to finance the construction of Phase I of the Northrail Project.
[10]

On 13 February 2006, respondents filed a Complaint for

Annulment of Contract and Injunction with Urgent Motion for
Summary Hearing to Determine the Existence of Facts and
Circumstances Justifying the Issuance of Writs of Preliminary
Prohibitory and Mandatory Injunction and/or TRO against
CNMEG, the Office of the Executive Secretary, the DOF, the
Department of Budget and Management, the National
Economic Development Authority and Northrail. [11] The case
was docketed as Civil Case No. 06-203 before the Regional
Trial Court, National Capital Judicial Region, Makati City,
Branch 145 (RTC Br. 145). In the Complaint, respondents
alleged that the Contract Agreement and the Loan
Agreement were void for being contrary to (a) the
Constitution; (b) Republic Act No. 9184 (R.A. No. 9184),

otherwise known as the Government Procurement Reform

Act; (c) Presidential Decree No. 1445, otherwise known as
the Government Auditing Code; and (d) Executive Order No.
292, otherwise known as the Administrative Code. [12]
RTC Br. 145 issued an Order dated 17 March 2006
setting the case for hearing on the issuance of injunctive
reliefs.[13] On 29 March 2006, CNMEG filed an Urgent Motion
for Reconsideration of this Order. [14] Before RTC Br. 145 could
rule thereon, CNMEG filed a Motion to Dismiss dated 12 April
2006, 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.[15]
On 15 May 2007, RTC Br. 145 issued an Omnibus Order
denying CNMEGs Motion to Dismiss and setting the case for
summary hearing to determine whether the injunctive reliefs
prayed for should be issued.[16] CNMEG then filed a Motion for
Reconsideration,[17] which was denied by the trial court in an
Order dated 10 March 2008.[18] Thus, CNMEG filed before the
CA a Petition for Certiorari with Prayer for the Issuance of
TRO and/or Writ of Preliminary Injunction dated 4 April 2008.
[19]

In the assailed Decision dated 30 September 2008, the

appellate court dismissed the Petition for Certiorari.
[20]
Subsequently, CNMEG filed a Motion for Reconsideration,
[21]
which was denied by the CA in a Resolution dated 5
December 2008.[22] Thus, CNMEG filed the instant Petition for
Review on Certiorari dated 21 January 2009, raising the
following issues: [23]
Whether or not petitioner CNMEG is an agent
of the sovereign Peoples Republic of China.

Whether or not the Northrail contracts are

products of an executive agreement between two
sovereign states.

Whether or not the certification from the

Department of Foreign Affairs is necessary under the
foregoing circumstances.

Whether or not the act being undertaken by

petitioner CNMEG is an act jure imperii.

Whether or not the Court of Appeals failed to

avoid a procedural limbo in the lower court.

Whether or not the Northrail Project is subject

to competitive public bidding.

Whether or not the Court of Appeals ignored

the ruling of this Honorable Court in the Neri case.

CNMEG prays for the dismissal of Civil Case No. 06-203

before RTC Br. 145 for lack of jurisdiction. It likewise requests
this Court for the issuance of a TRO and, later on, a writ of
preliminary injunction to restrain public respondent from
proceeding with the disposition of Civil Case No. 06-203.

The crux of this case boils down to two main issues,

namely:
1.

Whether CNMEG is entitled to immunity,

precluding it from being sued before a local court.

2.

Whether the Contract Agreement is an executive

agreement, such that it cannot be questioned by
or before a local court.

First
issue:
Whether
CNMEG is entitled to
immunity

This Court explained the doctrine of sovereign immunity

in Holy See v. Rosario,[24] to wit:
There are two conflicting concepts of sovereign
immunity, each widely held and firmly established.
According to the classical or absolute theory, a
sovereign cannot, without its consent, be
made a respondent in the courts of another
sovereign. According to the newer or restrictive
theory, 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. (Emphasis supplied; citations omitted.)

xxx xxx xxx

The restrictive theory came about because of the entry of

sovereign states into purely commercial activities remotely
connected with the discharge of governmental functions. This is
particularly true with respect to the Communist states which took
control of nationalized business activities and international
trading.

In JUSMAG v. National Labor Relations Commission,

this Court affirmed the Philippines adherence to the
restrictive theory as follows:
[25]

The doctrine of state immunity from suit has

undergone further metamorphosis. The view evolved
that the existence of a contract does not, per se,
mean that sovereign states may, at all times, be
sued in local courts. The complexity of relationships
between sovereign states, brought about by their
increasing commercial activities, mothered a
more restrictive application of the doctrine.

xxx xxx xxx

As it stands now, the application of the doctrine of

immunity
from
suit
has
been restricted to sovereign or governmental
activities (jure
imperii). The mantle of state immunity cannot be extended
to commercial, private and proprietary acts (jure gestionis).
[26]
(Emphasis supplied.)

Since the Philippines adheres to the restrictive theory, it

is crucial to ascertain the legal nature of the act involved
whether
the
entity
claiming
immunity
performs
governmental, as opposed to proprietary, functions. As held
in United States of America v. Ruiz [27]
The restrictive application of State immunity is
proper only when the proceedings arise out of
commercial transactions of the foreign sovereign, its
commercial activities or economic affairs. Stated
differently, a State may be said to have descended
to the level of an individual and can thus be deemed
to have tacitly given its consent to be sued only
when it enters into business contracts. It does not
apply where the contract relates to the exercise of
its sovereign functions.[28]

A.
CNMEG is engaged in
a proprietary activity.

A threshold question that must be answered is whether

CNMEG performs governmental or proprietary functions. A

thorough examination of the basic facts of the case would

show that CNMEG is engaged in a proprietary activity.
The parties executed the Contract Agreement for the
purpose of constructing the Luzon Railways, viz:[29]
WHEREAS the Employer (Northrail) desired to
construct the railways form Caloocan to Malolos,
section I, Phase I of Philippine North Luzon Railways
Project (hereinafter referred to as THE PROJECT);

AND WHEREAS the Contractor has offered to

provide the Project on Turnkey basis, including design,
manufacturing, supply, construction, commissioning,
and training of the Employers personnel;

AND WHEREAS the Loan Agreement of the

Preferential Buyers Credit between Export-Import Bank
of China and Department of Finance of Republic of
the Philippines;

NOW, THEREFORE, the parties agree to sign this

Contract for the Implementation of the Project.

The above-cited portion of the Contract Agreement,

however, does not on its own reveal whether the
construction of the Luzon railways was meant to be a
proprietary endeavor. In order to fully understand the
intention behind and the purpose of the entire undertaking,
the Contract Agreement must not be read in isolation.
Instead, it must be construed in conjunction with three other

documents executed in relation to the Northrail Project,

namely: (a) the Memorandum of Understanding dated 14
September 2002 between Northrail and CNMEG; [30] (b) the
letter of Amb. Wang dated 1 October 2003 addressed to Sec.
Camacho;[31] and (c) the Loan Agreement.[32]

1. Memorandum
Understanding
dated
September 2002

of
14

The Memorandum of Understanding dated 14

September 2002 shows that CNMEG sought the construction
of the Luzon Railways as a proprietary venture. The relevant
parts thereof read:
WHEREAS,
CNMEG
has
the
financial
capability, professional competence and technical
expertise to assess the state of the [Main Line
North (MLN)] and recommend implementation
plans as well as undertake its rehabilitation and/or
modernization;

WHEREAS, CNMEG
has
expressed
interest
in
the
rehabilitation
and/or
modernization of the MLN from Metro Manila to
San Fernando, La Union passing through the
provinces
of
Bulacan,
Pampanga,
Tarlac,
Pangasinan and La Union (the Project);

WHEREAS, the NORTHRAIL CORP. welcomes

CNMEGs proposal to undertake a Feasibility Study
(the Study) at no cost to NORTHRAIL CORP.;

WHEREAS, the NORTHRAIL CORP. also

welcomes CNMEGs interest in undertaking
the Project with Suppliers Credit and intends
to employ CNMEG as the Contractor for the
Project subject to compliance with Philippine
and Chinese laws, rules and regulations for
the selection of a contractor;

WHEREAS, the NORTHRAIL CORP. considers

CNMEGs
proposal
advantageous
to
the
Government of the Republic of the Philippines and
has therefore agreed to assist CNMEG in the
conduct of the aforesaid Study;

xxx xxx xxx

II. APPROVAL PROCESS

2.1

As soon as possible after completion and

presentation of the Study in accordance with
Paragraphs 1.3 and 1.4 above and in
compliance with necessary governmental
laws, rules, regulations and procedures
required from both parties, the parties shall

commence the preparation and negotiation

of the terms and conditions of the Contract
(the Contract) to be entered into between
them on the implementation of the
Project. The parties shall use their best
endeavors to formulate and finalize a
Contract with a view to signing the
Contract within one hundred twenty
(120) days from CNMEGs presentation
of the Study.[33] (Emphasis supplied)

Clearly, 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.

2. Letter dated 1 October

2003
That CNMEG, and not the Chinese government, initiated
the Northrail Project was confirmed by Amb. Wang in his letter
dated 1 October 2003, thus:
1.
CNMEG has the proven competence
and capability to undertake the Project as
evidenced by the ranking of 42 given by the ENR
among 225 global construction companies.

2.
CNMEG already signed an MOU with
the North Luzon Railways Corporation last
September 14, 2000 during the visit of Chairman
Li Peng. Such being the case, they have already
established an initial working relationship with
your North Luzon Railways Corporation. This
would categorize CNMEG as the state
corporation within the Peoples Republic of
China which initiated our Governments
involvement in the Project.

3.
Among the various state corporations
of the Peoples Republic of China, only CNMEG has
the advantage of being fully familiar with the
current requirements of the Northrail Project
having already accomplished a Feasibility Study
which was used as inputs by the North Luzon
Railways Corporation in the approvals (sic)
process required by the Republic of thePhilippines.
[34]
(Emphasis supplied.)

Thus, the desire of CNMEG to secure the Northrail

Project was in the ordinary or regular course of its business
as a global construction company. The implementation of the
Northrail Project was intended to generate profit for CNMEG,
with the Contract Agreement placing a contract price of USD
421,050,000 for the venture.[35] The use of the term state
corporation to refer to CNMEG was only descriptive of its
nature as a government-owned and/or -controlled
corporation, and its assignment as the Primary Contractor
did not imply that it was acting on behalf of China in the
performance of the latters sovereign functions. To imply

otherwise would result in an absurd situation, in which all

Chinese corporations owned by the state would be
automatically considered as performing governmental
activities, even if they are clearly engaged in commercial or
proprietary pursuits.

3.

The Loan 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. However, the
Loan Agreement, which originated from the same Aug 30
MOU, belies this reasoning, viz:
Article 11. xxx (j) Commercial Activity The
execution and delivery of this Agreement by the
Borrower constitute, and the Borrowers 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. Notwithstanding the foregoing, the
Borrower does not waive any immunity with respect
of its assets which are (i) used by a diplomatic or
consular mission of the Borrower and (ii) assets of a

military character and under control of a military

authority or defense agency and (iii) located in the
Philippines and dedicated to public or governmental
use (as distinguished from patrimonial assets or
assets dedicated to commercial use). (Emphasis
supplied.)

(k) Proceedings to Enforce Agreement In any

proceeding in the Republic of the Philippines to
enforce this Agreement, the choice of the laws of the
Peoples Republic of China as the governing law
hereof will be recognized and such law will be
applied. The waiver of immunity by the Borrower, the
irrevocable submissions of the Borrower to the nonexclusive jurisdiction of the courts of the Peoples
Republic of China and the appointment of the
Borrowers Chinese Process Agent is legal, valid,
binding and enforceable and any judgment obtained
in the Peoples Republic of China will be if introduced,
evidence for enforcement in any proceedings against
the Borrower and its assets in the Republic of the
Philippines provided that (a) the court rendering
judgment had jurisdiction over the subject matter of
the action in accordance with its jurisdictional rules,
(b) the Republic had notice of the proceedings, (c)
the judgment of the court was not obtained through
collusion or fraud, and (d) such judgment was not
based on a clear mistake of fact or law.[36]

Further, the Loan Agreement likewise contains this

express waiver of immunity:

15.5 Waiver
of
Immunity The
Borrower
irrevocably and unconditionally waives, any immunity
to which it or its property may at any time be or
become entitled, whether characterized as sovereign
immunity or otherwise, from any suit, judgment,
service of process upon it or any agent, execution on
judgment, set-off, attachment prior to judgment,
attachment in aid of execution to which it or its
assets may be entitled in any legal action or
proceedings with respect to this Agreement or any of
the transactions contemplated hereby or hereunder.
Notwithstanding the foregoing, the Borrower does not
waive any immunity in respect of its assets which are
(i) used by a diplomatic or consular mission of the
Borrower, (ii) assets of a military character and under
control of a military authority or defense agency and
(iii) located in the Philippines and dedicated to a
public or governmental use (as distinguished from
patrimonial assets or assets dedicated to commercial
use).[37]

Thus, despite petitioners claim that the EXIM Bank

extended financial assistance to Northrail because the bank
was mandated by the Chinese government, and not because
of any motivation to do business in the Philippines, [38] it is
clear from the foregoing provisions that the Northrail Project
was a purely commercial transaction.
Admittedly, the Loan Agreement was entered into
between EXIM Bank and the Philippine government, while the
Contract Agreement was between Northrail and CNMEG.
Although the Contract Agreement is silent on the
classification of the legal nature of the transaction, the
foregoing provisions of the Loan Agreement, which is an

inextricable part of the entire undertaking, nonetheless reveal

the intention of the parties to the Northrail Project to classify
the whole venture as commercial or proprietary in character.
Thus, piecing together the content and tenor of the
Contract Agreement, the Memorandum of Understanding
dated 14 September 2002, Amb. Wangs letter dated 1
October 2003, and the Loan Agreement would reveal the
desire of CNMEG to construct the Luzon Railways in pursuit
of a purely commercial activity performed in the ordinary
course of its business.

B.
CNMEG
failed
to
adduce evidence that it is
immune from suit under
Chinese law.

Even
assuming arguendo that
CNMEG
performs
governmental functions, such claim does not automatically
vest it with immunity. This view finds support in Malong v.
Philippine National Railways, in which this Court held that
(i)mmunity from suit is determined by the character of the
objects for which the entity was organized.[39]
In this regard, this Courts ruling in Deutsche
Gesellschaft Fr Technische Zusammenarbeit (GTZ) v.
CA[40] must
be
examined.
In Deutsche
Gesellschaft, Germany and thePhilippines entered into a
Technical Cooperation Agreement, pursuant to which both
signed an arrangement promoting the Social Health
InsuranceNetworking and Empowerment (SHINE) project. The
two governments named their respective implementing
organizations: the Department of Health (DOH) and the

Philippine
Health
Insurance
Corporation
(PHIC)
for
the Philippines, and GTZ for the implementation of Germanys
contributions. In ruling that GTZ was not immune from suit,
this Court held:
The arguments raised by GTZ and the [Office of the
Solicitor General (OSG)] are rooted in several indisputable
facts. The SHINE project was implemented pursuant to the
bilateral agreements between the Philippine and German
governments. GTZ was tasked, under the 1991 agreement, with
the implementation of the contributions of the German
government. The activities performed by GTZ pertaining to the
SHINE project are governmental in nature, related as they are to
the promotion of health insurance in the Philippines. The fact that
GTZ entered into employment contracts with the private
respondents did not disqualify it from invoking immunity from
suit, as held in cases such as Holy See v. Rosario, Jr., which set
forth what remains valid doctrine:

Certainly, the mere entering into a contract by

a foreign state with a private party cannot be the
ultimate test. Such an act can only be the start of the
inquiry. The logical question is whether the foreign
state is engaged in the activity in the regular course
of business. If the foreign state is not engaged
regularly in a business or trade, the particular act or
transaction must then be tested by its nature. If the
act is in pursuit of a sovereign activity, or an incident
thereof, then it is an act jure imperii, especially when
it is not undertaken for gain or profit.

Beyond dispute is the tenability of the comment points (sic)

raised by GTZ and the OSG that GTZ was not performing
proprietary functions notwithstanding its entry into the particular
employment contracts. Yet there is an equally fundamental premise
which GTZ and the OSG fail to address, namely: Is GTZ, by
conception, able to enjoy the Federal Republics immunity from
suit?

The principle of state immunity from suit, whether a local

state or a foreign state, is reflected in Section 9, Article XVI of the
Constitution, which states that the State may not be sued without
its consent. Who or what consists of the State? For one, the
doctrine is available to foreign States insofar as they are sought to
be sued in the courts of the local State, necessary as it is to avoid
unduly vexing the peace of nations.

If the instant suit had been brought directly against the

Federal Republic of Germany, there would be no doubt that it is a
suit brought against a State, and the only necessary inquiry is
whether said State had consented to be sued. However, the present
suit was brought against GTZ. It is necessary for us to understand
what precisely are the parameters of the legal personality of GTZ.
Counsel for GTZ characterizes GTZ as the
implementing agency of the Government of
the Federal Republic of Germany, a depiction
similarly adopted by the OSG. Assuming that the
characterization
is
correct, it
does
not
automatically invest GTZ with the ability to
invoke State immunity from suit. The distinction
lies in whether the agency is incorporated or
unincorporated.

xxx xxx xxx

State immunity from suit may be waived by

general or special law. The special law can take the
form of the original charter of the incorporated
government agency. Jurisprudence is replete with
examples of incorporated government agencies
which were ruled not entitled to invoke immunity
from suit, owing to provisions in their charters
manifesting their consent to be sued.

xxx xxx xxx

It is useful to note that on the part of the

Philippine government, it had designated two entities,
the Department of Health and the Philippine Health
Insurance Corporation (PHIC), as the implementing
agencies in behalf of the Philippines. The PHIC was
established under Republic Act No. 7875, Section 16
(g) of which grants the corporation the power to sue
and be sued in court. Applying the previously cited
jurisprudence, PHIC would not enjoy immunity from
suit even in the performance of its functions
connected with SHINE, however, (sic) governmental in
nature as (sic) they may be.

Is GTZ an incorporated agency of the German

government? There is some mystery surrounding that

question. Neither GTZ nor the OSG go beyond the claim that
petitioner is the implementing agency of the Government of
the Federal Republic of Germany. On the other hand, private
respondents asserted before the Labor Arbiter that GTZ was a
private corporation engaged in the implementation of
development projects. The Labor Arbiter accepted that claim in
his Order denying the Motion to Dismiss, though he was silent on
that point in his Decision. Nevertheless, private respondents
argue in their Comment that the finding that GTZ was a private
corporation was never controverted, and is therefore deemed
admitted. In its Reply, GTZ controverts that finding, saying that
it is a matter of public knowledge that the status of petitioner
GTZ is that of the implementing agency, and not that of a private
corporation.

In truth, private respondents were unable to adduce any

evidence to substantiate their claim that GTZ was a private
corporation, and the Labor Arbiter acted rashly in accepting such
claim without explanation. But neither has GTZ supplied any
evidence defining its legal nature beyond that of the bare
descriptive implementing agency. There is no doubt that the
1991 Agreement designated GTZ as the implementing agency
in behalf of the German government. Yet the catch is that such
term has no precise definition that is responsive to our
concerns. Inherently, an agent acts in behalf of a principal,
and the GTZ can be said to act in behalf of the German state.
But that is as far as implementing agency could take us. The
term by itself does not supply whether GTZ is incorporated or
unincorporated, whether it is owned by the German state or
by private interests, whether it has juridical personality
independent of the German government or none at all.

xxx xxx xxx

Again, we are uncertain of the corresponding legal

implications under German law surrounding a private
company owned by the Federal Republic of Germany. Yet
taking the description on face value, the apparent equivalent
under Philippine law is that of a corporation organized under
the Corporation Code but owned by the Philippine
government, or a government-owned or controlled
corporation without original charter. And it bears notice that
Section 36 of the Corporate Code states that [e]very
corporation incorporated under this Code has the power and
capacity x x x to sue and be sued in its corporate name.

It is entirely possible that under German law, an entity such

as GTZ or particularly GTZ itself has not been vested or has been
specifically deprived the power and capacity to sue and/or be sued.
Yet in the proceedings below and before this Court, GTZ has
failed to establish that under German law, it has not consented
to be sued despite it being owned by the Federal Republic of
Germany. We adhere to the rule that in the absence of
evidence to the contrary, foreign laws on a particular subject
are presumed to be the same as those of the Philippines, and
following the most intelligent assumption we can gather, GTZ
is akin to a governmental owned or controlled corporation
without original charter which, by virtue of the Corporation
Code, has expressly consented to be sued. At the very least, like
the Labor Arbiter and the Court of Appeals, this Court has no basis
in fact to conclude or presume that GTZ enjoys immunity from
suit.[41] (Emphasis supplied.)

Applying the foregoing ruling to the case at bar, 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. Thus, following this Courts ruling
in Deutsche Gesellschaft, in the absence of evidence to the
contrary, CNMEG is to be presumed to be a governmentowned 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.

C.
CNMEG
failed
to
present a certification from
the Department of Foreign
Affairs.

In Holy See,[42] this Court reiterated the oft-cited doctrine

that the determination by the Executive that an entity is
entitled to sovereign or diplomatic immunity is a political
question conclusive upon the courts, to wit:
In Public International Law, when a state or international
agency wishes to plead sovereign or diplomatic immunity in a
foreign court, it requests the Foreign Office of the state where it
is sued to convey to the court that said defendant is entitled to
immunity.

xxx xxx xxx

In the Philippines, the practice is for the foreign

government or the international organization to first secure
an executive endorsement of its claim of sovereign or
diplomatic immunity. But how the Philippine Foreign Office
conveys its endorsement to the courts varies. In International
Catholic Migration Commission v. Calleja, 190 SCRA 130
(1990), the Secretary of Foreign Affairs just sent a letter directly
to the Secretary of Labor and Employment, informing the latter
that the respondent-employer could not be sued because it enjoyed
diplomatic immunity. In World Health Organization v. Aquino, 48
SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial
court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1
(1974), the U.S. Embassy asked the Secretary of Foreign Affairs
to request the Solicitor General to make, in behalf of the
Commander of the United States Naval Base at Olongapo City,
Zambales, a suggestion to respondent Judge. The Solicitor
General embodied the suggestion in a Manifestation and
Memorandum as amicus curiae.

In the case at bench, the Department of Foreign Affairs,

through the Office of Legal Affairs moved with this Court to be
allowed to intervene on the side of petitioner. The Court allowed
the said Department to file its memorandum in support of
petitioners claim of sovereign immunity.

In some cases, the defense of sovereign immunity was

submitted directly to the local courts by the respondents through
their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945];
Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948];

United States of America v. Guinto, 182 SCRA 644 [1990] and

companion cases). In cases where the foreign states bypass the
Foreign Office, the courts can inquire into the facts and make their
own determination as to the nature of the acts and transactions
involved.[43] (Emphasis supplied.)

The question now is whether any agency of the Executive

Branch can make a determination of immunity from suit, which
may be considered as conclusive upon the courts. This Court,
in Department of Foreign Affairs (DFA) v. National Labor
Relations Commission (NLRC),[44] emphasized the DFAs
competence and authority to provide such necessary
determination, to wit:
The DFAs function includes, among its
other mandates, the determination of persons
and
institutions
covered
by
diplomatic
immunities, a determination which, when
challenge, (sic) entitles it to seek relief from
the court so as not to seriously impair the
conduct of the country's foreign relations. The
DFA must be allowed to plead its case whenever
necessary or advisable to enable it to help keep the
credibility of the Philippine government before the
international
community. When
international
agreements are concluded, the parties thereto
are deemed to have likewise accepted the
responsibility of seeing to it that their
agreements are duly regarded. In our country,
this task falls principally of (sic) the DFA as
being the highest executive department with
the competence and authority to so act in this
aspect of the international arena. [45] (Emphasis
supplied.)

Further, the fact that this authority is exclusive to the

DFA was also emphasized in this Courts ruling in Deutsche
Gesellschaft:
It is to be recalled that the Labor Arbiter, in both of his
rulings, noted that it was imperative for petitioners to secure from
the Department of Foreign Affairs a certification of respondents
diplomatic status and entitlement to diplomatic privileges
including immunity from suits. The requirement might not
necessarily be imperative. However, had GTZ obtained such
certification from the DFA, it would have provided factual
basis for its claim of immunity that would, at the very least,
establish a disputable evidentiary presumption that the foreign
party is indeed immune which the opposing party will have to
overcome with its own factual evidence. We do not see why
GTZ could not have secured such certification or endorsement
from the DFA for purposes of this case. Certainly, it would have
been highly prudential for GTZ to obtain the same after the Labor
Arbiter had denied the motion to dismiss. Still, even at this
juncture,we do not see any evidence that the DFA, the office of
the executive branch in charge of our diplomatic relations, has
indeed endorsed GTZs claim of immunity. It may be possible
that GTZ tried, but failed to secure such certification, due to the
same concerns that we have discussed herein.

Would the fact that the Solicitor General has endorsed

GTZs claim of States immunity from suit before this Court
sufficiently substitute for the DFA certification? Note that the
rule in public international law quoted in Holy See referred
to endorsement by the Foreign Office of the State where the
suit is filed, such foreign office in the Philippines being the
Department of Foreign Affairs. Nowhere in the Comment of

the OSG is it manifested that the DFA has endorsed GTZs

claim, or that the OSG had solicited the DFAs views on the
issue. The arguments raised by the OSG are virtually the same as
the arguments raised by GTZ without any indication of any
special and distinct perspective maintained by the Philippine
government on the issue. The Comment filed by the OSG does
not inspire the same degree of confidence as a certification
from the DFA would have elicited.[46] (Emphasis supplied.)

In the case at bar, CNMEG offers the Certification executed by the

Economic and Commercial Office of the Embassy of the Peoples 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 CNMEGs
entitlement to immunity from suit, as Holy Seeunequivocally refers to the
determination of the Foreign Office of the state where it is sued.
Further, CNMEG also claims that its immunity from suit has the
executive endorsement of both the OSG and the Office of the Government
Corporate Counsel (OGCC), which must be respected by the courts.
However, as expressly enunciated in Deutsche Gesellschaft, this
determination by the OSG, or by the OGCC for that matter, does not inspire
the same degree of confidence as a DFA certification. Even with a DFA
certification, however, it must be remembered that this Court is not precluded
from making an inquiry into the intrinsic correctness of such certification.

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

In the United States, the Foreign Sovereign Immunities

Act of 1976 provides for a waiver by implication of state
immunity. In the said law, the agreement to submit disputes
to arbitration in a foreign country is construed as an implicit
waiver of immunity from suit. Although there is no similar law
in the Philippines, there is reason to apply the legal reasoning
behind the waiver in this case.
The Conditions of Contract,[48] which is an integral part of
the Contract Agreement,[49] states:
33.
SETTLEMENT
ARBITRATION

OF

DISPUTES

AND

33.1. Amicable Settlement

Both parties shall attempt to amicably settle all

disputes or controversies arising from this Contract
before the commencement of arbitration.

33.2. Arbitration

All disputes or controversies arising from this

Contract which cannot be settled between the
Employer and the Contractor shall be submitted to
arbitration in accordance with the UNCITRAL
Arbitration Rules at present in force and as may be
amended by the rest of this Clause. The appointing
authority
shall
be Hong
Kong International Arbitration Center. The place of
arbitration shall be in Hong Kong at Hong Kong
International Arbitration Center (HKIAC).

Under the above provisions, if any dispute arises

between Northrail and CNMEG, both parties are bound to
submit the matter to the HKIAC for arbitration. In case the
HKIAC makes an arbitral award in favor of Northrail, its
enforcement in the Philippines would be subject to the
Special Rules on Alternative Dispute Resolution (Special
Rules). Rule 13 thereof provides for the Recognition and
Enforcement of a Foreign Arbitral Award. Under Rules 13.2
and 13.3 of the Special Rules, the party to arbitration wishing
to have an arbitral award recognized and enforced in the
Philippines must petition the proper regional trial court (a)
where the assets to be attached or levied upon is located; (b)
where the acts to be enjoined are being performed; (c) in the
principal place of business in the Philippines of any of the
parties; (d) if any of the parties is an individual, where any of
those individuals resides; or (e) in the National Capital Judicial
Region.
From all the foregoing, it is clear that CNMEG has agreed
that it will not be afforded immunity from suit. Thus, the
courts have the competence and jurisdiction to ascertain the
validity of the Contract Agreement.

Second issue: Whether the

Contract Agreement is an
executive agreement

Article 2(1) of the Vienna Convention on the Law of

Treaties (Vienna Convention) defines a treaty as follows:
[A]n
international
agreement
concluded
between States in written form and governed by
international law, whether embodied in a single
instrument or in two or more related instruments and
whatever its particular designation.

In Bayan Muna v. Romulo, this Court held that an

executive agreement is similar to a treaty, except that the
former (a) does not require legislative concurrence; (b) is
usually less formal; and (c) deals with a narrower range of
subject matters.[50]
Despite these differences, to be considered an executive
agreement, the following three requisites provided under the
Vienna Convention must nevertheless concur: (a) the
agreement must be between states; (b) it must be written;
and (c) it must governed by international law. The first and
the third requisites do not obtain in the case at bar.

A.
CNMEG is neither a
government nor a government
agency.

The Contract Agreement was not concluded between

the Philippines and China, but between Northrail and CNMEG.
[51]
By the terms of the Contract Agreement, Northrail is a
government-owned or -controlled corporation, while CNMEG
is a corporation duly organized and created under the laws of
the Peoples Republic of China.[52] Thus, both Northrail and
CNMEG entered into the Contract Agreement as entities with
personalities distinct and separate from the Philippine and
Chinese governments, respectively.
Neither can it be said that CNMEG acted as agent of the
Chinese government. As previously discussed, the fact that
Amb. Wang, in his letter dated 1 October 2003,[53]described
CNMEG as a state corporation and declared its designation as
the Primary Contractor in the Northrail Project did not mean it
was to perform sovereign functions on behalf of China. That
label was only descriptive of its nature as a state-owned
corporation, and did not preclude it from engaging in purely
commercial or proprietary ventures.

B.
The
Contract
Agreement is to be governed
by Philippine law.

Article 2 of the Conditions of Contract,[54] which under

Article 1.1 of the Contract Agreement is an integral part of
the latter, states:
APPLICABLE LAW AND GOVERNING LANGUAGE

The contract shall in all respects be read and

construed in accordance with the laws of
the Philippines.

The contract shall be written in English

language. All correspondence and other documents
pertaining to the Contract which are exchanged by
the parties shall be written in English language.

Since the Contract Agreement explicitly provides that

Philippine law shall be applicable, the parties have effectively
conceded that their rights and obligations thereunder are not
governed by international law.
It is therefore clear from the foregoing reasons that the
Contract Agreement does not partake of the nature of an
executive agreement. It is merely an ordinary commercial
contract that can be questioned before the local courts.
WHEREFORE,
the
instant
Petition
is DENIED.
Petitioner China National Machinery & Equipment Corp.
(Group) is not entitled to immunity from suit, and the Contract
Agreement is not an executive agreement. CNMEGs prayer for
the issuance of a TRO and/or Writ of Preliminary Injunction
is DENIED for being moot and academic. This case
isREMANDED to the Regional Trial Court of Makati, Branch

145, for further proceedings as regards the validity of the

contracts subject of Civil Case No. 06-203.
No pronouncement on costs of suit.
SO ORDERED.

MARIA LOURDES P. A. SERENO

Associate Justice