DFA vs NLRC, De Castro and Magnayi

FACTS
Jose Magnayi was an employee of ADB was allegedly illegally terminated. Hence, he filed a case against
ADB and its President before a labor arbiter. Summonses were served to ADB and DFA which they
notified LA that ADB, as well as the President and Officers are covered by an immunity under the ADB
charter and the headquarters agreement signed by Philippines.

LA favoured Magnayi which triggered DFA to refer the matter to NLRC.

NLRC favoured Magnari saying that the actions taken by DFA is wrong since it just have been raised
before LA by a special appearance which any decision thereafter is subjected to legal remedies like
appeals to Commission or to SC.

Hence, DFA filed petition for certiorari.

ISSUE
Has ADB immunity from suit in the Philippines based on its charter and the headquarters agreement as
claimed?

SC
Yes! ADB enjoys immunity from suit.

Article 50 (1) of the Agreement Establishing the ADB (charter) provides immunity from legal process
except for borrowings, guaranties or sale.

Further, Section 55 states that all governors, directors and officers shall be immune from legal process
relating to its performance in their official capacity.

These provisions are also found under Section 5 and Section 44 of Agreement Between the Bank and
Government of Philippine Regarding the Banks headquarters (headquarters agreement).

These are treaty covenants and commitments voluntarily assumed by Philippine government which
must be respected because as held in WHO vs Aquino, courts are duty bound to accept the claim of
immunity upon appropriate suggestion by the executive branch of government so as not to embarrass
the executive arm in conducting foreign relations.

The filing of the petition by DFA, in behalf of ADB, is itself an ffirmance of government’s own recognition
of ADB’s immunity.

Moreover, ADB is independent of the local laws being an international organization that has been
extended a diplomatic status. This is to prevent interference by the government in the operation or even
influence or controls the policies and decisions of the organization, as held in Southeast Asian Fisheries
Developement Center vs Acosta.
This claim of immunity can be done in various was as practiced by different countries like the suggestion
method in USA, certification by England. In Philippines and as was done in this case is thru a letter sent
by DFA to NLRC. And even Office of President sent a letter to Secretary of Labor.

Private respondent argued that since ADB entered into service contracts with difference private
companies, ADB waived its immunity from suit since it became an ordinary party to a commercial
transcation. However, court held in Holy See vs. Hon. Rosario that there are 2 concepts of sovereign
immunity: absolute and restrictive theories. The first pertains to sovereign which cannot be sued
without its consent while the second is recognized only with regards to public acts or acts jure imperii of
a state but not the private or acts jure gestionis.

The said service contracts were not for profit or gain but are official acts which would not constitute a
waiver of immunity from suit.

Hence, petition was granted.