G.R. No.

90478 November 21, 1991

REPUBLIC OF THE PHILIPPINES (PRESIDENTIAL COMMISSION ON GOOD

GOVERNMENT)
vs.
SANDIGANBAYAN, BIENVENIDO R. TANTOCO, JR. and DOMINADOR R.
SANTIAGO

FACTS:

The case was commenced on July 21, 1987 by the Presidential Commission on
Good Government (PCGG) in behalf of the Republic of the Philippines. The complaint
which initiated the action was denominated one "for reconveyance, reversion, accounting,
restitution and damages," and was avowedly filed pursuant to Executive Order No. 14 of
President Corazon C. Aquino. After having been served with summons, Tantoco, Jr. and
Santiago, instead of filing their answer, jointly filed a "Motion to Strike Out Some Portions
of the Complaint and For Bill of Particulars of Other Portions." The PCGG filed an
opposition thereto, and the movants, a reply to the opposition. Tantoco and Santiago then
presented a "motion for leave to file interrogatories under Rule 25 of the Rules of Court"
of which the PCGG responded by filing a motion. On March 18, 1988, in compliance with
the Order of January 29, 1988, the PCGG filed an Expanded Complaint of which the
Sandiganbayan denied with a Resolution. Tantoco and Santiago then filed an Answer
with Compulsory Counterclaim. On July 27, 1989 Tantoco and Santiago filed with the
Sandiganbayan a pleading denominated "Interrogatories to Plaintiff," and on August 2,
1989, an "Amended Interrogatories to Plaintiff"' as well as a Motion for Production and
Inspection of Documents. The Sandiganbayan admitted the Amended Interrogatories and
granted the motion for production and inspection of documents respectively. PCGG filed
a Motion for Reconsideration of the Resolution of August 25, 1989, it also filed an
opposition to the Amended Interrogatories. Tantoco and Santiago filed a reply and
opposition. After hearing, the Sandiganbayan promulgated two (2) Resolutions. Hence,
this present petition.

ISSUES:

1. WON PETITIONER CAN OBJECT TO THE INTERROGATORIES SERVED ON

IT IN ACCORDANCE WITH RULE 25 OF THE RULES OF COURT.

2. WON SANDIGANBAYAN ERRED IN ORDERING FOR THE PRODUCTION AND

INSPECTION OF SPECIFIED DOCUMENTS AND THINGS ALLEGEDLY IN THE
POSSESSION OF PCGG.

HELD:

1. No. The State is, of course, immune from suit in the sense that it cannot, as a rule,
be sued without its consent. But it is axiomatic that in filing an action, it divests
 itself of its sovereign character and sheds its immunity from suit, descending to the
level of an ordinary litigant. The PCGG cannot claim a superior or preferred status
to the State, even while assuming to represent or act for the State.

2. No. The Court gives short shrift to the argument that some documents sought to
be produced and inspected had already been presented in Court and marked
preliminarily as PCGG's exhibits, the movants having in fact viewed, scrutinized
and even offered objections thereto and made comments thereon. Obviously,
there is nothing secret or confidential about these documents. No serious objection
can therefore be presented to the desire of the private respondents to have copies
of those documents in order to study them some more or otherwise use them
during the trial for any purpose allowed by law.

Case Concerning The 1970 Barcelona Traction, Light and Power Company, Ltd.
(Belgium vs. Spain)

FACTS:

Barcelona Traction, Light and Power Company (BTLP) was a Canadian utility
company that operated light and power utilities in Catalonia, Spain. It was incorporated in
Canada, with Toronto headquarters, that made and supplied electricity in Spain. Most of
its shareholders were Belgium nationals. In 1936, the servicing of the Barcelona Traction
Bonds was suspended on account of the Spanish Civil War. After that war, the Spanish
exchange control authorities refused to authorize the transfer of the foreign currency
necessary for the resumption of the servicing of the sterling bonds. When the Belgian
Government complained of this, the Spanish Government stated that the transfer could
not be authorized unless it were shown that the foreign currency was to be used to repay
debts arising from the genuine importation of foreign capital into Spain; it had not been
established. Three Spanish holders of recently acquired Barcelona Traction Sterling
Bonds petitioned Court of Reus for the declaration of the company’s bankruptcy on the
account of failure to pay the interest on the bonds. The Court granted the petition and
ordered the seizure of the assets of Barcelona Traction and of two of its subsidiary
companies. The business was sold, the surplus distributed to the bondholders, and a
small amount was paid to the shareholders. The shareholders in Canada persuaded its
state and the others to complain that Spain had denied justice and violated a series of
treaty obligations. However, Canada eventually accepted that Spain had the right to
prevent BTLP from transferring currency and declaring the latter bankrupt.
In behalf of the Belgian nationals who had invested in BTLP, Belgium sued Spain in
the International Court of Justice (ICJ) in 1962, on the premise that the latter was
responsible for acts in violation of international law that had caused injury to the Canadian
Corp., and its Belgian shareholders. Spain contented that Belgium had no just standi
because BTLP Company, Ltd., was a Canadian Company.

ISSUE:

Whether or NOT Belgium have the jus standi to exercise diplomatic protection of
shareholders, right and jurisdiction to bring Spain to court for the actions of a Canadian
Company.

HELD:

No. In the field of diplomatic protection, international law was in continuous

evolution and was called upon to recognize institutions of municipal law. In municipal law,
the concept of the company was founded on a firm distinction between the rights of the
company and those of the shareholders. Only the company which was endowed with
legal personality, could act in respect of matters that were of a corporate character.
Whenever a shareholder’s interest was harmed by an act done to the company, it was to
the latter that he had to look to institute appropriate action. An act infringing only the
company’s rights did not involve responsibility towards the shareholders, even if their
interest were affected. International law had to refer to those rules generally accepted by
municipal legal systems. An injury to the shareholder’s interest resulting from an injury to
the rights of the company was sufficient to find claim.

Where it was a question of an unlawful act committed against representing foreign

capital, the general rule of international law authorized the national state of the company
alone to exercise diplomatic protection for the purpose of seeking redress. No rule of
international law expressly conferred such a right on the shareholder’s national state. The
Court considered whether there might not be in the present case special circumstances
for which the general rule might not take effect. There are two situations need to be
studied: a.) case of the company having ceased to exist, b.) the case of the protecting
State of the company lacking the capacity to act. The Court observed that whilst
Barcelona Traction had lost all its assets in Spain and been placed in receivership in
Canada, it could not be contended that the Corporate entity of the company had ceased
to exist or that it had lost its capacity to take corporate action. As to the second situation,
it was not disputed that the company had been incorporated in Canada and it had its
registered office in that country, and its Canadian nationality had received general
recognition.

The Canadian Government had exercised the protection of Barcelona Traction for
several years. If at a certain point the Canadian Government ceased to act on behalf of
Barcelona Traction, it nonetheless retained its capacity to do so, which the Spanish
Government had not questioned. This fact could not constitute a justification for the
exercise of diplomatic protection by another government. It had been maintained that a
State could make a claim when investments by its nationals abroad, such investments
being part of a State’s national economic resources, were prejudicially affected in violation
of the right of the State itself to have its nationals enjoy a certain treatment. But, in the
present case, such a right could only result from a treaty or special agreement. And no
treaty or special agreement of such a kind was in force between Belgium and Spain. If by
reason of equity, a State should be able to take up the protection of its nationals,
shareholder in a company which had been victim of a violation of international law.

The Court considered that the adoption of the theory of diplomatic protection of
shareholders as such would open the door to competing claims on the part of different
States, which could create an atmosphere of insecurity in international economic
relations. In the circumstances of the present case, where the company’s national State
was able to act, the Court was not of the opinion that jus standi was conferred on the
Belgian Government by considerations of equity.