G.R. No. 152318 . April 16, 2009.
DEUTSCHE GESELLSCHAFT FÜR TECHNISCHE ZUSAMMENARBEIT, also known as GERMAN AGENCY FOR TECHNICAL COOPERATION, (GTZ) HANS PETER PAULENZ and ANNE NICOLAY, Petitioners,

vs.
HON. COURT OF APPEALS, HON. ARIEL CADIENTE SANTOS, Labor Arbiter of the Arbitration Branch, National Labor Relations Commission, and BERNADETTE CARMELLA MAGTAAS, CAROLINA DIONCO, CHRISTOPHER RAMOS, MELVIN DELA PAZ, RANDY TAMAYO and EDGARDO RAMILLO, Respondents.

FACTS

On September 7, 1971, the governments of the Federal Republic of Germany and the Republic of the Philippines ratified an Agreement concerning Technical Co-operation. On December 10, 1999, both governments agreed to an Arrangement to promote a project called Social Health Insurance—Networking and Empowerment (SHINE). The German government charged Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH with the implementation of its contributions to the project. The Philippine government designated the Department of Health and the Philippine Health Insurance Corporation as implementing organizations.
Private respondents (Bernadette Carmella Magtaas, Carolina Dionco, Christopher Ramos, Melvin Dela Paz, Randy Tamayo, and Edgardo Ramilo) were engaged as contract employees by GTZ to work for SHINE between December 1998 and September 1999. Their employment contracts specified Dr. Rainer Tollkotter, a seconded GTZ expert, as the “employer,” but also stated he was hiring on behalf of GTZ for the SHINE project.
In September 1999, Anne Nicolay, a Belgian national, became SHINE Project Manager. Disagreements arose between Nicolay and the private respondents regarding salary adjustments and project implementation. On June 8, 2000, the private respondents sent a collective letter to Nicolay raising issues about the project’s direction and management, ending with the statement they “could no longer find any reason to stay with the project unless ALL of these issues be addressed immediately and appropriately.” In response, Nicolay, in letters dated June 21, 2000, interpreted this as a resignation and stated she was “to accept your resignation.” The private respondents clarified it was not a resignation letter. After failed negotiations, Nicolay, in letters dated July 11, 2000, informed each private respondent of the pre-termination of their contracts on grounds of “serious and gross insubordination, among others, resulting to loss of confidence and trust.”
On August 21, 2000, the private respondents filed a complaint for illegal dismissal with the NLRC against GTZ, Hans Peter Paulenz (Director of GTZ Manila office), Christian Jahn (Assistant Project Manager), and Anne Nicolay. The Labor Arbiter ruled in favor of the private respondents, declaring their dismissal illegal. The NLRC affirmed the Labor Arbiter’s decision. The Court of Appeals dismissed GTZ’s petition for certiorari, prompting GTZ to elevate the case to the Supreme Court.

ISSUE

Whether the National Labor Relations Commission (NLRC) has jurisdiction over the complaint for illegal dismissal filed by the private respondents against GTZ, considering GTZ’s claim that it is an agent of the Federal Republic of Germany and thus enjoys immunity from suit.

RULING

The Supreme Court ruled that the NLRC has jurisdiction. The Court held that GTZ is not entitled to invoke the doctrine of state immunity from suit.
The Court found that GTZ is a private corporation organized under German law. The Agreement and Arrangement between the German and Philippine governments identified GTZ as the German implementing organization, but this did not automatically cloak GTZ with the immunity enjoyed by the state it serves. The Court distinguished between sovereign/governmental acts (jure imperii) and private/proprietary acts (jure gestionis). The doctrine of state immunity applies only to acts jure imperii. The act of hiring and dismissing employees, as performed by GTZ in this case, is a private act falling under jure gestionis. Since GTZ entered into employer-employee relationships with private respondents through contracts of employment, it subjected itself to the jurisdiction of Philippine labor tribunals.
The Court further noted that GTZ, as a juridical entity separate and distinct from the German government, has the capacity to sue and be sued under its charter. By engaging in business and entering into employment contracts in the Philippines, GTZ is deemed to have waived any immunity from suit it might have had. Consequently, the NLRC properly exercised jurisdiction over the illegal dismissal complaint. The Supreme Court denied the petition and affirmed the Court of Appeals’ decision.