US vs Ruiz (136 SCRA 487)

FACTS:
The USA had a naval base in Subic, Zambales. The base was one of those provided in the military bases agreement between the Philippines and the US. Respondent alleges that it won in the bidding conducted by the US for the construction of wharves in said base that was merely awarded to another group. For this reason, a suit for specific performance was filed by him against the US.

ISSUE:
Whether the US naval base in bidding for said contracts exercise governmental functions to be able to invoke state immunity.

HELD:
The traditional role of the state immunity exempts a state from being sued in the courts of another state without its consent or waiver. This rule is necessary consequence of the principle of independence and equality of states. However, the rules of international law are not petrified; they are continually and evolving and because the activities of states have multiplied. It has been necessary to distinguish them between sovereign and governmental acts and private, commercial and proprietory acts. The result is that state immunity now extends only to sovereign and governmental acts.

The restrictive application of state immunity is proper only when the proceedings arise out of commercial transactions of the foreign sovereign. Its commercial activities of economic affairs. A state may be 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 the exercise of its sovereign function. In this case, the project are integral part of the naval base which is devoted to the defense of both US and Philippines, indisputably, a function of the government of highest order, they are not utilized for, nor dedicated to commercial or business purposes.