‘Waiver of sovereign immunity’ not fairly standard, not implied

The editorial “The sovereign immunity question” (4/1/19) contained the following errors:

1. “Waiver of sovereign immunity” is NOT a fairly standard provision between foreign lenders and a sovereign state or its agencies.

2. Such waiver is NOT IMPLIED in provisions that make the borrower subject to arbitration proceedings in case of disputes.

3. The example of the Japan International Cooperation Agency (Jica) and its specific provision on the waiving of sovereign immunity in its loan documents requires that the borrower “irrevocably waive (i) any and all of its privileges and sovereign immunities from and against any lawsuit and enforcement of arbitral award and (ii) any and all privileges and sovereign immunities….”

On the first error, Jica’s general terms and conditions (GTC)  for Japanese official development assistance (ODA) loans will tell you that nowhere in that document is the term “sovereign immunity” or any term to that effect ever mentioned, much less invoked as a provision of the contract.

On the second error,  arbitration gets treated in the same manner as a court proceeding when you argue that entering into a contract that provides for an arbitration clause is tantamount to a “waiver of sovereign immunity,” or giving one’s consent as a sovereign entity to be sued in court. Republic Act No. 9285 or the Alternative Dispute Resolution (ADR) Act of 2004 informs us that:

“‘Alternative Dispute Resolution System’ means any process or procedure used to resolve a dispute or controversy, other than by adjudication of a presiding judge of a court or an officer of a government agency, as defined in this Act, in which a neutral third party participates to assist in the resolution of issues, which includes ARBITRATION, mediation, conciliation, early neutral evaluation, mini-trial, or any combination thereof.” The same law was emphatic in saying that the ADR was “an important means to achieve speedy and impartial justice and declog court dockets.”

The third error claims that Jica’s LOAN documents require that the BORROWER waive sovereign immunity. I put LOAN and BORROWER in the uppercase because what should substitute for these terms are the terms GRANT and RECIPIENT, respectively, and the provision erroneously cited to support the “fairly standard” “waiver of sovereign immunity” was from Jica’s GTC for Japanese grant. “Loan” and “Borrower” are terms used in the GTC for Japanese ODA because, in fact, we are borrowing money and are required to pay it with interest, as with a loan. “Grant” and “Receiver,” on the other hand, are specifically denominated as such under the GTC for Japanese grant because, precisely, a grant (in its plain meaning) is a sum of money given by a government for a particular purpose. One is onerous (loan). The other is gratuitous (grant).

And it is in the GTC for Japanese grant that, as was pointed out, “(i) any and all… privileges and sovereign immunities from and against any lawsuit and enforcement of arbitral award” shall be irrevocably waived by the RECIPIENT (not BORROWER, as the editorial claims).

FRANCISCO ASHLEY L. ACEDILLO,

Juris Doctor Student, UP College of Law;

Former Member, House of Representatives (2013-2016)