CONSTITUTIONAL LAW I - 2020
CALIBUSO, JONA CARMELI
SHELL PHILIPPINES
vs. Efren Jalos, et al.
G.R. No. 179918 : September 08, 2010
STATE IMMUNITY
Takeaways:
Shell Philippines is NOT an agent of the Government but a mere service
contractor thus, the former cannot invoke the doctrine of state immunity.
Nature of the Case: Before the Court is a Petition for Review on Certiorari under
Rule 45 of the Rules of Court, assailing the Decision2cralaw of the Court of Appeals in
C.A.-G.R. CV No. 82268, dated 25 September 2006.
SC Decision:
WHEREFORE, the Court GRANTS the petition and REVERSES the decision of the Court of
Appeals in CA-G.R. CV 82404 dated November 20, 2006. Respondent Efren Jalos, et
al's complaint for damages against Shell Philippines Exploration B.V. in Civil Case P-
1818-03 of the Regional Trial Court, Branch 41, Pinamalayan, Oriental Mindoro is
ordered DISMISSED without prejudice to its refiling with the Pollution Adjudication
Board or PAB.
Facts:
This case is about a question of jurisdiction over an action against a petroleum
contractor, whose pipeline operation has allegedly driven the fish away from
coastal areas, inflicting loss of earnings among fishermen.
On December 11, 1990 petitioner Shell Philippines Exploration B.V. (Shell) and
the Republic of the Philippines entered into Service Contract 38 for the
exploration and extraction of petroleum in northwestern Palawan. Two years
later, Shell discovered natural gas in the Camago-Malampaya area and pursued
its development of the well under the Malampaya Natural Gas Project. This
entailed the construction and installation of a pipeline from Shell's production
platform to its gas processing plant in Batangas.
PETITIONERS FILE COMPLAINT FOR DAMAGES
On May 19, 2003, respondents Efren Jalos, Joven Campang, Arnaldo Mijares,
and 75 other individuals (Jalos, et al) filed a complaint for damages1 against
Shell before the Regional Trial Court (RTC), Branch 41, Pinamalayan, Oriental
Mindoro. Jalos, et al claimed that they were all subsistence fishermen
from the coastal barangay of Bansud, Oriental Mindoro whose livelihood was
adversely affected by the construction and operation of Shell's natural gas
pipeline.
Jalos, et al claimed that their fish catch became few after the construction of the
pipeline. As a result, their average net income per month fell from a high of
P4,848.00 to only P573.00. They said that "the pipeline greatly affected
biogenically hard-structured communities such as coral reefs and led [to] stress
to the marine life in the Mindoro Sea." They now have to stay longer and farther
CONSTITUTIONAL LAW I - 2020
CALIBUSO, JONA CARMELI
out at sea to catch fish, as the pipeline's operation has driven the fish population
out of coastal waters
RESPONDENT MOTION TO DISMISS
Shell also claimed that it could not be sued pursuant to the doctrine of
state immunity without the State's consent. Shell said that under Service
Contract 38, it served merely as an agent of the Philippine government in the
development of the Malampaya gas reserves.
RTC DISMISSED THE CASE
PETITIONERS FILE PETITION FOR CERTIORARI TO COURT OF APPEALS
CA REVERSED THE RTC DECISION, AND RULE IN FAVOR OF THE PETITIONER
RESPONDENT SHELL come to the Supreme Court
Issue: WON the suit is actually against the State and is barred under the doctrine of
state immunity. (NO)
Ruling: NO. Shell claims that it cannot be sued without the State's consent under
the doctrine of state immunity from suit. But, to begin with, Shell is not an agent
of the Republic of the Philippines. It is but a service contractor for the exploration
and development of one of the country's natural gas reserves. While the Republic
appointed Shell as the exclusive party to conduct petroleum operations in the
Camago-Malampayo area under the State's full control and supervision, it does not
follow that Shell has become the State's "agent" within the meaning of the law.
An agent is a person who binds himself to render some service or to do
something in representation or on behalf of another, with the consent or
authority of the latter. The essence of an agency is the agent's ability to
represent his principal and bring about business relations between the latter
and third persons. An agent's ultimate undertaking is to execute juridical
acts that would create, modify or extinguish relations between his principal
and third persons. It is this power to affect the principal's contractual
relations with third persons that differentiates the agent from a service
contractor.
Shell's main undertaking under Service Contract 38 is to "[p]erform all
petroleum operations and provide all necessary technology and finance" as
well as other connected services29 to the Philippine government. As defined
under the contract, petroleum operation means the "searching for and
obtaining Petroleum within the Philippines", including the "transportation,
storage, handling and sale" of petroleum whether for export or domestic
consumption.30 Shell's primary obligation under the contract is not to
represent the Philippine government for the purpose of transacting business
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CALIBUSO, JONA CARMELI
with third persons. Rather, its contractual commitment is to develop and
manage petroleum operations on behalf of the State.
Consequently, Shell is not an agent of the Philippine government, but a
provider of services, technology and financing31 for the Malampaya Natural
Gas Project. It is not immune from suit and may be sued for claims even
without the State's consent.
In sum, while the complaint in this case sufficiently alleges a cause of action,
the same must be filed with the PAB, which is the government agency
tasked to adjudicate pollution-related cases. Shell is not an agent of the
State and may thus be sued before that body for any damages caused by its
operations. The parties may appeal the PAB's decision to the CA. But
pending prior determination by the PAB, courts cannot take cognizance of
the complaint.
