Republic of the Philippines v Maler Foundation and Others

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 24 March 2008
• Neutral Citation: [2008] SGCA 14
• Citation: [2008] SGCA 14
• Defendant Counsel: Chandra Mohan Rethnam, Jerome Robert and Ng Jin (Rajah & Tann),Kenneth Michael Tan Wee Kheng SC, Soh Wei Chi and Cham Shan Jie Mark (Kenneth Tan Partnership)
• Published date: 25 March 2008
• Plaintiff Counsel: Harry Elias SC, Surenthiraj s/o Sauntharajah, Michael Palmer, Andy Lem and Sharmini Sharon Selvaratnam (Harry Elias Partnership)
• Date: 24 March 2008
• Docket Number: Civil Appeal No 7 of 2007
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether State thereby deemed to have submitted to jurisdiction,Whether prayer in stay application seeking release of disputed funds to State amounting to a step in proceedings,International Law,Whether escrow agent making claim to disputed funds on State's behalf via written submissions,State claiming funds in hands of third party which was not agent or trustee of State,Words and Phrases,Whether doctrine of sovereign immunity applicable,Whether State submitting to jurisdiction of Singapore courts through escrow agent,Section 4(3)(b) State Immunity Act (Cap 313, 1985 Rev Ed),"Step in the proceedings",Written submissions filed by escrow agent but not formally presented as oral arguments,Whether escrow agent of disputed funds acting as State's agent in proceedings,Application by foreign State to stay interpleader proceedings pursuant to s 3 State Immunity Act (Cap 313, 1985 Rev Ed),Sovereign immunity

24 March 2008 Judgment reserved.

Chan Sek Keong CJ (delivering the judgment of the court):

Introduction

1 The Republic of the Philippines (“the Appellant”) has appealed against the decision of Kan Ting Chiu J (“the Judge”) dismissing its application in Summons No 3874 of 2006 (“the Stay Application”) to stay the interpleader proceedings in Originating Summons No 134 of 2004 (“the Interpleader Summons”) on the basis of state immunity (see WestLB AG v Philippine National Bank [2007] 1 SLR 967 (“the Judgment”)).

Factual background

2 The interpleader proceedings concern competing claims to certain moneys (“the Funds”) which are held in an escrow account in the name of Harry Elias Partnership (“HE&P”), the solicitors for Philippine National Bank (“PNB”), for the credit of the said proceedings. The Funds were originally held in escrow in PNB’s account with WestLB AG, Singapore (“WLB”) pending the determination of the ownership of or the title to the Funds by the courts of the Philippines, upon which event the escrow would automatically terminate. On 15 July 2003, the Supreme Court of the Philippines ordered that the Funds be forfeited to the Appellant on the ground that they were the ill-gotten gains of the former President of the Philippines, the late Ferdinand E Marcos, and Mrs Imelda R Marcos.

3 However, before WLB could release the Funds to PNB as the account holder, eight other claimants notified WLB of their claims to the Funds on various grounds. As a result, WLB took out the Interpleader Summons to interplead the conflicting claims of the nine claimants. PNB was named as the first defendant in the Interpleader Summons. Five foundations, viz, the Maler Foundation, the Avertina Foundation, the Palmy Foundation, the Vibur Foundation and the Aguamina Corporation (collectively referred to as “the Foundations”), which are the first to fifth respondents in this appeal, were named as the second to sixth defendants. The seventh defendant in the Interpleader Summons (the sixth respondent in this appeal) is collectively the plaintiffs in the Estate of Ferdinand E Marcos Human Rights Litigation in Case No. MDL840-R in the United States District of Hawaii (“the HR Claimants”), who had obtained damages from the Hawaiian district court on 3 February 1995. The eighth and the ninth defendants have withdrawn from the interpleader proceedings and are not parties to this appeal. Hereafter in this judgment, the Foundations and the HR Claimants will be referred to collectively as “the Respondents”.

How and why the Funds came to be deposited in Singapore

4 The Funds (which at this time amounted to about US$25m inclusive of interest) were originally part of a larger pool of assets (“the Marcos assets”) held in the Swiss bank accounts of the Foundations. They came under the jurisdiction of the Singapore courts in rather unusual circumstances. The journey began on 28 February 1986, two days after former President Ferdinand E Marcos and his family fled the Philippines, when the Appellant set up a commission called the “Presidential Commission on Good Government” (“PCGG”) to recover “[all the] ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates, whether located in the Philippines or abroad”[note: 1] during his presidency. Some of the assets in question were the Marcos assets, which, as at 31 January 2002, amounted to more than US$658m with accrued interest.

5 The PCGG sought the assistance of the Swiss authorities to recover the Marcos assets from the Foundations. On 24 March 1986, the Swiss Federal Council issued an interim order freezing the Marcos assets pursuant to a Swiss federal law, viz, the International Mutual Assistance for Criminal Matters Act (“IMAC”), in anticipation of a formal request from the Appellant for assistance under the IMAC. Such assistance was formally sought on 7 April 1986. Pursuant to the procedures under the IMAC, the investigating magistrates in the Swiss cantons of Zurich, Fribourg and Geneva issued freezing orders against the Marcos assets between April 1986 and January 1990. These orders superseded the interim freezing order made earlier by the Swiss Federal Council.

6 The heirs of the late Ferdinand Marcos, Imelda Marcos and the Foundations challenged the validity of the cantonal freezing orders on the ground that the Appellant had not fulfilled the conditions required for the provision of assistance under the IMAC. On 21 December 1990, the Swiss Federal Court affirmed, with slight modifications, the freezing orders of the Fribourg and the Zurich cantonal courts on the grounds that:

(a) it was satisfied that the Appellant would commence the necessary proceedings in the Philippines to determine the ownership of the Funds, as required by the IMAC; and

(b) such proceedings would not be time-barred.

However, the Swiss Federal Court, while agreeing with the cantonal courts that the remittance of the Marcos assets to the Appellant was in principle granted, ordered their remittance to be deferred:

… until an executory decision of the Sandiganbayan [a special court established under the Constitution of the Philippines] or another Philippine Court legally competent in criminal matters concerning their restitution to those entitled or their confiscation is presented. If the [Appellant] intends to open a proceeding to this effect, it must do so within a maximum of one year from the present decision of the [Swiss] Federal Court, failing which the attachment of the assets shall be lifted on the request of the interested parties. [emphasis added]

In compliance with the decision of the Swiss Federal Court, the Geneva investigating magistrate modified his freezing order to conform to its terms.

7 On 14 August 1995, the PCGG and PNB entered into an escrow agreement (“the Escrow Agreement”) under which PNB agreed to act as the PCGG’s escrow agent in anticipation of the Swiss authorities agreeing to repatriate the Marcos assets to the Philippines on the Appellant’s undertaking that the assets would be held in escrow until the resolution of the Appellant’s actions against the estate of the late Ferdinand Marcos (“the Marcos Estate”) and Imelda Marcos which were pending in the Sandiganbayan. As the Escrow Agreement is relevant to the status of PNB in the interpleader proceedings, we summarise its material provisions below:

(a) Under cl 2(vii), PNB, as the escrow agent, undertook “not to dispose of the [Marcos assets] other than in accordance with a final and enforceable judgment of the Sandiganbayan or any final and enforceable judgment of any competent court in the Philippines …”.

(b) Under cl 5, the PCGG guaranteed that the funds held in escrow (“the Escrow Funds”), if invested with a Philippines bank or with some other entity, would not become the assets of such a bank or other entity with which the investment was made, but would instead continue to be held in escrow.

(c) Under cl 7, the PCGG and PNB agreed that the occurrence and fulfilment of condition (a) above (“the Escrow Condition”) would have the effect of terminating the Escrow Agreement. The PCGG also agreed to “indemnify and hold … [PNB] free and harmless from any liability whatsoever arising from the faithful observance by … [PNB] of the above conditions”. Further, if a suit or an action was filed against PNB in connection with or directly or indirectly related to the Escrow Funds, PNB was entitled to retain counsel to advise or defend it in the action, and all expenses incurred thereby could be deducted from the Escrow Funds.

(d) Under cl 9, PNB was entitled to charge to the Escrow Funds as “compensation” for its services “the usual fee charged by … [PNB] under similar arrangement[s]”, and also to reimbursement of out-of-pocket expenses incurred in the performance of its functions as escrow agent.

8 On 10 December 1997, the Swiss Federal Supreme Court affirmed the order of the District Attorney of Zurich that such of the Marcos assets as were held in the name of the Aguamina Corporation with the Swiss Bank Corporation and Credit Suisse in Zurich were to be released to the Appellant, subject to certain conditions. Following this ruling, the Marcos assets deposited in the names of the rest of the Foundations with other Swiss banks were also ordered to be released to the Appellant, subject to the following conditions:

(a) the assets in question were to be held in an escrow account in the name of a designated depositor;

(b) the assets could be invested in the money market or in securities provided the relevant debtor or company had a Standard & Poor’s (“S&P”) rating of at least “AA”; and

(c) the assets were to be held in escrow pending a final and binding decision by a competent court in the Philippines on their restitution or forfeiture (see [6] above).

PNB, with the consent of the Swiss authorities, was designated by the Appellant as the escrow agent, subject to the terms of the Escrow Agreement, in accordance with the requirements of the above Swiss court order.

9 Between April 1998 and July 1998, the Swiss authorities released the Marcos assets (then amounting to approximately US$567m) to PNB to hold as the escrow agent. On receipt of those assets, PNB deposited them in various banks in Singapore which had S&P ratings of at least “AA”. One such bank was WLB.

10 Some years prior to the repatriation of the Marcos assets but after the Swiss Federal Court’s order of 21 December 1990 (see [6] above), the Appellant had, on 17 December 1991, petitioned the Sandiganbayan for the forfeiture of the Marcos assets (“the forfeiture proceedings”) on the ground that they were ill-gotten wealth under the law of the Philippines. The defendants in the forfeiture proceedings (“the FP Defendants”) were the Marcos Estate and Imelda Marcos. On 18 October 1993, the FP Defendants filed their answers to the claim. Three years later, on 18 October 1996, the Appellant applied...