DBM vs KOLONWEL TRADING

G. R. No. 175608

June 8, 2007

DEPARTMENT O BUDGET AND MANAGEMENT PROCUREMENT SERVICE (DBM-PS) and the inter-Agency Bids and Awards Committee (IABAC), petetioners VS. KOLONWEL TRADING, respondent.



ISSUE:

Whether or not the foreign loan agreements (Loan No. 7118-PH) with international financial institutions, partake of an executive or international agreement and shall govern the procurement of goods necessary to implement the project.


HELD:

This issue has been affirmatively answered in the case of Abaya. In that case, the court declared that the RP-JBIC loan agreement was to be of governing application over the CP I project and that the JBIC Procurement Guidelines, as stipulated in the loan agreement.

Under the fundamental international law principle of pacta sunt servanda, the RP, as borrower, bound itself to perform in good faith its duties and obligation under Loan No. 7118-PH. Applying this postulate, the IABAC was legally obliged to comply with, or accord primacy to, the WB Guidelines on the conduct and implementation of the bidding/procurement process in question.