Alternative Dispute Resolution d.m.g. 2018 j.d.

Notes based on Judge J. Humiding’s Outline UC Law

I. Fundamentals of the ADR Law Application

RA 9285: AN ACT TO INSTITUTIONALIZE THE USE OF AN ALTERNATIVE Exceptions:
DISPUTE RESOLUTION SYSTEM IN THE PHILIPPINES AND TO ESTABLISH
THE OFFICE FOR ALTERNATIVE DISPUTE RESOLUTION AND FOR OTHER
PURPOSES. RA 9285 shall not apply to resolution or settlement of the
following: LC-VAJ-FCC
Definition of Terms
a. labor disputes covered by the Labor Code and its
ADR System is any process of procedure used to resolve a IRR;
dispute or controversy, other than by adjudication of a b. civil status of persons;
presiding judge of a court or an officer of a government c. validity of a marriage;
agency, in which a neutral third party participates to assist in d. any ground for legal separation;
the resolution of issues, which includes: e. jurisdiction of courts;
a. arbitration; f. future legitime;
b. mediation; g. criminal liability;
c. conciliation; h. disputes which by law cannot be compromised; and
d. early neutral evaluation; i. disputes referred to CAM.
e. mini-trial;
f. or any combination thereof. Robeniol Notes1

Arbitration is a voluntary dispute resolution process in Broad definition of ADR:

which one or more arbitrators, appointed in accordance with
the agreement of the parties, or the rules, resolve a dispute
by rendering an award.
Court-Annexed Mediation is any mediation process
conducted under the auspices of the 
court, after such court
has acquired jurisdiction of the dispute.
Court-Referred Mediation is mediation ordered by a court
to be conducted in accordance with the Agreement of the
Parties when an action is prematurely commenced in
violation of such agreement.
Early Neutral Evaluation is an ADR process wherein
parties and their lawyers are brought together early in a pre-
trial phase to present summaries of their cases and receive
a nonbinding assessment by an experienced, neutral person,
with expertise in the subject in the substance of the dispute.
Mediation is a voluntary process in which a mediator,
selected by the disputing parties, facilitates communication
and negotiation, and assists the parties in reaching a
voluntary agreement.
Mediation-Arbitration or Med-Arb is a two-step dispute
resolution process involving both 
mediation and arbitration.
Mini-trial is a structured dispute resolution method in which
the merits of a case are argued before a panel comprising
senior decision makers with or without the presence of a
neutral third person after which the parties seek a negotiated
settlement.
(a) It is a system;
(b) Using means and methods allowed by law and
approved by the parties;
(c) For the purpose of resolving or facilitating the
resolution of disputes and controversies between
them;
(d) In an expeditious and speedy manner;
(e) Without resorting to court adjudication.
Principles of ADR
1. Promotion of party autonomy and self-
determination
The parties have the freedom to choose the form,
procedure, practitioner, venue, and other terms of
the proceedings.
2. Recognition of ADR as an efficient tool and an
alternative procedure
As an alternative system, it does not altogether do
away with the trial system. It is a different, separate,
and independent means of settling disputes.
3. Enlisting private sector participation
ADR calls on the services of third parties who do not
necessarily dispense public service.
Objectives and Benefits of the ADR
1. speedy and impartial justice
2. declogging of court dockets
Features of the ADR
1. ADR is a means used to resolve a dispute or
controversy.

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Chapters 1 & 2, pp. 1-26

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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
A procedure that doesn’t lead to a final conclusion
and only serves for a temporary cessation is not
ADR.
2. ADR utilizes means and methods allowed by law.
The ADR Law doesn’t limit the allowable forms. Any
form may be recognized as long as it is not contrary
to law, morals, good customs, public order, and
public policy.
3. ADR is contractual in nature.
The parties are free to agree on the procedure. But
in order to be a valid form of ADR, the 3 essential
requisites of a contract (consent, object certain, and
cause) should be satisfied.
a. Pre-causal consent – when the parties to
the contract stipulate that any dispute that
will arise from the contract shall be resolved
by arbitration.
b. Present causal consent – when the parties
to an existing controversy voluntarily submit
themselves either to arbitration or mediation.
4. ADR avoids court trial.
5. ADR usually involves the participation of a
neutral third party.
Sources of ADR Rules
1. domestic laws and rules
2. acts of the Executive Branch
3. decisions of the Supreme Court
4. international laws
5. general principles of law and equity
Forms of ADR
A. Arbitration - It is a voluntary dispute resolution process
in which one or more arbitrators, appointed in
accordance with the agreement of the parties resolve a
dispute by rendering an award.
B. Mediation - It is a voluntary process in which a mediator,
selected by the disputing parties, facilitates
communication and negotiation, and assists the parties
in reaching a voluntary agreement regarding a dispute.
Parties to a controversy are convinced by a mediator to
settle through a voluntary agreement called “Mediated
Settlement Agreement”.
C. Conciliation - It is the adjustment and settlement of a
dispute in a friendly, unantagonistic manner.
D. Early Neutral Evaluation - It is an ADR process wherein
parties and their lawyers are brought together early in a
pre-trial phase to present summaries of their cases and
receive a non-binding assessment by an experienced,
neutral person, with expertise in the subject in the
substance of the dispute.
E. Mini-trial - It is a structured dispute resolution method in
which the merits of a case are argued before a panel
comprising senior decision makers with or without the
presence of a neutral third party after which the parties
seek negotiated settlement.
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UC Law
F. Other Forms of ADR - Any arrangement agreed upon by
the parties that satisfies the requisites of ADR. It must
comply with the essential requisites of a valid contract
and must not be contrary to law, morals, good customs,
public order and public policy. Agreements to resolve
disputes based on the outcome are equivalent to
gambling and considered void.
Classification of Forms
As to number of parties, it could be bilateral or multilateral
o Bilateral – when there are 2 contending parties
o Multilateral – when there are more than 2
contending parties
As to number of issues, it could be simple or complex
o Simple – only one issue is involved
o Complex – two or more issues
As to extent of the conclusion, it could be complete or partial
o Complete – all the issues involved are resolved
o Partial – only one or some, but not all, are
resolved
o (But in no case should ADR merely suspend or
defer the resolution of the dispute.)
As to the role of evidence in the proceedings, it could be
merit based or non-merit based
o Merit-based or evidentiary – when
presentation of evidence and evaluation of
merits are required.
As to the pendency of a court case, it could be case related
or independent
o Case-related – conducted in connection with or
as a prerequisite to trial (e.g., CAM, CRM)
o Independent – conducted irrespective of any
pending court case
As to the applicable law, it could be domestic, international,
or foreign
o Domestic – if the parties’ place of business,
place of arbitration, and place of the
performance of the obligation involved or subject
matter of the dispute, are in the Philippines
o International – any of the following:
a. When the parties’ place of business are
in different states
b. When the place of arbitration is outside
the Philippines
c. When the place where a substantial part
of the obligation is to be performed; or
the place where subject matter of the
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

dispute is most closely connected, is
outside the Philippines
d. When the parties agreed that the
subject matter of the dispute relates to
more than one country
o Foreign – when conducted outside the
Philippines
By nature of their functions, the ADR practitioners act in a
quasi-judicial capacity.
Hence, as a general rule, their decisions are reviewable in a
special civil action for certiorari under Rule 65, on the ground
of grave abuse of discretion amounting to lack or excess of
jurisdiction.

As to permanence, it could be ad hoc or institutional But in domestic arbitration, the arbitral tribunal’s decision to
defer the resolution of the issue of its jurisdiction cannot be
o Ad hoc – if the existence of the ADR provider is challenged by a MfR, appeal, or certiorari. The remedy of the
only temporary, for a particular dispute or aggrieved party is to proceed with the arbitration, and later
controversy on, once a final arbitral award has been rendered, petition
o Institutional – if the ADR practitioner’s the court to set aside the award on the ground that the
existence is permanent in character and not tribunal exceeded its powers.
dependent on any dispute
C. Preference for ADR
Components of the ADR
Even before the enactment of RA 9285, there is a clear
1. contending parties preference for ADR as seen in Art 2030 of the NCC, which
2. dispute or controversy instructs the court to suspend the proceedings if it is possible
3. form of ADR to settle the dispute using ADR.
4. ADR provider or practitioner
Hence:
Subject Matter of ADR
• Before or during pretrial, either party may file a
o General rule: All adversarial disputes and Motion to Refer the Parties to ADR.
controversies can be the subject matter • After pretrial, the parties may jointly file a Motion to
o Exceptions: Suspend or Motion to Dismiss, to allow a
a. Civil status of persons compromise agreement.
b. Validity of marriage or any ground for legal • In case a settlement agreement materializes, either
separation party may submit it to the court where the action is
c. Jurisdiction of the courts pending, and move for its approval. It will be
d. Future legitime approved if the court finds that it is not contrary to
e. Criminal liability law, morals, public policy, or public order.
f. Those which, by law, cannot be compromised
(e.g., Art 2035 of NCC, those against public ADR in the Philippines: Wave of the Future or the Road
policy) Less Traveled?
(Martha Lois V. Cordia)2
Basic concepts
A. Problem Areas
A. Concluding Acts
Clogged docket courts, expensive litigation fees, slow-paced
ADR proceedings are completed upon the execution of a court proceedings and rigid and adversarial system of courts
concluding act or agreement: characterize the current justice system of the Philippines.
• In mediation – a mediated settlement agreement or Most recent statistics show that there are about 1.2 million
a compromise agreement cases in the country and only 1,620 judges to resolve them.
• In CAM – a judgment based on compromise Minor cases take about 2-3 years to be resolved, whereas
• In conciliation – a waiver and quitclaim as major ones drag on up to 10 years.
• In arbitration – arbitral award (arbitral decision),
award on agreed terms, consent award, award Per the Constitution, the collegiate courts are given 12
based on compromise months to resolve its cases, while the Supreme Court has 24
months. The long, tedious delays are contrary to the
B. ADR Providers or Practitioners constitutional mandate to a speedy disposition and

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Summary by Group 1 (Jura Obra, et al.)

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Notes based on Judge J. Humiding’s Outline
administration of justice. It has adversely affected the
lawyers, the litigants, and the justice system.
B. ADR as a Better Alternative to Litigation
1. party autonomy
2. speed and cost
3. privacy and confidentiality
4. awards are final and binding
C. Procedure in ADR Methods
1. The arbitration commences upon demand of one
party to the other to submit a controversy to
arbitration. If there is no arbitration clause in the
contract, the parties may execute a submission
agreement to arbitrate.
2. The demand shall be served upon the other party in
accordance with the contract.
3. The parties will appoint the arbitrator tribunal in
accordance with the contract. If the contract provides
no guidance, each party will appoint an arbitrator
and the two appointed arbitrators will select a third
arbitrator. The chosen arbitrator must disclose the
circumstances that give justifiable doubts to his
impartiality or the fact that he does not possess the
necessary qualities.
4. The time and place of the hearing will be set and
must cause a notice of it to be given to the parties
5. The arbitrator shall act as the sole judge in assessing
the materiality and relevance of the evidence offered.
He is not bound to conform to the rules of evidence
but must observe the agreement among the parties
6. The arbitrator will render an award.
D. Salient Features of the ADR Law
1. Jurisdiction
An arbitral body, once constituted, has the power to examine
the question of its own competence.
2. Venue and Place
As a general rule, parties are free to agree in the place or
venue. In International Commercial Arbitration, parties could
also choose the State where the arbitration will be conducted.
This is to avoid the adverse influence of each other’s national
laws. If the parties don’t choose, the arbitrator tribunal will
choose the venue. In the absence of both, it will be in Metro
Manila.
3. Court Involvement
The courts generally have a limited role in arbitration.
Exceptions:
a. Courts may grant interim and provisional reliefs during
the pendency of arbitral proceedings before the
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arbitral is constituted or if the tribunal has no power to
act or is unable to act effectively.
b. The RTC could decide whether the arbitral tribunal
has jurisdiction after the arbitral tribunal has ruled
against the plea.
c. Recourse to a court against an arbitral award may be
made only by an application for setting aside an award.
d. Awards by foreign tribunals, must be filed in the RTC
for recognition and enforcement thereof in accordance
with the rules to be promulgated by the Supreme
Court. Once application is confirmed, it shall be
enforced in the same manner as final and executory
decisions of courts of law in the Philippines.
4. Recognition and Enforcement of Awards
Compared to foreign judgments, arbitral awards in
International Commercial Arbitration are readily enforced
pursuant to the New York Convention of 1958.
Foreign judgments are generally not enforceable in other
jurisdictions except in cases of reciprocity and comity.
Arbitral awards are more readily enforceable.
The original or duly authenticated copy of the award and the
arbitration agreement must be filed in the RTC and approved
for it to be enforceable in the country.
E. Conclusion
The passing of RA 9285 signified the promotion of ADR, but
its implementation is still in its initial stage. ADR methods are
still considered as the road less traveled. (The article was
published in 2007.)
The reasons are:
• In the domestic setting, there is a lack of awareness.
• In the international setting, the Philippines is not yet
equipped to be an effective venue for international
commercial arbitration because:
(1) the centers for ADR are still young and yet to gain
a strong foothold in the field; and
(2) the courts’ unbridled intervention prevents the
parties from choosing the Philippines as the venue
for arbitration.
Only when more parties support ADR and more courts
encourage its use can ADR be considered the “wave of the
future”.
II. Mediation in General
Definition
It is a voluntary process in which a mediator, selected by the
disputing parties, facilitates communication and negotiation,
and assists the parties in reaching a voluntary agreement.
Scope
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
Chapter 2 of RA 9285 (on Mediation) covers voluntary
mediation, whether ad hoc or institutional, other than court-
annexed.
“Mediation” shall include conciliation.
Exclusions – The ADR Law does not cover the following:
1. CAM
2. CRM
3. Conciliation conducted by the Pangkat
Tagapagkasundo
4. JDR
Robeniol Notes3
• Mediation is non-evidentiary or non-merits based.
• Mediation focuses on the facilitation of communication
and negotiation between parties in order to encourage
them to voluntarily settle their dispute.
• A mediator must refrain from:
a. Giving legal or technical advise;
b. Engaging in counseling advocacy;
c. Expressing his personal opinion on the rights and
duties of the parties, and the merits of any proposal
made.
• Mediation may be:
a. Ad hoc; or
b. Institutional – when administered by and conducted
under rules of a mediation institution
• An Agreement to Submit a Dispute to Mediation By An
Institution should include:
a. To be bound by the institution’s internal mediation
and administrative policies; and
b. To have such rules govern the mediation of the
dispute, and be followed by the mediator, the parties
and their counsels, non-party participants.
Place of Mediation: The parties are free to agree on the
place of mediation. If they don’t have an agreement, the
default venue is any place convenient and appropriate for all
parties.
Stages in Mediation
1. Opening statement of the mediator
2. Individual narration by the parties
3. Exchange by the parties
4. Summary of the issues
5. Generalization and evaluation of options
6. Closure
But this process is not obligatory. Pursuant to the principle of
party autonomy and self-determination, the parties may
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Chapter 3, pp. 27-42
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UC Law
choose the procedure that will govern their mediation.
The process shall be private unless the parties consent to
the presence of other persons.
It is concluded by the:
a. Execution of a Settlement Agreement by the parties;
b. Withdrawal of any party from mediation; or
c. Written Declaration of the mediator that any further effort
at mediation would not be helpful.
Advantages of Mediation: Assurances under Section 8 of
the RA 9285:
a. Confidentiality in the mediation process;
b. Prompt, economical, and amicable resolution of
disputes; and
c. The decision-making authority rests in the parties.
How is mediation closed and concluded?
Three ways:
a. By the parties’ execution of a settlement agreement or
compromise agreement;
b. By the withdrawal of any party from mediation; or
c. By the written declaration of the mediator that any further
effort at mediation would not be helpful.
Confidential and privileged nature of Mediation
communication
• All information obtained through mediation proceedings
is privileged and confidential in character.
• The ADR Act guarantees and enforces this privilege by:
a. Declaring certain information confidential and
therefore not capable of being disclosed; and
b. Declaring the information inadmissible in evidence.
The ADR Act defines confidential information as: “any
information, relative to the subject of mediation or arbitration,
expressly intended by the source not to be disclosed
(expressly confidential), or obtained under circumstances
that would create a reasonable expectation on behalf of the
source that the information shall not be disclosed (impliedly
confidential).”
They include, but are not limited to, the following:
1. Communication, oral or written, made in a dispute
resolution proceedings, including any memoranda,
notes or work product of the neutral party or non-party
participant;
2. An oral or written statement made or which occurs during
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Notes based on Judge J. Humiding’s Outline
mediation or for purposes of considering, conducting,
participating, initiating, continuing of reconvening
mediation or retaining a mediator; and
3. Pleadings, motions, manifestations, witness statements,
reports filed or submitted in arbitration or for expert
evaluation.
Legal effects of confidentiality:
1. A party, mediator, or non-party participant may refuse to
disclose or prevent another from disclosing the
information.
2. The information cannot be subject to discovery and they
are inadmissible in any adversarial proceeding.
3. The following persons involved in mediation cannot be
compelled to disclose:
a. Parties to the dispute
b. Mediator
c. Counsel for the parties
d. Non-party participants
e. Any person hired or engaged as secretary,
stenographer, clerk, or assistant
f. Any person who obtains or possesses confidential
information by reason of his profession.
4. The protection will continue to apply even if a mediator
has failed to act impartially.
5. A mediator may not be called to testify to provide
information gathered in mediation.
What are the exceptions?
There is no privilege against disclosure if mediation
communication is:
1. in an agreement evidenced by a record authenticated
by all parties to the agreement;
 there are any known facts likely to affect his
2. available to the public or that is made during a session
of a mediation which is open, or is 
required by law to
be open, to the public;
3. a threat or statement of a plan to inflict bodily injury or
commit a crime of violence; 
 2. Disclose to the parties any such fact as soon as is
4. intentionally used to plan a crime, attempt to commit,
or commit a crime, or conceal an 
ongoing crime or
criminal activity; 
 If such fact is learned after accepting mediation, the mediator
5. sought or offered to prove or disprove abuse, neglect,
abandonment, or exploitation in a 
proceeding in
which a public agency is protecting the interest of an
individual protected by law; but this exception does
not apply where a child protection matter is referred to
mediation by a court of a public agency participates in
the child protection mediation; 
 What are the qualifications of a mediator?
6. sought or offered to prove or disprove a claim or
complaint of professional misconduct or malpractice
filed against mediator in a proceeding; or 
 background or profession, unless required in the mediation
7. sought or offered to prove of disprove a claim or
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ADR Act, Section 13. Mediator’s Disclosure and Conflict of
Interest.
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complaint of professional misconduct or malpractice
filed against a party, nonparty participant, or
representative of a party based on conduct occurring
during a mediation.
Moreover, there are also exceptions based on public
policy, when the need for the evidence substantially
outweighs the need for confidentiality, and the mediation
communication is offered in:
1. a court proceeding involving a crime or felony; or 

2. a proceeding to prove a claim or defense that is sufficient
to reform or avoid a 
liability on a contract arising out of
the mediation. 

The Mediator
• He is required to keep in utmost confidence all
confidential information, and to discuss its confidentiality
with the parties before the process.
• The mediator may not make a report, assessment,
evaluation, finding or other communication to a court,
agency or other authority making a ruling on a dispute
that is the subject of a mediation, except:
a. where the mediation occurred or has terminated,
or where a settlement was reached; and
b. as permitted to be disclosed under the ADR Law
(Sec 13).
Operative Principles in Mediation4
Before accepting a request to serve as mediator, an
individual shall:
1. Make a reasonable inquiry to determine whether
impartiality of the mediator, including financial or
personal interest in the outcome, and any existing
or past relationship with a party or foreseeable
participant; and
practical before accepting a mediation.
shall disclose it as soon as practicable.
At the request of a party, an individual who is requested to
serve as mediator shall disclose his/her qualifications to
mediate a dispute.
The ADR Act does not require special qualifications by
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agreement or by the mediation parties.
Duties and Functions of a Mediator
1. Prior to the mediation
a. Competence – He should continually upgrade his
skills, make such skills and other qualifications
known to the parties. He should only mediate if he
knows he truly can.
b. Impartiality – Before accepting, he should make an
inquiry to make sure that he can mediate without any
bias or conflict of interest.
2. During the mediation
a. Confidentiality
b. Consent and self-determination – He should ensure
that the parties know that they are free and able to
make whatever choices they desire.
c. Promotion of respect and control of abuse – He
should encourage mutual respect and take steps to
limit the abuses of the mediation process.
3. No mediator or any member of a mediator’s immediate
family or his/her agent shall request, solicit, receive or
accept any gift or any type of compensation other than
the agreed fee and expenses in connection with any
matter coming before the mediator.
Mediated Settlement Agreement
• It is the concluding document in a successful mediation.
• It may also take the form of a Compromise Agreement.
Operative principles under the Act:
1. The Mediated Settlement Agreement is prepared by the
parties, with the assistance of their respective counsel,
and by the mediator.
2. They shall endeavor to make the terms and conditions
complete and make adequate provisions for the
contingency of breach to avoid conflicting interpretations
of the agreement. 
 The neighborhood justice system was codified through the
3. The parties and their respective counsel shall sign the
settlement agreement.
4. The mediator shall certify that he/she explained its
contents in a language they know.
5. If the parties so desire, they may deposit the settlement
agreement with the appropriate Clerk of the RTC where
one of the parties resides.
6. Where there is a need to enforce the settlement
agreement, a petition may be filed by any of the parties
with the same RTC, in which case, the court shall proceed
summarily to hear the petition.
7. The parties may agree that the mediator shall become a
sole arbitrator for the dispute and shall treat the
settlement agreement as an arbitral award, subject to RA
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Ohio State Journal on Dispute Resolution
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876.
Role of Counsel in Mediation
In AM 11-1-SC-PHILJA (2011), the Supreme Court stated
the role of lawyers in mediation as “adviser and consultant to
their clients, dropping the combative role in the adjudicative
process, and giving up their dominant role in judicial trials.
They must accept a less directive role in order to allow the
parties more opportunities to craft their own agreement.”
Mediation and the Neocolonial Legal Order: Access to
Justice and Self-Determination in the Philippines
(Eduardo R. C. Capulong)5
The article mentions two sides. On one hand, the author
acknowledged that Mediation provides greater access to
justice and self-determination, more efficient and effective
than the courts, less costly, more responsive to the poor, and
more culturally appropriate as it promotes social harmony.
On the other, he echoed the critics of US-style mediation as
promoting neocolonial hegemony. The critics said that
mediation has been used to expand the ambit of state power,
defeat democratic decision-making, and preserve unequal
relationships. They criticize mediation for putting “peace” first
over justice.
In the country, mediation is categorized into 5 areas:
1. Indigenous dispute resolution (IDR);
2. Neighborhood justice system;
3. CAM;
4. Administrative mediation; and
5. Private mediation.
In IDR, instead of a third-party stranger, an authoritative
elder usually oversees the process, and it is usually ended
by a ritual.
Katarungang Pambarangay under PD 1508 (1978).
The author emphasized the historical background of the law,
heavily implying that because it was crafted by a dictator, the
KP system was created “not by access to justice or self-
determination, but by their polar opposites, repression and
dictatorial control”, thereby strengthening the dictator’s
centralized hold over the country.
III. CAM & JDR
OCA Circular 51-2011
Through AM 11-1-6-SC-PHILJA, the Supreme Court
expanded CAM and JDR to cover the civil aspect of less
grave felonies punishable by correctional penalties not
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Notes based on Judge J. Humiding’s Outline
exceeding 6 years imprisonment, where the offended party
is a private person.
The expanded coverage also includes those cases
enumerated in Admin Circular 20-2002, namely:
a. All cases, settlement of estates, and cases covered by
the Rules of Summary Procedure except those, which
by law, cannot be compromised;
b. Cases cognizable by the Lupong Tagapamayapa
under the KP Law;
c. The civil aspect of BP 22; and
d. The civil aspect of quasi-offenses under Title 14 of the
RPC.
AM 10-4-16-SC
This covers (a) Court-Annexed Family Mediation, and (b)
Code of Ethical Standards for Mediators.
A. Family Mediation
The following cases will be referred to family mediation:
1. Settlement of estates
2. All issues under the Family Code and other laws in
relation to support, custody, visitation, property relation,
guardianship of minor child, and other issues which can
be subject of a compromise agreement, except:
a. Those covered by:
i. RA 9262 (VAWC)
ii. RA 7610 (Child Abuse)
iii. RA 8353 (New Rape Law)
iv. RA 9208 (Anti-Trafficking Law)
v. RA 9775 (Child Pornography)
b. Civil status of persons
c. Validity of marriage
d. Future support
e. Jurisdiction
f. Grounds for legal separation
g. Future legitime
PMC Units
The trial court may order the referral to a Philippine Mediation
Center (PMC) Unit after determining the possibility of an
amicable settlement, or of a submission to ADR.
• There is a PMC unit in the courthouses or near the
premises of the court for CRM proceedings.
• The PMC unit will assist the parties in selecting a
mutually acceptable Family Mediator from a list of duly
accredited ones. If they can’t agree, the unit will assign
one.
• A Family Mediator is an officer of the court when
conducting mediation proceedings.
• Lawyers may be present and act as consultant or adviser
of the parties, but may attend only upon the request of
the mediator.
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• At the end of the period given by the court, if no
settlement is reached, the case will be returned to the
trial court for further proceedings, unless the parties
agree to continue and the court grants an extension.
• All mediation proceedings and incidents must be kept
strictly confidential, unless specifically provided by law.
• All admissions or statements made therein are
inadmissible for any purpose in any proceeding.
• The parties undertake to not rely or introduce as
evidence the following:
a. Views or suggestions made by the other party in
respect to a possible settlement of the dispute;
b. Admission made by wither party in the course of
the proceedings;
c. Proposal made by the Family Mediator;
d. The fact that the other party had indicated his
willingness to accept a proposal settlement
made by the parties to the Family Mediator.
• Any transcript or minutes of the mediation proceedings
are inadmissible as evidence in any other proceeding.
• The period of mediation is excluded from the regular and
mandatory periods for trial and rendition of judgment.
• Individual parties must personally appear for family
mediation.
Conclusion of Family Mediation
If the mediation is successful, the PMC unit will submit to the
court within 3 days after the termination of the proceedings
any of the following, as the case may be:
a. Original Compromise Agreement entered into by the
parties - this will be the basis of the rendition of a
judgment by compromise, which may be enforced by
execution;
b. Withdrawal of the Complaint; or
c. Satisfaction of the claim.
If the mediation is a failure, the Family Mediator will prepare
a Certificate of Failed Mediation, to be submitted to the court
also within 3 days from termination of the proceedings.
B. Code of Ethical Standards for Mediators
Canon 1 – Responsibility to the Courts
A Family Mediator must be:
• candid, accurate and fully responsible to the trial
court;
• observe all the applicable rules and the judicial
standards of fidelity and diligence;
• report and encourage the parties to report breaches
of the Code of FMs to the proper authorities.
Canon 2 – Responsibility to the Parties
i. Impartiality – freedom from favoritism and bias; a
8
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

Family Mediator must: research, evaluation, professional development and

a. not meet one of the parties without the public education.
consent or presence of the other(s);
b. withdraw if he believes he can no longer be Cases6
impartial;
c. remind parties of their right to terminate the 1. CHAN KENT v. DIONESIO C. MICAREZ7
mediation;
d. not give or accept gifts in connection to the (On attendance in Family Mediation)
mediation.
FACTS: Linda Chan Kent filed a complaint for recovery of
ii. Competence – A FM must serve in a conscientious,
real property and annulment of title against her parents and
diligent, and efficient manner, and maintain
brother (Dionesio Micarez). Chan Kent alleged that in 1982,
competence in mediation skills.
she purchased subject residential lot through her younger
iii. Conflict of Interest – A FM must refrain from
sister, and authorized representative, Rosita Micarez-
participating if he perceives a clear conflict of
Manalang.
interest.
a. He must not be involved in any relationship
However, it was named under her parents under an implied
with the clients.
trust due to the difficulty in registering a real property in her
b. He must disclose any known, significant
name, as she was married to an American citizen. She
current or past personal or professional
learned from her sister that their parents fraudulently
relationship with any party or attorney
conveyed and transferred the subject lot to Dionesio.
involved in the mediation. After disclosing,
After the issues had been joined, the RTC ordered
and the parties don’t seek inhibition, the
the referral of the case to the Philippine Mediation
mediation must continue.
Center (PMC). Conferences were then scheduled. Based on
c. He must not have any interest in any
the Report of Mediator Esmeraldo O. Padao, Sr. that
property, real or personal, that is the subject
respondents’ counsel and representative did not appear on
matter of the case.
the conferences, the RTC issued an order, allowing Chan
iv. Avoidance of Delays - The FM must plan work
Kent to present her evidence ex parte. It was later clarified
schedules to avoid delays.
by Padao that it was Chan Kent’s counsel and representative
v. Prohibition Against Solicitation or Advertising – A FM
who did not attend the mediation proceedings.
shouldn’t use the mediation process to solicit,
Upon knowing this, the RTC issued an order
encourage, or otherwise incur future professional
dismissing the case. Chan Kent filed a motion for
services and financial gain from either or both
reconsideration to set aside the order, appealing the
parties. He must not exaggerate about his
relaxation of the rule on non-appearance in the mediation
qualifications and the mediation process.
proceedings but was denied. Petitioner invoked that the
vi. Prohibition Against Coercion – A FM shouldn’t
dismissal of the case was not in accordance with applicable
unfairly influence a party into a settlement
law and jurisprudence and claims that it was unjust because
agreement. He must only facilitate in arriving at a
her representative and counsel did not deliberately snub the
decision.
mediation proceedings. They have attended twice the
vii. Role in Settlement – A FM should see to it that the
mediation conferences and only left when respondent’s
parties consider and understand the terms of
counsel had not yet arrived. Moreover, she explained that
settlement.
there were some urgent matters caused by the sudden
increase in prices of commodities, which did not allow her
Canon 3 – Relationship with Other Professionals representative to appear in the last hearing.
• The FM should respect the relationship between ISSUE: Whether dismissal is the proper sanction due to her
mediators and other professional disciplines. He representative’s failure to attend the mediation process
must promote harmony and cooperation. although the party have appeared for two times.
• The FM must be knowledgeable and able to detect
abuse or violence, and refer the parties to other HELD: No. Dismissal was not the proper action. Although
professionals for appropriate help, when needed. the RTC had legal basis to order the dismissal of the civil
case, the SC finds this sanction too severe to be imposed on
Canon 4 – Relationship to Society the petitioner where the records of the case is devoid of
evidence of wilful or flagrant disregard of the rules on
• The FM should support the advancement of mediation proceedings.
mediation by encouraging and participating in its

6 7
Digests by Group 2 (Steph Baucas, et al.) G.R. No. 185758; March 9, 2011

9
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
A.M. No. 01-10-5-SC-PHILJA regards mediation as
part of pre-trial where parties are encouraged to personally
attend the proceeding. To ensure attendance, it provides
sanction including but not limited to censure, reprimand,
contempt and such other sanctions as are provided under
the Rules of Court for failure to appear for pre-trial, in case
any or both of the parties absent himself/themselves, or for
abusive conduct during mediation proceedings.
There is no clear demonstration that the absence of
petitioner’s representative during mediation proceedings
was intended to perpetuate delay in the litigation of the case.
Neither was it indicative of lack of interest to enter into a
possible amicable settlement.
The SC held that a mere censure or reprimand
would have been sufficient for petitioner’s representative and
her counsel so as to be informed of the court’s intolerance of
tardiness and laxity in the observation of its order. By failing
to do so and refusing to resuscitate the case, the RTC
impetuously deprived petitioner of the opportunity to recover
the land that she allegedly paid for. Unless the conduct of the
party is so negligent, irresponsible, contumacious, or dilatory
as for non-appearance to provide substantial grounds for
dismissal, the courts should consider lesser sanctions that
would still achieve the desired end.
2. BBB v AAA
(On what can and cannot be subjects of a Compromise
Agreement)
Facts: While A was a medical student and a single mother
to one child, B borne with her two more children. A and B
legalized their relationship and got married and legitimated
their 2 common children. The marriage soon went sour
because of constant fights over A’s allegations of B’s
womanizing and B’s verbal abuses against A. B left the
conjugal home alleging that A had fits of irrational jealousy.
A also decided to leave the conjugal home because B
displayed acts of marital infidelity which exposed A to public
ridicule causing her emotional and psychological distress. A
also found out that B failed to pay the rental fee to their
condominium unit, forcing her to be evicted. A decided to live
in a friend’s house. A found out that B had been stalking her
and the kids through B’s friend who lived in the same
subdivision. B’s friend had been checking the guard’s
logbook and had been monitoring the activities of A and her
children in and out of the subdivision. For fear of her and her
children’s safety, A filed for a Temporary Protection Order
(TPO; and prayed for it to become permanent upon the
findings of the RTC).
The RTC ruled a permanent protection order in favor of A
and granted A permanent sole custody over their common
children and B to provide support in the amount of Php
62,918.97 per month, requiring B to stay away from A at a
distance of 100 meters, plus damages and the cost of suit.
The CA affirmed the RTC’s decision but remanded the case
to determine who shall be awarded custody of the children.
d.m.g. 2018 j.d.
UC Law
B contends that the PPO issued against him is moot because
he now has actual care and custody of their common children
while A is working as a nurse abroad. B alleges that he and
A had entered into a compromise agreement regarding the
exercise of parental authority over, and support of their
common children.
A countered that B continuously violates the PPO. A alleged
that she signed the MOA while emotionally distressed and
without the advice and guidance of counsel. A claims that B
still verbally abuses her. B has not paid the fees and costs of
litigation awarded to A. He does not provide support for A’s
child who, in the eyes of the law, is also among B’s
legitimated children. A also alleged that she left their
common children under the care of B only because the
circumstances forced her to do so, she could not depend for
financial support from B, she was left with no choice but to
yield custody over their common children even if the set-up
exposed the children to B’s illicit affairs.
Issue: Whether the Memorandum of Agreement between
the parties over the PPO, and the support and custody of
their children should be honored by the court.
Held: The permanent protection order and the custody and
support of their children are not proper subjects of a
compromise agreement because it involves violence against
women and children.
Alleging psychological violence and economic abuse, A
anchored her application for the issuance of a TPO and a
PPO on the basis of the provisions of the Anti-Violence
Against Women and their Children (RA 9262). The rules
intend that cases filed under said low cannot be subjects of
compromise agreements.
Section 23(d) of A.M. No. 04-10-11-SC20 explicitly prohibits
compromise on any act constituting the crime of violence
against women. Violence is not a subject for compromise. A
process that involves parties mediating the issue of violence
implies that the victim is somehow at fault.
AM No. 10-4-16-SC directs the referral to mediation of all
issues under the Family Code and other laws in relation to
support, custody, visitation, property relations and
guardianship of minor children, excepting therefrom those
covered by R.A. No. 9262.
While A filed her application for a TPO and a PPO as an
independent action and not as an incidental relief prayed for
in a criminal suit, the instant petition cannot be taken outside
cases falling under the provisions of R.A. No. 9262. Hence,
the prohibition against subjecting it to compromise applies.
The PPO issued is valid. Remanding the case to the trial
court is necessary to determine who shall exercise custody
over the children. However, the choices of the children as
10
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
with whom they would prefer to stay would alter the effects
of the PPO. But as to who shall be granted custody over the
three children, how the spouses shall exercise visitation
rights, and the amount and manner of providing financial
support shall be remanded to the RTC.
While B and A arrived at an amicable settlement as regards
the issues of custody, exercise of parental authority over,
and support of their common children, and while these
matters can be lawful subjects of compromise, A’s
contentions compels the Court to exercise prudence by
directing the RTC to resolve with finality the said issues.
While the parties are not prohibited from entering into a
compromise as regards the aforesaid issues, the Court now
requires the RTC’s direct supervision to put an end to their
bickering.
The case is remanded for the RTC to resolve the question of
custody. Since the children are now all older than seven
years of age, they can choose for themselves whom they
want to stay with. If all the three children would manifest their
choice to stay with A, then the PPO issued by RTC shall
continue to be executed in its entirety. However, if any of the
three children would choose to be under B’s care, the PPO
issued against B relative to them is to be modified. The PPO,
in its entirety, would remain effective only as to A and any of
the children who opt to stay with her. The RTC may
accordingly alter the manner and amount of financial support
B should give depending on who shall finally be awarded
custody over the children.
3. Garcia v Drilon8
(Cases involving Protection Orders)
Facts: Rosalie Jaype-Garcia filed, for herself and in behalf
of her minor children, a verified petition before the RTC of
Bacolod City for the issuance of a Temporary Protection
Order against her husband, Jesus C. Garcia, pursuant to
R.A. 9262. She claimed to be a victim of physical abuse--
emotional, psychological, and economic violence as a result
of marital infidelity on the part of petitioner, with threats of
deprivation of custody of her children and of financial
support.
Rosalie married Jesus in 2002 when she was 34 years old
and he was eleven years her senior and had 3 children.
Rosalie is a dutiful and faithful wife, whose life revolved
around her husband. On the other hand, Jesus is dominant,
controlling, and demands absolute obedience from his wife
and children. He forbade private respondent to pray, and
deliberately isolated her from her friends. When she took up
law, and even when she was already working part time at a
law office, Jesus trivialized her ambitions and prevailed upon
her to just stay at home. He was often jealous of the fact that
his attractive wife still catches the eye of some men; at one
8
JESUS C. GARCIA, vs. THE HONORABLE RAY ALAN T. DRILON,
Presiding Judge, Regional Trial Court-Branch 41, Bacolod City, and
ROSALIE JAYPE-GARCIA, for herself and in behalf of minor
d.m.g. 2018 j.d.
UC Law
point threatening that he would have any man eyeing her
killed. Things turned for the worse when Jesus had an affair
with a bank manager. Jesus admitted it when Rosalie
confronted him. The infidelity spawned a series of fights that
left Rosalie physically and emotionally wounded. In one of
their quarrels, Jesus grabbed Rosalie on both arms and
shook her with such force that caused bruises and
hematoma. At another time, Jesus hit Rosalie forcefully on
the lips that caused some bleeding. Jesus sometimes turned
his ire on their daughter, Jo-Ann, who had seen the text
messages he sent to his paramour and whom he blamed for
squealing on him. He beat Jo-Ann on the chest and slapped
her many times. All the emotional and psychological turmoil
drove Rosalie to the brink of despair. At one point, she
attempted suicide. She was found by her son bleeding on the
floor. Jesus simply fled the house instead of taking her to the
hospital. Rosalie was hospitalized for about 7 days in which
time Jesus never bothered to visit, nor apologized or showed
pity on her.
When Rosalie informed the management of Robinson's
Bank that she intends to file charges against the bank
manager, Jesus got angry with her for jeopardizing the
manager's job. Jesus warned her that if she goes on a legal
battle with him, she would not get a single centavo.
RTC of Bacolod City: Issued a TPO, after finding reasonable
ground to believe that an imminent danger of violence
against the Rosalie and her children exists or is about to
recur.
Jesus’ Contention: By criminalizing run-of-the-mill
arguments, instead of encouraging mediation and
counselling, the law has done violence to the avowed policy
of the State to "protect and strengthen the family as a basic
autonomous social institution."
Ruling of the Court: The non-referral of a VAWC case to a
mediator is justified. Under Section 23(c) of A.M. No. 04-10-
11-SC, the court shall not refer such a case to a mediator.
This section prohibits a court from ordering or referring
parties to mediation in a proceeding for an order for
protection. Mediation is a process by which parties in
equivalent bargaining positions voluntarily reach consensual
agreement about the issue at hand. Violence, however, is
not a subject for compromise. A process that involves parties
mediating the issue of violence implies that the victim is
somehow at fault. In addition, mediation of issues in a
proceeding for an order of protection is problematic because
the petitioner is frequently unable to participate equally with
the person against whom the protection order has been
sought.
4. Arroyo v Alcantara
children, namely: JO-ANN, JOSEPH EDUARD, JESSE ANTHONE, all
surnamed GARCIA
11
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
(Can clerks of court be mediators?)
Facts: Antonio Arroyo filed an administrative complaint
against Sancho Alcantara for violations of RA 6713 (Code of
Conduct and Ethical Standards for Public Officials and
Employees) and RA 3019. The complaint arose when
Alcantara, a clerk of court, issued a subpoena to Joaquin
Opiana, Sr.
Joaquin is Arroyo’s father-in-law and the subpoena
required him to appear before the court. Ruben Olayres, the
barangay captain, was the one who served the subpoena.
Nine days after the service of the subpoena, Antonio wrote
the office of Alcantara, requesting for a copy of the alleged
subpoena and a certification as to the facts surrounding the
issuance of the same. A month later, he wrote again to follow
up his first request even to the point of requesting to examine
the records of the court, but his efforts proved futile. Hence,
this complaint was filed, seeking the preventive suspension
of Alcantara pending investigation of the charges against
him.
On the other hand, Alcantara claims that Antonio
mistook the document as a subpoena when in fact it was just
a letter, typed on an ordinary bondpaper and addressed to
Joaquin Opiana, Sr., requesting him to attend a meeting at
the office of the MTC of Guinobatan, Albay. Alcantara further
explains that he made the request in his personal capacity
upon the insistence of Olayres, who thought that Alcantara’s
position as a clerk of court could be used to amicably settle
the dispute concerning a real property, among the heirs of
Opina.
Issue: Is a clerk of court authorized to mediate in a dispute?
Ruling: No. Alcantara as a clerk of court had no authority to
mediate among the constituents of Isaac Olayres. Although
he claims that it was done in a personal capacity, his claim
is belied by the fact that Antonio was given the impression
that the intended meeting involving his father-in-law was
court-related. His acts exceeded his authority as a clerk of
court. In effect, he had, wittingly allowed his position to be
used to exercise his moral ascendancy over the Opiana
family, whom he summoned to his office for mediation.
IV. Court Annexed Mediation (CAM)
CAM: Summing Up The Past ad Charting The Future
(Carolyn Mercado & Damcelle Torres)9
Pilot tests: Between 1999-2001, The Philippine Judicial
Academy (PhilJA) conducted tests—first in selected cities in
Manila (which only had a 40% settlement rate), second in
Metro Manila, and third in Cebu and Davao. The success
rate in the latter tests was much higher: 87%.
9
Sourcebook on Alternatives to Formal Dispute Resolution
Mechanisms (2008)
d.m.g. 2018 j.d.
UC Law
AM 01-10-5-SC-PHILJA (2001)
1. It established the Philippine Mediation Center – with a goal
to set up units in the 13 judicial regions nationwide.
2. It approved the second Revised Guidelines in the
Implementation of Mediation Proceedings. The following
cases may be referred to mediation:
a. All civil cases, settlement of estates, and cases
covered by the Rules of Summary Procedure,
except those that cannot be compromised by
law;
b. Cases cognizable by the Lupong
Tagapamayapa under the KP Law;
c. The civil aspect of BP 22; and
d. Civil of quasi-offenses.
3. It also issued the Standards and Procedure for
Accreditation of Mediators and Code of Ethical
Standards for Mediators.
Mediation in the Court of Appeals
Per Resolution No. 04-04 (2005), the following cases can be
mediated in the CA:
1. Civil cases brought on ordinary appeal or petition for
review;
2. Appeals from final orders, awards, judgments,
resolution of quasi-judicial agencies in the exercise of
their quasi-judicial functions through petition for
review or certiorari;
3. Special civil actions for certiorari, except those
involving pure questions of law;
4. Habeas corpus cases involving custody of minors,
with the parties’ consent, as long as the minor is not
detained for a crime;
5. Criminal cases cognizable by the KP involving
offenses punishable by imprisonment not exceeding 1
year or a fine not exceeding 5,000.
Qualification in CA Mediation
Mediators in the CA are limited to:
1. retired judges and judges;
2. senior members of the Bar; and
3. senior law professors, trained and accredited by the
SC.
CAM’s success rate
• From 2002-2007: 70%
• 36,155 cases were cleared from the court dockets
through mediation.
• 22% of the successfully mediated cases involved
12
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
violations of BP 22.
Stakeholders’ Attitudes (Challenges)
• Lawyers: Most are straight-up hostile, having been
schooled in adversarial tradition. Some also see
mediation as a threat to their source of income.
• Solution: Lawyers will eventually mature and realize
that their role is not to litigate, but to be problem-
solvers—“reconcilers of divisions, pursuers of just
solutions”.
• Judges: They assume that non-lawyer mediators will
not be able to dispense justice properly. They also
dread public ridicule of being called “juezes de
areglo”, which means that of they permit out-of-court
settlement, the public will see them as “lazy and
incompetent”.
• Public: More awareness and appreciation of CAM
through continuous education, information drives,
etc, are needed.
• Coverage: CAM only covers a select list of cases.
• Solution: CAM could be extended to cover minor
crimes such as grave threats, slander, libel, and
slight physical injuries.
Mediation Core Values – “Voice and Choice”
• Even when mediation doesn’t produce a settlement,
it doesn’t necessarily mean it is a failed mediation.
• A compromise agreement is not the only positive
outcome that parties can get out of mediation.
• Other positive outcomes that the parties could
anticipate are:
a. The ability to speak and be heard;
b. The chance to talk about what might be
irrelevant to lawyers, but very important to the
parties;
c. The narrowing of important issues;
d. Clarity about what is most important to both
parties;
e. A more unfettered conversation between the
parties;
f. A better understanding of those involved and
their situations;
g. Restoration of good faith;
h. Strengthened reputation and stature; and
i. Agreements based on genuine terms created by
the parties themselves.
Future Prospects for CAM
1. Multi-Door Courthouse – After being screened in a
Dispute Resolution Center, certain cases would be
assigned to (or matched with) an apt ADR process
10
Collab Law and the Rules on Court Annexed Family Mediation;
55 Ateneo L.J. 938 (2011)
d.m.g. 2018 j.d.
UC Law
or series of processes. The “doors” can be mediation,
arbitration, case evaluation, or conciliation, among
others.
2. Online Dispute Resolution – A virtual or online
extension of ADR can be used for disputes with low
economic value, or with parties who are
geographically segregated.
3. Multi-Step Negotiation – A dispute not resolved at
one level moves progressively to higher levels, with
different mediators at each step.
4. CAM could be used in small claims courts.
5. The term “mediation” as it is currently used should
be clarified. Settlement should be seen as only one
of the many successful outcomes of CAM. (See
Mediation Core Values)
6. CAM could be used to address procedural and case
management issues, resulting in better quality of
briefs and oral arguments, which will expedite the
trial and decisions on the case.
7. Instead of an “opt-out” approach, an “opt-in”
approach could be better as it will ensure that those
who want to mediate their case, even if it is not one
of the court-mandated cases for mediation, will be
allowed to do so.
Conclusion
The usage of CAM will steadily increase through the
strengthening of mediators’ groups, rise in popularity of ADR,
and rise in litigation costs.
US Justice Sandra Day O-Connor: “Courts shouldn’t be the
place where resolution of disputes begin. They should be the
places where the disputes end after alternative methods of
resolving disputes have been considered and tried.”
Collaborative Law
(Patrick H. M. Wiedmer)10
The article mentioned the disadvantages of CAM: (1)
neutrality of the mediator; and (2) qualifications of the
mediator. Both cannot always be guaranteed.
Stuart Webb pioneered “Collaboration Law” which stemmed
from this simple idea: to formulate a new type of ADR that
puts more pressure on parties and their counsel to agree to
an out-of-court agreement.
Chief Justice Burger: Lawyers are reminded of their duty to
act as “healers of conflict”.
Key features and Advantages
1. Disqualification agreement – This prohibits a
counsel from continuing as such if the negotiations
13
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

fail and litigation is required in the next step. The
parties will have to get another counsel to represent
them in a judicial resolution. This is an incentive for
the lawyer to facilitate the negotiation in good faith.
2. Full and voluntary discovery disclosures
3. Avoidance of a even a threat to litigation throughout
the negotiation process
4. Commissioning of neutral experts to participate in
the discussions
5. Process – “four-way meetings” where the parties
negotiate face-to-face. The focus is the clients’
needs in a non-adversarial manner.
6. It seeks a win-win result.
7. Unlike CAM, the parties don’t need to wait for the
court to dictate when to begin negotiations. The
meetings may begin immediately if the parties desire,
at a mutually agreed pace.
Collaboration Law could be good for family disputes that are
highly sensitive in nature. Couples are given the chance to
settle at the earliest possible stage, even without court order
or mandate.
• Second Stage
a. Pretrial
b. Trial
c. Judgment
Some rules:
1. The JDR judge is not permitted to preside over the trial
of the same case if mediation doesn’t succeed, unless
the parties specifically ask him to continue as the trial
judge.
2. A judge is perfectly free to adopt any approach or
settlement technique he may deem appropriate, in
order to encourage the parties to settle.
3. JDR judges undergo training to prepare them for
conducting JDR.
The Current Status of JDR: The Research Project12
In 2007, JURIS PROJECT commissioned a research team
to evaluate the current state of the JDR program. It had the
following goals:

V. Judicial Dispute Resolution (JDR) 1. Identify the factors that would make the program more
effective
JDR As An Innovative Mode of Dispute Resolution 2. Ascertain the effectiveness of the program
(Salvador S. Panga, Jr.)11 3. Determine the possibility of extending the program to
other areas
JDR is a process by which a judge attempts to facilitate a
4. Determine the rate of approval or disapproval of the end
settlement between parties undergoing litigation after a
users in terms of value, fairness and acceptability of the
similar effort by a court-appointed mediator has failed.
program.
The JDR recasts judges from magistrates to mediators. In Indicators used:
court, the emphasis is on the assertion and ascertainment of
rights and obligations. 1. Efficiency
2. Effectiveness
In JDR, there is greater emphasis placed on: 3. Satisfaction of stakeholders
4. Program organization
a. value creation; 5. Service delivery
b. joint problem solving; 6. Program quality
c. option generation; and
d. the improvement of the parties’ relationships. The Findings

JDR was introduced in 2004, as one of the initiatives of the I. Case disposition rate
Justice Reform Initiative Support (JURIS) Project.
It is uneven among the pilot areas but the overall rate is 47%.
AM No. 04-1-12-SC0PHILJA (Process) In the 3500 cases that went through ADR, almost half were
successfully settled. This is a good indicator, considering the
fact that JDR is a second tier ADR process which involves
The Guidelines divide the judicial proceedings into 2 stages:
more difficult and complex disputes which already went
through CAM.
• First Stage
a. Filing of the Complaint II. Satisfaction of stakeholders
b. CAM
c. JDR Judges Lawyers Litigants

11 12
Sourcebook on Alternatives to Formal Dispute Resolution Summary by Group 5 (Jeslyn Apolonio, et al.)
Mechanisms (2008)

14
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

In terms of Perceived as useful in 1st level reduction of

usefulness in courts but not so much in 2nd lawyer’s
resolving court level courts fees as
disputes occasioned
Role of Judges Judges can be mediators. by the early
However some say that the settlement
precious time of Judges should of cases.
be spent in deciding cases not in There will
mediation. be a
Fairness of the Yes. Yes. decrease
Process 1. It is fair for both on their
parties income so
2. The judges are they are
able to explain pointing out
the mechanics of to
the JDR adjustment
3. The judges are s of the fee
helpful in the structure.
processs of Time and Yes.
reaching a Cost JDR involves no fees
settlement ( using efficiency It accelerates dispute resolution
their own It frees up court resources
standard of
fairness)
III. Program Organization

Can a judge use his own standard of fairness in helping the
parties reach a settlement?
61% of the judges said that the parties should be given a free
had in deciding the terms of the settlement.
Some judges from Pampanga believe that it is appropriate
for judges to tell a party what he thinks the result will be if the
case went through trial, in order to encourage the parties to
settle.
The respondents generally agreed that the program is well
designed with its adequate standards and that it has
achieved its most important goal of reducing the court’s case
loads. However the respondents from Bacolod and
Pampanga expressed their disagreement, stating that there
are sufficient existing procedures in place to guide the
participants in reaching settlement. Also some respondents
believe that the program still needs further modifications.
IV. Qualities of Lawyers

Judges Lawyers Litigant Many judges are not convinced that lawyers are able to
Satisfaction with the 96% 88% 85% reach out to the other party in a manner that encouraged the
outcomes agree agree agree latter to reciprocate and be reasonable.

Program Observations and Recommendations

However a significant portion of the litigants in Baguio and 1. JDR generated positive outcomes in so far as first level
Bacolod expressed their dissatisfaction. Popular Reasons: courts are concerned. However, the impact of JDR
before the 2nd level courts is still unclear.
1. Mistrust with the courts
2. Pragmatism Reason: The parties have much greater incentive to settle
3. Unfavorable decision early before the first level courts because of the limited
4. Rights based expectations penalty or amounts that 1st level courts are legally allowed to
impose or award. In addition to this, because of the tougher
Judges Lawyers Litigants penalties and higher cost of preparation before the 2 nd level
Improved Yes Yes. Yes courts, the parties may be more willing to go to trial.
Relationships However
some Recommendation: There is a need for further training of
lawyers are judges especially 2nd level court judges. For JDR to achieve
concerned same level of success in 2nd level courts, the judges may
about the have to attain a higher level of competence in JDR.
possible
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Notes based on Judge J. Humiding’s Outline
2. There is a limited amount of judicial resources for
trainings of judges
Reason: The trainings will require considerable financial
investment
Recommendations: The creation of Specialized JDR courts
will allow the use of financial resources for training to be
focused on a smaller group of judges, thus allowing the
advanced and in-depth training needed for effective JDR for
complex disputes.
With specialized JDR courts, those who possess the
personality and the innate ability to facilitate interest-based
settlement discussions will not have to conduct trial and write
decisions, but just perform JDR on a full-time basis.
The creation of specialized second-level JDR courts will
open a career advancement opportunity for first-level court
judges who display outstanding JDR skills because they can
be considered prime candidates for these specialized courts.
This career opportunity will further motivate first-level judges
to improve their performance.
3. A simple reversal of the order of CAM and JDR, with JDR
as the first-tier process and CAM as the second, will
address numerous stakeholder concerns about having
redundant processes.
Reason: The main reason is financial, that is, to avoid the
filing of CAM fees. Indeed, from an access to justice
standpoint, this is one of the weak points of CAM. But other
reasons for preferring JDR over CAM were repeated in many
focus group discussions, as follows:
(i) the CAM program has been losing its good mediators by
reason of low compensation;
(ii) CAM mediators lack the authority and moral ascendancy
of a judge which is helpful in facilitating settlement;
(iii) many CAM mediators are not lawyers and this hinders
their understanding of disputes; and (iv) non-lawyer
mediators cannot command the respect of lawyers and
litigants.
4. The possibility of expanding the coverage of JDR should
be studied.
Reason: The suggestion merits some study because
expansion of coverage will likely increase JDR case
disposals, but attention must be devoted to determining
where to draw the line, that is, in what types of cases will the
public be better served by allowing submission to JDR.
5. Clarification of the judges’ role in JDR
Reason: There is an existing stakeholder preference for a
judge who actively guides the parties towards settlement.
Despite the choice of some judges to withhold commenting
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on the merits of the case, a large percentage of judges
actually inform the parties in JDR of their opinions about the
merits of the parties’ respective positions. Not only do the
stakeholders prefer active guidance, but also failure to
provide such is viewed as resulting in unfairness or unfair
outcomes.
There is nothing that prevents judges from combining
facilitative and evaluative techniques. The researched
emphasized the following:
(i) the usefulness and propriety of the application of various
techniques, including facilitative mediation that incorporates
the use evaluative and fact-finding techniques such as
evaluation and mini-trial;
(ii) storytelling as a condition precedent to option generation;
and
(iii) issues pertaining to power imbalance identification and
correction.
6. Initiatives for enhancing awareness of lawyers and
litigants on JDR should be adopted.
Reason: The team noted that while the lawyers play a critical
role in any settlement, as the litigants would not normally
enter into any compromise without the favorable
endorsement of their lawyer, many lawyers are not fully
aware of the role they ought to play during JDR, particularly
with regard to their overall attitude towards settlement,
option-generation, evaluation of options and alternatives,
and similar issues.
Recommendation: Introduction to ADR concepts should be
done as early as law school to impart the advantages of ADR
upon future lawyers, and train them in essential ADR skills,
such as client counseling and negotiation
7. Litigants should be informed of the nature and purpose
of JDR before conducting JDR hearings to allow them to
craft settlement proposals, with the assistance of their
lawyers, to bring to the JDR hearings.
Recommendations: Give emphasis on informing the parties
of their rights to settle or not to settle.
While the issuance of subpoenas will almost certainly ensure
the parties’ presence, less coercive and threatening
measures may certainly be taken to achieve the same result.
The courts may perhaps consider sending invitations instead
of subpoenas, explaining the nature of the proceedings,
discussing the requirements of the process, requesting the
parties to be prepared beforehand with settlement options,
and generally asking the parties and counsel to come to the
proceedings as thoroughly prepared for negotiations as
possible.
Conclusion
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
The three-year JDR experiment has clearly yielded
extremely encouraging results. While certain program
modifications are in order, the basic concept of judge-
facilitated settlement is one that appears to have been fully
accepted by all sectors despite initial apprehensions. The
success of the experiment is due mainly to the readiness of
the judges themselves to take on the role of dispute
facilitators, and the training, monitoring, program support
and management provided by the JURIS Project and
PHILJA.
VI. Other Forms of ADR
RA 9285, Chapter 3: “SEC. 18. Referral of Dispute to Other
ADR Forms – The parties may agree to refer one or more or
all issues arising in a dispute or during its pendency to other
forms of ADR such as but not limited to (a) the evaluation of
a third person or (b) a mini-trial, (c) mediation-arbitration, or
a combination thereof.”
IRR, Chapter 7: The other forms include:
1. Early Neutral Evaluation
2. Neutral Evaluation
3. Mini-trial
4. Mediation-Arbitration
5. Combination of the forms
6. Any other ADR form
If the form is akin to mediation or arbitration, the respective
rules on Mediation and Domestic Arbitration in the IRR will
have suppletory application, as long as it will not be in conflict
with the agreement of the parties.
If a dispute is already before a court, either party may, before
and during pre-trial, file a motion for the court to refer the
parties to other ADR processes. However, at any time
during court proceedings, even after pre-trial, the parties
may jointly move for suspension/dismissal of the action
pursuant to Article 2030 of the Civil Code of the Philippines 13.
Following a neutral or an early neutral evaluation, mini-trial
or mediation- arbitration, either party may submit any
settlement agreement to the court where the case is
pending.
A. Neutral or Early Neutral Evaluation
What rule governs: (1) agreement by parties; or (2) in the
absence of an agreement, Rule 2 of Chapter 7 of the IRR.
Role of Default Appointing Authority
13
“Art. 2030. Every civil action or proceeding shall be suspended:
(1) If willingness to discuss a possible compromise is expressed by
one or both parties; or
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Either party may request the Appointing Authority to make
the appointment:
1. If the parties cannot agree on, or fail to provide for the
following:
a. The desired qualification of the neutral third person;
b. The manner of his/her selection;
c. The appointing authority (not IBP) who shall have the
authority to make the appointment of a neutral third person;
or
2. If despite an agreement and the lapse of the period for the
appointment, the parties are unable to select a neutral third
person or appointing authority.
Who is the Appointing Authority?
The IRR14 mentions the following:
1. The person or institution named in the arbitration
agreement as the appointing authority; or
2. The regular arbitration institution under whose rules the
arbitration is agreed to be conducted.
3. In ad hoc arbitration, the default appointment shall be
made by the National President of the Integrated Bar of
the Philippines (IBP) or his/her duly authorized
representative.
Factors in appointing a NTP:
1. nature of the dispute; and
2. experience and expertise of the neutral third person.
Process
1. The parties shall submit and exchange position papers
containing the issues and statement of the relevant facts
and appending supporting documents and affidavits of
witnesses to assist the neutral third person in evaluating
or assessing the dispute.
2. The neutral third person may request either party to
address additional issues that he/she may consider
necessary for a complete evaluation/assessment of the
dispute.
3. The neutral third person may structure the evaluation
process in any manner he/she deems appropriate. In the
course thereof, the neutral third person may identify
areas of agreement, clarify the issues, define those that
are contentious, and encourage the parties to agree on
a definition of issues and stipulate on facts or admit the
genuineness and due execution of documents.
4. The neutral third person shall issue a written evaluation
(2) If it appears that one of the parties, before the
commencement of the action or proceeding, offered to discuss a
possible compromise but the other party refused the offer. xxx"
14
IRR, Chapter 1, Rule 2, Definition of Terms, C.1
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Notes based on Judge J. Humiding’s Outline
or assessment within 30 days from the conclusion of the
evaluation process.
Nature & Contents of Written Evaluation
The opinion shall be non-binding and shall set forth how the
neutral third person would have ruled had the matter been
subject to a binding process.
The evaluation or assessment shall indicate the relative
strengths and weakness of the positions of the parties, the
basis for the evaluation or assessment, and an estimate,
when feasible, of the amount for which a party may be liable
to the other.
Other Rules
• There shall be no ex-parte communication between
the neutral third person and any party to dispute
without the consent of all parties.
• All papers and written presentations communicated
to the neutral third person, and the written
non-binding evaluation, shall be treated as
confidential.
B. Mini-Trial
What rule governs: (1) agreement by parties; or (2) in the
absence of an agreement, Rule 3 of Chapter 7 of the IRR.
How conducted: It shall be conducted either as:
1. a separate dispute resolution process; or
2. a continuation of mediation, neutral or early neutral
evaluation or any other ADR process.
Appointment of a Third Person/Panel
The parties may agree that a mini-trial be conducted with or
without the presence and participation of a neutral third
person.
If a neutral third person is agreed upon and chosen, he/she
shall preside over the mini- trial. The parties may agree to
appoint one or more (but equal in number per party) senior
executive/s, on its behalf, to sit as mini-trial panel members.
Qualification: The senior executive/s chosen to sit as
mini-trial panel members must be duly authorized to
negotiate and settle the dispute with the other party.
The appointment of a panel shall be communicated to the
other party. This appointment shall mean that the panel has
the authority to enter into a settlement agreement binding
upon the principal without any further action or ratification by
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the latter.
Process
1. Each party shall submit a brief executive summary of the
dispute in sufficient copies as to provide one copy to
each panel member and to the adverse party. The
summary shall identify the specific factual or legal issue
or issues.
2. At the date time and place agreed upon, the parties shall
appear before the panel members.
3. Each party’s lawyer or authorized representative shall
present his/her case starting with the claimant followed
by the respondent. The lawyer or representative may
thereafter offer rebuttal or sur-rebuttal arguments.
Duration: Unless the parties agree on a shorter or longer
period, the presentation-in-chief shall be made, without
interruption, for one hour and the rebuttal or sur-rebuttal shall
be 30 minutes.
4. At the end of each presentation, rebuttal or sur-rebuttal,
the panel may ask clarificatory questions.
5. After the mini-trial, the panel members shall negotiate a
settlement of the dispute by themselves.
In cases where a neutral third person is appointed, the
neutral third person shall assist the proceedings. The rules
on Mediation will apply.
C. Mediation-Arbitration
What rule governs: (1) agreement by parties; or (2) in the
absence of an agreement, the rules on Mediation shall first
apply and thereafter, the rules on Domestic Arbitration.
Rules:
1. No person who has engaged and acted as mediator of a
dispute between the parties, following a failed mediation,
act as arbitrator of the same dispute, unless the parties,
in a written agreement, expressly authorize such person
to hear and decide the case as an arbitrator.
2. The mediator who becomes an arbitrator shall make a
disclosure that the arbitration will proceed as a new
dispute resolution process, and shall, before entering
upon his/her duties, execute the appropriate oath or
affirmation of office as arbitrator in accordance with the
IRR.
Office for Alternative Dispute Resolution 15
• The OADR is an agency attached to the Department
of Justice.
• It is headed by an Executive Director, who is
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Notes based on Judge J. Humiding’s Outline
appointed by the President, after taking into
consideration the DOJ Secretary’s recommendation.
Powers:
1. Appointing authority of mediators and arbitrators, if
the parties agree in writing that the OADR is
empowered to do so.
2. Information dissemination – Conduct seminars,
symposia, conferences, and public fora. Publish the
proceedings and other relevant material to promote,
develop, and expand the use of ADR.
3. Resource Center – Establish an ADR library or
resource center.
4. Training – Establish programs for ADR providers or
practitioners.
5. Certification – Certify those who have completed the
professional training programs by the OADR.
6. Collection of Fees – Charge for services rendered.
7. Accept donations, grants, and other assistances from
local and foreign sources.
8. Exercise such other powers, as may be necessary
and proper to carry into effect the provisions of the
ADR Act.
Functions:
1. Promote, develop and expand the use of ADR in the
public and private sectors through information,
education, and communication.
2. Monitor, study, and evaluate the use of ADR for policy
formulation and other purposes.
3. Recommend statutory changes to Congress in order
to develop, strengthen, and improve ADR, in
accordance with international standards.
4. Make studies on and provide links for the
development, implementation, monitoring, and
evaluation of ADR programs.
5. Compile and publish a list or roster of ADR providers
or practitioners who have undergone training, or have
been certified by the OADR.
6. Perform such other functions as may be assigned to
it.
The Four Divisions:
1. Secretariat – provides support and other functions as
may be directed by the Executive Director;
2. Public information and Promotion Division –
disseminates information, promotes public
acceptance and importance of ADR modes.
3. Training Division – formulates the standards for ADR
providers, conducts their training, and issues
certifications.
16
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March 2002
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4. Records and Library Division – establishes and
maintains a central repository of ADR laws, rules,
jurisprudence, books, articles, and other information
about ADR in the Philippines and elsewhere.
Advisory Council
The Council advises the Executive Director on policy,
operational, and other relevant matters.
The DOJ Secretary, upon the OADR Executive Director’s
recommendation, appoints the members.
They are composed of a representative from each of the
following:
1. mediation profession;
2. arbitration profession;
3. ADR organizations;
4. IBP; and
5. Academe.
Dispute Resolution Mechanisms in the Philippines
(Prof. Domingo Disini, et al.)16
Current situation and viewpoints
The courts exercise their traditional duty to settle
controversies through a hierarchical organization. In the
Philippines, we have a four-level structure. The SC has
enforced a strict policy of strict observance of the structure.
Filipinos also seem to be litigious people, as seen by the
heavy case inflow in the first and second level courts, as well
as in the clogged dockets of review courts.
There has been a growing dissatisfaction among the
Filipinos when it comes to the use of courts. Among the
reasons are costliness, slowness, rigidity of procedures, the
adversarial nature of the system, inadequacy of solutions in
actually settling disputes.
Hence, the SC through the Davide Watch imposed the
following goals: (1) dispose backlogs, (2) study and address
the causes of failure to observe the periods prescribed; and
(3) promote ADR.
Filipinos also have “a culture that strongly values the
preservation of amicable relationships especially between
parties with a history of kinship and community ties”.
Factors that delay disposition of cases:
1. The due process mechanics take up a lot of time.
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
2. An open-ended appellate system further encourages
litigants to pursue their appeals and not surrender.
3. BP 22 cases are clogging the first level courts.
4. Automatic appeals to the SC are adding up to the
number of appeals the high court must resolve.
5. Apart from reviewing the lower courts, the SC is also
reviewing other constitutional bodies’ decisions (e.g.,
COMELEC).
Judicial Reforms
ADR has emerged as the ley to decongesting the courts. The
most popular modes are mediation and arbitration. Of the
two, it is mediation that holds greater promise for concrete
and immediate gains.
In 2001, the SC designated the PhilJA as its component unit
for court-referred and court-related mediation. The PMC was
established for this purpose.
Under the Second Revised Guidelines on Mediation (2001),
the trial court is now mandated to issue an Order for
Mediation after determining the possibility of amicable
settlement. The mediation becomes a part of the pretrial.
Mediation produces a two-fold advantage: (1) It declogs the
court dockets; and (2) It restores the traditional Filipino spirit
that highly values unity, solidarity, and cooperation.
12 Agencies that use ADR in the Philippines
1. Katarungang Pambarangay, where the Lupong
Tagapamayapa headed by the Barangay Captain
facilitates a two-step resolution. They go into
mediation first where there is a face-to-face
confrontation of the parties with the Barangay
Chairman who serves as mediator. If it succeeds, they
enter into an amicable settlement. If it fails, they resort
to conciliation which will be conducted by the Pangkat
Tagapagkasundo. If it succeeds, an arbitral award will
be granted.
2. Cooperative Development Authority (CDA) where
a legal officer is appointed to undertake the resolution
of disputes concerning cooperatives and their
activities.
3. Philippine Construction Industry Arbitration
Commission (CIAC), which handles cases involving
contractual claims within the construction industry.
4. Department of Agrarian Reform Adjudication
Board (DARAB), which provides a forum for the
settlement of agrarian disputes. The case first goes
through mediation in the Barangay Agrarian Reform
Committee (BARC). If that fails, the case is brought
before the Provincial Adjudicator (PARAD) for
arbitration. The agreement entered into with the
BARC, or the award by the PARAD will be entered as
an Order by the DARAB.
5. Philippine Dispute Resolution Center, Inc. (PDRCI),
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which was organized in 1996, is a private non-stock,
non-profit corporation, open to the public at large,
especially to those engaged in business. Here, an
accredited arbitrator or arbitrator chosen by the
parties conducts the arbitration. All awards are final
and executor. Delay in compliance with the award is
cognizable by the courts.
6. National Conciliation and Mediation Board
(NCMB) created in 1987 through EO 126, is an
agency under DOLE, tasked to resolve certain labor
disputes involving unionized workers, such as lock-
outs and strikes, CBA deadlock, and company policy
interpretation. The process starts with a conference. If
the dispute isn’t settled there, conciliation is
conducted. If it fails again voluntary arbitration is
encouraged. If the parties don’t choose arbitration,
then it becomes cognizable by the NLRC. The NCMB
enforces its award via a writ of execution if voluntary
compliance is breached, but it doesn’t really have a
mechanism to compel compliance.
7. National Labor Relations Commission (NLRC),
under the DOLE, tasked to settle disputes concerning
unfair labor practice, termination, breach of labor
standards, and others.
8. Bureau of Labor Relations (BLR), also under the
DOLE, concerned with resolving inter-union and intra-
union disputes, disputes in union representation,
cancellation of union registration, etc.
9. Commission on the Settlement of Land Problems
(COSLAP), under the DOJ, created in 1979 through
EO 561, is mandated to settle all disputes involving
land, whether urban or rural, involving squatters,
classification, release or subdivision of lands, and
other land problems of grave importance like
demolition. The dispute is referred to a mediation
committee. If that fails, trial ensues for arbitration.
10. Insurance Commission is an independent quasi-
judicial body tasked with resolving disputes in the
insurance industry, like settlement of claims.
11. Bureau of Trade Regulation and Consumer
Protection (BTRCP) is a quasi-judicial agency under
the DTI tasked to investigate, arbitrate, and resolve
complaints from consumers involving violations of the
Consumer Act, like fraudulent advertising, mislabeling,
etc.
12. Court Annexed Pilot Mediation Project where the
courts to encourage litigants at the pretrial stage to
submit their dispute to mediation/conciliation. Any
agreement reached therein would be the basis of the
court decision.
VII. History of Arbitration
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
Roots17
a. Roman Empire
Arbitration was used as a means of resolving private
disputes. An arbiter was synonymous to a “judge” or
“judex”. These are persons not specially trained but in
whose morality, probity, and good sense the parties
reposed full trust. Private conflicts were referred primarily to
them.
How was the arbiter chosen?
(a) designated by the parties by common agreement;
(b) selected by the parties from the “album judicium” or a
listing of those persons qualified; or
(c) chosen by lot.
b. Lex Mercatoria
Arbitration can also trace its roots to Lex Mercatoria, which
was influenced by Roman Law, based on maritime custom
as well as Medieval European fairs. This was a combination
of customary rules and principles relating to merchants and
mercantile transactions, adopted by merchants themselves,
to regulate their dealings with each other.
c. England – ADR’s “Checkered Career in Law”
Arbitration developed as a distinct and separate private
institution for the resolution of disputes, which were mostly
commercial. But it had a checkered career, in the sense that
one moment it is accepted, but in the next, it is completely
set aside.
The English courts firmly disapproved of arbitration
agreements as a vehicle for settling disputes, mainly
because of compensation-related reasons—Judges did not
have fixed salaries at the time; they mainly depended on
court fees.
The courts had “great jealousy” of arbitrations because they
were “robbed of cases”. They brought this jealousy out by
denying the enforceability of arbitration agreements, thereby
nullifying the very value of arbitration.
d. America
The American courts were on the same antagonizing mood.
They also denied judicial enforcement of arbitration
agreements.
The general rule in common law was that an arbitration
agreement was revocable even after proceedings had
already begun up to the time of the award. The award would
be recognized as valid, but it would not be enforceable. The
successful party would still have to go to court to litigate on
17
Parlade (2011) pp. 1-13.
d.m.g. 2018 j.d.
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it. Only after a successful litigation would the court consider
its enforcement.
But there was also a general exception. The arbitration
agreement would be enforceable if the following conditions
were met:
(a) if it did not decide on the general question of liability and
reserved it for judicial decision;
(b) if it is confined to determining the amount payable or to
furnishing essential evidence only; and
(c) if arbitration was made a condition precedent to the
cause of action.
Source: Red Cross Line v Atlantic Fruit Co., as cited in Chang v
Royal Exchange Assurance Corp. (1907) and Chan Linte v Law
Union & Rock Insurance Co. (1921)
However, America’s view took a 180 turn in 1854. In the case
of Burchell vs Marsh, their Supreme Court held: “Arbitrators
are judges chosen by the parties to decide the matters
submitted to them, finally and without appeal, and that if an
award is within the submission and it contains the honest
decision of the arbitrators, after a full and fair hearing of the
parties, a court of equity will not set it aside for error either in
law or in fact.”
Philippines – Then
a. Under Colonial Rule
The laws we were subjected to at the time of Spanish
colonization recognized friendly adjusters called “juicio de
amigables componedores”. This is a person appointed by
the parties for the settlement of their differences.
When the Americans came, their Code of Civil Procedure
impliedly repealed the provisions on the appointment of a
friendly adjuster. Therefore, arbitral awards then could no
longer be enforced, as there was no legal basis for them.
Wahl v. Donaldson (1903)
Following US jurisprudence, our Supreme Court declared:
“Agreements to refer matters in dispute to arbitration have
been regarded generally as attempts to oust the jurisdiction
of the court, and are not enforced.”
It cited the Clark on Contracts, which stated: “A condition in
a contract that disputes arising out of it shall be referred to
arbitration is good where the amount of damages sustained
by a breach of the contract is to be ascertained by specified
arbitration before any right of action arises, but that it is illegal
where all the matters in dispute of whatever sort may be
referred to arbitrators and to them alone. In the first case a
condition precedent to the accrual of a right of action is
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
imposed, while in the second it is attempted to prevent any
right of action accruing at all, and this cannot be permitted.”
b. Contrary to Public Policy
In many cases, the Court upheld the rule under civil law that
where there is a stipulation that all matters in dispute are to
be referred to arbitrators and to them alone, such stipulation
is contrary to public policy.
Allen v. Province of Tayabas (1918)
Following the change in the judicial perception of arbitration
in the US, which would later on flourish to create the New
York Arbitration Act of 1920, our Supreme Court softened its
attitude towards arbitration, holding that:
“It would be highly improper, for courts out of untoward
jealousy to annul laws or agreements which seek to oust the
courts of their jurisdiction. Unless the agreement is such as
absolutely to close the doors of the courts against the parties,
which agreement would be void, courts will look with favor
upon such amicable arrangements and will only with great
reluctance interfere to anticipate or nullify the action of the
arbitrator.”
c. Civil Code (1950)
In a 1924 case, Justice Malcolm said that the attitude of the
courts toward arbitration agreement is slowly crystallizing
into definite and workable form.
True enough, the issue was finally settled and crystallized
through the enactment of the 1950 Civil Code, which
contained a separate chapter on Arbitration with five
provisions:
Art. 2042. The same persons who may enter into a
compromise may submit their controversies to one or more
arbitrators for decision. (1820a)
Art. 2043. The provisions of the preceding Chapter upon
compromises shall also be applicable to arbitrations. (1821a)
Art. 2044. Any stipulation that the arbitrators' award or
decision shall be final, is valid, without prejudice to Articles
2038, 2039, and 2040. (n)**
Art. 2045. Any clause giving one of the parties power to
choose more arbitrators than the other is void and of no
effect. (n)
Art. 2046. The appointment of arbitrators and the procedure
for arbitration shall be governed by the provisions of such
rules of court as the Supreme Court shall promulgate. (n)
18
Ateneo LJ 288, Evolution of Arbitration (2016)
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**Arts. 2038, 2039, and 2040 allow that arbitration
agreements be set aside based on grounds similar to those
that call for the annulment of contracts.
d. RA 876 (1953)
Despite being embedded in the law of the land thru the Civil
Code, arbitration had not yet been painted as a complete
picture in the Philippines. We lacked a law that provides a
step-by-step guide on how to conduct arbitrations.
But finally, in 1953, in accordance with the prevailing positive
view on arbitration in America, the Legislature enacted the
first Arbitration Law. It did not repeal the Civil Code
provisions, but rather bolstered them by providing a fuller
and clearer picture on how to resolve disputes through
arbitration.
However, this law was criticized for the following reasons:
(a) Its provisions were too broad and failed to satisfy the
standards of arbitration systems elsewhere.
(b) The only type of arbitration it covered was domestic
arbitration.
(c) There was no complementary statute for the conduct of
international arbitration in the Philippines.
Moreover, even after the passage of the first Arbitration Law,
court litigation continued to be the primary choice for the
majority, as indicated by the growing number of cases filed
daily.
Philippines – Now
Evolution of Arbitration in the Philippines
(Arthur Autea)18
Tilting the Balance in Favor of ADR)
Statutory Recognition
As we have heard in the previous reports, ADR has been
finding a steadier and stronger place in the legal landscape
of our country.
This was largely due to the enactment of RA 9285, or the
ADR Act of 2004. It gave a more comprehensive and
updated set of rules to govern the various forms of alternative
dispute resolution, including arbitration.
Problem area: Mindset of the majority
The passing of the ADR Law was a big step. But until now,
ADR is not regarded as a primary means of dispute
resolution in the Philippines. Why? It is primarily due to our
litigious culture.
22
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
If you would ask a Filipino the question, “If you were in a
serious legal conflict right now, where would you go?” there’s
a big chance that the first image that pops in his head is that
of a courtroom or a judge.
We usually associate a judge or an administrative officer in
the government—persons with an official title or badge—as
the only official authorities that can put an end to a dispute.
Solution: More information and encouragement
The executive and the judiciary should put more efforts in
informing the masses about ADR and encouraging its use,
as stated in the Law’s declaration of state policy.
The goal is to add a third person in the minds of the Filipinos
for when they would be asked that question—a private
person or entity who would act as a neutral third party. He is
neither a court judge nor a public officer.
Policy of Judicial Restraint
Before the ADR Law: It was not difficult to prevent arbitration
from proceeding. Courts could easily intervene.
Now: The Special ADR Rules promulgated by the Supreme
Court in 2009 promoted the policy of judicial restraint. It
states:
“Rule 2.4. Policy implementing competence-competence
principle. - The arbitral tribunal shall be accorded the first
opportunity or competence to rule on the issue of whether or
not it has the competence or jurisdiction to decide a dispute
submitted to it for decision, including any objection with
respect to the existence or validity of the arbitration
agreement. When a court is asked to rule upon issue/s
affecting the competence or jurisdiction of an arbitral tribunal
in a dispute brought before it, either before or after the
arbitral tribunal is constituted, the court must exercise judicial
restraint and defer to the competence or jurisdiction of the
arbitral tribunal by allowing the arbitral tribunal the first
opportunity to rule upon such issues.
Where the court is asked to make a determination of whether
the arbitration agreement is null and void, inoperative or
incapable of being performed, under this policy of judicial
restraint, the court must make no more than a prima facie
determination of that issue.
Unless the court, pursuant to such prima facie determination,
concludes that the arbitration agreement is null and void,
inoperative or incapable of being performed, the court must
suspend the action before it and refer the parties to
arbitration pursuant to the arbitration agreement.”
The law now favors arbitration, as seen in the provisions that
protect arbitral proceedings from undue court intervention.
The Special Rules provide:
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“Rule 2.1. General policies. - It is the policy of the State to
actively promote the use of various modes of ADR and to
respect party autonomy or the freedom of the parties to make
their own arrangements in the resolution of disputes with the
greatest cooperation of and the least intervention from the
courts. To this end, the objectives of the Special ADR Rules
are to encourage and promote the use of ADR, particularly
arbitration and mediation, as an important means to achieve
speedy and efficient resolution of disputes, impartial justice,
curb a litigious culture and to de-clog court dockets.
The court shall exercise the power of judicial review as
provided by these Special ADR Rules. Courts shall intervene
only in the cases allowed by law or these Special ADR
Rules.”
However, we should also take note that the word used was
“restraint” and not complete blockage. The courts are not
shut out completely.
Arbitral Awards
One of the important rules in arbitration is that if the parties
mutually agree that the arbitrator’s decision is final and
appealable, there shall be no further judicial recourse if any
of the parties later on disagree with the arbitrator’s award,
unless their situation falls under the circumstances that merit
the annulment of contracts.
These have been illustrated in the cases of (1) Chan Linte
vs Law Union (1921); and (2) Chung Fu Industries v CA
(1992).
In the first case, the plaintiff owned a warehouse in Samar,
where he stored almost 31,000 kilos of hemp. He availed of
fire insurance policies from 3 different companies—Law
Union and Rock Insurance, Tokyo Marine Insurance, and
Chine Fire Insurance.
Later on, the warehouse caught fire and Chan declared
having lost P21,300. The insurance companies refused to
pay. They requested that their liability be submitted to
arbitration, in accordance with the policies’ provisions.
Both parties, by agreement, named Frank Ingersoll as the
sole arbitrator. After presenting of evidence by both parties,
Ingersoll found that there were only seven bales of hemp
destroyed by the fire, with value at P608.34.
The issue in this case is whether the arbitration clauses were
null and void for being contrary to public policy.
Said clauses stated that:
(a) any questions as to differences that shall arise as to the
amount of loss or damage shall be referred to an
arbitrator;
(b) the arbitration process shall be a condition precedent to
any right of action or suit upon the policies; and
23
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
(c) the award of the arbitrator shall be conclusive.
The lower court ruled in favor of Chan and but ordered each
of the defendants to pay only P202.78, pursuant to the
arbitrator’s award.
Chan then appealed to the Supreme Court, claiming that the
court was wrong in holding that the arbitrator’s decision is
conclusive or in any way binding on him.
The Supreme Court denied Chan’s petition and ruled that the
arbitration clauses were valid.
After the action was commenced and upon the request of the
insurance companies, Chan agreed to arbitrate under the
terms and provisions of the policies. The parties mutually
agreed upon an arbitrator. Each party appeared before him
and offered evidence.
Although the Court alluded to the possibility that the
proceedings were not honestly and fairly conducted, it
ultimately held that the findings of the arbitrator are
conclusive upon the parties. The plaintiff, having agreed to
arbitration and submitting his proof to the arbitrator, in the
absence of fraud or mistake, is estopped and bound by the
award.
The second case has a very similar issue, but the decision
of the Supreme Court here had more layers.
In 1989, Chung Fu and Roblecor Incorporated entered into a
construction agreement. Roblecor would undertake to
construct Chung Fu’s industrial complex in Cavite for a
consideration of P42 million. The agreement contained a
clause saying that in the event of disputes arising from the
performance of subject contract, the issue(s) shall be
submitted for resolution before a single arbitrator chosen by
both parties.
In the next months, they entered into 2 more ancillary
contracts: one for the construction of dorm and support
facilities, and another for the installation of electrical, water
and hydrant systems.
Roblecor failed to complete the project. They were granted
an extension, but nevertheless failed to fulfil their obligation.
So Chung Fu took over the construction.
In 1990, Roblecor filed a petition for compulsory arbitration
with prayer for TRO in the RTC. The company claimed that
it be paid P10.5 million and that it had progress billings of
P2.37 million.
Before the court would decide on the petition, the parties had
negotiations, the two parties entered into an arbitration
agreement (AA), which provided that:
d.m.g. 2018 j.d.
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(a) They will abide by the decision of the arbitrator including
any amount that may be awarded to either party as
compensation, consequential damage and/or interest;
(b) The decision of the arbitrator shall be final and
unappealable. Therefore, there shall be no further judicial
recourse if either party disagrees with the whole or any part
of the arbitrator's award; and
(c) Either party is entitled to seek judicial assistance for
purposes of enforcing the arbitrator's award.
The RTC approved the AA. Engr. Willardo Asuncion was
appointed as sole arbitrator.
A month later, Asuncion ordered Chung Fu to immediately
pay Roblecor P16.11 million and declared his award final
and unappealable.
Chung Fu filed a motion to remand the case for further
hearing and reconsideration of the award, claiming that
Asuncion exceeded his powers by going beyond the terms
in the construction agreement, and even granting extra
compensation to Roblecor.
Roblecor, on the other hand, filed a motion for confirmation
of award. The RTC granted Roblecor’s motion. Chung Fu
then elevated the case via a petition for certiorari in the CA.
The CA affirmed the RTC and held that as signatories to the
AA, Chung Fu and its officers are bound to observe the
stipulation saying that the award is final and unappealable.
After their Motion for Reconsideration was denied, Chung Fu
elevated the case to the SC. The main issue is whether the
arbitration award is beyond the ambit of the court’s power of
judicial review.
The SC first emphasized the following rules:
(a) Absent an agreement of the parties to resolve their
disputes via a particular mode, it is the regular courts
that remain the fora to resolve such matters.
(b) The parties may opt for recourse to third parties, like
through arbitration, by either spelling it out in the
contract itself in anticipation of a future dispute, OR
stipulating in a submission agreement later on when
they are actually facing a dispute.
(c) An extrajudicial means of settlement is not intended to
completely deprive the courts of their jurisdiction.
(d) But a stipulation to refer all future disputes to an
arbitrator or to submit an ongoing dispute to one is valid.
Being part of a contract between the parties, it is binding
and enforceable in court in case one of them neglects,
fails or refuses to arbitrate.
(e) Going a step further, in the event that they declare their
intention to refer their differences to arbitration first
before taking court action, this constitutes a condition
precedent, such that where a suit has been instituted
prematurely, the court shall suspend the same and the
24
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
parties shall be directed forthwith to proceed to
arbitration.
The answer to the main issue is no. An arbitration award is
not completely outside of the court’s jurisdiction. The rule on
finality of awards is not absolute. The Civil Code itself
provides for the exceptions under Arts 2038-2040.
The Arbitration Law also enumerates other exceptions to the
finality rule:
(a) corruption, fraud, or other undue means;
(b) evident partiality or corruption in the arbitrators or any of
them; or
(c) the arbitrators were guilty of misconduct in refusing to
postpone the hearing upon sufficient cause shown, or in
refusing to hear evidence pertinent and material to the
controversy; that one or more of the arbitrators was
disqualified to act and wilfully refrained from disclosing
such disqualifications or of any other misbehavior by
which the rights of any party have been materially
prejudiced; or
(d) the arbitrators exceeded their powers, or so imperfectly
executed them, that a mutual, final and definite award
upon the subject matter submitted to them was not
made.”
In the case of Chung Fu and Roblecor, the SC found that the
arbitrator committed a grave abuse of discretion by failing to
apply the terms of the original contract between the parties,
and in granting unjustified extra compensation.
Section 24(d) is therefore present here, and as stated in the
law, the court has the power to order that such award be
vacated.
Hence, the SC remanded the case back to the RTC for
further hearing.
It should be noted, however, that the Special Rules now
provide protection over arbitral awards from court
intervention.
The court’s power of judicial review is now limited by this rule:
“No appeal or certiorari on the merits of an arbitral award. -
An agreement to refer a dispute to arbitration shall mean that
the arbitral award shall be final and binding. Consequently, a
party to an arbitration is precluded from filing an appeal or a
petition for certiorari questioning the merits of an arbitral
award.”
Before: Awards rendered by arbitrators may be appealed to
the CA through a petition for review. Questions of fact, law,
or a mix of both may be raised.
19
GR No. 103200, Aug 31, 1994 (Digest by Diane Pena, et al.)
d.m.g. 2018 j.d.
UC Law
Now: The merits of an arbitral award could not longer be
altered by certiorari. The courts cannot disturb the arbitral
tribunal’s determination of facts and interpretation of law.
But we have to remember that this doesn’t again completely
deprive the court of its power to review. The Rules on
Domestic Arbitration enumerates seven grounds to vacate
an arbitral award:
1. award was procured through corruption, fraud or other
undue means;
2. evident partiality or corruption in the arbitral tribunal or
any of its members;
3. arbitral tribunal’s misconduct or any form of
misbehaviour that has materially prejudiced the rights of
any party such as refusing to postpone a hearing upon
sufficient cause shown or to hear evidence pertinent and
material to the controversy;
4. one or more of the arbitrators was disqualified to act as
such under the law and wilfully refrained from disclosing
such disqualification; or
5. arbitral tribunal exceeded its powers, or so imperfectly
executed them, such that a complete, final and definite
award upon the subject matter submitted to them was
not made.
6. arbitration agreement did not exist, or is invalid for any
ground for the revocation of a contract or is otherwise
unenforceable; or
7. a party to arbitration is a minor or a person judicially
declared to be incompetent.
It is important to point out that none of these grounds actually
refer to the merits of the award, but rather the means on how
it was procured, the character and qualification of the
arbitrators, the terms of the agreement, and the capacity of
the parties.
The Special ADR Rules also recognize the principle of
competence-competence, which means that the arbitral
tribunal may initially rule on its own jurisdiction, including any
objections with respect to the existence or validity of the
arbitration agreement or any condition precedent to the filing
of a request for arbitration.
It is clear that the arbitral tribunal now has full autonomy in
deciding the merits of the award. Absent any of the seven
grounds, the courts cannot touch their decision.
VIII. Nature of Arbitration: Contractual in Nature
1. La Naval Drug Corp vs CA19
(On the nature of Arbitration in relation to jurisdiction
of courts)
25
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
In 1989, a conflict between La Naval Drug Corporation and
a certain Wilson Yao arose regarding a lease contract. Yao
invoked a provision in the contract whereby pursuant to R.A.
876 (Arbitration Law), they should refer the matter to
arbitration. Hence, the parties agreed to refer the issue to
three arbitrators. However, certain complications arose when
they were choosing a third arbitrator. This prompted Yao
to go to court to demand the arbitrators to proceed with the
arbitration. Yao went to the RTC of Angeles City and the
case was filed as a summary proceeding case. Yao also
prayed for an award for damages in his favor.
In its Answer, La Naval asserted that the case should be
dismissed as it was filed prematurely; La Naval questioned
Yao’s claim for damages as it averred that the same should
be litigated independently and not in the same summary
proceeding case. However, La Naval also posed a
counterclaim.
The RTC resolved the matter regarding the arbitrators by
appointing a third arbitrator. The RTC also ruled that La
Naval is estopped from questioning Yao’s claim for damages
for being out of jurisdiction as La Naval itself filed a
counterclaim for damages.
Issue: Whether or not the RTC has jurisdiction over the
claims for damages between parties.
Held: No. RA 876 is clear that summary proceedings under
said law shall only involve the matter of arbitration. The
parties’ claims for damages must be litigated in another civil
case.
Where the court clearly has no jurisdiction over the subject
matter, in this case the claim and counterclaim for damages,
the court must dismiss the case (in this case, the claim and
counterclaim for damages). Lack of jurisdiction over the
subject matter as a defense may be raised at any time.
Failure to raise such defense shall not estop the defendant
from raising it later on.
“The want of jurisdiction by the court is indisputable, given
the nature of the controversy. The arbitration law explicitly
confines the court’s authority only to pass upon the issue of
whether there is or there is no agreement in writing providing
for arbitration. In the affirmative, the statute ordains that the
court shall issue an order “summarily directing the parties to
proceed with the arbitration in accordance with the terms
thereof.” If the court, upon the other hand, finds that no such
agreement exists, “the proceeding shall be dismissed.” The
proceedings are summary in nature.
All considered, the court a quo must then refrain from taking
up the claims of the contending parties for damages, which,
upon the other hand, may be ventilated in separate regular
proceedings at an opportune time and venue. The
circumstances obtaining in this case are far, we hold, from
20
GR No. 136154, Feb 7, 2001 (Digest by Diane Pena, et al.)
d.m.g. 2018 j.d.
UC Law
justifying the application of estoppel against either party.”
2. Del Monte Corp (DMC) USA vs CA20
(On the validity of Arbitration Agreements)
On 3 October 1996, private respondents MMI, SFI and MMIs
Managing Director Liong Liong C. Sy filed a Complaint
against petitioners DMC-USA, Paul E. Derby, Jr., Daniel
Collins and Luis Hidalgo, and Dewey Ltd. before the RTC of
Malabon, Metro Manila. Private respondents predicated their
complaint on the alleged violations by petitioners of Arts. 20,
21 and 23 of the Civil Code.
According to private respondents, DMC-USA products
continued to be brought into the country by parallel importers
despite the appointment of private respondent MMI as the
sole and exclusive distributor of Del Monte products thereby
causing them great embarrassment and substantial damage.
They alleged that the products brought into the country by
these importers were aged, damaged, fake or counterfeit
Private respondents claimed that they had exhausted all
possible avenues for an amicable resolution and settlement
of their grievances; that as a result of the fraud, bad faith,
malice and wanton attitude of petitioners, they should be
held responsible for all the actual expenses incurred by
private respondents.
Petitioners contend that the subject matter of private
respondents causes of action arises out of or relates to the
Agreement between petitioners and private respondents.
Thus, considering that the arbitration clause of the
Agreement provides that all disputes arising out of or relating
to the Agreement or the parties relationship, including the
termination thereof, shall be resolved by arbitration, they
insist on the suspension of the proceedings
Private respondents claim, on the other hand, that their
causes of action are rooted in Arts. 20, 21 and 23 of the Civil
Code, the determination of which demands a full blown trial,
as correctly held by the Court of Appeals. They further
contend that the arbitration clause centers more on venue
rather than on arbitration.
Issue: Whether the court has jurisdiction over the case.
Held: NO. There is no doubt that arbitration is valid and
constitutional in our jurisdiction.
A careful examination of the instant case shows that the
arbitration clause in the Distributorship Agreement between
petitioner DMC-USA and private respondent MMI is valid
26
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
and the dispute between the parties is arbitrable.
The Agreement between petitioner DMC-USA and private
respondent MMI is a contract. The provision to submit to
arbitration any dispute arising therefrom and the relationship
of the parties is part of that contract and is itself a contract.
3. Gilat vs UCPB General Insurance Co.21
(On the contractual nature of arbitration)
On September 15, 1999, One Virtual placed with GILAT a
purchase order for various telecommunications equipment,
accessories, spares, services and software, at a total
purchase price of Two Million One Hundred Twenty Eight
Thousand Two Hundred Fifty Dollars (US$2,128,250.00). Of
the said purchase price for the goods delivered, One Virtual
promised to pay a portion thereof totalling US$1.2 Million in
accordance with the payment schedule dated 22 November
1999. To ensure the prompt payment of this amount, it
obtained defendant UCPB General Insurance Co., Inc.s
surety bond dated 3 December 1999, in favor of GILAT.
GILAT shipped and delivered to One Virtual the purchased
products and equipment. All of the equipment including the
software components for which payment was secured by the
surety bond, was shipped by GILAT and duly received by
One Virtual.
One Virtual failed to pay GILAT the amount of Four Hundred
Thousand Dollars (US$400,000.00) in accordance with the
payment schedule to the surety bond, prompting GILAT to
write the surety defendant UCPB a demand letter for
payment of the said amount of US$400,000.00. No part of
the amount set forth in this demand has been paid to date by
either One Virtual or defendant UCPB. One Virtual likewise
failed to pay on the succeeding payment installment of the
surety bond, prompting GILAT to send a second demand
letter, for the payment of the full amount of US$1,200,000.00
guaranteed under the surety bond, plus interests and
expenses However, defendant UCPB failed to settle the
amount of US$1,200,000.00 or a part thereof, hence, the
instant complaint.
Respondent appealed to the CA. The CA dismissed the case
for lack of jurisdiction.
Issue: Whether CA erred in dismissing the case and ordering
petitioner and One Virtual to arbitrate.
Held: YES. The existence of a suretyship agreement does
not give the surety the right to intervene in the principal
contract, nor can an arbitration clause between the buyer
and the seller be invoked by a non-party such as the surety.
21
GR No. 189563, April 7, 2014 (Digest by Diane Pena, et al.)
d.m.g. 2018 j.d.
UC Law
Petitioner alleges that arbitration laws mandate that no court
can compel arbitration, unless a party entitled to it applies for
this relief. This referral, however, can only be demanded by
one who is a party to the arbitration agreement. Considering
that neither petitioner nor One Virtual has asked for a referral,
there is no basis for the CAs order to arbitrate.
3. Lanuza et al vs BR Corp22
(On Corporate Representatives; Piercing the Veil of
Corporate Fiction)
BF Corporation and Shari-La Properties entered into a
contract for the construction of a Shangri-La mall and a
multilevel parking structure along EDSA. During the
construction, Shangri-La defaulted in the payments but BF
Corporation nonetheless continued. According to BF
Corporation, Shangri-La misrepresented that it had funds to
pay for its obligations with BF Corporation, and the delay in
payment was simply a matter of delayed processing of BF
Corporation’s progress billing statements. BF Corporation
alleged that the officers of Shangri-La were in bad faith
because of this misrepresentation.
After the construction, Shangri-La took possession of the
buildings. BF Corporation demanded for the payment but
Shangri-La ignored the repeated demands. BF Corporation
filed an action in court for the collection of the outstanding
balance. The officers of Shangri-La filed a motion to suspend
the proceedings. They said that the contract contains an
arbitration clause and BF Corporation’s failure to submit the
dispute to arbitration is sufficient ground to dismiss their
complaint.
In the proceedings filed by BF Corporation, they included the
officers as parties because of their bad faith coming from
their misrepresentations.
Issue: Whether the officers should still be included as
“parties” considering that they already resigned from
Shangri-La Corporation.
Held: YES. The officers should be included as parties. True,
a corporation has a separate and distinct personality from its
owners, but this assumption admits of several exceptions,
we call this the “Piercing the veil of Corporate Fiction”.
Because of the alleged bad faith on the part of the officers,
they should be included as parties to the complaint. This is
to determine whether there are sufficient grounds to hold that
there is indeed bad faith. And in case there really is, to hold
them solidarily liable.
As a general rule, a corporation’s representative who did not
personally bind himself or herself to an arbitration agreement
cannot be forced to participate in arbitration proceedings
22
GR No. 174938, Oct 1, 2014 (Digest by Diane Pena, et al.)
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
made pursuant to an agreement entered into by the
corporation. He or she is generally not considered a party to
that agreement.
However, there are instances when the distinction between
personalities of directors, officers, and representatives, and
of the corporation, are disregarded. We call this piercing the
veil of corporate fiction.
Piercing the corporate veil is warranted when "[the separate
personality of a corporation] is used as a means to perpetrate
fraud or an illegal act, or as a vehicle for the evasion of an
existing obligation, the circumvention of statutes, or to
confuse legitimate issues."
When corporate veil is pierced, the corporation and persons
who are normally treated as distinct from the corporation are
treated as one person, such that when the corporation is
adjudged liable, these persons, too, become liable as if they
were the corporation.
When there are allegations of bad faith or malice against
corporate directors or representatives, it becomes the duty
of courts or tribunals to determine if these persons and the
corporation should be treated as one. Without a trial, courts
and tribunals have no basis for determining whether the veil
of corporate fiction should be pierced. Courts or tribunals do
not have such prior knowledge.
The determination of these circumstances must be made by
one tribunal or court in a proceeding participated in by all
parties involved, including current representatives of the
corporation, and those persons whose personalities are
impliedly the sameas the corporation.
This is because when the court or tribunal finds that
circumstances exist warranting the piercing of the corporate
veil, the corporate representatives are treated as the
corporation itself and should be held liable for corporate acts.
5. Koppel Inc vs Makati Rotary Club 23
(May arbitration be compelled even if the issue pertains
to the validity of a contract?)
Fedders Koppel, Incorporated (FKI) has a registered parcel
of land located in Paranaque. In 1975, FKI bequeathed the
said land to Makati Rotary Club, by way of a conditional
donation. Makati Rotary Club accepted the donation with all
of its conditions. Among the conditions was to rent back the
land to FKI for a period of 25 years at a rate of P40,126 per
annum. It is subject to renewal at conditions based on the
mutual agreement of the parties.
The parties executed another lease contract covering the
23
GR No. 198075, Sept 4, 2014 (Digest by Diane Pena, et al.)
d.m.g. 2018 j.d.
UC Law
same land. FKI and respondent agreed on a new five-year
lease to take effect on the 26th of May 2000, with annual
rents ranging from 4,000,000 for the first year up to
4,900,000 for the fifth year. The 2000 Lease Contract also
contained an arbitration clause enforceable in the event the
parties come to disagreement about the" interpretation,
application and execution" of the lease.
After the 2000 Lease Contract expired, FKI and respondent
agreed to renew their lease for another five (5) years. FKI
faithfully paid the rentals and " donations "due it per the 2005
Lease Contract.
But in June of 2008, FKI sold all its rights and properties
relative to its business in favor of herein petitioner Koppel,
Incorporated. The following year, petitioner discontinued the
payment of the rent and " donation " Their refusal to pay such
rent and "donation " emanated from its belief that the rental
stipulations of the 2005 Lease Contract, and even of the
2000 Lease Contract, violated one of the" material conditions
" of the donation of the subject land.
Makati Rotary Club sent a demand letter to Koppel because
of its default in payment. Koppel gave a reply stating that the
rentals are "severely disproportionate," "unconscionable"
and "in clear violation to the nominal rentals mandated by the
Amended Deed of Donation."
Makati Rotary Club sent a 2nd demand letter in September
2009, demanding the payment of the obligation and an order
to vacate the premises should it fail to pay the obligations
within 7 days from receipt of the letter. Koppel failed to
comply with both demands, prompting Makati Rotary Club to
file a recission or cancelation of the Deed of Donation and
an Unlawful Detainer suit against Koppel.
Koppel questions the legality of the proceedings commenced
considering that there is an arbitration clause in the lease
contracts. Makati Rotary Club questions the validity of the
contract and consequently the arbitration clause.
Issues:
1. Whether the validity of the contract could be subject
to arbitration.
2. Whether the arbitration clause in the contract could
still be invoked notwithstanding that contract’s
possible nullity.
3. Whether the arbitration clause could still operate
considering that there is no request filed in the MeTC
to arbitrate.
4. Whether the fact that the case was already submitted
for JDR resolution makes arbitration unnecessary and
circuitous.
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
Held:
1. Arbitration is not proper when one of the parties
repudiates the existence or validity of such contract or
agreement on the ground of fraud or oppression as in
this case. The validity of the contract cannot be
subject of arbitration proceedings. Allegations of fraud
and duress in the execution of a contract are matters
within the jurisdiction of the ordinary courts of law.
These questions are legal in nature and require the
application and interpretation of laws and
jurisprudence which is necessarily a judicial function.
2. Yes, the arbitration clause remains to be valid
because of the doctrine of separability. Under the
doctrine of separability, an arbitration agreement is
considered as independent of the main contract.
Being a separate contract in itself, the arbitration
agreement may thus be invoked regardless of the
possible nullity or invalidity of the main contract.
3. The arbitration clause could still be invoked. The filing
of a "request" pursuant to Section 24 of R.A. No. 9285
is not the sole means by which an arbitration clause
may be validly invoked in a pending suit. In this case,
it is conceded that petitioner was not able to file a
separate " request " of arbitration before the MeTC.
However, it is equally conceded that the petitioner, as
early as in its Answer with Counterclaim, had already
apprised the MeTC of the existence of the arbitration
clause in the 2005 Lease Contract and, more
significantly, of its desire to have the same enforced
in this case. This act of petitioner is enough valid
invocation of his right to arbitrate.
4. No, the has not become unnecessary and circuitous
by virtue of the JDR Resolution. The JDR framework
is based on the processes of mediation, conciliation or
early neutral evaluation which entails the submission
of a dispute before a "JDR judge" who shall merely
"facilitate settlement" between the parties in conflict or
make a "non-binding evaluation or assessment of the
chances of each party’s case." Thus in JDR, the JDR
judge lacks the authority to render a resolution of the
dispute that is binding upon the parties in conflict. In
arbitration, on the other hand, the dispute is submitted
to an arbitrator/s —a neutral third person or a group of
thereof— who shall have the authority to render a
resolution binding upon the parties.
Arbitral Autonomy Principle in Philippine
Jurisprudence
(Kristoffer James E. Purisima)24
Much of the discussion was around the PIATCO case (Agan
vs PIATCO, 2003), where the Court held the following:
• Arbitral proceedings can only be applied to the
24
50 Ateneo LJ 1091 (2006)
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contracting parties.
• If the dispute involves non-parties to the contract,
splitting the proceedings in order to have arbitration
for the parties and trial for the non-contracting
parties would result in multiplicity of suits, duplicitous
proceedings, and unnecessary delay. Thus, the
interest of justice would be best served if the court
hears and adjudicates the case in a single, complete
proceeding.
In that case, the court also rationed that since the principal
contracts were void, then the arbitral agreement is also
without legal existence.
But the author noted that the ruling in the PIATCO case
betrays the principle of arbitral autonomy.
This principle provides that an arbitral clause is considered
separate or independent from the main contract. The validity
of the arbitral agreement doesn’t rest upon the validity of the
principal agreement. This is embodied in Sections 24-25 of
the ADR Law.
Section 6 of the Old Arbitration Law also provides that if the
making of the agreement or the failure to comply with it is not
raised as an issue in the proceedings, the court where the
action is pending shall make an order directing the parties to
proceed to arbitration in accordance with the terms of the
agreement.
In General Insurance vs Union Insurance (1989), the court
held that where there is an arbitral agreement and one party
puts up a claim which the other party disputes, the need to
arbitrate is imperative. The duty of the court in a case like
this is not to resolve the merits of the claims, but only to
determine if they should proceed to arbitration or not.
The following US cases were cited:
• In Prima Paint vs Flood & Conklin (1967), it was held
that a claim of fraud in the inducement of an
arbitration agreement itself is cognizable by the
courts, but not as to claims of fraud in the
inducement of the principal contract. The latter is
resolved by means of arbitration.
• In Par-knit Mills vs Stockbridge (1980), it was held
that the determination of whether an arbitral
agreement had in fact been executed by the
contracting parties was an issue cognizable by
judicial proceedings.
• In Three Valleys vs Hutton (1991), it was held that:
If the dispute is within the scope of an arbitration
agreement, an arbitrator may properly decide
whether a contract is "voidable" because the parties
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Notes based on Judge J. Humiding’s Outline
have agreed to arbitrate the dispute. But, because
an "arbitrator's jurisdiction is rooted in the agreement
of the parties”, a party who contests the making of a
contract containing an arbitration provision cannot
be compelled to arbitrate the threshold issue of the
existence of an agreement to arbitrate. Only a court
can make that decision.
Hence, the arbitral autonomy principle entails that questions
as to the validity or invalidity of the principal contract is
cognizable by an arbitrator or arbitral tribunal for as long as
there is a valid and binding arbitral agreement.
However, where the legal existence of the arbitral agreement
is itself disputed, such question is properly cognizable by the
courts.
Absent any allegation whatsoever that the arbitral agreement
was procured through fraud such that there was no meeting
of the minds with respect to the arbitral clause, arbitration
proceedings should be allowed to take due course.
But everything would still depend on what is stated on the
contract in each case. In Bay View Hotel vs Ker & Co (1982),
where the clause only mentioned, “if dispute should arise as
to the amount of company’s liability”, it was construed as to
exclude the issue of total negation of liability. This means that
only disputes regarding the amount of liability could be
arbitrated, such that when the party completely denies any
liability, arbitration cannot be invoked.
In Toyota Motor vs CA (1992), it was held that the presence
of third persons doesn’t render the arbitration clause
disfunctional.
The author slammed that SC’s ruling in the PIATCO case,
where it held that a speedy and decisive resolution of all the
critical issues couldn’t be made before an arbitral tribunal.
In the author’s opinion, this means that the Court is
essentially saying that an arbitral tribunal is incapable of
reaching a credible conclusion. But the Court is totally
mistaken in this regard, according to Purisima. Arbitral
tribunals are triers of fact. When an arbitrable dispute is
submitted before it, the tribunal is precisely tasked to
determine and investigate the factual and circumstantial
antecedents of the dispute and, based on such investigation,
reach as conclusion as to the legal liability of any or both
parties.
Moreover, by brushing aside arbitration as a means of
resolving contractual disputes, the Court manifestly
expressed its distrust towards arbitral proceedings. The
author found it ironic and regressive that a Court who has
historically relied on American jurisprudence would now
25
Robeniol, pp. 43-58
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make a decision that is not in accord with the US courts’
favourable treatment of arbitration.
In the PIATCO case, the SC took cognizance relying on the
“transcendental importance” doctrine, which expands the
Court’s power of judicial review.
The author noted that this doctrine has been an instrument
of jurisprudential regression. He further said, “It is
unfortunate that the concept of transcendental importance
has made the Court envision itself as a governmental
messiah.”
IX. Arbitration in General
Robeniol Notes25
Arbitration distinguished from mediation:
• In arbitration, it is the arbitrator who decides the
dispute and renders an arbitral award to conclude
the proceeding. In mediation, it is the parties
themselves who enter into and execute a mediated
settlement agreement to conclude the proceeding.
• Arbitration is merit/evidence-based. Mediation is not
necessarily evidence-based.
Arbitrator: He/she is the person appointed to render an
award, alone or with others, in a dispute that is the subject
matter of an arbitration agreement.
Arbiter vs Arbitrator: An arbiter is bound by rules of law and
equity in rendering an award. An arbitrator may use his own
discretion in the performance of his functions.
Voluntary arbitrators act in a quasi-judicial capacity, such
that their decisions are within the scope of judicial review.
Arbitration agreement: It is the agreement by the parties to
submit to arbitration all or certain disputes which have arisen
or which may arise between them in respect of a defined
legal relationship, whether contractual or not.
Two modes of submitting a dispute to arbitration
1. Agreement to submit to arbitration – an
agreement to submit some future dispute, usually
stipulated upon in a civil contract between the
parties; made in anticipation of a dispute that might
arise between the parties after the contracts
execution.
2. Submission agreement – an agreement submitting
an existing matter of difference to arbitrators.
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Form: Since an arbitration agreement is a formal contract,
its validity is dependent on the contract being executed in a
particular form. It should be in writing and subscribed by the
parties.
The agreement to arbitrate may be:
1. Through an arbitration clause or compromissiore,
which is included in the container contract; or
2. Constituted in a separate contract; or
3. In the form of a reference in a written contract to a
document containing an arbitration clause such as
to make that clause part of the contract.
Concept of Arbitration
Uniwide Sales Realty and Resources Corp. vs Titan-
Ikeda Construction26
Arbitration as distinguished from the court trial system:
“An arrangement for taking and abiding by the judgment of
selected persons in some disputed matter, instead of
carrying it to established tribunals of justice, and is intended
to avoid the formalities, the delay, the expense, and vexation
of ordinary litigation.”
In this case, the question raised was, what if the award by
the arbitrator (the CIAC in this case) is not the same as the
findings of the courts? Are the CIAC bound by the Rules of
Court?
Held: No. The Rules governing Construction Arbitration
promulgated by the CIAC contains no provision on the
application of the Rules of Court to arbitration proceedings,
even in a suppletory capacity.
Such importation of the Rules of Court provision on
amendment to conform to evidence would contravene the
spirit, if not the letter of the CIAC rules. This is for the reason
that the formulation of the Terms of Reference is done with
the active participation of the parties and their counsel
themselves.
EO 1008 created an arbitration facility to which the
construction industry in the Philippines can have recourse. It
was enacted to encourage the early and expeditious
settlement of disputes in the construction industry, a public
policy the implementation of which is necessary and
important for the realization of national development goals.
Aware of the objective of voluntary arbitration in the labor
field, in the construction industry, and in any other area for
that matter, the Court will not assist one or the other or even
both parties in any effort to subvert or defeat that objective
26
511 SCRA 335 (2006)
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for their private purposes. The Court will not review the
factual findings of an arbitral tribunal upon the artful
allegation that such body had "misapprehended facts" and
will not pass upon issues which are, at bottom, issues of fact,
no matter how cleverly disguised they might be as "legal
questions." The parties here had recourse to arbitration and
chose the arbitrators themselves; they must have had
confidence in such arbitrators. The Court will not, therefore,
permit the parties to relitigate before it the issues of facts
previously presented and argued before the Arbitral Tribunal,
save only where a clear showing is made that, in reaching its
factual conclusions, the Arbitral Tribunal committed an error
so egregious and hurtful to one party as to constitute a grave
abuse of discretion resulting in lack or loss of jurisdiction.
Prototypical examples would be factual conclusions of the
Tribunal which resulted in deprivation of one or the other
party of a fair opportunity to present its position before the
Arbitral Tribunal, and an award obtained through fraud or the
corruption of arbitrators. Any other, more relaxed rule would
result in setting at naught the basic objective of a voluntary
arbitration and would reduce arbitration to a largely inutile
institution.
Kinds of Arbitration
Voluntary vs Compulsory
Voluntary arbitration involves the reference of a dispute to an
impartial body. The parties themselves choose the members
of such body, and the parties freely consent in advance to
abide by its award. This award will be issued after the
proceedings where both sides have the opportunity to be
heard. Compulsory arbitration is the process of settling
disputes by a government agency that has the authority to
investigate and to make an award, which is binding on all
parties. The parties are compelled to accept the resolution of
the dispute.
Domestic vs International
It is international if any of the following instances occur:
1. The parties’ place of business, at the time of the
conclusion of their arbitration agreement, are in different
states;
2. The place of arbitration provided in the arbitration
agreement and the parties’ places of business is outside
the Philippines;
3. The place where a substantial part of the obligation is to
be performed or the place with the subject matter of the
dispute is most closely connected is outside the
Philippines; or
4. The parties have expressly agreed that the subject
matter of the arbitration agreement relates to more than
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one country.
It is domestic if it is not international in character, that is, if
the components (places of business, of arbitration, of
substantial performance, and where subject matter is most
closely connected) are all in the Philippines.
Domestic vs Foreign
It is foreign if conducted outside the Philippines. It is
domestic of it is conducted in the Philippines, irrespective of
the presence or absence of foreign elements.
Commercial Arbitration
It is commercial if it covers matters arising from all
relationships of a commercial nature, whether contractual or
not. An international commercial arbitration proceeding
conducted in the Philippines under the ADR Act is domestic
and international in character, while that conducted outside
the Philippines is foreign.
Policy on Arbitration
Korea Technologies vs Lerma27
“Being an inexpensive, speedy and amicable method of
settling disputes, arbitration––along with mediation,
conciliation and negotiation––is encouraged by the Supreme
Court. Aside from unclogging judicial dockets, arbitration
also hastens the resolution of disputes, especially of the
commercial kind. It is thus regarded as the "wave of the
future" in international civil and commercial disputes.
Brushing aside a contractual agreement calling for arbitration
between the parties would be a step backward.”
Hence, arbitration clauses must be liberally construed
consistent with that policy. As long as the clause is
susceptible to interpretation that covers the dispute asserted,
an order to arbitrate should be granted. Any doubt must be
resolved in favour of arbitration.
Moreover, the Court reiterated the following pertinent
features of the ADR Law, which incorporated the UNCITRAL
Model Law:
1. The RTC must refer to arbitration in the proper cases.
2. Foreign arbitral awards must be confirmed by the RTC
(for recognition and enforcement).
3. The RTC has jurisdiction to review foreign arbitral
awards.
4. The grounds for judicial review in domestic and foreign
awards are different. For foreign awards, the grounds
are under Article 34(2) of the UNCITRAL Model Law. For
final domestic awards, the grounds are under Section 25
of RA 876.
27
542 SCRA 1 (2008)
d.m.g. 2018 j.d.
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5. The decision of the RTC regarding an assailed foreign
award is appealable to the CA via a petition for review
under Rule 45.
Comprehending Arbitration
(Mario E. Valderrama)28
The term “arbitration” is used loosely in many processes in
the Philippines (labor arbitration, consumer arbitration,
barangay arbitration). This has led to confusion. They use
similar words but they are not conceptually the same
because they are governed by different rules.
From the definitions in the Model Law, and the New York
Convention, we can say that arbitration is a contractual
method of resolving disputes, whereby the disputants have
an opportunity to present their positions before an impartial
tribunal or person, whose judgment and expertise they trust.
It is a device whereby the settlement of a question that’s of
interest to two or more persons is entrusted to the arbitrator/s
who derive their powers from a private agreement, not from
the authorities of a State, and who are to proceed and decide
the case on the basis of such agreement.
Components of arbitration:
1. Arbitration is contractual; and
2. It may either be adjudicative or judicial.
Characteristics of arbitration:
1. It is parties-specific and case-specific.
The arbitration and the award (collectively known as arbitral
decision) are binding on the parties and in respect of the
particular dispute involved in the arbitration.
Generally, only the signatories to the arbitration agreement
are bound. But non-signatories may be bound, too, like the
following:
a. Principal represented by an agent;
b. Alter ego of a signatory using piercing of veil;
c. Assignees or transferees; and
d. Successors-in-interest including those resulting from
mergers and business combinations
A party may also be bound as a result of waiver or estoppel.
2. It is a private dispute resolution process.
It is an extrajudicial mode of resolving disputes. There should
be minimal interference from the courts and the government.
3. The arbitral tribunal is an instrumentality of the
parties.
28
61 Ateneo LJ 608 (2016)
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Notes based on Judge J. Humiding’s Outline
As creators, they own the tribunal and they can shape it to
what they want it to be.
4. It is evidentiary.
The tribunal will decide based on the evidence presented by
the parties.
The tribunal cannot use its expertise in settling the dispute.
It cannot use “secret evidence” or evidence known only to
the tribunal, as basis for the award.
5. It is a mandatory procedure that will culminate to a
final and binding decision or award.
Entering into an arbitration agreement is voluntary. But once
they enter into it, they are bound to comply with the
stipulation to resolve their dispute through arbitration and not
go to litigation.
The parties may both withdraw from their agreement to
arbitrate, but they cannot do so unilaterally.
6. The principle of finality of arbitral awards or
decisions is based on contract and is a core
component of the process.
The arbitration agreement represents the parties’
acceptance to abide by the tribunal’s decision.
Any appeal based on errors of fact, law, or both, can be ruled
out. Attacks against an award shouldn’t focus on the merits,
but rather on the procedure.
7. The award is part of the agreement of the parties and
has the same standing as a contractual stipulation.
The validity and enforceability of the award is subject to the
same rules in contracts.
8. The arbitral tribunal has no imperium.
The tribunal doesn’t have the power to enforce its orders and
decision.
In post award proceedings, courts may exercise its
supervisory and enforcement jurisdictions.
For an award to be enforceable, it must be integrated into the
legal system by way of a:
1. Petition for Confirmation, for local awards; or
2. Petition for Recognition, for foreign awards.
Ad hoc vs Institutional
• Ad hoc arbitration is a DIY arbitration. It is subject
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only to the parties’ agreement and the applicable
national arbitration legislation. The parties
themselves, together with the tribunal, will lay down
the rules.
• Institutional arbitration is administered by an arbitral
institution that decides according to its own rules. In
practice, it is almost always overseen by an
appointing authority.
Arbitral institution: It is an organization that provides
arbitration services. Per the IRR and in relation to domestic
arbitration, it is an entity, registered as a domestic
corporation with the SEC, and engaged in arbitration of
disputes in the Philippines on a regular and permanent basis.
Rule of preference (based on the premise that arbitration is
contractual)
1. Mandatory rules – These are the public policy
safeguards, and thus, rules that the parties cannot
derogate. These refer to the limitations on the
freedom to contract.
2. Agreement between the parties – The law between
the parties.
3. Default rules – These are the law provisions
applicable in the absence or deficiency of agreement.
4. Arbitrator discretion – This is added by arbitration
laws. It is only possible if there are no mandatory,
agreement, or default rules.
The seat of arbitration (place of arbitration) determines
which law should apply. But it is not necessarily where the
proceedings occur. It is a legal construct, not a geographical
location. The arbitral seat is the nation where an international
arbitration has its legal domicile or juridical home.
As a general rule, the arbitration law of the seat will be the
governing law of the arbitration.
X. Domestic Arbitration
RA 876, Sec 1-7
Persons and matters subject to arbitration
Two or more persons or parties may submit to the arbitration
of one or more arbitrators any controversy existing between
them at the time of the submission and which may be the
subject of an action, or the parties to any contract may in
such contract agree to settle by arbitration a controversy
thereafter arising between them.
Such submission or contract shall be valid, enforceable and
irrevocable, save upon such grounds as exist at law for the
revocation of any contract.
Limitations
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Notes based on Judge J. Humiding’s Outline
A controversy cannot be arbitrated where one of the parties
to the controversy is an infant, or a person judicially declared
to be incompetent, unless the appropriate court having
jurisdiction approve a petition for permission to submit such
controversy to arbitration made by the general guardian or
guardian ad litem of the infant or of the incompetent.
But where a person capable of entering into a submission or
contract has knowingly entered into the same with a person
incapable of so doing, the objection on the ground of
incapacity can be taken only in behalf of the person so
incapacitated.
Controversies not subject to RA 876
This Act shall not apply to controversies and to cases which
are subject to the jurisdiction of the Court of Industrial
Relations (now NLRC) or which have been submitted to it.
Form of arbitration agreement
A contract to arbitrate a controversy thereafter arising
between the parties, as well as a submission to arbitrate an
existing controversy shall be in writing and subscribed by the
party sought to be charged, or by his lawful agent.
The making of a contract or submission for arbitration shall
be deemed as consent of the parties to the jurisdiction of the
RTC of the province or city where any of the parties resides,
to enforce such contract or submission.
Preliminary procedure
1. In the case of a contract to arbitrate future controversies,
it is instituted by the service by either party of a demand for
arbitration in accordance with the contract upon the other.
Such demand shall be set forth the nature of the controversy,
the amount involved, if any, and the relief sought, together
with a true copy of the contract providing for arbitration. The
demand shall be served upon any party either in person or
by registered mail.
In the event that the contract between the parties provides
for the appointment of a single arbitrator, the demand shall
be set forth a specific time within which the parties shall
agree upon such arbitrator. If the contract between the
parties provides for the appointment of three arbitrators, one
to be selected by each party, the demand shall name the
arbitrator appointed by the party making the demand; and
shall require that the party upon whom the demand is made
shall within 15 days, advise in writing the first party of the
name of the person appointed by the second party; such
notice shall require that the two arbitrators so appointed must
agree upon the third arbitrator within ten days from the date
of such notice.
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In the event that one party defaults in answering the demand,
the aggrieved party may file with the Clerk of the RTC having
jurisdiction over the parties, a copy of the demand for
arbitration under the contract to arbitrate, with a notice that
the original demand was sent by registered mail or delivered
in person to the party against whom the claim is asserted.
Such demand shall set forth the nature of the controversy,
the amount involved, if any, and the relief sought, and shall
be accompanied by a true copy of the contract providing for
arbitration.
2. In the case of the submission of an existing controversy,
it Is instituted by the filing with the Clerk of the RTC having
jurisdiction, of the submission agreement, setting forth the
nature of the controversy, and the amount involved, if any.
Such submission may be filed by any party and shall be duly
executed by both parties.
In the event that one party neglects, fails or refuses to
arbitrate under a submission agreement, the aggrieved party
shall follow the same procedure above.
Hearing by court: A party aggrieved by the failure, neglect
or refusal of another to perform under an arbitration
agreement may petition the court for an order directing that
such arbitration proceed. Five days notice in writing of the
hearing of such application shall be served either personally
or by registered mail upon the party in default. The court shall
hear the parties, and upon being satisfied that the making of
the agreement or such failure to comply therewith is not in
issue, shall make an order directing the parties to proceed to
arbitration in accordance with the terms of the agreement.
If the making of the agreement or default be in issue the court
shall proceed to summarily hear such issue. If the finding be
that no agreement in writing providing for arbitration was
made, or that there is no default in the proceeding
thereunder, the proceeding shall be dismissed. If the finding
be that a written provision for arbitration was made and there
is a default in proceeding thereunder, an order shall be made
summarily directing the parties to proceed with the arbitration
in accordance with the terms thereof.
The court shall decide all motions, petitions or applications
filed under the provisions of this Act, within 10 days after
such motions, petitions, or applications have been heard by
it.
Stay of civil action: If any suit or proceeding be brought
upon an issue arising out of an agreement which has an
arbitration clause, the court in which such suit or proceeding
is pending, upon being satisfied that the issue involved is
referable to arbitration, shall stay the action or proceeding
until an arbitration has been had in accordance with the
terms of the agreement: Provided, That the applicant, for the
stay is not in default in proceeding with such arbitration.
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Notes based on Judge J. Humiding’s Outline
(Also read IRR, Chapter 5, Rules 1-2)
Appointment of Domestic Arbitrators, Jurisdiction and
Conduct of Domestic Arbitration29
Appointment of arbitrators
If, in the contract for arbitration or submission agreement,
provision is made for a method of naming or appointing an
arbitrator or arbitrators, such method shall be followed.
But if no method is provided, the RTC shall designate an
arbitrator or arbitrators.
The RTC shall appoint an arbitrator or arbitrators in the
following instances:
(a) If the parties to the contract or submission are unable to
agree upon a single arbitrator; or
(b) If an arbitrator appointed by the parties is unwilling or
unable to serve, and his successor has not been appointed
in the manner in which he was appointed; or
(c) If either party to the contract fails or refuses to name his
arbitrator within 15 days after receipt of the demand for
arbitration; or
(d) If the arbitrators appointed by each party to the contract,
or appointed by one party to the contract and by the proper
Court, shall fail to agree upon or to select the third arbitrator.
Arbitrators appointed shall either accept or decline within 7
days of the receipt of their appointments.
In case of declination or failure of an arbitrator to duly accept,
the parties or the court, shall proceed to appoint a substitute
or substitutes for the arbitrator or arbitrators who decline or
failed to accept his or their appointments.
Number of Arbitrators: The parties are free to determine
the number of arbitrators. Failing such determination, the
default number of arbitrators shall be 3.
Qualifications of arbitrators: Any person appointed as an
arbitrator must be:
1. of legal age;
2. in full-enjoyment of his civil rights; and
3. know how to read and write.
Limitations
29
RA 876, Sec 8-18; IRR Chapter 5, Rule 3-5; Parlade, pp. 327-501
d.m.g. 2018 j.d.
UC Law
No person appointed to served as an arbitrator shall be
related by blood or marriage within the sixth degree to either
party to the controversy.
No person shall serve as an arbitrator in any proceeding if
he has or has had financial, fiduciary or other interest in the
controversy or cause to be decided or in the result of the
proceeding, or has any personal bias, which might prejudice
the right of any party to a fair and impartial award.
No party shall select as an arbitrator any person to act as his
champion or to advocate his cause.
Disclosure after appointment
If, after appointment but before or during hearing, the
appointed person discovers any circumstances likely to
create a presumption of bias, or which he believes might
disqualify him as an impartial arbitrator, he shall immediately
disclose such information to the parties. Thereafter, the
parties may agree in writing:
1. to waive the presumptive disqualifying circumstances; or
2. to declare the office of such arbitrator vacant. Any such
vacancy shall be filled in the same manner as the original
appointment was made.
Challenge of arbitrators
The arbitrators may be challenged only for the reasons
mentioned in the preceding section (qualifications and
limitations) which may have arisen after the arbitration
agreement or were unknown at the time of arbitration.
If they do not yield to the challenge, the challenging party
may renew the challenge before the RTC of the province or
city in which the challenged arbitrator or any of the parties
resides.
Procedure for challenge
1. The party will write a challenge.
2. Within 15 days, the challenged arbitrator must accept or
deny. If he accepts, he withdraws as arbitrator.
3. If he rejects the challenge, he shall communicate such
rejection and state the facts and arguments relied upon.
4. The arbitral tribunal shall decide on the challenge within
30 days.
5. If the challenge procedure is unsuccessful, the party who
made the challenge may request the appointing authority
in writing to decide on the challenge.
6. The appointing authority shall decide on it within 15
days.
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7. If the appointing authority fails to act, the requesting
party may renew the request with the court.
Grounds for Challenge:
1. If circumstances exist that give rise to justifiable doubts
as to his/her impartiality or independence;
2. If he/she does not possess qualifications as provided for
in the IRR or those agreed to by the parties;
3. If he/she is disqualified to act as arbitration under these
Rules;
4. If he refuses to respond to questions by a party regarding
the nature and extent of his professional dealings with a
party or its counsel.
Suspension of arbitration
RA 876: While the challenging incident is discussed before
the court, the hearing or arbitration shall be suspended, and
it shall be continued immediately after the court has
delivered an order on the challenging incident.
IRR: Until a decision is made to replace the arbitrator, the
arbitration proceeding shall continue notwithstanding the
challenge. Rhe challenged arbitrator shall continue to
participate therein as an arbitrator.
However, if the challenge incident is raised before the court,
the arbitration proceeding shall be suspended until the court
decides the incident.
The arbitration shall be continued immediately after the court
has delivered an order. If the court agrees that the
challenged arbitrator shall be replaced, the parties shall
immediately replace the arbitrator concerned.
When can a challenged arbitrator be replaced?
A challenged arbitrator shall be replaced if:
1. he/she withdraws as arbitrator;
2. the parties agree in writing to declare the office of
arbitrator vacant;
3. the arbitral tribunal decides the challenge and declares
the office of the challenged arbitrator vacant;
4. the appointing authority decides the challenge and
declares the office of the challenged arbitrator vacant;
5. in default of the appointing authority, the court decides
the challenge and declares the office of the challenged
arbitrator vacant.
Procedure by arbitrators
1. Setting of hearing: The arbitrator, within 5 days after
appointment if the parties to the controversy reside
within the same city or province, or within 15 days after
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UC Law
appointment if the parties reside in different provinces,
set a time and place for the hearing of the matters
submitted to them, and must cause notice thereof to be
given to each of the parties.
2. Postponement/Adjournment: The hearing can be
postponed or adjourned by the arbitrators only by
agreement of the parties; otherwise, adjournment may
be ordered by the arbitrators upon their own motion only
at the hearing and for good and sufficient cause. No
adjournment shall extend the hearing beyond the day
fixed in the submission or contract for rendering the
award, unless the time so fixed is extended by the written
agreement of the parties to the submission or contract or
their attorneys, or unless the parties have continued with
the arbitration without objection to such adjournment.
3. Hearing in absentia: The hearing may proceed in the
absence of any party who, after due notice, fails to be
present at such hearing or fails to obtain an adjournment
thereof. An award shall not be made solely on the default
of a party. The arbitrators shall require the other party to
submit such evidence as they may require for making an
award.
4. Legal representation: No one other than a party to said
arbitration, or a person in the regular employ of such
party duly authorized in writing by said party, or a
practicing attorney-at-law, shall be permitted by the
arbitrators to represent before him or them any party to
the arbitration. Any party desiring to be represented by
counsel shall notify the other party or parties of such
intention at least 5 days prior to the hearing.
5. The arbitrators shall arrange for the taking of a
stenographic record of the testimony when such a record
is requested by one or more parties, and when payment
of the cost is assumed by such party or parties.
6. Persons having a direct interest in the controversy which
is the subject of arbitration shall have the right to attend
any hearing; but the attendance of any other person shall
be at the discretion of the arbitrators.
Oath of arbitrators: Before hearing any testimony,
arbitrators must be sworn, by any officer authorized by law
to administer an oath, faithfully and fairly to hear and
examine the matters in controversy and to make a just award
according to the best of their ability and understanding.
Arbitrators shall have the power to administer the oaths to all
witnesses requiring them to tell the whole truth and nothing
but the truth in any testimony which they may give in any
arbitration hearing. This oath shall be required of every
witness before any of his testimony is heard.
Subpoena and subpoena duces tecum: Arbitrators shall
have the power to require any person to attend a hearing as
a witness. They shall have the power to subpoena witnesses
and documents when the relevancy of the testimony and the
materiality has been demonstrated.
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Notes based on Judge J. Humiding’s Outline
Attendance of arbitrators: All of the arbitrators appointed
in any controversy must attend all the hearings in that matter
and hear all the allegations and proofs of the parties; but an
award by the majority of them is valid unless the concurrence
of all of them is expressly required in the submission or
contract to arbitrate.
The arbitrator or arbitrators shall have the power at any time,
before rendering the award, without prejudice to the rights of
any party to petition the court to take measures to safeguard
and/or conserve any matter which is the subject of the
dispute in arbitration.
Hearing by arbitrators: Arbitrators may, at the
commencement of the hearing, ask both parties for brief
statements of the issues in controversy and/or an agreed
statement of facts.
Thereafter, the parties may offer such evidence as they
desire, and shall produce such additional evidence as the
arbitrators shall require or deem necessary to an
understanding and determination of the dispute.
The arbitrators shall be the sole judge of the relevancy and
materiality of the evidence offered or produced, and shall not
be bound to conform to the Rules of Court pertaining to
evidence.
The arbitrators may make an ocular inspection of any matter
or premises which are in dispute, but such inspection shall
be made only in the presence of all parties to the arbitration,
unless any party who shall have received notice thereof fails
to appear, in which event such inspection shall be made in
the absence of such party.
Briefs and Closing: At the close of the hearings, the
arbitrators shall specifically inquire of all parties whether they
have any further proof or witnesses to present; upon the
receipt of a negative reply from all parties, the arbitrators
shall declare the hearing closed unless the parties have
signified an intention to file briefs. Then the hearing shall be
closed by the arbitrations after the receipt of briefs and/or
reply briefs.
Definite time limit for the filing of such briefs must be fixed by
the arbitrators at the close of the hearing. Briefs may filed by
the parties within 15 days after the close of the oral hearings;
the reply briefs, if any, shall be filed within 5 days following
such 15-day period.
Reopening of hearing: The hearing may be reopened by
the arbitrators on their own motion or upon the request of any
party, upon good cause, shown at any time before the award
is rendered.
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Proceeding in lieu of hearing: The parties to a submission
or contract to arbitrate may, by written agreement, submit
their dispute to arbitration by other than oral hearing. The
parties may submit an agreed statement of facts. They may
also submit their respective contentions to the duly
appointed arbitrators in writing; this shall include a statement
of facts, together with all documentary proof. Parties may
also submit a written argument.
Each party shall provide all other parties to the dispute with
a copy of all statements and documents submitted to the
arbitrators.
Each party shall have an opportunity to reply in writing to any
other party's statements and proofs; but if such party fails to
do so within 7 days after receipt of such statements and
proofs, he shall be deemed to have waived his right to reply.
Upon the delivery to the arbitrators of all statements and
documents, together with any reply statements, the
arbitrators shall declare the proceedings in lieu of hearing
closed.
The Arbitral Tribunal has competence to rule on its own
jurisdiction: When a demand for arbitration is objected to
by the adverse party, the arbitral tribunal shall, in the first
instance, resolve the objection when made on any of the
following grounds:
1. The arbitration agreement is in existent, void,
unenforceable or not binding upon a person for any
reason, including the fact that the adverse party is not
privy to said agreement;
2. The dispute is not arbitrable or is outside the scope of
the arbitration agreement; or
3. The dispute is under the original and exclusive
jurisdiction of a court or quasi-judicial body.
Conduct of Arbitral Proceedings: The parties shall be
treated with equally and each party shall be given a full
opportunity of presenting his/her/its case.
Place of Arbitration: The parties are free to agree on the
place of arbitration. Failing such agreement, the place of
arbitration shall be in Metro Manila unless the arbitral tribunal,
having regard to the circumstances of the case, including the
convenience of the parties, shall decide on a different place
of arbitration.
The arbitral tribunal may, unless otherwise agreed by the
parties, meet at any place it considers appropriate for
consultation among its members, for hearing witnesses,
experts or the parties, or for inspection of goods, other
property or documents.
Default of a Party
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Unless otherwise agreed by the parties, if, without showing
sufficient causes:
1. the claimant fails to communicate his/her/its statement
of claim within the period of time agreed by the parties
or determined by the arbitral tribunal, the arbitral tribunal
shall terminate the proceedings;
2. the respondent fails to communicate his/her/its
statement of defense, the arbitral tribunal shall continue
the proceedings without treating such failure in itself as
an admission of the claimant’s allegations;
3. any party fails to appear at a hearing or to produce
documentary evidence, the arbitral tribunal may
continue the proceedings and make the award based on
the evidence before it.
Decision Making by the Arbitral Tribunal: Any decision of
the arbitral tribunal shall be made, unless otherwise agreed
by the parties, by a majority of all its members.
Unless otherwise agreed upon by the parties, the arbitral
tribunal shall render its written award within 30 days after the
closing of all hearings and/or submission of the parties’
respective briefs or if the oral hearings shall have been
waived, within 30 days after the arbitral tribunal shall have
declared such proceedings in lieu of hearing closed. This
period may be further extended by mutual consent of the
parties.
Settlement: If the parties settle the dispute, the arbitral
tribunal shall record the settlement in the form of an arbitral
award on agreed terms, consent award or award based on
compromise.
Form and Contents of Award: The award shall be made in
writing and shall be signed by the arbitral tribunal (majority).
The award shall state the reasons upon which is based,
unless the parties have agreed that no reasons are to be
given or the award on agreed terms, consent award based
on compromise.
The award shall state its date and the placed of arbitration.
The award shall be deemed to have made at that place.
After the award is made, a copy signed by the arbitrators
shall be delivered to each party.
The award of the arbitral tribunal need not be acknowledged,
sworn to under oath, or affirmed by the arbitral tribunal
unless so required on writing by the parties.
Termination of Proceedings: The arbitration proceedings
are terminated by the final award or by an order of the arbitral
30
596 SCRA 630 (2009)
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tribunal.
The arbitral tribunal shall issue an order for the termination
of the arbitration proceedings when:
1. The claimant withdraws his claim, unless the
respondents objects thereto for the purpose of
prosecuting his counterclaims in the same proceedings
of the arbitral tribunal recognizes a legitimate interest on
his part in obtaining a final settlement of the dispute;
2. The parties agree on the termination of the proceedings;
3. The arbitral tribunal finds that the continuation of the
proceedings has for any other reason before
unnecessary or impossible; or
4. The required deposits are not paid in full.
Except as otherwise provided in the arbitration agreement,
no motion for reconsideration correction and interpretation of
award or additional award shall be with the arbitral tribunal.
The arbitral tribunal, by releasing its final award, loses
jurisdiction over the dispute and the parties.
Grounds to Vacate an Arbitral Award: The arbitral award
may be questioned, vacated or set aside by the appropriate
court in accordance with the Special ADR Rules only on the
following grounds:
1. The arbitral award was procured by corruption, fraud or
other undue means;
2. There was evident partially or corruption in the arbitral
tribunal or any of its members;
3. The arbitral tribunal was guilty of misconduct or any form
of misbehavior that has materially prejudiced the rights
of any party such as refusing to postpone the hearing
upon sufficient cause shown or to hear evidence
pertinent and material to the controversy;
4. One or more of the arbitrators was disqualified to act as
such under this Chapter and willfully refrained from
disclosing such disqualification ; or
5. The arbitral tribunal exceeded its powers, or so
imperfectly executed them, such that a complete, final
and definite award upon the subject matter submitted to
it was not made.
This is an exclusive list. Any other ground raised to question,
vacate or set aside the arbitral award shall be disregarded
by the court.
Arbitration Agreements
a. Ormoc Sugarcane Planters vs CA30
Except where a compulsory arbitration is provided by statute,
the first step toward the settlement of a difference by
arbitration is the entry by the parties into a valid agreement
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to arbitrate. An agreement to arbitrate is a contract, the
relation of the parties is contractual, and the law of contract
controls the rights and liabilities of the parties. In an
agreement for arbitration, the ordinary elements of a valid
contract must appear, including an agreement to arbitrate
some specific thing, and an agreement to abide by the
award, either in express language or by implication.
b. Cargill Phils. vs San Fernando Regala Trading Inc.31
A contract is required for arbitration to take place and to be
binding. Submission to arbitration is a contract and a clause
in a contract providing that all matters in dispute between the
parties shall be referred to arbitration is a contract. The
provision to submit to arbitration any dispute arising
therefrom and the relationship of the parties is part of the
contract and is itself a contract.
An arbitration agreement which forms part of the main
contract shall not be regarded as invalid or non-existent just
because the main contract is invalid or did not come into
existence, since the arbitration agreement shall be treated
as a separate agreement independent of the main contract.
A contrary ruling would suggest that a party's mere
repudiation of the main contract is sufficient to avoid
arbitration and that is exactly the situation that the
separability doctrine sought to avoid. Thus, we find that even
the party who has repudiated the main contract is not
prevented from enforcing its arbitration clause.
c. Insular Savings Bank vs FEBATC32
The RTC dismissed the Petition of Insular for lack of
jurisdiction on the ground that it should have been docketed
as a separate case.
The SC ruled that the RTC erred in doing so. As provided in
the PCHC Rules, the findings of facts of the decision or
award rendered by the Arbitration Committee shall be final
and conclusive upon all the parties in said arbitration
dispute. Under Article 2044 of the New Civil Code, the
validity of any stipulation on the finality of the arbitrators’
award or decision is recognized. However, where the
conditions described in Articles 2038, 2039 and 2040
applicable to both compromises and arbitrations are
obtaining, the arbitrators’ award may be annulled or
rescinded. Consequently, the decision of the Arbitration
Committee is subject to judicial review.
The petitioner had several judicial remedies available at its
disposal after the Arbitration Committee denied its Motion for
Reconsideration:
a. It may petition the proper RTC to issue an order
vacating the award, invoking the grounds provided
for under Section 24 of the Arbitration Law.
31
641 SCRA 21 (2011)
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b. It may file a petition for review under Rule 43 with
the Court of Appeals on questions of fact, of law, or
mixed questions of fact and law; or
c. It may file a petition for certiorari under Rule 65 on
the ground that the Arbitrator Committee acted
without or in excess of its jurisdiction or with grave
abuse of discretion amounting to lack or excess of
jurisdiction.
Since this case involves acts or omissions of a quasi-judicial
agency, the petition should be filed in and cognizable only by
the Court of Appeals.
In this instance, petitioner did not avail of any of the
abovementioned remedies available. Instead it filed a
petition for review with the RTC where Civil Case No. 92-145
is pending pursuant to Section 13 of the PCHC Rules to
sustain its action. Clearly, it erred in the procedure it chose
for judicial review of the arbitral award.
Jurisdiction over the subject matter is conferred by law and
not by the consent or acquiescence of any or all of the parties
or by erroneous belief of the court that it exists.
In the instant case, petitioner and respondent have agreed
that the PCHC Rules would govern in case of
controversy. However, since the PCHC Rules came about
only as a result of an agreement between and among
member banks of PCHC and not by law, it cannot confer
jurisdiction to the RTC. Thus, the portion of the PCHC Rules
granting jurisdiction to the RTC to review arbitral awards,
only on questions of law, cannot be given effect.
Consequently, the proper recourse of petitioner from the
denial of its motion for reconsideration by the Arbitration
Committee is to file either a motion to vacate the arbitral
award with the RTC, a petition for review with the Court of
Appeals under Rule 43 or a petition for certiorari under Rule
65.
The Supreme Court encourages alternative dispute
resolution methods or ADRs – like arbitration, mediation,
negotiation and conciliation. By enabling parties to resolve
their disputes amicably, they provide solutions that are less
time-consuming, less tedious, less confrontational, and more
productive of goodwill and lasting relationships. It must be
borne in mind that arbitration proceedings are mainly
governed by the Arbitration Law and suppletorily by the
Rules of Court.
Doctrine of Separability
Also known as the doctrine of severability, it states that an
arbitration agreement is independent of the main contract
even if it is contained in an arbitration clause. Such is to be
treated as a separate agreement. Even if the validity of the
32
492 SCRA 146 (2006)
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Notes based on Judge J. Humiding’s Outline
main contract is challenged, the arbitration agreement or
clause remains valid and enforceable.
a. Gonzales vs Climax Mining (2005) 33
Arbitration before the Panel of Arbitrators is proper only
when there is a disagreement between the parties as to
some provisions of the contract between them, which needs
the interpretation and the application of that particular
knowledge and expertise possessed by members of that
Panel. It is not proper when one of the parties repudiates the
existence or validity of such contract or agreement on the
ground of fraud or oppression as in this case. The validity of
the contract cannot be subject of arbitration proceedings.
Allegations of fraud and duress in the execution of a contract
are matters within the jurisdiction of the ordinary courts of
law. These questions are legal in nature and require the
application and interpretation of laws and jurisprudence
which is necessarily a judicial function.
We agree that the case should not be brought under the
ambit of the Arbitration Law, but for a different reason. The
question of validity of the contract containing the agreement
to submit to arbitration will affect the applicability of the
arbitration clause itself. A party cannot rely on the contract
and claim rights or obligations under it and at the same time
impugn its existence or validity. Indeed, litigants are enjoined
from taking inconsistent positions. As previously discussed,
the complaint should have been filed before the regular
courts as it involved issues which are judicial in nature.
b. Gonzales vs Climax Mining (2007) 34
The doctrine of separability, or severability as other writers
call it, enunciates that an arbitration agreement is
independent of the main contract. The arbitration agreement
is to be treated as a separate agreement and the arbitration
agreement does not automatically terminate when the
contract of which it is part comes to an end.
The separability of the arbitration agreement is especially
significant to the determination of whether the invalidity of the
main contract also nullifies the arbitration clause.
Indeed, the doctrine denotes that the invalidity of the main
contract, also referred to as the container contract,
does not affect the validity of the arbitration
agreement. Irrespective of the fact that the main contract is
invalid, the arbitration clause or agreement still remains valid
and enforceable.
The separability of the arbitration clause is confirmed in Art.
16(1) of the UNCITRAL Model Law and Art. 21(2) of the
UNCITRAL Arbitration Rules. xxx
33
452 SCRA 607 (2005)
34
512 SCRA 148 (2007)
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This brings us back to G.R. No. 161957 (the 2005 case). The
adjudication of the petition in G.R. No. 167994 effectively
modifies part of the Decision dated 28 February 2005 in G.R.
No. 161957. Hence, we now hold that the validity of the
contract containing the agreement to submit to arbitration
does not affect the applicability of the arbitration clause
itself. A contrary ruling would suggest that a party’s mere
repudiation of the main contract is sufficient to avoid
arbitration. That is exactly the situation that the separability
doctrine, as well as jurisprudence applying it, seeks to avoid.
We add that when it was declared in G.R. No. 161957 that
the case should not be brought for arbitration, it should be
clarified that the case referred to is the case actually filed by
Gonzales before the DENR Panel of Arbitrators, which was
for the nullification of the main contract on the ground of
fraud, as it had already been determined that the case should
have been brought before the regular courts involving as it
did judicial issues.
Due Process in Arbitral Proceedings
Equitable PCI Banking Corp vs RCBC35
The principles of administrative due process apply to arbitral
proceedings, that is, the parties must be given ample
opportunity to be heard.
Issue: Whether the trial court acted contrary to law and
judicial authority in refusing to vacate and in confirming the
arbitral award, notwithstanding that the arbitrators had
plainly and admittedly failed to accord petitioners’ due
process by denying them a hearing on the basic factual
matter upon which their liability is predicated.
In this case, the SC ruled that the petitioners were not denied
due process.
SC: Petitioners impute on RCBC the act of creating
summaries of the accounts of Bankard which "in turn were
used by its experts to conclude that Bankard improperly
recorded its receivables and committed material deviations
from GAAP requirements."
Later, petitioners would assert that "the arbitrators’ partial
award admitted and used the Summaries as evidence, and
held on the basis of the ‘information’ contained in them that
petitioners were in breach of their warranty in GAAP
compliance."
To petitioners, the ICC-ICA’s use of such summaries but
without presenting the source documents violates their right
to due process. Pressing the point, petitioners had moved,
but to no avail, for the exclusion of the said summaries.
35
574 SCRA 858 (2008)
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
Petitioners allege that they had reserved the right to cross-
examine the witnesses of RCBC who testified on the
summaries, pending the resolution of their motion to exclude.
But, according to them, they were effectively denied the right
to cross-examine RCBC’s witnesses when the ICC-ICA
admitted the summaries of RCBC as evidence.
Petitioners’ position is bereft of merit.
Anent the use but non-presentation of the source documents
as the jumping board for a claim of denial of due process,
petitioners cite Compania Maritima v. Allied Free Worker’s
Union. It may be stated, however, that such case is not on
all fours with the instant case and, therefore, cannot be
applied here considering that it does not involve an
administrative body exercising quasi-judicial function but
rather the regular court.
In a catena of cases, we have ruled that "the essence of due
process is the opportunity to be heard. What the law prohibits
is not the absence of previous notice but the absolute
absence thereof and the lack of opportunity to be heard."31
We also explained in Lastimoso v. Asayo that "due process
in an administrative context does not require trial type
proceedings similar to those in courts of justice. Where an
opportunity to be heard either through oral arguments or
through pleadings is accorded, there is no denial of
procedural due process."
Were petitioners afforded the opportunity to refute the
summaries and pieces of evidence submitted by RCBC
which became the bases of the experts’ opinion? The
answer is in the affirmative.
Judicial Review and Court Intervention
Sec. 19-31, RA 876
Section 19. Time for rendering award.- Unless the parties
shall have stipulated by written agreement the time within
which the arbitrators must render their award, the written
award of the arbitrators shall be rendered within thirty days
after the closing of the hearings or if the oral hearings shall
have been waived, within thirty days after the arbitrators shall
have declared such proceedings in lieu of hearing closed.
This period may be extended by mutual consent of the
parties.
Section 20. Form and contents of award.- The award must
be made in writing and signed and acknowledged by a
majority of the arbitrators, if more than one; and by the sole
arbitrator, if there is only one. Each party shall be furnished
with a copy of the award. The arbitrators in their award may
grant any remedy or relief which they deem just and
equitable and within the scope of the agreement of the
parties, which shall include, but not be limited to, the specific
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performance of a contract.
In the event that the parties to an arbitration have, during the
course of such arbitration, settled their dispute, they may
request of the arbitrators that such settlement be embodied
in an award which shall be signed by the arbitrators. No
arbitrator shall act as a mediator in any proceeding in which
he is acting as arbitrator; and all negotiations towards
settlement of the dispute must take place without the
presence of the arbitrators.
The arbitrators shall have the power to decide only those
matters which have been submitted to them. The terms of
the award shall be confined to such disputes.
The arbitrators shall have the power to assess in their award
the expenses of any party against another party, when such
assessment shall be deemed necessary.
Section 21. Fees of arbitration. - The fees of the arbitrators
shall be fifty pesos per day unless the parties agree
otherwise in writing prior to the arbitration.
Section 22. Arbitration deemed a special proceeding. -
Arbitration under a contract or submission shall be deemed
a special proceeding, of which the court specified in the
contract or submission, or if none be specified, the Court of
First Instance for the province or city in which one of the
parties resides or is doing business, or in which the
arbitration was held, shall have jurisdiction. Any application
to the court, or a judge thereof, hereunder shall be made in
manner provided for the making and hearing of motions,
except as otherwise herein expressly provided.
Section 23. Confirmation of award. - At any time within one
month after the award is made, any party to the controversy
which was arbitrated may apply to the court having
jurisdiction, as provided in section twenty-eight, for an order
confirming the award; and thereupon the court must grant
such order unless the award is vacated, modified or
corrected, as prescribed herein. Notice of such motion must
be served upon the adverse party or his attorney as
prescribed by law for the service of such notice upon an
attorney in action in the same court.
Section 24. Grounds for vacating award. - In any one of
the following cases, the court must make an order vacating
the award upon the petition of any party to the controversy
when such party proves affirmatively that in the arbitration
proceedings:
(a) The award was procured by corruption, fraud, or
other undue means; or
(b) That there was evident partiality or corruption in the
arbitrators or any of them; or
(c) That the arbitrators were guilty of misconduct in
refusing to postpone the hearing upon sufficient cause
shown, or in refusing to hear evidence pertinent and
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material to the controversy; that one or more of the
arbitrators was disqualified to act as such under section
nine hereof, and wilfully refrained from disclosing such
disqualifications or of any other misbehavior by which the
rights of any party have been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so
imperfectly executed them, that a mutual, final and definite
award upon the subject matter submitted to them was not
made
Where an award is vacated, the court, in its discretion, may
direct a new hearing either before the same arbitrators or
before a new arbitrator or arbitrators to be chosen in the
manner provided in the submission or contract for the
selection of the original arbitrator or arbitrators, and any
provision limiting the time in which the arbitrators may make
a decision shall be deemed applicable to the new arbitration
and to commence from the date of the court's order.
Where the court vacates an award, costs, not exceeding fifty
pesos and disbursements may be awarded to the prevailing
party and the payment thereof may be enforced in like
manner as the payment of costs upon the motion in an action.
Section 25. Grounds for modifying or correcting award.
- In any one of the following cases, the court must make an
order modifying or correcting the award, upon the application
of any party to the controversy which was arbitrated:
(a) Where there was an evident miscalculation of
figures, or an evident mistake in the description of any
person, thing or property referred to in the award; or
(b) Where the arbitrators have awarded upon a matter
not submitted to them, not affecting the merits of the
decision upon the matter submitted; or
(c) Where the award is imperfect in a matter of form not
affecting the merits of the controversy, and if it had been
a commissioner's report, the defect could have been
amended or disregarded by the court.
The order may modify and correct the award so as to effect
the intent thereof and promote justice between the parties.
Section 26. Motion to vacate, modify or correct award:
when made. - Notice of a motion to vacate, modify or correct
the award must be served upon the adverse party or his
counsel within thirty days after award is filed or delivered, as
prescribed by law for the service upon an attorney in an
action.
Section 27. Judgment. - Upon the granting of an order
confirming, modifying or correcting an award, judgment may
be entered in conformity therewith in the court wherein said
application was filed. Costs of the application and the
proceedings subsequent thereto may be awarded by the
court in its discretion. If awarded, the amount thereof must
be included in the judgment.
36
Digests by Group 6 – Rica Dino, et al.
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Section 28. Papers to accompany motion to confirm,
modify, correct, or vacate award. - The party moving for
an order confirming, modifying, correcting, or vacating an
award, shall at the time that such motion is filed with the court
for the entry of judgment thereon also file the following
papers with the Clerk of Court;
(a) The submission, or contract to arbitrate; the
appointment of the arbitrator or arbitrators; and each
written extension of the time, if any, within which to make
the award.
(b) A verified of the award.
(c) Each notice, affidavit, or other paper used upon the
application to confirm, modify, correct or vacate such
award, and a copy of each of the court upon such
application.
The judgment shall be docketed as if it were rendered in an
action.
The judgment so entered shall have the same force and
effect in all respects, as, and be subject to all the provisions
relating to, a judgment in an action; and it may be enforced
as if it had been rendered in the court in which it is entered.
Section 29. Appeals. - An appeal may be taken from an
order made in a proceeding under this Act, or from a
judgment entered upon an award through certiorari
proceedings, but such appeals shall be limited to questions
of law. The proceedings upon such an appeal, including the
judgment thereon shall be governed by the Rules of Court in
so far as they are applicable.
Section 30. Death of party. - Where a party dies after
making a submission or a contract to arbitrate as prescribed
in this Act, the proceedings may be begun or continued upon
the application of, or notice to, his executor or administrator,
or temporary administrator of his estate. In any such case,
the court may issue an order extending the time within which
notice of a motion to confirm, vacate, modify or correct an
award must be served. Upon confirming an award, where a
party has died since it was filed or delivered, the court must
enter judgment in the name of the original party; and the
proceedings thereupon are the same as where a party dies
after a verdict.
Section 31. Repealing clause. - The provisions of chapters
one and two, Title XIV, of the Civil Code shall remain in force.
All other laws and parts of laws inconsistent with this Act are
hereby repealed. If any provision of this Act shall be held
invalid the remainder that shall not be affected thereby.
Cases36
ABS-CBN v. World Interactive Network Systems (WINS)
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
ABS-CBN entered into a licensing agreement with World
Interactive Network Systems (WINS) granting WINS the
exclusive license to distribute and sublicense the distribution
of the television service known as The Filipino Channel
(TFC) in Japan.
However, dispute arose when WINS allegedly aired nine
episodes of WINS WEEKLY, a weekly 35-minute community
news program for Filipinos in Japan, into the TFC
programming from March to May 2002 without the
knowledge and permission of ABS-CBN.
Thereafter, WINS filed an arbitration suit pursuant to the
arbitration clause of its agreement with ABS-CBN both
parties appointed Professor Alfredo F. Tadiar to act as sole
arbitrator. The following issues were raised :
• Was the broadcast of WINS WEEKLY by the
claimant duly authorized by ABS-CBN
• Did such broadcast constitute a material breach of
the agreement that is a ground for termination of the
agreement in accordance with Section 13 (a)
thereof?
• If so, was the breach seasonably cured under the
same contractual provision of Section 13 (a)?
• Which party is entitled to the payment of damages
they claim and to the other reliefs prayed for?
The arbitrator ruled in favor of WINS.
He held that petitioner gave its approval to respondent for
the airing of WINS WEEKLY as shown by a series of written
exchanges between the parties.
He also ruled that, had there really been a material breach
of the agreement, petitioner should have terminated the
same instead of sending a mere notice to terminate said
agreement.
The arbitrator found that petitioner threatened to terminate
the agreement due to its desire to compel respondent to re-
negotiate the terms thereof for higher fees.
He further stated that even if respondent committed a breach
of the agreement, the same was seasonably cured. He then
allowed respondent to recover temperate damages,
attorney's fees and one-half of the amount it paid as
arbitrator's fee.
ABS-CBN filed in the CA a petition for review under Rule 43
of the Rules of Court or, in the alternative, a petition for
certiorari under Rule 65 of the same Rules, with application
for temporary restraining order and writ of preliminary
injunction.
WINS, on the other hand, filed a petition for confirmation of
arbitral award before the Regional Trial Court (RTC) of
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Quezon City.
The CA dismissed ABS-CBNs petition for lack of jurisdiction.
The CA ruled that TOR itself provided that the arbitrator's
decision shall be final and unappealable and that no motion
for reconsideration shall be filed, then the petition for review
must fail.
It also ruled that it is the RTC which has jurisdiction over
questions relating to arbitration. It held that the only instance
it can exercise jurisdiction over an arbitral award is through
an appeal from the trial court's decision confirming, vacating
or modifying the arbitral award.
ISSUE: WON an aggrieved party in a voluntary arbitration
dispute may avail of, directly in the CA, a petition for review
under Rule 43 or a petition for certiorari under Rule 65 of the
Rules of Court, instead of filing a petition to vacate the award
in the RTC when the grounds invoked are other than those
for a petition to vacate an arbitral award enumerated under
RA 876.
RULING: YES. A petition for review under Rule 43 or a
petition for certiorari under Rule 65 may be availed of in the
CA. Which one would depend on the grounds relied upon by
petitioner.
Furthermore in case, the court the judicial remedies an
aggrieved party to an arbitral award may undertake:
(1) a petition in the proper RTC to issue an order to vacate
the award on the grounds provided for in Section 24 of RA
876;
(2) a petition for review in the CA under Rule 43 of the
Rules of Court on questions of fact, of law, or mixed
questions of fact and law; and
(3) a petition for certiorari under Rule 65 of the Rules of
Court should the arbitrator have acted without or in excess
of his jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction.
Nevertheless, although ABS-CBN’s position on the judicial
remedies available to it was correct, the SC sustained the
dismissal the petitioner because the petitioner availed of the
remedies in the alternative.
ABS-CBN cleverly crafted its assignment of errors in such a
way as to straddle both judicial remedies, that is, by alleging
serious errors of fact and law (in which case a petition for
review under Rule 43 would be proper) and grave abuse of
discretion (because of which a petition for certiorari under
Rule 65 would be permissible).
BENGUET CORPORATION v. DENR MINES
ADJUDICATION BOARD
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
Benguet Corporation entered into a Royalty Agreement with
Option to Purchase (RAWOP) with J.G. Realty who is the
owner of four mining claims located in a barangay in
Camarines Norte.
Under the agreement, Benguet was to determine whether
the mining claims were worth developing with reasonable
probability of profitable production, furnish J.G. Realty with
the results of the studies and if the mining claims were placed
in commercial production by Benguet, J.G. Realty should be
entitled to a royalty.
On August 9, 1989, Benguet Corp, issued a letter informing
J.G. Realty of its intention to develop the mining claims.
However, on February 9, 1999, J.G. Realty sent a letter to
the President of Benguet Corp informing the latter that it was
terminating the RAWOP. Among the grounds raised was
Benguet Corp’s failed to perform the obligations set forth in
the RAWOP and non-payment of the royalties thereon as
provided in the RAWOP
In response, Benguets Corp, wrote J.G. Realty a letter dated
March 8, 1999, therein alleging that Benguet complied with
its obligations under the RAWOP by investing PhP 42.4
million to rehabilitate the mines
Benguet then argued that the royalties due to J.G. Realty
were in fact in its office and ready to be picked up at any time.
It appeared that, previously, the practice by J.G. Realty was
to pick-up checks from Benguet representing such royalties.
However, starting August 1994, J.G. Realty allegedly
refused to collect such checks from Benguet. Thus, Benguet
posited that there was no valid ground for the termination of
the RAWOP. It also reminded J.G. Realty that it should
submit the disagreement to arbitration rather than unilaterally
terminating the RAWOP.
On June 7, 2000, J.G. Realty filed a Petition for Declaration
of Nullity/Cancellation of the RAWOP with DENR – Mines
Adjudication Board of Legaspi City.
The Panel of Arbitrators of the MAB declared the
cancellation of the Royalty Agreement with Option to
Purchase (RAWOP) between Benguet Corporation and J.G.
Realty.
Benguet Corp appealed the decision with Mines Adjudication
Board but was denied thus the corporation filed a petition
with the Supreme Court.
ISSUE: Should the controversy have first been submitted to
arbitration before the POA took cognizance of the case?
CONTENTIONS
BENGUET CORP: There is a stipulation in the RAWOP that
any disputes, differences or disagreements that cannot be
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amicably settled by the parties, thus shall, upon notice of one
party to the other, be referred to a Board of Arbitrators
consisting of three (3) members.
Thus, POA should have first referred the case to voluntary
arbitration before taking cognizance of the case.
JG Realty: It argued that RA 7942 or the Philippine Mining
Act of 1995 is a special law which should prevail over the
stipulations of the parties and over a general law, such as
RA 876. It also argued that the POA cannot be considered
as a court under the contemplation of RA 876 and that
jurisprudence saying that there must be prior resort to
arbitration before filing a case with the courts is inapplicable
to the instant case as the POA is itself already engaged in
arbitration.
RULING: The court sided with Benguet Corp.
Yes, the matter should have been submitted to arbitration
before the POA took cognizance of the case.
Availment of voluntary arbitration before resort is made to the
courts or quasi-judicial agencies of the government is a valid
contractual stipulation that must be adhered to by the parties.
In the event a case that should properly be the subject of
voluntary arbitration is erroneously filed with the courts or
quasi-judicial agencies, on motion of the defendant, the court
or quasi-judicial agency shall determine whether such
contractual provision for arbitration is sufficient and effective.
If in affirmative, the court or quasi-judicial agency shall then
order the enforcement of said provision
J.G. Realtys contention, that prior resort to arbitration is
ineffective in the instant case because the POAs mandate is
to arbitrate disputes involving mineral agreements, is
misplaced.
A distinction must be made between voluntary and
compulsory arbitration.
Compulsory arbitration has been defined both as the process
of settlement of labor disputes by a government
agency which has the authority to investigate and to make
an award while
A voluntary arbitration is not part of the governmental unit or
labor departments personnel, a voluntary arbitrator renders
arbitration services provided for under labor laws.
There is a clear distinction between compulsory and
voluntary arbitration. The arbitration provided by the POA is
compulsory, while the nature of the arbitration provision in
the RAWOP is voluntary, not involving any government
agency.
In sum, on the issue of whether POA should have referred
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
the case to voluntary arbitration, we find that, indeed, POA
has no jurisdiction over the dispute which is governed by RA
876, the arbitration law.
(Also read Parlade pp. 502-593)
Recognition & Enforcement of Domestic Awards
Rule 6, Arts. 5.36-5.46, IRR
Article 5.36. Confirmation of Award. The party moving for
an order confirming, modifying, correcting, or vacating an
award, shall, at the time that such motion is filled with the
court for the entry of judgment thereon, also file the original
or verified copy of the award, the arbitration or settlement
agreement, and such papers as may be required by the
Special ADR Rules.
Article 5.37. Judgment. Upon the grant of an order
confirming, modifying or correcting an award, judgment may
be entered in conformity therewith in the court where said
application is filed. Costs of the application and the
proceedings subsequent thereto may be awarded by the
court In its discretion. If awarded, the amount thereof must
be included in the judgment. Judgment will be enforced like
court judgments.
Article 5.38. Appeal. A decision of the court confirming,
vacating, setting aside, modifying or correcting an arbitral
award may be appealed to the Court of Appeals in
accordance with Special ADR Rules.
The losing party who appeals from the judgment of the Court
confirming an arbitral award shall be required by the Court of
Appeals to post a counter-bond executed in favor of the
prevailing party equal to the amount of the award in
accordance with the Special ADR Rules.
Article 5.39. Venue and Jurisdiction. Proceedings for
recognition and enforcement of an arbitration agreement or
for vacation or setting aside of an arbitral award, and any
application with a court for arbitration assistance and
supervision, except appeal, shall be deemed as special
proceedings and shall be filed with the court
(a) where the arbitration proceedings are conducted;
(b) where the asset to be attached or levied upon, or the act
to be enjoined is located;
(c) where any of the parties to the dispute resides or has its
place of business; or
(d) in the National Capital Judicial Region at the option of the
applicant.
Article 5.40. Notice of Proceedings to Parties. In a special
proceeding for recognition and enforcement of an arbitral
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award, the court shall send notice to the parties at their
address of record in the arbitration, or if any party cannot be
served notice at such address, at such party’s last known
address. The notice shall be sent in at least fifteen (15) days
before the date set for the initial hearing of the application.
Article 5.41. Legal Representation in Domestic
Arbitration. (a) In domestic arbitration conducted in the
Philippines, a party may be represented by any person of
his/her/its choice: Provided, that such representative, unless
admitted to the practice of law in the Philippines, shall not be
authorized to appear as counsel in any Philippine Court, or
any other quasi-judicial body whether or such appearance is
in relation to the arbitration in which he/she appears.
(b) No arbitrator shall act as mediator in any proceeding in
which he/she is acting as arbitrator and all negotiations
towards settlement of the dispute must take without the
presence of the arbitrators.
Article 5.42. Confidentially of Arbitration Proceedings.
The arbitration proceedings, including the records, evidence
and the arbitral award and other confidential information,
shall be considered privileged and confidential and shall not
be published except –
(1) with consent of the parties; or
(2) for the limited purpose of disclosing to the court relevant
documents in cases where resort to the court is allowed
herein:
Provided, however, that the court in which the action or the
appeal is pending may issue a protective order to prevent or
prohibit disclosure of documents or information containing
secret processes, developments, research and other
information where it is shown that the applicant shall be
materially prejudiced by an authorized disclosure thereof.
Article 5.43. Death of a Party. Where a party dies after
making a submission or a contact to arbitrate as prescribed
in these Rules, the proceeding may be begun or continued
upon the application of, or notice to, his/her executor or
administrator, or to temporary administrator of his/her estate.
In any such case, the court may issue an order extending the
time within which notice of a motion to recognize or vacate
an award must be served. Upon recognizing an award,
where a party has died since it was filed or delivered, the
court must enter judgment in the name of the original party;
and the proceedings thereupon are the same as where a
party dies after a verdict.
Article 5.44. Multi-Party Arbitration. (a)When a single
arbitration involves more than two parties, these Rules, to
the extent possible, shall be used subject to such
modifications consistent with Articles 5.17 (Equal Treatment
of Parties) and 5.18 (Determination of Rules of Procedure)
as the arbitral tribunal shall deem appropriate to address
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
possible complexities of a multi-party arbitration. (b) When a
claimant includes persons who are not parties to or otherwise
bound by the arbitration agreement , directly or by reference,
between him/her and the respondent as additional claimants
or the additional respondents unless not later than the date
communicating his/her answer to the request for arbitration,
either by motion or by a special defense in his answer, he
objects, on jurisdictional grounds, to the inclusion of such
additional respondents. The additional respondents shall be
deemed to have consented to their inclusion in the arbitration
unless, not later than the date of communicating their answer
to the request for arbitration, wither by motion or a special
defense in their answer, they object, on jurisdictional
grounds, to their inclusion.
Article 5.45. Consolidation of Proceedings and
Concurrent Hearings. The parties may agree that-
(a) the arbitration proceedings shall be consolidated with
other arbitration proceedings; or
(b) that concurrent hearings shall be held, on such terms as
may be agreed.
Unless the parties agree to confer such power on the arbitral
tribunal, the tribunal has no power to order consolidation of
arbitration proceedings or concurrent hearings.
Article 5.46. Fees and Costs. (a) The fees of the arbitrators
shall be agreed upon by the parties and the arbitrator/s in
writing prior to the arbitration.
In default of agreement of the parties as to the amount and
manner of payment of arbitrator’s fees, the arbitrator’s fees
shall be determined in accordance with the applicable
internal rules of the regular arbitration institution under
whose rules he arbitration is conducted; or in ad hoc
arbitration, the Schedule of Fees approved by the IBP, If any,
or in default thereof, the Schedule of Fees that may be
approved by the OADR.
(b) In addition to arbitrator’s fees, the parties shall be
responsible for the payment of the administrative fees of an
arbitration institution administering an arbitration and cost of
arbitration. The latter shall include, as appropriate, the fees
of an expert appointed by the arbitral tribunal, the expenses
for conducting a site inspection, the use of a room where
arbitration proceedings shall be or have been conducted, the
expenses for the recording and transcription of the arbitration
proceedings.
(c) The arbitral tribunal shall fix the costs of arbitration in its
award. The term "costs" include only:
(i) The fees of the arbitral tribunal to be stated separately as
to each arbitrator and to be fixed by the arbitral tribunal itself
in accordance with this Article;
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(ii) The travel and other expenses incurred by the arbitrators;
(iii) The costs of expert advice and of other assistance
required by the arbitral tribunal, such as site inspection and
expenses for the recording and transcription of the arbitration
proceedings;
(iv) The travel and other expenses of witnesses to the extent
such expenses are provided by the arbitral tribunal;
(v) The costs for legal representation and assistance of the
successful party if such costs were claimed during the
arbitral proceedings, and only to the extent that the arbitral
tribunal determines that the amount of such costs is
reasonable;
(vi) Any fees and expenses of the appointing authority.
(d) The fees of the arbitral tribunal shall be reasonable in
amount, taking into account the amount in dispute, the
complexity of the subject matter, the time spent by the
arbitrators and any other relevant circumstances of the case.
If an appointing authority has been agreed upon by the
parties and if such appointing authority has issued a
schedule of fees for arbitrators in domestic cases which it
administers, the arbitral tribunal, in fixing its fees shall take
that schedule of fees into account to the extent that it
considers appropriate in the circumstances of the case.
If such appointing authority has not issued a schedule of fees
for arbitrators in international cases, any party may, at any
time request the appointing authority to furnish a statement
setting forth the basis for establishing fees which is
customarily followed in international cases in which the
authority appoints arbitrators. If the appointing authority
consents to provide such a statement, the arbitral tribunal, in
fixing its fees shall take such information into account to the
extent that it considers appropriate in the circumstances of
the case.
In cases referred to in paragraph (d) of this Article, when a
party so requests and the appointing authority consents to
perform the function, the arbitral tribunal shall fix its fees only
after consultation with the appointing authority which may
make any comment it deems appropriate to the arbitral
tribunal concerning the fees.
(e) Except as provided in the next paragraph, the costs of
arbitration shall, in principle, be borne by the unsuccessful
party. However, the arbitral tribunal may apportion each of
such costs between the parties if it determines that
apportionment is reasonable, taking into account the
circumstances of the case.
With respect to the costs of legal representation and
assistance referred to in paragraph (c) (iii) of this Article, the
arbitral tribunal, taking into account the circumstances of the
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Notes based on Judge J. Humiding’s Outline
case, shall be free to determine which party shall bear such
costs or may apportion such costs between the parties if it
determines that appointment is reasonable.
When the arbitral tribunal issues an order for the termination
of the arbitral proceedings or makes an award on agreed
terms, it shall fix the costs of arbitration referred to in
paragraph (a) of this Article in the context of that order or
award.
(e) Except as otherwise agreed by the parties, no additional
fees may be charged by the arbitral tribunal for interpretation
or correction or completion of its award under these Rules.
(f) The arbitral tribunal, on its establishment, may request
each party to deposit an equal amount as an advance for the
costs referred to in paragraphs (i), (ii) and (iii) of paragraph
(c) of this Article.
During the course of the arbitral proceedings, the arbitral
tribunal may request supplementary deposits from the
parties.
If an appointing authority has been agreed upon by the
parties, and when a party so requests and the appointing
authority consents to perform the function, the arbitral
tribunal shall fix the amounts of any deposits or
supplementary deposits only after consultation with the
appointing authority which may make any comments to the
arbitral tribunal which it deems appropriate concerning the
amount of such deposits and supplementary deposits.
If the required deposits are not paid in full within thirty (30)
days after receipt of the request, the arbitral tribunal shall so
inform the parties in order that one of them may make the
required payment within such a period or reasonable
extension thereof as may be determined by the arbitral
tribunal. If such payment is not made, the arbitral tribunal
may order the termination of the arbitral proceedings.
After the award has been made, the arbitral tribunal shall
render an accounting to the parties of the deposits received
and return any unexpended balance to the parties
Case: Freuhauf vs TEAMPC37
(On the extent of permissible judicial review over
arbitral awards)
The Parties
Petitioner: Fruehauf Electronics Philippines Corporation
(FEPC) – Lessor
Respondent: Technology Electronics Assembly and
37
GR No. 204197, Nov. 23, 2016
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Management Pacific Corporation (TEAMPC) – Lessee
The Story
1978: Lease Agreement between FEPC and Signetics Corp,
which was good for 25 years (until May 2003)
1986: TEAMPC bought Signetics
1987: FEPC filed an unlawful detainer case vs TEAMPC. But
they entered into a MOA in 1988. TEAMPC promised to pay
FEPC Php14.7M of unpaid rent
1988: Lease Agreement between FEPC and TEAMPC
• 15 years (until June 2003); renewable
• This contract contained an AA.
• It also authorized TEAMPC to sublease the property,
which it did, after notice to FEPC, in 1996, to Capitol
Publishing.
2003: TEAMPC said they won't renew lease anymore. But
Capitol only vacated the premises in March 2005 entered
into a MOA in 1988.
RTC (2004)
Fruehauf instituted a special proceeding "Submission of an
Existing Controversy for Arbitration”, alleging that:
a. when the lease expired, property suffered from
damage that required extensive renovation;
b. TEAMPC failed to turn over the premises and
pay rent; and
c. TEAMPC did not restore the property to its
original condition as required in the contract.
The RTC granted the petition and directed the parties to
comply with the arbitration clause of the contract.
Arbitral Tribunal was formed: 2 retired CA justices, one
lawyer.
Arbitration Proceeding (2008): Issues
1. Did TEAMPC comply with its obligation to return the
leased premises to FEPC in 2003? In what
condition?
2. Is TEAMPC liable for payment of rentals after 2003?
How much and for what period?
3. Is TEAM liable real estate taxes, insurance, and
other expenses after 2003?
4. Who is liable for payment of damages and attorney's
fees and how much?
5. Who is liable for the expenses of arbitration,
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Notes based on Judge J. Humiding’s Outline
including arbitration fees?
6. Did TEAMPC have the obligation to return the
premises to FEPC as a "complete, rentable, and fully
facilitized electronic plant”?
The arbitral tribunal awarded Fruehauf:
• Php 8.2 million as unpaid rent from June 9, 2003
until March 5, 2005; Rationale: Despite the
expiration of the lease in 2003, TEAMPC remained
liable for rentals because it failed to return the
property to FEPC.
• Php 46.8 million as damages. Rationale: TEAMPC
was negligent with the maintenance of the
equipment in the premises, thus, liable for repairs.
RTC (2009)
FEPC filed a petition to partially vacate or modify the arbitral
award.
Ground: The tribunal failed to properly appreciate the facts
and the terms of the lease contract.
Decision: RTC found insufficient legal grounds under
Sections 24 and 25 of the Arbitration Law to modify or vacate
the award. It denied the petition and confirmed the arbitral
award.
TEAM filed a Notice of Appeal. RTC refused to give due
course an ordinary appeal under Rule 41 is not the proper
mode of appeal against an order confirming an arbitral award.
(Section 29)
Appeal to CA
After their MR was denied by the RTC, TEAMPC filed a
petition for certiorari before the CA arguing that the RTC
gravely abused its discretion in: (1) denying due course to its
notice of appeal; and (2) denying the motion to partially
vacate and/or modify the arbitral award.
The CA initially denied the petition.
But upon a MR in 2012, the CA amended its Decision and
ruled in favor of TEAMPC.
It also revisited the merits of the arbitral award and found
several errors in law and in fact, holding that TEAMPC was
not obliged to pay rent because it was Capitol that stayed
and that FEPC was not entitled to repairs on the buildings.
Arbitral award—reversed and set aside.
From CA to SC
Hence, FEPC filed a petition for certiorari under Rule 65
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before the SC.
Ultimately, the SC granted the petition, ruling in favor of
FEPC. The CA's Decision was set aside and the RTC's
Decision of confirmation was reinstated.
SC: The CA breached the bounds of its jurisdiction when it
reviewed the substance of the arbitral award outside of the
permitted grounds under the Arbitration Law.
Main Takeaways
A. Is an arbitral tribunal a quasi-judicial body?
B. What are the remedies or the modes of appeal
against an unfavorable arbitral award?
C. What are the available remedies from an RTC
decision confirming, vacating, modifying, or
correcting an arbitral award?
Quick review: Important concepts in Arbitration
Arbitration is consensual and contractual in character. It is a
purely private mode of dispute resolution. The proceedings,
testimonies, and other records are confidential.
This character of arbitration also gives the parties substantial
autonomy over the proceedings. They may stipulate any
procedure and choose their arbitrators/tribunal. They can
tailor-fit the composition of the tribunal to the nature of the
case. (e.g. Chung Fu case, where the arbitrator appointed
was an engineer on account of the nature of the case, which
involved a construction dispute)
And so special dispute can be resolved by experts on the
subject.
But because arbitrators need not be lawyers, they cannot be
expected to have the same level of legal mastery as that of
a judge.
Hence, there is greater risk that an arbitrator may misapply
law or misappreciate facts, which could then lead to an
erroneous decision.
This risk of error is made larger by the absence of an
effective appeal mechanism.
Generally, the errors of an arbitral tribunal cannot be
corrected by the judiciary.
As an ADR, arbitration is meant to end, not begin litigation.
Hence, an arbitral award is generally final and binding
between the parties who, in the first place, agreed to arbitrate
their future disputes.
But is this absolute? No. See (B).
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Notes based on Judge J. Humiding’s Outline
A. Is an arbitral tribunal a quasi-judicial body?
No. A quasi-judicial body or agency is a creature of law. An
arbitral tribunal is a creature of contract.
(Significance: Quasi-judicial bodies are co-equal with the
RTCs in terms of rank and stature. Thus, appeals go to the
CA via petition for certiorari under Rule 65)
B. What are the remedies or the modes of appeal
against an unfavorable arbitral award?
Take note of the following rules:
1. There can be no appeal (Rule 43) or petition for
certiorari (Rule 65) questioning the merits of the award.
Why? (1) No statutory basis for an appeal, (2) Arbitrators are
not quasi-judicial bodies, and (3) Section 41 of the Special
ADR Rules expressly prohibit it.
2. Remedy: petition to vacate or set aside an arbitral
award under RA 876
The RTC can only vacate or set aside the decision of an
arbitral tribunal on the 4 grounds under RA 876, or if the
arbitrator was disqualified and wilfully refrained from
disclosing such disqualification to the parties.
Note: The grounds to vacate an arbitral award do not pertain
to the correctness of an award, but rather speak of the
conduct and qualifications of the arbitrators.
RA 876, Section 24. Grounds for vacating award. xxx
(a) The award was procured by corruption, fraud, or other
undue means; or
(b) That there was evident partiality or corruption in the
arbitrators or any of them; or
(c) That the arbitrators were guilty of misconduct in refusing
to postpone the hearing upon sufficient cause shown, or in
refusing to hear evidence pertinent and material to the
controversy; that one or more of the arbitrators was
disqualified to act as such under section nine hereof, and
wilfully refrained from disclosing such disqualifications or of
any other misbehavior by which the rights of any party have
been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so
imperfectly executed them, that a mutual, final and definite
award upon the subject matter submitted to them was not
made.
3. Remedy: petition to set aside an arbitral award under
the IRR and SADR
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The RTC can also set aside an arbitral award based on the
6 grounds under Article 34 of the UNCITRAL Model Law
(as restated in Chapter 4 of the IRR of the ADR Act).
Note: These grounds also don't pertain to the correctness of
the award, but rather the validity of the arbitration agreement
and the regularity of the proceedings.
IRR, Chapter 4, Article 4.34. Aplication for Setting Aside
an Exclusive Recourse against Arbitral Award. xxx
(b) An arbitral award may be set aside by the Regional Trial
Court only If:
(i) the party making the application furnishes proof that:
(aa) a party to the arbitration agreement was under some
incapacity; or the said agreement is not valid under the law
to which the parties have subjected it or, failing any indication
thereon, under the law of the Philippines; or
(bb) the party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present his case; or
(cc) the award deals with a dispute not contemplated by or
not failing within the terms of the submission to arbitration, or
contains, decisions on matters beyond the scope of the
submission to arbitration, provided that, if the decisions on
matters submitted to arbitration can be separated from those
not so submitted, only the part of the award which contains
decisions on matters not submitted to arbitration may be set
aside; or
(dd) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties, unless such agreement was in conflict with a
provision of ADR Act from which the parties cannot derogate,
or, falling such agreement, was not in accordance with ADR
Act; or
(ii) the Court finds that:
(aa) the subject-matter of the dispute is not capable of
settlement by arbitration under the law of the Philippines; or
(bb) the award is in conflict with the public policy of the
Philippines.
4. Remedy: petition for correction/modification of an
arbitral award under RA 876
The RTC can correct or modify an award based on the
grounds under RA 876 and the IRR.
Note: This authority granted to the RTC cannot be
interpreted as jurisdiction to “review” the award.
RA 876, Section 25. Grounds for modifying or correcting
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award. xxx
(a) Where there was an evident miscalculation of
figures, or an evident mistake in the description of any
person, thing or property referred to in the award; or
(b) Where the arbitrators have awarded upon a matter
not submitted to them, not affecting the merits of the decision
upon the matter submitted; or
(c) Where the award is imperfect in a matter of form not
affecting the merits of the controversy, and if it had been a
commissioner's report, the defect could have been amended
or disregarded by the court
IRR, Article 4.33. Correction and Interpretation of Award,
Additional Award. (a) Within thirty (30) days from receipt of
the award, unless another period of time has been agreed
upon by the parties:
(i) A party may, with notice to the other party, request the
arbitral tribunal to correct in the award any errors in
computation, any clerical or typographical errors or any
errors of similar nature;
(ii) A party may, it so agreed by the parties and with notice to
the other party, request the arbitral tribunal to give an
interpretation of a specific point or part of the award. xxx
C. Appeal: What are the available remedies from
an RTC decision confirming, vacating,
modifying, or correcting an arbitral award?
1. Motion for Reconsideration (RTC who made the
decision) within 15 days from receipt of order.
2. Appeal from the RTC's ruling.
Before, the basis was RA 876 (Arbitration Law): Petition for
Review on Certiorari under Rule 45, limited to questions of
law, with the SC.
Now, pursuant to the Special ADR Rules (2009): Petition for
Review, with the CA.
Statutory basis: Special ADR Rules (2009)
Rule 19.1. Motion for reconsideration, when allowed. -
A party may ask the Regional Trial Court to reconsider its
ruling on the following: xxx
(h) Confirming, vacating or correcting a domestic arbitral
award; xxx
Rule 19.12. Appeal to the Court of Appeals. - An appeal
to the Court of Appeals through a petition for review under
this Special Rule shall only be allowed from the following final
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orders of the Regional Trial Court: xxx
(e) Confirming, vacating or correcting/modifying a domestic
arbitral award; xxx
Rule 19.26. Certiorari to the Court of Appeals. - When the
Regional Trial Court, in making a ruling under the Special
ADR Rules, has acted without or in excess of its jurisdiction,
or with grave abuse of discretion amounting to lack or excess
of jurisdiction, and there is no appeal or any plain, speedy,
and adequate remedy in the ordinary course of law, a party
may file a special civil action for certiorari to annul or set
aside a ruling of the Regional Trial Court.
A special civil action for certiorari may be filed against the
following orders of the court: xxx
(f) Confirming, vacating or correcting a domestic arbitral
award; xxx
Final Notes
If the RTC is asked to set aside an arbitral award on any
ground other than those provided in the Special ADR Rules,
the court shall entertain such ground for the setting aside or
non-recognition of the arbitral award only if the same
amounts to a violation of public policy.
Rule 19.10. Rule on judicial review on arbitration in the
Philippines. - As a general rule, the court can only vacate or
set aside the decision of an arbitral tribunal upon a clear
showing that the award suffers from any of the infirmities or
grounds for vacating an arbitral award under Section 24 of
Republic Act No. 876 or under Rule 34 of the Model Law in
a domestic arbitration, or for setting aside an award in an
international arbitration under Article 34 of the Model Law, or
for such other grounds provided under these Special Rules.
If the Regional Trial Court is asked to set aside an arbitral
award in a domestic or international arbitration on any
ground other than those provided in the Special ADR Rules,
the court shall entertain such ground for the setting aside or
non-recognition of the arbitral award only if the same
amounts to a violation of public policy.
The court shall not set aside or vacate the award of the
arbitral tribunal merely on the ground that the arbitral tribunal
committed errors of fact, or of law, or of fact and law, as the
court cannot substitute its judgment for that of the arbitral
tribunal.
The court shall not set aside or vacate the award of the
arbitral tribunal merely on the ground that the arbitral
tribunal committed errors of fact, or of law, or of fact and law,
as the court cannot substitute its judgment for that of the
arbitral tribunal.
In other words, simple errors of fact, of law, or of fact and law
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committed by the arbitral tribunal are not justiciable errors in
the Philippines.
TEAMPC agreed to submit their disputes to an arbitral
tribunal. It understood all the risks - including the absence
of an appeal mechanism and found that its benefits (both
legal and economic) outweighed the disadvantages.
Without a showing that any of the grounds to vacate the
award exists or that the same amounts to a violation of an
overriding public policy, the award is subject to confirmation
as a matter of course.
XI. International Arbitration
Sec. 19, RA 9285
SEC. 19. Adoption of the Model Law on International
Commercial Arbitration. – International commercial
arbitration shall be governed by the Model Law onwith the
RTC International Commercial Arbitration (the “Model Law”)
adopted by the United Nations Commission on International
Trade Law on 21 June 1985 (United Nations Document
A/40/17) and recommended for enactment by the General
Assembly in Resolution No. 40/72 approved on 11
December 1985.
Evolution of International Arbitration in the Phils
(Fidel Maximo Diego III)38
Notes:
“Law is a living organism. It is based on a factual and social
reality that has its foundation in the type of behavior that is
deemed acceptable and desirable to society. Law is a
discourse and its connection to this fluid reality implies that it
is too must change. The change can be drastic and easily
identifiable or it can be gradual and cannot sometimes be
seen without the proper distance and perspective. Either way,
the law must be flexible enough to reflect and change in
society without actually creating a gap between it and reality.”
On gaps: Every so often, gaps between reality and the law
will be created. Thus, the law must not just be “logic and
experience” but a renewal which adapts law to the new social
reality.
On international arbitration being the preferred method
for transnational commercial disputes and international
disputes:
a. Foreign investors who are not familiar with local
court procedures may prefer a more neutral process
where that can control the rules;
b. Disputes submitted for arbitration are more speedily
resolved;
38
59 Ateneo LJ 297 (2014)
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c. Parties can appoint someone who is an expert on
the subject matter; and
d. Arbitration proceedings are confidential.
On the nature of Special ADR Rules (SADR)
proceedings: All proceedings under the SADR are special
proceedings. A special proceeding is one where a party
seeks to establish or declare a status or right of a party, or a
particular fact. (In comparison, an ordinary civil action is one
where a party seeks protection and enforcement of a right,
or for the prevention or redress of a wrong.)
SADR proceedings are non-litigious and summary in nature.
Included in this nature is the separability of the arbitration
clause, that is, it remains valid even if the contract to which
it is a part of ends or is rendered void.
On venue: The petition to recognize and enforce a foreign
arbitral award is filed with:
a. RTC where the assets to be attached or levied upon
is located;
b. RTC where the act to be enjoined is being
performed;
c. RTC of the principal place of business (of either
party) in the Philippine;
d. RTC where any of the parties reside (if individuals);
or
e. RTC in the National Capital Judicial Region.
On ‘filing fees’ in connection with the case of Mijares vs
Ranada (2005): Here, victims of human rights violations
asked the RTC of Makati for the enforcement of a foreign
award (2.25 billion dollars) rendered by the US District Court
of Hawaii.
The defendant in this case was the Marcos Estate. They
moved for the dismissal of the case, arguing that the
petitioners only paid the minimal filing fee of Php 410. Based
on the amount of award, the filing fees should’ve been Php
472,000,000, they said. This is in application of the rule on
actions capable of pecuniary estimation.
The SC ruled in favor of the petitioners, holding that although
the judgment was indeed capable of pecuniary estimation, it
is also an action based on a judgment against an estate.
Therefore, it is included in the scope of “other actions not
involving property” which only required the minimal filing fee.
The SADR provides that a petitioner seeking enforcement of
foreign arbitral awards is required to pay the minimal filing
fee payable in “all other actions not involving property”.
On the court’s power to refuse to recognize and enforce
foreign arbitral awards: Rule 13.4 of the SADR states that
a Philippine court shall not set aside a foreign arbitral award.
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It may only refuse to recognize and enforce it on the following
grounds:
a. The party making the application to refuse
recognition and enforcement proves that:
i. A party to the arbitration agreement was
under some incapacity; or the agreement is
not valid under the law;
ii. The party asking for refusal was not given
proper notice of the appointment of an
arbitrator or of the proceedings; or he was
unable to present his case;
iii. The award deals with a dispute not
contemplated by the terms of the
submission to arbitration; or is beyond its
scope;
iv. The composition of the tribunal or the
procedure was not in accordance with the
agreement, or failing such agreement—of
the law where the arbitration took place; or
v. The award has not yet become binding on
the parties or has been set aside or
suspended by a court of the country in which
the award was made; or
b. The court finds that:
i. The subject matter of the dispute is not
capable of settlement or resolution by
arbitration under Philippine laws; or
ii. The recognition or enforcement of the award
would be contrary to public policy.
Which rule governs the enforcement of foreign awards?
It is the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (June 7, 1959). The SADR has
merely adopted and reiterated the rules of said Convention.
Hence, the RTC cannot entertain any other ground that is not
in the list above.
It is also important to point out that local courts cannot annul
foreign arbitral awards. Local courts can only refuse their
recognition and enforcement. Hence, even if a foreign award
is not recognized in the Philippines, it remains to be valid.
The issue of the validity of a foreign arbitral award remains
within the exclusive jurisdiction of the foreign tribunal.
May a foreign arbitral award made in a country that is
not a party to the Convention still be recognized?
Yes. The SADR provides that the court can recognize and
enforce a foreign arbitral award made in a country not a
signatory to the Convention when such country extends
comity and reciprocity to awards made in the Philippines.
These awards are “presumptively valid”.
If the country doesn’t extend comity and reciprocity, the local
courts may nevertheless treat such award as a foreign
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judgment enforceable as such under Section 48, Rule 39 of
the Rules of Court.
The decision of the RTC to recognize and enforce an award
is immediately executory (because it is summary in nature).
Are appeals allowed for decisions concerning foreign
arbitral awards?
Yes, but only on the following instances:
a. Orders of the RTC recognizing and enforcing foreign
arbitral award; and
b. Orders of the RTC refusing to recognize and enforce
a foreign arbitral award.
The SADR prohibits the parties from filing an appeal to
question the merits of a foreign arbitral award. The RTC
cannot review the findings of the arbitrator nor substitute its
own findings.
Moreover, even if an appeal based on the allowable grounds
is perfected, it will not stay the award.
On the gaps that are still left unfilled by the local laws:
Both the SADR and the ADR Law do not have provisions
which categorically state that foreign arbitral awards are
conclusively binding in the Philippines.
In the case of National Power Corporation vs Alonzo-
Legasto (2004), the SC held that an arbitration award is not
absolute. If the conditions under Arts. 2038, 2039, and 2040
of the NCC (these are the instances where contracts may be
annulled) are present, the award may be annulled.
So what’s next?
In December 2012, the SC, together with UP Law Center and
the IBP, launched a project to overhaul the current Rules of
Civil Procedure. Many provisions have been regarded as
“antiquated” and no longer relevant to our needs.
In May 2013, the SC released the First Draft of the Revised
Rules of Civil Procedure. This Draft adds a new provision
specifically for the recognition and confirmation of foreign
arbitral awards:
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This addresses the shortcomings of the SADR and the ADR
Law. It will “clear the cloud on whether foreign arbitral awards
are conclusively binding or only presumptively valid against
the parties.”
Conclusion
International arbitration law in the Philippines is almost 100
years old. The past, present and future evolution of such law
can be divided into 4 stages:
1. When the courts disfavored it;
2. When the courts favored it;
3. When it is treated as presumptively valid; and
4. When it will be treated as conclusively binding.
Today, Singapore and Hongkong are considered as the
world’s arbitration hubs. With “the imminent revision of the
Rules of Civil Procedure and the acruity of the Filipinos to the
English language”, the Philippines could easily become an
important venue for the settlement of international disputes.
Commercial Arbitration in the Phils.
(Francisco Lim)39 & Parlade notes40
Calvo Doctrine (1868): “Disputes involving foreign
investments must be resolved using the legal processes of
the place where the investment is located.”
Chan Linte vs Law Union and Rock Insurance: The first
case where the Supreme Court of the Philippines recognized
the validity and potential relevance of arbitration as a mode
of dispute resolution
New Civil Code (1950)
Art. 2042: “Same persons who may enter into a compromise
39
46 Ateneo LJ 394 (2001)
40
Summary by Group 1 (Stephen Saavedra, et al.)
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may submit their controversies to one or more arbitrators for
decision.”
Art. 2046: The procedure will be contained in the ROC
Republic Act 876 (1953)
Arbitration Law supplemented the provisions of the NCC on
arbitration and provided its procedure.
Problem Area: Lack of Provision on Enforcement of Foreign
Award
Solution: Apply the Rules of Court
Did this do the trick? No. Under Rule 39, Section 48 of the
Rules on Civil Procedure (1997), foreign arbitral awards
were not automatically binding, but merely presumptive
evidence.
Ratification of the New York Convention (1967)
Each Contracting State shall recognize arbitral awards as
binding and enforce them in accordance with the rules of
procedure of the territory where the award is relied upon,
under the conditions laid down in the following articles. There
shall not be imposed substantially more onerous conditions
or higher fees or charges on the recognition or enforcement
of arbitral awards to which this Convention applies than are
imposed on the recognition or enforcement of domestic
arbitral awards.41
Alternative Dispute Resolution Law (2004)
• Strengthened the provision of the Civil Code and RA
876 on International Arbitration
• Korea Technologies case was decided where the
Supreme Court stressed that domestic and
international arbitration must have different
procedures in terms of recognition of awards
• Gave way to the creation of the SADR
Special Rules of Court on ADR or SADR (2009)
• Promulgated by the Supreme Court
• SADR proceedings are special proceedings
• The RTC’s inquiry is only limited on WON the foreign
arbitral award should be recognized
International Commercial Arbitration
An arbitration is "commercial" if it covers matters arising from
all relationships of a commercial nature, whether contractual
41
Article III, Convention on the Recognition and Enforcement of
Foreign Arbitral Awards or the NY Convention
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or not.
Relationships of transactions: any trade transaction for
the supply or exchange of goods or services; distribution
agreements; construction of works; commercial
representation or agency; factoring; leasing, consulting;
engineering; licensing; investment; financing; banking;
insurance; joint venture and other forms of industrial or
business cooperation; carriage of goods or passengers by
air, sea, rail or road.
UNCITRAL
In 1985, the UNCITRAL adopted the MODEL LAW, short for
the UNCITRAL Model Law on International Commercial
Arbitration.
We adhere to it as the law governing the procedure of
international commercial arbitration.
The reason? Because of the ADR Law. (Sec 19)
RATIONALE: Because, we, like the rest of the world, desire
uniformity of the law of arbitral procedures.
The model law is said to reflect a world-wide consensus on
the principles and important issues of international arbitration
practice.
The arbitration law that may be adopted by the state that
follows the model law applies as lex specialis.
(Example: It works to the exclusion of all other non-treaty
laws wherever they may be contained)
Nonetheless, it is subject to other treaties on arbitration (i.e.:
UN Convention on Carriage of Goods by the Sea, New York
Convention).
Matters not covered:
• Arbitrability of the SM of the dispute
• Capacity of the parties to enter into arbitration
agreement
• State immunity from suit
• Enforcement by national courts of interim measures
of protection granted by an arbitrator
• Competence of an arbitrator to reform the contract
• Fixing of arbitration fees
• Request for and making a deposit for fees
• Time limit of an award
• Consolidation of arbitral proceedings
• Contractual relations between arbitrators and parties
• Security for fees or costs or period of time for the
enforcement of arbitral awards
• The enforcement of interim measures of protection
granted by arbitrators
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• The manner of enforcing arbitral awards
• Definition of arbitration
• Interpretation of arbitration agreements
• Duties and liability of arbitrators
• Remuneration of arbitrators
• Prescription
• Res Judicata
• Costs, interest
• Capacity
• Discharge of arbitration agreement
• Multi-partite proceedings
• Court assistance in appointing arbitrators
• Dispute as to venue if not indicated
They are covered by the arbitration law of the State. Take
note however, that the states, under Art. 2 (d) of the model
law, may appoint a third person to resolve the
abovementioned issues.
In enacting the ADR Law, the Congress made no attempt to
fill in gaps because of the difficulty of doing so.
They also viewed the modification as not contributing to
uniformity of the proceedings.
Territorial Scope
According to the model law, whose arbitration laws should
be followed? Territory of the investment.
According to the model law, where does the arbitration
proceedings take place? Stipulation in the agreement.
Model law adopts the territorial criterion over the autonomy
criterion for these reasons:
• Widely accepted by national laws of majority of the
states.
• Avoid conflicts/ Takes away the burden from the
parties or the foreign court in choosing where to
arbitrate
Exceptions:
a. A national court is required to refer parties to
arbitration
b. Interim measure of protection
c. Recognition and enforcement of the foreign award
d. A national court may refuse an application for
recognition and enforcement of foreign award
ADR Law applies, even if the arbitration proceedings is held
in a foreign country.
When is a dispute international?
1. The parties to an arbitration agreement have, at the time
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of the conclusion of that agreement, their places of business
in different States; or
2. One of the following places is situated outside the State in
which the parties have their places of business:
(a) the place of arbitration if determined in, or
pursuant to, the arbitration agreement;
(b) any place where a substantial part of the
obligations of the commercial relationship is to be
performed or the place with which the subject-matter
of the dispute is most closely connected; or
(c) the parties have expressly agreed that the
subject matter of the arbitration agreement relates to
more than one country.
Art. 1, Sec. 4 of the Model Law provides:
For the purposes of paragraph (3) of this article:
(a) if a party has more than one place of business, the place
of business is that which has the closest relationship to the
arbitration agreement;
(b) if a party does not have a place of business, reference is
to be made to his habitual residence
Test of internationality
1. Place of business – Are the places of business of the
parties in different states?
2. Place of arbitration – Is the stipulated venue in a foreign
state?
3. Place of performance – Is the obligation to be performed
outside the place of business of the parties?
4. Place of Subject Matter of Arbitration Agreement – Is the
subject matter of the arbitration agreement related to more
than one state?
Art. 1, Sec. 5 of the Model Law provides:
“This Law shall not affect any other law of this State by virtue
of which certain disputes may not be submitted to arbitration
or may be submitted to arbitration only according to
provisions other than those of this Law.”
Section 20 of the ADR Law mandates our courts that in
deciding the interpretation of the model law, it must consider
the interpretation of the foreign courts as well as the travaux
preparatoires of the UNCITRAL.
The model law recognizes both Institutional Arbitration and
Ad Hoc Arbitration.
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Because of the generality of the definition provided by the
model court, it is as if it lets the party-states decide as to
which court would have jurisdiction over arbitration.
In the Philippines, the court refers to the Regional Trial Court.
Written Communications
Unless otherwise agreed by the parties:
a. any written communication is deemed to have been
received if it is delivered to the addressee personally
or if it is delivered at his place of business, habitual
residence or mailing address;
b. if none of these can be found after making a
reasonable inquiry, a written communication is
deemed to have been received if it is sent to the
addressee’s last-known place of business, habitual
residence or mailing address by registered letter or
any other means which provides a record of the
attempt to deliver it
The communication is deemed to have been received on the
day it is so delivered.
Exceptions: communications in court proceedings.
Waiver of Objections
A party who knows that any provision of this Law from which
the parties may derogate or any requirement under the
arbitration agreement has not been complied with and yet
proceeds with the arbitration without stating his objection to
such non-compliance without undue delay or, if a time-limit
is provided therefor, within such period of time, shall be
deemed to have waived his right to object.
A party deems to waive his right to object if all these
requisites are met:
A. There is a procedural requirement that has not been
complied with which is non-mandatory under the Model Law
B. The party knew of such compliance
C. The party proceeds with arbitration without objections
D. The party failed to state his objection within a
reasonable period of time and in the manner provided in the
law or arbitration agreement
Court Intervention
“In matters governed by this Law, no court shall intervene
except where so provided in this Law.”
General Rule: “Courts must yield to the primary jurisdiction
of the Arbitral Tribunal”
Exception (When can the RTC intervene): SADR, following
Section 6 of the Model Law, provides the following:
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• Relief on the issue of Existence, Validity, or
Enforceability of the Arbitration Agreement;
• Referral to Alternative Dispute Resolution ("ADR");
• Interim Measures of Protection;
• Appointment of Arbitrator;
• Challenge to Appointment of Arbitrator;
• Termination of Mandate of Arbitrator;
• Confirmation, Correction or Vacation of Award in
Domestic Arbitration;
• Recognition and Enforcement or Setting Aside of an
Award in International Commercial Arbitration;
• Recognition and Enforcement of a Foreign Arbitral
Award;
• Confidentiality/Protective Orders; and
• Deposit and Enforcement of Mediated Settlement
Agreements.
• Assistance in Taking Evidence;
• Confirmation, Correction or Vacation of Award in
Domestic Arbitration;
• Recognition and Enforcement or Setting Aside of an
Award in International Commercial Arbitration;
• Recognition and Enforcement of a Foreign Arbitral
Award;
• Confidentiality/Protective Orders; and
• Deposit and Enforcement of Mediated Settlement
Agreements.
Arbitration Agreement
They may be found in an arbitration clause within the
contract of the parties, or in a separate document.
Forms:
a. In a document duly signed by the parties;
b. In an exchange of letters, telegrams, telexes, or
other means of telecommunications that provide a
record of the agreement;
c. In an exchange of statements of claims and
defenses in which the existence of an arbitration
agreement is alleged by one party and not denied by
another;
d. In a document supplementing the original contract
Are third parties bound to an Arbitration Agreement?
Arbitration is a contractual relation.
Hence, as a general Rule: No. Those who are bound are the
parties, their heirs, and their assigns.
But, in the Philippines, there is an exception provided in the
ADR Act of 2004. The third party would refer to the court in
cases where two parties to a civil action agreed beforehand
in writing to settle the dispute via arbitration.
Other notable exceptions are those laid down in the
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UNCITRAL Secretary General’s report on Settlement of
Commercial Disputes:
A. Stipulation pour autrui;
B. Third party rights and obligations under arb.
Agreements following assignment or novation underlying
contract to the third party;
C. Third party rights and obligations under arb.
Agreements where the third party exercises subrogated
rights;
D. Rights and obligations under arbitration agreements
where interests in contracts are asserted by successors to
parties, following merger or demerger of companies, so
that corporate entity is no longer the same.
Issues Concerning Arbitration Agreements
When an agreement exists but the parties did not sign to it
Answer:
• Partial performance of the contract
• By reason of custom, it is valid;
• Failure to object within a period of time and in the
required form
Exception: When the contract is entered into by a broker or
agent. In cases when the principal is unaware or did not
consent thereto, there is a void arbitration agreement
When there is incorporation by reference: It may be valid if it
is such as to make the subsequent document a part of the
former document.
What if it were in bills of lading?: Yes, they are binding
because they are part of customary practice. Even if the
parties’ names are not specified therein.
Agreement is found in the rules of an association: It binds the
members.
Exceptions: The member was not shown a copy, or the rules
were amended to include the arbitration agreement and the
member who is a party to the case dissents to such
amendment
Agreement requires a condition precedent
Mia and Stephanie, the parties to a conflict, were employees
working at Xian Corporation. Under their sub-contract, they
had to refer the issue to Atty. Masedman, and later to
arbitration if they both disagreed with Atty. Masedman’s
conclusion. But Mia commenced an action against
Stephanie, asking for an order of reference for arbitration,
because the arbitration agreement was void for containing a
condition precedent.
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Is Mia correct?
In Westco Air vs Sui Chong, it was held that such a
contention was wrong. The prior referral was only a first
instance procedure, and was not inconsistent with arbitration.
Therefore, arbitration can be had.
What if the contract containing the arbitration agreement is
terminated?
Danielle entered into a contract of sale with Danice for two
tractors. The contract contained an arbitration agreement if
there are issues that will arise. The money was paid and the
tractors delivered. Then, for some reason Danice wanted to
file a case against Danielle in connection with the transacion.
Danielle invokes the arbitration agreement. Danice
disagrees, saying that the contract of sale was already
extinguished.
Is Danice correct?
No. In Jiangxi Metal vs Sulanser, it was ruled that the
agreement is still binding despite the termination of the
original contract, following the doctrine of separability of the
Arbitration Agreement.
Substantive Claims before the Court
Article 8 of the Model Law provides that the court, to which
a dispute with an arbitration agreement is submitted to, must
refer that dispute to arbitration unless it is void, inoperative
or incapable of performance.
Arbitration may still continue or commence and an award be
made while the issue is pending in court.
Presumption of arbitrability
A court is called to resolve the doubt in favor of arbitration.
Exception: If, upon looking into the facts and jurisprudence
relating to the model law, the court can easily rule that it is
void, inoperative, or incapable of performance
(unenforceable).
(Also read Parlade pp. 15-102)
Composition of Arbitral Tribunal
Chapter 4, Rule 3, IRR
Article 4.10 Number of Arbitrators. The parties are free to
determine the number of arbitrators Failing such
determination, the number of arbitrators shall be three (3).
Article 4.11. Appointment of Arbitrators. (a) No person
shall be produced by reason of his/her nationality from acting
as an arbitrator, unless otherwise agreed by the parties.
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(b) The parties are free to agree on a procedure of appointing
the arbitrator or arbitrators, subject to provisions of
paragraphs (d) and (e) of this Article.
(c) Failing such agreement:
(i) in an arbitration with three (3 ) arbitrators, each party shall
appoint one arbitrator, and the two (2) arbitrators thus
appointed shall appoint the third arbitrator; if any party fails
to appoint the arbitrator within thirty (30) days of receipt of a
request to do so from the other party, or if the two (2)
arbitrators fail to agree on the third arbitrator within thirty
days (30) days of their appointment shall be made, upon
request of a party, by the appointing authority;
(ii) in an arbitration with a sole arbitrator, if the parties are
unable to agree on the arbitrator, he/she shall be appointed,
upon request of a party, by the appointing authority.
(d) Where, under an appointment procedure agreed upon
the parties,
(i) a party fails to act as required under such procedure, or
(ii) the parties , or two arbitrators, are unable to reach an
agreement expected of them under such procedure, or
(iii) a third party, including an institution, fails to perform any
function entrusted to it under such procedure,
Any party may request the appointing authority to take the
necessary measure to appoint an arbitrator, unless the
agreement on the appointment procedure provides other
means for securing the appointment.
(e) A decision on a matter entrusted by paragraphs (c) and
(d) of this to the appointing authority shall be immediate
executory and not be subject to a motion for reconsideration
or appeal. The appointing authority shall have in appointing
an arbitrator, due regard to any qualifications required of the
arbitrator by the agreement of the parties and to such
considerations as are likely to secure the appointment of an
independent and impartial arbitrator and, in the case of a sole
or third arbitrator , shall take into account as well the
advisability of appointing an arbitrator of a nationality other
than the Rules of Court of the Special ADR Rules.
Article 4.12 Grounds for Challenge. (a) When a person is
approached in connection with his/her possible appointment
as an arbitrator, he/she impartiality or independence. An
arbitrator, from the time of his/her appointment and
throughout the arbitral proceedings shall, without delay,
disclose any such circumstance to the parties unless they
have already been informed of them him/her.
(b) An arbitrator may be challenged only if circumstances
exist that give rise to justifiable doubts as to his/her
impartiality or independence, or if he/she does not possess
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qualifications agreed to by the parties. A party may challenge
an arbitrator appointed by him/her, or in whose appointment
he/she has participated, only for reasons of which he/she
becomes aware after the appointment has been made.
Article 4.13. Challenge Procedure. (a) The parties are free
to agree on a procedure for challenging an arbitrator, subject
to the provisions of this Article.
(b) Failing such agreement, a party who intends to challenge
an arbitrator shall, within fifteen (15) days after becoming
aware of the constitution of the arbitral tribunal or after
becoming aware of any circumstances referred to in
paragraph (b) of Article 4.12 (Grounds for Challenge,) send
a written statement of the reasons for the challenge to the
arbitral tribunal. Unless the challenged arbitrator withdraws
from his/her office or the other party agrees to the challenged
arbitrator withdraws from his/her office or the party agrees to
the challenge, the arbitral tribunal shall decide on the
challenge.
(c) If a challenge under any procedure agreed upon by the
parties or under the procedure of paragraph (b) of this Article
is not successful, the challenging party may request the
appointing authority, within thirty (30) days after having
received notice of the decision rejecting the challenge, to
decide on the challenge, which decision shall be immediately
executory and not subject to motion for reconsideration or
appeal. While such a request is pending, the arbitral tribunal,
including the challenged arbitrator, may continue the arbitral
proceedings and make an award.
A party may bring a petition under this Article before the court
in accordance with the Rules of Court or the Special ADR
Rules.
Article 4.14. Failure or Impossibility to Act. (a) If an
arbitrator becomes de jure or de facto unable to perform
his/her functions or for other reasons fails to act without
undue delay, his/her mandate terminates if he/she withdraws
from his/her office or if the parties agree on the termination.
Otherwise, if the controversy remains concerning any of
these grounds, any party may request the appointing
authority to decide on the termination of the mandate, which
decision shall be immediately executory and not subject for
motion for reconsideration or appeal.
(b) If, under this Article or paragraph (b) of Article 4.13
(Challenge Procedure), an arbitrator withdraws from his/her
office or a party agrees for termination of the mandate of an
arbitrator, this does not imply acceptance of the validity of
any ground referred to in this Article or in paragraph (b) of
Article 4.12 (Grounds for Challenge).
Article 4.15. Appointment of Substitute Arbitrator. Where
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the mandate of an arbitrator terminates under Articles 4.13
(Challenge Procedure) and 4.14 (Failure or Impossibility to
Act) or because of his/her withdrawal from office for any
other reason or because of the revocation of his/her mandate,
a substitute arbitrator shall be appointed according to the
rules that were applicable to the appointment of the arbitrator
being replaced.
(Also read Parlade pp. 103-150)
Setting aside of Arbitral Award Due to Improper
Constitution of Tribunal
(Susanne Heck & Niharika Dhall) 42
Antecendents: The case involved a dispute in relation to a
1986 lease agreement for a thermal bath. The agreement
contained an arbitration clause for settlement of disputes by
a three-member Tribunal seated in Germany.
2010: When disputes arose between the parties, the matter
was referred to ad hoc arbitration in accordance with the
agreement. Each Party appointed an arbitrator, and the two
arbitrators appointed the Chairperson.
One of the Parties (later, the Complainant) lodged a petition
to challenge the appointment of the chairperson, asking that
he be disqualified on the ground of bias.
The application was heard by the Tribunal but the challenge
was dismissed. Subsequently, the Complainant appealed
the decision of the Tribunal in the Higher Regional Court
(HRC) of Munich (equivalent to our RTC).
While that appeal was pending, the arbitral tribunal
continued with the arbitration proceedings.
April 2013: The Tribunal rendered an award against the
Complainant.
January 2014: The appeal was decided by the HRC and this
time, it was in decided favor of the Complainant.
The Court found the challenge justified because the
chairperson was not able to thoroughly destroy the lodged
reasonable doubts regarding his independence and
impartiality in a responding statement. Irrespective of an
actual existence of bias, the Court found these
circumstances to constitute objective reasons for a justified
disqualification of the Chairperson since objectively incorrect
statements as the one given by the Chairperson are also apt
to raise doubts regarding an arbitrator’s due diligence.
Petition to Set Aside the Award: The Complainant then
filed an application to set aside the award rendered by the
Tribunal on the ground that because the Chairperson was
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found to be biased, the constitution of the Tribunal was not
in accordance with law or the agreement of the Parties.
Issue: Whether a unanimous award could be set aside if the
appointment of one of the three arbitrators was successfully
challenged.
In other words, if an award had already been rendered in
favor of one party. May it be set aside because of a
subsequent decision approving the disqualification of one of
the arbitrators?
Contention of adverse party: They argued the decision of
the Tribunal had been unanimous and therefore, the bias of
the Chairperson had no impact on the award.
The two other arbitrators also submitted a statement, arguing
that the award was valid as the bias of the Chairperson had
no impact on the decision of the Tribunal. Even if the Tribunal
were to be re-constituted, the same award would be
rendered as the two arbitrators would retain the majority vote.
German Court: The Court did not accept this line of
reasoning. It rendered a decision to set aside the award.
In examining the degree to which the bias of one arbitrator
affected a unanimous award, the Court opined that the
standard for determining the same should not be very high.
In fact, whether or not the award was unanimous has no
bearing on a finding under the German laws.
The German Arbitration Law is based on the UNCITRAL
Model Law and provides that an arbitral award may be set
aside in the Courts of the lex arbitri (where the arbitration
took place) if the composition of the arbitral tribunal or the
arbitral procedure was not in accordance with the German
Code or the agreement of the parties, and this presumably
affected the award (Section 1059(2)(d) of the German Code
of Civil Procedure, Zivilprozessordnung).
Similarly, the Court held that the statement given by the two
party-appointed arbitrators that a re-constituted Tribunal
would also reach the same decision, had no probative value.
The biased arbitrator was an inherent part of the Tribunal and
participated in the arbitral proceedings. His bias could
potentially have influenced the other arbitrators through his
participation in meetings and deliberations. Thus, as his
mere presence on the Tribunal presumably affected the
award, it was not necessary to substantiate with evidence or
a specific finding the causal link between the improper
constitution of the Tribunal and the impugned award.
On a side-note, the Court emphasized that the statement
given by the two arbitrators even worsened the situation, by
raising doubts regarding their impartiality and the
qualification, too.
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This judgement of the Court is a well-reasoned decision and
reflects upon an important aspect, the inter-dependence of
arbitral proceedings on the Courts of the lex arbitri.
Had the decision of the Court been handed down in time, the
Chairperson would have had to recuse himself and the
Tribunal may have reached a different decision. The fact that
the Court reached a decision regarding the challenge of the
Chairperson after a unanimous award had been rendered,
cannot lead to a situation wherein the protection of Section
1059(2)(d) is nullified.
However, it would be interesting to see how this matter
proceeds now since the German law is silent on whether the
re-constituted Tribunal shall commence proceedings from
the beginning.
In this regard, even the UNCITRAL Model law does not
provide any guidance on whether the arbitral tribunal, on re-
constitution, shall determine if and to what extent the
proceedings shall be repeated.
Ultimately, the parties will have to reach an agreement on
how to proceed in this matter. Ideally, the two arbitrators
should recuse themselves altogether from the proceedings
in the light of the statement submitted by them since that
raised doubts regarding the arbitrators’ impartiality.
Failing this, the Complainant may attempt to challenge the
two based on their statement.
If the parties have not agreed on a procedure for the recusal,
the legal obstacle for the Complainant the two-week time
limit for an application for recusal which is provided in
Section 1037 (2) in the German Code of Civil Procedure.
In favor of the Complainant, it can be argued that the two
week time limit would start from the date of composition of
the new Tribunal, i.e. the appointment of the new
Chairperson by the two arbitrators. Because only then would
the Complainant gain knowledge of the actual composition
of the new Tribunal.
If the Tribunal again rejects the application, the Complainant
can again approach the Court. It is clear that this last step
would most certainly destroy the remaining credibility of the
two arbitrators.
The decision of this case is an explicit advice to future
arbitrators in a similar situation to desist from giving such a
statement in view of the principle of confidentiality of
deliberation.
Furthermore, this case is also an example of instances
where it can be argued that the Tribunal should have
suspended the proceedings till the Court decided on the
Complainant’s appeal.
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Either way, this judgement is relevant for all jurisdictions
which follow the UNCITRAL Model Law.
Jurisdiction of Arbitral Tribunal
Rule 4, IRR
Article 4.16. Competence of Arbitral Tribunal to Rule on
its Jurisdiction. (a) The arbitral tribunal may rule on its own
jurisdiction, including any objections with respect to the
existence or validity of the arbitration agreement or any
condition precedent to the filing of the request for arbitration.
For that purpose, an arbitration clause, which forms part of a
contract shall be treated as an agreement independent of the
other terms of the contract. A decision by the arbitral tribunal
that the contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause.
(b) A plea that the arbitral tribunal does not have jurisdiction
shall be raised not later than the submission of the statement
of defense (I.e., in an Answer or Motion to Dismiss). A party
is not precluded from raising such plea by the fact that he/she
has appointed, or participated in the appointment of, an
arbitrator. A plea that the arbitral tribunal is exceeding the
scope of its authority shall be raised as soon as the matter
alleged to be beyond the scope of its authority is raised
during the arbitral proceedings. The arbitral tribunal may, in
either case, admit a later plea if it considers the delay justified.
(c) The arbitral tribunal may rule on a plea referred to in
paragraph (b) of this Article either as a preliminary question
or in an award on the merits. If the arbitral tribunal rules as a
preliminary question that it has jurisdiction, any party may
request, within thirty (30) days after having received notice
of that ruling, the Regional Trial Court to decide the matter,
which decision shall be immediately executory and not
subject to motion for reconsideration or appeal. While such
a request is pending, the arbitral tribunal may contribute the
arbitral proceedings and make an award.
Article 4.17. Power of Arbitral Tribunal to Order Interim
Measures. (a) Unless otherwise agreed by the parties, the
arbitral tribunal may, at the request of the party, order any
party to take such interim measures of protection as the
arbitral tribunal may consider necessary in respect of the
subject to matter of the dispute following paragraph (c) of this
Article. Such interim measures may include, but shall not be
limited to, preliminary injunction directed against a party,
appointment of receivers, or detention, preservation,
inspection of property that is the subject of the dispute in
arbitration.
(b) After constitution of the arbitral tribunal, and during
arbitral proceeding, a request for interim measures of
protection, or modification thereof shall be made with the
arbitral tribunal. The arbitral tribunal is deemed constituted
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when the sole arbitrator or the third arbitrator, who has been
nominated, has accepted the nomination and written
communication of said nomination and acceptance has been
received by the party making the request.
(c) The following rules on interim or provisional relief shall be
observed:
(i) Any party may request that the interim or provisional relief
shall be observed:
(ii) Such relief may be granted:
(aa) To prevent irreparable loss or injury;
(bb) To provide security for the performance of an obligation;
(cc) To produce or preserve evidence
(dd) To compel any other appropriate acts or omissions.
(iii) The order granting provisional relief may be conditioned
upon the provision of security or any act or omission
specified in order.
(iv) Interim or provisional relief is requested by written
application transmitted by reasonable means to the arbitral
tribunal and the party against whom relief is sought,
describing in appropriate details of the precise relief, the
party against whom the relief is requested, the ground for the
relief, and the evidence, supporting the request.
(v) The order granting or denying an application for the
interim relief shall be binding upon the parties.
(vi) Either party may apply with the court for assistance in
implementing or enforcing an interim measure ordered by an
arbitral tribunal.
(vii) A party who does not comply with the order shall be
liable for all damages, resulting from noncompliance,
including all expenses, and reasonable attorney's fees, paid
in obtaining the order's judicial enforcement
(Also read Parlade pp. 151-180)
Jurisdiction of the Arbitral Tribunal: Current
Jurisprudence and Problem Areas under UNCITRAL
Model Law
(Prof. Dr. Alan Uzelac)43
This article deals with: (a) the procedural issues of the
determination of the jurisdiction (or lack of the jurisdiction) of
the arbitral tribunal; (b) the consequences of the arbitral
jurisdiction, such as its impact on the court proceedings
regarding the same claims; and (c) the authority of the
arbitrators to issue interim measures of protection.
These issues regard the following provisions of the
UNCITRAL Model Law on International Commercial
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Arbitration (MAL)
1. Art.8 (Arbitration and substantive claim before court)
2. Art.16 (Competence of arbitral tribunal to rule on its
jurisdiction)
3. Art.17 (Power of arbitral tribunal to order interim
measures)
4. Art.34(2)(a)(i) (Application for setting aside due to
lack of jurisdiction—incapacity of the parties or
invalidity of the agreement)
5. Art.36(1)(a)(i) (Refusal of recognition and
enforcement of the award due to lack of jurisdiction)
On Article 16
Doctrine of Kompetenz Kompetenz: the right of the
arbitrators to rule on their own jurisdiction
Practically all countries recognize this doctrine, subject to the
subsequent court control.
There is now a ‘‘wide consensus that the arbitral tribunal has
the power to rule on all aspects of its own jurisdiction’’.
Reported decisions have showed that the courts recognize
the right of the arbitral tribunal to determine:
a. whether arbitration agreement exists between the
parties
b. whether the matter in dispute comes within the
scope of the arbitration agreement
c. what is the proper interpretation of the arbitration
agreement
d. whether the arbitration agreement is valid or was
terminated
Doctrine of separability (or severability): reflected in the
last two sentences of Art.16(1), is now also a part of the
universal consensus among arbitration practitioners,
accepted by most legal systems of the world.
Courts have widely recognized that arbitral agreements are
independent from the main contract, so that invalidity of the
latter does not necessarily affect binding force of the former.
For example, even if arbitrators find that the main contract is
null and void ab initio, even owing to fraudulent behavior of
a party or the parties, but that arbitral clause continues to be
operative, providing arbitrators with authority to decide on
the consequences of the nullity of the main contract.
Is the arbitrator/tribunal’s ruling on their jurisdiction
separate from, or part of, the final award?
One court held that decision to postpone the ruling on
jurisdiction until the rendition of the final award, cannot be
attacked, but only setting-aside proceedings could review
whether the arbitrators erred in finding that they are
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competent to decide.
If the arbitral tribunal decides on the issue of jurisdiction as a
preliminary question, and concludes that it has jurisdiction,
this ruling may be subject to challenge under MAL Art. 16(3).
Regularly, the competent authority will be a state court.
However, in some jurisdictions that is not necessarily so.
In Croatia—whose Law on Arbitration departs slightly from
the text of the MAL—parties may transfer the authority to
control separate decisions on jurisdiction to some other
authority. Thus, Croatian courts have already confirmed that
the arbitration rules of an arbitration institution may replace
court control.
On Article 8: submitting substantive claim to the court
Just the same as the arbitrators cannot rule on their
jurisdiction unless an objection was raised by the respondent
in the arbitral proceedings, the court to which a substantive
claim for which arbitration was agreed upon cannot consider
this fact on its own initiative.
A plea as to the lack of jurisdiction in the court proceedings
has to be submitted by the respondent in due time—under
Art 8(1) MAL—not later than when submitting the first
statement on substance of the dispute. Belated objections
regularly cannot be taken into account, as the lack of
objection has to be construed as the waiver of the right to
request referral to arbitration.
Moreover, the lack of timely objections in the court
proceedings may be construed as termination of the
arbitration agreement: regularly, by submitting the statement
of claim to the court the plaintiff expresses his wish to
abandon the arbitration agreement; or by submitting his
statement of defense, the defendant accepts the offer to
amend their dispute resolution mechanism by agreeing on
court litigation instead of arbitration.
Articles 34 and 36: Court Review of the Decisions on the
Jurisdiction of the Tribunal
If the arbitrators decide that they have jurisdiction, there are
two ways of attacking their decision:
1. setting aside procedure, under Article 34
2. procedure of recognition and enforcement, under
Article 36
Under the first: a court should set aside an award if the
arbitration agreement ‘‘is not valid under the law to which the
parties have subjected it’’ or the lex fori of the setting aside
court.
The same reason is contained in the second: in respect to
refusal of recognition of the award. Lack of valid and binding
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arbitration agreement obviously also covers the cases when
no arbitration agreement was concluded at all. Lack of an
appropriate agreement in respect of the subject-matter of the
dispute partly overlaps with the reasons for setting aside, i.e.
with the situations in which the award deals with a dispute
‘‘not contemplated by or not falling within the terms of the
submissions to arbitration, or contains decisions on matters
beyond the scope of the submission to arbitration’’.
Article 17: Jurisdiction of the Tribunal to Issue Interim
Measures of Protection
There is a scarcity of reported case law. Unlike Articles 8 and
16, the provision of MAL 17 is among the least well-covered:
precisely there is only one case in the CLOUT database that
would point to MAL 17 in the search engine of the UNCITRAL.
Even this single case mentioned interim measures of
protection ordered by the tribunal only obiter dicta, asserting
that, once arbitration was commenced, the arbitral tribunal
sitting in Switzerland could order interim measures that
would be enforceable in Canada.
Despite the scarcity of reported cases, some ambiguities
with regard to parallel jurisdiction of both the arbitrators and
the court to order interim measures in the same matter have
already surfaced.
In one case connected with the application of Article 9, a
court had to resolve the issue whether interim measures of
protection that could be taken by courts included the interim
order granted in that case or whether such an order could be
granted only by the arbitral tribunal dealing with the
substance of the dispute.
The court referred to travaux pr´eparatoires regarding Art. 9
and quoted ‘‘dual principles that, first, a party does not waive
its right to go to arbitration by requesting (or obtaining)
interim measures of protection from a national court, and,
second, that a national court is not prevented from granting
such measures by the existence of an arbitration agreement’’.
However, in another court decision, without special
reference to authorities and UNCITRAL documents, another
court had seemingly come to the opposite conclusion,
namely that, if arbitrators may order themselves interim
measures that are enforceable in court, a direct application
to the court for interim measures should be dismissed.
Conclusions: Open Issues and Problem Areas
1. Dual jurisdiction (between the arbitrator/tribunal
and the court) regarding evaluation of validity of
the arbitration agreement
Although there is no doubt that arbitrators are empowered to
rule in their own jurisdiction upon timely objections raised in
the arbitral proceedings, virtually the same authority is also
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given to the court if the claim is raised in a court action, and
the other party objects on the ground that this claim was
covered by an arbitration agreement.
This parallel regime raises a number of questions regarding
the division of labor between arbitrators and the courts;
regarding potential duplication of work; regarding the
possibility of incompatible decisions; regarding the effects of
the arbitral and/or court’s final determination, etc.
In the reported case law, the courts had differently
interpreted their authority to refuse referring the case to
arbitration if the agreement is null and void, inoperative or
incapable of being performed.
Under MAL Art. 8(1) the courts clearly have the right and duty
to evaluate independently the validity and practicability of the
arbitration agreement; however, it would be wise both for the
courts and for the arbitrators to have an eye on the process
conducted before the other tribunal, perhaps suspending the
proceedings until the decision in the other process is being
made—but only if this would not cause undue hardship to
parties in the proceedings.
2. The form of the arbitral decision on jurisdiction
as a preliminary question under MAL 16(3) and
its effects
Another problem area deals with the form of the separate
decision on jurisdiction in the arbitral process, if such a
decision is made prior to the award on the merits, based on
the discretionary right of arbitrators to resolve the
jurisdictional challenge as a preliminary matter.
The MAL does not provide clear guidance, and basically
leaves the determination to national procedural laws and/or
practices. Apparently, there is a trend in international
arbitration to expand the circle of decisions that are entitled
‘‘arbitral awards’’ from decisions on the substance of the
dispute to procedural matters, usually those that end the
proceedings, but sometimes also to those that are regarded
to be of any greater importance. Proper or improper naming
of decisions should not affect the procedural fate of the
decision—falsa nominatio non nocet. Yet, in reported cases
from various part of the globe, the courts also went into a
different directions, drawing from the name ‘‘award on
jurisdiction’’ inferences as to the admissibility of setting aside
of such ‘‘awards’’.
This only contributes to confusion, as the original concept of
the MAL 16(3) certainly did not envisage multiple (double or
even triple) court proceedings controlling one and the same
arbitral decision on jurisdiction as the main matter—one
under Art. 16; the other, independent setting aside of the
award on jurisdiction; and, eventually, another setting aside
of the award on the merits for the reasons stated in Art. 34.
If such practice would develop, it could have a discouraging
effect on the arbitrators that would like to resolve
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jurisdictional issues in their preliminary decisions.
3. Availability of the remedies against negative
arbitral decisions on jurisdiction
Another area of ambiguities is concerned with the availability
of remedies in cases in which the arbitrators have issued
decisions rejecting their jurisdiction.
One classic approach would consider these decisions as
irrefutable because no one can force the arbitrators to
arbitrate if they are convinced that they have no jurisdiction.
However, as this is a final decision, the pressure of
dissatisfied parties led to emergence of court decisions that
expressed the opposite view—once relying on the formal
reasons, another time relying on alleged procedural rights to
seek court review at least in respect of the procedural
correctness of the arbitral decision-making.
Although one can well understand the dissatisfaction of the
parties who were convinced that they had right to arbitrate
their disputes, this additional controllability is not necessary,
and may ultimately prolong and complicate the process.
If arbitrators pronounced that they are not competent to
arbitrate, the most efficient and logical next step is to turn
immediately to the second closest match—to another
arbitration or to the competent state court. Arbitrators that
were reluctant to rule on the substance of the dispute in the
first round will, most likely, remain to be reluctant even if a
court authority strikes down their decision.
4. Scope of arbitral authority: do allegations of
fraud fall within the scope of submission to
arbitration
When the courts had to evaluate the validity and scope of the
arbitral agreement, they were usually expressing favorable
views about the use of arbitration, and interpreted broadly
the authority of arbitrators. One eminent exception in some
jurisdictions relates to the cases in which one party accused
the other of fraudulent behavior.
Some courts alluded to the fact that conspiracy, deceit and
fraud are not matters that can be covered by the arbitration
agreement.
Yet, in commercial reality, mutual allegations of immoral,
illegal or fraudulent actions happen often, and excluding
them from the scope of arbitral agreements may effectively
cripple their effectiveness. Therefore, for the sake of
harmonization of the global practice, it would be good to take
a uniform position on such objections.
5. Meaning of ‘‘inoperative’’ agreements
There are also certain divergences in the interpretation of the
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meaning of ‘‘inoperative arbitration agreements’’.
Some courts attempted to demonstrate such radical pro-
arbitration agreement that they declared agreements that
were rightfully abandoned as operative, by forcing a party to
arbitrate, although that party had expressed the wish to use
its right to opt for litigation provided in the dispute resolution
clause.
In one German case, it was approved that lack of financial
resources makes the arbitration agreement ‘‘inoperative’’. If
this became a general rule, it would lead to abuses, opening
ample opportunities to evade a dispute resolution
mechanism on the sheer ground of financial weakness.
6. Should the court make substantive inquiries as
to whether ‘‘a dispute’’ exists?
Requirement that only ‘‘disputes’’ can be referred to
arbitration has also proven to be ambiguous.
Some courts have posed too high a threshold for the
existence of disputes, considering that the evaluation of
differences that exist between the parties should be left to
arbitrators.
The right approach is to consider that a dispute should be
presumed to exist in every case in which the claimant’s
claims were not clearly and unequivocally admitted.
7. Dual jurisdiction regarding interim measures
The original ideas behind the MAL clearly envisaged dual
jurisdiction regarding interim measures. Recent work of
UNCITRAL on the revision of provisions on interim measures
may, once it is completed, contribute to resolution of such
issues by additions and clarifications.
8. Residual procedural differences between
common and civil law countries
Some discrepancies in court reasoning can be attributed to
the procedural differences and even different procedural
cultures in common law and civil law countries.
In common law jurisdictions, if a plea as to the lack of
jurisdiction (owing to the existence of the arbitration
agreement in the same matter) is successfully raised, the
court will stay the proceedings.
In civil law, the court will not stay the proceedings, but
dismiss the claims regarding which the arbitration was
agreed upon as inadmissible.
Such differences in approach may sometimes have far-
reaching effects on the case law and even some substantive
reasoning of the courts.
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A well-covered debate in Canadian courts regarding whether
stay of proceedings should be mandatory, or whether it
should be granted under a residual discretion that is enjoyed
by the courts is imaginable only in a common law jurisdiction.
Only gradually, by slow approximation of laws and practices,
can we expect that these differences will become less
marked, and only then can we fully expect that a sufficiently
high level of harmonization in the application of the basic
rules of international commercial arbitration will be achieved.
Interim Measures of Protection
Sec 28-29, RA 9285
SEC. 28. Grant of Interim Measure of Protection. – (a) It
is not incompatible with an arbitration agreement for a party
to request, before constitution of the tribunal, from a Court
an interim measure of protection and for the Court to grant
such measure. After constitution of the arbitral tribunal and
during arbitral proceedings, a request for an interim measure
of protection, or modification thereof, may be made with the
arbitral tribunal or to the extent that the arbitral tribunal has
no power to act or is unable to act effectively, the request
may be made with the Court. The arbitral tribunal is deemed
constituted when the sole arbitrator or the third arbitrator,
who has been nominated, has accepted the nomination and
written communication of said nomination and acceptance
has been received by the party making the request.
The following rules on interim or provisional relief shall be
observed:
(1) Any party may request that provisional relief be granted
against the adverse party.
(2) Such relief may be granted:
(i) to prevent irreparable loss or injury; (ii) to provide security
for the performance of any obligation; (iii) to produce or
preserve any evidence; or (iv) to compel any other
appropriate act or omission.
(3) The order granting provisional relief may be conditioned
upon the provision of security or any act or omission
specified in the order.
(4) Interim or provisional relief is requested by written
application transmitted by reasonable means to the Court or
arbitral tribunal as the case may be and the party against
whom the relief is sought, describing in appropriate detail the
precise relief, the party against whom the relief is requested,
the grounds for the relief, and the evidence supporting the
request.
44
By Group 4 (Jam Flora, et al.)
d.m.g. 2018 j.d.
UC Law
(5) The order shall be binding upon the parties.
(6) Either party may apply with the Court for assistance in
implementing or enforcing an interim measure ordered by an
arbitral tribunal.
(7) A party who does not comply with the order shall be liable
for all damages resulting from noncompliance, including all
expenses, and reasonable attorney’s fees, paid in obtaining
the order’s judicial enforcement.
SEC. 29. Further Authority for Arbitrator to Grant Interim
Measure of Protection. – Unless otherwise agreed by the
parties, the arbitral tribunal may, at the request of a party,
order any party to take such interim measures of protection
as the arbitral tribunal may consider necessary in respect of
the subject-matter of the dispute following the rules in
Section 28, paragraph 2. Such interim measures may
include but shall not be limited to preliminary injunction
directed against a party, appointment of receivers or
detention, preservation, inspection of property that is the
subject of the dispute in arbitration. Either party may apply
with the Court for assistance in implementing or enforcing an
interim measure ordered by an arbitral tribunal.
Summary44
Definition – They are issued to prevent or minimize any
disadvantage resulting from delay in the hearing and
determination of the dispute and the implementation or
enforcement of the award.
Power of Arbitral Tribunal
Subject to contrary agreement of the parties, at the request
of a party an arbitral tribunal has inherent power to take such
interim measures of protection as the arbitral tribunal may
consider necessary in respect of the subject matter of the
dispute.
Court Jurisdiction to Grant Interim Relief
Rule: the submission of a dispute to arbitration does not
exclude the exercise of jurisdiction of the court to grant
interim measures of protection in aid of arbitration
It is clear that there must first be an order of the arbitral
tribunal granting interim relief. The court’s assistance is
invoked for the purpose of implementing or enforcing an
interim measure ordered by the arbitral tribunal.
When and Where to File Petition for the Issuance of
Interim Measures of Protection
WHEN: Under Rule 5 of the Special ADR Rules, an
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Notes based on Judge J. Humiding’s Outline
application for relief shall be made in the form of petition filed
with the court:
a. Before arbitration is commenced;
b. After arbitration is commenced but before the
constitution of the arbitral tribunal;
c. After the constitution of the arbitral tribunal; or
d. Any time during arbitral proceedings
WHERE: An application for interim relief under Rule 5, may
be filed with any RTC which has jurisdiction over any of the
following places:
a. Where the principal place of business of any of the
parties to the arbitration is located;
b. Where any of the parties resides;
c. Where any of the acts sought to be enjoined are being
performed, threatened to be performed or not being
performed; or
d. Where the real property subject to the arbitration or a
portion is situated
Form and contents of petition - The petition must be
verified and it must state the following:
a. The fact that there is an arbitration agreement;
b. The fact that the arbitral tribunal has not been
constituted or if constituted, has no power to act or would
be unable to act effectively;
c. A detailed description of the relief sought; and
d. The grounds relied upon for the allowance of the petition
Type of Interim Measure of Protection the Court may
Grant - Classified into three groups:
a. Those which are aimed at facilitating the conduct of the
arbitral proceedings;
b. Those which are aimed at avoiding losses or damages
and measures aimed at preserving the status quo; or
c. Those which are aimed at facilitating the enforcement
of the award
The court may grant, among others:
a. Preliminary injunction directed against a party to
arbitration;
b. Preliminary attachment against property or garnishment
in the custody of a third person;
c. Appointment of receiver;
d. Detention, preservation, delivery or inspection of
property; or
e. Assistance in the enforcement of an interim measure or
protection granted by the arbitral tribunal
Grounds for granting interim relief
a. The need to prevent irreparable loss or injury
b. The need to provide security for the performance of any
d.m.g. 2018 j.d.
UC Law
obligation
c. The need to produce or preserve evidence or
d. The need to compel any appropriate act or omission.
ISSUE: Whether the relief granted by the court before an
arbitral tribunal is constituted may be set aside or modified
by the arbitral tribunal
It is clear in section 28 of the ADR Act that an application to
modify the measure granted by the court may be made with
the arbitral tribunal., because by their very nature, interim
measures are temporary and may be modified or terminated
during the arbitral proceedings
In case of a possible conflict between an interim measure
issued by the court and that is issued by the tribunal , the
court shall refer the matter to the arbitral tribunal which shall
have the authority to decide such question.
Cross Border Enforcement
A Philippine Court may have no legal obligation to enforce
an interim order issued by a foreign arbitral tribunal unless
it is made in the form of an arbitral award
Arts. 4.5-4.6, Special ADR Rules
Extent of Court Intervention
In matters governed by this Chapter, no court shall intervene
except where so provided in the ADR Act. Resort to
Philippine courts for matters within the scope of the ADR Act
shall be governed by the Special ADR Rules.
Court or Other Authority for Certain Functions of
Arbitration Assistance and Supervision
The functions of Appointing Authority:
1. Appointment of Arbitrators;
2. Challenge Procedure; and
3. Failure or Impossibility to Act
The functions of the RTC:
1. Competence of Arbitral Tribunal to Rule on its Jurisdiction;
2. Application for Setting Aside an Exclusive Recourse
Against Arbitral Award;
3. Recognition and Enforcement); and
4. Venue and Jurisdiction
Rule: A Court may not refuse to grant, implement or enforce
a petition for an interim measure, including those provided
for in the following, on the sole ground that the Petition is
merely an ancillary relief and the principal action is pending
with the arbitral tribunal:
a. Arbitration Agreement and Interim Measures by
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
Court;
b. Appointment of Arbitrators;
c. Challenge Procedure;
d. Court Assistance in Taking Evidence
(Also read Parlade pp. 181-207)
Interim Measures in International Commercial
Arbitration: Past, Present and Future
(Sandeep Adhipathi)45
The Model Law has a simple one-line provision regarding the
rights of the parties to approach a state court for interim
measures:
Article 9. Arbitration agreement and interim measures
by court: It is not incompatible with an arbitration agreement
for a party to request, before or during arbitral proceedings,
from a court an interim measure of protection and for a court
to grant such measure.
It makes such a request to the state courts compatible with
the agreement to arbitrate.
But this provision leaves out some important aspects out of
its purview. For instance, it does not say anything about the
scope of the interim measures that the courts can order.
Article 17 of the Model Law that deals with the interim
measures arbitrators may order limits the scope to matters
relating to the subject matter of the dispute. The question
now is whether such limitation is necessary for the courts.
Also, questions involving the preconditions for interim
measures, the types of interim measures, etc., are not
answered.
Even the provision dealing with power of arbitrators to order
interim measures, is short and does not cover the basic
issues relating to it. Except for a limitation restricting such
interim measures of protection to matters relating to the
subject matter of the dispute and providing discretionary
authority to order security for such measures, the provision
is threadbare.
Another important issue that is missing is the status of ex-
parte orders. Specifically, this issue becomes a problem at
the time of enforcement of such orders. Courts can refuse to
recognize such orders using Article 34, which provides for
refusal if the party has not been given notice of the arbitral
proceedings.
Also, the Model Law has no provision regarding the
enforcement of interim orders made by the tribunal.
The UNCITRAL Rules contains provisions regarding interim
45
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d.m.g. 2018 j.d.
UC Law
measures from arbitrators and as in the case of Model Law,
it expressly makes the request to judicial authorities for
interim
measures compatible with the arbitration agreement.
The provision contained in Article 26 of the Rules, authorize
the arbitrators to order interim measures of protection in
matters concerning the subject matter of dispute. The Article
specifically includes orders for conservation of property by
way of ordering its deposit with third persons, sale of
perishable goods, etc.
There is doubt whether the reference to the conservation of
property is just an example or a limit to the scope of the
interim measures. But, the plain reading suggests that it was
intended as just an example.
Even the Rules restrict the powers by limiting the orders to
matters concerning the subject matter of the dispute. Many
have interpreted the reference to ‘matters concerning the
subject matter of the dispute’ and ‘conservation of property’
as severely limiting the section.
Further, it does not provide for any preconditions that need
to be met in order for the arbitrators to issue the interim
measures. The Article also authorizes the arbitrators to
require security for granting such orders.
The Rules are also silent regarding the enforceability of
interim measures ordered by the tribunal.
When seen in light of Article 26(2) of the Rules, which
provides for the interim measures to be in the format of
awards, the applicability of the New York Convention to the
interim awards granted by the tribunal becomes important.
The general consensus so far has been that award
enforcement provisions of the Convention do not apply for
interim measures.
In light of the shortcomings, UNCITRAL is at present
discussing the possibility of amending the Model Law so as
to facilitate the harmonization of the national legislations
relating to the interim measure.
Conclusion
The current position on interim measures available in
international arbitration in different legal systems, including
the national legislations, court ruling, international institutions
and international conventions have been analyzed in the
paper.
Though the conditions more or less seem to be favorable for
interim measures of protection, it is felt that there is a lot of
confusion surrounding this issue.
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Notes based on Judge J. Humiding’s Outline
In spite of the criticism for court intervention and specific
legislations regulating tribunal ordered interim measure,
there is an urgent need for a more favorable and harmonized
international structure to support arbitration, for arbitration to
adapt itself to the changing circumstances and remain as an
alternative dispute resolution method in international
commerce.
For example, the position on interim measures in United
States is still in great confusion. A party before agreeing to
arbitration has to know the exact position of different circuits
on this important issue. The courts have taken differing views
in both their authority to grant interim measures and that of
the arbitrators. So when a party signs an arbitration
agreement involving a United States party, it has a daunting
task of finding out the circuit court that they will have to
approach and the position that the court is most likely to take
in enforcing the interim measures. Probably the time has
come for the Federal Arbitration Act to be amended to meet
the realities of the current international setup.
As far as the present system goes, English Arbitration Act
probably is the only national legislation that comes close to
providing a comprehensive coverage of all the issues
concerned.
Both the English courts and the legislations have supported
the provision of interim measures from the courts and the
arbitrators.
The English have been favorable to the availability of interim
measures over the years. But even in the English legislation,
there is some doubt regarding the enforcement of provisional
orders by the arbitrators themselves and the power to
approach the courts for enforcement. This position holds
good for most of the countries that are civil and common law
based. Hence, the need for a more harmonized international
setup to address this issue.
The work of UNCITRAL to amend the Model Law, so as to
provide for issues involved in the interim measures of
arbitration is really important. Many nations both developed
and developing, are considering the UNCITRAL Model Law
as a basis for drafting their own legislations. So a
comprehensive Model Law would definitely go a long way in
setting up a more harmonized view on this issue.
Most of the international institutions have adapted their rules
to provide interim measures of protection from the tribunals.
However, each rule has shortcomings of varying degrees.
WIPO, AAA and ICC have provided the parties with the
choice of incorporating their Optional Rules, which has been
designed specifically to meet the need for emergent interim
relief pending arbitration.
The international institutions may consider amending their
Rules by providing a more elaborate structure for the
46
Law Asia Moot Problem 2017; Asamura vs Shwe Pwint Thone
d.m.g. 2018 j.d.
UC Law
tribunals to work with. Since issues like the preconditions
necessary for
providing interim relief, the scope of the relief that the
arbitrators can grant, etc., are not contained in most of the
rules, the arbitrators may have difficulty in deciding whether
an interim measure is necessary and whether they have the
authority to grant such order.
The author suggested that the UNCITRAL working group
should also work on the UNCITRAL Arbitration Rules to
make it in consonance with the amendment to the Model Law,
so parties using the Rules for ad-hoc arbitration and also
other institutions can take advantage.
Conduct of Arbitral Proceedings
Sec 30-31, RA 9285
SEC. 30. Place of Arbitration. – The parties are free to
agree on the place of arbitration. Failing such agreement,
the place of arbitration shall be in Metro Manila, unless the
arbitral tribunal, having regard to the circumstances of the
case, including the convenience of the parties shall decide
on a different place of arbitration. The arbitral tribunal may,
unless otherwise agreed by the parties, meet at any place it
considers appropriate for consultation among its members,
for hearing witnesses, experts or the parties, or for inspection
of goods, other property or documents.
SEC. 31. Language of the Arbitration. – The parties are
free to agree on the language or languages to be used in the
arbitral proceedings. Failing such agreement, the language
to be used shall be English in international arbitration, and
English or Filipino for domestic arbitration, unless the arbitral
tribunal shall determine a different or another language or
languages to be used in the proceedings. This agreement
or determination, unless otherwise specified therein, shall
apply to any written statement by a party, any hearing and
any award, decision or other communication by the arbitral
tribunal. The arbitral tribunal may order that any
documentary evidence shall be accompanied by a
translation into the language or languages agreed upon by
the parties or determined in accordance with paragraph 1 of
this Section.
(Also read Parlade pp. 208-239)
Moot Problem46
(Asamura vs.Shwe Pwint Thone)
The Parties
Claimant: Asamura International Development Co. Ltd.
(AID); a private international development company
specializing in crisis relief and development, assisting
bilateral donors and the private sector to manage projects in
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
developing countries
Respondent: Shew Pwint Thone Co., Ltd (SPT); local
Myanmar company teashops, jade carving and polishing
studios, and training centres
The agreement: They entered into a jade venture, which
involved 4 main business activities:
(i) exploration and extraction;
(ii) breaking and cutting;
(iii) processing and production;
(iv) distribution and sales.
AID sourced for second hand machinery and equipment from
Japan, purchased them, and reconditioned them. They
imported into Myanmar where the jade extraction and
production business officially began. AID also imparted
technical knowledge to SPT’s employees and students.
SPT’s employees and students were trained on how to
operate and maintain the jade-mining equipment and
machinery.
The conflict: The head of AID, Dr. Asamura, started to feel
the burden of the operational costs borne by his company,
so he suggested for both AID and SPT to make capital
contributions to the partnership.
A confidant from SPT recommended an end to the
partnership with AID to save SPT because all the equipment
and SPT’s people have the skills to handle things on their
own, and they don’t need that much control and involvement
from a third party anymore.
The heads of both parties then met at a bar in hotel. There,
SPT’s representative finally decided to end the partnership.
Dr. Asamura protested, saying that SPT has no right to
terminate the agreement.
They further argued over the ownership of the machineries,
and most importantly, the special software they created for
their operations (JADEYE).
SPT claimed ownership over both, saying that they were the
ones who actually procured the permits, and thus, they were
the ones recorded as the owner and operator of such
machineries.
Since they were unable to settle their differences, they
sought the opinion of a mutual party – Atty. Farid Zakwan, a
lawyer based in Myanmar.
Atty. Zakwan recommended that the parties go for arbitration
at the Kuala Lumpur Regional Centre for Arbitration
(KLRCA) in Malaysia.
Dr. Asamura expressed his wish to have the arbitration in
Japan, toconfer upon him some sense of familiarity.
d.m.g. 2018 j.d.
UC Law
The parties agreed to attend arbitration in Tokyo, but using
the KLRCA Rules.
The issues: Parties agreed that the issues to be decided in
the arbitration are as follows:
(i) The validity of the termination of the agreement by
SPT;
(ii) The ownership of the jade-mining machinery and
equipment; and
(iii) Subsistence and ownership of rights in the JADEYE
software.
The determination of damages, if any, will be done in a
separate hearing.
The arbitration clause:
“9. If there is any disagreement to this agreement in the
future, as gentlemen of Japan and Myanmar, we will try to
solve everything in a polite manner.
10. Everything will be in accordance with and interpreted
under the law of the Golden Land of Myanmar.
11. To show respect towards the Golden Land, AID cannot
do or say anything harmful to the national interest and
solidarity of Myanmar, and vice versa.”
Mock Arbitration script by Group 6&7 (download here:
https://1drv.ms/w/s!AjgHSho4K72Tjmgqp0cvEY43odmj)
Rendition of Award and Termination of Proceedings
Article 4.32, IRR
Article 4.32. Termination of Proceedings. (a) The arbitral
proceedings are terminated by the final award or by an order
of the arbitral tribunal in accordance with paragraph (b) of
this Article. (b) The arbitral tribunal shall issue an order for
the termination of the arbitral proceedings when:
(i) The claimant withdraws his/her/its claim, unless the
respondent objects thereto and the arbitral tribunal
recognized a legitimate interest on his/her/its part in
obtaining a final settlement of the dispute;
(ii) The parties agree the termination of the proceedings;
(iii) The arbitral tribunal finds that the continuation of the
proceedings has for any other reason become unnecessary
or impossible.
(c) The mandate of the arbitral tribunal ends with termination
of the arbitral proceedings subject to the provisions of
Articles 4.33 (Correction and Interpretation of Award,
Additional Award) and paragraph (d) of Articles 4.34
(Application for Setting Aside an Exclusive Recourse against
Arbitral Award).
(d) Notwithstanding the foregoing, the arbitral tribunal may,
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

for special reasons, reserve in the final award or order, a and national civil res judicata effect of the
hearing to quantity costs and determine which party shall proceedings give arbitral award to the third
bear the costs or the division thereof as may be determined precedence to it. party.
to be equitable. Pending determination of this issue, the First of all, because it
award shall not be deemed final for purposes of appeal, more ensures rights of
vacation, correction, or any post-award proceedings. such nonparticipating
third parties.
(Also read Parlade pp. 240-263) It does not work in This, first of all, violates the
arbitration. fundamental right to be
The Scope of the Arbitral Award, Binding Effect The third party is meant heard. Secondly, it does
(Natalia Bocharova)47 to go to the court to ask not resolve the problem
to set the award aside. In because the understanding
Modern business international transactions are multi-party some countries, state of the res judicata effect of
and complicated. Such contracts are usually composed of court applies lis pendens an
several contracts which can contain bilateral dispute principle when two arbitral award is not clear
resolution arrangements. According to the principle of parties parties are in arbitration even for the participated
autonomy dispute arising between two persons bound by an proceedings, and one parties.
arbitration agreement in connection with a multi-party project party and the third party Res judicata is not only
will be resolved by arbitration exclusively between these two are in litigation in a state about binding effect. It also
parties. Other parties cannot participate in the resolution of court. In this case, court prohibits reassertion; it has
the dispute through arbitration, even if they have played an suspends proceedings, enforcement effect and
active role in the actual project. Notwithstanding any but it happens quite rare. evidentiary presumption
legitimate interest, they might have the outcome of the effect.
dispute; these parties will remain alien both to the arbitration
proceedings and an arbitral award. Their interests are not It is possible in some arbitration institution to bring to trial a
taken into consideration and left unprotected. Arbitration third party, but national legislation limits this possibility. The
proceedings, unlike litigation, usually do not bear any consent of both parties, of one party and the third party, both
intervention or joinder of parties, which is explained by the parties and the third party are required.
contractual nature of arbitration.
The general rule is that only the party of the agreement can
Meanwhile, an arbitral award can affect interests of third be in arbitration. Exclusions from this rule are quite rare. The
parties. participation of a third party is not usual. An arbitration
tribunal could not ex officio bring any party to the action. And
Question: How can these parties defend their interests in it is proved to be effective. The third party can participate if it
arbitration proceedings and during recognition and wants to defend his rights and suffer or enjoy the effect of the
enforcement proceedings in national courts? arbitral award.

Answer: There are two ways of resolving such problem in
state court litigation:
a. COMPULSORY PARTICIPATION of any third party with
any legitimate interest in litigation through intervention,
joinder of parties, and consolidation of cases. A court ex
officio has to gather all parties that can have any
legitimate interest in resolving the dispute. If judgment
affects any interest of a party that was not involved in the
proceedings judgment should be reversed in appellate
court.
b. The second way is also the SOLUTION AGAINST
PARALLEL PROCEEDINGS. This way is to harmonize
the outcome of parallel proceedings by the principle of
lis pendens and res judicata.
Lis pendens Res Judicata
The first way is preferable The second way is to extend
The doctrine of res judicata is well established in the
common law jurisdictions of England, Ireland, Canada, India,
Australia and New Zealand.
In common law civil procedure the category of “privies” is
used to identify all persons, who have community or privity
of interest with the participating party.
A privy is a person who has right to participate in the
proceedings and who has some interest in its outcome.
Usually, such persons should be noticed about proceedings.
But their nonparticipation does not exclude the effects of
res judicata towards them.
The following persons can be considered as privies of the
parties in the case law of common law countries:
1) a director of the company and company;

47
Russian Law Journal, Vol. V (2017) Issue 2; Summary by Group
1 (Ericha Gonadan, et al.)
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
2) individuals who own or control the company and the
company;
3) one company being alter ego of another company;
4) a bank solicitor and a bank;
5) an insured and the insurer;
6) a wife and a husband;
7) a stockbroker and a client etc.
Also, the doctrine of judgment in rem should be mentioned.
The doctrines of issue estoppel and cause of action relate to
judgment in personam or inter partes, that is, they relate to
judgment between parties.
A judgment in rem results from an action in rem. An action in
rem is proceedings to determine the status or condition of
the rem itself. A judgment in rem is conclusive against all
persons, not only against the parties to the proceeding. As
an example of judgment in rem the following judicial
decisions can be named: the ownership of land, a lawful non-
conforming use of property; an abatement of rent order
under rent control legislation; an adoption; the validity of
treaty and others.
ILA recommendations concern only the arbitral awards of the
international commercial arbitration and do not touch the
effect of the arbitral award to the proceedings in the state
court. ILA admits that to promote efficiency and finality of
international commercial arbitration, arbitral awards should
have conclusive and preclusive effects in further arbitral
proceedings. The conclusive and preclusive effects of
arbitral awards in further arbitral proceedings need not
necessarily be governed by national law and may be
governed by transnational rules applicable to international
commercial arbitration.
An arbitral award has conclusive and preclusive effects in
further arbitral proceedings if:
a) it has become final and binding in the country of origin,
and there is no impediment to recognition in the country of
the place of the subsequent arbitration;
b) it has decided on or disposed of a claim for relief which
is sought or is being reargued in the further arbitration
proceedings;
c) it is based upon a cause of action which is invoked in
the further arbitration proceedings or which forms the
basis for the subsequent arbitral proceedings; and
d) it has been rendered between the same parties.
An arbitral award has conclusive and preclusive effects in the
further arbitral proceedings as to:
a) determinations and relief contained in its dispositive
part as well as in all reasoning necessary thereto;
b) issues of fact or law which have actually been arbitrated
and determined by it, provided any such determination
was essential or fundamental to the dispositive part of the
arbitral award.
Both res judicata and legal effect doctrines give us a variety
d.m.g. 2018 j.d.
UC Law
of situations when the judicial decision would affect the right
of the third party even in the case when such party did not
participate in the proceedings. It is supposed that such
different cases need different approach how the state court,
arbitral tribunal or such third party should consider the
arbitral award which affects the rights or interests of the non-
participating party.
The following cases can be listed.
1. An arbitral award in it’s the operative part directly stated
the rights and obligation of the third party. This is the gross
violation of the principle to be heard, the idea of
adversarial proceedings and the party autonomy principle.
This part of the arbitral award that violates the core
principles of arbitration should be considered as void.
There is no need of any special proceedings to annul such
award. The third party, parties, arbitral tribunals and state
court should ignore such part of the arbitral award.
2. An arbitral award indirectly affect the rights and obligation
of the third party in case when
a) the third party is a privy of one of the party;
b) the arbitral award is an award in rem;
c) the arbitral award has another effect on the rights of the
third party, resulted from any substantive legal connection
(including contractual one) between party of arbitration
and the third party.
In these cases, to guarantee the stability of arbitral award,
the authority of arbitration itself, the balance of the rights of
parties and non-parties in arbitration the arbitral award
should have some limited effect towards non-parties.
It is reasonable to quote here the main reasoning of the
opponents of the theory of the binding effect of an arbitral
award:
1) arbitration proceedings are only possible between the
parties involved in arbitration agreement;
2) the withdrawal of arbitration tribunal beyond the limits
of the arbitration agreement is a ground reason for
canceling the arbitration award;
3) arbitration awards do not prevent third parties to bring
claims on the same subject or on the same and cause of
action to the state courts;
4) arbitration awards do not have a collateral estoppel
effect for subsequent judicial proceedings, so the third
party do not constrain by the arbitral award;
5) the core of arbitration is the consent of all parties to the
arbitration proceedings. This principle of arbitration, in
particular, implies that the intervention of a third party is
possible only with the consent of both the disputing parties
and this person involved.
If a third party did not participate in arbitration proceedings,
it can in no way be connected with the rendered award.
Such criticism of the idea of the binding effect of the arbitral
award for the third parties do not take into consideration the
following:
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
1) the idea of the respect to the arbitral award: the same
substantive effect to the rights of all parties and nonparties
should be given to the arbitral award as judicial decision
has;
2) the principle of procedure economy should prevent the
third party from the re-litigation of the same issues;
3) the possibility of parallel proceedings and other abuse
should be excluded. It is also worth to be mention that the
idea of only procedural nature of the judicial decision and
arbitral award is peculiar to the modern German legal
science (as the judicial decision could not have any
substantive effect on the third party and such party could
not have any right to challenge this decision by any means
but by bringing separate special claim (Art. 772 of the
German Civil Procedure Code40)).
Conclusion
The development of private commercial relations could lead
to the situation that it will be impossible to deliver an arbitral
award that does not affect any third party. The complexity of
the legal relations can result in the disability of arbitration
itself as far as the arbitration does not have the same
mechanisms of involvement of third parties.
It means that with the purpose of the possibility of arbitration,
the stability of arbitral awards and legal certainty we should
presume that an arbitral award can affect rights and
obligations of third parties even if they do not participate in
the arbitral proceedings.
Judicial Review of International Commercial Arbitral
Awards
Article 4.33-4.34, IRR
Article 4.33. Correction and Interpretation of Award,
Additional Award. (a) Within thirty (30) days from receipt of
the award, unless another period of time has been agreed
upon by the parties:
(i) A party may, with notice to the other party, request
the arbitral tribunal to correct in the award anyerrors in
computation, any clerical or typographical errors or any
errors of similar nature;
(ii) A party may, it so agreed by the parties and with
notice to the other party, request the arbitraltribunal to give
an interpretation of a specific point or part of the award.
(b) If the arbitral tribunal considers the request to be
justified, It shall make the correction or give the interpretation
within thirty (30) days from receipt of the request. The
interpretation shall form part of the award.
(c) The arbitral tribunal may correct any error of the type
referred to in paragraph (a) of this Article on its owninitiative
within thirty (30) day from the date of the award
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(d) Unless otherwise agreed by the parties, a party may,
with notice to the other party, request, within thirty(30) days
receipt of the award, the arbitral tribunal to make an
additional award as to claims presented in the arbitral
proceedings but omitted from the award. If the arbitral
tribunal considers the request to be justified, it shall make the
additional award within sixty (60) days
(e) The arbitral tribunal may extend, if necessary, the
period of time within which it shall make a
correctioninterpretation or an additional award under
paragraphs (a) and (b) of this Article.
(f) The provisions of Article 4.31 (Form and Contents of
Award) shall apply to a correction or interpretation ofthe
award or to an additional award.
Article 4.34. Aplication for Setting Aside an Exclusive
Recourse against Arbitral Award.
(a) Recourse to a court against an arbitral award may
be made only by application for setting aside inaccordance
with second and third paragraphs of this Article.
(b) An arbitral award may be set aside by the Regional
Trial Court only If:
(i) the party making the application furnishes proof that:
(aa) a party to the arbitration agreement was under some
incapacity ; or the said agreement isnot valid under the law
to which the parties have subjected it or, failing any indication
thereon, under the law of the Philippines; or
(bb) the party making the application was not given
proper notice of the appointment of anarbitrator or of the
arbitral proceedings or was otherwise unable to present his
case; or
(cc) the award deals with a dispute not contemplated by
or not failing within the terms of thesubmission to arbitration,
or contains, decisions on matters beyond the scope of the
submission to arbitration, provided that, if the decisions on
matters submitted to arbitration can be separated from those
not so submitted, only the part of the award which contains
decisions on matters not submitted to arbitration may be set
aside; or
(dd) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance withthe agreement of the
parties, unless such agreement was in conflict with a
provision of ADR Act from which the parties cannot derogate,
or, falling such agreement, was not in accordance with ADR
Act; or
(ii) the Court finds that:
(aa) the subject-matter of the dispute is not capable of
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settlement by arbitration under the law ofthe Philippines; or
(bb) the award is in conflict with the public policy of the
Philippines.
(c) An application for setting aside may not be made
after three months have elapsed from the date on whichthe
party making that application had received the award or, If a
request had been made under Article 4.33 (Correction and
Interpretation of Award, Additional Award) from the date on
which that request has been disposed of by the Arbitral
tribunal
(d) The court, when asked to set aside an award, may,
where appropriate and so requested by a party,suspend the
setting aside proceedings for a period of time determined by
it in order to give the arbitral tribunal an opportunity resume
the arbitral proceedings or take such other action as in the
arbitral tribunal's opinion will eliminate the grounds for setting
aside.
(e) A party may bring a petition under this Article before
the court in accordance with the Special ADR Rules.
(Also read Parlade pp. 264-251)
UNCITRAL 2012 Digest of Case Law on the Model Law
of International Commercial Arbitration 48
History
The UNCITRAL Model Law on International Commercial
Arbitration (“the Model Law”) was adopted by the United
Nations Commission on International Trade Law
(UNCITRAL) on 21 June 1985, at the end of the 18th session
of the Commission.
The UN General Assembly (through Resolution 40/72 on
December 11, 1985) recommended “that all States give due
consideration to the Model Law on International Commercial
Arbitration, in view of the desirability of uniformity of the law
of arbitral procedures and the specific needs of international
commercial arbitration practice”.
The Model Law was amended by UNCITRAL on 7 July 2006,
at its 39th session.
Purpose
The Model Law was developed to address considerable
disparities in national laws on arbitration.
National laws were often particularly inappropriate for
international cases, hence the need for improvement and
harmonization.
48
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The Model Law constitutes a sound basis for the desired
harmonization and improvement of national laws.
Scope/Coverage
It covers all stages of the arbitral process from the arbitration
agreement to the recognition and enforcement of the arbitral
award.
It reflects a worldwide consensus on the principles and
important issues of international arbitration practice. It is
acceptable to States of all regions and the different legal or
economic systems of the world.
Since its adoption by UNCITRAL, the Model Law has come
to represent the accepted international legislative standard
for a modern arbitration law. A significant number of
jurisdictions (90 countries since 2012, including ours) have
enacted arbitration legislation based on the Model Law.
States are encouraged to make as few changes as possible
when incorporating the Model Law into their legal systems.
The CLOUT
UNCITRAL has established a reporting system for Case Law
on UNCITRAL Texts (CLOUT).
CLOUT was established in order to assist judges, arbitrators,
lawyers, and parties to business transactions, by making
available decisions of courts and arbitral tribunals
interpreting
UNCITRAL texts.
Majority of its cases refers to the United Nations Convention
on Contracts for the International\ Sale of Goods (Vienna,
1980), and to the Model Law.
General Provisions
Scope of Application: It applies to international commercial
arbitration.
The term “commercial” should be given a wide interpretation
to cover matters arising from all relationships of a
commercial nature, whether contractual or not.
Relationships of a commercial nature include, but are not
limited to:
a. any trade transaction for the supply or exchange of
goods or services;
b. distribution agreement;
c. commercial representation or agency;
d. factoring; leasing;
e. construction of works;
f. consulting;
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Notes based on Judge J. Humiding’s Outline
g. engineering;
h. licensing;
i. investment;
j. financing;
k. banking;
l. insurance;
m. exploitation agreement or concession;
n. Joint venture and other forms of industrial or business
cooperation; and
o. carriage of goods or passengersby air, sea, rail or
road.
An arbitration is international if:
a. the parties to an arbitration agreement have, at the
time of the conclusion of that agreement, their places
of business in different States; or
b. one of the following places is situated outside the
State in which the parties have their places of
business:
i. the place of arbitration if determined in, or
pursuant to, the arbitration agreement;
ii. any place where a substantial part of the
obligations of the commercial relationship is
to be performed or the place with which the
subject matter of the dispute is most closely
connected; or
c. the parties have expressly agreed that the subject
matter of the arbitration agreement relates to more
than one country.
If a party has more than one place of business, the place of
business is that which has the closest relationship to the
arbitration agreement.
If a party does not have a place of business, reference is to
be made to his habitual residence.
Full copy: http://www.uncitral.org/pdf/english/clout/MAL-
digest-2012-e.pdf
Case law on Art. 36: Grounds for refusing enforcement
Courts construing Article 36 found that the list of grounds for
refusing recognition and enforcement of an arbitral award in
paragraph (1) was exclusive and should be construed
narrowly.
On Due Process: Art. 36, par. (1)(a)(ii) of Model Law
The concept of “unable to present his case”: It is sometimes
suggested that this provision only covers general violations
of the right to present one’s case and not issues pertaining
to evidence. However, certain courts have dealt with
rejections by arbitral tribunals of evidence.
One German court treated the refusal of the arbitrator to hear
witnesses to be primarily a question of the violation of the
right to be heard.
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Other issues that have been raised in case law include:
a. refusals to take evidence;
b. absence of consideration by the arbitral tribunal of
evidence presented; and
c. the language of the proceedings.
Courts in various jurisdictions also ruled that:
a. A party cannot invoke a lack of proper participation
or proper representation in the arbitral proceedings
as a ground to resist enforcement if that is not due
to circumstances attributable to the arbitral tribunal
or extraneous events beyond the parties’ control.
b. A lack of participation by the legal representatives
which is due to unclear instructions by the parties is
not sufficient to constitute violation of due process.
c. The right to due process was not violated where one
party was unable to attend the hearing, allegedly
since it was not granted a visa for the country where
the hearing took place. Such party had been notified
of the arbitral proceedings and had the opportunity
to participate in the proceedings.
d. The lack of participation due to insufficient funding
or because the hearing was not held at the place of
arbitration were not considered sufficient to justify an
assumption of a violation of the right to be heard.
e. A party can only present its case properly if the
relevant documents are served upon it. It sufficient
that the arbitral tribunal served the relevant
document to the respondent’s last known address.
f. The arbitral tribunal is under no obligation to discuss
with the parties the case or its preliminary legal view
on the facts. The arbitral tribunal should inform the
parties in instances where it would decide to deviate
from a legal position previously communicated to the
parties or where its decision would for other reasons
come as a surprise to the parties.
g. Arbitral tribunals are not under an obligation to
address all details of the arguments raised and the
evidence offered by the parties in the reasoning of
their decisions. Those that are irrelevant need not be
mentioned.
h. There is a presumption that the tribunal has
complied with its obligation to take the parties’
submissions into account. The mere silence of the
decision on certain points raised by the defendant
does not mean that the arbitral tribunal has not
considered the argument.
i. The defense of lack of understanding of language
will not be successful if the language of the arbitral
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Notes based on Judge J. Humiding’s Outline
proceedings had explicitly been agreed upon or was
determined in line with the chosen arbitration rule. A
party who is unable to understand the language
should arrange for the necessary translations. It is
sufficient that a party is represented by a lawyer who
speaks the language.
That the arbitral award has not become binding, has
been set aside or suspended—Art. 36, par. (1)(a)(v)
The arbitral award has not yet become binding upon the
parties:
In the absence of a definition of when an award becomes
binding, courts in several jurisdictions had to address that
matter.
A Canadian court found that an arbitral award was binding
and could be enforced irrespective of any confirmation of the
arbitral award by a court in the jurisdiction where the award
was made.
Other courts held that an award was binding under the law
of the country in which it was made if there was no statutory
remedy against the award providing for a review of its merits.
The arbitral award has been set aside or suspended:
After an arbitral award is made, the claimant may seek
enforcement either before the courts in the State where the
award was made or before the courts in another State (ex:
where the defendant has assets).
But if the award is set aside or vacated by the court in the
State of origin, the enforcement of the award in that State will
not be possible. The party seeking enforcement may then try
to have the award enforced by a court in another State.
Courts in that other State (the State of enforcement) usually
face the issue of whether to allow enforcement of the award,
even if it had been set aside in the State of origin.
In one decision, it was found that if the arbitral award had
been set aside at the place of arbitration, the award was no
longer binding. Thus, the enforcement court had no power to
recognize or enforce such arbitral award. This would be the
case even though there was a possibility that the decision
setting aside the award would be revised in further
proceedings which were pending at the place of arbitration.
Canadian courts have confirmed at least obiter dicta that
they have discretion to enforce awards which have been set
aside in their countries of origin.
Another court held that the suspension of the arbitral award
at the place of arbitration had no bearing on the court’s
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GR No. 196171; Dec. 10, 2012
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discretion to refuse enforcement.
Case: RCBC Capital Corp vs BDO49
(May an international arbitral award be set aside by the
courts?)
This case emanated from arbitration proceedings
commenced by RCBC pursuant to the arbitration clause
under its Share Purchase Agreement (SPA) with EPCIB.
The parties agreed on the following:
a. Laws to be Applied - The Tribunal shall determine the
issues to be resolved in accordance with the laws of
the Republic of the Philippines.
b. Procedure to be Applied - The proceedings before the
Tribunal shall be governed by the ICC Rules of
Arbitration and the law currently applicable to
arbitration in the Republic of the Philippines.
While the Tribunal constituted by the International Chamber
of Commerce-International Commercial Arbitration (ICC-
ICA) was conducting the arbitration proceedings, EPCIB
merged with BDO. BDO assumed all its liabilities and
obligations.
The Tribunal issued an award in favor of RCBC, ordering
BDO to pay RCBC. The RTC of Makati confirmed this
decision.
RCBC filed an urgent motion for the issuance of a writ of
execution, to implement the award, and the RTC granted this.
However, on appeal, the CA reversed the RTC’s
confirmation of the award.
RCBC filed a petition to set aside CA’s decision of reversing
of the award.
Issue: Whether there was legal ground to vacate the award
by the Tribunal from the ICC-ICA.
SC’s decision: Yes, on the ground of evident partiality of the
Tribunal/arbitrator, under Rule 11.4 of the Special ADR
Rules.
Evident partiality is not defined in our arbitration laws. The
SC then looked at international court decisions.
In the Federal Arbitration Act of the US, evident partiality was
defined as both: (a) an arbitrator’s explicit bias toward one
party; and (b) an arbitrator’s inferred bias when an arbitrator
fails to disclose relevant information to the parties.
In Commonwealth Coatings Corp. v. Continental
Casualty Co. (1968), the US SC laid down the rule that the
arbitrators must disclose to the parties "any dealings that
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Notes based on Judge J. Humiding’s Outline
might create an impression of possible bias," and that
underlying such standard is "the premise that any tribunal
permitted by law to try cases and controversies not only must
be unbiased but also must avoid even the appearance of
bias." Arbitrators should not automatically be disqualified
from an arbitration proceeding because of a business
relationship where both parties are aware of the relationship
in advance, or where the parties are unaware of the
circumstances but the relationship is trivial. However, in the
event that the arbitrator has a "substantial interest" in the
transaction at hand, such information must be disclosed.
In Morelite Construction Corp. v. New York District
Council Carpenters Benefit Funds, the court ordered for
the vacation of the arbitrator’s award, there being a father-
son relationship between the arbitrator and the president of
appellee union. This provided strong evidence of partiality
and was unfair to appellant construction contractor.
There is evident partiality when a reasonable person would
have to conclude that an arbitrator was partial to one party
to the arbitration.
In this case, BDO claimed that the Arbitration Tribunal
exceeded its powers in deciding the issue of advance cost
not contemplated in the TOR, and that Chairman Barker
acted with evident partiality in making such award.
The RTC held that BDO failed to substantiate these
allegations. On appeal, the CA likewise found that the
Arbitration Tribunal did not go beyond the submission of the
parties.
However, the CA found factual support in BDO’s charge of
partiality.
The ICC Rules require that an arbitral tribunal should act
fairly and impartially. Hence, an arbitrator’s conduct should
be beyond reproach and suspicion. His acts should be free
from the appearances of impropriety.
An examination of the circumstances claimed to be
illustrative of Chairman Barker’s partiality is indicative of bias.
Chairman Barker gave the parties a copy of an article by
Matthew Secomb entitled "Awards and Orders Dealing With
the Advance on Costs in ICC Arbitration: Theoretical
Questions and Practical Problems". His act established that
he had pre-formed opinions—that he had prejudged the
matter before him.
Chairman Barker’s act of furnishing the parties with copies
of Matthew Secomb’s article is indicative of partiality such
that a reasonable man would have to conclude that he was
favoring the Claimant, RCBC.
Mr. Secomb’s article specifically dealt with the situation when
one of the parties to international commercial arbitration
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refuses to pay its share on the advance on costs.
By furnishing the parties with a copy of this article, Chairman
Barker practically armed RCBC with supporting legal
arguments under the "contractual approach" discussed by
Secomb.
It may also be mentioned that Matthew Secomb is a member
of the ICC Secretariat and the "Counsel in charge of the file".
This bolstered the impression that Chairman Barker was
predisposed to grant relief to RCBC by issuing a partial
award.
Indeed, fairness dictates that Chairman Barker refrain from
suggesting to or directing RCBC towards a course of action
to advance the latter’s cause.
Though done purportedly to assist both parties, Chairman
Barker’s act clearly violated Article 15 of the ICC Rules
declaring that “in all cases, the Arbitral Tribunal shall act fairly
and impartially and ensure that each party has a reasonable
opportunity to present its case."
The actuations of arbitrators "must be guarded and
measured lest the best of intentions be misconstrued."
The SC then adopts the CA’s standard for evident partiality:
the reasonable impression of partiality standard, which
requires a showing that a reasonable person would have to
conclude that an arbitrator was partial to the other party to
the arbitration.
Such interest or bias "must be direct, definite and capable of
demonstration rather than remote, uncertain, or speculative."
The SC clarified, however, that the merits of the parties’
arguments as to the propriety of the issuance of the Second
Partial Award are not in issue here. Courts are generally
without power to amend or overrule merely because of
disagreement with matters of law or facts determined by the
arbitrators. They will not review the findings of law and fact
contained in an award, and will not undertake to substitute
their judgment for that of the arbitrators. A contrary rule
would make an arbitration award the commencement, not
the end, of litigation. It is the finding of evident partiality which
constitutes legal ground for vacating the award and not the
Arbitration Tribunal’s application of the ICC Rules adopting
the "contractual approach" tackled in Secomb’s article.
Alternative dispute resolution methods or ADRs are
encouraged. By enabling parties to resolve their disputes
amicably, they provide solutions that are less time-
consuming, less tedious, less confrontational, and more
productive of goodwill and lasting relationship.
The most important feature of arbitration, and indeed, the
key to its success, is the public’s confidence and trust in the
integrity of the process. For this reason, the law authorizes
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Notes based on Judge J. Humiding’s Outline
vacating an arbitral award when there is evident partiality in
the arbitrators.
Hence, in 2012, the SC denied BDO’s petition and affirmed
the CA’s decision to have the award vacated.
----(separate case)----
However, in 2014, the parties submitted to the SC a Joint
Motion and Manifestation, submitting and praying that:
“5. After negotiations, the Parties have mutually agreed that
it is in their best interest and general benefit to settle their
differences with respect to their respective causes of action,
claims or counterclaims in the RCBC Capital Petition and the
BDO Petition, with a view to a renewal of their business
relations.
6. Thus, the parties have reached a complete, absolute and
final settlement of their claims, demands, counterclaims and
causes of action arising, directly or indirectly, from the facts
and circumstances giving rise to, surrounding or arising from
both Petitions, and have agreed to jointly terminate and
dismiss the same in accordance with their agreement.
7. In view of the foregoing compromise between the Parties,
BDO, RCBC Capital and Go/Shareholders, with the
assistance of their respective counsels, have decided to
jointly move for the termination and dismissal of the above-
captioned cases with prejudice.”
The parties asked for the termination and dismissal of the
cases, with prejudice.
Hence, the SC ordered that the cases be “dismissed with
prejudice and deemed closed and terminated”.
Judicial Review of Arbitral Awards in the Philippines:
A Look into the Application of the Public Policy
Exception Under the NY Convention Applying United
States Precedents
(Mary Jude Cantorias)50
As commercial transactions become increasingly complex
with the expansion of international trade, it became practical
to include dispute resolution mechanisms in contracts.
Arbitration is one such mechanism.
Parties to international trade need their transactions to be
unhampered by disputes. Should a dispute arise, they want
such to be resolved speedily, with outcomes that are
predictable and certain.
Resorting to the national courts of one country or another
50
Arellano Law and Policy Review Vol. II, No. 1; Presented at a
Conference at the University of Massachusetts Boston, “Conflict
Studies: The New Generation of Ideas,” Oct. 22-23, 2010
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may defeat speed, predictability and certainty as parties may
be unfamiliar with the vagaries of the rules of domestic court
systems.
By utilizing the autonomous process of international
arbitration, the uncertainty brought on by a foreign law and
forum to resolve disputes may be lessened if not
altogether avoided.
Enforcement of an arbitral award is greatly facilitated by the
1958 United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York
Convention), with the growing liberality of judicial
interpretation favoring enforcement.
An arbitral award is generally easier to enforce than a court
judgment, largely due to most states’ accession to the New
York Convention.
As of 2010, the New York Convention is in force in 143
countries, including the Philippines.
However, to protect “fundamental interests of the parties,
society and the rule of law,” the Convention recognizes
certain grounds that may be raised before the courts to
oppose enforcement of an arbitral award.
This paper focuses on the “public policy” exception under
ArticleV (2)(b) of the Convention.
Public policy here is said to be that which reflects “the
fundamental economic, legal, moral, political, religious and
social standards of every state” where enforcement is sought.
To date (2010 when this was written), there is no Philippine
Supreme Court case law that specifically refers to non-
enforcement of foreign arbitral awards on grounds of
violation of public policy. This scarcity of case law in the
Supreme Court adds to the difficulty for lower courts in
finding guidance when faced with the public policy defense
against enforcement, especially so that adherence to judicial
precedents is embodied in Article 8 of the Philippine Civil
Code;28 hence, the need to develop an arbitration
civilization by looking to well-evolved jurisdictions like the US.
In Parsons vs RAKTA, the US court held that the public
policy defense is not meant to merely protect national
interests; an action that violates local public policy may not
necessarily violate international public policy. A distinction
must still be made where public policy is invoked in the field
of international commercial arbitration, i.e. beyond mere
contravention of domestic law.
The public policy contemplated under Article V (2) (b) are
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those which essentially pertains to matters that have
international connection or application.
The public policy defense should be narrowly construed,
especially so where the public policy allegedly violated is not
well defined and dominant. The court concluded that refusal
to enforce a foreign arbitral award should only be premised
on violation of the enforcing state's “most basic notions of
morality and justice.”
The approach of Philippine court decisions interpreting
national public policies should be consistent with the
objectives of the Convention and the public policy interests
of other Contracting States, not merely advancing “parochial,
local interests.”
Philippine court decisions should add to the growing
development of an “arbitration civilization” in the Philippines
by providing guidance in defining this area of law and
recognizing what is merely frivolous opposition clutching at
the public policy “straw”.
Finally, it may be an interesting innovation to have specific
Supreme Court justices tasked to oversee the development
of Philippine jurisprudence in the arbitration field. Such
expertise will help in the speedy disposition of arbitration
matters brought to court, helping the Philippines emerge as
a sophisticated international arbitration hub.
Judicial Review of International Arbitral Awards:
Preserving Independence in International Commercial
Arbitrations
(Jessica L. Gelander)51
The resolution of potential disputes is of great concern to
parties involved in international business transactions. Due
to the high cost of overseas litigation and the uncertainty of
relying upon a foreign legal system, such disputes are often
difficult to resolve.
It is essential to the maintenance of international trade
relationships that businesses feel confident in the methods
by which they resolve commercial disputes.
Arbitration agreements allay many of the concerns relating
to international business by ensuring a degree of
organization and predictability in the process through which
disputes are resolved.
Accordingly, international businesses frequently enter into
arbitration agreements that pre-arrange the procedures to be
followed in the event that a dispute arises. Establishing a
process of dispute resolution in advance helps to create a
"neutral playing field," increasing the parties' comfort level
and promoting future involvement in international
51
Marquette Law Review, Vol. 80, Issue No. 2, Winter, 1997
d.m.g. 2018 j.d.
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commercial transactions.
In long-term commercial relationships, the details of an
agreement to arbitrate are generally established in the initial
contract between the parties.
Ironically, the contractual nature of international arbitration
brings about many drawbacks. Although the possibility of an
arbitrator abusing an unchecked process may jeopardize its
integrity, interference in a private agreement is contrary to
the fundamental goals of international arbitration.
As noted by one commentator, "the effectiveness of
international commercial arbitration depends on the
predictable enforcement of arbitral agreements and awards."
International arbitration policies are founded upon two basic
interests:
a. preserving the finality of arbitral awards; and
b. maintaining a just system. 6
Arbitration is a consensual process. The contractual nature
of an arbitration permits international companies to pre-
arrange a predictable system of dispute resolution which
preserves the privacy of their business relationship.
Judicial review undermines the fundamental benefits of
submitting to commercial arbitration. The very reasons
parties enter into international arbitration agreements (to
increase speed, neutrality, efficiency, privacy, and finality,
and to reduce costs of dispute resolution) are rendered void
if a national court is permitted to reexamine the decision of
an arbitral panel.
Under a judicial system of control, increased costs in time
and money are passed onto parties who selected arbitration
as a way to protect their rights. Ultimately, such parties are
denied the protections they sought through arbitration and
possibly priced out of the system altogether.
Nevertheless, there are dangers inherent in the complete
independence of arbitral forums. A forum with no system of
review is more susceptible to abuse.
If the system of international arbitration is to continue to meet
the needs of international business, it is necessary to reach
a balance between the conflicting goals of justice and finality
in commercial arbitration.
Current Status of Judicial Review of Arbitral Awards
The primary issue facing the system of international
arbitration concerns the review of arbitral awards. Since
there is no institutional system of review, aggrieved parties
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Notes based on Judge J. Humiding’s Outline
are forced to appeal arbitrators' decisions in national courts.
The role of domestic judicial systems is limited. There is no
review of an arbitrator's substantive conclusions in rendering
an award.
Notwithstanding the parties' intent to provide for a final
decision, an arbitral award is subject to statutory defenses
regarding enforcement. Unfortunately, questions submitted
for review are frequently intertwined with the substantive
issues of a dispute.
Parties to an arbitration agreement are faced with
considerable uncertainty. Ironically, uncertainty is one of the
problems parties seek to avoid through the execution of an
arbitration agreement.
1. Excess of Authority
Due to the contractual nature of arbitration, an award must
be based on the provisions of the agreement, rather than an
arbitrator's personal interpretation of legislative requirements.
If an arbitrator fails to confine his or her decision to the
provisions of the agreement, the arbitrator has exceeded the
scope of authority, rendering the award unenforceable.
However, it is often difficult to distinguish between a mere
error of law and an action which wholly exceeds arbitral
authority.
Thus, a court risks imposing its own substantive evaluation
of a dispute in reviewing the scope of an arbitrator's authority.
The burden of showing an arbitral tribunal has exceeded its
contractual authority falls on the party challenging
confirmation of the award.
The strength of the public policy favoring international
arbitration renders this burden difficult to overcome.
2. Public Policy
A reviewing court may also vacate an award that it finds
contrary to domestic public policy.
Review under this "catch-all" standard is somewhat
troublesome. The court in Fotochrome Inc. v Copal Co.
limited its application of this provision to circumstances in
which recognizing the award would violate fundamental
conceptions of "morality and justice”.
In W.R. Grace v. Local 759, the court explained that under
this test, the policy must be "well defined and dominant" and
derive from "reference to the laws and legal precedents and
not from general consideration of supposed public interests."
One commentator characterized the public policy exception
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to enforcement as an "escape hatch," under which a court
may interject "national bias and political undertones" into its
assessment of the award.
Consideration of policy issues could threaten the viability of
international arbitration as a mechanism for commercial
dispute resolution. At a minimum, it would compromise the
neutrality of the proceeding, frustrating the fundamental
goals and intentions of the parties.
Common Law Standard of Manifest Disregard
Many courts have adopted the common law standard of
"manifest disregard."
The standard derives from dicta contained in the 1953 US
Supreme Court case of Wilko v. Swann. Here, the Court
invalidated an arbitration agreement on the grounds that the
dispute arose under the Securities Act and that
congressional intent was better served by prohibiting
arbitration of a securities issue.
Several courts have either declined to apply the doctrine of
manifest disregard or criticized its appropriateness.
In discussing its reluctance to apply the standard, one court
noted that, "indeed, we have expressed some doubt as to
whether it should be adopted since the standard would likely
never be met when the arbitrator provides no reasons for its
award (which is typically the case).
Bernhardt v. Polygraphic Company of America, Inc.,
suggests that application of a non-statutory standard of
manifest disregard to an arbitral award would be
inappropriate. The Court stated that “whether the arbitrators
misconstrued a contract is not open to judicial review," and
that arbitrators may draw on their personal knowledge in
making an award.
The fact that the manifest disregard doctrine has existed
since 1953, but was never incorporated into the New York
Convention or the Federal Arbitration Act, suggests that
Congress intended to exclude it as a standard of review for
arbitral awards.
Balancing the Interests of Review and Independence
The uncertainties of litigation are precisely what parties to an
arbitration agreement seek to avoid by establishing a
procedure for non-judicial dispute resolution.
The resolution of international commercial disputes is
complicated and expensive. Parties to an arbitration
agreement attempt to minimize the disadvantages inherent
to potential disputes involving international business
transactions through arbitration, which carries with it the
benefits of speed and cost efficiency.
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The pressure that national judicial review places upon the
system of arbitration eliminates these advantages, and the
consequence may be a reduction in international trade as
businesses become discouraged with the system."
In the commercial context, time is often a key concern when
a dispute arises. Thus, the finality of a decision is one of the
most attractive features of the arbitration procedure.
Although judicial review may increase the accuracy of
arbitration decisions, the costs of such review is passed on
to the parties submitting to arbitration, thereby negating the
benefits of arbitration and undermining the system altogether.
Due to the negative impact that a system of review has on
international commercial arbitration, review acts as a
"roadblock" to its effectiveness.
Notwithstanding the negative effect judicial review has on the
viability of international commercial arbitration, it is
unrealistic to presume that courts will permit the standards
of review to disappear altogether. Consequently, it is crucial
that the standards be clarified and narrowed such that
parties to arbitration are afforded a reasonable level of
certainty in their expectations.
In assessing the problems surrounding the grounds for
vacating arbitral awards, courts have considered the
following issues:
1. the absence of a complete record upon which to
apply the standards;
2. the interconnection of arbitral procedure with the
merits of the dispute; and
3. the possible misapplication of the standards due to
the lack of clarity in their scope.
Conclusion
The strong policy supporting international arbitration dictates
that courts preserve the independence of arbitral tribunals
and effectuate the intent of parties to finalize their disputes
through arbitration.
Although there are dangers inherent in an unchecked system
of dispute resolution, parties to an arbitration agreement are
free to balance the costs and benefits of arbitration and
overseas litigation.
The advantages of arbitration in an international commercial
context are strong, eliminating a great deal of cost and
uncertainty. Parties involved in international trade realize the
benefit of arranging a neutral, efficient, and final method of
resolving commercial disputes. Accordingly, they voluntarily
submit to the arbitral process.
It is imperative that both domestic and foreign parties remain
confident in the predictability and autonomy of international
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arbitration.
Imposing national review onto international arbitral awards
will only produce skepticism and reluctance to submit to
international commercial arbitration.
Recognition & Enforcement of Foreign Arbitral Awards
1958 New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards
The Convention entered into force on 7 June 1959.
How to become a party: The Convention is closed for
signature. It is subject to ratification, and is open to accession
by any Member State of the United Nations, any other State
which is a member of any specialized agency of the United
Nations, or is a Party to the Statute of the International Court
of Justice
Optional and/or mandatory declarations and
notifications: When signing, ratifying or acceding to the
Convention, any State may on the basis of reciprocity
declare that it will apply the Convention to the recognition
and enforcement of awards made only in the territory of
another Party to the Convention.
Denunciation/Withdrawal: Any Party may denounce this
Convention by a written notification to the Secretary-General
of the United Nations. Denunciation shall take effect one
year after the date of the receipt of the notification by the
Secretary-General.
Article V – Grounds for Refusing Recognition
1. Recognition and enforcement of the award may be
refused, at the request of the party against whom it is invoked,
only if that party furnishes to the competent authority where
the recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were,
under the law applicable to them, under some incapacity, or
the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon,
under the law of the country where the award was made;
(b) The party against whom the award is invoked was not
given proper notice of the appointment of the arbitrator or of
the arbitration proceedings or was otherwise unable to
present his case;
(c) The award deals with a difference not contemplated by or
not falling within the terms of the submission to arbitration, or
it contains decisions on matters beyond the scope of the
submission to arbitration, provided that, if the decisions on
matters submitted to arbitration can be separated from those
not so submitted, that part of the award which contains
decisions on matters submitted to arbitration may be
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recognized and enforced;
(d) The composition of the arbitral authority or the arbitral
procedure was not in accordance with the agreement of the
parties, or, failing such agreement, was not in accordance
with the law of the country where the arbitration took place;
(e) The award has not yet become binding on the parties, or
has been set aside or suspended by a competent authority
of the country in which, or under the law of which, that award
was made.
2. Recognition and enforcement of an arbitral award may
also be refused if the competent authority in the country
where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of
settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be
contrary to the public policy of that country.
Article 4.35-4.46, IRR
Article 4.35. Recognition and Enforcement. (a) A foreign
arbitral award shall be recognized as binding and, upon
petition in writing to the regional trial Court, shall be enforced
subject to the provisions of this Article and of Article 4.36
(Grounds for Refusing Recognition or Enforcement).
(b) The petition for recognition and enforcement of such
arbitral awards shall be filled with the Regional Trial Court In
accordance with Special ADR Rules.
(i) Convention Award - The New York Convention shall
govern the recognition and enforcement of arbitral awards
covered by said Convention. The petitioner shall establish
that the country in which the foreign arbitration award was
made is a party to the New York Convention
(ii) Non-Convention Award – The recognition and
enforcement of foreign arbitral awards not covered by the
New York Convention shall be done in accordance with
procedural rules to be promulgated by the Supreme Court.
The court may, on grounds of comity and reciprocity,
recognize and enforce a nonconvention award as a
convention award.
(c) The party relying on an award or applying for its
enforcement shall file with the Regional Trial Court the
original or duly authenticated copy of the award and the
original arbitration agreement or a duly authenticated copy
thereof. If the award or agreement is not made in an official
language of the Philippines, the party shall supply a duly
certified translation thereof into such language.
(d) A foreign arbitral award when confirmed by a court
of a foreign country, shall be recognized and enforced as a
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foreign arbitral award and not as a judgment of a foreign
court.
(e) A foreign arbitral award when confirmed by the
Regional Trial Court, shall be enforced in the same manner
as final and executory decisions of courts of law of the
Philippines.
(f) If the Regional Trial Court has recognized the arbitral
award but an application for rejection and/or) suspension of
enforcement of that award is subsequently made, the
Regional Trial Court may, if it considers the application to be
proper, vacate or suspend the decision to enforce that award
and may also, on the application of the party claiming
recognition or enforcement of that award, order the other
party seeking rejection or suspension to provide appropriate
security.
Article 4.36. Grounds for Refusing Recognition or
Enforcement.
A CONVENTION AWARD.
Recognition or enforcement of an arbitral award, made in a
state, which is a party to the New York Convention, may be
refused, at the request of the party against whom it is
provoked, only if the party furnishes to the Regional Trial
Court proof that:
(a) The parties to the arbitration agreement are, under
the law applicable to them, under some incapacity; or the
said agreement is not valid under the law to which the parties
have subjected it or; failing any indication thereon, under the
law of the country where the award was made; or
(b) the party against whom the award is invoked was not
given proper notice of the appointment of an arbitrator or of
the arbitral proceedings or was otherwise in able to present
his case; or
(c) the award deals with dispute not contemplated by or
not failing within the terms of the submission to arbitration, or
it contains decisions on matters beyond the scope of the
submission to arbitration; provided that, if the decisions on
matters submitted to arbitration can be separated from those
not so submitted, that part of the award which contains
decisions on matters submitted to arbitration may be
recognized and enforced; or
(d) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties or, failing such agreement, was not in accordance
with the law of the country where the arbitration too place; or
(e) the award has not become binding on the parties or
has been set aside or suspended by a court of the country in
which, or under the law of which, that award was made.
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Recognition and enforcement of an arbitral award may also
be refused if the Regional Trial Court where recognition and
enforcement is sought finds that:
(a) the subject-matter of the dispute is not capable of
settlement by arbitration under the law of Philippines; or
(b) the recognition or enforcement of the award would be
contrary to the public policy of the Philippines.
A party to a foreign arbitration proceeding may oppose an
application for recognition and enforcement of the arbitral
award in accordance with the Special ADR Rules only on the
grounds enumerated under paragraph (a) and (c) of Article
4.35 (Recognition and Enforcement). Any other ground
raised shall be disregarded by the Regional Trial Court.
B. NON-CONVENTION AWARD.
(a) A foreign arbitral award rendered in a state which is
not a party to the New York Convention will berecognized
upon proof of the existence of comity and reciprocity and
may be treated as a convention award. If not so treated and
if no comity or reciprocity exists, the non-convention award
cannot be recognized and/or enforced but may be deemed
as presumptive evidence of a right as between the parties in
accordance with Section 48 of the Rules of Court.
(b) If the Regional Trial Court has recognized the
arbitral award but a petition for suspension of enforcementof
that award is subsequently made, the Regional Trial Court
may, if it considers the petition to be proper, suspend the
proceedings to enforce the award, and may also, on the
application of the party claiming recognition or enforcement
of that award, order the other party seeking suspension to
provide appropriate security.
(c) If the petition for recognition or enforcement of the
arbitral award is filed by a party and a counter-petitionfor the
rejection of the arbitral award is filed by the other party, the
Regional Trial Court may, if it considers the counter-petition
to be proper but the objections thereto may be rectified or
cured, remit the award to the arbitral tribunal for appropriate
action and in the meantime suspend the recognition and
enforcement proceedings and may also on the application of
the petitioner order the counter-petitioner to provide
appropriate security.
Article 4.37. Appeal from Court Decision on Arbitral Awards.
A decision of the Regional Trial Court recognizing, enforcing,
vacating or setting aside an arbitral award may be appealed
to the Court of Appeals in accordance with the rules of
procedure to be promulgated by the Supreme Court.
The losing party who appeals from the judgment of the court
recognizing and enforcing an arbitral award shall be required
by the Court of Appeals to post a counter-bond executed if
favor of the prevailing party equal to the amount of the award
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in accordance with the Special ADR Rules.
Any stipulation by the parties that the arbitral tribunal’s award
or decision shall be final, and therefore not appealable, is
valid. Such stipulation carries with it a waiver of the right to
appeal from an arbitral award but without prejudice to judicial
review by way of certiorari under Rule 65 of the Rules of
Court.
Article 4.38. Venue and Jurisdiction. Proceedings for
recognition and enforcement of an arbitration agreement or
for vacation or setting aside of an arbitral award, and any
application with a court for arbitration assistance and
supervision, except appeal, shall be deemed as special
proceedings and shall be filed with the Regional Trial Court
where:
(a) the arbitration proceedings are conducted;
(b) where the asset to be attached or levied upon, or the
act to be enjoined is located;
(c) where any of the parties to the dispute resides or has
its place of business; or(d) in the National Capital Judicial
Region at the option of the applicant.
Article 4.39. Notice of Proceedings to Parties. In a special
proceeding for recognition and enforcement of an arbitral
award, the court shall send notice to the parties at their
address of record in the arbitration, or if any party cannot be
served notice at such address, at such party’s last known
address. The notice shall be sent at least fifteen (15) days
before the date set for the initial hearing of the application.
Article 4.40. Legal Representation in International
Commercial Arbitration. In international commercial
arbitration conducted in the Philippines, a party may be
represented by any person of his/her choice: Provided, that
such representative, unless admitted to the practice of law in
the Philippines, shall not be authorized to appear as counsel
in any Philippine court or any other quasi-judicial body
whether or not such appearance is in relation to the
arbitration in which he/she appears.
Article 4.41. Confidentially of Arbitration Proceedings.
The arbitration proceedings, including the records, evidence
and the arbitral award, shall be considered confidential and
shall not be poolside except:
(a) with the consent of the parties; or
(b) for the limited purpose of disclosing to the court
relevant documents in cases where resort to the court
isallowed herein.
Provided, however, that the court in which the action or the
appeal is pending may issue a protective order to prevent or
prohibit disclosure of documents or information containing
secret processes, developments, research and other
information where it is shown that the applicant shall be
materially prejudiced by an authorized disclosure thereof.
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Article 4.42. Summary nature of proceedings before the
court. A petition for recognition and enforcement of awards
brought before the court shall be heard and dealt with
summarily in accordance with the Special ADR Rules.
Article 4.43. Death of a Party. Where a party dies after
making a submission or a contract to arbitrate as prescribed
in these Rules, the proceedings may be begun or continued
upon the application of, or notice to, his/her executor or
administrator, or temporary administrator of his/her estate. In
any such case, the court may issue an order extending the
time within which notice of a motion to recognize or vacate
an award must be served. Upon recognizing an award,
where a party has died since it was filed or delivered, the
court must enter judgement in the name of the original party;
and the proceedings thereupon are the same as where a
party dies after a verdict.
Article 4.44. Multi-Party Arbitration. When a single
arbitration involves more than two parties, the foregoing
rules, to the extent possible, shall be used, subject to such
modifications consistent with this Chapter as the arbitral
tribunal shall deem appropriate to address possible
complexities of a multi-party arbitration.
Article 4.45. Consolidation of Proceedings and
Concurrent Hearings. – The parties and the arbitral tribunal
may agree –
(a) that the arbitration proceedings shall be
consolidated with other arbitration proceedings; or(b) that
concurrent hearings shall be held, on such terms as may be
agreed.
Unless the parties agree to confer such power on the arbitral
tribunal, the tribunal has no power to order consolidation of
arbitration proceedings or concurrent hearings.
Article 4.46. Costs. (a) The arbitral tribunal shall fix the
costs of arbitration in its award. The term "costs" include
only:
(i) The fees of the arbitral tribunal to be stated separately as
to each arbitrator and to be fixed by the tribunal itself in
accordance with the paragraph (b) of this Article;
(ii) The travel and other expenses incurred by the
arbitrators;
(iii) The costs of expert advice and of other assistance
required by the arbitral tribunal;
(iv) The travel and other expenses of witnesses to the
extent such expenses are approved by the arbitral tribunal;
(v) The costs for legal representation and assistance of
the successful party if such costs were claimed during the
arbitral proceedings, and only to the extent that the arbitral
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tribunal determines that the amount of such costs is
reasonable;
(v1) Any fees and expenses of the appointing authority.
(b) The fees of the arbitral tribunal shall be reasonable
in amount, taking into account the amount in dispute, the
complexity of the subject matter, the time spent by the
arbitrators and any other relevant circumstances of the case.
If an appointing authority has been agreed upon by the
parties and if such authority has issued a schedule of fees
for arbitrators in international cases which it administers, the
arbitral tribunal in fixing its fees shall take that schedule of
fees into account to the extent that it considers appropriate
in the circumstances of the case.
If such appointing authority has not issued a schedule of fees
for arbitrators in international cases, any party may, at any
time request the appointing authority to furnish a statement
setting forth the basis for establishing fees which is
customarily followed in international cases in which the
authority appoints arbitrators. If the appointing authority
consents to provide such a statement, the arbitral tribunal, in
fixing its fees, shall take such information into account to the
extent that it considers appropriate in the circumstances of
the case.
(c) In cases referred to in the second and third
sub-paragraphs of paragraph (b) of this Article, when a party
so requests and the appointing authority consents to perform
the function, the arbitral tribunal shall fix its fees only after
consultation with the appointing authority which may make
any comment it deems appropriate to the arbitral tribunal
concerning the fees.
(d) Except as provided in the next sub-paragraph of this
paragraph, the costs of arbitration shall, in principle, be
borne by the unsuccessful party. However, the arbitral
tribunal may apportion each of such costs between the
parties if it determines that apportionment is reasonable,
taking into account the circumstances of the case.
With respect to the costs of legal representation and
assistance referred to in paragraph (c) of paragraph (a) (iii)
of this Article, the arbitral tribunal, taking into account the
circumstances of the case, shall be free to determine which
party shall bear such costs or may apportion such costs
between the parties if it determines that appointment is
reasonable.
When the arbitral tribunal issues an order for the termination
of the arbitral proceedings or makes an award on agreed
terms, it shall fix the costs of arbitration referred to in
paragraphs (b), (c) and (d) of this Article in the context of that
order or award.
(e) The arbitral tribunal, on its establishment, may
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request each party to deposit an equal amount as an
advance for the costs referred to in paragraphs (i), (ii) and
(iii) of paragraph (a) of this Article.
During the course of the arbitral proceedings, the arbitral
tribunal may request supplementary deposits from the
parties.
If an appointing authority has been agreed upon by the
parties and when a party so requests and the appointing
authority consents to perform the function, the arbitral
tribunal shall fix the amounts of any deposits or
supplementary deposits only after consultation with the
appointing authority which may make any comments to the
arbitral tribunal which it deems appropriate concerning the
amount of such deposits and supplementary deposits.
If the required deposits are not paid in full within thirty (30)
days after receipt of the request, the arbitral tribunal shall so
inform the parties in order that the required payment may be
made. If such payment is not made, the arbitral tribunal may
order the suspension or termination of the arbitral
proceedings.
After the award has been made, the arbitral tribunal shall
render an accounting to the parties of the deposits received
and return any unexpended balance to the parties.
(Also read Parlade pp. 282-325)
Taming the Unruly Horse: Philippine Public Policy and
the New York Convention
(Donemark J.L. Calimon)52
This article proposes that Philippine courts be guided by a
policy of “judicial restraint” in applying the Public Policy
exception under Art V of the NY Convention.
Such exception should be construed in a narrow sense.
In order to fully embrace the pro-enforcement principle under
the Convention, the Philippine courts should be guided by
the following considerations:
1. Courts should initially consult the following evidence
of public policy:
a. Public policy under the Constitution –
provisions of the Constitution should be
upheld by the courts over n arbitral award
violating it.
b. Public policy based on states –but mindful
that not all violations will trigger the
application of the Public Policy Exception.
Only provisions of the law dealing with the
fundamental rule of overriding importance
may result to non-enforcement.
c. Public policy as declared by judicial decision
52
61 Ateneo L.J. 635 (2016)
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– based on stare decisis, previous SC
decisions are authoritative on future cases
where the facts are substantially the same.
2. If the court is presented with a situation potentially
involving the Public Policy exception, the court
should exercise judicial restraint and construe the
provision narrowly. Foreign arbitral awards should
be refused to be enforced only if:
a. there is a flagrant, effective, and concrete
violation of an overriding public policy of the
State; and
b. provided that the public policy consideration
involves international and transnational, not
merely domestic, public policy of the State.
3. As a general proposition, courts should be guided by
how the public policy exception under the
Convention has been applied in other jurisdictions.
The following are universally or generally-accepted
violations of public policy in the context of the
Convention:
a. Violation of the right to be heard; or of due
process;
b. Violation of equal opportunity to present
one’s case;
c. Award obtained by fraud or based on
falsified documents;
d. Award obtained following bribery of or
threats to an arbitrator;
e. Violation of res judicata;
f. Lack of independence and impartiality of the
arbitrators; and
g. Awards giving effect to illegal activities
which are universally condemned, such as
terrorism, drug trafficking, prostitution,
pedophilia, corruption, or fraud in
international commerce.
The Enforcement of International Arbitral Awards
(Jacinto D. Jimenez)53
The promulgation of an arbitral award doesn’t put an end to
the dispute. It opens the gate for the next sequence of
controversies – the enforcement of the award. The arbitral
tribunal doesn’t have the power to enforce the award. Hence,
the winning party must file a case with a national court.
While far from perfect, international arbitration is, rightly,
regarded as generally suffering fewer ills than litigation of
international disputes in national courts and as offering more
workable and effective opportunities for remedying or
avoiding those ills which do exist.
53
Ateneo LJ (March 2017)
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XII. Construction Industry Arbitration Commission
(CIAC)
Chapter 6, IRR
ARBITRATION OF CONSTRUCTION DISPUTES
The Construction Industry Arbitration Commission (CIAC),
which has original and exclusive jurisdiction over arbitration
of construction disputes pursuant to Executive Order No.
1008, s. 1985, otherwise known as the "Construction
Industry Arbitration Law", shall promulgate the Implementing
Rules and Regulations governing arbitration of construction
disputes, incorporating therein the pertinent provisions of the
ADR Act.
EO 1008 – Construction Industry Arbitration Law
February 4, 1985
CREATING AN ARBITRATION MACHINERY IN THE
CONSTRUCTION INDUSTRY OF THE PHILIPPINES
xxx
WHEREAS, there is a need to establish an arbitral
machinery to settle to such disputes expeditiously in order to
maintain and promote a healthy partnership between the
government and the private sector in the furtherance of
national development goals;
xxx
Sec. 1. Title. This Executive Order shall be known as the
"Construction Industry Arbitration Law".
Sec. 2. Declaration of Policy. It is hereby declared to be
the policy of the State to encourage the early and expeditious
settlement of disputes in the Philippine construction industry.
xxx
Sec. 4. Jurisdiction. The CIAC shall have original and
exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties involved in
construction in the Philippines, whether the dispute arises
before or after the completion of the contract, or after the
abandonment or breach thereof. These disputes may involve
government or private contracts. For the Board to acquire
jurisdiction, the parties to a dispute must agree to submit the
same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to
violation of specifications for materials and workmanship;
violation of the terms of agreement; interpretation and/or
application of contractual time and delays; maintenance and
defects; payment, default of employer or contractor and
changes in contract cost.
Excluded from the coverage of this law are disputes arising
from employer-employee relationships which shall continue
to be covered by the Labor Code of the Philippines.
xxx
Sec. 6. Functions of the Commission. The Commission
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shall perform, among others that may be conferred by law,
the following functions:
1) To formulate and adopt an arbitration program for the
construction industry;
2) To enunciate policies and prescribe rules and procedures
for construction arbitration;
3) To supervise the arbitration program, and exercise such
authority related thereto as regards the appointment,
replacement or challenging of arbitrators; and
4) To direct its officers and employees to perform such
functions as may be assigned to them from time to time.
xxx
Sec. 14. Arbitrators. A sole arbitrator or three arbitrators
may settle a dispute.
Where the parties agree that the dispute shall be settled by
a sole arbitrator, they may, by agreement, nominate him from
the list of arbitrators accredited by the CIAC for appointment
and confirmation. If the parties fail to agree as to the
arbitrator, the CIAC taking into consideration the
complexities and intricacies of the dispute/s has the option
to appoint a single arbitrator or an Arbitral Tribunal.
If the CIAC decides to appoint an Arbitral Tribunal, each
party may nominate one (1) arbitrator from the list of
arbitrators accredited by the CIAC for appointment and for
confirmation. The third arbitrator who is acceptable to both
parties confirmed in writing shall be appointed by the CIAC
and shall preside over the Tribunal.
Arbitration shall be men of distinction in whom the business
sector and the government can have confidence. They shall
not be permanently employed with the CIAC. Instead, they
shall render services only when called to arbitrate. For each
dispute they settle, they shall be given fees.
Sec. 15. Appointment of Experts. The services of technical
or legal experts may be utilized in the settlement of disputes
if requested by any of the parties or by the Arbitral Tribunal.
If the request for an expert is done by either or by both of the
parties, it is necessary that the appointment of the expert be
confirmed by the Arbitral Tribunal.
Whenever the parties request for the services of an expert,
they shall equally shoulder the expert's fees and expenses,
half of which shall be deposited with the Secretariat before
the expert renders service. When only one party makes the
request, it shall deposit the whole amount required.
xxx
Sec. 19. Finality of Awards. The arbitral award shall be
binding upon the parties. It shall be final and inappealable
except on questions of law which shall be appealable to the
Supreme Court.
Sec. 20. Execution and Enforcement of Awards. As soon
as a decision, order to award has become final and
executory, the Arbitral Tribunal or the single arbitrator with
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the occurrence of the CIAC shall motu propio, or on motion
of any interested party, issue a writ of execution requiring
any sheriff or other proper officer to execute said decision,
order or award.
Sec. 21. Rule-Making Power. The CIAC shall formulate and
adopt necessary rules and procedures for construction
arbitration. xxx
Revised Rules of Procedure Governing Construction
Arbitration
Issued: January 28, 2011
Copy at:
http://www.philconstruct.com/docs/downloads/CIAP%20DO
CS/CIAC%20ARBITRATION%20GUIDELINES/CIAC%20R
evised%20Rules%20of%20Procedure%20Governing%20C
onstruction%20Arbitration.pdf
As amended by CIAC Resolution Nos. 15-2006, 16-2006,
18-2006, 19-2006, 02-2007, 07-2007, 13-2007, 02-2008,
and 03-2008
Cases
National Irrigation Administration vs CA54
(On the jurisdiction of the CIAC)
In this special civil action for certiorari under Rule 65 of the
Rules of Court, the National Irrigation Administration (NIA),
seeks to annul and set aside the Resolutions of the Court of
Appeals which dismissed NIA’s petition for certiorari and
prohibition against CIAC.
Antecedents
Aug 1978: In a competitive bidding held by NIA, Hydro
Resources Contractors Corporation (HYDRO) was awarded
a Contract for the construction of the main civil works of the
Magat River Multi-Purpose Project. HYDRO would be paid
partly in Philippine pesos and partly in U.S. dollars.
HYDRO substantially completed the works under the
contract in 1982 and final acceptance by NIA was made in
1984. HYDRO thereafter determined that it still had an
account receivable from NIA representing the dollar rate
differential of the price escalation for the contract.
Dec 1994: After unsuccessfully pursuing its case with NIA,
HYDRO, filed with the CIAC a Request for Adjudication of
the aforesaid claim.
Jan 1995: NIA filed its Answer, questioning the jurisdiction
of the CIAC alleging lack of cause of action, laches and
estoppel in view of HYDRO’s alleged failure to avail of its
54
318 SCRA 255, Nov. 17, 1999
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right to submit the dispute to arbitration within the prescribed
period as provided in the contract
After reaching an accord on the issues to be considered by
the arbitration panel, the parties scheduled the dates of
hearings and of submission of simultaneous memoranda.
Mar 1995: NIA filed a Motion to Dismiss alleging lack of
jurisdiction over the disputes. NIA contended that there was
no agreement with HYDRO to submit the dispute to CIAC for
arbitration considering that the construction contract was
executed in 1978 and the project completed in 1982,
whereas EO 1008 was signed only in 1985; and that while
they have agreed to arbitration as a mode of settlement of
disputes, they could not have contemplated submission of
their disputes to CIAC.
April 1995: CIAC issued an order which deferred the
determination of the motion to dismiss and resolved to
proceed with the hearing of the case on the merits. Acting on
NIA’s MfR, CIAC ruled that it has jurisdiction over the
HYDRO’s claim over NIA pursuant to EO 1008.
May 1996: NIA filed with the Court of Appeals an original
action of certiorari and prohibition with prayer for restraining
order and/or injunction, seeking to annul the Orders of the
CIAC for having been issued without or in excess of
jurisdiction.
Contention of NIA: CIAC has no authority or jurisdiction to
hear and try this dispute between the herein parties as EO
1008 had no retroactive effect.
CA, Jun 1996: Finding that there was no grave abuse of
discretion, it dismissed the petition.
Jun 1997: NIA filed before the SC an original action for
certiorari and prohibition with urgent prayer for temporary
restraining order and writ of preliminary injunction, praying
for the annulment of the CA’s decision.
SC: The petition suffers from a procedural defect that
warrants its outright dismissal. The questioned resolutions of
the CA have already become final and executory by reason
of NIA’s failure to appeal. Instead of filing this petition for
certiorari under Rule 65 of the Rules of Court, NIA should
have filed a timely petition for review under Rule 45.
In any case, even if the issue of technicality is disregarded
and recourse under Rule 65 is allowed, the same result
would be reached since a review of the questioned
resolutions of the CIAC shows that it committed no grave
abuse of discretion.
Contrary to the claim of NIA, the CIAC has jurisdiction over
the controversy.
85
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
EO 1008 was promulgated on February 4, 1985. It vests
upon CIAC original and exclusive jurisdiction over disputes
arising from, or connected with contracts entered into by
parties involved in construction in the Philippines, whether
the dispute arises before or after the completion of the
contract, or after the abandonment or breach thereof. The
disputes may involve government or private contracts.
For the Board to acquire jurisdiction, the parties to a dispute
must agree to submit the same to voluntary arbitration.
The complaint of HYDRO against NIA on the basis of the
contract executed between them was filed on December 7,
1994, during the effectivity of E.O. No. 1008. Hence, it is well
within the jurisdiction of CIAC. The jurisdiction of a court is
determined by the law in force at the time of the
commencement of the action.
Moreover, it is undeniable that NIA agreed to submit the
dispute for arbitration to the CIAC. NIA through its counsel
actively participated in the arbitration proceedings.
J Plus Asia Development Corporation vs Utility
Assurance Corp.55
(Did RA 9285 divest the CA of its power to review
decisions of the CIAC?)
No. CIAC decisions are appealable to the CA via petition for
review under Rule 43.
The SC found no merit in petitioner’s contention that with the
institutionalization of alternative dispute resolution under RA
9285, the CA was divested of jurisdiction to review the
decisions or awards of the CIAC. Petitioner erroneously
relied on the provision in said law allowing any party to a
domestic arbitration to file in the RTC a petition either to
confirm, correct or vacate a domestic arbitral award.
RA 9285 did not confer jurisdiction on RTCs to review
awards or decisions of the CIAC in construction disputes. On
the contrary, Section 40 expressly declares that confirmation
by the RTC is not required, thus:
SEC. 40. Confirmation of Award. – The confirmation of a
domestic arbitral award shall be governed by Section 23 of
R.A. 876.
A domestic arbitral award when confirmed shall be enforced
in the same manner as final and executory decisions of the
Regional Trial Court.
The confirmation of a domestic award shall be made by the
regional trial court in accordance with the Rules of Procedure
to be promulgated by the Supreme Court.
55
GR No. 199650, June 26, 2013
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A CIAC arbitral award need not be confirmed by the regional
trial court to be executory as provided under EO 1008.
Executive Order (EO) No. 1008 vests upon the CIAC original
and exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties involved in
construction in the Philippines, whether the dispute arises
before or after the completion of the contract, or after the
abandonment or breach thereof.
By express provision of Section 19 thereof, the arbitral award
of the CIAC is final and unappealable, except on questions
of law, which are appealable to the Supreme Court.
With the amendments introduced by RA 7902 and
promulgation of the 1997 Rules of Civil Procedure, as
amended, the CIAC was included in the enumeration of
quasi-judicial agencies whose decisions or awards may be
appealed to the CA in a petition for review under Rule 43.
Such review of the CIAC award may involve either questions
of fact, of law, or of fact and law.
Petitioner misread the provisions of SADR which took effect
on October 30, 2009. Since RA 9285 explicitly excluded
CIAC awards from domestic arbitration awards that need to
be confirmed to be executory, said awards are therefore not
covered by Rule 11 of the Special ADR Rules, as they
continue to be governed by EO 1008, as amended and the
rules of procedure of the CIAC.
The CIAC Revised Rules of Procedure Governing
Construction Arbitration provide for the manner and mode of
appeal from CIAC decisions or awards in Section 18:
SECTION 18.2 Petition for review. – A petition for review
from a final award may be taken by any of the parties within
fifteen (15) days from receipt thereof in accordance with the
provisions of Rule 43 of the Rules of Court.
Stronghold Insurance vs Sps Stroem 56
(Is a dispute involving the liability of a surety under a
performance bond connected to a construction
contract within the exclusive jurisdiction of the CIAC?)
This case involves the proper invocation of the Construction
Industry Arbitration Committee's (CIAC) jurisdiction through
an arbitration clause in a construction contract. The main
issue here is whether the dispute — liability of a surety under
a performance bond — is connected to a construction
contract and, therefore, falls under the exclusive jurisdiction
of the CIAC.
Antecendents
Spouses Rune and Lea Stroem (Spss Stroem) entered into
56
GR No. 204689, Jan 21, 2015
86
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
an Owners-Contractor Agreement with Asis-Leif & Company,
Inc. for the construction of a two-storey house on their lot.
Asis-Leif secured Performance Bond in the amount of
₱4,500,000.00 from Stronghold Insurance Company, Inc.
Stronghold and Asis-Leif bound themselves jointly and
severally to pay the Sps Stroem the agreed amount in the
event that the construction project is not completed.
Asis-Leif failed to finish the projecton time despite repeated
demands of the Sps Stroem.
Sps Stroem subsequently rescinded the agreement. They
filed a Complaint (with Prayer for Preliminary Attachment) for
breach of contract and for sum of money with a claim for
damages against Asis-Leif and Stronghold. Only Stronghold
was served summons. Ms. Cynthia Asis-Leif allegedly
absconded and moved out of the country.
On July 13, 2010, the RTC rendered a judgment in favor of
the Sps Stroem. The court ordered Stronghold to pay the Sps
Stroem ₱4,500,000.00 with 6% legal interest from the time
of first demand.
Stronghold appealed to the CA. Appeal was denied.
Hence, this appeal to the SC.
Issue: Whether the CIAC has exclusive jurisdiction over the
controversy between the parties.
SC: When a dispute arises from a construction contract, the
CIAC has exclusive and original jurisdiction. Construction
has been defined as referring to "all on-site works on
buildings or altering structures, from land clearance through
completion including excavation, erection and assembly and
installation of components and equipment."
In this case, there is no dispute as to whether the Owners-
Contractor Agreement between Asis-Leif and Sps Stroem is
a construction contract. Stronghold and Sps Stroem
recognize that CIAC has jurisdiction over disputes arising
from the agreement.
What is at issue in this case is the parties’ agreement, or lack
thereof, to submit the case to arbitration. Respondents argue
that Stronghold is not a party to the arbitration agreement. It
did not consent to arbitration. It is only Sps Stroem and Asis-
Leif that may invoke the arbitration clause in the contract.
This court has previously held in Prudential vs Anscor
Land that a performance bond, which is meant "to guarantee
the supply of labor, materials, tools, equipment, and
necessary supervision to complete the project" is
significantly and substantially connected to the construction
contract and, therefore, falls under the jurisdiction of the
57
GR No. 212081; Feb. 23, 2015
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CIAC.However, in the Prudential case, the performance
bond was included in the main contract.
In this case, the suretyship agreement was made separately.
it is in the Owners-Contractor Agreement that the arbitration
clause is found. The construction agreement was signed
only by Sps Stroem and the contractor, Asis-Leif. It is basic
that contracts take effect only between the parties, their
assigns and heirs.
Not being a party to the construction agreement, Stronghold,
the surety, cannot invoke the arbitration clause. It thus
cannot invoke the jurisdiction of the CIAC.
Moreover, petitioner’s invocation of the arbitration clause
defeats the purpose of arbitration in relation to the
construction business.
Where a surety in a construction contract actively
participates in a collection suit, it is estopped from raising
jurisdiction later. Assuming that petitioner is privy to the
construction agreement, we cannot allow petitioner to invoke
arbitration at this late stage of the proceedings since to do so
would go against the law's goal of prompt resolution of cases
in the construction industry.
XIII. Special Rules of Court on ADR
AM No. 07-11-08-SC
Issued on: September 1, 2009
Copy at:
https://www.lawphil.net/courts/supreme/am/am_07-11-08-
sc_2009.html
DENR vs UPCI57
(Does the power to confirm an arbitral award include
the power to order its execution notwithstanding a lack
of provision in the Special ADR Rules?)
Yes.
In this case, petitioner asserts that its petition is not covered
by the Special ADR Rules (particularly, Rule 19.28 on the
15-day reglementary period to file a petition for certiorari) but
by Rule 65 of the Rules of Court (particularly, Section 4
thereof on the 60-day reglementary period to file a petition
for certiorari), which it claimed to have suppletory application
in arbitration proceedings since the Special ADR Rules do
not explicitly provide for a procedure on execution. The
position is untenable.
Execution is fittingly called the fruit and end of suit and the
life of the law. A judgment, if left unexecuted, would be
nothing but an empty victory for the prevailing party.
87
Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
While it appears that the SADR remain silent on the
procedure for the execution of a confirmed arbitral award, the
Rules’ procedural mechanisms cover not only aspects of
confirmation but necessarily extend to a confirmed award’s
execution. In light of the doctrine of necessary implication
which states that every statutory grant of power, right or
privilege is deemed to include all incidental power, right or
privilege.
Execution is but a necessary incident to the Court’s
confirmation of an arbitral award. To construe it otherwise
would result in an absurd situation whereby the confirming
court previously applying the SADR in its confirmation of the
arbitral award would later shift to the regular Rules of
Procedure come execution. A court’s power to confirm a
judgment award under the SADR should be deemed to
include the power to order its execution for such is but a
collateral and subsidiary consequence that may be fairly and
logically inferred from the statutory grant to regional trial
courts of the power to confirm domestic arbitral awards.
XIV. Philippine Dispute Resolution Center, Inc.
Arbitration Rules of the Philippine Dispute Resolution
Center, Inc. 58
Copy at: http://www.pdrci.org/web/wp-
content/uploads/2015/03/2015-PDRCI-ARBITRATION-
RULES-031915.pdf
Model Arbitration Clause:
"Any dispute, controversy or claim arising out of or relating
to this contract, or the breach, termination or invalidity
thereof shall be settled by arbitration in accordance with
the PDRCI Arbitration Rules in force at the time of the
commencement of the arbitration."
Parties may consider adding:
“The number of arbitrators shall be ... (one or three);
The place of arbitration shall be ... (city or country);
The language(s)to be used in the arbitral proceedings
shall be...(language)"
Where parties have agreed that disputes, controversies or
claims between them shall be referred to arbitration under
the Rules, then such Disputes shall be settled in accordance
with the Rules, subject to such modification as the parties
may agree in writing.
The Rules shall apply to arbitrations commenced on or after
1 January 2015, unless the parties have expressly agreed to
apply a particular version of the Rules.
58
PDRCI Website
59
Oct. 31, 2015;
https://www.nytimes.com/2015/11/01/business/dealbook/arbit
ration-everywhere-stacking-the-deck-of-justice.html
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Where any of the Rules is in conflict with a provision of the
law applicable to the arbitration from which the parties
cannot derogate, that provision of the law shall prevail.
XV. Emerging Issues and the Future of Arbitration
Should forced arbitration be banned?
1. Arbitration Everywhere: Stacking the Deck of
Justice (Jessica Silver-Greenberg & Robert
Gebeloff)59
By inserting individual arbitration clauses into a soaring
number of consumer and employment contracts, companies
like American Express devised a way to circumvent the
courts and bar people from joining together in class-action
lawsuits, realistically the only tool citizens have to fight illegal
or deceitful business practices.
Over the last few years, it has become increasingly difficult
to apply for a credit card, use a cellphone, get cable or
Internet service, or shop online without agreeing to private
arbitration. The same applies to getting a job, renting a car
or placing a relative in a nursing home.
Some state judges have called the class-action bans a “get
out of jail free” card, because it is nearly impossible for one
individual to take on a corporation with vast resources.
“This is among the most profound shifts in our legal history,”
William G. Young, a federal judge in Boston who was
appointed by President Ronald Reagan, said in an interview.
“Ominously, business has a good chance of opting out of the
legal system altogether and misbehaving without reproach.”
Corporations said that class actions were not needed
because arbitration enabled individuals to resolve their
grievances easily. But court and arbitration records show the
opposite has happened: Once blocked from going to court
as a group, most people dropped their claims entirely.
The Times investigation was based on thousands of court
records and interviews with hundreds of lawyers, corporate
executives, judges, arbitrators and plaintiffs in 35 states
(Class actions usually get favorable results, due to the
collective aspect. It is easier to fight as a group than alone.)
Civil rights experts worry that discriminatory labor practices
will go unchecked as class actions disappear.
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Notes based on Judge J. Humiding’s Outline
2. In Arbitration, a Privatization of the Justice
System (Jessica Silver-Greenberg & Michael
Corkerynov)60
A doctor brought a sex discrimination claim against the
medical group that had dismissed her. She had a stack of
glowing evaluations, and evidence that the group had a
pattern of denying women partnerships.
However, she was blocked from bringing it to court, and
forced into arbitration.
During the hearing, she noticed that the presiding arbitrator
was having friendly coffee with the head of the group she
was suing. During the proceedings, crucial evidence was
withheld, audiotapes were destroyed, and testimonies flip-
flopped. The arbitrator ultimately ruled against her, and his
decision contained passages pulled, verbatim, from legal
briefs prepared by lawyers for the medical practice.
The incident took away the doctor’s faith in a fair and
honorable legal system.
If the case had been brought in civil court, she would have
been able to appeal, raising questions about testimony,
destruction of evidence, and potential conflicts of interest.
But arbitration often bears little resemblance to court.
Thousands of business have used arbitration to create an
alternate system of justice. There, rules tend to favor
businesses, and judges and juries have been replaced by
arbitrators who commonly consider the companies their
clients.
This amounts to the whole-scale privatization of the justice
system, one law professor said. People are actively being
deprived of their rights.
All it took was adding simple arbitration clauses to contracts
that most employees and consumers don’t even read.
Little is known about arbitration because proceedings are
confidential and the government doesn’t require cases to be
reported.
This secretive nature makes it hard to ascertain whether the
proceedings were fairly conducted.
The doctor in this story lost her case and has been, up to
now, paying the legal costs to a system that was, in theory,
supposed to give her a speedy and inexpensive way of
60
Nov. 1, 2015;
https://www.nytimes.com/2015/11/02/business/dealbook/in-
arbitration-a-privatization-of-the-justice-system.html
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asserting her claims.
3. In Religious Arbitration, Scripture is the Rule of
Law (Michael Corkery & Jessica Silver-
Greenberg)61
In 2012, Nick Ellison, a 20-year-old, instead of going to jail,
was sent by a judge to ‘Teen Challenge’. It is a place that
gives substance abuse programs in Florida, run by
Christians.
He had a drug and alcohol problem, but what the program
did to him, according to a letter he wrote before taking a toxic
mix of drugs which kills him later on, was “de-gay” him. It
would also be discovered later on that the program included
“free labor” which tasked them to work odd jobs, instead of
being given treatment. They were also barred from
communicating with their families and friends.
His family sued Teen Challenge, hoping to uncover what
really happened. But they hit a wall because when Ellison
was admitted, he signed a contract that now his family from
taking the Christian group to court.
His claim had to be resolved through mediation or arbitration
that would not be bound by state law, but by the Bible.
The Holy Scripture will be the supreme authority, the contract
said.
Some lawyers and plaintiffs said that for some groups,
religious arbitration may have less to do with honoring a set
of beliefs than with controlling legal outcomes.
Few courts have intervened, saying that the terms of
arbitration are detailed in binding contracts signed by both
sides.
Some judges are also reluctant to risk infringing the rights of
religious groups.
One Scientologist protested that she was being forced to go
to arbitration run by a religion she no longer believed in.
Ellison’s mother went through the religious group’s
arbitration, which droned on for more than 2 years. She
finally agreed to settle when she felt like she had been
neglecting her other children in the process.
Without a court trial, she was never able to learn what
happened to her son, not just on the night he died, but during
his stay at Teen Challenge.
61
Nov. 2, 2015;
https://www.nytimes.com/2015/11/03/business/dealbook/in-
religious-arbitration-scripture-is-the-rule-of-law.html
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
4. Arbitrating Disputes, Denying Justice (The
Editorial Board of NY Times)62
Forced-arbitration clauses, found in the fine print of contracts,
bar aggrieved parties from pressing their claims as a group
in a class action, often the only practical way for individuals
to challenge corporations.
Corporations effectively control the arbitration process,
including the selection of the arbitrator and the rules of
evidence, a stacked deck if ever there was one.
As if that is not troubling enough, it is extremely difficult to
avoid or get out of forced-arbitration clauses and class-action
bans, particularly since they were upheld by two misguided
Supreme Court decisions in 2011 and in 2013.
People who were blocked from going to court as a group
usually dropped their claims entirely, in part because class
actions are often the only affordable way to file lawsuits.
Indeed, faced with arbitration, it appears that most people do
not pursue remedies to their grievances at all.
Even more disturbing, the shift away from the civil justice
system has gone beyond disputes about money. Nursing
homes, obstetrics practices and private schools increasingly
use forced-arbitration clauses to shield themselves from
being taken to court over alleged discrimination, elder abuse,
fraud, hate crimes, medical malpractice and wrongful death.
Reversing the broader trend of forced arbitration, however,
will require public outcry loud and long enough to stir the
White House and Congress to action. Many people
interviewed in The Times’s series did not realize that their
right to sue had been lost until they needed it. A common
refrain was the disbelief that this could happen in America.
But it is happening, and it needs to stop.
5. Treasury Faults Arbitration Rule Aimed at
Protecting Consumers (Jessica Silver-
Greenberg)63
The Treasury Department took aim at a rule that would allow
millions of Americans to band together in class action
lawsuits against Wall Street firms, saying it could trigger
frivolous lawsuits and drive up the cost of credit.
In an 18-page report, the department said the Consumer
62
Nov. 7, 2015;
https://www.nytimes.com/2015/11/08/opinion/sunday/arbitrati
ng-disputes-denying-justice.html
63
Oct. 23, 2017;
https://www.nytimes.com/2017/10/23/business/treasury-faults-
arbitration-rule-aimed-at-protecting-consumers.html
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Financial Protection Bureau, which adopted the rule this
summer, did not adequately evaluate the harm it could cause
to consumers.
The report arrived amid a broader push by the Trump
administration to relax or repeal regulations, including those
that affect financial institutions. Treasury has published two
reports recommending a series of changes to financial rules
put in place after the 2008 financial crisis.
The arbitration rule, which is set to take effect in 2019, will
prevent credit card companies and other financial institutions
from using the fine print of contracts to ban class action
lawsuits or force consumers into arbitration, a private system
where an individual has to go up alone against a deep-
pocketed corporation.
Treasury said the rule could deal an expensive blow to
financial institutions, costing them more than $500 million in
legal defense fees. The real winner, the report says, are
class action lawyers. At its center, the report questions the
very analysis the consumer agency used to create its
signature rule.
“The bureau failed to meaningfully evaluate whether
prohibiting mandatory arbitration clauses in consumer
financial contracts would serve either consumer protection or
the public interest,” the report said.
The rule does not explicitly ban mandatory arbitration. Still,
critics of the rule say it will effectively kill mandatory
arbitration.
“The report by the Treasury Department rehashes industry
arguments that were analyzed in depth and solidly refuted in
the final rule,” said Samuel Gilford, a spokesman for
Consumer Financial Protection Bureau. He added that the
bureau’s analysis “found that mandatory arbitration clauses
allow companies to avoid accountability for breaking the law
and cost consumers billions of dollars by blocking group
lawsuits.”
Across the country, judges, prosecutors and some regulators
have forcefully echoed those complaints, faulting arbitration
clauses for enabling corporations to opt out of the court
system and depriving Americans of one of the few ways to
fight abusive business practices.
6. Supreme Court Divided on Arbitration for
Workplace Cases (Adam Liptak)64
64
Oct. 2, 2017;
https://www.nytimes.com/2017/10/02/us/politics/supreme-
court-workplace-arbitration.html
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Alternative Dispute Resolution
Notes based on Judge J. Humiding’s Outline
The Supreme Court (US) considered whether to give
employers a powerful tool to bar class actions over
workplace issues.
The case is the court’s latest attempt to determine how far
companies can go in insisting that disputes be resolved in
individual arbitrations rather than in court.
The Supreme Court ruled in earlier cases that companies
doing business with consumers may require arbitration and
forbid class actions in their contracts, which are often of the
take-it-or-leave-it variety. Such contracts typically require
two things: that disputes be resolved by arbitration and that
claims be brought one by one. That makes it hard to pursue
minor claims that affect many people, whether in class
actions or in mass arbitration.
Justice Ruth Bader Ginsburg said there was often no point
in pursuing individual arbitration because the sums at issue
were too small.
“There is strength in numbers,” she said. “We have to protect
the individual worker from being in a situation where he can’t
protect his rights.”
Jeffrey B. Wall, a deputy solicitor general who argued in favor
of the employers, acknowledged that it was sometimes a
consequence of arbitration agreements “that the employees
would be practically unable to vindicate their claims.” He
added that the Supreme Court had said as much about
arbitration clauses generally in a 2013 decision concerning
an agreement among businesses.
Arbitration clauses with class-action waivers are now
commonplace in contracts for things like cellphones, credit
cards, rental cars and nursing home care.
In a 2015 dissent, Justice Ginsburg, citing a New York Times
article examining arbitration agreements, wrote that the
court’s decisions favoring arbitration “have predictably
resulted in the deprivation of consumers’ rights to seek
redress for losses, and, turning the coin, they have insulated
powerful economic interests from liability for violations of
consumer protection laws.”
The court’s earlier arbitration decisions were closely divided,
with its conservative members in the majority.
Workers seeking to sue their employers for overtime pay and
the like say the second law prohibits arbitration clauses that
require class-action waivers.
Justice Anthony M. Kennedy seemed to be ready to side with
employers. Justice Neil M. Gorsuch, the court’s newest
member, asked no questions.
Paul D. Clement, a lawyer for the employers, said the labor
law was “directed to the workplace, not the courthouse.”
d.m.g. 2018 j.d.
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Justice Ginsburg said the arbitration law was concerned with
agreements between merchants of relatively equal
bargaining power. The employment contracts at issue in the
case, she said, have been forced on workers.
“There was no true liberty of contract,” she said.
The cases, which were consolidated for a single hour of
argument, featured an unusual element: Lawyers for the
federal government appeared on both sides.
The Obama administration had filed a brief supporting the
workers on behalf of the National Labor Relations Board.
The Trump administration reversed course, and Mr. Wall
argued on behalf of the employers.
The labor board’s general counsel, Richard F. Griffin Jr.,
argued for the workers. He made a concession at odds with
the position of another lawyer on his side.
Mr. Griffin said that employment contracts could not require
workers to give up collective action in arbitration but that the
private entities that conduct arbitration could require that
cases be pursued one by one.
If that is so, Justice Samuel A. Alito Jr. responded, “you have
not achieved very much because, instead of having an
agreement that says no class arbitration, you have an
agreement requiring arbitration before the XYZ arbitration
association, which has rules that don’t allow class arbitration.”
Daniel R. Ortiz, a law professor at the University of Virginia
who also argued for the workers, took a different approach.
“When an employer tries to coerce by making it a condition
of continued employment that employees agree to a set of
arbitral rules that make collective action impossible,” he said,
that would be unlawful.
Some justices suggested that workers could band together
in a limited sense by hiring the same lawyer and filing
individual arbitration cases.
Justice Elena Kagan said that was not good enough.
“The fact that there is one way to exercise a right left over
does not make it O.K. if we’ve taken away another 25 ways
of exercising the right,” she said. “You know, when we think
about the First Amendment, we don’t say we can ban
leafleting because you can always write an op-ed.”
91