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1 AND 2 (Concept of Arbitration and Classification)

Concept of Arbitration
As defined under the ADR Act, arbitration is a voluntary dispute resolution process in which one
or more arbitrators, appointed in accordance with the agreement of the parties or rules
promulgated pursuant to the ADR Act, resolve a dispute by rendering an award (Section 3, d,
ADR ACT, Article 1.6, A, 3, IRR). It has also been defined and distinguished from the court trial
system as follows:x x x [A]n 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.
(Uniwide Sales Realty and Resources Corporation v. Titan-Ikeda Construction and Development
Corporation)
The primary distinction between arbitration and mediation is that, in the former, it is the
arbitrator that decides the dispute and renders an arbitral award to conclude the arbitral
proceeding; while in the latter, it is the parties themselves who enter into and execute a
mediated settlement agreement to conclude the mediation proceeding.
As to the role of evidence and the merits of the case, arbitration is a merit/evidence based form
of ADR.A completed arbitral proceeding is concluded by an arbitral award constituting the
partial or final decision by an arbitrator in resolving the issue in a controversy. (Section 3, f, R.A.
No. 9285)
ClassificationKinds of ArbitrationGenerally, there are two types of arbitration, compulsory and
voluntary. Arbitration is voluntary if it:x x x involves the reference of a dispute to an impartial
body, the members of which are chosen by the parties themselves, which parties freely
consent in advance to abide by the arbitral award issued after the proceedings where both
parties had the opportunity to be heard. (Uniwide Sales Realty and Resources Corporation v.
Titan-Ikeda Construction and Development Corporation)On the other hand, compulsory
arbitration is:x x x the process of settlement of [labor] disputes by a government agency
which has the authority to investigate and to make an award which is binding on all parties,
and as a mode of arbitration where the parties are compelled to accept the resolution of their
dispute through arbitration by a third part. (Benguet Corporation v. Department of
Environment and Natural Resources-Mines Adjudication Board; Reformist Union of R.B. Liner,
Inc. v. NLRC; Ludo and Luym Corporation v. Saornido)
According to the ADR Act, arbitration is domestic if it is not international in character (Section
32, ADR Act). On the other hand, arbitration is international if any of the following instances
occur (Art.1.6, B, 8, IRR):1. The parties places of business, which at the time of conclusion of
the arbitration agreement, is in different states;2. The place of arbitration provided in the
arbitration agreement and in which the parties have their places of business, is outside of the
Philippines;3. The place where a substantial part of the obligation is to be performed or the
place with which the subject matter of the dispute is most closely connected, and in which the
parties have their places of business, is outside the Philippines; or4. The parties have expressly
agreed that the subject matter of the arbitration agreement relates to more than one country.
Therefore, arbitration is domestic if the components of parties places of business, place of
arbitration, place of performance of a substantial part of the obligation, and place where the
subject matter of the dispute is most closely connected, are all located in the Philippines.
Arbitration is foreign if conducted outside the Philippines (A foreign arbitral award is defined
under Rule 1.11, d of the Specil ADR Rules as one made in a country other than the

Philippines). Under this definition, arbitration conducted in the Philippines is domestic


irrespective of the presence or absence of foreign elements.
Under the foregoing definitions, an international commercial arbitration proceeding conducted
in the Philippines under the auspices of the ADR Act is domestic and international in character.
On the other hand, an international commercial arbitration conducted outside the Philippines is
a foreign arbitration.
Arbitration is commercial if it covers matters arising from all relationships of commercial
nature, whether contractual or not (Section 3, g, Article 1.6, B, 4, IRR). In defining the extent of
commercial relationships covered by arbitration, the IRR sought to expand rather than delimit
its coverage. Hence, the IRR, instead of defining commercial relationships gave examples
thereof implying that the enumeration is merely descriptive and not exclusive.
By providing for a system of arbitration of an international and commercial character, the ADR
Act of 2004 opened the Philippines as a venue for international commercial arbitration.
Policy on ArbitrationIn Korea Technologies Co., Ltd. V. Lerma, the Supreme Court had an
opportunity to reiterate the judicial policy on arbitration in the following manner: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.
Objectives of ArbitrationThe basic objective of arbitration is to provide a speedy and
inexpensive method of settling disputes by allowing the parties to avoid the formalities, delay,
expense and aggravation which commonly accompany ordinary litigation, especially litigation
which goes through the hierarchy of courts. (Del Monte Corporation-USA v. Court of Appeals)
3 & 4 Arbitration Agreement (Arts. 5.6 and 5.7, IRR; Secs. 2 and 4, Arbitration Law)
Since an agreement to arbitrate is a contract, it must satisfy the essential requisites of a valid
contract.Like in the case of mediation and international commercial arbitration, the consent to
arbitrate can either be a pre-causal consent (agreement to submit to arbitration) such as when
the parties agree in a contract to settle by arbitration a controversy that will arise between
them; or a present causal consent (submission agreement) such as when the controversy
already exists between the parties at the time of the submission to arbitration. The submission
and contract shall be valid, enforceable and irrevocable except upon grounds provided by law
for the revocation of contracts.Incapacity of partyWhere one of the parties to the controversy is
an infant, or a person judicially declared to be incompetent, the dispute is not capable of
arbitration, unless the referral to arbitration is made by a general or guardian ad litem. And the
incapacity of a party cannot be invoked by a party who knowingly entered into an arbitration
agreement with an incapacitated party. Arbitration agreement must be in writing and
subscribed by the party sought to be charged, or by his lawful agent.A court before which an
action is brought on a matter which is the subject of an arbitration agreement shall, if at least
one party so requests not later than the pre-trial conference, or upon the request of both
parties thereafter, refer the parties to arbitration UNLESS it finds that the arbitration agreement
is null and void, inoperative or incapable of being performed. If the parties so request in the
same manner, the court may stay the proceedings during the pendency of the arbitration. In
such case, the court does not lose its jurisdiction over the case and the proceedings are merely
stayed to await the rendition of the arbitral award which shall be enforced by the court.
Moreover even while the court proceedings are pending, the arbitration can proceed and an
award may be made thereon. The rule however, is different where the issue involved is the

challenge to an arbitrator. In this case, the elevation of the incident to a court suspends the
arbitration. When the court action is a multi-party, and one or more but not all of them are
parties to an arbitration agreement, the court shall refer those who are parties to the
arbitration agreement to arbitration, and proceed with the court action as to those who are not
bound by such arbitration agreement. The court, however may issue an order directing the
inclusion in the arbitration of those parties who are not bound by the arbitration agreement but
who agree to such inclusion provided those originally bound by it do not object to their
inclusion.
Principle of SeparabilityIn most disputes, the validity of the agreement is in question. For
instance, if a party claims non-performance of the agreement by the other party, the latter will
claim that the agreement is invalid, if possible. However, in order to conduct arbitration
proceedings, the arbitration clause should remain unaffected by the claim of invalidity. In this
context, the doctrine of separability has been introduced and accepted in the practice of
international commercial arbitration. The separability of the arbitration clause from the
underlying agreement has been accepted as a principle which allows for arbitration
proceedings related to an agreement whose validity is put into question.According to the
separability principle, the invalidity of the underlying agreement will not have an impact on the
arbitration clause; likewise, the invalidity of the arbitration clause will not render the underlying
agreement invalid. In other words, the requirements for validity of the arbitration agreement
may differ from those sought for the validity of the underlying agreement. For instance, in
Turkish law, a representative may conclude a share purchase agreement on behalf of the
principal and this does not necessitate that the representative have specific authority to do so.
However, the same representative needs specific authority to conclude an arbitration
agreement on behalf of the same principal. In such event, the provisions of the share purchase
agreement concluded by the representative will be valid, except for the arbitration clause, due
to lack of specific authority1.Consequently, even if the underlying agreement is pronounced
invalid for any reason, the arbitration clause will remain valid; on the other hand, if the
arbitration clause is invalid, the underlying contract will remain valid and the dispute arising
from the underlying agreement will be resolved before national courts.Indeed, the arbitration
clause and the underlying agreement are two different agreements despite the fact that both
exist within the same text. While the underlying agreement creates a relationship of obligation
between the parties, the arbitration agreement solely addresses the settlement of disputes
between the parties.Due to aforementioned reasons, the principle of separability establishes
that the arbitration agreement and the underlying agreement have different qualities; the
arbitration agreement is juridically autonomous and shall not be affected when the main
contract is rendered invalid.Nonetheless, this principle does not necessarily require that the
"fate" of these two agreements is always different. Certain reasons invalidating the underlying
agreement may affect the validity of the arbitration agreement as well. For instance, where
either or both parties are found to lack the capacity to have entered into the agreements, both
agreements will be deemed invalid. Similarly, the arbitration agreement will be assigned to a
third party if the underlying agreement is assigned (provided that the assignee consents to
arbitrate).The effect of the separability of arbitration agreements upon the choice of applicable
law should also be analyzed; i.e. whether the law applicable to the underlying agreement will
be, automatically, different from the law applicable to the arbitration agreement by reason of
its separability. In other words, is the choice of law applicable to the main contract also
applicable to the arbitration agreement?This issue is especially important for arbitration
clauses. Choice of law and arbitration clauses are often stipulated in international agreements;
either as part of the same phrase, or as two paragraphs of the same article, or as consecutive

articles. In such cases, it should be analyzed on a case by case basis whether or not the
applicable law stated in the choice of law clause shall apply to the arbitration agreement or not.
ConclusionThe arbitration agreement is accepted as a distinct agreement, separate from the
underlying agreement a concept defined as the separability principle. This principle prevents
the validity of one agreement from being affected by the other one; it effectively establishes
the full autonomy of an arbitration agreement and the integrity of the arbitral process.
Nonetheless, the two may be assessed together. However, it is important to consider, because
of the separability of the arbitration agreement, whether the choice of law stipulated by the
parties in the main contract is applicable to the arbitration agreement. Thus, dispute resolution
and choice of law clauses should be drafted with the utmost caution and care.
5-6Arbitrator-person appointed to render an award, alone or with others, in a dispute that is
the subject of an arbitration agreement. May use his own discretion in the performance of his
functions. Appointment of arbitratorsIf, in the contract for arbitration or in the submission
described in section two, provision is made for a method of naming or appointing an arbitrator
or arbitrators, such method shall be followed; but if no method be provided therein the Court of
First Instance shall designate an arbitrator or arbitrators.The Court of First Instance shall
appoint an arbitrator or arbitrators, as the case may be, 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 fifteen 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.(e) The court shall, in its discretion appoint one or three arbitrators, according to the
importance of the controversy involved in any of the preceding cases in which the agreement is
silent as to the number of arbitrators.(f) Arbitrators appointed under this section shall either
accept or decline their appointments within seven days of the receipt of their appointments. In
case of declination or the failure of an arbitrator or arbitrators to duly accept their
appointments the parties or the court, as the case may be, shall proceed to appoint a
substitute or substitutes for the arbitrator or arbitrators who decline or failed to accept his or
their appointments.Qualifications of arbitrators.Any person appointed to serve as an arbitrator
must be of legal age, in full-enjoyment of his civil rights and know how to read and write. 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.ObligationsIf, after
appointment but before or during hearing, a person appointed to serve as an arbitrator shall
discover any circumstances likely to create a presumption of bias, or which he believes might
disqualify him as an impartial arbitrator, the arbitrator shall immediately disclose such
information to the parties. Thereafter the parties may agree in writing:(a) to waive the
presumptive disqualifying circumstances; or(b) to declare the office of such arbitrator vacant.
Any such vacancy shall be filled in the same manner as the original appointment was made.
Arbitration ProceedingsThe venue or place/s where the arbitration proceeding may be
conducted in an office space, a business center, a function room or any suitable place agreed
upon by the parties and the arbitral tribunal, which may vary per session/hearing/conference
Confidential of Arbitration Proceedings. - The arbitration proceedings, including the records,
evidence and the arbitral award, shall be considered confidential and shall not be published
except (1) with the consent of the parties, or (2) for the limited purpose of disclosing to the
court of 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.After initial disclosure is made and in
the course of the arbitration proceedings, when the arbitrator discovers circumstances that are
likely to create a presumption of bias, he/she shall immediately disclose those circumstances to
the parties. A written disclosure is not required where it is made during the arbitration and it
appears in a written record of the arbitration proceedings.
6) ARBITRAL AWARDS
1.DOMESTIC AWARDS- at any time within 1 month after the award is made, any party to the
controversy which was arbitrated may apply to the court having jurisdiction for an order
confirming the award.
The court must grant such order unless the award is vacated, modified or corrected (sec 23)
The confirmation of domestic award shall be made by the RTC.
Domestic Arbitral Award, when confirmed, shall be enforced in the same manner as final and
executor decisions of the RTC.
The CIAC arbitral award need not be confirmed by the RTC to be executor as provided by E.O
1008 (sec. 40)
VACATION AWARD
A party to a domestic arbitration may question the arbitral award with the appropriate RTC in
accordance with rules of procedure to be promulgated by the Supreme court only on those
grounds enumerated under Sec. 25 of RA 876. Any other ground raised against the domestic
arbitral award shall be disregarded by the RTC.
NOTE: it is actually sec. 24 of the said law which enumerated the grounds referred to under the
preceding section. The grounds are:
1) the award was procured by corruption, fraud or other undue means.
2) that there was evident partiality or corruption in the arbitrators or any of them.
3) that the arbitrators are 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 or
4) 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.
2)FOREIGN ARBITRAL AWARDS
The New York convention shall govern the recognition and enforcement of arbitral awards
covered by the said convention (sec 42)
New York convention
It provides for a uniform set of rules on the recognition and enforcement of foreign arbitral
awards.
The recognition and enforcement shall be filed with the RTC. The procedural rules shall provide
that the party relying on the award or applying for its enforcement shall file with the court the
original or authenticated copy of the award and the arbitration agreement. If the award or
agreement was not made in any official languages, the party shall supply a duly certified
translation thereof into any of such languages. (sec 42)

A foreign Arbitral Award when confirmed by a court of a foreign country/ RTC shall be enforced
as a foreign arbitral award and not as a judgment of a foreign court.
If the application for rejection or suspension of enforcement of an award has been made, the
RTC may, if it considers it proper, vacate his decision and may also, on the application of the
party claiming recognition or enforcement of award, order the party to provide appropriate
security. (sec. 42)
RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS NOT COVERED BY
THE NEW YORK CONVENTION
The court, on grounds of comity and reciprocity, recognize and enforce a non convention award
as a convention award (sec. 43)
COMITY- the courtesy or a disposition to accommodate a judicial decision or award made in
another jurisdiction. It is a principle in accordance with the courts of one state or jurisdiction
will give effect to the laws and judicial decisions of another, not as a matter of obligation but
out of deference and respect.
RECIPROCITY-it is founded on mutuality, it is founded on mutuality. It is a relation existing
between two estates when each of them gives the subjects of the other certain privileges on
condition that its own subjects shall enjoy similar privileges.
A foreign arbitral award when confirmed by the RTC shall be in the same manner as final and
executory decisions of courts of law of the Philippines. (sec 44)
A decision of the RTC confirming, vacating , setting aside, modifying or correcting an arbitral
award may be appealed to the court of appeals.
REJECTION OF FOREIGN ARBITRAL AWARD a party to a foreign arbitration proceeding may
oppose an application for recognition and enforcement of the arbitral award in accordance with
the procedural rules to be promulgated by the SC only on those grounds enumerated under Art
V of the New York convention . any other ground shall be disregarded by the RTC.
APPEAL OF JUDGMENT
The losing party who appeals a judgment confirming the arbitral award shall be required by the
appellate court to post counterbond executed in favor of the prevailing party equal to the
amount of the award.
Foreign arbitral awards are not foreign judgments.
A foreign arbitral award when confirmed by a foreign court shall be recognized and enforced as
a foreign arbitral award and not a judgment of foreign court. (sec 44)
APPEAL FROM COURT DECISIONS ON ARBITRAL REWARDS
A decision of the RTC confirming , vacating, setting aside, modifying or correcting 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 (sec 46)

7.) INTERIM MEASURES IN ARBITRATION (Book)


Interim measures otherwise referred to in the ADR Act as interim measures of protection
or provisional reliefs are ancillary remedies intended for the protection of the subject matter
of the dispute. They are akin to the provisional remedies under the 1997 Rules of Civil
Procedure (rules 57 to 61). They include but not limited to preliminary injunction, appointment

of receivers, detention of property, preservation of property, and inspection of property subject


of the dispute.
As a rule, interim measures are applied with and secured from the arbitral tribunal.
Instances when the arbitral tribunal cannot grant the interim measure such as :
-when the arbitral tribunal already constituted has no power to act or is unable to act
effectively.
In such instances, a party may apply for interim measures with a court which may grant them.
The petition for this purpose shall be governed by the Special ADR Rules.
In the case of interim measure, a court cannot refuse to grant , implement or enforce a petition
for an interim measure on the sole ground that the petition is merely an ancillary relief and the
principal action is pending with the arbitral tribunal.
While interim measures are categorized in the ADR act and IRR as ancillary remedies, they are
different from provisional remedies under the rules of court in that the application for interim
measures filed before the regular courts can stand by themselves despite the pendency of the
arbitration of the principal action before the arbitral tribunal.
(Beda notes)
Grant of interim measures of protection: 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 cout. (sec 28)
Note: An interim measure is a petition made either to a court of competent jurisdiction or to an
arbitral tribunal , whichever is appropriate for the temporary protection of the rights and
interest of a party pending the resolution of a dispute.
Such interim measures may include but shall not be limited to:
o preliminary injunction directed against a party
o appointment of receivers or detention ,
o reservation, and
o inspection of property that is the subject of the dispute in arbitrations (sec.29)

Grant of interim measure of protection: 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.

The following rules are to be observed in connection with the interim reliefs or provisional
remedies available:
Any party may request that provision relief be granted against the adverse party;
such relief may be granted:
to prevent irreparable loss or injury
to provide security for the performance of any obligation
to produce or preserve any evidence
to compel any other appropriate act or omission
the order granting provisional relief may be conditioned upon the provision of security or any
act or omission specified in the order;
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
relied is sought, 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 and
evidence supporting the request;
the order shall be binding upon the parties;

either party may apply with the court for assistance in implementing or enforcing an interim
measure ordered by an arbitral tribunal; and
a party who does not comply with the order shall be liable for all damages resulting from non
compliance, including all expenses and reasonable attorneys fees, paid in obtaining the orders
judicial enforcement. (sec. 28)