ADR Second Set

SECOND DIVISION
TUNA PROCESSING, INC., G.R. No. 185582

Petitioner,
-versus- Promulgated:
PHILIPPINE KINGFORD, INC., February 29, 2012

Respondent.
x-----------------------------------------------------------------------------------------x
DECISION
PEREZ, J.:
Can a foreign corporation not licensed to do business in the Philippines, but which collects
royalties from entities in the Philippines, sue here to enforce a foreign arbitral award?
In this Petition for Review on Certiorari under Rule 45,[1] petitioner Tuna Processing, Inc. (TPI),
a foreign corporation not licensed to do business in the Philippines, prays that the Resolution[2] dated
21 November 2008 of the Regional Trial Court (RTC) of Makati City be declared void and the case be
remanded to the RTC for further proceedings. In the assailed Resolution, the RTC dismissed
petitioners Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral
Award[3] against respondent Philippine Kingford, Inc. (Kingford), a corporation duly organized and
existing under the laws of the Philippines,[4] on the ground that petitioner lacked legal capacity to
sue.[5]
The Antecedents
On 14 January 2003, Kanemitsu Yamaoka (hereinafter referred to as the licensor), co-

patentee of U.S. Patent No. 5,484,619, Philippine Letters Patent No. 31138, and Indonesian Patent
No. ID0003911 (collectively referred to as the Yamaoka Patent), [6] and five (5) Philippine tuna
processors, namely, Angel Seafood Corporation, East Asia Fish Co., Inc., Mommy Gina Tuna
Resources, Santa Cruz Seafoods, Inc., and respondent Kingford (collectively referred to as the
sponsors/licensees)[7] entered into a Memorandum of Agreement (MOA),[8] pertinent provisions of
which read:
1. Background and objectives. The Licensor, co-owner of U.S.Patent No. 5,484,619,

Philippine Patent No. 31138, and Indonesian Patent No. ID0003911 xxx wishes to form
an alliance with Sponsors for purposes of enforcing his three aforementioned patents,
granting licenses under those patents, and collecting royalties.
The Sponsors wish to be licensed under the aforementioned patents in order to

practice the processes claimed in those patents in the United States, the Philippines,
and Indonesia, enforce those patents and collect royalties in conjunction with Licensor.
xxx
4. Establishment of Tuna Processors, Inc. The parties hereto agree to the

establishment of Tuna Processors, Inc. (TPI), a corporation established in the State of
California, in order to implement the objectives of this Agreement.
5. Bank account. TPI shall open and maintain bank accounts in the United States, which
will be used exclusively to deposit funds that it will collect and to disburse cash it will
be obligated to spend in connection with the implementation of this Agreement.
6. Ownership of TPI. TPI shall be owned by the Sponsors and Licensor. Licensor shall be
assigned one share of TPI for the purpose of being elected as member of the board of
directors. The remaining shares of TPI shall be held by the Sponsors according to
their respective equity shares. [9]
Alternative Dispute Resolution Page 1

xxx
The parties likewise executed a Supplemental Memorandum of Agreement[10] dated 15 January 2003
and an Agreement to Amend Memorandum of Agreement [11]dated 14 July 2003.
Due to a series of events not mentioned in the petition, the licensees, including respondent
Kingford, withdrew from petitioner TPI and correspondingly reneged on their obligations.[12] Petitioner
submitted the dispute for arbitration before the International Centre for Dispute Resolution in the State
of California, United States and won the case against respondent. [13] Pertinent portions of the award
read:
13.1 Within thirty (30) days from the date of transmittal of this Award to the Parties,
pursuant to the terms of this award, the total sum to be paid by RESPONDENT
KINGFORD to CLAIMANT TPI, is the sum of ONE MILLION SEVEN HUNDRED FIFTY
THOUSAND EIGHT HUNDRED FORTY SIX DOLLARS AND TEN CENTS
($1,750,846.10).
(A) For breach of the MOA by not paying past due assessments, RESPONDENT
KINGFORD shall pay CLAIMANT the total sum of TWO HUNDRED TWENTY NINE
THOUSAND THREE HUNDRED AND FIFTY FIVE DOLLARS AND NINETY CENTS
($229,355.90) which is 20% of MOA assessments since September 1, 2005[;]
(B) For breach of the MOA in failing to cooperate with CLAIMANT TPI in fulfilling the
objectives of the MOA, RESPONDENT KINGFORD shall pay CLAIMANT the total sum
of TWO HUNDRED SEVENTY ONE THOUSAND FOUR HUNDRED NINETY
DOLLARS AND TWENTY CENTS ($271,490.20)[;][14] and
(C) For violation of THE LANHAM ACT and infringement of the YAMAOKA 619
PATENT, RESPONDENT KINGFORD shall pay CLAIMANT the total sum of ONE
MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS AND NO CENTS
($1,250,000.00). xxx
xxx[15]
To enforce the award, petitioner TPI filed on 10 October 2007 a Petition for Confirmation,
Recognition, and Enforcement of Foreign Arbitral Award before the RTC of Makati City. The petition
was raffled to Branch 150 presided by Judge Elmo M. Alameda.
At Branch 150, respondent Kingford filed a Motion to Dismiss.[16] After the court denied the
motion for lack of merit,[17] respondent sought for the inhibition of Judge Alameda and moved for the
reconsideration of the order denying the motion.[18] Judge Alameda inhibited himself notwithstanding
[t]he unfounded allegations and unsubstantiated assertions in the motion. [19] Judge Cedrick O. Ruiz of
Branch 61, to which the case was re-raffled, in turn, granted respondents Motion for Reconsideration
and dismissed the petition on the ground that the petitioner lacked legal capacity to sue in the
Philippines.[20]
Petitioner TPI now seeks to nullify, in this instant Petition for Review on Certiorari under Rule
45, the order of the trial court dismissing its Petition for Confirmation, Recognition, and Enforcement
of Foreign Arbitral Award.
Issue
The core issue in this case is whether or not the court a quo was correct in so dismissing the
petition on the ground of petitioners lack of legal capacity to sue.
Our Ruling
The petition is impressed with merit.
The Corporation Code of the Philippines expressly provides:
Sec. 133. Doing business without a license. - No foreign corporation transacting

business in the Philippines without a license, or its successors or assigns, shall be

permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any valid cause of action
recognized under Philippine laws.
It is pursuant to the aforequoted provision that the court a quo dismissed the petition. Thus:
Herein plaintiff TPIs Petition, etc. acknowledges that it is a foreign corporation
established in the State of California and was given the exclusive right to license or
sublicense the Yamaoka Patent and was assigned the exclusive right to enforce the said
patent and collect corresponding royalties in the Philippines. TPI likewise admits that it
does not have a license to do business in the Philippines.
There is no doubt, therefore, in the mind of this Court that TPI has been doing
business in the Philippines, but sans a license to do so issued by the concerned
government agency of the Republic of the Philippines, when it collected royalties from five
(5) Philippine tuna processors[,] namely[,] Angel Seafood Corporation, East Asia Fish
Co., Inc., Mommy Gina Tuna Resources, Santa Cruz Seafoods, Inc. and respondent
Philippine Kingford, Inc. This being the real situation, TPI cannot be permitted to maintain
or intervene in any action, suit or proceedings in any court or administrative agency of the
Philippines. A priori, the Petition, etc. extant of the plaintiff TPI should be dismissed for it
does not have the legal personality to sue in the Philippines.[21]
The petitioner counters, however, that it is entitled to seek for the recognition and enforcement
of the subject foreign arbitral award in accordance with Republic Act No. 9285 (Alternative Dispute
Resolution Act of 2004),[22] the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards drafted during the United Nations Conference on International Commercial Arbitration in 1958
(New York Convention), and the UNCITRAL Model Law on International Commercial Arbitration
(Model Law),[23] as none of these specifically requires that the party seeking for the enforcement
should have legal capacity to sue. It anchors its argument on the following:
In the present case, enforcement has been effectively refused on a ground not found in
the [Alternative Dispute Resolution Act of 2004], New York Convention, or Model Law. It
is for this reason that TPI has brought this matter before this most Honorable Court, as it
[i]s imperative to clarify whether the Philippines international obligations and State policy
to strengthen arbitration as a means of dispute resolution may be defeated by misplaced
technical considerations not found in the relevant laws.[24]
Simply put, how do we reconcile the provisions of the Corporation Code of the Philippines on
one hand, and the Alternative Dispute Resolution Act of 2004, the New York Convention and
the Model Law on the other?
In several cases, this Court had the occasion to discuss the nature and applicability of
the Corporation Code of the Philippines, a general law, viz-a-viz other special laws. Thus, in Koruga
v. Arcenas, Jr.,[25] this Court rejected the application of the Corporation Code and applied the New
Central Bank Act. It ratiocinated:
Korugas invocation of the provisions of the Corporation Code is misplaced. In an

earlier case with similar antecedents, we ruled that:
The Corporation Code, however, is a general law applying to all types
of corporations, while the New Central Bank Act regulates specifically banks
and other financial institutions, including the dissolution and liquidation
thereof. As between a general and special law, the latter shall
prevail generalia specialibus non derogant. (Emphasis supplied)[26]
Further, in the recent case of Hacienda Luisita, Incorporated v. Presidential Agrarian Reform
Council,[27] this Court held:
Without doubt, the Corporation Code is the general law providing for the formation,
organization and regulation of private corporations. On the other hand, RA 6657 is the
special law on agrarian reform. As between a general and special law, the latter shall
prevailgeneralia specialibus non derogant.[28]

Following the same principle, the Alternative Dispute Resolution Act of 2004 shall apply in this
case as the Act, as its title - An Act to Institutionalize the Use of an Alternative Dispute Resolution
System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other
Purposes - would suggest, is a law especially enacted to actively promote party autonomy in the
resolution of disputes or the freedom of the party to make their own arrangements to resolve their
disputes.[29] It specifically provides exclusive grounds available to the party opposing an application
for recognition and enforcement of the arbitral award.[30]
Inasmuch as the Alternative Dispute Resolution Act of 2004, a municipal law, applies in the
instant petition, we do not see the need to discuss compliance with international obligations under
the New York Convention and the Model Law. After all, both already form part of the law.
In particular, the Alternative Dispute Resolution Act of 2004 incorporated the New York
Convention in the Act by specifically providing:
SEC. 42. Application of the New York Convention. - The New York Convention
shall govern the recognition and enforcement of arbitral awards covered by the said
Convention.
xxx
SEC. 45. Rejection of a 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 Supreme Court
only on those grounds enumerated under Article V of the New York Convention. Any
other ground raised shall be disregarded by the regional trial court.
It also expressly adopted the Model Law, to wit:
Sec. 19. Adoption of the Model Law on International Commercial

Arbitration. International commercial arbitration shall be governed by the Model Law on
International Commercial Arbitration (the Model Law) adopted by the United Nations
Commission on International Trade Law on June 21, 1985 xxx.
Now, does a foreign corporation not licensed to do business in the Philippines have legal
capacity to sue under the provisions of the Alternative Dispute Resolution Act of 2004? We answer in
the affirmative.
Sec. 45 of the Alternative Dispute Resolution Act of 2004 provides that the opposing party in
an application for recognition and enforcement of the arbitral award may raise only those grounds that
were enumerated under Article V of the New York Convention, to wit:
Article V
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; or
(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; or
(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 recognized and enforced;
or
(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; or

(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.
Clearly, not one of these exclusive grounds touched on the capacity to sue of the party seeking the
recognition and enforcement of the award.
Pertinent provisions of the Special Rules of Court on Alternative Dispute Resolution,[31] which
was promulgated by the Supreme Court, likewise support this position.
Rule 13.1 of the Special Rules provides that [a]ny party to a foreign arbitration may petition the
court to recognize and enforce a foreign arbitral award. The contents of such petition are enumerated
in Rule 13.5.[32] Capacity to sue is not included. Oppositely, in the Rule on local arbitral awards or
arbitrations in instances where the place of arbitration is in the Philippines,[33] it is specifically required
that a petition to determine any question concerning the existence, validity and enforceability of such
arbitration agreement[34] available to the parties before the commencement of arbitration and/or a
petition for judicial relief from the ruling of the arbitral tribunal on a preliminary question upholding or
declining its jurisdiction[35] after arbitration has already commenced should state [t]he facts showing
that the persons named as petitioner or respondent have legal capacity to sue or be sued.[36]
Indeed, it is in the best interest of justice that in the enforecement of a foreign arbitral award,
we deny availment by the losing party of the rule that bars foreign corporations not licensed to do
business in the Philippines from maintaining a suit in our courts. When a party enters
into a contract containing a foreign arbitrationclause and, as in this case, in fact submits itself to
arbitration, it becomes bound by the contract, by the arbitration and by the result of arbitration,
conceding therebythe capacity of the other party to enter into the contract, participate in the
arbitration and cause the implementation of the result. Although not on all fours with the instant case,
also worthy to consider is the
wisdom of then Associate Justice Flerida Ruth P. Romero in her Dissenting Opinion in Asset
Privatization Trust v. Court of Appeals,[37] to wit:
xxx Arbitration, as an alternative mode of settlement, is gaining adherents in legal

and judicial circles here and abroad. If its tested mechanism can simply be ignored by an
aggrieved party, one who, it must be stressed, voluntarily and actively participated in the
arbitration proceedings from the very beginning, it will destroy the very essence of
mutuality inherent in consensual contracts.[38]
Clearly, on the matter of capacity to sue, a foreign arbitral award should be respected not
because it is favored over domestic laws and procedures, but because Republic Act No. 9285 has
certainly erased any conflict of law question.
Finally, even assuming, only for the sake of argument, that the court a quo correctly observed
that the Model Law, not the New York Convention, governs the subject arbitral award,[39] petitioner
may still seek recognition and enforcement of the award in Philippine court, since the Model
Law prescribes substantially identical exclusive grounds for refusing recognition or enforcement.[40]
Premises considered, petitioner TPI, although not licensed to do business in the Philippines,
may seek recognition and enforcement of the foreign arbitral award in accordance with the provisions
of the Alternative Dispute Resolution Act of 2004.
II
The remaining arguments of respondent Kingford are likewise unmeritorious.
First. There is no need to consider respondents contention that petitioner TPI improperly raised
a question of fact when it posited that its act of entering into a MOA should not be considered doing
business in the Philippines for the purpose of determining capacity to sue. We reiterate that the

foreign corporations capacity to sue in the Philippines is not material insofar as the recognition and
enforcement of a foreign arbitral award is concerned.
Second. Respondent cannot fault petitioner for not filing a motion for reconsideration of the
assailed Resolution dated 21 November 2008 dismissing the case.We have, time and again, ruled
that the prior filing of a motion for reconsideration is not required in certiorari under Rule 45.[41]
Third. While we agree that petitioner failed to observe the principle of hierarchy of courts,
which, under ordinary circumstances, warrants the outright dismissal of the case,[42] we opt to relax
the rules following the pronouncement in Chua v. Ang,[43] to wit:
[I]t must be remembered that [the principle of hierarchy of courts] generally

applies to cases involving conflicting factual allegations. Cases which depend on
disputed facts for decision cannot be brought immediately before us as we are not triers
of facts.[44] A strict application of this rule may be excused when the reason behind the
rule is not present in a case, as in the present case, where the issues are not factual but
purely legal. In these types of questions, this Court has the ultimate say so that we
merely abbreviate the review process if we, because of the unique circumstances of a
case, choose to hear and decide the legal issues outright.[45]
Moreover, the novelty and the paramount importance of the issue herein raised should be seriously
considered.[46] Surely, there is a need to take cognizance of the case not only to guide the bench and
the bar, but if only to strengthen arbitration as a means of dispute resolution, and uphold the policy of
the State embodied in the Alternative Dispute Resolution Act of 2004, to wit:
Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to

actively promote party autonomy in the resolution of disputes or the freedom of the party
to make their own arrangements to resolve their disputes. Towards this end, the State
shall encourage and actively promote the use of Alternative Dispute Resolution (ADR) as
an important means to achieve speedy and impartial justice and declog court dockets.
xxx
Fourth. As regards the issue on the validity and enforceability of the foreign arbitral award, we
leave its determination to the court a quo where its recognition and enforcement is being sought.
Fifth. Respondent claims that petitioner failed to furnish the court of origin a copy of the motion
for time to file petition for review on certiorari before the petition was filed with this Court.[47] We,
however, find petitioners reply in order. Thus:
26. Admittedly, reference to Branch 67 in petitioner TPIs Motion for Time to File a
Petition for Review on Certiorari under Rule 45 is a typographical error. As correctly
pointed out by respondent Kingford, the order sought to be assailed originated from
Regional Trial Court, Makati City, Branch 61.
27. xxx Upon confirmation with the Regional Trial Court, Makati City, Branch 61, a
copy of petitioner TPIs motion was received by the Metropolitan Trial Court, Makati City,
Branch 67. On 8 January 2009, the motion was forwarded to the Regional Trial Court,
Makati City, Branch 61.[48]
All considered, petitioner TPI, although a foreign corporation not licensed to do business in the
Philippines, is not, for that reason alone, precluded from filing the Petition for Confirmation,
Recognition, and Enforcement of Foreign Arbitral Award before a Philippine court.
WHEREFORE, the Resolution dated 21 November 2008 of the Regional Trial Court, Branch
61, Makati City in Special Proceedings No. M-6533 is hereby REVERSED and SET ASIDE. The case
is REMANDED to Branch 61 for further proceedings.
SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 143581 January 7, 2008
KOREA TECHNOLOGIES CO., LTD., Petitioner,

- versus -
HON. ALBERTO A. LERMA, in his capacity as Presiding Judge of Branch 256 of Regional Trial
Court of Muntinlupa City, and PACIFIC GENERAL STEEL MANUFACTURING CORPORATION,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION
VELASCO, JR., J.:
In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly in civil
and commercial disputes. Arbitration along with mediation, conciliation, and negotiation, being
inexpensive, speedy and less hostile methods have long been favored by this Court. The petition
before us puts at issue an arbitration clause in a contract mutually agreed upon by the parties
stipulating that they would submit themselves to arbitration in a foreign country. Regrettably, instead
of hastening the resolution of their dispute, the parties wittingly or unwittingly prolonged the
controversy.
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in
the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while
private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic corporation.
On March 5, 1997, PGSMC and KOGIES executed a Contract[1] whereby KOGIES would set
up an LPG Cylinder Manufacturing Plant in Carmona, Cavite.The contract was executed in
the Philippines. On April 7, 1997, the parties executed, in Korea, an Amendment for Contract No.
KLP-970301 dated March 5, 1997[2]amending the terms of payment. The contract and its amendment
stipulated that KOGIES will ship the machinery and facilities necessary for manufacturing LPG
cylinders for which PGSMC would pay USD 1,224,000. KOGIES would install and initiate the
operation of the plant for which PGSMC bound itself to pay USD 306,000 upon the plants production
of the 11-kg. LPG cylinder samples. Thus, the total contract price amounted to USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract of Lease[3] with Worth Properties, Inc.
(Worth) for use of Worths 5,079-square meter property with a 4,032-square meter warehouse building
to house the LPG manufacturing plant. The monthly rental was PhP 322,560 commencing on January
1, 1998 with a 10% annual increment clause. Subsequently, the machineries, equipment, and
facilities for the manufacture of LPG cylinders were shipped, delivered, and installed in the Carmona
plant. PGSMC paid KOGIES USD 1,224,000.
However, gleaned from the Certificate[4] executed by the parties on January 22, 1998, after the
installation of the plant, the initial operation could not be conducted as PGSMC encountered financial
difficulties affecting the supply of materials, thus forcing the parties to agree that KOGIES would be
deemed to have completely complied with the terms and conditions of the March 5, 1997 contract.
For the remaining balance of USD306,000 for the installation and initial operation of the plant,
PGSMC issued two postdated checks: (1) BPI Check No. 0316412 dated January 30, 1998 for PhP
4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 for PhP 4,500,000. [5]
When KOGIES deposited the checks, these were dishonored for the reason PAYMENT
STOPPED. Thus, on May 8, 1998, KOGIES sent a demand letter[6] to PGSMC threatening criminal
action for violation of Batas Pambansa Blg. 22 in case of nonpayment. On the same date, the wife of
PGSMCs President faxed a letter dated May 7, 1998 to KOGIES President who was then staying at

a Makati City hotel. She complained that not only did KOGIES deliver a different brand of hydraulic
press from that agreed upon but it had not delivered several equipment parts already paid for.
On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but
the payments were stopped for reasons previously made known to KOGIES.[7]
On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract
dated March 5, 1997 on the ground that KOGIES had altered the quantity and lowered the quality of
the machineries and equipment it delivered to PGSMC, and that PGSMC would dismantle and
transfer the machineries, equipment, and facilities installed in the Carmona plant. Five days later,
PGSMC filed before the Office of the Public Prosecutor an Affidavit-Complaint for Estafadocketed as
I.S. No. 98-03813 against Mr. Dae Hyun Kang, President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not
unilaterally rescind their contract nor dismantle and transfer the machineries and equipment on mere
imagined violations by KOGIES. It also insisted that their disputes should be settled by arbitration as
agreed upon in Article 15, the arbitration clause of their contract.
On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1,
1998 letter threatening that the machineries, equipment, and facilities installed in the plant would be
dismantled and transferred on July 4, 1998. Thus, on July 1, 1998, KOGIES instituted an Application
for Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to
Art. 15 of the Contract as amended.
On July 3, 1998, KOGIES filed a Complaint for Specific Performance, docketed as Civil Case
No. 98-117[8] against PGSMC before the Muntinlupa City Regional Trial Court (RTC). The RTC
granted a temporary restraining order (TRO) on July 4, 1998, which was subsequently extended
until July 22, 1998. In its complaint, KOGIES alleged that PGSMC had initially admitted that the
checks that were stopped were not funded but later on claimed that it stopped payment of the checks
for the reason that their value was not received as the former allegedly breached their contract by
altering the quantity and lowering the quality of the machinery and equipment installed in the plant
and failed to make the plant operational although it earlier certified to the contrary as shown in a
January 22, 1998 Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their
Contract, as amended, by unilaterally rescinding the contract without resorting to arbitration. KOGIES
also asked that PGSMC be restrained from dismantling and transferring the machinery and
equipment installed in the plant which the latter threatened to do on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled
to the TRO since Art. 15, the arbitration clause, was null and void for being against public policy as it
ousts the local courts of jurisdiction over the instant controversy.
On July 17, 1998, PGSMC filed its Answer with Compulsory Counterclaim [9] asserting that it
had the full right to dismantle and transfer the machineries and equipment because it had paid
for them in full as stipulated in the contract; that KOGIES was not entitled to the PhP 9,000,000
covered by the checks for failing to completely install and make the plant operational; and that
KOGIES was liable for damages amounting to PhP 4,500,000 for altering the quantity and lowering
the quality of the machineries and equipment. Moreover, PGSMC averred that it has already paid
PhP 2,257,920 in rent (covering January to July 1998) to Worth and it was not willing to further
shoulder the cost of renting the premises of the plant considering that the LPG cylinder manufacturing
plant never became operational.
After the parties submitted their Memoranda, on July 23, 1998, the RTC issued an Order
denying the application for a writ of preliminary injunction, reasoning that PGSMC had paid KOGIES
USD 1,224,000, the value of the machineries and equipment as shown in the contract such that
KOGIES no longer had proprietary rights over them. And finally, the RTC held that Art. 15 of the
Contract as amended was invalid as it tended to oust the trial court or any other court jurisdiction over
any dispute that may arise between the parties. KOGIES prayer for an injunctive writ was
denied.[10] The dispositive portion of the Order stated:
WHEREFORE, in view of the foregoing consideration, this Court believes and so holds
that no cogent reason exists for this Court to grant the writ of preliminary injunction to

restrain and refrain defendant from dismantling the machineries and facilities at the lot
and building of Worth Properties, Incorporated at Carmona, Cavite and transfer the
same to another site: and therefore denies plaintiffs application for a writ of preliminary
injunction.
On July 29, 1998, KOGIES filed its Reply to Answer and Answer to Counterclaim. [11] KOGIES
denied it had altered the quantity and lowered the quality of the machinery, equipment, and facilities it
delivered to the plant. It claimed that it had performed all the undertakings under the contract and had
already produced certified samples of LPG cylinders. It averred that whatever was unfinished was
PGSMCs fault since it failed to procure raw materials due to lack of funds. KOGIES, relying on Chung
Fu Industries (Phils.), Inc. v. Court of Appeals,[12] insisted that the arbitration clause was without
question valid.
After KOGIES filed a Supplemental Memorandum with Motion to Dismiss[13] answering

PGSMCs memorandum of July 22, 1998 and seeking dismissal of PGSMCs counterclaims, KOGIES,
on August 4, 1998, filed its Motion for Reconsideration[14] of the July 23, 1998 Order denying its
application for an injunctive writ claiming that the contract was not merely for machinery and facilities
worth USD 1,224,000 but was for the sale of an LPG manufacturing plant consisting of supply of all
the machinery and facilities and transfer of technology for a total contract price of USD 1,530,000
such that the dismantling and transfer of the machinery and facilities would result in the dismantling
and transfer of the very plant itself to the great prejudice of KOGIES as the still unpaid owner/seller of
the plant. Moreover, KOGIES points out that the arbitration clause under Art. 15 of the Contract as
amended was a valid arbitration stipulation under Art. 2044 of the Civil Code and as held by this
Court in Chung Fu Industries (Phils.), Inc.[15]
In the meantime, PGSMC filed a Motion for Inspection of Things [16] to determine whether there
was indeed alteration of the quantity and lowering of quality of the machineries and equipment, and
whether these were properly installed. KOGIES opposed the motion positing that the queries and
issues raised in the motion for inspection fell under the coverage of the arbitration clause in their
contract.
On September 21, 1998, the trial court issued an Order (1) granting PGSMCs motion for
inspection; (2) denying KOGIES motion for reconsideration of the July 23, 1998 RTC Order; and (3)
denying KOGIES motion to dismiss PGSMCs compulsory counterclaims as these counterclaims fell
within the requisites of compulsory counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration [17] of the September
21, 1998 RTC Order granting inspection of the plant and denying dismissal of PGSMCs compulsory
counterclaims.
Ten days after, on October 12, 1998, without waiting for the resolution of its October 2, 1998
urgent motion for reconsideration, KOGIES filed before the Court of Appeals (CA) a petition for
certiorari[18] docketed as CA-G.R. SP No. 49249, seeking annulment of the July 23, 1998 and
September 21, 1998 RTC Orders and praying for the issuance of writs of prohibition, mandamus, and
preliminary injunction to enjoin the RTC and PGSMC from inspecting, dismantling, and transferring
the machineries and equipment in the Carmona plant, and to direct the RTC to enforce the specific
agreement on arbitration to resolve the dispute.
In the meantime, on October 19, 1998, the RTC denied KOGIES urgent motion for
reconsideration and directed the Branch Sheriff to proceed with the inspection of the machineries and
equipment in the plant on October 28, 1998.[19]
Thereafter, KOGIES filed a Supplement to the Petition[20] in CA-G.R. SP No. 49249 informing
the CA about the October 19, 1998 RTC Order. It also reiterated its prayer for the issuance of the
writs of prohibition, mandamus and preliminary injunction which was not acted upon by the
CA. KOGIES asserted that the Branch Sheriff did not have the technical expertise to ascertain
whether or not the machineries and equipment conformed to the specifications in the contract and
were properly installed.

On November 11, 1998, the Branch Sheriff filed his Sheriffs Report[21] finding that the
enumerated machineries and equipment were not fully and properly installed.
The Court of Appeals affirmed the trial court and declared

the arbitration clause against public policy
On May 30, 2000, the CA rendered the assailed Decision[22] affirming the RTC Orders and
dismissing the petition for certiorari filed by KOGIES. The CA found that the RTC did not gravely
abuse its discretion in issuing the assailed July 23, 1998 and September 21, 1998 Orders. Moreover,
the CA reasoned that KOGIES contention that the total contract price for USD 1,530,000 was for the
whole plant and had not been fully paid was contrary to the finding of the RTC that PGSMC fully paid
the price of USD 1,224,000, which was for all the machineries and equipment. According to the CA,
this determination by the RTC was a factual finding beyond the ambit of a petition for certiorari.
On the issue of the validity of the arbitration clause, the CA agreed with the lower court that an
arbitration clause which provided for a final determination of the legal rights of the parties to the
contract by arbitration was against public policy.
On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum

shopping by PGSMC, the CA held that the counterclaims of PGSMC were compulsory ones and
payment of docket fees was not required since the Answer with counterclaim was not an initiatory
pleading. For the same reason, the CA said a certificate of non-forum shopping was also not
required.
Furthermore, the CA held that the petition for certiorari had been filed prematurely since
KOGIES did not wait for the resolution of its urgent motion for reconsideration of the September 21,
1998 RTC Order which was the plain, speedy, and adequate remedy available. According to the CA,
the RTC must be given the opportunity to correct any alleged error it has committed, and that since
the assailed orders were interlocutory, these cannot be the subject of a petition for certiorari.
Hence, we have this Petition for Review on Certiorari under Rule 45.
The Issues
Petitioner posits that the appellate court committed the following errors:
a. PRONOUNCING THE QUESTION OF OWNERSHIP OVER THE MACHINERY AND
FACILITIES AS A QUESTION OF FACT BEYOND THE AMBIT OF A PETITION FOR
CERTIORARI INTENDED ONLY FOR CORRECTION OF ERRORS OF
JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF
(SIC) EXCESS OF JURISDICTION, AND CONCLUDING THAT THE TRIAL COURTS
FINDING ON THE SAME QUESTION WAS IMPROPERLY RAISED IN THE PETITION
BELOW;
b. DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15 OF

THE CONTRACT BETWEEN THE PARTIES FOR BEING CONTRARY TO PUBLIC
POLICY AND FOR OUSTING THE COURTS OF JURISDICTION;
c. DECREEING PRIVATE RESPONDENTS COUNTERCLAIMS TO BE ALL

COMPULSORY NOT NECESSITATING PAYMENT OF DOCKET FEES AND
CERTIFICATION OF NON-FORUM SHOPPING;
d. RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT

WAITING FOR THE RESOLUTION OF THE MOTION FOR RECONSIDERATION OF
THE ORDER DATED SEPTEMBER 21, 1998 OR WITHOUT GIVING THE TRIAL
COURT AN OPPORTUNITY TO CORRECT ITSELF;
e. PROCLAIMING THE TWO ORDERS DATED JULY 23

AND SEPTEMBER 21, 1998 NOT TO BE PROPER SUBJECTS OF CERTIORARI AND
PROHIBITION FOR BEING INTERLOCUTORY IN NATURE;

f. NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN HE
(SIC) PETITION AND, INSTEAD, DISMISSING THE SAME FOR ALLEGEDLY
WITHOUT MERIT.[23]
The Courts Ruling
The petition is partly meritorious.
Before we delve into the substantive issues, we shall first tackle the procedural issues.
The rules on the payment of docket fees for counterclaims

and cross claims were amended effective August 16, 2004
KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid docket
fees and filed a certificate of non-forum shopping, and that its failure to do so was a fatal defect.
We disagree with KOGIES.
As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with
Compulsory Counterclaim dated July 17, 1998 in accordance with Section 8 of Rule 11, 1997
Revised Rules of Civil Procedure, the rule that was effective at the time the Answer with Counterclaim
was filed. Sec. 8 on existing counterclaim or cross-claim states, A compulsory counterclaim or a
cross-claim that a defending party has at the time he files his answer shall be contained therein.
On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against
KOGIES, it was not liable to pay filing fees for said counterclaims being compulsory in nature. We
stress, however, that effective August 16, 2004 under Sec. 7, Rule 141, as amended by A.M. No. 04-
2-04-SC, docket fees are now required to be paid in compulsory counterclaim or cross-claims.
As to the failure to submit a certificate of forum shopping, PGSMCs Answer is not an initiatory
pleading which requires a certification against forum shopping under Sec. 5 [24] of Rule 7, 1997
Revised Rules of Civil Procedure. It is a responsive pleading, hence, the courts a quo did not commit
reversible error in denying KOGIES motion to dismiss PGSMCs compulsory counterclaims.
Interlocutory orders proper subject of certiorari
Citing Gamboa v. Cruz,[25] the CA also pronounced that certiorari and Prohibition are neither
the remedies to question the propriety of an interlocutory order of the trial court. [26] The CA erred on
its reliance on Gamboa. Gamboa involved the denial of a motion to acquit in a criminal case which
was not assailable in an action for certiorari since the denial of a motion to quash required the
accused to plead and to continue with the trial, and whatever objections the accused had in his
motion to quash can then be used as part of his defense and subsequently can be raised as errors on
his appeal if the judgment of the trial court is adverse to him. The general rule is that interlocutory
orders cannot be challenged by an appeal.[27] Thus, in Yamaoka v. Pescarich Manufacturing
Corporation, we held:
The proper remedy in such cases is an ordinary appeal from an adverse

judgment on the merits, incorporating in said appeal the grounds for assailing the
interlocutory orders. Allowing appeals from interlocutory orders would result in the sorry
spectacle of a case being subject of a counterproductive ping-pong to and from the
appellate court as often as a trial court is perceived to have made an error in any of its
interlocutory rulings. However, where the assailed interlocutory order was issued with
grave abuse of discretion or patently erroneous and the remedy of appeal would not
afford adequate and expeditious relief, the Court allows certiorari as a mode of
redress.[28]
Also, appeals from interlocutory orders would open the floodgates to endless occasions for
dilatory motions. Thus, where the interlocutory order was issued without or in excess of jurisdiction or
with grave abuse of discretion, the remedy is certiorari.[29]

The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction
in the issuance of the two assailed orders coupled with the fact that there is no plain, speedy, and
adequate remedy in the ordinary course of law amply provides the basis for allowing the resort to a
petition for certiorari under Rule 65.
Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum shopping in filing the petition for
certiorari. Note that KOGIES motion for reconsideration of the July 23, 1998 RTC Order which denied
the issuance of the injunctive writ had already been denied. Thus, KOGIES only remedy was to assail
the RTCs interlocutory order via a petition for certiorari under Rule 65.
While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, 1998
RTC Order relating to the inspection of things, and the allowance of the compulsory counterclaims
has not yet been resolved, the circumstances in this case would allow an exception to the rule that
before certiorari may be availed of, the petitioner must have filed a motion for reconsideration and
said motion should have been first resolved by the court a quo. The reason behind the rule is to
enable the lower court, in the first instance, to pass upon and correct its mistakes without the
intervention of the higher court.[30]
The September 21, 1998 RTC Order directing the branch sheriff to inspect the plant,
equipment, and facilities when he is not competent and knowledgeable on said matters is evidently
flawed and devoid of any legal support. Moreover, there is an urgent necessity to resolve the issue on
the dismantling of the facilities and any further delay would prejudice the interests of
KOGIES. Indeed, there is real and imminent threat of irreparable destruction or substantial damage to
KOGIES equipment and machineries. We find the resort to certiorari based on the gravely abusive
orders of the trial court sans the ruling on the October 2, 1998 motion for reconsideration to be
proper.
The Core Issue: Article 15 of the Contract
We now go to the core issue of the validity of Art. 15 of the Contract, the arbitration clause. It
provides:
Article 15. Arbitration.All disputes, controversies, or differences which may arise

between the parties, out of or in relation to or in connection with this Contract or for the
breach thereof, shall finally be settled by arbitration in Seoul, Korea in accordance with
the Commercial Arbitration Rules of the Korean Commercial Arbitration Board. The
award rendered by the arbitration(s) shall be final and binding upon both parties
concerned. (Emphasis supplied.)
Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void.
Petitioner is correct.
Established in this jurisdiction is the rule that the law of the place where the contract is made
governs. Lex loci contractus. The contract in this case was perfected here in
the Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the Civil Code
sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral
award. Art. 2044 provides, Any stipulation that the arbitrators award or decision shall be final, is
valid, without prejudice to Articles 2038, 2039 and 2040. (Emphasis supplied.)
Arts. 2038,[31] 2039,[32] and 2040[33] abovecited refer to instances where a compromise or an
arbitral award, as applied to Art. 2044 pursuant to Art. 2043,[34] may be voided, rescinded, or
annulled, but these would not denigrate the finality of the arbitral award.
The arbitration clause was mutually and voluntarily agreed upon by the parties. It has not been
shown to be contrary to any law, or against morals, good customs, public order, or public
policy. There has been no showing that the parties have not dealt with each other on equal
footing. We find no reason why the arbitration clause should not be respected and complied with by

both parties. In Gonzales v. Climax Mining Ltd.,[35] we held that submission to arbitration is a contract
and that a clause in a contract providing that all matters in dispute between the parties shall be
referred to arbitration is a contract.[36] Again in Del Monte Corporation-USA v. Court of Appeals, we
likewise ruled that [t]he 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.[37]
Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in
accordance with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is final
and binding, is not contrary to public policy. This Court has sanctioned the validity of arbitration
clauses in a catena of cases. In the 1957 case of Eastboard Navigation Ltd. v. Juan Ysmael and Co.,
Inc.,[38] this Court had occasion to rule that an arbitration clause to resolve differences and breaches
of mutually agreed contractual terms is valid. In BF Corporation v. Court of Appeals, we held that [i]n
this jurisdiction, arbitration has been held valid and constitutional. Even before the approval on June
19, 1953 of Republic Act No. 876, this Court has countenanced the settlement of disputes through
arbitration. Republic Act No. 876 was adopted to supplement the New Civil Codes provisions on
arbitration.[39] And in LM Power Engineering Corporation v. Capitol Industrial Construction Groups,
Inc., we declared that:
Being an inexpensive, speedy and amicable method of settling

disputes, arbitrationalong with mediation, conciliation and negotiationis 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.
Consistent with the above-mentioned policy of encouraging alternative dispute

resolution methods, courts should liberally construe arbitration clauses. Provided such
clause is susceptible of an interpretation that covers the asserted dispute, an order to
arbitrate should be granted. Any doubt should be resolved in favor of arbitration.[40]
Having said that the instant arbitration clause is not against public policy, we come to the
question on what governs an arbitration clause specifying that in case of any dispute arising from the
contract, an arbitral panel will be constituted in a foreign country and the arbitration rules of the
foreign country would govern and its award shall be final and binding.
RA 9285 incorporated the UNCITRAL Model law

to which we are a signatory
For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising
from contractual relations. In case a foreign arbitral body is chosen by the parties, the arbitration rules
of our domestic arbitration bodies would not be applied. As signatory to the Arbitration Rules of the
UNCITRAL Model Law on International Commercial Arbitration[41] of the United Nations Commission
on International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985,
the Philippines committed itself to be bound by the Model Law. We have even incorporated the Model
Law in Republic Act No. (RA) 9285, otherwise known as the Alternative Dispute Resolution Act of
2004 entitled An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the
Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other
Purposes, promulgated on April 2, 2004. Secs. 19 and 20 of Chapter 4 of the Model Law are the
pertinent provisions:
CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATION
SEC. 19. Adoption of the Model Law on International Commercial

Arbitration.International commercial arbitration shall be governed by the Model Law on
International Commercial Arbitration (the Model Law) adopted by the United Nations
Commission on International Trade Law on June 21, 1985 (United Nations Document
A/40/17) and recommended for enactment by the General Assembly in Resolution No.

40/72 approved on December 11, 1985, copy of which is hereto attached as Appendix
A.
SEC. 20. Interpretation of Model Law.In interpreting the Model Law, regard shall
be had to its international origin and to the need for uniformity in its interpretation and
resort may be made to the travaux preparatories and the report of the Secretary
General of the United Nations Commission on International Trade Law dated March 25,
1985 entitled, International Commercial Arbitration: Analytical Commentary on Draft
Trade identified by reference number A/CN. 9/264.
While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a
procedural law which has a retroactive effect. Likewise, KOGIES filed its application for arbitration
before the KCAB on July 1, 1998 and it is still pending because no arbitral award has yet been
rendered. Thus, RA 9285 is applicable to the instant case. Well-settled is the rule that procedural
laws are construed to be applicable to actions pending and undetermined at the time of their
passage, and are deemed retroactive in that sense and to that extent. As a general rule,
the retroactive application of procedural laws does not violate any personal rights because no vested
right has yet attached nor arisen from them.[42]
Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model
Law are the following:
(1) The RTC must refer to arbitration in proper cases
Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject
of arbitration pursuant to an arbitration clause, and mandates the referral to arbitration in such cases,
thus:
SEC. 24. Referral to Arbitration.A court before which an action is brought in a

matter which is the subject matter 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.
(2) Foreign arbitral awards must be confirmed by the RTC
Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be
final and binding are not immediately enforceable or cannot be implemented immediately. Sec.
35[43] of the UNCITRAL Model Law stipulates the requirement for the arbitral award to be recognized
by a competent court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may
refuse recognition or enforcement on the grounds provided for. RA 9285 incorporated these provisos
to Secs. 42, 43, and 44 relative to Secs. 47 and 48, thus:
SEC. 42. Application of the New York Convention.The New York Convention
shall govern the recognition and enforcement of arbitral awards covered by said
Convention.
The recognition and enforcement of such arbitral awards shall be filed with
the Regional Trial Court in accordance with the rules of procedure to be promulgated
by the Supreme Court. Said 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 is not made in any of the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign arbitration award
was made in party to the New York Convention.

xxxx
SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered
by the New York Convention.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 non-convention award as a convention award.
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.A foreign arbitral award when
confirmed by a court of a foreign country, shall be recognized and enforced as a foreign
arbitral award and not as a judgment of a foreign court.
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
xxxx
SEC. 47. Venue and Jurisdiction.Proceedings for recognition and enforcement of

an arbitration agreement or for vacations, setting aside, correction or modification of an
arbitral award, and any application with a court for arbitration assistance and
supervision shall be deemed as special proceedings and shall be filed with the Regional
Trial Court (i) where arbitration proceedings are conducted; (ii) where the asset to be
attached or levied upon, or the act to be enjoined is located; (iii) where any of the
parties to the dispute resides or has his place of business; or (iv) in the National Judicial
Capital Region, at the option of the applicant.
SEC. 48. Notice of Proceeding 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 part cannot be served notice at such
address, at such partys last known address. The notice shall be sent al least fifteen (15)
days before the date set for the initial hearing of the application.
It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a
judgment of a foreign court but as a foreign arbitral award, and when confirmed, are enforced as final
and executory decisions of our courts of law.
Thus, it can be gleaned that the concept of a final and binding arbitral award is similar to
judgments or awards given by some of our quasi-judicial bodies, like the National Labor Relations
Commission and Mines Adjudication Board, whose final judgments are stipulated to be final and
binding, but not immediately executory in the sense that they may still be judicially reviewed, upon the
instance of any party. Therefore, the final foreign arbitral awards are similarly situated in that they
need first to be confirmed by the RTC.
(3) The RTC has jurisdiction to review foreign arbitral awards
Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific
authority and jurisdiction to set aside, reject, or vacate a foreign arbitral award on grounds provided
under Art. 34(2) of the UNCITRAL Model Law. Secs. 42 and 45 provide:
SEC. 42. Application of the New York Convention.The New York Convention
shall govern the recognition and enforcement of arbitral awards covered by said
Convention.
The recognition and enforcement of such arbitral awards shall be filed with
the Regional Trial Court in accordance with the rules of procedure to be promulgated
by the Supreme Court. Said 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 is not made in any of the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which foreign arbitration award
was made is party to the New York Convention.
If the application for rejection or suspension of enforcement of an award has

been made, the Regional Trial Court may, if it considers it proper, vacate its decision
and may also, on the application of the party claiming recognition or enforcement of the
award, order the party to provide appropriate security.
xxxx
SEC. 45. Rejection of a 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 procedures and rules to be promulgated by the Supreme
Court only on those grounds enumerated under Article V of the New York
Convention. Any other ground raised shall be disregarded by the Regional Trial Court.
Thus, while the RTC does not have jurisdiction over disputes governed by arbitration mutually
agreed upon by the parties, still the foreign arbitral award is subject to judicial review by the RTC
which can set aside, reject, or vacate it. In this sense, what this Court held in Chung Fu Industries
(Phils.), Inc. relied upon by KOGIES is applicable insofar as the foreign arbitral awards, while final
and binding, do not oust courts of jurisdiction since these arbitral awards are not absolute and without
exceptions as they are still judicially reviewable. Chapter 7 of RA 9285 has made it clear that all
arbitral awards, whether domestic or foreign, are subject to judicial review on specific grounds
provided for.
(4) Grounds for judicial review different in domestic and foreign arbitral awards
The differences between a final arbitral award from an international or foreign arbitral tribunal
and an award given by a local arbitral tribunal are the specific grounds or conditions that vest
jurisdiction over our courts to review the awards.
For foreign or international arbitral awards which must first be confirmed by the RTC, the
grounds for setting aside, rejecting or vacating the award by the RTC are provided under Art. 34(2) of
the UNCITRAL Model Law.
For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec.
23 of RA 876[44] and shall be recognized as final and executory decisions of the RTC, [45] they may
only be assailed before the RTC and vacated on the grounds provided under Sec. 25 of RA 876.[46]
(5) RTC decision of assailed foreign arbitral award appealable
Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party
in cases where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award, thus:
SEC. 46. Appeal from Court Decision or Arbitral Awards.A decision of the
Regional Trial Court confirming, vacating, setting aside, modifying or correcting an
arbitral award may be appealed to the Court of Appeals in accordance with the rules
and procedure to be promulgated by the Supreme Court.
The losing party who appeals from the judgment of the court confirming an
arbitral award shall be required by the appellate court to post a counterbond executed in
favor of the prevailing party equal to the amount of the award in accordance with the
rules to be promulgated by the Supreme Court.
Thereafter, the CA decision may further be appealed or reviewed before this Court through a
petition for review under Rule 45 of the Rules of Court.
PGSMC has remedies to protect its interests

Thus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign
arbitration as it bound itself through the subject contract. While it may have misgivings on the foreign
arbitration done in Korea by the KCAB, it has available remedies under RA 9285. Its interests are
duly protected by the law which requires that the arbitral award that may be rendered by KCAB must
be confirmed here by the RTC before it can be enforced.
With our disquisition above, petitioner is correct in its contention that an arbitration clause,
stipulating that the arbitral award is final and binding, does not oust our courts of jurisdiction as the
international arbitral award, the award of which is not absolute and without exceptions, is still judicially
reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and
incorporated in RA 9285.
Finally, it must be noted that there is nothing in the subject Contract which provides that the
parties may dispense with the arbitration clause.
Unilateral rescission improper and illegal
Having ruled that the arbitration clause of the subject contract is valid and binding on the
parties, and not contrary to public policy; consequently, being bound to the contract of arbitration, a
party may not unilaterally rescind or terminate the contract for whatever cause without first resorting
to arbitration.
What this Court held in University of the Philippines v. De Los Angeles[47] and reiterated in
succeeding cases,[48] that the act of treating a contract as rescinded on account of infractions by the
other contracting party is valid albeit provisional as it can be judicially assailed, is not applicable to the
instant case on account of a valid stipulation on arbitration. Where an arbitration clause in a contract
is availing, neither of the parties can unilaterally treat the contract as rescinded since whatever
infractions or breaches by a party or differences arising from the contract must be brought first and
resolved by arbitration, and not through an extrajudicial rescission or judicial action.
The issues arising from the contract between PGSMC and KOGIES on whether the equipment
and machineries delivered and installed were properly installed and operational in the plant in
Carmona, Cavite; the ownership of equipment and payment of the contract price; and whether there
was substantial compliance by KOGIES in the production of the samples, given the alleged fact that
PGSMC could not supply the raw materials required to produce the sample LPG cylinders, are
matters proper for arbitration. Indeed, we note that on July 1, 1998, KOGIES instituted an Application
for Arbitration before the KCAB in Seoul, Korea pursuant to Art. 15 of the Contract as
amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate.
Corollarily, the trial court gravely abused its discretion in granting PGSMCs Motion for
Inspection of Things on September 21, 1998, as the subject matter of the motion is under the primary
jurisdiction of the mutually agreed arbitral body, the KCAB in Korea.
In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the
inspection made on October 28, 1998, as ordered by the trial court on October 19, 1998, is of no
worth as said Sheriff is not technically competent to ascertain the actual status of the equipment and
machineries as installed in the plant.
For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders pertaining to
the grant of the inspection of the equipment and machineries have to be recalled and nullified.
Issue on ownership of plant proper for arbitration
Petitioner assails the CA ruling that the issue petitioner raised on whether the total contract price of
USD 1,530,000 was for the whole plant and its installation is beyond the ambit of a Petition for
Certiorari.
Petitioners position is untenable.
It is settled that questions of fact cannot be raised in an original action for certiorari.[49] Whether or not
there was full payment for the machineries and equipment and installation is indeed a factual issue
prohibited by Rule 65.

However, what appears to constitute a grave abuse of discretion is the order of the RTC in resolving
the issue on the ownership of the plant when it is the arbitral body (KCAB) and not the RTC which
has jurisdiction and authority over the said issue. The RTCs determination of such factual issue
constitutes grave abuse of discretion and must be reversed and set aside.
RTC has interim jurisdiction to protect the rights of the parties
Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for
PGSMC to dismantle and transfer the equipment and machineries, we find it to be in order
considering the factual milieu of the instant case.
Firstly, while the issue of the proper installation of the equipment and machineries might well
be under the primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285
has jurisdiction to hear and grant interim measures to protect vested rights of the parties. Sec. 28
pertinently provides:
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 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 or to the extent that the arbitral
tribunal has no power to act or is unable to act effectivity, 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.
(b) The following rules on interim or provisional relief shall be observed:
Any party may request that provisional relief be granted against the adverse
party.
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.
(c) The order granting provisional relief may be conditioned upon the provision of
security or any act or omission specified in the order.
(d) 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.
(e) The order shall be binding upon the parties.
(f) Either party may apply with the Court for assistance in implementing or
enforcing an interim measure ordered by an arbitral tribunal.
(g) 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 orders judicial enforcement. (Emphasis ours.)
Art. 17(2) of the UNCITRAL Model Law on ICA defines an interim measure of protection as:

Article 17. Power of arbitral tribunal to order interim measures
xxx xxx xxx
(2) An interim measure is any temporary measure, whether in the form of an award or
in another form, by which, at any time prior to the issuance of the award by which the
dispute is finally decided, the arbitral tribunal orders a party to:
(a) Maintain or restore the status quo pending determination of the dispute;
(b) Take action that would prevent, or refrain from taking action that is likely to cause,
current or imminent harm or prejudice to the arbitral process itself;
(c) Provide a means of preserving assets out of which a subsequent award may be
satisfied; or
(d) Preserve evidence that may be relevant and material to the resolution of the dispute.
Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue
interim measures:
Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim measure in relation to
arbitration proceedings, irrespective of whether their place is in the territory of this State,
as it has in relation to proceedings in courts. The court shall exercise such power in
accordance with its own procedures in consideration of the specific features of
international arbitration.
In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were
explicit that even the pendency of an arbitral proceeding does not foreclose resort to the courts for
provisional reliefs. We explicated this way:
As a fundamental point, the pendency of arbitral proceedings does not foreclose resort
to the courts for provisional reliefs. The Rules of the ICC, which governs the parties
arbitral dispute, allows the application of a party to a judicial authority for interim or
conservatory measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The
Arbitration Law) recognizes 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. In addition, R.A. 9285, otherwise known as the Alternative Dispute
Resolution Act of 2004, allows the filing of provisional or interim measures with the
regular courts whenever the arbitral tribunal has no power to act or to act effectively. [50]
It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of
protection.
Secondly, considering that the equipment and machineries are in the possession of PGSMC, it
has the right to protect and preserve the equipment and machineries in the best way it
can. Considering that the LPG plant was non-operational, PGSMC has the right to dismantle and
transfer the equipment and machineries either for their protection and preservation or for the better
way to make good use of them which is ineluctably within the management discretion of PGSMC.
Thirdly, and of greater import is the reason that maintaining the equipment and machineries in
Worths property is not to the best interest of PGSMC due to the prohibitive rent while the LPG plant
as set-up is not operational. PGSMC was losing PhP322,560 as monthly rentals or PhP3.87M for
1998 alone without considering the 10% annual rent increment in maintaining the plant.
Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the
preservation or transfer of the equipment and machineries as an interim measure, yet on hindsight,

the July 23, 1998 Order of the RTC allowing the transfer of the equipment and machineries given the
non-recognition by the lower courts of the arbitral clause, has accorded an interim measure of
protection to PGSMC which would otherwise been irreparably damaged.
Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount
based on the contract. Moreover, KOGIES is amply protected by the arbitral action it has instituted
before the KCAB, the award of which can be enforced in our jurisdiction through the RTC. Besides,
by our decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause
of its contract with KOGIES.
PGSMC to preserve the subject equipment and machineries
Finally, while PGSMC may have been granted the right to dismantle and transfer the subject
equipment and machineries, it does not have the right to convey or dispose of the same considering
the pending arbitral proceedings to settle the differences of the parties. PGSMC therefore must
preserve and maintain the subject equipment and machineries with the diligence of a good father of a
family[51] until final resolution of the arbitral proceedings and enforcement of the award, if any.
WHEREFORE, this petition is PARTLY GRANTED, in that:
(1) The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is REVERSED and SET ASIDE;
(2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-117
are REVERSED and SET ASIDE;
(3) The parties are hereby ORDERED to submit themselves to the arbitration of their dispute
and differences arising from the subject Contract before the KCAB; and
(4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries, if
it had not done so, and ORDERED to preserve and maintain them until the finality of whatever arbitral
award is given in the arbitration proceedings.
No pronouncement as to costs.
SO ORDERED.

SPECIAL SECOND DIVISION
G.R. No. 146717 May 19, 2006
TRANSFIELD PHILIPPINES, INC., Petitioner,

- versus -
LUZON HYDRO CORPORATION, AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED and
SECURITY BANK CORPORATION, Respondents.
x---------------------------------------------------------------------------------x
RESOLUTION
TINGA, J.:
The adjudication of this case proved to be a two-stage process as its constituent parts involve two
segregate but equally important issues. The first stage relating to the merits of the case, specifically
the question of the propriety of calling on the securities during the pendency of the arbitral
proceedings, was resolved in favor of Luzon Hydro Corporation (LHC) with the Courts
Decision[1] of 22 November 2004. The second stage involving the issue of forum-shopping on which
the Court required the parties to submit their respective memoranda [2] is disposed of in this
Resolution.
The disposal of the forum-shopping charge is crucial to the parties to this case on account of its
profound effect on the final outcome of the international arbitral proceedings which they have chosen
as their principal dispute resolution mechanism.[3]
LHC claims that Transfield Philippines, Inc. (TPI) is guilty of forum-shopping when it filed the following
suits:
1. Civil Case No. 04-332 filed on 19 March 2004, pending before the Regional Trial
Court (RTC) of Makati, Branch 56 for confirmation, recognition and enforcement of
the Third Partial Award in case 11264 TE/MW, ICC International Court of
Arbitration, entitled Transfield Philippines, Inc. v. Luzon Hydro Corporation.[4]
2. ICC Case No. 11264/TE/MW, Transfield Philippines, Inc. v. Luzon Hydro

Corporation filed before the International Court of Arbitration, International Chamber
of Commerce (ICC) a request for arbitration dated 3 November 2000 pursuant to the
Turnkey Contract between LHC and TPI;
3. G.R. No. 146717, Transfield Philippines, Inc. v. Luzon Hydro Corporation, Australia
and New Zealand Banking Group Limited and Security Bank Corp. filed on 5
February 2001, which was an appeal by certiorari with prayer for TRO/preliminary
prohibitory and mandatory injunction, of the Court of Appeals Decision dated 31
January 2001 in CA-G.R. SP No. 61901.
a. CA-G.R. SP No. 61901 was a petition for review of the Decision in Civil Case
No. 00-1312, wherein TPI claimed that LHCs call on the securities was
premature considering that the issue of default has not yet been resolved with
finality; the petition was however denied by the Court of Appeals;
b. Civil Case No. 00-1312 was a complaint for injunction with prayer for
temporary restraining order and/or writ of preliminary injunction dated 5
November 2000, which sought to restrain LHC from calling on the securities
and respondent banks from transferring or paying of the securities; the
complaint was denied by the RTC.
On the other hand, TPI claims that it is LHC which is guilty of forum-shopping when it raised the issue
of forum-shopping not only in this case, but also in Civil Case No. 04-332, and even asked for the
dismissal of the other case based on this ground. Moreover, TPI argues that LHC is relitigating in Civil
Case No. 04-332 the very same causes of action in ICC Case No. 11264/TE/MW, and even
manifesting therein that it will present evidence earlier presented before the arbitral tribunal. [5]
Meanwhile, ANZ Bank and Security Bank moved to be excused from filing a memorandum. They
claim that with the finality of the Courts Decision dated 22 November 2004, any resolution by the
Court on the issue of forum-shopping will not materially affect their role as the banking entities
involved are concerned.[6] The Court granted their respective motions.

On 1 August 2005, TPI moved to set the case for oral argument, positing that the resolution of the
Court on the issue of forum-shopping may have significant implications on the interpretation of the
Alternative Dispute Resolution Act of 2004, as well as the viability of international commercial
arbitration as an alternative mode of dispute resolution in the country.[7] Said motion was opposed by
LHC in its opposition filed on 2 September 2005, with LHC arguing that the respectivememoranda of
the parties are sufficient for the Court to resolve the issue of forum-shopping.[8] On 28 October 2005,
TPI filed its Manifestation and Reiterative Motion [9] to set the case for oral argument, where it
manifested that the International Chamber of Commerce (ICC) arbitral tribunal had issued its Final
Award ordering LHC to pay TPI US$24,533,730.00 (including the US$17,977,815.00 proceeds of the
two standby letters of credit). TPI also submitted a copy thereof with a Supplemental Petition [10] to the
Regional Trial Court (RTC), seeking recognition and enforcement of the said award. [11]
The essence of forum-shopping is the filing of multiple suits involving the same parties for the same
cause of action, either simultaneously or successively, for the purpose of obtaining a favorable
judgment.[12] Forum-shopping has likewise been defined as the act of a party against whom an
adverse judgment has been rendered in one forum, seeking and possibly getting a favorable opinion
in another forum, other than by appeal or the special civil action of certiorari, or the institution of two
or more actions or proceedings grounded on the same cause on the supposition that one or the other
court would make a favorable disposition.[13]
Thus, for forum-shopping to exist, there must be (a) identity of parties, or at least such parties as
represent the same interests in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts; and (c) the identity of the two preceding particulars is such
that any judgment rendered in the other action will, regardless of which party is successful, amount
to res judicata in the action under consideration.[14]
There is no identity of causes of action between and among the arbitration case, the instant petition,
and Civil Case No. 04-332.
The arbitration case, ICC Case No. 11264 TE/MW, is an arbitral proceeding commenced
pursuant to the Turnkey Contract between TPI and LHC, to determine the primary issue of whether
the delays in the construction of the project were excused delays, which would consequently render
valid TPIs claims for extension of time to finish the project. Together with the primary issue to be
settled in the arbitration case is the equally important question of monetary awards to the aggrieved
party.
On the other hand, Civil Case No. 00-1312, the precursor of the instant petition, was filed to
enjoin LHC from calling on the securities and respondent banks from transferring or paying the
securities in case LHC calls on them. However, in view of the fact that LHC collected the proceeds,
TPI, in its appeal and petition for review asked that the same be returned and placed in escrow
pending the resolution of the disputes before the ICC arbitral tribunal. [15]
While the ICC case thus calls for a thorough review of the facts which led to the delay in the
construction of the project, as well as the attendant responsibilities of the parties therein, in contrast,
the present petition puts in issue the propriety of drawing on the letters of credit during
the pendency of the arbitral case, and of course, absent a final determination by the ICC Arbitral
tribunal. Moreover, as pointed out by TPI, it did not pray for the return of the proceeds of the letters of
credit. What it asked instead is that the said moneys be placed in escrow until the final resolution of
the arbitral case. Meanwhile, in Civil Case No. 04-332, TPI no longer seeks the issuance of a
provisional relief, but rather the issuance of a writ of execution to enforce the Third Partial Award.
Neither is there an identity of parties between and among the three (3) cases. The ICC case
only involves TPI and LHC logically since they are the parties to the Turnkey Contract. In comparison,
the instant petition includes Security Bank and ANZ Bank, the banks sought to be enjoined from
releasing the funds of the letters of credit. The Court agrees with TPI that it would be ineffectual to
ask the ICC to issue writs of preliminary injunction against Security Bank and ANZ Bank since these
banks are not parties to the arbitration case, and that the ICC Arbitral tribunal would not even be able
to compel LHC to obey any writ of preliminary injunction issued from its end. [16] Civil Case No. 04-
322, on the other hand, logically involves TPI and LHC only, they being the parties to the arbitration
agreement whose partial award is sought to be enforced.

As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the courts
for provisional reliefs. The Rules of the ICC, which governs the parties arbitral dispute, allows the
application of a party to a judicial authority for interim or conservatory measures. [17] Likewise, Section
14 of Republic Act (R.A.) No. 876 (The Arbitration Law)[18] recognizes 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. In addition, R.A. 9285, otherwise known as the Alternative Dispute
Resolution Act of 2004, allows the filing of provisional or interim measures with the regular courts
whenever the arbitral tribunal has no power to act or to act effectively. [19]
TPIs verified petition in Civil Case No. 04-332, filed on 19 March 2004, was captioned as one For:
Confirmation, Recognition and Enforcement of Foreign Arbitral Award in Case 11264 TE/MW, ICC
International Court of Arbitration, Transfield Philippines, Inc. v. Luzon Hydro Corporation (Place of
arbitration: Singapore).[20]In the said petition, TPI prayed:
1. That the THIRD PARTIAL AWARD dated February 18, 2004 in Case No.
11264/TE/MW made by the ICC International Court of Arbitration, the signed original
copy of which is hereto attached as Annex H hereof, be confirmed, recognized and
enforced in accordance with law.
2. That the corresponding writ of execution to enforce Question 31 of the said Third
Partial Award, be issued, also in accordance with law.
3. That TPI be granted such other relief as may be deemed just and equitable, and
allowed, in accordance with law.[21]
The pertinent portion of the Third Partial Award[22] relied upon by TPI were the answers to
Questions 10 to 26, to wit:
Question 30 Did TPI [LHC] wrongfully draw upon the security?

Yes
Question 31 Is TPI entitled to have returned to it any sum wrongfully taken by LHC for
liquidated damages?
Yes
Question 32 Is TPI entitled to any acceleration costs?
TPI is entitled to the reasonable costs TPI incurred after
Typhoon Zeb as a result of LHCs 5 February 1999 Notice to
Correct.[23]
According to LHC, the filing of the above case constitutes forum-shopping since it is the same
claim for the return of US$17.9 Million which TPI made before the ICC Arbitral Tribunal and before
this Court. LHC adds that while Civil Case No. 04-332 is styled as an action for money, the Third
Partial Award used as basis of the suit does not authorize TPI to seek a writ of execution for the sums
drawn on the letters of credit. Said award does not even contain an order for the payment of money,
but instead has reserved the quantification of the amounts for a subsequent determination, LHC
argues. In fact, even the Fifth Partial Award,[24] dated 30 March 2005, does not contain such orders.
LHC insists that the declarations or the partial awards issued by the ICC Arbitral Tribunal do not
constitute orders for the payment of money and are not intended to be enforceable as such, but
merely constitute amounts which will be included in the Final Award and will be taken into account in
determining the actual amount payable to the prevailing party.[25]
R.A. No. 9825 provides that international commercial arbitrations shall be governed shall be
governed by the Model Law on International Commercial Arbitration (Model Law) adopted by the
United Nations Commission on International Trade Law (UNCITRAL). [26] The UNCITRAL Model Law
provides:
ARTICLE 35. Recognition and enforcement
(1) An arbitral award, irrespective of the country in which it was made, shall
be recognized as binding and, upon application in writing to the
competent court, shall be enforced subject to the provisions of this article
and of article 36.

(2) The party relying on an award or applying for its enforcement shall supply
the duly authenticated original award or a duly certified copy thereof, and
the original arbitration agreement referred to in article 7 or a duly certified
copy thereof. If the award or agreement is not made in an official
language of this State, the party shall supply a duly certified translation
thereof into such language.
Moreover, the New York Convention,[27] to which the Philippines is a signatory, governs the
recognition and enforcement of foreign arbitral awards. The applicability of the New York Convention
in the Philippines was confirmed in Section 42 of R.A. 9285. Said law also provides that the
application for the recognition and enforcement of such awards shall be filed with the proper
RTC. While TPIs resort to the RTC for recognition and enforcement of the Third Partial Award is
sanctioned by both the New York Convention and R.A. 9285, its application for enforcement,
however, was premature, to say the least. True, the ICC Arbitral Tribunal had indeed ruled that LHC
wrongfully drew upon the securities, yet there is no order for the payment or return of the proceeds of
the said securities. In fact, Paragraph 2142, which is the final paragraph of the Third Partial Award,
reads:
2142. All other issues, including any issues as to quantum and costs, are
reserved to a future award.[28]
Meanwhile, the tribunal issued its Fifth Partial Award[29] on 30 March 2005. It contains, among
others, a declaration that while LHC wrongfully drew on the securities, the drawing was made in good
faith, under the mistaken assumption that the contractor, TPI, was in default. Thus, the tribunal ruled
that while the amount drawn must be returned, TPI is not entitled to any damages or interests due
to LHCs drawing on the securities.[30] In the Fifth Partial Award, the tribunal ordered:
6. Order
6.1 General
166. This Fifth Partial Award deals with many issues of quantum. However, it does not
resolve them all. The outstanding quantum issues will be determined in a
future award. It will contain a reconciliation of the amounts awarded to each
party and a determination of the net amount payable to Claimant or Respondent,
as the case may be.
167. In view of this the Tribunal will make no orders for payment in this Fifth Partial
Award. The Tribunal will make a number of declarations concerning the quantum
issues it has resolved in this Award together with the outstanding liability
issues. The declarations do not constitute orders for the payment of money
and are not intended to be enforceable as such. They merely constitute
amounts which will be included in the Final Award and will be taken into
account in determining the actual amount payable.[31] (Emphasis Supplied.)
Further, in the Declarations part of the award, the tribunal held:
6.2 Declarations
168. The Tribunal makes the following declarations:

xxx
3. LHC is liable to repay TPI the face value of the securities drawn down by it, namely,
$17,977,815. It is not liable for any further damages claimed by TPI in respect of the
drawdown of the securities.
x x x.[32]
Finally, on 9 August 2005, the ICC Arbitral tribunal issued its Final Award, in essence
awarding US$24,533,730.00, which included TPIs claim of U$17,977,815.00 for the return of the
securities from LHC.[33]

The fact that the ICC Arbitral tribunal included the proceeds of the securities shows that it
intended to make a final determination/award as to the said issue only in the Final Award and not in
the previous partial awards. This supports LHCs position that when the Third Partial Award was
released and Civil Case No. 04-332 was filed, TPI was not yet authorized to seek the issuance of a
writ of execution since the quantification of the amounts due to TPI had not yet been settled by the
ICC Arbitral tribunal. Notwithstanding the fact that the amount of proceeds drawn on the securities
was not disputed the application for the enforcement of the Third Partial Award was precipitately
filed. To repeat, the declarations made in the Third Partial Award do not constitute orders for the
payment of money.
Anent the claim of TPI that it was LHC which committed forum-shopping, suffice it to say that its bare
allegations are not sufficient to sustain the charge.
WHEREFORE, the Court RESOLVES to DISMISS the charges of forum-shopping filed by both
parties against each other.
No pronouncement as to costs.
SO ORDERED.

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SECOND DIVISION

TUNA PROCESSING, INC., G.R. No. 185582

PHILIPPINE KINGFORD, INC., February 29, 2012

On 14 January 2003, Kanemitsu Yamaoka (hereinafter referred to as the licensor), co-

1. Background and objectives. The Licensor, co-owner of U.S.Patent No. 5,484,619,

The Sponsors wish to be licensed under the aforementioned patents in order to

4. Establishment of Tuna Processors, Inc. The parties hereto agree to the

Alternative Dispute Resolution Page 1

The petition is impressed with merit.

The Corporation Code of the Philippines expressly provides:

Sec. 133. Doing business without a license. - No foreign corporation transacting

Alternative Dispute Resolution Page 2

Korugas invocation of the provisions of the Corporation Code is misplaced. In an

Alternative Dispute Resolution Page 3

It also expressly adopted the Model Law, to wit:

Sec. 19. Adoption of the Model Law on International Commercial

Alternative Dispute Resolution Page 4

xxx Arbitration, as an alternative mode of settlement, is gaining adherents in legal

The remaining arguments of respondent Kingford are likewise unmeritorious.

Alternative Dispute Resolution Page 5

[I]t must be remembered that [the principle of hierarchy of courts] generally

Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to

Alternative Dispute Resolution Page 6

G.R. No. 143581 January 7, 2008

KOREA TECHNOLOGIES CO., LTD., Petitioner,

VELASCO, JR., J.:

Alternative Dispute Resolution Page 7

Alternative Dispute Resolution Page 8

After KOGIES filed a Supplemental Memorandum with Motion to Dismiss[13] answering

Alternative Dispute Resolution Page 9

The Court of Appeals affirmed the trial court and declared

On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum

b. DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15 OF

c. DECREEING PRIVATE RESPONDENTS COUNTERCLAIMS TO BE ALL

d. RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT

e. PROCLAIMING THE TWO ORDERS DATED JULY 23

Alternative Dispute Resolution Page 10

The Courts Ruling

The petition is partly meritorious.

The rules on the payment of docket fees for counterclaims

We disagree with KOGIES.

Interlocutory orders proper subject of certiorari

The proper remedy in such cases is an ordinary appeal from an adverse

Alternative Dispute Resolution Page 11

Prematurity of the petition before the CA

The Core Issue: Article 15 of the Contract

Article 15. Arbitration.All disputes, controversies, or differences which may arise

Alternative Dispute Resolution Page 12

Arbitration clause not contrary to public policy

Being an inexpensive, speedy and amicable method of settling

Consistent with the above-mentioned policy of encouraging alternative dispute

RA 9285 incorporated the UNCITRAL Model law

CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATION

SEC. 19. Adoption of the Model Law on International Commercial

Alternative Dispute Resolution Page 13

(1) The RTC must refer to arbitration in proper cases

SEC. 24. Referral to Arbitration.A court before which an action is brought in a

(2) Foreign arbitral awards must be confirmed by the RTC

Alternative Dispute Resolution Page 14

SEC. 47. Venue and Jurisdiction.Proceedings for recognition and enforcement of

SEC. 48. Notice of Proceeding to Parties.In a special proceeding for recognition

(3) The RTC has jurisdiction to review foreign arbitral awards

Alternative Dispute Resolution Page 15