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

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

I. Fundamentals of the ADR Law Application


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

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


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

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Chapters 1 & 2, pp. 1-26

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

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

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

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

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

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

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

administration of justice. It has adversely affected the arbitral is constituted or if the tribunal has no power to
lawyers, the litigants, and the justice system. act or is unable to act effectively.
b. The RTC could decide whether the arbitral tribunal
B. ADR as a Better Alternative to Litigation has jurisdiction after the arbitral tribunal has ruled
1. party autonomy against the plea.
2. speed and cost c. Recourse to a court against an arbitral award may be
3. privacy and confidentiality made only by an application for setting aside an award.
4. awards are final and binding d. Awards by foreign tribunals, must be filed in the RTC
for recognition and enforcement thereof in accordance
C. Procedure in ADR Methods with the rules to be promulgated by the Supreme
Court. Once application is confirmed, it shall be
1. The arbitration commences upon demand of one enforced in the same manner as final and executory
party to the other to submit a controversy to decisions of courts of law in the Philippines.
arbitration. If there is no arbitration clause in the
contract, the parties may execute a submission 4. Recognition and Enforcement of Awards
agreement to arbitrate.
2. The demand shall be served upon the other party in Compared to foreign judgments, arbitral awards in
accordance with the contract. International Commercial Arbitration are readily enforced
3. The parties will appoint the arbitrator tribunal in pursuant to the New York Convention of 1958.
accordance with the contract. If the contract provides
no guidance, each party will appoint an arbitrator Foreign judgments are generally not enforceable in other
and the two appointed arbitrators will select a third jurisdictions except in cases of reciprocity and comity.
arbitrator. The chosen arbitrator must disclose the Arbitral awards are more readily enforceable.
circumstances that give justifiable doubts to his
impartiality or the fact that he does not possess the The original or duly authenticated copy of the award and the
necessary qualities. arbitration agreement must be filed in the RTC and approved
4. The time and place of the hearing will be set and for it to be enforceable in the country.
must cause a notice of it to be given to the parties
E. Conclusion
5. The arbitrator shall act as the sole judge in assessing
the materiality and relevance of the evidence offered. The passing of RA 9285 signified the promotion of ADR, but
He is not bound to conform to the rules of evidence its implementation is still in its initial stage. ADR methods are
but must observe the agreement among the parties still considered as the road less traveled. (The article was
6. The arbitrator will render an award. published in 2007.)
D. Salient Features of the ADR Law The reasons are:
1. Jurisdiction • In the domestic setting, there is a lack of awareness.
• In the international setting, the Philippines is not yet
An arbitral body, once constituted, has the power to examine
equipped to be an effective venue for international
the question of its own competence.
commercial arbitration because:
2. Venue and Place (1) the centers for ADR are still young and yet to gain
a strong foothold in the field; and
As a general rule, parties are free to agree in the place or (2) the courts’ unbridled intervention prevents the
venue. In International Commercial Arbitration, parties could parties from choosing the Philippines as the venue
also choose the State where the arbitration will be conducted. for arbitration.
This is to avoid the adverse influence of each other’s national
laws. If the parties don’t choose, the arbitrator tribunal will Only when more parties support ADR and more courts
choose the venue. In the absence of both, it will be in Metro encourage its use can ADR be considered the “wave of the
Manila. future”.

3. Court Involvement II. Mediation in General

The courts generally have a limited role in arbitration. Definition


Exceptions:
It is a voluntary process in which a mediator, selected by the
a. Courts may grant interim and provisional reliefs during disputing parties, facilitates communication and negotiation,
the pendency of arbitral proceedings before the and assists the parties in reaching a voluntary agreement.

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

Chapter 2 of RA 9285 (on Mediation) covers voluntary choose the procedure that will govern their mediation.
mediation, whether ad hoc or institutional, other than court-
annexed. The process shall be private unless the parties consent to
the presence of other persons.
“Mediation” shall include conciliation.
It is concluded by the:
Exclusions – The ADR Law does not cover the following:
a. Execution of a Settlement Agreement by the parties;
1. CAM b. Withdrawal of any party from mediation; or
2. CRM c. Written Declaration of the mediator that any further effort
3. Conciliation conducted by the Pangkat at mediation would not be helpful.
Tagapagkasundo
4. JDR Advantages of Mediation: Assurances under Section 8 of
the RA 9285:
Robeniol Notes3
a. Confidentiality in the mediation process;
• Mediation is non-evidentiary or non-merits based. b. Prompt, economical, and amicable resolution of
• Mediation focuses on the facilitation of communication disputes; and
and negotiation between parties in order to encourage c. The decision-making authority rests in the parties.
them to voluntarily settle their dispute.
• A mediator must refrain from: How is mediation closed and concluded?
a. Giving legal or technical advise;
b. Engaging in counseling advocacy; Three ways:
c. Expressing his personal opinion on the rights and
duties of the parties, and the merits of any proposal a. By the parties’ execution of a settlement agreement or
made. compromise agreement;
• Mediation may be: b. By the withdrawal of any party from mediation; or
a. Ad hoc; or c. By the written declaration of the mediator that any further
b. Institutional – when administered by and conducted effort at mediation would not be helpful.
under rules of a mediation institution
• An Agreement to Submit a Dispute to Mediation By An Confidential and privileged nature of Mediation
Institution should include: communication
a. To be bound by the institution’s internal mediation
and administrative policies; and • All information obtained through mediation proceedings
b. To have such rules govern the mediation of the is privileged and confidential in character.
dispute, and be followed by the mediator, the parties • The ADR Act guarantees and enforces this privilege by:
and their counsels, non-party participants. a. Declaring certain information confidential and
therefore not capable of being disclosed; and
Place of Mediation: The parties are free to agree on the b. Declaring the information inadmissible in evidence.
place of mediation. If they don’t have an agreement, the
default venue is any place convenient and appropriate for all The ADR Act defines confidential information as: “any
parties. information, relative to the subject of mediation or arbitration,
expressly intended by the source not to be disclosed
Stages in Mediation (expressly confidential), or obtained under circumstances
that would create a reasonable expectation on behalf of the
1. Opening statement of the mediator source that the information shall not be disclosed (impliedly
2. Individual narration by the parties confidential).”
3. Exchange by the parties
4. Summary of the issues They include, but are not limited to, the following:
5. Generalization and evaluation of options
6. Closure 1. Communication, oral or written, made in a dispute
resolution proceedings, including any memoranda,
But this process is not obligatory. Pursuant to the principle of notes or work product of the neutral party or non-party
party autonomy and self-determination, the parties may participant;
2. An oral or written statement made or which occurs during

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Chapter 3, pp. 27-42

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

mediation or for purposes of considering, conducting, complaint of professional misconduct or malpractice


participating, initiating, continuing of reconvening filed against a party, nonparty participant, or
mediation or retaining a mediator; and representative of a party based on conduct occurring
3. Pleadings, motions, manifestations, witness statements, during a mediation.
reports filed or submitted in arbitration or for expert
evaluation. Moreover, there are also exceptions based on public
policy, when the need for the evidence substantially
Legal effects of confidentiality: outweighs the need for confidentiality, and the mediation
communication is offered in:
1. A party, mediator, or non-party participant may refuse to
disclose or prevent another from disclosing the 1. a court proceeding involving a crime or felony; or 

information. 2. a proceeding to prove a claim or defense that is sufficient
2. The information cannot be subject to discovery and they to reform or avoid a 
liability on a contract arising out of
are inadmissible in any adversarial proceeding. the mediation. 

3. The following persons involved in mediation cannot be
compelled to disclose: The Mediator
a. Parties to the dispute
b. Mediator • He is required to keep in utmost confidence all
c. Counsel for the parties confidential information, and to discuss its confidentiality
d. Non-party participants with the parties before the process.
e. Any person hired or engaged as secretary, • The mediator may not make a report, assessment,
stenographer, clerk, or assistant evaluation, finding or other communication to a court,
f. Any person who obtains or possesses confidential agency or other authority making a ruling on a dispute
information by reason of his profession. that is the subject of a mediation, except:
4. The protection will continue to apply even if a mediator a. where the mediation occurred or has terminated,
has failed to act impartially. or where a settlement was reached; and
5. A mediator may not be called to testify to provide b. as permitted to be disclosed under the ADR Law
information gathered in mediation. (Sec 13).

What are the exceptions? Operative Principles in Mediation4

There is no privilege against disclosure if mediation Before accepting a request to serve as mediator, an
communication is: individual shall:

1. in an agreement evidenced by a record authenticated 1. Make a reasonable inquiry to determine whether


by all parties to the agreement;
 there are any known facts likely to affect his
2. available to the public or that is made during a session impartiality of the mediator, including financial or
of a mediation which is open, or is 
required by law to personal interest in the outcome, and any existing
be open, to the public; or past relationship with a party or foreseeable
3. a threat or statement of a plan to inflict bodily injury or participant; and
commit a crime of violence; 
 2. Disclose to the parties any such fact as soon as is
4. intentionally used to plan a crime, attempt to commit, practical before accepting a mediation.
or commit a crime, or conceal an 
ongoing crime or
criminal activity; 
 If such fact is learned after accepting mediation, the mediator
5. sought or offered to prove or disprove abuse, neglect, shall disclose it as soon as practicable.
abandonment, or exploitation in a 
proceeding in
which a public agency is protecting the interest of an At the request of a party, an individual who is requested to
individual protected by law; but this exception does serve as mediator shall disclose his/her qualifications to
not apply where a child protection matter is referred to mediate a dispute.
mediation by a court of a public agency participates in
the child protection mediation; 
 What are the qualifications of a mediator?
6. sought or offered to prove or disprove a claim or
complaint of professional misconduct or malpractice The ADR Act does not require special qualifications by
filed against mediator in a proceeding; or 
 background or profession, unless required in the mediation
7. sought or offered to prove of disprove a claim or

4
ADR Act, Section 13. Mediator’s Disclosure and Conflict of
Interest.
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

agreement or by the mediation parties. 876.

Duties and Functions of a Mediator Role of Counsel in Mediation

1. Prior to the mediation In AM 11-1-SC-PHILJA (2011), the Supreme Court stated


a. Competence – He should continually upgrade his the role of lawyers in mediation as “adviser and consultant to
skills, make such skills and other qualifications their clients, dropping the combative role in the adjudicative
known to the parties. He should only mediate if he process, and giving up their dominant role in judicial trials.
knows he truly can. They must accept a less directive role in order to allow the
b. Impartiality – Before accepting, he should make an parties more opportunities to craft their own agreement.”
inquiry to make sure that he can mediate without any
bias or conflict of interest. Mediation and the Neocolonial Legal Order: Access to
2. During the mediation Justice and Self-Determination in the Philippines
a. Confidentiality (Eduardo R. C. Capulong)5
b. Consent and self-determination – He should ensure
that the parties know that they are free and able to The article mentions two sides. On one hand, the author
make whatever choices they desire. acknowledged that Mediation provides greater access to
c. Promotion of respect and control of abuse – He justice and self-determination, more efficient and effective
should encourage mutual respect and take steps to than the courts, less costly, more responsive to the poor, and
limit the abuses of the mediation process. more culturally appropriate as it promotes social harmony.
3. No mediator or any member of a mediator’s immediate On the other, he echoed the critics of US-style mediation as
family or his/her agent shall request, solicit, receive or promoting neocolonial hegemony. The critics said that
accept any gift or any type of compensation other than mediation has been used to expand the ambit of state power,
the agreed fee and expenses in connection with any defeat democratic decision-making, and preserve unequal
matter coming before the mediator. relationships. They criticize mediation for putting “peace” first
over justice.
Mediated Settlement Agreement
In the country, mediation is categorized into 5 areas:
• It is the concluding document in a successful mediation.
• It may also take the form of a Compromise Agreement. 1. Indigenous dispute resolution (IDR);
2. Neighborhood justice system;
Operative principles under the Act: 3. CAM;
4. Administrative mediation; and
1. The Mediated Settlement Agreement is prepared by the 5. Private mediation.
parties, with the assistance of their respective counsel,
and by the mediator. In IDR, instead of a third-party stranger, an authoritative
2. They shall endeavor to make the terms and conditions elder usually oversees the process, and it is usually ended
complete and make adequate provisions for the by a ritual.
contingency of breach to avoid conflicting interpretations
of the agreement. 
 The neighborhood justice system was codified through the
3. The parties and their respective counsel shall sign the Katarungang Pambarangay under PD 1508 (1978).
settlement agreement.
4. The mediator shall certify that he/she explained its The author emphasized the historical background of the law,
contents in a language they know. heavily implying that because it was crafted by a dictator, the
5. If the parties so desire, they may deposit the settlement KP system was created “not by access to justice or self-
agreement with the appropriate Clerk of the RTC where determination, but by their polar opposites, repression and
one of the parties resides. dictatorial control”, thereby strengthening the dictator’s
6. Where there is a need to enforce the settlement centralized hold over the country.
agreement, a petition may be filed by any of the parties
with the same RTC, in which case, the court shall proceed III. CAM & JDR
summarily to hear the petition.
7. The parties may agree that the mediator shall become a OCA Circular 51-2011
sole arbitrator for the dispute and shall treat the
settlement agreement as an arbitral award, subject to RA Through AM 11-1-6-SC-PHILJA, the Supreme Court
expanded CAM and JDR to cover the civil aspect of less
grave felonies punishable by correctional penalties not

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

exceeding 6 years imprisonment, where the offended party • At the end of the period given by the court, if no
is a private person. settlement is reached, the case will be returned to the
trial court for further proceedings, unless the parties
The expanded coverage also includes those cases agree to continue and the court grants an extension.
enumerated in Admin Circular 20-2002, namely: • All mediation proceedings and incidents must be kept
strictly confidential, unless specifically provided by law.
a. All cases, settlement of estates, and cases covered by
• All admissions or statements made therein are
the Rules of Summary Procedure except those, which
inadmissible for any purpose in any proceeding.
by law, cannot be compromised;
• The parties undertake to not rely or introduce as
b. Cases cognizable by the Lupong Tagapamayapa
evidence the following:
under the KP Law;
a. Views or suggestions made by the other party in
c. The civil aspect of BP 22; and
respect to a possible settlement of the dispute;
d. The civil aspect of quasi-offenses under Title 14 of the
b. Admission made by wither party in the course of
RPC.
the proceedings;
AM 10-4-16-SC c. Proposal made by the Family Mediator;
d. The fact that the other party had indicated his
This covers (a) Court-Annexed Family Mediation, and (b) willingness to accept a proposal settlement
Code of Ethical Standards for Mediators. made by the parties to the Family Mediator.
• Any transcript or minutes of the mediation proceedings
A. Family Mediation are inadmissible as evidence in any other proceeding.
• The period of mediation is excluded from the regular and
The following cases will be referred to family mediation: mandatory periods for trial and rendition of judgment.
• Individual parties must personally appear for family
1. Settlement of estates mediation.
2. All issues under the Family Code and other laws in
relation to support, custody, visitation, property relation, Conclusion of Family Mediation
guardianship of minor child, and other issues which can
be subject of a compromise agreement, except: If the mediation is successful, the PMC unit will submit to the
a. Those covered by: court within 3 days after the termination of the proceedings
i. RA 9262 (VAWC) any of the following, as the case may be:
ii. RA 7610 (Child Abuse)
iii. RA 8353 (New Rape Law) a. Original Compromise Agreement entered into by the
iv. RA 9208 (Anti-Trafficking Law) parties - this will be the basis of the rendition of a
v. RA 9775 (Child Pornography) judgment by compromise, which may be enforced by
b. Civil status of persons execution;
c. Validity of marriage b. Withdrawal of the Complaint; or
d. Future support c. Satisfaction of the claim.
e. Jurisdiction
f. Grounds for legal separation If the mediation is a failure, the Family Mediator will prepare
g. Future legitime a Certificate of Failed Mediation, to be submitted to the court
also within 3 days from termination of the proceedings.
PMC Units
B. Code of Ethical Standards for Mediators
The trial court may order the referral to a Philippine Mediation
Center (PMC) Unit after determining the possibility of an Canon 1 – Responsibility to the Courts
amicable settlement, or of a submission to ADR.
A Family Mediator must be:
• There is a PMC unit in the courthouses or near the
premises of the court for CRM proceedings. • candid, accurate and fully responsible to the trial
• The PMC unit will assist the parties in selecting a court;
mutually acceptable Family Mediator from a list of duly • observe all the applicable rules and the judicial
accredited ones. If they can’t agree, the unit will assign standards of fidelity and diligence;
one. • report and encourage the parties to report breaches
• A Family Mediator is an officer of the court when of the Code of FMs to the proper authorities.
conducting mediation proceedings.
• Lawyers may be present and act as consultant or adviser Canon 2 – Responsibility to the Parties
of the parties, but may attend only upon the request of
the mediator. i. Impartiality – freedom from favoritism and bias; a
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Notes based on Judge J. Humiding’s Outline UC Law

Family Mediator must: research, evaluation, professional development and


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

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

9
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

A.M. No. 01-10-5-SC-PHILJA regards mediation as


part of pre-trial where parties are encouraged to personally B contends that the PPO issued against him is moot because
attend the proceeding. To ensure attendance, it provides he now has actual care and custody of their common children
sanction including but not limited to censure, reprimand, while A is working as a nurse abroad. B alleges that he and
contempt and such other sanctions as are provided under A had entered into a compromise agreement regarding the
the Rules of Court for failure to appear for pre-trial, in case exercise of parental authority over, and support of their
any or both of the parties absent himself/themselves, or for common children.
abusive conduct during mediation proceedings.
There is no clear demonstration that the absence of A countered that B continuously violates the PPO. A alleged
petitioner’s representative during mediation proceedings that she signed the MOA while emotionally distressed and
was intended to perpetuate delay in the litigation of the case. without the advice and guidance of counsel. A claims that B
Neither was it indicative of lack of interest to enter into a still verbally abuses her. B has not paid the fees and costs of
possible amicable settlement. litigation awarded to A. He does not provide support for A’s
The SC held that a mere censure or reprimand child who, in the eyes of the law, is also among B’s
would have been sufficient for petitioner’s representative and legitimated children. A also alleged that she left their
her counsel so as to be informed of the court’s intolerance of common children under the care of B only because the
tardiness and laxity in the observation of its order. By failing circumstances forced her to do so, she could not depend for
to do so and refusing to resuscitate the case, the RTC financial support from B, she was left with no choice but to
impetuously deprived petitioner of the opportunity to recover yield custody over their common children even if the set-up
the land that she allegedly paid for. Unless the conduct of the exposed the children to B’s illicit affairs.
party is so negligent, irresponsible, contumacious, or dilatory
as for non-appearance to provide substantial grounds for Issue: Whether the Memorandum of Agreement between
dismissal, the courts should consider lesser sanctions that the parties over the PPO, and the support and custody of
would still achieve the desired end. their children should be honored by the court.

2. BBB v AAA Held: The permanent protection order and the custody and
(On what can and cannot be subjects of a Compromise support of their children are not proper subjects of a
Agreement) compromise agreement because it involves violence against
women and children.
Facts: While A was a medical student and a single mother
to one child, B borne with her two more children. A and B Alleging psychological violence and economic abuse, A
legalized their relationship and got married and legitimated anchored her application for the issuance of a TPO and a
their 2 common children. The marriage soon went sour PPO on the basis of the provisions of the Anti-Violence
because of constant fights over A’s allegations of B’s Against Women and their Children (RA 9262). The rules
womanizing and B’s verbal abuses against A. B left the intend that cases filed under said low cannot be subjects of
conjugal home alleging that A had fits of irrational jealousy. compromise agreements.
A also decided to leave the conjugal home because B
displayed acts of marital infidelity which exposed A to public Section 23(d) of A.M. No. 04-10-11-SC20 explicitly prohibits
ridicule causing her emotional and psychological distress. A compromise on any act constituting the crime of violence
also found out that B failed to pay the rental fee to their against women. Violence is not a subject for compromise. A
condominium unit, forcing her to be evicted. A decided to live process that involves parties mediating the issue of violence
in a friend’s house. A found out that B had been stalking her implies that the victim is somehow at fault.
and the kids through B’s friend who lived in the same
subdivision. B’s friend had been checking the guard’s AM No. 10-4-16-SC directs the referral to mediation of all
logbook and had been monitoring the activities of A and her issues under the Family Code and other laws in relation to
children in and out of the subdivision. For fear of her and her support, custody, visitation, property relations and
children’s safety, A filed for a Temporary Protection Order guardianship of minor children, excepting therefrom those
(TPO; and prayed for it to become permanent upon the covered by R.A. No. 9262.
findings of the RTC).
While A filed her application for a TPO and a PPO as an
The RTC ruled a permanent protection order in favor of A independent action and not as an incidental relief prayed for
and granted A permanent sole custody over their common in a criminal suit, the instant petition cannot be taken outside
children and B to provide support in the amount of Php cases falling under the provisions of R.A. No. 9262. Hence,
62,918.97 per month, requiring B to stay away from A at a the prohibition against subjecting it to compromise applies.
distance of 100 meters, plus damages and the cost of suit.
The PPO issued is valid. Remanding the case to the trial
The CA affirmed the RTC’s decision but remanded the case court is necessary to determine who shall exercise custody
to determine who shall be awarded custody of the children. over the children. However, the choices of the children as

10
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

with whom they would prefer to stay would alter the effects point threatening that he would have any man eyeing her
of the PPO. But as to who shall be granted custody over the killed. Things turned for the worse when Jesus had an affair
three children, how the spouses shall exercise visitation with a bank manager. Jesus admitted it when Rosalie
rights, and the amount and manner of providing financial confronted him. The infidelity spawned a series of fights that
support shall be remanded to the RTC. left Rosalie physically and emotionally wounded. In one of
their quarrels, Jesus grabbed Rosalie on both arms and
While B and A arrived at an amicable settlement as regards shook her with such force that caused bruises and
the issues of custody, exercise of parental authority over, hematoma. At another time, Jesus hit Rosalie forcefully on
and support of their common children, and while these the lips that caused some bleeding. Jesus sometimes turned
matters can be lawful subjects of compromise, A’s his ire on their daughter, Jo-Ann, who had seen the text
contentions compels the Court to exercise prudence by messages he sent to his paramour and whom he blamed for
directing the RTC to resolve with finality the said issues. squealing on him. He beat Jo-Ann on the chest and slapped
While the parties are not prohibited from entering into a her many times. All the emotional and psychological turmoil
compromise as regards the aforesaid issues, the Court now drove Rosalie to the brink of despair. At one point, she
requires the RTC’s direct supervision to put an end to their attempted suicide. She was found by her son bleeding on the
bickering. floor. Jesus simply fled the house instead of taking her to the
The case is remanded for the RTC to resolve the question of hospital. Rosalie was hospitalized for about 7 days in which
custody. Since the children are now all older than seven time Jesus never bothered to visit, nor apologized or showed
years of age, they can choose for themselves whom they pity on her.
want to stay with. If all the three children would manifest their
choice to stay with A, then the PPO issued by RTC shall When Rosalie informed the management of Robinson's
continue to be executed in its entirety. However, if any of the Bank that she intends to file charges against the bank
three children would choose to be under B’s care, the PPO manager, Jesus got angry with her for jeopardizing the
issued against B relative to them is to be modified. The PPO, manager's job. Jesus warned her that if she goes on a legal
in its entirety, would remain effective only as to A and any of battle with him, she would not get a single centavo.
the children who opt to stay with her. The RTC may
accordingly alter the manner and amount of financial support RTC of Bacolod City: Issued a TPO, after finding reasonable
B should give depending on who shall finally be awarded ground to believe that an imminent danger of violence
custody over the children. against the Rosalie and her children exists or is about to
recur.
3. Garcia v Drilon8
(Cases involving Protection Orders) Jesus’ Contention: By criminalizing run-of-the-mill
arguments, instead of encouraging mediation and
Facts: Rosalie Jaype-Garcia filed, for herself and in behalf counselling, the law has done violence to the avowed policy
of her minor children, a verified petition before the RTC of of the State to "protect and strengthen the family as a basic
Bacolod City for the issuance of a Temporary Protection autonomous social institution."
Order against her husband, Jesus C. Garcia, pursuant to
R.A. 9262. She claimed to be a victim of physical abuse-- Ruling of the Court: The non-referral of a VAWC case to a
emotional, psychological, and economic violence as a result mediator is justified. Under Section 23(c) of A.M. No. 04-10-
of marital infidelity on the part of petitioner, with threats of 11-SC, the court shall not refer such a case to a mediator.
deprivation of custody of her children and of financial This section prohibits a court from ordering or referring
support. parties to mediation in a proceeding for an order for
protection. Mediation is a process by which parties in
Rosalie married Jesus in 2002 when she was 34 years old equivalent bargaining positions voluntarily reach consensual
and he was eleven years her senior and had 3 children. agreement about the issue at hand. Violence, however, is
Rosalie is a dutiful and faithful wife, whose life revolved not a subject for compromise. A process that involves parties
around her husband. On the other hand, Jesus is dominant, mediating the issue of violence implies that the victim is
controlling, and demands absolute obedience from his wife somehow at fault. In addition, mediation of issues in a
and children. He forbade private respondent to pray, and proceeding for an order of protection is problematic because
deliberately isolated her from her friends. When she took up the petitioner is frequently unable to participate equally with
law, and even when she was already working part time at a the person against whom the protection order has been
law office, Jesus trivialized her ambitions and prevailed upon sought.
her to just stay at home. He was often jealous of the fact that
his attractive wife still catches the eye of some men; at one 4. Arroyo v Alcantara

8
JESUS C. GARCIA, vs. THE HONORABLE RAY ALAN T. DRILON, children, namely: JO-ANN, JOSEPH EDUARD, JESSE ANTHONE, all
Presiding Judge, Regional Trial Court-Branch 41, Bacolod City, and surnamed GARCIA
ROSALIE JAYPE-GARCIA, for herself and in behalf of minor
11
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

(Can clerks of court be mediators?) AM 01-10-5-SC-PHILJA (2001)

Facts: Antonio Arroyo filed an administrative complaint 1. It established the Philippine Mediation Center – with a goal
against Sancho Alcantara for violations of RA 6713 (Code of to set up units in the 13 judicial regions nationwide.
Conduct and Ethical Standards for Public Officials and 2. It approved the second Revised Guidelines in the
Employees) and RA 3019. The complaint arose when Implementation of Mediation Proceedings. The following
Alcantara, a clerk of court, issued a subpoena to Joaquin cases may be referred to mediation:
Opiana, Sr. a. All civil cases, settlement of estates, and cases
Joaquin is Arroyo’s father-in-law and the subpoena covered by the Rules of Summary Procedure,
required him to appear before the court. Ruben Olayres, the except those that cannot be compromised by
barangay captain, was the one who served the subpoena. law;
Nine days after the service of the subpoena, Antonio wrote b. Cases cognizable by the Lupong
the office of Alcantara, requesting for a copy of the alleged Tagapamayapa under the KP Law;
subpoena and a certification as to the facts surrounding the c. The civil aspect of BP 22; and
issuance of the same. A month later, he wrote again to follow d. Civil of quasi-offenses.
up his first request even to the point of requesting to examine 3. It also issued the Standards and Procedure for
the records of the court, but his efforts proved futile. Hence, Accreditation of Mediators and Code of Ethical
this complaint was filed, seeking the preventive suspension Standards for Mediators.
of Alcantara pending investigation of the charges against
him. Mediation in the Court of Appeals
On the other hand, Alcantara claims that Antonio
mistook the document as a subpoena when in fact it was just Per Resolution No. 04-04 (2005), the following cases can be
a letter, typed on an ordinary bondpaper and addressed to mediated in the CA:
Joaquin Opiana, Sr., requesting him to attend a meeting at
the office of the MTC of Guinobatan, Albay. Alcantara further 1. Civil cases brought on ordinary appeal or petition for
explains that he made the request in his personal capacity review;
upon the insistence of Olayres, who thought that Alcantara’s 2. Appeals from final orders, awards, judgments,
position as a clerk of court could be used to amicably settle resolution of quasi-judicial agencies in the exercise of
the dispute concerning a real property, among the heirs of their quasi-judicial functions through petition for
Opina. review or certiorari;
3. Special civil actions for certiorari, except those
Issue: Is a clerk of court authorized to mediate in a dispute? involving pure questions of law;
4. Habeas corpus cases involving custody of minors,
Ruling: No. Alcantara as a clerk of court had no authority to with the parties’ consent, as long as the minor is not
mediate among the constituents of Isaac Olayres. Although detained for a crime;
he claims that it was done in a personal capacity, his claim 5. Criminal cases cognizable by the KP involving
is belied by the fact that Antonio was given the impression offenses punishable by imprisonment not exceeding 1
that the intended meeting involving his father-in-law was year or a fine not exceeding 5,000.
court-related. His acts exceeded his authority as a clerk of
court. In effect, he had, wittingly allowed his position to be Qualification in CA Mediation
used to exercise his moral ascendancy over the Opiana
family, whom he summoned to his office for mediation. Mediators in the CA are limited to:

1. retired judges and judges;


IV. Court Annexed Mediation (CAM) 2. senior members of the Bar; and
3. senior law professors, trained and accredited by the
CAM: Summing Up The Past ad Charting The Future
SC.
(Carolyn Mercado & Damcelle Torres)9

Pilot tests: Between 1999-2001, The Philippine Judicial CAM’s success rate
Academy (PhilJA) conducted tests—first in selected cities in
Manila (which only had a 40% settlement rate), second in • From 2002-2007: 70%
Metro Manila, and third in Cebu and Davao. The success • 36,155 cases were cleared from the court dockets
rate in the latter tests was much higher: 87%. through mediation.
• 22% of the successfully mediated cases involved

9
Sourcebook on Alternatives to Formal Dispute Resolution
Mechanisms (2008)
12
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

violations of BP 22. or series of processes. The “doors” can be mediation,


arbitration, case evaluation, or conciliation, among
Stakeholders’ Attitudes (Challenges) others.
2. Online Dispute Resolution – A virtual or online
• Lawyers: Most are straight-up hostile, having been extension of ADR can be used for disputes with low
schooled in adversarial tradition. Some also see economic value, or with parties who are
mediation as a threat to their source of income. geographically segregated.
• Solution: Lawyers will eventually mature and realize 3. Multi-Step Negotiation – A dispute not resolved at
that their role is not to litigate, but to be problem- one level moves progressively to higher levels, with
solvers—“reconcilers of divisions, pursuers of just different mediators at each step.
solutions”. 4. CAM could be used in small claims courts.
• Judges: They assume that non-lawyer mediators will 5. The term “mediation” as it is currently used should
not be able to dispense justice properly. They also be clarified. Settlement should be seen as only one
dread public ridicule of being called “juezes de of the many successful outcomes of CAM. (See
areglo”, which means that of they permit out-of-court Mediation Core Values)
settlement, the public will see them as “lazy and 6. CAM could be used to address procedural and case
incompetent”. management issues, resulting in better quality of
• Public: More awareness and appreciation of CAM briefs and oral arguments, which will expedite the
through continuous education, information drives, trial and decisions on the case.
etc, are needed. 7. Instead of an “opt-out” approach, an “opt-in”
• Coverage: CAM only covers a select list of cases. approach could be better as it will ensure that those
who want to mediate their case, even if it is not one
• Solution: CAM could be extended to cover minor
of the court-mandated cases for mediation, will be
crimes such as grave threats, slander, libel, and
allowed to do so.
slight physical injuries.
Conclusion
Mediation Core Values – “Voice and Choice”
The usage of CAM will steadily increase through the
• Even when mediation doesn’t produce a settlement,
strengthening of mediators’ groups, rise in popularity of ADR,
it doesn’t necessarily mean it is a failed mediation.
and rise in litigation costs.
• A compromise agreement is not the only positive
outcome that parties can get out of mediation.
US Justice Sandra Day O-Connor: “Courts shouldn’t be the
• Other positive outcomes that the parties could place where resolution of disputes begin. They should be the
anticipate are: places where the disputes end after alternative methods of
a. The ability to speak and be heard; resolving disputes have been considered and tried.”
b. The chance to talk about what might be
irrelevant to lawyers, but very important to the
Collaborative Law
parties;
(Patrick H. M. Wiedmer)10
c. The narrowing of important issues;
d. Clarity about what is most important to both The article mentioned the disadvantages of CAM: (1)
parties; neutrality of the mediator; and (2) qualifications of the
e. A more unfettered conversation between the mediator. Both cannot always be guaranteed.
parties;
f. A better understanding of those involved and Stuart Webb pioneered “Collaboration Law” which stemmed
their situations; from this simple idea: to formulate a new type of ADR that
g. Restoration of good faith; puts more pressure on parties and their counsel to agree to
h. Strengthened reputation and stature; and an out-of-court agreement.
i. Agreements based on genuine terms created by
the parties themselves. Chief Justice Burger: Lawyers are reminded of their duty to
act as “healers of conflict”.
Future Prospects for CAM
Key features and Advantages
1. Multi-Door Courthouse – After being screened in a
Dispute Resolution Center, certain cases would be 1. Disqualification agreement – This prohibits a
assigned to (or matched with) an apt ADR process counsel from continuing as such if the negotiations

10
Collab Law and the Rules on Court Annexed Family Mediation;
55 Ateneo L.J. 938 (2011)
13
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

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

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

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

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

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

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


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

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

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

Program Observations and Recommendations

However a significant portion of the litigants in Baguio and 1. JDR generated positive outcomes in so far as first level
Bacolod expressed their dissatisfaction. Popular Reasons: courts are concerned. However, the impact of JDR
before the 2nd level courts is still unclear.
1. Mistrust with the courts
2. Pragmatism Reason: The parties have much greater incentive to settle
3. Unfavorable decision early before the first level courts because of the limited
4. Rights based expectations penalty or amounts that 1st level courts are legally allowed to
impose or award. In addition to this, because of the tougher
Judges Lawyers Litigants penalties and higher cost of preparation before the 2 nd level
Improved Yes Yes. Yes courts, the parties may be more willing to go to trial.
Relationships However
some Recommendation: There is a need for further training of
lawyers are judges especially 2nd level court judges. For JDR to achieve
concerned same level of success in 2nd level courts, the judges may
about the have to attain a higher level of competence in JDR.
possible
15
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

2. There is a limited amount of judicial resources for on the merits of the case, a large percentage of judges
trainings of judges actually inform the parties in JDR of their opinions about the
merits of the parties’ respective positions. Not only do the
Reason: The trainings will require considerable financial stakeholders prefer active guidance, but also failure to
investment provide such is viewed as resulting in unfairness or unfair
outcomes.
Recommendations: The creation of Specialized JDR courts
will allow the use of financial resources for training to be There is nothing that prevents judges from combining
focused on a smaller group of judges, thus allowing the facilitative and evaluative techniques. The researched
advanced and in-depth training needed for effective JDR for emphasized the following:
complex disputes.
(i) the usefulness and propriety of the application of various
With specialized JDR courts, those who possess the techniques, including facilitative mediation that incorporates
personality and the innate ability to facilitate interest-based the use evaluative and fact-finding techniques such as
settlement discussions will not have to conduct trial and write evaluation and mini-trial;
decisions, but just perform JDR on a full-time basis.
(ii) storytelling as a condition precedent to option generation;
The creation of specialized second-level JDR courts will and
open a career advancement opportunity for first-level court
judges who display outstanding JDR skills because they can (iii) issues pertaining to power imbalance identification and
be considered prime candidates for these specialized courts. correction.
This career opportunity will further motivate first-level judges
to improve their performance. 6. Initiatives for enhancing awareness of lawyers and
litigants on JDR should be adopted.
3. A simple reversal of the order of CAM and JDR, with JDR
as the first-tier process and CAM as the second, will Reason: The team noted that while the lawyers play a critical
address numerous stakeholder concerns about having role in any settlement, as the litigants would not normally
redundant processes. enter into any compromise without the favorable
endorsement of their lawyer, many lawyers are not fully
Reason: The main reason is financial, that is, to avoid the aware of the role they ought to play during JDR, particularly
filing of CAM fees. Indeed, from an access to justice with regard to their overall attitude towards settlement,
standpoint, this is one of the weak points of CAM. But other option-generation, evaluation of options and alternatives,
reasons for preferring JDR over CAM were repeated in many and similar issues.
focus group discussions, as follows:
Recommendation: Introduction to ADR concepts should be
(i) the CAM program has been losing its good mediators by done as early as law school to impart the advantages of ADR
reason of low compensation; upon future lawyers, and train them in essential ADR skills,
such as client counseling and negotiation
(ii) CAM mediators lack the authority and moral ascendancy
of a judge which is helpful in facilitating settlement; 7. Litigants should be informed of the nature and purpose
of JDR before conducting JDR hearings to allow them to
(iii) many CAM mediators are not lawyers and this hinders craft settlement proposals, with the assistance of their
their understanding of disputes; and (iv) non-lawyer lawyers, to bring to the JDR hearings.
mediators cannot command the respect of lawyers and
litigants. Recommendations: Give emphasis on informing the parties
of their rights to settle or not to settle.
4. The possibility of expanding the coverage of JDR should
be studied. While the issuance of subpoenas will almost certainly ensure
the parties’ presence, less coercive and threatening
Reason: The suggestion merits some study because measures may certainly be taken to achieve the same result.
expansion of coverage will likely increase JDR case
disposals, but attention must be devoted to determining The courts may perhaps consider sending invitations instead
where to draw the line, that is, in what types of cases will the of subpoenas, explaining the nature of the proceedings,
public be better served by allowing submission to JDR. discussing the requirements of the process, requesting the
parties to be prepared beforehand with settlement options,
5. Clarification of the judges’ role in JDR and generally asking the parties and counsel to come to the
proceedings as thoroughly prepared for negotiations as
Reason: There is an existing stakeholder preference for a possible.
judge who actively guides the parties towards settlement.
Despite the choice of some judges to withhold commenting Conclusion
16
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

The three-year JDR experiment has clearly yielded Either party may request the Appointing Authority to make
extremely encouraging results. While certain program the appointment:
modifications are in order, the basic concept of judge-
facilitated settlement is one that appears to have been fully 1. If the parties cannot agree on, or fail to provide for the
accepted by all sectors despite initial apprehensions. The following:
success of the experiment is due mainly to the readiness of
the judges themselves to take on the role of dispute a. The desired qualification of the neutral third person;
facilitators, and the training, monitoring, program support b. The manner of his/her selection;
and management provided by the JURIS Project and c. The appointing authority (not IBP) who shall have the
PHILJA. authority to make the appointment of a neutral third person;
or
VI. Other Forms of ADR 2. If despite an agreement and the lapse of the period for the
appointment, the parties are unable to select a neutral third
RA 9285, Chapter 3: “SEC. 18. Referral of Dispute to Other person or appointing authority.
ADR Forms – The parties may agree to refer one or more or
all issues arising in a dispute or during its pendency to other Who is the Appointing Authority?
forms of ADR such as but not limited to (a) the evaluation of
a third person or (b) a mini-trial, (c) mediation-arbitration, or The IRR14 mentions the following:
a combination thereof.”
1. The person or institution named in the arbitration
IRR, Chapter 7: The other forms include:
agreement as the appointing authority; or
1. Early Neutral Evaluation 2. The regular arbitration institution under whose rules the
2. Neutral Evaluation arbitration is agreed to be conducted.
3. Mini-trial 3. In ad hoc arbitration, the default appointment shall be
4. Mediation-Arbitration made by the National President of the Integrated Bar of
5. Combination of the forms the Philippines (IBP) or his/her duly authorized
6. Any other ADR form representative.

If the form is akin to mediation or arbitration, the respective Factors in appointing a NTP:
rules on Mediation and Domestic Arbitration in the IRR will
have suppletory application, as long as it will not be in conflict 1. nature of the dispute; and
with the agreement of the parties. 2. experience and expertise of the neutral third person.

If a dispute is already before a court, either party may, before Process


and during pre-trial, file a motion for the court to refer the
parties to other ADR processes. However, at any time 1. The parties shall submit and exchange position papers
during court proceedings, even after pre-trial, the parties containing the issues and statement of the relevant facts
may jointly move for suspension/dismissal of the action and appending supporting documents and affidavits of
pursuant to Article 2030 of the Civil Code of the Philippines 13. witnesses to assist the neutral third person in evaluating
or assessing the dispute.
Following a neutral or an early neutral evaluation, mini-trial 2. The neutral third person may request either party to
or mediation- arbitration, either party may submit any address additional issues that he/she may consider
settlement agreement to the court where the case is necessary for a complete evaluation/assessment of the
pending. dispute.
3. The neutral third person may structure the evaluation
A. Neutral or Early Neutral Evaluation process in any manner he/she deems appropriate. In the
course thereof, the neutral third person may identify
What rule governs: (1) agreement by parties; or (2) in the areas of agreement, clarify the issues, define those that
absence of an agreement, Rule 2 of Chapter 7 of the IRR. are contentious, and encourage the parties to agree on
a definition of issues and stipulate on facts or admit the
Role of Default Appointing Authority genuineness and due execution of documents.
4. The neutral third person shall issue a written evaluation

13
“Art. 2030. Every civil action or proceeding shall be suspended: (2) If it appears that one of the parties, before the
(1) If willingness to discuss a possible compromise is expressed by commencement of the action or proceeding, offered to discuss a
one or both parties; or possible compromise but the other party refused the offer. xxx"
14
IRR, Chapter 1, Rule 2, Definition of Terms, C.1
17
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

or assessment within 30 days from the conclusion of the the latter.


evaluation process.
Process
Nature & Contents of Written Evaluation
1. Each party shall submit a brief executive summary of the
The opinion shall be non-binding and shall set forth how the dispute in sufficient copies as to provide one copy to
neutral third person would have ruled had the matter been each panel member and to the adverse party. The
subject to a binding process. summary shall identify the specific factual or legal issue
or issues.
The evaluation or assessment shall indicate the relative 2. At the date time and place agreed upon, the parties shall
strengths and weakness of the positions of the parties, the appear before the panel members.
basis for the evaluation or assessment, and an estimate, 3. Each party’s lawyer or authorized representative shall
when feasible, of the amount for which a party may be liable present his/her case starting with the claimant followed
to the other. by the respondent. The lawyer or representative may
thereafter offer rebuttal or sur-rebuttal arguments.
Other Rules
Duration: Unless the parties agree on a shorter or longer
• There shall be no ex-parte communication between period, the presentation-in-chief shall be made, without
the neutral third person and any party to dispute interruption, for one hour and the rebuttal or sur-rebuttal shall
without the consent of all parties. be 30 minutes.
• All papers and written presentations communicated
to the neutral third person, and the written 4. At the end of each presentation, rebuttal or sur-rebuttal,
non-binding evaluation, shall be treated as the panel may ask clarificatory questions.
confidential. 5. After the mini-trial, the panel members shall negotiate a
settlement of the dispute by themselves.
B. Mini-Trial
In cases where a neutral third person is appointed, the
What rule governs: (1) agreement by parties; or (2) in the neutral third person shall assist the proceedings. The rules
absence of an agreement, Rule 3 of Chapter 7 of the IRR. on Mediation will apply.

How conducted: It shall be conducted either as: C. Mediation-Arbitration

1. a separate dispute resolution process; or What rule governs: (1) agreement by parties; or (2) in the
2. a continuation of mediation, neutral or early neutral absence of an agreement, the rules on Mediation shall first
evaluation or any other ADR process. apply and thereafter, the rules on Domestic Arbitration.

Appointment of a Third Person/Panel Rules:

The parties may agree that a mini-trial be conducted with or 1. No person who has engaged and acted as mediator of a
without the presence and participation of a neutral third dispute between the parties, following a failed mediation,
person. act as arbitrator of the same dispute, unless the parties,
in a written agreement, expressly authorize such person
If a neutral third person is agreed upon and chosen, he/she to hear and decide the case as an arbitrator.
shall preside over the mini- trial. The parties may agree to 2. The mediator who becomes an arbitrator shall make a
appoint one or more (but equal in number per party) senior disclosure that the arbitration will proceed as a new
executive/s, on its behalf, to sit as mini-trial panel members. dispute resolution process, and shall, before entering
upon his/her duties, execute the appropriate oath or
Qualification: The senior executive/s chosen to sit as affirmation of office as arbitrator in accordance with the
mini-trial panel members must be duly authorized to IRR.
negotiate and settle the dispute with the other party.
Office for Alternative Dispute Resolution 15
The appointment of a panel shall be communicated to the
other party. This appointment shall mean that the panel has • The OADR is an agency attached to the Department
the authority to enter into a settlement agreement binding of Justice.
upon the principal without any further action or ratification by • It is headed by an Executive Director, who is

15
IRR Chapter 2

18
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Notes based on Judge J. Humiding’s Outline UC Law

appointed by the President, after taking into 4. Records and Library Division – establishes and
consideration the DOJ Secretary’s recommendation. maintains a central repository of ADR laws, rules,
jurisprudence, books, articles, and other information
Powers: about ADR in the Philippines and elsewhere.

1. Appointing authority of mediators and arbitrators, if Advisory Council


the parties agree in writing that the OADR is
empowered to do so. The Council advises the Executive Director on policy,
2. Information dissemination – Conduct seminars, operational, and other relevant matters.
symposia, conferences, and public fora. Publish the
proceedings and other relevant material to promote, The DOJ Secretary, upon the OADR Executive Director’s
develop, and expand the use of ADR. recommendation, appoints the members.
3. Resource Center – Establish an ADR library or
resource center. They are composed of a representative from each of the
4. Training – Establish programs for ADR providers or following:
practitioners.
5. Certification – Certify those who have completed the 1. mediation profession;
professional training programs by the OADR. 2. arbitration profession;
6. Collection of Fees – Charge for services rendered. 3. ADR organizations;
7. Accept donations, grants, and other assistances from 4. IBP; and
local and foreign sources. 5. Academe.
8. Exercise such other powers, as may be necessary
and proper to carry into effect the provisions of the Dispute Resolution Mechanisms in the Philippines
ADR Act. (Prof. Domingo Disini, et al.)16

Functions: Current situation and viewpoints

1. Promote, develop and expand the use of ADR in the The courts exercise their traditional duty to settle
public and private sectors through information, controversies through a hierarchical organization. In the
education, and communication. Philippines, we have a four-level structure. The SC has
2. Monitor, study, and evaluate the use of ADR for policy enforced a strict policy of strict observance of the structure.
formulation and other purposes.
3. Recommend statutory changes to Congress in order Filipinos also seem to be litigious people, as seen by the
to develop, strengthen, and improve ADR, in heavy case inflow in the first and second level courts, as well
accordance with international standards. as in the clogged dockets of review courts.
4. Make studies on and provide links for the
development, implementation, monitoring, and There has been a growing dissatisfaction among the
evaluation of ADR programs. Filipinos when it comes to the use of courts. Among the
5. Compile and publish a list or roster of ADR providers reasons are costliness, slowness, rigidity of procedures, the
or practitioners who have undergone training, or have adversarial nature of the system, inadequacy of solutions in
been certified by the OADR. actually settling disputes.
6. Perform such other functions as may be assigned to
it. Hence, the SC through the Davide Watch imposed the
following goals: (1) dispose backlogs, (2) study and address
The Four Divisions: the causes of failure to observe the periods prescribed; and
(3) promote ADR.
1. Secretariat – provides support and other functions as
may be directed by the Executive Director; Filipinos also have “a culture that strongly values the
2. Public information and Promotion Division – preservation of amicable relationships especially between
disseminates information, promotes public parties with a history of kinship and community ties”.
acceptance and importance of ADR modes.
3. Training Division – formulates the standards for ADR Factors that delay disposition of cases:
providers, conducts their training, and issues
certifications. 1. The due process mechanics take up a lot of time.

16
Institute of Developing Economies, Asian Law Series No. 18,
March 2002

19
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

2. An open-ended appellate system further encourages which was organized in 1996, is a private non-stock,
litigants to pursue their appeals and not surrender. non-profit corporation, open to the public at large,
3. BP 22 cases are clogging the first level courts. especially to those engaged in business. Here, an
4. Automatic appeals to the SC are adding up to the accredited arbitrator or arbitrator chosen by the
number of appeals the high court must resolve. parties conducts the arbitration. All awards are final
5. Apart from reviewing the lower courts, the SC is also and executor. Delay in compliance with the award is
reviewing other constitutional bodies’ decisions (e.g., cognizable by the courts.
COMELEC). 6. National Conciliation and Mediation Board
(NCMB) created in 1987 through EO 126, is an
Judicial Reforms agency under DOLE, tasked to resolve certain labor
disputes involving unionized workers, such as lock-
ADR has emerged as the ley to decongesting the courts. The outs and strikes, CBA deadlock, and company policy
most popular modes are mediation and arbitration. Of the interpretation. The process starts with a conference. If
two, it is mediation that holds greater promise for concrete the dispute isn’t settled there, conciliation is
and immediate gains. conducted. If it fails again voluntary arbitration is
encouraged. If the parties don’t choose arbitration,
In 2001, the SC designated the PhilJA as its component unit then it becomes cognizable by the NLRC. The NCMB
for court-referred and court-related mediation. The PMC was enforces its award via a writ of execution if voluntary
established for this purpose. compliance is breached, but it doesn’t really have a
mechanism to compel compliance.
Under the Second Revised Guidelines on Mediation (2001), 7. National Labor Relations Commission (NLRC),
the trial court is now mandated to issue an Order for under the DOLE, tasked to settle disputes concerning
Mediation after determining the possibility of amicable unfair labor practice, termination, breach of labor
settlement. The mediation becomes a part of the pretrial. standards, and others.
8. Bureau of Labor Relations (BLR), also under the
Mediation produces a two-fold advantage: (1) It declogs the DOLE, concerned with resolving inter-union and intra-
court dockets; and (2) It restores the traditional Filipino spirit union disputes, disputes in union representation,
that highly values unity, solidarity, and cooperation. cancellation of union registration, etc.
9. Commission on the Settlement of Land Problems
12 Agencies that use ADR in the Philippines (COSLAP), under the DOJ, created in 1979 through
EO 561, is mandated to settle all disputes involving
1. Katarungang Pambarangay, where the Lupong land, whether urban or rural, involving squatters,
Tagapamayapa headed by the Barangay Captain classification, release or subdivision of lands, and
facilitates a two-step resolution. They go into other land problems of grave importance like
mediation first where there is a face-to-face demolition. The dispute is referred to a mediation
confrontation of the parties with the Barangay committee. If that fails, trial ensues for arbitration.
Chairman who serves as mediator. If it succeeds, they 10. Insurance Commission is an independent quasi-
enter into an amicable settlement. If it fails, they resort judicial body tasked with resolving disputes in the
to conciliation which will be conducted by the Pangkat insurance industry, like settlement of claims.
Tagapagkasundo. If it succeeds, an arbitral award will 11. Bureau of Trade Regulation and Consumer
be granted. Protection (BTRCP) is a quasi-judicial agency under
2. Cooperative Development Authority (CDA) where the DTI tasked to investigate, arbitrate, and resolve
a legal officer is appointed to undertake the resolution complaints from consumers involving violations of the
of disputes concerning cooperatives and their Consumer Act, like fraudulent advertising, mislabeling,
activities. etc.
3. Philippine Construction Industry Arbitration 12. Court Annexed Pilot Mediation Project where the
Commission (CIAC), which handles cases involving courts to encourage litigants at the pretrial stage to
contractual claims within the construction industry. submit their dispute to mediation/conciliation. Any
4. Department of Agrarian Reform Adjudication agreement reached therein would be the basis of the
Board (DARAB), which provides a forum for the court decision.
settlement of agrarian disputes. The case first goes
through mediation in the Barangay Agrarian Reform VII. History of Arbitration
Committee (BARC). If that fails, the case is brought
before the Provincial Adjudicator (PARAD) for
arbitration. The agreement entered into with the
BARC, or the award by the PARAD will be entered as
an Order by the DARAB.
5. Philippine Dispute Resolution Center, Inc. (PDRCI),
20
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

Roots17 it. Only after a successful litigation would the court consider
its enforcement.
a. Roman Empire
But there was also a general exception. The arbitration
Arbitration was used as a means of resolving private agreement would be enforceable if the following conditions
disputes. An arbiter was synonymous to a “judge” or were met:
“judex”. These are persons not specially trained but in
whose morality, probity, and good sense the parties (a) if it did not decide on the general question of liability and
reposed full trust. Private conflicts were referred primarily to reserved it for judicial decision;
them. (b) if it is confined to determining the amount payable or to
furnishing essential evidence only; and
How was the arbiter chosen? (c) if arbitration was made a condition precedent to the
(a) designated by the parties by common agreement; cause of action.
(b) selected by the parties from the “album judicium” or a
listing of those persons qualified; or Source: Red Cross Line v Atlantic Fruit Co., as cited in Chang v
(c) chosen by lot. Royal Exchange Assurance Corp. (1907) and Chan Linte v Law
Union & Rock Insurance Co. (1921)
b. Lex Mercatoria
However, America’s view took a 180 turn in 1854. In the case
Arbitration can also trace its roots to Lex Mercatoria, which of Burchell vs Marsh, their Supreme Court held: “Arbitrators
was influenced by Roman Law, based on maritime custom are judges chosen by the parties to decide the matters
as well as Medieval European fairs. This was a combination submitted to them, finally and without appeal, and that if an
of customary rules and principles relating to merchants and award is within the submission and it contains the honest
mercantile transactions, adopted by merchants themselves, decision of the arbitrators, after a full and fair hearing of the
to regulate their dealings with each other. parties, a court of equity will not set it aside for error either in
law or in fact.”
c. England – ADR’s “Checkered Career in Law”
Philippines – Then
Arbitration developed as a distinct and separate private
institution for the resolution of disputes, which were mostly a. Under Colonial Rule
commercial. But it had a checkered career, in the sense that
one moment it is accepted, but in the next, it is completely The laws we were subjected to at the time of Spanish
set aside. colonization recognized friendly adjusters called “juicio de
amigables componedores”. This is a person appointed by
The English courts firmly disapproved of arbitration the parties for the settlement of their differences.
agreements as a vehicle for settling disputes, mainly
because of compensation-related reasons—Judges did not When the Americans came, their Code of Civil Procedure
impliedly repealed the provisions on the appointment of a
have fixed salaries at the time; they mainly depended on
friendly adjuster. Therefore, arbitral awards then could no
court fees.
longer be enforced, as there was no legal basis for them.
The courts had “great jealousy” of arbitrations because they
were “robbed of cases”. They brought this jealousy out by Wahl v. Donaldson (1903)
denying the enforceability of arbitration agreements, thereby
Following US jurisprudence, our Supreme Court declared:
nullifying the very value of arbitration.
“Agreements to refer matters in dispute to arbitration have
d. America been regarded generally as attempts to oust the jurisdiction
of the court, and are not enforced.”
The American courts were on the same antagonizing mood.
They also denied judicial enforcement of arbitration It cited the Clark on Contracts, which stated: “A condition in
agreements. a contract that disputes arising out of it shall be referred to
arbitration is good where the amount of damages sustained
The general rule in common law was that an arbitration by a breach of the contract is to be ascertained by specified
agreement was revocable even after proceedings had arbitration before any right of action arises, but that it is illegal
already begun up to the time of the award. The award would where all the matters in dispute of whatever sort may be
be recognized as valid, but it would not be enforceable. The referred to arbitrators and to them alone. In the first case a
successful party would still have to go to court to litigate on condition precedent to the accrual of a right of action is

17
Parlade (2011) pp. 1-13.

21
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

imposed, while in the second it is attempted to prevent any **Arts. 2038, 2039, and 2040 allow that arbitration
right of action accruing at all, and this cannot be permitted.” agreements be set aside based on grounds similar to those
that call for the annulment of contracts.
b. Contrary to Public Policy
d. RA 876 (1953)
In many cases, the Court upheld the rule under civil law that
where there is a stipulation that all matters in dispute are to Despite being embedded in the law of the land thru the Civil
be referred to arbitrators and to them alone, such stipulation Code, arbitration had not yet been painted as a complete
is contrary to public policy. picture in the Philippines. We lacked a law that provides a
step-by-step guide on how to conduct arbitrations.
Allen v. Province of Tayabas (1918)
But finally, in 1953, in accordance with the prevailing positive
Following the change in the judicial perception of arbitration view on arbitration in America, the Legislature enacted the
in the US, which would later on flourish to create the New first Arbitration Law. It did not repeal the Civil Code
York Arbitration Act of 1920, our Supreme Court softened its provisions, but rather bolstered them by providing a fuller
attitude towards arbitration, holding that: and clearer picture on how to resolve disputes through
arbitration.
“It would be highly improper, for courts out of untoward
jealousy to annul laws or agreements which seek to oust the However, this law was criticized for the following reasons:
courts of their jurisdiction. Unless the agreement is such as
absolutely to close the doors of the courts against the parties, (a) Its provisions were too broad and failed to satisfy the
which agreement would be void, courts will look with favor standards of arbitration systems elsewhere.
upon such amicable arrangements and will only with great (b) The only type of arbitration it covered was domestic
reluctance interfere to anticipate or nullify the action of the arbitration.
arbitrator.” (c) There was no complementary statute for the conduct of
international arbitration in the Philippines.
c. Civil Code (1950)
Moreover, even after the passage of the first Arbitration Law,
In a 1924 case, Justice Malcolm said that the attitude of the court litigation continued to be the primary choice for the
courts toward arbitration agreement is slowly crystallizing majority, as indicated by the growing number of cases filed
into definite and workable form. daily.

True enough, the issue was finally settled and crystallized Philippines – Now
through the enactment of the 1950 Civil Code, which
contained a separate chapter on Arbitration with five Evolution of Arbitration in the Philippines
provisions: (Arthur Autea)18

Art. 2042. The same persons who may enter into a Tilting the Balance in Favor of ADR)
compromise may submit their controversies to one or more
arbitrators for decision. (1820a) Statutory Recognition

Art. 2043. The provisions of the preceding Chapter upon As we have heard in the previous reports, ADR has been
compromises shall also be applicable to arbitrations. (1821a) finding a steadier and stronger place in the legal landscape
of our country.
Art. 2044. Any stipulation that the arbitrators' award or
decision shall be final, is valid, without prejudice to Articles This was largely due to the enactment of RA 9285, or the
2038, 2039, and 2040. (n)** ADR Act of 2004. It gave a more comprehensive and
updated set of rules to govern the various forms of alternative
Art. 2045. Any clause giving one of the parties power to dispute resolution, including arbitration.
choose more arbitrators than the other is void and of no
effect. (n) Problem area: Mindset of the majority

Art. 2046. The appointment of arbitrators and the procedure The passing of the ADR Law was a big step. But until now,
for arbitration shall be governed by the provisions of such ADR is not regarded as a primary means of dispute
rules of court as the Supreme Court shall promulgate. (n) resolution in the Philippines. Why? It is primarily due to our
litigious culture.

18
Ateneo LJ 288, Evolution of Arbitration (2016)

22
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

If you would ask a Filipino the question, “If you were in a “Rule 2.1. General policies. - It is the policy of the State to
serious legal conflict right now, where would you go?” there’s actively promote the use of various modes of ADR and to
a big chance that the first image that pops in his head is that respect party autonomy or the freedom of the parties to make
of a courtroom or a judge. their own arrangements in the resolution of disputes with the
greatest cooperation of and the least intervention from the
We usually associate a judge or an administrative officer in courts. To this end, the objectives of the Special ADR Rules
the government—persons with an official title or badge—as are to encourage and promote the use of ADR, particularly
the only official authorities that can put an end to a dispute. arbitration and mediation, as an important means to achieve
speedy and efficient resolution of disputes, impartial justice,
Solution: More information and encouragement curb a litigious culture and to de-clog court dockets.
The executive and the judiciary should put more efforts in
informing the masses about ADR and encouraging its use, The court shall exercise the power of judicial review as
as stated in the Law’s declaration of state policy. provided by these Special ADR Rules. Courts shall intervene
only in the cases allowed by law or these Special ADR
The goal is to add a third person in the minds of the Filipinos Rules.”
for when they would be asked that question—a private
person or entity who would act as a neutral third party. He is However, we should also take note that the word used was
neither a court judge nor a public officer. “restraint” and not complete blockage. The courts are not
shut out completely.
Policy of Judicial Restraint
Arbitral Awards
Before the ADR Law: It was not difficult to prevent arbitration
from proceeding. Courts could easily intervene. One of the important rules in arbitration is that if the parties
mutually agree that the arbitrator’s decision is final and
Now: The Special ADR Rules promulgated by the Supreme appealable, there shall be no further judicial recourse if any
Court in 2009 promoted the policy of judicial restraint. It of the parties later on disagree with the arbitrator’s award,
states: unless their situation falls under the circumstances that merit
the annulment of contracts.
“Rule 2.4. Policy implementing competence-competence
principle. - The arbitral tribunal shall be accorded the first These have been illustrated in the cases of (1) Chan Linte
opportunity or competence to rule on the issue of whether or vs Law Union (1921); and (2) Chung Fu Industries v CA
not it has the competence or jurisdiction to decide a dispute (1992).
submitted to it for decision, including any objection with
respect to the existence or validity of the arbitration In the first case, the plaintiff owned a warehouse in Samar,
agreement. When a court is asked to rule upon issue/s where he stored almost 31,000 kilos of hemp. He availed of
affecting the competence or jurisdiction of an arbitral tribunal fire insurance policies from 3 different companies—Law
in a dispute brought before it, either before or after the Union and Rock Insurance, Tokyo Marine Insurance, and
arbitral tribunal is constituted, the court must exercise judicial Chine Fire Insurance.
restraint and defer to the competence or jurisdiction of the
Later on, the warehouse caught fire and Chan declared
arbitral tribunal by allowing the arbitral tribunal the first
having lost P21,300. The insurance companies refused to
opportunity to rule upon such issues.
pay. They requested that their liability be submitted to
arbitration, in accordance with the policies’ provisions.
Where the court is asked to make a determination of whether
the arbitration agreement is null and void, inoperative or Both parties, by agreement, named Frank Ingersoll as the
incapable of being performed, under this policy of judicial sole arbitrator. After presenting of evidence by both parties,
restraint, the court must make no more than a prima facie Ingersoll found that there were only seven bales of hemp
determination of that issue. destroyed by the fire, with value at P608.34.

Unless the court, pursuant to such prima facie determination, The issue in this case is whether the arbitration clauses were
concludes that the arbitration agreement is null and void, null and void for being contrary to public policy.
inoperative or incapable of being performed, the court must
suspend the action before it and refer the parties to Said clauses stated that:
arbitration pursuant to the arbitration agreement.”
(a) any questions as to differences that shall arise as to the
amount of loss or damage shall be referred to an
The law now favors arbitration, as seen in the provisions that arbitrator;
protect arbitral proceedings from undue court intervention. (b) the arbitration process shall be a condition precedent to
The Special Rules provide: any right of action or suit upon the policies; and
23
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

(c) the award of the arbitrator shall be conclusive. (a) They will abide by the decision of the arbitrator including
any amount that may be awarded to either party as
The lower court ruled in favor of Chan and but ordered each compensation, consequential damage and/or interest;
of the defendants to pay only P202.78, pursuant to the (b) The decision of the arbitrator shall be final and
arbitrator’s award. unappealable. Therefore, there shall be no further judicial
recourse if either party disagrees with the whole or any part
Chan then appealed to the Supreme Court, claiming that the of the arbitrator's award; and
court was wrong in holding that the arbitrator’s decision is (c) Either party is entitled to seek judicial assistance for
conclusive or in any way binding on him. purposes of enforcing the arbitrator's award.
The Supreme Court denied Chan’s petition and ruled that the
arbitration clauses were valid. The RTC approved the AA. Engr. Willardo Asuncion was
appointed as sole arbitrator.
After the action was commenced and upon the request of the
insurance companies, Chan agreed to arbitrate under the A month later, Asuncion ordered Chung Fu to immediately
terms and provisions of the policies. The parties mutually pay Roblecor P16.11 million and declared his award final
agreed upon an arbitrator. Each party appeared before him and unappealable.
and offered evidence.
Chung Fu filed a motion to remand the case for further
Although the Court alluded to the possibility that the hearing and reconsideration of the award, claiming that
proceedings were not honestly and fairly conducted, it Asuncion exceeded his powers by going beyond the terms
ultimately held that the findings of the arbitrator are in the construction agreement, and even granting extra
conclusive upon the parties. The plaintiff, having agreed to compensation to Roblecor.
arbitration and submitting his proof to the arbitrator, in the
Roblecor, on the other hand, filed a motion for confirmation
absence of fraud or mistake, is estopped and bound by the
of award. The RTC granted Roblecor’s motion. Chung Fu
award.
then elevated the case via a petition for certiorari in the CA.
The second case has a very similar issue, but the decision
The CA affirmed the RTC and held that as signatories to the
of the Supreme Court here had more layers.
AA, Chung Fu and its officers are bound to observe the
stipulation saying that the award is final and unappealable.
In 1989, Chung Fu and Roblecor Incorporated entered into a
construction agreement. Roblecor would undertake to After their Motion for Reconsideration was denied, Chung Fu
construct Chung Fu’s industrial complex in Cavite for a elevated the case to the SC. The main issue is whether the
consideration of P42 million. The agreement contained a arbitration award is beyond the ambit of the court’s power of
clause saying that in the event of disputes arising from the judicial review.
performance of subject contract, the issue(s) shall be
submitted for resolution before a single arbitrator chosen by The SC first emphasized the following rules:
both parties.
(a) Absent an agreement of the parties to resolve their
In the next months, they entered into 2 more ancillary disputes via a particular mode, it is the regular courts
contracts: one for the construction of dorm and support that remain the fora to resolve such matters.
facilities, and another for the installation of electrical, water (b) The parties may opt for recourse to third parties, like
and hydrant systems. through arbitration, by either spelling it out in the
contract itself in anticipation of a future dispute, OR
stipulating in a submission agreement later on when
Roblecor failed to complete the project. They were granted
they are actually facing a dispute.
an extension, but nevertheless failed to fulfil their obligation.
(c) An extrajudicial means of settlement is not intended to
So Chung Fu took over the construction.
completely deprive the courts of their jurisdiction.
(d) But a stipulation to refer all future disputes to an
In 1990, Roblecor filed a petition for compulsory arbitration arbitrator or to submit an ongoing dispute to one is valid.
with prayer for TRO in the RTC. The company claimed that Being part of a contract between the parties, it is binding
it be paid P10.5 million and that it had progress billings of and enforceable in court in case one of them neglects,
P2.37 million. fails or refuses to arbitrate.
(e) Going a step further, in the event that they declare their
Before the court would decide on the petition, the parties had intention to refer their differences to arbitration first
negotiations, the two parties entered into an arbitration before taking court action, this constitutes a condition
agreement (AA), which provided that: precedent, such that where a suit has been instituted
prematurely, the court shall suspend the same and the

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

parties shall be directed forthwith to proceed to Now: The merits of an arbitral award could not longer be
arbitration. altered by certiorari. The courts cannot disturb the arbitral
tribunal’s determination of facts and interpretation of law.
The answer to the main issue is no. An arbitration award is
not completely outside of the court’s jurisdiction. The rule on But we have to remember that this doesn’t again completely
finality of awards is not absolute. The Civil Code itself deprive the court of its power to review. The Rules on
provides for the exceptions under Arts 2038-2040. Domestic Arbitration enumerates seven grounds to vacate
an arbitral award:
The Arbitration Law also enumerates other exceptions to the
finality rule: 1. award was procured through corruption, fraud or other
undue means;
(a) corruption, fraud, or other undue means; 2. evident partiality or corruption in the arbitral tribunal or
(b) evident partiality or corruption in the arbitrators or any of any of its members;
them; or 3. arbitral tribunal’s misconduct or any form of
(c) the arbitrators were guilty of misconduct in refusing to misbehaviour that has materially prejudiced the rights of
postpone the hearing upon sufficient cause shown, or in any party such as refusing to postpone a hearing upon
refusing to hear evidence pertinent and material to the sufficient cause shown or to hear evidence pertinent and
controversy; that one or more of the arbitrators was material to the controversy;
disqualified to act and wilfully refrained from disclosing 4. one or more of the arbitrators was disqualified to act as
such disqualifications or of any other misbehavior by such under the law and wilfully refrained from disclosing
which the rights of any party have been materially such disqualification; or
prejudiced; or 5. arbitral tribunal exceeded its powers, or so imperfectly
(d) the arbitrators exceeded their powers, or so imperfectly executed them, such that a complete, final and definite
executed them, that a mutual, final and definite award award upon the subject matter submitted to them was
upon the subject matter submitted to them was not not made.
made.” 6. arbitration agreement did not exist, or is invalid for any
ground for the revocation of a contract or is otherwise
In the case of Chung Fu and Roblecor, the SC found that the unenforceable; or
arbitrator committed a grave abuse of discretion by failing to 7. a party to arbitration is a minor or a person judicially
apply the terms of the original contract between the parties, declared to be incompetent.
and in granting unjustified extra compensation.
It is important to point out that none of these grounds actually
Section 24(d) is therefore present here, and as stated in the refer to the merits of the award, but rather the means on how
law, the court has the power to order that such award be it was procured, the character and qualification of the
vacated. arbitrators, the terms of the agreement, and the capacity of
the parties.
Hence, the SC remanded the case back to the RTC for
further hearing. The Special ADR Rules also recognize the principle of
competence-competence, which means that the arbitral
It should be noted, however, that the Special Rules now tribunal may initially rule on its own jurisdiction, including any
provide protection over arbitral awards from court objections with respect to the existence or validity of the
intervention. arbitration agreement or any condition precedent to the filing
of a request for arbitration.
The court’s power of judicial review is now limited by this rule:

“No appeal or certiorari on the merits of an arbitral award. - It is clear that the arbitral tribunal now has full autonomy in
An agreement to refer a dispute to arbitration shall mean that deciding the merits of the award. Absent any of the seven
the arbitral award shall be final and binding. Consequently, a grounds, the courts cannot touch their decision.
party to an arbitration is precluded from filing an appeal or a
VIII. Nature of Arbitration: Contractual in Nature
petition for certiorari questioning the merits of an arbitral
award.” 1. La Naval Drug Corp vs CA19
Before: Awards rendered by arbitrators may be appealed to (On the nature of Arbitration in relation to jurisdiction
the CA through a petition for review. Questions of fact, law, of courts)
or a mix of both may be raised.

19
GR No. 103200, Aug 31, 1994 (Digest by Diane Pena, et al.)

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

In 1989, a conflict between La Naval Drug Corporation and justifying the application of estoppel against either party.”
a certain Wilson Yao arose regarding a lease contract. Yao
invoked a provision in the contract whereby pursuant to R.A.
2. Del Monte Corp (DMC) USA vs CA20
876 (Arbitration Law), they should refer the matter to
arbitration. Hence, the parties agreed to refer the issue to (On the validity of Arbitration Agreements)
three arbitrators. However, certain complications arose when
they were choosing a third arbitrator. This prompted Yao
On 3 October 1996, private respondents MMI, SFI and MMIs
to go to court to demand the arbitrators to proceed with the
Managing Director Liong Liong C. Sy filed a Complaint
arbitration. Yao went to the RTC of Angeles City and the
against petitioners DMC-USA, Paul E. Derby, Jr., Daniel
case was filed as a summary proceeding case. Yao also
Collins and Luis Hidalgo, and Dewey Ltd. before the RTC of
prayed for an award for damages in his favor. Malabon, Metro Manila. Private respondents predicated their
In its Answer, La Naval asserted that the case should be complaint on the alleged violations by petitioners of Arts. 20,
dismissed as it was filed prematurely; La Naval questioned 21 and 23 of the Civil Code.
Yao’s claim for damages as it averred that the same should
be litigated independently and not in the same summary According to private respondents, DMC-USA products
proceeding case. However, La Naval also posed a continued to be brought into the country by parallel importers
counterclaim. despite the appointment of private respondent MMI as the
sole and exclusive distributor of Del Monte products thereby
The RTC resolved the matter regarding the arbitrators by causing them great embarrassment and substantial damage.
appointing a third arbitrator. The RTC also ruled that La
Naval is estopped from questioning Yao’s claim for damages
They alleged that the products brought into the country by
for being out of jurisdiction as La Naval itself filed a
these importers were aged, damaged, fake or counterfeit
counterclaim for damages.
Issue: Whether or not the RTC has jurisdiction over the Private respondents claimed that they had exhausted all
claims for damages between parties. possible avenues for an amicable resolution and settlement
of their grievances; that as a result of the fraud, bad faith,
Held: No. RA 876 is clear that summary proceedings under
malice and wanton attitude of petitioners, they should be
said law shall only involve the matter of arbitration. The
held responsible for all the actual expenses incurred by
parties’ claims for damages must be litigated in another civil
private respondents.
case.
Where the court clearly has no jurisdiction over the subject Petitioners contend that the subject matter of private
matter, in this case the claim and counterclaim for damages, respondents causes of action arises out of or relates to the
the court must dismiss the case (in this case, the claim and Agreement between petitioners and private respondents.
counterclaim for damages). Lack of jurisdiction over the Thus, considering that the arbitration clause of the
subject matter as a defense may be raised at any time. Agreement provides that all disputes arising out of or relating
Failure to raise such defense shall not estop the defendant to the Agreement or the parties relationship, including the
from raising it later on. termination thereof, shall be resolved by arbitration, they
insist on the suspension of the proceedings
“The want of jurisdiction by the court is indisputable, given
the nature of the controversy. The arbitration law explicitly
Private respondents claim, on the other hand, that their
confines the court’s authority only to pass upon the issue of
causes of action are rooted in Arts. 20, 21 and 23 of the Civil
whether there is or there is no agreement in writing providing
Code, the determination of which demands a full blown trial,
for arbitration. In the affirmative, the statute ordains that the
as correctly held by the Court of Appeals. They further
court shall issue an order “summarily directing the parties to
contend that the arbitration clause centers more on venue
proceed with the arbitration in accordance with the terms
rather than on arbitration.
thereof.” If the court, upon the other hand, finds that no such
agreement exists, “the proceeding shall be dismissed.” The
Issue: Whether the court has jurisdiction over the case.
proceedings are summary in nature.
All considered, the court a quo must then refrain from taking Held: NO. There is no doubt that arbitration is valid and
up the claims of the contending parties for damages, which, constitutional in our jurisdiction.
upon the other hand, may be ventilated in separate regular
proceedings at an opportune time and venue. The A careful examination of the instant case shows that the
circumstances obtaining in this case are far, we hold, from arbitration clause in the Distributorship Agreement between
petitioner DMC-USA and private respondent MMI is valid

20
GR No. 136154, Feb 7, 2001 (Digest by Diane Pena, et al.)

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

and the dispute between the parties is arbitrable. Petitioner alleges that arbitration laws mandate that no court
can compel arbitration, unless a party entitled to it applies for
The Agreement between petitioner DMC-USA and private this relief. This referral, however, can only be demanded by
respondent MMI is a contract. The provision to submit to one who is a party to the arbitration agreement. Considering
arbitration any dispute arising therefrom and the relationship that neither petitioner nor One Virtual has asked for a referral,
of the parties is part of that contract and is itself a contract. there is no basis for the CAs order to arbitrate.

3. Gilat vs UCPB General Insurance Co.21 3. Lanuza et al vs BR Corp22

(On the contractual nature of arbitration) (On Corporate Representatives; Piercing the Veil of
Corporate Fiction)
On September 15, 1999, One Virtual placed with GILAT a
purchase order for various telecommunications equipment, BF Corporation and Shari-La Properties entered into a
accessories, spares, services and software, at a total contract for the construction of a Shangri-La mall and a
purchase price of Two Million One Hundred Twenty Eight multilevel parking structure along EDSA. During the
Thousand Two Hundred Fifty Dollars (US$2,128,250.00). Of construction, Shangri-La defaulted in the payments but BF
the said purchase price for the goods delivered, One Virtual Corporation nonetheless continued. According to BF
promised to pay a portion thereof totalling US$1.2 Million in Corporation, Shangri-La misrepresented that it had funds to
accordance with the payment schedule dated 22 November pay for its obligations with BF Corporation, and the delay in
1999. To ensure the prompt payment of this amount, it payment was simply a matter of delayed processing of BF
obtained defendant UCPB General Insurance Co., Inc.s Corporation’s progress billing statements. BF Corporation
surety bond dated 3 December 1999, in favor of GILAT. alleged that the officers of Shangri-La were in bad faith
because of this misrepresentation.
GILAT shipped and delivered to One Virtual the purchased
products and equipment. All of the equipment including the After the construction, Shangri-La took possession of the
software components for which payment was secured by the buildings. BF Corporation demanded for the payment but
surety bond, was shipped by GILAT and duly received by Shangri-La ignored the repeated demands. BF Corporation
One Virtual. filed an action in court for the collection of the outstanding
balance. The officers of Shangri-La filed a motion to suspend
One Virtual failed to pay GILAT the amount of Four Hundred the proceedings. They said that the contract contains an
Thousand Dollars (US$400,000.00) in accordance with the arbitration clause and BF Corporation’s failure to submit the
payment schedule to the surety bond, prompting GILAT to dispute to arbitration is sufficient ground to dismiss their
write the surety defendant UCPB a demand letter for complaint.
payment of the said amount of US$400,000.00. No part of
the amount set forth in this demand has been paid to date by In the proceedings filed by BF Corporation, they included the
either One Virtual or defendant UCPB. One Virtual likewise officers as parties because of their bad faith coming from
failed to pay on the succeeding payment installment of the their misrepresentations.
surety bond, prompting GILAT to send a second demand
letter, for the payment of the full amount of US$1,200,000.00 Issue: Whether the officers should still be included as
guaranteed under the surety bond, plus interests and “parties” considering that they already resigned from
expenses However, defendant UCPB failed to settle the Shangri-La Corporation.
amount of US$1,200,000.00 or a part thereof, hence, the
instant complaint. Held: YES. The officers should be included as parties. True,
a corporation has a separate and distinct personality from its
Respondent appealed to the CA. The CA dismissed the case owners, but this assumption admits of several exceptions,
for lack of jurisdiction. we call this the “Piercing the veil of Corporate Fiction”.
Because of the alleged bad faith on the part of the officers,
Issue: Whether CA erred in dismissing the case and ordering they should be included as parties to the complaint. This is
petitioner and One Virtual to arbitrate. to determine whether there are sufficient grounds to hold that
there is indeed bad faith. And in case there really is, to hold
Held: YES. The existence of a suretyship agreement does them solidarily liable.
not give the surety the right to intervene in the principal
contract, nor can an arbitration clause between the buyer As a general rule, a corporation’s representative who did not
and the seller be invoked by a non-party such as the surety. personally bind himself or herself to an arbitration agreement
cannot be forced to participate in arbitration proceedings

21 22
GR No. 189563, April 7, 2014 (Digest by Diane Pena, et al.) GR No. 174938, Oct 1, 2014 (Digest by Diane Pena, et al.)

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

made pursuant to an agreement entered into by the same land. FKI and respondent agreed on a new five-year
corporation. He or she is generally not considered a party to lease to take effect on the 26th of May 2000, with annual
that agreement. rents ranging from 4,000,000 for the first year up to
4,900,000 for the fifth year. The 2000 Lease Contract also
However, there are instances when the distinction between contained an arbitration clause enforceable in the event the
personalities of directors, officers, and representatives, and parties come to disagreement about the" interpretation,
of the corporation, are disregarded. We call this piercing the application and execution" of the lease.
veil of corporate fiction.
After the 2000 Lease Contract expired, FKI and respondent
Piercing the corporate veil is warranted when "[the separate agreed to renew their lease for another five (5) years. FKI
personality of a corporation] is used as a means to perpetrate faithfully paid the rentals and " donations "due it per the 2005
fraud or an illegal act, or as a vehicle for the evasion of an Lease Contract.
existing obligation, the circumvention of statutes, or to
confuse legitimate issues." But in June of 2008, FKI sold all its rights and properties
relative to its business in favor of herein petitioner Koppel,
When corporate veil is pierced, the corporation and persons Incorporated. The following year, petitioner discontinued the
who are normally treated as distinct from the corporation are payment of the rent and " donation " Their refusal to pay such
treated as one person, such that when the corporation is rent and "donation " emanated from its belief that the rental
adjudged liable, these persons, too, become liable as if they stipulations of the 2005 Lease Contract, and even of the
were the corporation. 2000 Lease Contract, violated one of the" material conditions
" of the donation of the subject land.
When there are allegations of bad faith or malice against
corporate directors or representatives, it becomes the duty Makati Rotary Club sent a demand letter to Koppel because
of courts or tribunals to determine if these persons and the of its default in payment. Koppel gave a reply stating that the
corporation should be treated as one. Without a trial, courts rentals are "severely disproportionate," "unconscionable"
and tribunals have no basis for determining whether the veil and "in clear violation to the nominal rentals mandated by the
of corporate fiction should be pierced. Courts or tribunals do Amended Deed of Donation."
not have such prior knowledge.
Makati Rotary Club sent a 2nd demand letter in September
The determination of these circumstances must be made by 2009, demanding the payment of the obligation and an order
one tribunal or court in a proceeding participated in by all to vacate the premises should it fail to pay the obligations
parties involved, including current representatives of the within 7 days from receipt of the letter. Koppel failed to
corporation, and those persons whose personalities are comply with both demands, prompting Makati Rotary Club to
impliedly the sameas the corporation. file a recission or cancelation of the Deed of Donation and
an Unlawful Detainer suit against Koppel.
This is because when the court or tribunal finds that
circumstances exist warranting the piercing of the corporate Koppel questions the legality of the proceedings commenced
veil, the corporate representatives are treated as the considering that there is an arbitration clause in the lease
corporation itself and should be held liable for corporate acts. contracts. Makati Rotary Club questions the validity of the
contract and consequently the arbitration clause.
5. Koppel Inc vs Makati Rotary Club 23
Issues:
(May arbitration be compelled even if the issue pertains
to the validity of a contract?) 1. Whether the validity of the contract could be subject
to arbitration.
Fedders Koppel, Incorporated (FKI) has a registered parcel 2. Whether the arbitration clause in the contract could
of land located in Paranaque. In 1975, FKI bequeathed the still be invoked notwithstanding that contract’s
said land to Makati Rotary Club, by way of a conditional possible nullity.
donation. Makati Rotary Club accepted the donation with all 3. Whether the arbitration clause could still operate
of its conditions. Among the conditions was to rent back the considering that there is no request filed in the MeTC
land to FKI for a period of 25 years at a rate of P40,126 per to arbitrate.
annum. It is subject to renewal at conditions based on the 4. Whether the fact that the case was already submitted
mutual agreement of the parties. for JDR resolution makes arbitration unnecessary and
circuitous.
The parties executed another lease contract covering the

23
GR No. 198075, Sept 4, 2014 (Digest by Diane Pena, et al.)

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

Held: contracting parties.


• If the dispute involves non-parties to the contract,
1. Arbitration is not proper when one of the parties splitting the proceedings in order to have arbitration
repudiates the existence or validity of such contract or for the parties and trial for the non-contracting
agreement on the ground of fraud or oppression as in parties would result in multiplicity of suits, duplicitous
this case. The validity of the contract cannot be proceedings, and unnecessary delay. Thus, the
subject of arbitration proceedings. Allegations of fraud interest of justice would be best served if the court
and duress in the execution of a contract are matters hears and adjudicates the case in a single, complete
within the jurisdiction of the ordinary courts of law. proceeding.
These questions are legal in nature and require the
application and interpretation of laws and In that case, the court also rationed that since the principal
jurisprudence which is necessarily a judicial function. contracts were void, then the arbitral agreement is also
2. Yes, the arbitration clause remains to be valid without legal existence.
because of the doctrine of separability. Under the
doctrine of separability, an arbitration agreement is But the author noted that the ruling in the PIATCO case
considered as independent of the main contract. betrays the principle of arbitral autonomy.
Being a separate contract in itself, the arbitration
agreement may thus be invoked regardless of the This principle provides that an arbitral clause is considered
possible nullity or invalidity of the main contract. separate or independent from the main contract. The validity
3. The arbitration clause could still be invoked. The filing of the arbitral agreement doesn’t rest upon the validity of the
of a "request" pursuant to Section 24 of R.A. No. 9285 principal agreement. This is embodied in Sections 24-25 of
is not the sole means by which an arbitration clause the ADR Law.
may be validly invoked in a pending suit. In this case,
it is conceded that petitioner was not able to file a Section 6 of the Old Arbitration Law also provides that if the
separate " request " of arbitration before the MeTC. making of the agreement or the failure to comply with it is not
However, it is equally conceded that the petitioner, as raised as an issue in the proceedings, the court where the
early as in its Answer with Counterclaim, had already action is pending shall make an order directing the parties to
apprised the MeTC of the existence of the arbitration proceed to arbitration in accordance with the terms of the
clause in the 2005 Lease Contract and, more agreement.
significantly, of its desire to have the same enforced
in this case. This act of petitioner is enough valid In General Insurance vs Union Insurance (1989), the court
invocation of his right to arbitrate. held that where there is an arbitral agreement and one party
4. No, the has not become unnecessary and circuitous puts up a claim which the other party disputes, the need to
by virtue of the JDR Resolution. The JDR framework arbitrate is imperative. The duty of the court in a case like
is based on the processes of mediation, conciliation or this is not to resolve the merits of the claims, but only to
early neutral evaluation which entails the submission determine if they should proceed to arbitration or not.
of a dispute before a "JDR judge" who shall merely
"facilitate settlement" between the parties in conflict or The following US cases were cited:
make a "non-binding evaluation or assessment of the
chances of each party’s case." Thus in JDR, the JDR • In Prima Paint vs Flood & Conklin (1967), it was held
judge lacks the authority to render a resolution of the that a claim of fraud in the inducement of an
dispute that is binding upon the parties in conflict. In arbitration agreement itself is cognizable by the
arbitration, on the other hand, the dispute is submitted courts, but not as to claims of fraud in the
to an arbitrator/s —a neutral third person or a group of inducement of the principal contract. The latter is
thereof— who shall have the authority to render a resolved by means of arbitration.
resolution binding upon the parties.
• In Par-knit Mills vs Stockbridge (1980), it was held
that the determination of whether an arbitral
Arbitral Autonomy Principle in Philippine agreement had in fact been executed by the
Jurisprudence contracting parties was an issue cognizable by
(Kristoffer James E. Purisima)24 judicial proceedings.
Much of the discussion was around the PIATCO case (Agan • In Three Valleys vs Hutton (1991), it was held that:
vs PIATCO, 2003), where the Court held the following: If the dispute is within the scope of an arbitration
agreement, an arbitrator may properly decide
whether a contract is "voidable" because the parties
• Arbitral proceedings can only be applied to the

24
50 Ateneo LJ 1091 (2006)

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

have agreed to arbitrate the dispute. But, because make a decision that is not in accord with the US courts’
an "arbitrator's jurisdiction is rooted in the agreement favourable treatment of arbitration.
of the parties”, a party who contests the making of a
contract containing an arbitration provision cannot In the PIATCO case, the SC took cognizance relying on the
be compelled to arbitrate the threshold issue of the “transcendental importance” doctrine, which expands the
existence of an agreement to arbitrate. Only a court Court’s power of judicial review.
can make that decision.
The author noted that this doctrine has been an instrument
Hence, the arbitral autonomy principle entails that questions of jurisprudential regression. He further said, “It is
as to the validity or invalidity of the principal contract is unfortunate that the concept of transcendental importance
cognizable by an arbitrator or arbitral tribunal for as long as has made the Court envision itself as a governmental
there is a valid and binding arbitral agreement. messiah.”

However, where the legal existence of the arbitral agreement IX. Arbitration in General
is itself disputed, such question is properly cognizable by the
courts. Robeniol Notes25

Absent any allegation whatsoever that the arbitral agreement Arbitration distinguished from mediation:
was procured through fraud such that there was no meeting
of the minds with respect to the arbitral clause, arbitration • In arbitration, it is the arbitrator who decides the
proceedings should be allowed to take due course. dispute and renders an arbitral award to conclude
the proceeding. In mediation, it is the parties
But everything would still depend on what is stated on the themselves who enter into and execute a mediated
contract in each case. In Bay View Hotel vs Ker & Co (1982), settlement agreement to conclude the proceeding.
where the clause only mentioned, “if dispute should arise as • Arbitration is merit/evidence-based. Mediation is not
to the amount of company’s liability”, it was construed as to necessarily evidence-based.
exclude the issue of total negation of liability. This means that
only disputes regarding the amount of liability could be Arbitrator: He/she is the person appointed to render an
arbitrated, such that when the party completely denies any award, alone or with others, in a dispute that is the subject
liability, arbitration cannot be invoked. matter of an arbitration agreement.

In Toyota Motor vs CA (1992), it was held that the presence Arbiter vs Arbitrator: An arbiter is bound by rules of law and
of third persons doesn’t render the arbitration clause equity in rendering an award. An arbitrator may use his own
disfunctional. discretion in the performance of his functions.

The author slammed that SC’s ruling in the PIATCO case, Voluntary arbitrators act in a quasi-judicial capacity, such
where it held that a speedy and decisive resolution of all the that their decisions are within the scope of judicial review.
critical issues couldn’t be made before an arbitral tribunal.
Arbitration agreement: It is the agreement by the parties to
In the author’s opinion, this means that the Court is submit to arbitration all or certain disputes which have arisen
essentially saying that an arbitral tribunal is incapable of or which may arise between them in respect of a defined
reaching a credible conclusion. But the Court is totally legal relationship, whether contractual or not.
mistaken in this regard, according to Purisima. Arbitral
tribunals are triers of fact. When an arbitrable dispute is Two modes of submitting a dispute to arbitration
submitted before it, the tribunal is precisely tasked to
determine and investigate the factual and circumstantial 1. Agreement to submit to arbitration – an
antecedents of the dispute and, based on such investigation, agreement to submit some future dispute, usually
reach as conclusion as to the legal liability of any or both stipulated upon in a civil contract between the
parties. parties; made in anticipation of a dispute that might
arise between the parties after the contracts
Moreover, by brushing aside arbitration as a means of execution.
resolving contractual disputes, the Court manifestly
expressed its distrust towards arbitral proceedings. The 2. Submission agreement – an agreement submitting
author found it ironic and regressive that a Court who has an existing matter of difference to arbitrators.
historically relied on American jurisprudence would now

25
Robeniol, pp. 43-58

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

Form: Since an arbitration agreement is a formal contract, for their private purposes. The Court will not review the
its validity is dependent on the contract being executed in a factual findings of an arbitral tribunal upon the artful
particular form. It should be in writing and subscribed by the allegation that such body had "misapprehended facts" and
parties. will not pass upon issues which are, at bottom, issues of fact,
no matter how cleverly disguised they might be as "legal
The agreement to arbitrate may be: questions." The parties here had recourse to arbitration and
chose the arbitrators themselves; they must have had
1. Through an arbitration clause or compromissiore, confidence in such arbitrators. The Court will not, therefore,
which is included in the container contract; or permit the parties to relitigate before it the issues of facts
2. Constituted in a separate contract; or previously presented and argued before the Arbitral Tribunal,
save only where a clear showing is made that, in reaching its
3. In the form of a reference in a written contract to a factual conclusions, the Arbitral Tribunal committed an error
document containing an arbitration clause such as so egregious and hurtful to one party as to constitute a grave
to make that clause part of the contract. abuse of discretion resulting in lack or loss of jurisdiction.
Prototypical examples would be factual conclusions of the
Concept of Arbitration Tribunal which resulted in deprivation of one or the other
party of a fair opportunity to present its position before the
Uniwide Sales Realty and Resources Corp. vs Titan-
Arbitral Tribunal, and an award obtained through fraud or the
Ikeda Construction26
corruption of arbitrators. Any other, more relaxed rule would
Arbitration as distinguished from the court trial system: result in setting at naught the basic objective of a voluntary
arbitration and would reduce arbitration to a largely inutile
“An arrangement for taking and abiding by the judgment of institution.
selected persons in some disputed matter, instead of
carrying it to established tribunals of justice, and is intended Kinds of Arbitration
to avoid the formalities, the delay, the expense, and vexation
of ordinary litigation.” Voluntary vs Compulsory

In this case, the question raised was, what if the award by Voluntary arbitration involves the reference of a dispute to an
the arbitrator (the CIAC in this case) is not the same as the impartial body. The parties themselves choose the members
findings of the courts? Are the CIAC bound by the Rules of of such body, and the parties freely consent in advance to
Court? abide by its award. This award will be issued after the
proceedings where both sides have the opportunity to be
Held: No. The Rules governing Construction Arbitration heard. Compulsory arbitration is the process of settling
promulgated by the CIAC contains no provision on the disputes by a government agency that has the authority to
application of the Rules of Court to arbitration proceedings, investigate and to make an award, which is binding on all
even in a suppletory capacity. parties. The parties are compelled to accept the resolution of
the dispute.
Such importation of the Rules of Court provision on
amendment to conform to evidence would contravene the Domestic vs International
spirit, if not the letter of the CIAC rules. This is for the reason
that the formulation of the Terms of Reference is done with It is international if any of the following instances occur:
the active participation of the parties and their counsel
themselves. 1. The parties’ place of business, at the time of the
conclusion of their arbitration agreement, are in different
EO 1008 created an arbitration facility to which the states;
construction industry in the Philippines can have recourse. It 2. The place of arbitration provided in the arbitration
was enacted to encourage the early and expeditious agreement and the parties’ places of business is outside
settlement of disputes in the construction industry, a public the Philippines;
policy the implementation of which is necessary and 3. The place where a substantial part of the obligation is to
important for the realization of national development goals. be performed or the place with the subject matter of the
dispute is most closely connected is outside the
Aware of the objective of voluntary arbitration in the labor Philippines; or
field, in the construction industry, and in any other area for 4. The parties have expressly agreed that the subject
that matter, the Court will not assist one or the other or even matter of the arbitration agreement relates to more than
both parties in any effort to subvert or defeat that objective

26
511 SCRA 335 (2006)

31
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

one country. 5. The decision of the RTC regarding an assailed foreign


award is appealable to the CA via a petition for review
It is domestic if it is not international in character, that is, if under Rule 45.
the components (places of business, of arbitration, of
substantial performance, and where subject matter is most Comprehending Arbitration
closely connected) are all in the Philippines. (Mario E. Valderrama)28

Domestic vs Foreign The term “arbitration” is used loosely in many processes in


the Philippines (labor arbitration, consumer arbitration,
It is foreign if conducted outside the Philippines. It is barangay arbitration). This has led to confusion. They use
domestic of it is conducted in the Philippines, irrespective of similar words but they are not conceptually the same
the presence or absence of foreign elements. because they are governed by different rules.

Commercial Arbitration From the definitions in the Model Law, and the New York
Convention, we can say that arbitration is a contractual
It is commercial if it covers matters arising from all method of resolving disputes, whereby the disputants have
relationships of a commercial nature, whether contractual or an opportunity to present their positions before an impartial
not. An international commercial arbitration proceeding tribunal or person, whose judgment and expertise they trust.
conducted in the Philippines under the ADR Act is domestic
and international in character, while that conducted outside It is a device whereby the settlement of a question that’s of
the Philippines is foreign. interest to two or more persons is entrusted to the arbitrator/s
who derive their powers from a private agreement, not from
Policy on Arbitration the authorities of a State, and who are to proceed and decide
the case on the basis of such agreement.
Korea Technologies vs Lerma27
Components of arbitration:
“Being an inexpensive, speedy and amicable method of
settling disputes, arbitration––along with mediation, 1. Arbitration is contractual; and
conciliation and negotiation––is encouraged by the Supreme 2. It may either be adjudicative or judicial.
Court. Aside from unclogging judicial dockets, arbitration
also hastens the resolution of disputes, especially of the Characteristics of arbitration:
commercial kind. It is thus regarded as the "wave of the
future" in international civil and commercial disputes. 1. It is parties-specific and case-specific.
Brushing aside a contractual agreement calling for arbitration
between the parties would be a step backward.” The arbitration and the award (collectively known as arbitral
decision) are binding on the parties and in respect of the
Hence, arbitration clauses must be liberally construed particular dispute involved in the arbitration.
consistent with that policy. As long as the clause is
susceptible to interpretation that covers the dispute asserted, Generally, only the signatories to the arbitration agreement
an order to arbitrate should be granted. Any doubt must be are bound. But non-signatories may be bound, too, like the
resolved in favour of arbitration. following:
a. Principal represented by an agent;
Moreover, the Court reiterated the following pertinent b. Alter ego of a signatory using piercing of veil;
features of the ADR Law, which incorporated the UNCITRAL c. Assignees or transferees; and
Model Law: d. Successors-in-interest including those resulting from
1. The RTC must refer to arbitration in the proper cases. mergers and business combinations
2. Foreign arbitral awards must be confirmed by the RTC A party may also be bound as a result of waiver or estoppel.
(for recognition and enforcement).
3. The RTC has jurisdiction to review foreign arbitral 2. It is a private dispute resolution process.
awards.
4. The grounds for judicial review in domestic and foreign It is an extrajudicial mode of resolving disputes. There should
awards are different. For foreign awards, the grounds be minimal interference from the courts and the government.
are under Article 34(2) of the UNCITRAL Model Law. For 3. The arbitral tribunal is an instrumentality of the
final domestic awards, the grounds are under Section 25 parties.
of RA 876.

27 28
542 SCRA 1 (2008) 61 Ateneo LJ 608 (2016)

32
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

As creators, they own the tribunal and they can shape it to only to the parties’ agreement and the applicable
what they want it to be. national arbitration legislation. The parties
themselves, together with the tribunal, will lay down
4. It is evidentiary. the rules.
• Institutional arbitration is administered by an arbitral
The tribunal will decide based on the evidence presented by institution that decides according to its own rules. In
the parties. practice, it is almost always overseen by an
appointing authority.
The tribunal cannot use its expertise in settling the dispute.
It cannot use “secret evidence” or evidence known only to Arbitral institution: It is an organization that provides
the tribunal, as basis for the award. arbitration services. Per the IRR and in relation to domestic
arbitration, it is an entity, registered as a domestic
5. It is a mandatory procedure that will culminate to a corporation with the SEC, and engaged in arbitration of
final and binding decision or award. disputes in the Philippines on a regular and permanent basis.

Entering into an arbitration agreement is voluntary. But once Rule of preference (based on the premise that arbitration is
they enter into it, they are bound to comply with the contractual)
stipulation to resolve their dispute through arbitration and not
go to litigation. 1. Mandatory rules – These are the public policy
safeguards, and thus, rules that the parties cannot
The parties may both withdraw from their agreement to derogate. These refer to the limitations on the
arbitrate, but they cannot do so unilaterally. freedom to contract.
2. Agreement between the parties – The law between
6. The principle of finality of arbitral awards or the parties.
decisions is based on contract and is a core 3. Default rules – These are the law provisions
component of the process. applicable in the absence or deficiency of agreement.
4. Arbitrator discretion – This is added by arbitration
The arbitration agreement represents the parties’ laws. It is only possible if there are no mandatory,
acceptance to abide by the tribunal’s decision. agreement, or default rules.

Any appeal based on errors of fact, law, or both, can be ruled The seat of arbitration (place of arbitration) determines
out. Attacks against an award shouldn’t focus on the merits, which law should apply. But it is not necessarily where the
but rather on the procedure. proceedings occur. It is a legal construct, not a geographical
location. The arbitral seat is the nation where an international
7. The award is part of the agreement of the parties and arbitration has its legal domicile or juridical home.
has the same standing as a contractual stipulation.
As a general rule, the arbitration law of the seat will be the
The validity and enforceability of the award is subject to the governing law of the arbitration.
same rules in contracts.
X. Domestic Arbitration
8. The arbitral tribunal has no imperium.
RA 876, Sec 1-7
The tribunal doesn’t have the power to enforce its orders and
decision. Persons and matters subject to arbitration

In post award proceedings, courts may exercise its Two or more persons or parties may submit to the arbitration
supervisory and enforcement jurisdictions. of one or more arbitrators any controversy existing between
them at the time of the submission and which may be the
For an award to be enforceable, it must be integrated into the subject of an action, or the parties to any contract may in
legal system by way of a: such contract agree to settle by arbitration a controversy
thereafter arising between them.
1. Petition for Confirmation, for local awards; or
2. Petition for Recognition, for foreign awards. Such submission or contract shall be valid, enforceable and
irrevocable, save upon such grounds as exist at law for the
Ad hoc vs Institutional revocation of any contract.

• Ad hoc arbitration is a DIY arbitration. It is subject Limitations


33
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

A controversy cannot be arbitrated where one of the parties In the event that one party defaults in answering the demand,
to the controversy is an infant, or a person judicially declared the aggrieved party may file with the Clerk of the RTC having
to be incompetent, unless the appropriate court having jurisdiction over the parties, a copy of the demand for
jurisdiction approve a petition for permission to submit such arbitration under the contract to arbitrate, with a notice that
controversy to arbitration made by the general guardian or the original demand was sent by registered mail or delivered
guardian ad litem of the infant or of the incompetent. in person to the party against whom the claim is asserted.
Such demand shall set forth the nature of the controversy,
But where a person capable of entering into a submission or the amount involved, if any, and the relief sought, and shall
contract has knowingly entered into the same with a person be accompanied by a true copy of the contract providing for
incapable of so doing, the objection on the ground of arbitration.
incapacity can be taken only in behalf of the person so
incapacitated. 2. In the case of the submission of an existing controversy,
it Is instituted by the filing with the Clerk of the RTC having
Controversies not subject to RA 876 jurisdiction, of the submission agreement, setting forth the
nature of the controversy, and the amount involved, if any.
This Act shall not apply to controversies and to cases which Such submission may be filed by any party and shall be duly
are subject to the jurisdiction of the Court of Industrial executed by both parties.
Relations (now NLRC) or which have been submitted to it.
In the event that one party neglects, fails or refuses to
arbitrate under a submission agreement, the aggrieved party
Form of arbitration agreement
shall follow the same procedure above.
A contract to arbitrate a controversy thereafter arising
Hearing by court: A party aggrieved by the failure, neglect
between the parties, as well as a submission to arbitrate an
or refusal of another to perform under an arbitration
existing controversy shall be in writing and subscribed by the
agreement may petition the court for an order directing that
party sought to be charged, or by his lawful agent.
such arbitration proceed. Five days notice in writing of the
hearing of such application shall be served either personally
The making of a contract or submission for arbitration shall or by registered mail upon the party in default. The court shall
be deemed as consent of the parties to the jurisdiction of the hear the parties, and upon being satisfied that the making of
RTC of the province or city where any of the parties resides, the agreement or such failure to comply therewith is not in
to enforce such contract or submission. issue, shall make an order directing the parties to proceed to
arbitration in accordance with the terms of the agreement.
Preliminary procedure
If the making of the agreement or default be in issue the court
1. In the case of a contract to arbitrate future controversies, shall proceed to summarily hear such issue. If the finding be
it is instituted by the service by either party of a demand for that no agreement in writing providing for arbitration was
arbitration in accordance with the contract upon the other. made, or that there is no default in the proceeding
thereunder, the proceeding shall be dismissed. If the finding
Such demand shall be set forth the nature of the controversy, be that a written provision for arbitration was made and there
the amount involved, if any, and the relief sought, together is a default in proceeding thereunder, an order shall be made
with a true copy of the contract providing for arbitration. The summarily directing the parties to proceed with the arbitration
demand shall be served upon any party either in person or in accordance with the terms thereof.
by registered mail.
The court shall decide all motions, petitions or applications
In the event that the contract between the parties provides filed under the provisions of this Act, within 10 days after
for the appointment of a single arbitrator, the demand shall such motions, petitions, or applications have been heard by
be set forth a specific time within which the parties shall it.
agree upon such arbitrator. If the contract between the
parties provides for the appointment of three arbitrators, one Stay of civil action: If any suit or proceeding be brought
to be selected by each party, the demand shall name the upon an issue arising out of an agreement which has an
arbitrator appointed by the party making the demand; and arbitration clause, the court in which such suit or proceeding
shall require that the party upon whom the demand is made is pending, upon being satisfied that the issue involved is
shall within 15 days, advise in writing the first party of the referable to arbitration, shall stay the action or proceeding
name of the person appointed by the second party; such until an arbitration has been had in accordance with the
notice shall require that the two arbitrators so appointed must terms of the agreement: Provided, That the applicant, for the
agree upon the third arbitrator within ten days from the date stay is not in default in proceeding with such arbitration.
of such notice.
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

(Also read IRR, Chapter 5, Rules 1-2) No person appointed to served as an arbitrator shall be
related by blood or marriage within the sixth degree to either
Appointment of Domestic Arbitrators, Jurisdiction and party to the controversy.
Conduct of Domestic Arbitration29
No person shall serve as an arbitrator in any proceeding if
Appointment of arbitrators he has or has had financial, fiduciary or other interest in the
controversy or cause to be decided or in the result of the
If, in the contract for arbitration or submission agreement, proceeding, or has any personal bias, which might prejudice
provision is made for a method of naming or appointing an the right of any party to a fair and impartial award.
arbitrator or arbitrators, such method shall be followed.
No party shall select as an arbitrator any person to act as his
But if no method is provided, the RTC shall designate an champion or to advocate his cause.
arbitrator or arbitrators.
Disclosure after appointment
The RTC shall appoint an arbitrator or arbitrators in the
following instances: If, after appointment but before or during hearing, the
appointed person discovers any circumstances likely to
(a) If the parties to the contract or submission are unable to create a presumption of bias, or which he believes might
agree upon a single arbitrator; or disqualify him as an impartial arbitrator, he shall immediately
disclose such information to the parties. Thereafter, the
(b) If an arbitrator appointed by the parties is unwilling or parties may agree in writing:
unable to serve, and his successor has not been appointed
in the manner in which he was appointed; or 1. to waive the presumptive disqualifying circumstances; or
2. to declare the office of such arbitrator vacant. Any such
(c) If either party to the contract fails or refuses to name his vacancy shall be filled in the same manner as the original
arbitrator within 15 days after receipt of the demand for appointment was made.
arbitration; or
Challenge of arbitrators
(d) If the arbitrators appointed by each party to the contract,
or appointed by one party to the contract and by the proper The arbitrators may be challenged only for the reasons
Court, shall fail to agree upon or to select the third arbitrator. mentioned in the preceding section (qualifications and
limitations) which may have arisen after the arbitration
Arbitrators appointed shall either accept or decline within 7 agreement or were unknown at the time of arbitration.
days of the receipt of their appointments.
If they do not yield to the challenge, the challenging party
In case of declination or failure of an arbitrator to duly accept, may renew the challenge before the RTC of the province or
the parties or the court, shall proceed to appoint a substitute city in which the challenged arbitrator or any of the parties
or substitutes for the arbitrator or arbitrators who decline or resides.
failed to accept his or their appointments.
Procedure for challenge
Number of Arbitrators: The parties are free to determine
the number of arbitrators. Failing such determination, the 1. The party will write a challenge.
default number of arbitrators shall be 3. 2. Within 15 days, the challenged arbitrator must accept or
deny. If he accepts, he withdraws as arbitrator.
Qualifications of arbitrators: Any person appointed as an 3. If he rejects the challenge, he shall communicate such
arbitrator must be: rejection and state the facts and arguments relied upon.
4. The arbitral tribunal shall decide on the challenge within
30 days.
1. of legal age;
5. If the challenge procedure is unsuccessful, the party who
2. in full-enjoyment of his civil rights; and
made the challenge may request the appointing authority
3. know how to read and write.
in writing to decide on the challenge.
6. The appointing authority shall decide on it within 15
Limitations days.

29
RA 876, Sec 8-18; IRR Chapter 5, Rule 3-5; Parlade, pp. 327-501
35
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

7. If the appointing authority fails to act, the requesting appointment if the parties reside in different provinces,
party may renew the request with the court. set a time and place for the hearing of the matters
submitted to them, and must cause notice thereof to be
Grounds for Challenge: given to each of the parties.
2. Postponement/Adjournment: The hearing can be
1. If circumstances exist that give rise to justifiable doubts postponed or adjourned by the arbitrators only by
agreement of the parties; otherwise, adjournment may
as to his/her impartiality or independence;
be ordered by the arbitrators upon their own motion only
2. If he/she does not possess qualifications as provided for
at the hearing and for good and sufficient cause. No
in the IRR or those agreed to by the parties;
adjournment shall extend the hearing beyond the day
3. If he/she is disqualified to act as arbitration under these
Rules; fixed in the submission or contract for rendering the
4. If he refuses to respond to questions by a party regarding award, unless the time so fixed is extended by the written
agreement of the parties to the submission or contract or
the nature and extent of his professional dealings with a
their attorneys, or unless the parties have continued with
party or its counsel.
the arbitration without objection to such adjournment.
3. Hearing in absentia: The hearing may proceed in the
Suspension of arbitration absence of any party who, after due notice, fails to be
present at such hearing or fails to obtain an adjournment
RA 876: While the challenging incident is discussed before thereof. An award shall not be made solely on the default
the court, the hearing or arbitration shall be suspended, and of a party. The arbitrators shall require the other party to
it shall be continued immediately after the court has submit such evidence as they may require for making an
delivered an order on the challenging incident. award.
4. Legal representation: No one other than a party to said
IRR: Until a decision is made to replace the arbitrator, the arbitration, or a person in the regular employ of such
arbitration proceeding shall continue notwithstanding the party duly authorized in writing by said party, or a
challenge. Rhe challenged arbitrator shall continue to practicing attorney-at-law, shall be permitted by the
participate therein as an arbitrator. arbitrators to represent before him or them any party to
the arbitration. Any party desiring to be represented by
However, if the challenge incident is raised before the court, counsel shall notify the other party or parties of such
the arbitration proceeding shall be suspended until the court intention at least 5 days prior to the hearing.
decides the incident. 5. The arbitrators shall arrange for the taking of a
stenographic record of the testimony when such a record
The arbitration shall be continued immediately after the court is requested by one or more parties, and when payment
has delivered an order. If the court agrees that the of the cost is assumed by such party or parties.
challenged arbitrator shall be replaced, the parties shall 6. Persons having a direct interest in the controversy which
immediately replace the arbitrator concerned. is the subject of arbitration shall have the right to attend
any hearing; but the attendance of any other person shall
be at the discretion of the arbitrators.
When can a challenged arbitrator be replaced?
Oath of arbitrators: Before hearing any testimony,
A challenged arbitrator shall be replaced if: arbitrators must be sworn, by any officer authorized by law
to administer an oath, faithfully and fairly to hear and
1. he/she withdraws as arbitrator; examine the matters in controversy and to make a just award
2. the parties agree in writing to declare the office of according to the best of their ability and understanding.
arbitrator vacant;
3. the arbitral tribunal decides the challenge and declares Arbitrators shall have the power to administer the oaths to all
the office of the challenged arbitrator vacant; witnesses requiring them to tell the whole truth and nothing
4. the appointing authority decides the challenge and
but the truth in any testimony which they may give in any
declares the office of the challenged arbitrator vacant;
arbitration hearing. This oath shall be required of every
5. in default of the appointing authority, the court decides
witness before any of his testimony is heard.
the challenge and declares the office of the challenged
arbitrator vacant.
Subpoena and subpoena duces tecum: Arbitrators shall
have the power to require any person to attend a hearing as
Procedure by arbitrators a witness. They shall have the power to subpoena witnesses
and documents when the relevancy of the testimony and the
1. Setting of hearing: The arbitrator, within 5 days after materiality has been demonstrated.
appointment if the parties to the controversy reside
within the same city or province, or within 15 days after
36
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

Attendance of arbitrators: All of the arbitrators appointed Proceeding in lieu of hearing: The parties to a submission
in any controversy must attend all the hearings in that matter or contract to arbitrate may, by written agreement, submit
and hear all the allegations and proofs of the parties; but an their dispute to arbitration by other than oral hearing. The
award by the majority of them is valid unless the concurrence parties may submit an agreed statement of facts. They may
of all of them is expressly required in the submission or also submit their respective contentions to the duly
contract to arbitrate. appointed arbitrators in writing; this shall include a statement
of facts, together with all documentary proof. Parties may
The arbitrator or arbitrators shall have the power at any time, also submit a written argument.
before rendering the award, without prejudice to the rights of
any party to petition the court to take measures to safeguard Each party shall provide all other parties to the dispute with
and/or conserve any matter which is the subject of the a copy of all statements and documents submitted to the
dispute in arbitration. arbitrators.

Hearing by arbitrators: Arbitrators may, at the Each party shall have an opportunity to reply in writing to any
commencement of the hearing, ask both parties for brief other party's statements and proofs; but if such party fails to
statements of the issues in controversy and/or an agreed do so within 7 days after receipt of such statements and
statement of facts. proofs, he shall be deemed to have waived his right to reply.

Thereafter, the parties may offer such evidence as they Upon the delivery to the arbitrators of all statements and
desire, and shall produce such additional evidence as the documents, together with any reply statements, the
arbitrators shall require or deem necessary to an arbitrators shall declare the proceedings in lieu of hearing
understanding and determination of the dispute. closed.

The arbitrators shall be the sole judge of the relevancy and The Arbitral Tribunal has competence to rule on its own
materiality of the evidence offered or produced, and shall not jurisdiction: When a demand for arbitration is objected to
be bound to conform to the Rules of Court pertaining to by the adverse party, the arbitral tribunal shall, in the first
evidence. instance, resolve the objection when made on any of the
following grounds:
The arbitrators may make an ocular inspection of any matter
or premises which are in dispute, but such inspection shall 1. The arbitration agreement is in existent, void,
be made only in the presence of all parties to the arbitration, unenforceable or not binding upon a person for any
unless any party who shall have received notice thereof fails reason, including the fact that the adverse party is not
to appear, in which event such inspection shall be made in privy to said agreement;
the absence of such party. 2. The dispute is not arbitrable or is outside the scope of
the arbitration agreement; or
Briefs and Closing: At the close of the hearings, the 3. The dispute is under the original and exclusive
arbitrators shall specifically inquire of all parties whether they jurisdiction of a court or quasi-judicial body.
have any further proof or witnesses to present; upon the
receipt of a negative reply from all parties, the arbitrators Conduct of Arbitral Proceedings: The parties shall be
shall declare the hearing closed unless the parties have treated with equally and each party shall be given a full
signified an intention to file briefs. Then the hearing shall be opportunity of presenting his/her/its case.
closed by the arbitrations after the receipt of briefs and/or
reply briefs. Place of Arbitration: The parties are free to agree on the
place of arbitration. Failing such agreement, the place of
Definite time limit for the filing of such briefs must be fixed by arbitration shall be in Metro Manila unless the arbitral tribunal,
the arbitrators at the close of the hearing. Briefs may filed by having regard to the circumstances of the case, including the
the parties within 15 days after the close of the oral hearings; convenience of the parties, shall decide on a different place
the reply briefs, if any, shall be filed within 5 days following of arbitration.
such 15-day period.
The arbitral tribunal may, unless otherwise agreed by the
parties, meet at any place it considers appropriate for
Reopening of hearing: The hearing may be reopened by
consultation among its members, for hearing witnesses,
the arbitrators on their own motion or upon the request of any
experts or the parties, or for inspection of goods, other
party, upon good cause, shown at any time before the award
property or documents.
is rendered.
Default of a Party

37
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

Unless otherwise agreed by the parties, if, without showing tribunal.


sufficient causes:
The arbitral tribunal shall issue an order for the termination
1. the claimant fails to communicate his/her/its statement of the arbitration proceedings when:
of claim within the period of time agreed by the parties
or determined by the arbitral tribunal, the arbitral tribunal 1. The claimant withdraws his claim, unless the
shall terminate the proceedings; respondents objects thereto for the purpose of
2. the respondent fails to communicate his/her/its prosecuting his counterclaims in the same proceedings
statement of defense, the arbitral tribunal shall continue of the arbitral tribunal recognizes a legitimate interest on
the proceedings without treating such failure in itself as his part in obtaining a final settlement of the dispute;
an admission of the claimant’s allegations; 2. The parties agree on the termination of the proceedings;
3. any party fails to appear at a hearing or to produce 3. The arbitral tribunal finds that the continuation of the
documentary evidence, the arbitral tribunal may proceedings has for any other reason before
continue the proceedings and make the award based on unnecessary or impossible; or
the evidence before it. 4. The required deposits are not paid in full.

Decision Making by the Arbitral Tribunal: Any decision of Except as otherwise provided in the arbitration agreement,
the arbitral tribunal shall be made, unless otherwise agreed no motion for reconsideration correction and interpretation of
by the parties, by a majority of all its members. award or additional award shall be with the arbitral tribunal.

Unless otherwise agreed upon by the parties, the arbitral The arbitral tribunal, by releasing its final award, loses
tribunal shall render its written award within 30 days after the jurisdiction over the dispute and the parties.
closing of all hearings and/or submission of the parties’
respective briefs or if the oral hearings shall have been Grounds to Vacate an Arbitral Award: The arbitral award
waived, within 30 days after the arbitral tribunal shall have may be questioned, vacated or set aside by the appropriate
declared such proceedings in lieu of hearing closed. This court in accordance with the Special ADR Rules only on the
period may be further extended by mutual consent of the following grounds:
parties.
1. The arbitral award was procured by corruption, fraud or
Settlement: If the parties settle the dispute, the arbitral other undue means;
tribunal shall record the settlement in the form of an arbitral 2. There was evident partially or corruption in the arbitral
award on agreed terms, consent award or award based on tribunal or any of its members;
compromise. 3. The arbitral tribunal was guilty of misconduct or any form
of misbehavior that has materially prejudiced the rights
Form and Contents of Award: The award shall be made in of any party such as refusing to postpone the hearing
writing and shall be signed by the arbitral tribunal (majority). upon sufficient cause shown or to hear evidence
pertinent and material to the controversy;
The award shall state the reasons upon which is based, 4. One or more of the arbitrators was disqualified to act as
unless the parties have agreed that no reasons are to be such under this Chapter and willfully refrained from
given or the award on agreed terms, consent award based disclosing such disqualification ; or
on compromise. 5. The arbitral tribunal exceeded its powers, or so
imperfectly executed them, such that a complete, final
The award shall state its date and the placed of arbitration. and definite award upon the subject matter submitted to
The award shall be deemed to have made at that place. it was not made.

After the award is made, a copy signed by the arbitrators This is an exclusive list. Any other ground raised to question,
shall be delivered to each party. vacate or set aside the arbitral award shall be disregarded
by the court.
The award of the arbitral tribunal need not be acknowledged,
sworn to under oath, or affirmed by the arbitral tribunal Arbitration Agreements
unless so required on writing by the parties.
a. Ormoc Sugarcane Planters vs CA30
Termination of Proceedings: The arbitration proceedings
are terminated by the final award or by an order of the arbitral Except where a compulsory arbitration is provided by statute,
the first step toward the settlement of a difference by
arbitration is the entry by the parties into a valid agreement

30
596 SCRA 630 (2009)
38
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

to arbitrate. An agreement to arbitrate is a contract, the b. It may file a petition for review under Rule 43 with
relation of the parties is contractual, and the law of contract the Court of Appeals on questions of fact, of law, or
controls the rights and liabilities of the parties. In an mixed questions of fact and law; or
agreement for arbitration, the ordinary elements of a valid c. It may file a petition for certiorari under Rule 65 on
contract must appear, including an agreement to arbitrate the ground that the Arbitrator Committee acted
some specific thing, and an agreement to abide by the without or in excess of its jurisdiction or with grave
award, either in express language or by implication. abuse of discretion amounting to lack or excess of
jurisdiction.
b. Cargill Phils. vs San Fernando Regala Trading Inc.31
Since this case involves acts or omissions of a quasi-judicial
A contract is required for arbitration to take place and to be agency, the petition should be filed in and cognizable only by
binding. Submission to arbitration is a contract and a clause the Court of Appeals.
in a contract providing that all matters in dispute between the
parties shall be referred to arbitration is a contract. The In this instance, petitioner did not avail of any of the
provision to submit to arbitration any dispute arising abovementioned remedies available. Instead it filed a
therefrom and the relationship of the parties is part of the petition for review with the RTC where Civil Case No. 92-145
contract and is itself a contract. is pending pursuant to Section 13 of the PCHC Rules to
sustain its action. Clearly, it erred in the procedure it chose
An arbitration agreement which forms part of the main for judicial review of the arbitral award.
contract shall not be regarded as invalid or non-existent just
because the main contract is invalid or did not come into Jurisdiction over the subject matter is conferred by law and
existence, since the arbitration agreement shall be treated not by the consent or acquiescence of any or all of the parties
as a separate agreement independent of the main contract. or by erroneous belief of the court that it exists.
A contrary ruling would suggest that a party's mere
repudiation of the main contract is sufficient to avoid In the instant case, petitioner and respondent have agreed
arbitration and that is exactly the situation that the that the PCHC Rules would govern in case of
separability doctrine sought to avoid. Thus, we find that even controversy. However, since the PCHC Rules came about
the party who has repudiated the main contract is not only as a result of an agreement between and among
prevented from enforcing its arbitration clause. member banks of PCHC and not by law, it cannot confer
jurisdiction to the RTC. Thus, the portion of the PCHC Rules
c. Insular Savings Bank vs FEBATC32 granting jurisdiction to the RTC to review arbitral awards,
only on questions of law, cannot be given effect.
The RTC dismissed the Petition of Insular for lack of
jurisdiction on the ground that it should have been docketed Consequently, the proper recourse of petitioner from the
as a separate case. denial of its motion for reconsideration by the Arbitration
Committee is to file either a motion to vacate the arbitral
The SC ruled that the RTC erred in doing so. As provided in award with the RTC, a petition for review with the Court of
the PCHC Rules, the findings of facts of the decision or Appeals under Rule 43 or a petition for certiorari under Rule
award rendered by the Arbitration Committee shall be final 65.
and conclusive upon all the parties in said arbitration
dispute. Under Article 2044 of the New Civil Code, the The Supreme Court encourages alternative dispute
validity of any stipulation on the finality of the arbitrators’ resolution methods or ADRs – like arbitration, mediation,
award or decision is recognized. However, where the negotiation and conciliation. By enabling parties to resolve
conditions described in Articles 2038, 2039 and 2040 their disputes amicably, they provide solutions that are less
applicable to both compromises and arbitrations are time-consuming, less tedious, less confrontational, and more
obtaining, the arbitrators’ award may be annulled or productive of goodwill and lasting relationships. It must be
rescinded. Consequently, the decision of the Arbitration borne in mind that arbitration proceedings are mainly
Committee is subject to judicial review. governed by the Arbitration Law and suppletorily by the
Rules of Court.
The petitioner had several judicial remedies available at its
disposal after the Arbitration Committee denied its Motion for Doctrine of Separability
Reconsideration:
Also known as the doctrine of severability, it states that an
a. It may petition the proper RTC to issue an order arbitration agreement is independent of the main contract
vacating the award, invoking the grounds provided even if it is contained in an arbitration clause. Such is to be
for under Section 24 of the Arbitration Law. treated as a separate agreement. Even if the validity of the

31 32
641 SCRA 21 (2011) 492 SCRA 146 (2006)
39
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

main contract is challenged, the arbitration agreement or This brings us back to G.R. No. 161957 (the 2005 case). The
clause remains valid and enforceable. adjudication of the petition in G.R. No. 167994 effectively
modifies part of the Decision dated 28 February 2005 in G.R.
a. Gonzales vs Climax Mining (2005) 33 No. 161957. Hence, we now hold that the validity of the
contract containing the agreement to submit to arbitration
Arbitration before the Panel of Arbitrators is proper only does not affect the applicability of the arbitration clause
when there is a disagreement between the parties as to itself. A contrary ruling would suggest that a party’s mere
some provisions of the contract between them, which needs repudiation of the main contract is sufficient to avoid
the interpretation and the application of that particular arbitration. That is exactly the situation that the separability
knowledge and expertise possessed by members of that doctrine, as well as jurisprudence applying it, seeks to avoid.
Panel. It is not proper when one of the parties repudiates the
existence or validity of such contract or agreement on the We add that when it was declared in G.R. No. 161957 that
ground of fraud or oppression as in this case. The validity of the case should not be brought for arbitration, it should be
the contract cannot be subject of arbitration proceedings. clarified that the case referred to is the case actually filed by
Allegations of fraud and duress in the execution of a contract Gonzales before the DENR Panel of Arbitrators, which was
are matters within the jurisdiction of the ordinary courts of for the nullification of the main contract on the ground of
law. These questions are legal in nature and require the fraud, as it had already been determined that the case should
application and interpretation of laws and jurisprudence have been brought before the regular courts involving as it
which is necessarily a judicial function. did judicial issues.
We agree that the case should not be brought under the
ambit of the Arbitration Law, but for a different reason. The Due Process in Arbitral Proceedings
question of validity of the contract containing the agreement
Equitable PCI Banking Corp vs RCBC35
to submit to arbitration will affect the applicability of the
arbitration clause itself. A party cannot rely on the contract The principles of administrative due process apply to arbitral
and claim rights or obligations under it and at the same time proceedings, that is, the parties must be given ample
impugn its existence or validity. Indeed, litigants are enjoined opportunity to be heard.
from taking inconsistent positions. As previously discussed,
the complaint should have been filed before the regular Issue: Whether the trial court acted contrary to law and
courts as it involved issues which are judicial in nature. judicial authority in refusing to vacate and in confirming the
b. Gonzales vs Climax Mining (2007) 34 arbitral award, notwithstanding that the arbitrators had
plainly and admittedly failed to accord petitioners’ due
The doctrine of separability, or severability as other writers process by denying them a hearing on the basic factual
call it, enunciates that an arbitration agreement is matter upon which their liability is predicated.
independent of the main contract. The arbitration agreement
is to be treated as a separate agreement and the arbitration In this case, the SC ruled that the petitioners were not denied
agreement does not automatically terminate when the due process.
contract of which it is part comes to an end.
SC: Petitioners impute on RCBC the act of creating
The separability of the arbitration agreement is especially summaries of the accounts of Bankard which "in turn were
significant to the determination of whether the invalidity of the used by its experts to conclude that Bankard improperly
main contract also nullifies the arbitration clause. recorded its receivables and committed material deviations
from GAAP requirements."
Indeed, the doctrine denotes that the invalidity of the main
contract, also referred to as the container contract, Later, petitioners would assert that "the arbitrators’ partial
does not affect the validity of the arbitration award admitted and used the Summaries as evidence, and
agreement. Irrespective of the fact that the main contract is held on the basis of the ‘information’ contained in them that
invalid, the arbitration clause or agreement still remains valid petitioners were in breach of their warranty in GAAP
and enforceable. compliance."

The separability of the arbitration clause is confirmed in Art.


To petitioners, the ICC-ICA’s use of such summaries but
16(1) of the UNCITRAL Model Law and Art. 21(2) of the
without presenting the source documents violates their right
UNCITRAL Arbitration Rules. xxx
to due process. Pressing the point, petitioners had moved,
but to no avail, for the exclusion of the said summaries.

33 35
452 SCRA 607 (2005) 574 SCRA 858 (2008)
34
512 SCRA 148 (2007)

40
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

Petitioners allege that they had reserved the right to cross- performance of a contract.
examine the witnesses of RCBC who testified on the
summaries, pending the resolution of their motion to exclude. In the event that the parties to an arbitration have, during the
But, according to them, they were effectively denied the right course of such arbitration, settled their dispute, they may
to cross-examine RCBC’s witnesses when the ICC-ICA request of the arbitrators that such settlement be embodied
admitted the summaries of RCBC as evidence. in an award which shall be signed by the arbitrators. No
arbitrator shall act as a mediator in any proceeding in which
Petitioners’ position is bereft of merit. he is acting as arbitrator; and all negotiations towards
settlement of the dispute must take place without the
Anent the use but non-presentation of the source documents presence of the arbitrators.
as the jumping board for a claim of denial of due process,
petitioners cite Compania Maritima v. Allied Free Worker’s The arbitrators shall have the power to decide only those
Union. It may be stated, however, that such case is not on matters which have been submitted to them. The terms of
all fours with the instant case and, therefore, cannot be the award shall be confined to such disputes.
applied here considering that it does not involve an
administrative body exercising quasi-judicial function but The arbitrators shall have the power to assess in their award
rather the regular court. the expenses of any party against another party, when such
assessment shall be deemed necessary.
In a catena of cases, we have ruled that "the essence of due
Section 21. Fees of arbitration. - The fees of the arbitrators
process is the opportunity to be heard. What the law prohibits
shall be fifty pesos per day unless the parties agree
is not the absence of previous notice but the absolute
otherwise in writing prior to the arbitration.
absence thereof and the lack of opportunity to be heard."31
Section 22. Arbitration deemed a special proceeding. -
We also explained in Lastimoso v. Asayo that "due process Arbitration under a contract or submission shall be deemed
in an administrative context does not require trial type a special proceeding, of which the court specified in the
proceedings similar to those in courts of justice. Where an contract or submission, or if none be specified, the Court of
opportunity to be heard either through oral arguments or First Instance for the province or city in which one of the
through pleadings is accorded, there is no denial of parties resides or is doing business, or in which the
procedural due process." arbitration was held, shall have jurisdiction. Any application
to the court, or a judge thereof, hereunder shall be made in
Were petitioners afforded the opportunity to refute the manner provided for the making and hearing of motions,
summaries and pieces of evidence submitted by RCBC except as otherwise herein expressly provided.
which became the bases of the experts’ opinion? The
answer is in the affirmative. Section 23. Confirmation of award. - At any time within one
month after the award is made, any party to the controversy
Judicial Review and Court Intervention which was arbitrated may apply to the court having
jurisdiction, as provided in section twenty-eight, for an order
Sec. 19-31, RA 876 confirming the award; and thereupon the court must grant
such order unless the award is vacated, modified or
Section 19. Time for rendering award.- Unless the parties corrected, as prescribed herein. Notice of such motion must
shall have stipulated by written agreement the time within be served upon the adverse party or his attorney as
which the arbitrators must render their award, the written prescribed by law for the service of such notice upon an
award of the arbitrators shall be rendered within thirty days attorney in action in the same court.
after the closing of the hearings or if the oral hearings shall
have been waived, within thirty days after the arbitrators shall Section 24. Grounds for vacating award. - In any one of
have declared such proceedings in lieu of hearing closed. the following cases, the court must make an order vacating
This period may be extended by mutual consent of the the award upon the petition of any party to the controversy
parties. when such party proves affirmatively that in the arbitration
proceedings:
Section 20. Form and contents of award.- The award must
be made in writing and signed and acknowledged by a (a) The award was procured by corruption, fraud, or
majority of the arbitrators, if more than one; and by the sole other undue means; or
arbitrator, if there is only one. Each party shall be furnished (b) That there was evident partiality or corruption in the
with a copy of the award. The arbitrators in their award may arbitrators or any of them; or
grant any remedy or relief which they deem just and (c) That the arbitrators were guilty of misconduct in
equitable and within the scope of the agreement of the refusing to postpone the hearing upon sufficient cause
parties, which shall include, but not be limited to, the specific shown, or in refusing to hear evidence pertinent and
41
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

material to the controversy; that one or more of the Section 28. Papers to accompany motion to confirm,
arbitrators was disqualified to act as such under section modify, correct, or vacate award. - The party moving for
nine hereof, and wilfully refrained from disclosing such an order confirming, modifying, correcting, or vacating an
disqualifications or of any other misbehavior by which the award, shall at the time that such motion is filed with the court
rights of any party have been materially prejudiced; or for the entry of judgment thereon also file the following
(d) That the arbitrators exceeded their powers, or so papers with the Clerk of Court;
imperfectly executed them, that a mutual, final and definite
award upon the subject matter submitted to them was not (a) The submission, or contract to arbitrate; the
made appointment of the arbitrator or arbitrators; and each
Where an award is vacated, the court, in its discretion, may written extension of the time, if any, within which to make
direct a new hearing either before the same arbitrators or the award.
before a new arbitrator or arbitrators to be chosen in the (b) A verified of the award.
manner provided in the submission or contract for the (c) Each notice, affidavit, or other paper used upon the
selection of the original arbitrator or arbitrators, and any application to confirm, modify, correct or vacate such
provision limiting the time in which the arbitrators may make award, and a copy of each of the court upon such
a decision shall be deemed applicable to the new arbitration application.
and to commence from the date of the court's order. The judgment shall be docketed as if it were rendered in an
action.
Where the court vacates an award, costs, not exceeding fifty
pesos and disbursements may be awarded to the prevailing The judgment so entered shall have the same force and
party and the payment thereof may be enforced in like effect in all respects, as, and be subject to all the provisions
manner as the payment of costs upon the motion in an action. relating to, a judgment in an action; and it may be enforced
as if it had been rendered in the court in which it is entered.
Section 25. Grounds for modifying or correcting award.
- In any one of the following cases, the court must make an Section 29. Appeals. - An appeal may be taken from an
order modifying or correcting the award, upon the application order made in a proceeding under this Act, or from a
of any party to the controversy which was arbitrated: judgment entered upon an award through certiorari
proceedings, but such appeals shall be limited to questions
(a) Where there was an evident miscalculation of of law. The proceedings upon such an appeal, including the
figures, or an evident mistake in the description of any judgment thereon shall be governed by the Rules of Court in
person, thing or property referred to in the award; or so far as they are applicable.
(b) Where the arbitrators have awarded upon a matter
not submitted to them, not affecting the merits of the Section 30. Death of party. - Where a party dies after
decision upon the matter submitted; or making a submission or a contract to arbitrate as prescribed
(c) Where the award is imperfect in a matter of form not in this Act, the proceedings may be begun or continued upon
affecting the merits of the controversy, and if it had been the application of, or notice to, his executor or administrator,
a commissioner's report, the defect could have been or temporary administrator of his estate. In any such case,
amended or disregarded by the court. the court may issue an order extending the time within which
The order may modify and correct the award so as to effect notice of a motion to confirm, vacate, modify or correct an
the intent thereof and promote justice between the parties. award must be served. Upon confirming an award, where a
party has died since it was filed or delivered, the court must
Section 26. Motion to vacate, modify or correct award: enter judgment in the name of the original party; and the
when made. - Notice of a motion to vacate, modify or correct proceedings thereupon are the same as where a party dies
the award must be served upon the adverse party or his after a verdict.
counsel within thirty days after award is filed or delivered, as
prescribed by law for the service upon an attorney in an Section 31. Repealing clause. - The provisions of chapters
action. one and two, Title XIV, of the Civil Code shall remain in force.
All other laws and parts of laws inconsistent with this Act are
Section 27. Judgment. - Upon the granting of an order hereby repealed. If any provision of this Act shall be held
confirming, modifying or correcting an award, judgment may invalid the remainder that shall not be affected thereby.
be entered in conformity therewith in the court wherein said
application was filed. Costs of the application and the Cases36
proceedings subsequent thereto may be awarded by the
court in its discretion. If awarded, the amount thereof must ABS-CBN v. World Interactive Network Systems (WINS)
be included in the judgment.

36
Digests by Group 6 – Rica Dino, et al.
42
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

ABS-CBN entered into a licensing agreement with World Quezon City.


Interactive Network Systems (WINS) granting WINS the
exclusive license to distribute and sublicense the distribution The CA dismissed ABS-CBNs petition for lack of jurisdiction.
of the television service known as The Filipino Channel
(TFC) in Japan. The CA ruled that TOR itself provided that the arbitrator's
decision shall be final and unappealable and that no motion
However, dispute arose when WINS allegedly aired nine for reconsideration shall be filed, then the petition for review
episodes of WINS WEEKLY, a weekly 35-minute community must fail.
news program for Filipinos in Japan, into the TFC
programming from March to May 2002 without the It also ruled that it is the RTC which has jurisdiction over
knowledge and permission of ABS-CBN. questions relating to arbitration. It held that the only instance
it can exercise jurisdiction over an arbitral award is through
Thereafter, WINS filed an arbitration suit pursuant to the an appeal from the trial court's decision confirming, vacating
arbitration clause of its agreement with ABS-CBN both or modifying the arbitral award.
parties appointed Professor Alfredo F. Tadiar to act as sole
arbitrator. The following issues were raised : ISSUE: WON an aggrieved party in a voluntary arbitration
dispute may avail of, directly in the CA, a petition for review
• Was the broadcast of WINS WEEKLY by the under Rule 43 or a petition for certiorari under Rule 65 of the
claimant duly authorized by ABS-CBN Rules of Court, instead of filing a petition to vacate the award
• Did such broadcast constitute a material breach of in the RTC when the grounds invoked are other than those
the agreement that is a ground for termination of the for a petition to vacate an arbitral award enumerated under
agreement in accordance with Section 13 (a) RA 876.
thereof?
• If so, was the breach seasonably cured under the RULING: YES. A petition for review under Rule 43 or a
same contractual provision of Section 13 (a)? petition for certiorari under Rule 65 may be availed of in the
• Which party is entitled to the payment of damages CA. Which one would depend on the grounds relied upon by
they claim and to the other reliefs prayed for? petitioner.

The arbitrator ruled in favor of WINS. Furthermore in case, the court the judicial remedies an
aggrieved party to an arbitral award may undertake:
He held that petitioner gave its approval to respondent for
the airing of WINS WEEKLY as shown by a series of written (1) a petition in the proper RTC to issue an order to vacate
exchanges between the parties. the award on the grounds provided for in Section 24 of RA
876;
He also ruled that, had there really been a material breach (2) a petition for review in the CA under Rule 43 of the
of the agreement, petitioner should have terminated the Rules of Court on questions of fact, of law, or mixed
same instead of sending a mere notice to terminate said questions of fact and law; and
agreement. (3) a petition for certiorari under Rule 65 of the Rules of
Court should the arbitrator have acted without or in excess
The arbitrator found that petitioner threatened to terminate of his jurisdiction or with grave abuse of discretion
the agreement due to its desire to compel respondent to re- amounting to lack or excess of jurisdiction.
negotiate the terms thereof for higher fees.

He further stated that even if respondent committed a breach Nevertheless, although ABS-CBN’s position on the judicial
of the agreement, the same was seasonably cured. He then remedies available to it was correct, the SC sustained the
allowed respondent to recover temperate damages, dismissal the petitioner because the petitioner availed of the
attorney's fees and one-half of the amount it paid as remedies in the alternative.
arbitrator's fee.
ABS-CBN cleverly crafted its assignment of errors in such a
ABS-CBN filed in the CA a petition for review under Rule 43 way as to straddle both judicial remedies, that is, by alleging
of the Rules of Court or, in the alternative, a petition for serious errors of fact and law (in which case a petition for
certiorari under Rule 65 of the same Rules, with application review under Rule 43 would be proper) and grave abuse of
for temporary restraining order and writ of preliminary discretion (because of which a petition for certiorari under
injunction. Rule 65 would be permissible).

WINS, on the other hand, filed a petition for confirmation of BENGUET CORPORATION v. DENR MINES
arbitral award before the Regional Trial Court (RTC) of ADJUDICATION BOARD

43
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

Benguet Corporation entered into a Royalty Agreement with amicably settled by the parties, thus shall, upon notice of one
Option to Purchase (RAWOP) with J.G. Realty who is the party to the other, be referred to a Board of Arbitrators
owner of four mining claims located in a barangay in consisting of three (3) members.
Camarines Norte.
Thus, POA should have first referred the case to voluntary
Under the agreement, Benguet was to determine whether arbitration before taking cognizance of the case.
the mining claims were worth developing with reasonable
probability of profitable production, furnish J.G. Realty with JG Realty: It argued that RA 7942 or the Philippine Mining
the results of the studies and if the mining claims were placed Act of 1995 is a special law which should prevail over the
in commercial production by Benguet, J.G. Realty should be stipulations of the parties and over a general law, such as
entitled to a royalty. RA 876. It also argued that the POA cannot be considered
as a court under the contemplation of RA 876 and that
On August 9, 1989, Benguet Corp, issued a letter informing jurisprudence saying that there must be prior resort to
J.G. Realty of its intention to develop the mining claims. arbitration before filing a case with the courts is inapplicable
to the instant case as the POA is itself already engaged in
However, on February 9, 1999, J.G. Realty sent a letter to arbitration.
the President of Benguet Corp informing the latter that it was
terminating the RAWOP. Among the grounds raised was RULING: The court sided with Benguet Corp.
Benguet Corp’s failed to perform the obligations set forth in
the RAWOP and non-payment of the royalties thereon as Yes, the matter should have been submitted to arbitration
provided in the RAWOP before the POA took cognizance of the case.

In response, Benguets Corp, wrote J.G. Realty a letter dated Availment of voluntary arbitration before resort is made to the
March 8, 1999, therein alleging that Benguet complied with courts or quasi-judicial agencies of the government is a valid
its obligations under the RAWOP by investing PhP 42.4 contractual stipulation that must be adhered to by the parties.
million to rehabilitate the mines
In the event a case that should properly be the subject of
Benguet then argued that the royalties due to J.G. Realty voluntary arbitration is erroneously filed with the courts or
were in fact in its office and ready to be picked up at any time. quasi-judicial agencies, on motion of the defendant, the court
It appeared that, previously, the practice by J.G. Realty was or quasi-judicial agency shall determine whether such
to pick-up checks from Benguet representing such royalties. contractual provision for arbitration is sufficient and effective.
However, starting August 1994, J.G. Realty allegedly If in affirmative, the court or quasi-judicial agency shall then
refused to collect such checks from Benguet. Thus, Benguet order the enforcement of said provision
posited that there was no valid ground for the termination of
the RAWOP. It also reminded J.G. Realty that it should J.G. Realtys contention, that prior resort to arbitration is
submit the disagreement to arbitration rather than unilaterally ineffective in the instant case because the POAs mandate is
terminating the RAWOP. to arbitrate disputes involving mineral agreements, is
misplaced.
On June 7, 2000, J.G. Realty filed a Petition for Declaration
of Nullity/Cancellation of the RAWOP with DENR – Mines A distinction must be made between voluntary and
Adjudication Board of Legaspi City. compulsory arbitration.

The Panel of Arbitrators of the MAB declared the Compulsory arbitration has been defined both as the process
cancellation of the Royalty Agreement with Option to of settlement of labor disputes by a government
Purchase (RAWOP) between Benguet Corporation and J.G. agency which has the authority to investigate and to make
Realty. an award while

Benguet Corp appealed the decision with Mines Adjudication A voluntary arbitration is not part of the governmental unit or
Board but was denied thus the corporation filed a petition labor departments personnel, a voluntary arbitrator renders
with the Supreme Court. arbitration services provided for under labor laws.

ISSUE: Should the controversy have first been submitted to There is a clear distinction between compulsory and
arbitration before the POA took cognizance of the case? voluntary arbitration. The arbitration provided by the POA is
compulsory, while the nature of the arbitration provision in
CONTENTIONS the RAWOP is voluntary, not involving any government
agency.
BENGUET CORP: There is a stipulation in the RAWOP that
any disputes, differences or disagreements that cannot be In sum, on the issue of whether POA should have referred
44
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

the case to voluntary arbitration, we find that, indeed, POA award, the court shall send notice to the parties at their
has no jurisdiction over the dispute which is governed by RA address of record in the arbitration, or if any party cannot be
876, the arbitration law. served notice at such address, at such party’s last known
address. The notice shall be sent in at least fifteen (15) days
(Also read Parlade pp. 502-593) before the date set for the initial hearing of the application.

Recognition & Enforcement of Domestic Awards Article 5.41. Legal Representation in Domestic
Arbitration. (a) In domestic arbitration conducted in the
Rule 6, Arts. 5.36-5.46, IRR Philippines, a party may be represented by any person of
his/her/its choice: Provided, that such representative, unless
Article 5.36. Confirmation of Award. The party moving for admitted to the practice of law in the Philippines, shall not be
an order confirming, modifying, correcting, or vacating an authorized to appear as counsel in any Philippine Court, or
award, shall, at the time that such motion is filled with the any other quasi-judicial body whether or such appearance is
court for the entry of judgment thereon, also file the original in relation to the arbitration in which he/she appears.
or verified copy of the award, the arbitration or settlement
agreement, and such papers as may be required by the (b) No arbitrator shall act as mediator in any proceeding in
Special ADR Rules. which he/she is acting as arbitrator and all negotiations
towards settlement of the dispute must take without the
Article 5.37. Judgment. Upon the grant of an order presence of the arbitrators.
confirming, modifying or correcting an award, judgment may
be entered in conformity therewith in the court where said Article 5.42. Confidentially of Arbitration Proceedings.
application is filed. Costs of the application and the The arbitration proceedings, including the records, evidence
proceedings subsequent thereto may be awarded by the and the arbitral award and other confidential information,
court In its discretion. If awarded, the amount thereof must shall be considered privileged and confidential and shall not
be included in the judgment. Judgment will be enforced like be published except –
court judgments.
(1) with consent of the parties; or
Article 5.38. Appeal. A decision of the court confirming,
vacating, setting aside, modifying or correcting an arbitral (2) for the limited purpose of disclosing to the court relevant
award may be appealed to the Court of Appeals in documents in cases where resort to the court is allowed
accordance with Special ADR Rules. herein:

The losing party who appeals from the judgment of the Court Provided, however, that the court in which the action or the
confirming an arbitral award shall be required by the Court of appeal is pending may issue a protective order to prevent or
Appeals to post a counter-bond executed in favor of the prohibit disclosure of documents or information containing
prevailing party equal to the amount of the award in secret processes, developments, research and other
accordance with the Special ADR Rules. information where it is shown that the applicant shall be
materially prejudiced by an authorized disclosure thereof.
Article 5.39. Venue and Jurisdiction. Proceedings for
recognition and enforcement of an arbitration agreement or Article 5.43. Death of a Party. Where a party dies after
for vacation or setting aside of an arbitral award, and any making a submission or a contact to arbitrate as prescribed
application with a court for arbitration assistance and in these Rules, the proceeding may be begun or continued
supervision, except appeal, shall be deemed as special upon the application of, or notice to, his/her executor or
proceedings and shall be filed with the court administrator, or to temporary administrator of his/her estate.
In any such case, the court may issue an order extending the
(a) where the arbitration proceedings are conducted; time within which notice of a motion to recognize or vacate
an award must be served. Upon recognizing an award,
(b) where the asset to be attached or levied upon, or the act where a party has died since it was filed or delivered, the
to be enjoined is located; court must enter judgment in the name of the original party;
and the proceedings thereupon are the same as where a
(c) where any of the parties to the dispute resides or has its party dies after a verdict.
place of business; or
Article 5.44. Multi-Party Arbitration. (a)When a single
(d) in the National Capital Judicial Region at the option of the arbitration involves more than two parties, these Rules, to
applicant. the extent possible, shall be used subject to such
modifications consistent with Articles 5.17 (Equal Treatment
Article 5.40. Notice of Proceedings to Parties. In a special of Parties) and 5.18 (Determination of Rules of Procedure)
proceeding for recognition and enforcement of an arbitral as the arbitral tribunal shall deem appropriate to address
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Notes based on Judge J. Humiding’s Outline UC Law

possible complexities of a multi-party arbitration. (b) When a (ii) The travel and other expenses incurred by the arbitrators;
claimant includes persons who are not parties to or otherwise
bound by the arbitration agreement , directly or by reference, (iii) The costs of expert advice and of other assistance
between him/her and the respondent as additional claimants required by the arbitral tribunal, such as site inspection and
or the additional respondents unless not later than the date expenses for the recording and transcription of the arbitration
communicating his/her answer to the request for arbitration, proceedings;
either by motion or by a special defense in his answer, he
objects, on jurisdictional grounds, to the inclusion of such (iv) The travel and other expenses of witnesses to the extent
additional respondents. The additional respondents shall be such expenses are provided by the arbitral tribunal;
deemed to have consented to their inclusion in the arbitration
unless, not later than the date of communicating their answer (v) The costs for legal representation and assistance of the
to the request for arbitration, wither by motion or a special successful party if such costs were claimed during the
defense in their answer, they object, on jurisdictional arbitral proceedings, and only to the extent that the arbitral
grounds, to their inclusion. tribunal determines that the amount of such costs is
reasonable;
Article 5.45. Consolidation of Proceedings and
Concurrent Hearings. The parties may agree that- (vi) Any fees and expenses of the appointing authority.

(a) the arbitration proceedings shall be consolidated with (d) The fees of the arbitral tribunal shall be reasonable in
other arbitration proceedings; or amount, taking into account the amount in dispute, the
complexity of the subject matter, the time spent by the
(b) that concurrent hearings shall be held, on such terms as arbitrators and any other relevant circumstances of the case.
may be agreed.
If an appointing authority has been agreed upon by the
Unless the parties agree to confer such power on the arbitral parties and if such appointing authority has issued a
tribunal, the tribunal has no power to order consolidation of schedule of fees for arbitrators in domestic cases which it
arbitration proceedings or concurrent hearings. administers, the arbitral tribunal, in fixing its fees shall take
that schedule of fees into account to the extent that it
Article 5.46. Fees and Costs. (a) The fees of the arbitrators considers appropriate in the circumstances of the case.
shall be agreed upon by the parties and the arbitrator/s in
writing prior to the arbitration. If such appointing authority has not issued a schedule of fees
for arbitrators in international cases, any party may, at any
In default of agreement of the parties as to the amount and time request the appointing authority to furnish a statement
manner of payment of arbitrator’s fees, the arbitrator’s fees setting forth the basis for establishing fees which is
shall be determined in accordance with the applicable customarily followed in international cases in which the
internal rules of the regular arbitration institution under authority appoints arbitrators. If the appointing authority
whose rules he arbitration is conducted; or in ad hoc consents to provide such a statement, the arbitral tribunal, in
arbitration, the Schedule of Fees approved by the IBP, If any, fixing its fees shall take such information into account to the
or in default thereof, the Schedule of Fees that may be extent that it considers appropriate in the circumstances of
approved by the OADR. the case.

(b) In addition to arbitrator’s fees, the parties shall be In cases referred to in paragraph (d) of this Article, when a
responsible for the payment of the administrative fees of an party so requests and the appointing authority consents to
arbitration institution administering an arbitration and cost of perform the function, the arbitral tribunal shall fix its fees only
arbitration. The latter shall include, as appropriate, the fees after consultation with the appointing authority which may
of an expert appointed by the arbitral tribunal, the expenses make any comment it deems appropriate to the arbitral
for conducting a site inspection, the use of a room where tribunal concerning the fees.
arbitration proceedings shall be or have been conducted, the
expenses for the recording and transcription of the arbitration (e) Except as provided in the next paragraph, the costs of
proceedings. arbitration shall, in principle, be borne by the unsuccessful
party. However, the arbitral tribunal may apportion each of
(c) The arbitral tribunal shall fix the costs of arbitration in its such costs between the parties if it determines that
award. The term "costs" include only: apportionment is reasonable, taking into account the
circumstances of the case.
(i) The fees of the arbitral tribunal to be stated separately as
to each arbitrator and to be fixed by the arbitral tribunal itself With respect to the costs of legal representation and
in accordance with this Article; assistance referred to in paragraph (c) (iii) of this Article, the
arbitral tribunal, taking into account the circumstances of the
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Notes based on Judge J. Humiding’s Outline UC Law

case, shall be free to determine which party shall bear such Management Pacific Corporation (TEAMPC) – Lessee
costs or may apportion such costs between the parties if it
determines that appointment is reasonable. The Story

When the arbitral tribunal issues an order for the termination 1978: Lease Agreement between FEPC and Signetics Corp,
of the arbitral proceedings or makes an award on agreed which was good for 25 years (until May 2003)
terms, it shall fix the costs of arbitration referred to in
paragraph (a) of this Article in the context of that order or 1986: TEAMPC bought Signetics
award.
1987: FEPC filed an unlawful detainer case vs TEAMPC. But
(e) Except as otherwise agreed by the parties, no additional they entered into a MOA in 1988. TEAMPC promised to pay
fees may be charged by the arbitral tribunal for interpretation FEPC Php14.7M of unpaid rent
or correction or completion of its award under these Rules.
1988: Lease Agreement between FEPC and TEAMPC
(f) The arbitral tribunal, on its establishment, may request
each party to deposit an equal amount as an advance for the • 15 years (until June 2003); renewable
costs referred to in paragraphs (i), (ii) and (iii) of paragraph • This contract contained an AA.
(c) of this Article. • It also authorized TEAMPC to sublease the property,
which it did, after notice to FEPC, in 1996, to Capitol
During the course of the arbitral proceedings, the arbitral Publishing.
tribunal may request supplementary deposits from the
parties. 2003: TEAMPC said they won't renew lease anymore. But
Capitol only vacated the premises in March 2005 entered
If an appointing authority has been agreed upon by the into a MOA in 1988.
parties, and when a party so requests and the appointing
authority consents to perform the function, the arbitral RTC (2004)
tribunal shall fix the amounts of any deposits or
supplementary deposits only after consultation with the Fruehauf instituted a special proceeding "Submission of an
appointing authority which may make any comments to the Existing Controversy for Arbitration”, alleging that:
arbitral tribunal which it deems appropriate concerning the
amount of such deposits and supplementary deposits. a. when the lease expired, property suffered from
damage that required extensive renovation;
If the required deposits are not paid in full within thirty (30) b. TEAMPC failed to turn over the premises and
days after receipt of the request, the arbitral tribunal shall so pay rent; and
inform the parties in order that one of them may make the c. TEAMPC did not restore the property to its
required payment within such a period or reasonable original condition as required in the contract.
extension thereof as may be determined by the arbitral
tribunal. If such payment is not made, the arbitral tribunal The RTC granted the petition and directed the parties to
may order the termination of the arbitral proceedings. comply with the arbitration clause of the contract.
After the award has been made, the arbitral tribunal shall Arbitral Tribunal was formed: 2 retired CA justices, one
render an accounting to the parties of the deposits received lawyer.
and return any unexpended balance to the parties
Arbitration Proceeding (2008): Issues
Case: Freuhauf vs TEAMPC37
1. Did TEAMPC comply with its obligation to return the
(On the extent of permissible judicial review over leased premises to FEPC in 2003? In what
arbitral awards) condition?
2. Is TEAMPC liable for payment of rentals after 2003?
The Parties How much and for what period?
3. Is TEAM liable real estate taxes, insurance, and
Petitioner: Fruehauf Electronics Philippines Corporation other expenses after 2003?
(FEPC) – Lessor 4. Who is liable for payment of damages and attorney's
fees and how much?
Respondent: Technology Electronics Assembly and 5. Who is liable for the expenses of arbitration,

37
GR No. 204197, Nov. 23, 2016

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

including arbitration fees? before the SC.


6. Did TEAMPC have the obligation to return the
premises to FEPC as a "complete, rentable, and fully Ultimately, the SC granted the petition, ruling in favor of
facilitized electronic plant”? FEPC. The CA's Decision was set aside and the RTC's
Decision of confirmation was reinstated.
The arbitral tribunal awarded Fruehauf:
SC: The CA breached the bounds of its jurisdiction when it
• Php 8.2 million as unpaid rent from June 9, 2003 reviewed the substance of the arbitral award outside of the
until March 5, 2005; Rationale: Despite the permitted grounds under the Arbitration Law.
expiration of the lease in 2003, TEAMPC remained
liable for rentals because it failed to return the Main Takeaways
property to FEPC.
• Php 46.8 million as damages. Rationale: TEAMPC A. Is an arbitral tribunal a quasi-judicial body?
was negligent with the maintenance of the B. What are the remedies or the modes of appeal
equipment in the premises, thus, liable for repairs. against an unfavorable arbitral award?
C. What are the available remedies from an RTC
RTC (2009) decision confirming, vacating, modifying, or
correcting an arbitral award?
FEPC filed a petition to partially vacate or modify the arbitral
award. Quick review: Important concepts in Arbitration

Ground: The tribunal failed to properly appreciate the facts Arbitration is consensual and contractual in character. It is a
and the terms of the lease contract. purely private mode of dispute resolution. The proceedings,
testimonies, and other records are confidential.
Decision: RTC found insufficient legal grounds under
Sections 24 and 25 of the Arbitration Law to modify or vacate This character of arbitration also gives the parties substantial
the award. It denied the petition and confirmed the arbitral autonomy over the proceedings. They may stipulate any
award. procedure and choose their arbitrators/tribunal. They can
tailor-fit the composition of the tribunal to the nature of the
TEAM filed a Notice of Appeal. RTC refused to give due case. (e.g. Chung Fu case, where the arbitrator appointed
course an ordinary appeal under Rule 41 is not the proper was an engineer on account of the nature of the case, which
mode of appeal against an order confirming an arbitral award. involved a construction dispute)
(Section 29)
And so special dispute can be resolved by experts on the
Appeal to CA subject.

After their MR was denied by the RTC, TEAMPC filed a But because arbitrators need not be lawyers, they cannot be
petition for certiorari before the CA arguing that the RTC expected to have the same level of legal mastery as that of
gravely abused its discretion in: (1) denying due course to its a judge.
notice of appeal; and (2) denying the motion to partially
vacate and/or modify the arbitral award. Hence, there is greater risk that an arbitrator may misapply
law or misappreciate facts, which could then lead to an
The CA initially denied the petition. erroneous decision.

But upon a MR in 2012, the CA amended its Decision and This risk of error is made larger by the absence of an
ruled in favor of TEAMPC. effective appeal mechanism.

It also revisited the merits of the arbitral award and found Generally, the errors of an arbitral tribunal cannot be
several errors in law and in fact, holding that TEAMPC was corrected by the judiciary.
not obliged to pay rent because it was Capitol that stayed
and that FEPC was not entitled to repairs on the buildings. As an ADR, arbitration is meant to end, not begin litigation.

Arbitral award—reversed and set aside. Hence, an arbitral award is generally final and binding
between the parties who, in the first place, agreed to arbitrate
From CA to SC their future disputes.

Hence, FEPC filed a petition for certiorari under Rule 65 But is this absolute? No. See (B).

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

A. Is an arbitral tribunal a quasi-judicial body? The RTC can also set aside an arbitral award based on the
6 grounds under Article 34 of the UNCITRAL Model Law
No. A quasi-judicial body or agency is a creature of law. An (as restated in Chapter 4 of the IRR of the ADR Act).
arbitral tribunal is a creature of contract.
Note: These grounds also don't pertain to the correctness of
(Significance: Quasi-judicial bodies are co-equal with the the award, but rather the validity of the arbitration agreement
RTCs in terms of rank and stature. Thus, appeals go to the and the regularity of the proceedings.
CA via petition for certiorari under Rule 65)
IRR, Chapter 4, Article 4.34. Aplication for Setting Aside
B. What are the remedies or the modes of appeal an Exclusive Recourse against Arbitral Award. xxx
against an unfavorable arbitral award?
(b) An arbitral award may be set aside by the Regional Trial
Take note of the following rules: Court only If:

1. There can be no appeal (Rule 43) or petition for (i) the party making the application furnishes proof that:
certiorari (Rule 65) questioning the merits of the award. (aa) a party to the arbitration agreement was under some
incapacity; or the said agreement is not valid under the law
Why? (1) No statutory basis for an appeal, (2) Arbitrators are to which the parties have subjected it or, failing any indication
not quasi-judicial bodies, and (3) Section 41 of the Special thereon, under the law of the Philippines; or
ADR Rules expressly prohibit it.
(bb) the party making the application was not given proper
2. Remedy: petition to vacate or set aside an arbitral notice of the appointment of an arbitrator or of the arbitral
award under RA 876 proceedings or was otherwise unable to present his case; or

The RTC can only vacate or set aside the decision of an (cc) the award deals with a dispute not contemplated by or
arbitral tribunal on the 4 grounds under RA 876, or if the not failing within the terms of the submission to arbitration, or
arbitrator was disqualified and wilfully refrained from contains, decisions on matters beyond the scope of the
disclosing such disqualification to the parties. submission to arbitration, provided that, if the decisions on
matters submitted to arbitration can be separated from those
Note: The grounds to vacate an arbitral award do not pertain not so submitted, only the part of the award which contains
to the correctness of an award, but rather speak of the decisions on matters not submitted to arbitration may be set
conduct and qualifications of the arbitrators. aside; or

RA 876, Section 24. Grounds for vacating award. xxx (dd) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
(a) The award was procured by corruption, fraud, or other parties, unless such agreement was in conflict with a
undue means; or provision of ADR Act from which the parties cannot derogate,
or, falling such agreement, was not in accordance with ADR
Act; or
(b) That there was evident partiality or corruption in the
arbitrators or any of them; or
(ii) the Court finds that:
(c) That the arbitrators were guilty of misconduct in refusing
(aa) the subject-matter of the dispute is not capable of
to postpone the hearing upon sufficient cause shown, or in
settlement by arbitration under the law of the Philippines; or
refusing to hear evidence pertinent and material to the
controversy; that one or more of the arbitrators was
(bb) the award is in conflict with the public policy of the
disqualified to act as such under section nine hereof, and
Philippines.
wilfully refrained from disclosing such disqualifications or of
any other misbehavior by which the rights of any party have
4. Remedy: petition for correction/modification of an
been materially prejudiced; or
arbitral award under RA 876
(d) That the arbitrators exceeded their powers, or so
The RTC can correct or modify an award based on the
imperfectly executed them, that a mutual, final and definite
grounds under RA 876 and the IRR.
award upon the subject matter submitted to them was not
made.
Note: This authority granted to the RTC cannot be
interpreted as jurisdiction to “review” the award.
3. Remedy: petition to set aside an arbitral award under
the IRR and SADR
RA 876, Section 25. Grounds for modifying or correcting
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Notes based on Judge J. Humiding’s Outline UC Law

award. xxx orders of the Regional Trial Court: xxx

(a) Where there was an evident miscalculation of (e) Confirming, vacating or correcting/modifying a domestic
figures, or an evident mistake in the description of any arbitral award; xxx
person, thing or property referred to in the award; or
Rule 19.26. Certiorari to the Court of Appeals. - When the
(b) Where the arbitrators have awarded upon a matter Regional Trial Court, in making a ruling under the Special
not submitted to them, not affecting the merits of the decision ADR Rules, has acted without or in excess of its jurisdiction,
upon the matter submitted; or or with grave abuse of discretion amounting to lack or excess
of jurisdiction, and there is no appeal or any plain, speedy,
(c) Where the award is imperfect in a matter of form not and adequate remedy in the ordinary course of law, a party
affecting the merits of the controversy, and if it had been a may file a special civil action for certiorari to annul or set
commissioner's report, the defect could have been amended aside a ruling of the Regional Trial Court.
or disregarded by the court
A special civil action for certiorari may be filed against the
IRR, Article 4.33. Correction and Interpretation of Award, following orders of the court: xxx
Additional Award. (a) Within thirty (30) days from receipt of
the award, unless another period of time has been agreed (f) Confirming, vacating or correcting a domestic arbitral
upon by the parties: award; xxx

(i) A party may, with notice to the other party, request the Final Notes
arbitral tribunal to correct in the award any errors in
computation, any clerical or typographical errors or any If the RTC is asked to set aside an arbitral award on any
errors of similar nature; ground other than those provided in the Special ADR Rules,
the court shall entertain such ground for the setting aside or
(ii) A party may, it so agreed by the parties and with notice to non-recognition of the arbitral award only if the same
the other party, request the arbitral tribunal to give an amounts to a violation of public policy.
interpretation of a specific point or part of the award. xxx
Rule 19.10. Rule on judicial review on arbitration in the
C. Appeal: What are the available remedies from Philippines. - As a general rule, the court can only vacate or
an RTC decision confirming, vacating, set aside the decision of an arbitral tribunal upon a clear
modifying, or correcting an arbitral award? showing that the award suffers from any of the infirmities or
grounds for vacating an arbitral award under Section 24 of
1. Motion for Reconsideration (RTC who made the Republic Act No. 876 or under Rule 34 of the Model Law in
decision) within 15 days from receipt of order. a domestic arbitration, or for setting aside an award in an
international arbitration under Article 34 of the Model Law, or
2. Appeal from the RTC's ruling. for such other grounds provided under these Special Rules.

Before, the basis was RA 876 (Arbitration Law): Petition for If the Regional Trial Court is asked to set aside an arbitral
Review on Certiorari under Rule 45, limited to questions of award in a domestic or international arbitration on any
law, with the SC. ground other than those provided in the Special ADR Rules,
the court shall entertain such ground for the setting aside or
Now, pursuant to the Special ADR Rules (2009): Petition for non-recognition of the arbitral award only if the same
Review, with the CA. amounts to a violation of public policy.

Statutory basis: Special ADR Rules (2009) The court shall not set aside or vacate the award of the
arbitral tribunal merely on the ground that the arbitral tribunal
Rule 19.1. Motion for reconsideration, when allowed. - committed errors of fact, or of law, or of fact and law, as the
A party may ask the Regional Trial Court to reconsider its court cannot substitute its judgment for that of the arbitral
ruling on the following: xxx tribunal.

(h) Confirming, vacating or correcting a domestic arbitral The court shall not set aside or vacate the award of the
award; xxx arbitral tribunal merely on the ground that the arbitral
tribunal committed errors of fact, or of law, or of fact and law,
Rule 19.12. Appeal to the Court of Appeals. - An appeal as the court cannot substitute its judgment for that of the
to the Court of Appeals through a petition for review under arbitral tribunal.
this Special Rule shall only be allowed from the following final
In other words, simple errors of fact, of law, or of fact and law
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Notes based on Judge J. Humiding’s Outline UC Law

committed by the arbitral tribunal are not justiciable errors in c. Parties can appoint someone who is an expert on
the Philippines. the subject matter; and
d. Arbitration proceedings are confidential.
TEAMPC agreed to submit their disputes to an arbitral
tribunal. It understood all the risks - including the absence On the nature of Special ADR Rules (SADR)
of an appeal mechanism and found that its benefits (both proceedings: All proceedings under the SADR are special
legal and economic) outweighed the disadvantages. proceedings. A special proceeding is one where a party
seeks to establish or declare a status or right of a party, or a
Without a showing that any of the grounds to vacate the particular fact. (In comparison, an ordinary civil action is one
award exists or that the same amounts to a violation of an where a party seeks protection and enforcement of a right,
overriding public policy, the award is subject to confirmation or for the prevention or redress of a wrong.)
as a matter of course.
SADR proceedings are non-litigious and summary in nature.
XI. International Arbitration Included in this nature is the separability of the arbitration
clause, that is, it remains valid even if the contract to which
Sec. 19, RA 9285 it is a part of ends or is rendered void.

SEC. 19. Adoption of the Model Law on International On venue: The petition to recognize and enforce a foreign
Commercial Arbitration. – International commercial arbitral award is filed with:
arbitration shall be governed by the Model Law onwith the a. RTC where the assets to be attached or levied upon
RTC International Commercial Arbitration (the “Model Law”) is located;
adopted by the United Nations Commission on International b. RTC where the act to be enjoined is being
Trade Law on 21 June 1985 (United Nations Document performed;
A/40/17) and recommended for enactment by the General c. RTC of the principal place of business (of either
Assembly in Resolution No. 40/72 approved on 11 party) in the Philippine;
December 1985. d. RTC where any of the parties reside (if individuals);
or
Evolution of International Arbitration in the Phils e. RTC in the National Capital Judicial Region.
(Fidel Maximo Diego III)38
On ‘filing fees’ in connection with the case of Mijares vs
Notes: Ranada (2005): Here, victims of human rights violations
asked the RTC of Makati for the enforcement of a foreign
“Law is a living organism. It is based on a factual and social award (2.25 billion dollars) rendered by the US District Court
reality that has its foundation in the type of behavior that is of Hawaii.
deemed acceptable and desirable to society. Law is a
discourse and its connection to this fluid reality implies that it The defendant in this case was the Marcos Estate. They
is too must change. The change can be drastic and easily moved for the dismissal of the case, arguing that the
identifiable or it can be gradual and cannot sometimes be petitioners only paid the minimal filing fee of Php 410. Based
seen without the proper distance and perspective. Either way, on the amount of award, the filing fees should’ve been Php
the law must be flexible enough to reflect and change in 472,000,000, they said. This is in application of the rule on
society without actually creating a gap between it and reality.” actions capable of pecuniary estimation.

On gaps: Every so often, gaps between reality and the law The SC ruled in favor of the petitioners, holding that although
will be created. Thus, the law must not just be “logic and the judgment was indeed capable of pecuniary estimation, it
experience” but a renewal which adapts law to the new social is also an action based on a judgment against an estate.
reality. Therefore, it is included in the scope of “other actions not
involving property” which only required the minimal filing fee.
On international arbitration being the preferred method
for transnational commercial disputes and international The SADR provides that a petitioner seeking enforcement of
disputes: foreign arbitral awards is required to pay the minimal filing
a. Foreign investors who are not familiar with local fee payable in “all other actions not involving property”.
court procedures may prefer a more neutral process
where that can control the rules; On the court’s power to refuse to recognize and enforce
b. Disputes submitted for arbitration are more speedily foreign arbitral awards: Rule 13.4 of the SADR states that
resolved; a Philippine court shall not set aside a foreign arbitral award.

38
59 Ateneo LJ 297 (2014)

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

It may only refuse to recognize and enforce it on the following judgment enforceable as such under Section 48, Rule 39 of
grounds: the Rules of Court.
a. The party making the application to refuse
recognition and enforcement proves that: The decision of the RTC to recognize and enforce an award
i. A party to the arbitration agreement was is immediately executory (because it is summary in nature).
under some incapacity; or the agreement is
not valid under the law; Are appeals allowed for decisions concerning foreign
ii. The party asking for refusal was not given arbitral awards?
proper notice of the appointment of an Yes, but only on the following instances:
arbitrator or of the proceedings; or he was a. Orders of the RTC recognizing and enforcing foreign
unable to present his case; arbitral award; and
iii. The award deals with a dispute not b. Orders of the RTC refusing to recognize and enforce
contemplated by the terms of the a foreign arbitral award.
submission to arbitration; or is beyond its
scope; The SADR prohibits the parties from filing an appeal to
iv. The composition of the tribunal or the question the merits of a foreign arbitral award. The RTC
procedure was not in accordance with the cannot review the findings of the arbitrator nor substitute its
agreement, or failing such agreement—of own findings.
the law where the arbitration took place; or
v. The award has not yet become binding on Moreover, even if an appeal based on the allowable grounds
the parties or has been set aside or is perfected, it will not stay the award.
suspended by a court of the country in which
the award was made; or On the gaps that are still left unfilled by the local laws:
b. The court finds that: Both the SADR and the ADR Law do not have provisions
i. The subject matter of the dispute is not which categorically state that foreign arbitral awards are
capable of settlement or resolution by conclusively binding in the Philippines.
arbitration under Philippine laws; or
ii. The recognition or enforcement of the award In the case of National Power Corporation vs Alonzo-
would be contrary to public policy. Legasto (2004), the SC held that an arbitration award is not
absolute. If the conditions under Arts. 2038, 2039, and 2040
Which rule governs the enforcement of foreign awards? of the NCC (these are the instances where contracts may be
annulled) are present, the award may be annulled.
It is the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (June 7, 1959). The SADR has So what’s next?
merely adopted and reiterated the rules of said Convention. In December 2012, the SC, together with UP Law Center and
Hence, the RTC cannot entertain any other ground that is not the IBP, launched a project to overhaul the current Rules of
in the list above. Civil Procedure. Many provisions have been regarded as
“antiquated” and no longer relevant to our needs.
It is also important to point out that local courts cannot annul
foreign arbitral awards. Local courts can only refuse their In May 2013, the SC released the First Draft of the Revised
recognition and enforcement. Hence, even if a foreign award Rules of Civil Procedure. This Draft adds a new provision
is not recognized in the Philippines, it remains to be valid. specifically for the recognition and confirmation of foreign
arbitral awards:
The issue of the validity of a foreign arbitral award remains
within the exclusive jurisdiction of the foreign tribunal.

May a foreign arbitral award made in a country that is


not a party to the Convention still be recognized?

Yes. The SADR provides that the court can recognize and
enforce a foreign arbitral award made in a country not a
signatory to the Convention when such country extends
comity and reciprocity to awards made in the Philippines.
These awards are “presumptively valid”.

If the country doesn’t extend comity and reciprocity, the local


courts may nevertheless treat such award as a foreign

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

may submit their controversies to one or more arbitrators for


decision.”

Art. 2046: The procedure will be contained in the ROC

Republic Act 876 (1953)

Arbitration Law supplemented the provisions of the NCC on


arbitration and provided its procedure.

Problem Area: Lack of Provision on Enforcement of Foreign


Award

Solution: Apply the Rules of Court

Did this do the trick? No. Under Rule 39, Section 48 of the
Rules on Civil Procedure (1997), foreign arbitral awards
were not automatically binding, but merely presumptive
This addresses the shortcomings of the SADR and the ADR evidence.
Law. It will “clear the cloud on whether foreign arbitral awards
are conclusively binding or only presumptively valid against Ratification of the New York Convention (1967)
the parties.”
Each Contracting State shall recognize arbitral awards as
Conclusion binding and enforce them in accordance with the rules of
International arbitration law in the Philippines is almost 100 procedure of the territory where the award is relied upon,
years old. The past, present and future evolution of such law under the conditions laid down in the following articles. There
can be divided into 4 stages: shall not be imposed substantially more onerous conditions
1. When the courts disfavored it; or higher fees or charges on the recognition or enforcement
2. When the courts favored it; of arbitral awards to which this Convention applies than are
3. When it is treated as presumptively valid; and imposed on the recognition or enforcement of domestic
4. When it will be treated as conclusively binding. arbitral awards.41

Today, Singapore and Hongkong are considered as the Alternative Dispute Resolution Law (2004)
world’s arbitration hubs. With “the imminent revision of the
Rules of Civil Procedure and the acruity of the Filipinos to the • Strengthened the provision of the Civil Code and RA
English language”, the Philippines could easily become an 876 on International Arbitration
important venue for the settlement of international disputes. • Korea Technologies case was decided where the
Supreme Court stressed that domestic and
Commercial Arbitration in the Phils. international arbitration must have different
(Francisco Lim)39 & Parlade notes40 procedures in terms of recognition of awards
• Gave way to the creation of the SADR

Calvo Doctrine (1868): “Disputes involving foreign Special Rules of Court on ADR or SADR (2009)
investments must be resolved using the legal processes of
the place where the investment is located.” • Promulgated by the Supreme Court
• SADR proceedings are special proceedings
Chan Linte vs Law Union and Rock Insurance: The first • The RTC’s inquiry is only limited on WON the foreign
case where the Supreme Court of the Philippines recognized arbitral award should be recognized
the validity and potential relevance of arbitration as a mode
of dispute resolution International Commercial Arbitration

New Civil Code (1950) An arbitration is "commercial" if it covers matters arising from
all relationships of a commercial nature, whether contractual
Art. 2042: “Same persons who may enter into a compromise

39 41
46 Ateneo LJ 394 (2001) Article III, Convention on the Recognition and Enforcement of
40
Summary by Group 1 (Stephen Saavedra, et al.) Foreign Arbitral Awards or the NY Convention

53
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

or not. • The manner of enforcing arbitral awards


• Definition of arbitration
Relationships of transactions: any trade transaction for • Interpretation of arbitration agreements
the supply or exchange of goods or services; distribution • Duties and liability of arbitrators
agreements; construction of works; commercial • Remuneration of arbitrators
representation or agency; factoring; leasing, consulting; • Prescription
engineering; licensing; investment; financing; banking; • Res Judicata
insurance; joint venture and other forms of industrial or
• Costs, interest
business cooperation; carriage of goods or passengers by
• Capacity
air, sea, rail or road.
• Discharge of arbitration agreement
• Multi-partite proceedings
UNCITRAL
• Court assistance in appointing arbitrators
In 1985, the UNCITRAL adopted the MODEL LAW, short for • Dispute as to venue if not indicated
the UNCITRAL Model Law on International Commercial
Arbitration. They are covered by the arbitration law of the State. Take
note however, that the states, under Art. 2 (d) of the model
We adhere to it as the law governing the procedure of law, may appoint a third person to resolve the
international commercial arbitration. abovementioned issues.

The reason? Because of the ADR Law. (Sec 19) In enacting the ADR Law, the Congress made no attempt to
fill in gaps because of the difficulty of doing so.
RATIONALE: Because, we, like the rest of the world, desire
uniformity of the law of arbitral procedures. They also viewed the modification as not contributing to
uniformity of the proceedings.
The model law is said to reflect a world-wide consensus on
the principles and important issues of international arbitration Territorial Scope
practice.
According to the model law, whose arbitration laws should
The arbitration law that may be adopted by the state that be followed? Territory of the investment.
follows the model law applies as lex specialis.
According to the model law, where does the arbitration
(Example: It works to the exclusion of all other non-treaty proceedings take place? Stipulation in the agreement.
laws wherever they may be contained)
Model law adopts the territorial criterion over the autonomy
Nonetheless, it is subject to other treaties on arbitration (i.e.: criterion for these reasons:
UN Convention on Carriage of Goods by the Sea, New York
Convention). • Widely accepted by national laws of majority of the
states.
Matters not covered: • Avoid conflicts/ Takes away the burden from the
parties or the foreign court in choosing where to
• Arbitrability of the SM of the dispute arbitrate
• Capacity of the parties to enter into arbitration
agreement Exceptions:
• State immunity from suit
a. A national court is required to refer parties to
• Enforcement by national courts of interim measures
arbitration
of protection granted by an arbitrator
b. Interim measure of protection
• Competence of an arbitrator to reform the contract
c. Recognition and enforcement of the foreign award
• Fixing of arbitration fees
d. A national court may refuse an application for
• Request for and making a deposit for fees recognition and enforcement of foreign award
• Time limit of an award
• Consolidation of arbitral proceedings ADR Law applies, even if the arbitration proceedings is held
• Contractual relations between arbitrators and parties in a foreign country.
• Security for fees or costs or period of time for the
enforcement of arbitral awards When is a dispute international?
• The enforcement of interim measures of protection
granted by arbitrators 1. The parties to an arbitration agreement have, at the time
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

of the conclusion of that agreement, their places of business Because of the generality of the definition provided by the
in different States; or model court, it is as if it lets the party-states decide as to
which court would have jurisdiction over arbitration.
2. One of the following places is situated outside the State in
which the parties have their places of business: In the Philippines, the court refers to the Regional Trial Court.

(a) the place of arbitration if determined in, or Written Communications


pursuant to, the arbitration agreement;
Unless otherwise agreed by the parties:
(b) any place where a substantial part of the
obligations of the commercial relationship is to be a. any written communication is deemed to have been
performed or the place with which the subject-matter received if it is delivered to the addressee personally
of the dispute is most closely connected; or or if it is delivered at his place of business, habitual
residence or mailing address;
(c) the parties have expressly agreed that the b. if none of these can be found after making a
subject matter of the arbitration agreement relates to reasonable inquiry, a written communication is
more than one country. deemed to have been received if it is sent to the
addressee’s last-known place of business, habitual
Art. 1, Sec. 4 of the Model Law provides: residence or mailing address by registered letter or
any other means which provides a record of the
For the purposes of paragraph (3) of this article: attempt to deliver it

(a) if a party has more than one place of business, the place The communication is deemed to have been received on the
of business is that which has the closest relationship to the day it is so delivered.
arbitration agreement;
(b) if a party does not have a place of business, reference is Exceptions: communications in court proceedings.
to be made to his habitual residence
Waiver of Objections
Test of internationality
A party who knows that any provision of this Law from which
1. Place of business – Are the places of business of the the parties may derogate or any requirement under the
parties in different states? arbitration agreement has not been complied with and yet
proceeds with the arbitration without stating his objection to
2. Place of arbitration – Is the stipulated venue in a foreign such non-compliance without undue delay or, if a time-limit
state? is provided therefor, within such period of time, shall be
deemed to have waived his right to object.
3. Place of performance – Is the obligation to be performed
outside the place of business of the parties? A party deems to waive his right to object if all these
requisites are met:
4. Place of Subject Matter of Arbitration Agreement – Is the
subject matter of the arbitration agreement related to more A. There is a procedural requirement that has not been
than one state? complied with which is non-mandatory under the Model Law
B. The party knew of such compliance
Art. 1, Sec. 5 of the Model Law provides: C. The party proceeds with arbitration without objections
D. The party failed to state his objection within a
“This Law shall not affect any other law of this State by virtue reasonable period of time and in the manner provided in the
of which certain disputes may not be submitted to arbitration law or arbitration agreement
or may be submitted to arbitration only according to
provisions other than those of this Law.” Court Intervention

Section 20 of the ADR Law mandates our courts that in “In matters governed by this Law, no court shall intervene
deciding the interpretation of the model law, it must consider except where so provided in this Law.”
the interpretation of the foreign courts as well as the travaux
preparatoires of the UNCITRAL. General Rule: “Courts must yield to the primary jurisdiction
of the Arbitral Tribunal”
The model law recognizes both Institutional Arbitration and
Ad Hoc Arbitration. Exception (When can the RTC intervene): SADR, following
Section 6 of the Model Law, provides the following:
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Notes based on Judge J. Humiding’s Outline UC Law

• Relief on the issue of Existence, Validity, or UNCITRAL Secretary General’s report on Settlement of
Enforceability of the Arbitration Agreement; Commercial Disputes:
• Referral to Alternative Dispute Resolution ("ADR");
• Interim Measures of Protection; A. Stipulation pour autrui;
• Appointment of Arbitrator; B. Third party rights and obligations under arb.
• Challenge to Appointment of Arbitrator; Agreements following assignment or novation underlying
• Termination of Mandate of Arbitrator; contract to the third party;
• Confirmation, Correction or Vacation of Award in C. Third party rights and obligations under arb.
Domestic Arbitration; Agreements where the third party exercises subrogated
• Recognition and Enforcement or Setting Aside of an rights;
Award in International Commercial Arbitration; D. Rights and obligations under arbitration agreements
where interests in contracts are asserted by successors to
• Recognition and Enforcement of a Foreign Arbitral
parties, following merger or demerger of companies, so
Award;
that corporate entity is no longer the same.
• Confidentiality/Protective Orders; and
• Deposit and Enforcement of Mediated Settlement Issues Concerning Arbitration Agreements
Agreements.
• Assistance in Taking Evidence; When an agreement exists but the parties did not sign to it
• Confirmation, Correction or Vacation of Award in
Domestic Arbitration; Answer:
• Recognition and Enforcement or Setting Aside of an
Award in International Commercial Arbitration; • Partial performance of the contract
• Recognition and Enforcement of a Foreign Arbitral • By reason of custom, it is valid;
Award;
• Failure to object within a period of time and in the
• Confidentiality/Protective Orders; and required form
• Deposit and Enforcement of Mediated Settlement
Agreements. Exception: When the contract is entered into by a broker or
agent. In cases when the principal is unaware or did not
Arbitration Agreement consent thereto, there is a void arbitration agreement
They may be found in an arbitration clause within the When there is incorporation by reference: It may be valid if it
contract of the parties, or in a separate document. is such as to make the subsequent document a part of the
former document.
Forms:
What if it were in bills of lading?: Yes, they are binding
a. In a document duly signed by the parties; because they are part of customary practice. Even if the
b. In an exchange of letters, telegrams, telexes, or parties’ names are not specified therein.
other means of telecommunications that provide a
record of the agreement; Agreement is found in the rules of an association: It binds the
c. In an exchange of statements of claims and members.
defenses in which the existence of an arbitration
agreement is alleged by one party and not denied by Exceptions: The member was not shown a copy, or the rules
another; were amended to include the arbitration agreement and the
d. In a document supplementing the original contract member who is a party to the case dissents to such
amendment
Are third parties bound to an Arbitration Agreement?
Agreement requires a condition precedent
Arbitration is a contractual relation.
Mia and Stephanie, the parties to a conflict, were employees
Hence, as a general Rule: No. Those who are bound are the working at Xian Corporation. Under their sub-contract, they
parties, their heirs, and their assigns. had to refer the issue to Atty. Masedman, and later to
arbitration if they both disagreed with Atty. Masedman’s
But, in the Philippines, there is an exception provided in the conclusion. But Mia commenced an action against
ADR Act of 2004. The third party would refer to the court in Stephanie, asking for an order of reference for arbitration,
cases where two parties to a civil action agreed beforehand because the arbitration agreement was void for containing a
in writing to settle the dispute via arbitration. condition precedent.
Other notable exceptions are those laid down in the
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Notes based on Judge J. Humiding’s Outline UC Law

Is Mia correct? (b) The parties are free to agree on a procedure of appointing
the arbitrator or arbitrators, subject to provisions of
In Westco Air vs Sui Chong, it was held that such a paragraphs (d) and (e) of this Article.
contention was wrong. The prior referral was only a first
instance procedure, and was not inconsistent with arbitration. (c) Failing such agreement:
Therefore, arbitration can be had.
(i) in an arbitration with three (3 ) arbitrators, each party shall
What if the contract containing the arbitration agreement is appoint one arbitrator, and the two (2) arbitrators thus
terminated? appointed shall appoint the third arbitrator; if any party fails
to appoint the arbitrator within thirty (30) days of receipt of a
Danielle entered into a contract of sale with Danice for two request to do so from the other party, or if the two (2)
tractors. The contract contained an arbitration agreement if arbitrators fail to agree on the third arbitrator within thirty
there are issues that will arise. The money was paid and the days (30) days of their appointment shall be made, upon
tractors delivered. Then, for some reason Danice wanted to request of a party, by the appointing authority;
file a case against Danielle in connection with the transacion.
Danielle invokes the arbitration agreement. Danice (ii) in an arbitration with a sole arbitrator, if the parties are
disagrees, saying that the contract of sale was already unable to agree on the arbitrator, he/she shall be appointed,
extinguished. upon request of a party, by the appointing authority.

Is Danice correct? (d) Where, under an appointment procedure agreed upon


the parties,
No. In Jiangxi Metal vs Sulanser, it was ruled that the
agreement is still binding despite the termination of the (i) a party fails to act as required under such procedure, or
original contract, following the doctrine of separability of the
Arbitration Agreement. (ii) the parties , or two arbitrators, are unable to reach an
agreement expected of them under such procedure, or
Substantive Claims before the Court
(iii) a third party, including an institution, fails to perform any
Article 8 of the Model Law provides that the court, to which function entrusted to it under such procedure,
a dispute with an arbitration agreement is submitted to, must
refer that dispute to arbitration unless it is void, inoperative Any party may request the appointing authority to take the
or incapable of performance. necessary measure to appoint an arbitrator, unless the
agreement on the appointment procedure provides other
Arbitration may still continue or commence and an award be means for securing the appointment.
made while the issue is pending in court.
(e) A decision on a matter entrusted by paragraphs (c) and
Presumption of arbitrability (d) of this to the appointing authority shall be immediate
executory and not be subject to a motion for reconsideration
A court is called to resolve the doubt in favor of arbitration. or appeal. The appointing authority shall have in appointing
an arbitrator, due regard to any qualifications required of the
Exception: If, upon looking into the facts and jurisprudence arbitrator by the agreement of the parties and to such
relating to the model law, the court can easily rule that it is considerations as are likely to secure the appointment of an
void, inoperative, or incapable of performance independent and impartial arbitrator and, in the case of a sole
(unenforceable). or third arbitrator , shall take into account as well the
advisability of appointing an arbitrator of a nationality other
(Also read Parlade pp. 15-102) than the Rules of Court of the Special ADR Rules.

Composition of Arbitral Tribunal Article 4.12 Grounds for Challenge. (a) When a person is
approached in connection with his/her possible appointment
Chapter 4, Rule 3, IRR as an arbitrator, he/she impartiality or independence. An
arbitrator, from the time of his/her appointment and
Article 4.10 Number of Arbitrators. The parties are free to throughout the arbitral proceedings shall, without delay,
determine the number of arbitrators Failing such disclose any such circumstance to the parties unless they
determination, the number of arbitrators shall be three (3). have already been informed of them him/her.

Article 4.11. Appointment of Arbitrators. (a) No person (b) An arbitrator may be challenged only if circumstances
shall be produced by reason of his/her nationality from acting exist that give rise to justifiable doubts as to his/her
as an arbitrator, unless otherwise agreed by the parties. impartiality or independence, or if he/she does not possess
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Notes based on Judge J. Humiding’s Outline UC Law

qualifications agreed to by the parties. A party may challenge the mandate of an arbitrator terminates under Articles 4.13
an arbitrator appointed by him/her, or in whose appointment (Challenge Procedure) and 4.14 (Failure or Impossibility to
he/she has participated, only for reasons of which he/she Act) or because of his/her withdrawal from office for any
becomes aware after the appointment has been made. other reason or because of the revocation of his/her mandate,
a substitute arbitrator shall be appointed according to the
Article 4.13. Challenge Procedure. (a) The parties are free rules that were applicable to the appointment of the arbitrator
to agree on a procedure for challenging an arbitrator, subject being replaced.
to the provisions of this Article.
(Also read Parlade pp. 103-150)
(b) Failing such agreement, a party who intends to challenge
an arbitrator shall, within fifteen (15) days after becoming Setting aside of Arbitral Award Due to Improper
aware of the constitution of the arbitral tribunal or after Constitution of Tribunal
becoming aware of any circumstances referred to in (Susanne Heck & Niharika Dhall) 42
paragraph (b) of Article 4.12 (Grounds for Challenge,) send
a written statement of the reasons for the challenge to the Antecendents: The case involved a dispute in relation to a
arbitral tribunal. Unless the challenged arbitrator withdraws 1986 lease agreement for a thermal bath. The agreement
from his/her office or the other party agrees to the challenged contained an arbitration clause for settlement of disputes by
arbitrator withdraws from his/her office or the party agrees to a three-member Tribunal seated in Germany.
the challenge, the arbitral tribunal shall decide on the
challenge. 2010: When disputes arose between the parties, the matter
was referred to ad hoc arbitration in accordance with the
(c) If a challenge under any procedure agreed upon by the agreement. Each Party appointed an arbitrator, and the two
parties or under the procedure of paragraph (b) of this Article arbitrators appointed the Chairperson.
is not successful, the challenging party may request the
appointing authority, within thirty (30) days after having One of the Parties (later, the Complainant) lodged a petition
received notice of the decision rejecting the challenge, to to challenge the appointment of the chairperson, asking that
decide on the challenge, which decision shall be immediately he be disqualified on the ground of bias.
executory and not subject to motion for reconsideration or
appeal. While such a request is pending, the arbitral tribunal, The application was heard by the Tribunal but the challenge
including the challenged arbitrator, may continue the arbitral was dismissed. Subsequently, the Complainant appealed
proceedings and make an award. the decision of the Tribunal in the Higher Regional Court
(HRC) of Munich (equivalent to our RTC).
A party may bring a petition under this Article before the court
in accordance with the Rules of Court or the Special ADR While that appeal was pending, the arbitral tribunal
Rules. continued with the arbitration proceedings.

Article 4.14. Failure or Impossibility to Act. (a) If an April 2013: The Tribunal rendered an award against the
arbitrator becomes de jure or de facto unable to perform Complainant.
his/her functions or for other reasons fails to act without
undue delay, his/her mandate terminates if he/she withdraws January 2014: The appeal was decided by the HRC and this
from his/her office or if the parties agree on the termination. time, it was in decided favor of the Complainant.
Otherwise, if the controversy remains concerning any of
these grounds, any party may request the appointing The Court found the challenge justified because the
authority to decide on the termination of the mandate, which chairperson was not able to thoroughly destroy the lodged
decision shall be immediately executory and not subject for reasonable doubts regarding his independence and
motion for reconsideration or appeal. impartiality in a responding statement. Irrespective of an
actual existence of bias, the Court found these
(b) If, under this Article or paragraph (b) of Article 4.13 circumstances to constitute objective reasons for a justified
(Challenge Procedure), an arbitrator withdraws from his/her disqualification of the Chairperson since objectively incorrect
office or a party agrees for termination of the mandate of an statements as the one given by the Chairperson are also apt
arbitrator, this does not imply acceptance of the validity of to raise doubts regarding an arbitrator’s due diligence.
any ground referred to in this Article or in paragraph (b) of
Article 4.12 (Grounds for Challenge). Petition to Set Aside the Award: The Complainant then
filed an application to set aside the award rendered by the
Article 4.15. Appointment of Substitute Arbitrator. Where Tribunal on the ground that because the Chairperson was

42
Kluwer Arbitration Blog; August 27, 2015

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

found to be biased, the constitution of the Tribunal was not This judgement of the Court is a well-reasoned decision and
in accordance with law or the agreement of the Parties. reflects upon an important aspect, the inter-dependence of
arbitral proceedings on the Courts of the lex arbitri.
Issue: Whether a unanimous award could be set aside if the
appointment of one of the three arbitrators was successfully Had the decision of the Court been handed down in time, the
challenged. Chairperson would have had to recuse himself and the
Tribunal may have reached a different decision. The fact that
In other words, if an award had already been rendered in the Court reached a decision regarding the challenge of the
favor of one party. May it be set aside because of a Chairperson after a unanimous award had been rendered,
subsequent decision approving the disqualification of one of cannot lead to a situation wherein the protection of Section
the arbitrators? 1059(2)(d) is nullified.

Contention of adverse party: They argued the decision of However, it would be interesting to see how this matter
the Tribunal had been unanimous and therefore, the bias of proceeds now since the German law is silent on whether the
the Chairperson had no impact on the award. re-constituted Tribunal shall commence proceedings from
the beginning.
The two other arbitrators also submitted a statement, arguing
that the award was valid as the bias of the Chairperson had In this regard, even the UNCITRAL Model law does not
no impact on the decision of the Tribunal. Even if the Tribunal provide any guidance on whether the arbitral tribunal, on re-
were to be re-constituted, the same award would be constitution, shall determine if and to what extent the
rendered as the two arbitrators would retain the majority vote. proceedings shall be repeated.

German Court: The Court did not accept this line of Ultimately, the parties will have to reach an agreement on
reasoning. It rendered a decision to set aside the award. how to proceed in this matter. Ideally, the two arbitrators
should recuse themselves altogether from the proceedings
In examining the degree to which the bias of one arbitrator in the light of the statement submitted by them since that
affected a unanimous award, the Court opined that the raised doubts regarding the arbitrators’ impartiality.
standard for determining the same should not be very high.
In fact, whether or not the award was unanimous has no Failing this, the Complainant may attempt to challenge the
bearing on a finding under the German laws. two based on their statement.

The German Arbitration Law is based on the UNCITRAL If the parties have not agreed on a procedure for the recusal,
Model Law and provides that an arbitral award may be set the legal obstacle for the Complainant the two-week time
aside in the Courts of the lex arbitri (where the arbitration limit for an application for recusal which is provided in
took place) if the composition of the arbitral tribunal or the Section 1037 (2) in the German Code of Civil Procedure.
arbitral procedure was not in accordance with the German
Code or the agreement of the parties, and this presumably In favor of the Complainant, it can be argued that the two
affected the award (Section 1059(2)(d) of the German Code week time limit would start from the date of composition of
of Civil Procedure, Zivilprozessordnung). the new Tribunal, i.e. the appointment of the new
Chairperson by the two arbitrators. Because only then would
Similarly, the Court held that the statement given by the two the Complainant gain knowledge of the actual composition
party-appointed arbitrators that a re-constituted Tribunal of the new Tribunal.
would also reach the same decision, had no probative value.
If the Tribunal again rejects the application, the Complainant
The biased arbitrator was an inherent part of the Tribunal and can again approach the Court. It is clear that this last step
participated in the arbitral proceedings. His bias could would most certainly destroy the remaining credibility of the
potentially have influenced the other arbitrators through his two arbitrators.
participation in meetings and deliberations. Thus, as his
mere presence on the Tribunal presumably affected the The decision of this case is an explicit advice to future
award, it was not necessary to substantiate with evidence or arbitrators in a similar situation to desist from giving such a
a specific finding the causal link between the improper statement in view of the principle of confidentiality of
constitution of the Tribunal and the impugned award. deliberation.

On a side-note, the Court emphasized that the statement Furthermore, this case is also an example of instances
given by the two arbitrators even worsened the situation, by where it can be argued that the Tribunal should have
raising doubts regarding their impartiality and the suspended the proceedings till the Court decided on the
qualification, too. Complainant’s appeal.

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

Either way, this judgement is relevant for all jurisdictions when the sole arbitrator or the third arbitrator, who has been
which follow the UNCITRAL Model Law. nominated, has accepted the nomination and written
communication of said nomination and acceptance has been
Jurisdiction of Arbitral Tribunal received by the party making the request.

Rule 4, IRR (c) The following rules on interim or provisional relief shall be
observed:
Article 4.16. Competence of Arbitral Tribunal to Rule on
its Jurisdiction. (a) The arbitral tribunal may rule on its own (i) Any party may request that the interim or provisional relief
jurisdiction, including any objections with respect to the shall be observed:
existence or validity of the arbitration agreement or any
condition precedent to the filing of the request for arbitration. (ii) Such relief may be granted:
For that purpose, an arbitration clause, which forms part of a (aa) To prevent irreparable loss or injury;
contract shall be treated as an agreement independent of the (bb) To provide security for the performance of an obligation;
other terms of the contract. A decision by the arbitral tribunal (cc) To produce or preserve evidence
that the contract is null and void shall not entail ipso jure the (dd) To compel any other appropriate acts or omissions.
invalidity of the arbitration clause.
(iii) The order granting provisional relief may be conditioned
(b) A plea that the arbitral tribunal does not have jurisdiction upon the provision of security or any act or omission
shall be raised not later than the submission of the statement specified in order.
of defense (I.e., in an Answer or Motion to Dismiss). A party
is not precluded from raising such plea by the fact that he/she (iv) Interim or provisional relief is requested by written
has appointed, or participated in the appointment of, an application transmitted by reasonable means to the arbitral
arbitrator. A plea that the arbitral tribunal is exceeding the tribunal and the party against whom relief is sought,
scope of its authority shall be raised as soon as the matter describing in appropriate details of the precise relief, the
alleged to be beyond the scope of its authority is raised party against whom the relief is requested, the ground for the
during the arbitral proceedings. The arbitral tribunal may, in relief, and the evidence, supporting the request.
either case, admit a later plea if it considers the delay justified.
(v) The order granting or denying an application for the
(c) The arbitral tribunal may rule on a plea referred to in interim relief shall be binding upon the parties.
paragraph (b) of this Article either as a preliminary question
or in an award on the merits. If the arbitral tribunal rules as a (vi) Either party may apply with the court for assistance in
preliminary question that it has jurisdiction, any party may implementing or enforcing an interim measure ordered by an
request, within thirty (30) days after having received notice arbitral tribunal.
of that ruling, the Regional Trial Court to decide the matter,
which decision shall be immediately executory and not (vii) A party who does not comply with the order shall be
subject to motion for reconsideration or appeal. While such liable for all damages, resulting from noncompliance,
a request is pending, the arbitral tribunal may contribute the including all expenses, and reasonable attorney's fees, paid
arbitral proceedings and make an award. in obtaining the order's judicial enforcement

Article 4.17. Power of Arbitral Tribunal to Order Interim (Also read Parlade pp. 151-180)
Measures. (a) Unless otherwise agreed by the parties, the
arbitral tribunal may, at the request of the party, order any Jurisdiction of the Arbitral Tribunal: Current
party to take such interim measures of protection as the Jurisprudence and Problem Areas under UNCITRAL
arbitral tribunal may consider necessary in respect of the Model Law
subject to matter of the dispute following paragraph (c) of this (Prof. Dr. Alan Uzelac)43
Article. Such interim measures may include, but shall not be
limited to, preliminary injunction directed against a party, This article deals with: (a) the procedural issues of the
appointment of receivers, or detention, preservation, determination of the jurisdiction (or lack of the jurisdiction) of
inspection of property that is the subject of the dispute in the arbitral tribunal; (b) the consequences of the arbitral
arbitration. jurisdiction, such as its impact on the court proceedings
regarding the same claims; and (c) the authority of the
(b) After constitution of the arbitral tribunal, and during arbitrators to issue interim measures of protection.
arbitral proceeding, a request for interim measures of
protection, or modification thereof shall be made with the These issues regard the following provisions of the
arbitral tribunal. The arbitral tribunal is deemed constituted UNCITRAL Model Law on International Commercial

43
International Arbitration Law Review Issue No. 5 (2005)
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Notes based on Judge J. Humiding’s Outline UC Law

Arbitration (MAL) competent to decide.

1. Art.8 (Arbitration and substantive claim before court) If the arbitral tribunal decides on the issue of jurisdiction as a
2. Art.16 (Competence of arbitral tribunal to rule on its preliminary question, and concludes that it has jurisdiction,
jurisdiction) this ruling may be subject to challenge under MAL Art. 16(3).
3. Art.17 (Power of arbitral tribunal to order interim
measures) Regularly, the competent authority will be a state court.
4. Art.34(2)(a)(i) (Application for setting aside due to However, in some jurisdictions that is not necessarily so.
lack of jurisdiction—incapacity of the parties or
invalidity of the agreement) In Croatia—whose Law on Arbitration departs slightly from
5. Art.36(1)(a)(i) (Refusal of recognition and the text of the MAL—parties may transfer the authority to
enforcement of the award due to lack of jurisdiction) control separate decisions on jurisdiction to some other
authority. Thus, Croatian courts have already confirmed that
On Article 16 the arbitration rules of an arbitration institution may replace
court control.
Doctrine of Kompetenz Kompetenz: the right of the
arbitrators to rule on their own jurisdiction On Article 8: submitting substantive claim to the court

Practically all countries recognize this doctrine, subject to the Just the same as the arbitrators cannot rule on their
subsequent court control. jurisdiction unless an objection was raised by the respondent
in the arbitral proceedings, the court to which a substantive
There is now a ‘‘wide consensus that the arbitral tribunal has claim for which arbitration was agreed upon cannot consider
the power to rule on all aspects of its own jurisdiction’’. this fact on its own initiative.

Reported decisions have showed that the courts recognize A plea as to the lack of jurisdiction in the court proceedings
the right of the arbitral tribunal to determine: has to be submitted by the respondent in due time—under
Art 8(1) MAL—not later than when submitting the first
a. whether arbitration agreement exists between the statement on substance of the dispute. Belated objections
parties regularly cannot be taken into account, as the lack of
b. whether the matter in dispute comes within the objection has to be construed as the waiver of the right to
scope of the arbitration agreement request referral to arbitration.
c. what is the proper interpretation of the arbitration
agreement Moreover, the lack of timely objections in the court
d. whether the arbitration agreement is valid or was proceedings may be construed as termination of the
terminated arbitration agreement: regularly, by submitting the statement
of claim to the court the plaintiff expresses his wish to
Doctrine of separability (or severability): reflected in the abandon the arbitration agreement; or by submitting his
last two sentences of Art.16(1), is now also a part of the statement of defense, the defendant accepts the offer to
universal consensus among arbitration practitioners, amend their dispute resolution mechanism by agreeing on
accepted by most legal systems of the world. court litigation instead of arbitration.

Courts have widely recognized that arbitral agreements are Articles 34 and 36: Court Review of the Decisions on the
independent from the main contract, so that invalidity of the Jurisdiction of the Tribunal
latter does not necessarily affect binding force of the former.
If the arbitrators decide that they have jurisdiction, there are
For example, even if arbitrators find that the main contract is two ways of attacking their decision:
null and void ab initio, even owing to fraudulent behavior of
a party or the parties, but that arbitral clause continues to be 1. setting aside procedure, under Article 34
operative, providing arbitrators with authority to decide on 2. procedure of recognition and enforcement, under
the consequences of the nullity of the main contract. Article 36

Is the arbitrator/tribunal’s ruling on their jurisdiction Under the first: a court should set aside an award if the
separate from, or part of, the final award? arbitration agreement ‘‘is not valid under the law to which the
parties have subjected it’’ or the lex fori of the setting aside
One court held that decision to postpone the ruling on court.
jurisdiction until the rendition of the final award, cannot be
attacked, but only setting-aside proceedings could review The same reason is contained in the second: in respect to
whether the arbitrators erred in finding that they are refusal of recognition of the award. Lack of valid and binding
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

arbitration agreement obviously also covers the cases when given to the court if the claim is raised in a court action, and
no arbitration agreement was concluded at all. Lack of an the other party objects on the ground that this claim was
appropriate agreement in respect of the subject-matter of the covered by an arbitration agreement.
dispute partly overlaps with the reasons for setting aside, i.e.
with the situations in which the award deals with a dispute This parallel regime raises a number of questions regarding
‘‘not contemplated by or not falling within the terms of the the division of labor between arbitrators and the courts;
submissions to arbitration, or contains decisions on matters regarding potential duplication of work; regarding the
beyond the scope of the submission to arbitration’’. possibility of incompatible decisions; regarding the effects of
the arbitral and/or court’s final determination, etc.
Article 17: Jurisdiction of the Tribunal to Issue Interim
Measures of Protection In the reported case law, the courts had differently
interpreted their authority to refuse referring the case to
There is a scarcity of reported case law. Unlike Articles 8 and arbitration if the agreement is null and void, inoperative or
16, the provision of MAL 17 is among the least well-covered: incapable of being performed.
precisely there is only one case in the CLOUT database that
would point to MAL 17 in the search engine of the UNCITRAL. Under MAL Art. 8(1) the courts clearly have the right and duty
to evaluate independently the validity and practicability of the
Even this single case mentioned interim measures of arbitration agreement; however, it would be wise both for the
protection ordered by the tribunal only obiter dicta, asserting courts and for the arbitrators to have an eye on the process
that, once arbitration was commenced, the arbitral tribunal conducted before the other tribunal, perhaps suspending the
sitting in Switzerland could order interim measures that proceedings until the decision in the other process is being
would be enforceable in Canada. made—but only if this would not cause undue hardship to
parties in the proceedings.
Despite the scarcity of reported cases, some ambiguities
with regard to parallel jurisdiction of both the arbitrators and 2. The form of the arbitral decision on jurisdiction
the court to order interim measures in the same matter have as a preliminary question under MAL 16(3) and
already surfaced. its effects

In one case connected with the application of Article 9, a Another problem area deals with the form of the separate
court had to resolve the issue whether interim measures of decision on jurisdiction in the arbitral process, if such a
protection that could be taken by courts included the interim decision is made prior to the award on the merits, based on
order granted in that case or whether such an order could be the discretionary right of arbitrators to resolve the
granted only by the arbitral tribunal dealing with the jurisdictional challenge as a preliminary matter.
substance of the dispute.
The MAL does not provide clear guidance, and basically
The court referred to travaux pr´eparatoires regarding Art. 9 leaves the determination to national procedural laws and/or
and quoted ‘‘dual principles that, first, a party does not waive practices. Apparently, there is a trend in international
its right to go to arbitration by requesting (or obtaining) arbitration to expand the circle of decisions that are entitled
interim measures of protection from a national court, and, ‘‘arbitral awards’’ from decisions on the substance of the
second, that a national court is not prevented from granting dispute to procedural matters, usually those that end the
such measures by the existence of an arbitration agreement’’. proceedings, but sometimes also to those that are regarded
to be of any greater importance. Proper or improper naming
However, in another court decision, without special of decisions should not affect the procedural fate of the
reference to authorities and UNCITRAL documents, another decision—falsa nominatio non nocet. Yet, in reported cases
court had seemingly come to the opposite conclusion, from various part of the globe, the courts also went into a
namely that, if arbitrators may order themselves interim different directions, drawing from the name ‘‘award on
measures that are enforceable in court, a direct application jurisdiction’’ inferences as to the admissibility of setting aside
to the court for interim measures should be dismissed. of such ‘‘awards’’.

Conclusions: Open Issues and Problem Areas This only contributes to confusion, as the original concept of
the MAL 16(3) certainly did not envisage multiple (double or
1. Dual jurisdiction (between the arbitrator/tribunal even triple) court proceedings controlling one and the same
and the court) regarding evaluation of validity of arbitral decision on jurisdiction as the main matter—one
the arbitration agreement under Art. 16; the other, independent setting aside of the
award on jurisdiction; and, eventually, another setting aside
Although there is no doubt that arbitrators are empowered to of the award on the merits for the reasons stated in Art. 34.
rule in their own jurisdiction upon timely objections raised in If such practice would develop, it could have a discouraging
the arbitral proceedings, virtually the same authority is also effect on the arbitrators that would like to resolve
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

jurisdictional issues in their preliminary decisions. meaning of ‘‘inoperative arbitration agreements’’.

3. Availability of the remedies against negative Some courts attempted to demonstrate such radical pro-
arbitral decisions on jurisdiction arbitration agreement that they declared agreements that
were rightfully abandoned as operative, by forcing a party to
Another area of ambiguities is concerned with the availability arbitrate, although that party had expressed the wish to use
of remedies in cases in which the arbitrators have issued its right to opt for litigation provided in the dispute resolution
decisions rejecting their jurisdiction. clause.

One classic approach would consider these decisions as In one German case, it was approved that lack of financial
irrefutable because no one can force the arbitrators to resources makes the arbitration agreement ‘‘inoperative’’. If
arbitrate if they are convinced that they have no jurisdiction. this became a general rule, it would lead to abuses, opening
ample opportunities to evade a dispute resolution
However, as this is a final decision, the pressure of mechanism on the sheer ground of financial weakness.
dissatisfied parties led to emergence of court decisions that
expressed the opposite view—once relying on the formal 6. Should the court make substantive inquiries as
reasons, another time relying on alleged procedural rights to to whether ‘‘a dispute’’ exists?
seek court review at least in respect of the procedural
correctness of the arbitral decision-making. Requirement that only ‘‘disputes’’ can be referred to
arbitration has also proven to be ambiguous.
Although one can well understand the dissatisfaction of the
parties who were convinced that they had right to arbitrate Some courts have posed too high a threshold for the
their disputes, this additional controllability is not necessary, existence of disputes, considering that the evaluation of
and may ultimately prolong and complicate the process. differences that exist between the parties should be left to
arbitrators.
If arbitrators pronounced that they are not competent to
arbitrate, the most efficient and logical next step is to turn The right approach is to consider that a dispute should be
immediately to the second closest match—to another presumed to exist in every case in which the claimant’s
arbitration or to the competent state court. Arbitrators that claims were not clearly and unequivocally admitted.
were reluctant to rule on the substance of the dispute in the
first round will, most likely, remain to be reluctant even if a 7. Dual jurisdiction regarding interim measures
court authority strikes down their decision.
The original ideas behind the MAL clearly envisaged dual
4. Scope of arbitral authority: do allegations of jurisdiction regarding interim measures. Recent work of
fraud fall within the scope of submission to UNCITRAL on the revision of provisions on interim measures
arbitration may, once it is completed, contribute to resolution of such
issues by additions and clarifications.
When the courts had to evaluate the validity and scope of the
arbitral agreement, they were usually expressing favorable 8. Residual procedural differences between
views about the use of arbitration, and interpreted broadly common and civil law countries
the authority of arbitrators. One eminent exception in some
jurisdictions relates to the cases in which one party accused Some discrepancies in court reasoning can be attributed to
the other of fraudulent behavior. the procedural differences and even different procedural
cultures in common law and civil law countries.
Some courts alluded to the fact that conspiracy, deceit and
fraud are not matters that can be covered by the arbitration In common law jurisdictions, if a plea as to the lack of
agreement. jurisdiction (owing to the existence of the arbitration
agreement in the same matter) is successfully raised, the
Yet, in commercial reality, mutual allegations of immoral, court will stay the proceedings.
illegal or fraudulent actions happen often, and excluding
them from the scope of arbitral agreements may effectively In civil law, the court will not stay the proceedings, but
cripple their effectiveness. Therefore, for the sake of dismiss the claims regarding which the arbitration was
harmonization of the global practice, it would be good to take agreed upon as inadmissible.
a uniform position on such objections.
Such differences in approach may sometimes have far-
5. Meaning of ‘‘inoperative’’ agreements reaching effects on the case law and even some substantive
reasoning of the courts.
There are also certain divergences in the interpretation of the
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

A well-covered debate in Canadian courts regarding whether (5) The order shall be binding upon the parties.
stay of proceedings should be mandatory, or whether it
should be granted under a residual discretion that is enjoyed (6) Either party may apply with the Court for assistance in
by the courts is imaginable only in a common law jurisdiction. implementing or enforcing an interim measure ordered by an
Only gradually, by slow approximation of laws and practices, arbitral tribunal.
can we expect that these differences will become less
marked, and only then can we fully expect that a sufficiently (7) A party who does not comply with the order shall be liable
high level of harmonization in the application of the basic for all damages resulting from noncompliance, including all
rules of international commercial arbitration will be achieved. expenses, and reasonable attorney’s fees, paid in obtaining
the order’s judicial enforcement.
Interim Measures of Protection
SEC. 29. Further Authority for Arbitrator to Grant Interim
Sec 28-29, RA 9285 Measure of Protection. – Unless otherwise agreed by the
parties, the arbitral tribunal may, at the request of a party,
SEC. 28. Grant of Interim Measure of Protection. – (a) It order any party to take such interim measures of protection
is not incompatible with an arbitration agreement for a party as the arbitral tribunal may consider necessary in respect of
to request, before constitution of the tribunal, from a Court the subject-matter of the dispute following the rules in
an interim measure of protection and for the Court to grant Section 28, paragraph 2. Such interim measures may
such measure. After constitution of the arbitral tribunal and include but shall not be limited to preliminary injunction
during arbitral proceedings, a request for an interim measure directed against a party, appointment of receivers or
of protection, or modification thereof, may be made with the detention, preservation, inspection of property that is the
arbitral tribunal or to the extent that the arbitral tribunal has subject of the dispute in arbitration. Either party may apply
no power to act or is unable to act effectively, the request with the Court for assistance in implementing or enforcing an
may be made with the Court. The arbitral tribunal is deemed interim measure ordered by an arbitral tribunal.
constituted when the sole arbitrator or the third arbitrator,
who has been nominated, has accepted the nomination and Summary44
written communication of said nomination and acceptance
has been received by the party making the request. Definition – They are issued to prevent or minimize any
disadvantage resulting from delay in the hearing and
The following rules on interim or provisional relief shall be determination of the dispute and the implementation or
observed: enforcement of the award.

(1) Any party may request that provisional relief be granted Power of Arbitral Tribunal
against the adverse party.
Subject to contrary agreement of the parties, at the request
(2) Such relief may be granted: of a party an arbitral tribunal has inherent power to take such
interim measures of protection as the arbitral tribunal may
(i) to prevent irreparable loss or injury; (ii) to provide security consider necessary in respect of the subject matter of the
for the performance of any obligation; (iii) to produce or dispute.
preserve any evidence; or (iv) to compel any other
appropriate act or omission. Court Jurisdiction to Grant Interim Relief

(3) The order granting provisional relief may be conditioned Rule: the submission of a dispute to arbitration does not
upon the provision of security or any act or omission exclude the exercise of jurisdiction of the court to grant
specified in the order. interim measures of protection in aid of arbitration

(4) Interim or provisional relief is requested by written It is clear that there must first be an order of the arbitral
application transmitted by reasonable means to the Court or tribunal granting interim relief. The court’s assistance is
arbitral tribunal as the case may be and the party against invoked for the purpose of implementing or enforcing an
whom the relief is sought, describing in appropriate detail the interim measure ordered by the arbitral tribunal.
precise relief, the party against whom the relief is requested,
the grounds for the relief, and the evidence supporting the When and Where to File Petition for the Issuance of
request. Interim Measures of Protection

WHEN: Under Rule 5 of the Special ADR Rules, an

44
By Group 4 (Jam Flora, et al.)

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

application for relief shall be made in the form of petition filed obligation
with the court: c. The need to produce or preserve evidence or
d. The need to compel any appropriate act or omission.
a. Before arbitration is commenced;
b. After arbitration is commenced but before the ISSUE: Whether the relief granted by the court before an
constitution of the arbitral tribunal; arbitral tribunal is constituted may be set aside or modified
c. After the constitution of the arbitral tribunal; or by the arbitral tribunal
d. Any time during arbitral proceedings
It is clear in section 28 of the ADR Act that an application to
WHERE: An application for interim relief under Rule 5, may modify the measure granted by the court may be made with
be filed with any RTC which has jurisdiction over any of the the arbitral tribunal., because by their very nature, interim
following places: measures are temporary and may be modified or terminated
during the arbitral proceedings
a. Where the principal place of business of any of the
parties to the arbitration is located; In case of a possible conflict between an interim measure
b. Where any of the parties resides; issued by the court and that is issued by the tribunal , the
c. Where any of the acts sought to be enjoined are being court shall refer the matter to the arbitral tribunal which shall
performed, threatened to be performed or not being have the authority to decide such question.
performed; or
d. Where the real property subject to the arbitration or a Cross Border Enforcement
portion is situated
A Philippine Court may have no legal obligation to enforce
Form and contents of petition - The petition must be an interim order issued by a foreign arbitral tribunal unless
verified and it must state the following: it is made in the form of an arbitral award

a. The fact that there is an arbitration agreement; Arts. 4.5-4.6, Special ADR Rules
b. The fact that the arbitral tribunal has not been
constituted or if constituted, has no power to act or would Extent of Court Intervention
be unable to act effectively;
c. A detailed description of the relief sought; and In matters governed by this Chapter, no court shall intervene
d. The grounds relied upon for the allowance of the petition except where so provided in the ADR Act. Resort to
Philippine courts for matters within the scope of the ADR Act
Type of Interim Measure of Protection the Court may shall be governed by the Special ADR Rules.
Grant - Classified into three groups:
Court or Other Authority for Certain Functions of
a. Those which are aimed at facilitating the conduct of the Arbitration Assistance and Supervision
arbitral proceedings;
b. Those which are aimed at avoiding losses or damages The functions of Appointing Authority:
and measures aimed at preserving the status quo; or
c. Those which are aimed at facilitating the enforcement 1. Appointment of Arbitrators;
of the award 2. Challenge Procedure; and
3. Failure or Impossibility to Act
The court may grant, among others:
The functions of the RTC:
a. Preliminary injunction directed against a party to
arbitration; 1. Competence of Arbitral Tribunal to Rule on its Jurisdiction;
b. Preliminary attachment against property or garnishment 2. Application for Setting Aside an Exclusive Recourse
in the custody of a third person; Against Arbitral Award;
c. Appointment of receiver; 3. Recognition and Enforcement); and
d. Detention, preservation, delivery or inspection of 4. Venue and Jurisdiction
property; or
e. Assistance in the enforcement of an interim measure or Rule: A Court may not refuse to grant, implement or enforce
protection granted by the arbitral tribunal a petition for an interim measure, including those provided
for in the following, on the sole ground that the Petition is
Grounds for granting interim relief merely an ancillary relief and the principal action is pending
with the arbitral tribunal:
a. The need to prevent irreparable loss or injury
b. The need to provide security for the performance of any a. Arbitration Agreement and Interim Measures by
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

Court; measures from arbitrators and as in the case of Model Law,


b. Appointment of Arbitrators; it expressly makes the request to judicial authorities for
c. Challenge Procedure; interim
d. Court Assistance in Taking Evidence measures compatible with the arbitration agreement.

(Also read Parlade pp. 181-207) The provision contained in Article 26 of the Rules, authorize
the arbitrators to order interim measures of protection in
Interim Measures in International Commercial matters concerning the subject matter of dispute. The Article
Arbitration: Past, Present and Future specifically includes orders for conservation of property by
(Sandeep Adhipathi)45 way of ordering its deposit with third persons, sale of
perishable goods, etc.
The Model Law has a simple one-line provision regarding the
rights of the parties to approach a state court for interim There is doubt whether the reference to the conservation of
measures: property is just an example or a limit to the scope of the
interim measures. But, the plain reading suggests that it was
Article 9. Arbitration agreement and interim measures intended as just an example.
by court: It is not incompatible with an arbitration agreement
for a party to request, before or during arbitral proceedings, Even the Rules restrict the powers by limiting the orders to
from a court an interim measure of protection and for a court matters concerning the subject matter of the dispute. Many
to grant such measure. have interpreted the reference to ‘matters concerning the
subject matter of the dispute’ and ‘conservation of property’
It makes such a request to the state courts compatible with as severely limiting the section.
the agreement to arbitrate.
Further, it does not provide for any preconditions that need
But this provision leaves out some important aspects out of to be met in order for the arbitrators to issue the interim
its purview. For instance, it does not say anything about the measures. The Article also authorizes the arbitrators to
scope of the interim measures that the courts can order. require security for granting such orders.

Article 17 of the Model Law that deals with the interim The Rules are also silent regarding the enforceability of
measures arbitrators may order limits the scope to matters interim measures ordered by the tribunal.
relating to the subject matter of the dispute. The question
now is whether such limitation is necessary for the courts. When seen in light of Article 26(2) of the Rules, which
provides for the interim measures to be in the format of
Also, questions involving the preconditions for interim awards, the applicability of the New York Convention to the
measures, the types of interim measures, etc., are not interim awards granted by the tribunal becomes important.
answered. The general consensus so far has been that award
enforcement provisions of the Convention do not apply for
Even the provision dealing with power of arbitrators to order interim measures.
interim measures, is short and does not cover the basic
issues relating to it. Except for a limitation restricting such In light of the shortcomings, UNCITRAL is at present
interim measures of protection to matters relating to the discussing the possibility of amending the Model Law so as
subject matter of the dispute and providing discretionary to facilitate the harmonization of the national legislations
authority to order security for such measures, the provision relating to the interim measure.
is threadbare.
Conclusion
Another important issue that is missing is the status of ex-
parte orders. Specifically, this issue becomes a problem at The current position on interim measures available in
the time of enforcement of such orders. Courts can refuse to international arbitration in different legal systems, including
recognize such orders using Article 34, which provides for the national legislations, court ruling, international institutions
refusal if the party has not been given notice of the arbitral and international conventions have been analyzed in the
proceedings. paper.

Also, the Model Law has no provision regarding the Though the conditions more or less seem to be favorable for
enforcement of interim orders made by the tribunal. interim measures of protection, it is felt that there is a lot of
confusion surrounding this issue.
The UNCITRAL Rules contains provisions regarding interim

45
Digitalcommons.law.uga; 2003
66
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

In spite of the criticism for court intervention and specific tribunals to work with. Since issues like the preconditions
legislations regulating tribunal ordered interim measure, necessary for
there is an urgent need for a more favorable and harmonized providing interim relief, the scope of the relief that the
international structure to support arbitration, for arbitration to arbitrators can grant, etc., are not contained in most of the
adapt itself to the changing circumstances and remain as an rules, the arbitrators may have difficulty in deciding whether
alternative dispute resolution method in international an interim measure is necessary and whether they have the
commerce. authority to grant such order.

For example, the position on interim measures in United The author suggested that the UNCITRAL working group
States is still in great confusion. A party before agreeing to should also work on the UNCITRAL Arbitration Rules to
arbitration has to know the exact position of different circuits make it in consonance with the amendment to the Model Law,
on this important issue. The courts have taken differing views so parties using the Rules for ad-hoc arbitration and also
in both their authority to grant interim measures and that of other institutions can take advantage.
the arbitrators. So when a party signs an arbitration
agreement involving a United States party, it has a daunting Conduct of Arbitral Proceedings
task of finding out the circuit court that they will have to
approach and the position that the court is most likely to take Sec 30-31, RA 9285
in enforcing the interim measures. Probably the time has
come for the Federal Arbitration Act to be amended to meet SEC. 30. Place of Arbitration. – The parties are free to
the realities of the current international setup. agree on the place of arbitration. Failing such agreement,
the place of arbitration shall be in Metro Manila, unless the
As far as the present system goes, English Arbitration Act arbitral tribunal, having regard to the circumstances of the
probably is the only national legislation that comes close to case, including the convenience of the parties shall decide
providing a comprehensive coverage of all the issues on a different place of arbitration. The arbitral tribunal may,
concerned. unless otherwise agreed by the parties, meet at any place it
considers appropriate for consultation among its members,
Both the English courts and the legislations have supported for hearing witnesses, experts or the parties, or for inspection
the provision of interim measures from the courts and the of goods, other property or documents.
arbitrators.
The English have been favorable to the availability of interim SEC. 31. Language of the Arbitration. – The parties are
measures over the years. But even in the English legislation, free to agree on the language or languages to be used in the
there is some doubt regarding the enforcement of provisional arbitral proceedings. Failing such agreement, the language
orders by the arbitrators themselves and the power to to be used shall be English in international arbitration, and
approach the courts for enforcement. This position holds English or Filipino for domestic arbitration, unless the arbitral
good for most of the countries that are civil and common law tribunal shall determine a different or another language or
based. Hence, the need for a more harmonized international languages to be used in the proceedings. This agreement
setup to address this issue. or determination, unless otherwise specified therein, shall
apply to any written statement by a party, any hearing and
The work of UNCITRAL to amend the Model Law, so as to any award, decision or other communication by the arbitral
provide for issues involved in the interim measures of tribunal. The arbitral tribunal may order that any
arbitration is really important. Many nations both developed documentary evidence shall be accompanied by a
and developing, are considering the UNCITRAL Model Law translation into the language or languages agreed upon by
as a basis for drafting their own legislations. So a the parties or determined in accordance with paragraph 1 of
comprehensive Model Law would definitely go a long way in this Section.
setting up a more harmonized view on this issue.
(Also read Parlade pp. 208-239)
Most of the international institutions have adapted their rules
to provide interim measures of protection from the tribunals. Moot Problem46
However, each rule has shortcomings of varying degrees. (Asamura vs.Shwe Pwint Thone)
WIPO, AAA and ICC have provided the parties with the
The Parties
choice of incorporating their Optional Rules, which has been
designed specifically to meet the need for emergent interim
relief pending arbitration. Claimant: Asamura International Development Co. Ltd.
(AID); a private international development company
The international institutions may consider amending their specializing in crisis relief and development, assisting
Rules by providing a more elaborate structure for the bilateral donors and the private sector to manage projects in

46
Law Asia Moot Problem 2017; Asamura vs Shwe Pwint Thone
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

developing countries
The parties agreed to attend arbitration in Tokyo, but using
Respondent: Shew Pwint Thone Co., Ltd (SPT); local the KLRCA Rules.
Myanmar company teashops, jade carving and polishing
studios, and training centres The issues: Parties agreed that the issues to be decided in
the arbitration are as follows:
The agreement: They entered into a jade venture, which (i) The validity of the termination of the agreement by
involved 4 main business activities: SPT;
(ii) The ownership of the jade-mining machinery and
(i) exploration and extraction; equipment; and
(ii) breaking and cutting; (iii) Subsistence and ownership of rights in the JADEYE
(iii) processing and production; software.
(iv) distribution and sales.
The determination of damages, if any, will be done in a
AID sourced for second hand machinery and equipment from separate hearing.
Japan, purchased them, and reconditioned them. They
imported into Myanmar where the jade extraction and The arbitration clause:
production business officially began. AID also imparted “9. If there is any disagreement to this agreement in the
technical knowledge to SPT’s employees and students. future, as gentlemen of Japan and Myanmar, we will try to
SPT’s employees and students were trained on how to solve everything in a polite manner.
operate and maintain the jade-mining equipment and 10. Everything will be in accordance with and interpreted
machinery. under the law of the Golden Land of Myanmar.
11. To show respect towards the Golden Land, AID cannot
The conflict: The head of AID, Dr. Asamura, started to feel do or say anything harmful to the national interest and
the burden of the operational costs borne by his company, solidarity of Myanmar, and vice versa.”
so he suggested for both AID and SPT to make capital
contributions to the partnership. Mock Arbitration script by Group 6&7 (download here:
https://1drv.ms/w/s!AjgHSho4K72Tjmgqp0cvEY43odmj)
A confidant from SPT recommended an end to the
partnership with AID to save SPT because all the equipment Rendition of Award and Termination of Proceedings
and SPT’s people have the skills to handle things on their
own, and they don’t need that much control and involvement Article 4.32, IRR
from a third party anymore.
Article 4.32. Termination of Proceedings. (a) The arbitral
The heads of both parties then met at a bar in hotel. There, proceedings are terminated by the final award or by an order
SPT’s representative finally decided to end the partnership. of the arbitral tribunal in accordance with paragraph (b) of
Dr. Asamura protested, saying that SPT has no right to this Article. (b) The arbitral tribunal shall issue an order for
terminate the agreement. the termination of the arbitral proceedings when:

They further argued over the ownership of the machineries, (i) The claimant withdraws his/her/its claim, unless the
and most importantly, the special software they created for respondent objects thereto and the arbitral tribunal
their operations (JADEYE). recognized a legitimate interest on his/her/its part in
obtaining a final settlement of the dispute;
SPT claimed ownership over both, saying that they were the
ones who actually procured the permits, and thus, they were (ii) The parties agree the termination of the proceedings;
the ones recorded as the owner and operator of such
machineries. (iii) The arbitral tribunal finds that the continuation of the
proceedings has for any other reason become unnecessary
Since they were unable to settle their differences, they or impossible.
sought the opinion of a mutual party – Atty. Farid Zakwan, a
lawyer based in Myanmar. (c) The mandate of the arbitral tribunal ends with termination
of the arbitral proceedings subject to the provisions of
Atty. Zakwan recommended that the parties go for arbitration Articles 4.33 (Correction and Interpretation of Award,
at the Kuala Lumpur Regional Centre for Arbitration Additional Award) and paragraph (d) of Articles 4.34
(KLRCA) in Malaysia. (Application for Setting Aside an Exclusive Recourse against
Arbitral Award).
Dr. Asamura expressed his wish to have the arbitration in
Japan, toconfer upon him some sense of familiarity. (d) Notwithstanding the foregoing, the arbitral tribunal may,
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

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

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

47
Russian Law Journal, Vol. V (2017) Issue 2; Summary by Group
1 (Ericha Gonadan, et al.)
69
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

2) individuals who own or control the company and the of situations when the judicial decision would affect the right
company; of the third party even in the case when such party did not
3) one company being alter ego of another company; participate in the proceedings. It is supposed that such
4) a bank solicitor and a bank; different cases need different approach how the state court,
5) an insured and the insurer; arbitral tribunal or such third party should consider the
6) a wife and a husband; arbitral award which affects the rights or interests of the non-
7) a stockbroker and a client etc. participating party.

Also, the doctrine of judgment in rem should be mentioned. The following cases can be listed.
The doctrines of issue estoppel and cause of action relate to 1. An arbitral award in it’s the operative part directly stated
judgment in personam or inter partes, that is, they relate to the rights and obligation of the third party. This is the gross
judgment between parties. violation of the principle to be heard, the idea of
adversarial proceedings and the party autonomy principle.
A judgment in rem results from an action in rem. An action in This part of the arbitral award that violates the core
rem is proceedings to determine the status or condition of principles of arbitration should be considered as void.
the rem itself. A judgment in rem is conclusive against all There is no need of any special proceedings to annul such
persons, not only against the parties to the proceeding. As award. The third party, parties, arbitral tribunals and state
an example of judgment in rem the following judicial court should ignore such part of the arbitral award.
decisions can be named: the ownership of land, a lawful non- 2. An arbitral award indirectly affect the rights and obligation
conforming use of property; an abatement of rent order of the third party in case when
under rent control legislation; an adoption; the validity of a) the third party is a privy of one of the party;
treaty and others. b) the arbitral award is an award in rem;
c) the arbitral award has another effect on the rights of the
ILA recommendations concern only the arbitral awards of the third party, resulted from any substantive legal connection
international commercial arbitration and do not touch the (including contractual one) between party of arbitration
effect of the arbitral award to the proceedings in the state and the third party.
court. ILA admits that to promote efficiency and finality of
international commercial arbitration, arbitral awards should In these cases, to guarantee the stability of arbitral award,
have conclusive and preclusive effects in further arbitral the authority of arbitration itself, the balance of the rights of
proceedings. The conclusive and preclusive effects of parties and non-parties in arbitration the arbitral award
arbitral awards in further arbitral proceedings need not should have some limited effect towards non-parties.
necessarily be governed by national law and may be
governed by transnational rules applicable to international It is reasonable to quote here the main reasoning of the
commercial arbitration. opponents of the theory of the binding effect of an arbitral
award:
An arbitral award has conclusive and preclusive effects in 1) arbitration proceedings are only possible between the
further arbitral proceedings if: parties involved in arbitration agreement;
a) it has become final and binding in the country of origin, 2) the withdrawal of arbitration tribunal beyond the limits
and there is no impediment to recognition in the country of of the arbitration agreement is a ground reason for
the place of the subsequent arbitration; canceling the arbitration award;
b) it has decided on or disposed of a claim for relief which 3) arbitration awards do not prevent third parties to bring
is sought or is being reargued in the further arbitration claims on the same subject or on the same and cause of
proceedings; action to the state courts;
c) it is based upon a cause of action which is invoked in 4) arbitration awards do not have a collateral estoppel
the further arbitration proceedings or which forms the effect for subsequent judicial proceedings, so the third
basis for the subsequent arbitral proceedings; and party do not constrain by the arbitral award;
d) it has been rendered between the same parties. 5) the core of arbitration is the consent of all parties to the
arbitration proceedings. This principle of arbitration, in
An arbitral award has conclusive and preclusive effects in the particular, implies that the intervention of a third party is
further arbitral proceedings as to: possible only with the consent of both the disputing parties
a) determinations and relief contained in its dispositive and this person involved.
part as well as in all reasoning necessary thereto;
b) issues of fact or law which have actually been arbitrated If a third party did not participate in arbitration proceedings,
and determined by it, provided any such determination it can in no way be connected with the rendered award.
was essential or fundamental to the dispositive part of the
arbitral award. Such criticism of the idea of the binding effect of the arbitral
award for the third parties do not take into consideration the
Both res judicata and legal effect doctrines give us a variety following:

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

1) the idea of the respect to the arbitral award: the same (d) Unless otherwise agreed by the parties, a party may,
substantive effect to the rights of all parties and nonparties with notice to the other party, request, within thirty(30) days
should be given to the arbitral award as judicial decision receipt of the award, the arbitral tribunal to make an
has; additional award as to claims presented in the arbitral
2) the principle of procedure economy should prevent the proceedings but omitted from the award. If the arbitral
third party from the re-litigation of the same issues; tribunal considers the request to be justified, it shall make the
3) the possibility of parallel proceedings and other abuse additional award within sixty (60) days
should be excluded. It is also worth to be mention that the
idea of only procedural nature of the judicial decision and (e) The arbitral tribunal may extend, if necessary, the
arbitral award is peculiar to the modern German legal period of time within which it shall make a
science (as the judicial decision could not have any correctioninterpretation or an additional award under
substantive effect on the third party and such party could paragraphs (a) and (b) of this Article.
not have any right to challenge this decision by any means
but by bringing separate special claim (Art. 772 of the (f) The provisions of Article 4.31 (Form and Contents of
German Civil Procedure Code40)). Award) shall apply to a correction or interpretation ofthe
award or to an additional award.
Conclusion
Article 4.34. Aplication for Setting Aside an Exclusive
The development of private commercial relations could lead Recourse against Arbitral Award.
to the situation that it will be impossible to deliver an arbitral
award that does not affect any third party. The complexity of (a) Recourse to a court against an arbitral award may
the legal relations can result in the disability of arbitration be made only by application for setting aside inaccordance
itself as far as the arbitration does not have the same with second and third paragraphs of this Article.
mechanisms of involvement of third parties.
(b) An arbitral award may be set aside by the Regional
It means that with the purpose of the possibility of arbitration, Trial Court only If:
the stability of arbitral awards and legal certainty we should
presume that an arbitral award can affect rights and (i) the party making the application furnishes proof that:
obligations of third parties even if they do not participate in
the arbitral proceedings. (aa) a party to the arbitration agreement was under some
incapacity ; or the said agreement isnot valid under the law
Judicial Review of International Commercial Arbitral to which the parties have subjected it or, failing any indication
Awards thereon, under the law of the Philippines; or
Article 4.33-4.34, IRR
(bb) the party making the application was not given
proper notice of the appointment of anarbitrator or of the
Article 4.33. Correction and Interpretation of Award,
arbitral proceedings or was otherwise unable to present his
Additional Award. (a) Within thirty (30) days from receipt of
case; or
the award, unless another period of time has been agreed
upon by the parties:
(cc) the award deals with a dispute not contemplated by
or not failing within the terms of thesubmission to arbitration,
(i) A party may, with notice to the other party, request
or contains, decisions on matters beyond the scope of the
the arbitral tribunal to correct in the award anyerrors in
submission to arbitration, provided that, if the decisions on
computation, any clerical or typographical errors or any
matters submitted to arbitration can be separated from those
errors of similar nature; not so submitted, only the part of the award which contains
decisions on matters not submitted to arbitration may be set
(ii) A party may, it so agreed by the parties and with aside; or
notice to the other party, request the arbitraltribunal to give
an interpretation of a specific point or part of the award.
(dd) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance withthe agreement of the
(b) If the arbitral tribunal considers the request to be parties, unless such agreement was in conflict with a
justified, It shall make the correction or give the interpretation provision of ADR Act from which the parties cannot derogate,
within thirty (30) days from receipt of the request. The or, falling such agreement, was not in accordance with ADR
interpretation shall form part of the award. Act; or
(c) The arbitral tribunal may correct any error of the type (ii) the Court finds that:
referred to in paragraph (a) of this Article on its owninitiative
within thirty (30) day from the date of the award
(aa) the subject-matter of the dispute is not capable of
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Notes based on Judge J. Humiding’s Outline UC Law

settlement by arbitration under the law ofthe Philippines; or The Model Law constitutes a sound basis for the desired
harmonization and improvement of national laws.
(bb) the award is in conflict with the public policy of the
Philippines. Scope/Coverage

(c) An application for setting aside may not be made It covers all stages of the arbitral process from the arbitration
after three months have elapsed from the date on whichthe agreement to the recognition and enforcement of the arbitral
party making that application had received the award or, If a award.
request had been made under Article 4.33 (Correction and
Interpretation of Award, Additional Award) from the date on It reflects a worldwide consensus on the principles and
which that request has been disposed of by the Arbitral important issues of international arbitration practice. It is
tribunal acceptable to States of all regions and the different legal or
economic systems of the world.
(d) The court, when asked to set aside an award, may,
where appropriate and so requested by a party,suspend the Since its adoption by UNCITRAL, the Model Law has come
setting aside proceedings for a period of time determined by to represent the accepted international legislative standard
it in order to give the arbitral tribunal an opportunity resume for a modern arbitration law. A significant number of
the arbitral proceedings or take such other action as in the jurisdictions (90 countries since 2012, including ours) have
arbitral tribunal's opinion will eliminate the grounds for setting enacted arbitration legislation based on the Model Law.
aside.
States are encouraged to make as few changes as possible
(e) A party may bring a petition under this Article before when incorporating the Model Law into their legal systems.
the court in accordance with the Special ADR Rules.
The CLOUT
(Also read Parlade pp. 264-251)
UNCITRAL has established a reporting system for Case Law
UNCITRAL 2012 Digest of Case Law on the Model Law on UNCITRAL Texts (CLOUT).
of International Commercial Arbitration 48
CLOUT was established in order to assist judges, arbitrators,
History lawyers, and parties to business transactions, by making
available decisions of courts and arbitral tribunals
The UNCITRAL Model Law on International Commercial interpreting
Arbitration (“the Model Law”) was adopted by the United UNCITRAL texts.
Nations Commission on International Trade Law
(UNCITRAL) on 21 June 1985, at the end of the 18th session Majority of its cases refers to the United Nations Convention
of the Commission. on Contracts for the International\ Sale of Goods (Vienna,
1980), and to the Model Law.
The UN General Assembly (through Resolution 40/72 on
December 11, 1985) recommended “that all States give due General Provisions
consideration to the Model Law on International Commercial
Arbitration, in view of the desirability of uniformity of the law Scope of Application: It applies to international commercial
of arbitral procedures and the specific needs of international arbitration.
commercial arbitration practice”.
The term “commercial” should be given a wide interpretation
The Model Law was amended by UNCITRAL on 7 July 2006, to cover matters arising from all relationships of a
at its 39th session. commercial nature, whether contractual or not.

Purpose Relationships of a commercial nature include, but are not


limited to:
The Model Law was developed to address considerable a. any trade transaction for the supply or exchange of
disparities in national laws on arbitration. goods or services;
b. distribution agreement;
National laws were often particularly inappropriate for c. commercial representation or agency;
international cases, hence the need for improvement and d. factoring; leasing;
harmonization. e. construction of works;
f. consulting;

48
Uncitral.org
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

g. engineering; Other issues that have been raised in case law include:
h. licensing; a. refusals to take evidence;
i. investment; b. absence of consideration by the arbitral tribunal of
j. financing; evidence presented; and
k. banking; c. the language of the proceedings.
l. insurance;
m. exploitation agreement or concession; Courts in various jurisdictions also ruled that:
n. Joint venture and other forms of industrial or business
cooperation; and a. A party cannot invoke a lack of proper participation
o. carriage of goods or passengersby air, sea, rail or or proper representation in the arbitral proceedings
road. as a ground to resist enforcement if that is not due
to circumstances attributable to the arbitral tribunal
An arbitration is international if: or extraneous events beyond the parties’ control.
a. the parties to an arbitration agreement have, at the
time of the conclusion of that agreement, their places b. A lack of participation by the legal representatives
of business in different States; or which is due to unclear instructions by the parties is
b. one of the following places is situated outside the not sufficient to constitute violation of due process.
State in which the parties have their places of
business: c. The right to due process was not violated where one
i. the place of arbitration if determined in, or party was unable to attend the hearing, allegedly
pursuant to, the arbitration agreement; since it was not granted a visa for the country where
ii. any place where a substantial part of the the hearing took place. Such party had been notified
obligations of the commercial relationship is of the arbitral proceedings and had the opportunity
to be performed or the place with which the to participate in the proceedings.
subject matter of the dispute is most closely
connected; or d. The lack of participation due to insufficient funding
c. the parties have expressly agreed that the subject or because the hearing was not held at the place of
matter of the arbitration agreement relates to more arbitration were not considered sufficient to justify an
than one country. assumption of a violation of the right to be heard.

If a party has more than one place of business, the place of e. A party can only present its case properly if the
business is that which has the closest relationship to the relevant documents are served upon it. It sufficient
arbitration agreement. that the arbitral tribunal served the relevant
document to the respondent’s last known address.
If a party does not have a place of business, reference is to
be made to his habitual residence. f. The arbitral tribunal is under no obligation to discuss
with the parties the case or its preliminary legal view
Full copy: http://www.uncitral.org/pdf/english/clout/MAL- on the facts. The arbitral tribunal should inform the
digest-2012-e.pdf parties in instances where it would decide to deviate
from a legal position previously communicated to the
Case law on Art. 36: Grounds for refusing enforcement parties or where its decision would for other reasons
come as a surprise to the parties.
Courts construing Article 36 found that the list of grounds for
refusing recognition and enforcement of an arbitral award in g. Arbitral tribunals are not under an obligation to
paragraph (1) was exclusive and should be construed address all details of the arguments raised and the
narrowly. evidence offered by the parties in the reasoning of
their decisions. Those that are irrelevant need not be
On Due Process: Art. 36, par. (1)(a)(ii) of Model Law mentioned.

The concept of “unable to present his case”: It is sometimes h. There is a presumption that the tribunal has
suggested that this provision only covers general violations complied with its obligation to take the parties’
of the right to present one’s case and not issues pertaining submissions into account. The mere silence of the
to evidence. However, certain courts have dealt with decision on certain points raised by the defendant
rejections by arbitral tribunals of evidence. does not mean that the arbitral tribunal has not
considered the argument.
One German court treated the refusal of the arbitrator to hear
witnesses to be primarily a question of the violation of the i. The defense of lack of understanding of language
right to be heard. will not be successful if the language of the arbitral

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

proceedings had explicitly been agreed upon or was discretion to refuse enforcement.
determined in line with the chosen arbitration rule. A
party who is unable to understand the language Case: RCBC Capital Corp vs BDO49
should arrange for the necessary translations. It is
sufficient that a party is represented by a lawyer who (May an international arbitral award be set aside by the
speaks the language. courts?)

That the arbitral award has not become binding, has This case emanated from arbitration proceedings
been set aside or suspended—Art. 36, par. (1)(a)(v) commenced by RCBC pursuant to the arbitration clause
under its Share Purchase Agreement (SPA) with EPCIB.
The arbitral award has not yet become binding upon the
parties: The parties agreed on the following:
a. Laws to be Applied - The Tribunal shall determine the
In the absence of a definition of when an award becomes issues to be resolved in accordance with the laws of
binding, courts in several jurisdictions had to address that the Republic of the Philippines.
matter. b. Procedure to be Applied - The proceedings before the
Tribunal shall be governed by the ICC Rules of
A Canadian court found that an arbitral award was binding Arbitration and the law currently applicable to
and could be enforced irrespective of any confirmation of the arbitration in the Republic of the Philippines.
arbitral award by a court in the jurisdiction where the award
was made. While the Tribunal constituted by the International Chamber
of Commerce-International Commercial Arbitration (ICC-
Other courts held that an award was binding under the law ICA) was conducting the arbitration proceedings, EPCIB
of the country in which it was made if there was no statutory merged with BDO. BDO assumed all its liabilities and
remedy against the award providing for a review of its merits. obligations.

The arbitral award has been set aside or suspended: The Tribunal issued an award in favor of RCBC, ordering
BDO to pay RCBC. The RTC of Makati confirmed this
After an arbitral award is made, the claimant may seek decision.
enforcement either before the courts in the State where the
award was made or before the courts in another State (ex: RCBC filed an urgent motion for the issuance of a writ of
where the defendant has assets). execution, to implement the award, and the RTC granted this.
However, on appeal, the CA reversed the RTC’s
But if the award is set aside or vacated by the court in the confirmation of the award.
State of origin, the enforcement of the award in that State will
not be possible. The party seeking enforcement may then try RCBC filed a petition to set aside CA’s decision of reversing
to have the award enforced by a court in another State. of the award.

Courts in that other State (the State of enforcement) usually Issue: Whether there was legal ground to vacate the award
face the issue of whether to allow enforcement of the award, by the Tribunal from the ICC-ICA.
even if it had been set aside in the State of origin.
SC’s decision: Yes, on the ground of evident partiality of the
In one decision, it was found that if the arbitral award had Tribunal/arbitrator, under Rule 11.4 of the Special ADR
been set aside at the place of arbitration, the award was no Rules.
longer binding. Thus, the enforcement court had no power to
recognize or enforce such arbitral award. This would be the Evident partiality is not defined in our arbitration laws. The
case even though there was a possibility that the decision SC then looked at international court decisions.
setting aside the award would be revised in further
proceedings which were pending at the place of arbitration. In the Federal Arbitration Act of the US, evident partiality was
defined as both: (a) an arbitrator’s explicit bias toward one
Canadian courts have confirmed at least obiter dicta that party; and (b) an arbitrator’s inferred bias when an arbitrator
they have discretion to enforce awards which have been set fails to disclose relevant information to the parties.
aside in their countries of origin.
In Commonwealth Coatings Corp. v. Continental
Another court held that the suspension of the arbitral award Casualty Co. (1968), the US SC laid down the rule that the
at the place of arbitration had no bearing on the court’s arbitrators must disclose to the parties "any dealings that

49
GR No. 196171; Dec. 10, 2012
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Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

might create an impression of possible bias," and that refuses to pay its share on the advance on costs.
underlying such standard is "the premise that any tribunal
permitted by law to try cases and controversies not only must By furnishing the parties with a copy of this article, Chairman
be unbiased but also must avoid even the appearance of Barker practically armed RCBC with supporting legal
bias." Arbitrators should not automatically be disqualified arguments under the "contractual approach" discussed by
from an arbitration proceeding because of a business Secomb.
relationship where both parties are aware of the relationship
in advance, or where the parties are unaware of the It may also be mentioned that Matthew Secomb is a member
circumstances but the relationship is trivial. However, in the of the ICC Secretariat and the "Counsel in charge of the file".
event that the arbitrator has a "substantial interest" in the This bolstered the impression that Chairman Barker was
transaction at hand, such information must be disclosed. predisposed to grant relief to RCBC by issuing a partial
award.
In Morelite Construction Corp. v. New York District
Council Carpenters Benefit Funds, the court ordered for Indeed, fairness dictates that Chairman Barker refrain from
the vacation of the arbitrator’s award, there being a father- suggesting to or directing RCBC towards a course of action
son relationship between the arbitrator and the president of to advance the latter’s cause.
appellee union. This provided strong evidence of partiality
and was unfair to appellant construction contractor. Though done purportedly to assist both parties, Chairman
Barker’s act clearly violated Article 15 of the ICC Rules
There is evident partiality when a reasonable person would declaring that “in all cases, the Arbitral Tribunal shall act fairly
have to conclude that an arbitrator was partial to one party and impartially and ensure that each party has a reasonable
to the arbitration. opportunity to present its case."

In this case, BDO claimed that the Arbitration Tribunal The actuations of arbitrators "must be guarded and
exceeded its powers in deciding the issue of advance cost measured lest the best of intentions be misconstrued."
not contemplated in the TOR, and that Chairman Barker
acted with evident partiality in making such award. The SC then adopts the CA’s standard for evident partiality:
the reasonable impression of partiality standard, which
The RTC held that BDO failed to substantiate these requires a showing that a reasonable person would have to
allegations. On appeal, the CA likewise found that the conclude that an arbitrator was partial to the other party to
Arbitration Tribunal did not go beyond the submission of the the arbitration.
parties.
Such interest or bias "must be direct, definite and capable of
However, the CA found factual support in BDO’s charge of demonstration rather than remote, uncertain, or speculative."
partiality.
The SC clarified, however, that the merits of the parties’
The ICC Rules require that an arbitral tribunal should act arguments as to the propriety of the issuance of the Second
fairly and impartially. Hence, an arbitrator’s conduct should Partial Award are not in issue here. Courts are generally
be beyond reproach and suspicion. His acts should be free without power to amend or overrule merely because of
from the appearances of impropriety. disagreement with matters of law or facts determined by the
arbitrators. They will not review the findings of law and fact
An examination of the circumstances claimed to be contained in an award, and will not undertake to substitute
illustrative of Chairman Barker’s partiality is indicative of bias. their judgment for that of the arbitrators. A contrary rule
would make an arbitration award the commencement, not
Chairman Barker gave the parties a copy of an article by the end, of litigation. It is the finding of evident partiality which
Matthew Secomb entitled "Awards and Orders Dealing With constitutes legal ground for vacating the award and not the
the Advance on Costs in ICC Arbitration: Theoretical Arbitration Tribunal’s application of the ICC Rules adopting
Questions and Practical Problems". His act established that the "contractual approach" tackled in Secomb’s article.
he had pre-formed opinions—that he had prejudged the
matter before him. Alternative dispute resolution methods or ADRs are
encouraged. By enabling parties to resolve their disputes
Chairman Barker’s act of furnishing the parties with copies amicably, they provide solutions that are less time-
of Matthew Secomb’s article is indicative of partiality such consuming, less tedious, less confrontational, and more
that a reasonable man would have to conclude that he was productive of goodwill and lasting relationship.
favoring the Claimant, RCBC.
The most important feature of arbitration, and indeed, the
Mr. Secomb’s article specifically dealt with the situation when key to its success, is the public’s confidence and trust in the
one of the parties to international commercial arbitration integrity of the process. For this reason, the law authorizes

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

vacating an arbitral award when there is evident partiality in may defeat speed, predictability and certainty as parties may
the arbitrators. be unfamiliar with the vagaries of the rules of domestic court
systems.
Hence, in 2012, the SC denied BDO’s petition and affirmed
the CA’s decision to have the award vacated. By utilizing the autonomous process of international
arbitration, the uncertainty brought on by a foreign law and
----(separate case)---- forum to resolve disputes may be lessened if not
altogether avoided.
However, in 2014, the parties submitted to the SC a Joint
Motion and Manifestation, submitting and praying that: Enforcement of an arbitral award is greatly facilitated by the
1958 United Nations Convention on the Recognition and
“5. After negotiations, the Parties have mutually agreed that Enforcement of Foreign Arbitral Awards (New York
it is in their best interest and general benefit to settle their Convention), with the growing liberality of judicial
differences with respect to their respective causes of action, interpretation favoring enforcement.
claims or counterclaims in the RCBC Capital Petition and the
BDO Petition, with a view to a renewal of their business An arbitral award is generally easier to enforce than a court
relations. judgment, largely due to most states’ accession to the New
York Convention.
6. Thus, the parties have reached a complete, absolute and
final settlement of their claims, demands, counterclaims and As of 2010, the New York Convention is in force in 143
causes of action arising, directly or indirectly, from the facts countries, including the Philippines.
and circumstances giving rise to, surrounding or arising from
both Petitions, and have agreed to jointly terminate and However, to protect “fundamental interests of the parties,
dismiss the same in accordance with their agreement. society and the rule of law,” the Convention recognizes
certain grounds that may be raised before the courts to
7. In view of the foregoing compromise between the Parties, oppose enforcement of an arbitral award.
BDO, RCBC Capital and Go/Shareholders, with the
assistance of their respective counsels, have decided to This paper focuses on the “public policy” exception under
jointly move for the termination and dismissal of the above- ArticleV (2)(b) of the Convention.
captioned cases with prejudice.”
Public policy here is said to be that which reflects “the
The parties asked for the termination and dismissal of the fundamental economic, legal, moral, political, religious and
cases, with prejudice. social standards of every state” where enforcement is sought.

Hence, the SC ordered that the cases be “dismissed with To date (2010 when this was written), there is no Philippine
prejudice and deemed closed and terminated”. Supreme Court case law that specifically refers to non-
enforcement of foreign arbitral awards on grounds of
Judicial Review of Arbitral Awards in the Philippines: violation of public policy. This scarcity of case law in the
A Look into the Application of the Public Policy Supreme Court adds to the difficulty for lower courts in
Exception Under the NY Convention Applying United finding guidance when faced with the public policy defense
States Precedents against enforcement, especially so that adherence to judicial
(Mary Jude Cantorias)50 precedents is embodied in Article 8 of the Philippine Civil
Code;28 hence, the need to develop an arbitration
As commercial transactions become increasingly complex civilization by looking to well-evolved jurisdictions like the US.
with the expansion of international trade, it became practical
to include dispute resolution mechanisms in contracts. In Parsons vs RAKTA, the US court held that the public
Arbitration is one such mechanism. policy defense is not meant to merely protect national
interests; an action that violates local public policy may not
Parties to international trade need their transactions to be necessarily violate international public policy. A distinction
unhampered by disputes. Should a dispute arise, they want must still be made where public policy is invoked in the field
such to be resolved speedily, with outcomes that are of international commercial arbitration, i.e. beyond mere
predictable and certain. contravention of domestic law.

Resorting to the national courts of one country or another The public policy contemplated under Article V (2) (b) are

50
Arellano Law and Policy Review Vol. II, No. 1; Presented at a
Conference at the University of Massachusetts Boston, “Conflict
Studies: The New Generation of Ideas,” Oct. 22-23, 2010
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Notes based on Judge J. Humiding’s Outline UC Law

those which essentially pertains to matters that have commercial transactions.


international connection or application.
In long-term commercial relationships, the details of an
The public policy defense should be narrowly construed, agreement to arbitrate are generally established in the initial
especially so where the public policy allegedly violated is not contract between the parties.
well defined and dominant. The court concluded that refusal
to enforce a foreign arbitral award should only be premised Ironically, the contractual nature of international arbitration
on violation of the enforcing state's “most basic notions of brings about many drawbacks. Although the possibility of an
morality and justice.” arbitrator abusing an unchecked process may jeopardize its
integrity, interference in a private agreement is contrary to
The approach of Philippine court decisions interpreting the fundamental goals of international arbitration.
national public policies should be consistent with the
objectives of the Convention and the public policy interests As noted by one commentator, "the effectiveness of
of other Contracting States, not merely advancing “parochial, international commercial arbitration depends on the
local interests.” predictable enforcement of arbitral agreements and awards."

Philippine court decisions should add to the growing International arbitration policies are founded upon two basic
development of an “arbitration civilization” in the Philippines interests:
by providing guidance in defining this area of law and a. preserving the finality of arbitral awards; and
recognizing what is merely frivolous opposition clutching at b. maintaining a just system. 6
the public policy “straw”.
Arbitration is a consensual process. The contractual nature
Finally, it may be an interesting innovation to have specific of an arbitration permits international companies to pre-
Supreme Court justices tasked to oversee the development arrange a predictable system of dispute resolution which
of Philippine jurisprudence in the arbitration field. Such preserves the privacy of their business relationship.
expertise will help in the speedy disposition of arbitration
matters brought to court, helping the Philippines emerge as Judicial review undermines the fundamental benefits of
a sophisticated international arbitration hub. submitting to commercial arbitration. The very reasons
parties enter into international arbitration agreements (to
Judicial Review of International Arbitral Awards: increase speed, neutrality, efficiency, privacy, and finality,
Preserving Independence in International Commercial and to reduce costs of dispute resolution) are rendered void
Arbitrations if a national court is permitted to reexamine the decision of
(Jessica L. Gelander)51 an arbitral panel.

The resolution of potential disputes is of great concern to Under a judicial system of control, increased costs in time
parties involved in international business transactions. Due and money are passed onto parties who selected arbitration
to the high cost of overseas litigation and the uncertainty of as a way to protect their rights. Ultimately, such parties are
relying upon a foreign legal system, such disputes are often denied the protections they sought through arbitration and
difficult to resolve. possibly priced out of the system altogether.

It is essential to the maintenance of international trade Nevertheless, there are dangers inherent in the complete
relationships that businesses feel confident in the methods independence of arbitral forums. A forum with no system of
by which they resolve commercial disputes. review is more susceptible to abuse.
Arbitration agreements allay many of the concerns relating If the system of international arbitration is to continue to meet
to international business by ensuring a degree of the needs of international business, it is necessary to reach
organization and predictability in the process through which a balance between the conflicting goals of justice and finality
disputes are resolved. in commercial arbitration.
Accordingly, international businesses frequently enter into Current Status of Judicial Review of Arbitral Awards
arbitration agreements that pre-arrange the procedures to be
followed in the event that a dispute arises. Establishing a The primary issue facing the system of international
process of dispute resolution in advance helps to create a arbitration concerns the review of arbitral awards. Since
"neutral playing field," increasing the parties' comfort level there is no institutional system of review, aggrieved parties
and promoting future involvement in international

51
Marquette Law Review, Vol. 80, Issue No. 2, Winter, 1997

77
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Notes based on Judge J. Humiding’s Outline UC Law

are forced to appeal arbitrators' decisions in national courts. to enforcement as an "escape hatch," under which a court
may interject "national bias and political undertones" into its
The role of domestic judicial systems is limited. There is no
review of an arbitrator's substantive conclusions in rendering assessment of the award.
an award.
Consideration of policy issues could threaten the viability of
Notwithstanding the parties' intent to provide for a final international arbitration as a mechanism for commercial
decision, an arbitral award is subject to statutory defenses dispute resolution. At a minimum, it would compromise the
regarding enforcement. Unfortunately, questions submitted neutrality of the proceeding, frustrating the fundamental
for review are frequently intertwined with the substantive goals and intentions of the parties.
issues of a dispute.
Common Law Standard of Manifest Disregard
Parties to an arbitration agreement are faced with
considerable uncertainty. Ironically, uncertainty is one of the Many courts have adopted the common law standard of
problems parties seek to avoid through the execution of an "manifest disregard."
arbitration agreement.
The standard derives from dicta contained in the 1953 US
1. Excess of Authority Supreme Court case of Wilko v. Swann. Here, the Court
invalidated an arbitration agreement on the grounds that the
Due to the contractual nature of arbitration, an award must dispute arose under the Securities Act and that
be based on the provisions of the agreement, rather than an congressional intent was better served by prohibiting
arbitrator's personal interpretation of legislative requirements. arbitration of a securities issue.

If an arbitrator fails to confine his or her decision to the Several courts have either declined to apply the doctrine of
provisions of the agreement, the arbitrator has exceeded the manifest disregard or criticized its appropriateness.
scope of authority, rendering the award unenforceable.
In discussing its reluctance to apply the standard, one court
However, it is often difficult to distinguish between a mere noted that, "indeed, we have expressed some doubt as to
error of law and an action which wholly exceeds arbitral whether it should be adopted since the standard would likely
authority. never be met when the arbitrator provides no reasons for its
award (which is typically the case).
Thus, a court risks imposing its own substantive evaluation
of a dispute in reviewing the scope of an arbitrator's authority. Bernhardt v. Polygraphic Company of America, Inc.,
The burden of showing an arbitral tribunal has exceeded its suggests that application of a non-statutory standard of
contractual authority falls on the party challenging manifest disregard to an arbitral award would be
confirmation of the award. inappropriate. The Court stated that “whether the arbitrators
misconstrued a contract is not open to judicial review," and
The strength of the public policy favoring international that arbitrators may draw on their personal knowledge in
arbitration renders this burden difficult to overcome. making an award.

2. Public Policy The fact that the manifest disregard doctrine has existed
since 1953, but was never incorporated into the New York
A reviewing court may also vacate an award that it finds Convention or the Federal Arbitration Act, suggests that
contrary to domestic public policy. Congress intended to exclude it as a standard of review for
arbitral awards.
Review under this "catch-all" standard is somewhat
troublesome. The court in Fotochrome Inc. v Copal Co. Balancing the Interests of Review and Independence
limited its application of this provision to circumstances in
which recognizing the award would violate fundamental The uncertainties of litigation are precisely what parties to an
conceptions of "morality and justice”. arbitration agreement seek to avoid by establishing a
procedure for non-judicial dispute resolution.
In W.R. Grace v. Local 759, the court explained that under
this test, the policy must be "well defined and dominant" and The resolution of international commercial disputes is
derive from "reference to the laws and legal precedents and complicated and expensive. Parties to an arbitration
not from general consideration of supposed public interests." agreement attempt to minimize the disadvantages inherent
to potential disputes involving international business
One commentator characterized the public policy exception transactions through arbitration, which carries with it the
benefits of speed and cost efficiency.
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Notes based on Judge J. Humiding’s Outline UC Law

The pressure that national judicial review places upon the arbitration.
system of arbitration eliminates these advantages, and the
consequence may be a reduction in international trade as Imposing national review onto international arbitral awards
businesses become discouraged with the system." will only produce skepticism and reluctance to submit to
international commercial arbitration.
In the commercial context, time is often a key concern when
a dispute arises. Thus, the finality of a decision is one of the Recognition & Enforcement of Foreign Arbitral Awards
most attractive features of the arbitration procedure.
1958 New York Convention on the Recognition and
Although judicial review may increase the accuracy of Enforcement of Foreign Arbitral Awards
arbitration decisions, the costs of such review is passed on
to the parties submitting to arbitration, thereby negating the The Convention entered into force on 7 June 1959.
benefits of arbitration and undermining the system altogether.
How to become a party: The Convention is closed for
Due to the negative impact that a system of review has on signature. It is subject to ratification, and is open to accession
international commercial arbitration, review acts as a by any Member State of the United Nations, any other State
"roadblock" to its effectiveness. which is a member of any specialized agency of the United
Nations, or is a Party to the Statute of the International Court
Notwithstanding the negative effect judicial review has on the of Justice
viability of international commercial arbitration, it is
unrealistic to presume that courts will permit the standards Optional and/or mandatory declarations and
of review to disappear altogether. Consequently, it is crucial notifications: When signing, ratifying or acceding to the
that the standards be clarified and narrowed such that Convention, any State may on the basis of reciprocity
parties to arbitration are afforded a reasonable level of declare that it will apply the Convention to the recognition
certainty in their expectations. and enforcement of awards made only in the territory of
another Party to the Convention.
In assessing the problems surrounding the grounds for
vacating arbitral awards, courts have considered the Denunciation/Withdrawal: Any Party may denounce this
following issues: Convention by a written notification to the Secretary-General
of the United Nations. Denunciation shall take effect one
1. the absence of a complete record upon which to year after the date of the receipt of the notification by the
apply the standards; Secretary-General.
2. the interconnection of arbitral procedure with the
merits of the dispute; and Article V – Grounds for Refusing Recognition
3. the possible misapplication of the standards due to
the lack of clarity in their scope. 1. Recognition and enforcement of the award may be
refused, at the request of the party against whom it is invoked,
Conclusion only if that party furnishes to the competent authority where
the recognition and enforcement is sought, proof that:
The strong policy supporting international arbitration dictates
that courts preserve the independence of arbitral tribunals (a) The parties to the agreement referred to in article II were,
and effectuate the intent of parties to finalize their disputes under the law applicable to them, under some incapacity, or
through arbitration. the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon,
Although there are dangers inherent in an unchecked system under the law of the country where the award was made;
of dispute resolution, parties to an arbitration agreement are
free to balance the costs and benefits of arbitration and (b) The party against whom the award is invoked was not
overseas litigation. given proper notice of the appointment of the arbitrator or of
the arbitration proceedings or was otherwise unable to
The advantages of arbitration in an international commercial present his case;
context are strong, eliminating a great deal of cost and
uncertainty. Parties involved in international trade realize the (c) The award deals with a difference not contemplated by or
benefit of arranging a neutral, efficient, and final method of not falling within the terms of the submission to arbitration, or
resolving commercial disputes. Accordingly, they voluntarily it contains decisions on matters beyond the scope of the
submit to the arbitral process. submission to arbitration, provided that, if the decisions on
matters submitted to arbitration can be separated from those
It is imperative that both domestic and foreign parties remain not so submitted, that part of the award which contains
confident in the predictability and autonomy of international decisions on matters submitted to arbitration may be
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Notes based on Judge J. Humiding’s Outline UC Law

recognized and enforced; foreign arbitral award and not as a judgment of a foreign
court.
(d) The composition of the arbitral authority or the arbitral
procedure was not in accordance with the agreement of the (e) A foreign arbitral award when confirmed by the
parties, or, failing such agreement, was not in accordance Regional Trial Court, shall be enforced in the same manner
with the law of the country where the arbitration took place; as final and executory decisions of courts of law of the
Philippines.
(e) The award has not yet become binding on the parties, or
has been set aside or suspended by a competent authority (f) If the Regional Trial Court has recognized the arbitral
of the country in which, or under the law of which, that award award but an application for rejection and/or) suspension of
was made. enforcement of that award is subsequently made, the
Regional Trial Court may, if it considers the application to be
2. Recognition and enforcement of an arbitral award may proper, vacate or suspend the decision to enforce that award
also be refused if the competent authority in the country and may also, on the application of the party claiming
where recognition and enforcement is sought finds that: recognition or enforcement of that award, order the other
party seeking rejection or suspension to provide appropriate
(a) The subject matter of the difference is not capable of security.
settlement by arbitration under the law of that country; or
Article 4.36. Grounds for Refusing Recognition or
(b) The recognition or enforcement of the award would be Enforcement.
contrary to the public policy of that country.
A CONVENTION AWARD.
Article 4.35-4.46, IRR
Recognition or enforcement of an arbitral award, made in a
Article 4.35. Recognition and Enforcement. (a) A foreign state, which is a party to the New York Convention, may be
arbitral award shall be recognized as binding and, upon refused, at the request of the party against whom it is
petition in writing to the regional trial Court, shall be enforced provoked, only if the party furnishes to the Regional Trial
subject to the provisions of this Article and of Article 4.36 Court proof that:
(Grounds for Refusing Recognition or Enforcement).
(a) The parties to the arbitration agreement are, under
(b) The petition for recognition and enforcement of such the law applicable to them, under some incapacity; or the
arbitral awards shall be filled with the Regional Trial Court In said agreement is not valid under the law to which the parties
accordance with Special ADR Rules. have subjected it or; failing any indication thereon, under the
law of the country where the award was made; or
(i) Convention Award - The New York Convention shall
govern the recognition and enforcement of arbitral awards (b) the party against whom the award is invoked was not
covered by said Convention. The petitioner shall establish given proper notice of the appointment of an arbitrator or of
that the country in which the foreign arbitration award was the arbitral proceedings or was otherwise in able to present
made is a party to the New York Convention his case; or

(ii) Non-Convention Award – The recognition and (c) the award deals with dispute not contemplated by or
enforcement of foreign arbitral awards not covered by the not failing within the terms of the submission to arbitration, or
New York Convention shall be done in accordance with it contains decisions on matters beyond the scope of the
procedural rules to be promulgated by the Supreme Court. submission to arbitration; provided that, if the decisions on
The court may, on grounds of comity and reciprocity, matters submitted to arbitration can be separated from those
recognize and enforce a nonconvention award as a not so submitted, that part of the award which contains
convention award. decisions on matters submitted to arbitration may be
recognized and enforced; or
(c) The party relying on an award or applying for its
enforcement shall file with the Regional Trial Court the (d) the composition of the arbitral tribunal or the arbitral
original or duly authenticated copy of the award and the procedure was not in accordance with the agreement of the
original arbitration agreement or a duly authenticated copy parties or, failing such agreement, was not in accordance
thereof. If the award or agreement is not made in an official with the law of the country where the arbitration too place; or
language of the Philippines, the party shall supply a duly
certified translation thereof into such language. (e) the award has not become binding on the parties or
has been set aside or suspended by a court of the country in
(d) A foreign arbitral award when confirmed by a court which, or under the law of which, that award was made.
of a foreign country, shall be recognized and enforced as a
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Notes based on Judge J. Humiding’s Outline UC Law

Recognition and enforcement of an arbitral award may also in accordance with the Special ADR Rules.
be refused if the Regional Trial Court where recognition and
enforcement is sought finds that: Any stipulation by the parties that the arbitral tribunal’s award
or decision shall be final, and therefore not appealable, is
(a) the subject-matter of the dispute is not capable of valid. Such stipulation carries with it a waiver of the right to
settlement by arbitration under the law of Philippines; or appeal from an arbitral award but without prejudice to judicial
review by way of certiorari under Rule 65 of the Rules of
(b) the recognition or enforcement of the award would be Court.
contrary to the public policy of the Philippines.
Article 4.38. Venue and Jurisdiction. Proceedings for
A party to a foreign arbitration proceeding may oppose an recognition and enforcement of an arbitration agreement or
application for recognition and enforcement of the arbitral for vacation or setting aside of an arbitral award, and any
award in accordance with the Special ADR Rules only on the application with a court for arbitration assistance and
grounds enumerated under paragraph (a) and (c) of Article supervision, except appeal, shall be deemed as special
4.35 (Recognition and Enforcement). Any other ground proceedings and shall be filed with the Regional Trial Court
raised shall be disregarded by the Regional Trial Court. where:

B. NON-CONVENTION AWARD. (a) the arbitration proceedings are conducted;


(b) where the asset to be attached or levied upon, or the
(a) A foreign arbitral award rendered in a state which is act to be enjoined is located;
not a party to the New York Convention will berecognized (c) where any of the parties to the dispute resides or has
upon proof of the existence of comity and reciprocity and its place of business; or(d) in the National Capital Judicial
may be treated as a convention award. If not so treated and Region at the option of the applicant.
if no comity or reciprocity exists, the non-convention award
cannot be recognized and/or enforced but may be deemed Article 4.39. Notice of Proceedings to Parties. In a special
as presumptive evidence of a right as between the parties in proceeding for recognition and enforcement of an arbitral
accordance with Section 48 of the Rules of Court. award, the court shall send notice to the parties at their
address of record in the arbitration, or if any party cannot be
(b) If the Regional Trial Court has recognized the served notice at such address, at such party’s last known
arbitral award but a petition for suspension of enforcementof address. The notice shall be sent at least fifteen (15) days
that award is subsequently made, the Regional Trial Court before the date set for the initial hearing of the application.
may, if it considers the petition to be proper, suspend the
proceedings to enforce the award, and may also, on the Article 4.40. Legal Representation in International
application of the party claiming recognition or enforcement Commercial Arbitration. In international commercial
of that award, order the other party seeking suspension to arbitration conducted in the Philippines, a party may be
provide appropriate security. represented by any person of his/her choice: Provided, that
such representative, unless admitted to the practice of law in
(c) If the petition for recognition or enforcement of the the Philippines, shall not be authorized to appear as counsel
arbitral award is filed by a party and a counter-petitionfor the in any Philippine court or any other quasi-judicial body
rejection of the arbitral award is filed by the other party, the whether or not such appearance is in relation to the
Regional Trial Court may, if it considers the counter-petition arbitration in which he/she appears.
to be proper but the objections thereto may be rectified or
cured, remit the award to the arbitral tribunal for appropriate Article 4.41. Confidentially of Arbitration Proceedings.
action and in the meantime suspend the recognition and The arbitration proceedings, including the records, evidence
enforcement proceedings and may also on the application of and the arbitral award, shall be considered confidential and
the petitioner order the counter-petitioner to provide shall not be poolside except:
appropriate security.
(a) with the consent of the parties; or
Article 4.37. Appeal from Court Decision on Arbitral Awards. (b) for the limited purpose of disclosing to the court
A decision of the Regional Trial Court recognizing, enforcing, relevant documents in cases where resort to the court
vacating or setting aside an arbitral award may be appealed isallowed herein.
to the Court of Appeals in accordance with the rules of
procedure to be promulgated by the Supreme Court. Provided, however, that the court in which the action or the
appeal is pending may issue a protective order to prevent or
The losing party who appeals from the judgment of the court prohibit disclosure of documents or information containing
recognizing and enforcing an arbitral award shall be required secret processes, developments, research and other
by the Court of Appeals to post a counter-bond executed if information where it is shown that the applicant shall be
favor of the prevailing party equal to the amount of the award materially prejudiced by an authorized disclosure thereof.
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Notes based on Judge J. Humiding’s Outline UC Law

Article 4.42. Summary nature of proceedings before the tribunal determines that the amount of such costs is
court. A petition for recognition and enforcement of awards reasonable;
brought before the court shall be heard and dealt with
summarily in accordance with the Special ADR Rules. (v1) Any fees and expenses of the appointing authority.

Article 4.43. Death of a Party. Where a party dies after (b) The fees of the arbitral tribunal shall be reasonable
making a submission or a contract to arbitrate as prescribed in amount, taking into account the amount in dispute, the
in these Rules, the proceedings may be begun or continued complexity of the subject matter, the time spent by the
upon the application of, or notice to, his/her executor or arbitrators and any other relevant circumstances of the case.
administrator, or temporary administrator of his/her estate. In
any such case, the court may issue an order extending the If an appointing authority has been agreed upon by the
time within which notice of a motion to recognize or vacate parties and if such authority has issued a schedule of fees
an award must be served. Upon recognizing an award, for arbitrators in international cases which it administers, the
where a party has died since it was filed or delivered, the arbitral tribunal in fixing its fees shall take that schedule of
court must enter judgement in the name of the original party; fees into account to the extent that it considers appropriate
and the proceedings thereupon are the same as where a in the circumstances of the case.
party dies after a verdict.
If such appointing authority has not issued a schedule of fees
Article 4.44. Multi-Party Arbitration. When a single for arbitrators in international cases, any party may, at any
arbitration involves more than two parties, the foregoing time request the appointing authority to furnish a statement
rules, to the extent possible, shall be used, subject to such setting forth the basis for establishing fees which is
modifications consistent with this Chapter as the arbitral customarily followed in international cases in which the
tribunal shall deem appropriate to address possible authority appoints arbitrators. If the appointing authority
complexities of a multi-party arbitration. consents to provide such a statement, the arbitral tribunal, in
fixing its fees, shall take such information into account to the
Article 4.45. Consolidation of Proceedings and extent that it considers appropriate in the circumstances of
Concurrent Hearings. – The parties and the arbitral tribunal the case.
may agree –
(c) In cases referred to in the second and third
(a) that the arbitration proceedings shall be sub-paragraphs of paragraph (b) of this Article, when a party
consolidated with other arbitration proceedings; or(b) that so requests and the appointing authority consents to perform
concurrent hearings shall be held, on such terms as may be the function, the arbitral tribunal shall fix its fees only after
agreed. consultation with the appointing authority which may make
any comment it deems appropriate to the arbitral tribunal
Unless the parties agree to confer such power on the arbitral concerning the fees.
tribunal, the tribunal has no power to order consolidation of
arbitration proceedings or concurrent hearings. (d) Except as provided in the next sub-paragraph of this
paragraph, the costs of arbitration shall, in principle, be
Article 4.46. Costs. (a) The arbitral tribunal shall fix the borne by the unsuccessful party. However, the arbitral
costs of arbitration in its award. The term "costs" include tribunal may apportion each of such costs between the
only: parties if it determines that apportionment is reasonable,
taking into account the circumstances of the case.
(i) The fees of the arbitral tribunal to be stated separately as
to each arbitrator and to be fixed by the tribunal itself in With respect to the costs of legal representation and
accordance with the paragraph (b) of this Article; assistance referred to in paragraph (c) of paragraph (a) (iii)
of this Article, the arbitral tribunal, taking into account the
(ii) The travel and other expenses incurred by the circumstances of the case, shall be free to determine which
arbitrators; party shall bear such costs or may apportion such costs
between the parties if it determines that appointment is
(iii) The costs of expert advice and of other assistance reasonable.
required by the arbitral tribunal;
When the arbitral tribunal issues an order for the termination
(iv) The travel and other expenses of witnesses to the of the arbitral proceedings or makes an award on agreed
extent such expenses are approved by the arbitral tribunal; terms, it shall fix the costs of arbitration referred to in
paragraphs (b), (c) and (d) of this Article in the context of that
(v) The costs for legal representation and assistance of order or award.
the successful party if such costs were claimed during the
arbitral proceedings, and only to the extent that the arbitral (e) The arbitral tribunal, on its establishment, may
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Notes based on Judge J. Humiding’s Outline UC Law

request each party to deposit an equal amount as an – based on stare decisis, previous SC
advance for the costs referred to in paragraphs (i), (ii) and decisions are authoritative on future cases
(iii) of paragraph (a) of this Article. where the facts are substantially the same.
2. If the court is presented with a situation potentially
During the course of the arbitral proceedings, the arbitral involving the Public Policy exception, the court
tribunal may request supplementary deposits from the should exercise judicial restraint and construe the
parties. provision narrowly. Foreign arbitral awards should
be refused to be enforced only if:
If an appointing authority has been agreed upon by the a. there is a flagrant, effective, and concrete
parties and when a party so requests and the appointing violation of an overriding public policy of the
authority consents to perform the function, the arbitral State; and
tribunal shall fix the amounts of any deposits or b. provided that the public policy consideration
supplementary deposits only after consultation with the involves international and transnational, not
appointing authority which may make any comments to the merely domestic, public policy of the State.
arbitral tribunal which it deems appropriate concerning the 3. As a general proposition, courts should be guided by
amount of such deposits and supplementary deposits. how the public policy exception under the
Convention has been applied in other jurisdictions.
If the required deposits are not paid in full within thirty (30) The following are universally or generally-accepted
days after receipt of the request, the arbitral tribunal shall so violations of public policy in the context of the
inform the parties in order that the required payment may be Convention:
made. If such payment is not made, the arbitral tribunal may a. Violation of the right to be heard; or of due
order the suspension or termination of the arbitral process;
proceedings. b. Violation of equal opportunity to present
one’s case;
After the award has been made, the arbitral tribunal shall c. Award obtained by fraud or based on
render an accounting to the parties of the deposits received falsified documents;
and return any unexpended balance to the parties. d. Award obtained following bribery of or
threats to an arbitrator;
(Also read Parlade pp. 282-325) e. Violation of res judicata;
f. Lack of independence and impartiality of the
Taming the Unruly Horse: Philippine Public Policy and arbitrators; and
the New York Convention g. Awards giving effect to illegal activities
(Donemark J.L. Calimon)52 which are universally condemned, such as
terrorism, drug trafficking, prostitution,
This article proposes that Philippine courts be guided by a pedophilia, corruption, or fraud in
policy of “judicial restraint” in applying the Public Policy international commerce.
exception under Art V of the NY Convention.
The Enforcement of International Arbitral Awards
Such exception should be construed in a narrow sense. (Jacinto D. Jimenez)53

In order to fully embrace the pro-enforcement principle under The promulgation of an arbitral award doesn’t put an end to
the Convention, the Philippine courts should be guided by the dispute. It opens the gate for the next sequence of
the following considerations: controversies – the enforcement of the award. The arbitral
1. Courts should initially consult the following evidence tribunal doesn’t have the power to enforce the award. Hence,
of public policy: the winning party must file a case with a national court.
a. Public policy under the Constitution –
provisions of the Constitution should be While far from perfect, international arbitration is, rightly,
upheld by the courts over n arbitral award regarded as generally suffering fewer ills than litigation of
violating it. international disputes in national courts and as offering more
b. Public policy based on states –but mindful workable and effective opportunities for remedying or
that not all violations will trigger the avoiding those ills which do exist.
application of the Public Policy Exception.
Only provisions of the law dealing with the
fundamental rule of overriding importance
may result to non-enforcement.
c. Public policy as declared by judicial decision

52 53
61 Ateneo L.J. 635 (2016) Ateneo LJ (March 2017)
83
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Notes based on Judge J. Humiding’s Outline UC Law

XII. Construction Industry Arbitration Commission shall perform, among others that may be conferred by law,
(CIAC) the following functions:
1) To formulate and adopt an arbitration program for the
Chapter 6, IRR construction industry;
2) To enunciate policies and prescribe rules and procedures
ARBITRATION OF CONSTRUCTION DISPUTES for construction arbitration;
The Construction Industry Arbitration Commission (CIAC), 3) To supervise the arbitration program, and exercise such
which has original and exclusive jurisdiction over arbitration authority related thereto as regards the appointment,
of construction disputes pursuant to Executive Order No. replacement or challenging of arbitrators; and
1008, s. 1985, otherwise known as the "Construction 4) To direct its officers and employees to perform such
Industry Arbitration Law", shall promulgate the Implementing functions as may be assigned to them from time to time.
Rules and Regulations governing arbitration of construction xxx
disputes, incorporating therein the pertinent provisions of the Sec. 14. Arbitrators. A sole arbitrator or three arbitrators
ADR Act. may settle a dispute.

EO 1008 – Construction Industry Arbitration Law Where the parties agree that the dispute shall be settled by
a sole arbitrator, they may, by agreement, nominate him from
February 4, 1985 the list of arbitrators accredited by the CIAC for appointment
and confirmation. If the parties fail to agree as to the
CREATING AN ARBITRATION MACHINERY IN THE arbitrator, the CIAC taking into consideration the
CONSTRUCTION INDUSTRY OF THE PHILIPPINES complexities and intricacies of the dispute/s has the option
xxx to appoint a single arbitrator or an Arbitral Tribunal.

WHEREAS, there is a need to establish an arbitral If the CIAC decides to appoint an Arbitral Tribunal, each
machinery to settle to such disputes expeditiously in order to party may nominate one (1) arbitrator from the list of
maintain and promote a healthy partnership between the arbitrators accredited by the CIAC for appointment and for
government and the private sector in the furtherance of confirmation. The third arbitrator who is acceptable to both
national development goals; parties confirmed in writing shall be appointed by the CIAC
xxx and shall preside over the Tribunal.
Sec. 1. Title. This Executive Order shall be known as the
"Construction Industry Arbitration Law". Arbitration shall be men of distinction in whom the business
sector and the government can have confidence. They shall
Sec. 2. Declaration of Policy. It is hereby declared to be not be permanently employed with the CIAC. Instead, they
the policy of the State to encourage the early and expeditious shall render services only when called to arbitrate. For each
settlement of disputes in the Philippine construction industry. dispute they settle, they shall be given fees.
xxx
Sec. 4. Jurisdiction. The CIAC shall have original and Sec. 15. Appointment of Experts. The services of technical
exclusive jurisdiction over disputes arising from, or or legal experts may be utilized in the settlement of disputes
connected with, contracts entered into by parties involved in if requested by any of the parties or by the Arbitral Tribunal.
construction in the Philippines, whether the dispute arises If the request for an expert is done by either or by both of the
before or after the completion of the contract, or after the parties, it is necessary that the appointment of the expert be
abandonment or breach thereof. These disputes may involve confirmed by the Arbitral Tribunal.
government or private contracts. For the Board to acquire
jurisdiction, the parties to a dispute must agree to submit the Whenever the parties request for the services of an expert,
same to voluntary arbitration. they shall equally shoulder the expert's fees and expenses,
half of which shall be deposited with the Secretariat before
The jurisdiction of the CIAC may include but is not limited to the expert renders service. When only one party makes the
violation of specifications for materials and workmanship; request, it shall deposit the whole amount required.
violation of the terms of agreement; interpretation and/or xxx
application of contractual time and delays; maintenance and
defects; payment, default of employer or contractor and Sec. 19. Finality of Awards. The arbitral award shall be
changes in contract cost. binding upon the parties. It shall be final and inappealable
except on questions of law which shall be appealable to the
Excluded from the coverage of this law are disputes arising Supreme Court.
from employer-employee relationships which shall continue
to be covered by the Labor Code of the Philippines. Sec. 20. Execution and Enforcement of Awards. As soon
xxx as a decision, order to award has become final and
Sec. 6. Functions of the Commission. The Commission executory, the Arbitral Tribunal or the single arbitrator with

84
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

the occurrence of the CIAC shall motu propio, or on motion right to submit the dispute to arbitration within the prescribed
of any interested party, issue a writ of execution requiring period as provided in the contract
any sheriff or other proper officer to execute said decision,
order or award. After reaching an accord on the issues to be considered by
the arbitration panel, the parties scheduled the dates of
Sec. 21. Rule-Making Power. The CIAC shall formulate and hearings and of submission of simultaneous memoranda.
adopt necessary rules and procedures for construction
arbitration. xxx Mar 1995: NIA filed a Motion to Dismiss alleging lack of
jurisdiction over the disputes. NIA contended that there was
Revised Rules of Procedure Governing Construction no agreement with HYDRO to submit the dispute to CIAC for
Arbitration arbitration considering that the construction contract was
executed in 1978 and the project completed in 1982,
Issued: January 28, 2011 whereas EO 1008 was signed only in 1985; and that while
Copy at: they have agreed to arbitration as a mode of settlement of
http://www.philconstruct.com/docs/downloads/CIAP%20DO disputes, they could not have contemplated submission of
CS/CIAC%20ARBITRATION%20GUIDELINES/CIAC%20R their disputes to CIAC.
evised%20Rules%20of%20Procedure%20Governing%20C
onstruction%20Arbitration.pdf April 1995: CIAC issued an order which deferred the
determination of the motion to dismiss and resolved to
As amended by CIAC Resolution Nos. 15-2006, 16-2006, proceed with the hearing of the case on the merits. Acting on
18-2006, 19-2006, 02-2007, 07-2007, 13-2007, 02-2008, NIA’s MfR, CIAC ruled that it has jurisdiction over the
and 03-2008 HYDRO’s claim over NIA pursuant to EO 1008.

Cases May 1996: NIA filed with the Court of Appeals an original
action of certiorari and prohibition with prayer for restraining
National Irrigation Administration vs CA54 order and/or injunction, seeking to annul the Orders of the
CIAC for having been issued without or in excess of
(On the jurisdiction of the CIAC) jurisdiction.

In this special civil action for certiorari under Rule 65 of the Contention of NIA: CIAC has no authority or jurisdiction to
Rules of Court, the National Irrigation Administration (NIA), hear and try this dispute between the herein parties as EO
seeks to annul and set aside the Resolutions of the Court of 1008 had no retroactive effect.
Appeals which dismissed NIA’s petition for certiorari and
prohibition against CIAC. CA, Jun 1996: Finding that there was no grave abuse of
discretion, it dismissed the petition.
Antecedents
Jun 1997: NIA filed before the SC an original action for
Aug 1978: In a competitive bidding held by NIA, Hydro certiorari and prohibition with urgent prayer for temporary
Resources Contractors Corporation (HYDRO) was awarded restraining order and writ of preliminary injunction, praying
a Contract for the construction of the main civil works of the for the annulment of the CA’s decision.
Magat River Multi-Purpose Project. HYDRO would be paid
partly in Philippine pesos and partly in U.S. dollars. SC: The petition suffers from a procedural defect that
warrants its outright dismissal. The questioned resolutions of
HYDRO substantially completed the works under the the CA have already become final and executory by reason
contract in 1982 and final acceptance by NIA was made in of NIA’s failure to appeal. Instead of filing this petition for
1984. HYDRO thereafter determined that it still had an certiorari under Rule 65 of the Rules of Court, NIA should
account receivable from NIA representing the dollar rate have filed a timely petition for review under Rule 45.
differential of the price escalation for the contract.
In any case, even if the issue of technicality is disregarded
Dec 1994: After unsuccessfully pursuing its case with NIA, and recourse under Rule 65 is allowed, the same result
HYDRO, filed with the CIAC a Request for Adjudication of would be reached since a review of the questioned
the aforesaid claim. resolutions of the CIAC shows that it committed no grave
abuse of discretion.
Jan 1995: NIA filed its Answer, questioning the jurisdiction
of the CIAC alleging lack of cause of action, laches and Contrary to the claim of NIA, the CIAC has jurisdiction over
estoppel in view of HYDRO’s alleged failure to avail of its the controversy.

54
318 SCRA 255, Nov. 17, 1999
85
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

A CIAC arbitral award need not be confirmed by the regional


EO 1008 was promulgated on February 4, 1985. It vests trial court to be executory as provided under EO 1008.
upon CIAC original and exclusive jurisdiction over disputes
arising from, or connected with contracts entered into by Executive Order (EO) No. 1008 vests upon the CIAC original
parties involved in construction in the Philippines, whether and exclusive jurisdiction over disputes arising from, or
the dispute arises before or after the completion of the connected with, contracts entered into by parties involved in
contract, or after the abandonment or breach thereof. The construction in the Philippines, whether the dispute arises
disputes may involve government or private contracts. before or after the completion of the contract, or after the
abandonment or breach thereof.
For the Board to acquire jurisdiction, the parties to a dispute
must agree to submit the same to voluntary arbitration. By express provision of Section 19 thereof, the arbitral award
The complaint of HYDRO against NIA on the basis of the of the CIAC is final and unappealable, except on questions
contract executed between them was filed on December 7, of law, which are appealable to the Supreme Court.
1994, during the effectivity of E.O. No. 1008. Hence, it is well
within the jurisdiction of CIAC. The jurisdiction of a court is With the amendments introduced by RA 7902 and
determined by the law in force at the time of the promulgation of the 1997 Rules of Civil Procedure, as
commencement of the action. amended, the CIAC was included in the enumeration of
quasi-judicial agencies whose decisions or awards may be
Moreover, it is undeniable that NIA agreed to submit the appealed to the CA in a petition for review under Rule 43.
dispute for arbitration to the CIAC. NIA through its counsel Such review of the CIAC award may involve either questions
actively participated in the arbitration proceedings. of fact, of law, or of fact and law.

J Plus Asia Development Corporation vs Utility Petitioner misread the provisions of SADR which took effect
Assurance Corp.55 on October 30, 2009. Since RA 9285 explicitly excluded
CIAC awards from domestic arbitration awards that need to
(Did RA 9285 divest the CA of its power to review be confirmed to be executory, said awards are therefore not
decisions of the CIAC?) covered by Rule 11 of the Special ADR Rules, as they
continue to be governed by EO 1008, as amended and the
No. CIAC decisions are appealable to the CA via petition for rules of procedure of the CIAC.
review under Rule 43.
The CIAC Revised Rules of Procedure Governing
The SC found no merit in petitioner’s contention that with the Construction Arbitration provide for the manner and mode of
institutionalization of alternative dispute resolution under RA appeal from CIAC decisions or awards in Section 18:
9285, the CA was divested of jurisdiction to review the
decisions or awards of the CIAC. Petitioner erroneously SECTION 18.2 Petition for review. – A petition for review
relied on the provision in said law allowing any party to a from a final award may be taken by any of the parties within
domestic arbitration to file in the RTC a petition either to fifteen (15) days from receipt thereof in accordance with the
confirm, correct or vacate a domestic arbitral award. provisions of Rule 43 of the Rules of Court.

RA 9285 did not confer jurisdiction on RTCs to review Stronghold Insurance vs Sps Stroem 56
awards or decisions of the CIAC in construction disputes. On
the contrary, Section 40 expressly declares that confirmation (Is a dispute involving the liability of a surety under a
by the RTC is not required, thus: performance bond connected to a construction
contract within the exclusive jurisdiction of the CIAC?)
SEC. 40. Confirmation of Award. – The confirmation of a
domestic arbitral award shall be governed by Section 23 of This case involves the proper invocation of the Construction
R.A. 876. Industry Arbitration Committee's (CIAC) jurisdiction through
an arbitration clause in a construction contract. The main
A domestic arbitral award when confirmed shall be enforced issue here is whether the dispute — liability of a surety under
in the same manner as final and executory decisions of the a performance bond — is connected to a construction
Regional Trial Court. contract and, therefore, falls under the exclusive jurisdiction
of the CIAC.
The confirmation of a domestic award shall be made by the
regional trial court in accordance with the Rules of Procedure Antecendents
to be promulgated by the Supreme Court.
Spouses Rune and Lea Stroem (Spss Stroem) entered into

55 56
GR No. 199650, June 26, 2013 GR No. 204689, Jan 21, 2015
86
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

an Owners-Contractor Agreement with Asis-Leif & Company, CIAC.However, in the Prudential case, the performance
Inc. for the construction of a two-storey house on their lot. bond was included in the main contract.

Asis-Leif secured Performance Bond in the amount of In this case, the suretyship agreement was made separately.
₱4,500,000.00 from Stronghold Insurance Company, Inc. it is in the Owners-Contractor Agreement that the arbitration
Stronghold and Asis-Leif bound themselves jointly and clause is found. The construction agreement was signed
severally to pay the Sps Stroem the agreed amount in the only by Sps Stroem and the contractor, Asis-Leif. It is basic
event that the construction project is not completed. that contracts take effect only between the parties, their
assigns and heirs.
Asis-Leif failed to finish the projecton time despite repeated
demands of the Sps Stroem. Not being a party to the construction agreement, Stronghold,
the surety, cannot invoke the arbitration clause. It thus
Sps Stroem subsequently rescinded the agreement. They cannot invoke the jurisdiction of the CIAC.
filed a Complaint (with Prayer for Preliminary Attachment) for
breach of contract and for sum of money with a claim for Moreover, petitioner’s invocation of the arbitration clause
damages against Asis-Leif and Stronghold. Only Stronghold defeats the purpose of arbitration in relation to the
was served summons. Ms. Cynthia Asis-Leif allegedly construction business.
absconded and moved out of the country.
Where a surety in a construction contract actively
On July 13, 2010, the RTC rendered a judgment in favor of participates in a collection suit, it is estopped from raising
the Sps Stroem. The court ordered Stronghold to pay the Sps jurisdiction later. Assuming that petitioner is privy to the
Stroem ₱4,500,000.00 with 6% legal interest from the time construction agreement, we cannot allow petitioner to invoke
of first demand. arbitration at this late stage of the proceedings since to do so
would go against the law's goal of prompt resolution of cases
Stronghold appealed to the CA. Appeal was denied. in the construction industry.

Hence, this appeal to the SC. XIII. Special Rules of Court on ADR

Issue: Whether the CIAC has exclusive jurisdiction over the AM No. 07-11-08-SC
controversy between the parties. Issued on: September 1, 2009

SC: When a dispute arises from a construction contract, the Copy at:
CIAC has exclusive and original jurisdiction. Construction https://www.lawphil.net/courts/supreme/am/am_07-11-08-
has been defined as referring to "all on-site works on sc_2009.html
buildings or altering structures, from land clearance through
completion including excavation, erection and assembly and DENR vs UPCI57
installation of components and equipment."
(Does the power to confirm an arbitral award include
In this case, there is no dispute as to whether the Owners- the power to order its execution notwithstanding a lack
Contractor Agreement between Asis-Leif and Sps Stroem is of provision in the Special ADR Rules?)
a construction contract. Stronghold and Sps Stroem
recognize that CIAC has jurisdiction over disputes arising Yes.
from the agreement.
In this case, petitioner asserts that its petition is not covered
What is at issue in this case is the parties’ agreement, or lack by the Special ADR Rules (particularly, Rule 19.28 on the
thereof, to submit the case to arbitration. Respondents argue 15-day reglementary period to file a petition for certiorari) but
that Stronghold is not a party to the arbitration agreement. It by Rule 65 of the Rules of Court (particularly, Section 4
did not consent to arbitration. It is only Sps Stroem and Asis- thereof on the 60-day reglementary period to file a petition
Leif that may invoke the arbitration clause in the contract. for certiorari), which it claimed to have suppletory application
in arbitration proceedings since the Special ADR Rules do
This court has previously held in Prudential vs Anscor not explicitly provide for a procedure on execution. The
Land that a performance bond, which is meant "to guarantee position is untenable.
the supply of labor, materials, tools, equipment, and
necessary supervision to complete the project" is Execution is fittingly called the fruit and end of suit and the
significantly and substantially connected to the construction life of the law. A judgment, if left unexecuted, would be
contract and, therefore, falls under the jurisdiction of the nothing but an empty victory for the prevailing party.

57
GR No. 212081; Feb. 23, 2015
87
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

While it appears that the SADR remain silent on the Where any of the Rules is in conflict with a provision of the
procedure for the execution of a confirmed arbitral award, the law applicable to the arbitration from which the parties
Rules’ procedural mechanisms cover not only aspects of cannot derogate, that provision of the law shall prevail.
confirmation but necessarily extend to a confirmed award’s
execution. In light of the doctrine of necessary implication XV. Emerging Issues and the Future of Arbitration
which states that every statutory grant of power, right or
privilege is deemed to include all incidental power, right or Should forced arbitration be banned?
privilege.
1. Arbitration Everywhere: Stacking the Deck of
Execution is but a necessary incident to the Court’s Justice (Jessica Silver-Greenberg & Robert
confirmation of an arbitral award. To construe it otherwise Gebeloff)59
would result in an absurd situation whereby the confirming
court previously applying the SADR in its confirmation of the By inserting individual arbitration clauses into a soaring
arbitral award would later shift to the regular Rules of number of consumer and employment contracts, companies
Procedure come execution. A court’s power to confirm a like American Express devised a way to circumvent the
judgment award under the SADR should be deemed to courts and bar people from joining together in class-action
include the power to order its execution for such is but a lawsuits, realistically the only tool citizens have to fight illegal
collateral and subsidiary consequence that may be fairly and or deceitful business practices.
logically inferred from the statutory grant to regional trial
courts of the power to confirm domestic arbitral awards. Over the last few years, it has become increasingly difficult
to apply for a credit card, use a cellphone, get cable or
XIV. Philippine Dispute Resolution Center, Inc. Internet service, or shop online without agreeing to private
arbitration. The same applies to getting a job, renting a car
Arbitration Rules of the Philippine Dispute Resolution or placing a relative in a nursing home.
Center, Inc. 58
Some state judges have called the class-action bans a “get
Copy at: http://www.pdrci.org/web/wp- out of jail free” card, because it is nearly impossible for one
content/uploads/2015/03/2015-PDRCI-ARBITRATION- individual to take on a corporation with vast resources.
RULES-031915.pdf
“This is among the most profound shifts in our legal history,”
Model Arbitration Clause: William G. Young, a federal judge in Boston who was
"Any dispute, controversy or claim arising out of or relating appointed by President Ronald Reagan, said in an interview.
to this contract, or the breach, termination or invalidity “Ominously, business has a good chance of opting out of the
thereof shall be settled by arbitration in accordance with legal system altogether and misbehaving without reproach.”
the PDRCI Arbitration Rules in force at the time of the
commencement of the arbitration." Corporations said that class actions were not needed
because arbitration enabled individuals to resolve their
Parties may consider adding: grievances easily. But court and arbitration records show the
“The number of arbitrators shall be ... (one or three); opposite has happened: Once blocked from going to court
The place of arbitration shall be ... (city or country); as a group, most people dropped their claims entirely.
The language(s)to be used in the arbitral proceedings
shall be...(language)" The Times investigation was based on thousands of court
records and interviews with hundreds of lawyers, corporate
Where parties have agreed that disputes, controversies or executives, judges, arbitrators and plaintiffs in 35 states
claims between them shall be referred to arbitration under
the Rules, then such Disputes shall be settled in accordance (Class actions usually get favorable results, due to the
with the Rules, subject to such modification as the parties collective aspect. It is easier to fight as a group than alone.)
may agree in writing.
Civil rights experts worry that discriminatory labor practices
The Rules shall apply to arbitrations commenced on or after will go unchecked as class actions disappear.
1 January 2015, unless the parties have expressly agreed to
apply a particular version of the Rules.

58
PDRCI Website
59
Oct. 31, 2015;
https://www.nytimes.com/2015/11/01/business/dealbook/arbit
ration-everywhere-stacking-the-deck-of-justice.html
88
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

2. In Arbitration, a Privatization of the Justice asserting her claims.


System (Jessica Silver-Greenberg & Michael
Corkerynov)60 3. In Religious Arbitration, Scripture is the Rule of
Law (Michael Corkery & Jessica Silver-
Greenberg)61
A doctor brought a sex discrimination claim against the
medical group that had dismissed her. She had a stack of In 2012, Nick Ellison, a 20-year-old, instead of going to jail,
glowing evaluations, and evidence that the group had a was sent by a judge to ‘Teen Challenge’. It is a place that
pattern of denying women partnerships. gives substance abuse programs in Florida, run by
Christians.
However, she was blocked from bringing it to court, and
forced into arbitration. He had a drug and alcohol problem, but what the program
did to him, according to a letter he wrote before taking a toxic
During the hearing, she noticed that the presiding arbitrator mix of drugs which kills him later on, was “de-gay” him. It
was having friendly coffee with the head of the group she would also be discovered later on that the program included
was suing. During the proceedings, crucial evidence was “free labor” which tasked them to work odd jobs, instead of
withheld, audiotapes were destroyed, and testimonies flip- being given treatment. They were also barred from
flopped. The arbitrator ultimately ruled against her, and his communicating with their families and friends.
decision contained passages pulled, verbatim, from legal
briefs prepared by lawyers for the medical practice. His family sued Teen Challenge, hoping to uncover what
really happened. But they hit a wall because when Ellison
The incident took away the doctor’s faith in a fair and was admitted, he signed a contract that now his family from
honorable legal system. taking the Christian group to court.

If the case had been brought in civil court, she would have His claim had to be resolved through mediation or arbitration
been able to appeal, raising questions about testimony, that would not be bound by state law, but by the Bible.
destruction of evidence, and potential conflicts of interest.
The Holy Scripture will be the supreme authority, the contract
But arbitration often bears little resemblance to court. said.

Thousands of business have used arbitration to create an Some lawyers and plaintiffs said that for some groups,
alternate system of justice. There, rules tend to favor religious arbitration may have less to do with honoring a set
businesses, and judges and juries have been replaced by of beliefs than with controlling legal outcomes.
arbitrators who commonly consider the companies their
clients. Few courts have intervened, saying that the terms of
arbitration are detailed in binding contracts signed by both
This amounts to the whole-scale privatization of the justice sides.
system, one law professor said. People are actively being
deprived of their rights. Some judges are also reluctant to risk infringing the rights of
religious groups.
All it took was adding simple arbitration clauses to contracts
that most employees and consumers don’t even read. One Scientologist protested that she was being forced to go
to arbitration run by a religion she no longer believed in.
Little is known about arbitration because proceedings are
confidential and the government doesn’t require cases to be Ellison’s mother went through the religious group’s
reported. arbitration, which droned on for more than 2 years. She
finally agreed to settle when she felt like she had been
This secretive nature makes it hard to ascertain whether the neglecting her other children in the process.
proceedings were fairly conducted.
Without a court trial, she was never able to learn what
The doctor in this story lost her case and has been, up to happened to her son, not just on the night he died, but during
now, paying the legal costs to a system that was, in theory, his stay at Teen Challenge.
supposed to give her a speedy and inexpensive way of

60 61
Nov. 1, 2015; Nov. 2, 2015;
https://www.nytimes.com/2015/11/02/business/dealbook/in- https://www.nytimes.com/2015/11/03/business/dealbook/in-
arbitration-a-privatization-of-the-justice-system.html religious-arbitration-scripture-is-the-rule-of-law.html

89
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

4. Arbitrating Disputes, Denying Justice (The Financial Protection Bureau, which adopted the rule this
Editorial Board of NY Times)62 summer, did not adequately evaluate the harm it could cause
to consumers.
Forced-arbitration clauses, found in the fine print of contracts,
bar aggrieved parties from pressing their claims as a group The report arrived amid a broader push by the Trump
in a class action, often the only practical way for individuals administration to relax or repeal regulations, including those
to challenge corporations. that affect financial institutions. Treasury has published two
reports recommending a series of changes to financial rules
Corporations effectively control the arbitration process, put in place after the 2008 financial crisis.
including the selection of the arbitrator and the rules of
evidence, a stacked deck if ever there was one. The arbitration rule, which is set to take effect in 2019, will
prevent credit card companies and other financial institutions
As if that is not troubling enough, it is extremely difficult to from using the fine print of contracts to ban class action
avoid or get out of forced-arbitration clauses and class-action lawsuits or force consumers into arbitration, a private system
bans, particularly since they were upheld by two misguided where an individual has to go up alone against a deep-
Supreme Court decisions in 2011 and in 2013. pocketed corporation.

People who were blocked from going to court as a group Treasury said the rule could deal an expensive blow to
usually dropped their claims entirely, in part because class financial institutions, costing them more than $500 million in
actions are often the only affordable way to file lawsuits. legal defense fees. The real winner, the report says, are
class action lawyers. At its center, the report questions the
Indeed, faced with arbitration, it appears that most people do very analysis the consumer agency used to create its
not pursue remedies to their grievances at all. signature rule.

Even more disturbing, the shift away from the civil justice “The bureau failed to meaningfully evaluate whether
system has gone beyond disputes about money. Nursing prohibiting mandatory arbitration clauses in consumer
homes, obstetrics practices and private schools increasingly financial contracts would serve either consumer protection or
use forced-arbitration clauses to shield themselves from the public interest,” the report said.
being taken to court over alleged discrimination, elder abuse,
fraud, hate crimes, medical malpractice and wrongful death. The rule does not explicitly ban mandatory arbitration. Still,
critics of the rule say it will effectively kill mandatory
Reversing the broader trend of forced arbitration, however, arbitration.
will require public outcry loud and long enough to stir the
White House and Congress to action. Many people “The report by the Treasury Department rehashes industry
interviewed in The Times’s series did not realize that their arguments that were analyzed in depth and solidly refuted in
right to sue had been lost until they needed it. A common the final rule,” said Samuel Gilford, a spokesman for
refrain was the disbelief that this could happen in America. Consumer Financial Protection Bureau. He added that the
But it is happening, and it needs to stop. bureau’s analysis “found that mandatory arbitration clauses
allow companies to avoid accountability for breaking the law
5. Treasury Faults Arbitration Rule Aimed at and cost consumers billions of dollars by blocking group
Protecting Consumers (Jessica Silver- lawsuits.”
Greenberg)63
Across the country, judges, prosecutors and some regulators
have forcefully echoed those complaints, faulting arbitration
The Treasury Department took aim at a rule that would allow clauses for enabling corporations to opt out of the court
millions of Americans to band together in class action system and depriving Americans of one of the few ways to
lawsuits against Wall Street firms, saying it could trigger fight abusive business practices.
frivolous lawsuits and drive up the cost of credit.
6. Supreme Court Divided on Arbitration for
In an 18-page report, the department said the Consumer Workplace Cases (Adam Liptak)64

62 64
Nov. 7, 2015; Oct. 2, 2017;
https://www.nytimes.com/2015/11/08/opinion/sunday/arbitrati https://www.nytimes.com/2017/10/02/us/politics/supreme-
ng-disputes-denying-justice.html court-workplace-arbitration.html
63
Oct. 23, 2017;
https://www.nytimes.com/2017/10/23/business/treasury-faults-
arbitration-rule-aimed-at-protecting-consumers.html

90
Alternative Dispute Resolution d.m.g. 2018 j.d.
Notes based on Judge J. Humiding’s Outline UC Law

The Supreme Court (US) considered whether to give


employers a powerful tool to bar class actions over Justice Ginsburg said the arbitration law was concerned with
workplace issues. agreements between merchants of relatively equal
bargaining power. The employment contracts at issue in the
The case is the court’s latest attempt to determine how far case, she said, have been forced on workers.
companies can go in insisting that disputes be resolved in
individual arbitrations rather than in court. “There was no true liberty of contract,” she said.

The Supreme Court ruled in earlier cases that companies The cases, which were consolidated for a single hour of
doing business with consumers may require arbitration and argument, featured an unusual element: Lawyers for the
forbid class actions in their contracts, which are often of the federal government appeared on both sides.
take-it-or-leave-it variety. Such contracts typically require
two things: that disputes be resolved by arbitration and that The Obama administration had filed a brief supporting the
claims be brought one by one. That makes it hard to pursue workers on behalf of the National Labor Relations Board.
minor claims that affect many people, whether in class The Trump administration reversed course, and Mr. Wall
actions or in mass arbitration. argued on behalf of the employers.

Justice Ruth Bader Ginsburg said there was often no point The labor board’s general counsel, Richard F. Griffin Jr.,
in pursuing individual arbitration because the sums at issue argued for the workers. He made a concession at odds with
were too small. the position of another lawyer on his side.

“There is strength in numbers,” she said. “We have to protect Mr. Griffin said that employment contracts could not require
the individual worker from being in a situation where he can’t workers to give up collective action in arbitration but that the
protect his rights.” private entities that conduct arbitration could require that
cases be pursued one by one.
Jeffrey B. Wall, a deputy solicitor general who argued in favor
of the employers, acknowledged that it was sometimes a If that is so, Justice Samuel A. Alito Jr. responded, “you have
consequence of arbitration agreements “that the employees not achieved very much because, instead of having an
would be practically unable to vindicate their claims.” He agreement that says no class arbitration, you have an
added that the Supreme Court had said as much about agreement requiring arbitration before the XYZ arbitration
arbitration clauses generally in a 2013 decision concerning association, which has rules that don’t allow class arbitration.”
an agreement among businesses.
Daniel R. Ortiz, a law professor at the University of Virginia
Arbitration clauses with class-action waivers are now who also argued for the workers, took a different approach.
commonplace in contracts for things like cellphones, credit
cards, rental cars and nursing home care. “When an employer tries to coerce by making it a condition
of continued employment that employees agree to a set of
In a 2015 dissent, Justice Ginsburg, citing a New York Times arbitral rules that make collective action impossible,” he said,
article examining arbitration agreements, wrote that the that would be unlawful.
court’s decisions favoring arbitration “have predictably
resulted in the deprivation of consumers’ rights to seek Some justices suggested that workers could band together
redress for losses, and, turning the coin, they have insulated in a limited sense by hiring the same lawyer and filing
powerful economic interests from liability for violations of individual arbitration cases.
consumer protection laws.”
Justice Elena Kagan said that was not good enough.
The court’s earlier arbitration decisions were closely divided,
with its conservative members in the majority. “The fact that there is one way to exercise a right left over
does not make it O.K. if we’ve taken away another 25 ways
Workers seeking to sue their employers for overtime pay and of exercising the right,” she said. “You know, when we think
the like say the second law prohibits arbitration clauses that about the First Amendment, we don’t say we can ban
require class-action waivers. leafleting because you can always write an op-ed.”

Justice Anthony M. Kennedy seemed to be ready to side with


employers. Justice Neil M. Gorsuch, the court’s newest
member, asked no questions.

Paul D. Clement, a lawyer for the employers, said the labor


law was “directed to the workplace, not the courthouse.”

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