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Use of arbitration and recent trends

1. How is commercial arbitration used and what are the recent trends?

Use of commercial arbitration


The Republic of the Philippines has a strong and categorical government policy of promoting
alternative modes of dispute resolution, including mediation and arbitration, and a government-initiated
mandate to include arbitration clauses in government contracts. With this and the Supreme Court's
recent issuance of procedural rules clarifying and limiting court intervention in disputes with arbitration
agreements, commercial arbitration is gaining ground in the mainstream Philippine dispute resolution
arena. In particular, the construction industry is the sector that commonly uses arbitration, due to the
established presence of the Philippine Construction Industry Arbitration Commission (CIAC), which
was created pursuant to Executive Order No. 1008 signed on 04 February 1985.

Recent trends
A large number of commercial disputes in the Philippines relating to international business transactions
are currently being resolved through commercial arbitration. This trend began about two decades ago
in the Philippines and most of the parties to these commercial arbitrations use international arbitral
institutions.

Based on available data in 2013 and 2014, the Philippine Dispute Resolution Center Inc. (PDRCI)
handled 17 cases with total values of PHP16.2 billion, respectively. Comparatively, the CIAC handled
46 cases in 2013 with a total value in dispute of PHP835.2 million, which increased to 61 cases in
2014 with a total value of PHP4.6 billion (Source: PDRCI Official Report for 2014). A total number of
859 cases have been filed with the CIAC between 1989 and August 2015, with the total sum in dispute
of around PHP46 billion. Further, 682 of these cases were resolved by arbitral awards while 91 were
settled through compromise agreements for which arbitral awards were rendered based on the terms
of settlement between the parties.

Alternative modes of dispute resolution are expected to become more popular and extensive in the
coming years. This is especially true considering the continuous promotion of arbitration and other
modes of dispute resolution from the public and private sectors. Another factor is the lack of credibility
in the judicial system. This is due to allegations of corruption and an inadequate number of courts,
leading to notoriously slow proceedings, which take many years to reach completion. As a
consequence, big domestic commercial corporations that require a shorter period of time to resolve
their dispute and require the decision of a fair, independent and impartial tribunal are now starting to
choose arbitration instead of court litigation.

Advantages/disadvantages
Arbitration is considered more advantageous than court litigation in the Philippines for the following
reasons:

 Confidentiality.
 Shorter time-scale.
 Parties can appoint arbitrators based on their special knowledge, skill or experience.
 Parties have more flexibility in the conduct of and in selecting the rules that govern the
proceedings.
 The finality of the award. The modification or reversal of arbitral awards is legally possible only on
very stringent and specified grounds unlike decisions rendered in court litigation.
 The guarantee of the impartiality, fairness and independence of arbitrator(s).
On the other hand, the disadvantages of resolving a dispute through arbitration in the Philippines are:

 The final decision of an arbitrator is difficult to overturn even if erroneous with respect to the
merits.

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 The cost of arbitration has risen dramatically in recent years.
 Some pieces of evidences which are, under the Rules of Court, obviously inadmissible, can be
admitted and considered by the arbitral tribunal.
 The weight placed on evidence by the tribunal may not be very clear to the parties.
 Third party joinder is limited or may even be prohibited

Legislative framework
Applicable legislation
2. What legislation applies to arbitration? To what extent has your jurisdiction adopted the
UNCITRAL Model Law on International Commercial Arbitration 1985 (UNCITRAL Model Law)?

Arbitration in the Philippines is regulated by the:

 Civil Code of the Philippines.


 Republic Act 9876 otherwise known as the Arbitration Law.
 Republic Act 9285 otherwise known as the Alternative Dispute Resolution Act of 2004 (Alternative
Dispute Resolution Act of 2004).
 Supreme Court's A.M. No. 07-11-08-SC 01 September 2009 or the Special Rules of Court on
Alternative Dispute Resolution.
Philippine law, under Alternative Dispute Resolution Act of 2004, has adopted in its entirety the
UNCITRAL Model Law (Model Law). Therefore, some provisions of the Model Law, such as the
definition of international arbitration, appointment of arbitrators, and jurisdiction of the arbitral tribunal,
have been made applicable to domestic arbitration.

Mandatory legislative provisions


3. Are there any mandatory legislative provisions? What is their effect?

Regardless of the agreement of the parties, domestic awards can be vacated on the following grounds
(rule 11.4, Special Rules of Court on Alternative Dispute Resolution):

 The arbitral award was procured through corruption, fraud or other undue means.
 There is evidence of partiality or corruption in the arbitral tribunal or any of its members.
 The arbitral tribunal was guilty of misconduct or any form of misbehaviour that has materially
prejudiced the rights of any party.
 One or more of the arbitrators was disqualified to act as such under the law and deliberately
refrained from disclosing this disqualification.
 The arbitral tribunal exceeded its powers, or imperfectly executed them, so that a complete, final
and definite award on the subject matter submitted to them was not made.
 The arbitration agreement did not exist, is invalid or is otherwise unenforceable.
 A party to arbitration is a minor or a person judicially declared to be incompetent.
4. Does the law of limitation apply to arbitration proceedings?

The following matters cannot be the subject of arbitration (section 6, Republic Act 9285 otherwise
known as the Alternative Dispute Resolution Act of 2004 and Article 2035, Civil Code of the
Philippines):

 Labour disputes covered by the Labour Code.


 Civil status of persons.
 Validity of marriage.
 Any grounds for legal separation.
 Jurisdiction of courts.
 Future legitime (that is, the future right of an heir to the portion of the deceased's property which
he is entitled under the law regardless of the provisions in the predecessor's will).
 Criminal liability.
 Future support (that is, the right to the support of spouses, descendants, ascendants and siblings
at some future time).

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Limitation
5. Does the law of limitation apply to arbitration proceedings?

There is no specific Philippine legal provision that governs limitation periods in arbitration proceedings.
However, as the right to arbitrate arises from a written contract between the parties, the general law of
limitation may apply, which states that proceedings must be commenced within ten years from the date
the right to institute arises under the written contract of the parties (Article 1144, Civil Code of the
Philippines (Civil Code)).

However, nothing prohibits the parties, from agreeing on a different period of limitation as well as the
grounds for suspension of the time limits. The usual causes like force majeure are applicable and
contracting parties can establish such stipulations, clauses, terms and conditions as they deem
convenient, provided they are not contrary to law, morals, good customs, public order, or public policy
(Article 1306, Civil Code).

However, the Philippine Supreme Court recognises the equitable defence of laches (that is, the failure
or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due
diligence could or should have been done earlier). It is negligence or omission not to assert a right
within a reasonable time, warranting the presumption that the party entitled to assert his right has
either abandoned or declined to assert it (Heirs of Nieto vs. Municipality of Meycauayan, 540 SCRA
100 (2007)).

Arbitration Organisations
6. Which arbitration organisations are commonly used to resolve large commercial disputes?

The Construction Industry Arbitration Commission (CIAC) and the Philippine Dispute Resolution
Center Inc (PDRCI) are commonly used to resolve large commercial disputes in the Philippines. The
subject matter of arbitration proceedings conducted by the CIAC is limited to disputes arising out of
construction contracts. Arbitration proceedings in the CIAC have been considered by the Philippine
Supreme Court as part of traditional judicial proceedings. Therefore, the decisions of CIAC may be
appealed to the Court of Appeals and subsequently, to the Supreme Court, but only on questions of
law (rule 43, Revised Rules of Court in the Philippines).

The ICC International Court of Arbitration, the Singapore International Arbitration Centre and the Hong
Kong International Arbitration Centre are the arbitration institutions that are commonly specified in
contracts in the Philippines that have an international component.

PDRCI is the arbitral organisation that most commonly administers arbitration proceedings, involving
all kinds of subject matter (with the exception of construction contracts).

See box, Main arbitration organisations.

Jurisdictional issues
7. What remedies are available where one party denies that the tribunal has jurisdiction to
determine the dispute(s)? Does your jurisdiction recognise the concept of kompetenz-kompetenz?
Does the tribunal or the local court determine issues of jurisdiction?

A party questioning the jurisdiction of an arbitral tribunal can apply to the local courts for judicial relief
in determining the issue of the existence, validity and enforceability of the arbitration agreement.
However, when a court is asked to rule on issues affecting the competence or jurisdiction of an arbitral
tribunal in a dispute brought before it, the court must exercise judicial restraint and defer to the
competence or jurisdiction of the arbitral tribunal by allowing the arbitral tribunal the first opportunity to
rule on such issues (rule 2.4, Special Rules of Court on Alternative Dispute Resolution) (Special ADR
Rules)).

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However, the Special ADR Rules also recognise the principle of kompetenz-kompetenz, which means
that the arbitral tribunal can initially rule on its own jurisdiction, including any objections with respect to
the existence or validity of the arbitration agreement (rule 2.2, Special ADR Rules).

Arbitration agreements
Validity requirements
8. What are the requirements for an arbitration agreement to be enforceable?

Substantive/formal requirements
An arbitration agreement can arise in the following ways:

 Two more persons can agree to submit to an arbitration of one or more arbitrators, any
controversy existing between them at the time of the submission, which may be the subject of an
action.
 The parties to any contract can agree to settle by arbitration a controversy thereafter arising
between them.
Such submission or contract will be valid, enforceable, and irrevocable, save on such grounds that
exist under the law for revocation of any contract (section 2, Republic Act 9876 otherwise known as
the Arbitration Law) (Arbitration Law).

A contract or a submission to arbitrate, must be in writing and signed by the parties or their lawful
agents (section 4, Arbitration Law).

Separate arbitration agreement


Under the law, an arbitration agreement is valid so long as it is in writing and signed by the parties to
the agreement, or by their lawful agents. Therefore, a clause in the main contract is sufficient and a
separate arbitration agreement is not needed, so long as the requirements for a contract are met
(section 2, Arbitration Law).

Furthermore, the Republic Act 9285 otherwise known as the Alternative Dispute Resolution Act of
2004 (Alternative Dispute Resolution Act of 2004), (which adopted the UNCITRAL Model Law in its
entirety (Model Law)) provides that an arbitration agreement can be in the form of an arbitration clause
in a contract or in a separate agreement.

The Model Law states that the reference in a contract to a document containing an arbitration clause
constitutes an arbitration agreement, provided that the contract is in writing and the reference is such
as to make that clause part of the contract (Article 7(6), Model Law, Alternative Dispute Resolution Act
of 2004).

Unilateral or optional clauses


9. Are unilateral or optional clauses, where one party has the right to choose arbitration,
enforceable?

There is no express prohibition on unilateral or optional clauses. Therefore, an arbitration agreement


giving one party the right to choose arbitration is likely to be enforceable under the principle of party
autonomy (section 2, Republic Act 9285 otherwise known as the Alternative Dispute Resolution Act of
2004 ).

10. In what circumstances can a third party that did not sign the contract incorporating the arbitral
clause in question be compelled to arbitrate disputes relating to the contract in question?

As a general rule, an arbitration agreement is consensual and therefore only binding on the contracting
parties. Therefore, parties that did not sign the contract cannot be compelled to arbitrate disputes

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relating to the contract, except when the contract contains a reference to a document containing an
arbitration clause to which the third party is a signatory.

11. In what circumstance is a third party that did not sign the contract incorporating the arbitral
clause in question entitled to compel a party that did sign the contract to arbitrate disputes relating
to the contract?

A third party that did not sign a contract incorporating an arbitral clause may compel a party that did
sign the contract to arbitrate, if the contract contains a reference to a document containing an arbitral
clause and the reference is such as to make that arbitration clause part of the contract (section 7(2),
UNCITRAL Model Law).

Separability
12. Does the applicable law recognise the separability of arbitration agreements?

The Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules) recognise the
principle of separability of the arbitration clause. An arbitration clause must be treated as an
agreement independent of the other terms of the contract of which it forms part. Therefore, a decision
that the contract is null and void will not necessarily lead to the invalidity of the arbitration clause (rule
2.2, Special ADR Rules).

Breach of an arbitration agreement


13. What remedies are available where a party starts court proceedings in breach of an arbitration
agreement or initiates arbitration in breach of a valid jurisdiction clause?

Court proceedings in breach of an arbitration agreement


Where parties have agreed to submit their dispute to arbitration, the local courts must refer the parties
to arbitration, bearing in mind that the arbitration agreement is the law between the parties and they
are expected to abide by it in good faith (rule 2.2 (A), Special Rules of Court on Alternative Dispute
Resolution (Special ADR Rules).

Arbitration in breach of a valid jurisdiction clause


A party who initiates arbitration in breach of a valid jurisdiction clause (whether contained in an
arbitration clause or in a submission agreement), can file a motion requesting the local court to refer
the parties to arbitration in accordance with the jurisdiction clause (rule 4.1, Special ADR Rules).

14. Will the local courts grant an injunction to restrain proceedings started overseas in breach of an
arbitration agreement?

Assuming that a valid application for an injunction has been filed in the local court with jurisdiction over
matter, the court can grant an injunction to restrain the parties to continue proceedings started
overseas in breach of an arbitration agreement.

Joinder of third parties


15. In what circumstances can a third party be joined to an arbitration or otherwise be bound by an
arbitration award?

As a general rule, an arbitration agreement is consensual and therefore only binding on the contracting
parties. However, a third party can be joined to an arbitration or be bound by an arbitration award, if
the contract between the main parties contains a reference to a document containing a arbitration
clause to which the third party is a signatory and the reference is such as to make that arbitration
clause part of the contract (section 7(2), UNCITRAL Model Law) (see Question 11).

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Specific rules apply to third party securing loans between a lender and a borrower. Unless otherwise
expressly agreed on by the third-party securing the loan, his agreement to be bound by an arbitration
agreement in a loan agreement will be limited to disputes arising from or in connection with the
relationship between the lender and the borrower, as well as the relationship between the lender and
such third-party (including the right of the lender to proceed against the collateral securing the loan)
However, it will exclude disputes arising out of the exclusive relationship between the borrower and the
provider of security, such as a claim by the provider of security for indemnification against the borrower
(rule A.6, Special Rules of Court on Alternative Dispute Resolution).

Arbitrators
Number and qualifications/characteristics
16. Are there any legal requirements relating to the number and qualifications/characteristics of
arbitrators? Must an arbitrator be a national of, or licensed to practice in, your jurisdiction in order
to serve as an arbitrator there?

The parties are free to determine the number of arbitrators. However, if this is not expressly agreed,
the default position is three (Article 10, UNCITRAL Model Law (Model Law), section 19, Republic Act
9285 otherwise known as the Alternative Dispute Resolution Act of 2004.

A person appointed as an arbitrator must be of legal age, have full civil rights and must know how to
read and write. The person appointed as an arbitrator must not (section 10, Republic Act 9876
otherwise known as the Arbitration Law) (Arbitration Law):

 Be related by blood or marriage up to the sixth degree to either party to the arbitration agreement.
 Have or have had any financial, fiduciary or other interest in the dispute.
 Have any personal bias that might prejudice the right of any party to a fair and impartial award.
No person shall be precluded by reason of his nationality from acting as an arbitrator, unless otherwise
agreed by the parties (Article 11(1), Model Law, section 19, Arbitration Law)

Independence/impartiality
17. Are there any requirements relating to arbitrators' independence and/or impartiality?

See Question 16.

Appointment/removal
18. Does the law contain default provisions relating to the appointment and/or removal of
arbitrators?

Appointment of arbitrators
The court must act as the appointing authority (the person or institution named as such in an
arbitration agreement) to appoint arbitrators in the following instances (rule 6.1, Special Rules of Court
on Alternative Dispute Resolution (SpecialADR Rules)):

 Where any of the parties in an institutional arbitration:


 fail or refuse to appoint an arbitrator; or
 fail to reach an agreement on the sole arbitrator (in an arbitration before a sole arbitrator).
 When the two designated arbitrators fail to reach an agreement on the third or presiding arbitrator
(in an arbitration to be conducted by three arbitrators), and the institution under whose rules
arbitration is to be conducted fails or is unable to perform its duty as appointing authority within a
reasonable time from receipt of the request for appointment.
 In all instances where arbitration is ad hoc and:
 the parties failed to provide a method for appointing or replacing an arbitrator, or substitute
arbitrator; or
 the method agreed on is ineffective; and

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 the National President of the Integrated Bar of the Philippines or his duly authorised
representative fails or refuses to appoint an arbitrator.
 If the appointing authority fails or refuses to act or appoint an arbitrator within a reasonable time
from receipt of the request to do so, any party or the appointed arbitrator(s) can request the court
to appoint an arbitrator or the third arbitrator as the case may be.

Removal of arbitrators
An arbitrator can be removed in accordance with the procedure agreed by the parties or as provided
for in Article 13(2) of the UNCITRAL Model Law. If challenged, an arbitrator can be removed by an
appointing authority or the court, on application, if the appointing authority fail or refuses to act on the
challenge (rule 7.2, Special ADR Rules). The disqualification can occur if the arbitrator (section
10,Republic Act 9876 otherwise known as the Arbitration Law ):

 Is related by blood or marriage within the sixth degree to either party to the controversy.
 Has or had financial, fiduciary or other interest in the controversy or cause to be decided or in the
result of the proceeding.
 Has any personal bias which might prejudice the right of any party to a fair and impartial award.

Procedure
Commencement of arbitral proceedings
19. Does the law provide default rules governing the commencement of arbitral proceedings?

Philippine law does not provide for default rules governing the commencement of arbitral proceedings.
The parties are free to agree on the rules governing the commencement of arbitral proceedings.
However, arbitration must commence by service to the other party of a demand for arbitration (section
5, Republic Act 9876 otherwise known as the Arbitration Law and Article 21, UNCITRAL Model Law).

Applicable rules
20. What procedural rules are arbitrators likely to follow? Can the parties determine the procedural
rules that apply? Does the law provide any default rules governing procedure?

Applicable procedural rules


Arbitrators are likely to follow the UNCITRAL Rules of Procedure, International Chamber of Commerce
Rules of Procedure and the Philippine Dispute Resolution Center Inc Rules of Procedure. The parties
are also free to agree on the procedure to be followed in the conduct of arbitral proceedings, including
the adoption of procedural rules of institutional arbitration (rule 2.3, Special Rules of Court on
Alternative Dispute Resolution (Special ADR Rules)).

Default rules
If parties fail to agree on the procedure to be followed, the arbitral tribunal can conduct arbitration in
the manner it considers appropriate (rule 2.3, Special ADR Rules), taking into account the provisions
of the Republic Act 9876 otherwise known as the Arbitration Law and the Alternative Dispute
Resolution Act 2004.

Arbitrator's powers
21. What procedural powers does the arbitrator have under the applicable law? If there is no
express agreement, can the arbitrator order disclosure of documents and attendance of witnesses
(factual or expert)?

Regardless of any agreement between the parties, the arbitrators have the power to (section 14,
Republic Act 9876 otherwise known as the Arbitration Law) (Arbitration Law):

 Require any person to attend a hearing as a witness.

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 Subpoena witnesses and order the disclosure of documents when relevant to the case.
 Take measures to safeguard and/or conserve any matter that is the subject of the dispute in
arbitration (at any time before rendering the award).
An arbitrator can also require the parties to produce additional evidence that it deems necessary for
the understanding and determination of the dispute (section 15, Arbitration Law).

However, that the arbitral tribunal has no inherent contempt powers; accordingly, the arbitral tribunal
must apply to the proper court to enforce such orders and request sanctions in instances of non-
compliance.

The parties can also request the court for assistance in taking evidence and the disclosure of
documents (rule 9.5, Special Rules of Court on Alternative Dispute Resolution).

Evidence
22. What documents must the parties disclose to the other parties and/or the arbitrator? How, in
practice, does the scope of disclosure in arbitrations compare with disclosure in domestic court
litigation? Can the parties set the rules on disclosure by agreement?

Scope of disclosure
Much like court litigation in the Philippines, the parties are not required by law to make any disclosures
to the other party or the arbitrator, unless directed by the arbitral tribunal in circumstances of necessity,
relevance and materiality. However, the parties are not precluded from making any voluntary
disclosures.

Parties' choice
In accordance with the principle of party autonomy contained in the Civil Code and section 2 of the
Alternative Dispute Resolution Act 2004, nothing prohibits the parties in agreeing to set the rules on
disclosure, including an agreement to require both parties to disclose all relevant, material and
necessary facts and documents.

Confidentiality
23. Is arbitration confidential? If so, what is the scope of that confidentiality and who is subject to
the obligation (parties, arbitrators, institutions and so on)?

The arbitration proceedings, including the records, evidence and the arbitral award, are confidential
and must not be published (section 23, Republic Act 9285 otherwise known as the Alternative Dispute
Resolution Act of 2004 )(Alternative Dispute Resolution Act of 2004).

Information is deemed confidential if it is intended by the source not to be disclosed, or obtained under
circumstances that would create a reasonable expectation on behalf of the source that the information
must not be disclosed. This includes (section 3 (h),Alternative Dispute Resolution Act of 2004):

 Communications (oral or written) made in a dispute resolution proceedings, including memoranda,


notes or work products of the neutral party or non-party participant.
 Pleadings, motions manifestations, witness statements, reports filed or submitted in arbitration.
The restriction on confidentiality applies to all the participants in the arbitration proceedings, including
parties, arbitrators and non-party participants such as witnesses, resource persons or experts and
institutions.

Courts and arbitration


24. Will the local courts intervene to assist arbitration proceedings seated in its jurisdiction?

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As a general rule, the courts must exercise judicial restraint in relation to arbitration proceedings (rules
2.4 and 3.8, Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules)). However,
they can intervene in arbitration proceedings in certain limited instances.

Section 28(a) of the Republic Act 9285 otherwise known as the Alternative Dispute Resolution Act of
2004 provides that after the constitution of the arbitral tribunal and during arbitral proceedings, a
request for an interim measure of protection or modification thereof can be made to the arbitral
tribunal. A petition for interim measure of protection can be made with the court after the constitution of
the arbitral tribunal and at any time during the arbitral proceedings but only to the extent that the
arbitral tribunal has no power to act or is unable to act effectively (rule 5.2, Special ADR Rules).

The Philippine Regional Trial Court has jurisdiction over arbitration-related applications.

25. What is the risk of a local court intervening to frustrate an arbitration seated in its jurisdiction?
Can a party delay proceedings by frequent court applications?

Risk of court intervention


The Supreme Court has laid down a policy of judicial restraint when courts are asked to rule on issues
affecting the competence or jurisdiction of an arbitral tribunal, by allowing the tribunal to have the first
opportunity to rule on such issues (rule 2.4, Special Rules of Court on Alternative Dispute
Resolution (Special ADR Rules)). Further, unless the courts conclude that the arbitration agreement is
null and void, inoperative or incapable of being performed; courts must suspend court proceedings and
refer the parties to arbitration under the arbitration agreement. Only in very specific instances, as
expressly stated in the Special ADR Rules are the courts allowed to intervene in arbitration
proceedings, therefore, the risk of local court intervention to frustrate the arbitration proceedings
seated in its jurisdiction is minimal.

Delaying proceedings
A party cannot delay proceedings by frequent court applications and as a general rule, court
applications during arbitration proceedings must not suspend or postpone the arbitration proceedings.

Remedies
26. What interim remedies are available from the tribunal?

Interim measures
Unless otherwise agreed by the parties, the arbitral tribunal can, at the request of a party, order any
party to take such interim measures of protection as the arbitral tribunal may consider necessary. The
interim measures include but are not limited to:

 Preliminary injunctions directed against a party.


 Appointment of receivers.
 Detention, preservation or inspection of property that is the subject of the dispute in arbitration.
Either party can apply to the court for assistance in implementing or enforcing interim measures
ordered by an arbitral tribunal (section 29, Republic Act 9285 otherwise known as the Alternative
Dispute Resolution Act of 2004).

The court can only issue interim remedies in the following instances (rule 5.2, Special Rules of Court
on Alternative Dispute Resolution (Special ADR Rules)):

 Before arbitration has commenced.


 After arbitration has commenced, but before the constitution of the arbitral tribunal.
 After the constitution of the arbitral tribunal and at any time during arbitral proceedings but, at this
stage, only to the extent that the arbitral tribunal has no power to act or is unable to act effectively.

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Ex parte
As a general rule, only courts can grant ex parte interim reliefs when the applicant alleges that there is
an urgent need to (rule 5.7, Special ADR Rules):

 Preserve property.
 Prevent the respondent from disposing of, or concealing, the property.
 Prevent the relief applied for from becoming defunct.
The court must also find that the reasons given by the applicant have merit.

Security
The order issued by the arbitral tribunal, granting an interim measure of protection, may be conditioned
on the provision of security, the performance of an act, or omission thereof, specified in the order (rule
5.12, Special ADR Rules).

27. What final remedies are available from the tribunal?

Arbitrators have the power to award the expenses of any party against another party, when such
assessment is deemed necessary (section 20, Republic Act 9876 otherwise known as the Arbitration
Law ).

The arbitral tribunal only has the power to decide and give a final award on matters which have been
submitted to them by the parties. Therefore, if the parties have raised the issue of damages, injunction,
costs, interest or any other relief relating to the subject matter, then the same may be awarded by the
arbitral tribunal. If the parties have not raised these issues before the arbitral tribunal, then it has no
power to rule on them. As a general rule, the arbitral tribunal has the power to grant any award or final
remedy if these are submitted by the parties for resolution.

Appeals

28. Can arbitration proceedings and awards be appealed or challenged in the local courts? What are
the grounds and procedure? Can parties waive any rights of appeal or challenge to an award by
agreement before the dispute arises (such as in the arbitral clause itself)?

Rights of appeal/challenge
There is no right of appeal for an arbitral award. An arbitral award is final and binding (rule
19.7, Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules)). Consequently, a
party to an arbitration proceeding is precluded from filing an appeal or a petition for certiorari (a writ
seeking judicial review) questioning the merits of an arbitral award with the courts (rule 19.7, Special
ADR Rules). However, an arbitral award can be vacated, modified, corrected, or set aside under very
limited specified grounds by court action (sections 24 and 25, Republic Act 9876 otherwise known as
the Arbitration Law , rule 11.1, Special ADR Rules) (see Question 3).

The exception to the general rule is an arbitral award rendered by the Construction Industry Arbitration
Commission (CIAC), which can be appealed to the Court of Appeals (rule 43, Revised Rules of Court
of the Philippines).

Furthermore, a party to an arbitration can petition the Regional Trial Court to confirm, correct or vacate
an arbitral award (rule 11.1, Special ADR Rules). The decision and orders of the Regional Trial Court
relating to the arbitral award can be reviewed by the Court of Appeals and subsequently by the
Supreme Court (rules 19.8, 19.12 and 19.36, Special ADR Rules).

Grounds and procedure


An appeal to the Court of Appeals can be made on at least one of the following final orders of the
Regional Trial Court (rule 19.12, Special ADR Rules):

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 Granting or denying an interim measure of protection.
 Denying a petition for appointment of an arbitrator.
 Denying a petition for assistance in taking evidence.
 Enjoining or refusing to enjoin a person from divulging confidential information.
 Confirming, vacating or correcting/modifying a domestic arbitral award.
 Setting aside an international commercial arbitration award.
 Dismissing the petition to set aside an international commercial arbitration award even if the court
does not decide to recognise or enforce such award.
 Recognising and/or enforcing an international commercial arbitration award.
 Dismissing a petition to enforce an international commercial arbitration award.
 Recognising and/or enforcing a foreign arbitral award.
 Refusing recognition and/or enforcement of a foreign arbitral award.
 Granting or dismissing a petition to enforce a deposited mediated settlement agreement.
 Reversing the ruling of the arbitral tribunal upholding its jurisdiction.
When the Regional Trial Court, has acted without or in excess of its jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal or any plain, speedy, and
adequate remedy in the ordinary course of law, a party can file a special civil action for certiorari to
annul or set aside the order on one of the following grounds] (rule 19.26, Special ADR Rules):

 The arbitration agreement is inexistent, invalid or unenforceable.


 Reversing the arbitral tribunal's preliminary determination upholding its jurisdiction.
 Denying the request to refer the dispute to arbitration.
 Granting or refusing an interim relief.
 Denying a petition for the appointment of an arbitrator.
 Confirming, vacating or correcting a domestic arbitral award.
 Suspending the proceedings to set aside an international commercial arbitral award and referring
the case back to the arbitral tribunal.
 Allowing a party to enforce an international commercial arbitral award pending appeal.
 Adjourning or deferring a ruling on whether to set aside, recognise and or enforce an international
commercial arbitral award.
 Allowing a party to enforce a foreign arbitral award pending appeal.
 Denying a petition for assistance in taking evidence.
A party, who is not satisfied with the decision of the Court of Appeals, can appeal to the Supreme
Court. However, review by the Supreme Court is not a matter of right, but of sound judicial discretion,
which will be granted only for serious and compelling reasons resulting in grave prejudice to the
aggrieved party (rule 19.36, Special ADR Rules).

Arbitral awards made by the CIAC can be appealed through the standard procedure for appeal for
quasi-judicial bodies to the Court of Appeals under Rule 43 of the Revised Rules of Court of the
Philippines.

Excluding rights of appeal


Arbitration is a consensual agreement between the parties. As such, parties may include a stipulation
regarding the waiver of rights to challenge an award. However, such waiver may be questioned in
court as being contrary to ''...morals, good customs, public order, or public policy'' (Article 1306, Civil
Code of the Philippines).

29. What is the limitations period applicable to actions to vacate or challenge and international
arbitration award rendered?

A petition to set aside an arbitral award can only be filed within three months of receiving the award. If
a timely request is made to the arbitral tribunal for the correction, interpretation or request for an
additional award, the three month-period begins when the applicant the resolution of this request (rule
12.2(B), Special Rules of Court on Alternative Dispute Resolution).

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Costs
30. What legal fee structures can be used? Are fees fixed by law?

Like in court litigation, the legal fees are subject to agreement between the lawyer and his client such
as:

 Hourly rates.
 Contingency basis.
 Based on tasks accomplished.
 Success fees.
 A combination of the enumerated fee structures.
Fees may be reduced if found to be unconscionable or unreasonable (section 24, rule 138, Revised
Rules of Court ).

31. Does the unsuccessful party have to pay the successful party's costs? How does the tribunal
usually calculate any costs award and what factors does it consider?

Cost allocation
The arbitral tribunal has discretion as to how the costs of the arbitration process are awarded (section
20, Republic Act 9876 otherwise known as the Arbitration Law).

Cost calculation
Awarded costs usually include the expenses (or a portion of them) of any party against another party.
Whether a successful party’s costs (in full or partially), can be recovered is at the tribunal's discretion.

Following the general rule in evidence, the party who asserts that he is entitled to costs has the burden
of proving the same. The tribunal is prohibited from awarding costs that cannot be proved.

Factors considered
The tribunal can takes into consideration all the circumstances of the case. An example is whether the
arbitration case presented difficult questions of law and therefore, that the losing party acted sincerely
in pursuing or resisting the claims.

Enforcement of an award
Domestic awards
32. To what extent is an arbitration award made in your jurisdiction enforceable in the local courts?

The petition for enforcement and recognition of an arbitral award can be filed anytime after the award
is made. Once the court is satisfied that the petition filed meets the requirements of rule 12 of the
Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules), the court must serve a
copy of it on the respondent, directing him to file an opposition within 15 days of receipt. The
respondent can file a petition to set aside the award in opposition to the applicant's petition to
recognise and enforce, or a petition to recognise and enforce the award in opposition to the applicant's
petition to set aside (rule 12.8, Special ADR Rules).

A petition to recognise and enforce or set aside an arbitral award can be filed with the regional trial
court (rule 12.3, Special ADR Rules):

 Where arbitration proceedings were conducted.


 Where any of the assets to be attached or levied on are located.
 Where the act ordered in the award will be or is being performed.
 Where any of the parties to the arbitration resides or has its place of business.
 In the National Capital Judicial Region.

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If the court finds that the issue between the parties is mainly one of law, the parties may be required to
submit briefs of legal arguments, not more than 15 days of receipt of the order, which sufficiently
discuss the legal issues and the legal basis for the relief prayed (rule 12.9, Special ADR Rules).

Unless a ground to set aside an arbitral award has been fully established, the court must dismiss the
petition. If, in the same proceedings, there is a petition to recognise and enforce the arbitral award filed
in opposition to the petition to set aside, the court must recognise and enforce it (rule 12.13, Special
ADR Rules).

Foreign awards
33. Is your jurisdiction party to international treaties relating to recognition and enforcement of
foreign arbitration awards, such as the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards 1958 (New York Convention)?

The recognition and enforcement of a foreign arbitral award in the Philippines is governed by the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York
Convention) and the Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules).

However, the Philippines courts can, on grounds of comity and reciprocity, recognise and enforce a
foreign arbitral award made in a country that is not a signatory to the New York Convention (rule 13.4,
Special ADR Rules). Therefore, countries that are not a party to the New York Convention can still be
accorded the privileges under the New York Convention if they accord the Philippines the same
treatment.

34. To what extent is a foreign arbitration award enforceable?

Any party to a foreign arbitration can petition the local courts to recognise and enforce a foreign arbitral
award (rule 13.1, Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules)). At
any time after receipt of a foreign arbitral award, any party to the arbitration can petition the proper
regional trial court to recognise and enforce the award (rule 13.2, Special ADR Rules).

The petition to recognise and enforce a foreign arbitral award can be filed with the regional trial court
(rule 13.3, Special ADR Rules):

 Where the assets to be attached or levied on is located.


 Where the act ordered in the award will be or is being performed.
 Where any of the parties to the arbitration resides or has its place of business.
 In the National Capital Judicial Region.
If the court finds that the issue between the parties is mainly one of law, the parties can be required to
submit briefs of legal arguments, not more than 30 days from receipt of the order, which sufficiently
discuss the legal issues and the legal bases for the relief prayed for by each other (rule 13.8, Special
ADR Rules).

The court must set the case for hearing, if on the basis of the foregoing submissions; there is a need to
do so. The court must give due priority to hearings on such petitions. During the hearing, the affidavits
of witnesses must take the place of their direct testimonies and they will immediately be subject to
cross-examination. The court must have full control over the proceedings in order to ensure that the
case is heard without undue delay (rule 13.9, Special ADR Rules). This procedure must conform to the
Judicial Affidavit Rule, which states that:

 Judicial affidavits of witnesses take the place of their direct testimonies.


 The parties must file the judicial affidavits with the court and a serve copy of each judicial affidavit
(personally or by licensed courier) on the adverse party, not more than five days before the pre-
trial/preliminary conference or the scheduled hearing.

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The court must recognise and enforce a foreign arbitral award unless one or more of the grounds for
refusal as provided in rule 13.4 of the Special Rules of Court on Alternative Dispute Resolution, are
established.

The decision of the court in recognising and enforcing a foreign arbitral award is immediately
enforceable (rule 13.11, Special ADR Rules).

US and UK foreign arbitral awards are enforceable in the Philippines jurisdiction under the Convention
on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

35. What is the limitations period applicable to actions to enforce international arbitration awards
rendered outside your jurisdiction?

There is no applicable limitation period to actions to enforce international arbitration awards rendered
outside the Philippines so a party can petition the proper regional trial court to recognise and enforce a
foreign award at any time after receipt (rule 13.2, Special Rules of Court on Alternative Dispute
Resolution).

However, the Philippine Supreme Court has previously recognised the equitable defence of laches
(the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by
exercising due diligence could or should have been done earlier). It is negligence to fail to assert a
right within a reasonable time, warranting the presumption that the party entitled to assert his right has
either abandoned or declined to assert it (Heirs of Nieto vs. Municipality of Meycauayan, 540 SCRA
100 (2007)) Therefore, the application to enforce a foreign arbitral award should be filed within a
reasonable period of time.

Length of enforcement proceedings


36. How long do enforcement proceedings in the local court take, from the date of filing the
application to the date when the first instance court makes its final order? Is there an expedited
procedure?

Enforcement proceedings in the Philippine courts usually take six months to one year.

Reform
37. Are any changes to the law currently under consideration or being proposed?

Senate Bill No. 231 entitled, ''The Philippine Arbitration Act of 2013'' is currently pending. This Senate
Bill aims to introduce mandatory arbitration process for medical malpractice, maritime, insurance,
intellectual property, and intra-corporate issues. While the act will not change the current arbitration
laws of the Philippines it will expand the issues/matters that are required under the process of
arbitration.

Main arbitration organisations


Philippine Dispute Resolution Center, Inc. (PDRCI)
Main activities. PDRCI offers the following dispute resolution services:

 Administration of commercial arbitration and mediation.


 Appointment of arbitrators and mediators.
 Organisation of seminars on commercial arbitration.
 Provision of training and accreditation.
 Networking with various international arbitration centres.
 Referral services.
 Information on arbitration agreements, rules and arbitration law and practice.

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PDRCI maintains a panel of local and foreign accredited arbitrators and mediators. It has also has
been actively involved in the dissemination of information about legislative matters concerning
arbitration, trade law and commerce since its establishment.

W www.pdrci.org/

Construction Industry Arbitration Commission (CIAC)


Main activities. The CIAC is the body created by law to have original and exclusive jurisdiction over
disputes arising from, or connected with, contracts entered into by parties involved in construction in
the Philippines, whether the dispute arises before or after the completion of the contract, or after the
abandonment or breach thereof. These disputes involve government or private contracts. For CIAC to
acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration.

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