De Jesus, Mark William B.

3A 2020
Ateneo Law School

Reaction paper on the International Arbitration, Investment Arbitration, and the case of
Fraport AG v. Republic of the Philippines

The fourth set of readings focused on the International Arbitration and Investment Arbitration. In
this reaction paper, I shall discuss the contradiction of International Law as a law in the
application of arbitral awards to a local state, the Vested Rights Doctrine as applied in Private
International Law and lastly the Arbitral award in the case of Fraport vs. Philippines specifically
my objection to the discussion of the ADL – a special penal law – in an international arbitral
tribunal.

Is International law really a law?

The speaker in the 4th and last colloquium started with the question “is International Law really a
law?” and it struck me as I am of the opinion that for International Law to be really a law, it has to
be enforceable. Granted, there are enforcing mechanisms available for international law however
most of it starts with consent whether directly or indirectly given. I am not an expert in the practice
of international law/arbitration however, I am inclined to say that enforcement still lies on the
local/domestic acceptance of the state of the arbitral award.
In the words of Gary Born, “…arbitration is a process by which parties consensually submit a
dispute to a non-governmental decision-maker selected by or for the parties, to render a binding
decision resolving a dispute in accordance with neutral, adjudicatory procedures affording each
party an opportunity to present its case” – binding as it is, it’s enforcement will still require judicial
procedure. Described by Redfern and Hunter, “once an arbitral tribunal has made its final award,
it has done what is was established to do. [If] the award is not carried out voluntarily, it may be
enforced by legal proceedings-both locally and internationally.” Therefore, its binding effect still
relies in the local laws and or incorporated international laws. In the Redfern and Hunter readings,
it said that an arbitral tribunal does not have the powers or prerogatives of a court of law and that
an agreement to arbitrate is also include an agreement to carry out the award. When the dispute
involves subjects that are not exclusive to the parties, enforcement will have to take actions that
include the state’s participation.
The speakers further emphasized that more and more contracts between individuals, corporations,
and states, are now being exposed to the international arbitration due to several factors such as
speed, technical background, confidentiality, neutrality, acceptability and lastly – enforcement.
The enforcement part is incomplete however as enforcement can only take place when the state’s
policy is also to recognize and enforce international tribunal’s awards.
Take for example the case of Philippines v. China, even with the success of the Philippines in the
arbitration, the problem of enforcement is clearly evident. The Philippines cannot simply impose
the arbitral award despite being within the Exclusive Economic Zone of the Philippines when the
state of China still treat the disputed area as part of their sovereign state.
De Jesus, Mark William B.
3A 2020
Ateneo Law School

Even in the case discussed by the speakers with the agreement of Philippines with China regarding
the dam construction, where the project shall be performed in the Philippines but the seat of
arbitration is in Beijing China and the governing laws to be applied are the laws of China. In any
decisions regarding the dispute within the agreement, enforcing it will still be questionable. Will
the imposition of the Chinese laws in the Philippines violate the Philippine’s sovereignty? Will the
decision of the arbitral tribunal be judicially enforced in the Philippines if the local courts cannot
rule upon the governing laws of China?
Unless therefor there is a local legislation that supports the enforcement of international arbitral
awards, judicial enforcement of it may fall upon deaf ears. The local judicial system may simply
disregard the award even if it has consent of all the parties if there is no legal basis to enforce the
award. Ultimately therefor, its enforcement will rely most likely with the performance in good
faith of the parties – an obligation that can be difficult to impose when the other party is a state
whose sovereignty is supreme in its territory.

Vested Rights Doctrine

A further discussion regarding vested rights doctrine I believe is proper. When parties submit to
arbitration, they accede to the tribunal’s decision. This decision vests the winning party the rights
to claim against the losing party, and unless it is against or contrary to the public policy of the
enforcing state, such decision should be executed accordingly, not because the arbitral tribunal
exercised judicial power, rather because the parties are exercising their rights and obligations.
Further, vested rights doctrine is already a private international law principle where rights acquired
in one country must be recognized and legally protected in others. Obviously when it is assumed
that no law can be given effect extraterritorially, enforcement will really be an issue even taking
consideration of principle of comity. In the Private International Law book of Jovito Salonga citing
the case of McDonald v. Railway, the court in that case said “when a right is claimed upon acts
occurring in another country, courts look to the law of the country, not to extend the binding force
of a foreign law beyond the territorial limits of the sovereignty to which it belongs.. it is not the
foreign law but the rights acquired under it which are enforced by the courts of another country.”
Enforcement of arbitral awards can therefore be strengthen applying the vested rights doctrine as
instead of applying foreign law which will be very hard to swallow in the local judicial system, it
is merely protecting the rights acquired under that system that can be recognized by the local courts
in pursuit of fairness, justice, and the application of the law.

The Arbitral Tribunal is not qualified to determine whether ADL is present or not
In the case of Fraport v. Philippines, the arbitral tribunal should not have labored itself in
discussing the ADL when such is a special penal law of a local state. It should be beyond the scope
to which international tribunals can resolve. Arbitral Tribunals are usually preferred as the
arbitrators are usually well-experienced of the field and provides great help since the expertise
shall speed up the proceedings. However, in criminal cases prosecuted in the local state, there
should be nothing and no-one else more experienced, more adept, and more qualified than the
Courts and the Judicial System of the local state. The award of the international tribunal has no
De Jesus, Mark William B.
3A 2020
Ateneo Law School

weight in effect in touching upon the ADL as its decision cannot be binding through the Local
Courts.
Even with the consent of the state, the award simply does not bear any weight as enforcing the
award with regard to the determination of the ADL is futile. The local courts will most likely
dismiss, if not recognize, the award since the arbitrators are in no position to sit on the such
determination of facts and law to be applied.