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LAW 160 A (PROBLEMS IN REMEDIAL LAW / ALTERNATIVE DISPUTE RESOLUTION)
Prof. Arthur Autea | 1st Sem 2011-2012
Expanded Outl ine and Class Notes by Eva Marie G. Gutierrez
GRADING SYSTEM
60% - Attendance, Class Participation, Quizzes
40% - Final Exams
I. Introduction
o Course focus is on ARBITRATION, the only legally binding
form of ADR
o Look at ADR as an alternative to conventional litigation
procedure but use analogy to understand the process
better
o It is alternative because it can be practiced even without
a lawyer
Conventional Litigation
Arbitration
Nature Public Procedure Private Procedure “Private Judging”, private resolution of disputes
Who presides A judge The arbitrator
Participation in choosing presiding officer
You cannot choose your judge; assignment by raffle;
Parties have participation in choosing arbitrator; always by mutual agreement whether it be sole or panel arbitration
Composition of tribunal
Only one judge in RTC/MTC to preside
Usually, either a sole arbitrator or panel of 3
over the case (chairman and 2 co-arbitrators)
Who bears costs Salary of judges paid by the state
Compensation of arbitrators shouldered by the parties
Governing law and rules in settling the dispute
Applicable Philippine law is followed unless there is a choice of law clause; Rules of Court followed
Parties can choose applicable law and rules, including procedure, to govern the resolution of the dispute
Venue Rules on venue followed in adjudication of claim
Venue chosen by parties
Speed of proceedings
Procedure drags so long
Scheduled in quick succession
Parties Plaintiff and Respondent
Claimant and Respondent
Kinds of Arbitration
Ad hoc Institutional
Parties will take care of the logistics
Institutions acts just like Clerks of Court – receives request for arbitration, sends out notices, records proceedings, provides hearing rooms and other logistics
Arbitration deemed commenced upon service of demand for arbitration (Sec. 5(a), RA 876)
Governing law and rules: Domestic – RA 876 and
In default of agreement of the parties, institutions have their own rules that the
ADR Notes | Page 2 of 17
Special ADR Rules (RA 9285, Sec. 32 refers back to RA 876) International – UNCITRAL 1985 Model Law (as expressly adopted by Sec. 19, RA 9285) and UNCITRAL Rules of Arbitration
parties can adopt e.g. ICC Rules
Example: ICC/ICA (most prominent), AAA, LCIA, HIAC, SIAC, JCCA, KCAB, PDCI, CIA, KLRCA, IAB, ACICIA
Domestic International
“Domestic arbitration” shall mean an arbitration that is not international as defined in Article 1(3) of the Model Law (Sec. 32, RA 9285)
(3) An arbitration is international if: (a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or (b) one of the following places is situated outside the State in which the parties have their places of business: (i) the place of arbitration if determined in, or pursuant to, the arbitration agreement; (ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or (c) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country. (4) For the purposes of paragraph (3) of this article: (a) if a party has more than one place of business, the place of business is that which has the closest relationship to the arbitration agreement; (b) if a party does not have a place of business, reference is to be made to his habitual residence. [UNCITRAL Model Law Article 1 (3)]
Legislative History of Arbitration in the Philippines
Major Developments
(1) 1953 – RA 876 enacted by a domestic act, covers domestic
arbitration; meanwhile, Southeast Asian region’s use of
arbitration as a mode of dispute resolution continues to be
more prevalent
(2) 1985 – EO 1008 signed into law by Pres. Marcos which covers
construction arbitration and created a body – the CIAC:
Construction Industry Arbitration Authority; jurisprudence on
arbitration, especially construction arbitration, enriched from
1985; although in practice, arbitration clauses are not
regularly invoked even if there is arbitrable dispute
(3) 2004 – RA 9285 (ADR Act) deals with both domestic and
international discussion; not as extensive as RA 876; no
chapter discussing international arbitration, instead it
referred to an existing model of international arbitration –
the 1985 UNCITRAL Model Law
(4) 2009 – Special ADR Rules issued by Supreme Court, supplied a
lot of missing elements in RA 876 and RA 9285
Note: even before 1953, arbitration agreements were also
recognized by jurisprudence; a lot of jurisprudential
developments and language on arbitration landed in the statutes
and Special ADR Rules
Other Developments:
1958 – New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, Philippines a
signatory
1978 – UNCITRAL Arbitration Rules
1996 – China Chang Jiang Energy Corp (Philippines) vs Rosal
Infrastructure Builders, landmark case in construction
arbitration is decided although unreported: pronounced that
ADR Notes | Page 3 of 17
if there is an construction contract with arbitration clause
then jurisdiction is with CIAC
o Construction industry
o FIDIC
Definition of Arbitration Agreement
RA 876, Sec. 2
Arbitration Agreement Submission Agreement
As to time agreed upon by the parties (relative to the occurrence of the dispute)
Agreed by the parties even BEFORE the occurrence of dispute;
Agreed upon by the parties AFTER the occurrence of a dispute;
As defined in Sec. 2, RA 876
parties to a contract agree in such a contract [container contract] agree to settle by arbitration a controversy thereafter arising between them [usually, in an arbitration clause]
two or more persons submit to the arbitration of one or more arbitrators any controversy existing between them at the time of the submission
When it may be invoked
A party may invoke this at any time before pre-trial stage, after which both parties must invoke it
May be entered into at any time, even after pre-trial stage
RA 9285, Sec. 3 (d)
"Arbitration" means a voluntary dispute resolution process in which one or
more arbitrators, appointed in accordance with the agreement of the
parties, or rules promulgated pursuant to this Act, resolve a dispute by
rendering an award.
UNICTRAL Model Law, Article 7(1)
“Arbitration Agreement” is an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which may arise
between them in respect of a defined legal relationship, whether
contractual or not. An arbitration agreement may be in the form or an
arbitration clause in a contract or in the form of a separate agreement.
Civil Code, Article 1159
Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith.
Frabelle Fishing Corporation v. Philippine American Life Insurance
Company (2007)
o HLURB has no jurisdiction over reformation of contracts
o Arbitration is the “wave of the future” citing BF Homes v CA
o Re issue WON there should be prior referral to arbitration, SC
made no definite ruling.
o Case does not show if any of the parties prayed for arbitration;
however, there was an issue WON the dispute is arbitrable and
the Court resolved it in the affirmative
o Sir thinks Court fell short of ordering (in the dispositive) referral
to arbitration
Exclusion from coverage of commercial arbitration
RA 876, Sec. 3 – controversies and case subject to the jurisdiction of NLRC
i.e. labor disputes arising from employer-employee relationship
RA 9285, Sec. 6 –
(a) labor disputes covered by Presidential Decree No. 442, otherwise known
as the Labor Code of the Philippines, as amended and its Implementing
Rules and Regulations;
(b) the civil status of persons;
(c) the validity of a marriage;
(d) any ground for legal separation;
(e) the jurisdiction of courts;
(f) future legitime;
(g) criminal liability; and
ADR Notes | Page 4 of 17
(h) those which by law cannot be compromised.
Formal requirements of arbitration agreement
1. in writing
2. subscribed
RA 876, Sec. 4
A contract to arbitrate a controversy thereafter arising between the parties,
as well as a submission to arbitrate an existing controversy shall be in
writing and subscribed by the party sought to be charged, or by his lawful
agent.
UNCITRAL Model Law, Article 7(2)
The arbitration agreement shall be in writing. An agreement is in writing if
[1] it is contained in a document signed by the parties or
[2] in an exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the agreement, or
[3] in an exchange of statements of claim and defence in which the
existence of an agreement is alleged by one party and not denied by
another.
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.-
o Statement of Claim – first substantive pleading of the claimant
o Statement of Defence – first substantive pleading of the
respondent
Q: Is it conceivable to have an arbitration agreement not evidenced by
physical document?
A: Yes, third mode under Model Law Art. 7 (2)
BF Corporation v. Court of Appeals
o Articles of Agreement adopted/referred to another document
containing the arbitration agreement: valid
o The famous pronouncement re arbitration: Arbitration is now
regarded as the “wave of the future” in international civil and
commercial disputes.
Associated Bank v. Court of Appeals
o Participation in the Philippine Clearing House Rules (PCHR)
amounts to a written and subscribed consent to arbitration
Bloomfield Academy v. Court of Appeals
o A party was bound by the law to some kind of arbitration. Is the
provision an arbitration agreement?
Ormoc Sugarcane Planters Association, Inc v. Court of Appeals
o Association filed a case for arbitration without impleading the
individual planters who are the real parties in interest , they are
the parties (to the contract with sugar central owners) containing
the arbitration clause
o At best, the Association is an agent, however in that case, it
should be properly authorized to bring suit on behalf of the
planters
o The Associations complaint was denominated “Arbitration and
Recovery of Shares, Attorney’s Fees and Damages” – this is not a
proper complaint; if the issue is arbitrable, everything should be
referred to arbitration. Jurisdiction of the court is limited to the
resolution WON dispute should be referred to arbitration,
otherwise, it would be encroaching on the jurisdiction of the
arbitrator(s).
ADR Notes | Page 5 of 17
Ma. Luisa Park Association v. Almendras
o Court noted the existence of an arbitration agreement but did
not order the parties to arbitrate; if none of the parties invoke it,
the court cannot compel parties to go to arbitration; implication:
rights under an arbitration agreement are waivable
Q: What is a “pathological arbitration clause”?
A: a vague or defective arbitration clause; qualified; not a “any and all
disputes…” stipulation. The issue reluctant to submit to arbitration can
raise the issue that the dispute is not covered by the arbitration
agreement
e.g: Ormoc, McDOnough? Oil and Natural Gas Commission v. CA, LM
Power Eng’g Corporation v. Capitol Industrial Construction Groups, Inc.
Party Autonomy
o Freedom of the parties to determine the rules / law governing the
mode of resolving their dispute
o Standard of “least intervention” implies that the jurisdiction of
the court is only confined to the relief sought by the parties
e.g.
- In a Petition to Enforce Arbitration Agreement, RTC can only
refer the parties to arbitration after finding the existence of an
arbitration agreement and the default of the other party, it
cannot appoint the arbitrators
- In a Petition/Motion to Vacate Arbitral Award, it can only vacate
the award if so warranted but it cannot proceed to resolve the
merits of the case
RA 9285, Sec. 2
…it is hereby declared the policy of the State to actively promote party
autonomy in the resolution of disputes or the freedom of the party to make
their own arrangements to resolve their disputes xxx
SADR Rule 2. 1
It is the policy of the State to actively promote the use of various modes of
ADR and to respect party autonomy or the freedom of the parties to make
their own arrangements in the resolution of disputes with the greatest
cooperation of and the least intervention from the courts xxx
Principle of competence-competence and Doctrine of Separability
UNCITRAL Model Law, Article 16(1)
The arbitral tribunal may rule on its own jurisdiction, including any
objections with respect to the existence or validity of the arbitration
agreement. For that purpose, an arbitration clause which forms part of a
contract shall be treated as an agreement independent of the other parts of
the contract. The decision by the arbitral tribunal that the contract is null
and void shall not entail ipso jure the invalidity of the arbitration clause.
SADR, Rule 2.2 (B)
The Special ADR Rules recognize the principle of competence-competence,
which means that the arbitral tribunal may initially rule on its own
jurisdiction, including any objections with respect to the existence or
validity of the arbitration agreement or any condition precedent to the
filing of a request for arbitration.
The Special ADR Rules recognize the principle of separability of the
arbitration clause, which means that said clause shall be treated as an
agreement independent of the other terms of the contract of which it forms
part. A decision that the contract is null and void shall not entail ipso jure
the invalidity of the arbitration clause.
Gonzales v. Climax Mining Ltd.
o Ratio:
o If allegation is regarding the validity container contract and/or
validity of arbitration clause, they may be jointly resolved by the
tribunal
ADR Notes | Page 6 of 17
o Validity of arbitration agreement determines the jurisdiction of
the arbitration tribunal but principle of competence-competence
allows the arbitral tribunal to initially rule on its own jurisdiction
Korea Technologies Co., Ltd. v. Lerma
o On interim measures: When KOGIES filed injunction before RTC
Muntinlupa, no arbitral tribunal was constituted but 2 days later,
KOGIES commenced arbitration with KCAB
o Qualified ruling in UP v. Delos Angeles on unilateral rescission of
reciprocal obligations, thus: “Where an arbitration clause in a
contract is availing, neither if the parties can unilaterally treat the
contract as rescinded since whatever infractions or breaches by a
party or differences arising from the contract must be brought
first and resolved by arbitration, and not through an extrajudicial
rescission or judicial action.
• Article 2044 of the Civil Code sanctions the validity and mutuality
of agreed arbitration clause or the finality and binding effect of an
arbitral award.
• The arbitration clause which stipulates that the arbitration must
be done in Seoul, Korea in accordance with the Commercial
Arbitration Rules of KCAB, and that the award is final and binding,
is not against public policy. Consistent with the policy of
encouraging ADR methods, courts should liberally construe
arbitration clauses.
• RA 9285 incorporated the UNCITRAL Model Law to which we are
a signatory. Although passed only in 2004, it is a procedural law
which has a retroactive effect.
• Under Sec. 24, the RTC does not have jurisdiction over disputes
that are properly the subject of arbitration pursuant to an
arbitration clause, and mandates the referral to arbitration.
• Foreign arbitral awards when confirmed by the RTC are deemed
not as judgment of a foreign court but as foreign arbitral award,
and when confirmed, are enforced as final and executor decisions
of our courts of law.
• The concept of a final and binding award is similar to judgments
or awards given by quasi-judicial bodies whose final judgments
are stipulated to be final and binding but not immediately
executory in a sense that it can still be judicially reviewed.
PEZA v. Edision
Q: Was this a proper case for Motion for Judgment on the Pleadings?
International commercial arbitration
RA 9285, Secs. 19 – 21
UNCITRAL Model Law, Article 1 (supra)
Commencement of Arbitration
Under RA 876, Sec. 5, arbitration proceedings (ad hoc) is commenced by
service of a DEMAND FOR ARBITRATION.
Contents:
1. Amount involved, if any
2. Relief sought
3. Nature of controversy
4. Appointment of arbitrator (nominee)
Attach: true copy of the contract (arbitration agreement)
Note: the demand will also stop the running of the prescriptive period
If demand is ignored – Petition court for enforcement (See next section)
UNCITRAL Model Law, Article 21
Unless otherwise agreed by the parties, the arbitral proceedings in respect
of a particular dispute commence on the date on which a request for that
dispute to be referred to arbitration is received by the respondent.
ADR Notes | Page 7 of 17
o For institutional arbitration – arbitration is commenced upon
notice of the institution to the respondent of the claimant’s
request for arbitration with the institution
Enforcement of Arbitration/Submission Agreement
o Via a “Petition for Enforcement of Arbitration Agreement” under
RA 876, Sec. 6
o Grounds: Failure, neglect or refusal to comply with the arbitration
agreement
o How to dispose of a Petition to Enforce:
(1) Existence of Arbitration Agreement
(a) Not in issue – proceed to No. 2
(b) In issue
(i) no arbitration agreement – dismiss petition, nothing to
enforce
(ii) there is arbitration agreement – go to No. 2
(2) Existence of default
(a) No default – dismiss e.g. no prior service of demand for
arbitration
(b) There is default – Grant petition, refer to arbitration
o Note: “default” refers to performance under the arbitration
agreement or as used in Section 6, the other party’s “failure,
neglect or refusal”
o Nature of proceedings: under the SADR, summary in nature, ~
civil action for specific performance
o The kind of jurisdiction of the court who takes cognizance of
Section 6 petition: SPECIAL and LIMITED i.e. “the court cannot
stray to matters outside the area of its declared authority or
beyond what has been expressly invested by the law” (La Naval
Drug v. CA).
o Duty of the court in a Section 6 Petition:
“The duty of the court in this case is not to resolve the merits of
the parties’ claims but only to determine if they should proceed
to arbitration or not (Mindanao Portland Cement Corporation v.
McDonough Construction Company of Florida).
Section 6, RA 876 Section 7, RA 876 (in rel. to Sec. 24, RA 9285 – referral to arbitration)
“Petition for Enforcement of Arbitration Agreement”
“Motion for Stay of Action”
Dispute not yet with the court Dispute already with the court Note: provided the applicant for the stay is not in default in proceedings with such arbitration.
Q: Why is a “Motion for Stay of Action” more preferable than a “Motion
to Dismiss”?
A: Dismissal will result to loss of jurisdiction by the court (e.g APT v. CA,
1998). But remember that there will be instances when you have to go
back to court such as for interim reliefs, assistance in taking evidence, to
renew challenge of arbitrator, and most importantly for confirmation of
the arbitral.
For practical reasons: If you have to start a new case, you have to pay
new docket fees, have the case re-raffled, etc.
o See Section 7 discussion below (Referral to Arbitration)
Mindanao Portland Cement Corporation v. McDonough Construction
Company of Florida
o Respondent’s arguments touching upon the merits of the dispute
is improperly raised herein. They should be addressed to the
arbitrators. This proceeding is merely a summary remedy to
enforce the agreement to arbitrate. The duty of the court in this
ADR Notes | Page 8 of 17
case is not to resolve the merits of the parties’ claims but only to
determine if they should proceed to arbitration or not.
La Naval Drug Corp. v. Court of Appeals
o Under Section 6 of RA 876, a court, acting within the limits of its
special jurisdiction, may in this case solely determine the issue of
whether the litigants should proceed or not to arbitration.
o When a court is called upon to exercise limited and special
jurisdiction, that court cannot stray outside the area of its
declared authority or beyond what has been expressly invested
by law.
Judicial Relief Before and After Commencement of Arbitration
Proceedings
See: SADR Rule 3
Confidentiality of Arbitration Proceedings:
o Confidentiality refers to three things: records, evidence and
arbitral award
o Exceptions:
(1) Waived by the consent of the parties
(2) For a limited purpose of disclosing to the court of relevant
documents e.g
(a) enforcement/confirmation of award
(b) renewing challenge of appointment of arbitrator
(c) vacating/setting aside award
(d) interim relief
II. Arbitrators
APPLICABLE PROVISIONS:
SADR Rule 6 to Rule 8
RA 876 Sections 8, 10, 11, 13
UNCITRAL Model Law, Articles 10 – 14
Civil Code, Article 2045. Any clause giving one of the parties power to
choose more arbitrators than the other is void and of no effect.
CASES:
National Steel Corporation v. RTC of Lanao Del Norte, Branch 2, Iligan
City
o Arbitrators act in a “quasi-judicial capacity”. Implications:
1. quantum of evidence required is substantial evidence
2. arbitral tribunal same level as RTC
•
Oil and Natural Gas Commission v. Court of Appeals
o An example of a pathological arbitration clause
o This is a foreign arbitral award hence Laws/Rules of India
applicable when award was brought for confirmation on its
courts
Magellan Capital Management Corporation v. Zosa
o domestic arbitral award
o If some of the
o Arbitration clause is partially void as to composition of the
arbitral tribunal for violation of Article 2045 Civil Code
o If some (2) of the parties represent the same interest, they
should be entitled to only 1 arbitrator
o Q: Was the court right in prescribing the manner by which
tribunal should be constituted?
ADR Notes | Page 9 of 17
Appointment of Arbitrators
(A) Domestic – ad hoc (SADR Rule 6)
(1) Follow provisions of the arbitration
(2) If unable to implement (1), National President of IBP or his duly
authorized representative appoints w/in 30 days from receipt of
request for appointment
(3) Failing (1) and (2), any party may request the court to act as
Appointing Authority. See RA 876, Sec. 8 and SADR Rule 6.1 for
instances when court may appoint arbitrator
(B) Institutional: usually rules regarding appointment of arbitrators are
provided by the institution. Absent stipulation of the parties, the
institution acts as the Appointing Authority e.g. ICA under ICC Rules
Challenge (of the Appointment) of Arbitrators
See: SADR Rule 7
Grounds (Rule 7.2):
(1)As provided in RA 876 (Sec. 10 – qualifications/disqualifications)
and the Model Law (Article 12 – doubts as to impartiality or
independence)
(2) As stipulated by the parties
(3) Nationality or professional qualification NOT a ground, unless OW
stipulated
Different from Termination of Mandate of Arbitrator (See SADR Rule 8)
o As to ground: arbitrator becomes de jure or de facto unable to
perform his function or for other reasons fails to act without
undue delay (Rule 8.2)
Procedure of Challenge (SADR Rule 7.2)
o Confront the challenged arbitrator (see procedure, Artice 13 (2)
Model Law)
o Request Appointing Authority to Rule on the Challenge
o If challenge is unsuccessful or Appointing Authority fails or
refuses to act on it, aggrieved party may RENEW the challenge in
court (RTC)
o Decision shall be immediately executory and not subject to MR,
certiorari or appeal (Rule 7.8)
Effect of Challenge
o Article 13, Model Law as adopted by Sec. 33, RA 9285, amending
Sec. 11, RA 876
o Arbitral tribunal, including the challenged arbitrator, may
CONTINUE the arbitral proceedings and make an award
III. Arbitration Proceedings
PROVISIONS:
RA 9285 Sections 22-23, 26-27, 30-31
UNCITRAL Model Law Articles 16, 18-20, 23-27
RA 876 Sections 12-18, 22
SADR Rules 9-10
NOTES:
Arbitral Tribunal
Assistance in Taking Evidence
Confidentiality
ADR Notes | Page 10 of 17
In practice, here’s what happens:
1) Preliminary conference (similar to pre-trial proceedings)
2) Presentation of evidence
a) Arbitral tribunal require simultaneous submission of
(usually w/in 30 days upon approval of the parties):
i. “bundle of documents/exhibits” [similar to
formal offer of documents]
ii. Together with “Witnesses’ Statements” [for
purpose similar to judicial affidavits]
b) Dates to be followed set and issued
c) Cross examination of claimant’s witnesses
d) Cross examination of respondent’s witnesses
e) Final memoria/memorandum simultaneously submitted
IV. Referral to Arbitration
PROVISIONS:
RA 876 Section 7
RA 9285 Sections 24-25
UNCITRAL Model Law Article 8
SADR Rule 4
NOTES (referral to arbitration under RA 876 Section 7 in relation to RA
9285 Section 24):
GR: By one party if not later than the pre-trial
Exc: By consent of both parties after the pre-trial stage via a Joint
Motion or without objection from another upon motion of one of the
parties
Q: Is it ministerial the court to refer dispute to arbitration and to grant
motion to stay?
A: No. Court has to exercise discretion in determining:
1) WON issue is a proper subject of arbitration i.e. WON it is an
arbitrable issue
2) WON arbitration agreement is
a) Null and void (e.g. under RA 876 Section 3, RA 9285
Section 6)
b) Inoperative
c) Incapable of being performed
o Although Section 7 only refers to domestic arbitration, it is ALSO
applicable to international arbitration by virtue of RA 9285:
a) Article 24 is under the chapter on International
Commercial Arbitration
b) Article 8 Model Law as adopted by Article 19
(but Model Law uses “not later than submission of first
statement on substance” as reckoning point)
CASES:
Vega v. San Carlos Milling (1924)
o Malcolm’s dissent:
“In the Philippines fortunately, the attitude of the courts toward
arbitration agreements is slowly crystallizing into definite
workable form… The rule now is that unless the agreement is
such as absolutely to close the doors of the courts against the
parties, which would be void, the courts will look with favor upon
such amicable arrangements and will only with great reluctance
interfere to anticipate or nullify the action of the arbitrator.”
ADR Notes | Page 11 of 17
LM Power Eng’g Corporation v. Capitol Industrial Construction Groups,
Inc. (2003)
o Even if RTC denies motion/petition to refer to arbitration, and
proceeded to render judgment, it does not necessarily render
moot and academic the referral to arbitration.
o In this case RTC ordered Capitol to pay LM but CA and SC says
ordered the dispute to be referred to arbitration.
Puromines, Inc. v. Court of Appeals (1993)
o The rules now is that unless the agreement is such as absolutely
to close the doors of the courts against the parties, which
agreement would be void, the courts will look with favor upon
such amicable arrangements and will only interfere with great
reluctance to anticipate or nullify the action of the arbitrator
(citing Vega v San Carlos Milling)
o Dispute on liability to damages arising from carriage of goods
o Parties to a sales contract and/or bill of lading bound by the
arbitration clause thereat.
o Reiterated Mindanao v McDonough on duty of the courts under
Sec. 6
National Power Corporation v. Court of Appeals and PECORP (1996)
o Arbitration clause has no qualification as to what are arbitrable
issues
o Court of appeals nonetheless proceeded to resolve Issues Nos. 3
and 4 – not proper! Once dispute it properly referable to
arbitration, it the arbitral tribunal which must resolve all the
issues.
Sea-Land Service, Inc. v. Court of Appeals
o Court held that the third party complaint (based on
reimbursement) should be dismissed since reimbursement is to
be settled by arbitration pursuant to the agreement by the
parties
Fiesta World Mall Corp. v. Linberg Philippines (2006)
o J. Panganiban: “By enabling the parties to resolve their disputes
amicably, alternative dispute resolution methods or ADRs provide
solutions that are less time-consuming, less confrontational, and
more productive of goodwill and lasting relationships.”
o A good illustration of court’s exercise of discretion before
referring parties to arbitration in construing an arbitration clause
which refers to a venue stipulation on litigation
o A qualified arbitration clause but not pathological.
California and Hawaiian Sugar Company v. Pioneer Insurance and Surety
Corporation (2000)
o It would seem that a party may be bound to arbitration
agreement through subrogation but there is no categorical ruling
in this case.
o “There is nothing in Pan Malayan Insurance v CA that prohibited
the applicability of the arbitration clause to the subrogee.”
o Reverse situation in LM Power case wherein the question is WON
a party may be compelled by the other to arbitrate despite the
pendency of “Motion to Stay Civil Action”. Interested party may
commence arbitration proceeding, to complete the arbitral
tribunal make use of Appointing Authority.
Mindanao Portland Cement Corporation v. McDonough Construction
Company of Florida (1967) - supra
ADR Notes | Page 12 of 17
Rule on multi-party disputes
Toyota Motor Philippines Corporation v. Court of Appeals (1992)
o The presence of third parties in the dispute does not render the
arbitration agreement dysfunctional.
o Contracts are respected as law between the parties.
o The judge having been apprised of the presence of arbitration
agreement, he should have at least suspended the case and
directed the parties to settle their dispute by arbitration
o Silent as to third persons not bound by the arbitration
agreement. Note: Under RA 9285 Section 25, litigation may
continue as to third persons or under SADR Rule 4.7 they may
join the arbitration by consent of all parties
Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corporation (1999)
o Only parties to an agreement, their assigns or heirs have the right
to arbitrate or could be compelled to arbitrate.
o Buyers not such assigns or heirs.
o The splitting of the proceedings to arbitration to some of the
parties on one hand and trial for the others on the other hand, or
suspension of the trial pending arbitration between some of the
parties, should not be allowed as it would, in effect result in
multiplicity of suits, duplicitous procedure and unnecessary delay.
Del Monte Corporation-USA v. Court of Appeals (2001)
o Declared that Salas ruling supersedes Toyota thus making Salas
stare decisis
o A bad ruling! Persons who do not want to go arbitration can
easily thwart the arbitration agreement by merely impleading
third persons, even “innocent by-standers” who are not actually
real parties in interest.
o Del Monte ruling superseded by statute (RA 9285 Section 25) and
expounded by SADR Rules Rule 4.7
SEC. 25. xxx Where action is commenced by or against multiple parties,
one or more of whom are parties who are bound by the arbitration
agreement although the civil action may continue as to those who
are not bound by such arbitration agreement.
Rule 4.7. Multiple actions and parties. — The court shall not decline to refer some or all of the parties to arbitration for any of the following reasons:
a. Not all of the disputes subject of the civil action may be referred to arbitration;
b. Not all of the parties to the civil action are bound by the arbitration agreement and referral to arbitration would result in multiplicity of suits;
c. The issues raised in the civil action could be speedily and efficiently resolved in its entirety by the court rather than in arbitration;
d. Referral to arbitration does not appear to be the most prudent action; or
e. The stay of the action would prejudice the rights of the parties to the civil action who are not bound by the arbitration agreement.
The court may, however, issue an order directing the inclusion in arbitration of those parties who are not bound by the arbitration agreement but who agree to such inclusion provided those originally bound by it do not object to their inclusion.
V. Interim Measure of Protection
PROVISIONS:
SADR Rule 5
RA 876 Sec. 14
RA 9285 Sections 33, 28-29
UNCITRAL Model Law Articles 9, 17
NOTES:
ADR Notes | Page 13 of 17
3 periods when a petition for interim measures for protection
may be made (Rule 5.2)
(1) before arbitration is commenced
(2) after arbitration is commenced but before the constitution of
the arbitral tribunal
(3) after the constitution of the tribunal and at any time during
the arbitral proceedings but
GR: Arbitral Tribunal to grant interim measures
Exc: Courts may grant interim measures when:
(a) Arbitral Tribunal has no power to act
(b) It cannot act effectively
VI. The Arbitral Award
Domestic Arbitral Award
Civil Code, Art. 2044. Any stipulation that the arbitrators' award or
decision shall be final, is valid, without prejudice to Articles 2038,
2039, and 2040.
Art. 2038. A compromise in which there is mistake, fraud,
violence, intimidation, undue influence, or falsity of
documents, is subject to the provisions of Article 1330 of this
Code.
However, one of parties cannot set up a mistake of fact as
against the other if the latter, by virtue of the compromise, has
withdrawn from a litigation already commenced. (1817a)
Art. 2039. When the parties compromise generally on all
differences which they might have with each other, the
discovery of documents referring to one or more but not to all
of the questions settled shall not itself be a cause for
annulment or rescission of the compromise, unless said
documents have been concealed by one of the parties.
But the compromise may be annulled or rescinded if it refers
only to one thing to which one of the parties has no right, as
shown by the newly-discovered documents. (n)
Art. 2040. If after a litigation has been decided by a final judgment,
a compromise should be agreed upon, either or both parties
being unaware of the existence of the final judgment, the
compromise may be rescinded.
Ignorance of a judgment which may be revoked or set aside is
not a valid ground for attacking a compromise.
RA 876 Sections 19, 20, 23
Confirming, correcting/modifying, vacating domestic arbitral award
SADR Rule 11
RA 9285 Section 40, 41
RA 876 Sections 2, 24-28
Asset Privatization Trust v. Court of Appeals
o The arbitrators cannot resolve issues beyond the scope of the
submission agreement. An award of damages to one who is not a
party before the Arbitration Committee is a complete nullity.
o A party’s prayer for setting aside an arbitral award is not
inconsistent with its avowal of the court’s jurisidiction.
o RTC made a fatal mistake in dismissing the case instead of merely
suspending it to await the outcome of arbitration proceedings.
Romago, Inc. v. Siemens Building Technologies, Inc. (2009)
o Supply contract, not construction contract hence CIAC has no
jurisdiction
o Cited FBDC v Domingo in defining construction.
Chung Fu Industries (Philippines), Inc. v. Court of Appeals (1992)
o Cited Vega v San Carlos Milling; Art. 2044 CC applied
o The finality of the arbitrators award is not absolute and
without exceptions.
ADR Notes | Page 14 of 17
o Voluntary arbitrators by the nature of their functions act in a
quasi-judicial capacity. Their decisions should be beyond the
scope of the power of judicial review of the Supreme Court.
o Rule 65 Certiorari as a remedy
Adamson v. Court of Appeals (1994)
o That the party was disadvantaged by the decision of the
Arbitration Committee does not prove evident partiality.
o Independent evidence (other than the award) must be
presented and proved to show partiality,
National Steel Corporation v. RTC of Lanao Del Norte, Br. 2, Iligan City
(1999), supra
Equitable PCI Banking Corporation v. RCBC Capital Corporation (2008)
o Judicial review of an arbitration is more limited than judicial
review of a trial.
o Courts will not undertake to substitute their judgment for
that of the arbitrator, since any other rule will make an award
the commencement, not end of, litigation.
o To justify vacation of an arbitral award on account of
“manifest disregard of the law”, the arbiter’s findings must
clearly and unequivocally violate an established legal
precedent (citing APT v CA)
o Why a “Partial Award”? Arbitral Tribunal used the bifurcated
approach, a method usually used in international commercial
arbitration:
1. Liability Portion (Who is liable?)
2. Quantum (What is the quantity of liability?)
Recognition and Enforcement of International Commercial Arbitration
Award
UNCITRAL Model Law Articles 28-33, 35
SADR Rule 12
o Petition to Set Aside – the exclusive remedy against an
international arbitral award; within 3 months!
(Setting Aside and Refusing/Rejecting) Recognition or Enforcement of
Foreign arbitral award
UNCITRAL Model Articles 34, 36
RA 9285 Sections 42-45
New York Convention
SADR Rule 13
Foreign arbitral award – one made in a country other than the Philippines
[Rule 1.11(d)]
National Union Fire Insurance Company of Pittsburg v. Stolt-Nielsen
Philippines, Inc. (1990)
o Obligations of Philippines as contracting state to the New York
Convention:
1. recognize arbitration agreements; refer the parties to
arbitration unless it finds that said agreement is void, inoperative
or incapable of being performed
2. recognize and enforce arbitral awards
3. not to impose more onerous conditions that those impose to
domestic arbitration
ADR Notes | Page 15 of 17
VII. Motion for Reconsideration, Appeal, Certiorari
SADR Rule 19
RA 876 Section 29
RA 9285 Section 46
1997 Rule of Civil Proedure, Rule 43 Section 1
VIII. Pleading, Practice and Procedure under
Special ADR Rules
SADR Rule 1
Scope: 12 proceedings – 9 summary, 3 not summary in nature
Summary proceeding under this Rule is not the same as ordinary
summary proceedings:
1. service to respondent and filing with court with proof of service to the
respondent since no summons will be served
2. notice from court to file comment or opposition within 15 days from
receipt plus hearing, if necessary which will be within 5 days conducted in
1 day only
3. resolution by court within 30 days
(approx. 58 days!)
o Verification and CNFS general requirements but verification need
not be signed by the party: lawyer may sign
o Motions: written submissions up to Comment only
IX. Construction Arbitration
Executive Order No. 1008, s. 1985
Sec. 4. Jurisdiction. The CIAC shall 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
may involve government or private contracts. For the Board to acquire
jurisdiction, the parties to a dispute must agree to submit the same to
voluntary arbitration.xxx
RA 9285 Sections 34-40
SADR Rules 16, 17
Fort Bonifacio Development Corporation v. Sorongon (2009)
o Construction is defined as referring to all on-site works on
buildings or altering structures, from land clearance to
completion, including excavation, erection, and assembly and
installation of components and equipment.
o Dispute regarding an assigned retention money arising from a
construction contract not within the jurisdiction of CIAC.
China Chang Jiang Energy Corporation (Philippines) v. Rosal
Infrastructure Builders (1996)
o Cited Hi-Precision Steel v Lim Kim Steel Builders on exclusive
and original jurisdiction of CIAC whenever
1. there is a construction agreement
2. with arbitration clause/submission to voluntary arbitration
o Implication: CIAC has jurisdiction despite stipulation of
another arbitral body
Prudential Guarantee and Asssurance Inc. v. Anscor Land, Inc. (2010)
ADR Notes | Page 16 of 17
o A dispute must meet 2 requirements in order to fall under the
jurisdiction of CIAC:
1. the dispute must be somehow connected to a construction
contract
2. the parties must have agreed to submit the dispute to
arbitration proceedings
o Implication: it is conceivable for a non-party to the
construction agreement to submit to the jurisdiction of CIAC
o In this case, the bonding company which issued a surety bond
and performance bond in favor of the employer (project-
owner) is compelled to submit to the jurisdiction of CIAC
under Section 4 EO 1008: “xxxdisputes arising from or
connected with, construction contracts…”
Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc. (1993)
o Under Section 19 EO 1008 questions of fact cannot be raised
in a proceeding before the Supreme Court
o Factual issues cannot be craftily disguised as legal issues to
subvert this rule
o Standard: the Supreme Court will review issues of fact
previously presented before the Arbitral Tribunal only where
there is a very clear showing that, in reaching its factual
conclusions, the Tribunal committed an error so egregious
and hurtful to one party as to constitute grave abuse of
discretion.
Arbitration Clause in a Construction Agreement
Arbitration Clause in a Non-Construction Agreement
Court can motu proprio note the existence of an arbitration agreement
Court CANNOT motu proprio note the existence of an arbitration agreement, party/parties must invoke it
Court to dismiss action and refer to CIAC thus losing jurisdiction
Court merely stay civil action, court does not lose jurisdiction
X. Mediation
RA 9285, Section 3 (q)
"Mediation" means a voluntary process in which a mediator, selected
by the disputing parties, facilitates communication and negotiation,
and assist the parties in reaching a voluntary agreement regarding a
dispute.
RA 9285 Sections 7-17
Rule 15
o Mediation, as opposed to arbitration, will not result to
binding resolution unless:
1. a successful mediated settlement agreement is converted
into a arbitral award by consent of the parties, and
2. the mediator is considered as an arbitrator
XI. Other Forms of ADR ; Nature of Liability
RA 9285 Section 3 (definitions)
(l) "Court-Annexed Mediation" means any mediation process conducted
under the auspices of the court, after such court has acquired
jurisdiction of the dispute;
(m) "Court-Referred Mediation" means mediation ordered by a court to
be conducted in accordance with the Agreement of the Parties when as
action is prematurely commenced in violation of such agreement;
ADR Notes | Page 17 of 17
(n) "Early Neutral Evaluation" means an ADR process wherein parties and their lawyers are brought together early in a pre-trial phase to present summaries of their cases and receive a nonbinding assessment by an experienced, neutral person, with expertise in the subject in the substance of the dispute;
(t) "Mediation-Arbitration" or Med-Arb is a step dispute resolution process involving both mediation and arbitration;
(u) "Mini-Trial" means a structured dispute resolution method in which
the merits of a case are argued before a panel comprising senior decision makers with or without the presence of a neutral third person after which the parties seek a negotiated settlement;
RA 9285, Section 5
RA 876, Section 20
SADR Rule 18
XII. Loans Secured by Collateral
SADR Rule A