Alternative Dispute Resolution(ADR)

LAW 160A ALTERNATIVE DISPUTE RESOLUTION Prof. Arthur Autea Class Policies: 1) a) b) 2) a) b) 3)

Final Exam – 40% last day of our regular class – October problem + objective Class Participation – 60% attendance – 2x suprise quizzes Final Exam 40%

Relevant Laws / Rules 1) 2) 3) 4) 5) 6) 7)

RA 876 – Arbitration Law EO No 1008 – CIA Law RA 9285 - ADR Act of 2004 UNCITRAL Model Law Special ADR Rules UNCITRAL Arbitration Rules ICC Arbitration Rules

Cases 1) Vega v. San Carlos Milling Co. Ltd , 51 Phil 908 (1924) 2) California & Hawaiian Sugar Co. v. Pioneer Insurance & Surety Corp. 346 SCRA 214 (2000) 3) Associated Bank v. CA, 233 SCRA 137 (1994) 4) Bloomfield Academy v. CA, 237 SCRA 43 (1994) 5) Mindanao Portland Cement Corporation v. McDonough Construction Co. of Florida, 90 SCRA 808 (1967) 6) Gonzales v. Climax Mining Ltd ., ., 512 SCRA 148 (2007) 7) Oil & Natural Gas Commission v. CA, 293 SCRA 26 (1998) 8) Magellan Capital Mgt. Corp. v. Zosa, 355 SCRA 157 (2001) 9) BF Corporation v. CA, 288 SCRA 267 (1998) 10) Korea Technologies Co. Ltd. v. Lerma, 542 SCRA 1 (2008) 11) Luzon Development Bank v. Luzon Development Bank Employees , 249 SCRA 162 (1995) 12) Toyota Motor Phils. Corp. V. CA, 216 SCRA 336 13) Heirs of Agusto L. Salas, Jr. v. Laperal Realty Corp ., 302 SCRA 620 14) Del Monte Corp. USA v. CA, 351 SCRA 373 - WRONG 15) Homebankers Savings and Trust Co. v. CA, 318 SCRA 558 16) Chung Fu Industries Inc. V. CA, 206 SCRA ___ 17) Adamson v. CA , 232 SCRA 602 (1994) 18) National Steel Corp. v. RTC of Lanao del Norte, 304 SCRA 595 (1999) 19) Asset Privatization Tr ust v. CA, 300 SCRA 579 20) China Chiang Jiang Energy Corp (Phils) v. Rosal Infrastructure Builders , G.R. 125706, 30 September 1996 21) Hi Precision Steel, 228 SCRA 397 22) ABS CBN v. World , 544 SCRA 308

Law 160A – Alternative Dispute Resolution (Prof. A. Autea)

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Salma F. Angkaya | AY 2010-2011, 1 st semester Special thanks to Krizelle Poblacion for her great digests!

Class Notes - June 11, 2010 INTRODUCTION TO ALTERNATIVE MODES OF DISPUTE RESOLUTION ADR – alternative to conventional litigation Arbitration – only form of ADR that will result in a final, binding and enforceable award communication, impose resolution of the mediator

Mediation – facilitate Conventional Litigation Judgment Final Judgment Interlocutory Order P v. D / P v. R Stenographers

to of of – of

cannot

Arbitration Award Final Award Interim Award Claimant v. Respondent Court Reporters

Arbitration clause – stipulation that parties wil submit dispute to arbitration

Request for Arbitration – arbitrable dispute Legislative History: 1) RA 876 (1953) – Arbitration Law 2) New York Convention (1958) a) Convention on the recognition & enforcement of foreign arbitral awards b) Need to prove authenticity only e.g. NAIA 3 case 3) RA 9285 (2004) – ADR Act of 2004 a) Covers domestic & international arbitration b) Covers all forms of ADR 4) EO No. 1008 (1985) – CIAC a) Covers all disputes in the construction industry 5) Special ADR Rules (October 13, 2009) a) Clarified problems in RA 876 and RA 9285 6) UNCITRAL MODEL LAW – part of Philippine law a) Sec. 33 of ADR Act of 2004

Sec. 33 – Applicability to Domestic Arbitration Uncitral Model Law 8 – Arbitration Agreement + Substantive Claim 10 – No. of arbitrators 11 – Appointment 12 – Grounds for challenge 13 – Procedure for

challenge 14 – Unable perform 18 – Conduct hearings 19 – Determination rules 29 to 32 Termination proceedings

Preceding Ch. 4 Sec. 22 Legal – Representation in International Arbitration Sec. 23 – Confidentiality in Arbitration Proceedings Sec. 24 – Referral to Arbitration Sec. 25 – Interpretation of

the Act Sec. 26 – Meaning of “Appointing Authority” Sec. 27 – What Functions May be Performed by Appointing Authority Sec. 28 – Grant of Interim Measure of Protection Sec. 29 – Further Authority for Arbitrator to Grant Interim Measure of Protection Sec. 30 – Place of Arbitration Sec. 31 – Language of the Arbitration

ARBITRATION Arbitration v. Litigation {PALPVA} Arbitration Private & confidential Parties may select arbitrator Parties can select governing law that will determine their substantive rights Procedure depends on agreement Venue depends on agremeent

Consensual

Litigation Public Parties cannot agree on presiding officer; Judge is raffled Philippine law governs

Rules of Court applies Rules of Court governs; Venue may also depend on agreement Not consensual

Note: A voluntary arbitrator has the same status as an RTC judge.

What is the nature of ADR? Consensual – cannot be compelled to submit to arbitration; but once you agree, you’re bound by it

What is an arbitration agreement? Arbitration agreement – determines the rights, obligations, procedure & rules; - may be in a separate agreement or may be a clause in a contract

1) Arbitration clause “Any dispute arising out of this contract shall be resolved by arbitration.”

2) Container contract Contract containing the arbitration clause


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Class Notes - June 11, 2010 INTRODUCTION TO ALTERNATIVE MODES OF DISPUTE RESOLUTION ADR – alternative to conventional litigation Arbitration – only form of ADR that will result in a final, binding and enforceable award communication, impose resolution of the mediator

Mediation – facilitate Conventional Litigation Judgment Final Judgment Interlocutory Order P v. D / P v. R Stenographers

to of of – of

cannot

Arbitration Award Final Award Interim Award Claimant v. Respondent Court Reporters

Arbitration clause – stipulation that parties wil submit dispute to arbitration

Request for Arbitration – arbitrable dispute Legislative History: 1) RA 876 (1953) – Arbitration Law 2) New York Convention (1958) a) Convention on the recognition & enforcement of foreign arbitral awards b) Need to prove authenticity only e.g. NAIA 3 case 3) RA 9285 (2004) – ADR Act of 2004 a) Covers domestic & international arbitration b) Covers all forms of ADR 4) EO No. 1008 (1985) – CIAC a) Covers all disputes in the construction industry 5) Special ADR Rules (October 13, 2009) a) Clarified problems in RA 876 and RA 9285 6) UNCITRAL MODEL LAW – part of Philippine law a) Sec. 33 of ADR Act of 2004

Sec. 33 – Applicability to Domestic Arbitration Uncitral Model Law 8 – Arbitration Agreement + Substantive Claim 10 – No. of arbitrators 11 – Appointment 12 – Grounds for challenge 13 – Procedure for

challenge 14 – Unable perform 18 – Conduct hearings 19 – Determination rules 29 to 32 Termination proceedings

Preceding Ch. 4 Sec. 22 Legal – Representation in International Arbitration Sec. 23 – Confidentiality in Arbitration Proceedings Sec. 24 – Referral to Arbitration Sec. 25 – Interpretation of

the Act Sec. 26 – Meaning of “Appointing Authority” Sec. 27 – What Functions May be Performed by Appointing Authority Sec. 28 – Grant of Interim Measure of Protection Sec. 29 – Further Authority for Arbitrator to Grant Interim Measure of Protection Sec. 30 – Place of Arbitration Sec. 31 – Language of the Arbitration

ARBITRATION Arbitration v. Litigation {PALPVA} Arbitration Private & confidential Parties may select arbitrator Parties can select governing law that will determine their substantive rights Procedure depends on agreement Venue depends on agremeent

Consensual

Litigation Public Parties cannot agree on presiding officer; Judge is raffled Philippine law governs

Rules of Court applies Rules of Court governs; Venue may also depend on agreement Not consensual

Note: A voluntary arbitrator has the same status as an RTC judge.

What is the nature of ADR? Consensual – cannot be compelled to submit to arbitration; but once you agree, you’re bound by it

What is an arbitration agreement? Arbitration agreement – determines the rights, obligations, procedure & rules; - may be in a separate agreement or may be a clause in a contract

1) Arbitration clause “Any dispute arising out of this contract shall be resolved by arbitration.”

2) Container contract Contract containing the arbitration clause


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Note: Doctrine of separability applies.

Sample arbitration clause: “Any dispute arising out of this contract shall be

Rule 2.2. Policy on 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. XXX

Domestic v. International Arbitration 1) Domestic – not International (RA 9285) 2) International – Article 1.3 (UNCITRAL Model Law) RA 9285, Sec. 32. L a w G o v e r n i n g D o m e s t i c A r b i t r a t i o n . Domestic arbitration shall continue to be governed by Republic Act No. 876, otherwise known as "The Arbitration Law" as amended by this Chapter. The term " domestic arbitration" as used herein shall mean an arbitration that is not international as defined in Article (3) of the Model Law. Uncitral Model Law, Article 1 - xxx 3) An a r b i t r a t i o n i s i n t e r n a t i o n a l if: 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.

Institutional v. Adhoc Arbitration 1) Adhoc arbitration 2) Institutional – conducted under the auspices of an institution Examples:

International Chamber of Commerce CIAC PDRCI Singapore International Arbitration Centre Hongkong International Arbitration Centre ICSPI Disp. American Arbitration Association Japan Commercial Arbitration Kuala Lumpur RCA KCAB ICC – International Court of Arbitration ICA – not a court of adjudication

resolved by arbitration under the ICC Rules of Arbitration .”

Overview ICC Arbitration Rules / Principles: 1) Submit request for arbitration 2) Assessment of non-refundable fee + cost of arbitration a) Non-refundable fee - $2,500 b) Arbitration cost i) Fees of arbitrators – professional fees (1) 40% - chair (2) 30% - members ii) Claimant – 1 iii) Respondent – 1 iv) Appointee of Appointing Authority - 1 v) Administrative expenses 3) Highly confidential 4) Counsel in arbitration – does not have to be a lawyer a) ADR Rates - $300 / hour b) IBP Rates – P3,000 / appearance i) Senior - P7 to 10T / hour ii) Associate – P1-1,500 / hour 5) ICA – can modify the form of the award See provisions, page 31.

What is the principle of Party Autonomy? Party autonomy – freedom of the parties to determine the rules / law governing the mode of resolving their dispute Rule 2.1. General policies. — 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. To this end, the objectives of the Special ADR Rules are to encourage and promote the use of ADR, particularly arbitration and mediation, as an important means to achieve speedy and efficient resolution of disputes, impartial justice, curb a litigious culture and to de-clog court dockets.

RA 9285, Sec. 2 – Declaration of Policy -To actively promote party autonomy in the resolution of disputes or the freedom of the parties to make their own arrangements to resolve their disputes -To encourage and actively promote the use of ADR to achieve speedy and impartial justice & de-clog court dockets

Uncitral Model Law, Article 19 - [Determination of rules of procedure] 1) Subject to the provisions of this Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. proceedings. 2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law, conduct the arbitration in such manner as it considers appropriate. The power conferred upon the arbitral


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tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.

Uncitral Model Law, Article 28 - [Rules applicable to substance of dispute] 1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a given State shall be construed, unless otherwise expressed, as directly referring to the substantive law of that State and not to its conflict of laws rules. 2) Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable. 3) The arbitral tribunal shall decide ex aequo et bono1 or as amiable compositeur 2 only if the parties have expressly authorised it to do so. 4) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.

Uncitral Arbitration Rules, compositeur, Article 33

Applicable

law,

amiable

1. The arbitral tribunal shall apply the law designated by the parties as applicable to the substance of the dispute. Failing such designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable.

2. The arbitral tribunal shall decide as amiable compositeur or ex aequo et bono only if the parties have expressly authorised the arbitral tribunal to do so and if the law applicable to the arbitral procedure permits such arbitration.

3. In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.

Next meeting:

RA 876 RA 9285 Special ADR Rules UNCITRAL Model Law

Class Notes - June 18, 2010 Appointment of Arbitrators (Domestic) ADR Law – Sec. 5 & Sec. 8 RA 876, Sec. 8 – Appointment of arbitrators If, in the contract for arbitration or in the submission described in section two, provision is made for a method of naming or appointing an arbitrator or arbitrators, such method shall be followed; but if no method be provided therein the Court of First Instance shall designate an arbitrator or arbitrators. The Court of First Instance shall appoint an arbitrator or arbitrators, as the case may be, in the following instances: (a) If the parties to the contract or submission are unable to agree upon a single arbitrator; or (b) If an arbitrator appointed by the parties is unwilling or unable to serve, and his successor has not been appointed in the manner in which he was appointed; or (c) If either party to the contract fails or refuses to name his arbitrator within fifteen days after receipt of the demand for arbitration; or

ICC Rules, Article 15: Rules Governing the Proceedings

(d) If the arbitrators appointed by each party to the contract, or appointed by one party to the contract and by the proper Court, shall fail to agree upon or to select the third arbitrator.

1. The proceedings before the Arbitral Tribunal shall be governed by these Rules, and, where these Rules are silent, by any rules which the parties or, failing them, the Arbitral Tribunal may settle on, whether or not reference is thereby made to the rules of procedure of a national law to be applied to the arbitration.

(e) The court shall, in its discretion appoint one or three arbitrators, according to the importance of the controversy involved in any of the preceding cases in which the agreement is silent as to the number of arbitrators.

2. In all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case.

ICC Rules, Article 17: Applicable Rules of Law 1. The parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it determines to be appropriate. 2. In all cases the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages. 3. The Arbitral Tribunal shall assume the powers of an amiable compositeur or decide ex aequo et bono only if the parties have agreed to give it such powers. 1

Latin for "according to the right and good" or "from equity and conscience" 2 Clauses in arbitration agreements allowing the arbitrators to act as "amiables compositeurs", permit the arbitrators to decide the dispute according to the legal principles they believe to be just, without being limited to any particular national law.

(f) Arbitrators appointed under this section shall either accept or decline their appointments within seven days of the receipt of their appointments. In case of declination or the failure of an arbitrator or arbitrators to duly accept their appointments the parties or the court, as the case may be, shall proceed to appoint a substitute or substitutes for the arbitrator or arbitrators who decline or failed to accept his or their appointments.

Sec. 9 – Appointment of add’nal arbitrators Where a submission or contract provides that two or more arbitrators therein designated or to be thereafter appointed by the parties, may select or appoint a person as an additional arbitrator, the selection or appointment must be in writing. Such additional arbitrator must sit with the original arbitrators upon the hearing.

RULE 6: APPOINTMENT OF ARBITRATORS Rule 6.1. When the court may act as Appointing Authority. — The court shall act as Appointing Authority only in the following instances:


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a. Where any of the parties in an institutional arbitration failed or refused to appoint an arbitrator or when the parties have failed to reach an agreement on the sole arbitrator (in an arbitration before a sole arbitrator) or when the two designated arbitrators have failed to reach an agreement on the third or presiding arbitrator (in an arbitration before a panel of 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; b. 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 upon is ineffective, and the National President of the Integrated Bar of the Philippines (IBP) or his duly authorized representative fails or refuses to act within such period as may be allowed under the pertinent rules of the IBP or within such period as may be agreed upon by the parties, or in the absence thereof, within thirty (30) days from receipt of such request for appointment; c. Where the parties agreed that their dispute shall be resolved by three arbitrators but no method of appointing those arbitrators has been agreed upon, each party shall appoint one arbitrator and the two arbitrators thus appointed shall appoint a third arbitrator. If a party fails to appoint his arbitrator within thirty (30) days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within a reasonable time from their appointment, the appointment shall be made by the Appointing Authority. If the latter 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 may request the court to appoint an arbitrator or the third arbitrator as the case may be.

Rule 6.2. Who may request for appointment. — Any party to an arbitration may request the court to act as an Appointing Authority in the instances specified in Rule 6.1 above.

Rule 6.6. Submission of list of arbitrators. — The court may, at its option, also require each party to submit a list of not less than three (3) proposed arbitrators together with their curriculum vitae.

Rule 6.7. Court action. — After hearing, if the court finds merit in the petition, it shall appoint an arbitrator; otherwise, it shall dismiss the petition. In making the appointment, the court shall have regard to such considerations as are likely to secure the appointment of an independent and impartial arbitrator. At any time after the petition is filed and before the court makes an appointment, it shall also dismiss the petition upon being informed that the Appointing Authority has already made the appointment.

Rule 6.8. Forum shopping prohibited. — When there is a pending petition in another court to declare the arbitration agreement inexistent, invalid, unenforceable, on account of which the respondent failed or refused to participate in the selection and appointment of a sole arbitrator or to appoint a party-nominated arbitrator, the petition filed under this rule shall be dismissed.

Rule 6.9. Relief against court action. — If the court appoints an arbitrator, the order appointing an arbitrator shall be immediately executory and shall not be the subject of a motion for reconsideration, appeal or certiorari. An order of the court denying the petition for appointment of an arbitrator may, however, be the subject of a motion for reconsideration, appeal or certiorari.

How do you commence arbitration? (domestic) Sec. 5 – Preliminary procedure Arbitration Agreemen t

Rule 6.3. Venue. — The petition for appointment of arbitrator may be filed, at the option of the petitioner, in the Regional Trial Court (a) where the principal place of business of any of the parties is located, (b) if any of the parties are individuals, where those individuals reside, or (c) in the National Capital Region.

(a) (b) Default 

Submission Agreement (c) (d) Neglect / Fail / Refuse to arbitrate  Follow (a) and (b)

Rule 6.4. Contents of the petition. —The petition shall state the following: a. The general nature of the dispute; b. If the parties agreed on an appointment procedure, a description of that procedure with reference to the agreement where such may be found; c. The number of arbitrators agreed upon or the absence of any agreement as to the number of arbitrators; d. The special qualifications that the arbitrator/s must possess, if any, that were agreed upon by the parties; e. The fact that the Appointing Authority, without justifiable cause, has failed or refused to act as such within the time prescribed or in the absence thereof, within a reasonable time, from the date a request is made; and f. The petitioner is not the cause of the delay in, or failure of, the appointment of the arbitrator. Apart from other submissions, the petitioner must attach to the petition (a) an authentic copy of the arbitration agreement, and (b) proof that the Appointing Authority has been notified of the filing of the petition for appointment with the court.

Rule 6.5. Comment/Opposition. — The comment/opposition must be filed within fifteen (15) days from service of the petition.

RA 876, Sec. 5. Preliminary procedure . An arbitration shall be instituted by: (a) In the case of a contract to arbitrate future controversies by the service by either party upon the other of a demand for arbitration in accordance with the contract. Such demand shall be set forth the nature of the controversy, the amount involved, if any, and the relief sought, together with a true copy of the contract providing for arbitration. The demand shall be served upon any party either in person or by registered mail. In the event that the contract between the parties provides for the appointment of a single arbitrator, the demand shall be set forth a specific time within which the parties shall agree upon such arbitrator. If the contract between the parties provides for the appointment of three arbitrators, one to be selected by each party, the demand shall name the arbitrator appointed by the party making the demand; and shall require that the party upon whom the demand is made shall within fifteen days after receipt thereof advise in writing the party making such demand of the name of the person appointed by the second party; such notice


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shall require that the two arbitrators so appointed must agree upon the third arbitrator within ten days from the date of such notice.

ie they can be finalised using arbitration or another process. Adjudication decisions are usually binding on both parties by prior agreement.

(b) In the event that one party defaults in answering the demand, the aggrieved party may file with the Clerk of the Court of First Instance having jurisdiction over the parties, a copy of the demand for arbitration under the contract to arbitrate, with a notice that the original demand was sent by registered mail or delivered in person to the party against whom the claim is asserted. Such demand shall set forth the nature of the controversy, the amount involved, if any, and the relief sought, and shall be accompanied by a true copy of the contract providing for arbitration.

In relation to construction contracts, adjudication is a statutory procedure by which any party to the contract has a right to have a dispute decided by an adjudicator, normally used to ensure payment. It is intended to be quicker and more cost effective than litigation or arbitration. The right arises by virtue of the Housing Grants Construction and Regeneration Act 1996.

(c) In the case of the submission of an existing controversy by the filing with the Clerk of the Court of First Instance having jurisdiction, of the submission agreement, setting forth the nature of the controversy, and the amount involved, if any. Such submission may be filed by any party and shall be duly executed by both parties. (d) In the event that one party neglects, fails or refuses to arbitrate under a submission agreement, the aggrieved party shall follow the procedure prescribed in subparagraphs (a) and (b) of this section.

Adjudication is also sometimes used to describe a non-specific alternative dispute resolution process in which a third party makes a decision as to the best way to resolve the dispute. In this sense, ombudsmen, arbitrators and judges are all types of adjudicators.

The aim of adjudication is to resolve disputed issues in order to enable work to continue (either indefinitely or while awaiting the decision of a judge or arbitrator). Arbitration is a more formal process, and the arbitrator's decision is legally binding.

Arbitration v. Adjudication Sir thinks the difference is only in the terminology, until he saw the FIDIC.

Arbitration - (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 (RA 9285) In arbitration an independent, impartial third party hears both sides in a dispute and makes a decision to resolve it. In most cases the arbitrator's decision is legally binding on both sides, so it is not possible to go to court if you are unhappy with the decision. Arbitration is in many ways an alternative form of court with procedural rules which govern issues such as disclosure of documents and evidence. But arbitration is private rather than public. Hearings are less formal than court hearings, and some forms of arbitration do not involve hearings but are decided on the basis of documents only.

Adjudication

Adjudication involves an independent third party considering the claims of both sides and making a decision. The adjudicator is usually an expert in the subject matter in dispute. Adjudicators are not bound by the rules of litigation or arbitration. Their decisions are often interim ones,

FIDIC (Federacion Internationale Des Ingenieurs Conseil) 1) Dispute Adjudication Board 2) Relevant in contract negotiation 3) Different colors a) Red b) Blue c) Green d) Pink e) Silver i) 2 parties: (1) Project owner – employer (2) Contractor ii) Contains an interesting provision saying that an employer would not be liable even if wrong information was given iii) Contains an adjudication clause in the following tenor: “Appeal from adjudication may be taken to the arbitrational panel under ICC Rules.”

iv) Three levels: (1) Amicable settlement (2) Adjudication (3) Arbitration


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MINI-TRIAL What is a Mini-Trial? "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, Sec. 3(u)) Note:

Senior decision makers meet, negotiated settlement

EARLY NEUTRAL EVALUATION What is Early Neutral Evaluation? "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 Note: Similar to a “pre-trial”; before the filing of the

complaint

MEDIATION How are mediated-settlements enforced? By depositing in court (RA 9285, Sec. 17)

Principle of confidentiality in mediation Extends to admissions made in mediation Sec. 9 - Confidentiality of Information Information obtained through mediation proceedings shall be subject to the following principles and guidelines: (a) Information obtained through mediation shall be privileged and confidential. (b) A party, a mediator, or a nonparty participant may refuse to disclose and may prevent any other person from disclosing a

mediation communication.

(c) Confidential Information shall not be subject to discovery and shall be inadmissible if any adversarial proceeding, whether judicial or quasi-judicial, However, evidence or information that is otherwise admissible or subject to discovery does not become inadmissible or protected from discovery solely by reason of its use in a mediation. (d) In such an adversarial proceeding, the following persons involved or previously involved in a mediation may not be compelled to disclose confidential information obtained during mediation: (1) the parties to the dispute; (2) the mediator or mediators; (3) the counsel for the parties; (4) the nonparty participants; (5) any persons hired or engaged in connection with the mediation as secretary, stenographer, clerk or assistant; and (6) any other person who obtains or possesses confidential information by reason of his/her profession . (e) The protections of this Act shall continue to apply even of a mediator is found to have failed to act impartially. (f) a mediator may not be called to testify to provide information gathered in mediation. A mediator who is wrongfully subpoenaed shall be reimbursed the full cost of his attorney's fees and related expenses.

Sec. 10 – Waiver of Confidentiality

Court-Annexed Mediation v. Court-Ordered Mediation "Court-Annexed Mediation " means any mediation process conducted under the auspices of the court, after such court has acquired jurisdiction of the dispute (RA 9285, Sec. 3 (l)) Note: governed by SC issuances

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 (RA 9285, Sec. 3 (m)) Notes:

- ground for stay of civil action - related to Art. 1159 CC Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

A privilege arising from the confidentiality of information may be waived in a record, or orally during a proceeding by the mediator and the mediation parties. A privilege arising from the confidentiality of information may likewise be waived by a nonparty participant if the information is

provided by such nonparty participant.

A person who discloses confidential information shall be precluded from asserting the privilege under Section 9 of this Chapter to bar disclosure of the rest of the information necessary to a complete understanding of the previously disclosed information. If a person suffers loss or damages in a judicial proceeding against the person who made the disclosure. A person who discloses or makes a representation about a mediation is preclude from asserting the privilege under Section 9, to the extent that the communication prejudices another person in the proceeding and it is necessary for the person prejudiced to respond to the representation of disclosure.

Sec. 11 – Exceptions to Privilege {RPTCPM} (a) There is no privilege against disclosure under Section 9 if mediation communication is:


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(1) in an agreement evidenced by a record authenticated by all parties to the agreement; (2) available to the public or that is made during a session of a mediation which is open, or is required by law to be open, to the public; (3) a threat or statement of a plan to inflict bodily injury or commit a crime of violence; (4) internationally used to plan a crime, attempt to commit, or commit a crime, or conceal an ongoing crime or criminal activity; (5) sought or offered to prove or disprove abuse, neglect, abandonment, or exploitation in a proceeding in which a public agency is protecting the interest of an individual protected by law; but this exception does not apply where a child protection matter is referred to mediation by a court or a public agency participates in the child protection mediation; (6) sought or offered to prove or disprove a claim or complaint

of professional misconduct or malpractice filed against mediator in a proceeding; or (7) sought or offered to prove or disprove a claim of complaint

of professional misconduct of malpractice filed against a party, nonparty participant, or representative of a party based on conduct occurring during a mediation. (b) There is no privilege under Section 9 if a court or administrative agency, finds, after a hearing in camera, that the party seeking discovery of the proponent of the evidence has shown that the evidence is not otherwise available, that there is a need for the evidence that substantially outweighs the interest in protecting confidentiality, and the mediation communication is sought or offered in: (1) a court proceeding involving a crime or felony; or (2) a proceeding to prove a claim or defense that under the law is sufficient to reform or avoid a liability on a contract arising out of the mediation. (c) A mediator may not be compelled to provide evidence of a mediation communication or testify in such proceeding . (d) If a mediation communication is not privileged under an exception in subsection (a) or (b), only the portion of the communication necessary for the application of the exception for nondisclosure may be admitted. The admission of particular evidence for the limited purpose of an exception does not render that evidence, or any other mediation communication, admissible for any other purpose.

Sec. 12 – Prohibited Mediator Reports A mediator may not make a report, assessment, evaluation, recommendation, finding, or other communication regarding a mediation to a court or agency or other authority that make a ruling on a dispute that is the subject of a mediation, except: (a) Where the mediation occurred or has terminated, or where a settlement was reached. (b) As permitted to be disclosed under Section 13 of this Chapter.

RULE 10: CONFIDENTIALITY/PROTECTIVE ORDERS Rule 10.1. Who may request confidentiality. — A party, counsel

or witness who disclosed or who was compelled to disclose information relative to the subject of ADR under circumstances that would create a reasonable expectation, on behalf of the source, that the information shall be kept confidential has the right to prevent such information from being further disclosed without

the express written consent of the source or the party who made the disclosure. Rule 10.2. When request made.— A party may request a protective order at anytime there is a need to enforce the confidentiality of the information obtained, or to be obtained, in ADR proceedings.

Rule 10.3. Venue. — A petition for a protective order may be filed with the Regional Trial Court where that order would be implemented. If there is a pending court proceeding in which the information obtained in an ADR proceeding is required to be divulged or is being divulged, the party seeking to enforce the confidentiality of the information may file a motion with the court where the proceedings are pending to enjoin the confidential information from being divulged or to suppress confidential information.

Rule 10.4. Grounds . — A protective order may be granted only if it is shown that the applicant would be materially prejudiced by an unauthorized disclosure of the information obtained, or to be obtained, during an ADR proceeding.

Rule 10.5. Contents of the motion or petition. — The petition or motion must state the f ollowing: That the information sought to be protected was obtained, or would be obtained, during an ADR proceeding; b. The applicant would be materially prejudiced by the a.

disclosure of that information; c. The person or persons who are being asked to divulge the confidential information participated in an ADR proceedings; and d. The time, date and place when the ADR proceedings took place. Apart from the other submissions, the movant must set the motion for hearing and contain a notice of hearing in accordance with Rule 15 of the Rules of Court.

Rule 10.6. Notice. — Notice of a request for a protective order made through a motion shall be made to the opposing parties in accordance with Rule 15 of the Rules of Court.

Rule 10.7. Comment/Opposition. — The comment/opposition must be filed within fifteen (15) days from service of the petition. The opposition or comment may be accompanied by written proof that (a) the information is not confidential, (b) the information was not obtained during an ADR proceeding, (c) there was a waiver of confidentiality, or (d) the petitioner/movant is precluded from asserting confidentiality.

Rule 10.8. Court action. — If the court finds the petition or motion meritorious, it shall issue an order enjoining a person or persons from divulging confidential information. In resolving the petition or motion, t he courts shall be guided by the following principles applicable to all ADR proceedings:

Confidential information shall not be subject to discovery and shall be inadmissible in any adversarial proceeding, whether judicial or quasi judicial. However, evidence or information that is otherwise admissible or s ubject to discovery does not become inadmissible or protected from discovery solely by reason of its use therein.


9


For mediation proceedings, the court shall be further guided by the following principles:

rules promulgated pursuant to this Act, resolve a dispute by rendering an award (Sec. 3d, RA 9285)

a.

Information obtained through mediation shall be privileged and confidential. b. A party, a mediator, or a nonparty participant may refuse

What distinguishes Arbitration from other forms of ADR?

to disclose and may prevent any other person from disclosing a mediation communication. c. In such an adversarial proceeding, the following persons involved or previously involved in a mediation may not be compelled to disclose confidential information obtained during the mediation: (1) the parties to the dispute; (2) the mediator or mediators; (3) the counsel for the parties: (4) the nonparty participants; (5) any persons hired or engaged in connection with the mediation as secretary, stenographer; clerk or assistant; and (6) any other person who obtains or possesses confidential information by reason of his/ her profession . d. The protection of the ADR Laws shall continue to apply even if a mediator is found to have failed to act impartially. e. A mediator may not be called to testify to provide information gathered in mediation. A mediator who is wrongfully subpoenaed shall be reimbursed the full cost of his attorney fees and related expenses.

“Final,

immediately executory and may not be enjoined while the order is being questioned with the appellate courts. If the court declines to enjoin a person or persons from divulging confidential information, the petitioner may file a motion for reconsideration or appeal.

No Class - June 25, 2010 Class Notes - July 2, 2010 ARBITRATION What is ADR? "Alternative Dispute Resolution System" means any process or procedure used to resolve a dispute or controversy, other than by adjudication of a presiding judge of a court or an officer of a government agency, as defined in this Act, in which a neutral third party participates to assist in the resolution of issues, which includes arbitration, mediation, conciliation, early neutral evaluation, mini-trial, or any combination thereof (Sec. 3a, RA 9285)

What is Arbitration? "Arbitration" means a voluntary dispute resolution process in which one or more arbitrators, appointed in accordance with the agreement of the parties, or

enforceable”

through

the

Arbitration agreem ent | Dispute | Selection of arbitrators | Conduct of arbitration proceedings | Arbitral Award | Confirmation &/or Enforcement

person or persons from divulging confidential information shall be

disobeys the order of the court to cease from divulging confidential information shall be imposed the proper sanction by the court.

and

PROCESS OF ARBITRATION

Rule 10.9. Relief against court action. — The order enjoining a

Rule 10.10. Consequence of disobedience. — Any person who

binding

following procedures: 1) Confirmation of award 2) “Judgment” is capable of enforcement

FIRST PART: ARBITRATION AGREEMENT Arbitration Agreement v. Submission Agreement Arbitration Agreement Before dispute

Submission Agreement

occurence

of Agreement to submit dispute to arbitration; no previous arbitration clause A party may invoke this May be entered into at at any time before pre- any time, even after pretrial, after which, both trial parties must invoke it

Petition for Enforcement Agreement (See end)

of

Arbitration

Notice Requirements Depends on whether or not the petition / motion filed is covered by Summary Procedure.

Covered by Summary Procedure : 1) Judicial Relief Involving the Issue of Existence, Validity or Enforceability of the Arbitration Agreement;


10


2) 3) 4) 5) 6) 7) 8) 9)

Referral to ADR; Interim Measures of Protection; Appointment of Arbitrator; Challenge to Appointment of Arbitrator; Termination of Mandate of Arbitrator; Assistance in Taking Evidence; Confidentiality/Protec tive Orders; and Deposit and Enforcement of Mediated Settlement Agreements.

Not Covered by Summary Procedure: 1) Confirmation, Correction or Vacation of Award in Domestic Arbitration 2) Recognition and Enforcement or Setting Aside of an Award in International Commercial Arbitration 3) Recognition and Enforcement of a Foreign Arbitral Award Notes:

*Petition to correct / vacate does not touch upon the merits of the award. *Petition to vacate (domestic) – depends on grounds to vacate *Petition to set aside (international) – See UNCITRAL A.34 & 36

General Rule: the arbitral tribunal Except: the court, in the following instances: 1) Before commencement of arbitration 2) After arbitration is commenced, but before the constitution of the arbitral tribunal; 3) After the constitution of the arbitral 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. RA 876, Sec. 14 xxx “The arbitrator or arbitrators shall have the power at any time, before rendering the award, without prejudice to the rights of any party to petition the court to take measures to safeguard and/or conserve any matter, which is the subject of the dispute in arbitration.”

RA 9285, Sec. 28 – Grant of Interim Measure of Protection (a) It is not incompatible with an arbitration agreement for a party to request, before constitution of the tribunal, from a Court an interim measure of protection and for the Court to grant such measure. After constitution of the arbitral tribunal and during arbitral proceedings, a request for an interim measure of protection or modification thereof, may be made with the arbitral tribunal or to the extent that the arbitral tribunal has no power to act or is unable to act effectively, the request may be made with the Court. The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator who has been nominated, has accepted the nomination and written communication of said nomination and acceptance has been received by the party making request.

Pop Quiz - July 9, 2010

(b) The following rules on interim or provisional relief shall be observed:

Petition to Enforce Arbitation Agreement using the case of Mindanao Portland Cement Corporation v. McDonough Construction Co. of Florida, 90 SCRA 808 (1967)

(1) Any party may request that provision relief be granted against the adverse party: (2) Such relief may be granted: (i) to prevent irreparable loss or injury:

Class Notes - July 16, 2010

(ii) to provide security for the performance of any obligation; (iii) to produce or preserve any evidence; or

THIRD PART: COMMENCEMENT OF ARBITRATION & CONSTITUTION OF ARBITRAL TRIBUNAL How do you commence arbitration? 1) Adhoc – by a demand to arbitrate 2) Institutional - very similar to a demand to arbitrate, addressed to the institution; called a Request for Arbitration or Notice of Arbitration

What is the significance of filing a Request for Arbitration or Notice of Arbitration? Whether conventional litigation or ADR, the filing of the initiatory complaint / request for arbitration is significant in the area of interim measures of protection. It could be obtained from:

(iv) to compel any other appropriate act or omission. (3) The order granting provisional relief may be conditioned upon the provision of security or any act or omission specified in the order. (4) Interim or provisional relief is requested by written application transmitted by reasonable means to the Court or arbitral tribunal as the case may be and the party against whom the relief is sought, describing in appropriate detail the precise relief, the party against whom the relief is requested, the grounds for the relief, and evidence supporting the request. (5) The order shall be binding upon the parties. (6) Either party may apply with the Court for assistance in Implementing or enforcing an interim measure ordered by an arbitral tribunal. (7) A party who does not comply with the order shall be liable for all damages resulting from noncompliance, including all


11


expenses, and reasonable attorney's fees, paid in obtaining the order's judicial enforcement.

RA 9285, Sec. 29 – Further Authority for Arbitrator to Grant Interim Measure of Protection Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measures of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute following the rules in Section 28, paragraph 2. Such interim measures may include but shall not be limited to preliminary injuction directed against a party, appointment of receivers or detention, preservation, inspection of property that is the subject of the dispute in arbitration. Either party may apply with the Court for assistance in implementing or enforcing an interim measures ordered by an arbitral tribunal.

Uncitral Model Law, Article 17 - [Power of arbitral tribunal to order interim measures] Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute. The arbitral tribunal may require any party to provide appropriate security in connection with such measure.

Uncitral Arbitration Rules, Interim measures of protection, Article 26 1. At the request of either party, the arbitral tribunal may take any interim measures it deems necessary in respect of the subjectmatter of the dispute, including measures for the conservation of the goods forming the subject-matter in dispute, such as ordering their deposit with a third person or the sale of perishable goods.

2. Such interim measures may be established in the form of an interim award. The arbitral tribunal shall be entitled to require security for the costs of such measures.

3. A request for interim measures addressed by any party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate, or as a waiver of that agreement. ICC Rules, Article 23, Conservatory and Interim Measures 1. Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the Arbitral Tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving reasons, or of an Award, as the Arbitral Tribunal considers appropriate. 2. Before the file is transmitted to the Arbitral Tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an Arbitral Tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the Arbitral Tribunal. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat. The Secretariat shall inform the Arbitral Tribunal thereof.

Upon receipt: 1) WON a dispute is arbitable – the first thing that an institution should determine 2) Assess an non-refundable fee of $2500.

3) Inform the prospective respondent that a Request for Arbitration was received 4) Prospective respondent answers 5) Assess the fees

Period for rendering an Award: 1) Stipulation 2) To be determined by the arbitral tribunal during the preliminary conference

Less than 60 days – Summary (ADR Rules) 15 days from service to file Comment/Opposition 1 hearing day, only for the purpose of clarifications Resolution 30 days from the time the petition is submitted for resolution

10 days - ADR Law Four courses of action by the Court Determine existence of AA If no, dismiss (1) If yes, determine if there was default or not in the compliance with the Arbitration Agreement (2) If there is no default, (dismiss) If there was default, Court to

Challenge of arbitrator If a party renews his challenge in Court – arbitration proceedings are suspended But under Special ADR Rules – proceed

International Bar Association (IBA) Rules of Evidence Green List – list of factors that may or may not be disclosed but will not affect the fitness of Red List – list of prohibited factors

Long Quiz - July 23, 2010 Coverage: Class notes from start to latest.

Class Notes – July 30, 2010 FOURTH PART: CONDUCT OF ARBITRATION PROCEEDINGS CONFIDENTIALITY

Why is there no publication of awards of arbitral tribunals? Because of the principle of confidentiality arbitration proceedings (Sec. 23, RA 9285).

of


12


Sec. 23 – Confidentiality Proceedings

in

Arbitration

The arbitration proceedings, including the records, evidence and the arbitral award, shall be considered confidential and shall not be published except (1) with the consent of the parties, or (2) for the limited purpose of disclosing to the court of relevant documents in cases where resort to the court is allowed herein. Provided, however, that the court in which the action or the appeal is pending may issue a protective order to prevent or prohibit disclosure of documents or information containing secret processes, developments, research and other information where it is shown that the applicant shall be materially prejudiced by an authorized disclosure thereof.

There arises a policy of judicial restraint, such that the finding of the court on the jurisdiction of the arbitral tribunal is at best prima facie. Note: There is a before AT, after AT’s finding, and after -

after. Does the “p r i m a f a c i e finding” of the court mean

that the arbitral tribunal can still be formed? Yes. If the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed, a party may nevertheless commence arbitration and constitute the arbitral tribunal. So where does “p r i m a f a c i e finding” of the court

come in? How is it Exception to confidentiality : 1) Application for Interim Measure of Protection 2) Appoint Arbitrator 3) Challenge Arbitrator 4) Ask to Vacate / Modify Award 5) Ask to Enforce the Award

What is the consequence confidentiality?

of

breach

prima facie?

This means that the same issue may be passed upon by the arbitral tribunal, which has the effect of superseding the previous of the court. (This is the “AFTER” ruling.) What about the “after -after” ruling?

of

Claim for damages.

Where do you file the action for damanges arising from breach of confidentiality? RTC, not arbitral tribunal. Because the jurisdiction of the arbitral tribunal over issues is defined by the arbitration agreement. Issue of breach of confidentiality is usually involved in other causes of actions or pending actions. e.g. transactions with 3rd persons. Note:

Breach of confidentiality covers mere disclosure of fact of pendency of arbitration proceedings. COMPETENCE-COMPETENCE PRINCIPLE

The same issue may be passed upon in an action to vacate or set aside the arbitral award (Rule 3.11) In this case, it is no longer a prima fac ie determination of such issue or issues, but shall be a FULL REVIEW of such issue or issues with due regard, however, to the standard of review for arbitral awards.

But how may arbitration commence if it the court has made a prima facie finding that ithe arbitration agreement is found null and void, inoperative or incapable of being performed? Will the other party who got the favorable ruling of the court participate / cooperate? Get an appointment of arbitrator - sole arbitrator, adhoc, institutional.

Illustration: It’s possible for A to get a ruling from the court that

What is Principle”?

the

“Competence-Competence

Power of arbitral tribunal to initially rule on the question of its jurisdiction over a dispute including any objections with respect to the existence or validity of the arbitration agreement or any condition precedent to the filing of a request of arbitration. R e s t a t em e n t o f t h e R u l e :

Before the arbitral tribunal is constituted, the regular courts have jurisdiction to determine the issue of competence of a tribunal. The moment the arbitral tribunal is constituted, the arbitral tribunal has jurisdiction.

the arbitration agreement is null and void, and B may commence arbitration in an institution in another country. B now asked to appoint arbitrator for A contesting the arbitration agreement.

What is the remedy of A? a) Get an injunction from RTC Philippines. Next step is contempt. (Although the exercise of a legal right is not contemptuous) There may also be problem in getting injunction. Plus there’s a provision in Special

ADR Rules prohibiting injunction against arbitration. Finally, A can later on file a petition to set aside the award. b) Challenge jurisdiction of arbitral tribunal constituted by institution in foreign country.


13


UNCITRAL: 1) Petition to Set Aside 2) Petition to Refuse Recognition

What is the Principle of Separability? Arbitration clause is 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. (Uncitral Model Law, Sec. 16(1); Special ADR Rules 2.2)

What is the effect of multiple actions and parties?

A party ma y ask that the ruling of the arbitra l tribunal on a preliminary question upholding or declining its jurisdiction be declared null and void, inexistent or unenforceable. This is premised on the fact that the jurisdiction of the arbitral tribunal is defined by the arbitration agreement. The determination of the court is no longer a prima facie finding.

But would that not violate the CompetenceCompetence Principle? The determination of the court after commencement of arbitration proceedings

the

Illustration August 6 – Commencement of Arbitration

Rule 4.7.

Would Rule 4.7 result in multiplicity of suits? Yes. But this does not prevent arbitration from being commenced.

Cases for next meeting (August 6, 2010):

1) Vega v. San Carlos Milling Co. Ltd, 51 Phil 908 (1924) – no digest 2) California & Hawaiian Sugar Co. v. Pioneer Insurance & Surety Corp. 346 SCRA 214 (2000) 3) Associated Bank v. CA, 233 SCRA 137 (1994) 4) Bloomfield Academy v. CA, 237 SCRA 43 (1994) 5) Mindanao Portland Cement Corporation v. McDonough Construction Co. of Florida, 90 SCRA 808 (1967) 6) Gonzales v. Climax Mining Ltd., 512 SCRA 148 (2007) 7) Oil & Natural Gas Commission v. CA, 293 SCRA 26 (1998) 8) Magellan Capital Mgt. Corp. v. Zosa, 355 SCRA 157 (2001) 9) BF Corporation v. CA, 288 SCRA 267 (1998) 10) Korea Technolo gies Co. Ltd. v. Lerma, 542 SCRA 1 (2008) 11) Luzon Development Bank v. Luzon Development Bank Employees, 249 SCRA 162 (1995) – In re: multiplicity

Scenario A: On May 6, the determination of the court is merely prima facie and the parties may still commence arbitration. Scenario B: On November 6, the determination of the court is no longer prima facie. What would be the remedy of the claimant? Not final – may still be reviewed by MR, appeal, certiorari.

Rule 3.19 1) MR - yes 2) Certiorari – yes a) Affirming AT’s jurisdiction – not subject to certiorari b) AT has no jurisdiction – certiorari available Note: How many days? 3) Appeal – yes daw

Vega v. San Carlos Milling Co. Ltd, 51 Phil 908 (1924) Petitioners: Teodoro Vega Respondent: San Carlos Milling Co., Ltd.

Facts: Defendant-appellant contends that Sec. 23 of the

Class Notes - August 6, 2010 Is there a counterpart of the principle of confidentiality in Sec. 23 RA 9285 in RA 876? Sec. 14? (UNANSWERED)

What is the Judicial Relief After Commencement of Arbitration (Rule 3, Special ADR Rules)?

Mill’s covenant and Sec. 14 of the Planter’s

covenant , as such stipulations on arbitration are valid, and constitute a condition precedent , to which the plaintiff should have resorted before applying to the courts , as he prematurely did.3 3

Said STIPULATIONS TO ARBITRATE are as follows: "23 (Mill’s covenant). That it (the Mill—Party of the first part) will submit any and all differences that may arise between the Mill and the Planters to the decision of arbitrators , two of


14


This, more so, if these two provisions are read with the reciprocal covnenant in Sec. 7 of the Mill’s covenant .4 It is an admitted fact that the differences which later arose between the parties, and which are the subject of the present litigation have not been submitted to arbitration provided for in the above quoted clauses. Plaintiff filed an action for the recovery of 32,959 kilos of centrifugal sugar , or its value , P6,252, plus the payment of P500 damages and the costs. The lower court decided in favor of the plaintiff.

Issue: WON the lower court erred in having held itself with

jurisdiction to take cognizance of and render judgment in the cause Held: NO. Ratio: 1)

The defendant is right in contending that c l a u s e 2 3 o f t h e M i l l ' s c o v e n a n t and c l a u s e 1 4 o f t h e P l a n t e r ' s C o v e n a n t on arbitration are v a l i d , but they are n o t f o r t h a t r e a s o n a b a r t o ju d ic ia l ac ti o n , in view of the way they are

"Submission as Condition Precedent to Suit. — Clauses in insurance and other contracts providing for arbitration in case of disagreement are very dissimilar, and the question whether submission to arbitration is a condition precedent to a suit upon the contract depends upon the language employed in each particular stipulation . Where by the same

agreement which creates the liability, the ascertainment of certain facts by arbitrators is expressly made a condition precedent to a right of action thereon, s u i t c a n n o t b e b r o u g h t u n t i l t h e a w a r d i s m a d e . But the courts generally will not construe an arbitration clause as ousting them of their jurisdiction unless such construction is inevitable, and consequently when the arbitration clause is not made a condition precedent by express words or necessary implication, it will be construed as m e r e l y c o l l a t e r a l t o t h e l i a b i l i t y c l a u s e , and so n o b a r t o a n a c t i o n i n t h e c o u r t s w i t h o u t a n a w a r d. "

(2 R. C. L., 362, 363.) 2)

expressed :

agreement to submit to arbitration, not consummated by an award , is no bar to a suit at law or in equity concerning the subject matter submitted. And the rule applies both in respect of agreements to submit existing differences and agreements to submit differences which may arise in the future ." (5 C. J., 42.) "An

And in view of the te rms in which the said co venants on arbitration are expressed, it cannot be held that in agreeing on this point, the parties proposed to establish the arbitration as a condition precedent to judicial actio n, because these claus es quoted do not create such a condition either expressly or by necessary inference.

whom shall be chosen by the Mill and two by the Planters, who in case of inability to agree shall select a fifth arbitrator , and to respect and abide by the decision of said arbitrators , or any three of them, as the case may be." "14 (Planter’s covenant). That they (the Planters—Parties of the second part) will submit any and all differences that may arise between the parties of the first part and the parties of the second part to the decision of arbitrators , two of whom shall be chosen by the said parties of the first part and two by the said party of the second part, who in case of inability to agree, shall select a fifth arbitrator, and will respect and abide by the decision of said arbitrators, or any three of them, as the case may be." 4

Said RECIPROCAL COVENANT No. 7, reads: "7. Subject to the provisions as to arbitration, hereinbefore appearing, it is mutually agreed that the courts of

the City of Iloilo shall have jurisdiction of any and all judicial proceedings that may arise out of the contractual relations herein between the party of the first and the parties of the second part."

Neither does the r e c i p r o c a l c o v e n a n t N o . 7 expressly or impliedly establish the arbitration as a condition precedent. of the Mill’s covenant

The expression "subject to the provisions as to arbitration, hereinbefore appearing" does not declare such to be a condition precedent. This phrase does

not read "subject to the arbitration," but "subject to the provisions as to arbitration hereinbefore appearing." And, which are these "provisions as to arbitration hereinbefore appearing?" U n d o u b t e d l y clauses 23 and 14 quoted abov e, which do not m a k e a r b i t r a t i o n a c o n d i t i o n p r e c e d e n t.

Disposition. Affirmed. Separate Opinions AVANCEÑA, J., concurring: 1)

Inasmuch as clause 23 of the Mill's Covenants, and clause 14 of the Planter's Covenants provide

that the parties should respect and abide by the decision of the arbitrators , they bar judicial intervention and consequently are null and void in accordance with the ruling of this court in the case of Wahl and Wahl vs. Donaldson, Sims & Co. (2 Phil., 301). 2)

Clause 7 of the Mutual Covenants, naming the Court of First Instance of Iloilo as the one with jurisdiction to tr y such cases as might arise from the parties' contractual relations, by the very fact that it was made subject to the arbitration clauses previously mentioned, does not render such arbitration

merely a condition precedent to judicial action, nor does it change its scope , as clearly indicated by its wording and the intention of the parties. Said clause 7 was doubtless added in case it became


15


necessary to resort to the courts for the purpose of compelling the parties to accept the arbitrators' decision in accordance with the contract, and not in order to submit anew to the courts what had already been decided by the arbitrators , whose decision the contracting parties themselves to abide by and respect.

had

articles of the Civil Code, namely, articles 1820 and 1821, were given up to the subject of arbitration, and expressly confirmed this method of settling differences.

c)

bound

MALCOLM, J., dissenting : 1)

Defendant is not bound to furnish cars free of charge for use on the plaintiff's portable railway tracks, in relation with its corollary, that the letter written by the manager of the defendant's mill on March 18, 1916, does not estop the defendant from demanding compensation for the future use of the cars. 2) The parties having formally agreed to submit their differences to arbitrators, while recognizing the jurisdiction of the courts, arbitration has been made a condition precedent to litigation, and should be held valid and enforceable.

a)

In the Philippines fortunately, the attitude of the

courts toward arbitration agreements is slowly crystallizing into definite and workable form. The doctrine announced in Wahl and Wahl vs. Donaldsono. ([1903], 2 Phil., 301), was that a clause in a contract providing that all matters in dispute shall be referred to arbitrators and to them alone, is contrary to public policy and cannot oust the courts of jurisdiction. But the rule 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 with great reluctance interfere to anticipate or nullify the action of the arbitrator. b)

The new point of the judiciary in the progressive jurisdiction of Pennsylvania, in England, and under the Civil Law , is also worthy of our serious consideration. i)

It is the rule in Pennsylvania that when the persons making an executory contract stipulate in it that all disputes and differences between them, present or prospective, in reference to such contract or any sum payable under it, shall be submitted to the arbitrament of a named individual, or specifically designated persons, they are

effectually bound irrevocably by that stipulation, and precluded from seeking redress elsewhere until the arbiter or arbiters agreed upon have rendered an award or otherwise been discharged. ii)

iii)

In England, the view seems now to prevail that a contractual stipulation for a general arbitration, constitutes a condition precedent to the institution of judicial proceedings for the enforcement of the contract. Finally, it is within our knowledge that the Spanish

civil law wisely contains elaborate provisions looking to the amicable adjustment of controversies out of court. Litigation by means of friendly adjusters was formerly well known. The procedure in this kind of litigation was minutely outlined in the Ley de Enjuiciamiento Civil. Two

It was plainly the solemn purpose of the parties to settle their controversies amicably if possible before resorting to the courts. They provided for themselves by mutual consent a method which was speedier and less expensive for all concerned and less likely to breed that ill-feeling which is often the consequence of hotly contested litigation . All this was done by the Planters on the one hand and by the Milling Company on the other, to the end that justice might guide them and possible differences be quickly adjusted.

d)

It is clear, by paragraph 7 of the Mutual Covenants, that these parties did not intend that the decision of the arbitrators should prevent resort to the courts, for they expressly agreed to carry litigation between them to the courts of Iloilo . Acting under legal rules, even in their most restrictive form, disputes arising out of the contract, were to be referred to arbitration so that the damages sustained by a breach of the contract, could be ascertained by specified arbitrators before any right of action arose; but the matters in dispute were not to be referred to arbitrators and to them alone, to the utter exclusion of the courts . It is exactly correct to state that the clauses of the Covenants hereinbefore quoted, were meant as a condition precedent to litigation, which accordingly should be given effect.

STUDY NOTES Rule 2.2. Policy on arbitration.— (A) Where the parties have agreed to submit their dispute to arbitration, courts shall refer the parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith. Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not limited to, the following: a. The referral tends to oust a court of its jurisdiction d. The arbitration proceeding has not commenced

CLASS NOTES 1) Court was already talking about arbitration agreement, etc. as early as 1924. 2) Malcolm dissent: 3 jurisdictions: *Pensylvannia – irrevocably bound by stipulation, precluded from seeking redress to the courts; but makes a distinction between (a) did not name arbitrator; (b) *England – even a general reference to arbitration is a condition precedent (liberal)


16


*Spain (Ley de Enjuiciamiento Civil) – detailed amicable settlement + arbitration - Respect solemn purpose of the parties - Not null and void for absolutely ousts the courts of jurisdiction.

Class Notes - August 13, 2010

Is an arbitration agreement a condition precedent to the filing of an action in court?

See California & Hawaiian Sugar Co. v. Pioneer Insurance & Surety Corp (2000)

Rule 16.1 (j) of the Rules of Court – MTD on the ground of failure to comply with a condition precedent

Is this an absolute rule? No. It can be waived. R.A. 9285, Sec. 24. Referral to Arbitration. - A court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if at least one party so requests not later that the pre-trial conference, or upon the request of both parties thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

Sec. 7 – Stay of civil action Relate to Referral to ADR (Special Rules) Depends on the request of a party, because party may decide not to undergo ADR - Related to Section 24 of RA 9285 If any suit or proceeding be brought upon an issue arising out of an agreement providing for the arbitration thereof, the court in which such suit or proceeding is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration, shall stay the action or proceeding until an arbitration has been had in accordance with the terms of the agreement: Provided, That the applicant, for the stay is not in default in proceeding with such arbitration.

Rule 4.2. When to make request. — (A) Where the arbitration agreement exists before the action is filed. — The request for referral shall be made not later than the pre-trial conference . After the pre-trial conference, the courthuj will only act upon the request for referral if it is made with the agreement of all parties to the case.

Conclusion: An arbitration clause is NOT a condition precedent such that it is a ground for dismissal, because it is an alternative mode of dispute resolution . Hence, a party goes to court not to pass upon the merits or to have resolve it resolved, but for other reasons, such as to have the arbitration agreement enforced, modified, set aside, etc. It is a ground to STAY civil action (Sec. 7, RA 876; Sec. 24, RA 9285), not to dismiss it. Malcolm: Condition precedent if it is more of a factfinding task.

Can you be bound by an arbitration clause by subrogation?

California & Hawaiian Sugar Co. v. Pioneer Insurance & Surety Corp., 346 SCRA 214 (2000) Petitioners: California Hawaiian Sugar Company, Pacific Gulf Marine Inc and CF Sharp and Co Respondent: Pioneer Insurance and Surety Corporation

Facts: On November 27, 1990, the vessel MV “SUGAR ISLANDER” arrived at the port of Manila carrying a

cargo of soybean meal in bulk consigned to several consignees, one of which was the Metro Manila Feed Millers Association. Discharging of cargo from vessel to barges commenced. From the barges, the cargo was allegedly offloaded,

rebagged and reloaded on consignee’s delivery trucks. Respondent, however, claims that when the cargo was weighed on a licensed truck scale a shortage of 255.051 metric tons valued at P1,621,171.16 was discovered. The shipment was insured with Pioneer against all risk in the amount of P19,976,404.00. Due to the alleged refusal of petitioners to settle their respective liabilities , respondent, as insurer,

paid the consignee Metro Manila Feed Miller’s Association. Pioneer filed a complaint for damages against petitioners. Petitioners filed a Motion to Dismiss the complaint on the ground that respondent’s claim

is premature, the same being arbitrable. The RTC ordered to defer the hearing of the MTD and directed petitioners to file their Answer. Petitioners filed their answer with counterclaim and crossclaim alleging that Pioneer did not comply with the arbitration clause . Petitioners filed a Motion to Defer Pre-Trial and

Motion to Set for Preliminary Hearing the Affirmative Defense of Lack of Cause of Action for Failure to comply with Arbitration Clause, respectively. The RTC denied. The CA affirmed. It ruled that petitioner cannot set the case for preliminary hearing as an MTD was filed. Also, the arbitration clause in the charter party did not bind Pioneer. The right of Pioneer to file a


17


complaint against petitioners is not dependent upon the charter party, nor does it grow out of any privity contract . It accrues simply upon payment. Citing Pan Malayan Insurance Corporation v. CA, the CA ruled that the right of respondent insurance company as subrogee was not based on the charter party or any other contract ; rather, it accrued upon the payment of the insurance claim by private respondent to the insured consignee. Issue: WON the arbitration clause was binding upon Pioneer Held: YES Ratio: The CA erred when it held that the arbitration clause was not binding on Pioneer. There was nothing in Pan Malayan, however, that

prohibited the applicability of the arbitration That case merely clause to the subrogee. discussed, inter alia, the accrual of the right of subrogation and the legal basis therefor . This issue is completely different from that of the consequences of such subrogation ; that is, the rights that the insurer acquires from the insured upon payment of the indemnity . (Pan Malayan: The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer.) As to the preliminary hearing: True, Section 6, Rule 16 specifically provides that a preliminary hearing on the affirmative defenses may be allowed only when no motion to dismiss has been filed. Section 6, however, must be viewed in the light of Section 3 which requires courts to resolve a motion to dismiss and prohibits them from deferring its resolution on the ground of indubitability. Section 6 disallows a preliminary hearing of affirmative defenses once a motion to dismiss has been filed because such defense should have already been resolved. In the present case, however, the trial court did not categorically resolve petitioners’ Motion to Dismiss,

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.

CLASS NOTES Can you be bound by an arbitration clause in subrogation? No express ruling in California & Hawaiian Sugar Co. v. Pioneer Insurance & Surety Corp (2000), citing Pan Malayan, saying that a subrogee is bound. There’s only the accrual of the right of

subgrogation and the legal basis therefor.

Was there consent on the part of the insurance company? Yes, on the basis of the principle of subrogation and its effects.

Will Article 1311 of the Civil Code apply here? Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.

but merely deferred resolution thereof.

Can “Assignment” in A1311 be equated with

STUDY NOTES Rule 2.2. Policy on arbitration.— (A) Where the parties have agreed to submit their dispute to arbitration, courts shall refer the

No. The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer. (Pan Malayan)

parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith. Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not limited to, the following: c. The referral would result in multiplicity of suits;

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;

Subrogation?

c.f. Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled


18


to recover the deficiency from the person causing the loss or injury.

resulting increase in tuition fees allowed by RA 6728 were discussed at length.

Can a party be bound by the Arbitration Clause by statutory provision?

The DECS however affirmed the tuition fee increase.

Xam: Analogous to “heirs” in the sense that the

subrogee acquires the transmissible rights of the original party. (UNANSWERED). See however, Bloomfield Academy – Sec. 10 on Consultation of RA 6728, also commonly known as "An Act Providing Government Assistance to Students and Teachers in Private Education, And Appropriating Funds Therefor" Xam: See also, Associated Bank case – Sec. 3 (Agreement to the PCHC Rules) in relation to Sec. 36 on Arbitration.

Bloomfield Academy v. CA, 237 SCRA 43 (1994) Petitioners: Bloomfield Academy and Rodolfo Lagera Respondents: CA, Bloomfield Academy Parents Advisory Association I nc, et al

The court issued an order enjoining petitioners and Secretary Cariño and/or their agents, representatives or persons acting in their behalf from implementing the increase in tuition fees, and

not withholding their release of the report cards and/or other papers necessary for the students desiring to transfer to other schools until further orders from the court. The application for injunction was set for hearing on April 19, 1990 at 2:00 p.m. Answer to the complaint was filed by petitioners on April 19, 1990. On the same date, the court conducted the first hearing on the application for a writ of preliminary injunction which hearing was followed by settings on April 25, 26 and 27, 1990. The court thereafter issued an order granting the writ of preliminary injunction . On certiorai, the CA affirmed and ruled that the grant or denial of an injunction rests upon the sound discretion of the court.

Issue: WON the cour t erred in granting the Facts:

injunction

The petition originated in a complaint for injunction filed on April 6, 1990 by private respondent, the

Held:

association of parents and guardians of students

Ratio: The pertinent provisions RA 6728, also

enrolled in petitioner. One of the defendants in the case is petitioner which is a non-stock, non-profit educational institution . What is being disputed before the court is the increase in tuition fee . The petitioners contend that the increase is essential due to the increase of the minimum wage under RA 6727.

commonly known as "An Act Providing Government Assistance to Students and Teachers in Private Education, And Appropriating Funds Therefor," provide: Sec. 9. Further Assistance To Students in Private Colleges and Universities. — . . . . (b) For students enrolled in schools charging above one thousand five hundred pesos (P1,500.00) per year in tuition and other fees during the school year 1988-1989 or such amount in subsequent years as may be determined from time to time by the State Assistance Council, no assistance for tuition fees shall be granted by the Government: Provided,

Private respondents alleged that the 21.22% increase was made without prior consultation with the parents required by law and that, in any case, the approved increase was exorbitant (at 21.22%).

however, That the schools concerned may raise

They sent a letter to the DECS Secretary complaining that the tuition fee increase was without valid basis already , after both parties agreed on 50% of the increase which was implemented and paid by the students during the school year with the clear understanding that the other 50% is waived by the defendant.

Petitioners, on their part, contended that the parties did, in fact, hold consultations at which the wage increase for teachers mandated by RA6727 and the

their tuition fees subject to Section 10 hereof. xxx xxx xxx Sec. 10. Consultation. —

In any proposed increase in the rate of tuition fee, there shall be appropriate consultations conducted by the school administration with the duly organized parents and teachers associations and faculty associations with respect to secondary schools, and with students governments or councils, alumni and faculty associations with respect to colleges. For this purpose, audited financial statements shall be made


19


available to authorized representatives of these sectors. Every effort shall be exerted to reconcile

the matter has not been raised by the parties, it is an aspect, nevertheless, in our view, that c o u l d h a v e

possible differences. In case of disagreement, the alumni association of the school or any other impartial body of their choosing shall act as arbitrator .

well been explored by them instead of immediately invoking, such as they apparently did, the administrative and judicial relief to r e s o l v e t h e c o n t r o v e r s y.

xxx xxx xxx Sec. 14. Program Administration/Rules and Regulations. — The State Assistance Council shall be responsible for policy guidance and direction, monitoring and evaluation of new and existing programs, and the promulgation of rules and regulations, while the Department of Education,

All told, we hold that the court a quo has b een bereft of jurisdiction in taking cognizance of private respondent's complaint. We see no real justification, on the basis of the factual and case settings here obtaining, to permit a deviation from the long standing rule that the issue of jurisdiction may be raised at any time even on appeal.

Culture and Sports shall be responsible for the day to day administration and program implementation. Likewise, it may engage the

CLASS NOTES

services and support of any qualified government or private entity for its implementation.

Take Note of Sec. 10:

The judicial action initiated by private respondent before the court appears to us to b e a n i n a p p r o p r i a t e r e c o u r s e . It remains undisputed

“In case of disagreement, the alumni association of the school or any other impartial body of their choosing shall act as arbitrator”

that the DECS Secretary has, in fact, taken cognizance of the case for the tuition fee increase and has accordingly acted thereon. We can only assume that in so doing the DECS Secretary has duly passed upon the relevant legal and factual issues dealing on the propriety of the matter. In the decision process, the DECS Secretary has verily acted in a quasi-judicial capacity .

Is Sec. 10 an effective arbitration clause? Is the designation of the alumni association in Sec. 10 an appointment of arbitrator? Statutory arbitration clause? A republic act meddl ed with the legal relati onship. Sir, too broad, too vague. Consent is absent.

The remedy from that decision is an appeal.

Conformably with BP 129, the exclusive appellate jurisdiction to ques tion that administrative action lies with the CA, not with the court a quo. If we were to consider, upon the other hand, the case for injunction filed with the court a quo to be a ordinary action solely against herein petitioner (with DECS being then deemed to be merely a nominal party), it would have meant the court's taking cognizance over the case in disregard of the doctrine of primary jurisdiction. Neither can we treat the case as a special civil a c t i o n f o r c e r t i o r a r i o r p r o h i b i t i o n as the

complaint filed by private respondent with the court a quo, contains no allegation of lack, or grave abuse in the exercise, of jurisdiction on the part of DECS nor has there been any finding made to that effect by either the court a quo or the appellate court that could warrant the extraordinary remedy . A special

civil action, either for certiorari or prohibition, can be grounded only on either lack of jurisdiction or grave abuse of discretion.

In passing, we also observe that the parties have both remained silent on the provisions of Republic Act No. 6728 to the effect that in case of disagreement on tuition fee increases (in this instance by herein private parties), the issue should be resolved through arbitration. Although

If yes, party may move to stay civil action. If not, there’s no arbitrable dispute and there’s no

basis to stay civil action. Take Note of the the ff. provisions:

R.A. 9285, Sec. 24. Referral to Arbitration. - A court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if at least one party so requests not later that the pre-trial conference , or upon the request of both parties thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

Sec. 7 – Stay of civil action Relate to Referral to ADR (Special Rules) Depends on the request of a party, because party may decide not to undergo ADR - Related to Section 24 of RA 9285 If any suit or proceeding be brought upon an issue arising out of an agreement providing for the arbitration thereof, the court in which such suit or proceeding is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration, shall stay the action or proceeding


20


until an arbitration has been had in accordance with the terms of the agreement: Provided, That the applicant, for the stay is not in default in proceeding with such arbitration.

contractors' payment.

Rule 4.2. When to make request. — (A) Where the

construction. Due to this and to other causes deemed sufficient by Turnbull, Inc., extensions of time for the termination of the project , initially agreed to be finished on December 17, 1961, were granted.

arbitration agreement exists before the action is filed. — The request for referral shall be made not

later than the pre-trial conference . After the pretrial conference, the courthuj will only act upon the request for referral if it is made with the agreement of all parties to the case.

progress

and

fiscal

requests

for

Alterations in the plans and specifications were subsequently made during the progress of the

Respondent finally completed the project on October 22, 1962 . Differences later arose.

Take Note of the SC Ruling: Although the matter has not been raised by the parties, it is an aspect, nevertheless, in our view, that c o u l d h a v e w e l l b e e n e x p l o r e d b y t h e m

Petitioner claimed from respondent damages in the

instead of immediately invoking, such as they apparently did, the administrative and judic ial r e l i ef t o r e s o l v e t h e c o n t r o v e r s y .

Respondent in turn asked for more than P450,000 from petitioner for alleged losses due to cost of extra work and overhead as of April 1962.

Remedies available: 1) Move to dismiss 2) Ground to stay

Can the Court proceed to decide the case on the merits in the interest of justice? No, This proceeding [Petition for Enforcement of Agreement to Arbitrate] is merely a summary remedy to enforce the agreement to arbitrate. 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 Co. of Florida, 90 SCRA 808 (1967)).

amount of more than P2,000,000 allegedly occasioned by the delay in the project's completion.

A conference was held between petitioner and Turnbull, Inc., on one hand, and respondent on the other, to settle the differences, but no satisfactory results were reached.

Petitioner sent respondent written invitations to arbitrate, invoking a provision in their contract regarding arbitration of disputes. Instead of answering said invitations, respondent, with

Turnbull's approval, submitted to petitioner for payment its final statement of work accomplished, asking for P403,700 as unpaid balance of the consideration of the contract.

Petitioner filed the present action in the CFI of Manila to compel respondent to arbitrate with it Mindanao Portland Cement Corporation v. McDonough Construction Co. of Florida, 90 SCRA 808 (1967) Petitioner – appellee: Mindanao Portland Cement Corporation Respondent – appellant: McDonough Construction

concerning alleged disputes arising from their contract.5 It averred inter alia that deletions and

additions to the plans and specifications were agreed upon during the progress of the construction; that disagreement arose between them as to the cost of the additional or extra work done, and respondent's deviation from some The provision of the contract on " Arbitration of Disagreements" (par. 39) says: 39. In the event of disagreement between the Owner and the Contractor in respect of the rights or obligations of either of the parties hereunder except the interpretation of the plans and specifications and questions concerning the sufficiency of materials, the time, sequence and method of performing the work, which questions are to be finally determined by the Engineer , they shall submit the matter to arbitration , the 5

Facts: Petitioner and respondent McDonough executed a

contract for the construction by the respondent for the petitioner of a dry portland, cement plant at Iligan City. In a separate contract , Turnbull, Inc. — the "engineer"— was engaged to design and manage the construction of the plant, supervise the construction, schedule deliveries and the construction work as well as check and certify ill

Owner choosing one arbitrator, the Contractor one, and the two so chosen shall select a third. The decision of such arbitrators or a majority of them shall be made in writing to both parties and when so made shall be binding upon the parties thereto.


21


agreed specifications; that petitioner claims having overpaid respondent by P33,810.81; that petitioner further claims to have suffered damages due to respondent's delay in finishing the project; that respondent, on the other hand, still claims an

unpaid balance of about P403,700; that these matters fall under the general arbitration clause of their contract; and that respondent has failed to proceed to arbitration despite several requests

materials; and (3) the time, sequence and method of performing the work . The disputes involved here, on the other hand, are on (1) the proper computation of the total contract price, including the cost of additional or extra work; and (2) the liability for alleged delay in completing the project and for alleged losses due to change in the plans and specifications.

therefor. The court ruled that the matter should be submitted to arbitration.

Issue: WON the dispute should be submitted to

a) N o w f r o m t h e c o n t r a c t i t s e l f W e c a n determine the scope of the exceptions a f o r e m e n t i o n e d .

arbitration

Thus, pars. 19 to 22 of its General Conditions deal with the subject "Interpretation of Plans and Specifications". And thereunder, the engineer is

Respondent, contends that: 1) There is no showing of disagreement; and 2) If there is, the same falls under the exception , to be resolved by the engineer.

empowered to correct all discrepancies, errors or omissions in the plans and specifications; to explain all doubts that may arise thereon; and to furnish further plans and specifications as may be required .

Held: Ratio:

No mention is made therein as to the cost of the project; this matter is covered by the engineering contract, under which Turnbull, Inc.'s function is limited to making estimates of costs only.

1) As to the first point,

the fact of disagreement has been determined by the court below upon the stipulation of facts and d o c u m e n t a r y e v i d e n c e s u b m i t t e d . In this

appeal involving pure questions of law, the above finding should not be disturbed. Furthermore, the existence of disagreement is plainly shown in the record . Respondent admits the existence of petitioner's claim but denies its merit. It likewise admits that petitioner has refused to pay its claim for the unpaid balance of the price of the contract. Paragraph

86 of the stipulation of facts shows the dispute of the parties regarding their mutual claims and that said dispute remained unsettled.

2) Regarding the second point, the parties agreed by way of exception that disagreements with respect to the following matters shall be finally resolved by the engineer, instead of being submitted to arbitration: (1) The interpretation of plans and specifications; (2) sufficiency of

"Sufficiency of materials" and "method of performing the work" — under the second and third exceptions above-mentioned — are treated in pars. 2 to 6 of the General Conditions under the heading "QUALITY OF WORKS AND MATERIALS". Turnbull, Inc., is therein empowered to determine the land fitness of the several kinds of work and materials furnished and to reject or condemn many of them which, in its opinions, does not fully conform to the terms of the contrac t. In the present case, the

dispute is not as to the quality of the materials or of the kind of work done.

"Time" and "Sequence of Work " are covered by pars. 9 to 17 of the General Conditions under the heading "SCHEDULING." Neither would the disputes fall under these exceptions. Turnbull, Inc.'s power here is to schedule the deliveries and construction work and expedite the same so that the project can be finished on time. It is also authorized, under par. 15, to determine whether any eventuality is sufficient enough to warrant in extension of time

and if so, to determine the period of such extension. The delay envisioned here is one that occurs during 6

8. That on or about May 29, 1962, a conference was held between petitioner and Turnbill, Inc., on the one hand, and respondent, on the other, to settle their differences involving the claim for damages of petitioner in the amount of more than P2,000,000, occasioned by the delay in the completion of the project, and the claim of respondent for losses due to the cost of extra plant and overhead in the amount of more than P450,000, — as of April, 1962, but no satisfactory results were reached

the progress of the work which disturbs the prescheduling plan, thus necessitating an extension of

the over-all deadline precisely to prevent respondent from going beyond the same. Turnbull, Inc.'s function goes no further than to calculate and fix the period of extension. But the delay petitioner alleged


22


is different; it is delay beyond the last date of extension fixed by Turnbull, Inc. Clearly, the question of liability therefor, is not embraced in the exception. To none of the exceptions then do the disagreements in question belong , the rule of a r b i t r a t io n t h e r e f o r e a p p l i e s . The parties in fact

also stipulated in their contract, under "EXTRA WORK", that the cost of extra work to be paid shall be subject to negotiations. This negates the proposition that Turnbull, Inc.'s cost estimates appearing in Addenda 2, 3 and 7 are final and conclusive. b) The reason, moreover, for the exceptions — interpretation of plans and specifications; sufficiency of materials; sequence, time and method of performing the work — is the

need to decide these matters immediately, since the progress of the work would await their determination . The same is not true as to matters relating to the liability for delay in the project's completion; these are questions that the

engineer does not have to resolve before the project can go on . Consequently, We view that it is not included in the exceptions, as indeed the related provisions of their agreement indicate. Since there obtains herein a written provision for arbitration as well as failure on respondent's part to comply therewith, the court a quo rightly ordered the parties to proceed to arbitration in accordance with the terms of their agreement (Sec. 6, Republic Act 876). R e s p o n d e n t' s a r g u m e n t s t o u c h i n g u p o n the merits of the dispute are improperly raised . They should be addressed to the arbitrators. herein

This proceeding is merely a summary remedy to enforce the agreement to arbitrate. 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 . And although it has been ruled that a frivolous or patently baseless claim should not be ordered to arbitration, it is also recognized that the mere fact that a defense exists against a claim does not make it frivolous or baseless. STUDY NOTES: Rule 2.2. Policy on arbitration.— (A) Where the parties have agreed to submit their dispute to arbitration, courts shall refer the parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith.

Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not limited to, the following: b. The court is in a better position to resolve the dispute subject of arbitration;

CLASS NOTES: What is a “pathological arbitration clause”?

An arbitration clause that’s vague or unclear, such that instead of facilitating the arbitration of the case, it delays it. Mindanao Portland case contains a pathological arbtiration clause, thus: Some are referrable to arbitration, others are referrable to the engineer. Note: Respondent McDonough contended in the case that: 1) There is no showing of disagreement (merely a problem in computation); and 2) If there is, the same falls under the exception , to be resolved by the engineer. Whereas Petition Mindanao Portland insisted that there was a dispute and that it is referrable to arbitration. Problem is that McDonough started to argue the case on its merits. Court: It’s wrong.

What is the duty of the Court when confronted with the issue of the arbitrability of the dispute? (Most common mistake of courts) 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

Associated Bank v. CA, 233 SCRA 137 (1994) Petitioner: Associated Bank Respondents: CA,Visitacion Flores, Asuncion Flores PCIB, Far East Bank, Security Bank and Citytrust Bank

Facts: In a complaint for Violation of the NIL and Damages , Visitacion and Asuncion Flores seek the recovery of the amount of P900,913.60 which

petitioner charged against their current account by virtue of the 16 checks drawn by them despite the apparent alterations therein with respect to the


23


name of the payee, that is, the name Filipinas Shell was erased and substituted with Ever Trading and DBL Trading by their supervisor Jeremias Cabrera, without their knowledge and consent. Petitioner claimed that the subject checks appeared to have been regularly issued and free from any irregularity which would excite or arouse any suspicion or warrant their dishonor when the same were negotiated and honored by it. Petitioner filed a TPC against PCIB, Far East Bank and City Trust for reimbursement, contribution, indemnity for being the collecting banks of the subject checks and by virtue of their bank guarantee for all checks sent for clearing to the Philippine Clearing House Corporation (PCHC), as provided for in Section 17, (PCHC), as provided for in Section 17, PCHC Clearing House Rules and Regulations. Citytrust and PCIB claimed that the checks were complete and regular on their face. A Motion To Dismiss was filed by Security Bank on the grounds that petitioner failed to resort to arbitration as provided for in Section 36 of the

Clearing House Rules and Regulations of the Philippine Clearing House Corporation . Petitioner maintains that this Court has jurisdiction over the suit as the provisions of the Clearing House Rules and Regulations are applicable only if the suit or action is between participating member banks , whereas the Floreses are private persons and the third-party complaint between participating member banks is only a consequence of the original action initiated by the plaintiffs . The trial court dismissed the TPC for lack of jurisdiction citing Section 36 of the Clearing House Rules and Regulations of the PCHC providing for settlement of disputes and controversies involving any check or item cleared through the body with the PCHC . It ruled — citing the Arbitration Rules of Procedure — that

the decision or award of the PCHC through its arbitration committee/arbitrator is appealable only on questions of law to any of the Regional Trial Courts in the National Capital Region where the head office of any of the parties is located. The CA affirmed

Issue: WON the case should be dismissed for failure to arbitrate

Held: Yes

Ratio: The Clearing House Rules and Regulations on Arbitration of the Philippine Clearing House Corporation are clearly applicable to petitioner

and private respondents . Petitioner’s third party complaint in the trial court was one for reimbursement, contribution and indemnity against PCIB, FarEast, Security Bank, and CityTrust, in

connection

with

petitioner’s

having

honored

sixteen checks which said banks supposedly endorsed to the former for collection in 1989. Under the rules and regulations of the PCHC, the

mere act of participation of the parties concerned in its operations in effect amounts to a manifestation of agreement by the parties to abide by its rules and regulations . As a consequence of such participation, a party cannot invoke the jurisdiction of the courts over disputes and controversies which fall under the PCHC Rules and Regulations without first going through the arbitration processes laid out by the body. Since claims relating to the regularity of checks cleared by banking institutions are among those claims which should first be submitted for resolution by the PCHC’s Arbitration Committee,

petitioner, having voluntarily bound itself to abide by such rules and regulations, is estopped from seeking relief from the RTC on the coattails of a private claim and in the guise of a third party complaint without first having obtained a decision adverse to its claim from the said body. It cannot bypass the arbitration process on the basis of its averment that its third party complaint is inextricably linked to the original complaint in the RTC. Pursuant to PCHC’s function involving the clearing

of checks and other clearing items, the PCHC has adopted rules and regulations designed to

provide member banks with a procedure whereby disputes involving the clearance of checks and other negotiable instruments undergo a process of arbitration prior to submission to the courts below . This procedure (1) ensures a uniformity of rulings relating to factual disputes involving checks and other negotiable instruments (2) provides a mechanism for settling minor disputes among participating and member banks which would otherwise go directly to the trial courts. While the PCHC Rules and Regulations allow

appeal to the Regional Trial Courts only on questions of law , this does not preclude our lower courts from dealing with questions of fact already decided by the PCHC arbitration when warranted and appropriate.


24


In Banco de Oro Savings and Mortgage Banks vs. Equitable Banking Corporation this Court had the occasion to rule on the validity of these rules as well as the jurisdiction of the PCHC as a forum for resolving disputes and controversies involving checks and other clearing items when it held that "the participation of two banks. . . in the Clearing Operations of the PCHC (was) a manifestation of its submission to its jurisdiction."

obligation to first seek redress of their disputes and grievances with the PCHC before going to the trial court.

Under the PCHC Rules and Regulations, 7 not only do the parties manifest by mere participation their consent to these rules, but such participation is deemed (their) written and subscribed consent to the binding effect of arbitration agreements under the PCHC rules .

mere procedural device which under the Rules of

Moreover, a participant subject to the Clearing House Rules and Regulations of the PCHC may go on appeal to any of the Regional Trial Courts in the National Capital Region where the head office of any of the parties is located only after a decision or

award has been rendered by the arbitration committee or arbitrator on questions of law. Clearly

therefore, petitioner, b y i t s v o l u n t a r y participation and its consent to the arbitration r u l e s c a n n o t g o d i r e c t l y t o t h e R T C w h e n i t f in d s i t c o n v e n i e n t t o d o s o . The jurisdiction of the PCHC under the rules and regulations is clear, undeniable and is particularly applicable to all the parties in the third party complaint under their 7

The applicable PCHC provisions on the question of jurisdiction provide: 1) Sec. 3 — AGREEMENT TO THESE RULES It is the general agreement and understanding, that any participant in the PCHC MICR clearing operations, by the mere act of participation, thereby manifests its agreement to these Rules and Regulations, and its subsequent amendments. 2) Sec. 36 — ARBITRATION a) 36.1 Any dispute or controversy between two or more clearing participants involving any check/item cleared thru PCHC shall be submitted to the Arbitration Committee, upon written complaint of any involved participant by filing the same with the PCHC serving the same upon the other party or parties, who shall within fifteen (15) days after receipt thereof, file with the Arbitration Committee its written answer to such written complaint and also within the same period serve the same upon the complaining participant. This period of fifteen (15) days may be extended by the Committee not more than once for another period of fifteen (15) days, but upon agreement in writing of the complaining party, said extension may be for such period as the latter may agree to. b) Section 36.6 is even more emphatic: 36.6 The fact that a bank participates in the clearing

operations of PCHC shall be deemed its written and subscribed consent to the binding effect of this arbitration agreement as if it had done so in accordance with Section 4 of the Republic Act No. 876 otherwise known as the Arbitration Law.

Finally, the contention that the third party complaint should not have been dismissed for being a necessary and inseparable offshoot of the main case over which the court a quo had already exercised jurisdiction misses the fundamental point about such pleading. A third party complaint is a Court

is

allowed

only

with

the

court’s

permission. It is an action "actually independent of, separate and distinct from the plaintiffs’

complaint" (s)uch that, were it not for the Rules of Court, it would be necessary to file the action separately from the original complaint by the defendant against the third party. STUDY NOTES Rule 2.2. Policy on arbitration.— (A) Where the parties have agreed to submit their dispute to arbitration, courts shall refer the parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith. Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not limited to, the following: f. One or more of the issues are legal and one or more of the arbitrators are not lawyers;

CLASS NOTES: Xam: See also, Associated Bank case – Sec. 3 (Agreement to the PCHC Rules) in relation to Sec. 36 on Arbitration. Participation in the PCHC clearing process is equivalent to a WRITTEN and SUBSCRIBED consent to be bound by the PCHC Rules and Regulations, including the provision on arbitration.

Luzon Development Bank v. Luzon Development Bank Employees, 249 SCRA 162 (1995) – In re: multiplicity Petitioner: Luzon Development Bank Respondent: Association of Luzon Development Bank Employees and Atty. Ester Garcia

Facts: The following issue arose between petitioner and respondent: Whether or not the company has violated the CBA provision and the MOA dated April 1994, on promotion. The parties agreed on the submission of their respective Position Papers on December 1-15, 1994. Atty. Ester S. Garcia (Voluntary Arbitrator) received ALDBE's Position


25


Paper on January 18, 1995. LDB failed to submit its Position Paper despite a letter from the Voluntary Arbitrator reminding them to do so. The Voluntary Arbitrator rendered a decision finding that the Bank has not adhered to the CBA provision nor the MOA on promotion. Hence, this petition for certiorari and prohibition seeking to set aside the decision of the Voluntary Arbitrator and to prohibit her from enforcing the same.

parties to a CBA shall name and designate therein a voluntary arbitrator or a panel of arbitrators, or include a procedure for their selection, preferably from those accredited by the NCMB. Article 261 LC accordingly provides for exclusive original jurisdiction of such voluntary arbitrator or panel of arbitrators over (1) the interpretation or implementation of the CBA and (2) the interpretation or enforcement of company personnel policies. Article 262 authorizes them, but only upon agreement of the parties, to exercise jurisdiction over other labor disputes.

Issue: WON direct resort to the SC is warranted Held: No Ratio: In labor law context, arbitration is the reference of a labor dispute to an impartial third person for determination on the basis of evidence and arguments presented by such parties who have bound themselves to accept the decision of the arbitrator as final and binding. Arbitration may be classified, on the basis of the obligation on which it is based, as either compulsory or voluntary. Compulsory arbitration is a system whereby the parties to a dispute are compelled by the government to forego their right to strike and are compelled to accept the resolution of their dispute through arbitration by a third party. The essence of arbitration remains since a resolution of a dispute is arrived at by resort to a disinterested third party whose decision is final and binding on the parties, but in compulsory arbitration, such a third party is normally appointed by the government. Under voluntary arbitration referral of a dispute by the parties is made, pursuant to a voluntary arbitration clause in their collective agreement, to an impartial third person for a final and binding resolution. Ideally, arbitration awards are supposed to be complied with by both parties without delay, such that once an award has been rendered by an arbitrator, nothing is left to be done by both parties but to comply with the same. After all, they are presumed to have freely chosen arbitration as the mode of settlement for that particular dispute. Pursuant thereto, they have chosen a mutually acceptable arbitrator who shall hear and decide their case. Above all, they have mutually agreed to de bound by said arbitrator's decision. In the Philippine context, the parties to a CBA are required to include therein provisions for a machinery for the resolution of grievances arising from the interpretation or implementation of the CBA or company personnel policies. For this purpose,

On the other hand, a labor arbiter under Article 217 LC has jurisdiction over the following enumerated cases: (1) Unfair labor practice cases; (2) Termination disputes; (3) If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; (4) Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; (5) Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; (6) Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding P5,000.00 regardless of whether accompanied with a claim for reinstatement. It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator or a panel of such arbitrators is quite limited compared to the original jurisdiction of the labor arbiter and the appellate jurisdiction of the NLRC for that m atter. The state of our present law relating to voluntary arbitration provides that "(t)he award or decision of the Voluntary Arbitrator . . . shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties," 5 while the "(d)ecision, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders." Hence, while there is an express mode of appeal from the decision of a labor arbiter, RA 6715 is silent with respect to an appeal from the decision of a voluntary arbitrator. Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not, elevated to the SC itself on a petition for certiorari, in effect equating the voluntary arbitrator with the


26


NLRC or the CA. In the view of the Court, this is illogical and imposes an unnecessary burden upon it. In Volkschel Labor Union, et al. v. NLRC, et al., 8 on the settled premise that the judgments of courts and awards of quasi-judicial agencies must become final at some definite time, this Court ruled that the awards of voluntary arbitrators determine the rights of parties; hence, their decisions have the same legal effect as judgments of a court Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the CA shall exercise: (B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Employees Compensation Commission and the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. Assuming that t he voluntary arb itrator or the panel of voluntary arbitrators may not strictly be considered as a quasi-judicial agency, board or commission, still both he and the panel are comprehended within the concept of a "quasi-judicial instrumentality." It may even be stated that it was to meet the very situation presented by the quasi-judicial functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating under the CIAC, that the broader term "instrumentalities" was purposely included in the provision. An "i nstrumentality" is an ything used as a means or agency. Thus, the terms governmental "agency" or "instrumentality" are synonymous in the sense that either of them is a means by which a government acts, or by which a certain government act or function is performed. The word "instrumentality," with respect to a state, contemplates an authority to which the state delegates governmental power for the performance of a state function. An individual person, like an administrator or executor, is a judicial instrumentality in the settling of an estate, in the same manner that a sub-agent appointed by a bankruptcy court is an instrumentality of the court, and a trustee in bankruptcy of a defunct corporation is an instrumentality of the state.

The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under the provisions in the Labor Code and he falls, therefore, within the contemplation of the term "instrumentality" in Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in the Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein. It will be noted that, although the Employees Compensation Commission is also provided for in the Labor Code, Circular No. 1-91, which is the forerunner of the present Revised Administrative Circular No. 1-95, laid down the procedure for the appealability of its decisions to the CA under the foregoing rationalization, and this was later adopted by Republic Act No. 7902 in amending Sec. 9 of B.P. 129. A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the CA, in line with the procedure outlined in Revised Administrative Circular No. 1-95, just l ike those o f th e qu asi-judicial agencies, boards and commissions enumerated therein. This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to provide a uniform procedure for the appellate review of adjudications of all quasi-judicial entities not expressly excepted from the coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute. Nor will it run counter to the legislative intendment that decisions of the NLRC be reviewable directly by the Supreme Court since, precisely, the cases within the adjudicative competence of the voluntary arbitrator are excluded from the jurisdiction of the NLRC or the labor arbiter. In the same vein, it is worth mentioning that under Section 22 of RA 876, also known as the Arbitration Law, arbitration is deemed a special proceeding of which the court specified in the contract or submission, or if none be specified, the RTC for the province or city in which one of the parties resides or is doing business, or in which the arbitration is held, shall have jurisdiction. A party to the controversy may, at any time within one (1) month after an award is made, apply to the court having jurisdiction for an

order confirming the award and the court must grant such order unless the award is vacated, modified or corrected . In effect, this equates the award or decision of the

voluntary arbitrator with that of the regional trial court. Consequently, in a petition for certiorari from


27


that award or decision, the CA must be deemed to have concurrent jurisdiction with the Supreme Court. As a matter of policy, this Court shall henceforth remand to the CA petitions of this nature for proper disposition.

Is it “any other misbehavior"?

CLASS NOTES:

2) Ground for termination of mandate.

If an arbitrator and an RTC judge are of the same level, how come a party can ask an RTC judge to vacate an award made by an arbitrator? The explanation is found in assigned cases and in the Special ADR Rules.

Not a ground for appeal. 1) The arbitral tribunal is defective.

Rule 8.1. Who may request termination and on what grounds .— Any of the parties to an arbitration may request for the termination of the mandate of an arbitrator where an arbitrator becomes de jure or de facto unable to perform his function or for other reasons fails to act without undue delay and that arbitrator, upon request of any party, fails or refuses to withdraw from his office.

Is it because the RTC does not rule on the merits but on the validity of the arbitration proceedings? Is it because the equality presupposes the competence of the arbitral tribunal? Is it because the equality extends to the award not the body or tribunal? Xam: Upon the rendition of the award, the jurisdiction of the arbitral tribunal over the dispute ends. There is no jurisdiction over its enforcement.

In termination of mandate, a substitute is appointed according to the manner in which the arbitrator replaced was appointed.

What the RTC is doing is enforcing the award, not exercising its power of review.

3) Sec. 14 – All arbitrators should be present in all hearings. 4) In commercial arbitration – ground for setting aside (if arbitration not conducted according to the agreement of the parties).

Yet the law cannot simply grant the right to the courts to simply enforce the award without summarily looking into the extrinsic validity of the award. Cases for next meeting (August 6, 2010):

12) Toyota Motor Phils. Corp. V. CA, 216 SCRA 336 13) Heirs of Agusto L. Salas, Jr. v. Laperal Realty Corp., 302 SCRA 620 14) Del Monte Corp. USA v. CA, 351 SCRA 373 15) Homebankers Savings and Trust Co. v. CA, 318 SCRA 558

Class Notes - August 20, 2010 What is the legal significance if one of the arbitrators has been absent for an unreasonable length of time? Leeway not to confirm the award Not a ground for vacation. Is it a ground for vacation for evident partiality? No, it’s not evident.

Notes:

- Cannot ask for a commitment not to get an injunction in the Philippines. Jurisdiction over the issue is defined by the arbitration clause. (Mindanao Portland)

“Bundle

of documents ” – starting point in preliminary conference, to enable the parties to know what the evidence at issue. Also include witness statement (judicial affidavit). No formal offer.

Gonzales v. Climax Mining Ltd., 512 SCRA 148 (2007) Petitioners: Pedro Gonzales – alleges nullity and Panel of Arbitrators Respondents: Climax Mining Ltd, Climax Arimco Mining Corp and Australasian Philippines Mining –

wants to arbitrate Facts:

This is a consolidation of two petitions rooted in the same disputed Addendum Contract entered into by the parties. The first case arose from COMPLAINT FOR THE

ANNULMENT OF THE ADDENDUM CONTRACT


28


on grounds of fraud and violation of the Constitution

filed by Gonzales before the DENR Panel of Arbitrators. The SC held that the DENR Panel of Arbitrators had no jurisdiction over the complaint and that the action should have been brought before the regular courts as it involved judicial issues. Gonzales avers in his MR that the Court erred in holding that the DENR Panel of Arbitrators was bereft of jurisdiction, reiterating its argument that the case involves a mining dispute that properly falls within the ambit of the Panel’s authority.

Respondents filed their Partial MR seeking reconsideration of that part of the Decision holding that the case should not be brought for arbitration under RA. 876. Respondents argue that the arbitration clause in the Addendum Contract

should be treated as an agreement independent of the other terms of the contract, and that a claimed rescission of the main contract does not avoid the duty to arbitrate . The second case , on the other hand, stemmed from the PETITION TO COMPEL ARBITRATION filed by respondent before the RTC of Makati City

while the complaint for the nullification of the Addendum Contract was p e n d i n g before the DENR Panel of Arbitrators . Climax-Arimco had sent Gonzales a Demand for Arbitration pursuant to Clause 19.1 of the Addendum Contract and also in accordance with Sec. 5 of R.A. No. 876. The petition for arbitration was subsequently filed and Climax-Arimco sought an order to compel the parties to arbitrate pursuant to the said arbitration clause. Gonzales filed an Answer with Counterclaim

Climax-Arimco mentions that the special civil action for certiorari employed by Gonzales is available only where there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law against the challenged orders or acts. Climax Arimco then points out that R.A. No. 876 provides for an appeal from such orders . Climax-Arimco adds that an application to compel arbitration under

Sec. 6 of R.A. No. 876 confers on the trial court only a limited and special jurisdiction , i.e., a jurisdiction solely to determine (a) whether or not the parties have a written contract to arbitrate, and (b) if the defendant has failed to comply with that contract . Climax-Arimco further notes that Gonzales’s attack on o r repudiation of the Addendum Contract also is not a ground to deny effect to the arbitration clause in the Contract. The arbitration agreement is separate and severable from

the

contract

evidencing

the

parties’

commercial or economic transaction , it stresses. Climax-Arimco emphasizes that the summary proceeding to compel arbitration under Sec. 6 of R.A. No. 876 should not be confused with the procedure in Sec. 24 of R.A. No. 9285 . Sec. 6 of R.A. No. 876 refers to an application to compel arbitration wher e the court’s authority is limited to resolving the issue of whether there is or there is no agreement in writing providing for arbitration. Sec. 24 of R.A. No. 9285 refers to an ordinary action which covers a matter that appears to be

arbitrable or subject to arbitration under the arbitration agreement . Issue: WON it is proper for the RTC to order the parties to arbitrate even though the defendant has raised the twin issues of the validity and nullity of the Addendum Contract

questioning the validity of the Addendum Contract containing the arbitration clause . He

Held: YES

alleged that the contract is void in view of Climax-

1) PETITION TO COMPEL ARBITRATION - SC

Arimco’s acts of fraud, oppression and violation

ruled against Gonzales when he alleges that Judge Pimentel acted with grave abuse of discretion in ordering the parties to proceed with

of the Constitution . Thus, the arbitration clause, Clause 19.1, contained in the Addendum Contract is also null and void ab initio and legally inexistent.

Climax-Arimco then filed a motion to resolve its pending motion to compel arbitration. The RTC denied the same. RTC required Gonzales to proceed with arbitration proceedings and appointing retired CA Justice Jorge Coquia as sole arbitrator.

arbitration.

Gonzales’s

argument

that

the

Addendum Contract is null and void and, therefore the arbitration clause therein is void as well, is not tenable. a) First, the proceeding in a petition for arbitration under R.A. No. 876 is limited

only to the resolution of the question of whether the arbitration agreement exists .


29


b) Second, the separability of the arbitration

The jurisdiction of the courts in relation to Sec. 6

clause from the Addendum Contract means that validity or invalidity of the Addendum Contract will not affect the enforceability of the agreement to arbitrate. Thus, Gonzales’s petition for

of R.A. No. 876 as well as the nature of the proceedings therein was expounded upon in La

certiorari should be dismissed.

REMEDIAL LAW We address the Rule 65 petition in Petition to Compel Arbitration first from the remedial law perspective. It deserves to be d i s m i s s e d o n procedural grou nds, as it was filed in lieu of a p p e a l w h i c h i s t h e p r e s c r i b e d r e m e d y and at that

far beyond the reglementary period. There is no merit to Gonzales’s argument that the use of the

permissive term "may" in Sec. 29, R.A. No. 876 in the filing of appeals does not prohibit nor discount the filing of a petition for certiorari under Rule 65.

Proper interpretation of the aforesaid provision of law shows that the term "may" refers only to the filing of an appeal, not to the mode of review to be employed . CONSENSUAL NATURE Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in our jurisdiction . Disputes do not go to arbitration unless and until the parties have agreed

Naval Drug Corporation v. CA. There it was held that

R.A. No. 876 explicitly confines the court's authority only to the determination of whether or not there is an agreement in writing providing for arbitration. In the affirmative , the statute ordains that the court shall issue an order "summarily directing the parties to proceed with the arbitration in accordance with the terms thereof. " If the court, upon the other hand, finds that no such agreement exists, "the proceeding shall be dismissed." The cited case also stressed that the proceedings are summary in nature.

SEPARABILITY Implicit in the summary nature of the judicial proceedings is the separable or independent character of the arbitration clause or agreement. This was highlighted in the cases of Manila Electric Co. v. Pasay Trans. Co. and Del Monte CorporationUSA v. CA: The doctrine of separability, or

severability as other writers call it, enunciates that an arbitration agreement is independent of the main contract . The arbitration agreement is to be treated as a separate agreement and the arbitration agreement does not automatically terminate when the contract of which it is part comes to an end .

to abide by the arbitrator’s decision. Necessarily, a

contract is required for arbitration to take place and to be binding . R.A. No. 876 recognizes the contractual nature of the arbitration agreement (Section 2).

CONTRACTUAL NATURE Thus, we held in Manila Electric Co. v. Pasay Transportation Co. that a submission to arbitration is a contrac t. A clause in a contract providing

that all matters in dispute between the parties shall be referred to arbitration is a contract. In

The separability of the arbitration agreement is especially significant to the determination of

whether the invalidity of the main contract also nullifies the arbitration clause . Indeed, the doctrine denotes that the invalidity of the main contract, also referred to as the "container" contract, does not affect the validity of the arbitration agreement. Irrespective of the fact that the main contract is invalid, the arbitration clause/agreement still remains valid and enforceable.

Del Monte Corporation-USA v. CA we held that that

"the provision to submit to arbitration any

dispute arising therefrom and the relationship of the parties is part of that contract and is itself a contract. As a rule, contracts are respected as the law between the contracting parties and produce effect as between them, their assigns and heirs."

SPECIAL PROCEEDING The special proceeding under Sec. 6 of R.A. No. 876 recognizes the contractual nature of arbitration clauses or agreements. JURISDICTION & COURT ACTION

The separability of the arbitration clause is confirmed in Art. 16(1) of the UNCITRAL Model

Law and Art. 21(2) of the UNCITRAL Arbitration Rules. 2) ANNULMENT OF ADDENDUM CONTRACT : The adjudication of the petition arising from the Petition to Compel Arbitration effectively modifies part of the Decision arising from the Annulment case . Hence, we now hold that t h e validity of the contract containing the agreement to submit to arbitration does not affect the applicability of the arbitration


30


c l a u s e i t s e l f . We add that when it was declared

in the first case that the case should not be brought for arbitration, it should be clarified that the case referred to is the case actually filed by Gonzales before the DENR Panel of , which was for the nullification of the Arbitrators

main contract on the ground of fraud, as it had already been determined that the case shou ld have been brought before the regular c o u r t s i n v o l v i n g a s i t d i d j u d i c i a l i s s u e s .

The MR of Gonzales in the first case should also be denied. These are the same issues that Gonzales raised in his Rule 45 petition in the first case which were already resolved against him. The question of whether Gonzales had ceded his claims over the mineral deposits in the Addendum Area of Influence is a factual question which is not proper for determination before this Court. The CA likewise found that Gonzales’s complaint alleged fraud but did not provide any particulars to substantiate it. As to the issue of prescription, Gonzales’s claims of fraud and misrepresentation attending the execution of the Addendum Contract are grounds for the annulment of a voidable contract under the Civil Code. Under Art. 1391 of the Code, an action for annulment shall be brought within four years, in the case of fraud, beginning from the time of the discovery of the same. However, the time of the discovery of the alleged fraud is not clear from

parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith. Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not limited to, the following: b. The court is in a better position to resolve the dispute subject of arbitration f. One or more of the issues are legal and one or more of the arbitrators are not lawyers (B) Where court intervention is allowed under ADR Laws or the Special ADR Rules, courts shall not refuse to grant relief, as provided herein, for any of the following reasons: a. Prior to the constitution of the arbitral tribunal, the court finds that the principal action is the subject of an arbitration agreement; or b. The principal action is already pending before an arbitral tribunal. 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.

CLASS NOTES: 1) Take note of the facts of the case – illustrates realities in arbitration. 2) Special proceeding of arbitration in the case (read original) – citing Sec. 6, thus NO pre-trial

the allegations of Gonzales’s complaint. STUDY NOTES: Rule 2.4. Policy implementing competence-competence principle. — The arbitral tribunal shall be accorded the first opportunity or competence to rule on the issue of whether or not it has the competence or jurisdiction to decide a dispute submitted to it for decision, including any objection with respect to the existence or validity of the arbitration agreement. When a court is asked to rule upon issue/s affecting the competence or jurisdiction of an arbitral tribunal in a dispute brought before it, either before or after the arbitral tribunal is constituted, 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 upon such issues.

Where the court is asked to make a determination of whether the arbitration agreement is null and void, inoperative or incapable of being performed, under this policy of judicial restraint, the court must make no more than a prima facie determination of that issue. Unless the court, pursuant to such prima facie determination, concludes that the arbitration agreement is null and void, inoperative or incapable of being performed, the court must suspend the action before it and refer the parties to arbitration pursuant to the arbitration agreement.

Rule 2.2. Policy on arbitration.— (A) Where the parties have agreed to submit their dispute to arbitration, courts shall refer the

Oil & Natural Gas Commission v. CA, 293 SCRA 26 (1998) Petitioner: Oil and Natural Gas Commission - India Respondents: CA and Pacific Cement Company Inc - Phils

Facts: The parties entered into a contract where private respondent undertook to supply the petitioner 4300 metric tons of oil well cement . In consideration, petitioner bound itself to pay the amount of $477,300. The oil well cement was loaded on board the ship MV Surutana Nava at Surigao. However, due to a dispute between the shipowner and the private respondent , the cargo was held up in Bangkok . Notwithstanding the fact that the private respondent had already received payment and despite several demands made by the petitioner, the private respondent failed to deliver the oil well cement .

Negotiations ensued and they agreed that private respondent will replace the oil well cement with


31


Class G cement cost free . However, said cement did not conform to the parties specifications. The

The RTC dismissed the complaint for lack of a valid cause of action. It found the referral of the

petitioner informed private respondent that it was referring its claim to an arbitrator pursuant to Clause 16 of their contract8.

dispute between the parties to the arbitrator under Clause 16 of their contract erroneous . According to the contract, all questions, disputes and differences, arising under out of or in connection with this supply order , shall be subject to the EXCLUSIVE JURISDICTION OF THE COURT, within the local limits of whose jurisdiction and the place from which this supply order is situated." The RTC characterized the

The chosen arbitrator, Shri N.N. Malhotra, resolved the dispute in petitioner's favor . Petitioner filed before the Court of Civil Judge in Dehra Dun, India for the execution of the award . Subsequently, the said court directed the private respondent to pay the filing fees in order that the latter's objections could be given consideration. Instead of paying the required filing fees, the private respondent sent the following communication addressed to the Civil judge of Dehra Dun inquiring as to the amount of filing fees. The foreign court refused to admit

erroneous submission of the dispute to the arbitrator as a "mistake of law or fact amounting to want of jurisdiction". The CA affirmed.

Issue: WON the arbitrator had jurisdiction over the dispute between the parties

private respondent’s objections for non failure of

filing fees and ruled in favor of petitioner.

Held: NO

Petitioner filed a complaint with the RTC of

Ratio: The dispute between the parties had its

Surigao City for the enforcement of the judgment. Private respondent moved to dismiss the complaint on the following grounds: (1) plaintiffs lack of legal capacity to sue ; (2) lack of cause of action ; and (3) plaintiffs claim or demand has been waived, abandoned, or otherwise extinguished .

Except where otherwise provided in the supply order/contract all questions and disputes, relating to the meaning of the specification designs, drawings and instructions herein before mentioned and as to quality of workmanship of the items ordered or as to any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract (NO COMMA!!!) design, drawing, specification, instruction or these conditions or otherwise concerning the materials or the execution or failure to execute the same during stipulated/extended period or after the completion/abandonment thereof shall be referred 8

to the sole arbitration of the persons appointed by Member of the Commission at the time of dispute. It will be no objection to any such appointment that the arbitrator so appointed is a Commission employer ( sic ) that he had to deal with the matter to which the supply or contract relates and that in the course of his duties as Commission's employee he had expressed views on all or any of the matter in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason the Member of the Commission shall appoint another person to act as arbitrator in accordance with the terms of the contract/supply order. Such person shall be entitled to proceed with reference from the stage at which it was left by his predecessor. Subject as aforesaid the provisions of the Arbitration Act, 1940, or any Statutory modification or re -enactment there of and the rules made there under and for the time being in force shall apply to the arbitration proceedings under this clause. The arbitrator may with the consent of parties enlarge the time, from time to time, to make and publish the award. The venue for arbitration shall be at Dehra dun.

origin in the non-delivery of the 4,300 metric tons of oil well cement to the petitioner. First of all, the petitioner has misquoted the said phrase, shrewdly inserting a comma between the words "supply order/contract" and "design" where none actually exists. The petitioner also insists that the non-delivery of the cargo is not only covered by the foregoing phrase but also by the phrase, ". . . or otherwise concerning the materials or the execution or failure to execute the same during the stipulated/extended period or after completion/abandonment thereof . . .". According to the maxim noscitur a sociis, where a

particular word or phrase is ambiguous in itself or is equally susceptible of various meanings, its correct construction may be made clear and specific by considering the company of the words in which it is found or with which it is associated, or stated differently, its obscurity or doubt may be reviewed by reference to associated words. A close examination of Clause 16 reveals that it covers three matters which may be submitted to arbitration namely,

(1) all questions and disputes, relating to the meaning of the specification designs, drawings and instructions herein before mentioned and as to quality of workmanship of the items ordered; or


32


(2) any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions; or (3) otherwise concerning the materials or the execution or failure to execute the same during stipulated/extended period or after the completion/abandonment thereof. The first and second categories unmistakably refer to questions and disputes relating to the design,

drawing, instructions, specifications or quality of the materials of the supply/order contract. In accordance with the doctrine of noscitur a sociis, this reference to the supply order/contract must be construed in the light of the preceding words with which it is associated, meaning to say, as being

limited only to the design, drawing, instructions, specifications or quality of the materials of the supply order/contract . The non-delivery of the oil well cement is arising definitely not in the nature of a dispute

from the failure to execute the supply order/contract design, drawing, instructions, specifications or quality of the materials. That Clause 16 should pertain o n l y t o m a t t e r s i n v o l v i n g t h e t e c h n i c a l a s p e c t s o f t h e c o n t r a c t is but a logical inference considering that the

underlying purpose of a referral to arbitration is for such technical matters to be deliberated upon by a person possessed with the required skill and expertise which may be otherwise absent in the regular courts. This Court agrees with the appellate court in its ruling that the non-delivery of the oil well cement is a

matter properly cognizable by the regular courts as stipulated by the parties in Clause 15 . The provisions of a contract should not be read in isolation from the rest of the instrument but, on the contrary, interpreted in the light of the other related provisions. The whole and every part of a contract must be considered in fixing the meaning of any of its harmonious whole . The petitioner's interpretation that Clause 16 is of such latitude as to contemplate even the nondelivery of the oil well cement would in effect render Clause 15 a mere superfluity. A perusal of Clause 16 shows that the parties did not intend

arbitration to be the sole means of settling disputes. The petitioner then asseverates that granting, for the sake of argument, that the non-delivery of the oil well cement is not a proper subject for arbitration, the failure of the replacement cement to conform to the specifications of the contract is a matter clearly falling within the ambit of Clause 16. In this contention, we find merit. When the 4,300 metric tons of oil well cement were not delivered to the petitioner, an agreement was forged between the latter and the private respondent that Class "G" cement would be delivered to the petitioner as replacement. Upon inspection, however, the replacement cement was rejected as it did not conform to the specifications of the contract. Only after this latter circumstance was the matter brought before the arbitrator. Undoubtedly, what was referred to arbitration was n o l o n g e r t h e m e r e n o n - delivery of the cargo at the first instance but also t h e f a i lu r e o f t h e r e p l a c e m e n t c a r g o t o c o n f o r m to the specifications o f the contract, a matter c l e a r l y w i t h i n t h e c o v e r a g e o f C l a u s e 1 6.

What inspires credulity is not that the replacement was done in the spirit of liberality but that it was undertaken precisely because of the private respondent's recognition of its duty to do so under the supply order/contract, Clause 16 of which remains in force and effect until the full execution thereof.

Issue: WON the judgment of the foreign court is enforceable in the Philippines

Held: Yes Ratio: As specified in the order of the Civil Judge of Dehra Dun, "Award Paper No. 3/B-1 shall be a part of the decree". This is a categorical declaration

that the foreign court adopted the findings of facts and law of the arbitrator as contained in the latter's Award Paper. Award Paper No. 3/B-1, contains an exhaustive discussion of the respective claims and defenses of the parties, and the arbitrator's evaluation of the same. Inasmuch as the foregoing is deemed to have been incorporated into the foreign court's judgment t h e a p p e l l a t e c o u r t w a s i n error when it described the latter to be a " s i m p l i s t i c d e c i s i o n c o n t a i n i n g l i t er a l l y , o n l y t h e dispositive portion".

The constitutional mandate that no decision shall be rendered by any court without expressing therein dearly and distinctly the facts and the law on which it


33


is based does not preclude the validity of "memorandum decisions" which adopt by reference the findings of fact and conclusions of law contained in the decisions of inferior tribunals. Hence, even in this jurisdiction, incorporation by

reference is allowed if only to avoid the cumbersome reproduction of the decision of the lower courts, or portions thereof, in the decision of the higher court. This is particularly true when the decision sought to be incorporated is a lengthy and thorough discussion of the facts and conclusions arrived at, as in this case, where Award Paper No. 3/B-1 consists of eighteen (18) single spaced pages. Furthermore, the recognition to be accorded a foreign judgment is not necessarily affected by the fact that the procedure in the courts of the country in which such judgment was rendered differs from that of the courts of the country in which the judgment is relied on. This Court has held that matters of

remedy and procedure are governed by the fori or the internal law of the forum.

lex

2) Assessment of the Arbitration Clause a) Valid b) Void 3) Issues a) Contract of Adhesion b) Consensuality – whether or not this was met c) Article 2045 – giving one party more power in the appointment of the arbitrator What if the place of international arbitration were the Philippines?

What if the place of international arbitration were still India, but the applicable law is Philippine law, how do you enforce the award (India: apply civil court)? Party: File a petition for recognition and enforcement under Judge: Would you enforce the award?

Can Philippines refuse on the ground of public policy?

In the instant case, the private respondent does not deny the fact that it was notified by the foreign court to file its objections to the petition, and subsequently, to pay legal fees in order for its objections to be given consideration. Instead of paying the legal fees, however, the private respondent sent a communication to the foreign court inquiring about the correct amount of fees to be paid. On the pretext that it was yet awaiting the foreign court's reply, almost a year passed without the private respondent paying the legal fees. W e

How do you assail an award?

cannot subscribe to the private respondent's claim that the foreign court violated its right to due process when it failed to reply to its queries n o r w h e n t h e l a t t er r e j e c t e d i t s o b j e c t i o n s f o r a c l e a r l y m e r i t o r i o u s g r o u n d .

The recognition and enforcement of such arbitral awards shall be filled with regional trial court in accordance with the rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly certified translation thereof into any of such languages.

STUDY NOTES: Rule 2.2. Policy on arbitration.— (A) Where the parties have agreed to submit their dispute to arbitration, courts shall refer the parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith. Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not limited to, the following: b. The court is in a better position to resolve the dispute subject of arbitration; e. The place of arbitration is in a foreign country

Class Notes : 1) International Arbitration

Domestic – grounds for vacate International Award – grounds for setting aside

When is it proper to set aside, when is it proper to refuse recognition? Possible finals question. Sec. 42. Application of the New York Convention The New York Convention shall govern the recognition and enforcement of arbitral awards covered by the said Convention.

The applicant shall establish that the country in which foreign arbitration award was made is a party to the New York Convention. If the application for rejection or suspension of enforcement of an award has been made, the regional trial court may, if it considers it proper, vacate its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the party to provide appropriate security.

Sec. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York Convention. - The recognition and enforcement of foreign arbitral awards not covered by the New York Convention shall be done in accordance with procedural rules to be promulgated by the Supreme Court.


34


The Court may, grounds of comity and reciprocity, recognize and enforce a nonconvention award as a convention award.

Sec. 44. Foreign Arbitral Award Not Foreign Judgment. - A foreign arbitral award when confirmed by a court of a foreign country, shall be recognized and enforced as a foreign arbitral award and not a judgment of a foreign court. A foreign arbitral award, when confirmed by the regional trial court, shall be enforced as a foreign arbitral award and not as a judgment of a foreign foreign court. A foreign arbitral award, when confirmed by the regional trial court, shall be enforced in the same manner as final and executory decisions of courts of law of the Philippines. Philippines.

Article 35 - [Recognition and enforcement] 1) An arbitral award, irrespective of the country in which it was made, shall be recognised as binding and, upon application in writing to the competent court, shall be enforced subject to the provisions of this article and of article 36. 2) The party relying on an award or applying for its enforcement shall supply the duly authenticated original award or a duly certified copy thereof, and the original arbitration agreement referred to in article 7 or a duly certified copy thereof. If the award or agreement is not made in an official language of this State, the party shall supply a duly certified translation thereof into such language.

Article 33 - [Correction and interpretation of award; additional award] 1) Within thirty days of receipt of the award, unless another period of time has been agreed upon by the parties: a) a party, with notice to the other party, may request the arbitral tribunal to correct in the award any errors in computation, any clerical or typographical errors or any errors of similar nature; b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award. If the arbitral tribunal considers the request to be justified, it shall make the correction or give the interpretation within thirty days of receipt of the request. The interpretation shall form part of the award. 2) The arbitral tribunal may correct any error of the type referred to in paragraph 1)a) of this article on its own initiative within thirty days of the date of the award. 3) Unless otherwise agreed by the parties a party with notice to the other party, may request, within thirty days of receipt of the award, the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award. If the arbitral tribunal considers the request to be justified, it shall make the additional award within sixty days. 4) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, interpretation or an additional award under paragraph paragraph (1) or (3) of this article. 5) The provisions of article 31 shall apply to a correction or interpretation of the award or to an additional award.

Sec. 45. Rejection of a Foreign Arbitral Award. - A party to a foreign arbitration proceeding may oppose an application for recognition and enforcement of the arbitral award in accordance with the procedural rules to be promulgated by the Supreme Court only on those grounds enumerated under Article V of the New York Convention. Any other ground raised shall be disregarded disregarded by the regional trial court.

Article 36 enforcement]

[Grounds

for

refusing

recognition

or

1) Recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only:

a) at the request of the party against whom it is invoked, if that party furnishes to the competent court where recognition or enforcement is sought proof that: i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or ii) the party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings proceedings or was otherwise unable to present his case; or iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced; or iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or v) the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made; or b) if the court finds that: i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or ii) the recognition or enforcement of the award would be contrary to the public policy of this State. 2) If an application for setting aside or suspension of an award has been made to a court referred to in paragraph (1)(a)(v) of this article, the court where recognition or enforcement is sought may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the other party to provide appropriate security.

Article 34 - [Application for setting side as exclusive recourse against arbitral award] 1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with paragraphs paragraphs (2) and (3) of this article. 2) An arbitral award may be set aside by the court specified in article 6 only if: a) the party making the application furnishes proof that: i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State; or ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Law; or b) the court finds that: i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this State; or, ii) the award is in conflict with the public policy of this State. 3) An application for setting aside may not be made after three months have elapsed from the date on which the party making


35


that application had received the award or, if a request had been made under article 33, from the date on which that request had been disposed of by the arbitral tribunal. 4) The court, when asked to set aside an award, may where appropriate and so requested by a party, suspend the setting aside proceedings proceedings for a period of ti me determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal's opinion will eliminate the grounds for setting aside.

Rule 13.4. Governing law and grounds to refuse recognition and enforcement . — The recognition and enforcement of a foreign arbitral award shall be governed by the 1958 New York Convention on the Recognition and Enforcement Enforcement of Foreign Arbitral Awards Awards (the “New York York Convention”) Convention”) and this Rule. The The court may, upon grounds of comity and reciprocity, recognize and enforce a foreign arbitral award made in a country that is not a signatory to the New York Convention as if it were a Convention Award. A Philippine Philippine court shall not set set aside a foreign foreign arbitral award award but may refuse it recognition and enforcement on any or all of the following grounds: a. The party making making the application application to refuse refuse recognition recognition and enforcement of the award furnishes proof that: (i). A party party to the arbitration arbitration agreement agreement was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereof, under the law of the country where the award was made; or (ii). The party making the the application application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings proceedings or was otherwise unable to present his case; or (iii). The award award deals with a dispute not not contemplated contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration; provided provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or (iv). The composition composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where arbitration took place; or

a.

The party making the the application application furnishes furnishes proof proof that:

(i). A party to the arbitration agreement agreement was under under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereof, under Philippine law; or (ii). The party making the application application to set aside or resist enforcement was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings proceedings or was otherwise unable to present his case; or (iii). The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration; provided provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside or only that part of the award which contains decisions on matters submitted to arbitration may be enforced; or (iv). The composition of the arbitral arbitral tribunal or the arbitral arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of Philippine law from which the parties cannot derogate, or, failing such agreement, was not in accordance with Philippine law; b.

The court finds that:

(i). The subject-matter ect-matter of the dispute is not capable capable of settlement by arbitration under the law of the Philippines; or (ii). The recognition recognition or enforcement enforcement of the award would would be contrary to public policy. In deciding the petition, the Court shall disregard any other ground to set aside or enforce the arbitral award other than those enumerated above. The petition to set-aside or a pleading resisting the enforcement of an arbitral award on the ground that a party was a minor or an incompetent shall be filed only on behalf of the minor or incompetent and shall allege that (a) the other party to arbitration had knowingly entered into a submission or agreement with such minor or incompetent, or (b) the submission to arbitration was made by a guardian or guardian ad litem who was not authorized to do so by a competent court.

(v). The award has not yet become binding binding on the parties or has been set aside or suspended by a court of the country in which that award was made; or

Magellan Capital Mgt. Corp. v. Zosa, 355 SCRA 157 (2001)

b.

Petitioners: Magellan Capital Management Corporation and Magellan Capital Holdings Corporation Respondents: Rolando Zosa and Hon. Jose Soberano Jr

The court finds that:

(i). The subject-matter ect-matter of the dispute dispute is not capable of settlement or resolution by arbitration under Philippine law; or (ii). The recognition recognition or enforcement enforcement of the award would be contrary to public policy. The court shall disregard any ground for opposing the recognition and enforcement of a foreign arbitral award other than those enumerated above.

Rule 12.4. Grounds to set aside or resist enforcement. — The court may set aside or refuse the enforcement of the arbitral award only if:

Facts: Under a management agreement , Magellan Capital Holdings Corporation [MCHC] appointed Magellan Capital Management Corporation [MCMC] as manager for the operation of its business and affairs. MCMC, and M. Zosa entered into an "Employment Agreement " designating Zosa as


36


President and CEO of MCHC. Under the "Employment Agreement", the term of Zosa's employment shall be co-terminous with the management management agreement, unless sooner terminated pursuant to the provisions of the Employment Agreement. The grounds for termination of employment are also provided in the Employment Agreement.

the arbitration provision can only be determined after trial on the merits; and (2) the amount of damages claimed, which is over P100,000.00, falls within the jurisdiction of the RTC . The RTC issued a pre-trial order designating only one issue: WON the Arbitration Clause was void . Petitioners filed a

Motion Ad Cautelam for the clarification of the pretrial order , as well as another on the validity of the clause. The RTC denied.

The majority of MCHC's Board of Directors decided not to re-elect Zosa as President and CEO of MCHC on account of loss of trust and confidence arising from alleged violation of the resolution issued by MCHC's board of directors and of the noncompetition clause of the Employment Agreement. Nevertheless, Zosa was elected to a new position

as MCHC's Vice-Chairman/Chairman for New Ventures Development . Zosa communicated his resignation from the position of Vice-Chairman under paragraph 7 of the Employment Agreement on the ground that said position had less responsibility and scope than President and CEO. He demanded that he be given termination benefits. MCHC did not accept the resignation but instead informed him that the Employment Agreement is being terminated on acountr of breach thereof. Zosa invoked the Arbitration Clause of the Employment Agreement 9. He designated his brother, Atty. Francis Zosa as his representative in the arbitration panel. MCHC designated Atty. Inigo S. Fojas and MCMC nominated Atty. Enrique I. Quiason as their representatives l. However, instead of submitting the dispute to arbitration, Zosa filed an action for damages against petitioners before the RTC of Cebu to enforce his benefits under the Employment Agreement . Petitioners filed an MTD. The RTC denied the MTD on the ground that (1) the validity and legality of 9

"23. Arbitration. In the event that any dispute, controversy or claim arises out of or under any provisions of this Agreement, then the parties hereto agree to submit such dispute, controversy or claim to arbitration as set forth in this Section and the determination to be made in such arbitration shall be final and binding. Arbitration shall be effected by a panel of three arbitrators. The Manager, Employee and Corporation shall designate one (1) arbitrator who shall, in turn, nominate and elect who among them shall be the chairman of the committee. Any such arbitration, including the rendering of an arbitration award, shall take place in Metro Manila. The arbitrators shall interpret this Agreement in accordance with the substantive laws of the Republic of the Philippines. The arbitrators shall have no power to add to, subtract from or otherwise modify the terms of Agreement or to grant injunctive relief of any nature. Any judgment upon the award of the arbitrators may be entered in any court having jurisdiction thereof, with costs of the arbitration to be borne equally by the parties, except that each party shall pay the fees and expenses of its own counsel in the arbitration."

Petitioners filed a petition for certiorari and prohibition before the CA. The CA gave due course to the petition. Petitioners filed a motions for partial reconsideration of the CA decision praying (1) for the dismissal of the case in the trial court, on the ground of lack of jurisdiction, and (2) that the parties be directed to submit their dispute to arbitration in accordance with the Employment Agreement dated March 1994. The CA denied the motion for partial reconsideration for lack of merit. The RTC later declared the arbitration clause as partially void and of no effect insofar as it concerns the composition of the panel of arbitrators.

Issue: WON the SEC has jurisdiction over the case Held:

No

Ratio: The controversy does not in anyway involve the election/appointment of officers of petitioner MCHC, as claimed by petitioners in their assignment of errors. Zosa's amended complaint focuses heavily on the illegality of the Employment Agreement's "Arbitration Clause" initially invoked by him in seeking his termination benefits under Section 8 of the employment contract. And under RA 876, it is the regional trial court which exercises jurisdiction over questions relating to arbitration. "The determination and validity of the agreement is not a matter intrinsically connected with the regulation and internal affairs of corporations; it is rather an ordinary case to be decided in accordance with the general laws, and do not require any particular expertise or training to interpret and apply.”

Furthermore, the decision of the CA affirming the trial court's assumption of jurisdiction over the case has become the "law of the case" which now binds the petitioners. The "law of the case" doctrine has been defined as "a term applied to an established rule that when an appellate court passes on a question and remands the cause to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal."


37


Issue: WON the composition of arbitrators is valid Held: Ratio: The Court finds the trial court's observations on why the composition of the panel of arbitrators should be voided, incisively correct so as to merit our approval. Thus, "From the memoranda of both sides, the Court is of the view that the defendants [petitioner] MCMC and MCHC represent the same interest. There is no quarrel that both defendants are entirely two different corporations with personalities distinct and separate from each other and that a corporation has a personality distinct and separate from those persons composing the corporation as well as from that of any other legal entity to which it may be related. "But as the defendants [herein petitioner] represent the same interest, it could never be expected, in the arbitration proceedings, that they would not protect and preserve their own interest, much less, would both or either favor the interest of the plaintiff. The arbitration law, as all other laws, is intended for the good and welfare of everybody. In fact, what is being challenged by the plaintiff herein is not the law itself but the provision of the Employment Agreement based on the said law, which is the arbitration clause but only as regards the composition of the panel of arbitrators. "From the arbitration clause, it appears that the two (2) defendants [petitioners] (MCMC and MCHC) have one (1) arbitrator each to compose the panel of three (3) arbitrators. As the defendant MCMC is the Manager of defendant MCHC, its decision or vote in the arbitration proceeding would naturally and certainly be in favor of its employer and the defendant MCHC would have to protect and preserve its own interest; hence, the two (2) votes of both defendants (MCMC and MCHC) would certainly be against the lone arbitrator for the plaintiff [herein defendant]. Hence, apparently, plaintiff [defendant] would never get or receive justice and fairness in the arbitration proceedings from the panel of arbitrators as provided in the aforequoted arbitration clause. In fairness and justice to the plaintiff [defendant], the two defendants (MCMC and MCHC) [herein petitioners] which represent the same interest should be considered as one and should be entitled to only one arbitrator to represent them in the arbitration proceedings. Accordingly, the arbitration clause, insofar as the composition of the panel of arbitrators is concerned should be declared void and of no effect, because the law says, "Any clause

giving one of the parties power to choose more arbitrators than the other is void and of no effect" (Article 2045, Civil Code). "The dispute or controversy between the defendants (MCMC and MCHC) [herein petitioners] and the plaintiff [herein defendant] should be settled in the arbitration proceeding in accordance with the Employment Agreement, but under the panel of three (3) arbitrators, one (1) arbitrator to represent the plaintiff, one (1) arbitrator to represent both defendants (MCMC and MCHC) [herein petitioners] and the third arbitrator to be chosen by the plaintiff [defendant Zosa] and defendants [petitioners]. In this connection, petitioners' attempt to put respondent in estoppel in assailing the arbitration clause must be struck down. For one, this issue of estoppel, as likewise noted by the CA, found its way for the first time only on appeal. Well-settled is the rule that issues not raised below cannot be resolved on review in higher courts. Secondly, employment agreements such as the one at bar are usually contracts of adhesion. Any ambiguity in its provisions is generally resolved against the party who drafted the document. Thus, in the relatively recent case of Phil. Federation of Credit Cooperatives, Inc. (PFCCI) and Fr. Benedicto Jayoma vs. NLRC and Victoria Abril , we had the

occasion to stress that "where a contract of employment, being a contract of adhesion, is ambiguous, any ambiguity therein should be construed strictly against the party who prepared it." And, finally, Zosa never submitted himself to arbitration proceedings (as there was none yet) before bewailing the composition of the panel of arbitrators. He in fact, lost no time in assailing the "arbitration clause" upon realizing the inequities that may mar the arbitration proceedings if the existing line-up of arbitrators remained unchecked. Arbitration proceedings are designed to level the playing field among the parties in pursuit of a mutually acceptable solution to their conflicting claims. Any arrangement or scheme that would give undue advantage to a party in the negotiating table is anathema to the very purpose of arbitration and should, therefore, be resisted.

BF Corporation v. CA, 288 SCRA 267 (1998) Parties executed an “Agreement for the Execution of Builder’s Work for the EDSA Plaza Project” BF filed Complaint for collection SPI filed MTS TC denied – too late CA annulled TC order 1) Certiorari proper – QoL (jurisdiction); QoF (existence or arbitration clause) – CA annulled


38


RTC order saying that invoking the arbitration clause was too late 2) Arbitration clause exists, even if the parties did not sign the Conditions of Contract, since they signed the Articles of Agreement 3) No default in invoking the provisions of the arbitration clause – “within a reasonable time after the dispute has arisen and attempts to settle amicably have failed.”

BF Corporation v. CA, 288 SCRA 267 (1998) BF Corp vs CA Date: March 27, 1998 Petitioner: BF Corporation Respondents: CA, Shangri-la Properties Inc, Rufo Colayco, Alfredo Ramos, Maximo Licauco, et al

Facts: Petitioner and respondent Shangri-la Properties, Inc. entered into an agreement whereby the latter engaged the former to construct the main structure of the "EDSA Plaza Project," a shopping mall complex in Mandaluyong. Petitioner incurred delay in the construction work that SPI considered as "serious and substantial." On the other hand, according to petitioner, the construction works "progressed in faithful compliance with the First Agreement until a fire broke out damaging Phase I" of the Project. Hence, SPI proposed the renegotiation of the agreement between them. Petitioner and SPI entered into a written agreement denominated as "Agreement for the Execution of Builder's Work for the EDSA Plaza Project." Said agreement would cover the construction work on said project as of May 1, 1991 until its eventual completion. According to SPI, petitioner "failed to complete the construction works and abandoned the project." This resulted in disagreements between the parties as regards their respective liabilities under the contract. Petitioner filed with the RTC of Pasig a complaint for collection of the balance due under the construction agreement. SPI and its co-defendants filed a motion to suspend proceedings instead of filing an answer. The motion was anchored on defendants' allegation that the formal trade contract for the construction of the project provided for a clause requiring prior resort to arbitration before judicial intervention could be invoked in any dispute arising from the contract. Petitioner opposed said motion claiming that there was no formal contract between the parties although

they entered into an agreement defining their rights and obligations in undertaking the project. Thereafter, upon a finding that an arbitration clause indeed exists, the lower court denied the motion to suspend proceedings as the Conditions of Contract was not duly executed or signed by the parties, and the failure of the defendants to submit any signed copy of the said document,. The lower court then ruled that, assuming that the arbitration clause was valid and binding, still, it was "too late in the day for defendants to invoke arbitration. Considering the fact that under the supposed Arbitration Clause invoked by defendants, it is required that "Notice of the demand for arbitration of a dispute shall be filed in writing with the other party . . . . in no case . . . . later than the time of final payment . . . "which apparently, had elapsed because defendants have failed to file any written notice of any demand for arbitration during the said long period of one year and eight months. The CA annulled the orders of the RTC.

Issue: WON a petition for certiorari is proper Held: Yes Ratio: The rule that the special civil action of certiorari may not be invoked as a substitute for the

remedy of appeal. The Court has likewise ruled that "certiorari will not be issued to cure errors in proceedings or correct erroneous conclusions of law or fact. As long as a court acts within its jurisdiction, any alleged errors committed in the exercise of its jurisdiction will amount to nothing more than errors of judgment which are reviewable by timely appeal and not by a special civil action of certiorari ." The question of jurisdiction, which is a question of law depends on the determination of the existence of the arbitration clause, which is a question of fact. In the instant case, the lower court found that there exists an arbitration clause. However, it ruled that in contemplation of law, said arbitration clause does not exist. It is that mode of appeal taken by private respondents before the CA that is being questioned by the petitioners before this Court. But at the heart of said issue is the question of whether there exists an Arbitration Clause because if an Arbitration Clause does not exist, then private respondents took the wrong mode of appeal before the CA. For this Court to be able to resolve the question of whether private respondents took the proper mode of appeal, which, incidentally, is a question of law,


39


then it has to answer the core issue of whether there exists an Arbitration Clause which, admittedly, is a question of fact. Moreover, where a rigid application of the rule that certiorari cannot be a substitute for appeal will result in a manifest failure or miscarriage of justice, the provisions of the Rules of Court which are technical rules may be relaxed. As we shall show hereunder, had the CA dismissed the petition for certiorari , the issue of whether or not an arbitration clause exists in the contract would not have been resolved in accordance with evidence extant in the record of the case. Consequently, this would have resulted in a judicial rejection of a contra ctual provisio n agreed b y the parties to the contract. In the same vein, this Court holds that the question of the existence of the arbitration clause in the contract between petitioner and private respondents is a legal issue that must be determined in this petition for review on certiorari .

Issue: WON an arbitration clause exists Held:

representatives of both parties and duly notarized. The failure of the private respondent's representative to initial the "Conditions of Contract" would therefor not affect compliance with the formal requirements for arbitration agreements because that particular portion of the covenants between the parties was included by reference in the Articles of Agreement. Petitioner's contention that there was no arbitration clause because the contract incorporating said provision is part of a "hodge-podge" document, is therefore untenable. A contract need not be contained in a single writing. It may be collected from several different writings which do not conflict with each other and which, when connected, show the parties, subject matter, terms and consideration, as in contracts entered into by correspondence. 13 A contract may be encompassed in several instruments even though every instrument is not signed by the parties, since it is sufficient if the unsigned instruments are clearly identified or referred to and made part of the signed instrument or instruments. Similarly, a written agreement of which there are two copies, one signed by each of the parties, is binding on both to the same extent as though there had been only one copy of the agreement and both had signed it.

Ratio: Petitioner denies the existence of the arbitration clause primarily on the ground that the representatives of the contracting corporations did not sign the "Conditions of Contract" that contained the said clause. Its other contentions, specifically that insinuating fraud as regards the alleged insertion of the arbitration clause, are questions of fact that should have been threshed out below. Court may as well proceed to determine whether the arbitration clause does exist in the parties' contract. Republic Act No. 876 provides for the formal requisites of an arbitration. The formal requirements of an agreement to arbitrate are therefore the following: (a) it must be in writing and (b) it must be subscribed by the parties or their representatives. There is no denying that the parties entered into a written contract that was submitted in evidence before the lower court. To "subscribe" means to write underneath, as one's name; to sign at the end of a document. That word may sometimes be construed to mean to give consent to or to attest. The Court finds that, upon a scrutiny of the records of this case, these requisites were complied with in the contract in question. The Articles of Agreement, which incorporates all the other contracts and agreements between the parties, was signed by

The flaw in petitioner's contentions therefore lies in its having segmented the various components of the whole contract between the parties into several parts. This notwithstanding, petitioner ironically admits the execution of the Articles of Agreement. Notably, too, the lower court found that the said Articles of Agreement "also provides that the 'Contract Documents' therein listed 'shall be deemed an integral part of this Agreement,' and one of the said documents is the 'Conditions of Contract' which contains the Arbitration Clause.'" It is this Articles of Agreement that was duly signed b y Rufo B. Cola yco, president of private respondent SPI, and Bayani F. Fernando, president of petitioner corporation. The same agreement was duly subscribed before notary public Nilberto R. Briones. In other words, the subscription of the principal agreement effectively covered the other documents incorporated by reference therein. This Court likewise does not find that the CA erred in ruling that private respondents were not in default in invoking the provisions of the arbitration clause which states that "(t)he demand for arbitration shall be made within a reasonable time after the dispute has arisen and attempts to settle amicably had failed." Under the factual milieu, SPI should have paid its liabilities tinder the contract in accordance


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with its terms. However, misunderstandings appeared to have cropped up between the parties ostensibly brought about by either delay in the completion of the construction work or by force majeure or the fire that partially gutted the project. The almost two-year delay in paying its liabilities may not therefore be wholly ascribed to private respondent SPI. Besides, SPI's initiative in calling for a conference between the parties was a step towards the agreed resort to arbitration. However, petitioner posthaste filed the complaint before the lower court. Thus, while SPI's request for arbitration might appear an afterthought as it was made after it had filed the motion to suspend proceedings, it was because petitioner acted hastily in order to resolve the controversy through the courts. The arbitration clause provides for a "reasonable time" within which the parties may avail of the relief under that clause. "Reasonableness" is a relative term and the question of whether the time within which an act has to be done is reasonable depends on attendant circumstances. This Court finds that under the circumstances obtaining in this case, a one-month period from the time the parties held a conference on July 12, 1993 until private respondent SPI notified petitioner that it was invoking the arbitration clause, is a reasonable time. Indeed, petitioner may not be faulted for resorting to the court to claim what was due it under the contract. However, we find its denial of the existence of the arbitration clause as an attempt to cover up its misstep in hurriedly filing the complaint before the lower court. In this connection, it bears stressing that the lower court has not lost its jurisdiction over the case. Section 7 of RA 876 provides that proceedings therein have only been stayed. After the special proceeding of arbitration has been pursued and completed, then the lower court may confirm the award made by the arbitrator. It should be noted that in this jurisdiction, arbitration has been held valid and constitutional. Even before

Class Notes:

Arbitration clause in a Container Clause – merely initialed by one party. Held: Valid. The main agreement, the articles of agreement, was signed by the CEO. It did not contain arb clause. What it included are references to ____, “conditions of contract.”

What did Shangrila file in the RTC after DS filed the action for specific performance? Motion to Suspend, based on RA 876, Sec.7 (Stay of civil action); RA 9285, Sec. 24, not later than pretrial.

What if this place was an international arbitration and the place of arbitration is the Philippines? Would you have arrived at the same answer? Article 8 - [Arbitration agreement and substantive claim before court] 1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. 2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

Next 5 meetings

CIAC UNCINTRAL / ICC NY Convention Slideshow

Class Notes – August 27, 2010 Recap: Which proceedings are summary and which are not? Covered by Summary Procedure : 1) Judicial Relief Involving the Issue of Existence, Validity or Enforceability of the Arbitration Agreement; 2) Referral to ADR; 3) Interim Measures of Protection; 4) Appointment of Arbitrator; 5) Challenge to Appointment of Arbitrator; 6) Termination of Mandate of Arbitrator; 7) Assistance in Taking Evidence; 8) Confidentiality/Protec tive Orders; and


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9) Deposit and Enforcement of Mediated Settlement Agreements.

petition for certiorari questioning the merits of an arbitral award.

Not Covered by Summary Procedure:

See case APT v. CA –

1) Confirmation, Correction or Vacation of Award in Domestic Arbitration 2) Recognition and Enforcement or Setting Aside of an Award in International Commercial Arbitration 3) Recognition and Enforcement of a Foreign Arbitral Award

As a rule, the award of an arbitrator cannot be set

If the arbitration clause is found void, how will the parties resolve their dispute? Can one party go right away to the court? Is it not an issue that must be threshed out before the arbitral tribunal? What about the competencecompetence principle? See Gonzales and Magellan case See 3.12, 2.2 Note:

Separability clause protects the arbitration clause, not the container contract. (Carla) Before commencement – go to court, prim facie finding After commencement – go to court, questioning the ruling of the arbitral tribunal’s ruling on its jurisdiction

Go to court If court has declared that arbitration clause is void, Sir, it’s clear if sabay, but what if the court has

ALREADY declared the arbitration clause as void. Sir: Consider Article 5 of the Civil Code. If it’s void, can it give rise to a right? If it’s void due to lack of due process – VOID.

Purpose granting the court the power to declare it void Whether arbitration commencement has started or not Purpose of RA 9285 – whether luto or not Whether you will allow to proceed first and let us see the result Note: You cannot assail the arbitral award as to the merits.

aside for mere errors of judgment either as to the law or as to the facts . Courts are without power to amend or overrule merely because of disagreement with matters of law or facts determined by the arbitrators. They will not review the findings of law and fact contained in an award, and will not undertake to substitute their judgment for that of the arbitrators, since any other rule would make an award the commencement, not the end, of litigation . Errors of law and fact, or an erroneous decision of matters submitted to the judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial review of an arbitration is thus, more limited than judicial review of a trial. (Asset Privatization Trust vs CA)

If you do not want judicial review (cite the abovementioned ratio); if you want judicial review, cite the following) Nonetheless, the arbitrators' award is not absolute and without exceptions. The arbitrators cannot resolve issues beyond the scope of the submission agreement. The parties to such an agreement are bound by the arbitrators' award only to the extent and in the manner prescribed by the contract and only if the award is rendered in conformity thereto. Thus, Sections 24 and 25 of the Arbitration Law provide grounds for vacating, rescinding or modifying an arbitration award. Where the conditions described in Articles 2038, 2039, and 1040 of CC applicable to compromises and arbitration are attendant, the arbitration award may also be annulled. It should be stressed that while a court is precluded from overturning an award for errors in the determination of factual issues, nevertheless, if an examination of the record reveals no support whatever for the arbitrators determinations, their award must be vacated, in the same manner, an award must be vacated if it was made in manifest disregard of the law . (Asset Privatization Trust vs CA)

Rule 19.7. No appeal or certiorari on the merits of an arbitral award . — An agreement to refer a dispute

to arbitration shall mean that the arbitral award shall be final and binding. Consequently, a party to an arbitration is precluded from filing an appeal or a

Korea Technologies Co. Ltd. v. Lerma, 542 SCRA 1 (2008)


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Petitioner: Korea Technologies Co Ltd Respondents: Hon. Alberto Lerma and Pacific General Steel Manufacturing Corporation

Contract by unilaterally rescinding the contract without resorting to arbitration. PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the TRO since Art. 15, the arbitration clause, was null and void for being

Facts: Petitioner Korea is a Korean corporation which is engaged in the supply and installation of LPG Cylinder manufacturing plants , while private respondent is a domestic corporation . The parties executed a contract in the Philippines whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona, Cavite. The parties executed in Korea an Amendment of the Contract regarding the terms of payment. However, gleaned from the Certificate executed by the parties after the installation of the plant, the initial operation could not be conducted as PGSMC encountered financial difficulties affecting the supply of materials, thus forcing the parties to agree that KOGIES would be deemed to have

completely complied with the terms and conditions of the contract. For the remaining balance of USD306,000 for the installation and initial operation of the plant, PGSMC issued two postdated checks . When KOGIES deposited the checks, they were dishonored . KOGIES sent a demand letter to PGSMC threatening to file a case for BP22 . The wife of PGSMC’s President faxed a letter to KOGIES’ President complaining that KOGIES delivered a different brand of hydraulic press and did not deliver several equipment parts . PGSMC informed KOGIES that it will be cancelling their contract on grounds of alteration in the quantity and lowered quality of the machineries. PGSMC filed an Affidavit-Complaint for Estafa against the President of Kogies. KOGIES informed PGSMC that the latter could not unilaterally rescind the contract. It also insisted that the disputes should be settled by arbitration pursuant to the contract. KOGIES instituted an Application

for Arbitration before the Korean Commercial Arbitration Board pursuant to Art 15 of the Contract. also filed a complaint for specific performance before the Muntinlupa RTC. KOGIES KOGIES

against public policy as it ousts the local courts of jurisdiction over the instant controversy . The RTC issued an Order denying the application for a writ of preliminary injunction, reasoning that PGSMC had paid KOGIES USD 1,224,000, the value of the machineries and equipment as shown in the contract such that KOGIES no longer had proprietary rights over them. And finally, the RTC held that Art. 15 of the Contract as amended was invalid as it tended to oust the trial court or any other court jurisdiction over any dispute that may arise between the parties. Later, the trial court issued an Order (1) granting PGSMC’s motion for inspection; (2) denying KOGIES’ MR of the July 23, 1998 RTC Order; and (3) denying KOGIES’ motion to dismiss PGSMC’s

compulsory counterclaims as these counterclaims fell within the requisites of compulsory counterclaims. KOGIES filed a petition for certiorari before the CA praying that PGSMC be enjoined from dismantling the machineries and that the RTC enforce the specific agreement on arbitration to resolve the dispute. The CA affirmed the RTC Orders and dismissed the petition. On the issue of the validity of the arbitration clause, the CA agreed with the lower court that an arbitration clause which provided for a final determination of the legal rights of the parties to the contract by arbitration was against public policy.

Issue: WON the arbitration clause is valid Held: Yes Ratio: Established in this jurisdiction is the rule that the law of the place where the contract is made governs. Lex loci contractus. The contract in this case was perfected here in the Philippines . Therefore, our laws ought to govern. Nonetheless, Art. 2044 CC sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. Art. 2044 provides, “Any stipulation that the arbitrators’ award or decision

their

shall be final, is valid , without prejudice to Articles

Arbitration.— All disputes, controversies, or Article 15. differences which may arise between the parties, out of or in relation to or in connection with this Contract or for the breach thereof, shall finally be settled by arbitration in Seoul, Korea in

accordance with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board. The award rendered by the

averred that PGSMC violated Art. 15 10

10of

arbitration(s) shall be final and binding upon both parties concerned. (Emphasis supplied.)


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2038, 2039 and 2040.” Arts. 2038, 2039, and 2040

procedural law which has a retroactive effect.

refer to instances where a compromise or an arbitral award, as applied to Art. 2044 pursuant to Art. 2043, may be voided, rescinded, or annulled, but these would not denigrate the finality of the arbitral award.

Likewise, KOGIES filed its application for arbitration before the KCAB on July 1, 1998 and it is still pending because no arbitral award has yet been rendered. Thus, RA 9285 is applicable to the instant case. Well-settled is the rule that procedural laws are construed to be applicable to actions pending and undetermined at the time of their passage, and are deemed retroactive in that sense and to that extent. As a general rule, the retroactive application of procedural laws does not violate any personal rights because no vested right has yet attached nor arisen from them. Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the following:

arbitration clause was mutually and voluntarily agreed upon by the parties. It has not The

been shown to be contrary to any law, or against morals, good customs, public order, or public policy. There has been no showing that the parties have not dealt with each other on equal footing. We find no reason why the arbitration clause should not be respected and complied with by both parties.

Arbitration clause not contrary to public policy

(1) The RTC must refer to arbitration in proper cases. Under Sec. 24, the RTC does not have

The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is not contrary to public policy. This Court has sanctioned the validity of arbitration clauses in a catena of cases.

jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration clause, and mandates the referral to arbitration.

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

RA 9285 incorporated the UNCITRAL Model law to which we are a signatory In case a foreign arbitral body is chosen by the parties, the arbitration rules of our domestic arbitration bodies would not be applied. As signatory to the Arbitration Rules of the UNCITRAL Model Law on International Commercial Arbitration of the UNCITRAL, the Philippines committed itself to be bound by the Model Law. We have even incorporated the Model Law in RA 9285. While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a

(2) Foreign arbitral awards must be confirmed by the RTC. Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final and binding are not immediately enforceable or cannot be implemented immediately. Sec. 35 of the UNCITRAL Model Law stipulates the requirement for the arbitral award to be recognized by a competent court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may refuse recognition or enforcement on the grounds provided for. RA 9285 incorporated these provisos to Secs. 42, 43, and 44 relative to Secs. 47 and 48. It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a judgment of a foreign court but as a foreign arbitral award, and when confirmed, are enforced as final and executory decisions of our courts of law. Thus, it can be gleaned that the concept of a final and binding arbitral award is similar to judgments or awards given by some of our quasi-judicial bodies, like the NLRC and Mines Adjudication Board, whose final judgments are stipulated to be final and binding, but not immediately executory in the sense that they may still be judicially reviewed, upon the instance of any party. Therefore, the final foreign arbitral awards are similarly situated in that they need first to be confirmed by the RTC.

(3) The RTC has jurisdiction to review foreign arbitral awards. Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific authority and jurisdiction to set aside, reject, or


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vacate a foreign arbitral award on grounds provided under Art. 34(2) of the UNCITRAL Model Law. Thus, while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by the parties, still the foreign arbitral award is subject to judicial review by the RTC which can set aside, reject, or vacate it. In this sense, what this Court held in Chung Fu Industries relied upon by KOGIES is applicable insofar as the foreign arbitral awards, while final and binding, do not oust courts of jurisdiction since these arbitral awards are not absolute and without exceptions as they are still judicially reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subject to judicial review on specific grounds provided for.

(4) Grounds for judicial review different in domestic and foreign arbitral awards. The differences between a final arbitral award from an international or foreign arbitral tribunal and an award given by a local arbitral tribunal are the specific grounds or conditions that vest jurisdiction over our courts to review the awards. For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for setting aside, rejecting or vacating the award by the RTC are provided under Art. 34(2) of the UNCITRAL Model Law. For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA 876 and shall be recognized as final and executory decisions of the RTC, they may only be assailed before the RTC and vacated on the grounds provided under Sec. 25 of RA 876.

(5) RTC decision of assailed foreign arbitral award appealable. Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in cases where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award. The losing party who appeals from the judgment of the court confirming an arbitral award shall be required by the appellate court to post a counterbond executed in favor of the prevailing party equal to the amount of the award in accordance with the rules to be promulgated by the Supreme Court. Thereafter, the CA decision may further be appealed or reviewed before this Court through a petition for review under Rule 45 of the Rules of Court.

PGSMC has remedies to protect its interests Thus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign arbitration as it bound itself through the subject contract. While it

may have misgivings on the foreign arbitration done in Korea by the KCAB, it has available remedies under RA 9285. Its interests are duly protected by the law which requires that the arbitral award that may be rendered by KCAB must be confirmed here by the RTC before it can be enforced. Petitioner is correct in its contention that an arbitration clause, stipulating that the arbitral award is final and binding, does not oust our courts of jurisdiction as the international arbitral award, the award of which is not absolute and without exceptions, is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285. Finally, it must be noted that there is nothing in the subject Contract which provides that the parties may dispense with the arbitration clause.

Issue: WON the unilateral rescission is proper Held: No Ratio: What this Court held in

UP v. De Los and reiterated in succeeding cases, that Angeles

the act of treating a contract as rescinded on account of infractions by the other contracting party is valid albeit provisional as it can be judicially assailed, is not applicable to the instant case on account of a valid stipulation on arbitration. Where

an arbitration clause in a contract is availing, neither of the parties can unilaterally treat the contract as rescinded since whatever infractions or breaches by a party or differences arising from the contract must be brought first and resolved by arbitration, and not through an extrajudicial rescission or judicial action . The issues arising from the contract between PGSMC and KOGIES on whether the equipment and machineries delivered and installed were properly installed and operational in the plant in Carmona, Cavite; the ownership of equipment and payment of the contract price; and whether there was substantial compliance by KOGIES in the production of the samples, given the alleged fact that PGSMC could not supply the raw materials required to produce the sample LPG cylinders, are matters proper for arbitration. Indeed, we note that on July 1, 1998, KOGIES instituted an Application for Arbitration before the KCAB in Seoul, Korea pursuant to Art. 15 of the Contract as amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate.


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Issue: WON the issue on ownership of plant is proper for arbitration

As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the courts for provisional reliefs. The Rules of the ICC, which

Held: Yes

governs the parties’ arbitral dispute, allows the

Ratio: It is settled that questions of fact cannot be raised in an original action for certiorari. Whether or not there was full payment for the machineries and equipment and installation is indeed a factual issue prohibited by Rule 65. However, what appears to constitute a grave abuse of discretion is the order of the RTC in resolving the issue on the ownership of the plant when it is the arbitral body (KCAB) and not the RTC which has jurisdiction and authority over the said issue.

The RTC’s determination of such

factual issue constitutes grave abuse of discretion and must be reversed and set aside.

Issue: What are the interim measures which the RTC can issue

Ratio: Firstly, while the issue of the proper installation of the equipment and machineries might well be under the primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285 has jurisdiction to hear and grant interim measures to protect vested rights of the parties.

application of a party to a judicial authority for interim or conservatory measures. Likewise, Section 14 of RA 876 recognizes the rights of any party to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration. In addition, R.A. 9285 allows the filing of provisional or interim measures with the regular courts whenever the arbitral tribunal has no power to act or to act effectively. It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of protection. Secondly, considering that the equipment and machineries are in the possession of PGSMC, it has the right to protect and preserve the equipment and machineries in the best way it can. Considering that the LPG plant was non-operational, PGSMC has the right to dismantle and transfer the equipment and machineries either for their protection and preservation or for the better way to make good use of them which is ineluctably within the management discretion of PGSMC.

Art. 17(2) of the UNCITRAL Model Law on ICA

Thirdly, and of greater import is the reason that maintaining the equipment and machineries in

defines an “interim measure” of protection as:(2) An

Worth’s property is not to the best interest of

interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to: (a) Maintain or restore the status quo pending determination of the dispute; (b) Take action that would prevent, or refrain from

taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself; (c) Provide a means of preserving assets out of

which a subsequent award may be satisfied; or (d) Preserve evidence that may be relevant and

material to the resolution of the dispute. Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim measures. In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were explicit that even “the pendency of an arbitral proceeding does not foreclose resort to the courts for provisional reliefs.” We explicated this way:

PGSMC due to the prohibitive rent while the LPG plant as set-up is not operational. PGSMC was losing PhP322,560 as monthly rentals or PhP3.87M for 1998 alone without considering the 10% annual rent increment in maintaining the plant. Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the preservation or transfer of the equipment and machineries as an interim measure, yet on hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the equipment and machineries given the nonrecognition by the lower courts of the arbitral clause, has accorded an interim measure of protection to PGSMC which would otherwise been irreparably damaged. Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the contract. Moreover , KOGIES is amply protected by the arbitral action it has instituted before the KCAB, the award of which can be enforced in our jurisdiction through the RTC. Besides, by our decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its contract with KOGIES.


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PGSMC to preserve the subject equipment and machineries Finally, while PGSMC may have been granted the right to dismantle and transfer the subject equipment and machineries, it does not have the right to convey or dispose of the same considering the pending arbitral proceedings to settle the differences of the parties. PGSMC therefore must preserve and maintain the subject equipment and machineries with the diligence of a good father of a family until final resolution of the arbitral proceedings and enforcement of the award, if any.

CLASS NOTES: Arbitration is valid pursuant to Article 2044 of the Civil Code. Concept of a final and binding award similar to final judgments by a QJA. 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.

Voidable: Fraud Violence Mistake Undue Influence Intimidation

Was there a new doctrine laid down in the Korea case? Is there anything that modified, qualified what is otherwise a settled doctrine in civil law? Unilateral rescission / resolution doctrine in UP v. De Los Angeles, thus, under 1191 – one party may rescind if other party is unable to comply with his obligation (Unilateral rescission) – but this is

provisional, other party may challenge the validity in court. This case, however, was not applied to Korea on account of a valid stipulation on arbitration. Sir: It would seem that if you agree to arbitrate, then your hands will become tied. Note the denial of preliminary injunction by RTC Muntinlupa – Court said it’s proper because the arbitral tribunal was not yet constituted.

Assuming that the Korean Company proceeded to commence the arbitration in Korea, can he ask for the same preliminary injunction from the arbitral tribunal in Korea? Can it issue an interim award opposite from the RTC of Muntinlupa? Theoretically, yes. Basis? Rule 5.13 Practically speaking, how will Korea enforce it (not to dismantle and remove)? Rule 5.13. Modification, amendment, revision or revocation of court’s previously issued interim measure of protection. — Any court order granting or denying interim measure/s of protection is issued without prejudice to subsequent grant, modification, amendment, revision or revocation by the arbitral tribunal as may be warranted.

An interim measure of protection issued by the arbitral tribunal shall, upon its issuance be deemed to have ipso jure modified, amended, revised or revoked an interim measure of protection previously issued by the court to the extent that it is inconsistent with the subsequent interim measure of protection issued by the arbitral tribunal.

Rule 5.14. Conflict or inconsistency between interim measure of protection issued by the court and by the arbitral tribunal. — Any question involving a conflict or inconsistency between an interim measure of protection issued by the court and by the arbitral tribunal shall be immediately referred by the court to the arbitral tribunal which shall have the authority to decide such question.

So how can you enforce such interim award? Note Rule 5.16 – assistance in the enforcement of interim award. Invoke 5.13 and 5.14. What if he denies again? Rule 19.1. Motion for reconsideration, when allowed . — A party may ask the Regional Trial to reconsider its ruling on the following: d. Granting or denying a party an interim measure of protection

Rule 19.12. Appeal to the Court of Appeals.— An appeal to the Court of Appeals through a petition for review under this Special Rule shall only be allowed from the following final orders of the Regional Trial Court: a. Granting or denying an interim measure of protection;

Rule 19.26. Certiorari to the Court of Appeals . — When the Regional Trial Court, in making a ruling under the Special ADR Rules, has acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of


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jurisdiction, and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law, a party may file a special civil action for certiorari to annul or set aside a ruling of the Regional Trial Court. A special civil action for certiorari may be filed against the following orders of the court. d. Granting or refusing an interim relief;

Toyota Motor Phils. Corp. V. CA, 216 SCRA 336 (1992) Petitioner: Toyota Motors Philippines Corporation Respondents: CA, Hon. Fernando Gorospe and Sun Valley Manufacturing and Development Corp

to the CA on certiorari questioning the admission of the amended complaint. The CA denied due course to the Toyota petition on the finding that the amendment of Sun Valley's complaint was a valid one as Sun Valley's action was not for unlawful detainer but an accion publiciana . Furthermore, the supplemental petitions filed by Toyota assailing the prohibitory and mandatory injunctive writ were not ruled upon as they were expunged from the records because of Toyota's failure to attach a motion to admit these supplemental petitions.

Issue: Who as between Judge Tensuan or Judge Gorospe has jurisdiction over the dispute

Facts: Both Toyota and Sun Valley are the registered owners of two adjoining parcels of land formerly owned by Delta Motors Corp (DMC) situated in La Huerta, Parañaque, Metro Manila which they purchased from the APT. Part of the duly parcelled Delta I property was sold to Toyota through public bidding for the amount of P95,385,000. After its purchase, Toyota constructed a concrete hollow block (CHB) perimeter fence around its alleged property. Another part of the parcelled Delta I was purchased by Sun Valley from APT for the bid price of P124,349,767. Relying upon the title description of its property and the surveys it had commissioned, Sun Valley claimed that Toyota's perimeter fence overlaps Sun Valley's property. Toyota filed a case against APT and Sun

Valley before the Makati RTC for the reformation of the Deed of Sale executed between Toyota and APT. Sun Valley filed an MTD, on the ground that the Toyota complaint failed to state a cause of action against it (1) since it was not a party to the contract, and (2) the complaint was in effect a collateral attack on its title.

Ratio: Toyota filed an action for reformation on September 11, 1991, before Judge Tensuan alleging that the true intentions of the parties were not expressed in the instrument. The instrument sought to be reformed is the deed of sale executed by APT in favor of Toyota. Sun Valley was impleaded in order to obtain complete relief since it was the owner of the adjacent lot. It would appear that Toyota was correct in impleading Sun Valley as party defendant. However, these principles are not applicable under the particular circumstances of this case. Under the facts of the present case, Toyota's action for reformation is dismissible as against Sun Valley.

Attention must first be brought to the fact that the contract of sale executed between APT and Toyota provides an arbitration clause .11 The contention that the arbitration clause has become disfunctional because of the presence of third parties is untenable. Contracts are respected as the law between the contracting

Judge Tensuan denied the MTD eventually and granted Toyota’s application for injunction and

granted a writ of preliminary injunction enjoining Sun Valley from proceeding with the destruction and removal of Toyota's walls and directed Sun Valley to restore the premises to the status quo ante. The CA affirmed ruling that misjoinder of parties is not a ground for the dismissal of the case. Sun Valley, on the other hand, filed a case for recovery of possession of the disputed 723 square meters boundary with the Makati RTC. Toyota filed an MTD on the ground that the RTC has no jurisdiction over the case since the complaint was a simple ejectment case cognizable by the MTC. Sun Valley later sought to amend the complaint, which was granted by Judge Gorospe. Toyota went

11

5. In case of disagreement or conflict arising out of this Contract, the parties hereby undertake to submit the matter for determination by a committee of experts, acting as arbitrators, the composition of which shall be as follows: a) One member to be appointed by the VENDOR; b) One member to be appointed by the VENDEE; c) One member, who shall be a lawyer, to be appointed by both of the aforesaid parties; The members of the Arbitration Committee shall be appointed not later than three (3) working days from receipt of a written notice from either or both parties. The Arbitration Committee shall convene not later than three (3) weeks after all its members have been appointed and proceed with the arbitration of the dispute within three (3) calendar months counted therefrom. By written mutual agreement by the parties hereto, such time limit for the arbitration may be extended for another calendar month. The decision of the Arbitration Committee by majority vote of at least two (2) members shall be final and binding upon both the VENDOR and the VENDEE;


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parties. As such, the parties are thereby expected to abide with good faith in their contractual commitments. Toyota is therefore bound to respect the provisions of the contract it entered into with APT. Having been apprised of the presence of the arbitration clause in the motion to dismiss filed by APT, Judge Tensuan should have at least

suspended the proceedings and directed the parties to settle their dispute by arbitration . Judge Tensuan should have not taken cognizance of the case. But the more apparent reason which warrants the dismissal of the action as against Sun Valley is the fact that the complaint for reformation amounts to a collateral attack on Sun Valley's title. It is disputed that Sun Valley has a Torrens title registered in its name by virtue of its purchase of the land from APT. Well-settled is the rule that a certificate of title can not be altered, modified, or cancelled except in a direct proceeding in accordance with law. Assuming that Toyota is afforded the relief prayed for in the Tensuan court, the latter can not validly order the contested portion to be taken out from the Sun Valley's TCT and award it in favor of Toyota. An action for reformation is in personam, not in rem even when real estate is involved. It is merely an equitable relief granted to the parties where through mistake or fraud, the instrument failed to express the real agreement or intention of the parties. While it is a recognized remedy afforded by courts of equity it may not be applied if it is contrary to well-settled principles or rules. It is a long standing principle that equity follows the law. It is applied in the abscence of and never against statutory law. Courts are bound by rules of law and have no arbitrary discretion to disregard them. Courts of equity must proceed with utmost caution especially when rights of third parties may intervene. Thus in the instant case, vis-a-vis well-settled principles or rules in land registration, the equitable relief of reformation may not come into play in order to transfer or appropriate a piece of land that one claims to own but which is titled in the name of a third party. On the other hand, Sun Valley filed an action for reconveyance against Toyota to recover possession of the strip of land encroached upon and occupied by the latter. What Sun Valley seeks in its complaint is the recovery of possession de jure and not merely possession de facto. Toyota moved to dismiss on the assumption that the complaint was one for unlawful detainer cognizable by the MTC. We do not find any reversible error in the decision of the CA where it upheld Judge Gorospe's

order denying Toyota's motion to dismiss. An amendment to a complaint before a responsive pleading is filed, is a matter of right. Whether or not the complaint was amended, Sun Valley's complaint was one for accion publiciana cognizable by the RTC. Its right over the land is premised on the certificate of title registered in its name after it had purchased said land from APT. As the registered owner it had the right of possession of said land illegally occupied by another With the finding that Toyota's action for reformation is dismissable as it is in effect a collateral attack on Sun Valley's title, Sun Valley's action for recovery of possession filed before Judge Gorospe now stands to be the proper forum where the following dispute may be tried or heard. Issue: Who as between the parties has the rightful possession of the land Ratio: In actions involving realty, preliminary injunction will lie only after the plaintiff has fully established his title or right thereto by a proper action for the purpose. To authorize a temporary injunction, the complainant must make out at least a prima facie showing of a right to the final relief. Preliminary injunction will not issue to protect a right not in esse. Two requisites are necessary if a preliminary injunction is to issue, namely, the existence of the right to be protected, and the facts against which the injunction is to be directed, are violative of said right. In particular, for a writ of preliminary injunction to issue, the existence of the right and the violation must appear in the allegations of the complaint and an injunction is proper also when the plaintiff appears to be entitled to the relief demanded in his complaint. Furthermore, the complaint for injunctive relief must be construed strictly against the pleader. In the instant case the existence of a "clear positive right" especially calling for judicial protection has been shown by Sun Valley. Toyota's claim over the disputed property is anchored on the fact of its purchase of the property from APT, that from the circumstances of the purchase and the intention of the parties, the property including the disputed area was sold to it. Sun Valley, on the other hand has TCT No. 49019 of the Registry of Deeds of Parañaque embracing the aforesaid property in its name, having been validly acquired also from APT by virtue of a Deed of Sale executed in its favor on December 5, 1990. There are other circumstances in the case which militate against Toyota's claim for legal possession over the disputed area. The fact that Toyota has filed a suit for reformation seeking the inclusion of the 723 square meters strip of land is


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sufficient to deduce that it is not entitled to take over the piece of property it now attempts to appropriate for itself. As early as September, 1988 prior to the construction of the perimeter fence, Toyota was already aware of the discrepancies in the property's description in the title and the actual survey. Despite such notification, Toyota continued to build the perimeter fence. It is highly doubtful whether Toyota may be considered a builder in good faith to be entitled to protection under Article 448 of the Civil Code. The records also reveal that Toyota's own surveyor, the Certeza Surveying & Acrophoto Systems, Inc. confirmed in its reports dated April 1 and April 5, 1991 that Toyota's perimeter fence overlaps the boundaries of Sun Valley's lot. Even communication exchanges between and among APT, Toyota & Sun Valley show that the parties are certainly aware that the ownership of the disputed property more properly pertains to Sun Valley. Moreover, Sun Valley puts forth evidence that Toyota has altered the boundaries of its own property by moving the monuments erected thereon by APT's surveyor Geo-Resources and Consultancy, Inc. when Lot 2 was initially surveyed in August 1988. There is therefore sufficient and convincing proof that Sun Valley has a clear legal right to possession in its favor to warrant the issuance of a writ of preliminary/mandatory injunction. Sun Valley's TCT gives it that right to possession. On the other hand, Toyota has not established its right over the said property except for the assertion that there was a mistake in an instrument which purportedly should have included the questioned strip of land. As between the two (2) parties, Sun Valley has a better right. Under the circumstances, therefore, and considering that the clear legal right of Toyota to possession of the disputed area has not been established sufficient to grant the prayed for relief, a writ of preliminary mandatory injunction may be issued pendente lite.

CLASS NOTES: What was the effect of a 3 rd Party on the arbitration clause? The contention that the arbitration clause has become disfunctional because of the presence of third parties is untenable. Contracts are respected as the law between the contracting parties. As such, the parties are thereby expected to abide with good faith in their contractual commitments. Toyota is therefore bound to respect the provisions of the contract it entered into with APT.

Sir: In other words, the presence of a 3rd Party (Sun Valley) does not render the arbitration clause dysfunctional.

Heirs of Agusto L. Salas, Jr. v. Laperal Realty Corp., 302 SCRA 620 ( 1999) Petitioners: Heirs of Augusto Salas, et al Respondents: Laperal Realty Corporation, Rockway Real Estate Corporation et al

Facts: Salas, Jr. was the registered owner of a vast tract of land in Lipa City. He entered into an OwnerContractor Agreement with Laperal Realty Corporation to render and provide complete construction services on his land. Salas, Jr. executed an SPA in favor of Laperal Realty to exercise general control, supervision and management of the sale of his land, for cash or on installment basis. Later, Salas, Jr. left his home in the morning for a business trip to Nueva Ecija. He never returned. Teresita Diaz Salas filed with the Makati RTC a verified petition for the declaration of presumptive death of her husband, Salas, Jr., who had then been missing for more than seven (7) years. The petition was granted. Meantime, Laperal Realty subdivided the land of Salas, Jr. and sold subdivided portions thereof to the other respondents. Petitioners as heirs of Salas, Jr. filed in the RTC of Lipa City a Complaint for declaration of nullity of sale, reconveyance, cancellation of contract, accounting and damages against respondents. Laperal filed an MTD on the ground that petitioners failed to submit their grievance to arbitration as required under Article VI of the Agreement12. The RTC dismissed the complaint for non-compliance with the foregoing arbitration clause.

Issue: WON the dismissal of the case was proper Held: No Ratio: In a catena of cases inspired by Justice Malcolm's provocative dissent in Vega v . San Carlos Milling Co., this Court has recognized arbitration 12 Art. VI. ARBITRATION. All cases of dispute between CONTRACTOR and OWNER'S representative shall be referred to the committee represented by: a. One representative of the OWNER; b. One representative of the CONTRACTOR; c. One representative acceptable to both OWNER and CONTRACTOR.


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agreements as valid, binding, enforceable and not contrary to public policy so much so that when there obtains a written provision for arbitration which is not complied with, the trial court should suspend the proceedings and order the parties to proceed to arbitration in accordance with the terms of their agreement. Arbitration is the "wave of the future" in dispute resolution. To brush aside a contractual agreement calling for arbitration in case of disagreement between parties would be a step backward. A su bmission to ar bitration is a c ontract. As such, the Agreement, containing the stipulation on arbitration, binds the parties thereto, as well as their assigns and heirs. But only they. Petitioners, as heirs of Salas, Jr., and Laperal Realty are certainly bound by the Agreement. If Laperal had assigned its rights under the Agreement to a third party, making the former, the assignor, and the latter, the assignee, such assignee would also be bound by the arbitration provision since assignment involves such transfer of rights as to vest in the assignee the power to enforce them to the same extent as the assignor could have enforced them against the debtor 18 or in this case, against the heirs of the original party to the Agreement. However, Rockway Real Estate Corporation, South Ridge Village, Inc., Maharami Development Corporation, spouses Abrajano, spouses Lava, Oscar Dacillo, Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capellan are not assignees of the rights of Laperal under the Agreement to develop Salas, Jr.'s land and sell the same. They are, rather, buyers of the land that Laperal Realty was given the authority to develop and sell under the Agreement. As such, they are not "assigns" contemplated in Art. 1311 CC which provides that "contracts take effect only between the parties, their assigns and heirs". Petitioners claim that they suffered lesion of more than one-fourth (1/4) of the value of Salas, Jr.'s land when Laperal Realty subdivided it and sold portions thereof to respondent lot buyers. Thus, they instituted action against both Laperal Realty and respondent lot buyers for rescission of the sale transactions and reconveyance to them of the subdivided lots. They argue that rescission, being their cause of action, falls under the exception clause in Sec. 2 of RA 876 which provides that "such submission [to] or contract [of arbitration] shall be valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any contract". The petitioners' contention is without merit. For while rescission, as a general rule, is an arbitrable issue, 20 they impleaded in the suit for rescission the respondent lot buyers who are neither parties to the Agreement nor the latter's assigns or

heirs. Consequently, the right to arbitrate as provided in Article VI of the Agreement was never vested in respondent lot buyers. Laperal Realty, as a contracting party to the Agreement, has the right to compel petitioners to first arbitrate before seeking judicial relief. However, to split the proceedings into arbitration for Laperal Realty and trial for the respondent lot buyers, or to hold trial in abeyance pending arbitration between petitioners and Laperal Realty, would in effect result in multiplicity of suits, duplicitous procedure and unnecessary delay. On the other hand, it would be in the interest of justice if the trial court hears the complaint against all herein respondents and adjudicates petitioners' rights as against theirs in a single and complete proceeding.

Del Monte Corp. USA v. CA, 351 SCRA 373 (2001) Petitioners: Del Monte-USA, Paul Derby Jr, Daniel Collins and Luis Hidalgo Respondents: CA, Judge Bienvenido Reyes, Montebueno Marketing Inc, Liong Liong C. Sy and Sabrosa Foods Facts: In a Distributorship Agreement , petitioner appointed Montebueno Marketing, Inc. (MMI) as the sole and exclusive distributor of its Del Monte products in the Philippines for a period of 5 years, renewable for 2 consecutive 5 year periods with the consent of the parties. The agreement provided for an arbitration clause 13. The appointment of MMI was published in several newspapers in the country. MMI appointed Sabrosa Foods, Inc. (SFI), with the approval of petitioner, as MMI's marketing arm to concentrate on its marketing and selling function as well as to manage its critical relationship with the trade. MMI, SFI and MMI's Managing Director Liong Liong C. Sy filed a Complaint against petitioners before the RTC of Malabon for violations of Arts. 20, 21 and 23 CC. DMC-USA products

continued to be brought into the country by parallel importers despite the appointment of MMI as the sole and exclusive distributor of Del Monte products thereby causing them great 13

12. GOVERNING LAW AND ARBITRATION This Agreement shall be governed by the laws of the State of California and/or, if applicable, the United States of America. All disputes arising out of or relating to this Agreement or the parties' relationship, including the termination thereof, shall be resolved by arbitration in the City of San Francisco, State of California, under the Rules of the American Arbitration Association. The arbitration panel shall consist of three members, one of whom shall be selected by DMC-USA, one of whom shall be selected by MMI, and third of whom shall be selected by the other two members and shall have relevant experience in the industry x x x x


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embarrassment and substantial damage. They alleged that the products brought into the country by these importers were aged, damaged, fake or

counterfeit, so that they had to cause the publication of a "warning to the trade" paid advertisement in leading newspapers. Private respondents averred that petitioners knowingly and surreptitiously continued to deal with the former in bad faith by involving disinterested third parties and by proposing solutions which were entirely out of their control. Private respondents claimed that they had exhausted all possible avenues for an amicable resolution and settlement of their grievances. Petitioners filed a Motion to Suspend Proceedings invoking the arbitration clause in their Agreement with private respondents. The trial court deferred consideration of the motion as the

grounds alleged therein did not constitute the suspension of the proceedings considering that the action was for damages with prayer for the issuance of Writ of Preliminary Attachment and not on the Distributorship Agreement. Later, the Motion to Suspend Proceedings

was denied by the trial court on the ground that it "will not serve the ends of justice and to allow said suspension will only delay the determination of the issues, frustrate the quest of the parties for a judicious determination of their respective claims, and/or deprive and delay their rights to seek redress ." The CA affirmed and ruled that the alleged damaging acts recited in the Complaint, constituting petitioners' causes of action, required the interpretation of Art. 21 CC and that in determining whether petitioners had violated it "would require a full blown trial" making arbitration "out of the question." Issue: WON the dispute warrants compelling them to submit to arbitration.

an

order

Held: Ratio: Petitioners contend that the subject matter of private respondents' causes of action arises out of or relates to the Agreement between petitioners and private respondents . Thus, considering that the arbitration clause of the Agreement provides that all disputes arising out of or relating to the Agreement or the parties' relationship, including the termination thereof, shall be resolved by arbitration, they insist on the suspension of the proceedings in Civil Case No. 2637-MN as mandated by Sec. 7 of RA 876. Private respondents claim, on the other hand, that their causes of action are rooted in Arts. 20, 21 and 23 of the CC the determination of which demands a full blown trial, as correctly held by the CA. Moreover, they claim that the issues before the

trial court were not joined so that the Honorable Judge was not given the opportunity to satisfy himself that the issue involved in the case was referable to arbitration. They submit that, apparently, petitioners filed a motion to suspend proceedings instead of sending a written demand to private respondents to arbitrate because petitioners were not sure whether the case could be a subject of arbitration. They maintain that had petitioners done so and private respondents failed to answer the demand, petitioners could have filed with the trial court their demand for arbitration that would warrant a determination by the judge whether to refer the case to arbitration. Accordingly, private respondents assert that arbitration is out of the question. Private respondents further contend that the arbitration clause centers more on venue rather

than on arbitration. There is no doubt that arbitration is valid and constitutional in our jurisdiction. Even before the enactment of RA 876, this Court has countenanced the settlement of disputes through arbitration. 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 arrangement and will only interfere with great reluctance to anticipate or nullify the action of the arbitrator. Moreover, as RA 876 expressly authorizes arbitration of domestic disputes, foreign arbitration as a system of settling commercial disputes was likewise recognized when the Philippines adhered to the United Nations "Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of 1958" under the 10 May 1965 Resolution No. 71 of the Senate, giving reciprocal recognition and allowing enforcement of international arbitration agreements between parties of different nationalities within a contracting state. A careful examination of the instant case shows that the arbitration clause in the Distributorship Agreement between petitioner DMCUSA and private respondent MMI is valid and the

dispute between the parties is arbitrable.

However, this Court must deny the petition. The Agreement between petitioner DMCUSA and private respondent MMI is a contract. The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that contract and is itself a contract. As a rule,

contracts are respected as the law between the contracting parties and produce effect as between them, their assigns and heirs. Clearly, only parties to the Agreement, i.e., petitioners DMC-USA and its Managing Director for Export Sales Paul E. Derby, Jr., and private respondents MMI and its Managing Director LILY SY are


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bound by the Agreement and its arbitration clause as they are the only signatories thereto . Petitioners Daniel Collins and Luis Hidalgo, and private respondent SFI, not parties to the

Agreement and cannot even be considered assigns or heirs of the parties, are not bound by the Agreement and the arbitration clause therein. Consequently, referral to arbitration in the State of California pursuant to the arbitration clause and the suspension of the proceedings in Civil Case No. 2637-MN pending the return of the arbitral award could be called for but only as to petitioners DMCUSA and Paul E. Derby, Jr., and private respondents MMI and LILY SY, and not as to the other parties in this case. This is consistent with the recent case of Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corporation, which superseded that of Toyota Motor Philippines Corp. v. Court of Appeals. In T o y o t a , the Court ruled that "[ t]he

contention that the arbitration clause has become dysfunctional because of the presence of third parties is untenable" ratiocinating that "[c]ontracts are respected as the law between the contracting parties" and that "[a]s such, the parties are thereby expected to abide with good faith in their contractual commitments ." However, in Salas, Jr ., only parties to the Agreement, their assigns or heirs have the right to arbitrate or could be compelled to arbitrate . The Court went further by declaring that in recognizing the right of the contracting parties to arbitrate or to compel arbitration, the splitting of the

proceedings to arbitration as to some of the parties on one hand and trial for the others on the other hand, or the suspension of 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 . The object of arbitration is to allow the

expeditious determination of a dispute . Clearly, the issue before us could not be speedily and efficiently resolved in its entirety if we allow simultaneous arbitration proceedings and trial, or suspension of trial pending arbitration. Accordingly, the interest of justice would only be served if the trial court hears and adjudicates the case in a single and complete proceeding.

CLASS NOTES: Court found that the arbitration clause is valid and that the dispute is arbitrable, but nevertheless did not order the arbitration.

Do you agree with this decision? NO. RA 9285, Sec. 25 – Interpretation of the Act In interpreting the Act, the court shall have due regard to the policy of the law in favor of arbitration. 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 2.2. Policy on arbitration.— (A) Where the parties have agreed to submit their dispute to arbitration, courts shall refer the parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith. Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not limited to, the following: c. The referral would result in multiplicity of suits;

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.

Sir: Problem with this decision is that it will kill arbitration. A p arty may simply implead other parties and claim that they are not parties to the arbitration clause. READ UNITRAL ARBITRATION RULES and ICC ARBITRATION RU LES


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Class Notes – September 3, 2010 c/o Adrian What is the Rule on Multiple Parties? Binding between the parties, assigns and heirs (1311, Civil Code).

Can the court motu proprio separate the parties? What is the impact of presence of third parties? 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.

How did the court rule on the issue in the case of Toyota? The presence of third parties does not render the Arbitration Clause d ysfunctional.

What about in Salas? Are the facts the same? Are the vendees boun d by the Arbitration c lause contained in the contract between Laperal Realty and Salas, JR? SALAS NO : because the vendees are not "assignees." (UNDER 1311 OF THE CIVIL CODE) The buyers are not bound, although they are successors-in-interest, they are not assigns. ME : is a subrogee under through an insurance contract an assign? (see california case,

What is the effect of the Del Monte Ruling? Individuals who are NOT real parties in interest were impleaded. And the court ruled that the court proceeding should continue. A party may simply put arbitration into naught by impleading certain parties.

Del Monte case : (MMC --- my cause of action is TORT (20-21 NCC) -- sir wanted to address this.

What if a party files a motion to suspend proceedings on the ground that there is an existing Arbitration Agreement? The court should grant a motion to suspend proceedings and order the parties to proceed to arbitration. 9285 Sec. 25. Interpretation of the Act. - In interpreting the Act, the court shall have due regard to the policy of the law in favor of arbitration. 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.

(-ME- the jurisdiction of the court is determined by the allegations in the pleadings True - MMC)

Still : MMC --- my cause of action is TORT (2021 NCC) -- sir wanted to address this. -- AUTEA This is a spurious argument. Article 21, says any damage. Why is there damage? "Although I am the Exclusive Distributor, Del monte allowed the entry of subpar products." It is the distributorship agreement that caused damage. (ANECDOTE: the first two students who recited "AGREED" on the Del Monte Ruling. Sir was surprised.) DANGEROUS IMPLICATION OF DELMONTE again, is the vulnerability of the Arbitration Clause to a party defeating it by impleading other parties. This is what gave rise to SECTION 25 of RA 9285. ---- WHAT IS THE PRESENT STATE OF THE RULE WITH RESPECT TO THE PRESENC OF PARTIES? See RULE 2.2. Special ADR Rules

? ADR RULE - Rule 4.5. Court action. — After hearing, the court shall stay the action and, considering the statement of policy embodied in Rule 2.4, above, refer the parties to arbitration if it finds prima facie, based on the pleadings and supporting documents submitted by the parties, that there is an arbitration agreement and that the subject-matter of the dispute is capable of settlement or resolution by arbitration in accordance with Section 6 of the ADR Act. Otherwise, the court shall continue with the judicial proceedings.


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What is the impact of KOREA regarding reciprocal obligations under 1191 (CIVIL CODE)?

Can the court reverse the dispositive portion of the Arbitral Award? NO - court cannot substi tute.

if there is a delay on the part of one of the parties, the other party may rescind the contract.

APT v. CA Is this in act of judicial legislation? ASSAILING AN ARBITRAL AWARD What are the grounds for assailing a DOMESTIC ARBITRATION AWARD? See RA 876 Sec. 24. Grounds for vacating award. In any one of the following cases, the court must make an order vacating the award upon the petition of any party to the controversy when such party proves affirmatively that in the arbitration proceedings; (a) The award was procured by corruption, fraud, or other undue means; or (b) That there was evident partiality or corruption in the arbitrators or any of them; or (c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or more of the arbitrators was disqualified to act as such under section nine hereof, and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced; or (d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them was not made.

"As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either as to the law or as to the facts. Courts are without power to amend or overrule merely because of disagreement with matters of law or facts determined by the arbitrators. They will not review the findings of law and fact contained in an award, and will not undertake to substitute their judgment for that of the arbitrators, since any other rule would make an award the commencement, not the end, of litigation. Errors of law and fact, or an erroneous decision of matters submitted to the judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial revie w of an arbitration is , thus, more limited than judicial review of a trial."

How did they come to arbitration? How did it become a Rule 65 case? THERE was an ORDER confirming. Petition under rule 65 Was availed of.

Is this valid? See Section 29 . CF: ruling in APT vs CA:

Is this an exclusive listing? NO, see 11.4 of Special ADR rules The award may also be vacated on any or all of the following grounds: a. The arbitration agreement did not exist, or is invalid for any ground for the revocation of a contract or is otherwise unenforceable; or b. A party to arbitration is a minor or a person judicially declared to be incompetent.

Are these additions? No, see section of RA 876: Sec. 2. Persons and matters subject to arbitration. XXX Such submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any contract. XXX A controversy cannot be arbitrated where one of the parties to the controversy is an infant, or a person judicially declared to be incompetent, unless the appropriate court having jurisdiction approve a petition for permission to submit such controversy to arbitration made by the general guardian or guardian ad litem of the infant or of the incompetent.

Under the present state of the law, are there other grounds?

Section 29 of Republic Act No. 876, provides that: . . . An appeal may be taken from an order made in a proceeding under this Act, or from a judgment entered upon an award through certiorari proceedings, but such appeals shall be limited to questions of law. . . .. The provision, however, does not preclude a party aggrieved by the arbitral award from resorting to the extraordinary remedy of certiorari under Rule 65 where, as in this case, the RTC to which the award was submitted for confirmation has acted without jurisdiction or with grave abuse of discretion and there is no appeal, nor any plain, speedy remedy in the course of law. In the instant case, the respondent court erred in dismissing the special civil action for certiorari, it being clear from the pleadings and the evidence that the trial court lacked jurisdiction and/or committed grave abuse of discretion in taking cognizance of private respondents' motion to confirm the arbitral award and, worse, in confirming said award which is grossly and patently not in accord with the arbitration agreement, as will be hereinafter demonstrated.

Rule 19.7. No appeal or certiorari on the merits of an arbitral award . — An agreement to refer a dispute to arbitration shall mean that the arbitral award shall be final and binding. Consequently, a party to an arbitration is precluded from filing an appeal or a petition for certiorari questioning the merits of an arbitral award.

Rule 19.26. -- Certiorari to the Court of Appeals . — When the Regional Trial Court, in making a ruling under the Special ADR


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Rules, 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 may file a special civil action for certiorari to annul or set aside a ruling of the Regional Trial Court. A special civil action for certiorari may be filed against the following orders of the court. XXX

f. Confirming, vacating or correcting a domestic arbitral award; g. Suspending the proceedings to set aside an international commercial arbitral award and referring the case back to the arbitral tribunal; h. Allowing a party to enforce an international commercial arbitral award pending appeal; i. Adjourning or deferring a ruling on whether to set aside, recognize and or enforce an international commercial arbitral award; j. Allowing a party to enforce a foreign arbitral award pending appeal; and k. Denying a petition for assistance in taking evidence.

Note : "...and there is no appeal…") SEE: 19.12 - Appeal to the Court of Appeals.— An appeal to the Court of Appeals through a petition for review under this Special Rule shall only be allowed from the following final orders of the Regional Trial Court:

XXXConfirming, vacating or correcting a domestic arbitral award;

Kung ako yung kalaban and the other party files a certiorari, but there is an appeal. --

So how do we use 19.26? -- ME : LUZON DEVELOPMENT BANK prescribes the mode --FINAL - and not subject to review. 00 APPEAL -What is the object of an appeal What are you trying to say? --

Petition v. Motion to Vacate Petition – filed in a court which has no jurisidiction over the dispute; original; after dismissal (see APT) Motion – filed in a court which has jurisdiction over the dispute; continuation of proceedings; e.g. proceeding in the court was suspended / referred to arbitration

Is a Motion or Petition to Vacate governed by summary procedure? No. See 1.3. Rule 1.3. Summary proceedings in certain cases.—The proceedings in the following instances are summary in nature and shall be governed by this provision: a. Judicial Relief Involving the Issue of Existence, Validity or Enforceability of the Arbitration Agreement; b. Referral to ADR; c. Interim Measures of Protection; d. Appointment of Arbitrator; e. Challenge to Appointment of Arbitrator; f. Termination of Mandate of Arbitrator; g. Assistance in Taking Evidence; h. Confidentiality/Protective Orders; and i. Deposit and Enforcement of Mediated Settlement Agreements.

Must it be verified? Can it be verified by the lawyer? Yes. See 1.4. It can be verified by a lawyer. See 1.11(f). Rule 1.4. Verification and submissions. — Any pleading, motion, opposition, comment, defense or claim filed under the Special ADR Rules by the proper party shall be supported by verified statements that the affiant has read the same and that the factual allegations therein are true and correct of his own personal knowledge or based on authentic records and shall contain as annexes the supporting documents. The annexes to the pleading, motion, opposition, comment, defense or claim filed by the proper party may include a legal brief, duly verified by the lawyer submitting it, stating the pertinent facts, the applicable law and jurisprudence to justify the necessity for the court to rule upon the issue raised.

ADAMSON, CHUNG FU, NATIONAL STEEL -HOME BANKER'S ASSOCIATION.

No Class – September 10, 2010

Class Notes – September 17, 2010

f. “Verification” shall mean a certification under oath by a party or a person who has authority to act for a party that he has read the pleading/motion, and that he certifies to the truth of the facts stated therein on the basis of his own personal knowledge or authentic documents in his possession. When made by a lawyer, verification shall mean a statement under oath by a lawyer signing a pleading/motion for delivery to the Court or to the parties that he personally prepared the pleading/motion, that there is sufficient factual basis for the statements of fact stated therein, that there is sufficient basis in the facts and the law to support the prayer for relief therein, and that the pleading/motion is filed in good faith and is not interposed for delay.


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Is there an Appointing Authority in adhoc arbitration? Yes. 6.1 (c). Rule 6.1. When the court may act as Appointing Authority. — The court shall act as Appointing Authority only in the following instances: a. Where any of the parties in an institutional arbitration failed or refused to appoint an arbitrator or when the parties have failed to reach an agreement on the sole arbitrator (in an arbitration before a sole arbitrator) or when the two designated arbitrators have failed to reach an agreement on the third or presiding arbitrator (in an arbitration before a panel of 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; b. 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 upon is ineffective, and the National President of the Integrated Bar of the Philippines (IBP) or his duly authorized representative fails or refuses to act within such period as may be allowed under the pertinent rules of the IBP or within such period as may be agreed upon by the parties, or in the absence thereof, within thirty (30) days from receipt of such request for appointment; c. Where the parties agreed that their dispute shall be resolved by three arbitrators but no method of appointing those arbitrators has been agreed upon, each party shall appoint one arbitrator and the two arbitrators thus appointed shall appoint a third arbitrator. If a party fails to appoint his arbitrator within thirty (30) days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within a reasonable time from their appointment, the appointment shall be made by the Appointing Authority. If the latter 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 may request the court to appoint an arbitrator or the third arbitrator as the case may be.

RA 9285, Sec. 26 – Meaning of “Appointing Authority” "Appointing Authority" as used in the Model Law shall mean the person or institution named in the arbitration agreement as the appointing authority; or the regular arbitration arbitration institution under whose rules the arbitration is agreed to be conducted. Where the parties have agreed to submit their dispute to institutional arbitration rules, and unless they have agreed to a different procedure, they shall be deemed to have agreed to procedure under such arbitration rules for the selection and appointment of arbitrators. In ad hoc arbitration, the default appointment of an arbitrator shall be made by the National President of the Integrated Bar of the Philippines (IBP) or his duly authorized representative.

RA 9285, Sec. 27 – What Functions May be Performed by Appointing Authority The functions referred to in Articles 11(3), 11(4), 13(3) and 14(1) of the Model Law shall be performed by the Appointing Authority, unless the latter shall fail or refuse to act within thirty (30) days from receipt of the request in which case the applicant may renew the application with the Court.

RA 876, Sec. 8 – Appointment of arbitrators If, in the contract for arbitration or in the submission described in section two, provision is made for a method of naming or

appointing an arbitrator or arbitrators, such method shall be followed; but if no method be provided therein the Court of First Instance shall designate an arbitrator or arbitrators. The Court of First Instance shall appoint an arbitrator or arbitrators, as the case may be, in the following instances: (a) If the parties to the contract or submission are unable to agree upon a single arbitrator; or (b) If an arbitrator appointed by the parties is unwilling or unable to serve, and his successor has not been appointed in the manner in which he was appointed; or (c) If either party to the contract fails or refuses to name his arbitrator within fifteen days after receipt of the demand for arbitration; or (d) If the arbitrators appointed by each party to the contract, or appointed by one party to the contract and by the proper Court, shall fail to agree upon or to select the third arbitrator. (e) The court shall, in its discretion appoint one or three arbitrators, according to the importance of the controversy involved in any of the preceding cases in which the agreement is silent as to the number of arbitrators. (f) Arbitrators appointed under this section shall either accept or decline their appointments within seven days of the receipt of their appointments. In case of declination or the failure of an arbitrator or arbitrators to duly accept their appointments the parties or the court, as the case may be, shall proceed to appoint a substitute or substitutes for the arbitrator or arbitrators who decline or failed to accept his or their appointments.

Problem: Claimant appoints an arbitrator. Respondent refuses to name his arbitrator. Claimant asks IBP to appoint in behalf of Respondent, which IBP did. Can Respondent ask for an injunction enjoining the commencement of the injunction on the ground that it did not appoint an arbitrator? Can a court enjoin arbitration proceedings? Rule 3.18. Court action. — (B) No injunction of arbitration proceedings. — The court shall not enjoin the arbitration proceedings during the pendency of the petition.

What is the “petition” contemplated in Rule

3.18? Petition concerning the existence, validity or enforceability of the arbitration agreement. This concerns the jurisdiction of the arbitral tribunal. Rule 5.6. Type of interim measure of protection that a court may grant .—The following, among others, are the interim measures of protection that a court may grant:

a.

Preliminary injunction directed against a party to arbitration;

RA 9285, Sec. 28 – Grant of Interim Measure of Protection (a) It is not incompatible with an arbitration agreement for a party to request, before constitution of the tribunal, from a Court an interim measure of protection and for the Court to grant such measure. After constitution of the arbitral tribunal and during


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arbitral proceedings, a request for an interim measure of protection or modification thereof, may be made with the arbitral tribunal or to the extent that the arbitral tribunal has no power to act or is unable to act effectively, the request may be made with the Court. The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator who has been nominated, has accepted the nomination and written communication of said nomination and acceptance has been received by the party making request. (b) The following rules on interim or provisional relief shall be observed: (1) Any party may request that provision relief be granted against the adverse party: (2) Such relief may be granted: (i) to prevent irreparable loss or injury: (ii) to provide security for the performance of any obligation; (iii) to produce or preserve any evidence; or (iv) to compel any other appropriate act or omission. (3) The order granting provisional relief may be conditioned upon the provision of security or any act or omission specified in the order. (4) Interim or provisional relief is requested by written application transmitted by reasonable means to the Court or arbitral tribunal as the case may be and the party against whom the relief is sought, describing in appropriate detail the precise relief, the party against whom the relief is requested, the grounds for the relief, and evidence supporting the request. (5) The order shall be binding upon the parties. (6) Either party may apply with the Court for assistance in Implementing or enforcing an interim measure ordered by an arbitral tribunal. (7) A party who does not comply with the order shall be liable for all damages resulting from noncompliance, including all expenses, and reasonable attorney's fees, paid in obtaining the order's judicial enforcement.

performance of subject contract, it was stipulated therein that the issue(s) shall be submitted for resolution before a single arbitrator chosen by both parties. Apart from the construction agreement, Chung Fu and Roblecor entered into two (2) other ancillary contracts, for the construction of a dormitory and support facilities and for the installation of electrical, water and hydrant systems at the plant site. However, Roblecor failed to complete the work despite the extension of time allowed it by Chung Fu. Subsequently, the latter had to take over the construction. Claiming an unsatisfied account of P10,500,000.00 and unpaid progress billings of P2,370,179.23, Roblecor filed a petition for Compulsory Arbitration with prayer for TRO before the RTC, pursuant to the arbitration clause in the construction agreement. Chung Fu moved to dismiss the petition and further prayed for the quashing of the restraining order. Subsequent negotiations between the parties eventually led to the formulation of an arbitration agreement. The RTC approved the agreement. Engr. Willardo Asuncion was appointed as the sole arbitrator. Arbitrator Asuncion ordered petitioners to immediately pay respondent P16,108,801.00. He declared the award as final and unappealable, pursuant to the Arbitration Agreement precluding judicial review of the a ward. Roblecor moved for the confirmation of said award. On the other hand, Chung Fu moved to remand the case for further hearing and asked for a reconsideration of the judgment award claiming that Arbitrator Asuncion committed twelve (12) i nstances of grave error by disregarding the provisions of the parties' contract. The lower court denied petitioner’s motion to remand and granted Roblecor’s Motion for

Confirmation of Award. The CA affirmed.

Xam: No. Prohibition not injunction.

Issue: WON the arbitration award is beyond the ambit of the court's power of judicial review.

Chung Fu Industries vs CA ( 1992) Petitioner: Chung Fu Industries, et al Respondents: CA, Hon. Francisco Roblecor Philippines Inc

Held:

No

Ratio: Sparse though the law and jurisprudence Velez

and

Ponente: Romero

Facts: Petitioner Chung Fu Industries and Roblecor Philippines, Inc. forged a construction agreement whereby respondent committed to construct and finish on December 31, 1989, petitioner 's industrial/factory complex in Cavite for P42,000,000. In the event of disputes arising from the

may be on the subject of arbitration in the Philippines, it was nonetheless recognized in the Spanish Civil Code; specifically, the provisions on compromises made applicable to arbitrations under Articles 1820 and 1821. Although said provisions were repealed by implication with the repeal of the Spanish Law of Civil Procedure, these and additional ones were reinstated in the present Civil Code. Arbitration found a fertile field in the resolution of labor-management disputes in the


58


Philippines. Although early on, CA 103 (1936) provided for compulsory arbitration as the state policy to be administered by the CIR, in time such a modality gave way to voluntary arbitration. The Industrial Peace Act which was passed in 1953 as RA875, favored the policy of free collective bargaining and resort to grievance procedure, in particular, as the preferred mode of settling disputes in industry. It was accepted and enunciated more explicitly in the Labor Code, which was passed on November 1, 1974 as PD 442, with the amendments later introduced by RA6715 (1989). That there was a growing need for a law regulating arbitration in general was acknowledged when RA876 (1953), otherwise known as the Arbitration Law, was passed. "Said Act was obviously adopted to supplement — not to supplant — the New Civil Code on arbitration. It expressly declares that "the provisions of chapters one and two, Title XIV, Book IV of the Civil Code shall remain in force." In recognition of the pressing need for an arbitral machinery for the early and expeditious settlement of disputes in the construction industry, a CIAC was created by EO 1008, enacted on February 4, 1985. In practice nowadays, absent an agreement of the parties to resolve their disputes via a particular mode, it is the regular courts that remain the fora to resolve such matters. However, the parties may opt for recourse to third parties, exercising their basic freedom to "establish such stipulation, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy." In such a case, resort to the arbitration process may be spelled out by them in a contract in anticipation of disputes that may arise between them. Or this may be stipulated in a submission agreement when they are actually confronted by a dispute. Whatever be the case, such recourse to an extrajudicial means of settlement is not intended to completely deprive the courts of jurisdiction. But certainly, the stipulation to refer all future disputes to an arbitrator or to submit an ongoing dispute to one is valid. Being part of a contract between the parties, it is binding and enforceable in court in case one of them neglects, fails or refuses to arbitrate. Going a step further, in the event that they declare their intention to refer their differences to arbitration first before taking court action, this constitutes a condition precedent, such that where a suit has been instituted prematurely, the court shall suspend the same and the parties shall be directed forthwith to proceed to arbitration. A court action

may likewise be proven where the arbitrator has not been selected by the parties. Under present law, may the parties who agree to submit their disputes to arbitration further provide that the arbitrators' award shall be final, unappealable and executory? Article 2044 of the Civil Code recognizes the validity of such stipulation, thus: Any stipulation that the arbitrators' award or decision shall be final is valid, without prejudice to Articles 2038, 2039 and 2040. Similarly, the Construction Industry Arbitration Law prov ides that the arbi tral award "shall be final and inappealable except on questions of law which shall be appealable to the Supreme Court." Under the original Labor Code, voluntary arbitration awards or decisions were final, unappealable and executory. "However, voluntary arbitration awards or decisions on money claims, involving an amount exceeding P100,000 or 40% of the paid-up capital of the respondent employer, whichever is lower, maybe appealed to the NLRC on any of the following grounds: (a) abuse of discretion; and (b) gross incompetence." It is to be noted that the appeal in the instances cited were to be made to the NLRC and not to the courts. With the subsequent deletion of the provision from the LC, the voluntary arbitrator is now mandated to render an award or decision within 20 calendar days from the date of submission of the dispute and such decision shall be final and executory after 10 calendar days from receipt of the copy of the award or decision by the parties. Where the parties agree that the decision of the arbitrator shall be final and unappealable as in the instant case, the pivotal inquiry is whether subject arbitration award is indeed beyond the ambit of the court's power of judicial review. We rule in the negative. It is stated explicitly under Art. 2044 CC that the finality of the arbitrators' award is not absolute and without exceptions. Where the conditions described in Articles 203814, 2039 and

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 14

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.


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2040 applicable to both compromises and arbitrations are obtaining, the arbitrators' award may be annulled or rescinded. 19 Additionally, under Sections 24 and 25 of the Arbitration Law, there are grounds for vacating, modifying or rescinding an arbitrator's award. Thus, if and when the factual circumstances referred to in the above-cited provisions are present, judicial review of the award is properly warranted. What if courts refuse or neglect to inquire into the factual milieu of an arbitrator's award to determine whether it is in accordance with law or within the scope of his authority? How may the power of judicial review be invoked? This is where the proper remedy is certiorari under Rule 65 of the Revised Rules of Court. It is to be borne in mind, however, that this action will lie only where a grave abuse of discretion or an act without or in excess of jurisdiction on the part of the voluntary arbitrator is clearly shown. For "the writ of certiorari is an extraordinary remedy and that certiorari jurisdiction is not to be equated with appellate jurisdiction. In a special civil action of certiorari, the Court will not engage in a review of the facts found nor even of the law as interpreted or applied by the arbitrator unless the supposed errors of fact or of law are so patent and gross and prejudicial as to amount to a grave abuse of discretion or an exces de pouvoir on the part of the arbitrator." Even decisions of administrative agencies which are declared "final" by law are not exempt from judicial review when so warranted. It should be stressed, too, that voluntary arbitrators, by the nature of their functions, act in a quasi-judicial capacity. It stands to reason, therefore, that their decisions should not be beyond the scope of the power of judicial review of this Court. After closely studying the list of errors, as well as petitioners' discussion of the same in their Motion to Remand Case For Further Hearing and Reconsideration and Opposition to Motion for Confirmation of Award, we find that petitioners have amply made out a case where the voluntary arbitrator failed to apply the terms and provisions of the Construction Agreement which forms part of the law applicable as between the parties, thus 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.

committing a grave abuse of discretion. Furthermore, in granting unjustified extra compensation to respondent for several items, he exceeded his powers — all of which would have constituted ground for vacating the award under Section 24 (d) of the Arbitration Law. But the respondent trial court's refusal to look into the merits of the case, despite prima facie showing of the existence of grounds warranting judicial review, effectively deprived petitioners of their opportunity to prove or substantiate their allegations. In so doing, the trial court itself committed grave abuse of discretion. Likewise, the appellate court, in not giving due course to the petition, committed grave abuse of discretion. Respondent courts should not shirk from exercising their power to review, where under the applicable laws and jurisprudence, such power may be rightfully exercised; more so where the objections raised against an arbitration award may properly constitute grounds for annulling, vacating or modifying said award under the laws on arbitration.

Adamson vs CA (1994) Petitioners: Dr. Lucas Adamson and Adamson Management Corporation Respondents: CA and Apac Holding Limited

Facts: Adamson Management Corporation and Lucas Adamson on the one hand, and APAC Holdings Limited on the other, entered into a contract whereby the former sold 99.97% of outstanding common shares of stocks of Adamson and Adamson, Inc. to the latter for P24,384,600 plus the Net Asset Value of Adamson and Adamson, Inc. as of June 19, 1990. But the parties failed to agree on a reasonable Net Asset Value. This prompted them to submit the case for arbitration in accordance with RA 876. The Arbitration Committee rendered a decision finding the Net Asset Value of the Company to be P167,118. The Arbitration Committee disregarded petitioners' argument. According to the Committee, however, the amount of P5,146,000 which was claimed as initial NAV by petitioners, was merely an estimate of the Company's NAV as of February 28, 1990 which was still subject to financial developments until June 19, 1990, the cut-off date. Aside from deciding the amount o f NAV, the Committee also held that any ambiguity in the contract should not necessarily be interpreted against private respondents because the parties had stipulated that the draft of the agreement was submitted to petitioners for approval and that the


60


latter even proposed changes which were eventually incorporated in the final form of the Agreement. APAC Holdings Ltd. filed a petition for confirmation of the arbitration award before the Makati RTC. Petitioners opposed the petition and prayed for the nullification, modification and/or correction of the same, alleging that the arbitrators committed evident partiality and grave abuse of discretion. The RTC vacated the arbitration award. The CA reversed.

Issue: WON the CA

erred

in

affirmi ng

the

arbitration award

Held:

No

Ratio: The CA, in reversing the trial court's decision held that the nullification of the decision of the Arbitration Committee was not based on the grounds provided by the Arbitration Law and that ". . . petitioners herein have failed to substantiate with any evidence their claim of partiality. Significantly, even as respondent judge ruled against the arbitrators' award, he could not find fault with their impartiality and integrity. Evidently, the nullification of the award rendered at the case at bar was made not on the basis of any of the grounds provided by law." Assailing the above conclusion, petitioners argue that ". . . evident partiality is a state of mind that need not be proved by direct evidence but may be inferred from the circumstances of the case. It is related to intention which is a mental process, an internal state of mind that must be judged by the person's conduct and acts which are the best index of his intention." They pointed out that from the following circumstances may be inferred the arbitrators' evident partiality: 1. the material difference between the results of the arbitrators' computation of the NAV and that of petitioners; 2. the alleged piecemeal interpretation by the arbitrators of the Agreement which went beyond the clear provisions of the contract and negated the obvious intention of the parties; 3. reliance by the arbitrators on the financial statements and reports submitted by SGV which, according to petitioners, acted solely for the interests of private respondents; and 4. the finding of the trial court that "the arbitration committee has advanced no valid justification to warrant a departure from the well-settled rule in contract interpretation that if the terms of the contract are clear and leave no doubt upon the intention of the contracting parties the literal meaning of its interpretation shall control."

We find no reason to depart from the Court of Appeal's conclusion. Petitioners herein failed to prove their allegation of partiality on the part of the arbitrators. Proofs other than mere inferences are needed to establish evident partiality. That they were disadvantaged by the decision of the Arbitration Committee does not prove evident partiality. Too much reliance has been accorded by petitioners on the decision of the trial court. However, we find that the same is but an adaptation of the arguments of petitioners to defeat the petition for confirmation of the arbitral award in the trial court by private respondent. The trial court itself stated as follows: To allay any fear of petitioner that its reply and opposition, dated 11 June 1991, has not been taken into account in resolving this case, it will be well to state that the court has carefully read the same and, what is more, it has also read respondents' comment, dated 19 June 1991, wherein they made convincing arguments which are likewise adopted and incorporated herein by reference. The justifications advanced by the trial court for vacating the arbitration award are the following: (a) ". . . that the arbitration committee had advanced no valid justification to warrant a departure from the well-settled rule in contract interpretation that if the terms of the contract are clear and leave no doubt upon the intention of the contracting parties the literal meaning of its interpretation shall control; (b) that the final NAV of P47,121,468.00 as computed by herein petitioners was well within APAC's normal investment level which was at least US$1 million and to say that the NAV was merely P167,118.00 would negate Clause 6 of the Agreement which provided that the purchaser would deposit in escrow P5,146,000.00 to be held for two (2) years and to be used to satisfy any actual or contingent liability of the vendor under the Agreement; (c) that the provision for an escrow account negated any idea of the NAV being less than P5,146,000.00; and (d) that herein private respondent, being the drafter of the Agreement could not avoid performance of its obligations by raising ambiguity of the contract, or its failure to express the intention of the parties, or the difficulty of performing the same. It is clear therefore, that the award was vacated not because of evident partiality of the arbitrators but because the latter interpreted the contract in a way which was not favorable to herein petitioners and because it considered that herein private respondents, by submitting the controversy to arbitration, was seeking to renege on its obligations under the contract. That the award was unfavorable to petitioners herein did not prove evident partiality.


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That the arbitrators resorted to contract interpretation neither constituted a ground for vacating the award because under the circumstances, the same was necessary to settle the controversy between the parties regarding the amount of the NAV. The SC finds that the interpretation made by the arbitrators did not create a new contract, as alleged by herein petitioners but was a faithful application of the provisions of the Agreement. Neither was the award arbitrary for it was based on the statements prepared by the SGV which was chosen by both parties to be the "auditors." The trial court held that private respondent could not shirk from performing its obligations on account of the difficulty of complying with the terms of the contract. It said further that the contract may be harsh but private respondent could not excuse itself from performing its obligations on account of the ambiguity of the contract because as its drafter, private respondent was well aware of the implications of the Agreement. We note herein that during the arbitration proceedings, the parties agreed that the contract as prepared by private respondent, was submitted to petitioners for approval. Petitioners, therefore, are presumed to have studied the provisions of the Agreement and agreed to its import when they approved and signed the same. When it was submitted to arbitration to settle the issue regarding the computation of the NAV, petitioners agreed to be bound by the judgment of the arbitration committee, except in cases where the grounds for vacating the award existed. Petitioners cannot now refuse to perform its obligation after realizing that it had erred in its understanding of the Agreement. Petitioners also assailed the arbitrator's reliance upon the financial statements submitted by SGV as they allegedly served the interests of private respondents and did not reflect the true intention of the parties. We agree with the observation made by the arbitrators that SGV, being a reputable firm, it should be presumed to have prepared the statements in accordance with sound accounting principles. Petitioners have presented no proof to establish that SGV's computation was erroneous and biased. Petitioners likewise pointed out that the computation of the arbitrators leads to the absurd result of petitioners incurring great expense just to sell its properties. In arguing that the NAV could not be less than P5,146,000, petitioners quote Clause (B) of the Agreement as follows: CLAUSE 3(B) The consideration for the purchase of the Sale Shares by the Purchaser shall be equivalent to the Net Asset Value of the Company, . . . which the

parties HAVE FIXED at P5,146,000.00 prior to Adjustments . . . However, such quotation is incomplete and, therefore, misleading. The full text of the above provision as quoted by the arbitration committee reads as follows: (B) The consideration for the purchase of the Sale Shares by the purchaser shall be equivalent to the Net Asset Value of the Company, without the Property, which the parties have fixed at P5,146,000 prior to Adjustments plus P24,384,600. The consideration for the sale of the Sale Shares by the Vendor, is the acquisition of the property by the Vendor, through Aloha, from the Company at historical cost plus all Taxes due on said transfer of Property, and the release of all collaterals of the Vendor securing the RSBS Credit Facility. However, in the implementation of this Agreement, the parties shall designate the amounts specified in Clause 5 as the purchaser prices in the pro-forma deeds of sale and other documents required to effect the transfers contemplated in this Agreement. Thus, petitioner cannot claim that the consideration for private respondent's acquisition of the outstanding common shares of stock was grossly inadequate. If the NAV as computed was small, the result was not due to error in the computations made by the arbitrators but due to the extent of the liabilities being borne by petitioners. During the arbitration proceedings, the committee found that petitioner has been suffering losses since 1983, a fact which was not denied by petitioner. We cannot sustain the argument of petitioners that the amount of P5,146,000.00 was an initial NAV as of February 28, 1990 to which should still be added the value of tangible assets (excluding the land) and of intangible assets. If indeed the P5,146,000.00 was the initial NAV as of February 28, 1990, then as of said date, the total assets and liabilities of the company have already been set off against each other. NET ASSET VALUE is arrived at only after deducting TOTAL LIABILITIES from TOTAL ASSETS. "TOTAL ASSETS" includes those that are tangible and intangible. If the amount of the tangible and intangible assets would still be added to the "initial NAV," this would constitute double counting. Unless the company acquired new assets from February 28, 1990 up to June 19, 1990, no value corresponding to tangible and intangible assets may be added to the NAV. We also note that the computation by petitioners of the NAV did not reflect the liabilities of the company. The term "net asset value" indicates the amount of assets exceeding the liabilities as differentiated from total assets which include the liabilities. If petitioners were not satisfied, they could


62


have presented their own financial statements to rebut SGV's report but this, they did not do. Lastly, in assailing the decision of the Court of Appeals, petitioners would have this Court believe that the respondent court held that the decision of the arbitrators was not subject to review by the courts. This was not the position taken by the respondent court. The Court of Appeals, in its decision stated, thus: It is settled that arbitration awards are subject to judicial review. In the recent case of Chung Fu Industries (Philippines), Inc., et. al. v. Court of Appeals, Hon Francisco X. Velez, et. al., G. R. No. 96283, February 25, 1992, the Supreme Court categorically ruled that: It is stated expressly under Art. 2044 of the Civil Code that the finality of the arbitrators' award is not absolute and without exceptions. Where the conditions described in Articles 2038, 2039 and 2040 applicable to both compromises and arbitrations are obtaining, the arbitrators' award may be annulled or rescinded. Additionally, under Sections 24 and 25 of the Arbitration Law, there are grounds for vacating, modifying or rescinding an arbitrators' award. Thus, if and when the factual circumstances referred to in the above-cited provisions are present, judicial review of the award is properly warranted. Clearly, though recourse to the courts may be availed of by parties aggrieved by decisions or awards rendered by arbitrator/s, the extent of such is neither absolute nor all encompassing. . . . It is clear then that the Court of Appeals reversed the trial court not because the latter reviewed the arbitration award involved herein, but because the respondent appellate court found that the trial court had no legal basis for vacating the award.

rules of procedure [19.7] to be promulgated by the Supreme Court only on those grounds enumerated in Section 25 15 of Republic Act No. 876. Any other ground raised against a domestic arbitral

award shall be disregarded by the regional trial court. RA 876, Sec. 24. Grounds for vacating award {P-A-G-E} In any one of the following cases, the court must make an order vacating the award upon the petition of any party to the controversy when such party proves affirmatively that in the arbitration proceedings; (a) The award was procured by corruption, fraud, or other undue means; or (b) That there was evident partiality or corruption in the arbitrators or any of them; or (c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or more of the arbitrators was disqualified to act as such under section nine hereof, and willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights of any party have been materially prejudiced; or (d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to them was not made. Where an award is vacated, the court, in its discretion, may direct a new hearing either before the same arbitrators or before a new arbitrator or arbitrators to be c hosen in the manner provided in the submission or contract for the selection of the original arbitrator or arbitrators, and any provision limiting the time in which the arbitrators may make a decision shall be deemed applicable to the new arbitration and to commence from the date of the court's order. Where the court vacates an award, costs, not exceeding fifty pesos and disbursements may be awarded to the prevailing party and the payment thereof may be enforced in like manner as the payment of costs upon the motion in an action.

Rule 19.7. No appeal or certiorari on the merits of an arbitral award . — An agreement to refer a dispute to arbitration shall mean that the arbitral award shall be final and binding. Consequently, a party to an arbitration is precluded from filing an appeal or a petition for certiorari questioning the merits of an arbitral award.

What is the option of the court after vacating the award?

CLASS NOTES : Rule 11.9. Court action. — Unless a ground to vacate an arbitral

How do you assess the Chung Fu Rule in light of the new Special ADR Rules? In Chung Fu, the SC said that TC should have looked into the merits of the case, after a prima facie showing of the existence of grounds warranting judicial review.

If a court, after vacating an award, reverse the award? No. See 19.7 RA 9285, Sec. 41. Vacation Award A party to a domestic arbitration may question the arbitral award with the appropriate regional trial court in accordance with the

award under Rule 11.5 above is fully established, the court shall confirm the award. An arbitral award shall enjoy the presumption that it was made and released in due course of arbitration and is subject to confirmation by the court In resolving the petition or petition in opposition thereto in accordance with these Special ADR Rules, the court shall either confirm or vacate the arbitral award. The court shall not disturb the arbitral tribunal’s determination of facts and/or interpretation of law. In a petition to vacate an award or in petition to vacate an award in opposition to a petition to confirm the award, the petitioner may simultaneously apply with the Court to refer the case back to the 15

Should be Section 25 of RA 876.


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same arbitral tribunal for the purpose of making a new or revised award or to direct a new hearing, or in the appropriate case, order the new hearing before a new arbitral tribunal, the members of which shall be chosen in the manner provided in the arbitration agreement or submission, or the law. In the latter case, any provision limiting the time in which the arbitral tribunal may make a decision shall be deemed applicable to the new arbitral tribunal.

In referring the case back to the arbitral tribunal or to a new arbitral tribunal pursuant to Rule 24 of Republic Act No. 876, the court may not direct it to revise its award in a particular way, or to revise its findings of fact or conclusions of law or otherwise encroach upon the independence of an arbitral tribunal in the making of a final awa rd.

National Steel Corporation vs RTC of Lanao Date: March 11, 1999 Petitioner: National Steel Corporation Respondents: RTC of Lanao del Norte and E. Willkom Enterprises Inc Ponente: Purisima

Facts: Edward Willkom Enterprises Inc. together with Ramiro Construction and National Steel Corporation executed a contract whereby the former jointly undertook the Contract for Site Development for the latter's Integrated Iron and Steel Mills Complex to be established at Iligan City. Sometime in 1983, the services of Ramiro Construction was terminated and EWEI took over Ramiro's contractual obligation. Due to this, extensions of time for the termination of the project, initially agreed to be finished on July 17, 1983, were granted by NSC. Differences later arose, EWEI filed a civil casebefore the RTC of Lanao del Norte, Branch 06 praying for the payments of P458,381.001 with interest from the time of delay; the price adjustment as provided by PD 1594; and exemplary damages in the amount of P50,000.00 and attorney's fees. The court upon joint motion of both parties had issued an order dismissing the complaint and counterclaim . . . in view of the desire of both parties to implement Sec. 19 of the contract, providing for a resolution of any conflict by arbitration. After series of hearings, the Arbitrators rendered the decision which is the subject matter of these present causes of action, both initiated separately by the herein contending parties, substantial portion of which directs NSC to pay EWEI. The RTC affirmed.

Issue: WON the court acted with grave abuse of discretion in not vacating the arbitrator's award. Held: Ratio: A stipulation to refer all future disputes or to submit an ongoing dispute to an arbitrator is valid. RA 876, otherwise known as the Arbitration Law,

was enacted by Congress since there was a growing need for a law regulating arbitration in general. he parties in the present case, upon entering into a Contract for Site Development, mutually agreed that any dispute arising from the said contract shall be submitted for arbitration. Explicit is Paragraph 19 of subject contract. Thereunder, if a dispute should arise from the contract, the Arbitration Board shall assume jurisdiction and conduct hearings. After the Board comes up with a decision, the parties may immediately implement the same by treating it as an amicable settlement. However, if one of the parties refuses to comply or is dissatisfied with the decision, he may file a Petition to Vacate the Arbitrator's decision before the trial court. On the other hand, the winning party may ask the trial court's confirmation to have such decision enforced. It should be stressed that voluntary arbitrators, by the nature of their functions, act in a quasi-judicial capacity. As a rule, findings of facts by quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are accorded not only respect but even finality if they are supported by substantial evidence, even if not overwhelming or preponderant. As the petitioner has availed of Rule 65, the Court will not review the facts found nor even of the law as interpreted or applied by the arbitrator unless the supposed errors of facts or of law are so patent and gross and prejudicial as to amount to a grave abuse of discretion or an excess de pouvoir on the part of the arbitrators. Thus, in a Petition to Vacate Arbitrator's Decision before the trial court, regularity in the performance of official functions is presumed and the complaining party has the burden of proving the existence of any of the grounds for vacating the award, as provided for by Sections 24 of the Arbitration Law. The grounds relied upon by the petitioner were the following (a) That there was evident partiality in the assailed decision of the Arbitrators in favor of the respondent; and (b) That there was mistaken appreciation of the facts and application of the law by the Arbitrators. These were the very same grounds alleged by NSC before the trial court in their Petition to Vacate the Arbitration Award and which petitioner is reiterating in this petition under scrutiny. Petitioner's allegation that there was evident partiality is untenable. It is anemic of evidentiary support. In the case of Adamson vs. Court of Appeals, 232 SCRA 602, in upholding the decision of the Board of Arbitrators, this Court ruled that the fact that a party was disadvantaged by the decision of the Arbitration. Committee does not prove evident partiality. Proofs other than mere inference are


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needed to establish evident partiality. Here, petitioner merely averred evident partiality without any proof to back it up. Petitioner was never deprived of the right to present evidence nor was there any showing that the Board showed signs of any bias in favor of EWEI. Indeed, the allegation of evident partiality is not well-taken because the petitioner failed to substantiate the same. Anent the issue of mistaken appreciation of facts and law of the case, the petitioner theorizes that the awards made by the Board were unsubstantiated and the same were a plain misapplication of the law and even contrary to jurisprudence. To have a clearer understanding of the petition, this Court will try to discuss individually the awards made by the Board, and determine if there was grave abuse of discretion on the part of the trial court when it adopted such awards in toto.

I. P458,381.00 representing EWEI's last billing No. 16 with interest thereon at the rate of 1-1/4% per month from January 1, 1985 to actual date of payment; Petitioner seeks to bar payment of the said amount to EWEI. Since the latter failed to complete the works as agreed upon, NSC had the right to withhold such amount. The same will be used to cover the cost differential paid to another contractor who finished the work allegedly left uncompleted by EWEI. Said work cost NSC P1,225,000, and should be made chargeable to EWEI's receivables on Final Billing No. 16 issued to NSC. The query here therefore is whether there was failure on the part of EWEI to complete the work agreed upon. This will determine whether Final Billing No. 16 can be made chargeable to the cost differential paid by NSC to another contractor. After a series of hearings, the Board of Arbitrators concluded that the work was completed by EWEI. As correctly stated To authenticate the extent of unfinished work, quantity, unit cost differential and amount, NSC was required to submit copies of payment vouchers and/or job awards extended to the other contractor engaged to complete the works. The best efforts by NSC despite the multiplicity of accounting/auditing/engineering records required in a corporate complex failed to produce documentary proofs from their Iligan or Makati office despite repeated requests. NSC failed to substantiate such allusion of completion by another contractor three unfinished items of works, actual quantities accomplished and unit cost differential paid chargeable against EWEI. To affirm the work items, quantity, unit cost differential and amount of unfinished work left behind by EWEI, NSC in serving notice of contract termination to EWEI should have instead specifically

cited these obligations in detail for EWEI to perform/comply within 30 days, such failure to perform/comply should have constituted as an event in default that would have justified termination of contract of NSC with EWEI. If at all, this unfinished work may be additional/extra work awarded in 1984 to another contractor at prices higher than the unit price tendered by EWEI in 1982 and/or the discrepancy between actual quantities of work accomplished per plans versus estimated quantities of work covered by separate contract as expansion of the original project. Furthermore, under the contract sued upon, it is clear that should the Owner feel that the work agreed upon was not completed by the contractor, it is incumbent upon the OWNER to send to CONTRACTOR a letter within seven (7) days after completion of the inspection to specify the objections thereto. 9 NSC failed to comply with such requirement, and therefore it would be unfair to refuse payment to EWEI, considering that the latter had faithfully submitted Final Billing No. 16 believing that its work had been completed because NSC did not call its attention to any objectionable aspect of their project. But, what cannot be upheld is the Board's imposition of a 1-1/4% interest per month from January 1, 1985 to actual date of payment. There is nothing in the said contract to justify or authorize such an award. The trial court should have therefore disregarded the same and instead, applied the legal rate of 6% per annum, from Jan. 1, 1985 until this decision becomes final and executory. This is so because the legal rate of interest on monetary obligations not arising from loans or forebearance of credits or goods is 6% 10 per annum in the absence of any stipulation to the contrary.

(II) Price escalation with the interest rate of 11/4% per month from 1 January 1985 to actual date of payment. Petitioner contends that EWEI is not entitled to price escalation absent any stipulation to that effect in the contract under which, the contract price is fixed, citing Paragraph 2 thereof, which stipulates: 2. CONTRACT PRICE — applicable unit prices above fixed are based on the assumption that the disposal areas for cleared, grubbed materials, debris, excess filling materials and other matters that are to be disposed of or are within the boundary limits of the site, as designated in Annex A hereof. In the event that disposal areas fixed and designated in Annex A are diverted and transferred to such other areas as would be outside the limits of the site as would require additional costs to the contractor, then Owner shall be liable for such additional hauling costs of P1.45/km/m3."


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The phrase "prices above fixed" means that the contract price of the work shall be that agreed upon by the parties at the time of the execution of the contract, which is the law between them provided it is not contrary to law, morals, good customs, public order, or public policy. (Article 1306, New Civil Code). It cannot be inferred therefrom, however, that the parties are prohibited from imposing future increases or price escalation. It is a cardinal rule in the interpretation of contracts that "if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. 11 But price escalation is expressly allowed under Presidential Decree 1594, which law allows price escalation in all contracts involving government projects including contracts entered into by government entities and instrumentalities and Government Owned or Controlled Corporations (GOCCs). It is a basic rule in contracts that law is deemed written into the contract between the parties. And when there is no prohibitory clause on price escalation, the Court will allow payment therefor. Thus, petitioner cannot rely on the case of Llama Development Corporation vs. Court of Appeals and N ational Steel Corporation, GR 88 093, Resolution, Third Division, 20 Sept 1989. It is not applicable here since in that case, the contract explicitly provided that the contract price stipulated was fixed, inclusive of all costs and not subject to escalation. This, in effect, waived the provisions of PD 1594. The case under scrutiny is different as the disputed contract does not contain a similar provision. In a vain attempt to evade said law's application, they would like the Court to believe that it is an acquired asset corporation and not a government owned or controlled corporation so that they are not within the coverage of PD 1594. Whether NSC is an asset-acquired corporation or a government owned or controlled corporation is of no moment. It is not determinative of the pivot of inquiry. It bears emphasizing that during the hearings conducted by the Board of Arbitrators, there was presented documentary evidence to show that NSC, despite its being allegedly an asset acquired corporation, allowed price escalation to another contractor, Geo Transport and Construction, Inc. (GTCI). As said in the decision of a Board of Arbitrators: On the other hand, there was documentary evidence presented that NSC granted Geo Transport and Construction, Inc. (GTCI), the other favored contractor working side by side with EWEI on the site development project during the same period the GTCE was granted upon request and paid by NSC an actual sum of P6.9 million as price

adjustment compensation even without the benefit of escalation provision in the contract but allowed in accordance with PD NO. 1594 enforceable among government controlled or owned corporation. The statement is embodied in an affidavit (Exhibit "111h") submitted by affiant Jose M. Mesina, Asst. to the President and Legal Counsel of GTCI, submitted to the Arbitrators upon solicitation of EWEI, copy to NSC, on 3 October 1991. NSC did not assail the affidavit upon receipt of such document as evidence until the hearing of 19 December 1991 when the affidavit was branded by NSC counsel as incorrect and hearsay. Within 7 days reglamentary period after receipt of affidavit in 3 October 1991, the NSC had the recourse to contest the affidavit even preferably charge the affiant for slander if NSC could disprove the statements as untrue. If Petitioner seeks to refute such evidence, it should have done so before the Board of Arbitrators, during the hearings. To raise the issue now is futile. However, the same line of reasoning with respect to the first award should be used in disregarding the interest rate of 1-1/4%. The legal rate of 6% per annum should be similarly applied to the price escalation to be computed from Jan. 1, 1985 until this decision becomes final and executory.

(III) The award of P50,000 as exemplary damages and P350,000 as attorney's fees; The exemplary damages and attorneys fees awarded by the Board of Arbitrators should be deleted in light of the circumstances surrounding the case. The requirements for an award of exemplary damages, are: (1) they may be imposed by way of example in addition to compensatory damages, and only after the claimants right to them has been established; (2) that they cannot be recovered as a matter of right, their determination depending upon the amount of compensatory damages that may be awarded to the claimant; (3) the act must be accompanied by bad faith or done in a wanton, fraudulent, oppressive or malevolent manner. EWEI cannot claim that NSC acted in bad faith or in a wanton manner when it refused payment of the Final Billing No. 16. The belief that the work was never completed by EWEI and that it (NSC) had the right to make it chargeable to the cost differential paid by the latter to another contractor was neither wanton nor done in evident bad faith. The payment of legal rate of interest will suffice to compensate EWEI of whatever prejudice it suffered by reason of the delay caused by NSC. As regards the award of attorney's fees, award for attorney's fees without justification is a "conclusion without a premise, its basis being improperly left to …………….


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CLASS NOTES: National Steel Corporation is problematic. Supreme Court is wrong in substituting its own judgment.

Next Friday: 1) CIAC EO 1008 series of 1985, as amended China Chiang Jiang Energy Corp (Phils) v. Rosal Infrastructure Builders, G.R. 125706, 30 September 1996 2) Appeals Study ADR Rules very intensively. substantially modified the appellate process.

They

Take note of the wording of the Special ADR Rules – “enjoining” or “refusing to enjoining”

Section 1, Rule 43, Rules of Court – gives the impression that you can appeal from an arbitral award Whereas Special ADR Rules – review of the trial

the agreement, respondent was granted the exclusive license to distribute and sublicense the distribution of TFC in Japan. A dispute arose between the parties when petitioner accused respondent of inserting nine episodes of WINS WEEKLY, a weekly 35-minute community news program for Filipinos in Japan, into the TFC programming from March to May 2002. Petitioner claimed that these were “unauthorized insertions”

constituting a material breach of their agreement. Consequently, petitioner notified respondent of its intention to terminate the agreement effective June 10, 2002. Respondent filed an arbitration suit pursuant to the arbitration clause of its agreement with petitioner. It contended that the airing of WINS WEEKLY was made with petitioner's prior approval. It also alleged that petitioner only threatened to terminate their agreement because it wanted to renegotiate the terms thereof to allow it to demand higher fees. Respondent also prayed for damages.

court’s action Hi Precision Steel 228 SCRA 397 ABS CBN v. World 54 4 SCRA 308 3) Rule A

Class Notes – September 24, 2010 *Where the law extends to you a remedy of

appeal, but the ICC Rules of Arbitration prohibits you from taking an appeal (28.6), is there still a remedy for appeal or not? It’s waived! Article 1159 of the Civil Code!

Under the Special ADR Rules, can one appeal from an arbitral award? See ABSCBN.

ABS CBN vs WINS Date: February 11, 2008 Petitioner: ABS CBN Corporation Respondents: World Interactive Network Systems Japan Co, Ltd Facts: ABS-CBN Broadcasting Corporation entered into a licensing agreement with World Interactive Network Systems Japan Co., Ltd., a foreign corporation licensed under the laws of Japan. Under

The parties appointed Prof Tadiar to act as sole arbitrator. The arbitrator found in favor of respondent. He held that petitioner gave its approval to respondent for the airing of WINS WEEKLY as shown by a series of written exchanges between the parties. He also ruled that, had there really been a material breach of the agreement, petitioner should have terminated the same instead of sending a mere notice to terminate said agreement. Petitioner filed in the CA a petition for review under Rule 43 or, in the alternative, a petition for certiorari under Rule 65, with application for TRO and writ of preliminary injunction. Respondent, on the other hand, filed a petition for confirmation of arbitral award before RTC of QC. Petitioner filed a supplemental petition in the CA seeking to enjoin the RTC of QC from further proceeding with the hearing of respondent's petition for confirmation of arbitral award. After the petition was admitted by the appellate court, the RTC of QC issued an order holding in abeyance any further action on respondent's petition as the assailed decision of the arbitrator had already become the subject of an appeal in the CA. Respondent filed a MR but no resolution has been issued by the lower court to date. The CA dismissed the petition for lack of jurisdiction. It stated that as the TOR itself provided that the arbitrator's decision shall be final and unappealable and that no MR shall be filed, then the petition for review must fail. It ruled that it is the RTC which has jurisdiction over questions


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relating to arbitration. It held that the only instance it can exercise jurisdiction over an arbitral award is an appeal from the trial court's decision confirming, vacating or modifying the arbitral award. Issue: WON an aggrieved party in a voluntary arbitration dispute may avail of a Rule 43 or Rule 65 instead of a petition to vacate the award in the RTC

Held: Ratio: RA 876 itself mandates that it is the RTC, which has jurisdiction over questions relating to arbitration such as a petition to vacate an arbitral award. The law itself clearly provides that the RTC must issue an order vacating an arbitral award only “in any one of the . . . cases” enumerated therein. Under the legal maxim in statutory construction expressio unius est exclusio alterius, the explicit mention of one thing in a statute means the elimination of others not specifically mentioned. As RA 876 did not expressly provide for errors of fact and/or law and grave abuse of discretion (proper grounds for a petition for review under Rule 43 and a petition for certiorari under Rule 65, respectively) as grounds for maintaining a petition to vacate an arbitral award in the RTC, it necessarily follows that a party may not avail of the latter remedy on the grounds of errors of fact and/or law or grave abuse of discretion to overturn an arbitral award. In cases not falling under any of the grounds to vacate an award, the Court has already made several pronouncements that a petition for review under Rule 43 or a petition for certiorari under Rule 65 may be availed of in the CA. Which one would depend on the grounds relied upon by petitioner.

In Luzon Development Bank v. Association of Luzon Development Bank Employees, the Court

proper remedy from the adverse decision of a voluntary arbitrator, if errors of fact and/or law are raised, is a petition for review under Rule 43 of the Rules of Court. Thus, petitioner's contention that it may avail of a petition for review under Rule 43 under the circumstances of this case is correct. As to petitioner's arguments that a petition for certiorari under Rule 65 may also be resorted to, we hold the same to be in accordance with the Constitution and jurisprudence. It is well within the power and jurisdiction of the Court to inquire whether any instrumentality of the Government, such as a voluntary arbitrator, has gravely abused its discretion in the exercise of its functions and prerogatives. Any agreement stipulating that “the

decision

of

the

arbitrator shall

be

final

and

unappealable” and “that no further judicial recourse

if either party disagrees with the whole or any part of the arbitrator's award may be availed of” cannot be held to preclude in proper cases the power of judicial review which is inherent in courts. We will not hesitate to review a voluntary arbitrator's award where there is a showing of grave abuse of authority or discretion and such is properly raised in a petition for certiorari and there is no appeal, nor any plain, speedy remedy in the course of law. Significantly, Insular Savings Bank v. FEBTC definitively outlined several judicial remedies an aggrieved party to an arbitral award may undertake: (1) a petition in the proper RTC to issue an order to vacate the award on the grounds provided for in Section 24 of RA 876; (2) a petition for review in the CA under Rule 43 of he Rules of Court on questions of fact, of law, or mixed questions of fact and law; and

held that a voluntary arbitrator is properly classified as a “quasi- judicial instrumentality” and is, thus, within the ambit of Section 9 (3) of the Judiciary Reorganization Act, as amended. As such, decisions handed down by voluntary arbitrators fall within the exclusive appellate jurisdiction of the CA. This decision was taken into consideration in approving Section 1 of Rule 43 of the Rules of Court.

(3) a petition for certiorari under Rule 65 of the Rules of Court should the arbitrator have acted without or in excess of his jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction.

This rule was cited in Sevilla Trading Company v. Semana, Manila Midtown Hotel v. Borromeo, and Nippon Paint Employees UnionOlalia v. Court of Appeals. These cases held that the

petition for review under Rule 43 or petition for certiorari under Rule 65 , was wrong.

Nevertheless, although petitioner’s position

on the judicial remedies available to it was correct, we sustain the dismissal of its petition by the CA. The remedy petitioner availed of, entitled alternative


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Time and again, we have ruled that the remedies of appeal and certiorari are mutually exclusive and not alternative or successive. Proper issues that may be raised in a petition for review under Rule 43 pertain to errors of fact, law or mixed questions of fact and law. While a petition for certiorari under Rule 65 should only limit itself to errors of jurisdiction, that is, grave abuse of discretion amounting to a lack or excess of jurisdiction. Moreover, it c annot be availed of where appeal is the proper remedy or as a substitute for a lapsed appeal. A careful reading of the assigned errors reveals that the real issues calling for the CA's resolution were less the alleged grave abuse of discretion exercised by the arbitrator and more about the arbitrator’s appreciation of the issues and

evidence presented by the parties. Therefore, the issues clearly fall under the classification of errors of fact and law” questions which may be passed upon by the CA via a petition for review under Rule 43. Petitioner cleverly crafted its assignment of errors in such a way as to straddle both judicial remedies, that is, by alleging serious errors of fact and law (in which case a petition for review under Rule 43 would be proper) and grave abuse of discretion (because of which a petition for certiorari under Rule 65 would be permissible). It must be emphasized that every lawyer should be familiar with the distinctions between the two remedies for it is not the duty of the courts to determine under which rule the petition should fall. Petitioner's ploy was fatal to its cause. An appeal taken either to this Court or the CA by the wrong or inappropriate mode shall be dismissed. Thus, the alternative petition filed in the CA, being an inappropriate mode of appeal, should have been dismissed outright by the CA.

Hi Precision Steel vs Lim Kim Steel Date: December 13, 1993 Petitioner: Hi Precision Steel Center Inc Respondents: Lim Kim Steel Builders and CIAC Facts: Petitioner entered into a contract with private respondent under which the latter as Contractor was to complete a P21 M construction project owned by the former within a period of 153 days, i.e. from 8 May 1990 to 8 October 1990. The project completion date was first moved to 4 November 1990. On that date, however, only 75.8674% of the project was actually completed. Petitioner attributed this non-

completion to Steel Builders which allegedly had frequently incurred delays during the original contract period and the extension period. Steel Builders insisted that the delays in the project were either excusable or due to Hi-Precision's own fault and issuance of change orders. The project was taken over on 7 November 1990, and eventually completed on February 1991, by Hi-Precision. Steel Builders filed a "Request for Adjudication" with CIAC. In its Complaint filed with the CIAC, Steel Builders sought payment of its unpaid progress buildings, alleged unearned profits and other receivables. Hi-Precision, upon the other hand, in its Answer and Amended Answer, claimed actual and liquidated damages, reimbursement of alleged additional costs it had incurred in order to complete the project and attorney's fees. The CIAC formed an Arbitral Tribunal with three (3) members. After the arbitration proceeding, the Arbitral Tribunal rendered a unanimous ordering petitioner to pay the Contractor the amount of P6,400,717.83 and all other claims of the parties against each other are deemed compensated and offset. Upon MR, the Arbitral Tribunal issued an Order which reduced the net amount due to contractor Steel Builders to P6,115,285.83. In its Award, the Arbitral Tribunal stated that it was gui ded by Articles 1169, 1192 and 2215 CC. With such guidance, the arbitrators concluded that (a) both parties were at fault, though the Tribunal could not point out which of the parties was the first infractor; and (b) the breaches by one party affected the discharge of the reciprocal obligations of the other party. With mutual fault as a principal premise, the Arbitral Tribuna l denied (a) petitioner 's claims for the additional costs allegedly incurred to complete the project; and (b) private respondent's claim for profit it had failed to earn because of petitioner's take over of the project. Petitioner now asks this Court to set aside the Award, contending basically that it was Steel Builders who had defaulted on its contractual undertakings and so could not be the injured party and should not be allowed to recover any losses it may have incurred in the project. Petitioner insists it is still entitled to damages, and claims that the Arbitral Tribunal com mitted grave abuse o f discretion when it allowed certain claims by Steel Builders and offset them against claims of Hi-Precision. Issue: WON the CIAC should be impleaded Held:

No


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Ratio: We note that the Arbitral Tribunal has not been impleaded as a respondent in the Petition at bar. The CIAC has indeed been impleaded; however, the Arbitral Award was not rendered by the CIAC, but rather by the Arbitral Tribunal. Moreover, under Section 20 of EO 1008, it is the Arbitral Tribunal, or the single Arbitrator, with the concurrence of the CIAC, which issues the writ of execution requiring any sheriff or other proper officer to execute the award. The Arbitral Tribunal which rendered the Award sought to be reviewed and set aside, should be impleaded even though the defense of its Award would presumably have to be carried by the prevailing party. Petitioner Hi-Precision apparently seeks review of both under Rule 45 and Rule 65 of the Rules of Court. We do not find it necessary to rule which of the two: a petition for review under Rule 45 or a petition for certiorari under Rule 65 — is necessary under Executive Order No. 1008, as amended; this issue was, in any case, not squarely raised by either party and has not been properly and adequately litigated. Issue: WON petitioner is entitled to relief Held:

under the aegis of the CIAC. Consideration of the animating purpose of voluntary arbitration in general, and arbitration under the aegis of the CIAC in particular, requires us to apply rigorously the above principle embodied in Section 19 that the Arbitral Tribunal's findings of fact shall be final and inappealable. Voluntary arbitration involves the reference of a dispute to an impartial body, the members of which are chosen by the parties themselves, which parties freely consent in advance to abide by the arbitral award issued after proceedings where both parties had the opportunity to be heard. The basic objective is to provide a speedy and inexpensive method of settling disputes by allowing the parties to avoid the formalities, delay, expense and aggravation which commonly accompany ordinary litigation, especially litigation which goes through the entire hierarchy of courts. EO1008 created an arbitration facility to which the construction industry in the Philippines can have recourse. The EO was enacted to encourage the early and expeditious settlement of disputes in the construction industry, a public policy the implementation of which is necessary and important for the realization of national development goals.

No

Ratio: Hi-Precision may be seen to be making two (2) basic arguments: (a) Petitioner asks this Court to correct legal errors committed by the Arbitral Tribunal, which at the same time constitute grave abuse of discretion amounting to lack of jurisdiction on the part of the Arbitral Tribunal; and (b) Should the supposed errors petitioner asks us to correct be characterized as errors of fact, such factual errors should nonetheless be reviewed because there was "grave abuse of discretion" in the misapprehension of facts on the part of the Arbitral Tribunal. EO 1008, as amended, provides, in its Section 19, as follows: Sec. 19. Finality of Awards. — The arbitral award shall be binding upon the parties. It shall be final and inappealable except on questions of law which shall be appealable to the Supreme Court. Section 19 makes it crystal clear that questions of fact cannot be raised in proceedings before the Supreme Court — which is not a trier of facts — in respect of an arbitral award rendered

Aware of the objective of voluntary arbitration in the labor field, in the construction industry, and in any other area for that matter, the Court will not assist one or the other or even both parties in any effort to subvert or defeat that objective for their private purposes. The Court will not review the factual findings of an arbitral tribunal upon the artful allegation that such body had "misapprehended the facts" and will not pass upon issues which are, at bottom, issues of fact, no matter how cleverly disguised they might be as "legal questions." The parties here had recourse to arbitration and chose the arbitrators themselves; they must have had confidence in such arbitrators. The Court will not, therefore, permit the parties to relitigate before it the issues of facts previously presented and argued before the Arbitral Tribunal, save only where a very clear showing is made that, in reaching its factual conclusions, the Arbitral Tribunal committed an error so egregious and hurtful to one party as to constitute a grave abuse of discretion resulting in lack or loss of jurisdiction. Prototypical examples would be factual conclusions of the Tribunal which resulted in deprivation of one or the other party of a fair opportunity to present its position before the Arbitral Tribunal, and an award obtained through fraud or the corruption of arbitrators. Any other, more relaxed, rule would result in setting at naught the basic objective of a


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voluntary arbitration and would reduce arbitration to a largely inutile institution.

The first "legal issue" submitted by the Petition is the claimed misapplication by the Arbitral Tribunal of the first and second paragraphs of Article 1911 CC. Hi-Precision contends energetically that it is the injured party and that Steel Builders was the obligor who did not comply with what was incumbent upon it, such that Steel Builders was the party in default and the entity guilty of negligence and delay. As the injured party, Hi-Precision maintains that it may choose between the fulfillment or rescission of the obligation in accordance with Article 1191, and is entitled to damages in either case. Thus, HiPrecision continues, when the contractor Steel Builders defaulted on the 153rd day of the original contract period, Hi-Precision opted for specific performance and gave Steel Builders a 30-day extension period with which to complete the project.

A second "legal issue" sought to be raised by petitioner Hi-Precision relates to the supposed failure of the Arbitral Tribunal to apply the doctrines of estoppel and waiver as against Steel Builders. The Arbitral Tribunal, after declaring that the parties were mutually at fault, proceeded to enumerate the faults of each of the parties. One of the faults attributed to petitioner Hi-Precision is that it had failed to give the contractor Steel Builders the required 15-day notice for termination of the contract. This was clearly a finding of fact on the part of the Tribunal, supported by the circumstance that per the record, petitioner had offered no proof that it had complied with such 15-day notice required under Article 28.01 of the General Conditions of Contract forming part of the Contract Documents. Petitioner Hi-Precision's argument is that a written Agreement dated 16 November 1990 with Steel Builders concerning the take over of the project by Hi-Precision, constituted waiver on the part of the latter of its right to a 15-day notice of contract termination. Whether or not that Agreement dated 16 November 1990 (a document not submitted to this Court) is properly characterized as constituting waiver on the part of Steel Builders, may be conceded to be prima facie a question of law; but, if it is, and assuming arguendo that the Arbitral Tribunal had erred in resolving it, that error clearly did not constitute a grave abuse of discretion resulting in lack or loss of jurisdiction on the part of the Tribunal.

What petitioner Hi-Precision, in its above argument, disregards is that the determination of whether Hi-Precision or Steel Builders was the "injured party" is not to be resolved by an application of Article 1191. That determination is eminently a question of fact, for it requires ascertainment and identification of which the two (2) contending parties had first failed to comply with what is incumbent upon it. In other words, the supposed misapplication of Article 1191, while ostensibly a "legal issue," is ultimately a question of fact, i.e., the determination of the existence or non-existence of a fact or set of facts in respect of which Article 1191 may be properly applied. Thus, to ask this Court to correct a claimed misapplication or non-application of Article 1191 is to compel this Court to determine which of the two (2) contending parties was the "injured party" or the "first infractor." As noted earlier, the Arbitral Tribunal after the prolonged arbitration proceeding, was unable to make that factual determination and instead concluded that both parties had committed breaches of their respective obligations. We will not review, and much less reverse, that basic factual finding of the Arbitral Tribunal.

A third "legal issue" posed by Hi-Precision relates to the supposed failure on the part of the Arbitral Tribunal "to u phold the suprem acy of 'the law between the parties' and enforce it against private respondent [Steel Builders]." The "law between that parties" here involved is the "Technical Specifications" forming part of the Contract Documents. Hi-Precision asserts that the Arbitral Tribunal did not uphold the "law between the parties," but instead substituted the same with "its [own] absurd inference and 'opinion' on mud." Here again, petitioner is merely disguising a factual question as a "legal issue," since petitioner is in reality asking this Court to review the physical operations relating, e.g., to site preparation carried out by the contractor Steel Builders and to determine whether such operations were in accordance with the Technical Specifications of the project. The Arbitral Tribunal resolved Hi-Precision's claim by finding that Steel Builders had complied substantially with the Technical Specifications. This Court will not pretend that it has the technical and engineering capability to review the resolution of that factual issue by the Arbitral Tribunal.

Examination of the Petition at bar reveals that it is essentially an attempt to re-assert and relitigate before this Court the detailed or itemized factual claims made before the Arbitral Tribunal under a general averment that the Arbitral Tribunal had "misapprehended the facts" submitted to it. In the present Petition, too, Hi-Precision claims that the Arbitral Tribunal had committed grave abuse of discretion amounting to lack of jurisdiction in reaching its factual and legal conclusions.

Law 160A – Alternative Dispute Resolution (Prof. A. Autea) Salma F. Angkaya | AY 2010-2011, 1 st semester Special thanks to Krizelle Poblacion for her great digests!

Finally, the Petition asks this Court to "review serious errors in the findings of fact of the [Arbitral Tribunal]." In this section of its Petition, HiPrecision asks us to examine each item of its own claims which the Arbitral Tribunal had rejected in its Award, and each claim of the contractor Steel Builders which the Tribunal had granted. In respect of each item of the owner's claims and each item of the contractor's claims, Hi-Precision sets out its arguments, to all appearances the same arguments it had raised before the Tribunal. As summarized in the Arbitral Award, Contractor's Claims were as follows: We consider that in asking this Court to go over each individual claim submitted by it and each individual countering claim submitted by Steel Builders to the Arbitral Tribunal, petitioner HiPrecision is asking this Court to pass upon claims which are either clearly and directly factual in nature or require previous determination of factual issues. This upon the one hand. Upon the other hand, the Court considers that petitioner Hi-Precision has failed to show any serious errors of law amounting to grave abuse of discretion resulting in lack of jurisdiction on the part of the Arbitral Tribunal, in either the methods employed or the results reached by the Arbitral Tribunal, in disposing of the detailed claims of the respective parties.

CHINA CHIANG

Was there an arbitration clause in China Chiang? CIAC jurisdiction vs. ICC jurisdiction? Sir doesn’t know exactly what the answer is.

How is the UNCITRAL different from ICC Rules? Uncitral – no petition for review; adhoc; but there’s nothing to prevent party to adopt institutional; final and binding (32.2) ICC – with petition for review; insituttional; final and binding (28.6), but ICC is more strongly worded.

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72


REPUBLIC OF THE PHILIPPINES REGIONAL TRIAL COURT NATIONAL CAPITAL JUDICIAL REGION QUEZON CITY, BRANCH _____ MANUFACTURING CORPORATION Petitioner,

Sp .Proc. No. _____________ For: Enforcement of Arbitration Agreement

- versus -

SUPPLIER CORPORATION Respondents. x----------------------------------------------x

PETITION FOR ENFORCEMENT OF ABITRATION AGREEMENT Petitioner MANUFACTURING CORPORATION, by counsel, respectfully states that:

I.

PARTIES

1. Petitioner MANUFACTURING CORPORATION is a domestic corporation with business address at 123 High Rise, Gil Puyat Street, Makati City, where it may be served with pleadings, motions and other processes. 2. Respondent SUPPLIER CORPORATION is a domestic corporation with business address at 456 Low Rise, Makati Avenue, Makati City, where it may be served with pleadings, motions and other processes.

II.

FACTS

3.

On November 20, 2010, P & R entered into a contract for the construction of a building.

4.

Contained in the construction contract (Attached as Annex “A”) is an arbitration clause in the following tenor: “32. ARBITRATION

32.1 If at any time a dispute or claim arises out of or in connection with the Agreement the parties shall endeavor to settle such amicably, failing which it shall be referred to arbitration by a single arbitrator in London, such arbitrator to be appointed by agreement between the Lines within 14 days after service by one Line upon the other of a notice specifying the nature of the dispute or claim and requiring reference of such dispute or claim to arbitration pursuant to this Article.”

5.

On February 20, 2010, a dispute arose regarding the construction contract.

6.

P sent R a Demand for Arbitration (Attached Annex “B”) bu t R failed to respond within fifteen (15) days after receipt

7.

On May 15, 2010, P filed with the Clerk of the Court of the RTC, a copy of the demand for arbitration under the xxx

thereof.

PRAYER WHEREFORE, in view of the foregoing, petitioner respectfully prays that this Honorable Court issue an order directing that the arbitration agreement be enforced in the manner provided for in the arbitration of clause of the container contract. Petitioner also prays for such other reliefs as may be deemed just or equitable under the premises. Respectfully submitted. Quezon City; 29 July 2010.

ATTY. ANNA MARIE F. ROXAS IBP Lifetime Member No. 12345; Pasig City PTR No. 67890; 08/01/10; Pasig City SC Roll No. 55555 MCLE No. III – 22222


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VERIFICATION16 AND CERTIFICATION OF NON-FORUM SHOPPING I, JUAN DE LA CRUZ , of legal age, single, Filipino, with residence and postal address at 31 Lacson St., Quezon City, after being duly sworn on oath in accordance with law, hereby voluntarily depose and say: 1.

That I am the Petitioner in the above-entitled case;

2.

That I have caused the preparation of the foregoing Petition;

3. That I have read the contents thereof and the same are true and correct to the best of my knowledge and based on authentic records in my possession; 4.

That I certify to the authenticity of the documents attached to the Petition;

5. That I hereby certify that I have not commenced any action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any tribunal or agency; 6. That if I should hereafter learn that a similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or any tribunal or agency, I undertake to immediately report the same within five (5) days therefrom to the court or agency wherein the original pleading and sworn certification contemplated in Administrative Circular No. 04-94 of the Supreme Court has been filed.

JUAN DE LA CRUZ Affiant - JURAT - SECRETARY’S CERTIFICATE ATTESTED: xxxxxx President PLUS: Jurat - EXPLANATION -

REQUEST FOR AND NOTICE OF HEARING -

Copy Furnished: xxxxx

16

When made by a lawyer, verification shall mean a statement under oath by a lawyer signing a pleading/motion for delivery to t he Court or to the parties that he personally prepared the pleading/motion, that there is sufficient factual basis for the statements of fact stated therein, that there is sufficient basis in the facts and the law to support the prayer for relief therein, and that the pleading/motion is filed in good faith and is not interposed for delay. Formatted: Font:

(Default) Arial, 8 pt, English (Philippines)

Alternative Dispute Resolution(ADR)

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