Professional Documents
Culture Documents
Arbitration
- Private and confidential
- Parties may select the arbitrator, unless the
parties fail to agree.
Litigation
- Public
- Parties cannot agree on
officer because the judge is raffl
Plaintiff vs.
Respondent
Defendant
Arbitrator
Judge
Stenographer
Court Reporter
Ex.
- Parties are able to select their arbitrators or to participate in the
process for the selection of their arbitrators (the number of arbitrators,
their qualifications, the period for their selection).
Arbitration
- Award cannot be set aside by Domestic
a court.
The following requirements of an agreement to arbitrate under Sec. 4
RA 876 are:
International Arbitration
An arbitration is international if:a) It must be in writing; and
b) It must be subscribed by the parties or their representatives
a) The parties to an arbitration agreement
have, at the time of the conclusion
of the
To subscribe
means to write underneath, as ones name; to sign at the
agreement, their places of end
business
in
of a document.
different states; or
International Commercial Arbitration
b) One of the following places
situated requirements of an agreement to arbitrate under Art.
Theisfollowing
outside the State in which the7(2)
parties
have
of the
Model Law are:
their places of business:
a) It is contained in a document signed by the parties
1. The place of arbitration if determined in,
or pursuant to the arbitration agreement;
b) Its content is recorded in any form, whether or not the arbitration
2. Any place where a substantial
part of the
agreement
or contract has been concluded orally, by conduct, or by
obligations of the commercial other
relationship
meansis
to be performed or the place with which the
subject-matter of the dispute isc)most
closely
It is contained
in an exchange of statements of claim and defence in
connected
which the existence of an agreement is alleged by one party and no
denied by the other;
Irrespective of the fact that the main contract is invalid, the arbitration
clause/agreement still remains valid and enforceable.
VI. COMMENCEMENT OF ARBITRATION
Mode of Commencement of Arbitration
An agreement to arbitrate is a contract, the relation of the parties is
contractual, and the rights and liabilities of the parties are controlled
by the law of contracts.
An arbitration agreement is the law between the parties. They are,
therefore, expected to abide by it in good faith.
The manner of commencing the arbitration proceedings depends on
the rules adopted by the parties.
In Institutional Arbitration (whether Domestic or International)
- The rules of the arbitration institution adopted by the parties in their
arbitration agreement provide the procedure for commencing the
arbitration proceedings.
In Ad Hoc Arbitration
- Since there is no agreed procedure by the parties, the law provides
for the manner of commencing arbitration.
Demand For Arbitration
In the absence of agreed rules for the commencement and conduct of
arbitration proceedings, the law provides guidance as set below.
In Ad Hoc Domestic Arbitration
- The arbitration is instituted by the service by either party upon the
other a demand for arbitration in accordance with the arbitration
contract. (Sec. 5(a), RA 876)
Such demand shall set forth:
1) The nature of the controversy
2) The amount involved, if any; and
3) The relief sought,
4) Together with a true copy of the contract providing for arbitration
The court shall not enjoin the arbitration proceedings during the
pendency of the petition.
Judicial recourse to the court shall not prevent the arbitral tribunal from
continuing the proceedings and rendering its award. (Rule 3.18(B),
SAR)
The aggrieved party may file a motion for reconsideration of the order
of the court. The decision of the court shall, however, not be subject to
appeal. The ruling of the court affirming the arbitral tribunals
jurisdiction shall not be subject to a petition for certiorari. The ruling of
the court that the arbitral tribunal has no jurisdiction may be the
subject of a petition for certiorari. (Rule 3.19, SAR)
If the arbitral tribunal renders a final arbitral award and the Court has
not rendered a decision on the petition from the arbitral tribunals
preliminary ruling affirming its jurisdiction, that petition shall become
ipso facto moot and academic and shall be dismissed by the Regional
Trial Court. The dismissal shall be without prejudice to the right of the
aggrieved party to raise the same issue in a timely petition to vacate
or set aside the award. (Rule 3.21, SAR)
Nature of Courts Jurisdiction Whether Before or After
Arbitration Commences
When a court is called upon to exercise limited and special jurisdiction,
that court cannot stray to matters outside the area of its declared
authority or beyond what has been expressly invested by law.
In an action for enforcement of arbitration agreement under Sec. 6 of
RA 876, the law explicitly confines the courts authority only to the
determination of whether or not there is an agreement in writing
providing for arbitration.
- The duty of the court is not to resolve the merits of the parties claims
but only to determine if they should proceed to arbitration or not.
Liability of Arbitrators
Arbitrators have the same civil liability for acts done in the
performance of their duties as that of public officers as provided in Sec.
38(1), Ch. 9, Book I of the Administrative Code of 1987.
- This means that an arbitrator shall not be civilly liable for acts done in
the performance of his official duties, unless there is a clear showing of
bad faith, malice, or gross negligence.
Parties Participation in the Appointment of Arbitrators
It lies at the heart of the concept of party autonomy that the parties
should have the power to appoint the arbitrator(s) or to participate in
the process of appointment.
The parties are free to determine the number of arbitrators. Failing
such determination, the number of arbitrators shall be 3. (Art. 10,
Model Law).
- This rules applies to both Domestic (Sec. 33, RA 9285) and
International (Sec. 19, RA 9285) arbitration conducted in the
Philippines.
While the parties are free to agree on any procedure for the
appointment of arbitrators, any clause giving one of the parties power
to choose more arbitrators than the other is void and of no effect. (Art.
2045, Civil Code)
VIII. ARBITRATORS
A. APPOINTMENT OF ARBITRATORS
Rule 7.3. Venue. - The challenge shall be filed with 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.
Rule 7.4. Grounds. - An arbitrator may be challenged on any of the
grounds for challenge provided for in Republic Act No. 9285 and its
implementing rules, Republic Act No. 876 or the Model Law. The
nationality or professional qualification of an arbitrator is not a ground
to challenge an arbitrator unless the parties have specified in their
arbitration agreement a nationality and/or professional qualification for
appointment as arbitrator.
B. CHALLENGE OF ARBITRATORS
Challenging an arbitrator is the remedy available to a party in order to
apply for the disqualification of an arbitrator.
The
Arbitral
Proceedings
in
International
Commercial
Arbitration
Similar to Domestic Arbitration, how the proceedings will be conducted
in International Commercial Arbitration depends on the agreement of
the parties.
- The parties are free to agree on the procedure to be followed by the
arbitral tribunal in conducting the proceedings. (Article 19(1), Model
Law)
- The procedure agreed upon by the parties may be the institutional
arbitration rules adopted by the parties in their arbitration agreement.
Whatever is the procedure is to be observed, it is important that the
parties shall be treated with equality and each party shall be given a
full opportunity of presenting his case.
The parties may offer such evidence as they desire, and shall produce
additional evidence as the arbitrators shall require or deem necessary
to an understanding and determination of the dispute.
All of the arbitrators appointed must attend all the hearings and hear
all the allegations and proofs of the parties. (Sec. 14, RA 876)
- The arbitrators shall be the sole judge of the relevancy and
materiality of the evidence offered or produced, and shall not be bound
to conform to the Rules of Court pertaining to evidence.
- The arbitrators may make an ocular inspection of any matter or
premises which are in dispute, but such inspection shall be made only
in the presence of all parties to the arbitration, unless any party who
shall have received notice thereof fails to appear, in which event such
inspection shall be made in the absence of such party. (Sec. 15, RA
876)
Under the Model Law, a pleat that the arbitral tribunal does not have
jurisdiction shall be raised not later than the submission of the
Statement of Defence.
In addition, a plea that the arbitral tribunal is exceeding the scope of
its authority shall be raised as soon as the matter alleged to be beyond
the scope of its authority is raised during the arbitral proceedings.
Unless otherwise agreed by the parties, the arbitral tribunal (a) may
appoint one or more experts to report to it on specific issues to be
determined by the arbitral tribunal, or (b) may require a party to give
the expert any relevant information or to produce or to provide access
to, any relevant documents, goods or other property for his inspection.
C. ASSISTANCE IN TAKING EVIDENCE
- A petition for a protective order may be filed with the RTC where that
order would be implemented. (Rule 10.3, Special ADR Rules)
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.
(Rule 4.7, Special ADR Rules)
As a general rule, it is not ministerial on the part of the court to grant a
motion to suspend proceedings, unless it finds the arbitration
agreement null and void, inoperative or incapable of being performed.
Despite the pendency of the action referred to in Rule 4.1, above,
arbitral proceedings may nevertheless be commenced or continued,
and an award may be made, while the action is pending before the
court.
(Rule 4.8, Special ADR Rules)
Referral to Arbitration is a Recognition of Party Autonomy
It is the general 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
Doctrine: Where a party has already filed a complaint with the trial
court without prior recourse to arbitration, the proper procedure to
enable an arbitration panel to resolve the parties dispute pursuant to
their contract is for the trial court to stay the proceedings. After the
arbitration proceeding has been pursued and completed, then the trial
court may confirm the award made by the arbitration panel.
- The dangerous precedent which can be seen from this case is that an
arbitration agreement can be conveniently set aside by the
involvement, in an otherwise arbitrable dispute, of other parties who
are not parties to the arbitration agreement.
- This means that a party, at its option, may either invoke the power of
the arbitral tribunal or the power of the court in order to obtain interim
measures of protection.
Before the constitution of the arbitral tribunal, the court is the only
possible source of interim relief.
But once the arbitral tribunal has been constituted, a party may apply
for and obtain interim relief either from the arbitral tribunal or from the
court.
However, if the court has granted interim relief before the constitution
of the arbitral tribunal and, after the constitution of the arbitral
tribunal, the court-granted interim relief is presented to the arbitral
tribunal as an issue, then the arbitral tribunal has the power to modify
the interim relief previously granted by the court.
To what extent may the arbitral tribunal modify the interim relief
previously granted by the court? The answer to this query was
clarified by the Special ADR Rules.
The power of the court to grant interim relief under Sec. 14 of RA 876,
without qualification, was maintained by Sec. 28 of RA 9285 up to that
point only before the constitution of the arbitral tribunal.
Under RA 9285, it allows a Regional Trial Court to grant interim or
provisional relief, including preliminary injunction, to parties in an
arbitration case prior to the constitution of the arbitral tribunal.
After the constitution of the arbitral tribunal and during arbitral
proceedings, the general rule now is that a request for an interim
measure of protection may be made with the arbitral tribunal.
Exception: a request for an interim measure of protection, after the
constitution of the arbitral tribunal and during arbitral proceedings,
may be made with the court only to the extent that the arbitral tribunal
has no power to act on the request or is unable to act effectively.
This is now the rule for both domestic arbitration and international
commercial arbitration conducted in the Philippines.
The following grounds indicate the nature of the reasons that the court
shall consider in granting the relief:
a) The need to prevent irreparable loss or injury
b) The need to provide security for the performance of any
obligation
c) The need to produce or preserve evidence
d) The need to compel any other appropriate act or omission
(Special ADR Rules, Rule 5.4)
The petition for an interim measure of protection may be filed with the
RTC, which has jurisdiction over any of the following places:
a) Where the principal place of business of any of the parties to
arbitration is located
b) Where any of the parties who are individuals resides
c) Where any of the acts sought to be enjoined are being
performed, threatened to be performed or not being performed
d) Where the real property subject of arbitration, or a portion
thereof is situated
(Special ADR Rules, Rule 5.3)
The comment/opposition must be filed within 15 days from service of
the petition.
- The comment/opposition should state the reasons why the interim
measures of protection should not be granted.
Court Action
The court shall balance the relative interests of the parties and
inconveniences that may be caused, and on that basis resolve the
matter within 30 days from:
a) Submission of the opposition, or
b) Upon lapse of the period to file the same, or
c) From termination of the hearing that the court may set only if
there is a need for clarification or further argument
(Special ADR Rules, Rule 5.9)
After notice and hearing, the court may either grant or deny the
petition for an interim measure of protection.
In the event that the losing party refuses to voluntarily comply with the
arbitral award, then the need arises for the winning party to obtain a
judicial confirmation of the arbitral award.
At any time after the lapse of 30 days from receipt by the petitioner of
the arbitral award, he may petition the court to confirm that award.
(Special ADR Rules, Rule 11.2[A])
The petition for confirmation of a domestic arbitral award may be filed
with the RTC having jurisdiction over the place in which one of the
parties is doing business, where any of the parties reside or where
arbitration proceedings were conducted. (Special ADR Rules, Rule
11.3)
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. The court shall confirm the award unless it is vacated,
modified, or corrected.
- The court shall not disturb the arbitral tribunals determination of
facts and/or interpretation of the law.
Effect of Judicial Confirmation of Arbitral Award
The judgment confirming an arbitral award shall be docketed as if it
were rendered in an action. It shall have the same force and effect in
all respects, as, and be subject to all the provisions relating to, a
judgment in an action, and it may be enforced as if it had been
rendered in the court in which it is entered.
- A domestic arbitral award when confirmed shall be enforced in the
same manner as final and executory decisions of the RTC.
Correction or Modification of Domestic Arbitral Award
In any one of the following cases, the court must make an order
modifying or correcting the arbitral award, upon the application of any
party to the controversy which was arbitrated:
a) Where there was an evident miscalculation of figures or an
evident mistake in the description of any person, thing or
property referred to in the award
(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 only that part of the award which contains decisions on
matters submitted to arbitration may be enforced; 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 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 of the dispute is not capable of settlement by
arbitration under the law of the Philippines; or
(ii). The recognition or enforcement of the award 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.
(Special ADR Rules, Rule 12.4)
6 Exclusive Grounds to Set Aside an Arbitral Award:
1. The first ground deals with the validity of the arbitration agreement
- either the arbitration agreement is not valid under the applicable law,
or a party to the arbitration agreement suffers from some legal
incapacity to enter into the arbitration agreement.
2. The second ground raises a due process issue
- either a party was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings, or that party was unable to
present his case.
3. The third ground looks into the jurisdictional compliance of the
arbitral award with the arbitration agreement
- when the arbitral award deals with a dispute not contemplated by or
not falling within the terms of the submission to arbitration, or contains
matters beyond the scope of the submission to arbitration.
4. The fourth ground looks into procedural compliance with the
arbitration agreement
- when the composition of the arbitral tribunal or when the conduct of
the arbitral proceedings is not in accordance with the agreement of the
parties.
5. The fifth ground has reference to the arbitrability of the dispute
- when the subject matter of the dispute is not capable of settlement
by arbitration under Philippine law.
6. The sixth ground raises a public policy issue
- when the recognition or enforcement of the award would be contrary
to public policy.
C. FOREIGN ARBITRAL AWARD
Concept of Foreign Arbitration Under Philippine Law
A foreign arbitral award is defined in Rule 1.11(d) of the Special ADR
Rules as one made in a country other than the Philippines.
- Philippine law defines a foreign arbitration as one conducted in a
country other than the Philippines.
Adoption of the New York Convention in the Philippines
(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 or, failing
such agreement, was not in accordance with the law of the country
where 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 that award
was made.
(Special ADR Rules, Rule 13.4)
Recognition and enforcement of a foreign arbitral award may also be
refused if the court finds that:
(i). The subject-matter of the dispute is not capable of settlement or
resolution by arbitration under Philippine law; or
(ii). The recognition or enforcement of the award would be contrary to
public policy.
(Special ADR Rules, Rule 13.4)
The court shall disregard any ground for opposing the recognition and
enforcement of a foreign arbitral award other than those enumerated
above.
The court can deny recognition and enforcement of a foreign arbitral
award only upon the grounds provided in Art. V of the New York
Convention, but shall have no power to vacate or set aside a foreign
arbitral award.
Tuna Processing, Inc. vs. Philippine Kingford, Inc., GR No.
185582, 29 February 2012
the parties with the same court, in which case, the court shall proceed
summarily to hear the petition, in accordance with such rules of
procedure as may be promulgated by the Supreme Court.
(d) The parties may agree in the settlement agreement that the
mediator shall become a sole arbitrator for the dispute and shall treat
the settlement agreement as an arbitral award which shall be subject
to enforcement under Republic Act No. 876, otherwise known as the
Arbitration Law, notwithstanding the provisions of Executive Order No.
1008 for mediated dispute outside of the CIAC.
A mediated settlement agreement (MSA) is a product of a successful
mediation.
To enforce the MSA The parties may (1) deposit this with the court or
(2) convert this to an arbitral award so that, in the event of breach, it
would be enforced as if there was an arbitral award. In the latter case,
there is no need to deposit the MSA in court.
Rule 15 of Special ADR Rules apply to private mediation and courtreferred mediation. Court-annexed mediation is governed by circulars
of the SC.
Any party to a mediation that is not court-annexed may deposit with
the court the written settlement agreement, which resulted from that
mediation. (Rule 15.1, Special ADR Rules)