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The settlement of controversies by arbitration is an ancient practice at common law. In its broad sense it is a substitution, by consent of parties, of another tribunal for the tribunals provided by the ordinary processes of law. Its object is the final disposition, in a speedy and inexpensive way, of the matters involved, so that they may not become the subject of future litigation between the parties.

 Spanish Law of Civil Procedure

Repealed prior to the 20th century

R.A. No. 876 (The Arbitration Law)

1953

New York Convention on the Recognition & Enforcement of Foreign Arbitral Awards
1967

The New Civil Code that was passed in 1949 contained several provisions on arbitration, but these provisions did not provide a comprehensive legal framework. They merely laid down certain principles.

Then, in 2004, Congress

passed Republic Act No.

9285, otherwise known

as the

Alternative Dispute
Resolution Act of 2004.

The efforts of Congress and the judiciary at

improving the system of arbitration are welcome and timely. Today, two contemporary circumstances, one a local problem, the other an international phenomenon, acutely highlight the need to further promote and

develop arbitration: hopelessly clogged court

dockets and growing globalization.

Arbitration is an alternative to, or a substitute for, traditional litigation in court. Why do we need an alternative to the traditional court litigation?
A review of relevant statistics relating to our courts provides the answer.

Recent data from the Supreme Court shows that, for the period January to November 2005, the cases filed continue to outnumber the cases resolved at the Regional Trial Court (RTC), Metropolitan Trial Court (MeTC), Municipal Trial Court in Cities (MTCC), Municipal Trial Court (MTC), Municipal Circuit Trial Court (MCTC) levels.

As of 30 November 2004, the total number of pending cases was 785,670, with the trial courts bearing the brunt of the caseload as follows:

RTC 349,085 MeTC 144,408

MTCC 115,391

MCTC 65,692

MTC 85,452

Not surprisingly, the data likewise shows that the

problem of the shortage in

judges has persisted through the years. The vacancy rate

has hovered at around 30% on

average.

RTC level is at 15.5% (148 vacancies) MeTC level is at 26.83% (22 vacancies)

MTCC level is at 23.90% (49

vacancies)

MTC level is at 38.92% (151 vacancies)

MCTC level is 53.62% (252 vacancies)

This shortage in judges is largely due to the relatively

low pay of judges. Based on figures as of January

2005, an:

RTC judge

MCTC and MTC MeTC judge receives slightly less

receives
P44,416.33 monthly in

judges receive
P36,501 monthly in

salary and
allowances

salary and
allowances

The obvious solution to the problem is to increase the number of judges. However, this is easier said than done. The salaries of the judges are not determined by market forces but are subject to budget constraints and the priorities of our lawmakers.

The result is that our courts have not been able to function efficiently. While there is no ready data on the average

number of years that it takes the courts

to resolve disputes, anecdotal evidence shows that it usually takes 3-5 years for a case to be resolved at the trial court level, and another 2-4 years for a case to be resolved on appeal.

Under the circumstances, the need to promote arbitration becomes pressing.

Arbitration directly benefits the parties and indirectly benefits the courts since it diverts cases away from them and into the hands of arbitrators with much lesser caseloads. This indirect benefit has been recognized both by Congress and the Supreme Court.

The enactment of R.A. No. 9285...

It came 50 years after the passage of the countrys first arbitration law, Republic Act No. 876, It is certainly a welcome development and, perhaps not coincidentally, arrives at a time when the countrys economy is moving forward once again. It provides a more modern and effective framework for

and almost 40 years

after the countrys accession to the New York

the development of an
alternative dispute resolution system.

Convention.

Interpretation

Foreign and Domestic Arbitration

Confidentiality

Interim/ Conservatory Measures

Qualifications of an Arbitrator

Substantive Claim Before the Court

Confirmation of Domestic Arbitral Award

Recognition and Enforcement of Foreign Arbitral Award

Interpretation of R.A. No. 9285

Prior to the passage of R.A.

The courts are directed to

give due regard to the policy of favoring arbitration

No. 9285, an arbitration

agreement could be defeated by impleading or joining either as plaintiff or defendant a person who was not a party to the arbitration agreement.

Not anymore!

Foreign and Domestic Arbitration

It provides for a dual system of arbitration, i.e., International Commercial Arbitration and Domestic Arbitration.

Confidentiality

It expressly declares arbitration proceedings, including the records, evidence, and arbitral award, to be confidential.

Substantive Claim Before the Court Qualifications of an Arbitrator

It expressly provides that arbitration may nevertheless be commenced or continued, and an award may be made, despite the pendency of a related issue before the court.

It provides that, unless otherwise agreed by the parties, the arbitrator may be of any nationality. With this clarification, the parties now have a larger pool of arbitrators to choose from.

Interim/ Conservatory

Measures

May include but shall not be limited to preliminary injunction directed against a party, appointment of receivers or detention, preservation, inspection of property that is the subject of the dispute in arbitration.

Confirmation of Domestic Arbitral Award

It expressly declares that any ground other than the grounds specified under the law for vacating a domestic arbitral award shall be disregarded.

Recognition and Enforcement of Foreign Arbitral Award

It declares that any ground other than the grounds specified in Article V of the New York Convention for vacating a foreign arbitral award shall be disregarded.

Article V of the New York Convention: Grounds

Lack of a valid arbitration agreement; Violation of due process; Excess of the arbitral tribunals authority; Irregularity in the composition of the arbitral tribunal or arbitral procedure; and The award has been set aside

A. TRANSFIELD PHILIPPINES, INC. vs. LUZON HYDRO CORPORATION, G.R. No. 146717, May 19, 2006 Significance: Enforceability of foreign arbitral awards; and Right of parties to an arbitration proceeding to obtain provisional relief from the courts

B. GONZALES vs. CLIMAX MINING LTD. G.R. Nos. 161957 and 167994, Jan. 22, 2007 Significance: First, it held that a petition for review under Rule 45 is the proper mode of appeal in challenging the orders of the trial court in an action to compel arbitration.

B. GONZALES vs. CLIMAX MINING LTD. G.R. Nos. 161957 and 167994, Jan. 22, 2007 Significance: Second, the ruling in Gonzales re-affirmed the summary nature of and the RTCs limited and special jurisdiction over petitions to compel arbitration under Section 6 of R.A. No. 876, first enunciated in La Naval Drug

Corporation vs. Court of Appeal

B. GONZALES vs. CLIMAX MINING LTD. G.R. Nos. 161957 and 167994, Jan. 22, 2007 Significance: Third and last, modifying its earlier ruling, the Supreme Court in Gonzales introduced the widely-accepted doctrine of separability, which states that the validity of the contract containing the agreement to submit to arbitration does not affect the applicability of the arbitration clause itself.

Conclusion

Under the circumstances, arbitration is truly worth cultivating. It possesses many attractive features, as follows:

Second, there is a First, unlike judges, arbitrators are not burdened large pool of arbitrators to draw from. Unlike the traditional judges, arbitrators do not have to be lawyers.

Third, the fees of arbitrators are not fixed by law. They are flexible and adjust according to the complexities of the case and the reputation of the arbitrator.

by heavy
caseloads.

Fourth, arbitration has the indirect benefit of de-

Fifth, for those of the perception that the courts are unable to protect investors in an impartial manner, arbitration addresses the concern of partiality. Sixth, the costs of arbitration are borne by the parties.

clogging the court

dockets by diverting cases away from them.

The Philippines has come a long way since arbitration made its first appearance in the Spanish Code of Civil Procedure. Now that the wave is upon us, the challenge is to catch and ride it.

Main Reference: www.philippinesforum.com

Thank you!

Reported by: Estella Marie Barrete and Jessica J. Bacolta