By: Patricia-Ann T.

Prodigalidad
Partner, ACCRALAW
Assistant National Secretary, IBP National

Party Autonomy (ADR Law, Section

2)

Policy on Encouragement and Active

Promotion of the Use of ADR as a
means to dispense justice and
declog dockets (ADR Law, Section 2)

Policy
on
Enlisting
Active
Participation of the Private Sector in
ADR
as
a
mode
of
dispute
settlement (ADR Law, Section 2)
5

Party Autonomy (ADR Law, Section 2)

Active Participation of the Private Sector

(ADR Law, Section 2)

ADR as a means of providing SPEEDY and

IMPARTIAL justice (ADR Law, Section 2)

Liabilities of ADR Providers are the

same as liabilities of public officers
under
Section
30
(1)
of
the
Administrative Code of 1987 (ADR Law,
Section 5)
Upon a clear showing of bad faith, malice or gross negligence

Republic Act No. 876, as amended

Republic Act No. 9285 & its Implementing
Rules and Regulations
UNCITRAL Model Law
New York Convention
Supreme Court Special ADR Rules
E.O. No. 1008, as amended (otherwise known
as the Construction Industry Arbitration Law
and its Rules of Procedure
Miscellaneous Special Laws
Relevant Jurisprudence
7

1.
2.
3.
4.
5.
6.
7
8.

Labor Disputes
Civil Status of Persons
Validity of Marriage
Ground for Legal Separation
Jurisdiction of Courts
Future Legitime
Criminal Liability
Those which by law cannot be compromised
(R.A. 9285, Section 6)

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 [ADR Law, section 3a]

Ensures party autonomy on how parties settle

their disputes
Parties can be creative in settling their disputes
Flexibility of proceedings
Confidentiality of proceedings
Reduced cost and time in the resolution of
conflict
Less stress because it will avoid long litigation
Preservation of relationship

10

MEDIATION
CONCILIATION
EARLY NEUTRAL EVALUATION
MINI-TRIAL
MED-ARB
ARBITRATION
GOOD OFFICES

11

MEDIATION

A voluntary process in which a

mediator, selected by the disputing
parties,
facilitates
communication
and negotiation, and assists the
parties in reaching a voluntary
agreement regarding a dispute.

12

CONCILIATION

Process whereby parties request a third

person or persons (the conciliator) to
assist them in their attempt to reach an
amicable settlement of their dispute
arising out of or relating to a contractual
or
other
legal
relationship.
The
conciliator does not have the authority
to impose upon the parties a solution to
the dispute.
13

EARLY NEUTRAL EVALUATION

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.
14

MINI-TRIAL

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.

15

ARBITRATION

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 [ADR Law, section 3d]

16

Under
the
Philippine
ADR Law, three (3) types
of
arbitration
are
recognized:
international commercial
arbitration,
domestic
arbitration
and
construction arbitration
before the CIAC.

WHEN IS ARBITRATION INTERNATIONAL?

1. If the parties to an arbitration agreement
have, at the time of the conclusion of that
agreement, their places of business in
different States. (UML, Article 1 [3])
2.
If the place of arbitration, contract
performance, or the place of the subject
matter of the dispute is situated in a State
other than the place of business of the
parties.
3. The parties expressly agree that subject
matter is international.

WHAT IS COMMERCIAL ARBITRATION?

An

arbitration is commercial if it
covers matters arising from all
relationships of a commercial nature,
whether
contractual
or
not.
Relationships of a commercial nature
include, but are not limited to, the
following transactions:

any trade transaction for the supply

or exchange of goods or services;
distribution
agreements;
construction of works; commercial
representation or agency; factoring,
leasing;
consulting;
engineering;
licensing;
investment;
financing;
banking; insurance; joint venture
and other forms of industrial or
business cooperation; carriage of
goods or passengers by air, sea, rail
or road. (ADR Law, Section 21)

Domestic Arbitration means an

arbitration
that
is
not
international, as defined in Article
1(3) of the UML (ADR Law, Sec. 32)

CIAC
has
original
and
exclusive
jurisdiction over disputes arising from, or
connected with, contracts entered into
by parties involved in construction in the
Philippines. (E.O. No. 1008, Sec. 4)
Applies to both government and private
contracts ((E.O. No. 1008, Sec. 3)
Includes disputes between or among
parties to, or who are otherwise bound by,
an arbitration agreement, directly or by
reference whether such parties are project
owner, contractor, subcontractor, fabricator,
project
manager,
design
professional,
consultant, quantity surveyor, bondsman or
issuer of an insurance policy in a
construction project. (ADR Law, Sec. 35)

MED-ARB or ARB-MED

This is a two-step dispute resolution

process involving both mediation and
arbitration.

23

GOOD OFFICES
Offices that essentially provide logistical
support to parties to come up with
consultation. It is merely the provision of
venue only and not the consultation itself. It
is plainly administrative support.
[OADR Website, FAQs]

24

AD HOC
Parties agree to resolve
disputes by ADR but
without
any
specific
administering institution

Generally, IBP is the

default
appointing
authority
Common for mediation
and arbitration

INSTITUTIONAL
Parties agree to ADR
AND specify, in advance,
the
institution
administering the process

Generally, appointing
authority is the institution
Common for arbitration;
in Philippines, mediation is
predominantly institutional
(CAM, IPO-PHL, Appellate
Mediation)

25

PRIVATE
Philippine

Dispute
Resolution Center, Inc.
(PDRCI)
Core Group

GOVERNMENT
Philippine

Mediation

Center
Construction Industry
Arbitration Commission
(CIAC)
Intellectual Property
Office
Department Of Labor

26

27

effectively serves as a secondary tier of

mediation conducted, not by a mediator
accredited by the PMC, but by an active judge of
the first instance courts.
JDR is resorted to only where CAM fails to result in
a mediated settlement agreement.
Likewise, under PHILJA and PMC
Per the Supreme Court, the JDR system is
substantially
different
from
arbitration
proceedings

28

Koppel, Inc. vs. Makati Rotary Club Foundation, Inc.

(September 2013)
The JDR framework is based on the processes of
mediation, conciliation or early neutral evaluation which
entails the submission of a dispute before a "JDR judge"
who shall merely "facilitate settlement" between the
parties in conflict or make a "non-binding evaluation or
assessment of the chances of each party's case." Thus in
JDR, the JDR judge lacks the authority to render a resolution of
the dispute that is binding upon the parties in conflict. In
arbitration, on the other hand, the dispute is submitted to an
arbitrator/s a neutral third person or a group of thereof
who shall have the authority to render a resolution binding upon
the parties.

29

 Generally,

an interchange between two or

more parties in an attempt to reach a
compromise.
Communication is directly between the
parties (with or without their respective
counsel) and does not involve a neutral
third party
Technically, not within the definition of ADR
under RA 9285 (as there is no neutral
involved)

30

In 2011, Intellectual Property Office of the Philippines

(IPOPHL) established its ADR Program in consultation
with UNs World Intellectual Property Association
Objective of Program: Providing SPEEDY, QUALITY
AND EFFECTIVE legal remedies AND to BE THE FORUM
OF CHOICE in the resolution of IP disputes
SCOPE: ADR Program covers disputes involving
opposition to trademark registration, petition for
cancellation of patents and trademark registrations as
well as IP violation cases
As of May 2014: 61.6% acceptance rate & 41.6%
success rate (settled through mediation)

31

32

ODR expressly recognized by the ADR LAW and

Implementing Rules
ODR has been practiced, in reality, since November
2004, when the Philippine Online Dispute Resolution
service was launched by Former Philippine Supreme
Court Chief Justice Artemio Panganiban.
The Philippine Dispute Resolution service (at
www.disputeresolution.ph ) - organized as, and
envisioned to be, a web-based multi-door
courthouse offering several ADR services including
online mediation and online negotiation.
ODR platform in PHL: not just through a web-based
interface but also through the mobile phone SMS
33

There is the reported recent success of the online

mediation
conducted
by
the
Philippine
Department of Labor and Employment (DoLE) in a
dispute involving thirteen (13) disgruntled
workers claiming separation benefits.

Using Skype, a familiar online teleconferencing

application the DoLE achieved an online
mediated settlement that ranks as the highest of
its type ever achieved in the local area where
they lived without requiring the parties to have
their respective days in court.
34

BILATERAL INVESTMENT
TREATY (BIT)
FREE TRADE AGREEMENTS
ASEAN COMPREHENSIVE
INVESTMENT AGREEMENT

35

Among the protections granted to foreign investors is the

UNILATERAL ability to commence an arbitration AGAINST a
HOST STATE in the manner prescribed in the relevant
Investment Treaty
Through the Investment Treaty, the HOST STATE gives
advance consent to the submission of investment
disputes (with investors from another STATE) to
international arbitration
Once a covered investor provides its own consent to
arbitration (by commencing the arbitration process), the
HOST STATE becomes legally bound to proceed with the
arbitration (without any additional approval process)
Investment Treaties can be in the form of (i) Bilateral
Investment Treaties (BITs); (ii) Free Trade Agreements;
and other multilateral agreements such as (iii) ASEAN
Comprehensive Investment Agreement.

36

COMMERCIAL ARBITRATION INVESTMENT ARBITRATION

DISPUTE

DISPUTE

Arises from relationship of

contracting parties towards
one another. Such that,
arbitrator should decide on
relief entitled to by one party
against another

Arises from the behavior of

the Host State and its
agencies/department/officers
towards the investor. Such
that, arbitrator must
ascertain extent exercise by
Host State of its sovereign
rights have impacted on its
obligations to foreign
investors

37

COMMERCIAL
ARBITRATION

INVESTMENT
ARBITRATION

BASIS

BASIS

ARBITRATION AGREEMENT
SIGNED BY PARTIES

INVESTMENT TREATIES
(WHETHER BILATERALOR
MULTILATERAL); HOST
STATES INVESTMENT LAWS;
OR INVESTMENT
AGREEMENTS.

NATURE

NATURE

May be international or
domestic

Always international

SUPERVISION

SUPERVISION

Can be ad hoc or
institutional

Generally, institutional

38

ICSID is an autonomous international institution

established under the Convention on the
Settlement of Investment Disputes between
States and Nationals of Other States (the ICSID or
the Washington Convention) with over one
hundred and forty member States. The
Convention
sets
forth
ICSID's
mandate,
organization and core functions.
The primary purpose of ICSID is to provide
facilities for conciliation and arbitration of
international investment disputes.

39

The ICSID Convention is a multilateral treaty formulated

by the Executive Directors of the International Bank for
Reconstruction and Development (the World Bank). It
was opened for signature on March 18, 1965 and
entered into force on October 14, 1966.
The Convention sought to remove major impediments to the free
international flows of private investment posed by noncommercial risks and the absence of specialized international
methods for investment dispute settlement.

ICSID was created by the Convention as an impartial

international forum providing facilities for the resolution
of legal disputes between eligible parties, through
conciliation or arbitration procedures. Recourse to the
ICSID facilities is always subject to the parties' consent.

40

As evidenced by its large membership,

considerable caseload, and by the numerous
references to its arbitration facilities in
investment treaties and laws, ICSID plays an
important role in the field of international
investment and economic development.

Today, ICSID is considered to be the leading

international arbitration institution devoted
to investor-State dispute settlement.

41

ICSID does not conciliate or arbitrate disputes; it

provides
the
institutional
and
procedural
framework
for
independent
conciliation
commissions and arbitral tribunals constituted in
each case to resolve the dispute.

ICSID has two sets of procedural rules that may

govern the initiation and conduct of proceedings
under its auspices. These are: (i) the ICSID
Convention, Regulations and Rules; and (ii) the
ICSID Additional Facility Rules.

42

Additional activities of ICSID in the field of the settlement

of disputes have included the Secretary-General of
ICSID accepting to act as the appointing authority
of arbitrators in ad hoc (i.e., non-institutional)
arbitration proceedings. This is most commonly done
in the context of arrangements for arbitration under the
Arbitration Rules of the United Nations Commission on
International Trade Law (UNCITRAL), which are specially
designed for ad hoc proceedings.
At the request of the parties and the tribunal concerned,
ICSID may also agree to provide administrative
services for proceedings handled under the UNCITRAL
Arbitration Rules.

43

Besides providing facilities for conciliation

and arbitration under the ICSID Convention,
the Centre has since 1978 had a set of
Additional Facility Rules authorizing the
ICSID Secretariat to administer certain
types of proceedings between States and
foreign nationals which fall outside the
scope of the Convention. INCLUDING ---

44

Conciliation and arbitration proceedings for the

settlement of disputes arising directly out of an
investment where either the State party or the
home State of the foreign national is not an
ICSID Contracting State.
Conciliation and arbitration proceedings between
parties at least one of which is a Contracting
State or a national of a Contracting State for the
settlement of disputes that do not directly
arise out of an investment.
Fact-finding proceedings.

45

Philippines has BITs with several nations

Philippines is a member of the ASEAN and,
thus,
is
bound
by
the
ASEAN
Comprehensive
Investment
Agreement
(which provides for investment arbitration)
Philippines is a signatory to the ICSID
As of date, Philippines has been involved in
4 separate ICSID arbitrations

46

47

National Infrastructure
Development
Countrywide ADR Promotion
National ADR Day

48

An
attached
agency
to
the
Department of Justice (ADR Law, Sec.
49)

With a Secretariat to be headed by an

Executive Director (ADR Law, Sec. 49)

Executive Director shall be appointed

by the President (ADR Law, Sec. 49)
49

 To promote, develop and expand

the use of ADR in the private and
public sectors;
To assist in the monitoring,
studying and evaluating the use
by the public and the private
sector of ADR;
To recommend to Congress needful
statutory changes to develop,
strengthen, and improve ADR
practices in accordance with world
standards
50

 To act as APPOINTING AUTHORITY of mediators and

arbitrators when the parties agree in writing that it shall
be empowered to do so;
To conduct seminars, symposia, conferences and other
public fora and publish proceedings of said activities and
relevant materials/information that would PROMOTE
DEVELOP AND EXPAND THE USE OF ADR;
To establish an ADR LIBRARY OR RESOURCE CENTER that
willcontain laws, rules and regulations, jurisprudence,
books, articles and other information about ADR in the
Philippines and elsewhere for easy access to the public;
To establish TRAINING PROGRAMS FOR ADR PROVIDERS
AND/OR PRACTITIONERS, both in the public and private
sectors; and to undertake periodic and continuing training
programs for arbitration and mediation and charge fees
on participants. It may do so in conjunction with or in
cooperation with the IBP, private ADR organizations, and
local and foreign government offices and agencies and
international organizations;
51

 To CERTIFY those who have successfully

completed the regular professional training
programs provided by the OADR or other ADR
provider organizations as approved by the
OADR;
To charge fees for services rendered such as,
among others, for training and certifications
of ADR providers;
To accept donations, grants and other
assistance from local and foreign sources;
and
To exercise such other powers as may be
necessary and proper to carry into effect the
provisions of the ADR Act of 2004 (R.A. No.
9285).
52

IBP

AS DEFAULT APPOINTING
AUTHORITY FOR AD HOC ADR
GROWTH

OF ADR SERVICE
PROVIDERS
TRAINING
SUPPORT

& ACCREDITATION
FACILITIES
53

EXECUTIVE DEPARTMENT EFFORTS

MANDATORY INCLUSION OF ADR CLAUSE IN PPP
CONTRACTS (E.O. NO. 78, s. 2012)
NATIONAL ADR DAY = DECEMBER 19 OF EVERY YEAR
(PROC. 518, s. 2012)
JUDICIAL DEPARTMENT EFFORTS
JUDICIAL
PHILIPPINE
MEDIATION CENTER)
JDR EFFORTS

ACADEMY

(PHILIPPINE

54

E.O. 78 SERIES OF 2012

RECOGNITION OF ADR AND PARTY AUTONOMY
SECTION 1. Use of ADR mechanisms. All contracts
involving Public-Private Partnership (PPP) projects
and/or those entered into under [the BOT Law, as
amended] x x x shall include provisions on the
use of ADR mechanisms, at the option and upon
agreement of the parties to said contracts.
x x x
When parties to the abovementioned contracts
agree to submit the case for ADR, the use of
either
domestic
or
international
ADR
mechanisms shall be highly encouraged, giving
the parties complete freedom to choose which
venue and forum shall govern their dispute, as
well as the rules or procedures to be followed in
resolving the same.
55

Multi-Tiered Dispute
Resolution Clauses
Dispute Avoidance
Mechanisms

56

Multi-tiered dispute resolution clauses, or

WATERFALL clauses where parties provide for
the resort to one or more ADR processes, in
combination or sequentially (such as negotiation
and/or mediation) before resorting to litigation or
arbitration.
Generally, it involves a series of steps in the overall
dispute resolution process, each step designed to
handle the dispute if the same has not been
resolved by the prior step

Under RA 9285, ADR may be a combination of

mediation, conciliation, mini-trial, early neutral
evaluation, and arbitration.
57

Serves

as a reminder that ADR should always be on the

agenda when there is a dispute
Addresses

the impression of weakness that a suggestion

of ADR may create
Helpful

in preserving long-term relationships that may

have to continue after the dispute

58

May

be exploited by one party to prevent the injured

party from seeking relief (and thereby coerce a
settlement)

Augments

the time needed before parties can resort to

coercive powers of courts or arbitral tribunals
(especially where one party is rigid and recalcitrant)

If

poorly drafted, may unnecessarily add cost without

the corresponding value

59

Multi-Tier Guideline #1: The clause should

specify a period of time for negotiation or
mediation, triggered by a defined and
undisputable event (ie, a written request),
after which either party can resort to
arbitration.

60

Multi-Tier Guideline #2: The clause should

avoid the trap of rendering arbitration
permissive, not mandatory.

Multi-Tier Guideline 3: The clause should

define the disputes to be submitted to
negotiation or mediation and to arbitration
in identical terms.

61

The following clause provides for mandatory

negotiation as a first step:
The parties shall endeavor to resolve amicably by
negotiation all disputes arising out of or in connection with
this agreement, including any question regarding its
existence, validity or termination. Any such dispute which
remains unresolved [30] days after either party requests in
writing negotiation under this clause or within such other
period as the parties may agree in writing, shall be finally
settled under the [designated set of arbitration rules] by
[one or three] arbitrator[s] appointed in accordance with
the said Rules. The place of arbitration shall be [city,
country]. The language of arbitration shall be [].

62

The following clause provides for mandatory mediation as a

first step:

The parties shall endeavor to resolve amicably by mediation under the

[designated set of mediation rules] all disputes arising out of or in
connection with this agreement, including any question regarding its
existence, validity or termination. Any such dispute not settled
pursuant to the said Rules within [45] days after appointment of the
mediator or within such other period as the parties may agree in
writing, shall be finally settled under the [designated set of arbitration
rules] by [one or three] arbitrator[s] appointed in accordance with the
said Rules. The place of arbitration shall be [city, country]. The
language of arbitration shall be [].

[All communications during the mediation are confidential and shall

be treated as made in the course of compromise and settlement
negotiations for purposes of applicable rules of evidence and any
additional confidentiality and professional secrecy protections
provided by applicable law.]
63

The following clause provides for both

negotiation and mediation before arbitration:

mandatory

All disputes arising out of or in connection with this

agreement, including any question regarding its existence,
validity or termination (Dispute), shall be resolved in
accordance with the procedures specified below, which
shall be the sole and exclusive procedures for the
resolution of any such Dispute.

64

(A) Negotiation

The parties shall endeavor to resolve any Dispute amicably by negotiation

between executives who have authority to settle the Dispute and who are
at a higher level of management than the persons with direct responsibility
for administration or performance of this agreement.

(B) Mediation

Any Dispute not resolved by negotiation in accordance with paragraph (A)

within 30] days after either party requested in writing negotiation under
paragraph (A), or within such other period as the parties may agree in
writing, shall be settled amicably by mediation under the [designated set
of mediation rules].

65

(C) Arbitration

Any Dispute not resolved by mediation in accordance with paragraph (B)

within [45] days after appointment of the mediator, or within such other
period as the parties may agree in writing, shall be finally settled under
the [designated set of arbitration rules] by [one or three] arbitrator[s]
appointed in accordance with the said Rules. The place of arbitration
shall be []. The language of arbitration shall be [].
[All communications during the negotiation and mediation pursuant to
paragraphs (A) and (B) are confidential and shall be treated as made in
the course of compromise and settlement negotiations for purposes of
applicable rules of evidence and any additional confidentiality and
professional secrecy protections provided by applicable law.]

66

MULTI-TIERED CLAUSES ARE BESPOKE AND NOT BOILERPLATE

MODEL CLAUSES ARE STARTING POINTS ONLY
Tiered clauses are not boilerplate they should always be drafted by
reference to the particular circumstances of the transaction.
The specimen is useful for the purpose of illustrating how a tiered
clause looks and operates and as a starting point for the drafting of a
tailored tiered clause.

Cs RULE: CLAUSE MUST BE CLEAR, CERTAIN AND COMPLETE

SPECIFY THE PROCESSES INCLUDING RULES, IF ANY
INDICATE TRIGGERS AND PERIODS
IDENTIFY PERSONALITIES/DECISION MAKERS
HAVE A FIXED TIME FRAME (WITH A DEFINITE RECKONING DATE)
IF STEPS ARE WAIVABLE, INDICATE; IF NOT, INDICATE AS WELL

67

68

69

70

Definition: A Condition Precedent is an

event which must occur, unless its nonoccurrence is excused, before performance
under a contract becomes due, i.e., before
any contractual duty arises.

See Restatement (2d) Contracts 224

71

 The

clause creates a condition precedent

(mediation taking place) before performance
under the arbitration clause becomes due

recalcitrant party simply refuses to

participate in mediation, rendering the
arbitration
clause
unenforceable
until
mediation takes place.

Result:

no resolution is possible
72

HIM Portland, LLC v. DeVito Builders, Inc., 317 F.3d

41 (1st Cir. 2003).
Contract

for motel renovation

Multi-tier ADR clause was drafted to create a
condition
precedent
(mediation
before
arbitration)
Party sought to compel arbitration
The court declined to compel arbitration, as
the condition precedent (mediation) had not
taken place

73

Simple time expiration for mediation: If

settlement is not reached within 60 days after
service of a written demand for mediation

More elaborate carve out: In the event

mediation fails to resolve all of the issues
between or among the Parties, the Parties
forgo their option to mediate, or if mediation
is not held within 60 days of the event giving
rise to the dispute, then the matter or any
remaining matters shall be submitted to final,
non-appealable arbitration. The arbitration
shall be
74

Problem: Agreement to Negotiate or Mediate may

not be Enforceable in the Seat of the ADR Clause.
May be found to be an illusory agreement or an
unenforceable agreement to agree under the
law of the seat of the ADR clause
Should court intervention be required, a local
court will refuse to enforce the clause

75

Almost all U.S. Jurisdictions

Germany (German Federal Supreme Court)
France (French Cour de Cassation)
England (English Commercial Court) (recent
change in the law on this issue)
New South Wales, Australia (Supreme Court of
New South Wales)
Ireland (Irish High Court)

Klaus Peter Berger, Law and Practice of Escalation Clauses, 22

Arbitration Intl 1, 7-8 (2006).

76

 Seat

your Multi-Tier ADR Clause in a

jurisdiction which will enforce the preliminary
tiers

If

you are considering placing the seat in an

unfamiliar
jurisdiction,
Consult
Local
Counsel

Include

provisions giving the arbitrator the

power to require specific performance of
preliminary tiers of the ADR clause
77

78

79

2
RELEVANT EVENT

RELEVANT
IMPACT

4
CLAIM

DENIAL OF CLAIM

DISSATISFACTION

80

81

2
RELEVANT EVENT

RELEVANT
IMPACT

4
CLAIM

DENIAL OF CLAIM

DISSATISFACTION

82

DISPUTE BOARDS IS ONE OF THE

PROVEN SUCCESSFUL MEANS OF
BREAKING THE CHAIN OF EVENTS
THAT LEAD TO A DISPUTE

83

1. Dispute

Adjudication Board (DAB) DAB is

appointed by the parties themselves; tasked
with examining, at the request of either party,
any matter under dispute and, thereafter, to
express, in a written reasoned decision, their
view on the correct outcome of that dispute;
"Decision is binding on the parties but not final
unless accepted by the parties; otherwise,
Decision may be referred for final dispute
resolution by a court or arbitrator; and

84

2.

Dispute
Review
Board
(DRB)
-constituted in the same manner as DAB but
its views are expressed only as nonbinding Recommendations.

BUT, certain institutions recognize Combined

Dispute Board.

85

Standing - appointed at the start (or even prior

to the commencement date) of the Project

Ad hoc - Appointed as and when a dispute is

referred

86

a. Early Evaluation by a Neutral (and WellInformed) Expert

b. "Feedback Effect"
c. Role in Dispute Avoidance (or Dispute
Prevention)
DB with authority to give informal
advice or opinions (upon request of
both Parties)

87

DB with authority to have informal

consultations (with consent of both
Parties and not ex parte)

Clause 20.2 (par. 7) [Appointment of

the
Dispute Board]
If at any time the Parties agree, they
may jointly refer a matter to the DB for
it to give its opinion. Neither party
shall consult the DB on any matter
without the agreement of the other
Party.
88

General Conditions of
Agreement
(Appendix
Conditions of Contract)

Dispute Board
to
General

Clause 4(k) [General Obligations of the

Member]
(k) be available to give advice and
opinions, on any matter relevant to the
Contract when requested by both the
Employer and the Contractor, subject to the
Agreement of the Other Members.

89

d. Enhanced capacity of the Employer in

terms of contract management and of the
Contractor
in
terms
of
project
administration
e. Early and quick resolution of disputes that
could not be avoided
f. Eventual
cost
savings
(arising
from
successful dispute avoidance and/or early
resolution of disputes)

90

91

The Parties hereby agree to establish a Dispute

Review Board (DRB) in accordance with the
Dispute Board Rules of the International Chamber
of
Commerce
(the
Rules),
which
are
incorporated herein by reference. The DRB shall
have [one/three] member[s] appointed in this
Contract or appointed pursuant to the Rules.

92

All disputes arising out of or in connection with

the present Contract shall be submitted, in the
first instance, to the DRB in accordance with the
Rules. For any given dispute, the DRB shall issue
a Recommendation in accordance with the Rules.

If
any
Party
fails
to
comply
with
a
Recommendation when required to do so
pursuant to the Rules, the other Party may refer
the failure itself to Arbitration under the Rules of
Arbitration of the International Chamber of
Commerce by one or more arbitrators appointed
in accordance with the said Rules of Arbitration.

93

If any Party sends a written notice to the other

Party and the DRB expressing its dissatisfaction
with a Recommendation, as provided in the Rules,
or if the DRB does not issue the Recommendation
within the time limit provided in the Rules, or if
the DRB is disbanded pursuant to the Rules, the
dispute shall be finally settled under the Rules of
Arbitration of the International Chamber of
Commerce by one or more arbitrators appointed
in accordance with the said Rules of Arbitration.
[If the parties do not want the Emergency Arbitrator
Provisions to apply in the arbitration proceedings,
they must expressly opt out.]

94

The Parties hereby agree to establish a Dispute

Adjudication Board (DAB) in accordance with the
Dispute Board Rules of the International Chamber
of
Commerce
(the
Rules),
which
are
incorporated herein by reference. The DAB shall
have [one/three] member[s] appointed in this
Contract or appointed pursuant to the Rules.
All disputes arising out of or in connection with
the present Contract shall be submitted, in the
first instance, to the DAB in accordance with the
Rules. For any given dispute, the DAB shall issue
a Decision in accordance with the Rules. *
95

If any Party fails to comply with a Decision when

required to do so pursuant to the Rules, the other
Party may refer the failure itself to Arbitration under
the Rules of Arbitration of the International Chamber
of Commerce by one or more arbitrators appointed in
accordance with the said Rules of Arbitration.

If any Party sends a written notice to the other Party

and the DAB expressing its dissatisfaction with a
Decision, as provided in the Rules, or if the DAB does
not issue the Decision within the time limit provided
for in the Rules, or if the DAB is disbanded pursuant
to the Rules, the dispute shall be finally settled under
the Rules of Arbitration of the International Chamber
of Commerce by one or more arbitrators appointed in
accordance with the said Rules of Arbitration.

96

[If the parties do not want the Emergency Arbitrator

Provisions to apply in the arbitration proceedings,
they must expressly opt out.]

[* Parties may, if they wish, provide for review by ICC of a

DABs Decisions by inserting the following text in place of
the asterisk above: The DAB shall submit each Decision to
ICC for review in accordance with Article 21 of the Rules.]

97

The Parties hereby agree to establish a Combined

Dispute Board (CDB) in accordance with the Dispute
Board Rules of the International Chamber of Commerce
(the Rules), which are incorporated herein by reference.
The CDB shall have [one/three] member[s] appointed in
this Contract or appointed pursuant to the Rules.

All disputes arising out of or in connection with the

present Contract shall be submitted, in the first instance,
to the CDB in accordance with the Rules. For any given
dispute, the CDB shall issue a Recommendation unless
the Parties agree that it shall render a Decision or it
decides to do so upon the request of a Party and in
accordance with the Rules*.
98

If any Party fails to comply with a Recommendation or a

Decision when required to do so pursuant to the Rules,
the other Party may refer the failure itself to Arbitration
under the Rules of Arbitration of the International
Chamber of Commerce by one or more arbitrators
appointed in accordance with the said Rules of
Arbitration.

If any Party sends a written notice to the other Party and

the CDB expressing its dissatisfaction with a
Recommendation or a Decision as provided for in the
Rules, or if the CDB does not issue the Recommendation
or Decision within the time limit provided for in the
Rules, or if the CDB is disbanded pursuant to the Rules,
the dispute shall be finally settled under the Rules of
Arbitration of the International Chamber of Commerce by
one or more arbitrators appointed in accordance with
the said Rules of Arbitration.
99

[If the parties do not want the Emergency Arbitrator

Provisions to apply in the arbitration proceedings,
they must expressly opt out.]

[* Parties may, if they wish, provide for review by ICC of a

CDBs Decisions by inserting the following text in place of
the asterisk above: The CDB shall submit each Decision to
ICC for review in accordance with Article 21 of the Rules.]

10

1)

THE INCLUSION OF A DAB (OR ANY

FORM
OF
DISPUTE
BOARD)
IN
CONSTRUCTION CONTRACTS IS NOT THE
NORM

2)

GOVERNMENT
PROJECT
TEMPLATE
CONTRACTS ARE NOT BASED ON THE
FIDIC SUITE OF CONTRACTS AND, THUS,
HAVE THE TRADITIONAL TWO-TIERED
DISPUTE RESOLUTION MECHANISM OF
MEDIATION AND ARBITRATION
101

Executive Order No. 78 series of 2012 (EO

78) requires all contracts (i) involving PublicPrivate Partnership (PPP) Projects and/or (ii)
those entered into under the BOT Law, as
amended, and (iii) JVAs between the
government and private entities issued by the
National
Economic
And
Development
Authority (NEDA) pursuant to EO 423 s. 2005
shall include provisions on the use of ADR
mechanisms at the option and upon
agreement of the parties.
102

At present (and despite the autonomy provided in

EO 78 to define the ADR mechanisms), the
standard bidding documents of the Philippine
Government incorporates the traditional twotiered approach to dispute resolution:
1st tier - Amicable Settlement Negotiations
2nd tier - Arbitration under Philippine ADR Act of
2004
(should
amicable
settlement
not
materialize)

103

As such, the standard bidding documents have

not put in place a dispute avoidance
mechanism

Latest draft (January 2013) of the Philippine

Government PPP Centers Policy Brief on Dispute
Resolution for PPP Projects (PPP Policy Brief),
which was drafted under ADBs Capacity Building
Technical Assistance, expressly recognizes the
significance of, and thus recommends, the
incorporation in PPP contracts of not only dispute
resolution modes but dispute avoidance and
management mechanisms as well.
104

The PPP Policy Brief names, among

others, the use of Dispute Resolution
Boards as a mode of dispute
resolution but fails to emphasize its
role in dispute avoidance.

105

3)

4)

PROJECT PARTICIPANTS OFTEN DO NOT

CONSTITUTE THE DAB AS REQUIRED
(WHETHER STANDING OR AD HOC) FOR
A MYRIAD OF REASONS
2009 HUTAMA CASE DIMINISHES THE
DAB MECHANISM, WHICH MAY BE A
DISINCENTIVE TO THE INCORPORATION
OF THE DAB MECHANISM IN PHILIPPINE
CONSTRUCTION CONTRACTS

106

FACTS:
CMMTC is the general contractor for the Philippine
governments Skyway Project (a tollroad project).
HUTAMA was CMMTCs subcontractor.
CMMTC and HUTAMA entered into an Engineering
Procurement Construction Contract (EPCC) in 1996,
which provided for a standing Dispute Adjudication
Board.
Despite the clear terms of the EPCC, the parties did
NOT appoint/constitute the DAB.

107

HUTAMA eventually completed the works and

the Skyway Project was opened in December
1999 for public use.
Because of continued non-payment of its billings,
among
other
concerns,
HUTAMA
commenced
arbitration before the Philippine Construction Industry
Arbitration Commission (CIAC).
CMMTC claimed that CIAC had no jurisdiction because
a condition precedent to arbitration under the EPCC
was the prior referral by the parties of their dispute
to the DAB, which condition had not been satisfied.
Thus, CMMTC asked that the arbitration request be
denied/dismissed and that the parties be directed to
comply with said condition precedent.
108

ISSUE (as defined in the Terms of Reference in

Arbitration): Is prior resort to the DAB a
precondition to the submission of the dispute
to arbitration considering that the DAB was
not constituted?
DECISION: SUPREME COURT AFFIRMED THE
CIACS JURISDICTION AND THEREFORE THE
PROPRIETY OF THE ARBITRATION (DESPITE
NON-REFERRAL TO THE DAB).

109

Although the EPCC states that a dispute between the

parties as regards the EPCC shall be initially referred to
the DAB for decision, and only when the parties are
dissatisfied with the decision of the DAB should arbitration
commence, this does not, and cannot, mean that the
CIAC is barred from assuming jurisdiction over the dispute
if such clause was not complied with.

Under Philippine law and jurisprudence, the bare fact that

the parties incorporated an arbitration clause in the EPCC
is sufficient to vest the CIAC with jurisdiction over any
construction controversy or claim between the parties.
The arbitration clause in the EPCC ipso facto vested the
CIAC with jurisdiction. This rule applies, regardless of
whether the parties specifically choose another forum or
make reference to another arbitral body.

110

Although Clause 20.4 is not a case wherein the

arbitration clause in the EPCC named another forum, not
the CIAC, nonetheless, the High Court held that this
condition precedent (of prior referral to the DAB), or
more appropriately, non-compliance therewith, should
not deprive CIAC of its jurisdiction over the dispute
between the parties.

To affirm a condition precedent in the construction

contract that effectively suspends the jurisdiction of the
CIAC until compliance therewith, would be in conflict
with the recognized intention of the law and rules to
automatically vest CIAC with jurisdiction over a dispute
should the construction contract contain an arbitration
clause.

111

A ruling requiring the parties to still

appoint a DAB, to which they should first
refer their dispute before the same could
be submitted to the CIAC, would merely
be circuitous and dilatory at this point. It
would entail unnecessary delays and
expenses
on
both
parties,
which
Executive Order No. 1008 precisely seeks
to prevent. It would, indeed, defeat the
purpose for which the CIAC was created.
It would entail unnecessary delays and
expenses
on
both
parties,
which
Executive Order No. 1008 precisely seeks
to prevent. It would, indeed, defeat the
purpose for which the CIAC was created.
112

THE QUESTION, THEREFORE, IS WHETHER A

SIMILAR DECISION WOULD BE REACHED IN
CASES WHERE A DAB HAD BEEN CONSTITUTED
AS PER CONTRACT BUT DELIBERATELY IGNORED
BY ONE OF THE PARTIES BY REFERRING THE
DISPUTE DIRECTLY TO ARBITRATION (CIAC) EVEN
AS THE DAB CONTINUED TO EXIST.

113

THE REVISED EDITIONS OF THE FIDIC

SUITE OF CONTRACTS PARTICULARLY
THE DBO (GOLD BOOK) AND THE 2010
MDB HARMONIZED EDITION SEEM TO
HAVE ADDRESSED THE SCENARIO IN
HUTAMA:

114

If a dispute arises between the Parties in

connection with, or arising out of, the Contract
or the execution of the Works and there is no
DB in place, whether by reason of the expiry
of the DBs appointment or otherwise:
a) Sub-Clause 20.4 [Obtaining Dispute Board s
Decision] and Sub-Clause 20.5 [Amicable
Settlement] shall not apply; and
b) The dispute may be referred directly to
arbitration
under
Sub-Clause
20.6
[Arbitration].
115

BUT THE REMAINING QUESTION IS WILL THE

SUPREME COURT CHANGE HUTAMA?

IF NOT, DOES THIS DECISION IMPLY THAT:

THE SUPREME COURT WILL NOT ENFORCE MULTITIERED DISPUTE RESOLUTION CLAUSES?
WILL NOT CONSIDER THE ADR STEPS AS
CONDITIONSPRECEDENT FOR THE ARBITRAL TRIBUNAL
TO ACQUIRE JURISDICTION?
IF SO, WHAT WOULD BE THE VALUE OF THESE
CLAUSES?

116

1)

WORLD BANK
Standard Bidding Documents for Procurement of
Works provide for the appointment of a Standing
Dispute Board (consistent with the 2010 MDB
Harmonized Edition of the FIDIC Conditions of
Contract for Construction)

117

2)

ASIAN DEVELOPMENT BANK

Like the World Bank, the ADBs Standard Bidding
Document (as of January 2013) is based as well
on the MDB Harmonized Edition of the FIDIC
Conditions of Contract for Construction. Thus, the
bidding document requires a standing DB.

118

3)

JAPANESE INTERNATIONAL COOPERATION

AGENCY (JICA)

information
dissemination
and
seminars for potential adjudicators;

JICA adopted the FIDIC MDB Harmonised

Edition (2006) in 2009 as the Conditions of
Contract to be included in its Sample Bidding
Documents for Japans Overseas Development
Agency (ODA) loan projects;

crafted a DB Manual

training

119

120

1)

GILAT SATELLITE NETWORKS LTD. vs.

UCPB GENERAL INSURANCE (2014)

HELD: The existence of a suretyship

agreement does not give the surety the
right to intervene in the principal contract,
nor can an arbitration clause between the
buyer and the seller be invoked by a nonparty such as the surety.

121

The surety cannot invoke in its favor the

arbitration
clause
in
the
Purchase
Agreement, because it is not a party to that
contract. An arbitration agreement being
contractual in nature, it is binding only on
the parties thereto, as well as their assigns
and heirs.

122

2)

KOPPEL vs. MAKATI ROTARY CLUB (2013)

HELD:
a. The
arbitration clause of the 2005 Lease
Contract stipulates that "any disagreement"
as to the "interpretation, application or
execution" of the 2005 Lease Contract
ought to be submitted to arbitration. To
the mind of this Court, such stipulation is
clear and is comprehensive enough so as
to include virtually any kind of conflict or
dispute that may arise from the 2005 Lease
Contract including the one that presently
besets Koppel and Makati Rotary Club.
123

b.

Petitioner may still invoke the arbitration clause

of the 2005 Lease Contract notwithstanding the
fact that it assails the validity of such contract.
This is due to the doctrine of separability. Under
the doctrine of separability, an arbitration
agreement is considered as independent of the
main contract. Being a separate contract in
itself, the arbitration agreement may thus be
invoked regardless of the possible nullity or
invalidity of the main contract. As per Cargill,
wherein this Court held that, as a further consequence
of the doctrine of separability, even the very party
who repudiates the main contract may invoke its
arbitration clause.
124

c.

The operation of the arbitration clause in this

case is not at all defeated by the failure of the
petitioner to file a formal "request" or
application therefor with the MeTC. We find
that the filing of a "request" pursuant to
Section 24 of R.A. No. 9285 is not the
sole means by which an arbitration
clause may be validly invoked in a
pending suit. Attention must be paid,
however, to the salient wordings of Rule
4.1 (which implements Section 24 of RA
9285).
125

It reads: "[a] party to a pending action filed in

violation of the arbitration agreement . . . may
request the court to refer the parties to
arbitration in accordance with such agreement."
In using the word "may" to qualify the act of
filing a "request" under Section 24 of R.A. No.
9285, the Special ADR Rules clearly did not
intend to limit the invocation of an arbitration
agreement in a pending suit solely via such
"request." After all, non-compliance with an
arbitration agreement is a valid defense to any
offending suit and, as such, may even be raised
in an answer as provided in our ordinary rules of
procedure.
126

In this case, it is conceded that petitioner

was not able to file a separate "request" of
arbitration before the MeTC. However, it is
equally conceded that the petitioner, as
early as in its Answer with Counterclaim,
had already apprised the MeTC of the
existence of the arbitration clause in the
2005
Lease
Contract
and,
more
significantly, of its desire to have the same
enforced in this case. This act of petitioner
is enough valid invocation of his right to
arbitrate.
127

d.

It is clear that under the law, the instant

unlawful detainer action should have been
stayed; the petitioner and the respondent should
have been referred to arbitration pursuant to
the arbitration clause of the 2005 Lease
Contract. The MeTC, however, did not do so in
violation of the law which violation was, in
turn, affirmed by the RTC and Court of Appeals
on appeal. The violation by the MeTC of the
clear directives under R.A. Nos. 876 and 9285
renders invalid all proceedings it undertook in
the ejectment case after the filing by petitioner
of its Answer with Counterclaim the point
when the petitioner and the respondent should
have been referred to arbitration.
128

This
case
must,
therefore,
be
remanded to the MeTC and be
suspended at said point. Inevitably,
the decisions of the MeTC, RTC and the
Court of Appeals must all be vacated
and set aside.

129

3)

J. PLUS ASIA DEVELOPMENT CORP. vs.

UTILITY ASSURANCE CORPORATION
(2013)

Petitioner raised the procedural point that

the CA was divested of jurisdiction to
review the award of the CIAC Arbitral
Tribunal because, under RA 9285 and the
Special ADR Rules, the recourse is a
petition to vacate/set aside.

130

HELD:
R.A. No. 9285 did not confer on regional trial courts
jurisdiction to review awards or decisions of the CIAC in
construction disputes. On the contrary, Section 40 thereof
expressly declares that confirmation by the RTC is not
required. Since R.A. No. 9285 explicitly excluded CIAC
awards from domestic arbitration awards that need to be
confirmed to be executory, said awards are therefore not
covered by Rule 11 of the Special ADR Rules, 24 as they
continue to be governed by EO No. 1008, as amended and
the rules of procedure of the CIAC. The CIAC Revised Rules
of Procedure Governing Construction Arbitration provide for
the manner and mode of appeal from CIAC decisions or
awards in Section 18 thereof and the mode is a Rule 43
Petition for Review to the Court of Appeals.

131

4)

RCBC CAPITAL CORPORATION vs. BANCO

DE ORO UNIBANK INC. (2012)

HELD:

The Court adopts the reasonable impression of

partiality standard, which requires a showing that
a reasonable person would have to conclude that
an arbitrator was partial to the other party to the
arbitration. Such interest or bias, moreover, "must
be direct, definite and capable of demonstration
rather than remote, uncertain, or speculative."
When a claim of arbitrator's evident partiality is
made, "the court must ascertain from such record
as is available whether the arbitrators' conduct
was so biased and prejudiced as to destroy
fundamental fairness."
132

Applying the foregoing standard, we agree

with the CA in finding that Chairman Barker's
act of furnishing the parties with copies of
Matthew Secomb's article, considering the
attendant circumstances, is indicative of
partiality such that a reasonable man would
have to conclude that he was favoring the
Claimant, RCBC. By furnishing the parties
with a copy of this article, Chairman Barker
practically armed RCBC with legal arguments
to support its claim for relief.
133

5)

TUNA PROCESSING INC. vs. KINGFORD,

INC. (2012)
HELD:
As the ADR Law is a special law, it prevails over the
provisions of the Corporation Code, which is a general law.
Hence, a foreign corporation not licensed to do business in
the Philippines has legal capacity to sue under the
provisions of the ADR Law (including to file a petition to
enforce and recognize a foreign arbitral award) because,
under the ADR Law, the lack of personality to sue is not a
ground to vacate/set aside/refuse recognition to an arbitral
award. In addition, under the Supreme Court ADR Rules,
allegation and proof of the petitioners personality sue are
not required for the enforcement/recognition of foreign
arbitral awards, merely domestic awards.
134

6)

CHINA NATIONAL MACHINERY & EQUIPMENT

CORP. vs. HON. SANTAMARIA, ET AL. (2012)
HELD:
An agreement to submit any dispute to arbitration
may be construed as an implicit waiver of immunity
from suit. In the United States, the Foreign Sovereign
Immunities Act of 1976 provides for a waiver by
implication of state immunity. In the said law, the
agreement to submit disputes to arbitration in a
foreign country is construed as an implicit waiver of
immunity from suit. Although there is no similar law in
the Philippines, there is reason to apply the legal
reasoning behind the waiver in this case.

135

7)

EQUITABLE PCI BANKING

CORPORATION, ET AL. vs. RCBC CAPITAL
CORPORATION (2008)

HELD:

To justify the vacation of an arbitral award on

account of "manifest disregard of the law",
the arbiter's findings must clearly and
unequivocally violate an established legal
precedent. Anything less would not suffice.
136

By: Patricia-Ann T. Prodigalidad

Partner, ACCRALAW
Assistant National Secretary, IBP National

137

138