Philippine Institute of Arbitrators

Involved in Arbitration / ADR?

We know the different processes.

We can help you dissect and analyze them,

refine and combine them, and create hybrid
procedures to make them suitable for
particular relationships, as well as to develop
strategies and point you to the right direction.
ASEAN AND INTERNATIONAL
DISPUTE RESOLUTION
MECHANISMS
by

MARIO E. VALDERRAMA LLB, FCIARb, FHKIArb, FPIArb

ADR Adviser to the Construction Industry Arbitration Commission
CIArb Approved Tutor
CIAC, PDRCI & WESM Arbitrator
Contact Details
Tel No 367 4001; Telefax 362 1867
Mobile 0917 4114 594
E-mail <marval.law@gmail.com>
PRELIMINARY: ASEAN
INTEGRATION 2015

ASEAN MEMBERS: Brunei, Cambodia, Indonesia,

Laos, Malaysia, Myanmar, The Philippines,
Singapore, Thailand and Vietnam.
Purpose of ASEAN 2015: Basically focused on the
economic competitiveness of the Asean Nations.
Means to achieve purpose: all the separate markets
of the Asean Nations to coalesce into one. (Creation
of an Asean Economic Community). Note, though,
that ASEAN 2015 does not operate like the WTO or
the EU.
PRELIMINARY: ASEAN
INTEGRATION 2015

Free flow of goods, services, investment capital and

skilled labor (including professionals) within Asean.

Competition among Asean members re inbound

investments and jobs expected, but the hope is that
the line between competition and collaboration will
be less clear in the future.

It is reasonable to assume that disputes will arise.

PRELIMINARY: ASEAN
INTEGRATION 2015
Investors in choosing their point of entry would
most likely familiarize themselves with the dispute
resolution capability of the different ASEAN
countries.

Investors would most likely shy away from the

public dispute resolution practices.
The rather abnormal situation in the Philippines.

The focus is expected to be in the private dispute

resolution practices.
FOCUS OF DISCUSSION

Exclusion: Dispute Resolution Processes that have

compulsory characteristics.

Focus of Discussion: The Dispute Resolution

Practices that are based on consent / contract.

R.A. 9285 Sec. 2. Declaration of Policy. It is hereby

declared the policy of the State 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.
CHOICES

Parties can choose the mode of

resolving their disputes. Variety in the
menu.
 The Dispute Resolution
Spectrum
Non-Jurisdictional and ADR
Avoidance, violence, chance
Negotiation
Conciliation and Mediation
Other ADR forms
Special Mention: Adjudication / Dispute Boards
Jurisdictional
Arbitration
Statutory Arbitration
Litigation
CHOICES

Basic rule: if the parties have their own

agreed procedure, then that procedure
shall be followed.
CHOICES
Parties only or involving third parties.

Peaceful (voluntary) procedures or compulsory

procedures entailing binding or merely executory decisions.

Positional (derivative or compromising) or integrative

approaches.

Facilitative, evaluative or transformative approaches.

Negotiated or adversary (adversarial or inquisitorial) models.

 CHOICES
The procedures / approaches may be combined (see R.A. 9285
Sec. 18).

Parties can create and innovate. They can dissect and analyze
the different dispute resolution practices, refine and combine
them, and create and design hybrid procedures to make them
suitable for particular relationships / needs. The spectrum of
processes that they can create will be limited only by the extent
of their imagination.

Rule in hybrids: the rules corresponding to the combined

procedures will apply mutatis mutandis (see R.A. 9285 Sec. 18).
SIDELIGHT: THE HYBRIDS,
EXAMPLES
Mini Trials
Non-binding arbitration
Med-Arb
Arb-Med
Med-Arb-Med
Early neutral evaluation
Early expert evaluation
Adjudication / Dispute Boards
APPLIED PARTY AUTONOMY: THE
EVOLUTION OF ADJUDICATION (NOW
CALLED DISPUTE BOARDS) IN THE
CONSTRUCTION
Operating Concepts:
INDUSTRY
1. Disputes are better resolved as soon as they arise, rather than wait until they
pile-up and the amounts involved have bloated.
2. Cash flow is important.
3. In the executory award models: at the end of the construction period there is
still enough money to cover wrong payments.
May be statutory or contractual.
Models: The FIDIC Model, the World Bank Model. Variant is to constitute the
adjudication board at inception of contract.
The variant evolved to also become a dispute prevention mechanism; then
application of other ADR mechanisms.
Procedures record of success resulted to their application to other contracts.
ADR AND ARBITRATION

The processes are confidential by law in

the Philippines.

R.A. 9285 Secs. 9 , 12 & 23

Minimal, if at all, meddling from the

Government and the Court.
Processes are private, not public.
ADR Boards or Tribunals are instrumentalities
of the parties.
MAL Art. 5 in arbitration.
ADR AND ARBITRATION
RE ARBITRATION: Arbitral Tribunal is an instrumentality of
the parties.
In arbitration the parties by contract create their own
tribunal. They appoint their judges; craft the procedure;
agree on several categories of choice. As creators they own
the tribunal; as owners and creators they can shape the
tribunal to what they want it to be. As owners and creators
they pay the expenses of the tribunal that they created. The
arbitrators are akin to temporary employees whose job
description is to resolve the dispute between the parties
(see UNCITRAL Model Law 1985 Provisions).
ADR AND ARBITRATION
As a rule, parties set the qualifications and
disqualifications of their dispute resolvers. Not
dependent on ASEAN agreed standards. No need to
undergo processes required for other professionals
to practice within ASEAN.

ADR and Arbitration practitioners are practitioners

without borders.
ADR AND ARBITRATION
Settlements and decisions of arbitral tribunal
enforceable by courts. And the enforcement
processes are, as a rule, summary, hence speedy.
R.A. 9285 Sec. 17, 18, and Chapter 7 provisions.

International arbitral awards enforceable under the

New York Convention of 1958.
OTHER REASONS WHY WE SHOULD
FAMILIARIZE OURSELVES WITH PRIVATE
DISPUTE RESOLUTION PROCESSES

International commercial parties tend to shy away from

public dispute resolution processes. Even local parties
have to contend with the rather abnormal situation in
our local Court.

Treaty, FDI and state to state dispute resolution is

focused on party autonomy principles. Treaty
arbitrations, FDI (foreign direct investments)
arbitrations, state to state arbitrations etc. operate
substantially the same as commercial arbitration.
OTHER REASONS WHY WE SHOULD
FAMILIARIZE OURSELVES WITH PRIVATE
DISPUTE RESOLUTION PROCESSES

Some statutes require the insertion of dispute

resolution clauses, including arbitration, in contracts
entered into by the Government. E.0. 78 requires
dispute resolution clauses in all PPP & BOT
contracts; also joint venture agreements between
the National Government and its contracting parties.

Aid organizations (e.g. JICA, WB) have adopted the

dispute board concept. No DB, no loan.
 CROSSROADS

Developments

ADR is now being referred to as Appropriate Dispute

Resolution (SG CJ Sundaresh Menon). It embraces not
only ADR as we know it, but also arbitration, statutory
adjudications (examples CIAC, labor and consumer
arbitrations) as well as litigation.

Arbitration has become an indispensable part of

international commerce. However, it is said that the future is
towards a more inclusive and solid ADR framework.
 CROSSROADS

Developments (cont).

We have read in the papers that Asia is now the engine of

growth. Here there is an exponential growth in FDI. Asia is
consistently outperforming the global economy. It is said
that Asia is expected to record the fastest growth in any
other region.

We can reasonably expect disputes.

 CROSSROADS

New Approach Re Legal Practitioners

With that, our role is no longer limited to representation. We

have to include a more dynamic and proactive role.

We have to adopt a tool box approach for ADR. We should

have new product lines in the services that we offer.

Necessarily, this will require education, training, capacity

building and awareness of how ADR, arbitration and other
modes of dispute resolution work.
 CROSSROADS

New Approach Re Legal Practitioners

It is in education and capacity building that Bar associations

and institutions will play pivotal roles. We, the lawyers,
remain as the gatekeepers. We draft contracts, relevantly
dispute resolution clauses. We play a role in proceedings to
enforce those clauses. We play a role in the enforcement
stage of settlements, decisions and awards. The premise of
all that is that we are, as we should be, the bearers of
knowledge.
 CROSSROADS

Scope of Training and Capacity Building

It should include not only practitioners but also the judiciary.

And users as well.

Note: I was informed by the LEB Chair that two (2) schools
would want to open a tertiary course in ADR/Arbitration.
 CROSSROADS

Paradigm Shift

ADR is becoming part of the justice system and is no longer

being viewed as an aid to ease the problems of the judiciary.

Internationally we have the UNCITRAL Model Law and the

New York Convention of 1958 working together to unify the
legal regime in arbitration.

Work is in progress to have a Convention on the enforcement

of mediated settlements.
 CROSSROADS

Paradigm Shift (cont)

In Singapore there is now an International Commercial Court

which functions just like a court, but caters to international
commercial matters.

What about our fees?

 WHERE ARE WE NOW?

Comparison: ADR level of knowledge outside the country.

In ADR: Phl still in kindergarten level.
In Arbitration: there is a dearth of professors and teachers who could
handle arbitration.
Some law schools not offering ADR/Arbitration. Lack of professors; not a
Bar subject; not core subject in JD programs.
There is practically no knowledge of dispute boards (or adjudication).
Note that aid orgs (JICA, WB) have adopted the process: no DB, no loan.
Probable level of local knowledge.
Phl. still dependent on foreign tutors / trainors.
 WHERE ARE WE NOW?

In mediation we only know the

facilitative kind. Some of us may not
even know the name of what we practice.

Our mediation law needs a lot of fixing.

 WHERE ARE WE NOW?

Problem with our mediation law: lack of viable

default provisions.
Sample Clause: Any dispute arising out of or in
relation to this contract shall first be referred to
mediation before a party could go to court (or to
arbitration, as the case may be).
Proposed solution: Insert a time line. (ICC has a variety
of recommended clauses to address the problem).
 WHERE ARE WE NOW?

Arbitration: Experience in preliminary

conferences.
C T To: Countries who have upgraded their arbitration
law pass through that phase when cowboys are
arising and what they do is to mess things up.
Teresa Cheng: Experience shows that, in arbitration
and in many cases, on the job training will not suffice.
It is a recipe for disaster.
 WHERE ARE WE NOW?

Problem with our arbitration law:

R.A. 876 has an unviable default provision concerning
fees.
- The fees of the arbitrators shall be fifty pesos per day
unless parties agree otherwise in writing prior to the
arbitration. (R.A. 876 Sec. 21).
 WHERE ARE WE NOW?

Problem with our arbitration law:

Domestic Arbitration Law Very Difficult to Understand:
- Domestic Arbitration shall continue to be governed by
Republic Act No. 876 x x x.
- Articles 8, 10, 11, 12, 13, 14 and 18 and 19 and 29 to 32 of
the Model Law and Section 22 to 31 of the preceding Chapter
4 shall apply to domestic arbitration. (R.A. 9285 Secs 32
and 33).
 WHERE ARE WE NOW?

Problem with our arbitration law: Only In

the Philippines Provisions, Examples:

Special Rules Rule 12.2. (B) last sentence:

Failure to file a petition to set aside shall
preclude a party from raising grounds to resist
enforcement of the award.
The provision mixed-up the supervisory jurisdiction
of courts with its enforcement jurisdiction. Choice of
remedies, enshrined in the Model Law, disappeared.
 WHERE ARE WE NOW?

Problem with our arbitration law: Only In the

Philippines Provisions, Examples:
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 than 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. (R.A. 9285 Sec.24).
Rule on waiver ignored.
 WHERE ARE WE NOW?

Problem with our arbitration law:

Aside from (a) the confusing state of our domestic arbitration
law and (b) the only in the Philippines provisions, other
problems arise from the fact that our arbitration law is in
several enactments, namely R.A. 9285, R.A. 876, some civil
code provisions, the UNCITRAL Model Law 1985, the New York
Convention, the SCs Special Rules, the DOJs IRR, and a
several others. In certain instances they do not provide the
same rules.
 WHERE ARE WE NOW?

Examples of Conflicting Provisions:

R.A. 876 enumerates four (4) grounds to vacate a domestic award. In
contrast, Special Rules Rule 11.4 enumerates seven (7) grounds to
vacate a domestic award.
IRR Art. 4.37 last paragraph is premised on the proposition that local
international awards are appealable by providing that the right to
appeal may be waived. Such waiver, nevertheless, is without
prejudice to the application of the Rules of Court Rule 65. Most of
the other laws correctly provide for the finality of arbitral awards.
 WHERE ARE WE NOW?

Arbitration: Philippines v. China Arbitration

The information we got, initially, is that the
arbitration is ITLOS arbitration. Now, it is PCA
arbitration. Both are wrong.
It is actually ad hoc arbitration under Annex VII of
UNCLOS.
NOTE: Govt erroneously initiated an arbitration in
ITLOS. The handling lawyer used UNCLOS Annex VII,
instead.
 WHERE ARE WE NOW?

Arbitration: PIATCO Arbitration, Singapore

What we have not been told is that the Government

lost in its counterclaim on the ground that the
arbitral tribunal does not understand the legal
basis of the counterclaims.
Basic rule ignored: arbitration is evidentiary.
 WHERE ARE WE NOW?

Arbitration: RCBC V BDO G.R. No. 196171 10 Dec. 2012:

two internationally known and well respected arbitrators
were said to be guilty of bias and prejudgment. What they
did was to do what they were supposed to do, pursuant
to general rules of arbitration, to avoid using secret
evidence.
 WHERE ARE WE NOW?

Arbitration: Korea Technologies v Lerma, G.R. 143581 7 June

2008 classic in the mistakes in its obiter.

xxx as signatory to the Arbitration Rules of the UNCITRAL

Model Law on International Arbitration of the United Nations
Commission on International Trade Law (UNCITRAL) in the
New York Convention on June 21, 1985, the Philippines
committed itself to be bound by the Model Law.
 WHERE ARE WE NOW?

Arbitration: Korea Technologies v Lerma

xxx the foreign arbitral award is subject to judicial review

by the RTC which can set aside, reject, or vacate it.
For foreign or international awards which first must 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.
 WHAT IS BEING

DONE?
The Good News
DOJs OADR had established a technical working group to
look at our ADR and Arbitration laws to recommend the
necessary changes and amendments.
The commercial people are extending their assistance.
PDRC and PIArb are in the forefront of educating our
countrymen. We train, host, arrange and assist seminars,
courses, fellowships, lectures. We have connections with
foreign groups who assist in PDRCs and PIArbs activities.
Many individuals teach; speak during MCLE Seminars; give
lectures, some pro-bono; participate in mocks; go around
schools to give lectures.
 WHAT IS BEING
DONE?
PDRCI and PIArb Wish Re Judiciary

The premise is that we are a Model Law

Country. So, the eyes of all Model Law countries
are on us because there should be uniformity in
the interpretation of the Model Law Provisions.
 WHAT IS BEING
DONE?
What Some Countries are Additionally Doing:
Support their ADR/Arbitration Institutions.
Roadshows.
Give tax breaks to firms bringing in arbitration business.
Re GST liability.
Re Tax on Income.
No need to secure work permits (but note Thailand incident).
Others.
 WHAT WE NEED TO

DO
We need to be at par with our foreign counterparts if
we are to effectively compete.
What we need to do:
Raise level of awareness.
Capability Building: train practitioners, train the trainors;
and train the trainors who will train other trainors.
Have an inclusive, dynamic and innovative legal fraternity
that would move forward, keeping track of the new
improvements to avoid being left behind. This includes the
judiciary as, without its assistance and active participation,
it would be very difficult to achieve our goals.
 ASEAN AND DISPUTE
RESOLUTION MECHANISMS
QUESTIONS?
Comments and suggestions, critical, adverse or otherwise,
welcomed.
I would love to hear from you if you noticed any error or
omission, or if you have any suggestion on how to improve,
this presentation.
E-mail to marval.law@gmail.com. Visit our website at
<www.philippinearbitrators.org>.
 WANT TO KNOW MORE?
Attend our courses and
seminars
Contact us for schedules.
Visit us at
[www.philippinearbitrators.org]

Philippine Institute of Arbitrators

c/o Atty. Mario E. Valderrama
Tel. No. (632) 367 4001
Mobile 0917 4114 594
E-mail: marval.law@gmail.com