CHAPTER 4

ARBITRATON IN GENERAL
By Atty. Gabriel Robeniol
CHAPTER 4 - ARBITRATON IN GENERAL

ARBITRATION

Process which one or more arbitrators appointed in

accordance with the agreement of the parties

It is the arbiter that decides the dispute and renders an

arbitral award to conclude in arbitral proceedings
CHAPTER 4 - ARBITRATON IN GENERAL

Kinds of Arbitration

Voluntary Compulsary arbitration Reference of a dispute

to an impartial body Members are chosen by the parties
themselves Settlement of labor dispute by the
government agency which has the authority to investigate
Domestic International Foreign Commercial Arbitration
matters arising from all relationship of commercial in
nature
CHAPTER 4 - ARBITRATON IN GENERAL

Policy on Arbitration

Speedy, inexpensive and amicable method of

settling disputes , Arbitration along with
mediation, conciliation and negotiation is
encouraged by the Supreme Court.
CHAPTER 4 - ARBITRATON IN GENERAL

ARBITRATOR

Person appointed to render an award

May use his own discretion in the performance of his function
which should be distinguished from an arbiter who is bound by
rules of law and equity in rendering and award e.g. Labor Arbiter
(NLRC)
Voluntary arbitrators act in a quasi-judicial instrumentality
(decisions are within the scope of judicial review)
CHAPTER 4 - ARBITRATON IN GENERAL

ARBITRATION AGREEMENT

Agreement by the parties.

In respect of legal relationship.
Contractual in nature.
It shall be in writing and subscribed by the parties or his agent.
May be included in arbitration clause or compromise.
CHAPTER 4 - ARBITRATON IN GENERAL

ESSENTIAL ELEMENTS

Consent of the parties freely given

Cause of consideration
Lawful object
CHAPTER 4 - ARBITRATON IN GENERAL

ARBITRATION CLAUSE

Must be liberally construed consistent with the policy of

encouraging alternative dispute resolution method.
CHAPTER 4 - ARBITRATON IN GENERAL

DOCTRINE OF SEPARABILITY

Arbitration agreement is independent of the main contact even if it

contained in Arbitration clause. It is to be treated as a separate
agreement that even if the main contract is challenged the
arbitration agreement or clause remains valid and enforceable.
CHAPTER 4 - ARBITRATON IN GENERAL

DUE PROCESS IN ARBITRAL PROCEEDINGS

Principles of administrative due process equally apply to arbitral

proceedings in relation to the right to cross-examine witnesses in
an arbitral proceeding.
ADR providers and practitioners act in quasi-judicial capacity.
CHAPTER 4 - ARBITRATON IN GENERAL

JUDICIAL REVIEW AND COURT INTERVENTION

The inclusion of an arbitration clause in a contract does not ipso facto

divest the courts of jurisdiction to pass upon the findings of arbitral
bodies.
Proper RTC to issue an order to vacate the award
Review Court of Appeals Rule 43 ROC (mixed questions of facts or law, or
mixed)
Certiorari proper court Rule 65 ROC on questions of law or should the
arbitrator have acted in grave abuse of discretion amounting to lack or excess
of jurisdiction
CHAPTER 4 - ARBITRATON IN GENERAL

JUDICIAL REVIEW AND COURT INTERVENTION

A court before which an action is brought on a matter which is the

subject of an arbitration agreement shall refer the parties to
arbitration unless it finds that the arbitration agreement in null and
void.
The court may issue an order directing the inclusion in the
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.
CHAPTER 4 - ARBITRATON IN GENERAL

Interim Measures in Arbitration (Interim measures of protection or

provisional relief)

Allows the application of a party to a judicial authority for interim

conservatory;
Allows filing of provisional interim measures with regular courts
whenever the arbitral tribunal has no power to act effectively.
Interim Measures ancillary remedies intended for the protection of the subject
matter of the dispute they include but not limited to preliminary injunction,
appointment of receivers, detention of property, preservation of property, and
inspection of property subject of the dispute.
CASE 1 UNIWIDE SALES REALTY VS. TITAN-IKEDA CONSTRUCTION
G.R. No. 126619, 20 December 2006
FACTS:
An action for a sum of money filed by Titan against Uniwide;
Uniwides non-payment of claims billed by Titan after completion of 3
projects namely:
1) Construction of Uniwides warehouse club and Admin. Building. Contract
was executed and to be completed before 30 Nov. 1991. Building was
finished 15 Feb. 1992;
2) Construction of an additional floor and to renovate warehouses. No
contract executed. Project was completed in the latter part of Oct. 1992
3) Construction of a Department Store building executed in a written
contract. Project shall be completed not later than 28 Feb. 1993 and was
completed June 1993.
CASE 1 UNIWIDE SALES REALTY VS. TITAN-IKEDA CONSTRUCTION
G.R. No. 126619, 20 December 2006
FACTS:
Upon Uniwides motion to dismiss/suspend proceedings and Titans open court
manifestation agreeing to suspension and for them to undergo arbitration. Complaint
was re-filled with the CIAC
Conducted a preliminary conference and issued a TOR signed by the parties
CIAC rendered the following decisions of projects:
1. Uniwide is absolved of any liability for the claims of Titan;
2. a. Uniwide is absolved of any liability for VAT payment
b. Titan is absolved of any liability on the counterclaim for defective
construction
c. Uniwide is held liable for the unpaid balance in the amount of P6,30,075.77
with 12% interest per annum
3. a. Uniwide is held liable for the unpaid balance in the amount of P5,158,364.63 with
12% interest per annum
CASE 1 UNIWIDE SALES REALTY VS. TITAN-IKEDA CONSTRUCTION
G.R. No. 126619, 20 December 2006
FACTS:
3. b. Uniwide is held liable to pay in full the VAT on this project.
Uniwide filed a motion for reconsideration of the decision which
was denied by CIAC
Uniwide accordingly filed a petition for review with CA, which
rendered the assailed decision
Uniwides Motion for Reconsideration was likewise denied by the
CA.
CASE 1 UNIWIDE SALES REALTY VS. TITAN-IKEDA CONSTRUCTION
G.R. No. 126619, 20 December 2006
1st ISSUE: Whether the payment of Uniwid for Project 1 is a mistake
HELD: No, the provisions of Art. 1724 of the NCC as cited by Uniwide is
inapplicable to the case at bar because Uniwide had already paid and
characterized Uniwides payment of the said amount as a voluntary
fulfillment of a natural obligation as provided under Art. 1423 of the NCC,
albeit with unwritten reservations, for the additional works. The
provision would have been operative if Uniwide refused to pay for the
cost of the additional works. The situation was characterized as being akin
to Uniwide being a debtor who paid a debt even while it knew that I was
not legally compelled to do so.
CASE 1 UNIWIDE SALES REALTY VS. TITAN-IKEDA CONSTRUCTION
G.R. No. 126619, 20 December 2006
Furthermore, to claim a refund of payments made under the
principle of solution indebiti, as cited by Uniwide, Uniwide must be
able to establish that these payments were made through mistake.
Moreover, Uniwide is unable to show to any pertinent part of the
record that would indeed establish that the payments were made by
reason of mistake.
CASE 1 UNIWIDE SALES REALTY VS. TITAN-IKEDA CONSTRUCTION
G.R. No. 126619, 20 December 2006
2nd ISSUE: Whether Unwide is liable for the payment of the VAT.

HELD: Without any documentary evidence to show the extent of tax liability
assumed by Uniwide, the Tribunal holds that the parties is obliged to pay only
a share of the VAT payment upto P60,000,000.00 out of the total contract price
of 120,936,591.50. VAT is paid on the on labor oonly for construction contracts
since VAT had already been paid on the materials purchased. Since labor costs
is proportionately placed at 60%-40% of the contract price, simplified
accounting computes VAT at 4% of the contract price. Whatever is the balance
for VAT that ramins to be paid on Project 1 shall remain the obligation of Titan.
CASE 1 UNIWIDE SALES REALTY VS. TITAN-IKEDA CONSTRUCTION
G.R. No. 126619, 20 December 2006
3rd ISSUE: Whether Uniwide is entitled to liquidated damage for Project 1 and 3
HELD: No, the Court of Appeals found that the issue has never been made concrete
enough to make Titan and CIAC aware that it will be an issue. In fact, Uniwide only
introduced and quantified its claim for liquidated damages in its memorandum
submitted to the CIAC at the end of the arbitration proceeding.
As an arbitration body, the CIAC can only resolve issued brought before it by
the parties through the TOR which functions similarly as a pre-trial brief, Uniwides
claim for unliquidated damages was not raised as an issue in the TOR or in any
modified or amended version of it, the CIAC cannot make a ruling on it.
CASE 1 UNIWIDE SALES REALTY VS. TITAN-IKEDA CONSTRUCTION
G.R. No. 126619, 20 December 2006
4th ISSUE: Whether Uniwide is liable for deficiencies in project 2
HELD: Uniwide had the burden of proving that there was defective construction
in Project 2 but it failed to discharge his burden. Even the credibility of its own
witness was severely impaired. Further, it was found that the concrete slab
placed by Titan was not attached to the old columns where cracks were
discovered.
CHAPTER 4 - ARBITRATON IN GENERAL

KINDS OF ARBITRATION (Distinctions)

Voluntary involves the reference to an impartial body, the members
of which are chosen b the parties themselves, which parties freely
consent in advance to abide by the arbitral award after both parties
had the opportunity to be heard.

Compulsory the process of settlement of disputes by a government

agency which has the authority to investigate and to make an award
which is binding on all parties e.g. Labor disputes (NLRC)
CHAPTER 4 - ARBITRATON IN GENERAL

KINDS OF ARBITRATION (Distinctions)

Domestic if the components of parties places of business, place of

arbitration, place of performance of a substantial part of the
obligation, and place where the subject matter of the dispute is most
closely connected, are all Iocated in the Philippines. Arbitration
conducted in the Philippines is domestic irrespective of the presence or
absence of foreign elements.

Foreign is conducted outside of the Philippines.

CHAPTER 4 - ARBITRATON IN GENERAL

KINDS OF ARBITRATION (Distinctions)

International if any of the following instances occur:

1. The parties places of business, which at the time of the conclusion

of the arbitration agreement, is in different states;
2. The place of arbitration provided in the arbitration agreement and
in which the parties have their places of business, is outside the
Philippines;
CHAPTER 4 - ARBITRATON IN GENERAL

KINDS OF ARBITRATION (Distinctions)

International

3. The plae where a substantial part of the obligation is to be

performed or the place with which the subject matter of the dispute
is most closely connected, and in which the parties have their place
of business, is outside the Philippines; or
4. The parties have expressly agreed that the subject matter of the
arbitration agreement relates to more the one country.
CHAPTER 4 - ARBITRATON IN GENERAL

KINDS OF ARBITRATION (Distinctions)

NOTE:
An International Commercial Arbitration proceeding conducted in the
Philippines under the auspices of the ADR Act is domestic and
international in character. On the other hand, an International
Commercial Arbitration conducted outside the Philippines is a foreign
arbitration
CASE 2 KOREA TECHNOLOGIES CO. - versus - HON. ALBERTO A.
LERMA and PACIFIC GENERAL STEEL CORPORATION, 542 SCRA 1
The policy is to favor alternative methods of resolving disputes,
particularly in civil and commercial disputes. Arbitration along with
mediation, conciliation, and negotiation, being inexpensive, speedy and
less hostile methods have long been favored by this Court. The petition
before us puts at issue an arbitration clause in a contract mutually agreed
upon by the parties stipulating that they would submit themselves to
arbitration in a foreign country.
The Supreme Court reiterate the judicial policy on arbitration. Aside from
unclogging judicial dockets, arbitration also hasten the resolution of disputes,
especially of the commercial kind. It is thus regarded as the WAVE OF THE
FUTURE in international civil and commercial disputes.
CASE 2 KOREA TECHNOLOGIES VS. LERMA 542 SCRA 1 (2008)