LAW 160 A (PROBLEMS IN REMEDIAL LAW / ALTERNATIVE DISPUTE RESOLUTION)

Prof. Arthur Autea | 1st Sem 2011-2012

Expanded Outline and Class Notes by Eva Marie G . Gutierrez

over the case GRADING SYSTEM 60% - Attendance, Class Participation, Quizzes 40% - Final Exams Who bears costs Salary of judges paid by the state

(chairman and 2 coarbitrators) Compensation of arbitrators shouldered by the parties Parties can choose applicable law and rules, including procedure, to govern the resolution of the dispute Venue chosen by parties Scheduled in quick succession Claimant and Respondent

I.

Introduction
o o Course focus is on ARBITRATION, the only legally binding form of ADR Look at ADR as an alternative to conventional litigation procedure but use analogy to understand the process better It is alternative because it can be practiced even without a lawyer
Conventional Litigation Public Procedure Arbitration Private Procedure Private Judging, private resolution of disputes The arbitrator Parties have participation in choosing arbitrator; always by mutual agreement whether it be sole or panel arbitration Usually, either a sole arbitrator or panel of 3

Governing law and rules in settling the dispute

Applicable Philippine law is followed unless there is a choice of law clause; Rules of Court followed Rules on venue followed in adjudication of claim Procedure drags so long Plaintiff and Respondent

Venue

Speed of proceedings Parties

Nature

Kinds of Arbitration
Ad hoc Parties will take care of the logistics Institutional Institutions acts just like Clerks of Court receives request for arbitration, sends out notices, records proceedings, provides hearing rooms and other logistics

Who presides Participation in choosing presiding officer

A judge You cannot choose your judge; assignment by raffle;

Composition of tribunal

Only one judge in RTC/MTC to preside

Arbitration deemed commenced upon service of demand for arbitration (Sec. 5(a), RA 876) Governing law and rules: Domestic RA 876 and

In default of agreement of the parties, institutions have their own rules that the

ADR Notes | Page 2 of 17

Special ADR Rules (RA 9285, Sec. 32 refers back to RA 876) International UNCITRAL 1985 Model Law (as expressly adopted by Sec. 19, RA 9285) and UNCITRAL Rules of Arbitration parties can adopt e.g. ICC Rules

Example: ICC/ICA (most prominent), AAA, LCIA, HIAC, SIAC, JCCA, KCAB, PDCI, CIA, KLRCA, IAB, ACICIA Domestic Domestic arbitration shall mean an arbitration that is not international as defined in Article 1(3) of the Model Law (Sec. 32, RA 9285) International (3) An arbitration is international if: (a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States; or (b) one of the following places is situated outside the State in which the parties have their places of business: (i) the place of arbitration if determined in, or pursuant to, the arbitration agreement; (ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or (c) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country. (4) For the purposes of paragraph (3) of this article: (a) if a party has more than one place of business, the place of business is that which has the closest relationship to the arbitration agreement; (b) if a party does not have a place of business, reference is to be made to his habitual residence. [UNCITRAL Model Law Article 1 (3)]

Legislative History of Arbitration in the Philippines Major Developments (1) 1953 RA 876 enacted by a domestic act, covers domestic arbitration; meanwhile, Southeast Asian regions use of arbitration as a mode of dispute resolution continues to be more prevalent (2) 1985 EO 1008 signed into law by Pres. Marcos which covers construction arbitration and created a body the CIAC: Construction Industry Arbitration Authority; jurisprudence on arbitration, especially construction arbitration, enriched from 1985; although in practice, arbitration clauses are not regularly invoked even if there is arbitrable dispute (3) 2004 RA 9285 (ADR Act) deals with both domestic and international discussion; not as extensive as RA 876; no chapter discussing international arbitration, instead it referred to an existing model of international arbitration the 1985 UNCITRAL Model Law (4) 2009 Special ADR Rules issued by Supreme Court, supplied a lot of missing elements in RA 876 and RA 9285 Note: even before 1953, arbitration agreements were also recognized by jurisprudence; a lot of jurisprudential developments and language on arbitration landed in the statutes and Special ADR Rules Other Developments: 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Philippines a signatory 1978 UNCITRAL Arbitration Rules 1996 China Chang Jiang Energy Corp (Philippines) vs Rosal Infrastructure Builders, landmark case in construction arbitration is decided although unreported: pronounced that

ADR Notes | Page 3 of 17 if there is an construction contract with arbitration clause then jurisdiction is with CIAC o o Construction industry FIDIC
contractual or not. An arbitration agreement may be in the form or an arbitration clause in a contract or in the form of a separate agreement. Civil Code, Article 1159 Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

Definition of Arbitration Agreement

RA 876, Sec. 2
Arbitration Agreement As to time agreed upon by the parties (relative to the occurrence of the dispute) As defined in Sec. 2, RA 876 Agreed by the parties even BEFORE the occurrence of dispute; Submission Agreement Agreed upon by the parties AFTER the occurrence of a dispute;

Frabelle Fishing Corporation v. Philippine American Life Insurance Company (2007) o o o o HLURB has no jurisdiction over reformation of contracts Arbitration is the wave of the future citing BF Homes v CA Re issue WON there should be prior referral to arbitration, SC made no definite ruling. Case does not show if any of the parties prayed for arbitration; however, there was an issue WON the dispute is arbitrable and the Court resolved it in the affirmative Sir thinks Court fell short of ordering (in the dispositive) referral to arbitration

parties to a contract agree in such a contract [container contract] agree to settle by arbitration a controversy thereafter arising between them [usually, in an arbitration clause] A party may invoke this at any time before pre-trial stage, after which both parties must invoke it

two or more persons submit to the arbitration of one or more arbitrators any controversy existing between them at the time of the submission

Exclusion from coverage of commercial arbitration

May be entered into at any time, even after pre-trial stage RA 876, Sec. 3 controversies and case subject to the jurisdiction of NLRC i.e. labor disputes arising from employer-employee relationship RA 9285, Sec. 6 (a) labor disputes covered by Presidential Decree No. 442, otherwise known as the Labor Code of the Philippines, as amended and its Implementing Rules and Regulations; (b) the civil status of persons; (c) the validity of a marriage; (d) any ground for legal separation; (e) the jurisdiction of courts; (f) future legitime; (g) criminal liability; and

When it may be invoked

RA 9285, Sec. 3 (d) "Arbitration" means 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. UNICTRAL Model Law, Article 7(1) Arbitration Agreement is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether

ADR Notes | Page 4 of 17

(h) those which by law cannot be compromised.

BF Corporation v. Court of Appeals o Articles of Agreement adopted/referred to another document containing the arbitration agreement: valid The famous pronouncement re arbitration: Arbitration is now regarded as the wave of the future in international civil and commercial disputes.

Formal requirements of arbitration agreement 1. in writing 2. subscribed

RA 876, Sec. 4 A contract to arbitrate a controversy thereafter arising between the parties, as well as a submission to arbitrate an existing controversy shall be in writing and subscribed by the party sought to be charged, or by his lawful agent. UNCITRAL Model Law, Article 7(2) The arbitration agreement shall be in writing. An agreement is in writing if [1] it is contained in a document signed by the parties or [2] in an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement, or [3] in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by another. The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract.-

Associated Bank v. Court of Appeals o Participation in the Philippine Clearing House Rules (PCHR) amounts to a written and subscribed consent to arbitration

Bloomfield Academy v. Court of Appeals o A party was bound by the law to some kind of arbitration. Is the provision an arbitration agreement?

Ormoc Sugarcane Planters Association, Inc v. Court of Appeals o Association filed a case for arbitration without impleading the individual planters who are the real parties in interest , they are the parties (to the contract with sugar central owners) containing the arbitration clause At best, the Association is an agent, however in that case, it should be properly authorized to bring suit on behalf of the planters The Associations complaint was denominated Arbitration and Recovery of Shares, Attorneys Fees and Damages this is not a proper complaint; if the issue is arbitrable, everything should be referred to arbitration. Jurisdiction of the court is limited to the resolution WON dispute should be referred to arbitration, otherwise, it would be encroaching on the jurisdiction of the arbitrator(s).

o o

Statement of Claim first substantive pleading of the claimant Statement of Defence first substantive pleading of the respondent

Q: Is it conceivable to have an arbitration agreement not evidenced by physical document? A: Yes, third mode under Model Law Art. 7 (2)

ADR Notes | Page 5 of 17 Ma. Luisa Park Association v. Almendras o Court noted the existence of an arbitration agreement but did not order the parties to arbitrate; if none of the parties invoke it, the court cannot compel parties to go to arbitration; implication: rights under an arbitration agreement are waivable
RA 9285, Sec. 2 it is hereby declared the policy of the State to actively promote party autonomy in the resolution of disputes or the freedom of the party to make their own arrangements to resolve their disputes xxx SADR Rule 2. 1 It is the 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 xxx

Q: What is a pathological arbitration clause? A: a vague or defective arbitration clause; qualified; not a any and all disputes stipulation. The issue reluctant to submit to arbitration can raise the issue that the dispute is not covered by the arbitration agreement e.g: Ormoc, McDOnough? Oil and Natural Gas Commission v. CA, LM Power Engg Corporation v. Capitol Industrial Construction Groups, Inc.

Principle of competence-competence and Doctrine of Separability

UNCITRAL Model Law, Article 16(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other parts of the contract. The decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. SADR, Rule 2.2 (B) The Special ADR Rules recognize the principle of competence-competence, which means that the arbitral tribunal may initially rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement or any condition precedent to the filing of a request for arbitration. The Special ADR Rules recognize the principle of separability of the arbitration clause, which means that said clause shall be treated as an agreement independent of the other terms of the contract of which it forms part. A decision that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

Party Autonomy o o Freedom of the parties to determine the rules / law governing the mode of resolving their dispute Standard of least intervention implies that the jurisdiction of the court is only confined to the relief sought by the parties e.g. - In a Petition to Enforce Arbitration Agreement, RTC can only refer the parties to arbitration after finding the existence of an arbitration agreement and the default of the other party, it cannot appoint the arbitrators - In a Petition/Motion to Vacate Arbitral Award, it can only vacate the award if so warranted but it cannot proceed to resolve the merits of the case

Gonzales v. Climax Mining Ltd. o Ratio: o If allegation is regarding the validity container contract and/or validity of arbitration clause, they may be jointly resolved by the tribunal

ADR Notes | Page 6 of 17 o Validity of arbitration agreement determines the jurisdiction of the arbitration tribunal but principle of competence-competence allows the arbitral tribunal to initially rule on its own jurisdiction and when confirmed, are enforced as final and executor decisions of our courts of law. The concept of a final and binding award is similar to judgments or awards given by quasi-judicial bodies whose final judgments are stipulated to be final and binding but not immediately executory in a sense that it can still be judicially reviewed.

Korea Technologies Co., Ltd. v. Lerma o On interim measures: When KOGIES filed injunction before RTC Muntinlupa, no arbitral tribunal was constituted but 2 days later, KOGIES commenced arbitration with KCAB o Qualified ruling in UP v. Delos Angeles on unilateral rescission of reciprocal obligations, thus: Where an arbitration clause in a contract is availing, neither if the parties can unilaterally treat the contract as rescinded since whatever infractions or breaches by a party or differences arising from the contract must be brought first and resolved by arbitration, and not through an extrajudicial rescission or judicial action. Article 2044 of the Civil Code sanctions the validity and mutuality of agreed arbitration clause or the finality and binding effect of an arbitral award. The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance with the Commercial Arbitration Rules of KCAB, and that the award is final and binding, is not against public policy. Consistent with the policy of encouraging ADR methods, courts should liberally construe arbitration clauses. RA 9285 incorporated the UNCITRAL Model Law to which we are a signatory. Although passed only in 2004, it is a procedural law which has a retroactive effect. Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration clause, and mandates the referral to arbitration. Foreign arbitral awards when confirmed by the RTC are deemed not as judgment of a foreign court but as foreign arbitral award,

PEZA v. Edision Q: Was this a proper case for Motion for Judgment on the Pleadings? International commercial arbitration
RA 9285, Secs. 19 21 UNCITRAL Model Law, Article 1 (supra)

Commencement of Arbitration Under RA 876, Sec. 5, arbitration proceedings (ad hoc) is commenced by service of a DEMAND FOR ARBITRATION. Contents: 1. Amount involved, if any 2. Relief sought 3. Nature of controversy 4. Appointment of arbitrator (nominee) Attach: true copy of the contract (arbitration agreement) Note: the demand will also stop the running of the prescriptive period If demand is ignored Petition court for enforcement (See next section)
UNCITRAL Model Law, Article 21 Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.

ADR Notes | Page 7 of 17

o

For institutional arbitration arbitration is commenced upon notice of the institution to the respondent of the claimants request for arbitration with the institution

Duty of the court in a Section 6 Petition: The duty of the court in this case is not to resolve the merits of the parties claims but only to determine if they should proceed to arbitration or not (Mindanao Portland Cement Corporation v. McDonough Construction Company of Florida).

Enforcement of Arbitration/Submission Agreement o Via a Petition for Enforcement of Arbitration Agreement under RA 876, Sec. 6 o Grounds: Failure, neglect or refusal to comply with the arbitration agreement o How to dispose of a Petition to Enforce: (1) Existence of Arbitration Agreement (a) Not in issue proceed to No. 2 (b) In issue (i) no arbitration agreement dismiss petition, nothing to enforce (ii) there is arbitration agreement go to No. 2 (2) Existence of default (a) No default dismiss e.g. no prior service of demand for arbitration (b) There is default Grant petition, refer to arbitration o Note: default refers to performance under the arbitration agreement or as used in Section 6, the other partys failure, neglect or refusal Nature of proceedings: under the SADR, summary in nature, ~ civil action for specific performance The kind of jurisdiction of the court who takes cognizance of Section 6 petition: SPECIAL and LIMITED i.e. the court cannot stray to matters outside the area of its declared authority or beyond what has been expressly invested by the law (La Naval Drug v. CA).

Section 6, RA 876 Petition for Enforcement of Arbitration Agreement Dispute not yet with the court

Section 7, RA 876 (in rel. to Sec. 24, RA 9285 referral to arbitration) Motion for Stay of Action Dispute already with the court Note: provided the applicant for the stay is not in default in proceedings with such arbitration.

Q: Why is a Motion for Stay of Action more preferable than a Motion to Dismiss? A: Dismissal will result to loss of jurisdiction by the court (e.g APT v. CA, 1998). But remember that there will be instances when you have to go back to court such as for interim reliefs, assistance in taking evidence, to renew challenge of arbitrator, and most importantly for confirmation of the arbitral. For practical reasons: If you have to start a new case, you have to pay new docket fees, have the case re-raffled, etc. o See Section 7 discussion below (Referral to Arbitration)

o o

Mindanao Portland Cement Corporation v. McDonough Construction Company of Florida o Respondents arguments touching upon the merits of the dispute is improperly raised herein. They should be addressed to the arbitrators. This proceeding is merely a summary remedy to enforce the agreement to arbitrate. The duty of the court in this

ADR Notes | Page 8 of 17 case is not to resolve the merits of the parties claims but only to determine if they should proceed to arbitration or not. La Naval Drug Corp. v. Court of Appeals o Under Section 6 of RA 876, a court, acting within the limits of its special jurisdiction, may in this case solely determine the issue of whether the litigants should proceed or not to arbitration. o When a court is called upon to exercise limited and special jurisdiction, that court cannot stray outside the area of its declared authority or beyond what has been expressly invested by law. Judicial Relief Before and After Commencement of Arbitration Proceedings See: SADR Rule 3

II.

Arbitrators

APPLICABLE PROVISIONS: SADR Rule 6 to Rule 8 RA 876 Sections 8, 10, 11, 13 UNCITRAL Model Law, Articles 10 14 Civil Code, Article 2045. Any clause giving one of the parties power to choose more arbitrators than the other is void and of no effect. CASES: National Steel Corporation v. RTC of Lanao Del Norte, Branch 2, Iligan City o Arbitrators act in a quasi-judicial capacity. Implications: 1. quantum of evidence required is substantial evidence 2. arbitral tribunal same level as RTC Oil and Natural Gas Commission v. Court of Appeals o An example of a pathological arbitration clause o This is a foreign arbitral award hence Laws/Rules of India applicable when award was brought for confirmation on its courts Magellan Capital Management Corporation v. Zosa o domestic arbitral award o If some of the o Arbitration clause is partially void as to composition of the arbitral tribunal for violation of Article 2045 Civil Code o If some (2) of the parties represent the same interest, they should be entitled to only 1 arbitrator o Q: Was the court right in prescribing the manner by which tribunal should be constituted?

Confidentiality of Arbitration Proceedings: o Confidentiality refers to three things: records, evidence and arbitral award o Exceptions: (1) Waived by the consent of the parties (2) For a limited purpose of disclosing to the court of relevant documents e.g (a) enforcement/confirmation of award (b) renewing challenge of appointment of arbitrator (c) vacating/setting aside award (d) interim relief

ADR Notes | Page 9 of 17 o Appointment of Arbitrators (A) Domestic ad hoc (SADR Rule 6) (1) Follow provisions of the arbitration (2) If unable to implement (1), National President of IBP or his duly authorized representative appoints w/in 30 days from receipt of request for appointment (3) Failing (1) and (2), any party may request the court to act as Appointing Authority. See RA 876, Sec. 8 and SADR Rule 6.1 for instances when court may appoint arbitrator (B) Institutional: usually rules regarding appointment of arbitrators are provided by the institution. Absent stipulation of the parties, the institution acts as the Appointing Authority e.g. ICA under ICC Rules Challenge (of the Appointment) of Arbitrators See: SADR Rule 7 Grounds (Rule 7.2): (1)As provided in RA 876 (Sec. 10 qualifications/disqualifications) and the Model Law (Article 12 doubts as to impartiality or independence) (2) As stipulated by the parties (3) Nationality or professional qualification NOT a ground, unless OW stipulated Different from Termination of Mandate of Arbitrator (See SADR Rule 8) o As to ground: arbitrator becomes de jure or de facto unable to perform his function or for other reasons fails to act without undue delay (Rule 8.2) Procedure of Challenge (SADR Rule 7.2) o o Confront the challenged arbitrator (see procedure, Artice 13 (2) Model Law) Request Appointing Authority to Rule on the Challenge If challenge is unsuccessful or Appointing Authority fails or refuses to act on it, aggrieved party may RENEW the challenge in court (RTC) Decision shall be immediately executory and not subject to MR, certiorari or appeal (Rule 7.8)

Effect of Challenge o Article 13, Model Law as adopted by Sec. 33, RA 9285, amending Sec. 11, RA 876 o Arbitral tribunal, including the challenged arbitrator, may CONTINUE the arbitral proceedings and make an award

III.

Arbitration Proceedings
PROVISIONS: RA 9285 Sections 22-23, 26-27, 30-31 UNCITRAL Model Law Articles 16, 18-20, 23-27 RA 876 Sections 12-18, 22 SADR Rules 9-10 NOTES: Arbitral Tribunal Assistance in Taking Evidence Confidentiality

ADR Notes | Page 10 of 17 In practice, heres what happens: 1) Preliminary conference (similar to pre-trial proceedings) 2) Presentation of evidence a) Arbitral tribunal require simultaneous submission of (usually w/in 30 days upon approval of the parties): i. bundle of documents/exhibits [similar to formal offer of documents] ii. Together with Witnesses Statements [for purpose similar to judicial affidavits] b) Dates to be followed set and issued c) Cross examination of claimants witnesses d) Cross examination of respondents witnesses e) Final memoria/memorandum simultaneously submitted Q: Is it ministerial the court to refer dispute to arbitration and to grant motion to stay? A: No. Court has to exercise discretion in determining: 1) WON issue is a proper subject of arbitration i.e. WON it is an arbitrable issue 2) WON arbitration agreement is a) Null and void (e.g. under RA 876 Section 3, RA 9285 Section 6) b) Inoperative c) Incapable of being performed o Although Section 7 only refers to domestic arbitration, it is ALSO applicable to international arbitration by virtue of RA 9285: a) Article 24 is under the chapter on International Commercial Arbitration b) Article 8 Model Law as adopted by Article 19 (but Model Law uses not later than submission of first statement on substance as reckoning point)

IV.

Referral to Arbitration

PROVISIONS: RA 876 Section 7 RA 9285 Sections 24-25 UNCITRAL Model Law Article 8 SADR Rule 4 CASES:

Vega v. San Carlos Milling (1924) o Malcolms dissent: In the Philippines fortunately, the attitude of the courts toward arbitration agreements is slowly crystallizing into definite workable form The rule now is that unless the agreement is such as absolutely to close the doors of the courts against the parties, which would be void, the courts will look with favor upon such amicable arrangements and will only with great reluctance interfere to anticipate or nullify the action of the arbitrator.

NOTES (referral to arbitration under RA 876 Section 7 in relation to RA 9285 Section 24): GR: By one party if not later than the pre-trial Exc: By consent of both parties after the pre-trial stage via a Joint Motion or without objection from another upon motion of one of the parties

ADR Notes | Page 11 of 17 LM Power Engg Corporation v. Capitol Industrial Construction Groups, Inc. (2003) o Even if RTC denies motion/petition to refer to arbitration, and proceeded to render judgment, it does not necessarily render moot and academic the referral to arbitration. In this case RTC ordered Capitol to pay LM but CA and SC says ordered the dispute to be referred to arbitration. be settled by arbitration pursuant to the agreement by the parties Fiesta World Mall Corp. v. Linberg Philippines (2006) o J. Panganiban: By enabling the parties to resolve their disputes amicably, alternative dispute resolution methods or ADRs provide solutions that are less time-consuming, less confrontational, and more productive of goodwill and lasting relationships. A good illustration of courts exercise of discretion before referring parties to arbitration in construing an arbitration clause which refers to a venue stipulation on litigation A qualified arbitration clause but not pathological.

Puromines, Inc. v. Court of Appeals (1993) o The rules now is that unless the agreement is such as absolutely to close the doors of the courts against the parties, which agreement would be void, the courts will look with favor upon such amicable arrangements and will only interfere with great reluctance to anticipate or nullify the action of the arbitrator (citing Vega v San Carlos Milling) Dispute on liability to damages arising from carriage of goods Parties to a sales contract and/or bill of lading bound by the arbitration clause thereat. Reiterated Mindanao v McDonough on duty of the courts under Sec. 6 o

o o o

California and Hawaiian Sugar Company v. Pioneer Insurance and Surety Corporation (2000) o It would seem that a party may be bound to arbitration agreement through subrogation but there is no categorical ruling in this case. There is nothing in Pan Malayan Insurance v CA that prohibited the applicability of the arbitration clause to the subrogee. Reverse situation in LM Power case wherein the question is WON a party may be compelled by the other to arbitrate despite the pendency of Motion to Stay Civil Action. Interested party may commence arbitration proceeding, to complete the arbitral tribunal make use of Appointing Authority.

o o

National Power Corporation v. Court of Appeals and PECORP (1996) o o Arbitration clause has no qualification as to what are arbitrable issues Court of appeals nonetheless proceeded to resolve Issues Nos. 3 and 4 not proper! Once dispute it properly referable to arbitration, it the arbitral tribunal which must resolve all the issues.

Sea-Land Service, Inc. v. Court of Appeals o Court held that the third party complaint (based on reimbursement) should be dismissed since reimbursement is to

Mindanao Portland Cement Corporation v. McDonough Construction Company of Florida (1967) - supra

ADR Notes | Page 12 of 17 Rule on multi-party disputes Toyota Motor Philippines Corporation v. Court of Appeals (1992) o o o The presence of third parties in the dispute does not render the arbitration agreement dysfunctional. Contracts are respected as law between the parties. The judge having been apprised of the presence of arbitration agreement, he should have at least suspended the case and directed the parties to settle their dispute by arbitration Silent as to third persons not bound by the arbitration agreement. Note: Under RA 9285 Section 25, litigation may continue as to third persons or under SADR Rule 4.7 they may join the arbitration by consent of all parties o Del Monte ruling superseded by statute (RA 9285 Section 25) and expounded by SADR Rules Rule 4.7

SEC. 25. xxx Where action is commenced by or against multiple parties, one or more of whom are parties who are bound by the arbitration agreement although the civil action may continue as to those who are not bound by such arbitration agreement. Rule 4.7. Multiple actions and parties. The court shall not decline to refer some or all of the parties to arbitration for any of the following reasons: a. b. Not all of the disputes subject of the civil action may be referred to arbitration; 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; The issues raised in the civil action could be speedily and efficiently resolved in its entirety by the court rather than in arbitration; Referral to arbitration does not appear to be the most prudent action; or The stay of the action would prejudice the rights of the parties to the civil action who are not bound by the arbitration agreement.

c.

Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corporation (1999) o o o Only parties to an agreement, their assigns or heirs have the right to arbitrate or could be compelled to arbitrate. Buyers not such assigns or heirs. The splitting of the proceedings to arbitration to some of the parties on one hand and trial for the others on the other hand, or suspension of the trial pending arbitration between some of the parties, should not be allowed as it would, in effect result in multiplicity of suits, duplicitous procedure and unnecessary delay.
d. e.

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.

Del Monte Corporation-USA v. Court of Appeals (2001) o o Declared that Salas ruling supersedes Toyota thus making Salas stare decisis A bad ruling! Persons who do not want to go arbitration can easily thwart the arbitration agreement by merely impleading third persons, even innocent by-standers who are not actually real parties in interest.

V.

Interim Measure of Protection

PROVISIONS: SADR Rule 5 RA 876 Sec. 14 RA 9285 Sections 33, 28-29 UNCITRAL Model Law Articles 9, 17 NOTES:

ADR Notes | Page 13 of 17 3 periods when a petition for interim measures for protection may be made (Rule 5.2) (1) before arbitration is commenced (2) after arbitration is commenced but before the constitution of the arbitral tribunal (3) after the constitution of the tribunal and at any time during the arbitral proceedings but GR: Arbitral Tribunal to grant interim measures Exc: Courts may grant interim measures when: (a) Arbitral Tribunal has no power to act (b) It cannot act effectively

Art. 2040. If after a litigation has been decided by a final judgment, a compromise should be agreed upon, either or both parties being unaware of the existence of the final judgment, the compromise may be rescinded. Ignorance of a judgment which may be revoked or set aside is not a valid ground for attacking a compromise.

RA 876 Sections 19, 20, 23 Confirming, correcting/modifying, vacating domestic arbitral award SADR Rule 11 RA 9285 Section 40, 41 RA 876 Sections 2, 24-28 Asset Privatization Trust v. Court of Appeals o The arbitrators cannot resolve issues beyond the scope of the submission agreement. An award of damages to one who is not a party before the Arbitration Committee is a complete nullity. o A partys prayer for setting aside an arbitral award is not inconsistent with its avowal of the courts jurisidiction. o RTC made a fatal mistake in dismissing the case instead of merely suspending it to await the outcome of arbitration proceedings. Romago, Inc. v. Siemens Building Technologies, Inc. (2009) o Supply contract, not construction contract hence CIAC has no jurisdiction o Cited FBDC v Domingo in defining construction. Chung Fu Industries (Philippines), Inc. v. Court of Appeals (1992) o Cited Vega v San Carlos Milling; Art. 2044 CC applied o The finality of the arbitrators award is not absolute and without exceptions.

VI.

The Arbitral Award

Domestic Arbitral Award Civil Code, Art. 2044. Any stipulation that the arbitrators' award or
decision shall be final, is valid, without prejudice to Articles 2038, 2039, and 2040. Art. 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of documents, is subject to the provisions of Article 1330 of this Code. However, one of parties cannot set up a mistake of fact as against the other if the latter, by virtue of the compromise, has withdrawn from a litigation already commenced. (1817a) Art. 2039. When the parties compromise generally on all differences which they might have with each other, the discovery of documents referring to one or more but not to all of the questions settled shall not itself be a cause for annulment or rescission of the compromise, unless said documents have been concealed by one of the parties. But the compromise may be annulled or rescinded if it refers only to one thing to which one of the parties has no right, as shown by the newly-discovered documents. (n)

ADR Notes | Page 14 of 17 o Voluntary arbitrators by the nature of their functions act in a quasi-judicial capacity. Their decisions should be beyond the scope of the power of judicial review of the Supreme Court. Rule 65 Certiorari as a remedy Recognition and Enforcement of International Commercial Arbitration Award UNCITRAL Model Law Articles 28-33, 35 SADR Rule 12 o Petition to Set Aside the exclusive remedy against an international arbitral award; within 3 months!

Adamson v. Court of Appeals (1994) o That the party was disadvantaged by the decision of the Arbitration Committee does not prove evident partiality. o Independent evidence (other than the award) must be presented and proved to show partiality, National Steel Corporation v. RTC of Lanao Del Norte, Br. 2, Iligan City (1999), supra Equitable PCI Banking Corporation v. RCBC Capital Corporation (2008) o Judicial review of an arbitration is more limited than judicial review of a trial. o Courts will not undertake to substitute their judgment for that of the arbitrator, since any other rule will make an award the commencement, not end of, litigation. o To justify vacation of an arbitral award on account of manifest disregard of the law, the arbiters findings must clearly and unequivocally violate an established legal precedent (citing APT v CA) o Why a Partial Award? Arbitral Tribunal used the bifurcated approach, a method usually used in international commercial arbitration: 1. Liability Portion (Who is liable?) 2. Quantum (What is the quantity of liability?)

(Setting Aside and Refusing/Rejecting) Recognition or Enforcement of Foreign arbitral award UNCITRAL Model Articles 34, 36 RA 9285 Sections 42-45 New York Convention SADR Rule 13 Foreign arbitral award one made in a country other than the Philippines [Rule 1.11(d)] National Union Fire Insurance Company of Pittsburg v. Stolt-Nielsen Philippines, Inc. (1990) o Obligations of Philippines as contracting state to the New York Convention: 1. recognize arbitration agreements; refer the parties to arbitration unless it finds that said agreement is void, inoperative or incapable of being performed 2. recognize and enforce arbitral awards 3. not to impose more onerous conditions that those impose to domestic arbitration

ADR Notes | Page 15 of 17

VII.

Motion for Reconsideration, Appeal, Certiorari

SADR Rule 19 RA 876 Section 29 RA 9285 Section 46 1997 Rule of Civil Proedure, Rule 43 Section 1

IX.

Construction Arbitration
Executive Order No. 1008, s. 1985
Sec. 4. Jurisdiction. The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof. These disputes may involve government or private contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration.xxx

VIII.

Pleading, Practice and Procedure under Special ADR Rules

SADR Rule 1

RA 9285 Sections 34-40 Scope: 12 proceedings 9 summary, 3 not summary in nature Summary proceeding under this Rule is not the same as ordinary summary proceedings: 1. service to respondent and filing with court with proof of service to the respondent since no summons will be served 2. notice from court to file comment or opposition within 15 days from receipt plus hearing, if necessary which will be within 5 days conducted in 1 day only 3. resolution by court within 30 days (approx. 58 days!) o o Verification and CNFS general requirements but verification need not be signed by the party: lawyer may sign Motions: written submissions up to Comment only SADR Rules 16, 17 Fort Bonifacio Development Corporation v. Sorongon (2009) o Construction is defined as referring to all on-site works on buildings or altering structures, from land clearance to completion, including excavation, erection, and assembly and installation of components and equipment. o Dispute regarding an assigned retention money arising from a construction contract not within the jurisdiction of CIAC. China Chang Jiang Energy Corporation (Philippines) v. Rosal Infrastructure Builders (1996) o Cited Hi-Precision Steel v Lim Kim Steel Builders on exclusive and original jurisdiction of CIAC whenever 1. there is a construction agreement 2. with arbitration clause/submission to voluntary arbitration o Implication: CIAC has jurisdiction despite stipulation of another arbitral body Prudential Guarantee and Asssurance Inc. v. Anscor Land, Inc. (2010)

ADR Notes | Page 16 of 17 o A dispute must meet 2 requirements in order to fall under the jurisdiction of CIAC: 1. the dispute must be somehow connected to a construction contract 2. the parties must have agreed to submit the dispute to arbitration proceedings Implication: it is conceivable for a non-party to the construction agreement to submit to the jurisdiction of CIAC In this case, the bonding company which issued a surety bond and performance bond in favor of the employer (projectowner) is compelled to submit to the jurisdiction of CIAC under Section 4 EO 1008: xxxdisputes arising from or connected with, construction contracts

X.

Mediation
RA 9285, Section 3 (q) "Mediation" means a voluntary process in which a mediator, selected by the disputing parties, facilitates communication and negotiation, and assist the parties in reaching a voluntary agreement regarding a dispute. RA 9285 Sections 7-17 Rule 15

o o

Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc. (1993) o Under Section 19 EO 1008 questions of fact cannot be raised in a proceeding before the Supreme Court o Factual issues cannot be craftily disguised as legal issues to subvert this rule o Standard: the Supreme Court will review issues of fact previously presented before the Arbitral Tribunal only where there is a very clear showing that, in reaching its factual conclusions, the Tribunal committed an error so egregious and hurtful to one party as to constitute grave abuse of discretion.
Arbitration Clause in a Construction Agreement Court can motu proprio note the existence of an arbitration agreement Court to dismiss action and refer to CIAC thus losing jurisdiction Arbitration Clause in a NonConstruction Agreement Court CANNOT motu proprio note the existence of an arbitration agreement, party/parties must invoke it Court merely stay civil action, court does not lose jurisdiction

Mediation, as opposed to arbitration, will not result to binding resolution unless: 1. a successful mediated settlement agreement is converted into a arbitral award by consent of the parties, and 2. the mediator is considered as an arbitrator

XI.

Other Forms of ADR ; Nature of Liability

RA 9285 Section 3 (definitions)
(l) "Court-Annexed Mediation" means any mediation process conducted under the auspices of the court, after such court has acquired jurisdiction of the dispute; (m) "Court-Referred Mediation" means mediation ordered by a court to be conducted in accordance with the Agreement of the Parties when as action is prematurely commenced in violation of such agreement;

ADR Notes | Page 17 of 17

(n) "Early Neutral Evaluation" means an 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; (t) "Mediation-Arbitration" or Med-Arb is a step dispute resolution process involving both mediation and arbitration; (u) "Mini-Trial" means 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;

RA 9285, Section 5 RA 876, Section 20 SADR Rule 18

XII.

Loans Secured by Collateral

SADR Rule A