CHINA CHANG JIANG ENERGY CORPORATION vs ROSAL INFRASTRUCTURE

BUILDERS, G.R. No. 125706, September 30, 1996

By: Calatrava, Kim Lorenzo G.
FACTS:
China Chang is the operator of the Binga Hydroelectric Plant in Itogon, Benguet, which is under
a Rehabilitate Operate and Leaseback Contract with the National Power Corporation
(NAPOCOR) and was engaged in the rehabilitation of the power plant, including the construction
of check dams.
On February 1994, petitioner China Chang engaged the services of Rosal Infrastructure Builders
for the construction of a Dam in Itogon, Benguet. In this contract, the parties agreed to submit
disputes arising therefrom to arbitration before the Arbitration of the International Chamber of
Commerce.
When a dispute arose between the parties, Rosal filed a complaint before the Construction
Industry Arbitration Commission (CIAC) for arbitration. China Chang filed its answer with
compulsory counterclaim and raised therein the issue of lack of jurisdiction on the part of CIAC.
In August 1995, the CIAC considered the question of jurisdiction merely as a special defense
which can be included as part of the issues of the Terms of Reference. China Chang filed a motion
for reconsideration which was denied by CIAC in October 1995.
China Chang raised the issue of lack of jurisdiction with the CA. In February 1996, the CA
dismissed the petition. China Chang filed a Motion for Reconsideration, but was denied by the
CA. China Chang now questions the validity of Construction Industry Arbitration Commission
(CIAC) Resolution 3- 93 amending Section 1, Article III of CIAC Rules of Procedure Governing
Construction Arbitration promulgated by the CIAC pursuant to its rule-making power granted
under Section 21 of Executive Order No. 1008, which pertinently provides as follows:
Article III Effect of the Agreement to Arbitrate Section 1. Submission to CIAC Jurisdiction
An arbitration clause in a construction contract or a submission to arbitration of a
construction dispute shall be deemed an agreement to submit an existing or future
controversy to the CIAC jurisdiction, notwithstanding the reference to a different arbitral
institution or arbitral body in such contract or submission.
ISSUES:
1. W/N the CIAC has acquired jurisdiction over the dispute.
2. W/N the parties in the case at bar can agree to submit to arbitration their
construction dispute under the CIAC.
HELD:
1. YES.
There is no restriction whatsoever on any party from submitting a dispute for arbitration to
an arbitral body other than the CIAC. On the contrary, the new rule, as amended merely
implements the letter and the spirit of its enabling law, E.O. No. 1008, which vests
jurisdiction upon the CIAC:
 Section 4: Jurisdiction - The CIAC shall have the original and exclusive jurisdiction
over disputes arising from, or connected with, contracts entered into by the parties
involved in the construction in the Philippines, whether the dispute arises before or
after the completion of the contracts, 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. (Emphasis supplied)
What the law merely requires for a particular construction contract to fall within the
jurisdiction of CIAC is for the parties to agree to submit the same to voluntary arbitration.
Now that Section 1, Article III, as amended, is submitted to test in the present petition, the
Supreme Court ruled to uphold its validity with full certainty.
2. YES
However, this should not be understood to mean that the parties may no longer stipulate
to submit their disputes to a different forum or arbitral boy. Parties may continue to
stipulate as regards their preferred forum in case of voluntary arbitration, but in so doing,
they may not divest the CIAC of jurisdiction as provided by law. Under the elementary
principle on the law on contracts that laws obtaining in a jurisdiction form part of all
agreements, when the law provides that the Board acquires jurisdiction when the parties
to the contract agree to submit the same to voluntary arbitration, the law in effect,
automatically gives the parties an alternative forum before whom they may submit their
disputes. That alternative forum is the CIAC.