before October 31, 1989; 2 and the other dated August 12,
1989, for the installation of electrical, water and hydrant
G.R. No. 96283 February 25, 1992
CHUNG FU INDUSTRIES (PHILIPPINES) INC., its
Directors and Officers namely: HUANG KUO-
CHANG, HUANG AN-CHUNG, JAMES J.R. CHEN,
TRISTAN A. CATINDIG, VICENTE B. AMADOR,
ROCK A.C. HUANG, JEM S.C. HUANG, MARIA
TERESA SOLIVEN and VIRGILIO M. DEL
ROSARIO, petitioners,
vs.
COURT OF APPEALS, HON. FRANCISCO X.
VELEZ (Presiding Judge, Regional Trail Court of
Makati [Branch 57]) and ROBLECOR PHILIPPINES,
INC., respondents.
ROMERO, J.:
This is a special civil action for certiorari seeking to annul
the Resolutions of the Court of Appeals* dated October
22, 1990 and December 3, 1990 upholding the Orders of
July 31, 1990 and August 23, 1990 of the Regional Trial
Court of Makati, Branch 57, in Civil Case No. 90-1335.
Respondent Court of Appeals affirmed the ruling of the
trial court that herein petitioners, after submitting
themselves for arbitration and agreeing to the terms and
conditions thereof, providing that the arbitration award
shall be final and unappealable, are precluded from
seeking judicial review of subject arbitration award.
It appears that on May 17, 1989, petitioner Chung Fu
Industries (Philippines) (Chung Fu for brevity) and private
respondent Roblecor Philippines, Inc. (Roblecor for short)
forged a construction agreement 1 whereby respondent
contractor committed to construct and finish on December
31, 1989, petitioner corporation's industrial/factory
complex in Tanawan, Tanza, Cavite for and in
consideration of P42,000,000.00. In the event of disputes
arising from the performance of subject contract, it was
stipulated therein that the issue(s) shall be submitted for
resolution before a single arbitrator chosen by both parties.
Apart from the aforesaid construction agreement, Chung
Fu and Roblecor entered into two (2) other ancillary
contracts, to wit: one dated June 23, 1989, for the
construction of a dormitory and support facilities with a
contract price of P3,875,285.00, to be completed on or
systems at the plant site, commanding a price of P12.1
million and requiring completion thereof one month after
civil works have been finished. 3
However, respondent Roblecor failed to complete the work
despite the extension of time allowed it by Chung Fu.
Subsequently, the latter had to take over the construction
when it had become evident that Roblecor was not in a
position to fulfill its obligation.
Claiming an unsatisfied account of P10,500,000.00 and
unpaid progress billings of P2,370,179.23, Roblecor on
May 18, 1990, filed a petition for Compulsory Arbitration
with prayer for Temporary Restraining Order before
respondent Regional Trial Court, pursuant to the
arbitration clause in the construction agreement. Chung Fu
moved to dismiss the petition and further prayed for the
quashing of the restraining order.
Subsequent negotiations between the parties eventually led
to the formulation of an arbitration agreement which,
among others, provides:
2. The parties mutually agree that the arbitration shall
proceed in accordance with the following terms and
conditions:
xxx xxx xxx
d. The parties mutually agree that they will abide by the
decision of the arbitrator including any amount that may
be awarded to either party as compensation, consequential
damage and/or interest thereon;
e. The parties mutually agree that the decision of the
arbitrator shall be final and unappealable. Therefore, there
shall be no further judicial recourse if either party
disagrees with the whole or any part of the arbitrator's
award.
f. As an exception to sub-paragraph (e) above, the parties
mutually agree that either party is entitled to seek judicial
assistance for purposes of enforcing the arbitrator's award;
xxx xxx xxx 4
(Emphasis supplied)
Respondent Regional Trial Court approved the arbitration
agreement thru its Order of May 30, 1990. Thereafter,
Engr. Willardo Asuncion was appointed as the sole
arbitrator.
On June 30, 1990, Arbitrator Asuncion ordered petitioners
to immediately pay respondent contractor, the sum of
P16,108,801.00. He further declared the award as final and
unappealable, pursuant to the Arbitration Agreement
precluding judicial review of the award.
Consequently, Roblecor moved for the confirmation of
said award. On the other hand, Chung Fu moved to remand
the case for further hearing and asked for a reconsideration
of the judgment award claiming that Arbitrator Asuncion
committed twelve (12) instances of grave error by
disregarding the provisions of the parties' contract.
Respondent lower court denied Chung Fu's Motion to
Remand thus compelling it to seek reconsideration
therefrom but to no avail. The trial court granted
Roblecor's Motion for Confirmation of Award and
accordingly, entered judgment in conformity therewith.
Moreover, it granted the motion for the issuance of a writ
of execution filed by respondent.
Chung Fu elevated the case via a petition for certiorari to
respondent Court of Appeals. On October 22,1990 the
assailed resolution was issued. The respondent appellate
court concurred with the findings and conclusions of
respondent trial court resolving that Chung Fu and its
officers, as signatories to the Arbitration Agreement are
bound to observe the stipulations thereof providing for the
finality of the award and precluding any appeal therefrom.
A motion for reconsideration of said resolution was filed
by petitioner, but it was similarly denied by respondent
Court of Appeals thru its questioned resolution of
December 3, 1990.
Hence, the instant petition anchored on the following
grounds:
First
Respondents Court of Appeals and trial Judge gravely
abused their discretion and/or exceeded their jurisdiction,
as well as denied due process and substantial justice to
petitioners, (a) by refusing to exercise their judicial
authority and legal duty to review the arbitration award,
and (b) by declaring that petitioners are estopped from
questioning the arbitration award allegedly in view of the
stipulations in the parties' arbitration agreement that "the
decision of the arbitrator shall be final and unappealable"
and that "there shall be no further judicial recourse if either
party disagrees with the whole or any part of the
arbitrator's award."
Second
Respondent Court of Appeals and trial Judge gravely
abused their discretion and/or exceeded their jurisdiction,
as well as denied due process and substantial justice to
petitioner, by not vacating and annulling the award dated
30 June 1990 of the Arbitrator, on the ground that the
Arbitrator grossly departed from the terms of the parties'
contracts and misapplied the law, and thereby exceeded
the authority and power delegated to him. (Rollo, p. 17)
Allow us to take a leaf from history and briefly trace the
evolution of arbitration as a mode of dispute settlement.
Because conflict is inherent in human society, much effort
has been expended by men and institutions in devising
ways of resolving the same. With the progress of
civilization, physical combat has been ruled out and
instead, more specific means have been evolved, such as
recourse to the good offices of a disinterested third party,
whether this be a court or a private individual or
individuals.
Legal history discloses that "the early judges called upon
to solve private conflicts were primarily the arbiters,
persons not specially trained but in whose morality,
probity and good sense the parties in conflict reposed full
trust. Thus, in Republican Rome, arbiter and judge (judex)
were synonymous. The magistrate or praetor, after noting
down the conflicting claims of litigants, and clarifying the
issues, referred them for decision to a private person
designated by the parties, by common agreement, or
selected by them from an apposite listing (the album
judicium) or else by having the arbiter chosen by lot. The
judges proper, as specially trained state officials endowed
with own power and jurisdiction, and taking cognizance of
litigations from beginning to end, only appeared under the
Empire, by the so-called cognitio extra ordinem." 5
Such means of referring a dispute to a third party has also
long been an accepted alternative to litigation at common
law. 6
Sparse though the law and jurisprudence may be on the
subject of arbitration in the Philippines, it was nonetheless
recognized in the Spanish Civil Code; specifically, the
provisions on compromises made applicable to arbitrations
under Articles 1820 and 1821.7 Although said provisions
were repealed by implication with the repeal of the
Spanish Law of Civil Procedure, 8 these and additional
ones were reinstated in the present Civil Code. 9
Arbitration found a fertile field in the resolution of labor-
management disputes in the Philippines. Although early
on, Commonwealth Act 103 (1936) provided for
compulsory arbitration as the state policy to be
administered by the Court of Industrial Relations, in time
such a modality gave way to voluntary arbitration. While
not completely supplanting compulsory arbitration which
until today is practiced by government officials, the
Industrial Peace Act which was passed in 1953 as
Republic Act No. 875, favored the policy of free collective
bargaining, in general, and resort to grievance procedure,
in particular, as the preferred mode of settling disputes in
industry. It was accepted and enunciated more explicitly in
the Labor Code, which was passed on November 1, 1974
as Presidential Decree No. 442, with the amendments later
introduced by Republic Act No. 6715 (1989).
Whether utilized in business transactions or in employer-
employee relations, arbitration was gaining wide
acceptance. A consensual process, it was preferred to
orders imposed by government upon the disputants.
Moreover, court litigations tended to be time-consuming,
costly, and inflexible due to their scrupulous observance of
the due process of law doctrine and their strict adherence
to rules of evidence.
As early as the 1920's, this Court declared:
In the Philippines fortunately, the attitude of the courts
toward arbitration agreements is slowly crystallizing into
definite and 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 agreement 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. 10
That there was a growing need for a law regulating
arbitration in general was acknowledged when Republic
Act No. 876 (1953), otherwise known as the Arbitration
Law, was passed. "Said Act was obviously adopted to
supplement not to supplant the New Civil Code on
arbitration. It expressly declares that "the provisions of
chapters one and two, Title XIV, Book IV of the Civil
Code shall remain in force." 11
In recognition of the pressing need for an arbitral
machinery for the early and expeditious settlement of
disputes in the construction industry, a Construction
Industry Arbitration Commission (CIAC) was created by
Executive Order No. 1008, enacted on February 4, 1985.
In practice nowadays, absent an agreement of the parties to
resolve their disputes via a particular mode, it is the
regular courts that remain the fora to resolve such matters.
However, the parties may opt for recourse to third parties,
exercising their basic freedom to "establish such
stipulation, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law,
morals, good customs, public order or public policy." 12 In
such a case, resort to the arbitration process may be spelled
out by them in a contract in anticipation of disputes that
may arise between them. Or this may be stipulated in a
submission agreement when they are actually confronted
by a dispute. Whatever be the case, such recourse to an
extrajudicial means of settlement is not intended to
completely deprive the courts of jurisdiction. In fact, the
early cases on arbitration carefully spelled out the
prevailing doctrine at the time, thus: ". . . a clause in a
contract providing that all matters in dispute between the
parties shall be referred to arbitrators and to them alone is
contrary to public policy and cannot oust the courts of
Jurisdiction." 13
But certainly, the stipulation to refer all future disputes to
an arbitrator or to submit an ongoing dispute to one is
valid. Being part of a contract between the parties, it is
binding and enforceable in court in case one of them
neglects, fails or refuses to arbitrate. Going a step further,
in the event that they declare their intention to refer their
differences to arbitration first before taking court action,
this constitutes a condition precedent, such that where a
suit has been instituted prematurely, the court shall
suspend the same and the parties shall be directed
forthwith to proceed to arbitration. 14
A court action may likewise be proven where the arbitrator
has not been selected by the parties. 15
Under present law, may the parties who agree to submit
their disputes to arbitration further provide that the
arbitrators' award shall be final, unappealable and
executory?
Article 2044 of the Civil Code recognizes the validity of
such stipulation, thus:
Any stipulation that the arbitrators' award or decision shall
be final is valid, without prejudice to Articles 2038, 2039
and 2040.
Similarly, the Construction Industry Arbitration Law
provides that the arbitral award "shall be final and
inappealable except on questions of law which shall be
appealable to the Supreme Court." 16
Under the original Labor Code, voluntary arbitration
awards or decisions were final, unappealable and
executory. "However, voluntary arbitration awards or
decisions on money claims, involving an amount
exceeding One Hundred Thousand Pesos (P100,000.00) or
forty-percent (40%) of the paid-up capital of the
respondent employer, whichever is lower, maybe appealed
to the National Labor Relations Commission on any of the
following grounds: (a) abuse of discretion; and (b) gross
incompetence." 17 It is to be noted that the appeal in the
instances cited were to be made to the National Labor
Relations Commission and not to the courts.
With the subsequent deletion of the above-cited provision
from the Labor Code, the voluntary arbitrator is now
mandated to render an award or decision within twenty
(20) calendar days from the date of submission of the
dispute and such decision shall be final and executory after
ten (10) calendar days from receipt of the copy of the
award or decision by the parties. 18
Where the parties agree that the decision of the arbitrator
shall be final and unappealable as in the instant case, the
pivotal inquiry is whether subject arbitration award is
indeed beyond the ambit of the court's power of judicial
review.
We rule in the negative. It is stated explicitly under Art.
2044 of the Civil Code that the finality of the arbitrators'
award is not absolute and without exceptions. Where the
conditions described in Articles 2038, 2039 and 2040
applicable to both compromises and arbitrations are
obtaining, the arbitrators' award may be annulled or
rescinded. 19 Additionally, under Sections 24 and 25 of the
Arbitration Law, there are grounds for vacating, modifying
or rescinding an arbitrator's award. 20 Thus, if and when
the factual circumstances referred to in the above-cited
provisions are present, judicial review of the award is
properly warranted.
What if courts refuse or neglect to inquire into the factual
milieu of an arbitrator's award to determine whether it is in
accordance with law or within the scope of his authority?
How may the power of judicial review be invoked?
This is where the proper remedy is certiorari under Rule
65 of the Revised Rules of Court. It is to be borne in mind,
however, that this action will lie only where a grave abuse
of discretion or an act without or in excess of jurisdiction
on the part of the voluntary arbitrator is clearly shown. For
"the writ of certiorari is an extra-ordinary remedy and that
certiorari jurisdiction is not to be equated with appellate
jurisdiction. In a special civil action of certiorari, the
Court will not engage in a review of the facts found nor
even of the law as interpreted or applied by the arbitrator
unless the supposed errors of fact or of law are so patent
and gross and prejudicial as to amount to a grave abuse of
discretion or an exces de pouvoir on the part of the
arbitrator." 21
Even decisions of administrative agencies which are
declared "final" by law are not exempt from judicial
review when so warranted. Thus, in the case of Oceanic
Bic Division (FFW), et al. v. Flerida Ruth P. Romero, et
al., 22 this Court had occasion to rule that:
. . . Inspite of statutory provisions making "final" the
decisions of certain administrative agencies, we have taken
cognizance of petitions questioning these decisions where
want of jurisdiction, grave abuse of discretion, violation of
due process, denial of substantial justice or erroneous
interpretation of the lawwere brought to our attention . .
. 23 (Emphasis ours).
It should be stressed, too, that voluntary arbitrators, by the
nature of their functions, act in a quasi-judicial
capacity. 24 It stands to reason, therefore, that their
decisions should not be beyond the scope of the power of
judicial review of this Court.
In the case at bar, petitioners assailed the arbitral award on
the following grounds, most of which allege error on the
part of the arbitrator in granting compensation for various
items which apparently are disputed by said petitioners:
1. The Honorable Arbitrator committed grave error in
failing to apply the terms and conditions of the
Construction Agreement, Dormitory Contract and
Electrical Contract, and in using instead the "practices" in
the construction industry;
2. The Honorable Arbitrator committed grave error in several items, he exceeded his powers all of which
granting extra compensation to Roblecor for loss of would have constituted ground for vacating the award
productivity due to adverse weather conditions; under Section 24 (d) of the Arbitration Law.

3. The Honorable Arbitrator committed grave error in
granting extra compensation to Roblecor for loss due to
delayed payment of progress billings;
4. The Honorable Arbitrator committed grave error in
granting extra compensation to Roblecor for loss of
productivity due to the cement crisis;
5. The Honorable Arbitrator committed grave error in
granting extra compensation to Roblecor for losses
allegedly sustained on account of the failed coup d'tat;
6. The Honorable Arbitrator committed grave error in
granting to Roblecor the amount representing the alleged
unpaid billings of Chung Fu;
But the respondent trial court's refusal to look into the
merits of the case, despite prima facie showing of the
existence of grounds warranting judicial review,
effectively deprived petitioners of their opportunity to
prove or substantiate their allegations. In so doing, the trial
court itself committed grave abuse of discretion. Likewise,
the appellate court, in not giving due course to the petition,
committed grave abuse of discretion. Respondent courts
should not shirk from exercising their power to review,
where under the applicable laws and jurisprudence, such
power may be rightfully exercised; more so where the
objections raised against an arbitration award may
properly constitute grounds for annulling, vacating or
modifying said award under the laws on arbitration.

7. The Honorable Arbitrator committed grave error in
granting to Roblecor the amount representing the alleged
extended overhead expenses;
8. The Honorable Arbitrator committed grave error in
granting to Roblecor the amount representing expenses for
change order for site development outside the area of
responsibility of Roblecor;
9. The Honorable Arbitrator committed grave error in
granting to Roblecor the cost of warehouse No. 2;
10. The Honorable Arbitrator committed grave error in
granting to Roblecor extra compensation for airduct
change in dimension;
WHEREFORE, the petition is GRANTED. The
Resolutions of the Court of Appeals dated October 22,
1990 and December 3, 1990 as well as the Orders of
respondent Regional Trial Court dated July 31, 1990 and
August 23, 1990, including the writ of execution issued
pursuant thereto, are hereby SET ASIDE. Accordingly,
this case is REMANDED to the court of origin for further
hearing on this matter. All incidents arising therefrom are
reverted to the status quo ante until such time as the trial
court shall have passed upon the merits of this case. No
costs.
SO ORDERED.

11. The Honorable Arbitrator committed grave error in

granting to Roblecor extra compensation for airduct
plastering; and

12. The Honorable Arbitrator committed grave error in

awarding to Roblecor attorney's fees.

After closely studying the list of errors, as well as

petitioners' discussion of the same in their Motion to
Remand Case For Further Hearing and Reconsideration
and Opposition to Motion for Confirmation of Award, we
find that petitioners have amply made out a case where the
voluntary arbitrator failed to apply the terms and
provisions of the Construction Agreement which forms
part of the law applicable as between the parties, thus
committing a grave abuse of discretion. Furthermore, in
granting unjustified extra compensation to respondent for
G.R. No. 143581 January 7, 2008
KOREA TECHNOLOGIES CO., LTD., petitioner,
vs.
HON. ALBERTO A. LERMA, in his capacity as
Presiding Judge of Branch 256 of Regional Trial Court
of Muntinlupa City, and PACIFIC GENERAL STEEL
MANUFACTURING CORPORATION, respondents.
DECISION
VELASCO, JR., J.:
In our jurisdiction, 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. Regrettably, instead of
hastening the resolution of their dispute, the parties
wittingly or unwittingly prolonged the controversy.
Petitioner Korea Technologies Co., Ltd. (KOGIES) is a
Korean corporation which is engaged in the supply and
installation of Liquefied Petroleum Gas (LPG) Cylinder
manufacturing plants, while private respondent Pacific
General Steel Manufacturing Corp. (PGSMC) is a
domestic corporation.
On March 5, 1997, PGSMC and KOGIES executed a
Contract1 whereby KOGIES would set up an LPG
Cylinder Manufacturing Plant in Carmona, Cavite. The
contract was executed in the Philippines. On April 7, 1997,
the parties executed, in Korea, an Amendment for Contract
No. KLP-970301 dated March 5, 19972 amending the
terms of payment. The contract and its amendment
stipulated that KOGIES will ship the machinery and
facilities necessary for manufacturing LPG cylinders for
which PGSMC would pay USD 1,224,000. KOGIES
would install and initiate the operation of the plant for
which PGSMC bound itself to pay USD 306,000 upon the
plants production of the 11-kg. LPG cylinder samples.
Thus, the total contract price amounted to USD 1,530,000.
On October 14, 1997, PGSMC entered into a Contract of
Lease3 with Worth Properties, Inc. (Worth) for use of
Worths 5,079-square meter property with a 4,032-square
meter warehouse building to house the LPG manufacturing
plant. The monthly rental was PhP 322,560 commencing
on January 1, 1998 with a 10% annual increment clause.
Subsequently, the machineries, equipment, and facilities
for the manufacture of LPG cylinders were shipped,
delivered, and installed in the Carmona plant. PGSMC
paid KOGIES USD 1,224,000.
However, gleaned from the Certificate4 executed by the
parties on January 22, 1998, after the installation of the
plant, the initial operation could not be conducted as
PGSMC encountered financial difficulties affecting the
supply of materials, thus forcing the parties to agree that
KOGIES would be deemed to have completely complied
with the terms and conditions of the March 5, 1997
contract.
For the remaining balance of USD306,000 for the
installation and initial operation of the plant, PGSMC
issued two postdated checks: (1) BPI Check No. 0316412
dated January 30, 1998 for PhP 4,500,000; and (2) BPI
Check No. 0316413 dated March 30, 1998 for PhP
4,500,000.5
When KOGIES deposited the checks, these were
dishonored for the reason "PAYMENT STOPPED." Thus,
on May 8, 1998, KOGIES sent a demand letter6 to
PGSMC threatening criminal action for violation of Batas
Pambansa Blg.22 in case of nonpayment. On the same
date, the wife of PGSMCs President faxed a letter dated
May 7, 1998 to KOGIES President who was then staying
at a Makati City hotel. She complained that not only did
KOGIES deliver a different brand of hydraulic press from
that agreed upon but it had not delivered several
equipment parts already paid for.
On May 14, 1998, PGSMC replied that the two checks it
issued KOGIES were fully funded but the payments were
stopped for reasons previously made known to KOGIES.7
On June 1, 1998, PGSMC informed KOGIES that PGSMC
was canceling their Contract dated March 5, 1997 on the
ground that KOGIES had altered the quantity and lowered
the quality of the machineries and equipment it delivered
to PGSMC, and that PGSMC would dismantle and transfer
the machineries, equipment, and facilities installed in the
Carmona plant. Five days later, PGSMC filed before the
Office of the Public Prosecutor an Affidavit-Complaint
for Estafa docketed as I.S. No. 98-03813 against Mr. Dae
Hyun Kang, President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the
latter that PGSMC could not unilaterally rescind their
contract nor dismantle and transfer the machineries and
equipment on mere imagined violations by KOGIES. It
also insisted that their disputes should be settled by
arbitration as agreed upon in Article 15, the arbitration
clause of their contract.
On June 23, 1998, PGSMC again wrote KOGIES
reiterating the contents of its June 1, 1998 letter
threatening that the machineries, equipment, and facilities
installed in the plant would be dismantled and transferred
on July 4, 1998. Thus, on July 1, 1998, KOGIES instituted
an Application for Arbitration before the Korean
Commercial Arbitration Board (KCAB) in Seoul, Korea
pursuant to Art. 15 of the Contract as amended.
On July 3, 1998, KOGIES filed a Complaint for Specific
Performance, docketed as Civil Case No. 98-1178 against
PGSMC before the Muntinlupa City Regional Trial Court
(RTC). The RTC granted a temporary restraining order
(TRO) on July 4, 1998, which was subsequently extended
until July 22, 1998. In its complaint, KOGIES alleged that
PGSMC had initially admitted that the checks that were
stopped were not funded but later on claimed that it
stopped payment of the checks for the reason that "their
value was not received" as the former allegedly breached
their contract by "altering the quantity and lowering the
quality of the machinery and equipment" installed in the
plant and failed to make the plant operational although it
earlier certified to the contrary as shown in a January 22,
1998 Certificate. Likewise, KOGIES averred that PGSMC
violated Art. 15 of their Contract, as amended, by
unilaterally rescinding the contract without resorting to
arbitration. KOGIES also asked that PGSMC be restrained
from dismantling and transferring the machinery and
equipment installed in the plant which the latter threatened
to do on July 4, 1998.
On July 9, 1998, PGSMC filed an opposition to the TRO
arguing that KOGIES was not entitled to the TRO since
Art. 15, the arbitration clause, was null and void for being
against public policy as it ousts the local courts of
jurisdiction over the instant controversy.
On July 17, 1998, PGSMC filed its Answer with
Compulsory Counterclaim9 asserting that it had the full
right to dismantle and transfer the machineries and
equipment because it had paid for them in full as stipulated
in the contract; that KOGIES was not entitled to the PhP
9,000,000 covered by the checks for failing to completely
install and make the plant operational; and that KOGIES
was liable for damages amounting to PhP 4,500,000 for
altering the quantity and lowering the quality of the
machineries and equipment. Moreover, PGSMC averred
that it has already paid PhP 2,257,920 in rent (covering
January to July 1998) to Worth and it was not willing to
further shoulder the cost of renting the premises of the
plant considering that the LPG cylinder manufacturing
plant never became operational.
After the parties submitted their Memoranda, on July 23,
1998, the RTC issued an Order denying the application for
a writ of preliminary injunction, reasoning that PGSMC
had paid KOGIES USD 1,224,000, the value of the
machineries and equipment as shown in the contract such
that KOGIES no longer had proprietary rights over them.
And finally, the RTC held that Art. 15 of the Contract as
amended was invalid as it tended to oust the trial court or
any other court jurisdiction over any dispute that may arise
between the parties. KOGIES prayer for an injunctive
writ was denied.10 The dispositive portion of the Order
stated:
WHEREFORE, in view of the foregoing consideration,
this Court believes and so holds that no cogent reason
exists for this Court to grant the writ of preliminary
injunction to restrain and refrain defendant from
dismantling the machineries and facilities at the lot and
building of Worth Properties, Incorporated at Carmona,
Cavite and transfer the same to another site: and therefore
denies plaintiffs application for a writ of preliminary
injunction.
On July 29, 1998, KOGIES filed its Reply to Answer and
Answer to Counterclaim.11 KOGIES denied it had altered
the quantity and lowered the quality of the machinery,
equipment, and facilities it delivered to the plant. It
claimed that it had performed all the undertakings under
the contract and had already produced certified samples of
LPG cylinders. It averred that whatever was unfinished
was PGSMCs fault since it failed to procure raw materials
due to lack of funds. KOGIES, relying on Chung Fu
Industries (Phils.), Inc. v. Court of Appeals,12 insisted that
the arbitration clause was without question valid.
After KOGIES filed a Supplemental Memorandum with
Motion to Dismiss13 answering PGSMCs memorandum of
July 22, 1998 and seeking dismissal of PGSMCs
counterclaims, KOGIES, on August 4, 1998, filed its
Motion for Reconsideration14 of the July 23, 1998 Order
denying its application for an injunctive writ claiming that
the contract was not merely for machinery and facilities
worth USD 1,224,000 but was for the sale of an "LPG
manufacturing plant" consisting of "supply of all the
machinery and facilities" and "transfer of technology" for a
total contract price of USD 1,530,000 such that the
dismantling and transfer of the machinery and facilities
would result in the dismantling and transfer of the very
plant itself to the great prejudice of KOGIES as the still
unpaid owner/seller of the plant. Moreover, KOGIES
points out that the arbitration clause under Art. 15 of the
Contract as amended was a valid arbitration stipulation
under Art. 2044 of the Civil Code and as held by this
Court in Chung Fu Industries (Phils.), Inc.15
In the meantime, PGSMC filed a Motion for Inspection of
Things16 to determine whether there was indeed alteration
of the quantity and lowering of quality of the machineries
and equipment, and whether these were properly installed.
KOGIES opposed the motion positing that the queries and
issues raised in the motion for inspection fell under the
coverage of the arbitration clause in their contract.
On September 21, 1998, the trial court issued an Order (1)
granting PGSMCs motion for inspection; (2) denying
KOGIES motion for reconsideration of the July 23, 1998
RTC Order; and (3) denying KOGIES motion to dismiss
PGSMCs compulsory counterclaims as these
counterclaims fell within the requisites of compulsory
counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for
Reconsideration17 of the September 21, 1998 RTC Order
granting inspection of the plant and denying dismissal of
PGSMCs compulsory counterclaims.
Ten days after, on October 12, 1998, without waiting for
the resolution of its October 2, 1998 urgent motion for
reconsideration, KOGIES filed before the Court of
Appeals (CA) a petition for certiorari18 docketed as CA-
G.R. SP No. 49249, seeking annulment of the July 23,
1998 and September 21, 1998 RTC Orders and praying for
the issuance of writs of prohibition, mandamus, and
preliminary injunction to enjoin the RTC and PGSMC
from inspecting, dismantling, and transferring the
machineries and equipment in the Carmona plant, and to
direct the RTC to enforce the specific agreement on
arbitration to resolve the dispute.
In the meantime, on October 19, 1998, the RTC denied
KOGIES urgent motion for reconsideration and directed
the Branch Sheriff to proceed with the inspection of the
machineries and equipment in the plant on October 28,
1998.19
Thereafter, KOGIES filed a Supplement to the Petition20 in
CA-G.R. SP No. 49249 informing the CA about the
October 19, 1998 RTC Order. It also reiterated its prayer
for the issuance of the writs of prohibition, mandamus and
preliminary injunction which was not acted upon by the
CA. KOGIES asserted that the Branch Sheriff did not have
the technical expertise to ascertain whether or not the
machineries and equipment conformed to the
specifications in the contract and were properly installed.
On November 11, 1998, the Branch Sheriff filed his
Sheriffs Report21 finding that the enumerated machineries
and equipment were not fully and properly installed.
The Court of Appeals affirmed the trial court and
declared
the arbitration clause against public policy
On May 30, 2000, the CA rendered the assailed
Decision22 affirming the RTC Orders and dismissing the
petition for certiorari filed by KOGIES. The CA found that
the RTC did not gravely abuse its discretion in issuing the
assailed July 23, 1998 and September 21, 1998 Orders.
Moreover, the CA reasoned that KOGIES contention that
the total contract price for USD 1,530,000 was for the
whole plant and had not been fully paid was contrary to
the finding of the RTC that PGSMC fully paid the price of
USD 1,224,000, which was for all the machineries and
equipment. According to the CA, this determination by the
RTC was a factual finding beyond the ambit of a petition
for certiorari.
On the issue of the validity of the arbitration clause, the
CA agreed with the lower court that an arbitration clause
which provided for a final determination of the legal rights
of the parties to the contract by arbitration was against
public policy.
On the issue of nonpayment of docket fees and non-
attachment of a certificate of non-forum shopping by
PGSMC, the CA held that the counterclaims of PGSMC
were compulsory ones and payment of docket fees was not
required since the Answer with counterclaim was not an
initiatory pleading. For the same reason, the CA said a
certificate of non-forum shopping was also not required.
Furthermore, the CA held that the petition for certiorari
had been filed prematurely since KOGIES did not wait for
the resolution of its urgent motion for reconsideration of
the September 21, 1998 RTC Order which was the plain,
speedy, and adequate remedy available. According to the
CA, the RTC must be given the opportunity to correct any
alleged error it has committed, and that since the assailed
orders were interlocutory, these cannot be the subject of a
petition for certiorari.
Hence, we have this Petition for Review on Certiorari
under Rule 45.
The Issues
Petitioner posits that the appellate court committed the
following errors:
a. PRONOUNCING THE QUESTION OF OWNERSHIP
OVER THE MACHINERY AND FACILITIES AS "A
QUESTION OF FACT" "BEYOND THE AMBIT OF A
PETITION FOR CERTIORARI" INTENDED ONLY
FOR CORRECTION OF ERRORS OF JURISDICTION
OR GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OF (SIC) EXCESS OF JURISDICTION, AND
CONCLUDING THAT THE TRIAL COURTS
FINDING ON THE SAME QUESTION WAS
IMPROPERLY RAISED IN THE PETITION BELOW;
b. DECLARING AS NULL AND VOID THE
ARBITRATION CLAUSE IN ARTICLE 15 OF THE
CONTRACT BETWEEN THE PARTIES FOR BEING
"CONTRARY TO PUBLIC POLICY" AND FOR
OUSTING THE COURTS OF JURISDICTION;
c. DECREEING PRIVATE RESPONDENTS
COUNTERCLAIMS TO BE ALL COMPULSORY NOT
NECESSITATING PAYMENT OF DOCKET FEES AND
CERTIFICATION OF NON-FORUM SHOPPING;
d. RULING THAT THE PETITION WAS FILED
PREMATURELY WITHOUT WAITING FOR THE
RESOLUTION OF THE MOTION FOR
RECONSIDERATION OF THE ORDER DATED
SEPTEMBER 21, 1998 OR WITHOUT GIVING THE
TRIAL COURT AN OPPORTUNITY TO CORRECT
ITSELF;
e. PROCLAIMING THE TWO ORDERS DATED JULY
23 AND SEPTEMBER 21, 1998 NOT TO BE PROPER
SUBJECTS OF CERTIORARI AND PROHIBITION
FOR BEING "INTERLOCUTORY IN NATURE;"
f. NOT GRANTING THE RELIEFS AND REMEDIES
PRAYED FOR IN HE (SIC) PETITION AND,
INSTEAD, DISMISSING THE SAME FOR
ALLEGEDLY "WITHOUT MERIT."23
The Courts Ruling
The petition is partly meritorious.
Before we delve into the substantive issues, we shall first
tackle the procedural issues.
The rules on the payment of docket fees for
counterclaims
and cross claims were amended effective August 16,
2004
KOGIES strongly argues that when PGSMC filed the
counterclaims, it should have paid docket fees and filed a
certificate of non-forum shopping, and that its failure to do
so was a fatal defect.
We disagree with KOGIES.
As aptly ruled by the CA, the counterclaims of PGSMC
were incorporated in its Answer with Compulsory
Counterclaim dated July 17, 1998 in accordance with
Section 8 of Rule 11, 1997 Revised Rules of Civil
Procedure, the rule that was effective at the time the
Answer with Counterclaim was filed. Sec. 8 on existing
counterclaim or cross-claim states, "A compulsory
counterclaim or a cross-claim that a defending party has at
the time he files his answer shall be contained therein."
On July 17, 1998, at the time PGSMC filed its Answer
incorporating its counterclaims against KOGIES, it was
not liable to pay filing fees for said counterclaims being
compulsory in nature. We stress, however, that effective
August 16, 2004 under Sec. 7, Rule 141, as amended by
A.M. No. 04-2-04-SC, docket fees are now required to be
paid in compulsory counterclaim or cross-claims.
As to the failure to submit a certificate of forum shopping,
PGSMCs Answer is not an initiatory pleading which
requires a certification against forum shopping under Sec.
524 of Rule 7, 1997 Revised Rules of Civil Procedure. It is
a responsive pleading, hence, the courts a quo did not
commit reversible error in denying KOGIES motion to
dismiss PGSMCs compulsory counterclaims.
Interlocutory orders proper subject of certiorari
Citing Gamboa v. Cruz,25 the CA also pronounced that
"certiorari and Prohibition are neither the remedies to
question the propriety of an interlocutory order of the trial
court."26 The CA erred on its reliance
on Gamboa. Gamboa involved the denial of a motion to
acquit in a criminal case which was not assailable in an
action for certiorari since the denial of a motion to quash
required the accused to plead and to continue with the trial,
and whatever objections the accused had in his motion to
quash can then be used as part of his defense and
subsequently can be raised as errors on his appeal if the
judgment of the trial court is adverse to him. The general
rule is that interlocutory orders cannot be challenged by an
appeal.27 Thus, in Yamaoka v. Pescarich Manufacturing
Corporation, we held:
The proper remedy in such cases is an ordinary appeal
from an adverse judgment on the merits, incorporating in
said appeal the grounds for assailing the interlocutory
orders. Allowing appeals from interlocutory orders would
result in the sorry spectacle of a case being subject of a
counterproductive ping-pong to and from the appellate
court as often as a trial court is perceived to have made an
error in any of its interlocutory rulings. However, where
the assailed interlocutory order was issued with grave
abuse of discretion or patently erroneous and the remedy
of appeal would not afford adequate and expeditious relief,
the Court allows certiorari as a mode of redress.28
Also, appeals from interlocutory orders would open the
floodgates to endless occasions for dilatory motions. Thus,
where the interlocutory order was issued without or in
excess of jurisdiction or with grave abuse of discretion, the
remedy is certiorari.29
The alleged grave abuse of discretion of the respondent
court equivalent to lack of jurisdiction in the issuance of
the two assailed orders coupled with the fact that there is
no plain, speedy, and adequate remedy in the ordinary
course of law amply provides the basis for allowing the
resort to a petition for certiorari under Rule 65.
Prematurity of the petition before the CA
Neither do we think that KOGIES was guilty of forum
shopping in filing the petition for certiorari. Note that
KOGIES motion for reconsideration of the July 23, 1998
RTC Order which denied the issuance of the injunctive
writ had already been denied. Thus, KOGIES only
remedy was to assail the RTCs interlocutory order via a
petition for certiorari under Rule 65.
While the October 2, 1998 motion for reconsideration of
KOGIES of the September 21, 1998 RTC Order relating to
the inspection of things, and the allowance of the
compulsory counterclaims has not yet been resolved, the
circumstances in this case would allow an exception to the
rule that before certiorari may be availed of, the petitioner
must have filed a motion for reconsideration and said
motion should have been first resolved by the court a quo.
The reason behind the rule is "to enable the lower court, in
the first instance, to pass upon and correct its mistakes
without the intervention of the higher court."30
The September 21, 1998 RTC Order directing the branch
sheriff to inspect the plant, equipment, and facilities when
he is not competent and knowledgeable on said matters is
evidently flawed and devoid of any legal support.
Moreover, there is an urgent necessity to resolve the issue
on the dismantling of the facilities and any further delay
would prejudice the interests of KOGIES. Indeed, there is
real and imminent threat of irreparable destruction or
substantial damage to KOGIES equipment and
machineries. We find the resort to certiorari based on the
gravely abusive orders of the trial court sans the ruling on
the October 2, 1998 motion for reconsideration to be
proper.
The Core Issue: Article 15 of the Contract
We now go to the core issue of the validity of Art. 15 of
the Contract, the arbitration clause. It provides:
Article 15. Arbitration.All disputes, controversies, or
differences which may arise between the parties, out of or
in relation to or in connection with this Contract or for the
breach thereof, shall finally be settled by arbitration in
Seoul, Korea in accordance with the Commercial
Arbitration Rules of the Korean Commercial Arbitration
Board. The award rendered by the arbitration(s) shall
be final and binding upon both parties concerned.
(Emphasis supplied.)
Petitioner claims the RTC and the CA erred in ruling that
the arbitration clause is null and void.
Petitioner is correct.
Established in this jurisdiction is the rule that the law of
the place where the contract is made governs. Lex loci
contractus. The contract in this case was perfected here in
the Philippines. Therefore, our laws ought to govern.
Nonetheless, Art. 2044 of the Civil Code sanctions the
validity of mutually agreed arbitral clause or the finality
and binding effect of an arbitral award. Art. 2044 provides,
"Any stipulation that the arbitrators award or decision
shall be final, is valid, without prejudice to Articles 2038,
2039 and 2040." (Emphasis supplied.)
Arts. 2038,31 2039,32 and 204033 abovecited refer to
instances where a compromise or an arbitral award, as
applied to Art. 2044 pursuant to Art. 2043,34 may be
voided, rescinded, or annulled, but these would not
denigrate the finality of the arbitral award.
The arbitration clause was mutually and voluntarily agreed
upon by the parties. It has not been shown to be contrary to
any law, or against morals, good customs, public order, or
public policy. There has been no showing that the parties
have not dealt with each other on equal footing. We find
no reason why the arbitration clause should not be
respected and complied with by both parties. In Gonzales
v. Climax Mining Ltd.,35 we held that submission to
arbitration is a contract and that a clause in a contract
providing that all matters in dispute between the parties
shall be referred to arbitration is a contract.36 Again in Del
Monte Corporation-USA v. Court of Appeals, we likewise
ruled that "[t]he provision to submit to arbitration any
dispute arising therefrom and the relationship of the parties
is part of that contract and is itself a contract."37
Arbitration clause not contrary to public policy
The arbitration clause which stipulates that the arbitration
must be done in Seoul, Korea in accordance with the
Commercial Arbitration Rules of the KCAB, and that the
arbitral award is final and binding, is not contrary to public
policy. This Court has sanctioned the validity of arbitration
clauses in a catena of cases. In the 1957 case of Eastboard
Navigation Ltd. v. Juan Ysmael and Co., Inc.,38 this Court
had occasion to rule that an arbitration clause to resolve
differences and breaches of mutually agreed contractual
terms is valid. In BF Corporation v. Court of Appeals, we
held that "[i]n this jurisdiction, arbitration has been held
valid and constitutional. Even before the approval on June
19, 1953 of Republic Act No. 876, this Court has
countenanced the settlement of disputes through
arbitration. Republic Act No. 876 was adopted to
supplement the New Civil Codes provisions on
arbitration."39 And in LM Power Engineering Corporation
v. Capitol Industrial Construction Groups, Inc., we
declared that:
Being an inexpensive, speedy and amicable method of
settling disputes, arbitrationalong with mediation,
conciliation and negotiationis encouraged by the
Supreme Court. Aside from unclogging judicial dockets,
arbitration also hastens 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. Brushing aside a contractual
agreement calling for arbitration between the parties would
be a step backward.
Consistent with the above-mentioned policy of
encouraging alternative dispute resolution methods, courts
should liberally construe arbitration clauses. Provided such
clause is susceptible of an interpretation that covers the
asserted dispute, an order to arbitrate should be granted.
Any doubt should be resolved in favor of arbitration.40
Having said that the instant arbitration clause is not against
public policy, we come to the question on what governs an
arbitration clause specifying that in case of any dispute
arising from the contract, an arbitral panel will be
constituted in a foreign country and the arbitration rules of
the foreign country would govern and its award shall be
final and binding.
RA 9285 incorporated the UNCITRAL Model law
to which we are a signatory
For domestic arbitration proceedings, we have particular
agencies to arbitrate disputes arising from contractual
relations. In case a foreign arbitral body is chosen by the
parties, the arbitration rules of our domestic arbitration
bodies would not be applied. As signatory to the
Arbitration Rules of the UNCITRAL Model Law on
International Commercial Arbitration41 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. We have even incorporated the Model Law in
Republic Act No. (RA) 9285, otherwise known as the
Alternative Dispute Resolution Act of 2004 entitled An Act
to Institutionalize the Use of an Alternative Dispute
Resolution System in the Philippines and to Establish the
Office for Alternative Dispute Resolution, and for Other
Purposes, promulgated on April 2, 2004. Secs. 19 and 20
of Chapter 4 of the Model Law are the pertinent
provisions:
CHAPTER 4 - INTERNATIONAL COMMERCIAL
ARBITRATION
SEC. 19. Adoption of the Model Law on International
Commercial Arbitration.International commercial
arbitration shall be governed by the Model Law on
International Commercial Arbitration (the "Model Law")
adopted by the United Nations Commission on
International Trade Law on June 21, 1985 (United Nations
Document A/40/17) and recommended for enactment by
the General Assembly in Resolution No. 40/72 approved
on December 11, 1985, copy of which is hereto attached as
Appendix "A".
SEC. 20. Interpretation of Model Law.In interpreting the
Model Law, regard shall be had to its international origin
and to the need for uniformity in its interpretation and
resort may be made to the travaux preparatoriesand the
report of the Secretary General of the United Nations
Commission on International Trade Law dated March 25,
1985 entitled, "International Commercial Arbitration:
Analytical Commentary on Draft Trade identified by
reference number A/CN. 9/264."
While RA 9285 was passed only in 2004, it nonetheless
applies in the instant case since it is a procedural law
which has a retroactive effect. Likewise, KOGIES filed its
application for arbitration before the KCAB on July 1,
1998 and it is still pending because no arbitral award has
yet been rendered. Thus, RA 9285 is applicable to the
instant case. Well-settled is the rule that procedural laws
are construed to be applicable to actions pending and
undetermined at the time of their passage, and are deemed
retroactive in that sense and to that extent. As a general
rule, the retroactive application of procedural laws does
not violate any personal rights because no vested right has
yet attached nor arisen from them.42
Among the pertinent features of RA 9285 applying and
incorporating the UNCITRAL Model Law are the
following:
(1) The RTC must refer to arbitration in proper cases
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 in such cases, thus:
SEC. 24. Referral to Arbitration.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.
(2) Foreign arbitral awards must be confirmed by the
RTC
Foreign arbitral awards while mutually stipulated by the
parties in the arbitration clause to be final and binding are
not immediately enforceable or cannot be implemented
immediately. Sec. 3543 of the UNCITRAL Model Law
stipulates the requirement for the arbitral award to be
recognized by a competent court for enforcement, which
court under Sec. 36 of the UNCITRAL Model Law may
refuse recognition or enforcement on the grounds provided
for. RA 9285 incorporated these provisos to Secs. 42, 43,
and 44 relative to Secs. 47 and 48, thus:
SEC. 42. Application of the New York Convention.The
New York Convention shall govern the recognition and
enforcement of arbitral awards covered by said
Convention.
The recognition and enforcement of such arbitral awards
shall be filed with the Regional Trial Court in accordance
with the rules of procedure to be promulgated by the
Supreme Court. Said procedural rules shall provide that
the party relying on the award or applying for its
enforcement shall file with the court the original or
authenticated copy of the award and the arbitration
agreement. If the award or agreement is not made in any of
the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which
foreign arbitration award was made in party to the New
York Convention.
xxxx
SEC. 43. Recognition and Enforcement of Foreign
Arbitral Awards Not Covered by the New York
Convention.The recognition and enforcement of foreign
arbitral awards not covered by the New York Convention
shall be done in accordance with procedural rules to be
promulgated by the Supreme Court. The Court may, on
grounds of comity and reciprocity, recognize and enforce a
non-convention award as a convention award.
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.
A foreign arbitral award when confirmed by a court of a
foreign country, shall be recognized and enforced as a
foreign arbitral award and not as a judgment of a foreign
court.
A foreign arbitral award, when confirmed by the Regional
Trial Court, shall be enforced in the same manner as final
and executory decisions of courts of law of the Philippines
xxxx
SEC. 47. Venue and Jurisdiction.Proceedings for
recognition and enforcement of an arbitration agreement or
for vacations, setting aside, correction or modification of
an arbitral award, and any application with a court for
arbitration assistance and supervision shall be deemed as
special proceedings and shall be filed with the Regional
Trial Court (i) where arbitration proceedings are
conducted; (ii) where the asset to be attached or levied
upon, or the act to be enjoined is located; (iii) where any of
the parties to the dispute resides or has his place of
business; or (iv) in the National Judicial Capital Region, at
the option of the applicant.
SEC. 48. Notice of Proceeding to Parties.In a special
proceeding for recognition and enforcement of an arbitral
award, the Court shall send notice to the parties at their
address of record in the arbitration, or if any part cannot be
served notice at such address, at such partys last known
address. The notice shall be sent al least fifteen (15) days
before the date set for the initial hearing of the application.
It is now clear that foreign arbitral awards when confirmed
by the RTC are deemed not as a judgment of a foreign
court but as a foreign arbitral award, and when confirmed,
are enforced as final and executory decisions of our courts
of law.
Thus, it can be gleaned that the concept of a final and
binding arbitral award is similar to judgments or awards
given by some of our quasi-judicial bodies, like the
National Labor Relations Commission and Mines
Adjudication Board, whose final judgments are stipulated
to be final and binding, but not immediately executory in
the sense that they may still be judicially reviewed, upon
the instance of any party. Therefore, the final foreign
arbitral awards are similarly situated in that they need first
to be confirmed by the RTC.
(3) The RTC has jurisdiction to review foreign arbitral
awards
Sec. 42 in relation to Sec. 45 of RA 9285 designated and
vested the RTC with specific authority and jurisdiction to
set aside, reject, or vacate a foreign arbitral award on
grounds provided under Art. 34(2) of the UNCITRAL
Model Law. Secs. 42 and 45 provide:
SEC. 42. Application of the New York Convention.The
New York Convention shall govern the recognition and
enforcement of arbitral awards covered by said
Convention.
The recognition and enforcement of such arbitral awards
shall be filed with the Regional Trial Court in accordance
with the rules of procedure to be promulgated by the
Supreme Court. Said procedural rules shall provide that
the party relying on the award or applying for its
enforcement shall file with the court the original or
authenticated copy of the award and the arbitration
agreement. If the award or agreement is not made in any of
the official languages, the party shall supply a duly
certified translation thereof into any of such languages.
The applicant shall establish that the country in which
foreign arbitration award was made is party to the New
York Convention.
If the application for rejection or suspension of
enforcement of an award has been made, the Regional
Trial Court may, if it considers it proper, vacate its
decision and may also, on the application of the party
claiming recognition or enforcement of the award, order
the party to provide appropriate security.
xxxx
SEC. 45. Rejection of a Foreign Arbitral Award.A party
to a foreign arbitration proceeding may oppose an
application for recognition and enforcement of the arbitral
award in accordance with the procedures and rules to be
promulgated by the Supreme Court only on those grounds
enumerated under Article V of the New York Convention.
Any other ground raised shall be disregarded by the
Regional Trial Court.
Thus, while the RTC does not have jurisdiction over
disputes governed by arbitration mutually agreed upon by
the parties, still the foreign arbitral award is subject to
judicial review by the RTC which can set aside, reject, or
vacate it. In this sense, what this Court held in Chung Fu
Industries (Phils.), Inc. relied upon by KOGIES is
applicable insofar as the foreign arbitral awards, while
final and binding, do not oust courts of jurisdiction since
these arbitral awards are not absolute and without
exceptions as they are still judicially reviewable. Chapter 7
of RA 9285 has made it clear that all arbitral awards,
whether domestic or foreign, are subject to judicial review
on specific grounds provided for.
(4) Grounds for judicial review different in domestic
and foreign arbitral awards
The differences between a final arbitral award from an
international or foreign arbitral tribunal and an award
given by a local arbitral tribunal are the specific grounds or
conditions that vest jurisdiction over our courts to review
the awards.
For foreign or international arbitral awards which must
first 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.
For final domestic arbitral awards, which also need
confirmation by the RTC pursuant to Sec. 23 of RA
87644 and shall be recognized as final and executory
decisions of the RTC,45 they may only be assailed before
the RTC and vacated on the grounds provided under Sec.
25 of RA 876.46
(5) RTC decision of assailed foreign arbitral award
appealable
Sec. 46 of RA 9285 provides for an appeal before the CA
as the remedy of an aggrieved party in cases where the
RTC sets aside, rejects, vacates, modifies, or corrects an
arbitral award, thus:
SEC. 46. Appeal from Court Decision or Arbitral
Awards.A decision of the Regional Trial Court
confirming, vacating, setting aside, modifying or
correcting an arbitral award may be appealed to the Court
of Appeals in accordance with the rules and procedure to
be promulgated by the Supreme Court.
The losing party who appeals from the judgment of the
court confirming an arbitral award shall be required by the
appellate court to post a counterbond executed in favor of
the prevailing party equal to the amount of the award in
accordance with the rules to be promulgated by the
Supreme Court.
Thereafter, the CA decision may further be appealed or
reviewed before this Court through a petition for review
under Rule 45 of the Rules of Court.
PGSMC has remedies to protect its interests
Thus, based on the foregoing features of RA 9285,
PGSMC must submit to the foreign arbitration as it bound
itself through the subject contract. While it may have
misgivings on the foreign arbitration done in Korea by the
KCAB, it has available remedies under RA 9285. Its
interests are duly protected by the law which requires that
the arbitral award that may be rendered by KCAB must be
confirmed here by the RTC before it can be enforced.
With our disquisition above, petitioner is correct in its
contention that an arbitration clause, stipulating that the
arbitral award is final and binding, does not oust our courts
of jurisdiction as the international arbitral award, the
award of which is not absolute and without exceptions, is
still judicially reviewable under certain conditions
provided for by the UNCITRAL Model Law on ICA as
applied and incorporated in RA 9285.
Finally, it must be noted that there is nothing in the subject
Contract which provides that the parties may dispense with
the arbitration clause.
Unilateral rescission improper and illegal
Having ruled that the arbitration clause of the subject
contract is valid and binding on the parties, and not
contrary to public policy; consequently, being bound to the
contract of arbitration, a party may not unilaterally rescind
or terminate the contract for whatever cause without first
resorting to arbitration.
What this Court held in University of the Philippines v. De
Los Angeles47 and reiterated in succeeding cases,48 that the
act of treating a contract as rescinded on account of
infractions by the other contracting party is valid albeit
provisional as it can be judicially assailed, is not applicable
to the instant case on account of a valid stipulation on
arbitration. Where an arbitration clause in a contract is
availing, neither of 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.
The issues arising from the contract between PGSMC and
KOGIES on whether the equipment and machineries
delivered and installed were properly installed and
operational in the plant in Carmona, Cavite; the ownership
of equipment and payment of the contract price; and
whether there was substantial compliance by KOGIES in
the production of the samples, given the alleged fact that
PGSMC could not supply the raw materials required to
produce the sample LPG cylinders, are matters proper for
arbitration. Indeed, we note that on July 1, 1998, KOGIES
instituted an Application for Arbitration before the KCAB
in Seoul, Korea pursuant to Art. 15 of the Contract as
amended. Thus, it is incumbent upon PGSMC to abide by
its commitment to arbitrate.
Corollarily, the trial court gravely abused its discretion in
granting PGSMCs Motion for Inspection of Things on
September 21, 1998, as the subject matter of the motion is
under the primary jurisdiction of the mutually agreed
arbitral body, the KCAB in Korea.
In addition, whatever findings and conclusions made by
the RTC Branch Sheriff from the inspection made on
October 28, 1998, as ordered by the trial court on October
19, 1998, is of no worth as said Sheriff is not technically
competent to ascertain the actual status of the equipment
and machineries as installed in the plant.
For these reasons, the September 21, 1998 and October 19,
1998 RTC Orders pertaining to the grant of the inspection
of the equipment and machineries have to be recalled and
nullified.
Issue on ownership of plant proper for arbitration
Petitioner assails the CA ruling that the issue petitioner
raised on whether the total contract price of USD
1,530,000 was for the whole plant and its installation is
beyond the ambit of a Petition for Certiorari.
Petitioners position is untenable.
It is settled that questions of fact cannot be raised in an
original action for certiorari.49 Whether or not there was
full payment for the machineries and equipment and
installation is indeed a factual issue prohibited by Rule 65.
However, what appears to constitute a grave abuse of
discretion is the order of the RTC in resolving the issue on
the ownership of the plant when it is the arbitral body
(KCAB) and not the RTC which has jurisdiction and
authority over the said issue. The RTCs determination of
such factual issue constitutes grave abuse of discretion and
must be reversed and set aside.
RTC has interim jurisdiction to protect the rights of
the parties
Anent the July 23, 1998 Order denying the issuance of the
injunctive writ paving the way for PGSMC to dismantle
and transfer the equipment and machineries, we find it to
be in order considering the factual milieu of the instant
case.
Firstly, while the issue of the proper installation of the
equipment and machineries might well be under the
primary jurisdiction of the arbitral body to decide, yet the
RTC under Sec. 28 of RA 9285 has jurisdiction to hear and
grant interim measures to protect vested rights of the
parties. Sec. 28 pertinently provides:
SEC. 28. Grant of interim Measure of Protection.(a) It
is not incompatible with an arbitration agreement for a
party to request, before constitution of the tribunal,
from a Court to grant such measure. After constitution
of the arbitral tribunal and during arbitral proceedings, a
request for an interim measure of protection, or
modification thereof, may be made with the arbitral or to
the extent that the arbitral tribunal has no power to act
or is unable to act effectivity, the request may be made
with the Court. The arbitral tribunal is deemed
constituted when the sole arbitrator or the third arbitrator,
who has been nominated, has accepted the nomination and
written communication of said nomination and acceptance
has been received by the party making the request.
(b) The following rules on interim or provisional relief
shall be observed:
Any party may request that provisional relief be granted
against the adverse party.
Such relief may be granted:
(i) to prevent irreparable loss or injury;
(ii) to provide security for the performance of any
obligation;
(iii) to produce or preserve any evidence; or
(iv) to compel any other appropriate act or omission.
(c) The order granting provisional relief may be
conditioned upon the provision of security or any act or
omission specified in the order.
(d) Interim or provisional relief is requested by written
application transmitted by reasonable means to the Court
or arbitral tribunal as the case may be and the party against
whom the relief is sought, describing in appropriate detail
the precise relief, the party against whom the relief is
requested, the grounds for the relief, and the evidence
supporting the request.
(e) The order shall be binding upon the parties.
(f) Either party may apply with the Court for assistance in
implementing or enforcing an interim measure ordered by
an arbitral tribunal.
(g) A party who does not comply with the order shall be
liable for all damages resulting from noncompliance,
including all expenses, and reasonable attorney's fees, paid
in obtaining the orders judicial enforcement. (Emphasis
ours.)
Art. 17(2) of the UNCITRAL Model Law on ICA defines
an "interim measure" of protection as:
Article 17. Power of arbitral tribunal to order interim
measures
xxx xxx xxx
(2) An interim measure is any temporary measure,
whether in the form of an award or in another form, by
which, at any time prior to the issuance of the award by
which the dispute is finally decided, the arbitral tribunal
orders a party to:
(a) Maintain or restore the status quo pending
determination of the dispute;
(b) Take action that would prevent, or refrain from taking
action that is likely to cause, current or imminent harm or
prejudice to the arbitral process itself;
(c) Provide a means of preserving assets out of which a
subsequent award may be satisfied; or
(d) Preserve evidence that may be relevant and material to
the resolution of the dispute.
Art. 17 J of UNCITRAL Model Law on ICA also grants
courts power and jurisdiction to issue interim measures:
Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim
measure in relation to arbitration proceedings, irrespective
of whether their place is in the territory of this State, as it
has in relation to proceedings in courts. The court shall
exercise such power in accordance with its own procedures
in consideration of the specific features of international
arbitration.
In the recent 2006 case of Transfield Philippines, Inc. v.
Luzon Hydro Corporation, we were explicit that even "the
pendency of an arbitral proceeding does not foreclose
resort to the courts for provisional reliefs." We explicated
this way:
As a fundamental point, the pendency of arbitral
proceedings does not foreclose resort to the courts for
provisional reliefs. The Rules of the ICC, which governs
the parties arbitral dispute, allows the application of a
party to a judicial authority for interim or conservatory
measures. Likewise, Section 14 of Republic Act (R.A.)
No. 876 (The Arbitration Law) recognizes the rights of any
party to petition the court to take measures to safeguard
and/or conserve any matter which is the subject of the
dispute in arbitration. In addition, R.A. 9285, otherwise
known as the "Alternative Dispute Resolution Act of
2004," allows the filing of provisional or interim measures
with the regular courts whenever the arbitral tribunal has
no power to act or to act effectively.50
It is thus beyond cavil that the RTC has authority and
jurisdiction to grant interim measures of protection.
Secondly, considering that the equipment and machineries
are in the possession of PGSMC, it has the right to protect
and preserve the equipment and machineries in the best
way it can. Considering that the LPG plant was non-
operational, PGSMC has the right to dismantle and
transfer the equipment and machineries either for their
protection and preservation or for the better way to make
good use of them which is ineluctably within the
management discretion of PGSMC.
Thirdly, and of greater import is the reason that
maintaining the equipment and machineries in Worths
property is not to the best interest of PGSMC due to the
prohibitive rent while the LPG plant as set-up is not
operational. PGSMC was losing PhP322,560 as monthly
rentals or PhP3.87M for 1998 alone without considering
the 10% annual rent increment in maintaining the plant.
Fourthly, and corollarily, while the KCAB can rule on
motions or petitions relating to the preservation or transfer
of the equipment and machineries as an interim measure,
yet on hindsight, the July 23, 1998 Order of the RTC
allowing the transfer of the equipment and machineries
given the non-recognition by the lower courts of the
arbitral clause, has accorded an interim measure of
protection to PGSMC which would otherwise been
irreparably damaged.

Fifth, KOGIES is not unjustly prejudiced as it has already

been paid a substantial amount based on the contract.
Moreover, KOGIES is amply protected by the arbitral
action it has instituted before the KCAB, the award of
which can be enforced in our jurisdiction through the RTC.
Besides, by our decision, PGSMC is compelled to submit
to arbitration pursuant to the valid arbitration clause of its
contract with KOGIES.

PGSMC to preserve the subject equipment and

machineries

Finally, while PGSMC may have been granted the right to

dismantle and transfer the subject equipment and
machineries, it does not have the right to convey or
dispose of the same considering the pending arbitral
proceedings to settle the differences of the parties.
PGSMC therefore must preserve and maintain the subject
equipment and machineries with the diligence of a good
father of a family51 until final resolution of the arbitral
proceedings and enforcement of the award, if any.

WHEREFORE, this petition is PARTLY GRANTED, in

that:

(1) The May 30, 2000 CA Decision in CA-G.R. SP No.

49249 is REVERSED and SET ASIDE;

(2) The September 21, 1998 and October 19, 1998 RTC
Orders in Civil Case No. 98-117
are REVERSED and SET ASIDE;

(3) The parties are hereby ORDERED to submit

themselves to the arbitration of their dispute and
differences arising from the subject Contract before the
KCAB; and

(4) PGSMC is hereby ALLOWED to dismantle and

transfer the equipment and machineries, if it had not done
so, and ORDERED to preserve and maintain them until
the finality of whatever arbitral award is given in the
arbitration proceedings.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 141833 March 26, 2003
LM POWER ENGINEERING
CORPORATION, petitioner,
vs.
CAPITOL INDUSTRIAL CONSTRUCTION
GROUPS, INC., respondent.
PANGANIBAN, J.:
Alternative dispute resolution methods or ADRs -- like
arbitration, mediation, negotiation and conciliation -- are
encouraged by the Supreme Court. By enabling parties to
resolve their disputes amicably, they provide solutions that
are less time-consuming, less tedious, less confrontational,
and more productive of goodwill and lasting relationships.1
The Case
Before us is a Petition for Review on Certiorari2 under
Rule 45 of the Rules of Court, seeking to set aside the
January 28, 2000 Decision of the Court of Appeals3 (CA)
in CA-GR CV No. 54232. The dispositive portion of the
Decision reads as follows:
"WHEREFORE, the judgment appealed from is
REVERSED and SET ASIDE. The parties are ORDERED
to present their dispute to arbitration in accordance with
their Sub-contract Agreement. The surety bond posted by
[respondent] is [d]ischarged."4
The Facts
On February 22, 1983, Petitioner LM Power Engineering
Corporation and Respondent Capitol Industrial
Construction Groups Inc. entered into a "Subcontract
Agreement" involving electrical work at the Third Port of
Zamboanga.5
On April 25, 1985, respondent took over some of the work
contracted to petitioner.6 Allegedly, the latter had failed to
finish it because of its inability to procure materials.7
Upon completing its task under the Contract, petitioner
billed respondent in the amount of
P6,711,813.90.8Contesting the accuracy of the amount of
advances and billable accomplishments listed by the
former, the latter refused to pay. Respondent also took
refuge in the termination clause of the Agreement.9 That
clause allowed it to set off the cost of the work that
petitioner had failed to undertake -- due to termination or
take-over -- against the amount it owed the latter.
Because of the dispute, petitioner filed with the Regional
Trial Court (RTC) of Makati (Branch 141) a
Complaint10 for the collection of the amount representing
the alleged balance due it under the Subcontract. Instead of
submitting an Answer, respondent filed a Motion to
Dismiss,11 alleging that the Complaint was premature,
because there was no prior recourse to arbitration.
In its Order12 dated September 15, 1987, the RTC denied
the Motion on the ground that the dispute did not involve
the interpretation or the implementation of the Agreement
and was, therefore, not covered by the arbitral clause.13
After trial on the merits, the RTC14 ruled that the take-over
of some work items by respondent was not equivalent to a
termination, but a mere modification, of the Subcontract.
The latter was ordered to give full payment for the work
completed by petitioner.
Ruling of the Court of Appeals
On appeal, the CA reversed the RTC and ordered the
referral of the case to arbitration. The appellate court held
as arbitrable the issue of whether respondents take-over of
some work items had been intended to be a termination of
the original contract under Letter "K" of the Subcontract. It
ruled likewise on two other issues: whether petitioner was
liable under the warranty clause of the Agreement, and
whether it should reimburse respondent for the work the
latter had taken over.15
Hence, this Petition.16
The Issues
In its Memorandum, petitioner raises the following issues
for the Courts consideration:
"A
Whether or not there exist[s] a controversy/dispute
between petitioner and respondent regarding the
interpretation and implementation of the Sub-Contract
Agreement dated February 22, 1983 that requires prior
recourse to voluntary arbitration;
"B
In the affirmative, whether or not the requirements
provided in Article III 1 of CIAC Arbitration Rules
regarding request for arbitration ha[ve] been complied
with[.]"17
The Courts Ruling
The Petition is unmeritorious.
First Issue:
Whether Dispute Is Arbitrable
Petitioner claims that there is no conflict regarding the
interpretation or the implementation of the Agreement.
Thus, without having to resort to prior arbitration, it is
entitled to collect the value of the services it rendered
through an ordinary action for the collection of a sum of
money from respondent. On the other hand, the latter
contends that there is a need for prior arbitration as
provided in the Agreement. This is because there are some
disparities between the parties positions regarding the
extent of the work done, the amount of advances and
billable accomplishments, and the set off of expenses
incurred by respondent in its take-over of petitioners
work.
We side with respondent. Essentially, the dispute arose
from the parties ncongruent positions on whether certain
provisions of their Agreement could be applied to the
facts. The instant case involves technical discrepancies that
are better left to an arbitral body that has expertise in those
areas. In any event, 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,
because the awards are still judicially reviewable under
certain conditions.18
In the case before us, the Subcontract has the following
arbitral clause:
"6. The Parties hereto agree that any dispute or conflict as
regards to interpretation and implementation of this
Agreement which cannot be settled between [respondent]
and [petitioner] amicably shall be settled by means of
arbitration x x x."19
Clearly, the resolution of the dispute between the parties
herein requires a referral to the provisions of their
Agreement. Within the scope of the arbitration clause are
discrepancies as to the amount of advances and billable
accomplishments, the application of the provision on
termination, and the consequent set-off of expenses.
A review of the factual allegations of the parties reveals
that they differ on the following questions: (1) Did a take-
over/termination occur? (2) May the expenses incurred by
respondent in the take-over be set off against the amounts
it owed petitioner? (3) How much were the advances and
billable accomplishments?
The resolution of the foregoing issues lies in the
interpretation of the provisions of the Agreement.
According to respondent, the take-over was caused by
petitioners delay in completing the work. Such delay was
in violation of the provision in the Agreement as to time
schedule:
"G. TIME SCHEDULE
"[Petitioner] shall adhere strictly to the schedule related to
the WORK and complete the WORK within the period set
forth in Annex C hereof. NO time extension shall be
granted by [respondent] to [petitioner] unless a
corresponding time extension is granted by [the Ministry
of Public Works and Highways] to the CONSORTIUM."20
Because of the delay, respondent alleges that it took over
some of the work contracted to petitioner, pursuant to the
following provision in the Agreement:
"K. TERMINATION OF AGREEMENT
"[Respondent] has the right to terminate and/or take
over this Agreement for any of the following causes:
xxx xxx xxx
6. If despite previous warnings by [respondent],
[petitioner] does not execute the WORK in accordance
with this Agreement, or persistently or flagrantly neglects
to carry out [its] obligations under this Agreement."21
Supposedly, as a result of the "take-over," respondent
incurred expenses in excess of the contracted price. It
sought to set off those expenses against the amount
claimed by petitioner for the work the latter accomplished,
pursuant to the following provision:
"If the total direct and indirect cost of completing the
remaining part of the WORK exceed the sum which would
have been payable to [petitioner] had it completed the
WORK, the amount of such excess [may be] claimed by
[respondent] from either of the following:
1. Any amount due [petitioner] from [respondent] at the
time of the termination of this Agreement."22
The issue as to the correct amount of petitioners advances
and billable accomplishments involves an evaluation of the
manner in which the parties completed the work, the extent
to which they did it, and the expenses each of them
incurred in connection therewith. Arbitrators also need to
look into the computation of foreign and local costs of
materials, foreign and local advances, retention fees and
letters of credit, and taxes and duties as set forth in the
Agreement. These data can be gathered from a review of
the Agreement, pertinent portions of which are reproduced
hereunder:
"C. CONTRACT PRICE AND TERMS OF PAYMENT
xxx xxx xxx
"All progress payments to be made by [respondent] to
[petitioner] shall be subject to a retention sum of ten
percent (10%) of the value of the approved quantities. Any
claims by [respondent] on [petitioner] may be deducted by
[respondent] from the progress payments and/or retained
amount. Any excess from the retained amount after
deducting [respondents] claims shall be released by
[respondent] to [petitioner] after the issuance of [the
Ministry of Public Works and Highways] of the Certificate
of Completion and final acceptance of the WORK by [the
Ministry of Public Works and Highways].
xxx xxx xxx
"D. IMPORTED MATERIALS AND EQUIPMENT
"[Respondent shall open the letters of credit for the
importation of equipment and materials listed in Annex E
hereof after the drawings, brochures, and other technical
data of each items in the list have been formally approved
by [the Ministry of Public Works and Highways].
However, petitioner will still be fully responsible for all
imported materials and equipment.
"All expenses incurred by [respondent], both in foreign
and local currencies in connection with the opening of the
letters of credit shall be deducted from the Contract Prices.
xxx xxx xxx
"N. OTHER CONDITIONS
xxx xxx xxx
"2. All customs duties, import duties, contractors taxes,
income taxes, and other taxes that may be required by any
government agencies in connection with this Agreement
shall be for the sole account of [petitioner]."23
Being an inexpensive, speedy and amicable method of
settling disputes,24 arbitration -- along with mediation,
conciliation and negotiation -- is encouraged by the
Supreme Court. Aside from unclogging judicial dockets,
arbitration also hastens the resolution of disputes,
especially of the commercial kind.25 It is thus regarded as
the "wave of the future" in international civil and
commercial disputes.26 Brushing aside a contractual
agreement calling for arbitration between the parties would
be a step backward.27
Consistent with the above-mentioned policy of
encouraging alternative dispute resolution methods, courts
should liberally construe arbitration clauses. Provided such
clause is susceptible of an interpretation that covers the
asserted dispute, an order to arbitrate should be
granted.28 Any doubt should be resolved in favor of
arbitration.29
Second Issue:
Prior Request for Arbitration
According to petitioner, assuming arguendo that the
dispute is arbitrable, the failure to file a formal request for
arbitration with the Construction Industry Arbitration
Commission (CIAC) precluded the latter from acquiring
jurisdiction over the question. To bolster its position,
petitioner even cites our ruling in Tesco Services
Incorporated v. Vera.30 We are not persuaded.
Section 1 of Article II of the old Rules of Procedure
Governing Construction Arbitration indeed required the
submission of a request for arbitration, as follows:
"SECTION. 1. Submission to Arbitration -- Any party to a
construction contract wishing to have recourse to
arbitration by the Construction Industry Arbitration
Commission (CIAC) shall submit its Request for
Arbitration in sufficient copies to the Secretariat of the
CIAC; PROVIDED, that in the case of government
construction contracts, all administrative remedies
available to the parties must have been exhausted within
90 days from the time the dispute arose."
Tesco was promulgated by this Court, using the foregoing
provision as reference.
On the other hand, Section 1 of Article III of the new
Rules of Procedure Governing Construction Arbitration
has dispensed with this requirement and recourse to the
CIAC may now be availed of whenever a contract
"contains a clause for the submission of a future covers the dispute between the parties in the present case,
controversy to arbitration," in this wise: either of them may compel the other to arbitrate.36

"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 CIAC jurisdiction, notwithstanding the
reference to a different arbitration institution or arbitral
body in such contract or submission. When a contract
contains a clause for the submission of a future
controversy to arbitration, it is not necessary for the parties
to enter into a submission agreement before the claimant
may invoke the jurisdiction of CIAC."
Since petitioner has already filed a Complaint with the
RTC without prior recourse to arbitration, the proper
procedure to enable the CIAC to decide on the dispute is to
request the stay or suspension of such action, as provided
under RA 876 [the Arbitration Law].37
WHEREFORE, the Petition is DENIED and the assailed
Decision AFFIRMED. Costs against petitioner.
SO ORDERED.

The foregoing amendments in the Rules were formalized

by CIAC Resolution Nos. 2-91 and 3-93.31

The difference in the two provisions was clearly explained

in China Chang Jiang Energy Corporation (Philippines) v.
Rosal Infrastructure Builders et al.32 (an extended
unsigned Resolution) and reiterated in National Irrigation
Administration v. Court of Appeals,33 from which we quote
thus:

"Under the present Rules of Procedure, for a particular

construction contract to fall within the jurisdiction of
CIAC, it is merely required that the parties agree to submit
the same to voluntary arbitration Unlike in the original
version of Section 1, as applied in the Tesco case, the law
as it now stands does not provide that the parties should
agree to submit disputes arising from their agreement
specifically to the CIAC for the latter to acquire
jurisdiction over the same. Rather, it is plain and clear that
as long as the parties agree to submit to voluntary
arbitration, regardless of what forum they may choose,
their agreement will fall within the jurisdiction of the
CIAC, such that, even if they specifically choose another
forum, the parties will not be precluded from electing to
submit their dispute before the CIAC because this right has
been vested upon each party by law, i.e., E.O. No. 1008."34

Clearly, there is no more need to file a request with the

CIAC in order to vest it with jurisdiction to decide a
construction dispute.

The arbitral clause in the Agreement is a commitment on

the part of the parties to submit to arbitration the disputes
covered therein. Because that clause is binding, they are
expected to abide by it in good faith.35 And because it