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ARBITRATION PANEL DECISION

1
2
3Complainant:

Pampanga Energy Company (PEC)

4
5Respondent:

Construction Company (CC)

6
7Case Number:

Case No. 15-NNNNN

8
9Panel Members:

Claveria, Carina Amor D.

10

Pineda, Paul Christopher G.

11

Rogel, Angeline P.

12
13
14

The dispute involved in this case relates to an alleged breach of a construction contract

15entered into by the parties. The complainant avers that respondent committed various defects in
16the technical design and construction of their power station. On the other hand, respondent
17claims it was owed large sums of money by complainant under the contract. In addition, the
18respondent raises an issue which threatens the very core of the present arbitral processthat the
19Tribunal has no jurisdiction over the matter at hand.
20

The Tribunal shall now resolve the issues presented before it.

21I. THE PARTIES


22

Pampanga Energy Company (PEC), a Philippine company, is the owner of a power

23station in Pampanga. Sometime in October 2012, PEC employed Construction Company (CC),

24also a Philippine company, to design, construct, commission, test, complete and hand over the
25power station to it.
26

In mid-2013, disputes arose between the parties. PEC claimed that it is entitled to

27liquidated damages while CC claimed numerous extensions of time which the complainant
28refused to allow. It was alleged by CC that it was owed large sums of money by PEC under the
29contract. As a counterclaim, complainant PEC claimed that there were many technical design and
30construction defects in various parts of the project.
31II. PROCEDURAL HISTORY
32

On November 4, 2013 PEC commenced arbitration proceedings against CC and filed a

33Notice of Arbitration with the Hong Kong International Arbitration Centre (HKIAC). Fourteen
34days later, on November 18, CC commenced its own arbitration proceedings against PEC and
35submitted its Request for Arbitration to the Construction Industry Arbitration Commission
36(CIAC).
37

On the same day, CC applied for an anti-suit injunction against the HKIAC proceedings

38before the Regional Trial Court (RTC) of Manila. Such application was granted and
39consequently, the injunction was issued on November 25, 2013.
40

CC subsequently served its answer before the HKIAC on November 29, 2013. CC

41contended that this Arbitral Tribunal has no jurisdiction and that the RTC of Manila has issued an
42anti-suit injunction which deserves utmost respect from us on the ground of equity.
43III. PARTIES CONTENTIONS
441. The Respondent
45

Construction Company (CC) contends that since the case involves dispute arising from a

46construction industry contract entered into by parties relating to constructions in the Philippines,

47CIAC has original and exclusive jurisdiction. CC noted that jurisdiction is conferred by law and
48cannot be defeated by the agreement of the parties. Since the jurisdiction of CIAC is conferred
49by law, it cannot be subjected to any condition; nor can it be waived or diminished by the
50stipulation, act or omission of the parties, as long as the parties agreed to submit their
51construction contract dispute to arbitration, or if there is an arbitration clause in the construction
52contract.
53

CC cites Section 4 of Executive Order No. 1008 which provides:

54

Sec. 4. Jurisdiction. The CIAC shall have original and exclusive

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jurisdiction over disputes arising from, or connected with,

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contracts entered into by parties involved in construction in the

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Philippines, whether the dispute arises before or after the

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completion of the contract, or after the abandonment or breach

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thereof. These disputes may involve government or private

60

contracts. For the Board to acquire jurisdiction, the parties to a

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dispute must agree to submit the same to voluntary arbitration.

62

CC stressed that in effect, this provision makes it clear that the only requirement for

63CIAC to acquire jurisdiction is for the parties to agree to submit their dispute to voluntary
64arbitration. Thus, when the parties agreed to be bound by the arbitration agreement, they were
65deemed to have submitted themselves under the CIAC.
66

In its answer, CC also alleged that the waiver by the parties of applicable Philippine laws

67such as Executive Order No. 1008 and Republic Act No. 9285 is invalid. According to CC, if the
68parties have expressly agreed that the substantive law of the Philippines shall govern, they shall
69not be permitted to divest the laws specifically mandated to govern them.

70

In the matter of the anti-suit injunction secured by CC before the RTC of Manila, CC

71would want this Tribunal to respect said relief and dismiss respondents claim lodged before the
72HKIAC. CC interposes the defense of equity that where the proceeding merely intended to
73oppress and vex the other party, an anti-suit injunction must be recognized. CC emphasized that
74in the principle of comity and reciprocity, an anti-suit injunction that has been granted by a court
75of competent jurisdiction must be respected.
762. The Complainant
77

Meanwhile, in its submission before the Arbitral Tribunal, Pampanga Energy Company

78(PEC) contended that CC made a distorted interpretation of the rulings of the Supreme Court
79of the Philippines when it stated that only the CIAC has exclusive and original jurisdiction over
80the dispute presented herein.
81

Citing the Philippine jurisprudence of China Chang Jiang Energy Corporation vs. Rosal

82Infrastracture Builders1, PEC refuted respondents claims by stating that the CIAC does not
83possess sole jurisdiction over construction disputes where parties have stipulated and filed for
84arbitration in another forum. In said case, the Philippine High Court held that notwithstanding
85the validity of Section 1, Article III, such does not mean that the parties may no longer stipulate
86to submit their disputes to a different arbitral body. Instead, the law gives the parties an
87alternative forum before whom they may submit their controversies.
88PEC claims that for filing a Notice of Arbitration before the HKIAC several days before the
89respondent filed for arbitration before the CIAC, this Tribunal has first acquired jurisdiction on
90the matter. Also, the claimant submitted that under the doctrine of Kompetenz/Kompetenz, the
91arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the
92existence or validity of the arbitration agreement.
41 G.R. No. 125706, 30 September 1996

93

As to the matter of anti-suit injunction issued by the RTC of Manila, the claimant argues

94that such injunction may be validly disregarded by this Tribunal as the same is not a court of the
95seat of arbitration. According to PEC, only the courts of Hong Kong may issue such order since
96the seat of arbitration is Hong Kong, and not the Philippines.
97IV. FINDINGS OF THE ARBITRAL TRIBUNAL
981. The tribunal has jurisdiction over the dispute
99

In resolving this dispute at hand, the tribunal must first answer the question whether it has

100jurisdiction over the case since the other substantive issues raised in the pleadings are dependent
101to whether or not jurisdiction lies in this tribunal.
102

True to the contentions of the respondent, the tribunal, based on the existing laws and

103jurisprudence, must answer the question on jurisdiction in the affirmative.


104

In claiming that the tribunal has no jurisdiction in this case, the respondents cited

105Philippine laws and jurisprudence. One of this is E.O. 1008, Creating an Arbitration Machinery
106in the Construction Industry of the Philippines. The respondent pointed out Section 4 which
107states:
108

The CIAC shall have original and exclusive jurisdiction over

109

disputes arising from, or connected with, contracts entered into by

110

parties involved in construction in the Philippines, whether the

111

dispute arises before or after the completion of the contract, or

112

after the abandonment or breach thereof. xxx

113

To further support their allegations that only the CIAC has original and exclusive

114jurisdiction over all construction disputes in the Philippines, the respondents relied on the CIAC
115Rules of Procedure Governing Construction Arbitration, particularly Section 1, Article III, (as

116cited in China Chang Jiang vs. Rosal Infrastracture Builders, HUTAMA-RSEA Joint Operations,
117Inc. v. Citra Metro Manila Tollways Corporation) to wit:
118

Effect of the Agreement to Arbitrate

119

Section 1. Submission to CIAC Jurisdiction An arbitration clause

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in a construction contract or a submission to arbitration of a

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construction dispute shall be deemed an agreement to submit an

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existing or future controversy to the CIAC jurisdiction,

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notwithstanding the reference to a different arbitral institution or

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arbitral body in such contract or submission. xxxx

125

However, the law should be reconciled with the existing jurisprudence governing

126substantial issues involving jurisdiction in arbitral processes. It must be in the forefront of


127everyones minds that in relying on jurisprudence, it must be accentuated that pronouncements of
128the Court should not be served in a piece-meal fashion and that the parties should not single out
129parts of the decision favorable to their position.
130

The tribunal finds solace in the case of China Chang Jiang vs. Rosal Infrastracture

131Builders as cited by the petitioner.


132

In the abovementioned case, the Philippine Supreme Court enunciated:

133

Now that Section 1, Article III, as amended, is submitted to test in

134

the present petition, we rule to uphold its validity with full

135

certainty. However, this should not be understood to mean that the

136

parties may no longer stipulate to submit their disputes to a

137

different forum or arbitral body. Parties may continue to stipulate

138

as regards their preferred forum in case of voluntary arbitration,

139

but in so doing, they may not divest the CIAC of jurisdiction as

140

provided by law. xxx

141

xxx When the law provides that the Board acquires jurisdiction

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when the parties to the contract agree to submit the same to

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voluntary arbitration, the law in effect, automatically gives the

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parties an alternative forum before whom they may submit their

145

disputes. That alternative forum is the CIAC. This, to the mind of

146

the Court, is the real spirit of E.O. No. 1008, as implemented by

147

Section 1, Article III of the CIAC Rules.

148

While both parties made reference to the case of China Chang Jiang, said case must be

149read in its entirety and not in a part and parcel form. While we agree with the respondents
150contention that a mere agreement to arbitrate vests CIAC the jurisdiction to take over the case,
151such is only true when parties have not previously agreed to submit their dispute in a particular
152forum.2
153Thus, the respondents reliance on HUTAMA-RSEA Joint Operations, Inc. vs. Citra Metro
154Manila Tollways Corporation case is misplaced. In that case, the arbitration agreement in the
155contract did not provide for an institution where parties may submit their construction disputes.
156Said absence of a specific agreement on the appropriate institution/tribunal to handle the case
157automatically vests CIAC of original and exclusive jurisdiction over the matter.
158

The factual milieu in the case of HUTAMA is not present in the issue submitted before

159this Tribunal. In this case, it is clear that both parties agreed to submit their disputes to another
160forum, particularly the HKIAC. Therefore, when CC and PEC previously agreed to submit
161before the HKIAC tribunal, in effect, they have made CIAC as an alternative forum.
82 CHINA CHANG JIANG

162

At this point, it may be relevant to define the Doctrine of Adherence of Jurisdiction. This

163rule states that once the jurisdiction of a court attaches, the court cannot be ousted by subsequent
164happenings or events, although of a character that would have prevented jurisdiction from
165attaching in the first instance; the court retains jurisdiction until it finally disposes of the case.3
166In the normal course of proceedings, a court or tribunal acquires jurisdiction over the person of
167the plaintiff through the submission of complaints or any initiatory pleading. When the claimant
168first submitted its Notice of Arbitration before the Tribunal, in effect, HKIAC being the agreed
169venue, already acquired jurisdiction. Applying the doctrine laid down in the China Chang case,
170CIAC becomes merely an alternative forum.
171

In the same note, since HKIAC was first vested the authority to hear and determine the

172case, under the Doctrine of Adherence of Jurisdiction, it shall retain the authority to hear such
173until its final disposition. The mere objection of the respondents on jurisdiction is an event which
174would not oust the HKIAC tribunal of the power to render proper resolution of this controversy.
175

Moreover, to further bolster this Tribunals jurisdiction in the present case, it is

176noteworthy to examine the very arbitration agreement entered into by PEC and CC. The records
177of this case provide:

178

By clause 31 of the engineering procurement and construction

179

contract, the parties agreed to the following:

180

181

31.1 Any unresolved dispute shall be referred to and finally

182

resolved by arbitration administered by the Hong Kong

103 REGINA ONGSIAKO REYES, Petitioner, vs. COMMISSION ON ELECTIONS and JOSEPH SOCORRO B. TAN

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183

International Arbitration Centre under the Rules, except as the

184

Rules may be modified herein. The arbitration proceedings shall

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be conducted, and the award shall be rendered, in the English

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language. The seat of arbitration shall be Hong Kong.

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188

31.2 This clause and the parties agreement to arbitrate herein

189

shall be governed by the laws of Hong Kong.

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191

It is well emphasized that in arbitration proceedings, various laws, rules, and guidelines

192in the arbitral proceedings are observed in an order of hierarchy4 as follows:

193

I.Arbitration Agreement

194

II.

Arbitration Rules

195

III.

National Laws

196

IV.

International Arbitration Practice

197

V.

International Treaties

198

It is submitted that this hierarchy guidelines will help the arbitration tribunal to determine

199the existence and validity of arbitration agreements, jurisdiction, and granting the reliefs prayed
200for by the parties.
124 Moses, The Principles and Practice of International Commercial Arbitration (2012), Second
13Ed., p. 6
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201

As exemplified in the above enumeration, the top of the hierarchy is the Arbitration

202Agreement, followed by Arbitration Rules, then by the National Laws, the International
203Arbitration Practice and the International Treaties.

204

The Arbitration agreement is the underpinning for the regulatory framework governing

205the private dispute resolution process5 and it is the law between the parties. The agreement, as a
206binding stipulation between them, shall be followed by said parties in good faith. Since the
207arbitration agreement between PEC and CC clearly provided that Any unresolved dispute shall
208be referred to and finally resolved by arbitration administered by the Hong Kong International
209Arbitration Centre under the Rules, except as the Rules may be modified herein, this stipulation
210validly consented by the parties, is dictated not only by public policy and also by law that it be
211faithfully recognized in any court to which this case is pending.

2122. DOCTRINE OF SEPARABILITY IN RELATION TO ANTI-SUIT INJUNCTION

213In reality, the present controversy actually involves two distinct contract in one document. This is
214in conformity to the Doctrine of Separability, which treats an arbitration agreement contained
215in a contract as a separate agreement from the contract itself.6

216When the parties enter to a contract stipulating an agreement to arbitrate, they are in effect
217concluding two separate agreements.7 Both the Laws of Philippine and Hong Kong recognize

165 Supra Note 4


176 Greenberg, et al. International Commercial Arbitration An Asia-Pacific
18Perspective (2010). First Ed. Par. 4.36, p. 155.
197Id at Par. 4.47, p. 158.

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218this doctrine and are uniform in accepting and implementing this principle. This is elucidated in
219the case of Gonzales vs. Climax Mining Ltd8 which held:

220

The doctrine of separability, or severability as other writers call it,

221

enunciates that an arbitration agreement is independent of the main

222

contract. The arbitration agreement is to be treated as a separate

223

agreement and the arbitration agreement does not automatically

224

terminate when the contract of which it is part comes to an end.

225

226

The separability of the arbitration agreement is especially

227

significant to the determination of whether the invalidity of the

228

main contract also nullifies the arbitration clause. Indeed, the

229

doctrine denotes that the invalidity of the main contract, also

230

referred to as the "container" contract, does not affect the validity

231

of the arbitration agreement. Irrespective of the fact that the main

232

contract is invalid, the arbitration clause/agreement still remains

233

valid and enforceable.

234

235

The separability of the arbitration clause is confirmed in Art. 16(1)

236

of the UNCITRAL Model Law and Art. 21(2) of the UNCITRAL

237

Arbitration Rules.

238

218 G.R. No. 161957, 22 January 2007.

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239In the same way the High Court of Hong Kong ruled:

240

The problem with this argument is that it does not take into

241

account that the arbitration agreement contained in another

242

written agreement has a life of its own. The doctrine of

243

separability has now been enshrined in the Model Law and has

244

been fully accepted in case law in England and Hong Kong. x x x

245
246

In effect, the arbitration clause contracted by the party is separate from the document

247which it is contained, the law that will govern the arbitration and the contract must be separate. 9
248The two agreements having different purpose, it is very clear that different law applies to each.10

249Considering the premises, the agreement entered and expressly stipulated by the parties, it can be
250now deduced that the engineering and procurement contract (EPC), which is the main
251(construction) contract is governed by the Philippine law; while Clause 31, another separate and
252distinct contract pertaining to the arbitration agreement, is governed by the law of Hong Kong.

253

The contention of CC as to the invalidity of the arbitration clause supported by the cases

254held by the Supreme Court is misplaced. Considering that Hong Kong Law is the governing
255decree over the Arbitration Agreement (Clause 31) and Philippine Law applies only to the EPC
256Contract. Since the agreement not to apply E.O. No. 1008 and R.A. No. 9285 is contained in
257Clause 31, judicial pronouncement and Philippine laws are no longer controlling.

239 Supra note 19 at Par. 4.50, p. 159.


2410Supra note 22 at Par. 4.50, pp. 159-160.

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258

Furthermore, the Philippine cases cited by CC are not similar to facts and circumstances

259of the instant case. None of these cases portray a fact wherein the parties have chosen two
260different laws to separately govern their main contract and their arbitration agreement.
261

As evidenced by paragraph 31.1 of the arbitration clause, both parties have intended to be

262governed and be bound by the rules of HKIAC. And, to further clarify their intentions, they even
263agreed to submit to the domestic laws of Hong Kong, in case an arbitration proceeding is
264commenced, as what actually transpired in this case.
265

Considering the principle of doctrine of separability and its effect to the contract, the

266claim of the respondent regarding the applicability of certain Philippine Laws supposedly
267conferring jurisdiction to the CIAC is untenable, since it is Hong Kong Law, not Philippine Law,
268which governs the Arbitration Agreement.
269

As to the matter of the Anti-suit injunction ordered by the Manila Court on November 25,

2702013, the tribunal is in the opinion that the said order cannot stay, much less, intervene with the
271proceedings of this Arbitral Tribunal in determining jurisdiction and deciding upon the merits of
272the case.
273

The respondents prayer to recognize said anti-suit injunction order issued by the Manila

274Regional Court on the basis of the Arbitration Ordinance of Hong Kong (CAP 609) stating that
275the relief granted by courts outside Hong Kong should be respected is a fact in which this
276tribunal cannot agree.
277

Indeed, there is a clear misinterpretation of the Arbitration Ordinance in connection with

278the facts prevailing in this dispute. PEC and CC, as evidenced by their arbitration agreement,
279have clearly agreed to set Hong Kong as the seat of arbitration. Being the seat of arbitration it

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280actually serves as the legal domicile of the arbitration. 11 Therefore, it is only the courts of Hong
281Kong that could provide interim reliefs, as in this case, the anti-suit injunction sought by the
282respondent.
283On the final note, this Tribunal, in finding that it has jurisdiction in this case, is guided by an
284established principle (Kompetenz-kompetenz)12 in arbitration proceedings that arbitrators are
285vested with the ability to rule on their own jurisdiction and such is almost fully accepted as a part
286of a long founded practice in international arbitration.13
287V. CONCLUSION
288PREMISES CONSIDERED, with the failure of the respondent Construction Company to prove
289that this Tribunal lacks jurisdiction to hear the dispute, the members of this Honorable Tribunal
290hereby grants the petitioner Pampanga Energy Companys prayer to continue with the arbitral
291proceedings. The tribunal rules in the negative as to the recognition of the anti-suit injunction
292filed by the respondent before the RTC of Manila.
293

This Tribunal orders the petitioner and respondent to file their respective memoranda to

294support their position as to the merits of the case.


295

SO ORDERED.

296
297

Rogel, Angeline P.

2711 Belohlavek, Importance of the Seat of Arbitration in International Arbitration:


28Delocalization and Denationalization of Arbitration as an Outdated Myth, 31 ASA
29BULLETIN 2/2013 (JUNE), at p. 263.
3012 This empowers an arbitral tribunal to decide on any and all objections as to its
31own jurisdiction. This doctrine, which is followed in most jurisdictions, provides that
32arbitrators are competent to determine their own competence.
3313 Greenberg, et al. International Commercial Arbitration An Asia-Pacific Perspective (2010).
34First Ed. Par. 5.46, p. 214. Supra note at p. 91.

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Chairman

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299
300
301
302

Pineda, Paul Christopher G.

Claveria, Carina Amor D.

Arbitrator

Arbitrator

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305

26th September 2015

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