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ASEAN AND INTERNATIONAL DISPUTE RESOLUTION MECHANISMS

R.A. 9285 Sec. 2. Declaration of Policy. It is hereby declared the policy of the State to actively promote party
autonomy in the resolution of disputes or the freedom of the parties to make their own arrangements to resolve
their disputes.

Parties can choose the mode of resolving their disputes. Variety in the menu.

The Dispute Resolution Spectrum

Non-Jurisdictional and ADR


Avoidance, violence, chance
Negotiation
Conciliation and Mediation
Other ADR forms
Special Mention: Adjudication / Dispute Boards
Jurisdictional
Arbitration
Statutory Arbitration
Litigation

Basic rule: if the parties have their own agreed procedure, then that procedure shall be followed.

CHOICES
Parties only or involving third parties.
Peaceful (voluntary) procedures or compulsory procedures entailing binding or merely
executory decisions.
Positional (derivative or compromising) or integrative approaches.
Facilitative, evaluative or transformative approaches.
Negotiated or adversary (adversarial or inquisitorial) models.
The procedures / approaches may be combined (see R.A. 9285 Sec. 18).
Parties can create and innovate. They can dissect and analyze the different dispute resolution practices,
refine and combine them, and create and design hybrid procedures to make them suitable for particular
relationships / needs. The spectrum of processes that they can create will be limited only by the extent
of their imagination.
Rule in hybrids: the rules corresponding to the combined procedures will apply mutatis mutandis (see
R.A. 9285 Sec. 18).

SIDELIGHT: THE HYBRIDS, EXAMPLES


Mini Trials
Non-binding arbitration
Med-Arb
Arb-Med
Med-Arb-Med
Early neutral evaluation
Early expert evaluation
Adjudication / Dispute Boards
ADJUDICATION (NOW CALLED DISPUTE BOARDS) IN THE CONSTRUCTION INDUSTRY

Operating Concepts:
1. Disputes are better resolved as soon as they arise, rather than wait until they pile-up and the amounts
involved have bloated.
2. Cash flow is important.
3. In the executory award models: at the end of the construction period there is still enough money to cover
wrong payments.
May be statutory or contractual.
Models: The FIDIC Model, the World Bank Model. Variant is to constitute the adjudication board at
inception of contract.
The variant evolved to also become a dispute prevention mechanism; then application of other
ADR mechanisms.
Procedures record of success resulted to their application to other contracts.

RE ARBITRATION: Arbitral Tribunal is an instrumentality of the parties.


In arbitration the parties by contract create their own tribunal. They appoint their judges; craft the procedure;
agree on several categories of choice. As creators they own the tribunal; as owners and creators they can shape
the tribunal to what they want it to be. As owners and creators they pay the expenses of the tribunal that they
created. The arbitrators are akin to temporary employees whose job description is to resolve the dispute
between the parties (see UNCITRAL Model Law 1985 Provisions).

As a rule, parties set the qualifications and disqualifications of their dispute resolvers. Not
dependent on ASEAN agreed standards. No need to undergo processes required for other
professionals to practice within ASEAN.
ADR and Arbitration practitioners are practitioners without borders.
Settlements and decisions of arbitral tribunal enforceable by courts. And the enforcement processes are,
as a rule, summary, hence speedy.
R.A. 9285 Sec. 17, 18, and Chapter 7 provisions.
International arbitral awards are enforceable under the New York Convention of 1958

OTHER REASONS WHY WE SHOULD FAMILIARIZE OURSELVES WITH PRIVATE DISPUTE RESOLUTION
PROCESSES

International commercial parties tend to shy away from public dispute resolution processes. Even local
parties have to contend with the rather abnormal situation in our local Court.
Treaty, FDI and state to state dispute resolution is focused on party autonomy principles. Treaty
arbitrations, FDI (foreign direct investments) arbitrations, state to state arbitrations etc. operate
substantially the same as commercial arbitration.
Some statutes require the insertion of dispute resolution clauses, including arbitration, in contracts
entered into by the Government. E.0. 78 requires dispute resolution clauses in all PPP & BOT
contracts; also joint venture agreements between the National Government and its contracting parties.
Aid organizations (e.g. JICA, WB) have adopted the dispute board concept. No DB, no loan.

DEVELOPMENTS

ADR is now being referred to as Appropriate Dispute Resolution (SG CJ Sundaresh Menon).
It embraces not only ADR as we know it, but also arbitration, statutory adjudications (examples
CIAC, labor and consumer arbitrations) as well as litigation.
Arbitration has become an indispensable part of international commerce. However, it is said
that the future is towards a more inclusive and solid ADR framework.

New Approach Re Legal Practitioners


With that, our role is no longer limited to representation. We have to include a more dynamic
and proactive role.
We have to adopt a tool box approach for ADR. We should have new product lines in the
services that we offer.
Necessarily, this will require education, training, capacity building and awareness of how ADR,
arbitration and other modes of dispute resolution work.
It is in education and capacity building that Bar associations and institutions will play pivotal
roles. We, the lawyers, remain as the gatekeepers. We draft contracts, relevantly dispute
resolution clauses. We play a role in proceedings to enforce those clauses. We play a role in the
enforcement stage of settlements, decisions and awards. The premise of all that is that we are,
as we should be, the bearers of knowledge.

Paradigm Shift
ADR is becoming part of the justice system and is no longer being viewed as an aid to ease the
problems of the judiciary.
Internationally we have the UNCITRAL Model Law and the New York Convention of 1958
working together to unify the legal regime in arbitration.
Work is in progress to have a Convention on the enforcement of mediated settlements.

WHERE ARE WE NOW?

Comparison: ADR level of knowledge outside the country.


In ADR: Phl still in kindergarten level.
In Arbitration: there is a dearth of professors and teachers who could handle arbitration.
Some law schools not offering ADR/Arbitration. Lack of professors; not a Bar subject; not core
subject in JD programs.
There is practically no knowledge of dispute boards (or adjudication). Note that aid orgs (JICA,
WB) have adopted the process: no DB, no loan.
Probable level of local knowledge.
Phl. still dependent on foreign tutors / trainors.

In mediation we only know the facilitative kind. Some of us may not even know the name of
what we practice.
Our mediation law needs a lot of fixing.

Problem with our mediation law: lack of viable default provisions.


Sample Clause: Any dispute arising out of or in relation to this contract shall first be referred to
mediation before a party could go to court (or to arbitration, as the case may be).
Proposed solution: Insert a time line. (ICC has a variety of recommended clauses to address the
problem).

Arbitration: Experience in preliminary conferences.


C T To: Countries who have upgraded their arbitration law pass through that phase when
cowboys are arising and what they do is to mess things up.
Teresa Cheng: Experience shows that, in arbitration and in many cases, on the job training will
not suffice. It is a recipe for disaster.
Problem with our arbitration law:
R.A. 876 has an unviable default provision concerning fees.
The fees of the arbitrators shall be fifty pesos per day unless parties agree otherwise in writing
prior to the arbitration. (R.A. 876 Sec. 21).

Problem with our arbitration law:


Domestic Arbitration Law Very Difficult to Understand:
Domestic Arbitration shall continue to be governed by Republic Act No. 876 x x x.
Articles 8, 10, 11, 12, 13, 14 and 18 and 19 and 29 to 32 of the Model Law and Section 22 to 31
of the preceding Chapter 4 shall apply to domestic arbitration. (R.A. 9285 Secs 32 and 33).

Problem with our arbitration law: Only In the Philippines Provisions, Examples:
Special Rules Rule 12.2. (B) last sentence: Failure to file a petition to set aside shall preclude a party from
raising grounds to resist enforcement of the award.
The provision mixed-up the supervisory jurisdiction of courts with its enforcement jurisdiction. Choice of
remedies, enshrined in the Model Law, disappeared.

Problem with our arbitration law: Only In the Philippines Provisions, Examples:
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. (R.A. 9285 Sec.24).
Rule on waiver ignored.

Problem with our arbitration law:


Aside from (a) the confusing state of our domestic arbitration law and (b) the only in the
Philippines provisions, other problems arise from the fact that our arbitration law is in several
enactments, namely R.A. 9285, R.A. 876, some civil code provisions, the UNCITRAL Model
Law 1985, the New York Convention, the SCs Special Rules, the DOJs IRR, and a several
others. In certain instances they do not provide the same rules.

Examples of Conflicting Provisions:


R.A. 876 enumerates four (4) grounds to vacate a domestic award. In contrast, Special Rules
Rule 11.4 enumerates seven (7) grounds to vacate a domestic award.
IRR Art. 4.37 last paragraph is premised on the proposition that local international awards are
appealable by providing that the right to appeal may be waived. Such waiver, nevertheless, is
without prejudice to the application of the Rules of Court Rule 65. Most of the other laws
correctly provide for the finality of arbitral awards.

Arbitration: Philippines v. China Arbitration


The information we got, initially, is that the arbitration is ITLOS arbitration. Now, it is PCA
arbitration. Both are wrong.
It is actually ad hoc arbitration under Annex VII of UNCLOS.
NOTE: Govt erroneously initiated an arbitration in ITLOS. The handling lawyer used
UNCLOS Annex VII, instead.

Arbitration: PIATCO Arbitration, Singapore


What we have not been told is that the Government lost in its counterclaim on the ground that
the arbitral tribunal does not understand the legal basis of the counterclaims.
Basic rule ignored: arbitration is evidentiary.

Arbitration: RCBC V BDO G.R. No. 196171 10 Dec. 2012: two internationally known and well
respected arbitrators were said to be guilty of bias and prejudgment. What they did was to do what they
were supposed to do, pursuant to general rules of arbitration, to avoid using secret evidence.

Arbitration: Korea Technologies v Lerma, G.R. 143581 7 June 2008 classic in the mistakes in
its obiter.
xxx as signatory to the Arbitration Rules of the UNCITRAL Model Law on International Arbitration 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.

Arbitration: Korea Technologies v Lerma


xxx the foreign arbitral award is subject to judicial review by the RTC which can set aside, reject, or vacate it.
For foreign or international awards which first must 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.

WHAT IS BEING DONE?

The Good News


DOJs OADR had established a technical working group to look at our ADR and Arbitration laws
to recommend the necessary changes and amendments.
The commercial people are extending their assistance.
PDRC and PIArb are in the forefront of educating our countrymen. We train, host, arrange and
assist seminars, courses, fellowships, lectures. We have connections with foreign groups who
assist in PDRCs and PIArbs activities.
Many individuals teach; speak during MCLE Seminars; give lectures, some pro-bono;
participate in mocks; go around schools to give lectures.

PDRCI and PIArb Wish Re Judiciary

The premise is that we are a Model Law Country. So, the eyes of all Model Law countries are on
us because there should be uniformity in the interpretation of the Model Law Provisions.

What Some Countries are Additionally Doing:


Support their ADR/Arbitration Institutions.
Roadshows.
Give tax breaks to firms bringing in arbitration business.
Re GST liability.
Re Tax on Income.
No need to secure work permits (but note Thailand incident).
Others.

We need to be at par with our foreign counterparts if we are to effectively compete.

What we need to do:


Raise level of awareness.
Capability Building: train practitioners, train the trainors; and train the trainors who will train other
trainors.
Have an inclusive, dynamic and innovative legal fraternity that would move forward, keeping
track of the new improvements to avoid being left behind. This includes the judiciary as, without
its assistance and active participation, it would be very difficult to achieve our goals.

Remedial Law 2015 Bar Question


XV. Water Builders, a corporation company based in Makati City, entered into a construction agreement with
Super Powers, Inc., an energy company based in Manila, for the construction of a mini hydro electric plant.
Water Builders failed to complete the project within the stipulated duration. Super Powers cancelled the contract.
Water Builders filed a request for arbitration with the Construction Industry Arbitration Commission (CIAC). After
due proceedings, CIAC rendered judgment in favor of Super Powers, Inc. ordering Water Builders to pay the
former P10 million, the full amount of the downpayment paid, and P2 million by way of liquidated damages.
Dissatisfied with the CIACs judgment, Water Builders, pursuant to the Special Rules of Court on Alternative
Dispute Resolution (ADR Rules) filed with the RTC of Pasay City a petition to vacate the arbitral award. Super
Powers, Inc., in its opposition, moved to dismiss the petition, invoking the ADR Rules, on the ground of improper
venue as neither of the parties were doing business in Pasay City.
Would Water Builders petition be dismissed? (3 %)

WHAT IS ARBITRATION?

The law provided no help, either. The definition could include all kinds of arbitration.
Arbitration means a voluntary dispute resolution process in which one or more arbitrators,
appointed in accordance with the agreement of the parties, or rules promulgated pursuant to
this act, resolve a dispute by rendering an award (R.A. 9285 Sec. 3(d)).

There is no definition in the Convention and in the Model Law. What they defined is an arbitration
agreement.
Each contracting state shall recognize an agreement in writing under which the parties
undertake to submit to arbitration all or any differences which have arisen or which may arise
between them in respect of a defined relationship, whether contractual or not, concerning a
subject matter capable of settlement by arbitration. Convention Art. 2 (1).

Arbitration agreement is an agreement by the parties to submit to arbitration all or certain


disputes which have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not (Model Law Art. 7 (1)).

Inferences:
Contractual method of resolving disputes, that the disputes are either future or existing, and that
the disputes are in respect of a defined legal relationship, whether contractual or not.
Traditionally, in arbitration the resolution of the dispute or disputes is entrusted to one or more
persons and to them alone. Necessarily, this implies that the disputants should have the
opportunity to present their positions before an impartial tribunal.
Burchell v Marsh, 58 U.S. 344, 15 L.Ed. 96 (1854).

Redfern and Hunter: In its origins, the concept of arbitration is a simple one. Parties who are in dispute agree to
submit their disagreement to a person whose expertise or judgment they trust. They each put their respective
cases to this person this private individual, this arbitrator who listens, considers the facts and the arguments,
and then makes a decision. This decision is final and binding on the parties; and it is binding because the parties
have agreed that it should be, rather than because of the coercive action of any state.
Redfern and Hunter on International Commercial Arbitration, Fifth Edition, on pages 1
2.
The French Definition:
Arbitration is a device whereby the settlement of a question, which is of interest for two or more persons,
is entrusted to one or more other persons the arbitrator or arbitrators- who derive their powers from a private
agreement, not from the authorities of a State, and who are to proceed and decide the case on the basis of such
an agreement Fouchard, Gaillard, Goldman on International Commercial Arbitration para 7 citing several
authors.

INFERENCES:
1. Constituent Elements of an Arbitration:
a) It is contractual; and
b) It is judicial.
Thomas E. Carbonneu: Cases and Materials on The Law and Practice of Arbitration, Revised Third Edition

2. Other Characteristics of an Arbitration:


a) It is parties and case specific;
b) It is a private dispute resolution process;

c) The arbitral tribunal is an instrumentality of the parties;


d) It is evidentiary;
e) It is a mandatory procedure that will culminate to a final and binding award;
f) The principle of finality of arbitral award is based on contract and is a core component of the process;
g) The award is part of the agreement of the parties and has the same standing as a contractual
stipulation; and
h) The arbitral tribunal has no imperium.

DIGRESSION: CLASSIFICATION OF ARBITRATION

Classification
Ad Hoc do it yourself arbitration.
Institutional administered by an arbitral institution, usually under its own rules.
Born on p. 27; Model Law Art. 19; IRR
Classification as to applicable law
Foreign jurisdictional seat is a country other than the Philippines. Applicable law of arbitration is the
arbitration law of the seat.
If a foreign award were being enforced in the Philippines, the applicable law is the New York Convention of
1958.
Note: Classification of relative application.
Model Law Art. 1 (2); R.A. 9285 Sec. 42; A.M. No. 07-11-08 SC (Special Rules of
Court); R.A. 9285 Secs. 32 and 33.
Local - Philippines is the jurisdictional seat
Domestic without foreign element; defined in the negative. Applicable law is R.A. 876 and Civil
Code Title XIV as amended/modified by R.A. 9285.
International with foreign element. Governing law is the UNCITRAL Model Law (1985) as
modified by R.A. 9285.
Note: Classification of relative application.
R.A. 9285 Secs. 42, 43, 32 & 33, 19; Special Rules 13.2.
Re parties places of business;
Re agreed seat of arbitration in re places of business;
Re place where a substantial part of the obligations is to be performed; place with which the subject
matter of the dispute is most closely connected in re places of business;
Re agreement that the subject matter of the arbitration relates to more than one county.
CONSTITUENT ELEMENTS OF AN ARBITRATION

ARBITRATION IS CONTRACTUAL
Tribunals power arises from contract.
Distinguishes arbitration from litigation and arbitrations based on law.

ARBITRATION IS JUDICIAL
Decides disputes like a judge or collective judges, as the case may be.
Implies the use of an adjudicative procedure which afford each party an opportunity to present
its case.
Distinguishes arbitration from mediation and other ADR forms.
Born on page 4.

GROUNDS TO CHALLENGE AWARDS MAINLY BASED ON THE TWO CONSTITUENT ELEMENTS OF AN


ARBITRATION
See Model Law Art. 36 (1) (a) (v); Convention Art. 5 (1) (e).
Note additional ground.

ON THE CONTRACTUAL ELEMENT


Arbitration a creature of contract. Exclude other procedures called arbitration.
Governed by contractual precepts.
Choice of law rules on capacities. Rule re State.
Object and consideration. Enforceability of positive and negative obligations.
Stipulation is law between the parties; limitations.
Doctrine of non-arbitrability; resolution of excluded disputes. No violation of Convention.
Crafting the Procedure; Rule of Preference.

CHARACTERISTICS OF AN ARBITRATION

1. Case Specific and Parties Specific


Award stands alone re disputes.
Binding only on parties that are bound by the arbitration agreement.
Non-signatory issues.
Waiver.
Lozano v Shangrila.
Choice of law issues.
Redfern and Hunter on page 39; Civil Code Art. 1311; MAL Art. 16.2.

2. Private Dispute Resolution Process


Operates extrajudicially.
Minimal interference from the court.
Award has to be integrated into the legal/judicial system.
Model Law Art. 35, Convention Art. 3.

3. Tribunal an Instrumentality of the Parties

In arbitration the parties by contract create their own tribunal (see Model Law provisions). They appoint,
directly or indirectly, their judges; craft the procedure; agree on several categories of choice. As creators they
own the tribunal; as owners and creators they can shape the tribunal to what they want it to be. As owners and
creators they pay the expenses of the tribunal that they created. The arbitrators are akin to temporary
employees whose job description is to resolve the dispute between the parties.
Other choices. Flexibility.
Certiorari jurisdiction of courts does not apply.

4. Evidentiary
Tribunal cannot use its expertise in deciding the dispute. Secret evidence.
Judicial notice of laws?
No expert witness or inadequate expert testimony.
What if tribunal believes that the basis of the parties presentations were wrong?
Role of party autonomy.
RCBC v BDO; BDO v CA and RCBC, G.R. Nos. 196171 and 199238.
Special Rules, IBA Rules on Taking Evidence Arts. 4 & 5.

5. Mandatory Procedure
Effect of entering into an arbitration agreement.
Role of party autonomy.

6. Principle of finality of award is contractual


Agreement re binding effect of award.
No appeal on the merits.
Rule not applicable to grounds to challenge awards.

7. Award is part of agreement


Award is final and binding in the same way that a contractual stipulation is final and
binding.
Validity and enforceability of award follow the same rules as applicable to contractual
stipulations.
Saving grace that is possible in local awards.
Model Law Art. 34 (4).

8. Arbitral tribunal has no imperium.


Tribunal and parties have to rely on the courts.

WHY DISTINGUISH BETWEEN ARBITRATIONS?

They are different, governed by different laws/rules and hence will require different approaches.
Courts
Curial court the court in the seat of arbitration
Non curial court the court in a jurisdiction other than in the seat of arbitration
Basic Rule: In matters governed by this Law, no court shall intervene except where so provided by this
Law. (MAL Art. 5).

THE ROLES OF COURTS


1. Assistive Role referral to arbitration; issuance of and enforcement of interim measures in aid
of arbitration; enforcement of interim measures issued by the tribunal; assistance in taking
evidence; performance of the functions of a defaulting appointing authority
2. Supervisory Role
3. Enforcement Role
Note: The functions are clearly delineated by law and should not intrude into each other.

In proper cases, the curial court could be:


An assistive court
A supervising court
An enforcement court

In proper cases, the curial court in the exercise of its supervisory jurisdiction can:
Vacate or set-aside an award rendered in the jurisdiction where the curial court is located
Suspend the setting aside proceedings for a period determined by it to give the arbitral tribunal
an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral
tribunals opinion will eliminate the grounds for setting aside.

Time Bar to Invoke the Supervisory Jurisdiction of the Curial Court:
Not after three months have elapsed from the date the applicant had received the award; or
Not after three months have elapsed from the date that the arbitral tribunal had disposed of an
application for correction or interpretation of an award or the issuance of an additional award.

The curial court as an enforcement court may, in the proper cases:


Confirm or confirm and enforce an award (MAL Art 35); or
Refuse confirmation or refuse confirmation and enforcement of an award (MAL Art 36).

A Non-Curial Court could be:


An assistive court
A court of enforcement

The non-curial in the proper cases may:


Recognize and enforce an award (Convention Art 3; see also MAL Art 35); or
Refuse recognition or enforcement of an award (Convention Art 5; see also MAL Art 36).
If a petition to vacate were filed in the curial court, the non-curial court may:
Enforce the award; or
Suspend the enforcement proceedings with or without bond filed by the party resisting
enforcement (Convention Art 6; see also MAL Art 36.2).
Note: The standard used is the probability of success test.

NOTE: The non-curial court has no power to vacate the award. This power is reserved to the curial court
in the exercise of its supervisory jurisdiction.
NOTE: There is no prohibition against filing in different jurisdictions simultaneous petitions for
enforcement, subject to the rule that the applicant cannot recover more than what was awarded.

TIME BARS
Petitions to Enforce: no express provision in the Model Law and the Convention. Opinion is to
follow contractual precepts of the seat unless if expressly provided by law/agreement.
Raising Grounds to Resist Enforcement: the global rule (except in the Philippines) is to wait
and wait and wait until a petition for enforcement were filed.

Choice of Remedies Against Award


Active Remedy File petition to vacate within reglementary period (MAL Art 34).
Passive Remedy Wait until the filing of petition to enforce and raise defenses against enforcement (MAL Art
36; also Convention Art 5).
Astro v Lippo, SGCA 57

No Second Bite at the Cherry


Some jurisdictions follow the principle that if a party had already filed a petition to vacate and it failed, the
party will no longer be allowed to raise the same grounds to resist enforcement. Accordingly, only public policy
issues of the place of enforcement will be allowed to resist enforcement.

WARNING: In Special Rules Rule 12.2 (B) last sentence: Failure to file a petition to set aside shall
preclude a party from raising grounds to resist enforcement of the award.
The quoted provision is an only in the Philippines provision. The provision, based on the supervisory
jurisdiction of a curial court, had effectively intruded into the enforcement jurisdictions of both the curial
and non-curial courts not only under the Model Law but also the New York Convention.
The reason for the provision is unknown. Several issues may be raised against the provision, and it is
most likely against the law considering that the grounds to resist enforcement may involve public policy
issues.

ANOTHER CLASSIFICATION OF COURTS

1. Court of Primary Jurisdiction the supervising court.


2. Court of Secondary Jurisdiction the enforcement court.
3. Court of Eventual Enforcement a court who intervenes in an arbitration neither as a supervising court
nor as an enforcement court.

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