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CHAPTER 1 THE ARBITRATION AGREEMENT

Party Autonomy - Arbitration Agreement is the Law between the Contracting Parties
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Ra 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 party to make their
own arrangements to resolve their disputes. Towards this end, the State shall encourage and
actively promote the use of Alternative Dispute Resolution (ADR) as an important means to
achieve speedy and impartial justice and declog court dockets. As such, the State shall provide
means for the use of ADR as an efficient tool and an alternative procedure for the resolution of
appropriate cases. Likewise, the State shall enlist active private sector participation in the
settlement of disputes through ADR. This Act shall be without prejudice to the adoption by the
Supreme Court of any ADR system, such as mediation, conciliation, arbitration, or any
combination thereof as a means of achieving speedy and efficient means of resolving cases
pending before all courts in the Philippines which shall be governed by such rules as the
Supreme Court may approve from time to time.

Exception
Labor disputes covered by Presidential Decree No. 442, otherwise known as the Labor Code of
the Philippines, as amended and its Implementing Rules and Regulations;
o Civil status of persons;
o Validity of a marriage;
o Any ground for legal separation;
o Jurisdiction of courts;
o Future legitime;
o Criminal liability;
o And those which by law cannot be compromised. (Sec. 6, R.A. No. 9285)
Formal Requisites of Arbitration Agreement
o

FORMS:
o Arbitral Agreement or Clause;
o Submission Agreement;
ARBITRAL AGREEMENT OR CLAUSE DISTINGUISHED FROM SUBMISSION.
o Arbitral Agreement or Clause (Pre-causal consent) the parties to any contract agree in
such contract to settle by arbitration a controversy thereafter arising between them.
o Submission Agreement (Present causal consent) no pre-existing arbitration agreement,
but parties subsequently agree to submit to arbitration any controversy existing between
them at the time of the submission and which may be the subject of an action.
BF Corporation v. Court of Appeals
Associated Bank v. Court ofAppeals
Ormoc Sugarcane Planters' Association, Inc. v. Court ofAppeals
Principle of Separability of Arbitration Clause
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Under the doctrine of separability, an arbitration agreement is considered as independent of the


main contract. Being a separate contract in itself, the arbitration agreement may thus be invoked
regardless of the possible nullity or invalidity of the main contract.

Even the very party who repudiates or assails the validity of such contract may invoke the
arbitration clause.

The operation of the arbitration clause is not at all defeated by the failure of the party to file a
formal "request" or application therefor. The filing of a "request" pursuant to Section 24 of R.A.
No. 9285 is not the sole means by which an arbitration clause may be validly invoked in a
pending suit. (Koppel, Inc. vs. Makati Rotary Club Foundation, Inc., G.R. No. 198075, September
4, 2013.
Gonzales v. Climax M ining Ltd
o

Resolution/Rescission of Arbitration Agreement Korea Technologies Co., Ltd. v. Lerma


Arbitration Clause is valid
ART 15, CONTRACTall disputes, controversies or differences shall be settled by arbitration in Seoul,
Korea. Award rendered by arbitration shall be final and binding upon both parties concerned.
Law of place where contract is made governs. Lex loci contractus. Contract was perfected in the
Philippines. Therefore, our laws ought to govern. Nonetheless, ART 2044 sanctions validity of mutually
agreed arbitral clause or finality and binding effect of an arbitral award. ART 2038, 2039 and 2040 refer to
instances where a compromise or an arbitral award may be voided, rescinded or annulled, but these
would not denigrate the finality of the arbitral award. Arbitration clause was mutually and voluntarily
agreed upon parties.
Arbitrationwhile it is the law of place where the contract is made governs (lex loci contractus), ART
2044 CCODE sanctions the validity of mutually agreed arbitral clause or finality and binding effect of an
arbitral award. Any stipulation that the arbitrators award or decision shall be final, is valid, without
prejudice to ART 2038, 2039 and 2040.
ART 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence or
falsity of documents, is subject to ART 1330 of this Code.
However, one of the parties cannot set up a mistake of fact as against the other if the latter, by virtue of
compromise, has withdrawn from a litigation already commenced.
ART 1330. A contract where consent is given through mistake, violence, intimidation, undue influence or
fraud is voidable.
ART 2039. When parties compromise generally on all differences which they might have with each other,
the discovery of documents referring to one or more but not to all questions settled shall not itself be a
cause for annulment or rescission of the compromise, unless said documents have been concealed by
one of parties.
But the compromise may be annulled or rescinded if it refers only to one thing to which one of the parties
has no right, as shown by newly-discovered documents.
ART 2040. If after a litigation has been decided by a final judgment, a compromise should be agreed
upon, either or both parties being unaware of the existence of the final judgment, compromise may be
rescinded.
Ignorance of judgment which may be revoked or set aside is not a valid ground for attacking a
compromise.
Arbitration clause not contrary to public policy
An arbitration clause to resolve differences and breaches of mutually agreed contractual terms is valid.
Even before the approval of Arbitration Law (RA 876(, Court has countenanced the settlement of disputes
through arbitration.
RA 9285 incorporated UNICTRAL MODEL LAW to which we are signatory

While RA 9285 was passed only in 2004, it applies in instant case since it is a procedural law which has a
retroactive effect. KOGIES filed its application before KCAB on July 1998 and it is still pending because
no arbitral award has yet been rendered. Thus, RA 9285 is applicable to this case.
GR: 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.
GR: retroactive application of procedural laws does not violate any personal rights because no vested has
yet attached nor arisen from them.
Features of RA 9285:
1. RTC must refer to arbitration in proper cases
SEC 24RTC shall refer the parties to arbitration unless it finds that arbitration
agreement is null and void, inoperative or incapable of being performed.
2. Foreign arbitral awards must be confirmed by RTC
SEC 36, UNCITRALcourt may refuse recognition or enforcement on grounds provided
in RA 9285 incorporated these provisions in SEC 42, 43, 44 relative to SEC 47 and 48
SEC 42, Application of NY ConventionRecognition and enforcement of such arbitral
awards shall be filed with RTC in accordance with rules of procedure to be promulgated
by SC.
SEC 43, Recognition and Enforcement of Foreign Arbitral Awards not covered by NY
Conventionrecognition and enforcement of foreign arbitral awards not covered by NY
Convention shall be done in accordance with procedural rules to be promulgated by SC.
SEC 44, Foreign Arbitral Award Not Foreign Judgmentforeign arbitral award when
confirmed by a court of forign country, shall be recognized and enforced as a foreign
arbitral award and not as a judgment of foreign court.
SEC 47, Venue and jurisdictionproceedings for recognition and enforcement of an
arbitral agreement and any application with a court for arbitration assistance shall be
deemed as special proceedings and shall be filed with RTC where
a. Where arbitration proceedings are conducted
b. Where asset to be attached or levied upon or act to be enjoined is located
c. Where any of the parties to the dispute resides or has his place of business
d. In national judicial capital region, at the option of applicant
SEC 48, Notice of proceeding to partiesin a special proceeding for recognition and
enforcement of an arbitral award, Court shall send notice to parties at their address of
record in the arbitration or last known address.
It can be gleaned that concept of a final and binding arbitral award is similar to judgments or awards
given by some of our quasi-judicial bodies. Therefore, the final foreign arbitral awards are similarly
situated that they need first to be confirmed by RTC.
UNICITRAL MODELPhilippines committed itself to be bound by the Model Law. In case a foreign
arbitral body is chosen by parties, arbitration rules of our domestic arbitration would not be applied.
RA 9285 is a procedural law which has a retroactive effectWhile RA 9285 was passed only in 2004, It
applies to the case since it is a procedural law which has a retroactive effect. KOGIES filed its application
for arbitration before KCAB on July 1998 and it is still pending because no arbitral award has yet been
issued. Thus, RA 9285 is applicable to the instant case. Procedural laws are construed to be applicable to
actions pending and undetermined at the time of their passage and are deemed retroactive.
GR: retroactive application of procedural laws does not violate any personal rights because no vested
rights has yet been attacked or arisen from them.

SEC 24, RA 9285, RTC does not have jurisdiction over disputes that are subject of arbitration pursuant to
any arbitration clause and mandates the referral to arbitration in such casesA 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 request of both parties, refer the parties
to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of
being performed.
Judicial revieweven if foreign arbitral awards are mutually stipulated by parties in the arbitration clause
to be final and binding, same are not immediately enforceable or cannot be implemented immediately,
they must still be confirmed by RTC.
SEC 35, UNCITRAL MODEL LAWrequirement for arbitral award to be recognized by a competent court
for enforcement, which under SEC 36 UNCITRAL may refuse recognition or enforcement on grounds
provide for.
Foreign arbitral awards when confirmed by 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 executor decisions of our courts of
lawconcept of a final and binding arbitral award is similar to judgments or awards given by some quasijudicial bodieswhen confirmed by RTC are deemed not as a judgment of a foreign court but as a
foreign arbitral award are enforced as final and executory decisions of our courts of law.
RTC has jurisdiction to review foreign arbitral awards.
SEC 42 in relation to SEC 45, RA 9285designated and vested RTC the specific authority and
jurisdiction to set aside, reject and vacate foreign arbitral award on grounds under ART 34(2) UNCITRAL.
SEC 42. Application of NY Conventionif application for rejection or suspension of enforcement
of an award has been made, RTC may vacate its decision and may also, on application of the
party claiming recognition or enforcement of the award, order party to provide appropriate
security.
SEC 45. Rejection of foreign arbitral awarda party to a foreign arbitration proceeding may
oppose an application for recognition and enforcement of arbitral award in accordance with
procedures and rules to be promulgated by SC only on those ground enumerated under ART 5 of
NY Convention. Any other ground raised shall be disregarded by RTC.
While RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by
parties, still foreign arbitration award is subject to judicial review by RTC which can set aside, reject or
vacate itforeign arbitral awards, while final and binding, do not oust courts of jurisdiction since these are
not absolute and without exceptions as they are still judicially reviewable.
CHAPTER 7, RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subject
to judicial review on specific grounds provided for.
Grounds for judicial review different in domestic and foreign arbitral awards.
Grounds for judicial review are different between domestic and foreign arbitral awards:
ART 34(2) UNCITRAL MODELforeign
SEC 25, RA876domestic
RTC decision of assailed foreign arbitral award appealable
SEC 46, RA 9285 provides for appeal before CA as remedy of an aggrieved party in cases where RTC
sets aside, rejects, vacates, modifies or corrects an arbitral award.
PGSCM has remedies to protect its interests
PGSMC must submit to foreign arbitration as it bound itself through the contract.
Its interests are protected by law which requires that arbitral award that may be rendered by KCAB must
be confirmed here by RTC before it can be enforced.

Arbitration clause does not oust our courts of jurisdiction as the international arbitral award is still judicially
reviewable under certain conditions in UNCITRAL Model as applied and incorporated in RA 9285
foreign arbitral award is still judicially reviewable.
There is nothing in the Contract which provides that parties may dispense with arbitration clause.
CHAPTER 2 DOMESTIC AND INTERNATIONAL COMMERCIAL ARBITRATION
Importance of Distinguishing Type of Arbitration
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To know the law which should be applied

FOREIGN ARBITRAL AWARD Recognition and enforcement of a foreign arbitral award shall
be governed by the 1958 New York Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (the "New York Convention") and the Special ADR Rules.

DOMESTIC ARBITRAL AWARD governed by RA 9285 and Special ADR Rules

Distinction between Domestic and International Commercial Arbitration

CHAPTER 3 COMMENCEMENT OF ARBITRATION


Mode of Commencement of Arbitration / Demand for Arbitration / Request for Arbitration
1. PRELLIMINARY PROCEDURE:
1.1.
IN CASE OF ARBITRAL AGREEMENT/CLAUSE:
1.1.1. Demand/request for arbitration; (Not applicable in controversies covered by
CIAC)
1.1.2. Statement of the nature of the controversy;
1.1.3. Amount involved, if applicable;
1.1.4. Relief sought;
1.1.5. Attached true copy of the contract providing the arbitration;
1.1.6. Demand shall be served in person or registered mail;
1.1.7. Should the contract provides for the appointment of single arbitrator:
a. Indicate the time and date within which the parties shall agree upon such
arbitrator;
1.1.8. Should the contract provides for the appointment of three arbitrators:
a. Indicate the name of the arbitrator appointed;
b. Require the other party within 15 days from notice/receipt to make an advice in
writing the name of the person appointed by the second party;
1.2.
The 2 arbitrators appointed must agree on the third arbitrator within 10 days from the
date of such notice;
1.3.
In case of default by the other party in answering the demand, aggrieved party may file,
through a verified petition, with the RTC having jurisdiction of the parties:
1.3.1. A copy of the demand/request for arbitration;
1.3.2. A statement that an original demand was sent and which set forth:
a. The nature of the action;
b. Amount involved, if applicable;
c. Relief sought;
d. Attached true copy of the contract providing for arbitration;
2. SAME PROCEDURE TO BE FOLLOWED IN SUBMISSION AGREEMENTS.
3. HEARING BY COURT IN CASE OF FAILURE, NEGLECT OR REFUSAL TO ARBITRATE.

3.1.

File an application by way of a verified petition with the RTC for an order directing that
such arbitration to proceed in the manner provided in the agreement;
3.2.
Notice to the defaulting party;
3.3.
RTC shall summarily hear the parties:
3.3.1. If the RTC is satisfied that the making of the agreement or such failure to comply
therewith is not in issue, it shall issue an order directing the parties to proceed to
proceed to arbitration in accordance with the terms of the agreement;
3.3.2. If the making of the agreement or default be in issue, the RTC shall proceed to
summarily hear such issue;
3.4.
Should it be found that there is no agreement or no default, the proceeding shall be
dismissed;
3.5.
Should it be found that there was written provision for arbitration was made or there is a
default in proceeding thereunder, the RTC shall direct the parties to proceed with the
arbitration in accordance with the terms thereof;
Judicial Relief Before Commencement of Arbitration
1.1. JUDICIAL BEFORE THE COMENCEMENT OF ARBITRATION.
1.1.1. Service of verified petition upon the respondent.
1.1.2.
Filing of verified petition with certification against forum shopping before the
RTC.
1.1.3. Respondent has 15 days from notice to take a comment/ opposition.
1.1.4. RTC must exercise judicial restraint conformably with the policy on competencecompetence principle.
1.1.5. Arbitral proceedings may nevertheless commenced and render an arbitral award
despite pendency of judicial relief.
1.1.6.
RTC prima facie determination upholding the existence, validity or validity of
arbitration agreement is not subject to motion for reconsideration, appeal or
certiorari.
a. But same issue(s) may still be raised before the arbitral tribunal;
b. Or in a latter action to vacate or set aside the arbitral award.
Competence-Competence Principle
Rule 2.4. Policy implementing competence-competence principle. - The arbitral tribunal
shall be accorded the first opportunity or competence to rule on the issue of whether or not it has
the competence or jurisdiction to decide a dispute submitted to it for decision, including any
objection with respect to the existence or validity of the arbitration agreement. When a court is
asked to rule upon issue/s affecting the competence or jurisdiction of an arbitral tribunal in a
dispute brought before it, either before or after the arbitral tribunal is constituted, the court must
exercise judicial restraint and defer to the competence or jurisdiction of the arbitral tribunal by
allowing the arbitral tribunal the first opportunity to rule upon such issues.
Where the court is asked to make a determination of whether the arbitration agreement is
null and void, inoperative or incapable of being performed, under this policy of judicial restraint,
the court must make no more than a prima facie determination of that issue.
Unless the court, pursuant to such prima facie determination, concludes that the
arbitration agreement is null and void, inoperative or incapable of being performed, the court must
suspend the action before it and refer the parties to arbitration pursuant to the arbitration
agreement.
Effect of Prima Facie Determination Before Commencement of Arbitration
Judicial Relief After Arbitration Commences
1.1. JUDICIAL RELIEF AFTER THE COMENCEMENT OF ARBITRATION.

1.1.1.

Within 30 days from notice, file a verified petition (with certification against forum
shopping) assailing the ruling of the arbitral tribunal on the preliminary question
upholding or declining its jurisdiction.
1.1.2. Respondent has 15 days from notice to take a comment/opposition.
1.1.3. Arbitration proceedings shall continue and render its award thereon.
1.1.4. No court may enjoin the arbitration proceedings pending the petition in court.
Court Action After Arbitration Commences
No Injunction of Arbitration Proceedings
Relief Against Court Action
1.1. RELIEFS FROM A COURT ACTION:
1.1.1. Motion for reconsideration;
1.1.2. But not subject to appeal;
1.1.3. A ruling by the court affirming the jurisdiction of the arbitral tribunal shall not be
subject to petition for certiorari (under Rule 65).
1.1.4. A ruling by the court denying the jurisdiction of the arbitral tribunal may be the
subject of petition for certiorari (under Rule 65).
When the Tribunal Renders Award Ahead of Court Action
When the Tribunal Defers Preliminary
Ruling on Jurisdiction
Nature of Courts Jurisdiction Whether Before or After Arbitration Commences

CHAPTER 4 APPOINTMENT OF ARBITRATORS


Definition of Arbitrator
Liability of Arbitrators
Parties' Participation in the Appointment of Arbitrators
Magellan Capital Management Corporation v. Zosa.........
Oil and Natural Gas Commission v. Court ofAppeals
When the Court May Act as Appointing Authority..
Petition for Appointment of Arbitrator(s)
Relief Against Court Action

1.1.

Relief against court action:


1.1.1. If the court appoints an arbitrator, the order appointing an arbitrator shall
be immediately executory and shall not be the subject of a motion for
reconsideration, appeal or certiorari.

1.1.2. An order of the court denying the petition for appointment of an arbitrator
may be the subject of a motion for reconsideration, appeal or certiorari.
(Rule 6.9.)
Qualifications and Disqualifications

1.1.

QUALIFICATIONS:
1.1.1. Must be of legal age;
1.1.2. In full-enjoyment of his civil rights;
1.1.3. Knows how to read and write;
1.1.4. Not related by blood or marriage within the sixth degree to either party to
the controversy;
1.1.5. No financial, fiduciary or other interest in the controversy or cause to be
decided or in the result of the proceeding, or
1.1.6. Has any personal bias, which might prejudice the right of any party to a
fair and impartial award;
1.2.
If, after appointment but before or during hearing, a person appointed to serve as
an arbitrator shall discover any circumstances likely to create a presumption of
bias, or which he believes might disqualify him as an impartial arbitrator, the
arbitrator shall immediately disclose such information to the parties. Thereafter
the parties may agree in writing:
1.2.1. to waive the presumptive disqualifying circumstances; or
1.2.2. to declare the office of such arbitrator vacant. Any such vacancy shall
be filled in the same manner as the original appointment was made.
(Sec. 10, R.A. No. 876)
Challenge to Appointment of Arbitrators

1.1.

3.6.

The arbitrators may be challenged only for the reasons mentioned in Sec 10, R.A.
No. 876 which may have arisen after the arbitration agreement or were unknown
at the time of arbitration.
The challenge shall be made before them.
If they do not yield to the challenge, the challenging party may renew the
challenge before the RTC of the province or city in which the challenged
arbitrator, or, any of them, if there be more than one, resides. While the
challenging incident is discussed before the court, the hearing on arbitration
shall be suspended, and it shall be continued immediately after the court has
delivered an order on the challenging incident. (Sec.11, R.A. No. 876)
GROUNDS FOR CHALLENGE (Under the Model Law)
3.6.1. When the person is approached in connection with a possible appointment
as an arbitrator, he shall disclose any circumstances likely to give rise to
justifiable doubts as to his impartiality or independence. An arbitrator
from the time of his appointment and throughout the arbitral proceedings,
shall without delay disclose any such circumstances to the parties unless
they have already been informed of them by him.
3.6.2. An arbitrator may be challenged only if circumstances exist that give rise
to justifiable doubts as to his impartiality or independence, or if he does
not possess qualifications agreed to by the parties. A party may challenge

an arbitrator appointed by him, or in whose appointment he has


participated, only for reasons of which he becomes aware after the
appointment has been made.
Court Action on the Challenge

1.1.

CHALLENGE PROCEDURE. (Under the Model Law)


1.1.1. The parties are free to agree on a procedure for challenging an arbitrator,
subject to the provisions of paragraph (3) of thia article.
1.1.2. Failing such agreement, a party who intends to challenge an arbitrator
shall, within 15 days after becoming aware of the constitution of the
arbitral tribunal or after becoming aware of any circumstance referred to
in article 12.2., send a written statement of the reasons for the challenge to
the arbitral tribunal. Unless the challenged arbitrator withdraws from his
office or the other party agrees to the challenge, the arbitral tribunal shall
decide on the challenge.
1.1.3. If a challenge under any procedure agreed upon by the parties or the
procedure of paragraph (2) of this article is not successful, the challenging
party may request, within 30 day after having received notice of the
decision rejecting the challenge, the court or other authority specified in
article 6 to decide on the challenge, which decision shall be subject to no
appeal; while such a request is pending, the arbitral tribunal, including the
challenge arbitrator, may continue the arbitral proceedings and make an
award.

Appointment of Substitute Arbitrator Resulting from Challenge


Termination of the Mandate of Arbitrator
Court Action on the Issue of Termination of M a n d a t e

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