This is the first part of a two-part article on CAM and JDR.

This
part of the article will discuss the expanded coverage of CAM and
JDR. The CAM and JDR procedures will be discussed in the
October issue.
On January 11, 2011, the Philippine Supreme Court approved new guidelines to expand the coverage of
court-annexed mediation (CAM) and judicial dispute resolution (JDR) [Guidelines]. The Guidelines
were issued through Resolution A.M. No. 11-1-6-SC-PHILJA .

The Guidelines adopted the policy of diverting court cases to CAM and JDR to put an end to pending
litigation through a compromise agreement of the parties and thereby help solve the ever-pressing
problem of court docket congestion. While recognizing that criminal cases may not be compromised,
this policy strongly indicates that the ultimate objective of CAM and JDR is to end all litigation, not
merely its civil aspect.

The Guidelines are empowers the parties to resolve their own disputes and give practical effect to the
State policy in Rep. Act No. 9285 (The ADR Act of 2004) to actively promote party autonomy in the
resolution of disputes or the freedom of the parties to make their own arrangement to resolve disputes
(Sec. 2). The reference to RA 9285 is interesting because the Act does not cover court-annexed mediation
(Sec. 7). Moreover, the mandatory nature of CAM and JDR and the restriction of the parties ability to
choose their mediators makes CAM and JDR somehow inconsistent with the idea that in an alternative
dispute resolution system, the parties have the freedom to determine how their dispute should be
resolved.
Three stages of diversion

The Guidelines define three stages of court diversion, namely: CAM, JDR and Appeals Court Mediation
(ACM). Each was previously covered by a separate Supreme Court issuance, which somehow made it
difficult to see that they were meant to complement each other. The Guidelines now clarify that CAM,
JDR and ACM have the same objective and that they are merely different stages of a comprehensive
dispute resolution process aimed at abating or ending court-docket congestion.

1. During CAM, the first stage of court diversion, the judge refers the parties to the Philippine Mediation
Center (PMC) for the mediation of their dispute by trained and accredited mediators.
2. If CAMfails, the second stage, called the JDR, is undertaken by the JDR judge, acting as a mediator-
conciliator-early neutral evaluator.[1]

3. The third stage is during appeal, where covered cases are referred to ACM.
Expanded jurisdiction
In addition to consolidating the existing CAM and JDR rules, the Guidelines covers the civil aspect of less
grave felonies punishable by correctional penalties not exceeding six years imprisonment, where the
offended party is a private person.[2]
The purpose is for the court diversion process to achieve a greater impact. The expansion to less grave
offensesis needed since civil cases constitute only a small 16 percent of all cases filed in court, while
special proceedings constitute even a smaller 7.6 percent. Since correctional penalties are intended for
rehabilitation and correction of the offender, there is no reason why crimes punishable by correctional
penalties may not be compromised, as to their civil aspect. However, it is not clear if the Guidelines
applies to the civil aspect of criminal cases that are governed by special laws, although punishable with
imprisonment not exceeding six years. In a strict sense, the term less grave felonies applies to crimes
under the Revised Penal Code but not crimes governed by special laws.

Despite the non-mediatable nature of the principal action, like annulment of marriage, other issues such
as custody of children, support, visitation, property relations and guardianship may be referred to CAM
and JDR to limit the issues for trial.
Role of lawyers

Finally, the Guidelines define the role of lawyers inCAMand JDR as that of adviser and consultant to their
clients. They are encouraged to drop their combative role in the adjudicative process and to give up their
dominant role in judicial trials, in order to allow the parties more opportunities to craft their own
agreement.

[ 1 ] T h e J D R j u d g e a c t s a s a m e d i a t o r, n e u t r a l e v a l u a t o r a n d / o r c o n c i l i a t o r. A s m e d i a t o r

a n d c o n c i l i a t o r, h e f a c i l i t a t e s t h e s e t t l e m e n t d i s c u s s i o n s b e t w e e n t h e p a r t i e s a n d t r i e s t o

r e c o n c i l e t h e i r d i f f e r e n c e s . A s a n e u t r a l e v a l u a t o r, h e a s s e s s e s t h e r e l a t i v e s t r e n g t h s a n d

weakn esses o f each part ys case, makes a no n -bin din g an d impart ia l evalu at io n o f t he

ch an ces of each part ys su ccess in t he case, an d persu ades th e part ies to a fair an d

mutually acceptable settlement of their dispute.

[2] The other cases subject to mandatory CAM/JDR are:

(1) All civil cases and the civil liability of criminal cases covered by the Rule on

S u m m a r y P r o c e d u r e , i n c l u d i n g t h e c i v i l l i a b i l i t y f o r v i o l a t i o n o f B . P. 2 2 , e x c e p t c a s e s

which may not be compromised.

(2) Special proceedings for the settlement of estates.

(3) All civil and criminal cases filed with a certificate to file action issued by the Punong

Barangayor the Pangkat ng Tagapagkasundo under the Revised Katarungang

Pambarangay Law.

(4) The civil aspect of Quasi- Offenses under Title 14 of the Revised Penal Code.

(5) The civil aspect of estafa, theft and libel.

(6) All civil cases, probate proceedings, forcible entry and unlawful, cases involving title

to or possession of real property or an interest therein, and habeas corpus cases decided

b y t h e f i r s t l e v e l c o u r t s i n t h e a b s e n c e o f t h e R e g i o n a l Tri a l C o u r t j u d g e , b r o u g h t o n

appeal from the exclusive and original jurisdiction granted to the first level courts.

The first part of this article discussed the expanded coverage of

CAM and JDR. This part of the article discusses the CAM and JDR
procedures.
CAM and JDR

The Guidelines divide judicial proceedings into two stages, namely: (a) from the filing of a complaint up to
the conduct of CAM and JDR during the pre-trial stage; and (b) from the pre-trial proper up to trial and
judgment.

In both CAM and JDR, the court or any party may move to sanction a party who fails to appear or any
person who engages in abusive conduct during the proceedings. Sanctions may include censure,
reprimand, contempt or requiring the absent party to reimburse up to treble the cost of the appearing
party.

A representative of a party who is unable to attend in person must be fully authorized to appear, negotiate
and enter into a compromise without need of further approval by or notification to the authorizing party.
With respect to corporations, partnerships, or other juridical entities, the representative must also be a
ranking corporate officer.

The Guidelines emphasize that both CAM and JDR are confidential. Any information or communication
made or received is inadmissible as evidence in any other proceeding. JDR judges and all court personnel
or any other person present during the proceeding are prohibited from passing information obtained in
the course of conciliation and early neutral evaluation to the trial judge or to any other person.
CAM Procedure

Under the Guidelines, the CAM procedure is:

1. Upon filing the last pleading, the judge orders the parties to appear before the PMC Unit.

2. The parties shall select an acceptable accredited mediator. Otherwise, the mediator shall be chosen by
lot.

3. The mediator starts the mediation and explains the mediation process.

4. With the consent of both sides, the mediator may hold separate caucuses and/or joint conferences with
them.

5. If no settlement is reached at the end of the mediation period, the case is returned to the referring
judge.

6. The mediator has 30 days from the initial conference to complete the mediation process, extendible for
another 30 days upon motion to be filed by the mediator, with the conformity of the parties.

7. If full settlement is reached, the parties shall draft the compromise agreement for approval by the
court. If compliance has been made, the court shall dismiss the case upon the submission by the parties
of a satisfaction of claim or a mutual withdrawal of the case.

If partial settlement is reached, the parties will submit its terms for appropriate action by the court,
without waiting for resolution of the unsettled part. The court will conduct JDR for the unsettled part of
the dispute.
JDR Procedure

Under the Guidelines, the JDR procedure is:

1. The JDR judge first refers the case to CAM but also pre-sets the JDR conference not earlier than 45
days from the parties first mediation appearance.

First-level courts such as Metropolitan Trial Courts and Regional Trial Courts have 30 days from the first
JDR conference to complete the process. Second-level courts such as Regional Trial Courts exercising its
appellate jurisdiction have 60 days to complete the process.
In criminal cases where a settlement has been reached on the civil aspect but the period of payment in
accordance with the terms of settlement exceeds one year, the case may be archived upon motion of the
prosecution, with notice to the other party and with approval by the judge.

2. The judge to whom the case was assigned by raffle shall be the JDR judge. He shall preside over the
first stage and resolve all incidents or motions filed during this stage. If the case is not resolved during
JDR, it shall be raffled to another judge for the second stage. As a general rule, the JDR judge shall not
preside over the trial of the case. However, the parties may jointly request in writing that the case be tried
by the JDR judge.
3. In single-sala courts, the parties may file a joint written motion requesting the court of origin to
conduct the JDR and trial. Otherwise the JDR will be conducted by the judge of the pair court or, if none,
by the judge of the nearest court at the station where the case was originally filed. The result of the JDR
shall be referred to the court of origin for appropriate action, e.g., approval of the compromise agreement
or trial.

4. In areas where only one court is designated as a family court, the parties may file a joint written motion
requesting the family court to which the case was originally raffled to conduct the JDR and trial.
Otherwise, the JDR shall be conducted by a judge of another branch through raffle. If there is another
family court in the same area, the family court to whom the case was originally raffled shall conduct JDR
and, if no settlement is reached, the other family court shall conduct the pre-trial proper and trial.
5. In areas where only one court is designated as commercial/intellectual property/environmental court
(special court), unless otherwise agreed upon by the parties, the JDR shall be conducted by another
judge through raffle and not by the judge of the special court. Where there is no settlement, the judge of
the special court shall be the trial judge. Any incident or motion filed before the pre-trial stage shall be
dealt with by the special court that referred the case to CAM.

6. Cases may be referred to JDR even during trial, upon written motion of one or both parties. The JDR
judge may either be (a) another judge through raffle in multiple-sala courts; or (b) the nearest court (or
pair court, if any) regardless of the level of the latter court in single sala courts.

7. If the dispute is fully settled, the parties will submit the compromise agreement for approval by the
court. If there has been compliance, the court shall dismiss the case upon submission by the parties of a
satisfaction of claims or a mutual withdrawal of the parties respective claims and counterclaims.

In case of partial settlement, the compromise may be submitted to the court for approval and rendition of
a judgment upon partial compromise, which may be immediately enforced by execution.
In criminal cases, if settlement is reached on the civil aspect thereof, the parties shall submit the
compromise agreement for appropriate action by the court. Action on the criminal aspect of the case will
be determined by the Public Prosecutor, subject to the appropriate action of the court.

When parties go through the trouble and expense of

submitting their disputes to international arbitration, they
do so in the expectation that unless a settlement is reached
along the way, the proceedings will end in an award. [1]
Definitions
Republic Act No. 9285 (2004), the ADR Act, defines award as a partial or final decision by an arbitrator
in resolving the issue in a controversy.[2] The UNCITRAL Model Law on International Commercial
Arbitration (Model Law), which was adopted by the ADR Act,[3] does not provide a definition of the
same term.
Alan Redfern and Martin Hunter proposed the following definition: Award means a final award which
disposes of all issues submitted to the arbitral tribunal and any other decision of the arbitral tribunal,
which finally determines any question of substance or the question of its competence or any other
question of procedure but, in the latter case, only if the arbitral tribunal terms its decision an award.[4]
Kinds

The Model Law contemplates that there may be more than one award in the course of an arbitration. For
example, a plea that the arbitral tribunal does not have jurisdiction may be dealt with either in the final
award or as a preliminary question.

Some commentators attempt to classify awards as follows:

Award on jurisdiction This can be qualified as interim or final, depending on
whether the arbitral tribunal admits or declines jurisdiction.
Interim, interlocutory or preliminary award An interim or interlocutory
award is one rendered in the course of the arbitral procedure, without ending
it.
Partial award A partial judgment is one that adjudicates a part of the dispute
as defined by the prayers for relief of the parties.
Final award This refers to the award, be it unique or the last one, which
decides all the claims referred to the arbitrator, or at least those remaining to
be decided, and thus puts an end to the proceedings.
 Default award This may be deemed no different from one made following
proceedings where all the parties participate, the essential point being that the
defaulting party must have been offered the opportunity to appear and present
its case.
Agreed or consent awards It embodies a settlement reached by the parties. To
the extent that it determines all the claims referred to the arbitrators, it ends
the proceedings. It differs from a final award by its object, which consists in
the consent of the parties and not in a decision of the arbitral tribunal, and by
the absence of reasons.[5]
Writing the award

How does one begin writing an internationally enforceable award?

First, the arbitral tribunal must initially satisfy itself that it has jurisdiction to determine the matters it is
called upon to determine.

Second, the arbitral tribunal must comply with any procedural rules governing the arbitration. This will
include having the award formally approved by an arbitral institution as required in an International
Chamber of Commerce arbitration.
Finally, the arbitral tribunal must sign and date the award and ensure that it is communicated to the
parties in the manner set out in the relevant law or in the rules that apply to the arbitration. [6]
Essential elements of an award

Article 31 of the Model Law sets out the formal requirements of a valid and enforceable award:
Form and contents of award
1. The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In arbitral
proceedings with more than one arbitrator, the signatures of the majority of all members of the arbitral
tribunal shall suffice, provided that the reason for any omitted signature is stated.

2. The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons
are to be given or the award is an award on agreed terms under article 30.

3. The award shall state its date and the place of arbitration as determined in accordance with article
20(1). The award shall be deemed to have been made at that place.
4. After the award is made, a copy signed by the arbitrators in accordance with paragraph (1) of this
article shall be delivered to each party.[7]
================================================
===============
[1]Alan Redfern and Martin Hunter with Nigel Blackaby and Constantine Partasides, Law

and Practice of International Arbitration 8-01, p. 416 (Sweet & Maxwell,

2004).

[2] ADR Act, Sec. 3(f).

[3] ADR Act, Sec. 19.

[ 4 ] R e d f e r n & H u n t e r, 8 - 0 5 , c i t i n g B r o c h e s , R e c o u r s e A g a i n s t t h e A w a r d ; E n f o r c e m e n t

o f t h e A w a r d , U N C I T R A L s P r o j e c t f o r a M o d e l L a w o n I n t e r n a t i o n a l

Commercial Arbitration, ICCA Congress Series No. 2 (a984), p. 208.

[5] Jean-Francois Poudret and SebastienBesson, Comparative Law of International

Arbitration 644-648 (Sweet & Maxwell, 2007).

[ 6 ] R e d f e r n & H u n t e r, 8 - 0 4 .

[7] Implementing Rules and Regulations (IRR) of ADR Act, Art. 4.31.

Editors note: Last issue, the author discussed the definition and
kinds of arbitral awards, and their essential elements. Part II of
the article discusses the essential elements and formal parts of the
award.

To recap, the essential elements of an arbitral award are:

It should be in writing.

It should be signed by the arbitrator or the arbitrators. In proceedings with more than one arbitrator,
the signatures of a majority of the members of the arbitral tribunal shall be sufficient, provided that the
reason for any omitted signature is stated.

The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons
are to be given or the award is an award on agreed terms under Article 30(2) of the Model Law.

The award shall state its date and the place of arbitration as determined in accordance with Article 20(1)
of the Model Law.

After the award is made, a copy signed in accordance with Article 31(4) of the Model Law shall be
delivered to each party.
Written form
The majority of arbitration laws require that the award be made in writing and signed. The award must be
in writing in the interest of certainty.[1] Oral awards are rare. They lead to difficulties at the enforcement
stage, since their existence cannot be established in writing within the meaning of NCPC, Art. 1499[2] or
its equivalent and Article IV of the New York Convention.[3]
Signatures of arbitrators
It was recognized that, before the award, there was always the likelihood that an arbitrator might not
agree with the award and accordingly, refuse to sign it. In such case, following the example in the 1976
UNCITRAL Arbitration Rules as well as those in a number of national laws, it is sufficient that the award
is signed by a majority of the arbitrators provided that the reason for the missing signature is stated.[4]
Reasoned awards
The Model Law requires reasoned awards.[5] The way in which reasons are given in arbitral awards varies
considerably. Sometimes the reasoning (or motivation) is set out with extreme brevity. In other cases,
the awards include a detailed review of the evidence and arguments put forward by the parties, followed
by a closely reasoned conclusion.[6]
Most arbitral tribunals in international cases are composed of lawyers. Hence, it is not surprising that the
tribunal allots more time and space in the award to giving the reasons for its determination of the legal
arguments than a review of the factual issues.[7]
Common law arbitrators traditionally abstained from giving reasons, to avoid exposing their awards to
appeals on a point of law.[8] A commentator has pointed out that an unreasoned award was less subject
to challenge, and that in fact where the issue was whether the quality of goods met industry or contractual
standards under certain types of arbitrations, no reason was required to be given.[9]
Date and place of arbitration
The Model Law only requires a mention of the seat, the award being deemed to have been made
there[10]regardless of where it was signed, dispatched or delivered to any of the parties. The place of
arbitration is of legal significance in that it identifies the procedural rules governing the arbitration, which
is applied for certain purposes when an application is made to set aside the award or for recognition and
enforcement of the award.[11]
As to the date, the award must mention the exact date. In some jurisdictions (e.g., Italy), the award must
mention the exact date (day, month and year) when each arbitrator signed the circulated text, the last date
being important for determining the date of the award. Usually, the last signature is that of the Chairman.
[12] The date is important when new evidence is discovered or in the case where the arbitrators fail to
meet the deadline fixed for rendering the award.[13]
Delivery of signed copies to parties
The Model Law requires immediate notification after the award is made. A copy signed by the arbitrators
shall be delivered to each party. In institutional arbitration, the award is generally notified by the
institution itself, after the costs of the arbitration have been dealt with.[14] In ad hoc arbitration, the
notification is made by the arbitral tribunal or its chairman.
The arbitral proceedings are terminated by the final award. Notwithstanding such termination, however,
Section 4.32(d) of the Implementing Rules and Regulations of the ADR Act provides that the arbitral
tribunal may for special reasons reserve in the final award or order a hearing to quantify cost and
determine (a) which party shall bear the cost; or (b) the division thereof as may be equitable. Pending
determination of this issue, the award is not deemed final for purposes of appeal, vacation, correction or
any post-award proceedings.[15]

================================
[1] Custodio O. Parlade, International and Domestic Arbitration 252 (Central Book

S u p p ly, I n c ., 2 0 1 1 ) .

[2] Nouveau Code de Procedure Civilefrancais (New French Code of Civil Procedure).

[3] Poudret & Besson, at 663-4.

[4] Parlade, at 252, citing A Guide to the UNCITRAL Arbitration Rules, p.837.

[5] Mo del L aw, Art . 31(2).

[ 6 ] R e d f e r n & H u n t e r, 8 - 6 5 , f i r s t p a r.

[7] Id., 8 - 6 5 , s e c o n d p a r.

[8] Poudret & Besson, 746, at 666.

[9] Parlade, at 253.

[10] Mo del L aw, Art . 31(3).

[11] Parlade, at 254, citing A Guide to the UNCITRAL Model law, pp. 838-839 .

[12] Poudret & Besson, 755, at 680, citing the Italian Code of Civil Procedure, ICCP

2006, Art. 823 (2), No. 8.

[13] Parlade, at 255, cit in g A Gu ide to t he U NCITRAL Model L aw, p. 638.

[14] ICC Rules, Art. 28.1.

[15] Section 4.32(d) IRR.

Comments are closed.

Party autonomy is the defining feature of arbitration that

distinguishes it from conventional litigation. Section 2 of
Republic Act No. 9285 (2004) defines party autonomy as
the freedom of the parties to make their own
arrangements to resolve their disputes. Beyond its
definition, party autonomy is best felt within the arbitral
forum itself where the arbitrator, though capable of
exercising the coercive powers of a judge over the parties,
is nevertheless guided and bound by the terms of reference
that the parties themselves helped shape.
When the Special Rules of Court on Alternative Dispute Resolution (A.M. No. 07-11-08-SC, or SADR)
became effective four years later in 2009, the concept of party autonomy was enhanced. As originally
formulated in Section 2 of RA 9285, it was 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. To this, the SADR adds, with the greatest cooperation of and the least
intervention from the courts. As expressed in Rule 2.1 of the SADR, the provision now reads: It is the
policy of the State to actively promote the use of various modes of ADR and to respect party autonomy or
the freedom of the parties to make their own arrangements in the resolution of disputes with the
greatest cooperation of and the least intervention from the courts

From RA 9285 in 2004 to the SADR in 2009, what is observable is the refinement of the concept of party
autonomy with the introduction of the policy of judicial restraint. The prescription for the greatest
cooperation of and the least intervention from the courts is not a motherhood statement. There are
several other provisions in the SADR where the policy of judicial restraint is imposed by affirmative
provisions.
Rule 2.2 of the SADR recognizes the principle of competence-competence, which means that the arbitral
tribunal may initially rule on its own jurisdiction, including any objections with respect to the existence or
validity of the arbitration agreement or any condition precedent to the filing of a request for arbitration.
In implementing the principle of competence-competence, Rule 2.4 of the SADR provides that [t]he
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.

As Rule 2.4 indicates, a court may be confronted with an issue on the arbitral tribunals jurisdiction either
before or after it is constituted.
Before the arbitral tribunal is constituted, in fact even before the arbitration commences, the policy of
judicial restraint is already in effect. Rule 3.3 of the SADR provides that at any time prior to the
commencement of arbitration, a party may file a petition for judicial determination of the existence,
validity and/or enforceability of an arbitration agreement. At this point, the court is the only existing
dispute resolution forum that can rule on the existence, validity and/or enforceability of an arbitration
agreement, for the obvious reason that the arbitral tribunal is still inexistent. Yet, although Rule 3.5 of the
SADR recognizes that the court may rule that the arbitration agreement is, under the applicable law,
invalid, void, unenforceable or inexistent, Rule 3.8 in relation to Rule 2.4 of the SADR expressly provides
that, under the policy of judicial restraint, the court must make no more than a prima facie determination
of that issue. In the absence of a prima facie ruling that the arbitration agreement is null and void,
inoperative or incapable of being performed, the court is duty-bound under Rule 2.4 to suspend the
action before it and refer the parties to arbitration pursuant to the arbitration agreement.
The ruling of the court is prima facie because Rule 3.11 of the SADR recognizes the right of any party to
resurrect the issue of the existence, validity and enforceability of the arbitration agreement before the
arbitral tribunal or the court in a subsequent action to vacate or set aside the arbitral award. This is
something novel in the Philippine legal system a panel of private individuals constituted as an arbitral
tribunal passing upon the ruling of a court of justice.
In a different scenario where judicial intervention is invoked after the arbitral tribunal has been
constituted, and the court is called upon to review a preliminary ruling of the arbitral tribunal either
upholding or declining its jurisdiction under the arbitration agreement, as contemplated in Rule 3.12 of
the SADR, the policy of judicial restraint is still observable in light of Rule 3.19 of the SADR, which
provides that the ruling of the court affirming the arbitral tribunals jurisdiction shall not be subject to
a petition for certiorari. On the other hand, the ruling of the court that the arbitral tribunal has no
jurisdiction may be the subject of a petition for certiorari.
The policy of judicial restraint is significantly observable with reference to the matter of interim relief.
Under Section 14 of RA 876, which is a 1953 statute, there was a concurrence of power equally shared by
the court and the arbitral tribunal in granting interim relief. Section 14 provides that [t]he arbitrator or
arbitrators shall have the power at any time, before rendering the award, without prejudice to 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.
This concurrence of power between the court and the arbitral tribunal was diluted by the policy of judicial
restraint with the enactment of RA 9285 in 2004. Section 28 provides that [i]t is not incompatible with
an arbitration agreement for a party to request, before the constitution of the tribunal, from a Court an
interim measure of protection and for the Court to grant such measure. After constitution of the arbitral
tribunal and during arbitral proceedings, a request for an interim measure or protection, or modification
thereof, may be made with the arbitral tribunal or to the extent that the arbitral tribunal has no power to
act or is unable to act effectively, the request may be made with the Court In other words, the general
rule in Section 28 of RA 9285 is that it is the arbitral tribunal which is the primary authority to grant
interim relief subject to two exceptions: (1) when the arbitral tribunal has no power to act, or (2) when it is
unable to act effectively.

Before the constitution of the arbitral tribunal where the court is the only existing dispute resolution
forum that can grant interim relief, judicial restraint is nevertheless in place as Rule 5.15 of the SADR
provides that [t] he court shall defer action on any pending petition for an interim measure of protection
filed by a party to an arbitration agreement arising from or in connection with a dispute thereunder upon
being informed that an arbitral tribunal has been constituted pursuant to such agreement
The policy of judicial restraint is made more pronounced by Rule 5.13 of the SADR which provides that
[a]ny court order granting or denying interim measure/s of protection is issued without prejudice to
subsequent grant, modification, amendment, revision or revocation by the arbitral tribunal as may be
warranted. An interim measure of protection issued by the arbitral tribunal shall, upon its issuance be
deemed to have ipso juremodified, amended, revised or revoked an interim measure of protection
previously issued by the court to the extent that it is inconsistent with the subsequent interim measure of
protection issued by the arbitral tribunal. Any question involving a conflict or inconsistency between an
interim measure of protection issued by the court and by the arbitral tribunal, according to Rule 5.14 of
the SADR, shall be immediately referred by the court to the arbitral tribunal which shall have the
authority to decide such question.

Comments are closed.

Turning off the audio recorder can save time and costs.

Oral hearings are an important feature of domestic and international arbitrations. In most cases, the right
to be heard, if allowed by law or stipulated by contract, is an essential part of due process [David J. A.
Cairns, Oral Advocacy and Time Control in International Arbitration, in A.J. van den Berg & Van Den
Berg, Arbitration Advocacy in Changing Times 187 (Kluwer, 2011)].
Oral hearings in domestic arbitration

The Arbitration Law [Rep. Act No. 876 (1953)] requires the tribunal to hold a hearing within five days
from their appointment, if the parties reside within the same city or province, or within 15 days if the
parties reside in different provinces. At the hearing, the tribunal may ask both parties for an agreed
stipulation of facts and brief statements of the issues (Sec. 15), after which the parties may offer such
evidence as they desire and such additional evidence as the tribunal may require (Ibid.).

All the arbitrators appointed must attend all the hearings and hear all the allegations and proofs of the
parties (Sec. 14). They shall arrange for the taking of a stenographic record of the testimony when such a
record is requested is requested by one or more parties, and when payment of the cost is assumed by such
party or parties (Sec. 12, par. four). The tribunal shall receive as exhibits any document which the parties
may wish to submit, properly identified at the time of submission (Sec. 15).

At the close of the hearings, the tribunal shall specifically inquire of all parties if they have any further
proof or witnesses to present and, upon receipt of a negative reply from all the parties, the tribunal shall
declare the hearing closed unless the parties have signified an intention to file briefs (Sec. 16). The hearing
shall be closed after receipt of the briefs and/or reply briefs (Ibid.). The hearing may only be reopened by
the tribunal upon its own motion or upon the request of any party, upon good cause at any time before the
award is made (Sec. 17).

However, the parties may by written agreement submit their dispute to arbitration other than by oral
hearing, on the basis of an agreed stipulation of facts, written witness statements, documents, and
arguments (Sec. 18). Based on the law, the default procedure in domestic arbitration is to conduct oral
hearings unless the parties agree to waive it in writing.
Oral hearings in international arbitration

The right to a reasonable opportunity to be heard in international arbitration does not necessarily include
a right to an oral hearing [Thomas Schultz, Information Technology and Arbitration: A Practitioners
Guide 111 (Kluwer, 2006)]. Unless the law of the forum guarantees such right, a party can not demand an
oral hearing.

The law governing the arbitration procedure, which may provide for a possible right to an oral hearing,
varies from country to country but, according to Schulz, there are two possible situations. Either there
exists no right to an oral hearing (as is true under English and Swiss law) or there is a right to an oral
hearing but it may be waived (which is the case in the Philippines as well as in most jurisdictions such as
Germany, France, Italy, the Netherlands, Belgium, Sweden as well as under the UNCITRAL Model Law)
[Schultz, at 111-12].

The European Convention on Human Rights, for example, requires an oral hearing only if it is
indispensable for the protection of the interest of the person concerned and if the person concerned has
not waived that right (Ibid.). Hence, an oral hearing is not necessary to comply with the principle of equal
treatment of the parties in Article 18 of the UNCITRAL Model Law. However, if so requested by any party,
the tribunal shall hold oral hearings at an appropriate stage of the proceedings. (Art. 24.1)
Time and cost of oral hearings

The oral hearing, and particularly lengthy oral hearing, is a characteristic of common law procedure
(Cairns, at 182). But two common features of international arbitration have successfully reduced the
length of oral hearings: (a) the current preference for written submissions, written witness statements,
and written briefs; and (b) the displacement of the potential functions of an oral hearing to other parts of
the arbitral process, such as the appointment of common experts in place of extensive adversarial
evidence by the parties and the submission of written reports in lieu of oral expert testimony (Ibid.).

The International Chamber of Commerce, in its manual Techniques for Controlling Time and Cost in
Arbitration, has noted that Hearings are expensive and time-consuming. If the length and number of
hearings requiring the physical attendance of the arbitral tribunal and the parties are minimized, this will
significantly reduce the time and cost of the proceeding.

The length and number of hearings depend on several factors such as (1) advocacy skills and procedural
efficiency of counsel; (2) due process; and (3) party agreement.
Advocacy skills and procedural efficiency of counsel

The primary function of the oral hearing is the examination of witness, especially cross-examination.
Ideally, the parties, witnesses, expert, counsel, and arbitrators must all prepare for the hearing. When that
happens, all the participants are fully focused on the case at the same time (Cairns, at 184). In theory, an
imminent hearing concentrates minds wonderfully and this contemporaneous focus can be a powerful
force (Ibid.). As a result, the parties may suddenly settle a matter that previously proved intractable, or
counsel may dispense with witnesses and arguments previously deemed indispensable (Ibid.).

In practice, however, multiple professional and work responsibilities leave the counsel, witnesses, and the
arbitrators with little or no time to prepare for the hearing. Moreover, counsel who bill on the basis of
time or who argue in the presence of the client are tempted to substitute wit for wisdom and commonly
fall prey to the tendency to over-examine a witness or over-argue a position. This prompts opposing
counsel to respond in kind. The result is a lengthy and costly oral hearing.
Due process

What aggravates the time and cost of oral hearings is the norm of recording the hearing for future
reference by the tribunal and the parties. When counsel argues or a witness testifies on record, they tend
to become self-conscious. An objection elicits a response, which in turn draws a counter-argument. The
examination of the witness may repeat what is already stated in the written statement or documents or
can veer away from relevant matters, sometimes revealing the ignorance or lack of preparation of counsel.
The witness can say too much or debate with counsel, and use the hearing as an opportunity to vent
against the other party.

Because of the importance of giving the parties a full and equal opportunity to present their case, the
tribunal may feel powerless to stop the tit-for-tat or to limit the examination only to matters arising from
the agreed issues. The tribunal may also be hampered by a desire to please the parties and counsel who
nominated them. The threat of a challenge to the arbitrators or the vacation of the award can likewise be
daunting.

However, it is important to note that oral hearings can suffer from diminishing returns over time.
According to Cairns, an advocate allowed 15 minutes for argument will only address the most
fundamental issues but another one allowed an entire day will discuss many peripheral issues (at 185).
The same principle applies to the examination of witnesses (Ibid.).
Party agreement

Because party autonomy is the foundation of arbitration, the parties may sometimes reach a detailed
agreement on the conduct of the arbitral hearing, including the provision for oral testimony on direct
examination, generous amounts of time for cross-examination, opening and closing statement, and legal
submissions. This is likely to occur, observed Cairns, where both parties are represented by lawyers from
common law jurisdictions who agree on an extended oral hearing on the common law model. (at 191)
Going off the record

One way of shortening the oral hearing is by the tribunal and the parties agreeing to turn off the audio
recorder and discussing the agenda or roadmap at the start of the hearing. The tribunal used this
approach in two arbitration hearings attended by the author.

In the first one, the oral hearing was threatened with delay due to several motions filed by the parties.
While the respondent filed a motion to amend the signed Terms of Reference, the claimant filed its own
motion to amend its Statement of Claims to include an individual who was not a party to the arbitration
agreement.

The claimants ingenious argument in support of its motion was, since respondent denied the authority of
the signatory to the contract containing the arbitration clause, then the signatory acted as if he were the
principal and was therefore bound by the arbitration clause. In addition to the two motions, respondent
filed another motion to substitute the written statements of its witnesses with evidence to be gathered
during the ocular inspection of the project site in dispute.

Instead of recording the oral hearing and ruling on the merits of the motions after hearing the oral
arguments of counsel, which would have delayed the hearing for several weeks, the tribunal invited the
parties to go off the record to discuss the agenda of the hearing. As the tribunal discussed each item on the
agenda beginning with the motion filed by the respondent, the parties began to move forward from their
initial hostile positions and eventually agreed to appoint a common expert to inspect the project site and
to submit a report in two weeks.

As common expert, they jointly nominated an engineer who was a witness for one of the parties. The
witness, who was already at the hearing, accepted her appointment and quickly agreed to her terms of
reference. The parties also agreed to accept the experts report and recommendation and to let it serve as
basis for the tribunals award. As icing on the cake, the parties agreed to waive their statutory right to
appeal from the award and to comply with it after 15 days from notice.

In the other case, the tribunal called the parties to a second preliminary conference to stipulate on the
issues of fact and law involved in the dispute. The parties had earlier submitted a joint stipulation of facts
and documents but they were unable to reach agreement on the issues. Each side submitted a list of
several issues they wanted the tribunal to resolve. To avoid a possible ultra petita objection in case the
tribunal grants a broader relief than that specified by the parties, the tribunal invited them and their
counsel to discuss the issues off the record.

Instead of both counsel fighting each other on record and debating the language of each proposed issue,
the tribunal proposed that both sides dovetail their issues by basing it on specific contractual clauses or
legal provisions, such as Whether claimant or respondent is liable for cost under Art. 38 of the PDRCI
Rules and, if so, how much?

After about two hours of collaborative discussion, the parties reached agreement on several issues that
were recast by the tribunal in the form of a supplemental Terms of Reference. No voices were raised and
no egos were bruised during the exchange of views, which involved not only the parties and their counsel
but all three members of the tribunal. The tribunal then officially went on record and briefly summarized
the proceeding, making sure that the parties confirmed what transpired. As a bonus, the parties agreed to
stipulate on two more items of fact suggested by the tribunal.

Had the parties gone on record in those two cases, the oral hearings would have proceeded in the usual
way of objections, arguments and heated discussions. The oral hearings would have been longer and
costlier for the parties, the record thicker and heavier, and the issues more complex for the tribunals to
resolve.
About the Author

Atty. Roberto N. Dio is a senior litigation partner of Castillo Laman Tan Pantaleon & San Jose. He is an
accredited construction arbitrator and a mediator of the Court of Appeals. He is also a trained intellectual
property arbitrator. He serves as a trustee of PDRCI and editor of The Philippine ADR Review. In August,
he will undergo dispute board adjudication training under the auspices of the Japan International
Cooperation Agency and FIDIC.

Comments are closed.

National and local government agencies are now required

to include provisions on the use of alternative dispute
resolution (ADR) mechanisms in all contracts involving
projects with the private sector. This is the mandate of
Executive Order No. 78 (EO 78), which was issued by the
President on July 4, 2012.
EO 78 mandates the inclusion of ADR mechanisms in all Public-Private Partnership (PPP) projects, build-
operate-and-transfer (BOT) contracts, and joint venture agreements (JVAs) between the Philippine
government and private entities. Local government units (LGUs) are also encouraged to stipulate on ADR
mechanisms in accordance with their own rules when they enter into similar contracts with the private
sector.

EO 78 envisions a more inviting climate for private investments by making the resolution of disputes
arising from contracts less expensive, tedious, complex, and time-consuming, especially for large-scale,
capital-intensive infrastructure and development contracts. It also aims to encourage and actively
promote the use of ADR mechanisms as efficient tools in achieving speedy and impartial justice, thus de-
clogging the court dockets.

EO 78 directs the National Economic and Development Authority (NEDA), in consultation with the
appropriate government agencies, to issue the implementing rules and regulations for the EO, which will
be binding on all government agencies and which shall guide LGUs who enter into PPP or BOT contracts
and JVAs with the private sector.
It also orders the Department of Justice, through the Office of the Alternative Dispute Resolution, NEDA
through the PPP Center, and the government media instrumentalities to conduct a massive information
campaign on the policy directive and the different alternative dispute resolution mechanisms.

Comments are closed.

The Philippine Supreme Court recently clarified that the

interpretation of the terms of the Subcontract Agreement
is a question of law that may be raised on appeal from a
final award in construction arbitration.
In F.F. Cruz & Co., Inc. vs. HR Construction Corporation, G.R. No. 187521, decided on March 14, 2012,
F.F. Cruz & Co., Inc. (FFCCI) was the contractor of the Magsaysay Viaduct, known as the Lower Agusan
Development Project (Project), of the Philippine government. FFCCI entered into a Subcontract
Agreement with HR Construction Corporation (HRCC) for the supply of materials, labor, equipment,
tools and supervision of the construction of a portion of the Project called the East Bank Levee and Cut-
Off Channel.

Due to disputes in progress billings and the valuation of work performed, HRCC filed with the
Construction Industry Arbitration Commission (CIAC) a Complaint against FFCCI for collection and
damages, pursuant to the arbitration clause in the Subcontract Agreement.

The CIAC ruled against FFCCI and held that the payment method unilaterally adopted by FFCCIthe
back-to-back payment schemewas not agreed upon under the Subcontract Agreement. Hence, FFCCI
could not unilaterally impose on HRCC its valuation of the works completed by HRCC. FFCCI appealed to
the Court of Appeals (CA), but its appeal was dismissed.

On petition for review on certiorari with the Supreme Court, it upheld the decisions of the CIAC and the
CA and dismissed FFCCIs petition. Citing Section 19 of Executive Order No. 1008 (1985), the law creating
CIAC, the Supreme Court ruled that the arbitral award of the CIAC shall be final and inappealable except
on questions of law which shall be appealable to the Supreme Court. It declined to review the factual
findings of the arbitral tribunal upon the artful allegation that such body had misapprehended the facts
and (the Supreme Court) will not pass upon issues which are, at bottom, issues of fact, no matter how
cleverly disguised they might be as legal questions.
The Supreme Court held that, as an exception to this rule, it may review factual findings of construction
arbitrators only if it is affirmatively proved that: (a) the award was procured by corruption, fraud or other
undue means; (b) there was evident partiality or corruption of the arbitrators or of any of them; (c) the
arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient cause shown, or
in refusing to hear evidence pertinent and material to the controversy; (d) one or more of the arbitrators
were disqualified to act as such under Section 9 of Republic Act No. 876 (1951), the Arbitration Law, and
willfully refrained from disclosing such disqualifications or of any other misbehavior by which the rights
of any party have been materially prejudiced; or (e) the arbitrators exceeded their powers, or so
imperfectly executed them, that a mutual, final and definite award upon the subject matter submitted to
them was not made.

After holding that the interpretation of contract clauses involves a question of law, it granted a review but
held against FCCI on the merits of HRCCs claim.

Comments are closed.

On August 17, 2012, the Office for Alternative Dispute

Resolution (OADR), through the Department of Justice,
promulgated Department Circular No. 49 (Adopting
Accreditation Guidelines for Alternative Dispute
Resolution Provider Organizations and Training Standards
for Alternative Dispute Resolution Practitioners).
The Guidelines were enacted pursuant to Section 50 of the Alternative Dispute Resolution Act of 2004
(ADR Act), which empowered the OADR to formulate training standards for and to certify the
professional training of ADR practitioners and service providers.
Accreditation, in general

As a rule, the Guidelines mandate accreditation only for ADR practitioners and ADR provider
organizations (APO) that offer their services to government agencies or in partnership with said
agencies.

A private APO, such as PDRCI, is a private sector APO that offers ADR training programs or dispute
resolution services to the general public, to government agencies, or in partnership with said agencies. A
public APO is a government agency that offers ADR training programs or dispute resolution services
within that agency, to the general public, to other government agencies, or in partnership with said other
agencies

Private APOs offering ADR services to government agencies or in partnership with said agencies are
required to secure OADR accreditation. However, accreditation is voluntary for private APOs that offer
services to the general public, but not to government agencies or in partnership with government
agencies.

The ADR programs of public APOsexcept those of the Constitutional Commissions (Commission on
Audit, Commission on Elections, and Civil Service Commission), the Philippine Congress, the Supreme
Court and its subordinate agencies and all lower courts, and the Construction Industry Arbitration
Commission, as well as ADR programs under the Labor Code and the Katarungang Pambarangay Law
shall also be accredited by the OADR.

ADR practitioners, or those individuals acting as a mediator, conciliator, arbitrator, neutral evaluator, or
exercising similar functions in any ADR system, offering ADR services to government agencies or in
partnership with said agencies are likewise required to secure OADR accreditation. For ADR practitioners
offering services to the general public but not to government agencies or in partnership with government
agencies, OADR accreditation is voluntary.

Chapter I, Title I of the Guidelines applies to ADR practitioners trained by accredited APOs, while Title II
covers the accreditation of APO practitioners trained by non-accredited APOs, ADR centers or
institutions.
Requirements for accreditation

The following table shows the requirements for and the effects of accreditation of private APOs, public
APOs, and ADR practitioners:

EFFECTS OF
APPLICANT REQUIREMENTS ACCREDITATION
Private APO (a) notarized application form (OADR (a) the private APO shall be
Form 001) signed by a duly authorized included in the list of accredited
senior officer of the applicant and APOs in the OADR website;(b) any
supported by a board resolution where certification or accreditation of
applicable;(b) certificate of registration individual ADR practitioners
from the Securities and Exchange granted by the private APO shall be
Commission or other relevant regulatory recognized by the OADR, but only
agencies; for the period within which the
private APO remains accredited
and only for the particular field of
practice for which the ADR
(c) website address or link containing, at
practitioner has been certified or
a minimum, the following information:
accredited; and
(1) basic information, such as company
profile, mission and objectives, officers
and directors, contact details; (2) kinds
of ADR services offered, including (c) the private APO shall be
process flow, rules of procedure and permitted to offer ADR services to
enforcement mechanism; (3) roster of government agencies and shall also
accredited practitioners (including be allowed to provide ADR
professional resumes) and schedule of training, systems design or similar
fees, as well as qualification standards services to government agencies,
for the practitioners; (4) ethical subject to additional guidelines that
standards and recourse mechanisms (for the OADR may prescribe.
complaints against the practitioners),
which must be consistent with ethical
standards of the ADR Act and related
laws and regulations;

(d) complete printout (in letter-sized

paper) of all the information contained
in the website at the time of the filing of
the application;

(e) duly-signed OADR Form 002

expressing the applicants commitment
to the guidelines and standards of the
 OADR Statement of Principles for
Accredited ADR Provider Organizations
(Statement of Principles) and the
OADR Training Standards for ADR
Practitioners (Training Standards);
and

(f) payment of application fee.

(a) notarized application form (OADR

Form 003);(b) curriculum vitaeshowing
relevant ADR training and experience;
(c) syllabus/brochure/program
indicating training courses taken, names
of instructors, training hours and dates,
or similar documentation indicating
nature and duration of training
received;
(d) certificate or other proof of
attendance to relevant trainings; and
(e) payment of application fee.
(a) the ADR practitioner shall be
included in the list of accredited
ADR practitioners in the OADR
website but only for the particular
field of practice for which the ADR
practitioner has applied for and
had been certified and/or
accredited by the OADR); and(b)
the ADR practitioner may offer
ADR services to government
agencies and shall also be allowed
to provide ADR training, systems
design or similar services to
government agencies, subject to
additional guidelines that the
OADR may prescribe.

ADR Practitioner

Public APO (a) notarized application form (OADR (a) the public APOs ADR program
 Form 004) signed by the head of agency
or by the designated official;(b) OADR
certificate of accreditation of the private
APO or private ADR practitioner (in
case the public APO intends to partner
with such private APO or ADR
practitioner for the design or
implementation of its proposed ADR
program);

(c) agency issuance authorizing the shall be included in the list of

proposed ADR program and subsequent public APOs with accredited ADR
issuances approving the revised ADR
program, if any;
(d) proposed ADR program and related
documents, including, to the extent
possible, those enumerated under item
(c) above for private APOs; and
programs in the OADR website;
and(b) any certification or
accreditation of individual ADR
practitioners granted by the public
APO under the accredited ADR
program shall be recognized by the
OADR, but only for the particular
ADR program and field of practice
for which the ADR practitioner has
been certified or accredited.

(e) payment of application fee.

Applications for accreditation submitted by an APO or ADR practitioner will be initially evaluated by the
OADR for completeness or defects, in which case the applicant will be directed to make the corresponding
corrections or submit additional documents.
Accreditation of ADR training program

Private and public APOs as well as ADR practitioners who intend to offer ADR training shall also submit
their proposed training program to the OADR for approval. The proposed training program (including the
faculty resumes/curriculum vitae and training materials/module) shall be submitted to the OADR at least
one month prior to the intended training date. The OADR may require changes to the training program in
accordance with the Guidelines and may monitor the training program by sending a representative. Any
substantial deviation from the approved program without written approval of the OADR may be a ground
for revocation of accreditation of the provider of the training program.
Term of accreditation

Once an APO or ADR practitioner is accredited by the OADR, the accreditation shall be valid for two
years, subject to renewal upon submission of a new application form, payment of the required fees, and
compliance with additional requirements that may be set by the OADR.

Those who were accredited as ADR practitioners under existing government ADR programs prior to the
Guidelines will be recognized as accredited ADR practitioners for one year from the effectivity of the
Guidelines, after which they must comply with the accreditation requirements under the Guidelines.
Monitoring by the OADR

The OADR shall monitor the compliance by accredited APOs with their commitments to the guidelines
and principles provided under the Guidelines, as well as the OADR Statement of Principles and the OADR
Training Standards.
Revocation of accreditation

Upon complaint of any interested party or motu proprio, the OADR may revoke any accreditation upon a
finding of (a) material violation of any provision of the OADR Statement of Principles or the OADR
Training Standards; (b) failure to maintain the website required under the Guidelines, or its material
alteration in such a way that the private APO adopts ethical, professional, practice, legal or administrative
standards significantly lower than those initially represented in the original website; or (c) any other
violation or circumstance of a similar nature and/or analogous to items (a) and (b). The OADR shall
prepare a separate guideline outlining the procedure for resolving complaints against accredited entities.
Minimum ADR training standards

Under the Guidelines, an ADR training program shall comply with the following minimum standards:
a detailed statement of the training objectives and expected outcome in terms of knowledge to
be imparted and skills to be taught
the program must directly meet the objectives and expected outcomes of the training program
the lecturers, trainors and facilitators must either have advanced training in ADR or work
experience of at least three years in the specific area/s covered by the assigned topic
it must consist of at least 24 hours of lecture and/or coursework and a minimum of 16 hours
of simulations, practical exercises and/or skills training
it shall cover the following areas: (1) discussion of applicable laws, administrative and
executive issuances on ADR; (2) ADR theory and concepts, depending on whether the
 course covered is mediation or arbitration; (3) subject-matter content, which shall include
materials applying ADR theory and concepts to the typical types of ADR disputes; and (4)
practical exercises, role plays, simulations or similar skills-based training.
The participants in the training program shall undergo either a written or skills assessment to test their
understanding of the concepts and skills imparted. In case the training covers mediation, conciliation or
any other consensus-based process, skills assessment is mandatory.

While an apprenticeship or mentoring program is not required, the Guidelines strongly encourages each
APO to adopt this as part of their continuing education/training for newly-accredited practitioners.

The OADR will issue operational guidelines for the implementation of the Guidelines within 90 days from
its effectivity.

Comments are closed.

We learned from the presentation of Minn Naing Oo that

the term public policy as used in the enforcement of an
arbitral award does not have a uniform meaning. Different
countries have different notions of what public policy is.
That makes public policy a tough subject to discuss.
Whether in Asia or elsewhere, the meaning of public policy in the enforcement stage of the arbitral award
can be broad or narrow. At the outset, let me state that according to the editors of the Interim Report on
Public Policy as a Bar to Enforcement of International Arbitral Awards published by the International
Law Association in connection with its London Conference 2000, it is notoriously difficult to provide a
precise definition of public policy.

In one old English case, Egerton v. Brownlow, [1853] 4 HLV1, which provided the germ of what later on
will become the narrow meaning or concept of public policy in the context of enforcement of arbitral
awards, the English Court of Appeals describedbut did not define public policy as that principle of
law which holds that no subject can lawfully do that which has a tendency to be injurious to the public
good, or against public good. In another English case of more recent vintage, Deutsche Schachtbau-und
v. Ras Al Khaimah National Oil, [1987] 2 Lloyds Rep. 246, 254, the Court explained public policy in the
context of the enforcement of an arbitral award in this language:
Considerations of public policy can never be exhaustively defined, but they should be approached with
extreme caution. It has to be shown that there is some element of illegality or that the enforcement of
the award would be clearly injurious to the public good or, possibly, that enforcement would be offensive
to the ordinary reasonable and fully informed members of the public on whose behalf the powers of the
State are exercised.
The definition of public policy most often quoted is that of U.S. Circuit Court Judge Joseph Smith in
Parsons & Whittemore Overses Co., Inc. V. Societe Generale de LIndustrie de papierRAKTA and bank of
America, 508 F. 2nd 969 (2nd Cir., 1974), in which he held that enforcement of a foreign arbitral award
may be denied on public policy grounds only where enforcement would violate the forums most basic
notions of morality and justice.

Revolving around this terse and narrow definition of public policy, Singapore and Hong Kong Courts have
held that public policy should only operate in instances where the upholding of an arbitral award would
shock the conscience or is clearly injurious to the public good or wholly offensive to the ordinary
reasonable and fully informed member of the public.

The New York Convention of 1958

Article V2(b) of the New York Convention provides that recognition and enforcement of an arbitral
award may also be refused if the competent authority in the country where recognition and enforcement is
sought finds that the recognition and enforcement of the award would be contrary to the public policy
of that country. The way the provision was drafted seems to indicate that the drafters of the 1958 New
York Convention did not attempt to harmonize public policy or to establish a common international
standard.

UNCITRAL Model Law.

The 1985 UNCITRAL Model Law owes its origins to a request made in 1977 by the Asian-African Legal
Consultative Committee for a review of the operations of the New York Convention. The Committee
maintained that there was an apparent lack of uniformity in the approach of national courts to the
enforcement of awards. The Secretary-General of UNCITRAL concluded that harmonization of the
enforcement practices of States, and the judicial control of the procedure, could be achieve more
effectively by the promulgation of a model or uniform law rather than by any attempt to revise the New
York Convention.

The final text of the Model law was adopted in 1985. The Model Law includes public policy as a ground
for setting aside an award by the courts in the seat of arbitration (Art. 34) and as a ground for refusing
recognition and enforcement of a foreign award (Art. 36), in essence echoing Article V2(b) of the New
York Convention. Unfortunately, the Model Law does not define public policy. [Interim Report on
Public Policy as a Bar to Enforcement of International Arbitral Awards, International Law Association,
London Conference (2000), p. 9].

There is a Philippine case mentioned by Mr. Minn, Luzon Hydro Corporation v. Hon. Baybay and Trans-
Filed Philippines, CA-G.R. SP No. 93418, November 29, 2006, decided by the Philippine Court of Appeals,
which involved an ICC arbitration seated in Singapore. The arbitrator awarded cost to the claimant by
applying the familiar rule cost follows the event. When the award was enforced in the Philippines, the
Court of Appeals. The Court of Appeals set aside the award on the ground that it violated public policy
because there was no law in the Philippines authorizing the assessment of cost of litigation on a losing
party. The appellate court said that to make a bona fide litigant bear the cost of the other party was
contrary to public policy.

For the sake of academic discussion and with due respect to the Court of Appeals, I wish to point out two
errors in this decision.
First, it is not true that there is no law in the Philippine that authorizes a court to assess cost on the losing
party. Rule 142, Section 1 of the Revised Rules of Court provide that cost may be assessed against the
losing party as a matter of course. However, the court is given discretion not to award cost in favor of
the successful party depending on the circumstances of the case. Hence, it is not correct that there is no
law that authorizes the assessment of cost on the losing litigant. Also, the fact that the court is given
discretion to award or not to award cost can only mean that there is a public policy on cost.
The second error is the fact that the Court of Appeals had no jurisdiction to set aside a foreign arbitral
award. The Philippine court, being a court of secondary jurisdiction, can only refuse recognition and
enforcement of a foreign arbitral award on the limited grounds provided in Article V of the New York
Convention, but certainly it cannot set aside a foreign arbitral award.
In another case decided by the Philippine Supreme Court, Korea Technologies v. Hon. Alberto Lerma, G.
R. No. 143581, January 07, 2008, it stated in an obiter dictum that a Regional Trial Court, pursuant to
Article 34(2) of the Model Law, has jurisdiction to set aside a foreign arbitral award. However, when a
foreign arbitral award is sought to be enforced in the Philippines, a Philippine court, being a court of
secondary jurisdiction, can only refuse to recognize and enforce such foreign arbitral award on the limited
ground provided in Article V of the New York Convention. Only the proper court of the place of
arbitration, as the court of primary jurisdiction, has the power to set aside the award under the limited
grounds provided in Article 34(2) of the Model Law.
Errors like these are bound to occur as our courts struggle to learn the relevant nuances of international
arbitration and the processes envisaged by the New York Convention, which was ratified by the Philippine
Senate in 1967, and the Model Law, which was adopted as the Philippine law on international arbitration
in 2004 by Republic Act 9285.

In the Asia-Pacific region significant measures have been taken to promote arbitration as a form of
alternative dispute resolution, at least in terms of legislation. In some countries, the judiciary is still
struggling to come to terms with their role in the recognition and enforcement of foreign arbitral awards.
One problem lies in the judicial interpretation of modern legislation and its resultant conflict with old
case law. Another problem appears to be the continuing anxiety about arbitration. While some of it may
be attributed to a lack of familiarity with the process and relevant international consensus, the rest
appears to be founded on misplaced judicial parochialism.

With Singapore and Hong Kong in the forefront, international commercial arbitration in Asia has come of
age. Some arbitral institutions in Asia, such as the Singapore International Arbitration Centre and the
Hong Kong International Arbitration Centre have risen to the stature of leading interntional arbitral
institutions. It is the authors hope, expressed with a good measure of confidence, that the other arbitral
institutions in the region, including our very own PDRCI, will follow the lead of Singapore and Hong Kong
and in good time establish themselves in their rightful place in this part of the world.

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Part 1 of this article introduces the reader to the concept of construction contracts, its definition, types,
and types. Part 2 will discuss the parties to the contract, its terms and conditions, the contract
documents, and the stages in construction.

It has been said that if one were repeatedly involved in construction, anything that can go wrong
eventually will [Murdoch & Hughes, Construction Contracts: Law and Management 8 (2007)]. These
events are called construction risks. Construction contracts predict and allocate these risks, which become
contractual risks, by making one party financially liable should the risks occur.

The parties will estimate the likely magnitude of the cost and the likelihood of the risks happening. An
owner who builds only once may avoid some or all of the risks involved in construction, but a contractor,
architect or developer who regularly engages in construction is statistically bound sooner or later to meet
some of these disasters (Ibid.).
The allocation of risk will impact the contract price. If the risk is to be borne by the contractor, the bid
price would include an element of this contingency. On the other hand, whenever the risk is transferred
from the contractor to the owner, this should reflect a reduction in the price to balance the risk assumed
by the owner (Id., at 9).

Claims consciousnessor active familiarity with and awareness of potential claim situationsis
essential to successful project management. To do this, the contractor must be aware of the contractual
risks associated with claims. One of his highest priorities would be to manage such risks [Levin,
Construction Contract Claims, Changes and Dispute Resolution 8 (1998)].

Early identification of a claims situation requires (a) a good working knowledge of the contract documents
by the project manager, project engineer, foreman or superintendent, and the general support staff; and
(b) working familiarity with legal concepts and rights that will affect the outcome of potential claim
situations (Id., at 9, 10). This article aims to introduce the reader to the legal concept of construction
contracts.
What is a construction contract?

Online sources define a construction contract as a formal agreement for construction, alteration, or repair
of buildings or structures (bridges, dams, facilities, roads, tanks, etc.). A construction contract is distinct
from a contract to assemble, fabricate, or manufacture
(http://www.businessdictionary.com/definition/construction-contract).

Under Article 1713 of the Philippine Civil Code, a construction contract falls within the general
classification of a contract for a piece of work whereby the contractor binds himself to execute a piece of
work for the employer, in consideration of a certain price or compensation. The contractor may either
employ only his labor or skill, or also furnish the material.

The term construction can include the erection, repair and demolition of things as diverse as houses,
offices, shops, dams, bridges, expressways, home extensions, factories and airports. Different firms may
carry out specialist work relating to particular technologies, but few firms are confined to only one
building type or technology. Thus, the industryand issues that affect construction projectsis
sometimes be difficult to comprehend fully because:
The relationship between the parts are not always clear.
The boundary of the industry is unclear.1
A construction contract encompasses a building contract related to the construction of a building, as
distinguished from the construction of infrastructure or engineering projects. Engineering contracts refer
to the engineering and construction of an industrial facility designed by engineers, such as an offshore oil
and gas platform or a mineral processing facility (Ibid.).
Types of construction contract

Construction contracts fall into six general types:

EPC/Turnkey, where the contractor takes total responsibility for the engineering,
procurement and construction (EPC), and provides a fully equipped facility ready for
operation at the turn of a key.
Design and construct, in which the contractor prepares the design to satisfy the owners
requirements and then constructs that design.
Construct only, the traditional form of construction contract between an owner and
contractor in which the contractor constructs the design prepared for the owner by the
owners engineer/architect, who has a separate design contract with the owner. These
contracts can be:
(a) Lump sum

This is the most basic form of agreement between a supplier of services and a customer. The supplier or
contractor agrees to provide specified services for a specific price. The owner then agrees to pay the price
upon completion of the work or according to a negotiated payment schedule. In developing a lump sum
bid, the builder will estimate the costs of labor and materials and add to it a standard amount for
overhead and the desired amount of profit.
(b) Unit price

In this contract, the work to be performed is broken into various parts, usually by construction trade, and
a fixed price is established for each unit of work. For example, painting is typically done on a square foot
basis. Unit price contracts are seldom used for an entire major construction project, but they are
frequently used for agreements with sub-contractors. In a unit price contract, like a lump sum contract,
the contractor is paid the agreed upon price, regardless of the actual cost to do the work.
Project management, where the owner engages a project manager to act as its agent with
control over the whole project, which may or may not be divided into discrete parts.
EPCM (Engineering, Procurement, and Construction Management), in which the contractor
designs, procures and as agent for the owner manages the construction.
Construction management, in which the owner engages a construction manager to program
and coordinate the design and construction activities, which are divided into discrete parts.2

1 Loots & Charrett, Practical Guide to Engineering and Construction Contracts 24 (2009).
2 Id., at 26-7.
Next issue: Parties to the contract, its terms and conditions, the contract documents, and the stages in
construction.

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