ARBITRATION LAW agreement.
The invalidity of the container contract does not affect the validity of the
Arbitration – voluntary dispute resolution process in which one or more arbitrators, appointed
in accordance with the agreement of the parties, or rules promulgated pursuant to law, resolve
a dispute by rendering an award. (“wave of the future”)
Laws that govern:
1. Domestic Arbitration – R.A. 876
2. International Commercial Arbitration – UNCITRAL Model Law of 1985 pursuant to R.A.
9285 Sec. 19 (even if there is a 2006 version of the UNCITRAL Model Law)
- Note that R.A. 9285 only applies if the seat of arbitration is in the Philippines
Generally, everything may be subjected to arbitration
Except:
a. Labor disputes
b. Civil status of persons
c. Validity of marriage / legal separation
d. Future legitime / future support
e. Criminal liability
f. Jurisdiction of courts
g. Those by law which cannot be compromised (Art. 2035, NCC)
Arbitration Agreement
1. Party Autonomy
The parties are free to contract on the:
o ADR mechanism – such as arbitration, mediation etc.
o The arbitrators, number, their qualifications, substantive law, procedure
o Seat of arbitration – where the arbitration is conducted
 Note: vis-à-vis place of arbitration – place of evidentiary hearing
2. Obligatory Force of Arbitration Contract
o There must always be a contract
 Arbitration agreement – parties to any contract agree to settle by arbitration
any controversy arising in the future
 Submission agreement – two or more persons or parties agree to submit to
arbitration any controversy existing between them at the time of submission
o Arbitration agreement is law between the parties, thus, they must abide by it in good
faith
3. Principle of Separability – it is treated as an agreement independent of the other terms of
the contract of which it forms part
o A decision that a container contract is void does not ipso jure result to the invalidity
of the arbitration clause. This is because an arbitration agreement is a contract in
itself.
o This applies to domestic and international arbitration clause
Gonzales vs. Climax Mining (2007) – a petition to compel arbitration was filed by Climax against
Gonzales. Gonzales, however, filed in his answer making as issue the validity of the arbitration
agreement. The court held that an arbitration agreement is a separate and independent
arbitration agreement.
Moreover, in a petition to compel arbitration, the issue is only limited to whether an
arbitration agreement exists.
4. Limits as to Resolution / Rescission of the Arbitration Agreement
o If the contract contains an arbitration clause, a party cannot unilaterally resolve the
contract without first resorting to arbitration.
Korea Technologies vs. Lerma (2008) – As a general rule, a party may unilaterally rescind
subject to judicial review. An exception is when there is a conflict that must be resolved
through arbitration.
Form of Arbitration Agreement
It musts be:
(1) in writing
 note, under the Model Law, the agreement may be contained:
 in a document signed by the parties
 in an exchange of letters, telegram or other means of communication
 in an exchange of statements of claim and defense in which the existence
of an agreement was alleged by one party, and not denied by another
(2) subscribed by the parties or their representatives
BF Corporation vs. CA (1998) – Here, container agreement was signed, however, the arbitration
agreement, which was in a separate document, was not. The Court held that the arbitration
agreement and the container agreement (principal contract) need not be in the same
document. The arbitration agreement was included by reference to the contract, and thus, the
container agreement is deemed to incorporate all other contracts and agreements between
the parties.
Associated Bank vs. CA (1994) – Associated Bank, as issuing bank, and FEBTC, as collecting bank,
are deemed subject to the rules of Philippine Clearing House Corporation (PCHC). PCHC Rules
provide that the fact that a bank participates in the clearing operations of PCHC shall be
deemed written and subscribed consent to the binding effect of the arbitration agreement of
PCHC. Such participation is deemed their written and subscribed consent.
Ormoc Sugarcane Planters’ Assoc. vs. CA (2009) – a planters’ association cannot demand
arbitration if it is not a signatory to the arbitration agreement. It cannot claim to be a
representative of the planters because it was not indicated in the contract, and even if they
were representatives, they sued in their own name – which is inconsistent.
 DOMESTIC AND INTERNATIONAL COMMERCIAL ARBITRATION COMMENCEMENT OF ARBITRATION

Commercial Arbitration – if it covers matters arising from all relationships of a commercial Institutional Arbitration – depends upon the rules of the institution
nature, whether contractual or not. Ex. banking, leasing, financing, insurance, investment,
commercial representation etc. Ad hoc arbitration – deemed commenced upon service of the demand for arbitration (date of
receipt by the respondent)
Model Law Art. 1 (3): An arbitration is international if: The demand must contain: (1) nature of the controversy; (2) amount involved; (3) relief
a. the parties to an arbitration agreement have, at the time of the conclusion of that sought; (4) true copy of the contract
agreement, their places of business in different states; And also, appointment of the arbitrator
o note place of business: If single arbitrator – state specific time
 if a party has more than one place of business, the place of business is that which If three arbitrators – name party’s appointee, and then demand that a party appoints
has the closest relationship to the arbitration agreement his arbitrator within 15 days
 if a party does not have a place of business, reference is to be made to his Service: person or by registered mail
habitual residence
b. one of the places is situated outside the State in which the parties have their places of Judicial Relief Before Commencement of Arbitration
business: - If the seat is in the Philippines
(i) place of arbitration if determined in, or pursuant to, the arbitration agreement; - File with RTC place of residence or principal place of business
(ii) any place where a substantial part of the obligations of the commercial - there may be a question regarding the existence, validity, and enforceability of the
relationship is to be performed, or the place with which the subject-matter of arbitration agreement
the dispute is most closely connected; o note: pendency of the petition does not restrain the arbitral proceedings
(iii) the parties have expressly agreed that the subject-matter of the arbitration - petition – summary proceeding
agreement relates to more than one country o legal capacity to sue and be sued
o nature and substance of the dispute
Domestic International Foreign o grounds and circumstances relied upon
Seat is PH Defined above Seat of arbitration is o relief sought
Seat is PH outside the PH o attach authentic copy of the arbitration agreement
Petition for confirmation Petition for enforcement Petition for enforcement - Ruling of the court
Petition to vacate Petition to set aside Wait for petition for o Agreement is valid: not subject to MR/ 65/ appeal
enforcement and then o Agreement is void: 65
oppose by applying to
refuse recognition Judicial Relief After Arbitration Commences
Winning party may enforce - If the seat is in the Philippines
in another country where - there is already a ruling by the arbitral tribunal as regards their jurisdiction
losing party has assets - petition – summary proceeding
o legal capacity to sue and be sued
o nature and substance of the dispute
o grounds and circumstances relied upon
o relief sought
o attach authentic copy of the arbitration agreement
o also implead the arbitrators as nominal parties
- court will decide 30 days from submission of the case for resolution
- if the arbitral tribunal decides before the court renders a decision, the petition before the
court is moot and academic

Competence-Competence Principle
- 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
 o 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.
o Court’s decision as to the validity of an arbitration agreement is merely prima facie.
If there is no finding that the arbitration agreement is void, then the court must
suspend the action and refer the parties to arbitration
o The court has no authority to enjoin the arbitration proceedings.
The court is merely called upon to exercise limited and special jurisdiction – that is, the
court can only determine whether the agreement in writing provides for arbitration.
There is no law granting the judiciary authority to review the merits of an arbitral award.
APPOINTMENT OF ARBITRATORS
The appointee is not beholden to the appointing party because of the arbitrator’s impartiality
and independence.
Arbitrator – the person appointed to render an award, alone or with others, in a dispute that
is the subject of an arbitration agreement.
Requirements under R.A. 876:
1. Legal age
2. In full-enjoyment of his civil rights
3. Knows how to read and write
4. No financial, fiduciary or other interest in the controversy or
5. has personal bias which might prejudice the right of any party to a fair and impartial
award
6. Not related within the 6th degree of consanguinity or affinity to either party
If the arbitrator determines a fact that might disqualify him, he must inform the parties. The
parties may then:
a. Waive the presumptive disqualifying circumstance
b. Declare said office vacant
o Note that the grounds for disqualification can be used as a ground to vacate or set
aside the judgment
- An arbitrator is not civilly liable for acts done in the performance of their duties similar to
public officers
o EXC: gross negligence, bad faith, or malice
- The parties may agree as to the number of arbitrators. If they did not, the number shall
be three.
o Also, an agreement which provides that a party, or a person representing him (such
as the managing corporation) may appoint more arbitrators is void. (Magellan
Capital Management Corporation vs. Zosa, 2001). This is because it violates the
mutuality principle of contracts.
o Parties representing the same interest can only appoint one out of three arbitrators.
o In Oil and Natural Gas Commission vs. CA (1998) – the agreement provided that the
arbitrator shall be appointed by the Indian Commission (a party to the contract).
Moreover, the PH company cannot object to such appointment. There was already
an arbitration agreement recognized by the Indian Court. Thus, the SC held that
there is already a binding foreign judgment, and said that the party agreed that it will
not object to the appointment.
 Note that in this case, the main issue was enforcement of the foreign judgment
and not the validity of the arbitration agreement.
What if the parties failed to agree on an arbitrator, or when the 2 arbitrators fail to appoint a
third arbitrator
- Institutional Arbitration
o The institution appoints first
o If it fails, or is unable, the court may appoint
 Note that the parties may opt to have an institutional arbitration but designate
an appointing authority
- Ad hoc arbitration and the parties did not designate an appointing authority
o National President of the IBP or his duly authorized representative
o If he/she fails or refuses to act within 30 days, or period agreed upon by the parties,
the court will appoint
- Ad hoc or institutional arbitration and the parties designated an appointing authority
o And the appointing authority fails or is unable to appoint
Petition for Appointment of Arbitrators filed with the court:
o nature of the dispute
o description of the appointment procedure, if any
 number of arbitrators
 special qualifications
o fact that the appointing authority failed or refuses to act within the period prescribed
 plus, proof that the appointing authority has been notified of the filing of this
petition
o that the petitioner is not the cause of the delay or failure of the appointment of the
arbitrator
o attach authentic copy of the arbitration agreement
Decision of the Court:
- Appointing an Arbitrator
o immediately executory
o no MR/ Appeal / 65
- Denying appointment
o May MR/ Appeal/ 65
Challenge to Arbitrators – when the arbitrator does not have any of the qualifications or has
disqualifications
- This applies to both domestic and international commercial arbitration
- The parties may agree as to the procedure for challenging an arbitrator
- If there is none, file a written challenge within 15 days to the arbitral tribunal
o If denied, party must file within 30 days from receipt to go to the Appointing
Authority
o If fails or refuses to act, renew the challenge within 30 days to the RTC
 Immediately executory
 No MR/ Appeal/ 65
- Note that when the arbitrator withdraws or is terminated by court order, a substitute
arbitrator shall be appointed
o The appointment will be the same as the rules applicable to the appointment of the
arbitrator replaced
- While the challenge is pending in court, the arbitral tribunal may continue the arbitral
proceedings and make the award.

Termination of the Mandate of Arbitrator – when the arbitrator becomes de jure or de facto
unable to perform his function or for other reasons fails to act without undue delay
- The arbitrator may withdraw, or if all the parties agree – no need for court action
- A petition may also be filed with the court after the denial of the termination of his
mandate by the tribunal.
o No MR/ Appeal/ 65
o The appointment will be the same as the rules applicable to the appointment of the
arbitrator replaced