Digest

ALTERNATIVE DISPUTE RESOLUTION
Judge Carlo D. Villarama

Manuel L. Quezon University, School of Law
2nd Semester, S.Y. 2018-19
COURSE OUTLINE
I. Introduction
a. Definition of Alternative Dispute Resolution - RA 9285, Section 3 (a)
“Alternative Dispute Resolution System” means any process of procedure used to resolve a dispute or
controversy, other than by adjudication of a presiding judge of a court or an officer of a government
agency, as defined in this Act, in which a neutral third party participates to assist in the resolution of
issues, which includes arbitration, mediation, conciliation, early neutral evaluation, mini-trial, or any
combination thereof.
b. Definition of Arbitration — RA 9285, Section 3 (d)

“Arbitration” means a voluntary dispute resolution process in which one or more arbitrators, appointed
in accordance with the agreement of the parties, or rules promulgated pursuant to this Act, resolve a
dispute by rendering an award.
II. The Arbitration Agreement

a. Guiding Principle of Party Autonomy
i. RA 9285, Section 2;
Declaration of Policy. – It is hereby declared the policy of the State to actively promote party autonomy
in the resolution of disputes or the freedom of the parties to make their own arrangements to resolve
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 de-clog
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.
Book: Chapter 1, page 1-2

Arbitration – one form of ADR which results in a binding and enforceable resolution of disputes
Arbitration Litigation
Exercise of party autonomy: selection of No choice of the judge,
arbitrators (number, qualifications, period of no choice in the
selection), substantive law basis, procedure, seat procedure
of arbitration
Civil Code of the Philippines, Articles 2028, 2029, 2030, 2034, 2035, 2038, 2041,
2042, 2043, 2044, 2045, 2046
Art. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a
litigation or put an end to one already commenced. (1809a)
Art. 2029. The court shall endeavor to persuade the litigants in a civil case to agree upon some fair
compromise. (n)
Art. 2030. Every civil action or proceeding shall be suspended:

(1) If willingness to discuss a possible compromise is expressed by one or both parties; or
(2) If it appears that one of the parties, before the commencement of the action or proceeding, offered
to discuss a possible compromise but the other party refused the offer.
ADR | notes and cases based on syllabus | 1

The duration and terms of the suspension of the civil action or proceeding and similar matters shall be
governed by such provisions of the rules of court as the Supreme Court shall promulgate. Said rules of
court shall likewise provide for the appointment and duties of amicable compounders. (n)
Art. 2034. There may be a compromise upon the civil liability arising from an offense; but such
compromise shall not extinguish the public action for the imposition of the legal penalty. (1813)
Art. 2035. No compromise upon the following questions shall be valid:

(1) The civil status of persons;
(2) The validity of a marriage or a legal separation;
(3) Any ground for legal separation;
(4) Future support;
(5) The jurisdiction of courts;
(6) Future legitime. (1814a)
Art. 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence, or
falsity of documents, is subject to the provisions of Article 1330 of this Code.
However, one of parties cannot set up a mistake of fact as against the other if the latter, by virtue of the
compromise, has withdrawn from a litigation already commenced. (1817a)
Art. 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or
fraud is voidable. (1265a)
Art. 2039. When the 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 of the questions settled shall not itself be a cause
for annulment or rescission of the compromise, unless said documents have been concealed by one of the 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 the newly-discovered documents. (n)
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, the compromise may be rescinded.
Ignorance of a judgment which may be revoked or set aside is not a valid ground for attacking a compromise.
(1819a)
Art. 2041. If one of the parties fails or refuses to abide by the compromise, the other party may either
enforce the compromise or regard it as rescinded and insist upon his original demand. (n)
Art. 2042. The same persons who may enter into a compromise may submit their controversies to one
or more arbitrators for decision. (1820a)
Art. 2043. The provisions of the preceding Chapter upon compromises shall also be applicable to
arbitrations. (1821a)
Art. 2044. Any stipulation that the arbitrators' award or decision shall be final, is valid, without
prejudice to Articles 2038, 2039, and 2040. (n)
Art. 2045. Any clause giving one of the parties power to choose more arbitrators than the other is void
and of no effect. (n)
Art. 2046. The appointment of arbitrators and the procedure for arbitration shall be governed by the
provisions of such rules of court as the Supreme Court shall promulgate. (n)
ii. China Chang Jiang Energy Corporation vs. Rosal Infrastructure Builders, G.R. No.
125706, September 30, 1996
Doctrine: Under the elementary principle on the law on contracts that laws obtaining in a jurisdiction form part of
all agreements, when the law provides that the Board acquires jurisdiction when the parties to the contract agree
to submit the same to voluntary arbitration, the law in effect, automatically gives the parties an alternative forum

before whom they may submit their disputes. Cases may either be submitted to such Board or another they have
agreed upon.
Facts: Petitioner is the operator of the Binga Hydroelectric Plant in Benguet under a Rehabilitate
Operate and Leaseback Contract ("ROL Contract") with the National Power Corporation whereby it is
mandated to engage in the rehabilitation of the power plant, including the construction of check dams.
Petitioner engaged the services of respondent Rosal Infrastructure Builders ("RIB") as subcontractor,
executing a contract for the construction of Check Dam No. 1 along Sadyo River. In this contract, the
parties agreed to submit disputes arising therefrom to arbitration before the Arbitration of the
International Chamber of Commerce.
When a dispute arose between the parties, respondent RIB filed a complaint before respondent
Construction Industry Arbitration Commission (CIAC) for arbitration. Petitioner filed its answer with
compulsory counterclaim and raised therein the issue of lack of jurisdiction on the part of CIAC. In an
order, respondent CIAC considered the question of jurisdiction merely as a special defense which can be
included as part of the issues in the Terms of Reference. CIAC denied petitioner’s MR.
Petitioner raised the sole issue of lack of jurisdiction in a petition for certiorari and prohibition,
with a prayer for a temporary restraining order and writ of preliminary injunction with respondent CA.
The CA dismissed this and the MR filed by petitioner thereafter.
Issue: Whether or not CIAC has jurisdiction over the case, despite the agreement of the parties to bring
disputes before the International Chamber of Commerce.
Ruling: Yes, CIAC has jurisdiction according to E.O. No. 1008. What the law merely requires for a
particular construction contract to fall within the jurisdiction of CIAC is for the parties to agree to
submit the same to voluntary arbitration. Unlike in the original version of Section 1, as applied in the
Tesco case, the law does not mention that the parties should agree to submit disputes arising from their
agreement specifically to the CIAC for the latter to acquire jurisdiction over such disputes. Rather, it is
plain and clear that as long as the parties agree to submit to voluntary arbitration, regardless of what
forum they may choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if
they specifically choose another forum, the parties will not be precluded from electing to submit their
dispute before the CIAC because this right has been vested upon each party by law, i.e., E.O. No. 1008.
Parties may continue to stipulate as regards their preferred forum in case of voluntary
arbitration, but in so doing, they may not divest the CIAC of jurisdiction as provided by law. Under the
elementary principle on the law on contracts that laws obtaining in a jurisdiction form part of all
agreements, when the law provides that the Board acquires jurisdiction when the parties to the
contract agree to submit the same to voluntary arbitration, the law in effect, automatically gives the
parties an alternative forum before whom they may submit their disputes. That alternative forum is the
CIAC. This, to the mind of the Court, is the real spirit of E.O. No. 1008, as implemented by Section 1,
Article III of the CIAC Rules.

b. Existence of Arbitration Clause
i. La Naval Drug Corporation vs. Court of Appeals, Wilson Yao, 236 SCRA 78
(1994)
Facts: Yao is the owner of a commercial building a portion of which is leased to LNDC under a contract
of leases executed with the former owner La Proveedora Inc. LNDC exercised its option to lease the
same building for another 5 years, but when LNDC and Yao disagreed on the rental rate, the latter sent a
letter to the former expressing his intention to resolve their controversy through arbitration in
accordance with R.A. No. 876 or the Arbitration Law and in accordance to their lease contract.
Yao appointed Domingo Almarez, Jr. as his arbitrator while LNDC chose Atty. Casiano Sabile as
its arbitrator. The confirmation of the appointment of Aurelio Tupang, as third arbitrator, was held in
abeyance because LNDC needed approval from its Board of Directors on Tupang’s appointment. Yao
theorizes that this was LNDC’s design to delay the arbitration proceedings, in violation of the
Arbitration Law, and the governing stipulations of their contract of lease. As such, Yao filed claims for
damages before the RTC under a summary proceeding in accordance with Section 6 of R.A. 876,
predicated on alleged tortuous acts of LNDC in their interference and dilatory tactics in the
implementation of the Arbitration Agreement.
The respondent court announced that the two arbitrators chose Mrs. Eloisa R. Narciso as the
third arbitrator and ordered the parties to submit their position papers on the issue as to whether or
not respondent Yao's claim for damages may be litigated upon in the summary proceeding for
enforcement of arbitration agreement. In moving for reconsideration of the said Order, petitioner
argued that in Special Case No. 6024, the respondent court sits as a special court exercising limited
jurisdiction and is not competent to act on respondent Yao's claim for damages, which poses an issue
litigable in an ordinary civil action. However, respondent court was not persuaded by petitioner's
submission, hence, it denied MR. While the appellate court has agreed with petitioner that, under
Section 6 of Republic Act No. 876, a court, acting within the limits of its special jurisdiction, may in this
case solely determine the issue of whether the litigants should proceed or not to arbitration, it,
however, considered petitioner in estoppel from questioning the competence of the court to
additionally hear and decide in the summary proceedings private respondent's claim for damages,
it(petitioner) having itself filed similarly its own counterclaim with the court a quo.
Issue: Whether or not the RTC has jurisdiction over the claims for damages between parties.
Ruling: No. R.A. 876 is clear that summary proceedings under said law shall only involve the matter of
arbitration (of whether or not there is an agreement for arbitration). The parties’ claims for damages
must be litigated in another civil case. Doctrine of estoppel cannot be used as counterclaim against it.
The arbitration law explicitly confines the court’s authority only to pass upon the issue of whether
there is or there is no agreement in writing providing for arbitration. In the affirmative, the statute
ordains that the court shall issue an order “summarily directing the parties to proceed with the
arbitration in accordance with the terms thereof.” If the court, upon the other hand, finds that no such
agreement exists, “the proceedings shall be dismissed.” The proceedings are summary in nature.
It is hardly disputable that when a court is called upon to exercise limited and special
jurisdiction, that court cannot stray to matters outside the area of its declared authority or beyond what
has been expressly invested by law, particularly, such as in this instance, where the proceedings are
summary in nature.
The Supreme Court went on to discuss that where the court clearly has no jurisdiction over the
subject matter, in this case the claim and counterclaim for damages, the court must dismiss the case (in
this case, the claim and counterclaim for damages). Lack of jurisdiction over the subject matter as a
defense may be raised at any time. Failure to raise such defense shall not estop the defendant from
raising such defense (as opposed to the defense of lack of jurisdiction over the person which is deemed
waived if the defendant voluntarily appeared – if defendant voluntarily appeared, then he is estopped
from raising that defense).
ii. Cargill Philippines, Inc, vs San Fernando Regala Trading, Inc., 641 SCRA 31
(2011)
Facts: Respondent San Fernando Regala Trading, Inc. was engaged in buying and selling of molasses
and entered into a contract on July 11, 1996 with petitioner Cargill Philippines, Inc., where the former
purchased 12,000 metric tons of Thailand origin cane blackstrap molasses at US$192 per metric ton
from petitioner. Derlivery was to be made and payment by means of an Irrevocable Letter of Credit
payable at sight, opened upon petitioner’s advice. However, despite demands, petitioner failed to
comply with its obligations under the contract. As such, respondent prayed for rescission of the
contract and payment of damages.
Petitioner filed a Motion to Dismiss/Suspend Proceedings and To Refer Controversy to
Voluntary Arbitration, wherein it argued that the alleged July 11, 1996 contract was never
consummated because respondent never returned the proposed agreement bearing its written
acceptance or conformity nor did respondent open the Irrevocable Letterof Credit at sight. Petitioner
contended that the controversy between the parties was whether or not the alleged contract between
the parties was legally in existence and the RTC was not the proper forum to ventilate such issue. It
claimed that the contract contained an arbitration clause that respondent must first comply with the
arbitration clause before resorting to court, thus, the RTC must either dismiss the case or suspend the
proceedings and direct the parties to proceed with arbitration.
RTC found that there was no clear basis for petitioner’s plea to dismiss the case, pursuant to
Section 7 of the Arbitration Law. The RTC found that the arbitration clause in question contravened the
Arbitration Law procedures, i.e., the arbitration clause contemplated an arbitration proceeding in New
York before a non-resident arbitrator (American Arbitration Association); that the arbitral award shall
be final and binding on both parties. Petitioner’s MR was denied by the RTC. On appeal, the CA affirmed
the RTC Orders.
Issue: Whether or not the arbitration clause contained in the contract subject of the complaint is valid
and enforceable.
Ruling: Yes, under the Doctrine of Separability, an arbitration agreement is independent of the main
contract. The arbitration agreement is to be treated as a separate agreement and the arbitration
agreement does not automatically terminate when the contract of which it is a part comes to an end.
Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in
our jurisdiction. R.A. No. 876 authorizes arbitration of domestic disputes. Foreign arbitration, as a
system of settling commercial disputes of an international character, is likewise recognized. The
enactment of R.A. No. 9285 on April 2, 2004 further institutionalized the use of alternative dispute
resolution systems, including arbitration, in the settlement of disputes.
A contract is required for arbitration to take place and to be binding. Submission to arbitration is
a contract and a clause in a contract providing that all matters in dispute between the parties shall be
referred to arbitration is a contract. The provision to submit to arbitration any dispute arising therefrom
and the relationship of the parties is part of the contract and is itself a contract.
An arbitration agreement which forms part of the main contract shall not be regarded as invalid
or non-existent just because the main contract is invalid or did not come into existence, since the
arbitration agreement shall be treated as a separate agreement independent of the main contract. To
reiterate a contrary ruling would suggest that a party’s mere repudiation of the main contract is
sufficient to avoid arbitration and that is exactly the situation that the separability doctrine sought to
avoid. Thus, we find that even the party who has repudiated the main contract is not prevented from
enforcing its arbitration clause.
Respondent filed a complaint for rescission of contract and damages with the RTC. In so doing,
respondent alleged that a contract exists between respondent and petitioner. It is that contract which
provides for an arbitration clause which states that “any dispute which the Buyer and Seller may not be
able to settle by mutual agreement shall be settled before the City of New York by the American
Arbitration Association. The arbitration agreement clearly expressed the parties’ intention that any
dispute between them as buyer and seller should be referred to arbitration. It is for the arbitrator and
not the courts to decide whether a contract between the parties exists or is valid.
Procedural Issue: In issuing the Order which denied petitioner’s Motion to Dismiss/Suspend
Proceedings and to Refer Controversy to Voluntary Arbitration, the RTC went beyond its authority of
determining only the issue of whether or not there is an agreement in writing providing for arbitration
by directing petitioner to file an answer, instead of ordering the parties to proceed to arbitration. In so
doing, it acted in excess of its jurisdiction and since there is no plain, speedy, and adequate remedy in
the ordinary course of law, petitioner’s resort to a petition for certiorari is the proper remedy.
c. Formal Requisites of an Arbitration Clause

i. RA 876, Section 4 (domestic arbitration)
Section 4. Form of arbitration agreement. - A contract to arbitrate a controversy thereafter arising
between the parties, as well as a submission to arbitrate an existing controversy shall be in writing and
subscribed by the party sought to be charged, or by his lawful agent.
The making of a contract or submission for arbitration described in section two hereof,
providing for arbitration of any controversy, shall be deemed a consent of the parties to the jurisdiction
of the Court of First Instance of the province or city where any of the parties resides, to enforce such
contract or submission.
Section 2. Persons and matters subject to arbitration. - Two or more persons or parties may
submit to the arbitration of one or more arbitrators any controversy existing between them at
the time of the submission and which may be the subject of an action, or the parties to any
contract may in such contract agree to settle by arbitration a controversy thereafter arising
between them. Such submission or contract shall be valid, enforceable and irrevocable, save
upon such grounds as exist at law for the revocation of any contract.
Such submission or contract may include question arising out of valuations, appraisals
or other controversies which may be collateral, incidental, precedent or subsequent to any issue
between the parties.
A controversy cannot be arbitrated where one of the parties to the controversy is an
infant, or a person judicially declared to be incompetent, unless the appropriate court having
jurisdiction approve a petition for permission to submit such controversy to arbitration made
by the general guardian or guardian ad litem of the infant or of the incompetent.
But where a person capable of entering into a submission or contract has knowingly
entered into the same with a person incapable of so doing, the objection on the ground of
incapacity can be taken only in behalf of the person so incapacitated.
ii. BF Corporation vs Court of Appeals, Shangri-La Properties, Inc., Rufo Colayco,

Alfredo Ramos, maximo Licauco III, Benjamin Ramos, 288 SCRA 267 (1998)
Facts: Petitioner and respondent Shangri-la Properties, Inc. (SPI) entered into an agreement whereby
the latter engaged the former to construct the main structure of the “EDSA Plaza Project,” a shopping
mall complex in the City of Mandaluyong. The construction work was in progress when SPI decided to
expand the project by engaging the services of petitioner again, thereby entering into an agreement for
the main contract.
However, petitioner incurred delay in the construction work that SPI considered as “serious and
substantial.” On the other hand, according to petitioner, the construction works “progressed in faithful
compliance with the First Agreement until a fire broke out on November 30, 1990 damaging Phase I” of
the Project. Hence, SPI proposed the re-negotiation of the agreement between them.
Consequently, on May 30, 1991, petitioner and SPI entered into a written agreement
denominated as
“Agreement for the Execution of Builder’s Work for the EDSA Plaza Project.” Said agreement would
cover the construction work on said project as of May 1, 1991 until its eventual completion.
According to SPI, petitioner “failed to complete the construction works and abandoned the
project.” This resulted in disagreements between the parties as regards their respective liabilities under
the contract. Upon SPI’s initiative, the parties’ respective representatives met in conference but they
failed to come to an agreement. Two days after, petitioner filed with the RTC a complaint for collection
of the balance due under the construction agreement. SPI and its co-defendants filed a motion to
suspend proceedings instead of filing an answer, anchored on defendants’ allegation that the formal
trade contract for the construction of the project provided for a clause requiring prior resort to
arbitration before judicial intervention could be invoked in any dispute arising from the contract.
Petitioner opposed said motion claiming that there was no formal contract between the parties
although they entered into an agreement defining their rights and obligations in undertaking the
project.

Upon a finding that an arbitration clause indeed exists, the lower court denied SPI’s motion to
suspend proceedings. It noted that it was stated in the contract that 3 copies of the Contract Documents
were to be signed, but upon inspection, the ‘Conditions of Contract’ is not duly signed by the parties on
any page thereof—although it bears the initials of BF’s representatives and without initials of any
representative of Shangri-La Properties, Inc. SPI’s MR was denied. The CA set aside the lower court’s
decision.
Issue: Whether or not the arbitration clause found in the said ‘Conditions of Contract’ is binding upon
the parties to the Articles of Agreement, considering that it was not duly signed by the parties.
Ruling: Yes.
The formal requirements of an agreement to arbitrate in accordance to R.A. No. 876 are the
following: (a) it must be in writing and (b) it must be subscribed by the parties or their representatives.
There is no denying that the parties entered into a written contract that was submitted in evidence
before the lower court. To “subscribe” means to write underneath, as one’s name; to sign at the end of a
document. That word may sometimes be construed to mean to give consent to or to attest.
The Court finds that, upon a scrutiny of the records of this case, these requisites were complied
with in the contract in question. The Articles of Agreement, which incorporates all the other contracts
and agreements between the parties, was signed by representatives of both parties and duly notarized.
The failure of a party to initial the ‘Conditions of Contract’ does not affect compliance with the formal
requirements for arbitration agreements where that particular portion of the covenants between the
parties is included by reference in the Articles of Agreement.
Petitioner’s contention that there was no arbitration clause because the contract incorporating
said provision is part of a “hodgepodge” document, is therefore untenable. A contract need not be
contained in a single writing. It may be collected from several different writings which do not conflict
with each other and which, when connected, show the parties, subject matter, terms and consideration,
as in contracts entered into by correspondence. A contract may be encompassed in several instruments
even though every instrument is not signed by the parties, since it is sufficient if the unsigned instruments
are clearly identified or referred to and made part of the signed instrument or instruments. Similarly, a
written agreement of which there are two copies, one signed by each of the parties, is binding on both
to the same extent as though there had been only one copy of the agreement and both had signed it. The
subscription of the principal agreement effectively covers the other documents incorporated by reference
therein.
The arbitration clause provides for a “reasonable time” within which the parties may avail of the
relief under that clause. “Reasonableness” is a relative term and the question of whether the time within
which an act has to be done is reasonable depends on attendant circumstances. This Court finds that
under the circumstances obtaining in this case, a one-month period from the time the parties held a
conference on July 12, 1993 until private respondent SPI notified petitioner that it was invoking the
arbitration clause, is a reasonable time. Indeed, petitioner may not be faulted for resorting to the court
to claim what was due it under the contract. However, we find its denial of the existence of the
arbitration clause as an attempt to cover up its misstep in hurriedly filing the complaint before the
lower court.
It should be noted that in this jurisdiction, arbitration has been held valid and constitutional.
Even before the approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the
settlement of disputes through arbitration. Republic Act No. 876 was adopted to supplement the New
Civil Code’s provisions on arbitration. The potentials of arbitration as one of the alternative dispute
resolution methods that are now rightfully vaunted as “the wave of the future” in international relations,
is recognized worldwide. To brush aside a contractual agreement calling for arbitration in case of
disagreement between the parties would therefore be a step backward.
iii. Ormoc Sugarcane Planters' Association Inc. vs Court of Appeals, 596 SCRA 630
(2009)
Facts: Petitioners are associations organized by and whose members are individual sugar planters
(Planters). The membership of each association follows: 264 Planters were members of OSPA; 533
Planters belong to OLFAMCA; 617 Planters joined UNIFARM; 760 Planters enlisted with ONDIMCO; and
the rest belong to BAP-MPC which did not join the lawsuit. Respondents Hideco Sugar Milling Co., Inc.
(Hideco) and Ormoc Sugar Milling Co, Inc. (OSCO) are sugar centrals engaged in grinding and milling
sugarcane delivered to them by numerous individual sugar planters, who may or may not be members
of an association such as petitioners.
Petitioners assert that the relationship between respondents and the individual sugar planters
is governed by milling contracts, presenting representative samples of such. Notably, Article VII of the
milling contracts provides that 34% of the sugar and molasses produced from milling the Planter’s
sugarcane shall belong to the centrals (respondents) as compensation, 65% thereof shall go to the
Planter and the remaining 1% shall go the association to which the Planter concerned belongs, as aid to
the said association. The 1% aid shall be used by the association for any purpose that it may deem fit for
its members, laborers and their dependents. If the Planter was not a member of any association, then
the said 1% shall revert to the centrals. Article XIV, paragraph B4 states that the centrals may not,
during the life of the milling contract, sign or execute any contract or agreement that will provide better
or more benefits to a Planter, without the written consent of the existing and recognized associations
except to Planters whose plantations are situated in areas beyond 30km from the mill. Article XX
provides that all differences and controversies which may arise between the parties concerning the
agreement shall be submitted for discussion to a Board of Arbitration, consisting of 5 members— 2 of
which shall be appointed by the centrals, 2 by the Planter and the fifth to be appointed by the four
appointed by the parties.
Petitioners claimed that respondents violated the Milling Contract when they gave to
independent planters who do not belong to any association the 1% share, instead of reverting said
share to the centrals. Petitioners contended that respondents unduly accorded the independent
Planters more benefits and thus prayed that an order be issued directing the parties to commence with
arbitration in accordance with the terms of the milling contracts. They also demanded that respondents
be penalized by increasing their member Planters’ 65% share provided in the milling contract by 1%, to
66%. Respondents filed a motion to dismiss on ground of lack of cause of action because petitioners had
no milling contract with respondents. According to respondents, only some 80 Planters who were
members of OSPA, one of the petitioners, executed milling contracts. Respondents and these 80 Planters
were the signatories of the milling contracts. Thus, it was the individual Planters, and not petitioners,
who had legal standing to invoke the arbitration clause in the milling contracts. Petitioners, not being
privy to the milling contracts, had no legal standing whatsoever to demand or sue for arbitration.
RTC issued a Joint Order denying the motion to dismiss, declaring the existence of a milling
contract between the parties, and directing respondents to nominate two arbitrators to the Board of
Arbitrators. The RTC denied respondents’ MR and so they elevated the case to the CA through a Petition
for Certiorari with Prayer for the Issuance of Temporary Restraining Order and/or Writ of Preliminary
Injunction.
The CA rendered its challenged Decision, setting aside the assailed Orders of the RTC. The CA
held that petitioners neither had an existing contract with respondents nor were they privy to the
milling contracts between respondents and the individual Planters. In the main, the CA concluded that
petitioners had no legal personality to bring the action against respondents or to demand for
arbitration. Petitioners’ MR was denied by the CA. Thus, the instant petition.
Issue: Whether or not petitioners have legal personality to demand arbitration from respondents.
Ruling: No, although petitioners are organized members, they did not have standing to bring the case in
court nor before arbitration proceedings.
Section 2 or R.A. No. 876 (the Arbitration Law) speaks of two modes of arbitration: (a) an
agreement to submit to arbitration some future dispute, usually stipulated upon in a civil contract
between the parties, and known as an agreement to submit to arbitration, and (b) an agreement
submitting an existing matter of difference to arbitrators, termed the submission agreement. Article XX
of the milling contract is an agreement to submit to arbitration because it was made in anticipation of a
dispute that might arise between the parties after the contract’s execution.
Except where a compulsory arbitration is provided by statute, the first step toward the settlement
of a difference by arbitration is the entry by the parties into a valid agreement to arbitrate. An agreement
to arbitrate is a contract, the relation of the parties is contractual, and the rights and liabilities of the
parties are controlled by the law of contracts. In an agreement for arbitration, the ordinary elements of
a valid contract must appear, including an agreement to arbitrate some specific thing, and an agreement
to abide by the award, either in express language or by implication. The requirements that an
arbitration agreement must be written and subscribed by the parties thereto were enunciated by the
Court in B.F. Corporation v. CA, 288 SCRA 267 (1998).
By their own allegation, petitioners are associations duly existing and organized under
Philippine law, i.e. they have juridical personalities separate and distinct from that of their member
Planters. It is likewise undisputed that the 80 milling contracts that were presented were signed only by
the member Planter concerned and one of the Centrals as parties. In other words, none of the
petitioners were parties or signatories to the milling contracts. This circumstance is fatal to petitioners’
cause since they anchor their right to demand arbitration from the respondent sugar centrals upon the
arbitration clause found in the milling contracts. There is no legal basis for petitioners’ purported right
to demand arbitration when they are not parties to the milling contracts, especially when the language of
the arbitration clause expressly grants the right to demand arbitration only to the parties to the contract.
Even assuming that petitioners are indeed representatives of the member Planters who have
milling contracts with the respondents and assuming further that petitioners signed the milling
contracts as representatives of their members, petitioners could not initiate arbitration proceedings in
their own name as they had done in the present case. As mere agents, they should have brought the suit
in the name of the principals that they purportedly represent. Even if Section 4 of R.A. No. 876 allows the
agreement to arbitrate to be signed by a representative, the principal is still the one who has the right to
demand arbitration.
The formal requirements of an agreement to arbitrate are therefore the following: (a) it must be
in writing and (b) it must be subscribed by the parties or their representatives. To subscribe means to
write underneath, as one’s name; to sign at the end of a document. That word may sometimes be
construed to mean to give consent to or to attest.
Even assuming that petitioners are indeed representatives of the member Planters who have
milling contracts with the respondents and assuming further that petitioners signed the milling
contracts as representatives of their members, petitioners could not initiate arbitration proceedings in
their own name as they had done in the present case. As mere agents, they should have brought the suit
in the name of the principals that they purportedly represent. Even if Section 4 of R.A. No. 876 allows the
agreement to arbitrate to be signed by a representative, the principal is still the one who has the right to
demand arbitration.
Assuming petitioners had properly brought the case in the name of their members who had
existing milling contracts with respondents, petitioners must still prove that they were indeed
authorized by the said members to institute an action for and on the members’ behalf. In the same
manner that an officer of the corporation cannot bring action in behalf of a corporation unless it is
clothed with a board resolution authorizing an officer to do so, an authorization from the individual
member planter is a sine qua non for the association or any of its officers to bring an action before the
court of law. The mere fact that petitioners were organized for the purpose of advancing the interests and
welfare of their members does not necessarily mean that petitioners have the authority to represent their
members in legal proceedings, including the present arbitration proceedings.
Procedural Issue: At the outset, it is noted that petitioners filed the instant petition for certiorari under
Rule 65 of the Rules of Court. The instant recourse is improper because the resolution of the CA was a
final order from which the remedy of appeal was available under Rule 45 in relation to Rule 56. The
existence and availability of the right of appeal proscribes resort to certiorari because one of the
requirements for availment of the latter is precisely that there should be no appeal. It is elementary that
for certiorari to prosper, it is not enough that the trial court committed grave abuse of discretion
amounting to lack or excess of jurisdiction; the requirement that there is no appeal, nor any plain,
speedy and adequate remedy in the ordinary course of law must likewise be satisfied. The proper mode
of recourse for petitioners was to file a petition for review of the CA’s decision under Rule 45.
iv. Associated Bank vs. Court of Appeals, Philippine Commercial International Bank,
Far East Bank & Trust Co., Security Bank & Trust Co., CityTrust Banking
Corporation, 233 SCRA 137 (1994)
Facts: In a complaint for Violation of the Negotiable Instrument Law and Damages, plaintiffs seek the
recovery of the amount of P900,913.60 which defendant bank charged against their current account by
virtue of the 16 checks drawn by them despite the apparent alterations therein with respect to the
name of the payee, that is, the name Filipinas Shell was erased and substituted with Ever Trading and
DBL Trading by their supervisor Jeremias Cabrera, without their knowledge and consent.
Answering the complaint, defendant bank claimed that the subject checks appeared to have
been regularly issued and free from any irregularity which would excite or arouse any suspicion or
warrant their dishonor when the same were negotiated and honored by it; that it observed and
exercised the required diligence, care and the prescribed standard verification procedures before
finally accepting and honoring the subject checks and that the proximate cause of plaintiffs’ loss, if any,
was their own laxity, negligence and lack of control, due care and diligence in the conduct of their
business affairs.
With leave of court, defendant bank filed a Third-Party Complaint against Philippine
Commercial International Bank, Far East Bank & Trust Company, Security Bank and Trust Company and
Citytrust Banking Corporation for reimbursement, contribution, indemnity from said third-party
defendants for being the collecting banks of the subject checks and by virtue of their bank guarantee for
all checks sent for clearing to the Philippine Clearing House Corporation (PCHC), as provided for in
Section 17, PCHC Clearing House Rules and Regulations.
A Motion To Dismiss was filed by Security Bank and Trust Company on the grounds that third-
party plaintiff failed to resort to arbitration as provided for in Section 36 of the Clearing House Rules
and Regulations of the Philippine Clearing House Corporation, and that it was released from any
liability with the acceptance by third-party plaintiff of the subject check.
On the other hand, third-party plaintiff maintains that this Court has jurisdiction over the suit as
the provisions of the Clearing House Rules and Regulations are applicable only if the suit or action is
between participating member banks, whereas the plaintiffs are private persons and the third-party
complaint between participating member banks is only a consequence of the original action initiated by
the plaintiffs.
The trial court dismissed the third-party complaint for lack of jurisdiction citing Section 36 of
the Clearing House Rules and Regulations of the PCHC providing for settlement of disputes and
controversies involving any check or item cleared through the body with the PCHC. It ruled—citing the
Arbitration Rules of Procedure—that the decision or award of the PCHC through its arbitration
committee/arbitrator is appealable only on questions of law to any of the Regional Trial Courts in the
National Capital Region where the head office of any of the parties is located. After the trial court denied
plaintiffs’ Motion for Reconsideration, petitioner appealed to the Court of Appeals which promulgated
the challenged decision dismissing the petition for lack of merit. Petitioner is now before this Court
seeking a review of respondent court’s decision.
Issue: Whether or not petitioner drawee bank’s 3rd Party Complaint against private respondent
collecting banks fall within the jurisdiction of the PCHC and not the regular court.
Ruling: Yes, the Clearing House Rules and Regulations on Arbitration of the Philippine Clearing House
Corporation are clearly applicable to petitioner and private respondents, third party plaintiff and
defendants, respectively.
Petitioner Associated Bank’s third party complaint in the trial court was one for reimbursement,
contribution and indemnity against the Philippine Commercial and Industrial Bank (PCIB), the Far East
Bank and Trust, Co. (FEBTC), Security Bank and Trust Co. (SBTC), and the CityTrust Banking
Corporation (CTBC), in connection with petitioner’s having honored sixteen checks which said
respondent banks supposedly endorsed to the former for collection in 1989. Under the rules and
regulations of the Philippine Clearing House Corporation (PCHC), the mere act of participation of the
parties concerned in its operations in effect amounts to a manifestation of agreement by the parties to
abide by its rules and regulations. As a consequence of such participation, a party cannot invoke the
jurisdiction of the courts over disputes and controversies which fall under the PCHC Rules and
Regulations without first going through the arbitration processes laid out by the body. Since claims
relating to the regularity of checks cleared by banking institutions are among those claims which should
first be submitted for resolution by the PCHC’s Arbitration Committee, petitioner Associated Bank,
having voluntarily bound itself to abide by such rules and regulations, is estopped from seeking relief
from the Regional Trial Court on the coattails of a private claim and in the guise of a third party
complaint without first having obtained a decision adverse to its claim from the said body. It cannot
bypass the arbitration process on the basis of its averment that its third party complaint is inextricably
linked to the original complaint in the Regional Trial Court.
Pursuant to its function involving the clearing of checks and other clearing items, the PCHC has
adopted rules and regulations designed to provide member banks with a procedure whereby disputes
involving the clearance of checks and other negotiable instruments undergo a process of arbitration
prior to submission to the courts below. This procedure not only ensures a uniformity of rulings
relating to factual disputes involving checks and other negotiable instruments but also provides a
mechanism for settling minor disputes among participating and member banks which would otherwise
go directly to the trial courts. While the PCHC Rules and Regulations allow appeal to the Regional Trial
Courts only on questions of law, this does not preclude our lower courts from dealing with questions of
fact already decided by the PCHC arbitration when warranted and appropriate.
Not only do the parties manifest by mere participation their consent to these rules, but such
participation is deemed (their) written and subscribed consent to the binding effect of arbitration
agreements under the PCHC rules. Moreover, a participant subject to the Clearing House Rules and
Regulations of the PCHC may go on appeal to any of the Regional Trial Courts in the National Capital
Region where the head office of any of the parties is located only after a decision or award has been
rendered by the arbitration committee or arbitrator on questions of law.
Clearly therefore, petitioner Associated Bank, by its voluntary participation and its consent to the
arbitration rules cannot go directly to the Regional Trial Court when it finds it convenient to do so. The
jurisdiction of the PCHC under the rules and regulations is clear, undeniable and is particularly
applicable to all the parties in the third party complaint under their obligation to first seek redress of
their disputes and grievances with the PCHC before going to the trial court.

d. Matters that Parties May Agree On
i. Type of Arbitration,
 Ad Hoc Arbitration
-“created for a specific purpose”
-parties agree on specific procedures to use or not to use
-there is greater freedom, thereby having the option to resolve issues quicker
-however, it requires extraordinary cooperation between the parties
 Institutional Arbitration
-parties agree on an arbitration center (ex: Philippine Institute of Arbitration

 Domestic International Arbitration
 International Commercial Arbitration
Arbitration is “commercial” if it covers matters arising from all relationships of a commercial

nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to,
the following: any trade transaction for the supply or exchange of goods or services; distribution
agreements; construction works; commercial representation or agency; factoring; leasing; consulting;
engineering; licensing; investment; financing; banking; insurance; joint venture and other forms of
industrial or business cooperation; carriage of goods or passengers by air, sea, rail or road. (Section 21,
RA 9285)
Appointment of Arbitrators,
Procedure,
Law Governing the Dispute,
Ex Aequeo et Bono or Amiable Compositeur,

(Latin for "according to the right and good" or "from equity and conscience") In the context of
arbitration, it refers to the power of arbitrators to dispense with consideration of the law but consider
solely what they consider to be fair and equitable in the case at hand. It is often described as arbitration
and not arbitrary which may be the result of strict application and interpretation of the various
applicable laws to the arbitration.
It is expressly provided for in the UNCITRAL Model Law on International Commercial
Arbitration 1985. Article 38(2) of the Statute of the International Court of Justice (ICJ) provides that the
court may decide cases ex aequo et bono, but only where the parties agree thereto. Equally, Article 33 of
the United Nations Commission on International Trade Law's Arbitration Rules (1976) provides that
the arbitrators shall consider only the applicable law, unless the arbitration agreement allows the
arbitrators to consider ex aequo et bono, or amiable compositeur, instead. Article 13(4) of the ICC
Arbitration Rules and Articles 28(3) and 33(2) of the UNCITRAL Model Law 1985 with the
amendments adopted in 2006 allow the arbitrators to act as amiable compositeur, but only if the
parties confer such powers upon them.
Language used,
Experts
e. Matters that are Non-Arbitrable

i. RA 9285, Section 25
Sec. 25. Interpretation of the Act. – In interpreting the Act, the court shall have due regard to the policy
of the law in favor of arbitration. Where action is commenced by or against multiple parties, one or
more of whom are parties to an arbitration agreement, the court shall refer to arbitration those parties
who are bound by the arbitration agreement although the civil action may continue as to those who are
not bound by such arbitration agreement.
ii. Civil Code of the Philippines, Article 2035
Art. 2035. No compromise upon the following questions shall be valid:
(1) The civil status of persons; (4) Future support;
(2) The validity of a marriage or a legal (5) The jurisdiction of courts;
separation; (6) Future legitime. (1814a)
(3) Any ground for legal separation;
f. Separability of Arbitration Clause

i. 1985 Model Law, Article 16 (1);
Article 16. Competence of arbitral tribunal to rule on its jurisdiction.
(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the
existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms
part of a contract shall be treated as an agreement independent of the other terms of the contract. A
decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity
of the arbitration clause.
Special Rules on ADR, Rule 2.2 (B)
Rule 2.2. Policy on arbitration.
(B) Where court intervention is allowed under ADR Laws or the Special ADR Rules, courts shall not
refuse to grant relief, as provided herein, for any of the following reasons:
a. Prior to the constitution of the arbitral tribunal, the court finds that the principal action is the subject
of an arbitration agreement; or
b. The principal action is already pending before an arbitral tribunal.
The Special ADR Rules recognize 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.
The Special ADR Rules recognize the principle of separability of the arbitration clause, which
means that said clause shall be treated as an agreement independent of the other terms of the contract
of which it forms part. A decision that the contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause.
Book: Chapter 1, page 19

Principle of Separability of the arbitration clause, which means that the arbitration clause shall be
treated as an agreement independent of the other terms of the contract of which it forms part. A
decision that the container contract is null and void shall not entail ipso jure the invalidity of the
arbitration clause.
ii. Gonzales vs Climax Mining Ltd., 512 SCRA 148 (2007)

Facts: book page 20
Issue: Whether or not arbitration is proper even though Gonzales has raised the twin issues of validity
and nullity of the Addendum Contract and consequently the arbitration clause contained therein.
Ruling: Yes, arbitration is proper under the doctrine of separability.

It is elementary in remedial law that the use of an erroneous mode of appeal is cause for
dismissal of the petition for certiorari and it has been repeatedly stressed that a petition for certiorari is
not a substitute for a lost appeal. The Arbitration Law specifically provides for an appeal by certiorari,
i.e., a petition for review on certiorari under Rule 45 of the Rules of Court that raises pure questions of
law. Proper interpretation of Sec. 29 of R.A. No. 876 shows that the term “may” refers only to the filing of
an appeal, not to the mode of review to be employed—the use of “may” merely reiterates the principle

that the right to appeal is not part of due process of law but is a mere statutory privilege to be exercised
only in the manner and in accordance with law.
Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted
in our jurisdiction. The Civil Code is explicit on the matter. R.A. No. 876 also expressly authorizes
arbitration of domestic disputes. Foreign arbitration, as a system of settling commercial disputes of an
international character, was likewise recognized when the Philippines adhered to the United Nations
“Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of 1958,” under the 10
May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and allowing
enforcement of international arbitration agreements between parties of different nationalities within a
contracting state. The enactment of R.A. No. 9285 on 2 April 2004 further institutionalized the use of
alternative dispute resolution systems, including arbitration, in the settlement of disputes.
Disputes do not go to arbitration unless and until the parties have agreed to abide by the
arbitrator’s decision. Necessarily, a contract is required for arbitration to take place and to be binding.
R.A. No. 876 recognizes the contractual nature of the arbitration agreement, thus: Sec. 2.Persons and
matters subject to arbitration.—Two or more persons or parties may submit to the arbitration of one or
more arbitrators any controversy existing, between them at the time of the submission and which may
be the subject of an action, or the parties to any contract may in such contract agree to settle by
arbitration a controversy thereafter arising between them. Such submission or contract shall be valid,
enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any contract.
Such submission or contract may include question arising out of valuations, appraisals or other
controversies which may be collateral, incidental, precedent or subsequent to any issue between the
parties. A controversy cannot be arbitrated where one of the parties to the controversy is an infant, or a
person judicially declared to be incompetent, unless the appropriate court having jurisdiction approve a
petition for permission to submit such controversy to arbitration made by the general guardian or
guardian ad litem of the infant or of the incompetent.
The arbitration agreement is to be treated as a separate agreement and the arbitration agreement
does not automatically terminate when the contract of which it is part comes to an end. The separability
of the arbitration agreement is especially significant to the determination of whether the invalidity of
the main contract also nullifies the arbitration clause. Indeed, the doctrine denotes that the invalidity of
the main contract, also referred to as the “container” contract, does not affect the validity of the
arbitration agreement. Irrespective of the fact that the main contract is invalid, the arbitration
clause/agreement still remains valid and enforceable.
The proceeding in a petition for arbitration under R.A. No. 876 is limited only to the resolution
of the question of whether the arbitration agreement exists. The Court now holds that the validity of the
contract containing the agreement to submit to arbitration does not affect the applicability of the
arbitration clause itself.
iii. Del Monte Corporation-USA vs. Court of Appeals, 351 SCRA 373 (2001)
Facts: In a Distributorship Agreement, petitioner Del Monte Corporation-USA (DMC-USA) appointed
private respondent Montebueno Marketing, Inc. (MMI) as the sole and exclusive distributor of its Del
Monte products in the Philippines for a period of 5 years, renewable for 2 consecutive 5-year periods
with the consent of the parties. The Agreement provided, among others, for an arbitration clause which
states that the agreement shall be governed by laws of the State of California and/or, if applicable, the
USA and that all disputes arising out of or relating to the agreement, the parties’ relationship or its
termination, shall be resolved by arbitration in San Francisco City, California under the Rules of
American Arbitration Association. Immediately after its appointment, private respondent MMI
appointed Sabrosa Foods, Inc (SFI), with the approval of petitioner DMC-USA, as MMFs marketing arm
to concentrate on its marketing and selling function as well as to manage its critical relationship with
the trade.
Private respondents MMI, SFI and MMI’s Managing Director Liong Liong C. Sy (LILY SY) filed a
Complaint against petitioners DMC-USA, Paul E. Derby, Jr., Daniel Collins and Luis Hidalgo, and Dewey
Ltd. before the Regional Trial Court of Malabon, Metro Manila for alleged violations of Arts. 20, 21 and
23 of the Civil Code. According to private respondents, DMC-USA products continued to be brought into
the country by parallel importers despite the appointment of private respondent MMI as the sole and
exclusive distributor of Del Monte products thereby causing them great embarrassment and substantial
damage. They alleged that the products brought into the country by these importers were aged,
damaged, fake or counterfeit, so that they had to cause the publication of a “warning to the trade” paid
advertisement in leading newspapers. Private respondents further averred that petitioners knowingly
and surreptitiously continued to deal with the former in bad faith by involving disinterested third
parties and by proposing solutions which were entirely out of their control. As a result of the fraud, bad
faith, malice and wanton attitude of petitioners, they should be held responsible for all the actual
expenses incurred by private respondents in the delayed shipment of orders which resulted in the extra
handling thereof, the actual expenses and cost of money for the unused Letters of
Credit (LCs) and the substantial opportunity losses due to created out-of-stock situations and
unauthorized shipments of Del Monte-USA products to the Philippine Duty Free Area and Economic
Zone.
Petitioners filed a Motion to Suspend Proceedings invoking the arbitration clause in their
Agreement with private respondents. But in a Resolution, the trial court deferred consideration of
petitioners’ Motion to Suspend Proceedings as the grounds alleged therein did not constitute the
suspension of the proceedings considering that the action was for damages with prayer for the issuance
of Writ of Preliminary Attachment and not on the Distributorship Agreement. Furthermore, the trial
court stated that it “will not serve the ends of justice and to allow said suspension will only delay the
determination of the issues, frustrate the quest of the parties for a judicious determination of their
respective claims, and/or deprive and delay their rights to seek redress.”
On appeal, the CA affirmed the decision of the RTC. It held that the alleged damaging acts recited
in the Complaint, constituting petitioners’ causes of action, required the interpretation of Art. 21 of the
Civil Code and that in determining whether petitioners had violated it “would require a full blown trial”
making arbitration “out of the question.”
Issue: Whether or not the action for damages under Art. 21 of the Civil Code under a contract with
reciprocal obligations and arbitration clause warrants an order compelling the parties to submit to
arbitration.
Ruling: Yes, the issue is arbitrable but only parties to the agreement are bound by the arbitration
agreement. In the interest of justice, the controversy shall be heard and adjudicated by the trial court in
a single and complete proceedings.
There is no doubt that arbitration is valid and constitutional in our jurisdiction. Even before the
enactment of RA 876, this Court has countenanced the settlement of disputes through arbitration.
Unless the agreement is such as absolutely to close the doors of the courts against the parties, which
agreement would be void, the courts will look with favor upon such amicable arrangement and will only
interfere with great reluctance to anticipate or nullify the action of the arbitrator. Moreover, as RA 876
expressly authorizes arbitration of domestic disputes, foreign arbitration as a system of settling
commercial disputes was likewise recognized when the Philippines adhered to the United Nations
“Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of 1958” under the 10
May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and allowing
enforcement of international arbitration agreements between parties of different nationalities within a
contracting state.
A careful examination of the instant case shows that the arbitration clause in the Distributorship
Agreement between petitioner DMC-USA and private respondent MMI is valid and the dispute between
the parties is arbitrable. However, this Court must deny the petition.
Only parties to the Agreement, their assigns or heirs have the right to arbitrate or could be
compelled to arbitrate. The Agreement between petitioner DMC-USA and private respondent MMI is a
contract. The provision to submit to arbitration any dispute arising therefrom and the relationship of
the parties is part of that contract and is itself a contract. As a rule, contracts are respected as the law
between the contracting parties and produce effect as between them, their assigns and heirs. Clearly,
only parties to the Agreement, i.e., petitioners DMC-USA and its Managing Director for Export Sales Paul E.
Derby, Jr., and private respondents MMI and its Managing Director LILY SY are bound by the Agreement
and its arbitration clause as they are the only signatories thereto. Petitioners Daniel Collins and Luis
Hidalgo, and private respondent SFI, not parties to the Agreement and cannot even be considered
assigns or heirs of the parties, are not bound by the Agreement and the arbitration clause therein.
Consequently, referral to arbitration in the State of California pursuant to the arbitration clause and the
suspension of the proceedings in Civil Case No. 2637-MN pending the return of the arbitral award could
be called for but only as to petitioners DMC-USA and Paul E. Derby, Jr., and private respondents MMI
and LILY SY, and not as to the other parties in this case
The object of arbitration is to allow the expeditious determination of a dispute. Clearly, the issue
before us could not be speedily and efficiently resolved in its entirety if we allow simultaneous
arbitration proceedings and trial, or suspension of trial pending arbitration. Accordingly, the interest of
justice would only be served if the trial court hears and adjudicates the case in a single and complete
proceeding.
g. Rescission of Arbitration Agreement

Where a contract contains an arbitration clause, a party may not unilaterally resolve or terminate the
contract, on account of infractions committed by the other party, without first resorting to arbitration.
i. Korea Technologies Co. Ltd vs. Lerma, 542 SCRA 1 (2008)

Facts: book page 25
Issue: Whether or not a party may unilaterally resolve or rescind the contract in a reciprocal obligation
with the presence of an arbitration clause.
Ruling: No, even if the other party fails to perform its prestation in reciprocal obligations, the aggrieved
party may not unilaterally resolve or terminate the contract without first resorting to arbitration.
While it is established in this jurisdiction is the rule that the law of the place where the contract is
made governs—lex loci contractus—Art. 2044 of the Civil Code sanctions the validity of mutually agreed
arbitral clause or the finality and binding effect of an arbitral award. Established in this jurisdiction is the
rule that the law of the place where the contract is made governs. Lex loci contractus. The contract in
this case was perfected here in the Philippines. Therefore, our laws ought to govern. Nonetheless, Art.
2044 of the Civil Code sanctions the validity of mutually agreed arbitral clause or the finality and
binding effect of an arbitral award. Art. 2044 provides, “Any stipulation that the arbitrators’ award or
decision shall be final, is valid, without prejudice to Articles 2038, 2039 and 2040.” (Emphasis
supplied.) Arts. 2038, 2039, and 2040 above-cited refer to instances where a compromise or an arbitral
award, as applied to Art. 2044 pursuant to Art. 2043, may be voided, rescinded, or annulled, but these
would not denigrate the finality of the arbitral award.
While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a
procedural law which has a retroactive effect. Under Sec. 24 of R.A. 9285, the Regional Trial Court does
not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an
arbitration clause, and mandates the referral to arbitration in such cases.
Even if foreign arbitral awards are mutually stipulated by the parties in the arbitration clause to
be final and binding, the same are not immediately enforceable or cannot be implemented immediately—
they must still be confirmed by the Regional Trial Court. It is now clear that foreign arbitral awards when
confirmed by the 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 executory decisions of our courts of law. Thus, it can be
gleaned that the concept of a final and binding arbitral award is similar to judgments or awards given by
some of our quasi-judicial bodies, like the National Labor Relations Commission and Mines Adjudication
Board, whose final judgments are stipulated to be final and binding, but not immediately executory in the
sense that they may still be judicially reviewed, upon the instance of any party. Therefore, the final
foreign arbitral awards are similarly situated in that they need first to be confirmed by the RTC.
While the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed
upon by the parties, still the foreign arbitral award is subject to judicial review by the RTC which can set
aside, reject, or vacate it.
The differences between a final arbitral award from an international or foreign arbitral tribunal
and an award given by a local arbitral tribunal are the specific grounds or conditions that vest
jurisdiction over our courts to review the awards. For foreign or international arbitral awards which
must first be confirmed by the RTC, the grounds for setting aside, rejecting or vacating the award by the
RTC are provided under Art. 34(2) of the UNCITRAL Model Law. For final domestic arbitral awards,
which also need confirmation by the RTC pursuant to Sec. 23 of RA 876 and shall be recognized as final

and executory decisions of the RTC, they may only be assailed before the RTC and vacated on the
grounds provided under Sec. 25 of RA 876.
An arbitration clause, stipulating that the arbitral award is final and binding, does not oust our
courts of jurisdiction as the international arbitral award is still judicially reviewable under certain
conditions provided for by the United Nations Commission on International Trade Law (UN-CITRAL)
Model Law on International Commercial Arbitration (ICA) as applied and incorporated in RA 9285.
The act of treating a contract as rescinded on account of infractions by the other contracting
party is valid albeit provisional as it can be judicially assailed, is not applicable to the instant case on
account of a valid stipulation on arbitration. Where an arbitration clause in a contract is availing, neither
of the parties can unilaterally treat the contract as rescinded since whatever infractions or breaches by a
party or differences arising from the contract must be brought first and resolved by arbitration, and not
through an extrajudicial rescission or judicial action.
The pendency of an arbitral proceeding does not foreclose resort to the courts for provisional
reliefs—the RTC has authority and jurisdiction to grant interim measures of protection.
III. Commencement of Arbitration

a. Ad Hoc Default Rules
i. RA 876, Section 5(a)
Section 5. Preliminary procedure. - An arbitration shall be instituted by:
(a) In the case of a contract to arbitrate future controversies by the service by either party upon the
other of a demand for arbitration in accordance with the contract. Such demand shall be set forth the
nature of the controversy, the amount involved, if any, and the relief sought, together with a true copy
of the contract providing for arbitration. The demand shall be served upon any party either in person or
by registered mail. In the event that the contract between the parties provides for the appointment of a
single arbitrator, the demand shall be set forth a specific time within which the parties shall agree upon
such arbitrator. If the contract between the parties provides for the appointment of three arbitrators,
one to be selected by each party, the demand shall name the arbitrator appointed by the party making
the demand; and shall require that the party upon whom the demand is made shall within fifteen days
after receipt thereof advise in writing the party making such demand of the name of the person
appointed by the second party; such notice shall require that the two arbitrators so appointed must
agree upon the third arbitrator within ten days from the date of such notice.
b. Institutional Arbitration
i. House Rules of Respective Arbitration Center
c. Principle of Competence-Competence
-tribunal rules on its own jurisdiction
-“including any objection with respect to the existence or validity of the arbitration agreement” of Rule
2.4 of the Special ADR Rules is valid for the court’s determination of existence of AA is only prima facie;
same issue can be determined by the Tribunal itself
i. Rule 2.4 of Special ADR Rules

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.

ii. 1985 Model Law Article 16;
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the
submission of the statement of defense. A party is not precluded from raising such a plea by the fact that
he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is
exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope
of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit
a later plea if it considers the delay justified.
(3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a
preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary
question that it has jurisdiction, any party may request, within thirty days after having received notice
of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no
appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and
make an award.
Special Rules on ADR, Rule 2.2, 2.4, 3.8, 4.8

Rule 2.2. Policy on arbitration.- (A) Where the parties have agreed to submit their dispute to arbitration,
courts shall refer the parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such
arbitration agreement is the law between the parties and that they are expected to abide by it in good
faith. Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not
limited to, the following:
a. The referral tends to oust a court of its jurisdiction;
b. The court is in a better position to resolve the dispute subject of arbitration;
c. The referral would result in multiplicity of suits;
d. The arbitration proceeding has not commenced;
e. The place of arbitration is in a foreign country;
f. One or more of the issues are legal and one or more of the arbitrators are not lawyers;
g. One or more of the arbitrators are not Philippine nationals; or
h. One or more of the arbitrators are alleged not to possess the required qualification under the
arbitration agreement or law.
(B) Where court intervention is allowed under ADR Laws or the Special ADR Rules, courts shall not
refuse to grant relief, as provided herein, for any of the following reasons:
a. Prior to the constitution of the arbitral tribunal, the court finds that the principal action is the
subject of an arbitration agreement; or
b. The principal action is already pending before an arbitral tribunal.
The Special ADR Rules recognize 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.
The Special ADR Rules recognize the principle of separability of the arbitration clause, which
means that said clause shall be treated as an agreement independent of the other terms of the contract
of which it forms part. A decision that the contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause.
Rule 3.8. Court action. - In resolving the petition, the court must exercise judicial restraint in accordance
with the policy set forth in Rule 2.4, deferring to the competence or jurisdiction of the arbitral tribunal
to rule on its
competence or jurisdiction.

Rule 4.8. Arbitration to proceed.- Despite the pendency of the action referred to in Rule 4.1, above,
arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while
the action is pending before the court.

IV. The Arbitrators
a. Definition
Arbitrator means the person appointed to render an award, alone or with others, in a dispute
that is the subject of an arbitration agreement. Arbitrators have the same civil liability for acts done in
the performance of their duties as that of public officers as provided in Section 38(1), Chapter 9, Book I
of the Administrative Code of 1987. This means that an arbitrator shall not be civilly liable for acts done
in the performance of his official duties, unless there is a clear showing of bad faith, malice or gross
negligence.
i. 1985 Model Law Article 11, 10(2)

Article 10. Number of arbitrators
(1) The parties are free to determine the number of arbitrators.
(2) Failing such determination, the number of arbitrators shall be three.
Article 11. Appointment of arbitrators

(1) No person shall be precluded by reason of his nationality from acting as an arbitrator, unless
otherwise agreed by the parties.
(2) The parties are free to agree on a procedure of appointing the arbitrator or arbitrators, subject to
the provisions of paragraphs (4) and (5) of this article.
(3) Failing such agreement,
(a) in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two
arbitrators thus appointed shall appoint the third arbitrator; if a party fails to appoint the
arbitrator within thirty (30) days of receipt of a request to do so from the other party, or if the
two arbitrators fail to agree on the third arbitrator within thirty (30) days of their appointment,
the appointment shall be made, upon request of a party, by the court or other authority
specified in Article 6;
(b) in an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator, he
shall be appointed, upon request of a party, by the court or other authority specified in article 6.
(4) Where, under an appointment procedure agreed upon by the parties,
(a) a party fails to act as required under such procedure, or
(b) the parties, or two arbitrators, are unable to reach an agreement expected of them under
such procedure, or
(c) a third party, including an institution, fails to perform any function entrusted to it under
such procedure, any party may request the court or other authority specified in Article 6 to take
the necessary measure, unless the agreement on the appointment procedure provides other
means for securing the appointment.
(5) A decision on a matter entrusted by paragraph (3) or (4) of this article to the court or other
authority specified in Article 6 shall be subject to no appeal. The court or other authority, in appointing
an arbitrator, shall have due regard to any qualifications required of the arbitrator by the agreement of
the parties and to such considerations as are likely to secure the appointment of an independent and
impartial arbitrator and, in the case of a sole or third arbitrator, shall take into account as well the
advisability of appointing an arbitrator of a nationality other than those of the parties.
b. Duties
i. 1985 Model Law Article 18, Article 11(5), Article 12
Article 12. Grounds for challenge
(1) When a person is approached in connection with his 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.
(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.
Article 18. Equal treatment of parties
The parties shall be treated with equality and each party shall be given a full opportunity of presenting
his case.
c. Appointment
i. Magellan Capital Management Corp. vs. Zosa, 355 SCRA 157 (2001)
Facts: Under a management agreement, Magellan Capital Holdings Corporation (MCHC) appointed
Magellan Capital Management Corporation (MCMC) as manager for the operation of its business affairs.
Pursuant thereto, MCHC, MCMC and private respondent Rolando M. Zosa entered into an Employment
Agreement designating Zosa as President and Chief Executive Officer of MCHC. Under the Employment
Agreement, the term of Zosa's employment shall be co-terminous with the management agreement
unless sooner terminated. The grounds for termination of employment are provided in the Employment
Agreement.
A year following the execution of the management agreement, the majority of MCHCs Board of
Directors decided not to re-elect Zosa as President and CEO on account of loss of trust and confidence
but he was elected to a new position as MCHC's Vice-Chairman/Chairman for New Ventures
Development. Not long after, Zosa communicated his resignation for good reason from the position of
Vice-Chairman on the ground that the position had less responsibility and scope than President and
CEO. He demanded that he be given termination benefits under the Employment Agreement MCHC
communicated its non-acceptance of Zosa's resignation for good reason, but instead informed him,
among other things, that the Employment Agreement is terminated for cause. Disagreeing with the
position taken by MCHC and MCMC, Zosa invoked the arbitration clause of the Employment Agreement,
to wit:
“23. Arbitration. In the event that any dispute, controversy or claim arises out of or under any
provisions of this Agreement, then the parties hereto agree to submit such dispute, controversy or
claim to arbitration as set forth in this Section and the determination to be made in such
arbitration shall be final and binding. Arbitration shall be effected by a panel of three arbitrators.
The Manager, Employee and Corporation shall designate one (1) arbitrator who shall, in turn,
nominate and elect who among them shall be the chairman of the committee. Any such arbitration,
including the rendering of an arbitration award, shall take place in Metro Manila. The arbitrators
shall interpret this Agreement in accordance with the substantive laws of the Republic of the
Philippines. The arbitrators shall have no power to add to, subtract from or otherwise modify the
terms of Agreement or to grant injunctive relief of any nature. Any judgment upon the award of the
arbitrators may be entered in any court having jurisdiction thereof, with costs of the arbitration to
be borne equally by the parties, except that each party shall pay the fees and expenses of its own
counsel in the arbitration.”
Respondent Zosa designated his brother, Atty. Francis Zosa, as his representative in the
arbitration panel while MCHC designated Atty. Inigo S. Fojas and MCMC nominated Atty. Enrique I.
Quiason as their respective representatives in the arbitration panel. However, instead of submitting the
dispute to arbitration, respondent Zosa, filed an action for damages against petitioners before the
Regional Trial Court of Cebu to enforce his benefits under the Employment Agreement. MCHC and
MCMC filed a motion to dismiss arguing that the trial court has no jurisdiction because of the arbitration
clause and because of improper venue.
The motion to dismiss was denied. After further proceedings, the RTC declared the arbitration
clause partially void and of no effect:
"WHEREFORE, premises considered, judgment is hereby rendered partially declaring the
arbitration clause of the Employment Agreement void and of no effect, only insofar as it concerns
the composition of the panel of arbitrators, and directing the parties to proceed to arbitration in
accordance with the Employment Agreement under the panel of three (3) arbitrators, one for the
plaintiff, one for the defendants, and the third to be chosen by both the plaintiff and defendants.
The other terms, conditions and stipulations in the arbitration clause remain in force and effect"
MCHC and MCMC went up to the SC under Rule 45 to question the trial court's decision.
Issue: Whether or not the arbitration clause (Section 23 of the Employment Contract) is valid.
Ruling: No, it is invalid for violating Article 2045 of the Civil Code in allowing petitioners to choose more
arbitrators than the other. Implied from the Supreme Court decision in the Magellan case is that, in a
multi-party arbitration, parties representing the same interest are entitled to the appointment of one
arbitrator only.
It is unavailing for MCHC and MCMC to ask for a review of the factual findings of the trial court
that the composition of the panel of arbitrators would, in all probability, work injustice to Zosa. The
jurisdiction of this Court in a petition for review on certiorari under Rule 45 is limited to reviewing only
errors of law, not of fact, unless the factual findings are devoid of support by the evidence on record, or
the assailed judgment is based on misapprehension of facts.
Even if procedural rules are disregarded, this Court finds the trial court's observations on why
the composition of the panel of arbitrators should be voided, incisively correct so as to merit our
approval. The Court is of the view that the defendants MCMC and MCHC represent the same interest.
There is no quarrel that both defendants are entirely two different corporations with personalities
distinct and separate from each other and that a corporation has a personality distinct and separate
from those persons composing the corporation as well as from that of any other legal entity to which it
may be related. But as the defendants [MCMC and MCHC] represent the same interest, it could never be
expected, in the arbitration proceedings, that they would not protect and preserve their own interest,
much less, would both or either favor the interest of the plaintiff [Zosa].
From the foregoing arbitration clause, it appears that the two defendants [MCMC and MCHC]
have one arbitrator each to compose the panel of three arbitrators. As the defendant MCMC is the
Manager of defendant MCHC, its decision or vote in the arbitration proceeding would naturally and
certainly be in favor of its employer and the defendant MCHC would have to protect and preserve its
own interest; hence, the two votes of both defendants [MCMC and MCHC] would certainly be against the
lone arbitrator for the plaintiff [Zosa]. Hence, apparently, plaintiff [Zosa] would never get or receive
justice and fairness in the arbitration proceedings from the panel of arbitrators as provided in the
aforequoted arbitration clause.
In fairness and justice to the plaintiff [Zosal, the two defendants [MCMC and MCHC] which
represent the same interest should be considered as one and should be entitled to only one arbitrator to
represent them in the arbitration proceedings. Accordingly, the arbitration clause, insofar as the
composition of the panel of arbitrators is concerned should be declared void and of no effect, because
the law says, "any clause giving one of the parties power to choose more arbitrators than the other is
void and of no effect" (Article 2045, Civil Code).
The dispute or controversy between the defendants [MCMC and MCHC] and the plaintiff [Zosa]
should be settled in the arbitration proceeding in accordance with the Employment Agreement, but
under the panel of three arbitrators, one arbitrator to represent the plaintiff, one arbitrator to
represent both defendants [MCMC and MCHC] and the third arbitrator to be chosen by the plaintiff
[Zosa] and defendants [MCMC and MCHCJ."
Arbitration proceedings are designed to level the playing field among the parties in pursuit of a
mutually acceptable solution to their conflicting claims. Any arrangement or scheme that would give
undue advantage to a party in the negotiating table is anathema to the very purpose of arbitration and
should, therefore, be resisted.
ii. Oil and Natural Gas Commission vs. Court of Appeals, 293 SCRA 26 (1998)
Facts: Oil and Natural Gas Commission, a foreign corporation owned and controlled by the Government
of India, and Pacific Cement Company, Inc., a private corporation organized and existing under the laws
of the Philippines, entered into a contract whereby the Philippine corporation undertook to supply the
Indian Commission 4,300 metric tons of oil well cement for the price of US$477,300.00. The oil well
cement was loaded for delivery at Bombay and Calcutta, India. However, the cargo was held up in
Bangkok and did not reach its point of destination. Notwithstanding the fact that the Philippine
corporation had received payment and despite several demands made by the Indian Commission, the
Philippine corporation failed to deliver the oil well cement. Negotiations ensued between the parties
and they agreed that the Philippine corporation will replace the entire 4,300 metric tons of oil well
cement with Class "G" cement cost free at the Indian Commission's designated port. However, upon
inspection of the replacement cement which was delivered to the Indian Commission, it did not
conform to the agreed specifications. The Indian Commission then informed the Philippine corporation
that it was referring its claim to an arbitrator pursuant to Clause 16 of their contract. Clause 16 contains
the following arbitration clause:
"Except where otherwise provided in the supply order/contract all questions and
disputes, relating to the meaning of the specifications, designs, drawings and instructions herein
before mentioned and as to quality of workmanship of the items ordered or as to any other
question, claim, right or thing whatsoever, in any way arising out of or relating to the supply
order/contract design, drawing, specification, instruction or these conditions or otherwise
concerning the materials or the execution or failure to execute the same during
stipulated/extended period or after the completion/abandonment thereof shall be referred to the
sole arbitration of the persons appointed by Member of the Commission at the time of dispute. It will
be no objection to any such appointment that the arbitrator so appointed is a Commission employer
(sic) that he had to deal with the matter to which the supply or contract relates and that in the
course of his duties as Commission's employee he had expressed views on all or any of the matter
in dispute or difference.”
The arbitrator to whom the matter is originally referred being transferred or vacating his
office or being unable to act for any reason the Member of the Commission shall appoint another
person to act as arbitrator in accordance with the terms of the contract/supply order. Such person
shall be entitled to proceed with reference from the stage at which it was left by his predecessor.
Subject as aforesaid the provisions of the Arbitration Act, 1940, or any Statutory modification or
re-enactment thereof and the rules made there under and for the time being in force shall apply to
the arbitration proceedings under this clause.
The arbitrator may with the consent of parties enlarge the time, from time to time, to make
and publish the award.
The venue of arbitration shall be at Dehra dun."
The chosen arbitrator rendered an arbitral award in favor of the Indian Commission and
ordered the Philippine corporation to pay US$899,603.77 plus interest. To execute the award, the
Indian Commission filed a petition before the Court of the Civil Judge in Dehra Dun, India praying that
the arbitral award be made "the Rule of Court" in India.
The foreign court issued notices to the Philippine corporation for filing objections to the
petition. The
Philippine corporation complied and filed its objections. Subsequently, the foreign court directed the
Philippine corporation to pay the filing fee in order that the objections could be given consideration.
Instead of paying the required filing fee, the Philippine corporation sent a letter inquiring about the
amount to be paid and asking for 15 days from receipt of the response to its letter within which to
comply with the required payment.
Without responding to the letter, the foreign court refused to admit the objections and issued
the following order:
"Award dated 23.7.88, Paper No. 3/B-1 [the arbitral award] is made Rule of the Court. On
the basis of conditions of award decree is passed. Award Paper No. 3/B-1 shall be part of the
decree. The plaintiff shall also be entitled to get from defendant US$899,603.77 along with 9%
interest per annum till the last date of realization."
The Philippine corporation refused to pay the amount adjudged. The Indian Commission filed a
complaint with the Regional Trial Court of Surigao City for the enforcement of the judgment of the
foreign court.
The RTC found the referral of the dispute to the arbitrator erroneous because the coverage of
the arbitration clause referred to questions and disputes relating to the meaning of the specification,
designs, drawings and related instructions. The RTC observed that the breach, consisting of the non-
delivery of the purchased materials, should have been litigated before a court of law pursuant to Clause
15 of the Contract/Supply Order:
"Jurisdiction
All questions, disputes and differences, arising under out of or in connection with this supply order,
shall be subject to the EXCLUSIVE JURISDICTION OF THE COURT, within the local limits of whose
jurisdiction and the place from which this supply order is situated."
The RTC characterized the erroneous submission of the dispute to the arbitrator as a mistake of
law or fact amounting to want of jurisdiction. Consequently, the proceedings had before the arbitrator
were null and void and the foreign court had therefore, adopted no legal award which could be the
source of an enforceable right.
The Court of Appeals affirmed the dismissal of the complaint. In addition, the Court of Appeals
observed that the judgment of the foreign court indicates no findings of fact and law as basis for the
award and that the arbitration proceeding was defective because the arbitrator was appointed solely by
the Indian Commission and he was a former employee of the Commission giving rise to a presumed bias
on his part in favor of the Commission.
Issue: Whether or not the arbitrator had jurisdiction over the dispute under Clause 16 of the contract.
Ruling:
A close examination of Clause 16 reveals that it covers three matters which may be submitted to
arbitration namely: (1) all questions and disputes, relating to the meaning of the specification designs,
drawings and instructions herein before mentioned and as to quality of workmanship of the items
ordered; or (2) any other question, claim, right or thing whatsoever, in any way arising out of or
relating to the supply order/contract design, drawing, specification, instruction or these conditions; or
(3) otherwise concerning the materials or the execution or failure to execute the same during
stipulated/extended period or after the completion/abandonment thereof.
The non-delivery of the oil well cement is definitely not in the nature of a dispute arising from the
failure to execute the supply order/contract design, drawing, instructions, specifications or quality of the
materials. That Clause 16 should pertain only to matters involving the technical aspects of the contract
is a logical inference considering that the purpose of a referral to arbitration is for technical matters to
be deliberated upon by a person possessed with the required skill which may be absent in the regular
courts. This
Court agrees with the appellate court in its ruling that the non-delivery of the oil well cement is a matter
properly cognizable by the regular courts as stipulated by the parties in Clause 15 of their contract.
However, while the non-delivery of the oil well cement is not a proper subject for arbitration, the
failure of the replacement cement to conform to the specifications of the contract is a matter clearly
falling within the ambit of Clause 16. Undoubtedly, what was referred to arbitration was no longer the
mere non-delivery of the cargo at the first instance but also the failure of the replacement cargo to
conform to the specifications of the contract, a matter clearly within the coverage of Clause 16.
With respect to the issue that the judgment of the foreign court is bereft of any statement of
facts and law upon which the award was based, as specified in the order of the Civil Judge of Dehra Dun,
"Award Paper No. 3/B-i shall be a part of the decree". This is a categorical declaration that the foreign
court adopted the findings of facts and law of the arbitrator as contained in the latter's Award Paper.
Award Paper No. 3/B-1, contains an exhaustive discussion of the respective claims and defenses of the
parties, and the arbitrator's evaluation of the same. The constitutional mandate that no decision shall be
rendered by any court without expressing therein clearly and distinctly the fact and the law on which it
is based does not preclude the validity of "memorandum decisions" which adopt by reference the
findings of fact and conclusions of law contained in the decisions of inferior tribunals.
Furthermore, the recognition to be accorded a foreign judgment is not necessarily affected by
the fact that the procedure in the courts of the country in which such judgment was rendered differs
from that of the courts of the country in which the judgment is relied on. This Court has held that
matters of remedy and procedure are governed by the lex fori or the internal law of the forum. Thus, if
under the procedural rules of the Civil Court of Dehra Dun, India, a valid judgment may be rendered by
adopting the arbitrator's findings, then the same must be accorded respect. In the same vein, if the
procedure in the foreign court mandates that an Order of the Court becomes final and executory upon
failure to pay the necessary docket fees, then the courts in this jurisdiction cannot invalidate the order
of the foreign court simply because our rules provide otherwise.
The private respondent [the Philippine corporation] bewails the presumed bias on the part of
the arbitrator who was a former employee of the petitioner [the Indian Commission]. This point
deserves scant consideration in view of the following stipulation in the contract "... It will be no
objection to any such appointment that the arbitrator so appointed is a Commission employer (sic) that
he had to deal with the matter to which the supply or contract relates and that in the course of his
duties as Commission's employee he had expressed views on all or any of the matter in dispute or
difference."
Finally, "a foreign judgment is presumed to be valid and binding in the country from which it
comes, until the contrary is shown. It is also proper to presume the regularity of the proceedings and
the giving of due notice therein." The party attacking the foreign judgment had the burden of
overcoming the presumption of its validity which it failed to do in the instant case.
The foreign judgment being valid, there is nothing else left to be done than to order its
enforcement, despite the fact that the petitioner [the Indian Commission] merely prays for the remand
of the case to the RTC for further proceedings. As this Court has ruled on the validity and enforceability
of the foreign judgment in this jurisdiction, further proceedings in the RTC for the reception of evidence
to prove otherwise are no longer necessary.
Unfortunately, the dispute in the Oil and Natural Gas Commission case was not decided under
Philippine law, coupled with the fact that the dispute was presented to Philippine courts as an issue on
the enforcement of a foreign judgment, not as an issue on the enforcement of a foreign arbitral award.
At any rate, the case illustrates the consequence of giving one party greater power than the other party in
choosing arbitrators. Article 2045 of the Civil Code forbids giving one party "power to choose more
arbitrators". The case of Oil and Natural Gas Commission goes a step further back because the
arbitration clause there gave only one party the exclusive power to choose the arbitrator.
iii. Court Appointed Arbitrators

First, where any of the parties in an institutional arbitration failed or refused to appoint an
arbitrator or when the parties have failed to reach an agreement on the sole arbitrator (in an
arbitration before a sole arbitrator) or when the two designated arbitrators have failed to reach an
agreement on the third or presiding arbitrator (in an arbitration before a panel of three arbitrators),
and the institution under whose rules the arbitration is to be conducted fails or is unable to perform its
duty as Appointing Authority within a reasonable time from receipt of the request for appointment, the
court may act as Appointing Authority. The Appointing Authority actually has a specific period of thirty
days, instead of reasonable time, to act on the request for appointment. Section 27 of RA 9285 applies to
both domestic and international commercial arbitration conducted in the Philippines by virtue of
Section 33 and Section 19 of RA 9285.
Second, in all instances where arbitration is ad hoc and the parties failed to provide a method
for appointing or replacing an arbitrator, or substitute arbitrator, or the method agreed upon is
ineffective, and the National President of the IBP or his duly authorized representative fails or refuses
to act within such period as may be allowed under the pertinent rules of the IBP or within such period
as may be agreed upon by the parties, or in the absence thereof, within thirty days from receipt of such
request for appointment, the court shall act as Appointing Authority. Before the court may step in to
appoint an arbitrator, there must be a prior request to the National President of the IBP or his duly
authorized representative to appoint an arbitrator. Only upon the failure of the National President of
the IBP or his duly authorized representative to act within the applicable time may the court act as
Appointing Authority.
Third, where the parties agreed that their dispute shall be resolved by three arbitrators but no
method of appointing those arbitrators has been agreed upon, each party shall appoint one arbitrator
and the two arbitrators thus appointed shall appoint a third arbitrator. If a party fails to appoint his
arbitrator within thirty days of receipt of a request to do so from the other party, or if the two
arbitrators fail to agree on the third arbitrator within a reasonable time from their appointment, the
appointment shall be made by the Appointing Authority. If the latter fails or refuses to act or appoint an
arbitrator within a reasonable time from receipt of the request to do so, any party or the appointed
arbitrator/s may request the court to appoint an arbitrator or the third arbitrator as the case may be.
Appointing Authority has a specific period of thirty days, instead of reasonable time, within which to act
on the request for appointment.
The court may act as Appointing Authority regardless of whether the arbitration is domestic or
international. It is not ministerial on the part of the court to appoint an arbitrator. It must conduct a
hearing before deciding to appoint or not appoint an arbitrator. 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. While a court order appointing an arbitrator is immediately
executory, in contrast 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.
d. Qualifications and Disqualifications

i. RA 9285, Section 3(b), (e);
SEC. 3. Definition of Terms. – For purposes of this Act, the term:
(b) “ADR Provider” means institutions or persons accredited as mediator, conciliator, arbitrator,
neutral evaluator, or any person exercising similar functions in any Alternative Dispute Resolution
system.
This is without prejudice to the rights of the parties to choose non-accredited individuals to act as
mediator, conciliator, arbitrator, or neutral evaluator of their dispute;
Whenever referred to in this Act, the term “ADR practitioners” shall refer to individuals acting as
mediator, conciliator, arbitrator, or neutral evaluator;
(e) “Arbitrator” means the person appointed to render an award, alone or with others, in a dispute that
is the subject of an arbitration agreement;
RA 876 Section 10
Section 10. Qualifications of arbitrators. - Any person appointed to serve as an arbitrator must be of legal
age, in full-enjoyment of his civil rights and know how to read and write. No person appointed to served
as an arbitrator shall be related by blood or marriage within the sixth degree to either party to the
controversy. No person shall serve as an arbitrator in any proceeding if he has or has had financial,
fiduciary or other interest in the controversy or cause to be decided or in the result of the proceeding,
or has any personal bias, which might prejudice the right of any party to a fair and impartial award.
No party shall select as an arbitrator any person to act as his champion or to advocate his cause.
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:
(a) to waive the presumptive disqualifying circumstances; or
(b) to declare the office of such arbitrator vacant. Any such vacancy shall be filled in the same manner
as the original appointment was made.
e. Challenge to Appointment
i. 1985 Model Law, Article 12, 13, 14, 16(2);
Article 12. Grounds for challenge
(1) When a person is approached in connection with his 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.
(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.
Article 13. Challenge procedure

(1) The parties are free to agree on a procedure for challenging an arbitrator, subject to the provisions
of paragraph (3) of this article.
(2) Failing such agreement, a party who intends to challenge an arbitrator shall, within fifteen (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.
(3) If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph
(2) of this article is not successful, the challenging party may request, within thirty days 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 challenged arbitrator, may continue the arbitral proceedings and
make an award.
Article 14. Failure or impossibility to act

(1) If an arbitrator becomes de jure or de facto unable to perform his functions or for other reasons fails
to act without undue delay, his mandate terminates if he withdraws from his office or if the parties
agree on the termination. Otherwise, if a controversy remains concerning any of these grounds, any
party may request the court or other authority specified in article 6 to decide on the termination of the
mandate, which decision shall
be subject to no appeal.
(2) If, under this article or article 13(2), an arbitrator withdraws from his office or a party agrees to the
termination of the mandate of an arbitrator, this does not imply acceptance of the validity of any ground
referred to in this article or article 12(2).
Article 16. Competence of arbitral tribunal to rule on its jurisdiction

exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope
of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit
a later plea if it considers the delay justified.
(3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a
preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary
question that it has jurisdiction, any party may request, within thirty days after having received notice
of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no
appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and
make an award.
RA 9285 IRR Article 4.12 to 4.15, 5.11, 5.12;

Article 4.12. Grounds for Challenge. (a) When a person is approached in connection with his/her
possible appointment as an arbitrator, he/she shall disclose any circumstance likely to give rise to
justifiable doubts as to his/her impartiality or independence. An arbitrator, from the time of his/her
appointment and throughout the arbitral proceedings shall, without delay, disclose any such
circumstance to the parties unless they have already been informed of them by him/her.
(b) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to
his/her impartiality or independence, or if he/she does not possess qualifications agreed to by the
parties. A party may challenge an arbitrator appointed by him/her, or in whose appointment he/she
has participated, only for
reasons of which be/she becomes aware after the appointment has been made.
Article 4.13. Challenge Procedure. (a) The parties are free to agree on a procedure for challenging an
arbitrator, subject to the provisions of this Article.
(b) Failing such agreement, a party who intends to challenge an arbitrator shall, within fifteen (15)
circumstance referred to in paragraph (b) of Article 4.12 (Grounds for Challenge), send a written
statement of the reasons for the challenge to the arbitral tribunal. Unless the challenged arbitrator
withdraws from his/her office or the other party agrees to the challenge, the arbitral tribunal shall
decide on the challenge.
(c) If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph
(b) of this Article is not successful, the challenging party may request the appointing authority, within
thirty (30) days after having received notice of the decision rejecting the challenge, to decide on the
challenge, which decision shall be immediately executory and not subject to motion for reconsideration
or appeal. While such a request is pending, the arbitral tribunal, including the challenged arbitrator,
may continue the arbitral proceedings and make an award.

A party may bring a petition under this Article before the court in accordance with the Rules of
Court or the Special ADR Rules.
Article 4.14. Failure or Impossibility to Act. (a) If an arbitrator becomes de jure or de facto unable to
perform his/her functions or for other reasons fails to act without undue delay, his/her mandate
terminates if he/she withdraws from his/her office or if the parties agree on the termination.
Otherwise, if a controversy remains concerning any of these grounds, any party may request the
appointing authority to decide on the termination of the mandate, which decision shall be immediately
executory and not subject to motion for reconsideration or appeal.
(b) If, under this Article or paragraph (b) of Article 4.13 (Challenge Procedure), an arbitrator
withdraws from his/her office or a party agrees to the termination of the mandate of an arbitrator, this
does not imply acceptance of the validity of any ground referred to in this Article or in paragraph (b) of
Article 4.12 (Grounds for Challenge).
Article 4.15. Appointment of Substitute Arbitrator. Where the mandate of an arbitrator terminates under
Articles 4.13 (Challenge Procedure) and 4.14 (Failure or Impossibility to Act) or because of his/her
withdrawal from office for any other reason or because of the revocation of his/her mandate by
agreement of the parties or in any other case of termination of his/her mandate, a substitute arbitrator
shall be appointed according to the rules that were applicable to the appointment of the arbitrator
being replaced.
Article 5.11. Grounds for Challenge. (a) When a person is approached in connection with his/her
possible appointment as an arbitrator, he/she shall disclose any circumstance likely to give rise to
justifiable doubts as to his/her impartiality, independence, qualifications and disqualifications. An
arbitrator, from the time of his/her 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/her.
A person, who is appointed as an arbitrator notwithstanding the disclosure made in accordance
with this Article, shall reduce the disclosure to writing and provide a copy of such written disclosure to
all parties in the arbitration.
(b) An arbitrator may be challenged only if:
(i) circumstances exist that give rise to justifiable doubts as to his/her impartiality or
independence;
(ii) he/she does not possess qualifications as provided for in this Chapter or those agreed to by
the parties;
(iii) he/she is disqualified to act as arbitration under these Rules;
(iv) he refuses to respond to questions by a party regarding the nature and extent of his
professional dealings with a party or its counsel.
(c) If, after appointment but before or during hearing, a person appointed to serve as an arbitrator shall
discover any circumstance likely to create a presumption of bias, or which he/she believes might
disqualify him/her as an impartial arbitrator, the arbitrator shall immediately disclose such
information to the parties. Thereafter, the parties may agree in writing:
(i) to waive the presumptive disqualifying circumstances; or
(ii) to declare the office of such arbitrator vacant. Any such vacancy shall be filled in the same
manner the original appointment was made.
(d) After initial disclosure is made and in the course of the arbitration proceedings, when the arbitrator
discovers circumstances that are likely to create a presumption of bias, he/she shall immediately
disclose those circumstances to the parties. A written disclosure is not required where it is made during
the arbitration and it appears in a written record of the arbitration proceedings.
(e) An arbitrator who has or has had financial or professional dealings with a party to the arbitration or
to the counsel of either party shall disclose in writing such fact to the parties, and shall, in good faith,
promptly respond to questions from a party regarding the nature, extent and age of such financial or
professional dealings.
Article 5.12. Challenge Procedure. (a) The parties are free to agree on a procedure for challenging an
arbitrator, subject to the provisions of paragraph (c) of this Article.
(b) Failing such agreement, a party who intends to challenge an arbitrator shall, within fifteen (15)
circumstance referred to in paragraph (b) of Article 5.11 (Grounds for Challenge), send a written
statement of the reasons for the challenge to the arbitral tribunal. Unless the challenged arbitrator
withdraws from his/her office or the other party agrees to the challenge, the arbitral tribunal shall
decide on the challenge.
(c) If a challenge under any procedure agreed upon by the parties or under the procedure of paragraph
(b) of this Article is not successful, the challenging party may request the appointing authority, within
thirty (30) days after having received notice of the decision rejecting the challenge, to decide on the
challenge, which decision shall be immediately executory and not subject to appeal or motion for
reconsideration. While such a request is pending, the arbitral tribunal, including the challenged
arbitrator, may continue the arbitral proceedings and make an award.
(d) If a request for inhibition is made, it shall be deemed as a challenge.
(e) A party may challenge an arbitrator appointed by him/her/it, or in whose appointment he/she/it
has participated, only for reasons of which he/she/it becomes aware after the appointment has been
made.
(f) The challenge shall be in writing and it shall state specific facts that provide the basis for the ground
relied upon for the challenge. A challenge shall be made within fifteen (15) days from knowledge by a
party of the existence of a ground for a challenge or within fifteen (15) days from the rejection by an
arbitrator of a
party's request for his/her inhibition.
(g) Within fifteen (15) days of receipt of the challenge, the challenged arbitrator shall decide whether
he/she shall accept the challenge or reject it. If he/she accepts the challenge, he/she shall voluntarily
withdraw as arbitrator. If he/she rejects it, he/she shall communicate, within the same period of time,
his/her rejection of the challenge and state the facts and arguments relied upon for such rejection.
(h) An arbitrator who does not accept the challenge shall be given an opportunity to be heard.
(i) Notwithstanding the rejection of the challenge by the arbitrator, the parties may, within the same
fifteen (15) day period, agree to the challenge.
(j) In default of an agreement of the parties to agree on the challenge thereby replacing the arbitrator,
the arbitral tribunal shall decide on the challenge within thirty (30) days from receipt of the challenge.
(k) If the challenge procedure as agreed upon by the parties or as provided in this Article is not
successful, or a party or the arbitral tribunal shall decline to act, the challenging party may request the
appointing authority in writing to decide on the challenge within thirty (30) days after having received
notice of the decision rejecting
the challenge. The appointing authority shall decide on the challenge within fifteen (15) days from
receipt of the request. If the appointing authority shall fail to act on the challenge within thirty (30)
days from the date of its receipt or within such further time as it may fix, with notice to the parties, the
requesting party may renew the request with the court.
The request made under this Article shall include the challenge, the reply or explanation of the
challenged arbitrator and relevant communication, if any, from either party, or from the arbitral
tribunal.
(l) Every communication required or agreement made under this Article in respect of a challenge shall
be delivered, as appropriate, to the challenged arbitrator, to the parties, to the remaining members of
the arbitral tribunal and to the institution administering the arbitration, if any.
(m) A challenged arbitrator shall be replaced if:
(i) he/she withdraws as arbitrator, or
(ii) the parties agree in writing to declare the office of arbitrator vacant, or
(iii) the arbitral tribunal decides the challenge and declares the office of the challenged
arbitrator vacant, or
(iv) the appointing authority decides the challenge and declares the office of the challenged
arbitrator vacant, or
(v) in default of the appointing authority, the court decides the challenge and declares the office
of the challenged arbitrator vacant.
(n) The decision of the parties, the arbitral tribunal, the appointing authority, or in proper cases, the
court, to accept or reject a challenge is not subject to appeal or motion for reconsideration.

(o) Until a decision is made to replace the arbitrator under this Article, the arbitration proceeding shall
continue notwithstanding the challenge, and the challenged arbitrator shall continue to participate
therein as an arbitrator. However, if the challenge incident is raised before the court, because the
parties, the arbitral tribunal or appointing authority failed or refused to act within the period provided
in paragraphs (j) and (k) of this Article, the arbitration proceeding shall be suspended until after the
court shall have decided the incident. The arbitration shall be continued immediately after the court has
delivered an order on the challenging incident. If the court agrees that the challenged arbitrator shall be
replaced, the parties shall immediately replace the arbitrator concerned.
(p) The appointment of a substitute arbitrator shall be made pursuant to the procedure applicable to
the appointment of the arbitrator being replaced.
RA 876, Section 11
Section 11. Challenge of arbitrators. - The arbitrators may be challenged only for the reasons mentioned
in the preceding section 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
Court of First Instance 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 or
arbitration shall be suspended, and it shall be continued immediately after the court has delivered an
order on the challenging incident.

V. The Arbitral Tribunal and Arbitral Proceedings
a. Place/Seat of Arbitration
The place of arbitration is (merely) the venue chosen by the parties to a dispute for conduct of
arbitration. This may or may not be defined in the Contract between the parties, but can be mutually decided
any time.
While the “place” or venue can be a choice of convenience to the parties, the “seat” will be dictated
by implication of the contract (Law of Contract) between the parties to the dispute.
For example, two parties, one from India and another from Japan, may choose Singapore as the place
or venue of arbitration. But they may choose jurisdiction of either Indian or Japanese court, which is termed
as the “seat” of arbitration. In the unfortunate event, the jurisdiction is not spelt out in contract or it is
disputed, the court can decide basing on the implications of the contract. So, ultimately, the arbitration
award will be governed, in the above example, either by the Indian or Japanese laws.
i. RA 9285 Section 30
SEC. 30. Place of Arbitration. – The parties are free to agree on the place of arbitration. Failing such
agreement, the place of arbitration shall be in Metro Manila, unless the arbitral tribunal, having regard
to the circumstances of the case, including the convenience of the parties shall decide on a different
place of arbitration.
ii. Model Law Article 1(2) and (3) Article 20

Article 1. Scope of application.
(2) The provisions of this Law, except articles 8, 9, 17 H, 17 I, 17 J, 35 and 36, apply only if the place of
arbitration is in the territory of this State. *(Article 1(2) has been amended by the Commission at its
thirty-ninth session, in 2006)
(3) An arbitration is international if:
(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement,
their places of business in different States; or
(b) one of the following places is situated outside the State in which the parties have their
places of business:
(i) the place of arbitration if determined in, or pursuant to, the arbitration agreement;
(ii) any place where a substantial part of the obligations of the commercial relationship
is to be performed or the place with which the subject-matter of the dispute is most
closely connected;
or (c) the parties have expressly agreed that the subject matter of the arbitration agreement
relates to more than one country.
Article 20. Place of arbitration.

(1) The parties are free to agree on the place of arbitration. Failing such agreement, the place of
arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case,
including the convenience of the parties.
(2) Notwithstanding the provisions of paragraph (1) of this article, the arbitral tribunal may, unless
otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its
members, for hearing witnesses, experts or the parties, or for inspection of goods, other property or
documents.
b. Jurisdiction
i. Questioning Jurisdiction
Book: Chapter 5, p. 83-84
Under the 1997 Rules of Civil Procedure, after the filing of the complaint, the defendant, before
filing an answer, may file a motion to dismiss on the ground that the court has no jurisdiction. The
counterpart procedure in arbitration is when the respondent, after the constitution of the arbitral
tribunal, raises a preliminary issue on the jurisdiction of the tribunal.
Under the Model Law, a party is not precluded from questioning the jurisdiction of the arbitral
tribunal although he has appointed, or participated in the appointment of, an arbitrator. (Model Law,
Article 16(2))

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.
1. 1985 Model Law Article 16(2)

exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of
its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later
plea if it considers the delay justified.
c. Procedure to be adopted
i. 1985 Model Law Article 18, 19;
Article 18. Equal treatment of parties.
The parties shall be treated with equality and each party shall be given a full opportunity of presenting
his case.
Article 19. Determination of rules of procedure.

(1) Subject to the provisions of this Law, the parties are free to agree on the procedure to be followed
by the arbitral tribunal in conducting the proceedings.
(2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law, conduct the
arbitration in such manner as it considers appropriate. The power conferred upon the arbitral tribunal
includes the power to determine the admissibility, relevance, materiality and weight of any evidence.
RA 9285 IRR Article 4.18, 4.19, 5.18

Article 4.18. Equal Treatment of Parties. The parties shall be treated with equality and each party shall
be given a full opportunity of presenting his/her case.
Article 4.19. Determination of Rules of Procedure. (a) Subject to the provisions of this Chapter, the
parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the
proceedings.
(b) Failing such agreement, the arbitral tribunal may, subject to this Chapter, conduct the arbitration in
such manner as it considers appropriate. Unless the arbitral tribunal considers it inappropriate, the
UNCITRAL Arbitration Rules adopted by the UNCITRAL on 28 April 1976 and the UN General Assembly
on 15 December 1976 shall apply subject to the following clarification: All references to the "Secretary-
General of the Permanent Court of Arbitration at the Hague" shall be deemed to refer to the appointing
authority.
(c) The power conferred upon the arbitral tribunal includes the power to determine the admissibility,
relevance, materiality and weight of any evidence.
Article 5.18. Determination of Rules of Procedure. (a) Subject to the provisions of these Rules, the parties
are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.
(b) Failing such agreement, the arbitral tribunal may, subject to the provision of the ADR Act, conduct
the arbitration in such manner as it considers appropriate. The power conferred upon the arbitral
tribunal includes the power to determine admissibility, relevance, materiality and weight of evidence.
ii. Power of the Tribunal to determine rules

iii. Predetermined procedure
1. 1985 Model Law, Article 19 or
Article 19. Determination of rules of procedure.
(1) Subject to the provisions of this Law, the parties are free to agree on the procedure to be followed
by the arbitral tribunal in conducting the proceedings.
(2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law, conduct the
arbitration in such manner as it considers appropriate. The power conferred upon the arbitral tribunal
includes the power to determine the admissibility, relevance, materiality and weight of any evidence.
RA 9285 IRR Article 4.19

Article 4.19. Determination of Rules of Procedure. (a) Subject to the provisions of this Chapter, the
parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the
proceedings.
(b) Failing such agreement, the arbitral tribunal may, subject to this Chapter, conduct the arbitration in
such manner as it considers appropriate. Unless the arbitral tribunal considers it inappropriate, the
UNCITRAL Arbitration Rules adopted by the
UNCITRAL on 28 April 1976 and the UN General Assembly on 15 December 1976 shall apply subject to
the following clarification: All references to the "Secretary-General of the Permanent Court of
Arbitration at the Hague" shall be deemed to refer to the appointing authority.
(c) The power conferred upon the arbitral tribunal includes the power to determine the admissibility,
relevance, materiality and weight of any evidence.
d. Confidentiality of Proceedings
i. Special ADR Rules, Rule 10
RULE 10: CONFIDENTIALITY/PROTECTIVE ORDERS
Rule 10.1. Who may request confidentiality. - A party, counsel or witness who disclosed or who was
compelled to disclose information relative to the subject of ADR under circumstances that would create
a reasonable expectation, on behalf of the source, that the information shall be kept confidential has the
right to prevent such information from being further disclosed without the express written consent of
the source or the party who made the disclosure.
Rule 10.2. When request made. - A party may request a protective order at anytime there is a need to
enforce the confidentiality of the information obtained, or to be obtained, in ADR proceedings.
Rule 10.3. Venue. - A petition for a protective order may be filed with the Regional Trial Court where
that order would be implemented.
If there is a pending court proceeding in which the information obtained in an ADR proceeding is
required to be divulged or is being divulged, the party seeking to enforce the confidentiality of the
information may file a motion with the court where the proceedings are pending to enjoin the
confidential information from being divulged or to suppress confidential information.
Rule 10.4. Grounds. - A protective order may be granted only if it is shown that the applicant would be
materially prejudiced by an unauthorized disclosure of the information obtained, or to be obtained,
during an ADR proceeding.
Rule 10.5. Contents of the motion or petition. - The petition or motion must state the following:
a. That the information sought to be protected was obtained, or would be obtained, during an ADR
proceeding;
b. The applicant would be materially prejudiced by the disclosure of that information;
c. The person or persons who are being asked to divulge the confidential information participated in an
ADR proceedings; and
d. The time, date and place when the ADR proceedings took place.
Apart from the other submissions, the movant must set the motion for hearing and contain a notice of
hearing in accordance with Rule 15 of the Rules of Court.
Rule 10.6. Notice. - Notice of a request for a protective order made through a motion shall be made to
the opposing parties in accordance with Rule 15 of the Rules of Court.

Rule 10.7. Comment/Opposition. - The comment/opposition must be filed within fifteen (15) days from
service of the petition. The opposition or comment may be accompanied by written proof that (a) the
information is not confidential, (b) the information was not obtained during an ADR proceeding, (c)
there was a waiver of confidentiality, or (d) the petitioner/movant is precluded from asserting
confidentiality.
Rule 10.8. Court action. - If the court finds the petition or motion meritorious, it shall issue an order
enjoining a person or persons from divulging confidential information.
In resolving the petition or motion, the courts shall be guided by the following principles applicable to
all ADR proceedings: Confidential information shall not be subject to discovery and shall be
inadmissible in any adversarial proceeding, whether judicial or quasi judicial. However, evidence or
information that is otherwise admissible or subject to discovery does not become inadmissible or
protected from discovery solely by reason of its use therein.
For mediation proceedings, the court shall be further guided by the following principles:
a. Information obtained through mediation shall be privileged and confidential.
b. A party, a mediator, or a nonparty participant may refuse to disclose and may prevent any other
person from disclosing a mediation communication.
c. In such an adversarial proceeding, the following persons involved or previously involved in a
mediation may not be compelled to disclose confidential information obtained during the mediation:
(1) the parties to the dispute; (2) the mediator or mediators; (3) the counsel for the parties: (4) the
nonparty participants; (5) any persons hired or engaged in connection with the mediation as secretary,
stenographer; clerk or assistant; and (6) any other person who obtains or possesses confidential
information by reason of his/ her profession.
d. The protection of the ADR Laws shall continue to apply even if a mediator is found to have failed to
act impartially.
e. A mediator may not be called to testify to provide information gathered in mediation. A mediator who
is wrongfully subpoenaed shall be reimbursed the full cost of his attorney fees and related expenses.
Rule 10.9. Relief against court action. - The order enjoining a person or persons from divulging
confidential information shall be immediately executory and may not be enjoined while the order is
being questioned with the appellate courts.
If the court declines to enjoin a person or persons from divulging confidential information, the
petitioner may file a motion for reconsideration or appeal.
Rule 10.10. Consequence of disobedience. - Any person who disobeys the order of the court to cease
from divulging confidential information shall be imposed the proper sanction by the court.

VI. The Arbitral Award
a. Form of Arbitral Award
RA 9285 defines "award" as "any partial or final decision by an arbitrator in resolving the issue
in controversy". The final award in arbitration is the equivalent of the judgment in litigation. The
arbitral award is the culmination of the arbitral process. Any stipulation that the arbitrators' award or
decision shall be final, is valid, without prejudice to Articles 2038, 2039 and 2040 of the Civil Code.
Unless the parties shall have stipulated by written agreement the time within which the
arbitrators must render their award, the written award of the arbitrators shall be rendered within
thirty days after the dosing of the hearings or if the oral hearings shall have been waived, within thirty
days after the arbitrators shall have declared such proceedings in lieu of hearing closed. This period
may be extended by mutual consent of the parties.
The law requires that the award must be made in writing and signed and acknowledged by a
majority of the arbitrators, if more than one; and by the sole arbitrator, if there is only one. This is
without prejudice to the right of the parties to stipulate in the arbitration agreement that the arbitral
award must be signed by all the arbitrators, and not just a majority of them.
b. Judicial Confirmation of Arbitral Award

i. Romago, Inc. vs. Siemens Building Technologies, Inc., 602 SCRA 656 (2009)
Facts:
Romago, Inc. bidded and was awarded the Sub-contract for the Building Services-Electrical
Package of the Insular Life Corporate Center project. To accomplish the project, ROMAGO entered into
an Equipment Supply Sub-Contract Agreement (ESSA) with Siemens Building Technologies, Inc. (SBTI).
For the contract price of PhP100,000,000, SBTI undertook to deliver the needed electrical equipment
for the project.
SBTI made deliveries, but ROMAGO failed to pay in full. ROMAGO's unpaid billings amounted to
PhP6,807,400.92. SBTI demanded payment, but the demand just fell on deaf ears, prompting SBTI to
withhold further deliveries of equipment to the jobsite. Consequently, ROMAGO took over all the
contractual activities of SBTI.
Later, however, SBTI resumed its deliveries under the ESSA and was able to deliver 99.81% of
all the necessary equipment. ROMAGO, however, refused to pay for the deliveries which, by then,
already amounted to PhP16,937,612.68, unless SBTI compensates ROMAGO for the total expenses it
allegedly incurred in taking over SBTI's contractual obligations. Demands to pay were made but were
not heeded.
SBTI filed a Request for Arbitration with the Philippine Dispute Resolution Center, Inc. (PDRCI).
ROMAGO, through its Vice-President for Operations, signed the Agreement to Submit Dispute to
Arbitration. ROMAGO admitted in its Answer that the agreed contract price was PhP67,734,457.27, but
averred that it made substantial payments. It further alleged that it had claims against SBTI, which
should be deducted from the former's liability, leaving a balance of only PhP2,127,471.97.
After due proceedings, the Sole Arbitrator rendered a decision on 1 February 2005, ruling that
SBTI was entitled to its claim for (1) PhP16,937,61268 plus legal interest computed from the time that
it made its extrajudicial demand up to its filing of the Request for Arbitration, (2) attorney's fees in the
amount of PhP500,000 and (3) arbitration costs in the sum of PhP916,300.04, and further holding that
SBTI was not liable for ROMAGO's counterclaim of PhP11,241,058.33.
SBTI, through counsel, was served a copy of the Arbitrator's decision via personal service on 3
February 2005. ROMAGO’s counsel was also served copies of the decision through private courier on 3
February 2005, received on the same day; and through registered mail on 7 February 2005, received on
28 February 2005.
Meanwhile, on 16 February 2005 SBTI filed a petition for confirmation of the Arbitrator's
decision with the Regional Trial Court (RTC) of Makati City. On 15 March 2005 the RTC issued an order
directing ROMAGO to file its answer to the petition within fifteen (15) days from receipt of the Order.
On 30 March 2005, ROMAGO, through its collaborating counsel, filed an answer, praying for the
denial of the petition and for the setting aside of the Arbitrator's decision. ROMAGO argued that the
Arbitrator displayed partiality in hearing the arbitration case and in rendering the decision. It pointed
out that the Arbitrator considered SBTI's claims as gospel truth and granted the same in toto, but
denied ROMAGO's counterclaims despite the preponderance of evidence in support of its claim.
ROMAGO, thus, contended that SBTI could not ask for the confirmation and execution of the Arbitrator's
decision.
On 22 June 2006 the RTC issued an Order granting SBTI's petition, viz.:
...The only point of contention now is the issue of whether or not the same [arbitrator's]
Decision has attained finality and hence may now be confirmed for purposes of execution. It is clear
to the Court that the answer to this core issue should be in the affirmative. [SBTI] has for its legal
anchor Section 26 of the Arbitration Law, which states that, "a motion to vacate, modify or correct
the award or decision must be made within 30 days after the award is filed or delivered."
[ROMAGO] does not dispute that it did not file any Motion to Vacate the Award made by the
PDRCI Arbitrator. It insists however that it met the requirements for the timely filing of such Motion
when it alleged the grounds for vacation in its Answer to the herein petition. This is faulty reasoning.
As correctly argued by [SBTI], there is a difference between the act of setting forth an affirmative
defense and filing a Motion to Vacate within the context of the law on Arbitration. The Arbitration
Law requires the losing party to seek vacation of the award by filing a Motion for this purpose within
a period of thirty days from service of the Decision. For as a matter of consequence, failure to do so
will amount to an unqualified acquiescence to the findings of the Arbitrator, and if he does not, then
the award must be confirmed in accordance with section 23 of the law...
It is possible therefore, that when the prevailing party, file[d] a petition to confirm a
domestic arbitral award, the losing party responds with a counterclaim to have the award vacated.
There is a time limit, however, to actions to vacate domestic arbitral awards. The party dissatisfied
with the award must institute a suit to vacate the award within one (1) month from the time it is
served upon him. If he fails to institute the suit to vacate the award within this period, the award
becomes final and executory...
ROMAGO avers that it actually received its copy of the arbitral Decision on 28 February
2005. But a review of the records would show that it was furnished with a copy of the Arbitral
Decision twice. One, by courier on 3 February 2005, received on 4 February 2005; and the second, by
registered mail on 28 February 2005. Thirty (30) days from 4 February 2005, is 6 March 2005.
Hence, the filing of an Answer with Affirmative and special defenses to the Petition on 30 March
2005 is way beyond that period prescribed by law hence rendering the subject arbitral Decision final
and executory.
The RTC thus confirmed the 1 February 2005 decision of the Arbitrator and directed the
issuance of a writ of execution. It was on 3 July 2006 that ROMAGO and its counsel were served copies
of the 22 June 2006 RTC order. Despite receipt of the order, ROMAGO did not interpose any appeal.
On 22 August 2006 ROMAGCYs counsel withdrew and he was substituted by a new one.
ROMAGO's new counsel filed a Petition for Relief from Judgment claiming that the former counsel failed
to appeal because he was diagnosed with severe hypertension and, by the time he became aware of the
22 June 2006 order, the period to appeal had already lapsed. ROMAGO prayed for the setting aside of
the Arbitrator's decision and of the 22 June 2006 order. In the alternative, it prayed that it be allowed to
file a notice of appeal.
On 12 December 2006 the RTC denied ROMAGO's Petition for Relief from Judgment on the
ground that its former counsel's failure to exercise the expected degree of diligence cannot be described
as excusable. ROMAGO filed a motion for reconsideration but it was denied.
ROMAGO sought to annul and to reverse the Arbitrator's decision and the adverse orders of the
RTC before the Court of Appeals on grounds of lack of jurisdiction and grave abuse of discretion,
arguing that its contract with SBTI is a construction contract cognizable by the Construction Industry
Arbitration Commission (CIAC).
The Court of Appeals rejected ROMAGO's arguments and held that the contract between SBTI
and ROMAGO is a supply contract, which may be taken cognizance of by the PDRCI, and that ROMAGO is
estopped from assailing the PDRCI's jurisdiction over the dispute, after actively participating in all its
proceedings. The CA added that the Arbitrator's decision already attained finality; thus, the RTC
committed no reversible error or grave abuse of discretion in confirming the decision. The CA also
sustained the denial of ROMAGO's petition for relief from judgment. It applied the well-settled rule that
the negligence of counsel binds the client.
ROMAGO went up to the Supreme Court to nullify the proceedings before the PDRCI, the RTC
and the CA.

Issue: Whether there was jurisdiction on the part of the Arbitrator over the dispute, and on the part of
the RTC to confirm the Arbitrator's award.
Ruling: YES
Specifically, ROMAGO asserts that SBTI's claim arose from a construction contract.
In Fort Bonifacio Development Corporation v. Domingo, the word construction is defined as
referring to all on-site works on buildings or altering structures, from land clearance through
completion,
including excavation, erection, and assembly and installation of components and equipment.
By no stretch of the imagination can the ESSA be characterized as a construction contract.
Crystal clear from the provisions of the ESSA is that SBTI's role was merely to supply the needed
equipment for the Insular Life Corporate Center project. The ESSA is, therefore, a mere supply contract
that does not fall within the original and exclusive jurisdiction of CIAC, as claimed by ROMAGO.
The Consortium Agreement between ROMAGO and SBTI contained an arbitration clause,
wherein the parties agreed to submit any dispute between them for arbitration under the Philippine
Chamber of Commerce and Industry (PCCI), such as the PDRCI. It is well settled that the arbitral clause
in the agreement is a commitment by the parties to submit to arbitration the disputes covered therein.
Because that clause is binding, they are expected to abide by it in good faith. The CA, therefore, correctly
rejected ROMAGO's assertion that the PDRCI had no jurisdiction over the suit in the first instance.
Furthermore, the issue of jurisdiction was rendered moot by ROMAGO's active participation in the
proceedings before the PDRCI and the RTC.
Records show that ROMAGO's Vice-President for Operations signed an Agreement to Submit
Dispute to Arbitration before the PDRCI. ROMAGO also concluded and signed the TOR [Terms of
Reference] and the Amended TOR confirming its intention and agreement to submit the dispute to
PDRC. It actively participated in the discussion on the merits of the case, even going to the extent of
seeking affirmative relief.
To repeat, ROMAGO actively participated in the proceedings before the PDRCI; even after an
adverse judgment had been rendered by the Arbitrator, it did not assail the PDRCI's jurisdiction over
the dispute. In fact, during the proceedings for the confirmation of the Arbitrator's award, ROMAGO’s
opposition zeroed in on the alleged bias and partiality of the Arbitrator in rendering the decision. Even
in its petition for relief from judgment filed with the RTC, the PDRCI's alleged lack of jurisdiction was
never raised as an issue. It was only in its petition for certiorari with the CA, and after a writ of
execution had been issued, that ROMAGO raised the issue of lack of jurisdiction.
In Tijam v. Sibonghanoy, it was held:
[A] party cannot invoke the jurisdiction of a court to secure affirmative relief against his
opponent and, after obtaining or failing to obtain such relief, repudiate or question that same
jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79)...the question whether the court had
jurisdiction either of the subject-matter of the action or of the parties was not important in such
cases because the party is barred from such conduct not because the judgment or order of the Court
is valid and conclusive as an adjudication, but for the reason that such a practice cannot be tolerated
– obviously for reasons of public policy.
Furthermore, it has also been held that after voluntarily submitting a cause and
encountering an adverse decision on the merits, it is too late for the loser to question the jurisdiction
or power of the court... [a]nd in Littleton vs. Burgess, 16 Wyo. 58, the Court said that it is not right for
a party who has affirmed and invoked the jurisdiction of a court in a particular matter to secure an
affirmative relief, to afterwards deny that same jurisdiction to escape a penalty.
It is too late in the day for ROMAGO to repudiate the jurisdiction of PDRCI over the dispute, and
consequently, of the RTC to confirm the decision.
Finally, ROMAGO conceded and estopped itself from further questioning the jurisdiction of the
PDRCI and the RTC when it filed a petition for relief from judgment. A petition for relief under Rule 38
of the Rules of Court is only available against a final and executory judgment If ROMAGO indeed
believed that the PDRCI had no jurisdiction over the suit in the first instance, then all the proceedings
therein, including the decision, are null and void. Hence, it would not have filed a petition for relief from
judgment. In so doing, ROMAGO recognized that the PDRCI had jurisdiction over the dispute.
Certainly, the Arbitrator's decision, which was confirmed by the RTC, had attained finality when
ROMAGO failed to interpose an appeal to the CA. Hence, the decision may now be executed.

ii. Confirmation by petition or by motion
Whether it is a petition or a motion that should be filed by the applicant for confirmation of
arbitral award depends on whether a court case arising from the same arbitrable dispute exists at the
time of the issuance of the arbitral award. Best explained in the 2 following scenarios.
A dispute arises and both parties agree to settle through arbitration, as stipulated in their
contract, appointing a sole arbitrator. The sole arbitrator hears the case and renders an award. The
losing party in the arbitration refuses to voluntarily comply with the arbitral award, which makes it
necessary for the winning party to apply for judicial confirmation of the arbitral award in order to be
able to enforce it. In this case, the proper mode for applying for judicial confirmation is to file a petition
for confirmation in court. There is no existing court case which arose from the same arbitrable dispute,
and therefore, it is necessary to file an initiatory pleading in court in order to initiate court proceedings
for confirmation of the arbitral award.
In contrast, a dispute arises and the first party to the contract, decides to by-pass the arbitration
process and goes to court directly to file a civil action. Summons is served upon the second party
requiring the filing of an answer. However, instead of filing an answer, the second party files a motion
to stay civil action and asks the The court grants the motion, orders the parties to arbitrate their dispute
and stays the civil action pending the arbitration of the dispute. Both parties comply with the court
order and agree to appoint a specific individual as sole arbitrator, as stipulated in the arbitration
clause. The sole arbitrator hears the case and renders an award. The losing party in the arbitration
refuses to voluntarily comply with the arbitral award, which makes it necessary for the winning party
to apply for judicial confirmation of the arbitral award in order to be able to enforce it. In this case, the
proper mode for applying for judicial confirmation is to file a motion for confirmation before the same
court where the civil action was initially filed. Since there is already an existing court case which arose
from the same arbitrable dispute, there is no necessity to initiate another court case, for which reason it
is improper to file an initiatory petition in order to initiate another court case.
1. Asset Privatization Trust vs. Court of Appeals, 300 SCRA 579 (1998)
Facts:
The Republic of the Philippines granted the Marinduque Mining and Industrial Corporation
(MMIC) the exclusive right to explore, develop and exploit nickel, cobalt and other minerals in the
Surigao mineral reservation. The Philippine Government undertook to support the financing of MMIC
by purchase of MMIC debenture bonds and extension of guarantees. Further, the Philippine
Government obtained a firm commitment from the Development Bank of the Philippines (DBP) and/or
other government financing institutions to subscribe in MIVIIC and issue guarantee/s for foreign loans
or deferred payment arrangements. DBP approved guarantees in favor of MMIC and the Government
also extended accommodations to MMIC in various amounts.
MMIC, the Philippine National Bank (PNB) and DBP executed a Mortgage Trust Agreement
whereby
MMIC, as mortgagor, agreed to constitute a mortgage in favor of PNB and DBP as mortgagees, over all
MMIC's assets.
MMIC was having a difficult time meeting its financial obligations and its outstanding loan with
DBP and PNB reached the amount of more than PhP22-Billion. Thus, a financial restructuring plan
(FRP) was drafted to reduce MMIC's interest expense through debt conversion to equity. The FRP was
approved by the Board of Directors of the NMIC, but it was never formally adopted, approved or ratified
by either PNB or DBP.
In August and September 1984, as the various loans and advances made by DBP and PNB to
MMIC had become overdue and since any restructuring program relative to the loans was no longer
feasible, and in compliance with the directive of Presidential Decree No. 385, DBP and PNB as
mortgagees of MMIC assets, decided to exercise their right to extra-judicially foreclose the mortgages in
accordance with the Mortgage Trust Agreement. The foreclosed assets were sold to PNB as the lone
bidder. These assets were later transferred to the Asset Privatization Trust (API).
The President of MMIC, together with other stockholders, filed a derivative suit against DBP and
PNB before the Regional Trial Court of Makati for annulment of foreclosures, specific performance and
damages. In the course of the trial, MMIC and APT, as successor in interest of DBP and PNB, agreed to
submit the case to arbitration by entering into a Compromise and Arbitration Agreement. They
stipulated that the issues to be submitted to the arbitrators shall be (a) Whether plaintiffs have the
capacity or the personality to institute this derivative suit in behalf of the MMIC or its directors; (b)
Whether or not the actions leading to, and including, the PNB-DBP foreclosure of the MMIC assets were
proper, valid and in good faith. This agreement was approved by the trial court and the complaint was
corollarily dismissed. Thereafter, the Arbitration Committee rendered a decision ordering APT to pay
MMIC damages and arbitration costs. On motion of the President and the other stockholders of MMIC,
the trial court confirmed the Arbitration Committee's award. Its motion for reconsideration having
been denied, Asset Privatization Trust filed a special civil action for certiorari with the Court of Appeals.
It was likewise denied. Hence, this petition for review on certiorari.
Issue: Whether or not the trial court has jurisdiction to confirm the decision of the arbitration
committee.
Ruling: NO, by the court’s own action (and inaction of the parties), trial court has lost jurisdiction over
the case.
The order of the RTC in very clear terms stated that the "complaint was dismissed." The term
"dismiss" has a precise definition in law. "To dispose of an action, suit, or motion without trial on the
issues involved. Conclude, discontinue, terminate, quash." Admittedly, the correct procedure was for the
parties to go back to the court where the case was pending to have the award confirmed. However, the
trial court made the fatal mistake of issuing a final order dismissing the case. While it should have merely
suspended the case and not dismissed it, neither of the parties questioned said dismissal. Thus, both
parties as well as said court are bound by such error.
By its own action, the trial court had lost jurisdiction over the case. It could not have validly
reacquired jurisdiction on mere motion of one of the parties. The Rules of Court is specific on how a new
case may be initiated and such is not done by mere motion in a particular branch of the RTC.
Consequently, as there was no "pending action" to speak of, the petition to confirm the arbitral award
should have been filed as a new case and raffled accordingly to one of the branches of the RTC.
c. Arbitral Award in International Commercial Arbitration

i. Model Law provisions
1. Article 28, 29, 30, 31, 32
Article 28. Rules applicable to substance of dispute.
(1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen by
the parties as applicable to the substance of the dispute. Any designation of the law or legal system of a
given State shall be construed, unless otherwise expressed, as directly referring to the substantive law
of that State and not to its conflict of laws rules.
(2) Failing any designation by the parties, the arbitral tribunal shall apply the law determined by the
conflict of laws rules which it considers applicable.
(3) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties
have expressly authorized it to do so.
(4) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall
take into account the usages of the trade applicable to the transaction.
Article 29. Decision-making by panel of arbitrators.

In arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be
made, unless otherwise agreed by the parties, by a majority of all its members. However, questions of
procedure may be decided by a presiding arbitrator, if so authorized by the parties or all members of
the arbitral tribunal.
Article 30. Settlement.

(1) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the
proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record the
settlement in the form of an arbitral award on agreed terms.
(2) An award on agreed terms shall be made in accordance with the provisions of article 31 and shall
state that it is an award. Such an award has the same status and effect as any other award on the merits
of the case.
Article 31. 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.
Article 32. Termination of proceedings.

(1) The arbitral proceedings are terminated by the final award or by an order of the arbitral tribunal in
accordance with paragraph (2) of this article.
(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings when:
(a) the claimant withdraws his claim, unless the respondent objects thereto and the arbitral
tribunal recognizes a legitimate interest on his part in obtaining a final settlement of the
dispute;
(b) the parties agree on the termination of the proceedings;
(c) the arbitral tribunal finds that the continuation of the proceedings has for any other reason
become unnecessary or impossible.
(3) The mandate of the arbitral tribunal terminates with the termination of the arbitral proceedings,
subject to the provisions of articles 33 and 34(4).
ii. Recognition and Enforcement of International Commercial Arbitral Award

1. Special ADR Rules, Rule 12
RULE 12: RECOGNITION AND ENFORCEMENT OR SETTING ASIDE OF AN INTERNATIONAL
COMMERCIAL ARBITRATION AWARD
Rule 12.1. Who may request recognition and enforcement or setting aside. - Any party to an international
commercial arbitration in the Philippines may petition the proper court to recognize and enforce or set
aside an arbitral award.
Rule 12.2. When to file petition. - (A) Petition to recognize and enforce. - The petition for enforcement
and recognition of an arbitral award may be filed anytime from receipt of the award. If, however, a
timely petition to set aside an arbitral award is filed, the opposing party must file therein and in
opposition thereto the petition for recognition and enforcement of the same award within the period
for filing an opposition.
(B) Petition to set aside. - The petition to set aside an arbitral award may only be filed within
three (3) months from the time the petitioner receives a copy thereof. If a timely request is made with
the arbitral tribunal for correction, interpretation or additional award, the three (3) month period shall
be counted from the time the petitioner receives the resolution by the arbitral tribunal of that request.
A petition to set aside can no longer be filed after the lapse of the three (3) month period. The
dismissal of a petition to set aside an arbitral award for being time-barred shall not automatically result
in the approval of the petition filed therein and in opposition thereto for recognition and enforcement
of the same award. Failure to file a petition to set aside shall preclude a party from raising grounds to
resist enforcement of the award.
Rule 12.3. Venue. - A petition to recognize and enforce or set aside an arbitral award may, at the option
of the
petitioner, be filed with the Regional Trial Court: (a) where arbitration proceedings were conducted;
(b) where any of the assets to be attached or levied upon is located; (c) where the act to be enjoined
will be or is being performed; (d) where any of the parties to arbitration resides or has its place of
business; or (e) in the National Capital Judicial
Region.
Rule 12.4. Grounds to set aside or resist enforcement. - The court may set aside or refuse the
enforcement of the arbitral award only if:
a. The party making the application furnishes proof that:
(i). A party to the arbitration agreement was under some incapacity, or the said agreement is
not valid under the law to which the parties have subjected it or, failing any indication thereof,
under Philippine law; or
(ii). The party making the application to set aside or resist enforcement was not given proper
notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise
unable to present his case; or
(iii). The award deals with a dispute not contemplated by or not falling within the terms of the
submission to arbitration, or contains decisions on matters beyond the scope of the submission
to arbitration; provided that, if the decisions on matters submitted to arbitration can be
separated from those not so submitted, only that part of the award which contains decisions on
matters not submitted to arbitration may be set aside or only that part of the award which
contains decisions on matters submitted to arbitration may be enforced; or
(iv). The composition of the arbitral tribunal or the arbitral procedure was not in accordance
with the agreement of the parties, unless such agreement was in conflict with a provision of
Philippine law from which the parties cannot derogate, or, failing such agreement, was not in
accordance with Philippine law;
b. The court finds that:
(i). The subject-matter of the dispute is not capable of settlement by arbitration under the law of
the Philippines; or
(ii). The recognition or enforcement of the award would be contrary to public policy.
In deciding the petition, the Court shall disregard any other ground to set aside or enforce the
arbitral award other than those enumerated above.
The petition to set-aside or a pleading resisting the enforcement of an arbitral award on the
ground that a party was a minor or an incompetent shall be filed only on behalf of the minor or
incompetent and shall allege that (a) the other party to arbitration had knowingly entered into a
submission or agreement with such minor or incompetent, or (b) the submission to arbitration was
made by a guardian or guardian ad litem who was not authorized to do so by a competent court.
Rule 12.5. Exclusive recourse against arbitral award. - Recourse to a court against an arbitral award shall
be made only through a petition to set aside the arbitral award and on grounds prescribed by the law
that governs
international commercial arbitration. Any other recourse from the arbitral award, such as by appeal or
petition for review or petition for certiorari or otherwise, shall be dismissed by the court.
Rule 12.6. Form. - The application to recognize and enforce or set aside an arbitral award, whether
made through a petition to recognize and enforce or to set aside or as a petition to set aside the award
in opposition thereto, or through a petition to set aside or petition to recognize and enforce in
opposition thereto, shall be verified by a person who has personal knowledge of the facts stated therein.
When a petition to recognize and enforce an arbitral award is pending, the application to set it
aside, if not yet time-barred, shall be made through a petition to set aside the same award in the same
proceedings.
When a timely petition to set aside an arbitral award is filed, the opposing party may file a
petition for recognition and enforcement of the same award in opposition thereto.
Rule 12.7. Contents of petition. - (A) Petition to recognize and enforce. - The petition to recognize and
enforce or petition to set aside in opposition thereto, or petition to set aside or petition to recognize and
enforce in opposition thereto, shall state the following:
a. The addresses of record, or any change thereof, of the parties to arbitration;
b. A statement that the arbitration agreement or submission exists;
c. The names of the arbitrators and proof of their appointment;
d. A statement that an arbitral award was issued and when the petitioner received it; and
e. The relief sought.
Apart from other submissions, the petitioner shall attach to the petition the following:
a. An authentic copy of the arbitration agreement;
b. An authentic copy of the arbitral award;
c. A verification and certification against forum shopping executed by the applicant in accordance with
Sections 4 and 5 of Rule 7 of the Rules of Court; and
d. An authentic copy or authentic copies of the appointment of an arbitral tribunal. enforce an arbitral
award in international commercial arbitration shall have the same contents as a petition to recognize
and enforce or petition to recognize and enforce in opposition to a petition to set aside an arbitral
award.
In addition, the said petitions should state the grounds relied upon to set it aside.
Further, if the ground of the petition to set aside is that the petitioner is a minor or found incompetent
by a court, there shall be attached to the petition certified copies of documents showing such fact. In
addition, the petitioner shall show that even if the submission or arbitration agreement was entered
into by a guardian or guardian ad litem, the latter was not authorized by a competent court to sign such
the submission or arbitration agreement.
In either case, if another court was previously requested to resolve and/or has resolved, on appeal, the
arbitral tribunal’s preliminary determination in favor of its own jurisdiction, the petitioner shall apprise
the court before which the petition to recognize and enforce or set aside is pending of the status of the
appeal or its resolution.
Rule 12.8. Notice. - Upon finding that the petition filed under this Rule is sufficient both in form and in
substance, the court shall cause notice and a copy of the petition to be delivered to the respondent
directing him to file an opposition thereto within fifteen (15) days from receipt of the petition. In lieu of
an opposition, the respondent may file a petition to set aside in opposition to a petition to recognize and
enforce, or a petition to recognize and enforce in opposition to a petition to set aside.
The petitioner may within fifteen (15) days from receipt of the petition to set aside in opposition to a
petition to recognize and enforce, or from receipt of the petition to recognize and enforce in opposition
to a petition to set aside, file a reply.
Rule 12.9. Submission of documents. - If the court finds that the issue between the parties is mainly one
of law, the parties may be required to submit briefs of legal arguments, not more than fifteen (15) days
from receipt of the order, sufficiently discussing the legal issues and the legal basis for the relief prayed
for by each of them.
If the court finds from the petition or petition in opposition thereto that there are issues of fact relating
to the
ground(s) relied upon for the court to set aside, it shall require the parties within a period of not more
than 15 days from receipt of the order simultaneously to submit the affidavits of all of their witnesses
and reply affidavits within 10 days from receipt of the affidavits to be replied to. There shall be
attached to the affidavits or reply affidavits, all documents relied upon in support of the statements of
fact in such affidavits or reply affidavits.
Rule 12.10. Hearing. - If on the basis of the petition, the opposition, the affidavits and reply affidavits of
the parties, the court finds that there is a need to conduct an oral hearing, the court shall set the case for
hearing. This case shall have preference over other cases before the court, except criminal cases. During
the hearing, the affidavits of witnesses shall take the place of their direct testimonies and they shall
immediately be subject to cross-examination thereon. The court shall have full control over the
proceedings in order to ensure that the case is heard without undue delay.
Rule 12.11. Suspension of proceedings to set aside. - The court when asked to set aside an arbitral award
may, where appropriate and upon request by a party, suspend the proceedings for a period of time
determined by it to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to
take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside.
The court, in referring the case back to the arbitral tribunal may not direct it to revise its award in a
particular way, or to revise its findings of fact or conclusions of law or otherwise encroach upon the
independence of an arbitral tribunal in the making of a final award.

The court when asked to set aside an arbitral award may also, when the preliminary ruling of an
arbitral tribunal affirming its jurisdiction to act on the matter before it had been appealed by the party
aggrieved by such preliminary ruling to the court, suspend the proceedings to set aside to await the
ruling of the court on such pending appeal or, in the alternative, consolidate the proceedings to set
aside with the earlier appeal.
Rule 12.12. Presumption in favor of confirmation. - It is presumed that an arbitral award was made and
released in due course and is subject to enforcement by the court, unless the adverse party is able to
establish a ground for setting aside or not enforcing an arbitral award.
Rule 12.13. Judgment of the court. - Unless a ground to set aside an arbitral award under Rule 12.4
above is fully established, the court shall dismiss the petition. If, in the same proceedings, there is a
petition to recognize and enforce the arbitral award filed in opposition to the petition to set aside, the
court shall recognize and enforce the award.
In resolving the petition or petition in opposition thereto in accordance with the Special ADR Rules, the
court shall either set aside or enforce the arbitral award. The court shall not disturb the arbitral
tribunal’s determination of facts and/or interpretation of law.
Rule 12.14. Costs. - Unless otherwise agreed upon by the parties in writing, at the time the case is
submitted to the court for decision, the party praying for recognition and enforcement or setting aside
of an arbitral award shall submit a statement under oath confirming the costs he has incurred only in
the proceedings for such recognition and enforcement or setting aside. The costs shall include the
attorney’s fees the party has paid or is committed to pay to his counsel of record.
The prevailing party shall be entitled to an award of costs, which shall include reasonable
attorney’s fees of the prevailing party against the unsuccessful party. The court shall determine the
reasonableness of the claim for attorney’s fees.
d. Foreign Arbitral Award

i. Definition, Special ADR Rules, Rule 1.11(d)
Rule 1.11. Definition. - The following terms shall have the following meanings:
d. "Foreign Arbitral Award" is one made in a country other than the Philippines.
ii. New York Convention, Article II(1), (2), (3), Article III
Article II
1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to
submit to arbitration all or any differences which have arisen or which may arise between them in
respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable
of settlement by arbitration.
2. The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration
agreement, signed by the parties or contained in an exchange of letters or telegrams.
3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties
have made an agreement within the meaning of this article, shall, at the request of one of the parties,
refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or
incapable of being performed.
Article III
Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with
the rules of procedure of the territory where the award is relied upon, under the conditions laid down
in the following articles. There shall not be imposed substantially more onerous conditions or higher
fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies
than are imposed on the recognition or enforcement of domestic arbitral awards.
iii. Capacity to Sue for Enforcement

1. Tuna Processing, Inc. vs. Philippine Kingford, Inc., 667 SCRA 287 (2012)
Facts:

Kanemitsu Yamaoka ("licensor"), co-patentee of a US Patent, a Philippine Letters Patent, and an
Indonesian Patent (collectively, "Yamaoka Patent"), and five Philippine tuna processors (collectively,
"sponsors"/"licensees"), which include respondent Philippine Kingford, Inc. ("Kingford") entered into a
Memorandum of Agreement ("MOA"). The MOA established the Tuna Processors Inc ("TPI"), a
corporation organized in California and co-owned by licensor and sponsors, to enforce the Yamaoka
Patent, and under which the sponsors sought to be licensed to practice the patented processes in the
US, the Philippines and Indonesia, to enforce the patents and to collect royalties in conjunction with
licensor. TPI was also established to maintain bank accounts for the deposit of funds and disbursement
of expenses.
Eventually sponsors/licensees withdrew from TPI and reneged on their obligations, prompting
TPI to submit the dispute for arbitration before the International Centre for Dispute Resolution in
California. An arbitral award in the total amount of US$ 1,750.846.10 was rendered in favor of TPI.
To enforce the award, TPI filed on 10 October 2007 a Petition for Confirmation, Recognition,
and
Enforcement of Foreign Arbitral Award before the Regional Trial Court. Respondent Kingford, a
domestic Philippine corporation, filed a motion to dismiss which was, at first, denied, but subsequently
reconsidered leading to the dismissal of the petition on the ground that the petitioner lacked legal
capacity to sue in the Philippines.
The dismissal was appealed directly to the Supreme Court.
Issue: Can a foreign corporation not licensed to do business in the Philippines, but which collects
royalties from entities in the Philippines, sue here to enforce a foreign arbitral award?
Ruling: YES
The RTC dismissed the petition pursuant to Section 133 of the Corporation Code: "Doing
business without a license. - No foreign corporation transacting business in the Philippines without a
license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the Philippines; but such corporation may be sued
or proceeded against before Philippine courts or administrative tribunals on any valid cause of action
recognized under Philippine laws."
TPI counters that it is entitled to seek recognition and enforcement of the foreign arbitral award
in accordance with RA 9285, the New York Convention, and the UNCJTRAL Model Law, as none of these
specifically requires that the party seeking enforcement should have legal capacity to sue.
In several cases, this Court had the occasion to discuss the nature and applicability of the
Corporation Code of the Philippines, a general law, viz-a-viz other special laws. As between a general
and special law, the latter shall prevail – generalia specialibus non derogant.
Following the same principle, the ADR Act of 2004 (RA 9285) shall apply. It specifically provides
exclusive grounds available to the party opposing an application for recognition and enforcement of the
arbitral award. Inasmuch as the ADR Act of 2004, a municipal law, applies, there is no need to discuss
compliance with international obligations under the New York Convention and the Model Law. After all,
both already form part of the law.
Section 42 (Application of the New York Convention) of RA 9285 provides that "the New York
Convention shall govern the recognition and enforcement of arbitral awards covered by the said
Convention", while Section 45 (Rejection of a Foreign Arbitral Award) provides that "a party to a
foreign arbitration proceeding may oppose an application for recognition and enforcement of the
arbitral award in accordance with the procedural rules to be promulgated by the Supreme Court only
on those grounds enumerated under Article V of the New York Convention. Any other ground raised
shall be disregarded by the regional trial court."
Article V of New York Convention provides the following grounds to refuse recognition and
enforcement of foreign arbitral award: (a) The parties to the arbitration agreement were, under the law
applicable to them, under some incapacity, or the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the law of the country where the
award was made; or (b) The party against whom the award is invoked was not given proper notice of
the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present
his case; or (c) The award deals with a difference not contemplated by or not falling within the terms of
the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to
arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from
those not so submitted, that part of the award which contains decisions on matters submitted to
arbitration may be recognized and enforced; or (d) The composition of the arbitral authority or the
arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement,
was not in accordance with the law of the country where the arbitration took place; or (e) The award
has not yet become binding on the parties, or has been set aside or suspended by a competent authority
of the country in which, or under the law of which, that award was made; (f) The subject matter of the
difference is not capable of settlement by arbitration under the law of the country were recognition and
enforcement is sought; or (g) The recognition or enforcement of the award would be contrary to the
public policy of that country.
Not one of these exclusive grounds touched on the capacity to sue of the party seeking the
recognition and enforcement of the award.
Rule 13.1 of the Special ADR Rules supports this position and provides that "[any party to a
foreign arbitration may petition the court to recognize and enforce a foreign arbitral award." The
contents of such petition are enumerated in Rule 13.5. Capacity to sue is not included. Oppositely, in the
Rule on local arbitral awards or arbitrations in instances where "the place of arbitration is in the
Philippines" (Rule 3.1), it is specifically required that a petition "to determine any question concerning
the existence, validity and enforceability of such arbitration agreement" (Rule 3.2) available to the
parties before the commencement of arbitration and/or a petition for "judicial relief from the ruling of
the arbitral tribunal on a preliminary question upholding or declining its jurisdiction" (Rule 3.12) after
arbitration has already commenced should state "[t]he facts showing that the persons named as
petitioner or respondent have legal capacity to sue or be sued." (Rules 3.6 and 3.16)
Indeed, it is in the best interest of justice that in the enforcement of a foreign arbitral award, we
deny availment by the losing party of the rule that bars foreign corporations not licensed to do business
in the Philippines from maintaining a suit in our courts. When a party enters into a contract containing
a foreign arbitration clause and, as in this case, in fact submits itself to arbitration, it becomes bound by
the contract, by the arbitration and by the result of arbitration, conceding thereby the capacity of the
other party to enter into the contract, participate in the arbitration and cause the implementation of the
result.
Clearly, on the matter of capacity to sue, a foreign arbitral award should be respected not
because it is favored over domestic laws and procedures, but because RA 9285 has certainly erased any
conflict of law question.
Finally, even assuming, only for the sake of argument, that the court a quo correctly observed
that the Model Law, not the New York Convention, governs the subject arbitral award, petitioner may
still seek recognition and enforcement of the award in Philippine court, since the Model Law prescribes
substantially identical exclusive grounds for refusing recognition or enforcement.
The foreign corporation's capacity to sue in the Philippines is not material insofar as the
recognition and enforcement of a foreign arbitral award is concerned.
The Supreme Court resolved the issue in the affirmative Although the Tuna Processing case involves an
issue on the legal capacity of a foreign corporation not licensed to do business in the Philippines to
petition for recognition and enforcement of a foreign arbitral award, relies on a municipal law, RA 9285
to resolve the issue, declaring in the process that the New York Convention and the Model Law already
form part of Philippine law.

VII. Post Award Remedies
a. Vacating an Arbitral Award
i. Adamson vs. Court of Appeals, 232 SCRA 602 (1994)
Facts:
Petitioners, Adamson Management and Dr. Lucas Adamson entered into a contract with APAC Holdings
Limited whereby petitioners sold 99.97% of outstanding common shares of stock of Adamson and
Adamson Inc. for 24.3M plus the Net Asset Value (NAV) of Adamson and Adamson Inc. Both parties
failed to agree on a reasonable NAV, hence, case was submitted for arbitration.
The Arbitration Committee rendered a decision finding that the NAV of the Company is 167,118.00
which was computed based on a pro-forma balance sheet submitted by SGV. It disregarded petitioner’s
Argument that there was a fixed NAV amounting to 5.1M. The Committee claimed that said amount was
merely an estimate and still subject to financial developments. The Committee also held that any
ambiguity in the contract should not be necessarily be interpreted against APAC because the parties
themselves had stipulated provisions in the agreement for approval of petitioners.
APAC filed a petition for confirmation of the arbitration award before the RTC-Makati. The RTC
rendered a decision vacating the arbitration award. On appeal, the CA reversed the decision claiming
that the nullification of the arbitration decision was not based on the grounds provided by the
Arbitration law.
Issue: Whether or not the CA erred in affirming the arbitration award and reversing the trial court.
Ruling: NO.
Section 24, Arbitration Law provides for Grounds for vacating award. – The court must make an order
vacating the award when such party proves affirmatively that in the arbitration proceedings:
(a) The award was procured by corruption, fraud or other undue means; or
(b) That there was evident partiality or corruption in the arbitrators or any of them; or
(c) That 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; that one or
more of the arbitrators was disqualified to act as such under section nine hereof, and willfully refrained
from disclosing such disqualifications or any other misbehavior by which the rights of any party
have been materially prejudiced; or
(d) That 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.
Petitioners failed to prove their allegation of partiality on the part of the arbitrators. From the decision
of the RTC, it is clear that the award was vacated not because of evident partiality of the arbitrators but
because the arbitrator interpreted the contract in a way which was not favorable to the petitioners.
That the award was unfavorable to petitioners did not prove evident partiality. The arbitrators resorted
to contract interpretation because it was necessary to settle the controversy between the parties
regarding the amount of the NAV. The interpretation did not create a new contract but was a faithful
application of the provisions of the agreement. Neither was the award arbitrary based on statements
prepared by SGV since it was chosen by both parties to be the auditors. SGV, being a reputable firm, is
presumed to have prepared statements in accordance with sound accounting principles. Petitioners
also did not present their own financial statements to rebut SGV’s report.
ii. National Steel Corporation vs. Regional Trial Court of Lanao del Norte, Branch 2,
Iligan City, 304 SCRA 595 (1999)
Facts:
Edward Wilkom Enterprises Inc. (EWEI) together with Ramiro Construction and National Steel
Corporation (NSC) executed a contract whereby the former jointly undertook the Contract for Site
Development for the latter's Integrated Iron and Steel Mills Complex to be established at Iligan City.

Sometime in 1983, the services of Ramiro Construction was terminated and EWEI took over Ramiro's
contractual obligation. Due to this and to other causes deemed sufficient by EWEI, extensions of time
for the termination of the project were granted by NSC.
Differences later arose, EWEI filed Civil Case before the RTC of Lanao del Norte Branch 6.
Presiding Judge Valario M. Salazar issued an order dismissing the said complaint and counterclaim in
view of the desire of both parties to implement Sec. 19 of the contract, providing for a resolution of any
conflict by arbitration.
After series of hearings, the Arbitrators rendered the decision substantial portion of which directs NSC
to pay EWEI, as follows:
(a) P458,381.00 representing EWEI's last billing No. 16 with interest thereon at the rate of 1-
1/4% per month from January 1, 1985 to actual date of payment; (b) P1,335,514.20
representing price escalation adjustment under PD No. 1594, with interest thereon at the rate
of 1-1/4 % per month from January 1, 1985 to actual date of payment;(c) P50,000 as and for
exemplary damages; (d) P350,000 as and for attorney's fees.; and (e) P35,000.00 as and for
cost of arbitration.
The RTC of Lanao del Norte Branch 2 rendered judgment as follows:

(1) In Civil Case No. 11-2198, declaring the award of the Board of Arbitrators, dated April 21,
1992 to be duly AFFIRMED and CONFIRMED "en toto" ; that an entry of judgment be
entered therewith pursuant to RA 876; and costs against respondent National Steel
Corporation.
(2) In Special Proceeding No. 11-2206, ordering the petition to vacate the aforesaid award be
DISMISSED.
With the denial of its Motion for Reconsideration, the NSC has come to this court via the present
petition.
Issue: Whether or not the lower court acted with grave abuse of discretion in not vacating the
arbitrator's award.
Ruling: NO.
If a dispute should arise from the contract, the Arbitration Board shall assume jurisdiction and conduct
hearings. After the Board comes up with a decision, the parties may immediately implement the same
by treating it as an amicable settlement. However, if one of the parties refuses to comply or is dissatisfied
with the decision, he may file a Petition to Vacate the Arbitrator's decision before the trial court. On the
other hand, the winning party may ask the trial court's confirmation to have such decision enforced.
In a Petition to Vacate Arbitrator's Decision before the trial court, regularity in the performance of
official functions is presumed and the complaining party has the burden of proving the existence of any of
the grounds for vacating the award, as provided for by Sections 24 of the Arbitration Law, to wit:
"Sec. 24 GROUNDS FOR VACATING THE AWARD - In any one of the following cases, the court must make
an order vacating the award upon the petition of any party to the controversy when such party proves
affirmatively that in the arbitration proceedings:
(a) The award was procured by corruption, fraud or other undue means;
(b) That there was evident partiality or corruption in the arbitrators of any of them; or
more of the arbitrators was disqualified to act as such under section nine hereof, and wilfully refrained
from disclosing such disqualification or of any other misbehavior by which the rights of any party have
been materially prejudiced; or
(d) That 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.”

The grounds relied upon by the petitioner were the following (a) That there was evident partiality in the
assailed decision of the Arbitrators in favor of the respondent; and (b) That there was mistaken
appreciation of the facts and application of the law by the Arbitrators.
Petitioner's allegation that there was evident partiality is untenable. It is anemic of evidentiary support.
In Adamson vs. Court of Appeals , in upholding the decision of the Board of Arbitrators, this Court ruled
that the fact that a party was disadvantaged by the decision of the Arbitration Committee does not
prove evident partiality. Proofs other than mere inference are needed to establish evident partiality.
Here, petitioner merely averred evident partiality without any proof to back it up. Petitioner was never
deprived of the right to present evidence nor was there any showing that the Board showed signs of any
bias in favor of EWEI.
Parentethically, and in the light of the record above-mentioned, this Court hereby holds that the Board
of Arbitrators did not commit any 'evident partiality' imputed by petitioner NSC.
Above all, this Court must sustain the said decision for it is a well settled rule that the actual findings of
an administrative body should be affirmed if there is substantial evidence to support them and the
conclusions stated in the decision are not clearly against the law and jurisprudence similar to the
instant case.
Henceforth, every reasonable intendment will be indulged to give effect such proceedings and in favor
of the regulatory and integrity of the arbitrators act. Indeed, the allegation of evident partiality is not
well-taken because the petitioner failed to substantiate the same.
Anent the issue of mistaken appreciation of facts and law of the case, the petitioner theorizes that the
awards made by the Board were unsubstantiated and the same were a plain misapplication of the law
and even contrary to jurisprudence.
iii. ABS-CBN Broadcasting Corporation vs. World Interactive Network Systems,

Japan Com Ltd., 544 SCRA 308 (2008)
Facts:
ABS-CBN Broadcasting Corporation entered into a licensing agreement with respondent World
Interactive Network Systems Japan Co., Ltd., a foreign corporation licensed under the laws of Japan.
Under the agreement, respondent was granted the exclusive license to distribute and sublicense the
distribution of the television service known as "The Filipino Channel" (TFC) in Japan. By virtue thereof,
petitioner undertook to transmit the TFC programming signals to respondent which the latter received
through its decoders and distributed to its subscribers.
A dispute arose between the parties when petitioner accused respondent of inserting nine episodes of
WINS WEEKLY. Petitioner claimed that these were "unauthorized insertions" constituting a material
breach of their agreement. Petitioner notified respondent of its intention to terminate the agreement
effective June 10, 2002.
Thereafter, respondent filed an arbitration suit pursuant to the arbitration clause of its agreement with
petitioner.
The parties appointed Professor Alfredo F. Tadiar to act as sole arbitrator. They stipulated on the
following issues in their terms of reference (TOR):
1. Was the broadcast of WINS WEEKLY by the claimant duly authorized by the respondent [herein
petitioner]?
2. Did such broadcast constitute a material breach of the agreement that is a ground for termination of
the agreement in accordance with Section 13 (a) thereof?
3. If so, was the breach seasonably cured under the same contractual provision of Section 13 (a)?
4. Which party is entitled to the payment of damages they claim and to the other reliefs prayed for?
The arbitrator found in favor of respondent.

Petitioner filed in the CA a petition for review under Rule 43 of the Rules of Court or, in the alternative, a
petition for certiorari under Rule 65 of the same Rules, with application for temporary restraining order
and writ of preliminary injunction. It alleged serious errors of fact and law and/or grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the arbitrator.
Respondent, on the other hand, filed a petition for confirmation of arbitral award before the RTC of
Quezon City.
Consequently, petitioner filed a supplemental petition in the CA seeking to enjoin the RTC of Quezon
City from further proceeding with the hearing of respondent's petition for confirmation of arbitral
award.
After the petition was admitted by the appellate court, the RTC of Quezon City issued an order holding
in abeyance any further action on respondent's petition as the assailed decision of the arbitrator had
already become the subject of an appeal in the CA. Respondent filed a motion for reconsideration but no
resolution has been issued by the lower court to date.
CA: rendered the assailed decision dismissing ABS-CBN’s petition for lack of jurisdiction. It stated that as
the TOR itself provided that the arbitrator's decision shall be final and unappealable and that no motion
for reconsideration shall be filed, then the petition for review must fail. It ruled that it is the RTC which
has jurisdiction over questions relating to arbitration. It held that the only instance it can exercise
jurisdiction over an arbitral award is an appeal from the trial court's decision confirming, vacating or
modifying the arbitral award. It further stated that a petition for certiorari under Rule 65 of the Rules of
Court is proper in arbitration cases only if the courts refuse or neglect to inquire into the facts of an
arbitrator's award.
Petitioner moved for reconsideration. The same was denied. Hence, this petition.
Issue: Whether or not an aggrieved party in a voluntary arbitration dispute may avail of, directly in the
CA, a petition for review under Rule 43 or a petition for certiorari under Rule 65 of the Rules of Court,
instead of filing a petition to vacate the award in the RTC when the grounds invoked to overturn the
arbitrator’s decision are other than those for a petition to vacate an arbitral award enumerated under RA
876.
Ruling: NO.
RA 876 itself mandates that it is the CFI, now the RTC, which has jurisdiction over questions relating to
arbitration, such as a petition to vacate an arbitral award.
Section 24 of RA 876 provides for the specific grounds for a petition to vacate an award made by an
arbitrator:
Sec. 24. Grounds for vacating award. - In any one of the following cases, the court must make an
order vacating the award upon the petition of any party to the controversy when such party
proves affirmatively that in the arbitration proceedings:
(a) The award was procured by corruption, fraud, or other undue means; or
(c) That 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; that one or more of the arbitrators was disqualified to act as such under section
nine hereof, and willfully refrained from disclosing such disqualifications or of any other
misbehavior by which the rights of any party have been materially prejudiced; or
(d) That 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.
Based on the foregoing provisions, the law itself clearly provides that the RTC must issue an order
vacating an arbitral award only "in any one of the . . . cases" enumerated therein.

As RA 876 did not expressly provide for errors of fact and/or law and grave abuse of discretion (proper
grounds for a petition for review under Rule 43 and a petition for certiorari under Rule 65,
respectively) as grounds for maintaining a petition to vacate an arbitral award in the RTC, it necessarily
follows that a party may not avail of the latter remedy on the grounds of errors of fact and/or law or
grave abuse of discretion to overturn an arbitral award.
Adamson v. Court of Appeals gave ample warning that a petition to vacate filed in the RTC which is not
based on the grounds enumerated in Section 24 of RA 876 should be dismissed.
In cases not falling under any of the aforementioned grounds to vacate an award, the Court has already
made several pronouncements that a petition for review under Rule 43 or a petition for certiorari
under Rule 65 may be availed of in the CA. Which one would depend on the grounds relied upon by
petitioner.
As to petitioner's arguments that a petition for certiorari under Rule 65 may also be resorted to, we
hold the same to be in accordance with the Constitution and jurisprudence.
Section 1 of Article VIII of the 1987 Constitution provides that:
SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower courts as
may be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies involving
rights which are legally demandable and enforceable, and to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government.
As may be gleaned from the above stated provision, it is well within the power and jurisdiction of the
Court to inquire whether any instrumentality of the Government, such as a voluntary arbitrator, has
gravely abused its discretion in the exercise of its functions and prerogatives.
Any agreement stipulating that "the decision of the arbitrator shall be final and unappealable" and "that
no further judicial recourse if either party disagrees with the whole or any part of the arbitrator's
award may be availed of" cannot be held to preclude in proper cases the power of judicial review which
is inherent in courts.
We will not hesitate to review a voluntary arbitrator's award where there is a showing of grave abuse of
authority or discretion and such is properly raised in a petition for certiorari and there is no appeal, nor
any plain, speedy remedy in the course of law.
Significantly, Insular Savings Bank v. Far East Bank and Trust Company definitively outlined several
judicial remedies an aggrieved party to an arbitral award may undertake:
(1) a petition in the proper RTC to issue an order to vacate the award on the grounds provided
for in Section 24 of RA 876;
(2) a petition for review in the CA under Rule 43 of the Rules of Court on questions of fact, of
law, or mixed questions of fact and law; and
(3) a petition for certiorari under Rule 65 of the Rules of Court should the arbitrator have acted
without or in excess of his jurisdiction or with grave abuse of discretion amounting to lack or
excess of jurisdiction.
Nevertheless, although petitioner’s position on the judicial remedies available to it was correct, we
sustain the dismissal of its petition by the CA. The remedy petitioner availed of, entitled
"alternative petition for review under Rule 43 or petition for certiorari under Rule 65," was wrong.
Time and again, we have ruled that the remedies of appeal and certiorari are mutually exclusive and not
alternative or successive.
Proper issues that may be raised in a petition for review under Rule 43 pertain to errors of fact, law or
mixed questions of fact and law. While a petition for certiorari under Rule 65 should only limit itself to
errors of jurisdiction, that is, grave abuse of discretion amounting to a lack or excess of jurisdiction.

Moreover, it cannot be availed of where appeal is the proper remedy or as a substitute for a lapsed
appeal.
A careful reading of the assigned errors reveals that the real issues calling for the CA's resolution were
less the alleged grave abuse of discretion exercised by the arbitrator and more about the arbitrator’s
appreciation of the issues and evidence presented by the parties. Therefore, the issues clearly fall under
the classification of errors of fact and law — questions which may be passed upon by the CA via a
petition for review under Rule 43.
Petitioner cleverly crafted its assignment of errors in such a way as to straddle both judicial remedies,
that is, by alleging serious errors of fact and law (in which case a petition for review under Rule 43
would be proper) and grave abuse of discretion (because of which a petition for certiorari under Rule
65 would be permissible).
Petitioner's ploy was fatal to its cause. An appeal taken either to this Court or the CA by the wrong or
inappropriate mode shall be dismissed.
Thus, the alternative petition filed in the CA, being an inappropriate mode of appeal, should have been
dismissed outright by the CA.
iv. Equitable PCI Banking Corporation vs. RCBC Capital Corporation, 574 SCRA 858
(2008)
Facts:
Petitioners Equitable PCI Bank, Inc. (EPCIB) and the individual shareholders of Bankard, Inc., as sellers,
and respondent RCBC Capital Corporation (RCBC), as buyer, executed a Share Purchase Agreement
(SPA) for the purchase of petitioners’ interests in Bankard, representing 226,460,000 shares, for the
price of PhP 1,786,769,400. To expedite the purchase, RCBC agreed to dispense with the conduct of a
due diligence audit on the financial status of Bankard. Under the SPA, RCBC undertakes, on the date of
contract execution, to deposit, as downpayment, 20% of the purchase price, or PhP 357,353,880, in an
escrow account. The escrowed amount, the SPA stated, should be released to petitioners on an agreed-
upon release date and the balance of the purchase price shall be delivered to the share buyers upon the
fulfillment of certain conditions agreed upon, in the form of a manager’s check.
RCBC deposited the stipulated downpayment amount in an escrow account after which it was given full
management and operational control of Bankard. June 2, 2000 is also considered by the parties as the
Closing Date referred to in the SPA.
Thereafter, the parties executed an Amendment to Share Purchase Agreement (ASPA). Its paragraph
2(e) provided that: “the remedy for a breach of the SELLERS’ representation and warranty in Section
5(h) of the Share Purchase Agreement shall be available if the demand therefor is presented to the
SELLERS in writing together with schedules and data to substantiate such demand, on or before 31
December 2000.”
Sometime in September 2000, RCBC had Bankard’s accounts audited, creating for the purpose an audit
team and the conclusion was that the warranty, as contained in Section 5(h) of the SPA (simply Sec.
5[h] hereinafter), was correct.
RCBC paid the balance of the contract price. The corresponding deeds of sale for the shares in question
were executed in January 2001. Thereafter RCBC informed petitioners of its having overpaid the
purchase price of the subject shares, claiming that there was an overstatement of valuation of accounts
amounting to PhP 478 million, resulting in the overpayment of over PhP 616 million. Thus, RCBC
claimed that petitioners violated their warranty, as sellers, embodied in Sec. 5(g) of the SPA (Sec. 5[g]
hereinafter).
Following unsuccessful attempts at settlement, RCBC, in accordance with Sec. 10 of the SPA, filed a
Request for Arbitration with the ICC-ICA. In the request, RCBC charged Bankard with deviating from,
contravening and not following generally accepted accounting principles and practices in maintaining
their books. Due to these improper accounting practices, RCBC alleged that both the audited and
unaudited financial statements of Bankard prior to the stock purchase were far from fair and accurate
and, hence, violated the representations and warranties of petitioners in the SPA. Per RCBC, its
overpayment amounted to PhP 556 million. It thus prayed for the rescission of the SPA, restitution of
the purchase price, payment of actual damages in the amount of PhP 573,132,110, legal interest on the
purchase price until actual restitution, moral damages, and litigation and attorney’s fees. As alternative
to rescission and restitution, RCBC prayed for damages in the amount of at least PhP 809,796,092 plus
legal interest.
Petitioners filed an Answer denying RCBC’s exculpatory averments and setting up the following
affirmative allegations: the period for filing of the asserted claim had already lapsed by force of Sec. 7 of
the SPA; RCBC is not entitled to rescission having had ample opportunity and reasonable time to file a
claim against petitioners; RCBC is not entitled to its alternative prayer of damages, being guilty of laches
and failing to set out the details of the breach as required under Sec. 7.
Arbitration in the ICC-ICA proceeded after the formation of the arbitration tribunal consisting of retired
Justice Santiago M. Kapunan, nominated by petitioners; Neil Kaplan, RCBC’s nominee; and Sir Ian
Barker, appointed by the ICC-ICA. After drawn out proceedings with each party alleging deviation and
non-compliance by the other with arbitration rules, the tribunal, with Justice Kapunan dissenting,
rendered a Partial Award. It found that respondent established the breaches by petitioner. On the
matter of prescription, the tribunal held that RCBC’s claim is not time-barred, the claim properly falling
under the contemplation of Sec. 5(g) and not Sec. 5(h). As such, the tribunal concluded, RCBC’s claim
was filed within the 3-year period under Sec. 5(g) and that the six (6)-month period under Sec. 5(h) did
not apply. The tribunal also exonerated RCBC from laches, the latter having sought relief within the 3-
year period prescribed in the SPA. Notably, the tribunal considered the rescission of the SPA and ASPA
as impracticable and "totally out of the question."
RCBC filed with the RTC a Motion to Confirm Partial Award. The RTC issued the first assailed order
confirming the Partial Award and denying the adverted separate motions to vacate and to suspend and
inhibit. From this order, petitioners sought reconsideration, but their motion was denied by the RTC.
Issue: Whether or not the confirmation of the arbitral award should be vacated.
Ruling: NO, there is no showing of a ground to vacate the arbitral award. The Court will not overturn an
arbitral award unless it was made in manifest disregard of the law.
In Asset Privatization Trust v. Court of Appeals (1998), the Court passed on similar issues as the ones
tendered in the instant petition. In that case, the arbitration committee issued an arbitral award which
the trial court, upon due proceedings, confirmed despite the opposition of the losing party. Motions for
reconsideration by the losing party were denied. An appeal interposed by the losing party to the CA was
denied due course. On appeal to this Court, we established the parameters by which an arbitral award
may be set aside, to wit: As a rule, the award of an arbitrator cannot be set aside for mere errors of
judgment either as to the law or as to the facts. Courts are without power to amend or overrule merely
because of disagreement with matters of law or facts determined by the arbitrators. They will not review
the findings of law and fact contained in an award, and will not undertake to substitute their judgment for
that of the arbitrators, since any other rule would make an award the commencement, not the end, of
litigation. Errors of law and fact, or an erroneous decision of matters submitted to the judgment of the
arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial review of an
arbitration is, thus, more limited than judicial review of a trial. Nonetheless, the arbitrators’ awards is
not absolute and without exceptions. The arbitrators cannot resolve issues beyond the scope of the
submission agreement. The parties to such an agreement are bound by the arbitrators’ award only to
the extent and in the manner prescribed by the contract and only if the award is rendered in conformity
thereto. Thus, Sections 24 and 25 of the Arbitration Law provide grounds for vacating, rescinding or
modifying an arbitration award. Where the conditions described in Articles 2038, 2039 and 2040 of the
Civil Code applicable to compromises and arbitration are attendant, the arbitration award may also be
annulled. x x x x Finally, it should be stressed that while a court is precluded from overturning an award
for errors in determination of factual issues, nevertheless, if an examination of the record reveals no
support whatever for the arbitrators’ determinations, their award must be vacated. In the same
manner, an award must be vacated if it was made in “manifest disregard of the law."
Following Asset Privatization Trust, errors in law and fact would not generally justify the reversal of an
arbitral award. A party asking for the vacation of an arbitral award must show that any of the grounds for
vacating, rescinding, or modifying an award are present or that the arbitral award was made in manifest
disregard of the law. Otherwise, the Court is duty-bound to uphold an arbitral award. To justify the
vacation of an arbitral award on account of “manifest disregard of the law,” the arbiter’s findings must
clearly and unequivocally violate an established legal precedent. Anything less would not suffice.
In the present case, petitioners, in a bid to establish that the arbitral award was issued in manifest
disregard of the law, allege that the Partial Award violated the principles of prescription, due process,
and estoppel. A review of petitioners’ arguments would, however, show that their arguments are bereft
of merit. Thus, the Partial Award cannot be vacated.
“The essence of due process is the opportunity to be heard. What the law prohibits is not the
absence of previous notice but the absolute absence thereof and the lack of opportunity to be heard.”
We also explained in Lastimoso v. Asayo that “due process in an administrative context does not require
trial type proceedings similar to those in courts of justice. Where an opportunity to be heard either
through oral arguments or through pleadings is accorded, there is no denial of procedural due process.”
In resolving administrative cases, conduct of full-blown trial is not indispensable to dispense
justice to the parties. The requirement of notice and hearing does not connote full adversarial
proceedings. Submission of position papers may be sufficient for as long as the parties thereto are given
the opportunity to be heard. In administrative proceedings, the essence of due process is simply an
opportunity to be heard, or an opportunity to explain one’s side or opportunity to seek a reconsideration
of the action or ruling complained of. This constitutional mandate is deemed satisfied if a person is
granted an opportunity to seek reconsideration of an action or a ruling. It does not require trial-type
proceedings similar to those in the courts of justice. Where opportunity to be heard either through oral
arguments or through pleadings is accorded, there is no denial of procedural due process.
The right to cross-examine a witness, although a fundamental right of a party, may be waived.
Petitioners themselves admit having had the opportunity to cross-examine RCBC’s witnesses during the
hearings before the tribunal, but declined to do so by reserving such right at a later time. Having had the
opportunity to cross-examine RCBC’s witnesses, petitioners were not denied their right to due process.
Art. 1431 of the Civil Code, on the subject of estoppel, provides: “Through estoppel an admission
or representation is rendered conclusive upon the person making it, and cannot be denied or disproved
as against the person relying thereon.” The doctrine of estoppel is based upon the grounds of public
policy, fair dealing, good faith, and justice; and its purpose is to forbid one to speak against one’s own
acts, representations, or commitments to the injury of one to whom they were directed and who
reasonably relied on them. The elements of estoppel pertaining to the party estopped are: (1) conduct
which amounts to a false representation or concealment of material facts, or, at least, which calculated
to convey the impression that the facts are otherwise than, and inconsistent with, those which the party
subsequently attempts to assert; (2) intention, or at least expectation, that such conduct shall be acted
upon by the other party; and (3) knowledge, actual or constructive, of the actual facts.
v. Jurisdiction in Vacating and Arbitral Award

b. Application to Vacate with the RTC (Domestic Arbitral Award)
i. RA 876, Section 24;
Section 24. Grounds for vacating award. - In any one of the following cases, the court must make an
order vacating the award upon the petition of any party to the controversy when such party proves
affirmatively that in the arbitration proceedings:
(a) The award was procured by corruption, fraud, or other undue means; or
more of the arbitrators was disqualified to act as such under section nine hereof, and wilfully refrained
from disclosing such disqualifications or of any other misbehavior by which the rights of any party have
been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final
Where an award is vacated, the court, in its discretion, may direct a new hearing either before the same
arbitrators or before a new arbitrator or arbitrators to be chosen in the manner provided in the
submission or contract for the selection of the original arbitrator or arbitrators, and any provision
limiting the time in which the arbitrators may make a decision shall be deemed applicable to the new
arbitration and to commence from the date of the court's order.
Where the court vacates an award, costs, not exceeding fifty pesos and disbursements may be awarded
to the
prevailing party and the payment thereof may be enforced in like manner as the payment of costs upon
the motion in an action.
RA 9285, Section 41;

SEC. 41. Vacation Award. – A party to a domestic arbitration may question the arbitral award with the
appropriate Regional Trial Court in accordance with rules of procedure to be promulgated by the
Supreme Court only on those grounds enumerated in Section 25 of Republic Act. No. 876. Any other
ground raised against a domestic arbitral award shall be disregarded by the Regional Trial Court.
Special ADR Rules, Rule 11.4(A)

Rule 11.4. Grounds. - (A) To vacate an arbitral award. - The arbitral award may be vacated on the
following grounds:
a. The arbitral award was procured through corruption, fraud or other undue means;
b. There was evident partiality or corruption in the arbitral tribunal or any of its members;
c. The arbitral tribunal was guilty of misconduct or any form of misbehavior that has materially
prejudiced the rights of any party such as refusing to postpone a hearing upon sufficient cause shown or
to hear evidence pertinent and material to the controversy;
d. One or more of the arbitrators was disqualified to act as such under the law and willfully refrained
from disclosing such disqualification; or
e. The arbitral tribunal exceeded its powers, or so imperfectly executed them, such that a complete, final
The award may also be vacated on any or all of the following grounds:
a. The arbitration agreement did not exist, or is invalid for any ground for the revocation of a contract
or is otherwise unenforceable; or
b. A party to arbitration is a minor or a person judicially declared to be incompetent.
The petition to vacate an arbitral award on the ground that the party to arbitration is a minor or a
person judicially declared to be incompetent shall be filed only on behalf of the minor or incompetent
and shall allege that (a) the other party to arbitration had knowingly entered into a submission or
agreement with such minor or incompetent, or (b) the submission to arbitration was made by a
guardian or guardian ad litem who was not authorized to do so by a competent court.
In deciding the petition to vacate the arbitral award, the court shall disregard any other ground than
those enumerated above.
(B) To correct/modify an arbitral award. - The Court may correct/modify or order the arbitral tribunal
to correct/modify the arbitral award in the following cases:
a. Where there was an evident miscalculation of figures or an evident mistake in the description of any
person, thing or property referred to in the award;
b. Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of
the decision upon the matter submitted;
c. Where the arbitrators have omitted to resolve an issue submitted to them for resolution; or
d. Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it
had been a commissioner’s report, the defect could have been amended or disregarded by the Court.
c. Application to Set Aside with the RTC (International Commercial Arbitration conducted
in the Philippines)
i. 1985 Model Law, Article 34;
Article 34. Application for setting aside as exclusive recourse against arbitral award.
(1) Recourse to a court against an arbitral award may be made only by an application for setting aside
in accordance with paragraphs (2) and (3) of this article.
(2) An arbitral award may be set aside by the court specified in article 6 only if:
(a) the party making the application furnishes proof that:
(i) a party to the arbitration agreement referred to in article 7 was under some
incapacity; or the said agreement is not valid under the law to which the parties have
subjected it or, failing any indication thereon, under the law of this State; or
(ii) the party making the application was not given proper notice of the appointment of
an arbitrator or of the arbitral proceedings or was otherwise unable to present his case;
or
(iii) the award deals with a dispute not contemplated by or not falling within the terms
of the submission to arbitration, or contains decisions on matters beyond the scope of
the submission to arbitration, provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted, only that part of the award
which contains decisions on matters not submitted to arbitration may be set aside; or
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties, unless such agreement was in confl ict
with a provision of this Law from which the parties cannot derogate, or, failing such
agreement, was not in accordance with this Law; or
(b) the court finds that:
(i) the subject-matter of the dispute is not capable of settlement by arbitration under
the law of this State; or
(ii) the award is in conflict with the public policy of this State.
(3) An application for setting aside may not be made after three months have elapsed from the date on
which the party making that application had received the award or, if a request had been made under
article 33, from the date on which that request had been disposed of by the arbitral tribunal.
(4) The court, when asked to set aside an award, may, where appropriate and so requested by a party,
suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral
tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral
tribunal’s opinion will eliminate the grounds for setting aside.
Special ADR Rules, Rule 12.4

Rule 12.4. Grounds to set aside or resist enforcement. - The court may set aside or refuse the
enforcement of the arbitral award only if:
a. The party making the application furnishes proof that:
(i). A party to the arbitration agreement was under some incapacity, or the said agreement is
not valid under the law to which the parties have subjected it or, failing any indication thereof,
under Philippine law; or
(ii). The party making the application to set aside or resist enforcement was not given proper
notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise
unable to present his case; or
(iii). The award deals with a dispute not contemplated by or not falling within the terms of the
submission to arbitration, or contains decisions on matters beyond the scope of the submission
to arbitration; provided that, if the decisions on matters submitted to arbitration can be
separated from those not so submitted, only that part of the award which contains decisions on
matters not submitted to arbitration may be set aside or only that part of the award which
contains decisions on matters submitted to arbitration may be enforced; or
(iv). The composition of the arbitral tribunal or the arbitral procedure was not in accordance
with the agreement of the parties, unless such agreement was in conflict with a provision of
Philippine law from which the parties cannot derogate, or, failing such agreement, was not in
accordance with Philippine law;
b. The court finds that:
(i). The subject-matter of the dispute is not capable of settlement by arbitration under the law of
the Philippines; or
(ii). The recognition or enforcement of the award would be contrary to public policy.
In deciding the petition, the Court shall disregard any other ground to set aside or enforce the arbitral
award other than those enumerated above.
The petition to set-aside or a pleading resisting the enforcement of an arbitral award on the ground that
a party was a minor or an incompetent shall be filed only on behalf of the minor or incompetent and
shall allege that (a) the other party to arbitration had knowingly entered into a submission or
agreement with such minor or incompetent, or (b) the submission to arbitration was made by a
guardian or guardian ad litem who was not authorized to do so by a competent court.
d. Application to Refused Recognition with the RTC (for Foreign Arbitral Award to be
enforced in the Philippines)
e. Appeal on the Merits?
i. Special ADR Rules, Rule 19.8
Rule 19.8. Subject matter and governing rules. - The remedy of an appeal through a petition for review
or the remedy of a special civil action of certiorari from a decision of the Regional Trial Court made
under the Special ADR Rules shall be allowed in the instances, and instituted only in the manner,
provided under this Rule.
ii. F.F. Cruz & Co. Inc. vs. HR Construction Corporation, 668 SCA 302 (2012)
Facts:
In 2004, petitioner FFCCI entered into a contract with DPWH for the construction of Magsaysay Viaduct,
known as Lower Lagusan Development Project. Petitioner entered into a Subcontract Agreement with
respondent HRCC for the supply of materials, labor, equipment, tools and supervision for the
construction of a portion of the project. The subcontract price was P31.2 M and it also stated
respondent was to submit a monthly progress billing which petitioner shall pay, subject to stipulated
deductions, within 30 days from receipt therof.
Both parties agreed that HRCC’s request for payment should include progress accomplishment reports
as approved by FFCCI. They also agreed to make a joint measurement of completed works with a
representative of the DPWH. HRCC commenced construction.
The first progress billing was eventually paid by Petitioner however, for the payment of the 2 nd to the
5th progress billing, only a portion was paid by petitioner. P7.3 M remained unpaid.
Pursuant to the arbitration clause in the subcontract agreement, respondent filed with CIAC for the
payment of the overdue obligation in the reduced amount of 4M, atty’s fees, acceptance fees & costs of
litigation.
An arbitral tribunal was created composed of Chairman AttyTadiar, Engr San Juan and Joven Joaquin.
During the preliminary investigation, HRCC further reduced the amount claimed to 2.2 M. After due
proceedings, the CIAC ruled in favour of HRCC. It held that the payment method unilaterally adopted by
FFCCI—the “back-to-back payment scheme”—was 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.
Issues:
1) Whether or not the arbitral award of the CIAC can be appealed on questions of fact.
2) Whether or not the HRCC can still collect from petitioner even if the joint quantification requirement
on the progress billings are not complied with.
Ruling:
1) YES.
Citing Sec 19 of EO 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 Court will not pass upon issues which
are, at bottom, issues of fact, no matter how cleverly disguised they might be as ‘legal questions.’
As an exception, the Court may review factual findings of construction arbitrators if it was 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.
A question of law arises when there is doubt as to what the law is on a certain state of facts, while there
is a question of fact when the doubt arises as to the truth or falsity of the alleged facts.
On the surface, the instant petition appears to merely raise factual questions as it mainly puts in issue
the appropriate amount that is due to HRCC. However, a more thorough analysis of the issues raised by
FFCCI would show that it actually asserts questions of law which is ‘ in the absence of the joint
measurement agreed upon in the Subcontract Agreement, how will the completed works of HRCC be
verified and the amount due thereon be computed?’
The determination of the foregoing question entails an interpretation of the terms of the Subcontract
Agreement vis--vis the respective rights of the parties herein. On this point, it should be stressed that
where an interpretation of the true agreement between the parties is involved in an appeal, the appeal is
in effect an inquiry of the law between the parties, its interpretation necessarily involves a question of
law. Since it involves a question of law, a review can be granted by the Court.
2) YES.
FFCCI claims that its valuation should be upheld since it was the result of a measurement of completed
works by it and DPWH while HRCC claims that its valuation should be upheld on account of FFFCI’s
failure to observe the joint measurement requirement in ascertaining the extent of its completed works.
The Court held that the terms of the Subcontract Agreement should prevail and if the terms of a
contract are clear and leave no doubt upon the intention of the parties, the literal meaning of its
stipulations shall control. The joint measurement in the agreement should be conducted by both parties
with the DPWH. FFFCI, being the main contractor of DPWH, has the responsibility to request the
representative of the DPWH to conduct the said joint measurement.
The Court held that FFCCI had waived its right to demand for a joint measurement of HRCC’s completed
works under the Subcontract Agreement since it failed to demand the joint measurement of HRCC’s
completed works as a condition sine qua non to HRCC’s submission of its monthly progress billings.

Major Materials
 Republic Act 9285 –An Act to Institutionalize the Use of an Alternative Dispute Resolution
System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for
Other Purposes
 Implementing Rules and Regulations of the ADR Act of 2004 – DOJ Dept. Circular No. 98,
December 4, 2009
 Republic Act 876 – An Act to Authorize the Making of Arbitration and Submission Agreements,
to Provide for the Appointment of Arbitrators and the Procedure for Arbitration in Civil
Controversies, and for Other Purposes
 UNCITRAL Model Law on International Commercial Arbitration of 1995 (United Nations
Document A/40/17) with amendments as adopted in 2006
 The New York Convention of 1958 – Convention on Recognition and Enforcement of Foreign
Arbitral Awards
 Special Rules on Alternative Dispute Resolution (Special ADR Rules) – A.M. No. 07-11-08-SC,
September 1, 2009
 Executive Order No. 1008 – Creating an Arbitration Machinery for the Philippine Construction
Industry

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ALTERNATIVE DISPUTE RESOLUTION

Judge Carlo D. Villarama

b. Definition of Arbitration — RA 9285, Section 3 (d)

II. The Arbitration Agreement

Book: Chapter 1, page 1-2

Art. 2030. Every civil action or proceeding shall be suspended:

ADR | notes and cases based on syllabus | 1

Art. 2035. No compromise upon the following questions shall be valid:

ADR | notes and cases based on syllabus | 2

ADR | notes and cases based on syllabus | 3

c. Formal Requisites of an Arbitration Clause

ii. BF Corporation vs Court of Appeals, Shangri-La Properties, Inc., Rufo Colayco,

ADR | notes and cases based on syllabus | 6

ADR | notes and cases based on syllabus | 11

Book: Chapter 2, page 34-35

Arbitration is “commercial” if it covers matters arising from all relationships of a commercial

Law Governing the Dispute,

Ex Aequeo et Bono or Amiable Compositeur,

e. Matters that are Non-Arbitrable

f. Separability of Arbitration Clause

Book: Chapter 1, page 19

ii. Gonzales vs Climax Mining Ltd., 512 SCRA 148 (2007)

Ruling: Yes, arbitration is proper under the doctrine of separability.

ADR | notes and cases based on syllabus | 13

g. Rescission of Arbitration Agreement

i. Korea Technologies Co. Ltd vs. Lerma, 542 SCRA 1 (2008)

ADR | notes and cases based on syllabus | 16

III. Commencement of Arbitration

i. Rule 2.4 of Special ADR Rules

ADR | notes and cases based on syllabus | 17

Special Rules on ADR, Rule 2.2, 2.4, 3.8, 4.8

ADR | notes and cases based on syllabus | 18

ADR | notes and cases based on syllabus | 19

i. 1985 Model Law Article 11, 10(2)

Article 11. Appointment of arbitrators

iii. Court Appointed Arbitrators

d. Qualifications and Disqualifications

Article 13. Challenge procedure

Article 14. Failure or impossibility to act

Article 16. Competence of arbitral tribunal to rule on its jurisdiction

RA 9285 IRR Article 4.12 to 4.15, 5.11, 5.12;

ADR | notes and cases based on syllabus | 27

ADR | notes and cases based on syllabus | 29

ADR | notes and cases based on syllabus | 30

ii. Model Law Article 1(2) and (3) Article 20

Article 20. Place of arbitration.

ADR | notes and cases based on syllabus | 31

1. 1985 Model Law Article 16(2)

Article 19. Determination of rules of procedure.

RA 9285 IRR Article 4.18, 4.19, 5.18

ii. Power of the Tribunal to determine rules

RA 9285 IRR Article 4.19

ADR | notes and cases based on syllabus | 33

ADR | notes and cases based on syllabus | 34

b. Judicial Confirmation of Arbitral Award

ADR | notes and cases based on syllabus | 36

ADR | notes and cases based on syllabus | 37

c. Arbitral Award in International Commercial Arbitration

Article 29. Decision-making by panel of arbitrators.

Article 30. Settlement.

Article 32. Termination of proceedings.

ii. Recognition and Enforcement of International Commercial Arbitral Award

ADR | notes and cases based on syllabus | 42

d. Foreign Arbitral Award