Law 160A Alternative Dispute Resolution (Prof. A. Autea)2
ALTERNATIVE DISPUTE RESOLUTION
Relevant Laws / Rules1) RA 876 Arbitration Law
2) EO No 1008 CIA Law
3) RA 9285 - ADR Act of 2004
4) UNCITRAL Model Law
5) Special ADR Rules
6) UNCITRAL Arbitration Rules
7) ICC Arbitration Rules
Cases
1) Vega v. San Carlos Milling Co. Ltd, 51 Phil 908 (1924)
2) California & Hawaiian Sugar Co. v. Pioneer Insurance
& Surety Corp. 346 SCRA 214 (2000)
3) Associated Bank v. CA, 233 SCRA 137 (1994)
4) Bloomfield Academy v. CA, 237 SCRA 43 (1994)
5) Mindanao Portland Cement Corporation v. McDonough
Construction Co. of Florida, 90 SCRA 808 (1967)
6) Gonzales v. Climax Mining Ltd., 512 SCRA 148 (2007)
7) Oil & Natural Gas Commission v. CA, 293 SCRA 26
(1998)
8) Magellan Capital Mgt. Corp. v. Zosa, 355 SCRA 157 (2001)
9) BF Corporation v. CA, 288 SCRA 267 (1998)
10) Korea Technologies Co. Ltd. v. Lerma, 542 SCRA 1 (2008)
11) Luzon Development Bank v. Luzon Development Bank Employees,
249 SCRA 162 (1995)12) Toyota Motor Phils. Corp. V. CA, 216 SCRA
336
13) Heirs of Agusto L. Salas, Jr. v. Laperal Realty Corp., 302
SCRA 620
14) Del Monte Corp. USA v. CA, 351 SCRA 373 - WRONG15)
Homebankers Savings and Trust Co. v. CA, 318 SCRA 55816) Chung Fu
Industries Inc. V. CA, 206 SCRA ___17) Adamson v. CA, 232 SCRA 602
(1994)
18) National Steel Corp. v. RTC of Lanao del Norte, 304 SCRA 595
(1999)
19) Asset Privatization Trust v. CA, 300 SCRA 579
20) China Chiang Jiang Energy Corp (Phils) v. Rosal
Infrastructure Builders, G.R. 125706, 30 September 1996
21) Hi Precision Steel, 228 SCRA 397
22) ABS CBN v. World, 544 SCRA 308
INTRODUCTION TO ALTERNATIVE MODES OF DISPUTE RESOLUTION
ADR alternative to conventional litigation
Arbitration only form of ADR that will result in a final,
binding and enforceable award
Mediation facilitate communication, cannot impose resolution of
the mediator
Conventional LitigationArbitration
JudgmentAward
Final JudgmentFinal Award
Interlocutory OrderInterim Award
P v. D / P v. R Claimant v. Respondent
StenographersCourt Reporters
Arbitration clause stipulation that parties wil submit dispute
to arbitration
Request for Arbitration arbitrable dispute
Legislative History:
1) RA 876 (1953) Arbitration Law
2) New York Convention (1958)
a) Convention on the recognition & enforcement of foreign
arbitral awards
b) Need to prove authenticity only
e.g. NAIA 3 case
3) RA 9285 (2004) ADR Act of 2004
a) Covers domestic & international arbitration
b) Covers all forms of ADR
4) EO No. 1008 (1985) CIAC
a) Covers all disputes in the construction industry
5) Special ADR Rules (October 13, 2009)
a) Clarified problems in RA 876 and RA 9285
6) UNCITRAL MODEL LAW part of Philippine law
a) Sec. 33 of ADR Act of 2004
Sec. 33 Applicability to Domestic Arbitration
Uncitral Model LawPreceding Ch. 4
8 Arbitration Agreement + Substantive Claim
10 No. of arbitrators
11 Appointment
12 Grounds for challenge
13 Procedure for challenge
14 Unable to perform
18 Conduct of hearings
19 Determination of rules
29 to 32 Termination of proceedingsSec. 22 Legal Representation
in International Arbitration
Sec. 23 Confidentiality in Arbitration Proceedings
Sec. 24 Referral to Arbitration
Sec. 25 Interpretation of the Act
Sec. 26 Meaning of Appointing Authority
Sec. 27 What Functions May be Performed by Appointing
Authority
Sec. 28 Grant of Interim Measure of Protection
Sec. 29 Further Authority for Arbitrator to Grant Interim
Measure of Protection
Sec. 30 Place of Arbitration
Sec. 31 Language of the Arbitration
ARBITRATION
Arbitration v. Litigation {PALPVA}ArbitrationLitigation
Private & confidentialPublic
Parties may select arbitratorParties cannot agree on presiding
officer; Judge is raffled
Parties can select governing law that will determine their
substantive rightsPhilippine law governs
Procedure depends on agreementRules of Court applies
Venue depends on agremeentRules of Court governs; Venue may also
depend on agreement
ConsensualNot consensual
Note: A voluntary arbitrator has the same status as an RTC
judge.What is the nature of ADR?
Consensual cannot be compelled to submit to arbitration; but
once you agree, youre bound by it
What is an arbitration agreement? Arbitration agreement
determines the rights, obligations, procedure & rules;
- may be in a separate agreement or may be a clause in a
contract
1) Arbitration clause
Any dispute arising out of this contract shall be resolved by
arbitration.
2) Container contract
Contract containing the arbitration clause
Note: Doctrine of separability applies.
Rule 2.2. Policy on arbitration. XXX 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. Domestic
v. International Arbitration
1) Domestic not International (RA 9285)2) International Article
1.3 (UNCITRAL Model Law)RA 9285, Sec. 32. Law Governing Domestic
Arbitration. - Domestic arbitration shall continue to be governed
by Republic Act No. 876, otherwise known as "The Arbitration Law"
as amended by this Chapter. The term "domestic arbitration" as used
herein shall mean an arbitration that is not international as
defined in Article (3) of the Model Law.
Uncitral Model Law, Article 1 - xxx
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.
4) For the purposes of paragraph (3) of this article:
a) if a party has more than one place of business, the place of
business is that which has the closest relationship to the
arbitration agreement;
b) if a party does not have a place of business, reference is to
be made to his habitual residence.Institutional v. Adhoc
Arbitration
1) Adhoc arbitration -
2) Institutional conducted under the auspices of an
institution
Examples:
International Chamber of Commerce
CIAC
PDRCI
Singapore International Arbitration Centre
Hongkong International Arbitration Centre
ICSPI Disp.
American Arbitration Association
Japan Commercial Arbitration
Kuala Lumpur RCA
KCAB
ICC International Court of Arbitration
ICA not a court of adjudication
Sample arbitration clause:
Any dispute arising out of this contract shall be resolved by
arbitration under the ICC Rules of Arbitration.
Overview ICC Arbitration Rules / Principles:1) Submit request
for arbitration
2) Assessment of non-refundable fee + cost of arbitration
a) Non-refundable fee - $2,500
b) Arbitration cost
i) Fees of arbitrators professional fees
(1) 40% - chair
(2) 30% - members
ii) Claimant 1
iii) Respondent 1
iv) Appointee of Appointing Authority - 1v) Administrative
expenses
3) Highly confidential4) Counsel in arbitration does not have to
be a lawyer
a) ADR Rates - $300 / hour
b) IBP Rates P3,000 / appearance
i) Senior - P7 to 10T / hour
ii) Associate P1-1,500 / hour
5) ICA can modify the form of the award
See provisions, page 31.
What is the principle of Party Autonomy?
Party autonomy freedom of the parties to determine the rules /
law governing the mode of resolving their dispute
Rule 2.1. General policies. It is the policy of the State to
actively promote the use of various modes of ADR and to respect
party autonomy or the freedom of the parties to make their own
arrangements in the resolution of disputes with the greatest
cooperation of and the least intervention from the courts. To this
end, the objectives of the Special ADR Rules are to encourage and
promote the use of ADR, particularly arbitration and mediation, as
an important means to achieve speedy and efficient resolution of
disputes, impartial justice, curb a litigious culture and to
de-clog court dockets.
RA 9285, Sec. 2 Declaration of Policy
-To actively promote party autonomy in the resolution of
disputes or the freedom of the parties to make their own
arrangements to resolve their disputes
-To encourage and actively promote the use of
ADR to achieve speedy and impartial justice & de-clog court
dockets
Uncitral Model Law, 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.
Uncitral Model Law, 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 authorised
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.
Uncitral Arbitration Rules, Applicable law, amiable compositeur,
Article 33
1. The arbitral tribunal shall apply the law designated by the
parties as applicable to the substance of the dispute. Failing such
designation by the parties, the arbitral tribunal shall apply the
law determined by the conflict of laws rules which it considers
applicable.
2. The arbitral tribunal shall decide as amiable compositeur or
ex aequo et bono only if the parties have expressly authorised the
arbitral tribunal to do so and if the law applicable to the
arbitral procedure permits such arbitration.
3. 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.
ICC Rules, Article 15: Rules Governing the Proceedings 1. The
proceedings before the Arbitral Tribunal shall be governed by these
Rules, and, where these Rules are silent, by any rules which the
parties or, failing them, the Arbitral Tribunal may settle on,
whether or not reference is thereby made to the rules of procedure
of a national law to be applied to the arbitration.
2. In all cases, the Arbitral Tribunal shall act fairly and
impartially and ensure that each party has a reasonable opportunity
to present its case.
ICC Rules, Article 17: Applicable Rules of Law 1. The parties
shall be free to agree upon the rules of law to be applied by the
Arbitral Tribunal to the merits of the dispute. In the absence of
any such agreement, the Arbitral Tribunal shall apply the rules of
law which it determines to be appropriate.
2. In all cases the Arbitral Tribunal shall take account of the
provisions of the contract and the relevant trade usages.
3. The Arbitral Tribunal shall assume the powers of an amiable
compositeur or decide ex aequo et bono only if the parties have
agreed to give it such powers.
Next meeting:
RA 876
RA 9285
Special ADR Rules
UNCITRAL Model Law
Appointment of Arbitrators (Domestic)ADR Law Sec. 5 & Sec.
8
RA 876, Sec. 8 Appointment of arbitrators
If, in the contract for arbitration or in the submission
described in section two, provision is made for a method of naming
or appointing an arbitrator or arbitrators, such method shall be
followed; but if no method be provided therein the Court of First
Instance shall designate an arbitrator or arbitrators.
The Court of First Instance shall appoint an arbitrator or
arbitrators, as the case may be, in the following instances:
(a) If the parties to the contract or submission are unable to
agree upon a single arbitrator; or
(b) If an arbitrator appointed by the parties is unwilling or
unable to serve, and his successor has not been appointed in the
manner in which he was appointed; or
(c) If either party to the contract fails or refuses to name his
arbitrator within fifteen days after receipt of the demand for
arbitration; or
(d) If the arbitrators appointed by each party to the contract,
or appointed by one party to the contract and by the proper Court,
shall fail to agree upon or to select the third arbitrator.
(e) The court shall, in its discretion appoint one or three
arbitrators, according to the importance of the controversy
involved in any of the preceding cases in which the agreement is
silent as to the number of arbitrators.
(f) Arbitrators appointed under this section shall either accept
or decline their appointments within seven days of the receipt of
their appointments. In case of declination or the failure of an
arbitrator or arbitrators to duly accept their appointments the
parties or the court, as the case may be, shall proceed to appoint
a substitute or substitutes for the arbitrator or arbitrators who
decline or failed to accept his or their appointments.
Sec. 9 Appointment of addnal arbitrators
Where a submission or contract provides that two or more
arbitrators therein designated or to be thereafter appointed by the
parties, may select or appoint a person as an additional
arbitrator, the selection or appointment must be in writing. Such
additional arbitrator must sit with the original arbitrators upon
the hearing.
RULE 6: APPOINTMENT OF ARBITRATORS
Rule 6.1. When the court may act as Appointing Authority. The
court shall act as Appointing Authority only in the following
instances:
a. 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 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;
b. 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 Integrated Bar of
the Philippines (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 (30)
days from receipt of such request for appointment;
c. 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 (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 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.
Rule 6.2. Who may request for appointment. Any party to an
arbitration may request the court to act as an Appointing Authority
in the instances specified in Rule 6.1 above.
Rule 6.3. Venue. The petition for appointment of arbitrator may
be filed, at the option of the petitioner, in the Regional Trial
Court (a) where the principal place of business of any of the
parties is located, (b) if any of the parties are individuals,
where those individuals reside, or (c) in the National Capital
Region.
Rule 6.4. Contents of the petition. The petition shall state the
following:
a. The general nature of the dispute;b. If the parties agreed on
an appointment procedure, a description of that procedure with
reference to the agreement where such may be found; c. The number
of arbitrators agreed upon or the absence of any agreement as to
the number of arbitrators;d. The special qualifications that the
arbitrator/s must possess, if any, that were agreed upon by the
parties;e. The fact that the Appointing Authority, without
justifiable cause, has failed or refused to act as such within the
time prescribed or in the absence thereof, within a reasonable
time, from the date a request is made; andf. The petitioner is not
the cause of the delay in, or failure of, the appointment of the
arbitrator.
Apart from other submissions, the petitioner must attach to the
petition (a) an authentic copy of the arbitration agreement, and
(b) proof that the Appointing Authority has been notified of the
filing of the petition for appointment with the court.
Rule 6.5. Comment/Opposition. The comment/opposition must be
filed within fifteen (15) days from service of the petition.
Rule 6.6. Submission of list of arbitrators. The court may, at
its option, also require each party to submit a list of not less
than three (3) proposed arbitrators together with their curriculum
vitae.
Rule 6.7. Court action. After hearing, if the court finds merit
in the petition, it shall appoint an arbitrator; otherwise, it
shall dismiss the petition.
In making the appointment, the court shall have regard to such
considerations as are likely to secure the appointment of an
independent and impartial arbitrator.
At any time after the petition is filed and before the court
makes an appointment, it shall also dismiss the petition upon being
informed that the Appointing Authority has already made the
appointment.
Rule 6.8. Forum shopping prohibited. When there is a pending
petition in another court to declare the arbitration agreement
inexistent, invalid, unenforceable, on account of which the
respondent failed or refused to participate in the selection and
appointment of a sole arbitrator or to appoint a party-nominated
arbitrator, the petition filed under this rule shall be
dismissed.
Rule 6.9. Relief against court action. 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. An order of the court
denying the petition for appointment of an arbitrator may, however,
be the subject of a motion for reconsideration, appeal or
certiorari.
How do you commence arbitration? (domestic)
Sec. 5 Preliminary procedure
Arbitration AgreementSubmission Agreement
(a) (c)
(b) Default ((d) Neglect / Fail / Refuse to arbitrate ( Follow
(a) and (b)
RA 876, Sec. 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) In the event that one party defaults in answering the
demand, the aggrieved party may file with the Clerk of the Court of
First Instance having jurisdiction over the parties, a copy of the
demand for arbitration under the contract to arbitrate, with a
notice that the original demand was sent by registered mail or
delivered in person to the party against whom the claim is
asserted. Such demand shall set forth the nature of the
controversy, the amount involved, if any, and the relief sought,
and shall be accompanied by a true copy of the contract providing
for arbitration.
(c) In the case of the submission of an existing controversy by
the filing with the Clerk of the Court of First Instance having
jurisdiction, of the submission agreement, setting forth the nature
of the controversy, and the amount involved, if any. Such
submission may be filed by any party and shall be duly executed by
both parties.
(d) In the event that one party neglects, fails or refuses to
arbitrate under a submission agreement, the aggrieved party shall
follow the procedure prescribed in subparagraphs (a) and (b) of
this section.
Arbitration v. Adjudication
Sir thinks the difference is only in the terminology, until he
saw the FIDIC.
Arbitration - (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 (RA
9285)In arbitration an independent, impartial third party hears
both sides in a dispute and makes a decision to resolve it. In most
cases the arbitrator's decision is legally binding on both sides,
so it is not possible to go to court if you are unhappy with the
decision.
Arbitration is in many ways an alternative form of court with
procedural rules which govern issues such as disclosure of
documents and evidence. But arbitration is private rather than
public. Hearings are less formal than court hearings, and some
forms of arbitration do not involve hearings but are decided on the
basis of documents only.
Adjudication - Adjudication involves an independent third party
considering the claims of both sides and making a decision. The
adjudicator is usually an expert in the subject matter in dispute.
Adjudicators are not bound by the rules of litigation or
arbitration. Their decisions are often interim ones, ie they can be
finalised using arbitration or another process. Adjudication
decisions are usually binding on both parties by prior
agreement.
In relation to construction contracts, adjudication is a
statutory procedure by which any party to the contract has a right
to have a dispute decided by an adjudicator, normally used to
ensure payment. It is intended to be quicker and more cost
effective than litigation or arbitration. The right arises by
virtue of the Housing Grants Construction and Regeneration Act
1996.
Adjudication is also sometimes used to describe a non-specific
alternative dispute resolution process in which a third party makes
a decision as to the best way to resolve the dispute. In this
sense, ombudsmen, arbitrators and judges are all types of
adjudicators.
The aim of adjudication is to resolve disputed issues in order
to enable work to continue (either indefinitely or while awaiting
the decision of a judge or arbitrator). Arbitration is a more
formal process, and the arbitrator's decision is legally
binding.
FIDIC (Federacion Internationale Des Ingenieurs Conseil)
1) Dispute Adjudication Board
2) Relevant in contract negotiation
3) Different colors
a) Red
b) Blue
c) Green
d) Pink
e) Silveri) 2 parties:
(1) Project owner employer
(2) Contractor
ii) Contains an interesting provision saying that an employer
would not be liable even if wrong information was given
iii) Contains an adjudication clause in the following tenor:
Appeal from adjudication may be taken to the arbitrational panel
under ICC Rules.
iv) Three levels:(1) Amicable settlement
(2) Adjudication
(3) Arbitration
MINI-TRIAL
What is a Mini-Trial?"Mini-Trial" means a structured dispute
resolution method in which the merits of a case are argued before a
panel comprising senior decision makers with or without the
presence of a neutral third person after which the parties seek a
negotiated settlement (RA 9285, Sec. 3(u))
Note:
Senior decision makers meet, negotiated settlement
EARLY NEUTRAL EVALUATION
What is Early Neutral Evaluation?
"Early Neutral Evaluation" means an ADR process wherein parties
and their lawyers are brought together early in a pre-trial phase
to present summaries of their cases and receive a nonbinding
assessment by an experienced, neutral person, with expertise in the
subject in the substance of the dispute
Note:
Similar to a pre-trial; before the filing of the complaint
MEDIATION
How are mediated-settlements enforced?
By depositing in court (RA 9285, Sec. 17)Court-Annexed Mediation
v. Court-Ordered Mediation
"Court-Annexed Mediation" means any mediation process conducted
under the auspices of the court, after such court has acquired
jurisdiction of the dispute (RA 9285, Sec. 3 (l))Note: governed by
SC issuances
Court-Referred Mediation" means mediation ordered by a court to
be conducted in accordance with the Agreement of the Parties when
as action is prematurely commenced in violation of such agreement
(RA 9285, Sec. 3 (m))Notes:
- ground for stay of civil action- related to Art. 1159 CC
Art. 1159. Obligations arising from contracts have the force of
law between the contracting parties and should be complied with in
good faith.
Principle of confidentiality in mediation
Extends to admissions made in mediation
Sec. 9 - Confidentiality of Information
Information obtained through mediation proceedings shall be
subject to the following principles and guidelines:
(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) Confidential Information shall not be subject to discovery
and shall be inadmissible if 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 in a mediation.
(d) 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 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.
(e) The protections of this Act shall continue to apply even of
a mediator is found to have failed to act impartially.
(f) 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's fees
and related expenses.
Sec. 10 Waiver of Confidentiality
A privilege arising from the confidentiality of information may
be waived in a record, or orally during a proceeding by the
mediator and the mediation parties.
A privilege arising from the confidentiality of information may
likewise be waived by a nonparty participant if the information is
provided by such nonparty participant.A person who discloses
confidential information shall be precluded from asserting the
privilege under Section 9 of this Chapter to bar disclosure of the
rest of the information necessary to a complete understanding of
the previously disclosed information. If a person suffers loss or
damages in a judicial proceeding against the person who made the
disclosure.
A person who discloses or makes a representation about a
mediation is preclude from asserting the privilege under Section 9,
to the extent that the communication prejudices another person in
the proceeding and it is necessary for the person prejudiced to
respond to the representation of disclosure.
Sec. 11 Exceptions to Privilege {RPTCPM}
(a) There is no privilege against disclosure under Section 9 if
mediation communication is:
(1) in an agreement evidenced by a record authenticated by all
parties to the agreement;
(2) available to the public or that is made during a session of
a mediation which is open, or is required by law to be open, to the
public;
(3) a threat or statement of a plan to inflict bodily injury or
commit a crime of violence;
(4) internationally used to plan a crime, attempt to commit, or
commit a crime, or conceal an ongoing crime or criminal
activity;
(5) sought or offered to prove or disprove abuse, neglect,
abandonment, or exploitation in a proceeding in which a public
agency is protecting the interest of an individual protected by
law; but this exception does not apply where a child protection
matter is referred to mediation by a court or a public agency
participates in the child protection mediation;
(6) sought or offered to prove or disprove a claim or complaint
of professional misconduct or malpractice filed against mediator in
a proceeding; or
(7) sought or offered to prove or disprove a claim of complaint
of professional misconduct of malpractice filed against a party,
nonparty participant, or representative of a party based on conduct
occurring during a mediation.
(b) There is no privilege under Section 9 if a court or
administrative agency, finds, after a hearing in camera, that the
party seeking discovery of the proponent of the evidence has shown
that the evidence is not otherwise available, that there is a need
for the evidence that substantially outweighs the interest in
protecting confidentiality, and the mediation communication is
sought or offered in:
(1) a court proceeding involving a crime or felony; or
(2) a proceeding to prove a claim or defense that under the law
is sufficient to reform or avoid a liability on a contract arising
out of the mediation.
(c) A mediator may not be compelled to provide evidence of a
mediation communication or testify in such proceeding.
(d) If a mediation communication is not privileged under an
exception in subsection (a) or (b), only the portion of the
communication necessary for the application of the exception for
nondisclosure may be admitted. The admission of particular evidence
for the limited purpose of an exception does not render that
evidence, or any other mediation communication, admissible for any
other purpose.
Sec. 12 Prohibited Mediator Reports
A mediator may not make a report, assessment, evaluation,
recommendation, finding, or other communication regarding a
mediation to a court or agency or other authority that make a
ruling on a dispute that is the subject of a mediation, except:
(a) Where the mediation occurred or has terminated, or where a
settlement was reached.
(b) As permitted to be disclosed under Section 13 of this
Chapter.
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; andd.
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.
No Class - June 25, 2010Class Notes - July 2,
2010ARBITRATION
What is ADR?
"Alternative Dispute Resolution System" means any process or
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 (Sec. 3a, RA
9285)
What is Arbitration?
"Arbitration" means a voluntary dispute resolution process in
which one or more arbitrators, appointed in accordance with the
agreement of the parties, or rules promulgated pursuant to this
Act, resolve a dispute by rendering an award (Sec. 3d, RA 9285)
What distinguishes Arbitration from other forms of ADR? Final,
binding and enforceable through the following procedures:
1) Confirmation of award
2) Judgment is capable of enforcement
PROCESS OF ARBITRATIONArbitration agreement
|Dispute
|Selection of arbitrators
|Conduct of arbitration proceedings
|Arbitral Award
|Confirmation &/or Enforcement
FIRST PART: ARBITRATION AGREEMENT
Arbitration Agreement v. Submission Agreement
Arbitration AgreementSubmission Agreement
Before occurence of disputeAgreement to submit dispute to
arbitration; no previous arbitration clause
A party may invoke this at any time before pre-trial, after
which, both parties must invoke it May be entered into at any time,
even after pre-trial
Petition for Enforcement of Arbitration Agreement (See
end)Notice Requirements
Depends on whether or not the petition / motion filed is covered
by Summary Procedure.
Covered by Summary Procedure:
1) Judicial Relief Involving the Issue of Existence, Validity or
Enforceability of the Arbitration Agreement;
2) Referral to ADR;
3) Interim Measures of Protection;
4) Appointment of Arbitrator;
5) Challenge to Appointment of Arbitrator;
6) Termination of Mandate of Arbitrator;
7) Assistance in Taking Evidence;
8) Confidentiality/Protective Orders; and
9) Deposit and Enforcement of Mediated Settlement
Agreements.
Not Covered by Summary Procedure:
1) Confirmation, Correction or Vacation of Award in Domestic
Arbitration2) Recognition and Enforcement or Setting Aside of an
Award in International Commercial Arbitration3) Recognition and
Enforcement of a Foreign Arbitral AwardNotes:
*Petition to correct / vacate does not touch upon the merits of
the award.
*Petition to vacate (domestic) depends on grounds to vacate
*Petition to set aside (international) See UNCITRAL A.34 &
36
Pop Quiz - July 9, 2010Petition to Enforce Arbitation Agreement
using the case of Mindanao Portland Cement Corporation v. McDonough
Construction Co. of Florida, 90 SCRA 808 (1967)
Class Notes - July 16, 2010THIRD PART: COMMENCEMENT OF
ARBITRATION &CONSTITUTION OF ARBITRAL TRIBUNAL
How do you commence arbitration?
1) Adhoc by a demand to arbitrate2) Institutional - very similar
to a demand to arbitrate, addressed to the institution; called a
Request for Arbitration or Notice of Arbitration
What is the significance of filing a Request for Arbitration or
Notice of Arbitration?Whether conventional litigation or ADR, the
filing of the initiatory complaint / request for arbitration is
significant in the area of interim measures of protection. It could
be obtained from:
General Rule: the arbitral tribunal
Except: the court, in the following instances:1) Before
commencement of arbitration2) After arbitration is commenced, but
before the constitution of the arbitral tribunal;3) After the
constitution of the arbitral and at any time during arbitral
proceedings but, at this stage, only to the extent that the
arbitral tribunal has no power to act or is unable to act
effectively.
RA 876, Sec. 14 xxx The arbitrator or arbitrators shall have the
power at any time, before rendering the award, without prejudice to
the rights of any party to petition the court to take measures to
safeguard and/or conserve any matter, which is the subject of the
dispute in arbitration.
RA 9285, Sec. 28 Grant of Interim Measure of Protection
(a) It is not incompatible with an arbitration agreement for a
party to request, before constitution of the tribunal, from a Court
an interim measure of protection and for the Court to grant such
measure. After constitution of the arbitral tribunal and during
arbitral proceedings, a request for an interim measure of
protection or modification thereof, may be made with the arbitral
tribunal or to the extent that the arbitral tribunal has no power
to act or is unable to act effectively, the request may be made
with the Court. The arbitral tribunal is deemed constituted when
the sole arbitrator or the third arbitrator who has been nominated,
has accepted the nomination and written communication of said
nomination and acceptance has been received by the party making
request.
(b) The following rules on interim or provisional relief shall
be observed:
(1) Any party may request that provision relief be granted
against the adverse party:
(2) Such relief may be granted:
(i) to prevent irreparable loss or injury:
(ii) to provide security for the performance of any
obligation;
(iii) to produce or preserve any evidence; or
(iv) to compel any other appropriate act or omission.
(3) The order granting provisional relief may be conditioned
upon the provision of security or any act or omission specified in
the order.
(4) Interim or provisional relief is requested by written
application transmitted by reasonable means to the Court or
arbitral tribunal as the case may be and the party against whom the
relief is sought, describing in appropriate detail the precise
relief, the party against whom the relief is requested, the grounds
for the relief, and evidence supporting the request.
(5) The order shall be binding upon the parties.
(6) Either party may apply with the Court for assistance in
Implementing or enforcing an interim measure ordered by an arbitral
tribunal.
(7) A party who does not comply with the order shall be liable
for all damages resulting from noncompliance, including all
expenses, and reasonable attorney's fees, paid in obtaining the
order's judicial enforcement.
RA 9285, Sec. 29 Further Authority for Arbitrator to Grant
Interim Measure of Protection
Unless otherwise agreed by the parties, the arbitral tribunal
may, at the request of a party, order any party to take such
interim measures of protection as the arbitral tribunal may
consider necessary in respect of the subject matter of the dispute
following the rules in Section 28, paragraph 2. Such interim
measures may include but shall not be limited to preliminary
injuction directed against a party, appointment of receivers or
detention, preservation, inspection of property that is the subject
of the dispute in arbitration. Either party may apply with the
Court for assistance in implementing or enforcing an interim
measures ordered by an arbitral tribunal.
Uncitral Model Law, Article 17 - [Power of arbitral tribunal to
order interim measures]
Unless otherwise agreed by the parties, the arbitral tribunal
may, at the request of a party, order any party to take such
interim measure of protection as the arbitral tribunal may consider
necessary in respect of the subject-matter of the dispute. The
arbitral tribunal may require any party to provide appropriate
security in connection with such measure.
Uncitral Arbitration Rules, Interim measures of protection,
Article 26
1. At the request of either party, the arbitral tribunal may
take any interim measures it deems necessary in respect of the
subject-matter of the dispute, including measures for the
conservation of the goods forming the subject-matter in dispute,
such as ordering their deposit with a third person or the sale of
perishable goods.
2. Such interim measures may be established in the form of an
interim award. The arbitral tribunal shall be entitled to require
security for the costs of such measures.
3. A request for interim measures addressed by any party to a
judicial authority shall not be deemed incompatible with the
agreement to arbitrate, or as a waiver of that agreement.
ICC Rules, Article 23, Conservatory and Interim Measures 1.
Unless the parties have otherwise agreed, as soon as the file has
been transmitted to it, the Arbitral Tribunal may, at the request
of a party, order any interim or conservatory measure it deems
appropriate. The Arbitral Tribunal may make the granting of any
such measure subject to appropriate security being furnished by the
requesting party. Any such measure shall take the form of an order,
giving reasons, or of an Award, as the Arbitral Tribunal considers
appropriate.
2. Before the file is transmitted to the Arbitral Tribunal, and
in appropriate circumstances even thereafter, the parties may apply
to any competent judicial authority for interim or conservatory
measures. The application of a party to a judicial authority for
such measures or for the implementation of any such measures
ordered by an Arbitral Tribunal shall not be deemed to be an
infringement or a waiver of the arbitration agreement and shall not
affect the relevant powers reserved to the Arbitral Tribunal. Any
such application and any measures taken by the judicial authority
must be notified without delay to the Secretariat. The Secretariat
shall inform the Arbitral Tribunal thereof.
Upon receipt:
1) WON a dispute is arbitable the first thing that an
institution should determine2) Assess an non-refundable fee of
$2500.
3) Inform the prospective respondent that a Request for
Arbitration was received4) Prospective respondent answers
5) Assess the fees
Period for rendering an Award:1) Stipulation
2) To be determined by the arbitral tribunal during the
preliminary conference
Less than 60 days Summary (ADR Rules)15 days from service to
file Comment/Opposition1 hearing day, only for the purpose of
clarifications
Resolution 30 days from the time the petition is submitted for
resolution
10 days - ADR LawFour courses of action by the CourtDetermine
existence of AA
If no, dismiss (1)
If yes, determine if there was default or not in the compliance
with the Arbitration Agreement (2)
If there is no default, (dismiss)
If there was default, Court to
Challenge of arbitrator
If a party renews his challenge in Court arbitration proceedings
are suspended
But under Special ADR Rules proceed
International Bar Association (IBA) Rules of Evidence
Green List list of factors that may or may not be disclosed but
will not affect the fitness of
Red List list of prohibited factors
FOURTH PART:
CONDUCT OF ARBITRATION PROCEEDINGS
CONFIDENTIALITY
Why is there no publication of awards of arbitral tribunals?
Because of the principle of confidentiality of arbitration
proceedings (Sec. 23, RA 9285).
Sec. 23 Confidentiality in Arbitration Proceedings
The arbitration proceedings, including the records, evidence and
the arbitral award, shall be considered confidential and shall not
be published except (1) with the consent of the parties, or (2) for
the limited purpose of disclosing to the court of relevant
documents in cases where resort to the court is allowed herein.
Provided, however, that the court in which the action or the appeal
is pending may issue a protective order to prevent or prohibit
disclosure of documents or information containing secret processes,
developments, research and other information where it is shown that
the applicant shall be materially prejudiced by an authorized
disclosure thereof.
Exception to confidentiality:
1) Application for Interim Measure of Protection
2) Appoint Arbitrator
3) Challenge Arbitrator
4) Ask to Vacate / Modify Award
5) Ask to Enforce the Award
What is the consequence of breach of confidentiality?
Claim for damages.Where do you file the action for damanges
arising from breach of confidentiality?
RTC, not arbitral tribunal. Because the jurisdiction of the
arbitral tribunal over issues is defined by the arbitration
agreement. Issue of breach of confidentiality is usually involved
in other causes of actions or pending actions. e.g. transactions
with 3rd persons.
Note:
Breach of confidentiality covers mere disclosure of fact of
pendency of arbitration proceedings.COMPETENCE-COMPETENCE
PRINCIPLE
What is the Competence-Competence Principle?
Power of arbitral tribunal to initially rule on the question of
its jurisdiction over a dispute including any objections with
respect to the existence or validity of the arbitration agreement
or any condition precedent to the filing of a request of
arbitration.Restatement of the Rule: Before the arbitral tribunal
is constituted, the regular courts have jurisdiction to determine
the issue of competence of a tribunal. The moment the arbitral
tribunal is constituted, the arbitral tribunal has
jurisdiction.There arises a policy of judicial restraint, such that
the finding of the court on the jurisdiction of the arbitral
tribunal is at best prima facie.
Note:There is a before AT, after ATs finding, and
after-after.
Does the prima facie finding of the court mean that the arbitral
tribunal can still be formed?
Yes. If the court finds that the arbitration agreement is null
and void, inoperative or incapable of being performed, a party may
nevertheless commence arbitration and constitute the arbitral
tribunal.So where does prima facie finding of the court come in?
How is it prima facie?This means that the same issue may be passed
upon by the arbitral tribunal, which has the effect of superseding
the previous of the court. (This is the AFTER ruling.)
What about the after-after ruling?
The same issue may be passed upon in an action to vacate or set
aside the arbitral award (Rule 3.11) In this case, it is no longer
a prima facie determination of such issue or issues, but shall be a
FULL REVIEW of such issue or issues with due regard, however, to
the standard of review for arbitral awards.
But how may arbitration commence if it the court has made a
prima facie finding that ithe arbitration agreement is found null
and void, inoperative or incapable of being performed? Will the
other party who got the favorable ruling of the court participate /
cooperate?Get an appointment of arbitrator - sole arbitrator,
ad-hoc, institutional. Illustration:
Its possible for A to get a ruling from the court that the
arbitration agreement is null and void, and B may commence
arbitration in an institution in another country. B now asked to
appoint arbitrator for A contesting the arbitration agreement.What
is the remedy of A?
a) Get an injunction from RTC Philippines. Next step is
contempt. (Although the exercise of a legal right is not
contemptuous) There may also be problem in getting injunction. Plus
theres a provision in Special ADR Rules prohibiting injunction
against arbitration. Finally, A can later on file a petition to set
aside the award.b) Challenge jurisdiction of arbitral tribunal
constituted by institution in foreign country.
UNCITRAL:
1) Petition to Set Aside
2) Petition to Refuse Recognition
What is the Principle of Separability?Arbitration clause is
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. (Uncitral Model Law, Sec. 16(1); Special ADR
Rules 2.2)What is the effect of multiple actions and parties?Rule
4.7.Would Rule 4.7 result in multiplicity of suits?
Yes. But this does not prevent arbitration from being commenced.
Cases for next meeting (August 6, 2010):
1) Vega v. San Carlos Milling Co. Ltd, 51 Phil 908 (1924) no
digest2) California & Hawaiian Sugar Co. v. Pioneer Insurance
& Surety Corp. 346 SCRA 214 (2000)
3) Associated Bank v. CA, 233 SCRA 137 (1994)4) Bloomfield
Academy v. CA, 237 SCRA 43 (1994)5) Mindanao Portland Cement
Corporation v. McDonough Construction Co. of Florida, 90 SCRA 808
(1967)6) Gonzales v. Climax Mining Ltd., 512 SCRA 148 (2007)
7) Oil & Natural Gas Commission v. CA, 293 SCRA 26
(1998)
8) Magellan Capital Mgt. Corp. v. Zosa, 355 SCRA 157 (2001)
9) BF Corporation v. CA, 288 SCRA 267 (1998)
10) Korea Technologies Co. Ltd. v. Lerma, 542 SCRA 1 (2008)
11) Luzon Development Bank v. Luzon Development Bank Employees,
249 SCRA 162 (1995) In re: multiplicityIs there a counterpart of
the principle of confidentiality in Sec. 23 RA 9285 in RA 876?
Sec. 14? (UNANSWERED)What is the Judicial Relief After
Commencement of Arbitration (Rule 3, Special ADR Rules)?A party may
ask that the ruling of the arbitral tribunal on a preliminary
question upholding or declining its jurisdiction be declared null
and void, inexistent or unenforceable. This is premised on the fact
that the jurisdiction of the arbitral tribunal is defined by the
arbitration agreement. The determination of the court is no longer
a prima facie finding.
But would that not violate the Competence-Competence
Principle?
The determination of the court after the commencement of
arbitration proceedings
Illustration
August 6 Commencement of Arbitration
Scenario A:
On May 6, the determination of the court is merely prima facie
and the parties may still commence arbitration.
Scenario B:
On November 6, the determination of the court is no longer prima
facie. What would be the remedy of the claimant?
Not final may still be reviewed by MR, appeal, certiorari.
Rule 3.19
1) MR - yes2) Certiorari yes
a) Affirming ATs jurisdiction not subject to certiorari
b) AT has no jurisdiction certiorari available
Note: How many days?
3) Appeal yes dawVega v. San Carlos Milling Co. Ltd, 51 Phil 908
(1924)
Petitioners: Teodoro Vega
Respondent: San Carlos Milling Co., Ltd.
Facts:
Defendant-appellant contends that Sec. 23 of the Mills covenant
and Sec. 14 of the Planters covenant, as such stipulations on
arbitration are valid, and constitute a condition precedent, to
which the plaintiff should have resorted before applying to the
courts, as he prematurely did. This, more so, if these two
provisions are read with the reciprocal covnenant in Sec. 7 of the
Mills covenant.
It is an admitted fact that the differences which later arose
between the parties, and which are the subject of the present
litigation have not been submitted to arbitration provided for in
the above quoted clauses.
Plaintiff filed an action for the recovery of 32,959 kilos of
centrifugal sugar, or its value, P6,252, plus the payment of P500
damages and the costs.
The lower court decided in favor of the plaintiff.
Issue:
WON the lower court erred in having held itself with
jurisdiction to take cognizance of and render judgment in the
cause
Held: NO. Ratio:
1) The defendant is right in contending that clause 23 of the
Mill's covenant and clause 14 of the Planter's Covenant on
arbitration are valid, but they are not for that reason a bar to
judicial action, in view of the way they are expressed:
"An agreement to submit to arbitration, not consummated by an
award, is no bar to a suit at law or in equity concerning the
subject matter submitted. And the rule applies both in respect of
agreements to submit existing differences and agreements to submit
differences which may arise in the future." (5 C. J., 42.)
And in view of the terms in which the said covenants on
arbitration are expressed, it cannot be held that in agreeing on
this point, the parties proposed to establish the arbitration as a
condition precedent to judicial action, because these clauses
quoted do not create such a condition either expressly or by
necessary inference."Submission as Condition Precedent to Suit.
Clauses in insurance and other contracts providing for arbitration
in case of disagreement are very dissimilar, and the question
whether submission to arbitration is a condition precedent to a
suit upon the contract depends upon the language employed in each
particular stipulation. Where by the same agreement which creates
the liability, the ascertainment of certain facts by arbitrators is
expressly made a condition precedent to a right of action thereon,
suit cannot be brought until the award is made. But the courts
generally will not construe an arbitration clause as ousting them
of their jurisdiction unless such construction is inevitable, and
consequently when the arbitration clause is not made a condition
precedent by express words or necessary implication, it will be
construed as merely collateral to the liability clause, and so no
bar to an action in the courts without an award." (2 R. C. L., 362,
363.)
2) Neither does the reciprocal covenant No. 7 of the Mills
covenant expressly or impliedly establish the arbitration as a
condition precedent.
The expression "subject to the provisions as to arbitration,
hereinbefore appearing" does not declare such to be a condition
precedent. This phrase does not read "subject to the arbitration,"
but "subject to the provisions as to arbitration hereinbefore
appearing." And, which are these "provisions as to arbitration
hereinbefore appearing?" Undoubtedly clauses 23 and 14 quoted
above, which do not make arbitration a condition precedent.
Disposition. Affirmed.
Separate Opinions
AVANCEA, J., concurring:
1) Inasmuch as clause 23 of the Mill's Covenants, and clause 14
of the Planter's Covenants provide that the parties should respect
and abide by the decision of the arbitrators, they bar judicial
intervention and consequently are null and void in accordance with
the ruling of this court in the case of Wahl and Wahl vs.
Donaldson, Sims & Co. (2 Phil., 301).
2) Clause 7 of the Mutual Covenants, naming the Court of First
Instance of Iloilo as the one with jurisdiction to try such cases
as might arise from the parties' contractual relations, by the very
fact that it was made subject to the arbitration clauses previously
mentioned, does not render such arbitration merely a condition
precedent to judicial action, nor does it change its scope, as
clearly indicated by its wording and the intention of the parties.
Said clause 7 was doubtless added in case it became necessary to
resort to the courts for the purpose of compelling the parties to
accept the arbitrators' decision in accordance with the contract,
and not in order to submit anew to the courts what had already been
decided by the arbitrators, whose decision the contracting parties
had bound themselves to abide by and respect.
MALCOLM, J., dissenting:
1) Defendant is not bound to furnish cars free of charge for use
on the plaintiff's portable railway tracks, in relation with its
corollary, that the letter written by the manager of the
defendant's mill on March 18, 1916, does not estop the defendant
from demanding compensation for the future use of the cars.
2) The parties having formally agreed to submit their
differences to arbitrators, while recognizing the jurisdiction of
the courts, arbitration has been made a condition precedent to
litigation, and should be held valid and enforceable.
a) In the Philippines fortunately, the attitude of the courts
toward arbitration agreements is slowly crystallizing into definite
and workable form. The doctrine announced in Wahl and Wahl vs.
Donaldsono. ([1903], 2 Phil., 301), was that a clause in a contract
providing that all matters in dispute shall be referred to
arbitrators and to them alone, is contrary to public policy and
cannot oust the courts of jurisdiction. But the rule now is that
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 arrangements and
will only with great reluctance interfere to anticipate or nullify
the action of the arbitrator.
b) The new point of the judiciary in the progressive
jurisdiction of Pennsylvania, in England, and under the Civil Law,
is also worthy of our serious consideration.
i) It is the rule in Pennsylvania that when the persons making
an executory contract stipulate in it that all disputes and
differences between them, present or prospective, in reference to
such contract or any sum payable under it, shall be submitted to
the arbitrament of a named individual, or specifically designated
persons, they are effectually bound irrevocably by that
stipulation, and precluded from seeking redress elsewhere until the
arbiter or arbiters agreed upon have rendered an award or otherwise
been discharged.
ii) In England, the view seems now to prevail that a contractual
stipulation for a general arbitration, constitutes a condition
precedent to the institution of judicial proceedings for the
enforcement of the contract.
iii) Finally, it is within our knowledge that the Spanish civil
law wisely contains elaborate provisions looking to the amicable
adjustment of controversies out of court. Litigation by means of
friendly adjusters was formerly well known. The procedure in this
kind of litigation was minutely outlined in the Ley de
Enjuiciamiento Civil. Two articles of the Civil Code, namely,
articles 1820 and 1821, were given up to the subject of
arbitration, and expressly confirmed this method of settling
differences.
c) It was plainly the solemn purpose of the parties to settle
their controversies amicably if possible before resorting to the
courts. They provided for themselves by mutual consent a method
which was speedier and less expensive for all concerned and less
likely to breed that ill-feeling which is often the consequence of
hotly contested litigation. All this was done by the Planters on
the one hand and by the Milling Company on the other, to the end
that justice might guide them and possible differences be quickly
adjusted.
d) It is clear, by paragraph 7 of the Mutual Covenants, that
these parties did not intend that the decision of the arbitrators
should prevent resort to the courts, for they expressly agreed to
carry litigation between them to the courts of Iloilo. Acting under
legal rules, even in their most restrictive form, disputes arising
out of the contract, were to be referred to arbitration so that the
damages sustained by a breach of the contract, could be ascertained
by specified arbitrators before any right of action arose; but the
matters in dispute were not to be referred to arbitrators and to
them alone, to the utter exclusion of the courts. It is exactly
correct to state that the clauses of the Covenants hereinbefore
quoted, were meant as a condition precedent to litigation, which
accordingly should be given effect.
STUDY NOTES
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
d. The arbitration proceeding has not commenced
CLASS NOTES1) Court was already talking about arbitration
agreement, etc. as early as 1924.
2) Malcolm dissent:
3 jurisdictions:
*Pensylvannia irrevocably bound by stipulation, precluded from
seeking redress to the courts; but makes a distinction between (a)
did not name arbitrator; (b) *England even a general reference to
arbitration is a condition precedent (liberal)*Spain (Ley de
Enjuiciamiento Civil) detailed amicable settlement + arbitration-
Respect solemn purpose of the parties- Not null and void for
absolutely ousts the courts of jurisdiction.
Is an arbitration agreement a condition precedent to the filing
of an action in court?Rule 16.1 (j) of the Rules of Court MTD on
the ground of failure to comply with a condition precedentIs this
an absolute rule?
No. It can be waived. R.A. 9285, Sec. 24. Referral to
Arbitration. - A court before which an action is brought in a
matter which is the subject matter of an arbitration agreement
shall, if at least one party so requests not later that the
pre-trial conference, or upon the request of both parties
thereafter, refer the parties to arbitration unless it finds that
the arbitration agreement is null and void, inoperative or
incapable of being performed.
Sec. 7 Stay of civil action
Relate to Referral to ADR (Special Rules)
Depends on the request of a party, because party may decide not
to undergo ADR
- Related to Section 24 of RA 9285
If any suit or proceeding be brought upon an issue arising out
of an agreement providing for the arbitration thereof, the court in
which such suit or proceeding is pending, upon being satisfied that
the issue involved in such suit or proceeding is referable to
arbitration, shall stay the action or proceeding until an
arbitration has been had in accordance with the terms of the
agreement: Provided, That the applicant, for the stay is not in
default in proceeding with such arbitration.
Rule 4.2. When to make request. (A) Where the arbitration
agreement exists before the action is filed. The request for
referral shall be made not later than the pre-trial conference.
After the pre-trial conference, the courthuj will only act upon the
request for referral if it is made with the agreement of all
parties to the case.
Conclusion: An arbitration clause is NOT a condition precedent
such that it is a ground for dismissal, because it is an
alternative mode of dispute resolution. Hence, a party goes to
court not to pass upon the merits or to have resolve it resolved,
but for other reasons, such as to have the arbitration agreement
enforced, modified, set aside, etc. It is a ground to STAY civil
action (Sec. 7, RA 876; Sec. 24, RA 9285), not to dismiss it.
Malcolm: Condition precedent if it is more of a fact-finding
task.Can you be bound by an arbitration clause by subrogation?
See California & Hawaiian Sugar Co. v. Pioneer Insurance
& Surety Corp (2000)California & Hawaiian Sugar Co. v.
Pioneer Insurance & Surety Corp., 346 SCRA 214 (2000)
Petitioners: California Hawaiian Sugar Company, Pacific Gulf
Marine Inc and CF Sharp and Co
Respondent: Pioneer Insurance and Surety Corporation
Facts:
On November 27, 1990, the vessel MV SUGAR ISLANDER arrived at
the port of Manila carrying a cargo of soybean meal in bulk
consigned to several consignees, one of which was the Metro Manila
Feed Millers Association. Discharging of cargo from vessel to
barges commenced. From the barges, the cargo was allegedly
offloaded, rebagged and reloaded on consignees delivery trucks.
Respondent, however, claims that when the cargo was weighed on a
licensed truck scale a shortage of 255.051 metric tons valued at
P1,621,171.16 was discovered. The shipment was insured with Pioneer
against all risk in the amount of P19,976,404.00.
Due to the alleged refusal of petitioners to settle their
respective liabilities, respondent, as insurer, paid the consignee
Metro Manila Feed Millers Association.
Pioneer filed a complaint for damages against petitioners.
Petitioners filed a Motion to Dismiss the complaint on the ground
that respondents claim is premature, the same being arbitrable.
The RTC ordered to defer the hearing of the MTD and directed
petitioners to file their Answer.
Petitioners filed their answer with counterclaim and crossclaim
alleging that Pioneer did not comply with the arbitration
clause.
Petitioners filed a Motion to Defer Pre-Trial and Motion to Set
for Preliminary Hearing the Affirmative Defense of Lack of Cause of
Action for Failure to comply with Arbitration Clause,
respectively.
The RTC denied.
The CA affirmed. It ruled that petitioner cannot set the case
for preliminary hearing as an MTD was filed. Also, the arbitration
clause in the charter party did not bind Pioneer. The right of
Pioneer to file a complaint against petitioners is not dependent
upon the charter party, nor does it grow out of any privity
contract. It accrues simply upon payment.
Citing Pan Malayan Insurance Corporation v. CA, the CA ruled
that the right of respondent insurance company as subrogee was not
based on the charter party or any other contract; rather, it
accrued upon the payment of the insurance claim by private
respondent to the insured consignee.
Issue: WON the arbitration clause was binding upon Pioneer
Held:YES
Ratio: The CA erred when it held that the arbitration clause was
not binding on Pioneer.
There was nothing in Pan Malayan, however, that prohibited the
applicability of the arbitration clause to the subrogee. That case
merely discussed, inter alia, the accrual of the right of
subrogation and the legal basis therefor. This issue is completely
different from that of the consequences of such subrogation; that
is, the rights that the insurer acquires from the insured upon
payment of the indemnity.
(Pan Malayan: The right of subrogation is not dependent upon,
nor does it grow out of, any privity of contract or upon written
assignment of claim. It accrues simply upon payment of the
insurance claim by the insurer.)
As to the preliminary hearing: True, Section 6, Rule 16
specifically provides that a preliminary hearing on the affirmative
defenses may be allowed only when no motion to dismiss has been
filed. Section 6, however, must be viewed in the light of Section 3
which requires courts to resolve a motion to dismiss and prohibits
them from deferring its resolution on the ground of indubitability.
Section 6 disallows a preliminary hearing of affirmative defenses
once a motion to dismiss has been filed because such defense should
have already been resolved. In the present case, however, the trial
court did not categorically resolve petitioners Motion to Dismiss,
but merely deferred resolution thereof.
STUDY NOTES
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:
c. The referral would result in multiplicity of suits;
Rule 4.7. Multiple actions and parties. The court shall not
decline to refer some or all of the parties to arbitration for any
of the following reasons:
a. Not all of the disputes subject of the civil action may be
referred to arbitration;
b. Not all of the parties to the civil action are bound by the
arbitration agreement and referral to arbitration would result in
multiplicity of suits;
c. The issues raised in the civil action could be speedily and
efficiently resolved in its entirety by the court rather than in
arbitration;
d. Referral to arbitration does not appear to be the most
prudent action; or
e. The stay of the action would prejudice the rights of the
parties to the civil action who are not bound by the arbitration
agreement.
The court may, however, issue an order directing the inclusion
in arbitration of those parties who are not bound by the
arbitration agreement but who agree to such inclusion provided
those originally bound by it do not object to their inclusion.
CLASS NOTESCan you be bound by an arbitration clause in
subrogation?
No express ruling in California & Hawaiian Sugar Co. v.
Pioneer Insurance & Surety Corp (2000), citing Pan Malayan,
saying that a subrogee is bound. Theres only the accrual of the
right of subgrogation and the legal basis therefor.Was there
consent on the part of the insurance company?
Yes, on the basis of the principle of subrogation and its
effects.Will Article 1311 of the Civil Code apply here?
Art. 1311. Contracts take effect only between the parties, their
assigns and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature, or
by stipulation or by provision of law. The heir is not liable
beyond the value of the property he received from the decedent.
If a contract should contain some stipulation in favor of a
third person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its revocation. A
mere incidental benefit or interest of a person is not sufficient.
The contracting parties must have clearly and deliberately
conferred a favor upon a third person.Can Assignment in A1311 be
equated with Subrogation?
No. The right of subrogation is not dependent upon, nor does it
grow out of, any privity of contract or upon written assignment of
claim. It accrues simply upon payment of the insurance claim by the
insurer. (Pan Malayan)c.f.
Art. 2207. If the plaintiff's property has been insured, and he
has received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained of,
the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the
contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person causing the loss
or injury.Can a party be bound by the Arbitration Clause by
statutory provision?
Xam: Analogous to heirs in the sense that the subrogee acquires
the transmissible rights of the original party. (UNANSWERED).
See however, Bloomfield Academy Sec. 10 on Consultation of RA
6728, also commonly known as "An Act Providing Government
Assistance to Students and Teachers in Private Education, And
Appropriating Funds Therefor"Xam: See also, Associated Bank case
Sec. 3 (Agreement to the PCHC Rules) in relation to Sec. 36 on
Arbitration.Bloomfield Academy v. CA, 237 SCRA 43 (1994)
Petitioners: Bloomfield Academy and Rodolfo Lagera
Respondents: CA, Bloomfield Academy Parents Advisory Association
Inc, et al
Facts:
The petition originated in a complaint for injunction filed on
April 6, 1990 by private respondent, the association of parents and
guardians of students enrolled in petitioner. One of the defendants
in the case is petitioner which is a non-stock, non-profit
educational institution. What is being disputed before the court is
the increase in tuition fee. The petitioners contend that the
increase is essential due to the increase of the minimum wage under
RA 6727.
Private respondents alleged that the 21.22% increase was made
without prior consultation with the parents required by law and
that, in any case, the approved increase was exorbitant (at
21.22%).
They sent a letter to the DECS Secretary complaining that the
tuition fee increase was without valid basis already, after both
parties agreed on 50% of the increase which was implemented and
paid by the students during the school year with the clear
understanding that the other 50% is waived by the defendant.
Petitioners, on their part, contended that the parties did, in
fact, hold consultations at which the wage increase for teachers
mandated by RA6727 and the resulting increase in tuition fees
allowed by RA 6728 were discussed at length.
The DECS however affirmed the tuition fee increase.
The court issued an order enjoining petitioners and Secretary
Cario and/or their agents, representatives or persons acting in
their behalf from implementing the increase in tuition fees, and
not withholding their release of the report cards and/or other
papers necessary for the students desiring to transfer to other
schools until further orders from the court. The application for
injunction was set for hearing on April 19, 1990 at 2:00 p.m.
Answer to the complaint was filed by petitioners on April 19,
1990. On the same date, the court conducted the first hearing on
the application for a writ of preliminary injunction which hearing
was followed by settings on April 25, 26 and 27, 1990.
The court thereafter issued an order granting the writ of
preliminary injunction.
On certiorai, the CA affirmed and ruled that the grant or denial
of an injunction rests upon the sound discretion of the court.
Issue:WON the court erred in granting the injunction
Held:Ratio: The pertinent provisions RA 6728, also commonly
known as "An Act Providing Government Assistance to Students and
Teachers in Private Education, And Appropriating Funds Therefor,"
provide:
Sec. 9. Further Assistance To Students in Private Colleges and
Universities. . . . .
(b) For students enrolled in schools charging above one thousand
five hundred pesos (P1,500.00) per year in tuition and other fees
during the school year 1988-1989 or such amount in subsequent years
as may be determined from time to time by the State Assistance
Council, no assistance for tuition fees shall be granted by the
Government: Provided, however, That the schools concerned may raise
their tuition fees subject to Section 10 hereof.xxx xxx xxx
Sec. 10. Consultation. In any proposed increase in the rate of
tuition fee, there shall be appropriate consultations conducted by
the school administration with the duly organized parents and
teachers associations and faculty associations with respect to
secondary schools, and with students governments or councils,
alumni and faculty associations with respect to colleges. For this
purpose, audited financial statements shall be made available to
authorized representatives of these sectors. Every effort shall be
exerted to reconcile possible differences. In case of disagreement,
the alumni association of the school or any other impartial body of
their choosing shall act as arbitrator.xxx xxx xxx
Sec. 14. Program Administration/Rules and Regulations. The State
Assistance Council shall be responsible for policy guidance and
direction, monitoring and evaluation of new and existing programs,
and the promulgation of rules and regulations, while the Department
of Education, Culture and Sports shall be responsible for the day
to day administration and program implementation. Likewise, it may
engage the services and support of any qualified government or
private entity for its implementation.
The judicial action initiated by private respondent before the
court appears to us to be an inappropriate recourse. It remains
undisputed that the DECS Secretary has, in fact, taken cognizance
of the case for the tuition fee increase and has accordingly acted
thereon. We can only assume that in so doing the DECS Secretary has
duly passed upon the relevant legal and factual issues dealing on
the propriety of the matter. In the decision process, the DECS
Secretary has verily acted in a quasi-judicial capacity.
The remedy from that decision is an appeal. Conformably with BP
129, the exclusive appellate jurisdiction to question that
administrative action lies with the CA, not with the court a quo.
If we were to consider, upon the other hand, the case for
injunction filed with the court a quo to be a ordinary action
solely against herein petitioner (with DECS being then deemed to be
merely a nominal party), it would have meant the court's taking
cognizance over the case in disregard of the doctrine of primary
jurisdiction.
Neither can we treat the case as a special civil action for
certiorari or prohibition as the complaint filed by private
respondent with the court a quo, contains no allegation of lack, or
grave abuse in the exercise, of jurisdiction on the part of DECS
nor has there been any finding made to that effect by either the
court a quo or the appellate court that could warrant the
extraordinary remedy. A special civil action, either for certiorari
or prohibition, can be grounded only on either lack of jurisdiction
or grave abuse of discretion.
In passing, we also observe that the parties have both remained
silent on the provisions of Republic Act No. 6728 to the effect
that in case of disagreement on tuition fee increases (in this
instance by herein private parties), the issue should be resolved
through arbitration. Although the matter has not been raised by the
parties, it is an aspect, nevertheless, in our view, that could
have well been explored by them instead of immediately invoking,
such as they apparently did, the administrative and judicial relief
to resolve the controversy.
All told, we hold that the court a quo has been bereft of
jurisdiction in taking cognizance of private respondent's
complaint. We see no real justification, on the basis of the
factual and case settings here obtaining, to permit a deviation
from the long standing rule that the issue of jurisdiction may be
raised at any time even on appeal.CLASS NOTES
Take Note of Sec. 10:
In case of disagreement, the alumni association of the school or
any other impartial body of their choosing shall act as
arbitratorIs Sec. 10 an effective arbitration clause? Is the
designation of the alumni association in Sec. 10 an appointment of
arbitrator? Statutory arbitration clause?A republic act meddled
with the legal relationship.
Sir, too broad, too vague. Consent is absent.
If yes, party may move to stay civil action.
If not, theres no arbitrable dispute and theres no basis to stay
civil action.
Take Note of the the ff. provisions:
R.A. 9285, Sec. 24. Referral to Arbitration. - A court before
which an action is brought in a matter which is the subject matter
of an arbitration agreement shall, if at least one party so
requests not later that the pre-trial conference, or upon the
request of both parties thereafter, refer the parties to
arbitration unless it finds that the arbitration agreement is null
and void, inoperative or incapable of being performed.
Sec. 7 Stay of civil action
Relate to Referral to ADR (Special Rules)
Depends on the request of a party, because party may decide not
to undergo ADR
- Related to Section 24 of RA 9285
If any suit or proceeding be brought upon an issue arising out
of an agreement providing for the arbitration thereof, the court in
which such suit or proceeding is pending, upon being satisfied that
the issue involved in such suit or proceeding is referable to
arbitration, shall stay the action or proceeding until an
arbitration has been had in accordance with the terms of the
agreement: Provided, That the applicant, for the stay is not in
default in proceeding with such arbitration.
Rule 4.2. When to make request. (A) Where the arbitration
agreement exists before the action is filed. The request for
referral shall be made not later than the pre-trial conference.
After the pre-trial conference, the courthuj will only act upon the
request for referral if it is made with the agreement of all
parties to the case.
Take Note of the SC Ruling:
Although the matter has not been raised by the parties, it is an
aspect, nevertheless, in our view, that could have well been
explored by them instead of immediately invoking, such as they
apparently did, the administrative and judicial relief to resolve
the controversy.
Remedies available:
1) Move to dismiss2) Ground to stay
Can the Court proceed to decide the case on the merits in the
interest of justice?
No, This proceeding [Petition for Enforcement of Agreement to
Arbitrate] is merely a summary remedy to enforce the agreement to
arbitrate. The duty of the court in this case is not to resolve the
merits of the parties' claims but only to determine if they should
proceed to arbitration or not. (Mindanao Portland Cement
Corporation v. McDonough Construction Co. of Florida, 90 SCRA 808
(1967)).Mindanao Portland Cement Corporation v. McDonough
Construction Co. of Florida, 90 SCRA 808 (1967)
Petitioner appellee: Mindanao Portland Cement Corporation
Respondent appellant: McDonough Construction
Facts:
Petitioner and respondent McDonough executed a contract for the
construction by the respondent for the petitioner of a dry
portland, cement plant at Iligan City. In a separate contract,
Turnbull, Inc. the "engineer" was engaged to design and manage the
construction of the plant, supervise the construction, schedule
deliveries and the construction work as well as check and certify
ill contractors' progress and fiscal requests for payment.
Alterations in the plans and specifications were subsequently
made during the progress of the construction. Due to this and to
other causes deemed sufficient by Turnbull, Inc., extensions of
time for the termination of the project, initially agreed to be
finished on December 17, 1961, were granted.
Respondent finally completed the project on October 22, 1962.
Differences later arose.
Petitioner claimed from respondent damages in the amount of more
than P2,000,000 allegedly occasioned by the delay in the project's
completion.
Respondent in turn asked for more than P450,000 from petitioner
for alleged losses due to cost of extra work and overhead as of
April 1962.
A conference was held between petitioner and Turnbull, Inc., on
one hand, and respondent on the other, to settle the differences,
but no satisfactory results were reached.
Petitioner sent respondent written invitations to arbitrate,
invoking a provision in their contract regarding arbitration of
disputes. Instead of answering said invitations, respondent, with
Turnbul