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Involved in Arbitration / ADR?

We know the different processes.

We can help you dissect and analyze them,refine and combine them, and create hybrid

procedures to make them suitable forparticular relationships, as well as to developstrategies and point you to the right direction.

Philippine Institute of Arbitrators


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COMPREHENDING COMMERCIAL

ARBITRATION

By

MARIO E. VALDERRAMA AB, LLB, FCIARb, FHKIArb,

FPIArb

CIArb Approved Tutor

CIAC Accredited Arbitrator

Resident Representative to the Regional Sub-Committee

The Chartered Institute of Arbitrators

East Asia Branch

Contact DetailsTel No 367 4001; Telefax 362 1867

Mobile 0917 4114 594

E-mail


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CLEARING THE CONFUSION: ARBITRATION

AND STATUTE BASED ARBITRATIONS

There are several processes called

arbitrationin the Philippines.

Classes:

a. Arbitration (traditional/agreement based)

b. Statute based arbitrationsbased on law


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CLEARING THE CONFUSION

CONCEPT OF ARBITRATION (AGREEMENTBASED)

Arbitration is a device whereby the settlement ofa question, which is of interest for two or morepersons, is entrusted to one or more otherpersons the arbitrator or arbitrators- whoderive their powers from a private agreement,not from the authorities of a State, and who are

to proceed and decide the case on the basis ofsuch an agreement Fouchard, Gaillard,Goldman on International CommercialArbitration para 7 citing several authors.


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AGREEMENT BASED ARBITRATION

Elements:

A consensual mode of dispute

resolution by a third party neutral chosenby the parties leading to a final andbinding award.

It is not true arbitration if any of theelements is not present.


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CLEARING THE CONFUSION:

STATUTE BASED ARBITRATIONS

Sub Classification

Optional - needs stipulation to arbitrate, e.g.CIAC and voluntary labor arbitrations

Imposeddoes not require agreement toarbitrate, e.g. consumer and compulsory laborarbitrations


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FOCUS OF DISCUSSION

Our focus is on agreement based

arbitration.

This is true arbitration, based on consent and

not on law. Consensual justice.

In arbitration the parties craft the procedure.Those who do not know what to do have no

recourse except to rely on the arbitrator.


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CLEARING THE CONFUSION: AGREEMENT

BASED ARBITRATION

Contractual; synonymous with the concept of

party autonomy in the resolution of disputes

Tribunal an instrumentality of the parties

Award is product of private dispute resolutionprocesses, hence the need for judicial

recognition of confirmation

Principle of finality of awards is based on

contract & core component of the process Validity issues: award treated just like a

contractual stipulation


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ARBITRATION

Contractual Nature

Arbitration is a creature of contract, not of

law. It is based on the contract principle ofparty autonomy or the will of the parties,expressed as the freedom to contract.

Hence, the governing law affirmed, ratherthan grant, the right to choose arbitration.


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ARBITRATION

Contractual Nature: Basis

An adult is presumed to have sufficient

discretion hence capable of making informeddecisions.

He can, therefore, make arrangements with his

counterpart to resolve their disputes in the samemanner that he and his counterpart can create

legal relations by contract.


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ARBITRATION

Contractual Nature:

The process is governed more by contractual

precepts, less by law.

Age of majority

Autonomy of contracts

Limitations on the freedom to contract


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ARBITRATION

Contractual Nature:

A common mistake is to look at the law first

instead of applying contractual precepts.

Doing sotaking the legal approachwill

most likely result to the wrong ideas.


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ARBITRATION

Tribunal an Instrumentality of the Parties

In arbitration the parties by contract create theirown tribunal (see Model Law provisions). Theyappoint their judges; craft the procedure;

agree on several categories of choice. Ascreators they own the tribunal; as owners andcreators they can shape the tribunal to what theywant it to be. As owners and creators they pay

the expenses of the tribunal that they created.The arbitrators are akin to temporary employeeswhose job description is to resolve the disputebetween the parties.


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ARBITRATION

Award a Product of Private DisputeResolution Process; Need forConfirmation/Recognition

A vacated award x x x was an internationalaward which was not integrated in the legalsystem of that State x x x (Hilmarton v OTV,

1994 BULL CIV. A, No. 104, Court deCassation, March 23, 1994. FromCarbonneu).


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ARBITRATION

Principle of Finality of Award is Contractual

x x x arbitrators are judges chosen by theparties to decide the matters submitted to .them, finally and without appeal x x x (Burchell

v Marsh, 58 U.S.. 344, 15 L.Ed. 96 (1854).

The essence of the arbitration process is that anarbitral award shall put the dispute to rest x x x.Arbitral finality is a core component of the

parties agreement to submit to arbitration.Thus, an arbitration decision is final andconclusive because the parties have agreed thatit be so x x x. (Stasz v Schwab).


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ARBITRATION

Validity Issues: Summary Nature ofEnforcement/Recognition Processes

The syllogism: The contract between the parties

is to abide by the award or decision of theTribunal; the subject of the petition is the award;ergo the award must be enforced.

Cautionary Note: segregate from the merits of theaward the grounds to vacate the /refuserecognition of the award where issues of factand law may arise.


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ARBITRATION

Validity Issues: Award is Treated Just Like a

Contractual Stipulation

An award is ignored or vacated if bad;recognized or confirmed and enforced if good;

subject to the principle of separability.

An added saving grace is referral back to theTribunal which was introduced by arbitration

laws.


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ARBITRATION

Grounds To Vacate/Refuse Recognition

are mainly based on the two constituent

elements of an arbitration, namely:

Contractual

Judicial


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The Constituent Elements of an Arbitration

Judicial The arbitral tribunal decides the

dispute/s like a judge or collective judges, as the

case may be. This distinguishes consensual

arbitration from mediation and other ADR forms. Contractual The power of the tribunal arises

from contract. This distinguishes consensual

arbitration from litigation and statutory

arbitration.


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From the Judicial Element flows the following:

Requirement to observe due process

Equality of the parties

Reasonable opportunity to be heard Impartiality of arbitrators

Arbitral Ethics


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From the Contractual Element

Capacity of the Parties

Correlation: The New Civil Code provisions on capacity to act

and rules involving agency

Consent

No consent, no arbitration

Consent may be vitiated by the vices of consent


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From the Contractual Element (cont)

Form

Must be in writing.

NOTE: The law has since evolved to have an expanded

definition of inwriting.


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Jurisdiction of the Arbitral Tribunal

Contractual arbitrability, meaning that the tribunal should not

go beyond the jurisdiction granted to it by the parties.

But note that the law may grant additional powers to the

tribunal, e.g., power to issue interim measures of protection


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The Rules and Procedure

Parties make their own rules and procedure.

[Note: The terms of reference is more akin to the Rules of

Court rather than a Pre-Trial Order.]

Legal Arbitrability (limitations arising from law that

affect the freedom to contract)

Principle of separability


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Established by statute

Hybrid processes

Freedom of parties to select arbitrators andcraft procedure heavily curtailed

Tribunal an instrumentality of Government Resultant award deemed integrated into the

legal system

No agreement exists that the award is final,

hence a merits review is available


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Created by statute:

There is hereby established in the CIAP

a body to be known as the Construction

Industry Arbitration Commission (E.O. 1008Section 3).


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Hybrid Processes

A perusal of the procedures will show a

combination of the precepts of agreement

based arbitration and litigation.


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Curtailment of freedom to choose arbitrators:

Generally, only CIAC accredited arbitrators

may be appointed in CIAC panels.


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Curtailment of freedom to craft procedure:

The Arbitral Tribunal shall at all times adopt the

most expeditious procedure for the introduction and

reception of evidence, and SHALL HAVECOMPLETE CONTROL OVER THE

PROCEEDINGS, but in any case shall afford full

and equal opportunity to all parties to present

relevant evidence (CIAC Rules Sec. 13.4).


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Tribunal an instrumentality of the

Government

Obviously, as CIAC was created by statute in

implementation of a public interest

declaration.


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Resultant award integrated into the legal

system

No need for confirmation for enforceability.


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Award subject to appeal

Rule 43 Section 1. Scope.This Rule shall

apply to appeals from awards x x x. Among

these agencies are the x x x Construction

Industry Arbitration Commission.


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WANT TO KNOW MORE?

Attend our courses and seminars.

Contact us for schedules.

Philippine Institute of Arbitrators

c/o Atty. Mario E. Valderrama

Tel. No. (632) 367 4001

Telefax (632) 362 1867

E mail: marval law@gmail com

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