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CHAPTER XII:

CONSTRUCTION DISPUTE ARBITRATION


ALTERNATIVE DISPUTE RESOLUTION
ATTY. DAVID BALLESTEROS

CONSTRUCTION DISPUTE POLICY AND OBJECTIVE OF THE CIAC

CONSTRUCTION - To provide a fair and expeditious settlement of construction


disputes through a non-judicial process which ensures
- refers to all on-site works on buildings or alternating harmonious and friendly relations between or among the parties.
structures, from land clearance through completion including
excavation, erection and assembly and installation of - Created in recognition of the construction industry’s contribution
components and equipment. to national development goals.

CONSTRUCTION DISPUTE FUNCTIONS OF THE CIAC

- include “those between or among parties to, or who are a. To formulate and adopt an arbitration program for the
otherwise bound by, an arbitration agreement, directly or by construction industry;
reference, whether such parties are project owner, b. To enunciate policies and prescribe rules and procedures for
contractor, subcontractor, fabricator, project manager, construction arbitration;
design professional, consultant, quantity surveyor, c. To supervise the arbitration program, and exercise such
bondsman or issuer of an insurance policy in a construction authority related thereto as regards the appointment,
project.” (CIAC REVISED RULES) replacement or challenging of arbitrators; and
d. To direct its officers and employees to perform such functions
CONSTRUCTION ARBITRATION UNDER THE ADR as may be assigned to them from time to time.
ACT OF 2004
NATURE AND CHARACTER OF THE CIAC
ADR Act of 2004 not only affirmed the original and exclusive
jurisdiction of the CIAC over construction disputes, but also - It is a quasi-judicial agency or body defined as an organ of
strengthened it which include “those between or among parties government other than a court and other than a legislature,
to, or who are otherwise bound by, an arbitration agreement, which affects the rights of private parties through either
directly or by reference, whether such parties are project owner, adjudication or rule-making.
contractor, subcontractor, fabricator, project manager, design
professional, consultant, quantity surveyor, bondsman or issuer - To adjudicate claims and/or determine rights in accordance with
of an insurance policy in a construction project”, and even if the procedures set forth in E.O. No. 1008 is the CIAC’s primary
arbitration is commercial in character. function.

Request for the dismissal of action and the referral to the CIAC • First Rules of Procedure Governing Construction was
for arbitration shall be made through a VERIFIED MOTION which promulgated in August 1988.
shall contain:
a. Statement showing that the dispute is a construction • Latest Revised Rules of Procedure Governing Construction
dispute; Arbitration was approved on November 19, 2005 and took effect
b. Accompanied by proof of the existence of the on December 15, 2005, fifteen (15) days after its publication.
arbitration agreement unless it is already part of the
records of the case; JURISDICTION OF THE CIAC
c. Contain a notice of hearing.
• The jurisdiction of the CIAC is conferred by E.O. No. 1008
Note: An order dismissing the case and referring the dispute to
arbitration by the CIAC is immediately executory. - it has exclusive and original jurisdiction over disputes
arising from, or connected with, contracts, entered into by
THE CONSTRUCTION INDUSTR Y ARBITRATION parties involved in construction in the Philippines, whether
COMMISSION (CIAC) the dispute arises before or after completion of the contract,
or after the abandonment or breach thereof;
CONSTRUCTION INDUSTR Y ARBITRATION LAW
(EXECUTIVE ORDER NO. 1008) - may involve government or private contracts

- a quasi-judicial agency accorded with the jurisdiction to


• The doctrine of primary jurisdiction dictates prior recourse to the
resolve disputes arising from contracts involving
CIAC for construction disputes. The same doctrine precludes
construction in the Philippines.
courts from resolving construction disputes over which jurisdiction
CONSTRUCTION INDUSTR Y ARBITRATION has been initially lodged with the CIAC by reason of its special
COMMISSION (CIAC) knowledge, experience and services to determine technical and
intricate matters of fact.
- an agency under the Construction Industry Authority of the
Philippines (CIAP) and administratively attached to the • CIAC’s findings of fact, are generally accorded great respect, if not
Department of Trade and Industry; finality, by the courts.

- consists of a Chairman and two (2) members.

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• Two (2) acts which vest the CIAC with jurisdiction over e. Other just and valid reasons affecting independence,
construction dispute: integrity, impartiality and interest.

- Presence of an arbitration clause in a construction 6. Preliminary conference and terms of reference


contract; and The arbitrator shall set the case for preliminary conference, similar
- Agreement of the parties to submit the dispute to the to a pre-trial not later than 15 days after their appointment.
CIAC.
7. Arbitration proceedings
a. Venue date and time. Shall be mutually agreed upon by the
• CIAC may continue with the arbitration even though only
parties and the arbitral tribunal. In case of disagreement, the
one of the parties requested for the arbitration, or even both
choice of venue by the arbitral tribunal shall prevail.
parties have withdrawn their consent to arbitrate. b. Quorum. In arbitration with 3 arbitrators, 2 members of the
arbitral tribunal shall comprise a quorum for the purpose of
• Arbitration agreement or a submission to arbitration must conducting a hearing.
be in writing but it need not be signed by the parties, if the c. Presentation of evidence. The arbitral tribunal shall at all times
intent is clear. Agreement may be in form of exchange adopt the most expeditious procedure for the introduction of
letters sent by post or telefax, telexes, telegrams, e-mail or evidence.
any other modes of communication. d. Draft decision or final memorandum. If any or both parties so
desire, they may submit not later than 10 calendar days from
the termination of the hearing, their draft decision or final
RULES OF PROCEDURE I N THE CIAC
memorandum of arguments.
e. Closing of the hearings. After submission of the draft decision
The arbitral tribunal of the CIAC is mandated to “act according
or the final memorandum, the proceedings shall be deemed
to justice an equity and merits of the case, without regard to
closed.
technicalities or legal forms and need not be bound by any
technical rule of evidence. 8. Award
The award shall be rendered promptly by the arbitral tribunal within
PROCEDURAL RULES IN THE CIAC
30 days from the time the case is submitted for resolution but not
1. Complaint/request for arbitration more than 6 months from the date of signing of the TOR, or in the
The initiatory pleading is a complaint or request for absence of a TOR, not more than 6 months from the date of last
arbitration which must be filed with the Secretariat of CIAC. preliminary conference called for the purpose of finalizing or
The complaint or request for arbitration must allege the signing the TOR. There shall be no extension of this period unless
existence of the arbitration agreement or subsequent approved by the CIAC.
submission.
9. Execution of the award
2. Answer The arbitral tribunal, or the remaining members thereof, or, if there
Within 3 days from such filing, the Secretariat shall transmit are none, the CIAC itself, shall, motu proprio or upon motion of the
to the respondent a request for his answer attaching a copy prevailing party, issue a writ if execution of a final and executory
of the complaint and supporting documents. Without decision, order or award requiring any sheriff or proper officer to
prejudice to extensions of time if warranted, the respondent execute said decision, order or final award.
has 15 days from receipt of the request for arbitration or
complaint within which to file his answer.
JUDICIAL REVIEW OF CIAC DECISIONS
3. Reply
The claimant may file a reply to the counterclaim within 15 - A petition for review from a final award of the CIAC may be taken
days from the date of receipt of the answer with by any of the parties to the Court of Appeals within fifteen (15)
counterclaim. days from receipt thereof in accordance with Rule 43 of the 1997
Rules of Civil Procedure.
4. Appointment and acceptance of arbitrators
1 or 3 arbitrators may be appointed to settle a dispute - This petition is based on errors of fact, law or mixed fact and law.
depending on the agreement of the parties, or discretion of
the CIAC if there is no such agreement. (enter) If there is - The petition shall not stay the execution of the final award unless
one common nominee, he shall be appointed together with
the Court of Appeals issues a temporary restraining order and/or
the two others from the list submitted by the parties. If there
a writ of preliminary injunction.
are 2 common nominees, the CIAC shall appoint them, if
there are 3 common nominees, all of them shall be
appointed. (enter) Unless there are 3 common nominees, - The availability of a petition for review under Rule 43 precludes
within 15 days from their appointment, the two arbitrators the remedy of a petition for certiorari under Rule 65, and the
first chosen shall select the third arbitrator. Otherwise, CIAC filing of an erroneous petition for certiorari will not toll the 15-day
shall, within 15 days thereafter, appoint a third member. period to file a petition for review.

5. Challenge to arbitrators Note: Generally, in the absence of any showing of grave abuse
The challenge shall be based on the following grounds: of discretion, courts must sustain the factual findings of the CIAC
arbitrator in accordance with established principle that the
a. Relationship by blood or marriage within the sixth determination of certain questions of fact falling within the
degree of either party to the controversy, or the technical expertise of an administrative agency, must be
counsels within the fourth degree, computed accorded great respect, if not finality by the courts.
according to rules of civil law;
b. Financial, fiduciary or other interest in the COSTS OF ARBITRATION
controversy;
c. Partiality or bias; Sec. 5 Art. XV of the Rules of Procedure Governing Construction
d. Incompetence, or professional misconduct; and Arbitration

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DECISION AS TO COST OF ARBITRATION

In the case of non-monetary claims or where the parties agreed


that the sharing of fees shall be determined by the Arbitrator(s),
the award shall, in addition to dealing with the merits of the case,
fix the cost of arbitration, and/or decide which of the parties shall
bear the cost(s) or in what proportion the cost(s) shall be borne
by each.
Rule 142 of the Revised Rules of Court of the Philippines
Section 1. Costs ordinarily follow the result of suit

Unless otherwise provided in these rules, costs shall be allowed


to the prevailing party as a matter of course, but the court shall
have the power for special reasons, to adjudge that either party
shall pay the cost of an action, or that the same shall be divided,
as may be equitable.

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