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Chapter 1 - The Arbitration Agreement
Chapter 1 - The Arbitration Agreement
Party Autonomy - Arbitration Agreement is the Law between the Contracting Parties
o Ra 9285, SEC. 2. Declaration of Policy. - it is hereby declared the policy of the State to actively
promote party autonomy in the resolution of disputes or the freedom of the party to make their
own arrangements to resolve their disputes. Towards this end, the State shall encourage and
actively promote the use of Alternative Dispute Resolution (ADR) as an important means to
achieve speedy and impartial justice and declog court dockets. As such, the State shall provide
means for the use of ADR as an efficient tool and an alternative procedure for the resolution of
appropriate cases. Likewise, the State shall enlist active private sector participation in the
settlement of disputes through ADR. This Act shall be without prejudice to the adoption by the
Supreme Court of any ADR system, such as mediation, conciliation, arbitration, or any
combination thereof as a means of achieving speedy and efficient means of resolving cases
pending before all courts in the Philippines which shall be governed by such rules as the
Supreme Court may approve from time to time.
Exception
o Labor disputes covered by Presidential Decree No. 442, otherwise known as the Labor Code of
the Philippines, as amended and its Implementing Rules and Regulations;
o Civil status of persons;
o Validity of a marriage;
o Any ground for legal separation;
o Jurisdiction of courts;
o Future legitime;
o Criminal liability;
o And those which by law cannot be compromised. (Sec. 6, R.A. No. 9285)
Formal Requisites of Arbitration Agreement
FORMS:
o Arbitral Agreement or Clause;
o Submission Agreement;
o Even the very party who repudiates or assails the validity of such contract may invoke the
arbitration clause.
o The operation of the arbitration clause is not at all defeated by the failure of the party to file a
formal "request" or application therefor. The filing of a "request" pursuant to Section 24 of R.A.
No. 9285 is not the sole means by which an arbitration clause may be validly invoked in a
pending suit. (Koppel, Inc. vs. Makati Rotary Club Foundation, Inc., G.R. No. 198075, September
4, 2013.
Gonzales v. Climax M ining Ltd
Law of place where contract is made governs. Lex loci contractus. Contract was perfected in the
Philippines. Therefore, our laws ought to govern. Nonetheless, ART 2044 sanctions validity of mutually
agreed arbitral clause or finality and binding effect of an arbitral award. ART 2038, 2039 and 2040 refer to
instances where a compromise or an arbitral award may be voided, rescinded or annulled, but these
would not denigrate the finality of the arbitral award. Arbitration clause was mutually and voluntarily
agreed upon parties.
Arbitration—while it is the law of place where the contract is made governs (lex loci contractus), ART
2044 CCODE sanctions the validity of mutually agreed arbitral clause or finality and binding effect of an
arbitral award. Any stipulation that the arbitrator’s award or decision shall be final, is valid, without
prejudice to ART 2038, 2039 and 2040.
ART 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence or
falsity of documents, is subject to ART 1330 of this Code.
However, one of the parties cannot set up a mistake of fact as against the other if the latter, by virtue of
compromise, has withdrawn from a litigation already commenced.
ART 1330. A contract where consent is given through mistake, violence, intimidation, undue influence or
fraud is voidable.
ART 2039. When parties compromise generally on all differences which they might have with each other,
the discovery of documents referring to one or more but not to all questions settled shall not itself be a
cause for annulment or rescission of the compromise, unless said documents have been concealed by
one of parties.
But the compromise may be annulled or rescinded if it refers only to one thing to which one of the parties
has no right, as shown by newly-discovered documents.
ART 2040. If after a litigation has been decided by a final judgment, a compromise should be agreed
upon, either or both parties being unaware of the existence of the final judgment, compromise may be
rescinded.
Ignorance of judgment which may be revoked or set aside is not a valid ground for attacking a
compromise.
SEC 43, Recognition and Enforcement of Foreign Arbitral Awards not covered by NY
Convention—recognition and enforcement of foreign arbitral awards not covered by NY
Convention shall be done in accordance with procedural rules to be promulgated by SC.
SEC 44, Foreign Arbitral Award Not Foreign Judgment—foreign arbitral award when
confirmed by a court of forign country, shall be recognized and enforced as a foreign
arbitral award and not as a judgment of foreign court.
SEC 48, Notice of proceeding to parties—in a special proceeding for recognition and
enforcement of an arbitral award, Court shall send notice to parties at their address of
record in the arbitration or last known address.
It can be gleaned that concept of a final and binding arbitral award is similar to judgments or awards
given by some of our quasi-judicial bodies. Therefore, the final foreign arbitral awards are similarly
situated that they need first to be confirmed by RTC.
UNICITRAL MODEL—Philippines committed itself to be bound by the Model Law. In case a foreign
arbitral body is chosen by parties, arbitration rules of our domestic arbitration would not be applied.
RA 9285 is a procedural law which has a retroactive effect—While RA 9285 was passed only in 2004, It
applies to the case since it is a procedural law which has a retroactive effect. KOGIES filed its application
for arbitration before KCAB on July 1998 and it is still pending because no arbitral award has yet been
issued. Thus, RA 9285 is applicable to the instant case. Procedural laws are construed to be applicable to
actions pending and undetermined at the time of their passage and are deemed retroactive.
GR: retroactive application of procedural laws does not violate any personal rights because no vested
rights has yet been attacked or arisen from them.
SEC 24, RA 9285, RTC does not have jurisdiction over disputes that are subject of arbitration pursuant to
any arbitration clause and mandates the referral to arbitration in such cases—“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 than the pre-trial conference, or upon request of both parties, refer the parties
to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of
being performed.
Judicial review—even if foreign arbitral awards are mutually stipulated by parties in the arbitration clause
to be final and binding, same are not immediately enforceable or cannot be implemented immediately,
they must still be confirmed by RTC.
SEC 35, UNCITRAL MODEL LAW—requirement for arbitral award to be recognized by a competent court
for enforcement, which under SEC 36 UNCITRAL may refuse recognition or enforcement on grounds
provide for.
Foreign arbitral awards when confirmed by RTC are deemed not as a judgment of a foreign court but as a
foreign arbitral award, and when confirmed, are enforced as final and executor decisions of our courts of
law—concept of a final and binding arbitral award is similar to judgments or awards given by some quasi-
judicial bodies—when confirmed by RTC are deemed not as a judgment of a foreign court but as a
foreign arbitral award are enforced as final and executory decisions of our courts of law.
SEC 45. Rejection of foreign arbitral award—“a party to a foreign arbitration proceeding may
oppose an application for recognition and enforcement of arbitral award in accordance with
procedures and rules to be promulgated by SC only on those ground enumerated under ART 5 of
NY Convention. Any other ground raised shall be disregarded by RTC”.
While RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by
parties, still foreign arbitration award is subject to judicial review by RTC which can set aside, reject or
vacate it—foreign arbitral awards, while final and binding, do not oust courts of jurisdiction since these are
not absolute and without exceptions as they are still judicially reviewable.
CHAPTER 7, RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subject
to judicial review on specific grounds provided for.
Grounds for judicial review different in domestic and foreign arbitral awards.
Grounds for judicial review are different between domestic and foreign arbitral awards:
ART 34(2) UNCITRAL MODEL—foreign
SEC 25, RA876—domestic
There is nothing in the Contract which provides that parties may dispense with arbitration clause.
o FOREIGN ARBITRAL AWARD Recognition and enforcement of a foreign arbitral award shall
be governed by the 1958 New York Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (the "New York Convention") and the Special ADR Rules.
1. PRELLIMINARY PROCEDURE:
1.1. IN CASE OF ARBITRAL AGREEMENT/CLAUSE:
1.1.1. Demand/request for arbitration; (Not applicable in controversies covered by
CIAC)
1.1.2. Statement of the nature of the controversy;
1.1.3. Amount involved, if applicable;
1.1.4. Relief sought;
1.1.5. Attached true copy of the contract providing the arbitration;
1.1.6. Demand shall be served in person or registered mail;
1.1.7. Should the contract provides for the appointment of single arbitrator:
a. Indicate the time and date within which the parties shall agree upon such
arbitrator;
1.1.8. Should the contract provides for the appointment of three arbitrators:
a. Indicate the name of the arbitrator appointed;
b. Require the other party within 15 days from notice/receipt to make an advice in
writing the name of the person appointed by the second party;
1.2. The 2 arbitrators appointed must agree on the third arbitrator within 10 days from the
date of such notice;
1.3. In case of default by the other party in answering the demand, aggrieved party may file,
through a verified petition, with the RTC having jurisdiction of the parties:
1.3.1. A copy of the demand/request for arbitration;
1.3.2. A statement that an original demand was sent and which set forth:
a. The nature of the action;
b. Amount involved, if applicable;
c. Relief sought;
d. Attached true copy of the contract providing for arbitration;
Ruling on Jurisdiction
Liability of Arbitrators
1.1. QUALIFICATIONS:
1.1.1. Must be of legal age;
1.1.2. In full-enjoyment of his civil rights;
1.1.3. Knows how to read and write;
1.1.4. Not related by blood or marriage within the sixth degree to either party to
the controversy;
1.1.5. No financial, fiduciary or other interest in the controversy or cause to be
decided or in the result of the proceeding, or
1.1.6. Has any personal bias, which might prejudice the right of any party to a
fair and impartial award;
1.2. If, after appointment but before or during hearing, a person appointed to serve as
an arbitrator shall discover any circumstances likely to create a presumption of
bias, or which he believes might disqualify him as an impartial arbitrator, the
arbitrator shall immediately disclose such information to the parties. Thereafter
the parties may agree in writing:
1.2.1. to waive the presumptive disqualifying circumstances; or
1.2.2. to declare the office of such arbitrator vacant. Any such vacancy shall
be filled in the same manner as the original appointment was made.
(Sec. 10, R.A. No. 876)
1.1. The arbitrators may be challenged only for the reasons mentioned in Sec 10, R.A.
No. 876 which may have arisen after the arbitration agreement or were unknown
at the time of arbitration.
The challenge shall be made before them.
If they do not yield to the challenge, the challenging party may renew the
challenge before the RTC of the province or city in which the challenged
arbitrator, or, any of them, if there be more than one, resides. While the
challenging incident is discussed before the court, the hearing on arbitration
shall be suspended, and it shall be continued immediately after the court has
delivered an order on the challenging incident. (Sec.11, R.A. No. 876)
3.6. GROUNDS FOR CHALLENGE (Under the Model Law)
3.6.1. When the person is approached in connection with a possible appointment
as an arbitrator, he shall disclose any circumstances likely to give rise to
justifiable doubts as to his impartiality or independence. An arbitrator
from the time of his appointment and throughout the arbitral proceedings,
shall without delay disclose any such circumstances to the parties unless
they have already been informed of them by him.
3.6.2. An arbitrator may be challenged only if circumstances exist that give rise
to justifiable doubts as to his impartiality or independence, or if he does
not possess qualifications agreed to by the parties. A party may challenge
an arbitrator appointed by him, or in whose appointment he has
participated, only for reasons of which he becomes aware after the
appointment has been made.
Court Action on the Challenge