Tourism Infrastructure v Global Builder

Facts:
 In 2007 and 2008, the Philippine Tourism Authority (PTA) entered into five Memoranda of Agreement
(MOA) with respondent Global-V Builders Co. (Global-V)
1. Memorandum of Agreement (MOA) dated February 2, 2007 for the Construction of Stamped
Concrete Sidewalk and Installation of Streetlights (Main Road) located at Boracay, Aklan
2. MOA dated September 6, 2007 for the Boracay Environmental Infrastructure Project (BEIP)-
Extension of Drainage Component System (Main Road and Access Road) located at Barangay
Balabag, Boracay, Aklan;5
3. MOA dated December 7, 2007 for the Additional Sidewalk, Streetlighting and Drainage System
(Main Road), located at Bora cay, Aklan;
4. MOA dated September 19, 2008 for the Widening of Boracay Road along Willy's Place at
Barangay Balabag, Boracay, Aklan;
5. MOA dated February 29, 2008 for the Perimeter Fence at Banaue Hotel in Banaue, Ifugao
 The BEIP-Extension of Drainage Component System (Main Road and Access Road) Project and the
Perimeter Fence at Banaue Hotel Project were procured through competitive bidding, while the rest of
the projects aforementioned were obtained through negotiated procurement
 On July 31, 2012, Global-V filed a Request for Arbitration and a Complaint before the CIAC, seeking
payment from the Tourism Infrastructure and Enterprise Zone Authority (TIEZA), the office that took
over the functions of PTA, of unpaid bills in connection with the five projects, as well as payment of
interest, moral and exemplary damages, and attorney's fees.
o The claims of Global-V amounted to P16,663,736.34
 TIEZA filed a Refusal of Arbitration (Motion to Dismiss for Lack of Jurisdiction), instead of filing an Answer.
 TIEZA argued that:
o CIAC has no jurisdiction over the case filed by Global-V because the Complaint does not allege
an agreement to arbitrate and the contracts do not contain an arbitration agreement in
accordance with Sections 2.3 and 2.3.113 of the CIAC Revised Rules of Procedure Governing
Construction Arbitration (CIAC Rules).
o An arbitration clause is a condition sine qua non before CIAC can acquire jurisdiction over the
subject matter, as provided for in the CIAC Rules.
o That Claimant did not exhaust administrative remedies by failing to file a money claim before
the Commission on Audit (COA).
 Global-V countered that:
o R.A. No. 9184 vests on CIAC jurisdiction over disputes involving government infrastructure
projects like the projects in this case.
o Section 59 of R.A. No. 9184 provides that "[a]ny and all disputes arising from the implementation
of a contract covered by this Act shall be submitted to arbitration in the Philippines according to
the provisions of Republic Act No. 876, otherwise known as the "Arbitration Law"
o Global-V asserted that the pertinent provisions of R.A. No. 9184 governing the subject
infrastructure projects are deemed part of the contracts entered into by the parties.
 CIAC Arbitral Tribunal
o Dismissed TIEZA's motion to dismiss
o Ruled that provisions of Section 59 of R.A. No. 9184 are deemed incorporated in the contract
between the parties
 On July 16, 2013, the Arbitral Tribunal promulgated its Final Award in favor of Global-V
 CA initially reversed the AT’s decision, but later on ruled in favor of Global V after Global V filed a motion
for reconsideration

ISSUE: Does the CIAC have jurisdiction over the dispute?

Ruling:
 YES
 E.O. No. 1008 created the CIAC as an arbitral machinery to settle disputes in the construction industry
expeditiously in order to maintain and promote a healthy partnership between the government and the
private sector in the furtherance of national development goals. It was therein declared to be the policy
of the State to encourage the early and expeditious settlement of disputes in the Philippine construction
industry. CIAC's jurisdiction over disputes arising from construction contracts is contained in Section 4
of E.O. No. 1008, to wit:
o SECTION 4. Jurisdiction. - The CIAC shall have original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by parties involved in construction in the
Philippines, whether the dispute arises before or after the completion of the contract, or after
the abandonment or breach thereof. These disputes may involve government or private
contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit
the same to voluntary arbitration.
o The jurisdiction of the CIAC may include but is not limited to violation of specifications for
materials and workmanship; violation of the terms of agreement; interpretation and/or
application of contractual time and delays; maintenance and defects; payment, default of
employer or contractor and changes in contract cost.
o Excluded from the coverage of this law are disputes arising from employer-employee
relationships which shall continue to be covered by the Labor Code of the Philippines.
 The CIAC, pursuant to its rule-making power granted by E.O. No. 1008, promulgated the first Rules of
Procedure Governing Construction in August 1988, and it has amended the rules through the years to
address the problems encountered in the administration of construction arbitration.
o SECTION 4.1 Submission to CIAC Jurisdiction. - An arbitration clause in a construction contract
or a submission to arbitration of a construction dispute shall be deemed an agreement to submit
an existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a
different arbitration institution or arbitral body in such contract or submission.
 From the foregoing, it is evident that for CIAC to acquire jurisdiction over a construction controversy, the
parties to a dispute must be bound by an arbitration agreement in their contract or subsequently agree
to submit the same to voluntary arbitration, and that an arbitration clause in a construction contract or
a submission to arbitration of a construction dispute shall be deemed an agreement to submit an existing
or future controversy to CIAC's jurisdiction.

Application:
 In this case, the Court of Appeals found that there was an agreement to arbitrate in the General
Conditions of Contract, particularly in Clause 20.2 thereof, which formed part of the MOAs dated
September 6, 2007 (BEIP- Extension of Drainage Component System [Main Road and Access Road]
Project) and February 29, 2008 (Perimeter Fence at Banaue Hotel Project), which contracts were
procured through competitive bidding. To reiterate, Clause 20.2 of the General Conditions of Contract
states:
o 20.2. Any and all disputes arising from the implementation of this Contract covered by x x x R.A.
9184 and its IRR-A shall be submitted to arbitration in the Philippines according to the provisions
of [R]epublic Act 9285, otherwise known as the "Alternative Dispute Resolution Act 2004"
 Undoubtedly, Clause 20.2 of the General Conditions of Contract is an arbitration clause that clearly
provides that all disputes arising from the implementation of the contract covered by R.A. No. 9184 shall
be submitted to arbitration in the Philippines. In accordance with Section 4.1 of the CIAC Rules, the
existence of the arbitration clause in the General Conditions of Contract that formed part of the said
MOAs shall be deemed an agreement of the parties to submit existing or future controversies to CIAC's
jurisdiction. Since CIAC's jurisdiction is conferred by law, it cannot be subjected to any condition; nor can
it be waived or diminished by the stipulation, act or omission of the parties, as long as the parties agreed
 to submit their construction contract dispute to arbitration, or if there is an arbitration clause in the
construction contract.
 Hence, the fact that the process of arbitration was not incorporated in the contract by the parties is of
no moment. Moreover, the contracts in this case are expressly covered by R.A. No. 9184 (The
Government Procurement Reform Act), which provides under Section 59 thereof that all disputes arising
from the implementation of a contract covered by it shall be submitted to arbitration in the Philippines,
and disputes that are within the competence of CIAC to resolve shall be referred thereto.
 As CIAC's jurisdiction over the disputes arising from the said MOAs is conferred by E.O. No. 1008 and R.A.
No. 9184, the process of arbitration questioned to not have been incorporated in the contracts could
then only refer to the process of arbitration by CIAC, as provided in the CIAC Rules. Therefore, there is
no vagueness in the process of arbitration to follow even if it was not incorporated as a provision in the
contracts.

Other Discussion
 Further, the MOAs dated February 2, 2007 (Construction of Stamped Concrete Sidewalk and Installation
of Streetlights [Main Road] Project) and December 7, 2007 (Additional Sidewalk, Streetlighting and
Drainage System [Main Road] Project) specifically stated that the projects covered thereby were
additional works to the original contracts covered by bidding (with General Conditions of Contract
containing an arbitration clause) and, together with the MOA dated September 19, 2008 (Widening of
Boracay Road along Willy's Place Project), were negotiated procurements made pursuant to Sections 53
(d) and 53 (b), respectively, of the IRR-A of R.A. No. 9184.
 The jurisdiction of CIAC over the construction controversy involving the said MOAs is questioned because
the MOAs do not contain an arbitration clause.
 However, the said MOAs expressly state that they are covered by R.A. No. 9184.
 By virtue of R.A. No. 9184, which is the law that authorized the negotiated procurement of the
construction contracts entered into by the parties, CIAC is vested with jurisdiction over the dispute.
 Applicable laws form part of, and are read into contracts; hence, the provision on settlement of disputes
by arbitration under Section 59 of R.A. No. 9184 formed part of the MOAs in this case.
Dale Strickland v Punongbayan and Araullo
Facts:
 Nature of case:
o Strickland filed a complaint against respondents PA and EYLLP, praying for collection of sum of
money
 On March 26, 2002, National Home Mortgage Finance Corporation (NHMFC) and PA entered into a
Financial Advisory Services Agreement (FASA) for the liquidation of the NHMFC's Unified Home Lending
Program (UHLP). At the time of the engagement, PA was the Philippine member of respondent global
company, EYLLP.
 During this period, Strickland was a partner of EYLLP seconded to respondent Ernst & Young Asia Pacific
Financial Solutions (EYAPFS)
 Significantly, Strickland played a role in negotiating the FASA between PA and NHMFC. In a letter dated
April 15, 2002, PA wrote Strickland to formalize the working relationship between PA/EYLLP and EY/APFS
for the FASA with NHMFC
 By June 6, 2002, EYLLP wrote PA of the termination of its membership in EYLLP. Despite the termination,
the working relationship among the parties continued. In an assignment letter dated November 15, 2002,
EYLLP confirmed Strickland's assignment to Manila as a partner and summarized the working
arrangement
 In July 2004, the transactional relationship between the parties went awry. In an exchange of letters,
notice was given to NHMFC of PA's intention to remove Strickland from the NHMFC Engagement Team
as a result of Strickland's resignation from EYLLP and/or EYAPFS effective on July 2, 2004.
 Responding to NHMFC's concerns on the removal of Strickland from the UHLP Project and his
replacement by Mark Grinis (Grinis), EYAPFS' Managing Director, EYLLP reiterated Grinis' qualifications
and affirmed its team of professionals' dedication of "all the time necessary to close this transaction and
to make NHMFC [their team's, headed by Grinis,] first priority."
 Since NHMFC was intent on retaining Strickland's services despite his separation from EYLLP and/or
EYAPFS, the parties entered into negotiations to define Strickland's possible continued participation in
the UHLP Project. PA, NHMFC, and Strickland exchanged letters containing proposed amendments to
cover the new engagement and Strickland's participation within the UHLP Project. No actual written and
final agreement among the parties amending the original engagement letter of March 26, 2002
materialized.
 On August 20, 2004, PA wrote a letter, signed by its President/Chairman & CEO, Benjamin R.
Punongbayan, to NHMFC to initiate discussions on a "mutual voluntary termination of the NHMFC
Agreement.
 Subsequently, conflict on Strickland's actual participation and concurrent designation on the project
arose among PA, NHMFC, and Strickland as reflected in the proposed revisions to the "Draft Financial
Advisory Services" initially prepared by PA
 PA objected to Strickland's proposed amendments, specifically on the terms of compensation, which
now contemplated PA's engagement of Strickland as subcontractor for the closing of the UHLP Project.
 By May 23, 2005, counsel for Strickland wrote PA asking for "equitable compensation for professional
services" rendered to NHMFC on the UHLP Project from the time of his separation from EYLLP and/or
EYAPFS in July 2004 "up and through the recent Signing and Closing Ceremony held on 22 April 2004 and
his continued provision of services as the final closing approaches."
 On June 2, 2005, counsel for PA responded, categorically denying any contractual relationship with
Strickland and his assertion that he effectively substituted EYLLP and/or EYAPFS for the portion of the
work he carried out in the UHLP Project
 Thus, [Strickland] filed a Complaint, dated May 17, 2005, which included [EYAPFS], [PA] and NHMFC
among the defendants
 Subsequent to the complaint, [EYLLP and/or EYAPFS] filed a "Motion to Refer to Arbitration,"
  RTC
o The dispute between the defendants and [Strickland] covers domestic arbitral proceedings and
cannot be categorized as a commercial dispute of an international character since the dispute
arose from their professional and service relationship and does not cover matters arising from a
relationship of a commercial nature or commercial intercourse that would qualify as commercial.
The agreement has also no reasonable relationship with one or more foreign states.
o It appearing therefore that the arbitral clause in question is inoperative or incapable of being
performed in this jurisdiction referral to arbitration in the United States pursuant to the
arbitration clause is uncalled for.
 SC
o Granted the arbitration of Strickland and EYLLP
 Strickland (wants resolution of case in the Phils)
o Contends that the CA's referral of the dispute between EYLLP and Strickland to arbitration is
grave error since EYLLP failed to properly allege and prove the Partnership Agreement. Absent
an actionable Partnership Agreement, there is no existing arbitration clause.

ISSUE:
Was the referral to arbitration proper?

Ruling:
 YES
 Section 7, Rule 8 of the Rules of Court provides:
o Sec. 7. Action or defense based on document. Whenever an action or defense is based upon a
written instrument or document, the substance of such instrument or document shall be set
forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an
exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be
set forth in the pleading.
 In this case, EYLLP initially only quoted the provision of the Partnership Agreement on Dispute
Resolution, including a section on Arbitration, in its answer dated February 15, 2006. Eventually, it
submitted a copy of the Partnership Agreement in a manifestation dated March 15, 2006. Thus, we agree
with the holding of the CA that EYLLP substantially, and ultimately, complied with the provision given
that Strickland himself did, and does not even deny, the Partnership Agreement nor the arbitration
clause.
 In Cargill Philippines, Inc. v. San Fernando Regala Trading, Inc., we discussed at length the nature of an
arbitration clause as a contract in itself and the continued referral of a dispute to arbitration despite a
party's repudiation of the main contract:
o Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted
in our jurisdiction. R.A. No. 876 authorizes arbitration of domestic disputes. Foreign arbitration,
as a system of settling commercial disputes of an international character, is likewise recognized.
The enactment of R.A. No. 9285 on April 2, 2004 further institutionalized the use of alternative
dispute resolution systems, including arbitration, in the settlement of disputes.
o A contract is required for arbitration to take place and to be binding. Submission to arbitration
is a contract and a clause in a contract providing that all matters in dispute between the parties
shall be referred to arbitration is a contract. The provision to submit to arbitration any dispute
arising therefrom and the relationship of the parties is part of the contract and is itself a contract.
o Hence, we now hold that the validity of the contract containing the agreement to submit to
arbitration does not affect the applicability of the arbitration clause itself. A contrary ruling
would suggest that a party's mere repudiation of the main contract is sufficient to avoid
arbitration. That is exactly the situation that the separability doctrine, as well as jurisprudence
applying it, seeks to avoid.
  In so ruling that the validity of the contract containing the arbitration agreement does not affect the
applicability of the arbitration clause itself, we then applied the doctrine of separability, thus:
o "The doctrine of separability, or severability as other writers call it, enunciates that an arbitration
agreement is independent of the main contract. The arbitration agreement is to be treated as a
separate agreement and the arbitration agreement does not automatically terminate when the
contract of which it is a part comes to an end.
o The separability of the arbitration agreement is especially significant to the determination of
whether the invalidity of the main contract also nullifies the arbitration clause. Indeed, the
doctrine denotes that the invalidity of the main contract, also referred to as the "container"
contract, does not affect the validity of the arbitration agreement. Irrespective of the fact that
the main contract is invalid, the arbitration clause/agreement still remains valid and enforceable.
Application:
 Plainly, considering that the arbitration clause is in itself a contract, the setting forth of its provisions in
EYLLP's answer and in its motion to refer to arbitration, coupled with the actual submission by EYLLP of
the Partnership Agreement, complies with the requirements of Section 7, Rule 8 of the Rules of Court
which Strickland should have specifically denied
 We note that while the cases before us have a foreign element involving foreign parties and international
transactions, the parties do not question the jurisdiction of our courts to hear and decide the case. The
parties quibble only on whether the dispute between Strickland and EYLLP should be referred to
arbitration despite Strickland's alleged causes of action based on tortious conduct of the parties in
refusing to compensate him for services rendered. Moreover, in relation to the other defendants,
specifically respondent PA, the issue pertains to the suspension of the proceedings in Civil Case No. 05-
692 pending resolution of the arbitration between Strickland and EYLLP.
 We have consistently affirmed that commercial relationships covered by our arbitration laws are purely
private and contractual in nature. Article 1306 of the Civil Code provides for autonomy of contracts
where the parties are free to stipulate on such terms and conditions except for those which go against
law, morals, and public policy. In our jurisdiction, commercial arbitration is a purely private system of
adjudication facilitated by private citizens which we have consistently recognized as valid, binding, and
enforceable.
 Thus, we agree with the CA's ruling on the nature of the contract between Strickland and EYLLP, and its
application of our commercial arbitration laws to this case:
o In this jurisdiction, one of the laws governing arbitration is the [Alternative Dispute Resolution
(ADR)] Act. Under this statute, international commercial arbitration shall be governed by the
Model Law on International Commercial Arbitration ("Model Law") adopted by the United
Nations Commission on International Trade Law. Meanwhile, domestic arbitration is governed
by the Arbitration Law as amended by the ADR Act.
o To determine the applicable law here, the nature of the arbitration sought to be undertaken
must be looked at. The ADR Act defines domestic arbitration negatively by stating that it is one
that is not international as defined in the Model Law[]. In turn, Article 1 (3) of the Model Law
provides that 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:
1. The place of arbitration if determined in, or pursuant to, the arbitration
agreement;
2. 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."
o It is obvious then that the arbitration sought in the instant case is international for falling under
Article 1(3)(b)(ii) quoted above. The place of business of EYLLP is in the United States of America.
x x x It is here [the Philippines] that the services for which [Strickland] seeks remuneration were
rendered
o For the Model Law to apply, however, the arbitration should also be commercial. The
explanatory footnote to Article 1(l) of the Model Law explains that "[t]he term 'commercial'
should be given a wide interpretation so as to cover matters arising from all relationships of a
commercial nature, whether contractual or not." It also states that relationships of a commercial
nature include the following transactions among others:
 "any trade transaction for the supply or exchange of goods or services;
distribution agreement; commercial representation or agency; factoring;
leasing; construction of works; consulting; engineering; licensing; investment;
financing; banking; insurance; exploitation agreement or concession; joint
venture and other forms of industrial or business co-operation; carriage of
goods or passengers by air, sea, rail or road." x x x
o The meaning attached to the term "commercial" by the Model Law is broad enough to cover a
partnership. The Civil Code x x x defines a partnership as a contract where "two or more persons
bind themselves to contribute money, property, or industry to a common fund, with the
intention of dividing the profits among themselves." Hence, considering that EYLLP and
Strickland had a partnership relationship, which was not changed during his assignment [to]
Manila for the Project, the request for arbitration here has a commercial character. The dispute
between the said parties relates to Strickland's and EYLLP's association with each other

Other Discussions:
 The following factors further militate against Strickland's insistence on Philippine courts to primarily
adjudicate his claims of tortious conduct, and not commercial arbitration, as stipulated in the Partnership
Agreement:
1. From his complaint and amended complaint, Strickland's causes of action against EYLLP and PA
hinge primarily on contract, i.e., the Partnership Agreement, and the resulting transactions and
working relationship among the parties, where Strickland seeks to be paid.
2. The Partnership Agreement is bolstered by the assignment letter of EYLLP to Strickland
confirming his assignment to Manila as partner and which assignment letter contains a choice of
law provision:
“This assignment letter will be governed by, and construed in accordance with,
the laws of the U.S., under which the firm and you agree to the exclusive
jurisdiction of the U.S. courts. In addition, all terms and conditions of your
Partnership Agreement with Ernst & Young LLP, which are not consistent with
this letter, shall remain in full force and effect”
3. The allegations in Strickland's complaint, specifically his narration of facts, admit that the entire
controversy stems from his working relationship with EYLLP as a partner, thus:
(14)(9) When the NHMFC Agreement was signed, [Strickland] was a Partner in
E&Y and held the title of Managing Director of Ernst & Young Asia Pacific
Financial Solutions LLC ("EYAPFS"), a 100% owned and controlled subsidiary of
Ernst & Young LLP ("E&Y")
 On the whole, the dispute between Strickland and EYLLP, even considering the former's
allegations of tortious conduct, were properly referred by the CA to arbitration.
Federal Builders, Inc v Power Factors, Inc.
Facts:
 Doctrine
o An agreement to submit to voluntary arbitration for purposes of vesting jurisdiction
over a construction dispute in the Construction Industry Arbitration Commission
(CIAC) need not be contained in the construction contract, or be signed by the parties.
It is enough that the agreement be in writing.
 Federal was the general contractor of the Bullion Mall under a construction agreement with
Bullion Investment and Development Corporation (BIDC)
 Federal engaged respondent Power Factors Inc. (Power) as its subcontractor for the electric
works at the Bullion Mall and the Precinct Building for ₱l8,000,000.00
 On February 19, 2008, Power sent a demand letter to Federal claiming the unpaid amount of
₱ll,444,658.97 for work done by Power for the Bullion Mall and the Precinct Building.
 Federal replied that its outstanding balance under the original contract only amounted to
₱1,641,513.94, and that the demand for payment for work done by Power after June 21, 2005
should be addressed directly to BIDC.
 Nonetheless, Power made several demands on Federal to no avail.
 On October 29, 2009, Power filed a request for arbitration in the CIAC invoking the arbitration
clause of the Contract of Service reading as follows:
o 15. ARBITRATION COMMITTEE - All disputes, controversies or differences, which may
arise between the parties herein, out of or in relation to or in connection with this
Agreement, or for breach thereof shall be settled by the Construction Industry
Arbitration Commission (CIAC) which shall have original and exclusive jurisdiction over
the aforementioned disputes.
 On November 20, 2009, Atty. Vivencio Albano, the counsel of Federal, submitted a letter to
the CIAC manifesting that Federal agreed to arbitration and sought an extension of 15 days
to file its answer, which request the CIAC granted.
 On December 16, 2009, Atty. Albano filed his withdrawal of appearance stating that Federal
had meanwhile engaged another counsel.
 Federal, represented by new counsel (Domingo, Dizon, Leonardo and Rodillas Law Office),
moved to dismiss the case on the ground that CIAC had no jurisdiction over the case inasmuch
as the Contract of Service between Federal and Power had been a mere draft that was never
finalized or signed by the parties. Federal contended that in the absence of the agreement for
arbitration, the CIAC had no jurisdiction to hear and decide the case
 On February 8, 2010, the CIAC issued an order setting the case for hearing, and directing that
Federal's motion to dismiss be resolved after the reception of evidence of the parties
 Federal did not thereafter participate in the proceedings until the CIAC rendered the Final
Award dated May 12, 2010 in favor of Power
 Federal appealed the award to the CA insisting that the CIAC had no jurisdiction to hear and
decide the case; and that the amounts thereby awarded to Power lacked legal and factual
bases.
 CA
o Affirmed the CIAC’s decision

ISSUE:
WON the CIAC had jurisdiction over the case

Ruling:
 YES
 The parties had an effective agreement to submit to voluntary arbitration; hence, the CIAC had
jurisdiction
 The need to establish a proper arbitral machinery to settle disputes expeditiously was
recognized by the Government in order to promote and maintain the development of the
country's construction industry. With such recognition came the creation of the CIAC through
Executive Order No. 1008 (E.O. No. 1008), also known as The Construction Industry Arbitration
Law. Section 4 of E.O. No. 1008 provides:
o Sec. 4. Jurisdiction. - The CIAC shall have original and exclusive jurisdiction over
disputes arising from, or connected with, contracts entered into by parties involved in
construction in the Philippines, whether the dispute arises before or after the
completion of the contract, or after the abandonment or breach thereof. These
disputes may involve government or private contracts. For the Board to acquire
jurisdiction, the parties to a dispute must agree to submit the same to voluntary
arbitration.
 Under the CIAC Revised Rules of Procedure Governing Construction Arbitration (CIAC Revised
Rules), all that is required for the CIAC to acquire jurisdiction is for the parties of any
construction contract to agree to submit their dispute to arbitration. Also, Section 2.3 of the
CIAC Revised
 Rules states that the agreement may be reflected in an arbitration clause in their contract or
by subsequently agreeing to submit their dispute to voluntary arbitration. The CIAC Revised
Rules clarifies, however, that the agreement of the parties to submit their dispute to
arbitration need not be signed or be formally agreed upon in the contract because it can also
be in the form of other modes of communication in writing, viz.:
o RULE 4 - EFFECT OF AGREEMENT TO ARBITRATE
o SECTION 4.1. Submission to CIAC jurisdiction - An arbitration clause in a construction
contract or a submission to arbitration of a construction dispute shall be deemed an
agreement to submit an existing or future controversy to CIAC jurisdiction,
notwithstanding the reference to a different arbitration institution or arbitral body in
such contract or submission.
o 4.1.1 When a contract contains a clause for the submission of a future controversy to
arbitration, it is not necessary for the parties to enter into a submission agreement
before the Claimant may invoke the jurisdiction of CIAC.
o 4.1.2 An arbitration agreement or a submission to arbitration shall be in writing, but
it need not be signed by the parties, as long as the intent is clear that the parties
agree to submit a present or future controversy arising from a construction contract
to arbitration. It may be in the form of exchange of letters sent by post or by telefax,
telexes, telegrams, electronic mail or any other mode of communication.
 The liberal application of procedural rules as to the form by which the agreement is embodied
is the objective of the CIAC Revised Rules. Such liberality conforms to the letter and spirit of
E.O. No. 1008 itself which emphasizes that the modes of voluntary dispute resolution like
arbitration are always preferred because they settle disputes in a speedy and amicable
manner. They likewise help in alleviating or unclogging the judicial dockets. Verily, E.O. No.
1008 recognizes that the expeditious resolution of construction disputes will promote a
healthy partnership between the Government and the private sector as well as aid in the
continuous growth of the country considering that the construction industry provides
employment to a large segment of the national labor force aside from its being a leading
contributor to the gross national product
 Worthy to note is that the jurisdiction of the CIAC is over the dispute, not over the contract
between the parties. Section 2.1, Rule 2 of the CIAC Revised Rules particularly specifies that
the CIAC has original and exclusive jurisdiction over construction disputes, whether such
 disputes arise from or are merely connected with the construction contracts entered into by
parties, and whether such disputes arise before or after the completion of the contracts.
Accordingly, the execution of the contracts and the effect of the agreement to submit to
arbitration are different matters, and the signing or non-signing of one does not necessarily
affect the other. In other words, the formalities of the contract have nothing to do with the
jurisdiction of the CIAC.

Other Discussion (on unsigned contract)

 Federal contends that there was no mutual consent and no meeting of the minds between it
and Power as to the operation and binding effect of the arbitration clause because they had
rejected the draft service contract.
 The contention of Federal deserves no consideration.
 Under Article 1318 of the Civil Code, a valid contract should have the following essential
elements, namely: (a) consent of the contracting parties; (b) object certain that is the subject
matter of the contract; and (c) cause or consideration. Moreover, a contract does not need to
be in writing in order to be obligatory and effective unless the law specifically requires so.
 Pursuant to Article 1356 and Article 1357 of the Civil Code, contracts shall be obligatory in
whatever form they may have been entered into, provided that all the essential requisites for
their validity are present. Indeed, there was a contract between Federal and Power even if the
Contract of Service was unsigned.
 Such contract was obligatory and binding between them by virtue of all the essential elements
for a valid contract being present.
Steamship (insurance company) v Sulpicio (shipping line)
FACTS:
 Sulpicio insured its fleet of inter-island vessels with Steamship for Protection & Indemnity risks through
local insurance agents, Pioneer Insurance and Surety Corporation (Pioneer Insurance) or Seaboard-
Eastern Insurance Co., Inc. (Seaboard-Eastern).
 On July 7, 2005, M/V Princess of the World was gutted by fire while on voyage from Iloilo to Zamboanga
City, resulting in total loss of its cargoes.
 The fire incident was found by the Department of Interior and Local Government to be "accidental" in
nature.
 Sulpicio claimed indemnity from Steamship under the Protection & Indemnity insurance policy.
 Steamship denied the claim and subsequently rescinded the insurance coverage of Sulpicio's other
vessels on the ground that "Sulpicio was grossly negligent in conducting its business regarding safety,
maintaining the seaworthiness of its vessels as well as proper training of its crew."
 On June 28, 2007, Sulpicio filed a Complaint with the Regional Trial Court of Makati City against
Steamship; one (1) of its directors, Gary Rynsard; and its local insurance agents Pioneer Insurance and
Seaboard-Eastern for specific performance and damages.
 Steamship filed its Motion to Dismiss and/or to Refer Case to Arbitration pursuant to Republic Act No.
9285, or the Alternative Dispute Resolution Act of 2004 (ADR Law), and to Rule 47 of the 2005/2006 Club
Rules, which supposedly provided for arbitration in London of disputes between Steamship and its
members.
 The other defendants filed separate motions to dismiss.
 Branch 149, Regional Trial Court, Makati City denied the motions to dismiss.
o In its July 11, 2008 Order, denying Steamship's motion and supplemental motion to dismiss and
citing European Resources and Technologies, Inc. v. Ingenieuburo Birkhann + Nolte,
Ingeniurgesellschaft Gmbh the Regional Trial Court held that "arbitration [did] not appear to be
the most prudent action, . . . considering that the other defendants . . . ha[d] already filed their
[respective] [a]nswers."
 Steamship filed its Motion for Reconsideration, but it was likewise denied in the Order dated September
24, 2008.
 Steamship assailed trial court orders before the Court of Appeals through a Rule 65 Petition, docketed
as CA-G.R. SP No. 106103.
 The Court of Appeals dismissed the petition in its November 26, 2010 Decision.
o It found no grave abuse of discretion on the part of the trial court in denying Steamship's Motion
to Dismiss and/or to Refer Case to Arbitration or any convincing evidence to show that a valid
arbitration agreement existed between the parties.
o Steamship's Motion for Reconsideration of this Decision was likewise denied in the
Resolution dated March 10, 2011.
 On April 29, 2011, Steamship filed before this Court this Petition for Review, docketed as G.R. No.
196072.

CONTENTION OF STEAMSHIP:
 Steamship contends that the arbitration agreement set forth in its Club Rules, which in turn is
incorporated by reference in the Certificate of Entry and Acceptance of M/V Princess of the World, is
valid and binding upon Sulpicio, pursuant to this Court's ruling in BF Corporation v. Court of Appeals.
Steamship further avers that the Court of Appeals' finding that there was no proof that Sulpicio was given
a copy of the Club Rules was incorrect and contradicted by the evidence on record.
 Steamship adds that by Sulpicio's own declarations in its letter-application for membership of its vessels,
Sulpicio acknowledged that it had received a copy of the Club Rules and that its membership in
Steamship is subject to them.
  It contends that Sulpicio was "provided with copies of the Club's Rule books on an annual basis by Pioneer
Insurance and Seaboard-Eastern who acted as brokers [for Sulpicio's] entry."
 Moreover, throughout Sulpicio's almost 20 years of membership, it has been aware of, and relied upon,
the terms of the Club Rules, as revealed in its various correspondences through its brokers with
Steamship.
 Thus, Sulpicio is estopped to deny that it was aware of, and agreed to be bound by, the Club Rules and
their provisions.
 Steamship argues that a referral of the case to arbitration is imperative pursuant to the mandates of
Republic Act No. 9285 or the ADR Law.
 It adds that the trial court's reliance on the ruling in European Resources and Technologies, Inc. v.
Ingenieuburo Birkhann + Nolte, Ingeniurgesellschaft Gmbh was misplaced.
 That case was decided on the basis of Republic Act 876 or the Old Arbitration Law, which did not provide
for instances where some of the multiple impleaded parties were not covered by an arbitration
agreement.
 It adds that now, Section 25 of the ADR Law specifically provides that "the court shall refer to
arbitration those parties who are bound by the arbitration agreement although the civil action may
continue as to those who are not bound by such arbitration agreement."
 Even from a procedural standpoint, Steamship contends that the claim against it may be separated from
Pioneer Insurance and Seaboard-Eastern as these local insurance companies were impleaded as solidary
obligors/debtors.
 Steamship further submits that "a Philippine court is an inconvenient forum to thresh out the issues
involved in Sulpicio's claim."
o First, Sulpicio's claim is governed by the English Law, as expressly stated in the 2005/2006 Club
Rules.
o Second, a Philippine court would be "an ineffective venue" to enforce any judgment that may be
obtained against Steamship, a foreign corporation.
o Thus, on the basis of the doctrine of forum non conveniens alone, Steamship contends that the
claim against it should be referred to arbitration in London.
 Finally, Steamship holds that "Sulpicio should participate in the London Arbitration as [it] is already
progressing . . . [i]nstead of wasting its time on prosecuting its claim before a Philippine court that is
devoid of jurisdiction

CONTENTION OF SULPICIO:
 Sulpicio counters that the Court of Appeals was correct in ruling that there was no arbitration agreement
between the parties.
o The arbitration clause in the 2005/2006 Club Rules is not valid and binding for failure to comply
with Section 4 of the ADR Law, which requires that an arbitration agreement be in writing and
subscribed by the parties or their lawful agent.
o Sulpicio adds that "[i]n White Gold Marine Services, Inc. vs. Pioneer Insurance and Surety
Corporation, . . . Steamship did not invoke arbitration but filed suit before a Philippine court,
which . . . proves that [the 2005/2006 Club Rules' arbitration clause] is neither mandatory nor
binding" upon the parties.
o Sulpicio further contends that the Certificate of Entry and Acceptance did not provide for
arbitration as a mode of dispute resolution, that the rules referred to was not particularly
identified or described, and that it never received a copy of the Club Rules.
o Assuming there was valid arbitration agreement between them, Sulpicio submits that the trial
court correctly relied on the ruling in European Resources in denying the referral of the case to
arbitration.
 o Arbitration in London would not be the "most prudent action" because the arbitral decision will
not be binding on Pioneer Insurance and Seaboard-Eastern and it would result in a "split
jurisdiction."
o Sulpicio further contends that the exception laid down in European Resources still applies
because the ADR Law was already in effect when the case was decided by this Court.

ISSUE: whether or not there is a valid and binding arbitration agreement between Steamship and Sulpicio
Lines, Inc.?

RULING:
 Yes, there is a valid arbitration agreement between both parties.
 It is the State's policy to promote party autonomy in the mode of resolving disputes.
 Under the freedom of contract principle, parties to a contract may stipulate on a particular method of
settling any conflict between them.
 Arbitration and other alternative dispute resolution methods like mediation, negotiation, and
conciliation are favored over court action.
 Republic Act No. 9285 expresses this policy:
o Section 2. Declaration of Policy. — It is hereby declared the policy of the State to actively
promote party autonomy in the resolution of disputes or the freedom of the parties to make
their own arrangements to resolve 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. (Emphasis supplied)
 Arbitration, as a mode of settling disputes, was already recognized in the Civil Code.
 In 1953, Republic Act No. 876 was passed, which reinforced domestic arbitration as a process of dispute
resolution.
 Foreign arbitration was likewise recognized through the Philippines' adherence to the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, otherwise known
as the New York Convention.
 Republic Act No. 9285 sets the basic principles in the enforcement of foreign arbitral awards in the
Philippines.
 Consistent with State policy, "arbitration agreements are liberally construed in favor of proceeding to
arbitration."
 Every reasonable interpretation is indulged to give effect to arbitration agreements.
 Thus, courts must give effect to the arbitration clause as much as the terms of the agreement would
allow.
 "Any doubt should be resolved in favor of arbitration."
 Sulpicio contends that there was no valid arbitration agreement between them, and if there were, it was
not aware of it.
 This Court rules against Sulpicio's submission.
APPLICATION:
 The contract between Sulpicio and Steamship is more than a contract of insurance between a marine
insurer and a shipowner. By entering its vessels in Steamship, Sulpicio not only obtains insurance
coverage for its vessels but also becomes a member of Steamship.
 A protection and indemnity club, like Steamship, is an association composed of shipowners generally
formed for the specific purpose of providing insurance cover against third-party liabilities of its members.
 Sulpicio's acceptance of the Certificate of Entry and Acceptance manifests its acquiescence to all its
provisions. There is no showing in the records or in Sulpicio's contentions that it objected to any of the
terms in this Certificate. Its acceptance, likewise, operated as an acceptance of the entire provisions of
the Club Rules.
 When a contract is embodied in two (2) or more writings, the writings of the parties should be read and
interpreted together in such a way as to render their intention effective.
 With the exception of the War Risk Extension clause, the Bio-chem clause, and a succinct statement of
the limits of liability, warranties, exclusion, and deductibles, the Certificate of Entry and Acceptance does
not contain the details of the insurance coverage. A person would have to refer to the Club Rules to have
a complete understanding of the contract between the parties.
 The arbitration clause is found in Rule 47 of the 2005/2006 Club Rules. (SEE NOTES)
 Under Rule 47, any dispute concerning the insurance afforded by Steamship must first be brought by a
claiming member to the Directors for adjudication.
 If this member disagrees with the decision of the Director, the dispute must be referred to arbitration in
London. Despite the member's disagreement, the Managers of Steamship may refer the dispute to
arbitration without adjudication of the Directors.
 This procedure must be complied with before the member can pursue legal proceedings against
Steamship.
 There is no ambiguity in the terms and clauses of the Certificate of Entry Acceptance.
 Contrary to the ruling of the Court of Appeals, the Certificate clearly incorporates the entire Club
Rules—not only those provisions relating to cancellation and alteration of the policy.
 "[W]hen the text of a contract is explicit and leaves no doubt as to its intention, the court may not read
into it any other intention that would contradict its plain import."
 The incorporation of the Club Rules in the insurance policy is without any qualification.
 This includes the arbitration clause even if not particularly stipulated.
 A basic rule in construction is that the entire contract, and each and all of its parts, must be read together
and given effect, with all its clauses and provisions harmomonized with one another.

ISSUE: Whether or not the arbitration agreement in the 2005/2006 Club Rules is valid?
RULING:
 Yes. The arbitration agreement was valid.
 In domestic arbitration, the formal requirements of an arbitration agreement are that it must "be in
writing and subscribed by the party sought to be charged, or by his lawful agent."
 In international commercial arbitration, it is likewise required that the arbitration agreement must be
in writing.
 An arbitration agreement is in writing if it is contained (1) in a document signed by the parties, (2) in an
exchange of letters, telex, telegrams or other means of telecommunication which provide a record of
the agreement, or (3) in an exchange of statements of claim and defense in which the existence of an
agreement is alleged by a party and not denied by another.
 The reference in a contract to a document containing an arbitration clause constitutes an arbitration
agreement provided that the contract is in writing and the reference is such as to make that clause part
of the contract.
  In BF Corp. v. Court of Appeals, one (1) of the parties denied the existence of the arbitration cause on the
ground that it did not sign the Conditions of Contract that contained the clause.
o This Court held that the arbitration clause was nonetheless binding because the Conditions of
Contract were expressly made an integral part of the principal contract between the parties.
o The formal requirements of the law were deemed complied with because "the subscription of
the principal agreement effectively covered the other documents incorporated by reference [to
them]."
 Thus, an arbitration agreement that was not embodied in the main agreement but set forth in another
document is binding upon the parties, where the document was incorporated by reference to the main
agreement.
 The arbitration agreement contained in the Club Rules, which in turn was referred to in the Certificate
of Entry and Acceptance, is binding upon Sulpicio even though there was no specific stipulation on
dispute resolution in this Certificate.
 Furthermore, as stated earlier, Sulpicio became a member of Steamship by the very act of making a
contract of insurance with it.
 The Certificate of Entry and Acceptance issued by Steamship states that "[its] name has been entered in
the Register of Members of the Club as a Member."
 Sulpicio admits its membership and the entry of its vessels to Steamship.
 Sulpicio's agreement to abide by Steamship's Club Rules, including its arbitration clause, can be
reasonably inferred from its submission of an application for entry of its vessels to Steamship "subject
to the Rules, receipt of which we acknowledge."1
o Rule 8(v) of the 2005/2006 Club Rules provides that:

o Each Member or other person whose application for insurance or reinsurance is accepted shall
be deemed to have agreed both for itself and its successors and each of them that both it and
they and each and all of them will be subject to and bound by and will perform their obligations
under the Rules, Act and By(e)-Laws of the Club and any contract of insurance with the Club.
 In this case, by its act of entering its fleet of vessels to Steamship and accepting without objection the
Certificate of Entry and Acceptance covering its vessels, Sulpicio manifests its consent to be bound by
the Club Rules.
 The contract between Sulpicio and Steamship gives rise to reciprocal rights and obligations. Steamship
undertakes to provide protection and indemnity cover to Sulpicio's fleet.
 On the other hand, Sulpicio, as a member, agrees to observe Steamship's rules and regulations, including
its provisions on arbitration.

NOTES: 47 dispute resolution, Adjudication

i. in the event of any difference or dispute whatsoever, between or affecting a Member and the Club and
concerning the insurance afforded by the Club under these rules or any amounts due from the Club to
the Member or the Member to the Club, such difference or dispute shall in the first instance be referred
to adjudication by the Directors. That adjudication shall be on the basis of documents and written
submissions alone. Notwithstanding the terms of this Rule 47i, the Managers shall be entitled to refer
any difference or dispute to arbitration in accordance with sub-paragraph ii below without prior
adjudication by the Directors
ii. If the Member does not accept the decision of the Directors, or if the Managers, in their absolute
discretion, so decide, the difference or dispute shall be referred to the arbitration of three arbitrators,
one to be appointed by each of the parties and the third by the two arbitrators so chosen, in London.
The submission to arbitration and all the proceedings therein shall be subject to the provisions of the
English Arbitration Act, 1996 and the schedules thereto or any statutory modifications or re-enactment
thereof.
6. Metro Rail Transit Development Corporation vs. Gammon Philippines, Inc., G.R. No. 200401, January 17,
2018
Ponente: Leonen, J.

Nature of the case: This case is a petition for review on certiorari of the decision and resolution of the CA
 The assailed decision affirmed the Construction Industry Arbitration Commission’s (CIAC’s) decision
o Which awarded Gammon Philippines, Inc. (Gammon) its monetary claims for lost profits and
reimbursements for engineering services, design work, and site dewatering and cleanup, due to
breach of contract
 The assailed resolution denied Metro Rail Transit Development Corporation’s (MRT) Motion for
Reconsideration

FACTS:
 This case involves MRT’s MRT-3 North Triangle Description Project (Project), covering 54 hectares of
land, out of which 16 hectares were allotted for a commercial center.
 Half of the commercial center would be used for a podium structure (Podium), which was meant to
provide the structure for the Project’s Leasable Retail Development and to serve as the maintenance
depot of the rail transit system.
 Parsons Interpro JV (Parsons) was the Management Team authorized to oversee the construction’s
execution
 On April 30, 1997, respondent Gammon received from Parsons an invitation to bid for the complete
concrete works of the Podium.
o The scope of the work involved supplying the necessary materials, labor, plants, tools,
equipment, facilities, supervision, and services for the construction of Level 1 to Level 4 of the
Podium.
 On May 30, 1997, Gammon submitted three (3) separate bids and several clarifications on certain
provisions of the Instruction to Bidders and the General Conditions of Contract
o Gammon won the bid

Re First Notice to Proceed

 On August 27, 1997, Parsons issued a Letter of Award and Notice to Proceed (First Notice to Proceed)
to Gammon.
o It was accompanied by the formal contract documents.
o Included, among others, in the First Notice to Proceed was the lump sum bid amounting to
P1,401,672,095
 That it includes 2 separate geographical areas designated as Phase I and Phase II
 That it can proceed with the work at Phase I starting seven (7) days from receipt of this
Notice or from the time that Site is dewatered and cleaned up, whichever is the later.
o In a letter dated September 2, 1997, Gammon signed and returned the First Notice to Proceed
without the contract documents.
o In a letter dated September 3, 1997, Gammon transmitted to Parsons a signed Letter of Comfort
to guarantee its obligations in the Project
 However, in a letter dated September 8, 1997, MRT wrote Gammon that it would need one (1) or two
(2) weeks before it could issue the latter the Formal Notice to Proceed – due to current developments
in the Philippines’ foreign exchange rate and the concomitant soaring interest rates, it needs to estimate
the possible effects and repercussions on the project

 On September 9, 1997, Gammon transmitted the contract documents to Parsons

o In a facsimile transmission sent on the same day, Parsons directed Gammon “to hold any further
mobilization activities.”
  In a letter dated September 10, 1997, Gammon stated that a notice of award and notice to proceed
addressed to it was issued by the petitioner’s project managers, Parsons Interpro JV and has been signed,
accepted and on original returned to them by their authorized people
o Therefore, a contract exists between MTRDC (petitioner) and GPI (Gammon).
o Required now to proceed with the work, as stipulated in the letter
 Seven days from receipt of that Notice and
 It was agreed that it would commence dewatering of the flooded site and clean up
immediately, under a Change Order, and
 That the construction period would run from the date of achieving the cleanup of the
site.
 It was anticipated that these clean up works would take 11 days.

 On September 11, 1997, Gammon sent Parsons a facsimile to confirm if all requirements in the contract
documents were temporarily suspended pending the clarification of the scope and programming of the
Project

Re Second Notice to Proceed

 In a facsimile transmission dated September 12, 1997, Parsons confirmed “the temporary suspension of
all the requirements under the contract except the redesign of the project floor slabs and the site
dewatering and cleanup.”
 Thereafter, MRT decided to downscale the Podium’s construction and to proceed with the Project’s
conceptual redesign.
 Upon Parson’s request order, Gammon studied and discussed with MRT the best option to phase the
work.

 On November 7, 1997, Gammon presented to MRT the sequencing and phasing of the work
o MRT decided to adopt Gammon’s recommendation to construct the Podium up to Level 2 only
 Due to these revisions on the scope of work, MRT also decided to redesign the Level 2 slab, which it
perceived would be exposed to more load stresses from prolonged exposure to elements and the weight
of heavy construction equipment.
o MRT asked Gammon to redesign
 On February 18, 1998, Parsons issued Gammon a Notice of Award and Notice to Proceed (Second Notice
to Proceed) for the engineering services based on the redesigned plan.
o It is stated in the notice that “in the event that this contract will not be finalized in the near
future, any and all expenses that are necessary and directly incurred by Gammon in connection
therewith shall be reimbursed based on actual cost plus a negotiated fee.
 Gammon signed the Second Notice to Proceed on March 11, 1998 with qualification
 On March 3, 1998, Gammon submitted to Parsons a Revised Lump Sum Price Proposal of
P1,044,055,102.00 for the construction of the Podium up to Level 2, including the design of the floor slab
at Level 2.
o At this time, Gammon had already started its engineering services pursuant to the Second Notice
to Proceed

Re Third Notice to Proceed

 (In a letter dated March 6, 1998) Gammon sent Parsons a breakdown of the Revised Extra Contract
Expenses it allegedly incurred in connection with the works’ suspension amounting to P17,241,505.16

o It later (March 11, 1998) on notified Parsons of is revised Breakdown of Lump Sum Price worth
P1,062,986,607.00

  On April 2, 1998, MRT issued in favor of Gammon another Notice of Award and Notice to Proceed (Third
Notice to Proceed)
 In its Letter dated April 8, 1998, Gammon acknowledged receipt of the Third Notice to Proceed and
requested clarification of certain items.
o Parsons wrote Gammon, stating that since the building had been revised, structural changes
would be needed and quantities may change.

 On April 29, 1998, Gammon wrote Parsons, confirming its readiness to start mobilization and requesting
clarification of “urgent issues requiring resolution”
 HOWEVER, in its Letter dated May 7, 1998, Parsons informed Gammon that MRT was temporarily
rescinding the Third Notice to Proceed, noting that it remained unaccepted by Gammon.

Re Fourth Notice to Proceed

 On June 11, 1998, Gammon received from Parsons the Contract for the Construction and Development
of the Superstructure, MRT-3 North Triangle – Amended Notice to Proceed dated June 10, 1998 (Fourth
Notice to Proceed)
o The terms of the Fourth Notice to Proceed were different from those of the First and the Third
Notices to Proceed.
o The Fourth Notice to Proceed also expressly cancelled the First and Third Notices to Proceed
 On June 19, 1998, Gammon qualifiedly accepted the Fourth Notice to Proceed.
o MRT treated Gammon’s qualified acceptance as a new offer.
 In a Letter dated June 22, 1998, MRT rejected Gammon’s qualified acceptance and informed Gammon
that the contract would be awarded instead to Filsystems if Gammon would not accept the Fourth
Notice to Proceed within five (5) days

 In a Letter dated July 8, 1998, Gammon wrote to MRT, acknowledging the latter’s intent to grant the
Fourth Notice to Proceed to another party despite having granted the First Notice to Proceed to
Gammon.

Re Claim for Reimbursement

 Thus, it notified MRT of its claims for reimbursement for costs, losses, charges, damages, and expenses
it had incurred due to the rapid mobilization program in response to MRT’s additional work instructions,
suspension order, ongoing discussions, and the consequences of its award to another party

 In a Letter dated July 15, 1998, MRT expressed its disagreement with Gammon and its amenability to
discussing claims for reimbursement
 In a Letter dated July 23, 1998, Gammon notified Parsons of its claim for payment of all costs, damages,
and expenses due to MRT’s suspension order and the consequences of its award of the contract to
another party

 In a Letter dated August 7, 1998, MRT informed Gammon that it was willing to reimburse Gammon for
its cost in participating in the bid amounting to about 5% of Gammon’s total claim of more or less
P121,000,000.00
 In a Letter dated August 11, 1998, Gammon replied that MRT’s offer was not enough to cover the
expenses it had incurred for the Project and that it was willing to send MRT additional information
necessary for the evaluation of its claims
 In a Letter dated August 24, 1998, Parsons requested Gammon for additional supporting documents to
its claims
o Gammon wrote several communications to MRT to follow up on its evaluation request
Re Notice of Claim before CIAC (Construction Industry Arbitration Commission)
 On July 1, 1999, Gammon filed a Notice of Claim before CIAC against MRT

CIAC’s Order (dated August 18, 1999)

 Directed MRT to file its Answer and submit the names of its nominees to the Arbitral Tribunal

 MRT filed a Motion to Dismiss, arguing that CIAC had no jurisdiction to arbitrate the dispute
 This Motion was denied and this matter was elevated to this Court
o In Gammon v. Metro Rail Transit Development Corporation, this Court held that CIAC had
jurisdiction over the case.
 On October 19, 2006, MRT filed its Answer with Compulsory Counterclaim
o MRT is willing to pay Gammon the total amount of P5,493,639.27 representing the sum of
P4,821,261.91 and P672,377.36, which comprise Gammon’s claim for cost of the engineering
and design services and site dewatering and cleanup works, respectively.

Arbitral Tribunal
 On November 2, 2006, the Arbital Tribunal was formed.
 On December 11, 2006, a preliminary conference was set to finalize the Terms of Reference, which
would regulate the conduct of the proceedings.
 The parties agreed that they would simultaneously submit their witnesses’ affidavits on January 19, 2007

CIAC Ruling (dated March 27, 2007)

 Granted an AWARD on the monetary claims of Claimant (Gammon) as follows:
o P4,821,261.91 - for Engineering services design work

o P672,377.36 - for site dewatering and cleanup
o P5,493,639.27 - total claim under issue #1

o P53,149,330.35 - as a reasonable estimate of the profit it had lost by reason of Respondent’s
breach of contract in awarding the construction to a different contractor
o P58,642,969.62 – TOTAL DUE THE CLAIMANT
 MRT assailed the CIAC’s Decision before the CA

CA Ruling:
 Denied the petition
 Affirmed the CIAC’s decision

 Thus, MRT filed the instant Petition for Review

MRT’s Arguments:
 That Gammon was not entitled to CIAC’s award considering that there is no perfected contract between
MRT and Gammon and
 That Gammon’s claim for lost profits was based only on an unsubstantiated and self-serving assertion of
its employee.
 That the claim for reimbursements for engineering services, design work, site dewatering, and cleanup
was not supported by official receipts
 That it is not estopped from contradicting its alleged judicial admission of liability for reimbursements in
the amount of P5,493,639.27, and further states that it is entitled to attorney’s fees
Gammon’s Comment:
 Insisted that there is a perfected contract between them
o That MRT did not withdraw or modify its offer before Gammon signed and returned the First
Notice to Proceed and the contract documents
o That the contract was not cancelled and was only temporarily and partially suspended, and this
did not affect its perfection
 That this Court (SC) determined the perfection of the contract in Gammon v. Metro Rail Transit
Development Corporation, and thus, the doctrine of the law of the case applies
o That Gammon already determined that there is a perfected contract, and thus, the doctrine of
the law of the case applies.
o It insists that without the perfected contract, which contains the provision for arbitration, CIAC
would not have acquired jurisdiction over the case.

 That its claim for lost profits was sufficiently substantiated and that it has proven its entitlement to the
reimbursements
o That there need not be absolute certainty in its amount to be able to recover lost profits
o That “lost profits cannot be denied in a construction contract on the ground of business
uncertainty”
o It also holds that loss of profits can be proven on the basis of experience and the industry
standard by which it can be calculated, if there is any.
o That MRT did not refute the 5% amount given by Delos Santos or quantify how much Gammon
is actually entitled to
o MRT presented no evidence contrary to what was testified and that this Court has accepted 10%
profit as the standard industry practice in the construction business

 That damages may be proved not only by official receipts, but also through other documentary evidence,
such as invoices and debit notes
o That It avers that official receipts are not the only documentary evidence to prove the claim of
damages
o Invoices and debit notes are allowed.
o Debit notes do not require an official receipt as additional documentation.

 That MRT is bound by its implied admission of its liability for the reimbursements in its Answer with
Compulsory Counterclaim
o It points out that MRT mentioned the exact amount it was willing to pay and that it did not state
that it would pay only the proved amount
 That MRT is raising factual issues and that CIAC’s factual findings on the existence of the contract and
the amount of damages ought to be respected

MRT’s Reply:
 Argued that the doctrine of the law of the case does not apply as the issue in Gammon was CIAC’s
jurisdiction and not the existence of the contract
o It did not determine that a contract was perfected as to warrant the application of the doctrine
of the law of the case
o The ruling was limited only to the preliminary question of whether or not there is an arbitration
agreement between the parties to give CIAC’s jurisdiction over the dispute
 It reiterates that no contract was perfected because MRT withdrew its offer to Gammon before Gammon
returned the contract documents
o While Gammon had already then returned the First Notice to Proceed, it did not return the
contract documents until September 12, 1997
  Already withdrawn the First Notice to Proceed, and were already renegotiating the
contact
 Thus, Gammon’s acceptance only came after the offer had been withdrawn and nothing that could
have been accepted remained
o That it withdrew its offer to Gammon in its September 8, 1997 Letter, when it suspended the
Project to review the foreign exchange rates and interest rates
 Reasoned that the loss of profits was not proven with a reasonable degree of certainty because
Gammon’s witness is not an expert witness
o His testimony was not sufficient because there is no proof of his experience, and his functions
consist only of preparing project proposals, negotiations, mobilization, and meetings with and
among the parties in the Project.
o That his testimony was bare, insufficient, self-serving, and unsubstantiated by independent
evidence, like audited financial statements or other reports on past projects
o That the 5% lost profits should not be based on the last net estimate of the contract cost because
it must be based on the contract price agreed upon.
o That basing it on the revised scope of work and a greatly increased foreign exchange rate would
unjustly enrich Gammon
 It emphasizes that the finding in National Housing Authority v. First United Construction Corporation of
10% profit as the standard practice in the construction industry is merely obiter dictum, and thus, cannot
operate as a precedent for construction-related cases

 Further claimed that invoices and debit memos are not sufficient proof of payment to entitle Gammon
to reimbursements because an invoice is a mere detailed statement of the items and their prices and
charges, while a debit memo is only an advice to the receiver of an outstanding debt.
o That it was not supported by sufficient documentary evidence as only 2% of the claims have
official receipts
 Averred that the alleged admission in its Answer with Compulsory Counterclaim should be construed as
extending only to those “supported by official receipts”
o That “judicial admissions cannot supplant the requirements of law . . . that actual or
compensatory damages . . . must be duly proven.”
 Asserted that its offer to pay is not an admission of liability but only “an attempt to settle the issue and
avoid litigation.”
o While it expressed its willingness to pay Gammon the reimbursements, it only applies to those
supported by official receipts
o Gammon was allegedly aware that it had to substantiate its claims, as proven by its inclusion of
the reimbursement amount in the issues to be resolved by CIAC in the Terms of Reference and
its presentation of proof for its claims
o That its judicial admission is not conclusive because an answer is a mere statement of fact that
the filing party is expected to prove
 That the exact amount of P5,493,639.27 was mentioned in the Answer with Compulsory Counterclaim
as it was the amount claimed by Gammon, which MRT offered to pay, if proven.
o That judicial admissions cannot supplant the requirement that actual damages must be duly
proven
o
 That the findings of CIAC and of the CA are all contrary to evidence on record or are premised on
speculation, surmises, and conjectures, and thus, are serious errors of law properly re-examinable by
this Court.


SC denies this petition.

Re CIAC’s Factual findings [Issue 1] and Jurisdiction – supported by SC ruling in the case of Gammon vs. MRTDC
[Issue 2]

ISSUE 1: Whether, in this case, CIAC’s factual findings on construction disputes are final, conclusive, and not
reviewable by this Court on appeal.

RULING 1:
 Yes. In this case, CIAC’s factual findings on construction disputes are final, conclusive, and not reviewable
by this Court on appeal.
 CIAC was created under EO No. 1008 to establish an arbitral machinery that will settle expeditiously
problems arising from, or connected with, contracts in the construction industry
 Its jurisdiction includes construction disputes between or among parties to an arbitration agreement, or
those who are otherwise bound by the latter, directly or by reference.
 Thus, any project owner, contractor, subcontractor, fabricator, or project manager of a construction
project who is bound by an arbitration agreement in a construction contract is under CIAC’s jurisdiction
in case of any dispute.

 CIAC is a quasi-judicial body exercising quasi-judicial powers.

 A quasi-judicial agency is a government body, not part of the judiciary or the legislative branch, which
adjudicates disputes and creates rules which affect private parties’ rights
 It is created by an enabling statute, and thus, its existence continues beyond the resolution of a dispute
and is independent from the will of the parties
 Its powers are limited to those expressly granted or necessarily implied in the enabling law

 Quasi-judicial or administrative adjudicatory power has been defined as the power:

(1) To hear and determine questions of fact to which legislative policy is to apply, and
(2) To decide in accordance with the standards laid down by the law itself in enforcing and
administering the same law.
 ARBITRATION under a quasi-judicial body is similar to commercial arbitration in that its factual findings
are generally accorded respect and finality
 However, COMMERCIAL ARBITRATION is conducted by ad hoc bodies created by stipulation of parties
for the purpose of settling disputes concerning their private or proprietary interests.
o In general, the findings in commercial arbitration are respected to uphold the autonomy of
arbitral awards

 On the other hand, quasi-judicial agencies were created for a speedier resolution of controversies on
matters of state interest that require specialized knowledge and expertise
 CIAC exercises quasi-judicial powers over arbitration disputes concerning construction contracts.
 Thus, its findings are accorded respect because it comes with the presumption that CIAC is technically
proficient in efficiently and speedily resolving conflicts in the construction industry
 Thus, under the Construction Industry Arbitration Law, arbitral awards are binding and shall be final and
inappealable, except on pure questions of law – which shall be appealable to the SC
 Initially, CIAC’s decisions are appealable only to this Court.
 However, when the Rules of Court were enacted, appeals from CIAC’s decisions became appealable to
the Court of Appeals under Rule 43, ROC [Sections 1 and 2]
 While Rule 43 petitions may pertain to questions of fact, questions of law, or both questions of law and
fact, it has been established that factual findings of CIAC may not be reviewed on appeal.
 In CE Construction v. Araneta, this Court explained that appeals from CIAC may only raise questions of
law
 o xxx in keeping with the Construction Industry Arbitration Law, any appeal from CIAC Arbitral
Tribunals must remain limited to questions of law
 Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc. explained the wisdom underlying the
limitation of appeals to pure questions of law.
o xxx Voluntary arbitration involves the reference of a dispute to an impartial body, the members
of which are chosen by the parties themselves, which parties freely consent in advance to abide
by the arbitral award issued after proceedings where both parties had the opportunity to be
heard. xxx
o The Construction Industry Arbitration Law was enacted to encourage the early and expeditious
settlement of disputes in the construction industry, a public policy the implementation of which
is necessary and important for the realization of national development goals
o Consistent with this restrictive approach, this Court is duty-bound to be extremely watchful and
to ensure that an appeal does not become an ingenious means for undermining the integrity
of arbitration or for conveniently setting aside the conclusions arbitral processes make
o An appeal is not an artifice for the parties to undermine the process they voluntarily elected to
engage in
o To prevent this Court from being a party to such perversion, this Court’s primordial inclination
must be to uphold the factual findings of arbitral tribunals.

General Rule
 Thus, CIAC’s factual findings on construction disputes are final, conclusive, and not reviewable by this
Court on appeal.

Exceptions
 The only exceptions are when:
(1) The award was procured by corruption, fraud or other undue means;
(2) There was evident partiality or corruption of the arbitrators or of any of them;
(3) The arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient
cause shown, or in refusing to hear evidence pertinent and material to the controversy;
(4) One or more of the arbitrators were disqualified to act as such under Section 9 of RA No. 876
and willfully refrained from disclosing such disqualifications or of any other misbehavior by which
the rights of any party have been materially prejudiced; or
(5) The arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final and
definite award upon the subject matter submitted to them was not made.

Application
 Necessarily, before petitioner may raise any question of fact, it must prove that the above circumstances
exist in the case at bar.
 In this case, however, none of the circumstances above were proved to exist.
 Hence, CIAC’s factual finding on this construction dispute is final, conclusive, and not reviewable by this
Court on appeal.
o Also, being a construction dispute, CIAC has jurisdiction over the matter.

Re: CIAC Jurisdiction

ISSUE 2: Whether the doctrine of the law of the case in Gammon v. Metro Rail Transit Development Corporation
applies.
Or stated differently, did the CIAC have jurisdiction over this construction dispute? – Yes.

[[Refer to the parties’ arguments above anent this issue]

RULING 2:
 Yes. This Court rules that the doctrine of the law of the case applies in this case.
 CA affirmed that there was a perfected contract because MRT alleged in Gammon that the contract was
novated or abandoned.
 It found that this was an implied admission that the contract was perfected considering that there was
nothing to novate or abandon if there had been no perfected contract
 The perfection of the contract was further confirmed by this Court’s ruling in Gammon that the contract
was merely modified.
 In Gammon v. Metro Rail Transit Development Corporation, this Court held:
o xxx the main question of whether the CIAC’s jurisdiction was properly invoked.
o The resolution of this question necessarily involves a two-pronged analysis,
 First, of the requisites for invoking the jurisdiction of the CIAC, and
 Second, of the scope of arbitrable issues covered by CIAC’s jurisdiction.
o EO 1008 expressly vests in the CIAC’s original and exclusive jurisdiction over disputes arising from
or connected with construction contracts entered into by parties that have agreed to submit
their dispute to voluntary arbitration . . .
o In this case, the parties submitted themselves to the jurisdiction of the CIAC by virtue of the
arbitration clause in the General Conditions of Contract
o We have carefully gone over the records of this case and are convinced that the redesign of the
podium structure and the reduction in the contract price merely modified the contract.
o The jurisdiction of the CIAC is not over the contract but the disputes which arose therefrom, or
are connected thereto, whether such disputes arose before or after the completion of the
contract, or after the abandonment or breach thereof

 This Court rules that the doctrine of the law of the case applies in this case.

 There is a distinction between the agreement to arbitrate and the contract which may be the subject
matter of the dispute between the parties
 While the agreement to arbitrate may be in the same subject matter contract, it is a separate agreement
in itself.
 Under the Construction Industry Arbitration Law, CIAC ACQUIRES JURISDICTION WHEN THE PARTIES
AGREE TO SUBMIT THE MATTER TO VOLUNTARY ARBITRATION. [Refer to Notes below for the
provision]

 In Ormoc Sugarcane Planters’ Association, Inc. v. Court of Appeals, this Court discussed that “an
agreement to arbitrate is a contract” in itself
 Thus, in Gammon v. Metro Rail Transit Development Corporation, this Court ruled that CIAC does not
have jurisdiction over construction contracts.
 Rather, it has jurisdiction over the DISPUTE arising from or connected to construction contracts, such
that it still acquires jurisdiction even if the contract has been breached, abandoned, terminated, or
rescinded.

 On the basis of this ruling, this Court concluded that CIAC has jurisdiction over the dispute between
MRT and Gammon.
o Their contract need not be valid or in force before CIAC may arbitrate the matter, so long as
there is an agreement to arbitrate.
 Thus, the agreement to arbitrate is separate from the construction contract entered into by parties.
 Nonetheless, the doctrine of the law of the case applies in the case at bar.
  While Gammon did not expressly state that the contract was perfected, it concluded that both the
construction contract and the arbitration contract existed between the parties.
 The doctrine of the law of the case applies when in a particular case, an appeal to a court of last resort
has resulted in a determination of a question of law
 The determined issue will be deemed to be the law of the case such that it will govern a case through all
its subsequent stages
 Thus, after ruling on the legal issue and remanding the case to a lower court for further proceedings, the
determined legal issue can no longer be passed upon and determined differently in another appeal in
the same case.

Re Doctrine of the “Law of the Case” [In Presidential Decree No. 1271 Committee v. De Guzman]
 The doctrine of the “law of the case” provides that questions of law previously determined by a court
will generally govern a case through all its subsequent stages where “the determination has already been
made on a prior appeal to a court of last resort”

 In People v. Olarte:
o “Law of the case” has been defined as the opinion delivered on a former appeal.
o More specifically, it means that whatever is once irrevocably established as the controlling legal
rule of decision between the same parties in the same case continues to be the law of the case,
whether correct on general principles or not, so long as the facts on which such decision was
predicated continue to be the facts of the case before the court.

 The legal issue determined in Gammon is the jurisdiction of CIAC.

 However, this determination was arrived at after this Court found that the parties entered into a
construction contract with an agreement to arbitrate.
 This is indicated when Gammon determined that there is no novation of the contract between MRT and
Gammon as to deprive CIAC of jurisdiction.
 It ruled that there is merely a modification, not an annulment or extinguishment, of the contract.

 While this Court’s determination on the perfection of the contract is not categorical and its finding that
the CIAC’s jurisdiction is not over the contract but rather over the disputes that arise from it, the
existence of a contract, albeit terminated or rescinded, is still contemplated.
 Thus, the doctrine of the law of the case applies.
o The current appeal can no longer bring the existence of the contract into issue.

Re: Perfection of Contract

ISSUE 3: Whether there is a perfected contract between petitioner MRT and respondent Gammon.

RULING 3:
 Yes. This Court rules that there is a perfected contract between MRT and Gammon.
o [Refer to the parties’ arguments above anent the perfection of contract]
 CA affirmed CIAC’s finding that the contract was perfected when the contract documents were returned
to MRT on September 9, 1997.
o It found that the contract was merely suspended and not terminated when MRT was studying
the effects of the foreign exchange rates and interests on the Project
o Moreover, it noted that MRT found it necessary to expressly cancel the First Notice to Proceed,
implying that a contract was perfected
 This Court rules that there is a perfected contract between the parties.
  Article 1305 of the Civil Code states:
o “A contract is a meeting of minds between two persons whereby one binds himself, with respect
to the other, to give something or to render some service.”
 Article 1315, CC:
o “Contracts are perfected by mere consent, and from that moment the parties are bound not
only to the fulfillment of what has been expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with good faith, usage and law.”

Requisites of a Valid Contract

 The requisites of a valid contract are provided for in Article 1318 of the Civil Code:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established

 A contract is perfected when both parties have consented to the object and cause of the contract.
 There is consent when the offer of one party is absolutely accepted by the other party.
 The acceptance of the other party may be express or implied.
 However, the offering party may impose the time, place, and manner of acceptance by the other party,
and the other party must comply
 Acceptance made by letter or telegram does not bind the offerer except from the time it came to his
knowledge.
 The contract, in such a case, is presumed to have been entered into in the place where the offer was
made
 Thus, there are three (3) stages in a contract:
o Negotiation,
o Perfection, and
o Consummation.
 Negotiation refers to the time the parties signify interest in the contract up until the time the parties
agree on its terms and conditions.
 Perfection of the contract occurs when there is a meeting of the minds of the parties such that there is
a concurrence of offer and acceptance, and all the essential elements of the contract – consent, object
and cause – are present
 Consummation of the contract covers the period when the parties perform their obligations in the
contract until it is finished or extinguished.
 To determine when the contract was perfected, the acceptance of the offer must be unqualified,
unconditional, and made known to the offeror
 Before knowing of the acceptance, the offeror may withdraw the offer
 Moreover, if the offeror imposes the manner of acceptance to be done by the offerree, the offerree must
accept it in that manner for the contract to be binding.
 If the offeree accepts the offer in a different manner, it is not effective, but constitutes a counter-offer,
which the offeror may accept or reject.

In BIDDING CONTRACTS
 In bidding contracts, this Court has ruled that the award of the contract to the bidder is an acceptance
of the bidder’s offer.
o Its effect is to perfect a contract between the bidder and the contractor upon notice of the award
to the bidder.
 Thus, the award of a contract to a bidder perfects the contract.
  Failure to sign the physical contract does not affect the contract’s existence or the obligations arising
from it.

Application
 Applying this principle to the case at bar, this Court finds that there is a perfected contract between the
parties.
 MRT has already awarded the contract to Gammon, and Gammon’s acceptance of the award was
communicated to MRT before MRT rescinded the contract.
 The Invitation to Bid issued to Gammon stated that MRT “will select the Bidder that MRT judges to be
the most suitable, most qualified, most responsible and responsive, and with the most attractive Price
and will enter into earnest negotiations to finalize and execute the Contract.
 On May 30, 1997, Gammon tendered its bids.
 In a Letter dated July 14, 1997, Gammon submitted another offer to MRT in response to the latter’s
invitation to submit a final offer considering the fluctuation in foreign exchange rates and an odd and
even vehicle restriction plan
 Parsons thereafter issued the First Notice to Proceed
 In its First Letter, Gammon signed and returned the First Notice to Proceed to signify its consent to its
prestations
 In its Second Letter, Gammon transmitted to Parsons the signed Letter of Comfort to guarantee its
obligations in the Project
 On September 9, 1997, Gammon returned to Parsons the contract documents
 MRT argues that the return of the contract documents occurred after it had already revoked its offer,
i.e., after it sent its September 8, 1997 Letter
o However, MRT had already accepted the offered bid of Gammon and had made known to
Gammon its acceptance when it awarded the contract and issued it the First Notice to Proceed
on August 27, 1997.
 The First Notice to Proceed clearly laid out the object and the cause of the contract.
 In exchange for P1,401,672,095.00, Gammon was to furnish “labor, supervision, materials, plant,
equipment and other facilities and appurtenances necessary to perform all the works in accordance with
its bid”
o This acceptance is also manifested in the First Notice to Proceed when it authorized Gammon to
proceed with the work seven (7) days from its receipt or from the time the site is dewatered and
cleaned up.
 Thus, Gammon’s receipt of the First Notice to Proceed constitutes the acceptance that is necessary to
perfect the contract.
 The First Notice to Proceed stated that the award “is predicated on the commitments contained in the .
. . comfort letter . . . issued by Gammon Construction Limited,” Gammon’s associate company overseas
 It also required that Gammon signify its concurrence by signing and returning the First Notice to Proceed
and the accompanying contract documents.

 Assuming that this constitutes a counter-offer from MRT, this Court rules that Gammon sufficiently
complied with these requirements such that the perfection of the contract cannot be affected.
 Gammon returned the signed First Notice to Proceed on September 2, 1997.
 It transmitted to Parsons the signed Letter of Comfort to guarantee its obligations in the Project on
September 3, 1997
 The signed contract documents were returned on September 9, 1997
 Gammon manifested its unqualified acceptance of the First Notice to Proceed on September 2, 1997 in
its First Letter.
Further, re the First Letter
 This shows that Gammon fully consented to the contents and accepted the prestations of the First
Notice to Proceed
 Gammon’s acceptance is also manifested in its undertakings to mobilize resources, to prepare the
Performance and Advance Payment Bonds, and to procure materials necessary for the Project.
 All that remained was the formality of returning the contract documents and the Letter of Comfort,
which eventually was complied with by Gammon.
 Thus, there is already mutual consent on the object of the contract and its consideration, and an absolute
acceptance of the offer.
 In any case, this Court has ruled that the meeting of the minds need not always be put in writing, and
the fact that the documents have not yet been signed or notarized does not mean that the contract has
not been perfected
 A binding contract may exist even if the signatures have not yet been affixed because acceptance may
be expressed or implied
 Thus, the parties have become bound to consummate the contract such that the failure by one party to
comply with its obligations under the contract entitles the other party to damages
 Clearly, Gammon was expected to comply with the award when it signified its concurrence.
 Thus, it is not just or equitable for the perfection of the contract to be one (1)-sided such that the contract
only binds Gammon but not MRT just because the contract documents were not yet returned before
MRT suspended the contract

Re the argument that the OFFER was REVOKED

 Moreover, this Court rules that MRT did not revoke its offer when it temporarily suspended the First
Notice to Proceed.
 After MRT’s September 8, 1997 Letter, Parsons directed Gammon to hold any further mobilization
activities in a facsimile transmission dated September 9, 1997
 On September 11, 1997, Gammon sent Parsons a facsimile to confirm if all requirements in the contract
documents were temporarily suspended pending the clarification of the scope and programming of the
Project.
o In a facsimile transmission dated September 12, 1997, Parsons confirmed “the temporary
suspension of all the requirements under the contract except the redesign of the project floor
slabs and the site dewatering and cleanup”
 The wording of these communications indicates that the contract is still binding though on hold.
 Gammon was informed that the contract was temporarily suspended.
o When a contract is suspended temporarily, it provisionally ceases to be operative until the
occurrence of a condition or situation that warrants the lifting of the suspension of the contract
 It is different from a cancellation of a contract, which terminates the contract such that it does not
become operative again
 The usage of the words “temporary suspension” is clear.
 It is a settled rule that when the words in a contract are clear and leave no doubt on the parties’
intentions, the literal meaning shall control
 Thus, the above communications cannot be interpreted to mean that the contract has been cancelled or
rescinded.
 This is bolstered by MRT’s express cancellation of the contract on June 10, 1998 in its Fourth Notice to
Proceed
 It can be implied that prior to the Fourth Notice to Proceed, the First and Third Notices to Proceed were
not cancelled and were still valid and subsisting.
 Furthermore, MRT’s Second Notice to Proceed issued on February 18, 1998 for engineering services
based on the redesigned plan was signed by Gammon on March 11, 1998 with a qualification
  MRT did not contest Gammon’s notice of receipt of the First Notice to Proceed, expressing that it was
still valid and was not cancelled.
 Additionally, when the parties were discussing the change of plans, MRT did not mention that no contract
was executed between them.
 Instead, it sought to modify its terms and conditions.
 Thus, Gammon was made to believe that the First Notice to Proceed was in force and effect, albeit
temporarily suspended.
 Given these circumstances, it cannot be said that no contract was perfected between the parties.

Re: Judicial Admissions

ISSUE 4: Whether or not petitioner MRT is bound by its allegation in its Answer with Compulsory Counterclaim
– that it was “willing to pay Gammon the total amount of P5,493,639.27 – representing the sum of P4,821,261.91
and P672,377.36, which comprise Gammon’s claim for cost of the engineering and design services and site
dewatering and cleanup works, respectively.”

[Refer to the parties’ arguments above anent the perfection of contract]

RULING 4:
 Yes. MRT is bound by its allegation in its Answer with Compulsory Counterclaim.
 CIAC ruled that as MRT had already admitted its liability for the claims, it was bound by this admission
 This finding was also affirmed by CA, which ruled that there was no showing that the admission was
made by palpable mistake
 It also noted that MRT did not amend its Answer.
 Rule 129, Section 4 of the Revised Rules of Court provides:
o Section 4. Judicial admissions. – An admission, verbal or written, made by a party in the course
of the proceedings in the same case, does not require proof. The admission may be contradicted
only by showing that it was made through palpable mistake or that no such admission was made.
 Judicial admissions may be made by a party in his or her pleadings, during the trial, through verbal or
written manifestations, or in other stages of the judicial proceeding
o They are binding such that no matter how much the party rationalizes it, the party making the
admission cannot contradict himself or herself unless it is shown that the admission was made
through a palpable mistake

Application
 In this case, MRT alleges that it is willing to pay Gammon the total amount of P5,493,639.27, which
comprises the latter’s claim for cost of engineering and design services, and de-watering and cleanup
works
 MRT’s allegation was not qualified.
 It neither stated that Gammon must first present proof of its claims for the cost of engineering and design
services, and of dewatering and cleanup works nor amended the Answer with Compulsory Counterclaim
to either correct this allegation or to qualify that Gammon must first present official receipts.
 Thus, CIAC correctly held that MRT is bound by this admission and is estopped from denying its
representation

Re: Damages
ISSUE 5: Whether respondent Gammon’s claims for actual damages, reimbursement of amounts, and lost profits
were sufficiently proven.

RULING 5:
  Yes. Respondent Gammon’s claims for actual damages, reimbursement of amounts, and lost profits
were sufficiently proven.
 Actual damages are provided for under Article 2199 of the Civil Code:
o Article 2199. Except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved. Such
compensation is referred to as actual or compensatory damages.
 Actual damages constitute compensation for sustained measurable losses
 It must be proven “with a reasonable degree of certainty, premised upon competent proof or the best
evidence obtainable.”
o It is never presumed or based on personal knowledge of the court.

 Although official receipts are the best evidence of payment, this Court has acknowledged that actual
damages may be proved by other forms of documentary evidence, including invoices

 For lost profits, Article 2200 of the CC provides:

o Article 2200. Indemnification for damages shall comprehend not only the value of the loss
suffered, but also that of the profits which the obligee failed to obtain
 This Court has ruled that the award of unrealized profits cannot be based on the sole testimony of the
party claiming it.

As to the reimbursement award for engineering services, design work, site dewatering, and cleanup
 CA found that there are sufficient bases for the award of Gammon’s reimbursement claims.
 It ruled that MRT failed to prove that the evidence was insufficient and that Gammon’s computations
were erroneous.
 It found that Gammon provided the best available documentary evidence, through invoices, debit notes,
and official receipts.

As to lost profits
 Gammon presented evidence of its claim for lost profits by presenting as witness Francisco Delos Santos
(Delos Santos), the Planning and Estimating Engineer of Gammon since 1996
o He was responsible for the preparation of proposals, “negotiations, mobilization, and meetings
with and among the parties involved in the Project”
o Testified that “the average competitive percentage of profit in the construction industry, in
Gammon’s experience, was 5% and that the Net Cost Estimate was properly set at
P65,194,050.93

 CIAC granted the award of lost profits based on Delos Santos’ testimony
 CA affirmed this finding and found that the award for lost profits was not grounded on pure speculation
as “documentary evidence is not absolutely necessary . . . to prove a claim for lost profit.”
 It found that Delos Santos was competent to testify on the matter

 In any case, it ruled that CIAC shall act without regard to technicalities or legal forms, in accordance with
justice and equity and the merits of the case
 It also noted CIAC’s finding that this Court upheld as reasonable 18% as expected profit estimate.

 This Court affirms the findings of CIAC and the CA.

 MRT is raising questions of fact.

  Questions of fact are not proper in a Petition for Review under Rule 45.
 This Court can no longer entertain factual issues, unless there are compelling and cogent reasons, as
when the findings were “drawn from a vacuum or arbitrarily reached, or are grounded entirely on
speculation or conjectures, are conflicting or are premised on the supposed evidence and contradicted
by the evidence on record or when the inference made is manifestly mistaken or absurd.”

Re CIAC’s findings of fact in this case

 The findings of fact in the case at bar was arrived at by CIAC, a quasi-judicial body, the jurisdiction of
which is confined to construction disputes.
 Findings of fact of administrative agencies and quasi-judicial bodies, which have acquired expertise
because their jurisdiction is confined to specific matters, are generally accorded not only respect, but
finality when affirmed by the Court of Appeals

 Moreover, ARBITRATION PROCEEDINGS are not bound by the technical rules of evidence in judicial
proceedings.
 Arbitrators are to ascertain the facts in each case by all reasonable means without regard to technicalities
of law or procedure.
 Thus, under Section 13.5 of the CIAC Revised Rules of Procedure Governing Construction Arbitration:
o Section 13.5. Evidence. – The parties may offer such evidence as they desire and shall produce
such additional documents and witnesses as the Arbitral Tribunal may deem necessary to clear
understanding of facts issues for a judicious determination of the dispute(s). The Arbitral
Tribunal shall act according to justice and equity and merits of the case, without regard to
technicalities or legal forms and need not be bound by any technical rule of evidence. Evidence
shall be taken in the presence of the Arbitral Tribunal and all of the parties, except where any of
the parties is absent, or has waived his right to be present.
o 13.5.1 Order to produce documentary evidence. Upon motion of either or both of the parties,
or on its own initiative, the Arbitral Tribunal may direct any person, board, body, tribunal, or
government office, agency or instrumentality, or corporation to produce real or documentary
evidences necessary for the proper adjudication of the issues.
o 13.5.2 Order to give testimony. The Arbitral Tribunal may, likewise, direct any person to give
testimony at any proceedings for arbitration.

 Thus, the findings of fact of CIAC are binding, respected, and final.
 They are not reviewable by this Court, especially when affirmed by the Court of Appeals.
 A review of the CIAC’s findings of fact would have had the effect of setting at naught the basic objective
of a voluntary arbitration and would reduce arbitration to a largely inutile institution.
 The only exceptions subject to this rule were laid out in Uniwide Sales Realty and Resources Corp. v.
Titan-Ikeda Construction and Development Corporation
 However, petitioner failed to prove that any of these exceptions are present in the case at bar.
 Thus, this Court will no longer disturb CIAC’s factual findings, which were affirmed by the Court of
Appeals.

Disposition: Petition denied. CA’s decision and resolution are hereby affirmed.

Notes:
Re CIAC’s Jurisdiction

Section 4. Jurisdiction. – The CIAC shall have original and exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties involved in construction in the Philippines, whether the dispute
arises before or after the completion of the contract, or after the abandonment or breach thereof. These disputes
may involve government or private contracts. For the Board to acquire jurisdiction, the parties to a dispute
must agree to submit the same to voluntary arbitration.

The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and
workmanship; violation of the terms of agreement; interpretation and/or application of contractual time and
delays; maintenance and defects; payment, default of employer or contractor and changes in contract cost.

Excluded from the coverage of this law are disputes arising from employer-employee relationships which shall
continue to be covered by the Labor Code of the Philippines. (Emphasis supplied)
7. MABUHAY HOLDINGS CORPORATION VS. SEMBCORP LOGISTICS LIMITED
PONENTE: TIJAM, J.:
Facts:

 Petitioner Mabuhay Holdings Corporation (Mabuhay) and Infrastructure Development & Holdings, Inc.
(IDHI) are corporations duly organized and existing under the Philippine Laws.
 Respondent Sembcorp Logistics Limited (Sembcorp), formerly known as Sembawang Maritime Limited,
is a company incorporated in the Republic of Singapore.
 On January 23, 1996, Mabuhay and IDHI incorporated Water Jet Shipping Corporation (WJSC) in the
Philippines to engage in the venture of carrying passengers on a common carriage by inter-island fast
ferry.
 On February 5, 1996, they also incorporated Water Jet Netherlands Antilles, N.Y. (WJNA) in Curasao,
Netherlands.[6]
 Their respective shareholding percentage are as follows:
WJSC WJNA

Mabuhay 70% 70%

IDHI 30% 30%

 On September 16, 1996, Mabuhay, IDHI, and Sembcorp entered into a Shareholders'
Agreement[8] (Agreement) setting out the terms and conditions governing their relationship in
connection with a planned business expansion of WJSC and WJNA.
 Sembcorp decided to invest in the said corporations.
 As a result of Sembcorp's acquisition of shares, Mabuhay and IDHI's shareholding percentage in the said
corporations were reduced, as follows:
WJSC WJNA

Mabuhay 45.5% 45.5%

IDHI 19.5% 19.5%

Sembcorp 35.0% 35.0%

 Pursuant to Article 13 of the Agreement, Mabuhay and IDHI voluntarily agreed to jointly guarantee that
Sembcorp would receive a minimum accounting return of US$929,875.50 (Guaranteed Return) at the
end of the 24th month following the full disbursement of the Sembcorp's equity investment in WJNA and
WJSC.
 They further agreed that the Guaranteed Return shall be paid three (3) months from the completion of
the special audits of WJSC and WJNA as per Article 13.3 of the Agreement.[10]

 The Agreement included an arbitration clause, viz:

Article XIX. APPLICABLE LAW; ARBITRATION

19.1 This Agreement and the validity and performance thereof shall be governed by the laws of the
Republic of the Philippines.

19.2 Any dispute, controversy or claim arising out of or relating to this Agreement, or a breach thereof,
other than intra-corporate controversies, shall be finally settled by arbitration in accordance with the
rules of conciliation and arbitration of the International Chamber of Commerce by one arbitrator with
 expertise in the matter at issue appointed in accordance with said rules. The arbitration proceeding
including the rendering of the award shall take place in Singapore and shall be conducted in the English
Language. This arbitration shall survive termination of this Agreement. Judgment upon the award
rendered may be entered in any court having jurisdiction or application may be made to such court for
a judicial acceptance of the award and an order of enforcement, as the case may be.[11]

 On December 6, 1996, Sembcorp effected full payment of its equity investment. Special audits of WJNA
and WJSC were then carried out and completed on January 8, 1999. Said audits revealed that WJSC and
WJNA both incurred losses.[12]
 On November 26, 1999, Sembcorp requested for the payment of its Guaranteed Return from Mabuhay
and IDID.
o Mabuhay admitted its liability but asserted that since the obligation is joint, it is only liable for
fifty percent (50%) of the claim or US$464,937.75.[13]
 On February 24, 2000, Sembcorp sent a Final Demand to Mabuhay to pay the Guaranteed Return.
o Mabuhay requested for three (3) months to raise the necessary funds but still failed to pay any
amount after the lapse of the said period.[14]
 On December 4, 2000, Sembcorp filed a Request for Arbitration before the International Court of
Arbitration of the International Chamber of Commerce (ICC) in accordance with the Agreement and
sought the following reliefs:
(1) payment of the sum of US$929,875.50;
(2) alternatively, damages;
(3) interest on the above sum at such rate as the Arbitral Tribunal deems fit and just;
(4) cost of the arbitration; and
(5) Such further and/or other relief as the Arbitral Tribunal deems fit and just.

 On April 20, 2004, a Final Award[16] was rendered by Dr. Anan Chantara-Opakom (Dr. Chantara-Opakorn),
the Sole Arbitrator appointed by the ICC.
 The dispositive portion of the award reads:
The Sole Arbitrator hereby decides that the Sole Arbitrator has jurisdiction over the parties' dispute
and directs [Mabuhay] to make the following payments to [Sembcorp]:

1. Half of the Guaranteed Return or a n amount of US$464,937.75 (Four Hundred Sixty Four
Thousand Nine Hundred Thirty Seven and Point Seventy Five US Dollars);

2. Interest at the rate of 12% per annum on the said amount of US$464,937.75 calculated from the
date of this Final Award until the said amount of US$464,937.75 is actually and completely paid by
[Mabuhay] to [Sembcorp]; and

3. A reimbursement of half of the costs of arbitration fixed by the ICC Court at US$57,000 or the
aggregate half of which amount to US$28,500 together with an interest at the rate of 12% per
annum calculated from the date of this Final Award until the said amount is actually and
completely paid by [Mabuhay] to [Sembcorp].[17]

 Consequently, Sembcorp filed a Petition for Recognition and Enforcement of a Foreign Arbitral
Award[18] before the RTC of Makati City.

 Mabuhay filed an Opposition citing the following grounds for non-enforcement under Article V of the
1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York
Convention):
 (1) the award deals with a conflict not falling within the terms of the submission to arbitration;
(2) the composition of the arbitral authority was not in accordance with the agreement of the
parties; and
(3) recognition or enforcement of the award would be contrary to the public policy of the
Philippines.
 Mabuhay argued that the dispute is an intra-corporate controversy, hence, excluded from the scope of
the arbitration clause in the Agreement.
 It alleged that on March 13, 1997, Sembcorp became the controlling stockholder of IDHI by acquiring
substantial shares of stocks through its nominee, Mr. Pablo N. Sare (Sare).
 Mabuhay thus claimed that it has already been released from the joint obligation with IDHI as Sembcorp
assumed the risk of loss when it acquired absolute ownership over the aforesaid shares.
 Moreover, Mabuhay argued that the appointment of Dr. Chantara-Opakorn was not in accordance with
the arbitral clause as he did not have the expertise in the matter at issue, which involved application of
Philippine law.
 Finally, Mabuhay argued that the imposition of twelve percent (12%) interest from the date of the Final
Award was contrary to the Philippine law and jurisprudence.[21]
Ruling of the RTC

In a Decision[22] dated May 23, 2008, the RTC dismissed the petition and ruled that the Final Award could not be
enforced.

The RTC ruled that the "simple contractual payment obligation" of Mabuhay and IDHI to Sembcorp had been
rescinded and modified by the merger or confusion of the person of IDHI into the person of Sembcorp. As a
result, said obligation was converted into an intra-corporate matter.[23]

The RTC also ruled on the issue of the lack of expertise of the Sole Arbitrator. Thus, the dispositive portion of
its Decision reads:
WHEREFORE, premises considered, this court finds in favor of the defendant Mabuhay Holdings
Corporation, hence it hereby DISMISSED the petition for the recognition and enforcement of the subject
Arbitral Award for the simple reason that it was issued in violation of the agreement. Moreover, this
court cannot recognize the Arbitral Award because it was not the work of an expert as required under
the agreement. Finally, the payment obligation in interest of 12% per annum on the US Dollar Amounts
($464,937.75 and $28,500) as ordered by the Sole Arbitrator is contrary to law and existing
jurisprudence, hence void. Thus, it cannot be enforced by this Court.

 Aggrieved, Sembcorp appealed to the CA via a Notice of Appeal under Rule 41 of the Rules of Court.

Ruling of the CA
On November 19, 2013, the CA promulgated its Decision[26] reversing and setting aside the RTC Decision.
 The CA noted that the Final Award already settled the factual issue on whether Sembcorp acquired the
adverted shares of stock in IDHI.
 Thus, RTC's contrary findings constituted an attack on the merits of the Final Award.
 In sum, the CA held that the court shall not disturb the arbitral tribunal's determination of facts and/or
interpretation of the law. It recognized the Final Award and remanded the case to the RTC for proper
execution.[27]

 Undaunted, Mabuhay moved for the reconsideration of the CA Decision but the same was denied in a
Resolution[28]dated June 3, 2014.

 Hence, this petition.

Issue: Whether the RTC correctly refused to enforce the Final Award. Stated differently, was Mabuhay able to
establish a ground for refusing the enforcement of the Final Award under our applicable laws and jurisprudence
on arbitration?

Ruling: NO
I. Governing Laws
 An assiduous analysis of the present case requires a prefatory determination of the rules and other legal
authorities that would govern the subject arbitration proceedings and award.
 The arbitration proceedings between the parties herein were conducted in Singapore and the resulting
Final Award was also rendered therein.
 As such, the Final Award is a "foreign arbitral award" or an award made in a country other than the
Philippines.
 The Philippines is among the first signatories of the 1958 Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York Convention) and acceded to the same as early as
1967.[30]
 Singapore, on the other hand, became a Contracting State in 1986.[31]
 The New York Convention aims to provide common legislative standards for the recognition of
arbitration agreements and court recognition and enforcement of foreign and non-domestic arbitral
awards.
 Thus, the New York Convention primarily governs the recognition and enforcement of foreign arbitral
awards by our courts.
 In addition, as a member of the United Nations Commission in International Trade Law (UNCITRAL), the
Philippines also adopted the UNCITRAL Model Law[33] (Model Law) as the governing law on international
commercial arbitrations.
 Hence, when the Congress enacted Republic Act No. 9285 or the Alternative Dispute Resolution Act of
2004[34] (ADR Act), it incorporated the Model Law in its entirety.

Sections 19 and 42 of the ADR Act expressly provided for the applicability of the New York Convention
and the Model Law in our jurisdiction, viz:

SEC. 19. Adoption of the Model Law on International Commercial Arbitration. - International commercial
arbitration shall be governed by the Model Law on International Commercial Arbitration (the "Model Law")
adopted by the United Nations Commission on International Trade Law on June 21, 1985 (United Nations
Document A/40/17) and recommended approved on December 11, 1985, copy of which is hereto attached
as Appendix "N'.

xxxx

SEC. 42. Application of the New York Convention. - The New York Convention shall govern the recognition
and enforcement of arbitral awards covered by the said Convention.
The recognition and enforcement of such arbitral awards shall be filled (sic) with regional trial court in
accordance with the rules of procedure to be promulgated by the Supreme Court. Said procedural rules
shall provide that the party relying on the award or applying for its enforcement shall file with the court the
original or authenticated copy of the award and the arbitration agreement. If the award or agreement is
not made in any of the official languages, the party shall supply a duly certified translation thereof into any
of such languages.

The applicant shall establish that the country in which foreign arbitration award was made is a party to the
New York Convention.
x x x x (Emphasis ours)

 Five years after the enactment of the ADR Act, the Department of Justice issued the ADR Act's
Implementing Rules and Regulations (IRR)[35], and the Supreme Court issued the Special Rules of Court
on Alternative Dispute Resolution[36] (Special ADR Rules).
 These two rules, in addition to the ADR Act incorporating the New York Convention and the Model Law,
are our arbitration laws.
 In addition to our arbitration laws, our courts, in recognizing or enforcing a foreign arbitral award, shall
also take into consideration the laws applied by the arbitral tribunal.
 These may comprise the substantive law of the contract and the procedural rules or the rules governing
the conduct of arbitration proceedings.
 As agreed upon by the parties herein under the arbitral clause in their Agreement, the substantive law
of the contract is the Philippine law and the procedural rules are the ICC Rules.
 During the filing of the request for Arbitration, the ICC Rules in effect was the ICC Rules of Arbitration
1998[37]
 Considering that the essence of arbitration is party autonomy, the Court shall refer to the said Rules for
purposes of examining the procedural infirmities raised by the parties to the arbitration.

II. Jurisdiction

 Mabuhay argues that the CA seriously erred in not dismissing outright the appeal of Sembcorp as it had
no jurisdiction to act on the appeal. Mabuhay's argument hinges on Rule 19.12 of the Special ADR Rules,
as follows:

Rule 19.12. Appeal to the Court of Appeals. - An appeal to the Court of Appeals through a petition for
review under this Special Rule shall only be allowed from the following final orders of the Regional Trial
Court:

xxxx

k. Refusing recognition and/or enforcement of a foreign arbitral award; (Emphasis supplied)

xxxx

 Mabuhay thus contends that filing a petition for review and not a notice of appeal is the proper remedy
to contest the RTC's refusal to enforce the Final Award.
 The Court notes, however, that the Special ADR Rules took effect in 2009.
 Sembcorp's notice of appeal was filed only in 2008.
 The ADR Act, which was already in effect at that time, did not specify the proper remedy of appeal from
the RTC to the CA.
 It merely provides that "a decision of the regional trial court confirming, vacating, setting aside,
modifying or correcting an arbitral award may be appealed to the CA in accordance with the rules of
procedure to be promulgated by the Supreme Court."[38]
 The Special ADR Rules shall retroactively apply to all pending cases provided that no vested rights are
impaired or prejudiced.[39]
 In this case, Sembcorp filed a notice of appeal in accordance with Section 2 of Rule 41[40] as it is the only
applicable rule existing at that time.
  Sembcorp had a vested right to due process in relying on the said rule.
 Consequently, the CA had jurisdiction to act on Sembcorp's appeal.

SC’s Jurisdiction

 We now discuss the Court's jurisdiction to entertain the instant petition. The Court's review of a CA
Decision is discretionary and limited to specific grounds provided under the Special ADR Rules. Thus:

Rule 19.36. Review discretionary. - A review by the Supreme Court is not a matter of right, but of sound
judicial discretion, which will be granted only for serious and compelling reasons resulting in grave
prejudice to the aggrieved party. The following, while neither controlling nor fully measuring the court's
discretion, indicate the serious and compelling, and necessarily, restrictive nature of the grounds that
will warrant the exercise of the Supreme Court's discretionary powers, when the Court of Appeals:

a. Failed to apply the applicable standard or test for judicial review prescribed in these Special ADR
Rules in arriving at its decision resulting in substantial prejudice to the aggrieved party;

b. Erred in upholding a final order or decision despite the lack of jurisdiction of the court that rendered
such final order or decision;

c. Failed to apply any provision, principle, policy or rule contained in these Special ADR Rules resulting
in substantial prejudice to the aggrieved party; and

d. Committed an error so egregious and harmful to a party as to amount to an undeniable excess of

jurisdiction.

 The mere fact that the petitioner disagrees with the Court of Appeals' determination of questions of fact,
of law or both questions of fact and law, shall not warrant the exercise of the Supreme Court's
discretionary power.
 The error imputed to the Court of Appeals must be grounded upon any of the above prescribed grounds
for review or be closely analogous thereto.
 A mere general allegation that the Court of Appeals has committed serious and substantial error or that
it has acted with grave abuse of discretion resulting in substantial prejudice to the petitioner without
indicating with specificity the nature of such error or abuse of discretion and the serious prejudice
suffered by the petitioner on account thereof, shall constitute sufficient ground for the Supreme Court
to dismiss outright the petition. (Emphasis ours)

 In relation to the applicable standard or test for judicial review by the CA in arriving at its decision, the
Special ADR Rules further provide:

Rule 19.20. Due course. - If upon the filing of a comment or such other pleading or documents as may
be required or allowed by the Court of Appeals or upon the expiration of the period for the filing
thereof, and on the basis of the petition or the records, the Court of Appeals finds prima facie that the
Regional Trial Court has committed an error that would warrant reversal or modification of the
judgment, final order, or resolution sought to be reviewed, it may give due course to the petition;
otherwise, it shall dismiss the same.

xxxx
 Rule 19.24. Subject of appeal restricted in certain instance. - If the decision of the Regional Trial Court
refusing to recognize and/or enforce, vacating and/or setting aside an arbitral award is premised on a
finding of fact, the Court of Appeals may inquire only into such fact to determine the existence or
non-existence of the specific ground under the arbitration laws of the Philippines relied upon by the
Regional Trial Court to refuse to recognize and/or enforce, vacate and/or set aside an award. Any such
inquiry into a question of fact shall not be resorted to for the purpose of substituting the court's
judgment for that of the arbitral tribunal as regards the latter's ruling on the merits of the controversy.
(Emphasis ours)

 Here, Mabuhay did not specifically raise any of the grounds under Rule 19.36 above in its petition before
this Court.
 Nonetheless, considering the dearth of jurisprudence on enforcement of foreign arbitral awards and the
fact that the CA reversed the RTC decision, the Court exercises its discretion to review the CA decision
solely for purposes of determining whether the CA applied the aforecited standard of judicial review.

III. Grounds for Refusing Enforcement or Recognition (Our Topic)

 We now delve into the core of the issue - whether there is a ground for the RTC to refuse recognition
and enforcement of the Final Award in favor of Sembcorp.
 Our jurisdiction adopts a policy in favor of arbitration.[41]
 The ADR Act and the Special ADR Rules both declare as a policy that the State shall encourage and actively
promote the use of alternative dispute resolution, such as arbitration, as an important means to achieve
speedy and impartial justice and declog court dockets.[42]
 This pro-arbitration policy is further evidenced by the rule on presumption in favor of enforcement of a
foreign arbitral award under the Special ADR Rules, viz:

Rule 13.11. Court action. - It is presumed that a foreign arbitral award was made and released in due
course of arbitration and is subject to enforcement by the court.

The court shall recognize and enforce a foreign arbitral award unless a ground to refuse recognition or
enforcement of the foreign arbitral award under this rule is fully established.

The decision of the court recognizing and enforcing a foreign arbitral award is immediately executory.

In resolving the petition for recognition and enforcement of a foreign arbitral award in accordance with
these Special ADR Rules, the court shall either [a] recognize and/or enforce or [b] refuse to recognize
and enforce the arbitral award. The court shall not disturb the arbitral tribunal's determination of
facts and/or interpretation of law.(Emphasis ours)

 Under Article V of the New York Convention, the grounds for refusing enforcement and recognition of a
foreign arbitral award are:

1. Recognition and enforcement of the award may be refused, at the request of the party against whom
it is invoked, only if that party furnishes to the competent authority where the recognition and
enforcement is sought, proof that:

(a) The parties to the agreement referred to in article II were, under the law applicable to them,
under some incapacity, or the said agreement is not valid under the law to which the parties
have subjected it or, failing any indication thereon, under the law of the country where the
award was made; or
 (b) The party against whom the award is invoked was not given proper notice of the
appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to
present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms of
the submission to arbitration, or it contains decisions on matters beyond the scope of the
submission to arbitration, provided that, if the decisions on matters submitted to arbitration
can be separated from those not so submitted, that part of the award which contains
decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance
with the agreement of the parties, or, failing such agreement, was not in accordance with
the law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended
by a competent authority of the country in which, or under the law of which, that award was
made.

2. Recognition and enforcement of an arbitral award may also be refused if the competent authority
in the country where recognition and enforcement is sought finds that:

(a) The subject matter of the difference is not capable of settlement by arbitration under the
law of that country; or

(b) The recognition or enforcement of the award would be contrary to the public policy of
that country

 The aforecited grounds are essentially the same grounds enumerated under Section 36[43] of the Model
Law.
 The list is exclusive.
 Thus, Section 45 of the ADR Act provides:

SEC. 45. Rejection of a Foreign Arbitral Award. - A party to a foreign arbitration proceeding may oppose
an application for recognition and enforcement of the arbitral award in accordance with the procedural
rules to be promulgated by the Supreme Court only on those grounds enumerated under Article V of
the New York Convention. Any other ground raised shall be disregarded by the regional trial
court. (Emphasis ours)

 In Our jurisdiction, We have incorporated the grounds enumerated under the New York Convention in
our arbitration laws. Article 4.36, Rule 6[44] of the IRR and Rule 13.4[45] of the Special ADR Rules reiterated
the exact same exclusive list of grounds.

APPLICATION:
 After a careful review of the case, We find that Mabuhay failed to establish any of the grounds for
refusing enforcement and recognition of a foreign arbitral award.
 We discuss the grounds raised by Mabuhay in seriatim:

A. The arbitral authority, composed of Dr. Chatara-Opakorn as the sole arbitrator, was constituted in
accordance with the arbitration agreement.
o The first ground raised by Mabuhay is Article V(l)(d) of the New York Convention, i.e., that the
composition of the arbitral authority was not in accordance with the agreement of the parties.
Mabuhay and Sembcorp stipulated in their Agreement that the sole arbitrator must have
"expertise in the matter at issue". Since they also agreed that the validity and the performance
 of the Agreement shall be governed by the Philippine law, Mabuhay argues that the phrase
"expertise in the matter at issue" necessarily means expertise in the Philippine law. Dr. Chatara-
Opakom, a Thai national, does not possess any educational degree or training in Philippine law.
o The Agreement provides, however, that the arbitrator with expertise in the matter at issue
shall be appointed in accordance with the ICC Rules. The ICC, thus, is the appointing authority
agreed upon by the parties. The "appointing authority" is the person or institution named in
the arbitration agreement as the appointing authority; or the regular arbitration institution
under whose rule the arbitration is agreed to be conducted.[46] Where the parties have agreed
to submit their dispute to institutional arbitration rules, and unless they have agreed to a
different procedure, they shall be deemed to have agreed to procedure under such arbitration
rules for the selection and appointment of arbitrators.[47]

The pertinent rules in the ICC Arbitration Rules of 1998 provide:

Article 9 - Appointment and Confirmation of the Arbitrators

xxxx

3. Where the Court is to appoint a sole arbitrator or the chairman of an Arbitral Tribunal, it
shall make the appointment upon a proposal of a National Committee of the ICC that it
considers to be appropriate. If the Court does not accept the proposal made, or if the National
Committee fails to make the proposal requested within the time limit fixed by the Court, the
Court may repeat its request or may request a proposal from another National Committee that
it considers to be appropriate.

xxxx

5. The sole arbitrator or the chairman of the Arbitral Tribunal shall be of a nationality other
than those of the parties. However, in suitable circumstances and provided that neither of the
parties objects within the time limit fixed by the Court, the sole arbitrator or the chairman of
the Arbitral Tribunal may be chosen from a country of which any of the parties is a national.
(Emphasis ours)

 In accordance with the aforecited rules, Dr. Chantara-Opakom was appointed upon the proposal of the
Thai National Committee.
 It bears stressing that the pro-arbitration policy of the State includes its policy to respect party autonomy.
o Thus, Rule 2.3 of the Special ADR Rules provides that "the parties are free to agree on the
procedure to be followed in the conduct of arbitral proceedings."
o The procedure to be followed on the appointment of arbitrator are among the procedural rules
that may be agreed upon by the parties.
 Moreover, under Rule 7.2 of the Special ADR Rules, a challenge to the appointment of an arbitrator may
be raised in court only when the appointing authority fails or refuses to act on the challenge within such
period as may be allowed under the applicable rule or in the absence thereof, within thirty (30) days
from receipt of the request, that the aggrieved party may renew the challenge in court.
 This is clearly not the case for Mabuhay as it was able to challenge the appointment of Dr. Chantara-
Opakom in accordance with Article 11 of the ICC Rules, but the ICC Court rejected the same.[48]
o As such, the Court shall not entertain any challenge to the appointment of arbitrator disguised
as a ground for refusing enforcement of an award.
 At any rate, Mabuhay's contention that the sole arbitrator must have the expertise on Philippine law fails
to persuade.
 If the intent of the parties is to exclude foreign arbitrators due to the substantive law of the contract,
they could have specified the same considering that the ICC Rules provide for appointment of a sole
arbitrator whose nationality is other than those of the parties.

B. The dispute is not an intra corporate controversy, hence, included in the scope of disputes submitted
to arbitration.

 Under Article V(l)(c) of the New York Convention, the court may refuse enforcement of a foreign arbitral
award when the award deals with a difference not contemplated by or not falling within the terms of
the submission to arbitration.

 Mabuhay argues that the dispute is an intracorporate controversy which is expressly excluded from the
scope of disputes submitted to arbitration under the Agreement. In essence, Mabuhay attacks the
jurisdiction of the arbitral tribunal to hear the dispute as it did not fall within the terms of submission to
arbitration.

 The CA correctly applied the Kompetenz-Kompetenz principle expressly recognized under Rule 2.2 of the
Special ADR Rules, viz:

The Special ADR Rules recognize the principle of competence competence, which means that the arbitral
tribunal may initially rule on its own jurisdiction, including any objections with respect to the existence
or validity of the arbitration agreement or any condition precedent to the filing of a request for
arbitration.

The Special ADR Rules expounded on the implementation of the said principle:
Rule 2.4. Policy implementing competence-competence principle. The arbitral tribunal shall be accorded
the first opportunity or competence to rule on the issue of whether or not it has the competence or
jurisdiction to decide a dispute submitted to it for decision, including any objection with respect to the
existence or validity of the arbitration agreement. When a court is asked to rule upon issue/s affecting
the competence or jurisdiction of an arbitral tribunal in a dispute brought before it, either before or after
the arbitral tribunal is constituted, the court must exercise judicial restraint and defer to the
competence or jurisdiction of the arbitral tribunal by allowing the arbitral tribunal the first opportunity
to rule upon such issues. (Emphasis ours)

 To recall, the Agreement provides that "(a)ny dispute, controversy or claim arising out of or relating to
this Agreement, or breach thereof, other than intra-corporate controversies, shall be finally settled by
arbitration..."
 Among the issues settled in the Final Award is whether the dispute is an intra-corporate controversy.
 Dr. Chantara-Opakom ruled in the negative.
 The pertinent portion of the Final Award is reproduced as follows:
x x x Indeed, during the cross-examination of Mr. Chay, he admitted that there was no transfer of
shares from IDHI to the Claimant [p. 130 of Transcript of Proceedings]:

xxxx

During the re-examination of Mr. Chay by the Respondent's counsel, he again admitted that the
transfer of the shares from IDHI to the Claimant has not taken effect [p. 155 of Transcript of
Proceedings]:

xxxx
 It is clear that the Claimant's claim is neither premised on allegations of mismanagement of WJNA and
WJSC, nor on who manages or controls or who has the right to manage or control WJNA and WJSC, nor
is it a claim to effect the transfer of the share, nor an action for registration of the shares transfer [sic]
already transferred from IDHI to the Claimant in the books of WJNA and WJSC. The nature of the
Claimant's claim is not intrinsically connected with the regulation of the corporation. The Claimant's
claim in this arbitration is straightforward: that the Respondent agreed, under a contract, to make
payment of certain amount of money to the Claimant upon the occurrence of a specified event; that
the said event occurred but the Respondent refused to pay such amount of money to the Claimant;
that the Claimant filed the Request in order to enforce the payment. Accordingly, the Sole Arbitrator is
of the opinion that the dispute in this arbitration is not an intra-corporate controversy, and, hence, it
is not excluded from arbitration under Article 19.2 of the Shareholders' Agreement.[49] (Emphasis ours)

 Again, the Special ADR Rules specifically provides that in resolving the petition for recognition and
enforcement of a foreign arbitral award, the court shall not disturb the arbitral tribunal's determination
of facts and/or interpretation of law.[50]
 Yet, the RTC, in its decision dismissing the petition of Sembcorp, declared that "it is undisputed that the
shares of stocks of IDHI in WJNA and WJSC were actually owned by [Sembcorp] before the filing of the
request for arbitration"[51] without providing any factual basis for such conclusion which directly
contradicts the arbitral tribunal's findings.
 Even granting that the court may rule on the issue of whether the dispute is an intra-corporate
controversy, Mabuhay's argument is premised on the factual issue of whether Sembcorp indeed
acquired the shares of IDHI.
 Mabuhay failed to establish such fact before the arbitral tribunal.
 The RTC, on the other hand, concluded that Sembcorp acquired the subject shares but failed to explain
the basis for such conclusion.
 In the absence of sufficient evidence that Sembcorp acquired the shares of IDHI, the Court finds no
cogent reason to disturb the arbitral tribunal's ruling in favor of the latter's jurisdiction over the dispute.

C. Enforcement of the award would not be contrary to public policy of the Philippines.

 Under Article V(2)(b) of the New York Convention, a court may refuse to enforce an award if doing so
would be contrary to the public policy of the State in which enforcement is sought. Neither the New York
Convention nor the mirroring provisions on public policy in the Model Law and Our arbitration laws
provide a definition of "public policy" or a standard for determining what is contrary to public policy. Due
to divergent approaches in defining public policy in the realm of international arbitration, public policy
has become one of the most controversial bases for refusing enforcement of foreign arbitral awards.[52]

 Most arbitral jurisdictions adopt a narrow and restrictive approach in defining public policy pursuant to
the pro-enforcement policy of the New York Convention.

 The public policy exception, thus, is "a safety valve to be used in those exceptional circumstances when
it would be impossible for a legal system to recognize an award and enforce it without abandoning the
very fundaments on which it is based."[53]

 An example of a narrow approach adopted by several jurisdictions[54] is that the public policy defense
may only be invoked "where enforcement [of the award] would violate the forum state's most basic
notions of morality and justice."[55]
  Thus, in Hong Kong, an award obtained by fraud was denied enforcement by the court on the ground
that fraud is contrary to Hong Kong's "fundamental notions of morality and justice."[56]

 In Singapore, also a Model Law country, the public policy ground is entertained by courts only in
instances where upholding the award is "clearly injurious to the public good or... wholly offensive to the
ordinary reasonable and fully informed member of the public."[57]

 In Our jurisdiction, the Court has yet to define public policy and what is deemed contrary to public policy
in an arbitration case.

 However, in an old case, the Court, through Justice Laurel, elucidated on the term "public policy" for
purposes of declaring a contract void:

x x x At any rate, courts should not rashly extend the rule which holds that a contract is void as against
public policy. The term "public policy" is vague and uncertain in meaning, floating and changeable
in connotation. It may be said, however, that, in general, a contract which is neither prohibited by
law nor condemned by judicial decision, nor contrary to public morals, contravenes no public policy.
In the absence of express legislation or constitutional prohibition, a court, in order to declare a
contract void as against public policy, must find that the contract as to the consideration or thing to
be done, has a tendency to injure the public, is against the public good, or contravenes some
established interests of society, or is inconsistent with sound policy and good morals, or tends
clearly to undermine the security of individual rights, whether of personal liability or of private
property.[58] (Emphasis ours)

 An older case, Ferrazzini v. Gsell[59], defined public policy for purposes of determining whether that part
of the contract under consideration is against public policy:

By "public policy," as defined by the courts in the United States and England, is intended that
principle of the law which holds that no subject or citizen can lawfully do that which has a
tendency to be injurious to the public or against the public good, which may be termed the
"policy of the law," or "public policy in relation to the administration of the law." Public policy is
the principle under which freedom of contract or private dealing is restricted by law for the good
of the public. In determining whether a contract is contrary to public policy the nature of the
subject matter determines the source from which such question is to be solved. (Emphasis ours
and citation omitted)

 In light of the foregoing and pursuant to the State's policy in favor of arbitration and enforcement of
arbitral awards, the Court adopts the majority and narrow approach in determining whether
enforcement of an award is contrary to Our public policy.
 Mere errors in the interpretation of the law or factual findings would not suffice to warrant refusal of
enforcement under the public policy ground.
 The illegality or immorality of the award must reach a certain threshold such that, enforcement of the
same would be against Our State's fundamental tenets of justice and morality, or would blatantly be
injurious to the public, or the interests of the society.

OTHERS:
Violation of partnership law
 Mabuhay contends that it entered into a joint venture, which is akin to a particular partnership, with
Sembcorp.
 o Applying the laws on partnership, the payment of the Guaranteed Return to Sembcorp is a
violation of Article 1799[60] of the Civil Code, as it shields the latter from sharing in the losses of
the partnership. Ergo, enforcement of the Final Award would be contrary to public policy as it
upholds a void stipulation.
 The restrictive approach to public policy necessarily implies that not all violations of the law may be
deemed contrary to public policy.
o It is not uncommon for the courts in Contracting States of the New York Convention to enforce
awards which does not conform to their domestic laws.[61]
 At any rate, Mabuhay's contention is bereft of merit.
 The joint venture between Mabuhay, IDHI, and Sembcorp was pursued under the Joint Venture
Corporations, WJSC and WJNA.
 By choosing to adopt a corporate entity as the medium to pursue the joint venture enterprise, the parties
to the joint venture are bound by corporate law principles under which the entity must operate.[62]
 Among these principles is the limited liability doctrine.
 The use of a joint venture corporation allows the co-venturers to take full advantage of the limited
liability feature of the corporate vehicle which is not present in a formal partnership arrangement.[63]
 In fine, Mabuhay's application of Article 1799 is erroneous.

Imposition of interest

 Mabuhay argues that the twelve percent (12%) annual interest from the date of the Final Award is also
contrary to the Philippine law and jurisprudence.
 To reiterate, the only ground for refusing enforcement of a foreign arbitral award is when enforcement
of the same would be contrary to public policy.
 Mere incompatibility of a foreign arbitral award with domestic mandatory rules on interest rates does
not amount to a breach of public policy.
 However, some jurisdictions refused to recognize and enforce awards, or the part of the award which
was considered to be contrary to public policy, where they considered that the awarded interest was
unreasonably high.[64]
 In this case, the twelve percent (12%) interest rate imposed under the Final Award is not unreasonably
high or unconscionable such that it violates our fundamental notions of justice.

NOTES:
On a final note, We implore the lower courts to apply the ADR Act and the Special ADR Rules accordingly.
Arbitration, as a mode of alternative dispute resolution, is undeniably one of the viable solutions to the
longstanding problem of clogged court dockets. International arbitration, as the preferred mode of dispute
resolution for foreign companies, would also attract foreign investors to do business in the country that would
ultimately boost Our economy. In this light, We uphold the policies of the State favoring arbitration and
enforcement of arbitral awards, and have due regard to the said policies in the interpretation of Our arbitration
laws.
8. FEDERAL EXPRESS CORPORATION and RHICKE S. JENNINGS vs. AIRFREIGHT 2100, INC. and ALBERTO D. LINA,
G.R. No. 216600
Petitioners – FedEx Corp and Jennings
Respondents – Air21 and Lina

Facts:
 Petition for Review on Certiorari under Rule 45 of the ROC assailing the January 20, 2015 Decision of the
CA which affirmed the May 7, 2014 Order of the RTC, dismissing its petition for the issuance of a
confidentiality/protective order.

 FedEx is a foreign corporation doing business in the Philippines primarily engaged in international air
carriage, logistics and freight forwarding. Jennings serves as its Managing Director for the Philippines and
Indonesia.
 Respondent Airfreight 2100 (Air21) is a domestic corporation likewise involved in the freight forwarding
business. Alberto Lina is the Chairman of its Board of Directors.
 FedEx, having lost its International Freight Forwarder's (IFF) license to engage in international freight
forwarding in the Philippines, executed various Global Service Program (GSP) contracts with Air2l, an
independent contractor, to primarily undertake its delivery and pick-up services within the country.
o Under the GSP arrangement, the packages sent by FedEx customers from abroad would be
picked up at a Philippine airport and delivered by Air21 to its respective consignees.
o Conversely, packages from Philippine clients would be delivered by Air21 to the airport and
turned over to FedEx for shipment to consignees abroad.
o As stipulated in the GSP contracts, Air21 guaranteed that all shipments would be cleared through
customs in accordance with Philippine law.
 In the implementation of these contracts, however, several issues relating to money remittance, value-
added taxes, dynamic fuel charge, trucking costs, interests, and penalties ensued between the parties.
 May 11, 2011 - in an effort to settle their commercial dispute, FedEx and Air21 agreed to submit
themselves to arbitration before the Philippine Dispute Resolution Center (PDRC). On June 24, 2011,
FedEx filed its Notice of Arbitration. On October 3, 2011, the Arbitral Tribunal was constituted.

Arbitration Proceedings
 Jennings, John Lumley Holmes, the Managing Director of SPAC Legal of FedEx; and David John
Ross, Senior Vice President of Operations, Middle East, India and Africa, executed their respective
statements as witnesses for FedEx.
o Ross and Holmes deposed that Federal Express Pacific, Inc., a subsidiary of FedEx, used to have
an IFF license to engage in the business of freight forwarding in the Philippines. This license,
however, was suspended pending a case in court filed by Merit International, Inc. and Ace
Logistics, Inc., both freight forwarding companies, which questioned the issuance of the IFF to
FedEx.
o Absent the said license, FedEx executed the GSP contracts with Air21 to be able to conduct its
business in the Philippines. Ross and Holmes, in their individual statements, averred that Merit
and Ace were either owned or controlled by Air21 employees or persons connected with the
Lina Group of Companies, which included Air21.
 Jennings, in his cross-examination, was identified as the source of the information that Merit and Ace
were Air21's proxies and was asked if he had any written proof of such proxy relationship. He answered
in the negative.
o In his re-direct examination, he was made to expound on the supposed proxy relationship
between Merit, Ace and Air21. He responded that Merit and Ace were just very small companies
with meager resources, yet they were able to finance and file a case to oppose the grant of IFF
 license to FedEx. Jennings also disclosed that one of the directors of Ace was a friend of Lina and
that Loma Orbe, the President of Merit, was the former "boss" of Lito Alvarez, who was also
associated with Air21.

 Feeling aggrieved by those statements, Lina for himself and on behalf of Air21, filed a complaint for grave
slander against Jennings before the Office of the City Prosecutor in Taguig City.
o Lina claimed that the defamatory imputation of Jennings that Merit and Ace were Air21 's proxies
brought dishonor, discredit and contempt to his name and that of Air21 and quoted certain
portions of the written statements of Holmes and Ross and the Transcript of Stenographic
Notes (TSN) of the April 25, 2013 arbitration hearing reflecting Jennings' testimony to support
his complaint.

 Consequently, FedEx and Jennings (petitioners) filed their Petition for Issuance of a
Confidentiality/Protective Order with Application for Temporary Order of Protection and/or Preliminary
Injunction before the RTC
o alleging that all information and documents obtained in, or related to, the arbitration
proceedings were confidential.
o FedEx asserted that the testimony of Jennings, a witness in the arbitration proceedings, should
not be divulged and used to bolster the complaint-affidavit for grave slander as this was
inadmissible in evidence.

 January 16, 2014 - the RTC granted petitioners' application for the Temporary Order of Protection.
 Meanwhile, on February 3, 2014, the arbitral tribunal rendered an award in favor of FedEx.

RTC decision
 Subsequently, in the assailed Order, dated May 7, 2014, the RTC denied FedEx's petition for lack of merit,
o stating that the statements and arbitration documents were not confidential information.
o It went on to state that "the statement and 'Arbitration Documents' which purportedly consists
the crime of Grave Slander under Articles 353 and 358 of the Revised Penal Code are not in any
way related to the subject under Arbitration."
o The RTC further wrote that "a crime cannot be protected by the confidentiality rules under ADR.
The said rules should not be used as a shield in the commission of any crime."
 Dissatisfied, petitioners challenged the RTC order before the CA via a petition for review.
 January 20, 2015 - the CA denied the petition.
o The CA explained that the declarations by Jennings were not confidential as they were not at all
related to the subject of mediation as the arbitration proceedings revolved around the parties'
claims for sum of money.
o The CA ruled that "statements made without any bearing on the subject proceedings are not
confidential in nature." It must be emphasized that other declarations given therein, if relative
to the subject of mediation or arbitration, are certainly confidential."
 Hence, this present petition before the Court.

Issue: Whether the testimony of Jennings given during the arbitration proceedings falls within the ambit of
confidential information and, therefore, covered by the mantle of a confidentiality/protection order?
Ruling: YES.

FedEx arguments
 Argues that the Jennings' statements were part of the
o (a) records and evidence of Arbitration (Section 23);
 o (b) witness statements made therein (Section 3[h][3]); and
o (c) communication made in a dispute resolution proceeding (Section 3 [h][l]).
 They, thus, averred that Jennings' oral statements made during the April 25, 2013 arbitration hearing
and the TSN of the hearings, conducted on April 22 and 25, 2013, form part of the records of arbitration
and must, therefore, be considered confidential information.
 For said reason, petitioners assert that Rule 10.5 of the Special Alternative Dispute Resolution Rules,
allowing for the issuance of a confidentiality/protective order, was completely disregarded by the CA
when it denied the petition filed by FedEx as a result of Lina divulging what were supposed to be
confidential information from ADR proceedings.
 Petitioners also claim that in ruling that Jennings' statements were not confidential information, by
applying the test of relevance that "statements made without any bearing on the subject proceedings
are not confidential in nature," the CA used a "test" that had no basis in law and whose application in its
petition amounted to judicial legislation.

Respondent arguments
 Respondent Air21 and Lina essentially countered that:
o While the Alternative Dispute Resolution Act of 2004 (the "ADR Law") confers communications
made during arbitration the privilege against disclosure, otherwise known as the confidentiality
principle, to assist the parties in having a speedy, efficient and impartial resolution of their
disputes, said privilege cannot be invoked to shield any party from criminal responsibility. The
privilege is not absolute. The ADR Law does not exist in a vacuum without regard to other existing
jurisprudence and laws, particularly the RPC. Otherwise, we will permit a dangerous situation
where arbitration proceedings will be used by an unscrupulous disputant as a venue for the
commission of crime, which cannot be punished by the simple invocation of the privilege. Such
an absurd interpretation of our laws cannot be deemed to be the underlying will of our Congress
in framing and enacting our law on arbitration. To be sure, a crime cannot be protected or
extinguished through a bare invocation of the confidentiality rule.

The Court's Ruling

 The Court finds the petition meritorious.
 Section 3(h) of R.A. No. 9285 or the Alternative Dispute Resolution of 2004 defines confidential
information as follows:
o "Confidential information" means any information, relative to the subject of mediation or
arbitration, expressly intended by the source not to be disclosed, or obtained under
circumstances that would create a reasonable expectation on behalf of the source that the
information shall not be disclosed. It shall include (1) communication, oral or written, made in
a dispute resolution proceedings, including any memoranda, notes or work product of the
neutral party or non-party participant, as defined in this Act; (2) an oral or written statement
made or which occurs during mediation or for purposes of considering, conducting, participating,
initiating, continuing of reconvening mediation or retaining a mediator; and (3) pleadings,
motions manifestations, witness statements, reports filed or submitted in an arbitration or for
expert evaluation. [Emphases Supplied]
 The said list is not exclusive and may include other information as long as they satisfy the requirements
of express confidentiality or implied confidentiality.

 Plainly, Rule 10.1 of A.M. No. 07-11-08-SC or the Special Rules of Court on Alternative Dispute
Resolution (Special ADR Rules) allows "[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 xxx 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." Thus, the rules on confidentiality and protective
orders apply when:
1. An ADR proceeding is pending;
2. A party, counsel or witness disclosed information or was otherwise compelled to disclose
information;
3. The disclosure was made under circumstances that would create a reasonable expectation, on
behalf of the source, that the information shall be kept confidential;
4. The source of the information or the party who made the disclosure has the right to prevent
such information from being disclosed;
5. The source of the information or the party who made the disclosure has not given his express
consent to any disclosure; and
6. The applicant would be materially prejudiced by an unauthorized disclosure of the information
obtained, or to be obtained, during the ADR proceeding.

 Gauged by the said parameters, the written statements of witnesses Ross, Holmes and Jennings, as well
as the latter's oral testimony in the April 25, 2013 arbitration hearing, both fall under Section 3 (h) [1]
and [3] of the ADR Act which states that "communication, oral or written, made in a dispute resolution
proceedings, including any memoranda, notes or work product of the neutral party or non-party
participant, as defined in this Act; and (3) pleadings, motions, manifestations, witness
statements, reports filed or submitted in an arbitration or for expert valuation," constitutes confidential
information.
 Notably, both the parties and the Arbitral Tribunal had agreed to the Terms of Reference (TOR) that "the
arbitration proceedings should be kept strictly confidential as provided in Section 23 of the ADR Act and
Article 25-A of the PDRCI Arbitration Rules (Arbitration Rules) and that they should all be bound by such
confidentiality requirements."
 The provisions of the ADR Act and the Arbitration Rules repeatedly employ the word "shall" which, in
statutory construction, is one of mandatory character in common parlance and in ordinary signification.
 Thus, the general rule is that information disclosed by a party or witness in an ADR proceeding is
considered privileged and confidential.

 In evaluating the merits of the petition, Rule 10.8 of the Special ADR Rules mandates that courts should
be guided by the principle that confidential information shall not be subject to discovery and shall be
inadmissible in any adversarial proceeding, to wit:
o 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.
 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.
 Article 5.42 of the Implementing Rules and Regulations (JRR) of the ADR Act likewise echoes that
arbitration proceedings, records, evidence and the arbitral award and other confidential information are
privileged and confidential and shall not be published except
o [i] with the consent of the parties; or
o [ii] for the limited purpose of disclosing to the court relevant documents where resort to the
court is allowed.

 Given that the witness statements of Ross, Holmes and Jennings, and the latter's arbitration
testimony, fall within the ambit of confidential information, they must, as a general rule, remain
confidential.
 Although there is no unbridled shroud of confidentiality on information obtained or disclosed in an
arbitration proceeding, the presence of the above criteria must be apparent; otherwise, the general rule
should be applied. Here in this case, only a perceived imputation of a wrongdoing was alleged by the
respondents.

 In denying the said application for confidentiality/protection order, the RTC and the CA did not consider
the declarations contained in the said witness statements and arbitration testimony to be related to the
subject of arbitration and, accordingly, ruled that they could not be covered by a confidentiality order.
o The Court does not agree.
o Suffice it to say that the phrase "relative to the subject of mediation or arbitration" need not be
strictly confined to the discussion of the core issues in the arbitral dispute.
o By definition, "relative" simply means "connected to," which means that parties in arbitration
proceedings are encouraged to discuss openly their grievances and explore the circumstances
which might have any connection in identifying the source of the conflict in the hope of finding
a better alternative to resolve the parties' dispute.

 An ADR proceeding is aimed at resolving the parties' conflict without court intervention. It was not
designed to be strictly technical or legally confined at all times. By mutual agreement or consent of the
parties to a controversy or dispute, they acquiesce to submit their differences to arbitrators for an
informal hearing and extra-judicial determination and resolution.

 Usually, an ADR hearing is held in private and the decision of the persons selected to comprise the
tribunal will take the place of a court judgment. This avoids the formalities, delays and expenses of an
ordinary litigation. Arbitration, as envisioned by the ADR Act, must be taken in this perspective.

 Verily, it is imperative that legislative intent or spirit be the controlling factor, the leading star and guiding
light in the application and interpretation of a statute. If a statute needs construction, the influence most
dominant in that process is the intent or spirit of the act. A thing which is within the intent of the
lawmaker is as much within the statute as if within the letter; and a thing which is within the letter of
the statute is not within the statute unless within the intent of the lawmakers. A statute must be read
according to its spirit or intent and legislative intent is part and parcel of the statute. It is the controlling
factor in interpreting a statute. Any interpretation that contradicts the legislative intent is unacceptable.

 In the case at bench, the supposed questionable statements surfaced when FedEx's suspended IFF
license was discussed during the arbitration hearing.
 In fact, when Jennings was asked by Arbitrator Panga to expound on how the opposition of Ace and Merit
could be related to the ongoing arbitration, Jennings replied that, to his mind, it was indicative of the
leverage that Air21 had over FedEx as it was able to withhold large sums of money and siphon their joint
plans from being properly established.
 Whether the information disclosed in the arbitration proceeding would be given weight by the tribunal
in the resolution of their dispute is a separate matter. Likewise, the relevance or materiality of the said
statements should be best left to the arbitrators' sound appreciation and judgment.
 Even granting that the weight of the said statements was not fundamental to the issues in the arbitration
process, nevertheless, they were still connected to, and propounded by, a witness who relied upon the
confidentiality of the proceedings and expect that his responses be reflected.

 Arbitration, being an ADR proceeding, was primarily designed to be a prompt, economical and amicable
forum for the resolution of disputes. It guarantees confidentiality in its processes to encourage parties
to ventilate their claims or disputes in a less formal, but spontaneous manner. It should be emphasized
 that the law favors settlement of controversies out of court. Thus, a person who participates in an
arbitration proceeding is entitled to speak his or her piece without fear of being prejudiced should the
process become unsuccessful. Hence, any communication made towards that end should be regarded
as confidential and privileged.

 The confidential nature of the arbitration proceeding is well-entrenched in Section 23 of the ADR Act:
o SEC. 23. Confidentiality of 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.

 If Lina had legal grounds to suspect that Jennings committed slanderous remarks even before the
arbitration proceeding commenced, then he must present evidence independent and apart from some
quoted portions of the arbitration documents.
 It must be stressed that the very soul of an arbitration proceeding would be rendered useless if it would
be simply used as an avenue for evidence gathering or an entrapment mechanism to lure the other
unsuspecting party into conveying information that could be potentially used against him in another
forum or in court.
 Ultimately, the RTC and the CA failed to consider the fact that an arbitration proceeding is essentially a
unique proceeding that is non-litigious in character where the parties are bound by a different set of
rules as clearly encapsulated under the Special ADR Rules. Inevitably, when Lina cited portions of the
said arbitration documents, he violated their covenant in the TOR to resolve their dispute through the
arbitration process and to honor the confidentiality of the said proceeding. To disregard this
commitment would impair the very essence of the ADR proceeding. By itself, this would have served as
a valid justification for the grant of the confidentiality/protection order in favor of FedEx and Jennings.
 Thus, the claimed slanderous statements by Jennings during the arbitration hearing are deemed
confidential information and the veil of confidentiality over them must remain.
 WHEREFORE, the petition is GRANTED. The January 20, 2015 Decision of the CA is REVERSED and SET
ASIDE. The Petition for the Issuance of a Confidentiality/Protective Order filed by Federal Express
Corporation and Rhicke S. Jennings is hereby GRANTED. SO ORDERED.