CHAPTER 12 CONSTRUCTION DISPUTE ARBITRATION Construction Dispute Construction refers to “all on-site works on buildings or alter- ing structures, from land clearance through completion including excavation, erection and assembly and installation of components and equipment.”* Under the Revised Rules of Procedure Governing Construction Arbitration (CIAC Revised Rules) a construction dispute shall include “those between or among parties to, or who are otherwise bound by, an arbitration agreement, directly or by reference, whether such par- ties are’ project owner, contractor, subcontractor, fabricator, project manager, design professional, consultant, quantity surveyor, bonds- man or issuer of an insurance policy in a construction project.” Construction Arbitration Under the ADR Act of'2004 (Sections 34 to 39, ADR Act of 2004; Rules 17.1 to 17.8, Special ADR Rules) The ADR Act of 2004 not only affirmed the original and exclu- sive jurisdiction of the Construction Industry Arbitration Commis- ' Fort Bonifacio Development Corporation v. Sorongon, 587 SCRA 613 12009), p. 621, citing Fort Bonifacio Development Corporation v. Do- mingo, G.R. No. 180765, 27 February 2009, 580 SCRA 398, and Gammon Philippines, Inc. v. Metro. Rail Transit Development Corporation, 481 SCRA 209 (20061, pp. 218-219; see also Romago, Inc. v. Siemens Building Technologies, Inc., 602 SCRA 656 [2009], p. 670. * Section 2.2, CIAC Revised Rules; based on Section 35, ADR Act. 233 Scanned with CamScannerConstruction Dispute: ARBITRATION 235 wise known as the “Construction Industry Arbitration Law.” It is the quasi-judicial agency accorded with the jurisdiction to resolve disputes arising from contracts involving construction in the Phil- ippines. The CIAC is an agency under the Construction Industry Au- thority of the Philippines (CIAP) and is administratively attached to the Department of Trade and Industry. It consists of a Chair- man and two (2) members.” The policy and objective of the CIAC is to “provide a fair and expeditious settlement of construction disputes through a non- judicial process which ensures harmonious and friendly relations between or among the parties.” Its mission has been succinctly described in Gammon Philippines, Inc. v. Metro Rail Transit De- velopment Corporation,” as follows: “The Construction Industry Arbitration Commission (CIAC) was created in recognition of the construction indus- try’s contribution to national development goals. Realizing that delays in the resolution of construction industry disputes would also hold up the country’s development, Executive Order No. 1008 (EO 1008) expressly mandates the CIAC to expedi- tiously settle construction industry disputes and, for this pur- pose, vests upon the CIAC original and exclusive jurisdiction over disputes arising from, or connected ‘with, contracts en- tered into by parties involved in construction in the Philip- pines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof. x x a? The CIAC has the following functions: 1, To formulate and adopt an arbitration program for the construction industry; * Section 5, CIAC Revised Rules, * Uniwide Sales Realty and Res: Construction and Development Co * 481 SCRA 209 (2006), p. Foundation Specialists, Inc., 647 ” Section 6, E.O. No. 1008. sources Corporation v. Titan-lkeda rporation, 511 SCRA 335 [2006], p. 357 212; see also: LICOMCEN SCRA 83 [2011], p. 96, Incorporated v. Scanned with CamScanner236 ALTeRNativE Dispute Reson "TION 2, To enunciate policies and preseribe rules and proce dures for construction arbitration; 3. To supervise the arbitration program, and exercise such authority related thereto as regards the appointment, re- placement or challenging of arbitrators: and 4. To direct its officers and employees to perform such func. tions as may be assigned to them from time to time. The nature and character of the CIAC has been defined in the case of Metro Construction, Inc. v. Chatham Properties, Inc.,” in this wise: “xxx In the first place, it is a quasi-judicial agency. A quasi-judicial agency or body has been defined as an organ of government other than a court and other than a I.,..-ia:ure, which affects the rights of private parties through either adju- dication or rule-making. x x x The CIAC’s primary function is that of a quasi-judicial agency, which is to adjudicate claims and/or determine rights in accordance with Pro- cedures set forth in E.0, No. 1008. XxX Xxx XxX x x x Further, it is a quasi-judicial agency or in- strumentality. The decision in Luzon Development Bank vs. {izon Development Bank Employees, shed light on the matter, thus: Assuming arguendo that the voluntary arbi- trator or the panel of voluntary arbitrators may not be strictly considered as a quasi-judicial agency, board or commission, still both he and the panel are comprehended within the concept of a ‘quasi- Judicial instrumentality.’ It may even be stated that it was to meet the very situation presented by the quasi-judicial functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral Tro * 365 SCRA 697 12001], pp. 722-724, emphasis supplied; citing Aa Ment Homes, Inc. v. National Housing Authority, 152 SCRA 540 (1987); Pa 'y Corp. v. NHA, 183 SCRA 399 [1987]; Solid Homes, Inc. vw opm, 177 SCRA 72 [1989]; Luzon Development Bank v. Luzon Devel. "4 Bahk Employees, 249 SCRA 162 |19981, Scanned with CamScannerCow! rRUCTION Dispure ARBITRATION 237 tribunal operating under the Construction Industry Arbitration Commission, that the broader term ‘in- strumentalities’ was purposely included in [Section 9 of BP. Big. 129 as amended by R.A. No. 79021. An ‘instrumentality’ is anything used as a means or agency. Thus, the terms governmental ‘agency’ or ‘instrumentality’ are synonymous in the sense that either of them is a means by which a government acts, or by which a certain government act or function is performed. The word ‘instrumen- ” with respect to a state, contemplates an au- thority to which the state delegates governmental power for the performance of state function.” The CIAC has undergone various reorganizations and its rules of procedure have been revised a number of times. Its first Rules of Procedure Governing Construction was promulgated in August 1988. The latest Revised Rules. of Procedure Governing Construction Arbitration was approved on 19 November 2005, and took effect on 15 December 2005 fifteen (15) days after its publica- tion.” This revision was prompted by the need to align the rules with international practice and the provisions of the ADR Act of 2004. Jurisdiction of the CIAC The jurisdiction of the CIAC is conferred by E.0. No. 1008." Specifically, Section 4'thereof provides that: “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 be- fore or after the completion of the contract, or after the aban- donment or breach thereof. These disputes may involve gov- ernment or private contracts. x x x” * Section 25.1, CIAC Revised Rules. “ Heunghwa Industry Co, Lid. v. DJ o 3 cena oneal Ia ». DJ Builders Corporation, 813 Scanned with CamScanner238 ALTERNATIVE Dispute Rese =>LUTION The jurisdiction of the CIAC may include but is not lime ited to violation of specifications for materials and workman, ship; violation of the terms of agreement; interpretation and/or application of contractual provisions; amounts of damages and penalties; commencement time and delays; maintenance and defects; payment default of employer or contractor and changes in contract cost.”"* In LICOMCEN, Incorporated v. Foundation Specialists, Inc," the Supreme Court discussed the jurisdiction of the CIAC as fol- lows: “The jurisdiction of the CIAC The CIAC was created through Executive Order No. 1008 €.0. 1008), in recognition of the need to establish an arbitral machinery that would expeditiously settle construction indus- try disputes. The prompt resolution of problems arising from or connected with the construction industry was considered of (sic) necessary and vital for the fulfillment of national devel- opment goals, as the construction industry provides employ- ment to a large segment of the national labor force and is a leading contributor to the gross national product.” x x x XxX XXX XXX The jurisdiction of courts and quasi-judicial bodies is de- termined by the Constitution and the law.” It cannot be fixed by the will of the parties to a dispute:” the parties can neither expand nor diminish a tribunal's jurisdiction by stipulation or agreement. The text of Section 4 of E.0. No. 1008 is broad enough to cover any dispute arising from, or connected with construction contracts, whether these involve mere contractual |, See also Sections 2.1 and 2.1.1 of the CIAC Revised Rules. “647 SCRA 83, [2011], pp. 96-100. "E.O. 1008 (1985), Whereas clauses. “BF. Homes, Inc., et al. v. Manila Electric Company, G.R. No 171624, December 6, 2010, 636 SCRA 495, citing Civil Service Commission * Albao, G.R. No, 155784, October 18, 2005, 472 SCRA 548, 555. teampe, Municipality of Sogod v. Rosal, G.R. Nos. 38204 and 38205, Sep- "mber 24, 1991, 201 SCRA 632, Scanned with CamScannerConstruction Dispute ARBITRATION 239 money claims or execution of the works.” x x x The CIAC's ju- risdiction cannot be limited by the parties’ stipulation that only disputes in connection with or arising out of the physical con- struction activities (execution of the works) are arbitrable be- fore it. In fact, all that is required for the CIAC to acquire jurisdiction is for the parties to a construction contract to agree to submit their dispute to arbitration. x x x XXX XXX XxX In HUTAMA-RSEA Joint Operations, Inc. v. Citra Metro Manila Tollways Corporation,” the Court declared that ‘the bare fact that the parties x x x incorporated an arbitration clause in [their contract] is sufficient to vest the CIAC with ju- risdiction over any construction controversy or claim between the parties. The arbitration clause in the construction contract ipso facto vested the CIAC with jurisdiction.’ XxX XxX XXX If the CIAC’s jurisdiction can neither be enlarged nor di- minished by the parties, it also cannot be subjected to a condi- tion precedent. GC-61 requires a party disagreeing with LICOMCEN’s decision to ‘officially give notice to contest such decision through arbitration’ within 30 days from receipt of the decision. However, FSI’s April 15, 1998 letter is not the no- tice contemplated by GC-61; it never mentioned FSTI’s plan to submit the dispute to arbitration and instead requested LICOMCEN to reevaluate its claims. Notwithstanding FSI’s failure to make a proper and timely notice, LICOMCEN’s deci- sion (embodied in its March 24, 1998 letter) cannot become ‘fi- nal and binding’ so as to preclude resort to the CIAC arbitra- tion. To reiterate, all that is required for the CIAC to acquire jurisdiction is for the parties to agree to submit their dispute to voluntary arbitration: © “E.0. No. 1008 does not distinguish between claims involving pay- ment of money or not,” Excellent Quality Apparel, Inc. v. Win Multi-Rich Builders, Inc., G.R. No. 175048, February 10, 2009, 578 SCRA 272, 280, citing Parlade, The Law and Practice of Conciliation and Arbitration of Construction Disputes, (2001 ed.), p. 89. * G.R. No. 180640, April 24, 2009, 586 SCRA 746, 760-761. Scanned with CamScanner240 ALTERNATIVE Dispur, Resowurion ‘[Tlhe mere existence of an arbitration struction contract is consid. n agreement by the parties to submit existing or future controversies be- tween them to CIAC jurisdiction, without any qualification or condition precedent. To affirm a condition precedent in the construction contract, which would effectively suspend the jurisdiction of the CIAC until compliance therewith, would be in conflict with the intention of the law and rules to automatically vest CIAC with jurisdiction over a dispute should the construction contract contain an arbitration clause.” The CIAC is given the original and exclusive juris- diction over disputes arising from, or connected with, con- tracts entered into by parties involved in construction in the Philippines.* This jurisdiction cannot be altered by stipula- tions restricting the nature of construction disputes, appoint- ing another arbitral body, or making that body's decision final and binding.” In principle, the CIAC has jurisdiction over the construction disp, ute, and not the contract.” It also has jurisdiction over the teformation of contracts, Excluded from the CIAC’s jurisdiction are disputes arising ™ employer-employee relationships which are covered by the Labor Code of the Philippines.” Also excluded from the CIAC’s jurisdiction are claims for moral damages, exemplary damages, ‘Pportunity or business losses in addition to liquidated damages, and attorney's fees, which are non-arbitrable, unless the parties “ld, at p. 763. E.O. 1008, Section 4. . 25 National Irrigation Administration v. Court of Appeals, 318 SCRA (19081, p. 267, reiterated in Metropolitan Cebu Water District v. Mac- “= Rock Industries, Inc., 615 SCRA 577120121, p. 597. » g@opolitan Cebu Water District, supra. . Section 4, B.0. No, 1008; Section 2.2.2, CIAC Revised Rules; see also Ron > . 5 [2099 7-480, Inc. v. Siemens Building Technologies, Inc., 602 SCRA 656 1, p. 670. Scanned with CamScannerpyre Construction Dispute ARBITRATION 241 acquiesce or mutually agree to submit these issues for arbitration and to abide by the decision of the arbitrator thereon.” E.0. No. 1008 is a special law. Hence, it takes precedence over Batas Pambansa Big. 129 or the “Judiciary Reorganization Act of 1980,”" a general law which vests jurisdiction to the Metro- politan or Municipal Trial Courts, and Regional Trial Courts over certain civil actions, including those for breach of contract. Thus, while ordinarily, civil actions for breach of contract are within the jurisdiction of the regular courts, complaints for construction dis- putes, including the breach of construction contracts, must be filed with the CIAC, provided that the parties agree to submit their dispute to arbitration. Indeed, the doctrine of primary jurisdiction dictates prior re- course to the CIAC for construction disputes and parties over which it has acquired jurisdiction. The same doctrine precludes courts from resolving construction disputes over which jurisdiction has been initially lodged with the CIAC by reason of its special knowledge, experience and services to determine technical and intricate matters of fact.” Thus, the CIAC’s findings of fact, as in the case of other quasi-judicial agencies, are generally accorded great respect, if not finality, by the courts, having been rendered by an agency in a better position to pass judgment thereon.” The passage of R.A. No. 9285 (ADR Act of 2004), which re- quired the confirmation of domestic arbitral awards, did not alter the character of CIAC decisions as final and executory. In J Plus Asia Development Corporation v. Utility Assurance Corporation,” the Supreme Court clarified that: * Gammon Philippines, Inc., supra, p. 228 * Reyes v. Balde I, 498 SCRA 186 [2006], p. 195. * Maria Luisa Park Association, Inc. v. Almendras, 588 SCRA 663 (2009); Drilon v. De Venecia, Jr., 594 SCRA 749 [2009]; Montanez v. Pro- vincial Agrarian Reform Adjudicator (PARAD), Negros Occidental, 600 SCRA 217 [20091; Office of the Ombudsman v. Heirs of Margarita Vda. De Ventura, 605 SCRA 1 [2009] * Republic v. Far East Enterprises, Inc., 591 SCRA 75 [2009]; Lu- mayna v. Commission on Audit, 601 SCRA 163 [2009] * 700 SCRA 134 12013), pp. 146-147, Scanned with CamScanner2 TIVE Dispure, Resonurion “x x x Since R.A. No, 9285 explicitly excluded GIAG awards from domestic arbitration awards that need to be confirmed to be executory, said awards are therefore not covered by Rule 11 of the Special ADR Rules as they continue to be governed by EO No. 1008, as amended and the rules of pro- cedure of the CIAC. x x x” For the CIAC to acquire Jurisdiction, the parties to must be bound by an arbitration agreement in their ¢ subsequently agree to submit the same to voluntary arbitration,” Plainly, the CIAC has original and exclusive jurisdiction over dis- putes arising from or connected with construction contracts en- tered into by parties that have agreed to submit their dispute to voluntary arbitration.” The jurisdiction of the CIAC is dependent on the agreement and consent of the parties to the construction contract, to submit their dispute to arbitration, and that, absent such consent, the CIAC cannot validly proceed against a party for lack of jurisdiction.* Absent such an agreement contained in an arbitration agreement, or consent expressed or implied subsequent to the accrual of the cause of action, the jurisdiction over the con- struction dispute will remain with the regular courts. There are two acts which vest the CIAC with jurisdiction over ‘construction dispute. . a dispute ‘ontract or “x x x One is the presence of an arbitration clause in a construction contract, and the other is the agreement of the Parties to submit the dispute to the CIAC. Where there is an existing arbitration agreement, a subse- ‘went consent by the parties would be superfluous and unneces- {Section 2.3, CLAC Revised Rules. ‘ ” LICOMCEN, Incorporated v. Foundation Specialists, Inc., 531 pera 705 120071, p. 717; see also Philrock, Inc. v. Construction Induistry ‘tration Commission, 359 SCRA 632 (20011, p. 640. . «UY &. Court of Appeals, 494 SCRA 535 [2006], p. Sim 8 Sogn olleunghwa Industry Co., Ltd. v. DJ Builders Corporal » an ©. Citra py 2008): B. 259; see also HUTAMA-RSEA Joint Operations Ine, ‘aqge Metro Manila Tollways Corporation, 586 SCRA 746 (20081, pp Scanned with CamScannerConstruction Dispute ARBITRATION 243, sary.” In other words, the consent to arbitration necessary for the CIAC to acquire jurisdiction may be a pre-causal consent or a pre- sent causal consent. Once jurisdiction has been acquired by the CIAG, the refusal of one party to participate in the proceedings will not prevent the CIAC from proceeding with the case and issuing an award in favor of one of the parties. This principle was explained by the Supreme Court in Metropolitan Cebu Water District” as follows: “Section 4.2 of the Revised Rules of Procedure Governing Construction Arbitration (CIAC Rules) specifically provides that where the jurisdiction of the CIAC is properly invoked by the filing of a Request for Arbitration in accordance with the CIAC Rules, the failure of a respondent to appear, which amounts to refusal to arbitrate, will not stay the pro- ceedings, notwithstanding the absence of the respon- dent or the lack of participation of such party. In such cases, the CIAC is mandated to appoint the arbitrator/s in accordance with the Rules, and the arbitration pro- ceedings shall continue, The award shall then be made after receiving the evidence of the claimant. In such a case, all is not lost for the party who did not participate. Even after failing to appear, a respondent is still given the opportunity, under the CIAC Rules, to have the proceedings reopened and be allowed to pre- sent evidence, although with the qualification that this is done before an award is issued: “4.2.1 In the event that, before award, the Respondent who had not earlier questioned the ju- risdiction of the Tribunal, appears and offers to present his evidence, the Arbitral Tribunal may, for reasons that justifies (sic) the failure to appear, re- open the proceedings, require him to file his answer with or without counterclaims, pay the fees, where required under these Rules, and allow him to pre- sent his evidence, with limited right to cross exam- ine witnesses already (sic) in the discretion of the Tribunal. Evidence already admitted shall remain, * Heunghwa Industry Co., Ltd., supra, id “Id., pp. 600-601; emphasis supplied. Scanned with CamScanneroud ALTERNATIVE Dispur, LUTION The Tribunal shall decide the effect of si verting evidence presented by evidence already pearance.” h contro- the Respondent on admitted prior to such belated ap- Thus, under the CIAC Rules, even with- out the participation of one of the parties in the proceedings, the CIAC is still required to proceed with the hearing of the construction dispute.” In fact, it has been held that the CIAC may continue with the arbitration even though only one of the parties requested for arbi- tration,” or even if both parties have withdrawn their consent to arbitrate.” An arbitration agreement or a submission to arbitration must 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. The pet ment may even be in the form of exchange of letters sent by Post or telefax, telexes, telegrams, electronic mail or any other mode of communication.” In the event that a party has already filed a complaint before the regular courts involving a dispute within the jurisdiction of the CIAC, the proper procedure to enable the CIAC to decide on the dispute is to request the stay or suspension of the judicial action as Frovided for under the Arbitration Law (R.A. No. 876) Moreover, the court is directed by the ADR Act not just to dismiss the com- Plaint falling within the CIAC’s jurisdiction, but also to refer the Case to the CIAC.“ The principle of jurisdiction by estoppel is equally applicable ‘0 the CIAC. When a party to an arbitration conducted by the W, * National Irrigation Administration, id., cited in Metropolitan Cebu ‘ter District, id., p. 601 359 goqh Milrock, Inc. v. Construction Industry Arbitration Commission, 6 trict 682 (20011, pp. 641-642, cited in Metropolitan Cebu Water Dis. "tid, p. 601. « Section 4.2, CLAC Revised Rules. 17.1, Special ADR Rules.” Scanned with CamScannerConstruction Dispure ARBITRATION 245, CIAC has actively participated in the proceedings before the CIAC, even going to the extent of seeking affirmative relief, such active participation is tantamount to an invocation of, or at least an ac- quiescence to CIAC’s jurisdiction, notwithstanding that that party initially assailed the CIAC’s jurisdiction.” Rules of Procedure in the CIAC In the proceedings before the CIAC, judicial rules of evidence are not controlling and the technicalities of law or procedure may be disregarded in order to ascertain the facts in each and every case by every reasonable means.” The arbitral tribunal of the CIAC is mandated to “act according to justice and equity and mer- its of the case, without regard to technicalities or legal forms and need not be bound by any technical rule of evidence.” Briefly, the following are the procedural rules in the CIAC: 1. Complaint/request for arbitration. The initiatory plead- ing is a complaint or request for arbitration which must be filed with the Secretariat of the CIAC." The complaint or request for arbitration must allege the existence of the arbitration agreement or subsequent submission, a copy of which should be attached to the complaint or request.” 2. Answer. Within three (3) days from such filing, the Se- cretariat shall transmit to the respondent a request for his answer attaching thereto a copy of the complaint and supporting documents.” Without préjudice to extensions of time if warranted, the respondent has fifteen (15) days from receipt of the request for arbitration or complaint within which to file his answer thereto including therein “ LICOMCEN, supra, C P. 721; also Romago, Inc. v. Siemens Building fenela gies, Inc., 602 SCRA 656 [2009], p. 672; and Philrock, Inc., id., Pp 641-642. “ Section 1.3, CIAC Revised Rules. “ Section 13.5, CIAC Revised Rules. “ Section 3.1, CIAC Revised Rules, “ Section 2.3.1, CIAC Revised Rules. “ Section 3.4, CIAC Revised Rules, Scanned with CamScannerALTERNATIVE Dispute: F 246 such counterclaims as he may a plainant shall be furnished t." of which the com- a copy. The respondent shall be requested to inform the CIAC of his willingness to have the dispute resolved by arbitra- tion, which should be clearly expressed in the answer.” In the absence of an arbitration agreement or subsequent submission, or of the respondent's statement of his will- ingness to undergo arbitration, the CIAC shall dismiss the complaint without prejudice to its refiling upon a sub. sequent submission.” The failure of the respondent to file an answer or his re- fusal to arbitrate shall not stay the proceedings as long as the jurisdiction of the CIAC has been properly invoked by the filing of the request for arbitration in accordance with the CIAC Revised Rules, and there is an arbitration agreement providing for arbitration by the CIAC, or there is a subsequent submission agreement therefor. In such case, the CIAC shall appoint the arbitrators, continue with the proceedings, receive the evidence of the claimant, and render an award based thereon. If, before the award, the respondent appears and offers to present his evidence, the arbitral tribunal may, for justi- fiable reasons, reopen the proceedings, require the re- spondent to file his answer with or without counterclaims, allow him to present evidence, and grant him a limited right to cross examine witnesses already presented in the Proceedings.” {Section 5.1, CIAC Revised Rules. {Section 5.2, CIAC Revised Rules. ,, Section 2.3.1, CIAC Revised Rules. «, Section 2.3.3, CIAC Revised Rules. Distrig, @*tio8 4.2, CAC Revised Rules; see also Metropolitan Cebu Water inet id., pp. 600-601; National Irrigation Administration, id.; Philrock, PP. 641-642; Heunghwa Industry Co., Lid., id., pp. 25: n 4.2.1, CIAC Revised Rules; see also Metropolitan Cebu Wa- id., pp. 600-601. * “*r District, Scanned with CamScannerConstruction Dispute ARBITRATION 247 3. Reply. The claimant may file a reply to the counterclaim within fifteen (15) days from the date of receipt of the an- swer with counterclaim.” 4, Appointment and acceptance of arbitrators. One (1) or three (3) arbitrators may be appointed to settle a dispute depending on the agreement of the parties, or the discre- tion of the CIAC if there is no such agreement.” Each party shall submit the names of not more than six (6) nominees from CIAC-accredited arbitrators in the order of their preference for appointment as arbitrators.” For sole arbitrators, the CIAC shall appoint among the parties’ nominees the common nominee provided he is available and not disqualified. If the parties fail to submit the names of the nominees, the CIAC shall appoint the sole arbitrator.” For arbitral tribunals, again the CIAC shall appoint the parties’ common nominees. If there is no common nomi- nee, the CIAC shall choose and appoint one arbitrator from the claimant’s nominees and another arbitrator from the respondent’s nominees.” If there is one common nominee, he shall be appointed to- gether with the two others from the list submitted by the parties. If there are two (2) common nominees, the CIAC shall appoint them. If there are three (3) common nomi- nees, all of them shall be appointed.” Unless there are three (3) common nominees, within fif- teen (15) days from their appointment, the two arbitrators first chosen shall select the third arbitrator. In case of failure to agree on the third member within the said pe- riod, the CIAC shall, within fifteen (15) days thereafter, “ Section 5.3, CIAC Revised Rules. * Sections 9.1 and 9.1.2, CIAC Revised Rules “ Sections 9.1.1 and 9.2 and 9.3, CIAC Revised Rules. “ Sections 9.2 and 9.2.1, CIAC Revised Rules. “ Section 9.3, CIAC Revised Rules. * Section 9.3.1, CLAC Revised Rules. Scanned with CamScanner248 on oe ® ALTERNATIVE Dispury Resonurion appoint the third member trators. The arbitrators { among them will be nal.” from its list of hus chosen sh; the chairman of the accredited arbi- all decide who arbitral tribu- appoint a replace- minated him or, if ‘accredited arbitra- ment from the list of the party who not there is none, from the list of CIAC-; tors." Challenge to arbitrators. A challenge to an arbitrator, including a motion for inhibition or a request for disquali- fication or replacement which shall be treated as a chal- lenge, shall be in the form of a complaint under oath, stat- ing distinctly the facts complained of, supported by affi- davits, and accompanied by such documents as may sub- Stantiate the said facts.” The challenge should be filed at any time after the challenged arbitrators’ appointment but before the lapse of the original ten (10) day period for the submission of memoranda or draft decision under See- tion 13.16, Rule 13, CIAC Revised Rules, without exten- sions.” The challenge shall be based on the following grounds: a. Relationship by blood or marriage within the sixth degree of either party to the controversy, or to counsels within the fourth degree, computed according to the rules of civil law; b. Financial, fiduciary or other interest in the con- troversy; ¢. Partiality or bias; Sstion 9.3, CIAC Revised Rules. ions 9.5 and 10.3, CIAC Revised Rules ‘ons 9.6, 9.6.1 and 9.6.2, CIAC Revised Rules. 0n 9.6, CIAC Revised Rules. Scanned with CamScannerConstruction Dispur: Arprrration 249 a. Incompetence, or professional misconduct; and c. Other just and valid reasons affecting independ- ence, integrity, impartiality and interest.” The challenged arbitrator will be given an opportunity to be heard, and, subject to the approval of the CIAC, to in- hibit himself without admitting the existence of the ground of the challenge, motion or request.” Upon removal or inhibition, the CIAC shall promptly ap- point the replacement, unless he is the third member, in which case, the first two members of the arbitral tribunal shall select his replacement.” 6. Preliminary conference and terms of reference. The arbi- trator or arbitral tribunal shall set the case for prelimi- nary conference, similar to a pre-trial,” not later than fif- teen (15) days after their appointment during -which the following matters shall be considered:* a. Possibility of amicable settlement; b. Necessity or desirability of amendment to plead- ings; c. Obtaining stipulations or admissions of facts anW/or documents to avoid unnecessary proof; d. Limitation of the number of witnesses; e. Suggested formulation of issues by the parties; Application for interim relief, appointment of ex- perts and necessity of site inspection; and g. Such other matters as may aid in the just and speedy disposition of the case. A draft copy of the document known as Terms of Refer- ence (TOR) shall be attached to the notice of preliminary “ Section 9.6, CIAC Revised Rules. “ Section 9.6.3, CIAC Revised Rules. © Rule 18, 1997 Rules of Civil Procedure. “ Section 11.1, CIAC Revised Rules. Scanned with CamScanner250 SRNATIVE Dispur Resonution conference. This document functions like der” in judicial proceedings and controle unless corrected for manifest err later than the hearing date.” ing:” a pre-trial or- the proceedings ors by a motion filed not "It shalll include the follow. a. The full names of the parties, r , and their respec. tive counsels, if any; b. The addresses and contact numbers of the par- ties/counsels, to which notifications or communi- cations arising in the course of the arbitration may be validly made; Asummary of the parties’ respective claims; Full statement of admitted facts and documents; The issues to be resolved in question form; The arbitrators’ full names; The place where the arbitration proceedings shall be held; h. The breakdown, schedule of payments, and shar- ing of arbitration fees; i. Such other particulars as may be required by the arbitral tribunal for the proper and speedy adju- dication of the case. It shall be signed by the parties, their counsels and the arbi- tral tribunal ae finalization.” Notwithstanding the - Sence of a TOR, the arbitration shall proceed on the basis of the issues formulated by the pleadings filed by the parties. 7. Arbitration Proceedings. @. Venue, date and time. The venue, date and time mh eae i of the arbitral proceedings shall be mutually * ‘. » Section 7, Rule 18, 1997 Rules of Civil Procedure. o Sstions 11.1 ana 11.4, CIAC Revised Rules. 11.4 and 11.4.1, CIAC Revised Rules. wget 4, CIAC Revised Rules. 11.5, CIAC Revised Rules. Scanned with CamScannerConstruction Dispute ARBITRATION 251 agreed upon by the parties and the arbitral tri- bunal. In case of disagreement, the choice of venue by the arbitral tribunal shall prevail.’ Quorum. In an arbitration with three (3) arbi- trators, two (2) members of the arbitral tribunal shall comprise a quorum for the purpose of con- ducting a hearing. Presentation of evidence. The arbitral tribunal shall at all times adopt the most expeditious pro- cedure for the introduction of evidence. It shall be within its discretion to determine the order of presentation of evidence. Generally, the party who seeks to enforce a right or establish a claim shall be required to present his evidence first.” Instead of a formal hearing, the parties may agree to submit the issues for resolution after the filing of pleadings, evidence, memoranda or draft decisions™ similar to a summary judgment under Rule 35 of the 1997 Rules of Civil Proce- dure. The arbitral tribunal shall require the simulta- neous submission of affidavits of witnesses in lieu of their direct testimonies attaching thereto supporting documents. The arbitral tribunal may ask clarificatory questions of the witnesses at any stage of the proceedings.” After the presentation and offer of evidence by the parties, the parties may be directed by the arbi- tral tribunal to make a brief oral summation.” Draft decision or final memorandum. If any or both parties so desire, they may submit not later ™ Section 12.1, CIAC Revised Rules, ™ Sections 13.2 and 13.3, CIAC Revised Rules. * Section 13.17, CLAC Revised Rules. ™ Sections 13.6 and 13.7, CLAC Revised Rules. ™ Section 13.15, CIAC Revised Rules, Scanned with CamScanner8. Award. The award shall be rendered Aurannanivi: Diseure Resovsmion than ten (10) calendar days from the of the hearing, their draft memorandum of arguments,” @ Closing of the hearings. After the the draft decision or the fin Proceedings shall be deem, arbitral tribunal motu propio or upon the request, of any party at any time before the award 1. ren. dered, and on good cause shown, reopen the hearing, in which case, the effective date of the closing of the hearing shalll be the date of closing of the reopened hearing.”” termination decision or final submission of al memorandum, the ed closed unless the Promptly by the arbitral tribunal within thirty (30) days from the time the case is submitted for resolution but not more than six (6) months from the date of signing of the TOR, or in the ab- sence of a TOR, not more than six (6) months from the date of the last preliminary conference called for the pur- Pose of finalizing or signing the TOR. There shall be no extension of this period unless approved by the CIAC. The award shall be in writing and signed by the arbitral tribunal or a majority of its members. It shall contain S issues involved, a brief statement and discussion of the facts, and the authority relied upon for the resolution or disposition of the case.” / A dissent from the decision of the majority or 8 portion thereof shall be in writing specifying the portion Seah from with a statement of the reasons therefor, and be signed by the dissenting member. The final arbitral award shall become ey eg ihe thereo! lapse of fifteen (15) days from receipt tt “ eed by ony ties, unless a timely motion for correctio’ « Settion 13.16, CIAC Revised Rules. ; « Sections 13.13 and 13.14, CIAC Revised Rules » gation 16.1, CIAC Revised Rules. « gttions 16.2 and 16.3, CIAC Revised Rules. ion 16.3, CIAC Revised Rules Scanned with CamScannerConstruction Dispt rs ARBITRATION 253 party within the said fifteen (15) day period. A motion for reconsideration and new trial are prohibited plead- ings.” As a rule, the jurisdiction of the arbitral tribunal is ter- minated upon the finality of the decision,” order or award except in the following instances: a. When a timely motion for correction has been filed” in which case jurisdiction will continue un- til the resolution of the motion and the finality of the corrected award; and b. Notwithstanding the finality of the award, the arbitral tribunal retains jurisdiction to exercise executory powers, which include “the determina- tion of the sufficiency of the bond [stay of execu- tion], approval of the surety or bonding company, satisfaction of the award, quashal of the execu. tion, issuance of alias writs, assessment of prop- erties levied, appointment of a quantity surveyor or assessor, examination of banks, debtors of the judgment debtor and any person holding proper- ties or assets of the judgment debtor, and issu- ance of subpoena ad testificandum and subpoena duces tecum.”™ 9. Execution of the award. ‘The arbitral tribunal, or the re- maining members thereof, or, if there are none, the CIAC itself, shall, motu propio or upon motion of the party, issue a writ of execution of a final and executory decision, order or award requiring any sheriff or proper of. ficer to execute said decision, order or final award.” prevailing “ Sections 17.1, 17.1.1, and 18.1, CIAC Revised Rules, * Section 17.2, CIAC Revised Rules; see ronment and Natural Resources (DENR) v. Unit Inc. (UPCL), GR. No. 212081, February 23, 2015. “ Section 16.6, CIAC Revised Rules. “ Section 17.1, CIAC Revised Rules. “ Section 18.8, CIAC Revised Rules. © Section 18.5, CIAC Revised Rules also: Department of Envi- ited Planners Consultants, Scanned with CamScanner-TERNATIVE Dispute: Resor ATION, If the decision, order or final award is appealed, the exe- aes may be stayed upon approval by the arbitral tribu- nal, or the remaining members thereof, with the ¢ s ; he concur- rence of the CIAC, of a bond posted by the petitioner in an amount equal to the award, conditioned upon the per- formance of the Judgment of the appellate court in case it upholds the award in whole or in part.” Judicial Review of CIAC Decisions A petition for review from a final award of the CIAC may be taken by any of the parties to th ‘e Court of Appeals within fifteen (15) days from receipt thereof in accordance with Rule 43 of the 1997 Rules of Civil Procedure.” This petition is based on errors of fact, law or mixed fact and law. The development of this remedy from the decisions of the CIAC was explained in the case of Asian Construction and Development Corporation v. Sumitomo Corpora- tion® as follows: “A brief exegesis on the development of the procedural rules governing CIAC cases clearly shows that a final award rendered by the Arbitral Tribunal is not absolutely insulated from judicial review. . To begin, Executive Order No. (E.0.) 1008, which vests “pon the CIAC original and exclusive jurisdiction over dis- putes arising from, or connected with, contracts entered into ¥ Parties involved in construction in the Philippines, plainly States that the arbitral award ‘shall be final and inappealable “xcept on questions of law which shall be appealable to the [Court]. Later, however, the Court, in Revised Administrative Cireular (RAC) No. 1-95, modified this rule, directing that the @pPeals from the arbitral award of the CIAC be first brought ‘© the CA on questions of fact and law. This amendment was __ *ventually transposed into the present CIAC Revised Rule « Section 18.6, CIAC Revised Rules. : 4 Plus Asia Development Corporation v. Utility Assurance Corpora- © Department of Environment and Natural Resources (DENR), id. HR CggiOt SCRA 332 [2013], pp. 344-346, citing FF. Cruz & Co, Ine. v Construction Corp., 668 SCRA 302 [2012], p. 315; and Philrock, Inc. v. struction Industry Arbitration Commission, id., pp. 643-644. tion, Scanned with CamScannerConstruction Diseure: Arprrration 255 which directs that ‘a petition for review from a final award may be taken by any of the parties within fifteen (15) days from receipt thereof in accordance with the provisions of Rule 43 of the Rules of Court. Notably, the current provision is in harmony with the Court’s pronouncement that ‘despite itu- tory provisions making the decisions of certain administra- tive agencies ‘final,’ [the Court] still takes cognizance of peti- tions showing want of jurisdiction, grave abuse of discretion, violation of due process, denial of substantial justice or erro. neous interpretation of the law’ and that, in particular, ‘vol- untary arbitrators, by the nature of their functions, act in a quasi-judicial capacity, such that their decisions are within the scope of judicial review.” The petition shall not stay the execution of the final award unless the Court of Appeals issues a temporary restraining order and/or a writ of preliminary injunction.” The petitioner may also post 2 bond with the CIAC in an amount equal to the award, condi- tioned upon the performance of the appellate court’s judgment. The execution of the award shall be stayed upon the approval of the bond by the CLAC.* The availability of a petition for review under Rule 43 pre- cludes the remedy of a petition for certiorari under Rule 65, and the filing of an erroneous petition for certiorari will not toll the 15- day period to file a petition for review.” Generally, in the absence of any showing of grave abuse of discretion, courts must sustain the factual findings of the CIAC arbitrator this being in accordance with the established principle that the determination of certain questions of fact falling within the peculiar technical expertise of an administrative agency, must be accorded great respect, if not finality by the courts.” The court will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of * Sections 18.2 and 18.4, CIAC Revised Rules. “Section 18.6, CIAC Revised Rules, * Department of Environment and Natural Resi i] Speremep emir sources (DENR), id. ‘onstruction C Xe : 512 SORA 684 (20071 9 Gos ‘ctton Corporation v. Court of Appeals, Scanned with CamScanner256 ALTERNATIVE Dispur Resonution activities coming under the gs) ing of such agencie As held in Uniwide Sales Realty and Res Titan-Ikeda Construction and Development C Pecial technical knowledge and train- ‘ources Corporation v, ‘orporation:” “xxx . The Court will not revi an arbitral tribunal upon the had ‘misapprehended facts’ which are, at bottom, disguised they may be iew the factual findings of artful allegation that such body and will not pass upon issues issues of fact, no matter how cleverly as ‘legal questions.’ The parties here tion and chose the arbitrators them. selves; they must have had confidence in such arbitrators, The Court will not, therefore, permit the parties to relitigate before X the issues of facts previously presented and argued befrs the Arbitral Tribunal, save only where a clear showing is made that, in reaching its factual conclusions, the Acbi, fral Tribunal committed an error so egregious and hurt, tion resulting in lack or loss of jurisdiction. » x x Any other, more relaxed rule would result in setting at naught the basic objective of a voluntary arbitration and would reduce at. bitration to a largely inutile institution,” Also, in Shinryo (Philippines) Company, Inc. v. RRN Incorpo- rated,” it was held that: : “As reiterated by the Court in IEX International, Ine. v Government Service Insurance System, to wit: ‘It is settled that findings of fact of quasi- judicial bodies, which have acquired exper. tise because their jurisdiction is confined to Specific matters, are generally accorded not only respect, but also finality, especially when affirmed by the Court of Appeals. In particu- lar, factual findings of construction arbitra- tors are final and conclusive and not review- able by this Court on appeal.” lig9¢, 778 Lepanto Ceramics, Ine. v. Court of Appeals, 253 SCRA 552 996), p. 558, 2511 SCRA 335 {2006}, pp. 362-363, emphasis supplied, 4 SCRA 123 {2010}, p. 130, emphasis supplied Scanned with CamScannerConstruction Dispute ARBITRATION 257 However, as exceptions to the foregoing rule, factual findings of construction arbitrators may be reviewed by the Supreme Court when the petitioner proves affirmatively that: “x x x (1) the award was procured by corruption, fraud or other undue means; (2) there was evident partiality or corrup- tion of the arbitrators or of any of them; (3) the arbitrators were guilty of misconduct in refusing to hear evidence perti- nent and material to the controversy; (4) one of the arbitrators were disqualified to act as such under Section nine of Republic Act No. 876 and willfully refrained from disclosing such dis- qualifications or of any other misbehavior by which the rights of any party have been materially prejudiced; or (5) the arbi- trators exceeded their powers, or so imperfectly executed them, that a mutual, final and definitive award upon the subject matter submitted to them was not made. Other recognized exceptions are as follows: (1) when there is a very clear showing of grave abuse of discretion re- sulting in lack or excess of jurisdiction as when a party was deprived of a fair opportunity to present its position before the Arbitral Tribunal or when an award is obtained through fraud or the corruption of arbitrators, (2) when the findings of the Court of Appeals are contrary to those of the CIAC, and (3) when a party is deprived of administrative due process.” Costs of Arbitration In the case of Philippine National Construction Corporation vs. Court of Appeals," the Supreme Court had occasion to reiterate “° Uniwide Sales Realty and Resources Corporation v. Titan-Iheda Construction and Development Corporation, 511 SCRA 335 [2006], pp. 345-346; citing David v. Construction Industry Arbitration Comission 435 SCRA 654 (2004), p. 666; Megaworld Globus Asia, Inc. v. DSM Con. struction and Development Corporation, 424 SCRA 179 (2004), p. 198; Hi. Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc., 228 SCRA 391 (1980p 408: Metro Construction, ne. v. Chatham Properties, Inc., 365 |; Shinryo (Philippines) reed 634 Sole nia (Philippines) Company, Ins. v. RAN Incorpo 6 ypolitan Cebu Wate ea 514 SCRA 569 (20071, pp. 574-575, ee Scanned with CamScannerERNATIVE Dispute: Resorarrion the general rule in determining which party ought to bear the costs of arbitration before the CIAC. Said the Court, “In respect of the costs of arbit the Rules of Procedure Governing states: tration, Sec. 5, Article XV of Construction Arbitration” Decision as to Cost of Arbitration—In the case of non-monetary claims or where the parties agreed that the sharing of fees shall be determined by the Arbitrator(s), the award shall, in addition to dealing with the merits of the case, fix the cost of arbitration, and/or decide which of the parties shall bear the cost(s) or in what proportion the cost(s) shall be borne by each. Rule 142 of the Revised Rules of Court of the Philippines Governing the imposition of costs likewise provides the follow. ing: Section 1. Costs ordinarily follow the result of suit.—Unless otherwise provided in these rules, costs shall be allowed to the prevailing party as a matter of course, but the court shall have the power for special reasons, to adjudge that either party Shall pay the vost of an action, or that the same shall be divided, as may be equitable.” In the instant case, there is no basis for assessing the ar- bitration costs against one party or the other, as the parties’ prayers were only partially granted. We find it is just and equi- table that both parties equally share the costs of arbitration.” 2 ion gygtttion 5, Rule XV of the Rules of Procedure Governing Construe- es taeeest ion was carried over to the CIAC Revised Rules as Section Scanned with CamScannerAPPENDICES Scanner rd with CamScanner