ADR CASE DOCTRINES

General Principles
Department of Foreign Affairs vs BCA International

LEX LOCI CONTRACTUS.Under Article 33 of the UNCITRAL Arbitration Rules governing the parties, "the
arbitral tribunal shall apply the law designated by the parties as applicable to the substance of the
dispute." "Failing such designation by the parties, the arbitral tribunal shall apply the law determined by
the conflict of laws rules which it considers applicable." Established in this jurisdiction is the rule that the
law of the place where the contract is made governs, or lex loci contractus. 17 As the parties did not
designate the applicable law and the Agreement was perfected in the Philippines, our Arbitration laws,
particularly, RA No. 876, 18 RA No. 9285 19 and its IRR, and the Special ADR Rules apply. 20 The IRR of RA
No. 9285 provides that "[t]he arbitral tribunal shall decide the dispute in accordance with such law as is
chosen by the parties. In the absence of such agreement, Philippine law shall apply."

ARBITRATION. In another earlier case filed by petitioner entitled Department of Foreign Affairs v. BCA
International Corporation, 22 docketed as G.R. No. 210858, petitioner also raised as one of its issues that
the 1976 UNCITRAL Arbitration Rules and the Rules of Court apply to the present arbitration proceedings,
not RA No. 9285 and the Special ADR Rules. We ruled therein thus:

Arbitration is deemed a special proceeding and governed by the special provisions of RA 9285, its
IRR, and the Special ADR Rules. RA 9285 is the general law applicable to all matters and
controversies to be resolved through alternative dispute resolution methods. While enacted only
in 2004, we held that RA 9285 applies to pending arbitration proceedings since it is a procedural
law, which has retroactive effect.

xxx xxx xxx

The IRR of RA 9285 reiterate that RA 9285 is procedural in character and applicable to all pending
arbitration proceedings. Consistent with Article 2046 of the Civil Code, the Special ADR Rules were
formulated and were also applied to all pending arbitration proceedings covered by RA 9285,
provided no vested rights are impaired. Thus, contrary to DFA's contention, RA 9285, its IRR, and
the Special ADR Rules are applicable to the present arbitration proceedings. The arbitration
between the DFA and BCA is still pending, since no arbitral award has yet been rendered.
Moreover, DFA did not allege any vested rights impaired by the application of those procedural
rules.

Heirs of Salas vs Laperal Realty Corporation

CIVIL LAW; OBLIGATIONS AND CONTRACTS; ARBITRATION AGREEMENTS; VALID, BINDING,

ENFORCEABLE AND NOT CONTRARY TO PUBLIC POLICY. — In a catena of cases inspired by Justice
Malcolm's provocative dissent in Vega v. San Carlos Milling Co., this Court has recognized arbitration
agreements as valid, binding, enforceable and not contrary to public policy so much so that when there
obtains a written provision for arbitration which is not complied with, the trial court should suspend the
proceedings and order the parties to proceed to arbitration in accordance with the terms of their
agreement. Arbitration is the "wave of the future" in dispute resolution. To brush aside a contractual
agreement calling for arbitration in case of disagreement between parties would be a step backward.

BINDS PARTIES THERETO AS WELL AS THEIR ASSIGNS AND HEIRS; CASE AT BAR. — A submission to
arbitration is a contract. As such, the Agreement, containing the stipulation on arbitration, binds the
parties thereto, as well as their assigns and heirs. But only they. Petitioners, as heirs of Salas, Jr., and
respondent Laperal Realty are certainly bound by the Agreement. If respondent Laperal Realty had
assigned its rights under the Agreement to a third party, making the former, the assignor, and the latter,
the assignee, such assignee would also be bound by the arbitration provision since assignment involves
such transfer of rights as to vest in the assignee the power to enforce them to the same extent as the
assignor could have enforced them against the debtor or in this case, against the heirs of the original party
to the Agreement.

Home Bankers Savings and Trust Company vs CA

REMEDIAL LAW; ACTIONS; REPUBLIC ACT NO. 876 (ARBITRATION LAW); ALLOWS PARTY IN
ARBITRATION PROCEEDING TO PETITION COURT TO TAKE MEASURES TO SAFEGUARD AND/OR
CONSERVE ANY MATTER SUBJECT OF ARBITRATION. — Section 14 of Republic Act 876, otherwise known
as the Arbitration Law, allows any party to the arbitration proceeding to petition the court to take
measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration.
Section 14 simply grants an arbitrator the power to issue subpoena and subpoena duces tecum at any
time before rendering the award. The exercise of such power is without prejudice to the right of a party
to file a petition in court to safeguard any matter which is the subject of the dispute in arbitration. In the
case at bar, private respondent ;led an action for a sum of money with prayer for a writ of preliminary
attachment. Undoubtedly, such action involved the same subject matter as that in arbitration, i.e., the
sum of P25,200,000.00 which was allegedly deprived from private respondent in what is known in banking
as a "kiting scheme." However, the civil action was not a simple case of a money claim since private
respondent has included a prayer for a writ of preliminary attachment, which is sanctioned by Section 14
of the Arbitration Law.

RULING IN ASSOCIATED BANK VS. COURT OF APPEALS (233 SCRA 137), NOT APPLICABLE TO CASE AT
BAR. — In Associated Bank, we affirmed the dismissal of the third-party complaint ;led by Associated Bank
against Philippine Commercial International Bank, Far East Bank & Trust Company, Security Bank and Trust
Company and City trust Banking Corporation for lack of jurisdiction, it being shown that the said parties
were bound by the Clearing House Rules and Regulations on Arbitration of the Philippine Clearing House
Corporation. Simply put, participants in the regional clearing operations of the Philippine Clearing House
Corporation cannot bypass the arbitration process laid out by the body and seek relief directly from the
courts. In the case at bar, undeniably, private respondent has initiated arbitration proceedings as required
by the PCHC rules and regulations, and pending arbitration has sought relief from the trial court for
measures to safeguard and/or conserve the subject of the dispute under arbitration, as sanctioned by
Section 14 of the Arbitration Law, and otherwise not shown to be contrary to the PCHC rules and
regulations.
RULING IN PUROMINES, INC. VS. COURT OF APPEALS (220 SCRA 281), ALSO NOT APPLICABLE TO CASE
AT BAR. — Likewise, in the case of Puromines, Inc. vs. Court of Appeals, we have ruled that: "In any case,
whether the liability of respondent should be based on the sales contract or that of the bill of lading, the
parties are nevertheless obligated to respect the arbitration provisions on the sales contract and/or bill of
lading. Petitioner being a signatory and party to the sales contract cannot escape from his obligation under
the arbitration clause as stated therein." In Puromines, we found the arbitration clause stated in the sales
contract to be valid and applicable, thus, we ruled that the parties, being signatories to the sales contract,
are obligated to respect the arbitration provisions on the contract and cannot escape from such obligation
by ;ling an action for breach of contract in court without resorting first to arbitration, as agreed upon by
the parties.

ARBITRATION, AS AN ALTERNATIVE METHOD OF DISPUTE RESOLUTION, ENCOURAGED BY THIS COURT. —

At this point, we emphasize that arbitration, as an alternative method of dispute resolution, is encouraged
by this Court. Aside from unclogging judicial dockets, it also hastens solutions especially of commercial
disputes. The Court looks with favor upon such amicable arrangement and will only interfere with great
reluctance to anticipate or nullify the action of the arbitrator.

LM Power Engineering Corp vs Capitol Industrial Construction Groups

LABOR AND SOCIAL LEGISLATION; LABOR RELATIONS; VOLUNTARY ARBITRATION; ARBITRATION

CLAUSES SHOULD BE LIBERALLY CONSTRUED. — Being an inexpensive, speedy and amicable method of
settling disputes, arbitration — along with mediation, conciliation and negotiation — is encouraged by
the Supreme Court. Aside from unclogging judicial dockets, arbitration also hastens the resolution of
disputes, especially of the commercial kind. It is thus regarded as the "wave of the future" in international
civil and commercial disputes. Brushing aside a contractual agreement calling for arbitration between the
parties would be a step backward. Consistent with the above-mentioned policy of encouraging alternative
dispute resolution methods, courts should liberally construe arbitration clauses. Provided such clause is
susceptible of an interpretation that covers the asserted dispute, an order to arbitrate should be granted.
Any doubt should be resolved in favor of arbitration.

RESOLUTION OF TECHNICAL DISCREPANCIES ARE BETTER LEFT TO AN ARBITRAL BODY; CASE AT BAR. —
Clearly, the resolution of the dispute between the parties herein requires a referral to the provisions of
their Agreement. Within the scope of the arbitration clause are discrepancies as to the amount of
advances and billable accomplishments, the application of the provision on termination, and the
consequent setoff of expenses. A review of the factual allegations of the parties reveals that they differ
on the following questions: (1) Did a take-over/termination occur? (2) May the expenses incurred by
respondent in the take-over be set off against the amounts it owed petitioner? (3) How much were the
advances and billable accomplishments? The resolution of the foregoing issues lies in the interpretation
of the provisions of the Agreement. . . . The instant case involves technical discrepancies that are better
left to an arbitral body that has expertise in those areas.

ID.; ID.; ID.; CONSTRUCTION INDUSTRY ARBITRATION COMMISSION (CIAC); HAS JURISDICTION TO
DECIDE A CONSTRUCTION DISPUTE WHEN CONSTRUCTION CONTRACT HAS AN ARBITRAL CLAUSE; CASE
AT BAR. — Section 1 of Article II of the old Rules of Procedure Governing Construction Arbitration indeed
required the submission of a request for arbitration. . . On the other hand, Section 1 of Article III of the
new Rules of Procedure Governing Construction Arbitration has dispensed with this requirement and
recourse to the CIAC may now be availed of whenever a contract "contains a clause for the submission of
a future controversy to arbitration,". . . Clearly, there is no more need to FIle a request with the CIAC in
order to vest it with jurisdiction to decide a construction dispute.

PARTIES ARE EXPECTED TO ABIDE BY THE ARBITRAL CLAUSE IN GOOD FAITH; CASE AT BAR. — The
arbitral clause in the Agreement is a commitment on the part of the parties to submit to arbitration the
disputes covered therein. Because that clause is binding, they are expected to abide by it in good faith.
And because it covers the dispute between the parties in the present case, either of them may compel
the other to arbitrate. Since petitioner has already filed a Complaint with the RTC without prior recourse
to arbitration, the proper procedure to enable the CIAC to decide on the dispute is to request the stay or
suspension of such action, as provided under RA 876 [the Arbitration Law].

Luzon Iron Development Corp vs Bridestone Mining and Development Corp.

Thus, consistent with the state policy of favoring arbitration, the present TPAA must be construed in such
a manner that would give life to the arbitration clause rather than defeat it, if such interpretation is
permissible. With this in mind, the Court views the interpretation forwarded by the petitioners as more
in line with the state policy favoring arbitration.

Paragraphs 14.8 and 15.1 of the TPAA should be harmonized in such a way that the arbitration clause is
given life, especially since such construction is possible in the case at bench. A synchronized reading of
the abovementioned TPAA provisions will show that a claim or action raising the sufficiency, validity,
legality or constitutionality of: (a) the assignments of the EP to Luzon Iron; (b) any other assignments
contemplated by the TPAA; or (c) any agreement to which the EPs may be converted, may be instituted
only when there is a direct and/or blatant violation of the TPAA. In turn, the said action or claim is
commenced by proceeding with arbitration, as espoused in the TPAA.

The Court disagrees with the respondents that Paragraph 14.8 of the TPAA should be construed as an
exception to the arbitration clause where direct court action may be resorted to in case of direct and/or
blatant violation of the TPAA occurs. If such interpretation is to be espoused, the arbitration clause would
be rendered inutile as practically all matters may be directly brought before the courts. Such construction
is anathema to the policy favoring arbitration.

A closer perusal of the TPAA will also reveal that paragraph 14 and all its sub--paragraphs are general
provisions, whereas paragraphs 15 and all its sub-­­clauses specifically refer to arbitration. When general
and specific provisions are inconsistent, the specific provision shall be paramount and govern the general
provision.

Steamship Mutual Underwriting Association vs Sulpicio Lines

ARBITRATION AGREEMENT LIBERALLY CONTRUED. 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'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. The arbitration clause is found
in Rule 47 of the 2005/2006 Club Rules

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.”

ARBITRATION AGREEMENT. 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.

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

DPWH vs CMC/Monark/Pacific/Hi-tri Joint Venture

CONSTRUCTION INDUSTRY AUTHORITY OF THE PHILIPPINES. CIAC was created under Executive Order
No. 1008, or the "Construction Industry Arbitration Law." It was originally under the administrative
supervision of the Philippine Domestic Construction Board which, in turn, was an implementing agency
of the Construction Industry Authority of the Philippines. 60 The Construction Industry Authority of the
Philippines is presently a part of the Department of Trade and Industry as an attached agency.

CIAC's specific purpose is the "early and expeditious settlement of disputes" 62 in the construction
industry as a recognition of the industry's role in "the furtherance of national development goals." 63

Section 4 of the Construction Industry Arbitration Law lays out 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.

TYPES OF ARBITRATION. In distinguishing between commercial arbitration, voluntary arbitration under

Article 219 (14) of the Labor Code, 66 and construction arbitration, Freuhauf Electronics Philippines
Corporation v. Technology Electronics Assembly and Management Pacific ruled that commercial arbitral
tribunals are purely ad hoc bodies operating through contractual consent, hence, they are not quasi-
judicial agencies. In contrast, voluntary arbitration under the Labor Code and construction arbitration
derive their authority from statute in recognition of the public interest inherent in their respective
spheres. Furthermore, voluntary arbitration under the Labor Code and construction arbitration exist
independently of the will of the contracting parties:

Voluntary Arbitrators resolve labor disputes and grievances arising from the interpretation of Collective
Bargaining Agreements. These disputes were specifically excluded from the coverage of both the
Arbitration Law and the ADR Law.

Unlike purely commercial relationships, the relationship between capital and labor are heavily impressed
with public interest. Because of this, Voluntary Arbitrators authorized to resolve labor disputes have been
clothed with quasi-judicial authority.

On the other hand, commercial relationships covered by our commercial arbitration laws are purely
private and contractual in nature. Unlike labor relationships, they do not possess the same compelling
state interest that would justify state interference into the autonomy of contracts. Hence, commercial
arbitration is a purely private system of adjudication facilitated by private.
BCDA vs DMCI
Arbitration agreements are liberally construed in favor of proceeding to arbitration. We adopt the
interpretation that would render effective an arbitration clause if the terms of the agreement allow for
such interpretation. Hence, we resolve the issue of whether DMCI-­­PDI may compel BCDA and Northrail
to submit to arbitration proceedings in light of the policy in favor of arbitration.

Fruehaf vs Technology

An Arbitral Tribunal does not exercise quasi-judicial powers. Quasi-judicial or administrative

adjudicatory power is 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. Quasi-judicial power is only exercised by administrative agencies —
legal organs of the government.

Quasi-judicial bodies can only exercise such powers and jurisdiction as are expressly or by necessary
implication conferred upon them by their enabling statutes. Like courts, a quasi-judicial body's
jurisdiction over a subject matter is conferred by law and exists independently from the will of the
parties. As government organs necessary for an effective legal system, a quasi-judicial tribunal's legal
existence continues beyond the resolution of a specific dispute. In other words, quasi-judicial bodies are
creatures of law .

As a contractual and consensual body, the arbitral tribunal does not have any inherent powers over the
parties. It has no power to issue coercive writs or compulsory processes. Thus, there is a need to resort
to the regular courts for interim measures of protection 82 and for the recognition or enforcement of
the arbitral award.

The arbitral tribunal acquires jurisdiction over the parties and the subject matter through stipulation.
Upon the rendition of the final award, the tribunal becomes functus officio and — save for a few
exceptions — ceases to have any further jurisdiction over the dispute. The tribunal's powers (or in the
case of ad hoc tribunals, their very existence) stem from the obligatory force of the arbitration
agreement and its ancillary stipulations. 86 Simply put, an arbitral tribunal is a creature of contract .

JUDICAL RESTRAINT. Upholding the CA's ruling would weaken our alternative dispute resolution
mechanisms by allowing the courts to "throw their weight around" whenever they disagree with the
results. It erodes the obligatory force of arbitration agreements by allowing the losing parties to "forum
shop" for a more favorable ruling from the judiciary.

Whether or not the arbitral tribunal correctly passed upon the issues is irrelevant. Regardless of the
amount of the sum involved in a case, a simple error of law remains a simple error of law. Courts are
precluded from revising the award in a particular way, revisiting the tribunal's findings of fact or
conclusions of law, or otherwise encroaching upon the independence of an arbitral tribunal.

In other words, simple errors of fact, of law, or of fact and law committed by the arbitral tribunal are not
justiciable errors in this jurisdiction.
TEAM agreed to submit their disputes to an arbitral tribunal. It understood all the risks — including the
absence of an appeal mechanism — and found that its benefits (both legal and economic) outweighed
the disadvantages. Without a showing that any of the grounds to vacate the award exists or that the
same amounts to a violation of an overriding public policy, the award is subject to confirmation as a
matter of course.

APPEAL. The right to an appeal is neither a natural right nor an indispensable component of due process;
it is a mere statutory privilege that cannot be invoked in the absence of an enabling statute. Neither the
Arbitration Law nor the ADR Law allows a losing party to appeal from the arbitral award. The statutory
absence of an appeal mechanism reflects the State's policy of upholding the autonomy of arbitration
proceedings and their corresponding arbitral awards.

This Court recognized this when we enacted the Special Rules of Court on Alternative Dispute Resolution
in 2009:

Rule 2.1. General policies. — It is the policy of the State to actively promote the use of various
modes of ADR and to respect party autonomy or the freedom of the parties to make their own
arrangements in the resolution of disputes with the greatest cooperation of and the least
intervention from the courts. Xxx
The Court shall exercise the power of judicial review as provided by these Special ADR Rules.
Courts shall intervene only in the cases allowed by law or these Special ADR Rules.

xxx xxx xxx Rule 19.7. No appeal or certiorari on the merits of an arbitral award. — An agreement
to refer a dispute to arbitration shall mean that the arbitral award shall be final and binding.
Consequently, a party to an arbitration is precluded from filing an appeal or a petition for
certiorari questioning the merits of an arbitral award

EXCEPTIONS TO AUTONOMY OF ARBITRATION. Nonetheless, an arbitral award is not absolute. Rule 19.10
of the Special ADR Rules — by referring to Section 24 of the Arbitration Law and Article 34 of the 1985
United Nations Commission on International Trade Law (UNCITRAL) Model Law recognizes the very
limited exceptions to the autonomy of arbitral awards:

Rule 19.10. Rule on judicial review on arbitration in the Philippines. — As a general rule, the court
can only vacate or set aside the decision of an arbitral tribunal upon a clear showing that the
award suffers from any of the infirmities or grounds for vacating an arbitral award under Section
24 of Republic Act No. 876 or under Rule 34 of the Model Law in a domestic arbitration , or for
setting aside an award in an international arbitration under Article 34 of the Model Law, or for
such other grounds provided under these Special Rules.

If the Regional Trial Court is asked to set aside an arbitral award in a domestic or international
arbitration on any ground other than those provided in the Special ADR Rules , the court shall
entertain such ground for the setting aside or non-recognition of the arbitral award only if the
same amounts to a violation of public policy.
 The court shall not set aside or vacate the award of the arbitral tribunal merely on the ground
that the arbitral tribunal committed errors of fact, or of law, or of fact and law, as the court cannot
substitute its judgment for that of the arbitral tribunal.

GROUNDS FOR VACATING DOMESTIC ARBITRATION AWARD. The grounds for vacating a domestic
arbitral award under Section 24 of the Arbitration Law contemplate the following scenarios:
1. when the award is procured by corruption, fraud, or other undue means;
2. there was evident partiality or corruption in the arbitrators or any of them;
3. the arbitrators were guilty of misconduct that materially prejudiced the rights of any party;
or
4. 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

The award may also be vacated if an arbitrator who was disqualified to act willfully refrained from
disclosing his disqualification to the parties. Notably, none of these grounds pertain to the correctness of
the award but relate to the misconduct of arbitrators.

GROUNDS FOR SETTING ASIDE ARBITRATION AWARD. The grounds for vacating a domestic arbitral
award under Section 24 of the Arbitration Law contemplate the following scenarios:
5. when the award is procured by corruption, fraud, or other undue means;
6. there was evident partiality or corruption in the arbitrators or any of them;
7. the arbitrators were guilty of misconduct that materially prejudiced the rights of any party;
or
8. 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

The award may also be vacated if an arbitrator who was disqualified to act willfully refrained from
disclosing his disqualification to the parties. Notably, none of these grounds pertain to the correctness of
the award but relate to the misconduct of arbitrators.

The RTC may also set aside the arbitral award based on Article 34 of the UNCITRAL Model Law. These
grounds are reproduced in Chapter 4 of the Implementing Rules and Regulations (IRR) of the 2004 ADR
Act:

I. the party making the application furnishes proof that:

1. a party to the arbitration agreement was 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 Philippines; or
2. the party making the application was not given proper notice of the appointment of
an arbitrator or of the arbitral proceedings or was otherwise unable to present his
case; or
3. the award deals with a dispute not contemplated by or not falling within the terms
of the submission to arbitration, or 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, only the part of the
award which contains decisions on matters not submitted to arbitration may be set
aside; or
 4. the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties, unless such agreement was in conflict
with a provision of ADR Act from which the parties cannot derogate, or, failing such
agreement, was not in accordance with ADR Act; or

II. The Court finds that:

1. the subject-matter of the dispute is not capable of settlement by arbitration under
the law of the Philippines ; or
2. the award is in conflict with the public policy of the Philippines.

Chapter 4 of the IRR of the ADR Act applies particularly to International Commercial Arbitration. However,
the abovementioned grounds taken from the UNCITRAL Model Law are specifically made applicable to
domestic arbitration by the Special ADR Rules.

Notably, these grounds are not concerned with the correctness of the award; they go into the validity of
the arbitration agreement or the regularity of the arbitration proceedings.

RULE 43 AND RULE 65. NOT THE RIGHT MODE OF APPEAL.. As established earlier, an arbitral award is not
appealable via Rule 43 because: (1) there is no statutory basis for an appeal from the final award of
arbitrators; (2) arbitrators are not quasi-judicial bodies; and (3) the Special ADR Rules specifically prohibit
the filing of an appeal to question the merits of an arbitral award.

The Special ADR Rules allow the RTC to correct or modify an arbitral award pursuant to Section 25 of the
Arbitration Law. However, this authority cannot be interpreted as jurisdiction to review the merits of the
award. The RTC can modify or correct the award only in the following cases:
1. Where there was an evident miscalculation of figures or an evident mistake in the description
of any person, thing or property referred to in the award;
2. Where the arbitrators have awarded upon a matter not submitted to them, not affecting the
merits of the decision upon the matter submitted;
3. Where the arbitrators have omitted to resolve an issue submitted to them for resolution; or
4. Where the award is imperfect in a matter of form not affecting the merits of the controversy,
and if it had been a commissioner's report, the defect could have been amended or
disregarded by the Court.

A losing party is likewise precluded from resorting to certiorari under Rule 65 of the Rules of Court.
Certiorari is a prerogative writ designed to correct errors of jurisdiction committed by a judicial or quasi-
judicial body.

Lastly, the Special ADR Rules are a self-contained body of rules. The parties cannot invoke remedies and
other provisions from the Rules of Court unless they were incorporated in the Special ADR Rules:

Rule 22.1. Applicability of Rules of Court. — The provisions of the Rules of Court that are applicable
to the proceedings enumerated in Rule 1.1 of these Special ADR Rules have either been included
and incorporated in these Special ADR Rules or specifically referred to herein .

In Connection with the above proceedings, the Rules of Evidence shall be liberally construed to achieve
the objectives of the Special ADR Rules.
Thus, a losing party cannot assail an arbitral award through a petition for review under Rule 43 or a
petition for certiorari under Rule 65 because these remedies are not specifically permitted in the Special
ADR Rules.

In sum, the only remedy against a final domestic arbitral award is to file petition to vacate or to
modify/correct the award not later than thirty (30) days from the receipt of the award. Unless a ground
to vacate has been established, the RTC must confirm the arbitral award as a matter of course.

CORRECTNESS OR INCORRECTNESS OF ARBITRATION AWARD. We have deliberately refrained from

passing upon the merits of the arbitral award — not because the award was erroneous — but because it
would be improper. None of the grounds to vacate an arbitral award are present in this case and as already
established, the merits of the award cannot be reviewed by the courts.

There is no law granting the judiciary authority to review the merits of an arbitral award would be
tantamount to expanding our jurisdiction without the benefit of legislation. This translates to judicial
legislation — a breach of the fundamental principle of separation of powers.

Whether or not the arbitral tribunal correctly passed upon the issues is irrelevant. Regardless of the
amount of the sum involved in a case, a simple error of law remains a simple error of law. Courts are
precluded from revising the award in a particular way, revisiting the tribunal's findings of fact or
conclusions of law, or otherwise encroaching upon the independence of an arbitral tribunal.

l tribunal are not justiciable errors in this jurisdiction.

Lanuza vs BF Corp

As a general rule, therefore, a corporation's representative who did not personally bind himself or herself
to an arbitration agreement cannot be forced to participate in arbitration proceedings made pursuant to
an agreement entered into by the corporation. He or she is... generally not considered a party to that
agreement.

However, there are instances when the distinction between personalities of directors, officers, and
representatives, and of the corporation, are disregarded. We call this piercing the veil of corporate fiction.

Piercing the corporate veil is warranted when "[the separate personality of a corporation] is used as a
means to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, or to confuse legitimate... issues."

It is also warranted in alter ego cases "where a corporation is merely a farce since it is a mere alter ego or
business conduit of a person, or where the corporation is so organized and controlled and its affairs are
so conducted as to make it... merely an instrumentality, agency, conduit or adjunct of another
corporation."
When corporate veil is pierced, the corporation and persons who are normally treated as distinct from
the corporation are treated as one person, such that when the corporation is adjudged liable, these
persons, too, become liable as if they were the corporation.

Koppel vs Makati Rotary

REFEREAL TO ADR. Section 24 of R.A. No. 9285 reads: SEC. 24. Referral to Arbitration . — A court before
which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if at
least one party so requests not later that the pre-trial conference, or upon the request of both parties
thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is null and void,
inoperative or incapable of being performed. [Emphasis ours; italics original]

The "request" referred to in the above provision is, in turn, implemented by Rules 4.1 to 4.3 of A.M. No.
07-11-08-SC or the Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules):

RULE 4: REFERRAL TO ADR

Rule 4.1. Who makes the request. — A party to a pending action Fled in violation of the arbitration
agreement, whether contained in an arbitration clause or in a submission agreement, may
request the court to refer the parties to arbitration in accordance with such agreement.

Rule 4.2. When to make request. —

(A) Where the arbitration agreement exists before the action is filed. — The request for referral
shall be made not later than the pre-trial conference. After the pre-trial conference, the court will
only act upon the request for referral if it is made with the agreement of all parties to the case.

(B)Submission agreement. — If there is no existing arbitration agreement at the time the case is
filed but the parties subsequently enter into an arbitration agreement, they may request the court
to refer their dispute to arbitration at any time during the proceedings.

Rule 4.3. Contents of request. — The request for referral shall be in the form of a motion, which
shall state that the dispute is covered by an arbitration agreement.

Apart from other submissions, the movant shall attach to his motion an authentic copy of the arbitration
agreement.

The request shall contain a notice of hearing addressed to all parties specifying the date and time when it
would be heard. The party making the request shall serve it upon the respondent to give him the
opportunity to file a comment or opposition as provided in the immediately succeeding Rule before the
hearing. [Emphasis ours; italics original]

Attention must be paid, however, to the salient wordings of Rule 4.1. It reads: "[a] party to a pending
action filed in violation of the arbitration agreement . . . may request the court to refer the parties to
arbitration in accordance with such agreement."
In using the word "may" to qualify the act of filing a "request" under Section 24 of R.A. No. 9285, the
Special ADR Rules clearly did not intend to limit the invocation of an arbitration agreement in a pending
suit solely via such "request." After all, non-compliance with an arbitration agreement is a valid defense
to any offending suit and, as such, may even be raised in an answer as provided in our ordinary rules of
procedure.

JUDICIAL DISPUTE RESOLUTION NOT A BAR TO ARBITRATION. The JDR framework is based on the
processes of mediation, conciliation o r early neutral evaluation which entails the submission of a dispute
before a "JDR judge" who shall merely "facilitate settlement" between the parties in conflict or make a
"non-binding evaluation or assessment of the chances of each party's case." 98 Thus in JDR, the JDR judge
lacks the authority to render a resolution of the dispute that is binding upon the parties in conflict. In
arbitration, on the other hand, the dispute is submitted to an arbitrator/s — a neutral third person or a
group of thereof — who shall have the authority to render a resolution binding upon the parties.

Clearly, the mere submission of a dispute to JDR proceedings would not necessarily render the subsequent
conduct of arbitration a mere surplusage. The failure of the parties in conflict to reach an amicable
settlement before the JDR may, in fact, be supplemented by their resort to arbitration where a binding
resolution to the dispute could finally be achieved. This situation precisely finds application to the case at
bench.

A pivotal feature of arbitration as an alternative mode of dispute resolution is that it is, fitst and foremost,
a product of party autonomy or the freedom of the parties to "make their own arrangements to resolve
their own disputes." 100 Arbitration agreements manifest not only the desire of the parties in conflict for
an expeditious resolution of their dispute. They also represent, if not more so, the parties' mutual
aspiration to achieve such resolution outside of judicial auspices, in a more informal and less antagonistic
environment under the terms of their choosing. Needless to state, this critical feature can never be
satisfied in an ejectment case no matter how summary it may be.

Korea vs Lerma

The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance
with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is not
contrary to public policy. This Court has sanctioned the validity of arbitration clauses in a catena of cases.
In the 1957 case of Eastboard Navigation Ltd. v. Juan Ysmael and Co., Inc. , this Court had occasion to rule
that an arbitration clause to resolve differences and breaches of mutually agreed contractual terms is
valid. In BF Corporation v. Court of Appeals , we held that "[i]n this jurisdiction, arbitration has been held
valid and constitutional. Even before the approval on June 19, 1953 of Republic Act No. 876, this Court
has countenanced the settlement of disputes through arbitration. Republic Act No. 876 was adopted to
supplement the New Civil Code's provisions on arbitration."\

Having said that the instant arbitration clause is not against public policy, we come to the question on
what governs an arbitration clause specifying that in case of any dispute arising from the contract, an
arbitral panel will be constituted in a foreign country and the arbitration rules of the foreign country would
govern and its award shall be final and binding.
Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the
following:

(1) The RTC must refer to arbitration in proper cases

Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of arbitration
pursuant to an arbitration clause, and mandates the referral to arbitration in such cases

(2) Foreign arbitral awards must be confirmed by the RTC

Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final and
binding are not immediately enforceable or cannot be implemented immediately. Sec. 35 43 of the
UNCITRAL Model Law stipulates the requirement for the arbitral award to be recognized by a competent
court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may refuse recognition or
enforcement on the grounds provided for. RA 9285 incorporated these provisos to Secs. 42, 43, and 44
relative to Secs. 47 and 48

Grounds for judicial review different in domestic and foreign arbitral awards. For foreign or international
arbitral awards which must first be confirmed by the RTC, the grounds for setting aside, rejecting or
vacating the award by the RTC are provided under Art. 34 (2) of the UNCITRAL Model Law.

For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA 876
and shall be recognized as final and executory decisions of the RTC, 45 they may only be assailed before
the RTC and vacated on the grounds provided under Sec. 25 of RA 876.

RTC decision of assailed foreign arbitral award appealable

• Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in
cases where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award
• Thereafter, the CA decision may further be appealed or reviewed before this Court through a
petition for review under Rule 45 of the Rules of Court.

Gonzales vs Climax

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 part comes to an end.

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.
Del Monte

The Agreement between petitioner DMC-USA and private respondent MMI is a contract. The provision to
submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that
contract and is itself a contract. As a rule, contracts are respected as the law between the contracting
parties and produce effect as between them, their assigns and heirs. Clearly, only parties to the
Agreement, i.e., petitioners DMC-USA and its Managing Director for Export Sales Paul E. Derby, Jr., and
private respondents MMI and its Managing Director LILY SY are bound by the Agreement and its
arbitration clause as they are the only signatories thereto. Petitioners Daniel Collins and Luis Hidalgo, and
private respondent SFI, not parties to the Agreement and cannot even be considered assigns or heirs of
the parties, are not bound by the Agreement and the arbitration clause therein. Consequently, referral to
arbitration in the State of California pursuant to the arbitration clause and the suspension of the
proceedings in Civil Case No. 2637-MN pending the return of the arbitral award could be called for but
only as to petitioners DMC-USA and Paul E. Derby, Jr., and private respondents MMI and LILY SY, and not
as to the other parties in this case.

The object of arbitration is to allow the expeditious determination of a dispute. Clearly, the issue before
us could not be speedily and efficiently resolved in its entirety if we allow simultaneous arbitration
proceedings and trial, or suspension of trial pending arbitration. Accordingly, the interest of justice would
only be served if the trial court hears and adjudicates the case in a single and complete proceeding.

CIVIL LAW; SPECIAL CONTRACTS; ARBITRATION; VALID AND CONSTITUTIONAL. — There is no doubt
that arbitration is valid and constitutional in our jurisdiction. Even before the enactment of RA 876, this
Court has countenanced the settlement of disputes through arbitration. Unless the agreement is such as
absolutely to close the doors of the courts against the parties, which agreement would be void, the
courts will look with favor upon such amicable arrangement and will only interfere with great reluctance
to anticipate or nullify the action of the arbitrator. Moreover, as RA 876 expressly authorizes arbitration
of domestic disputes, foreign arbitration as a system of settling commercial disputes was likewise
recognized when the Philippines adhered to the United Nations "Convention on the Recognition and the
Enforcement of Foreign Arbitral Awards of 1958" under the 10 May 1965 Resolution No. 71 of the
Philippine Senate, giving reciprocal recognition and allowing enforcement of international arbitration
agreements between parties of different nationalities within a contracting state.

OBLIGATIONS AND CONTRACTS; CONTRACT, LAW BETWEEN PARTIES, THEIR ASSIGNS AND HEIRS; CASE
AT BAR. — The provision to submit to arbitration any dispute arising therefrom and the relationship of
the parties is part of that contract and is itself a contract. As a rule, contracts are respected as the law
between the contracting parties and produce effect as between them, their assigns and heirs. Clearly,
only parties to the Agreement, i.e., petitioners DMC-USA and its Managing Director for Export Sales Paul
E. Derby, Jr., and private respondents MMI and its Managing Director LILY SY are bound by the
Agreement and its arbitration clause as they are the only signatories thereto. Petitioners Daniel Collins
and Luis Hidalgo, and private respondent SFI, not parties to the Agreement and cannot even be
considered assigns or heirs of the parties, are not bound by the Agreement and the arbitration clause
therein. Consequently, referral to arbitration in the State of California pursuant to the arbitration clause
and the suspension of the proceedings in Civil Case No. 2637-MN pending the return of the arbitral
award could be called for but only as to petitioners DMC-USA and Paul E. Derby, Jr., and private
respondents MMI and LILY SY, and not as to the other parties in this case, in accordance with the recent
case of Heirs of Augusto L. Salas, Jr. v. Laperal Realty Corporation , which superseded that of Toyota
Motor Philippines Corp. v. Court of Appeals.

SPECIAL CONTRACTS; ARBITRATION; DISPENSED WITHIN THE INTEREST OF JUSTICE. — The object of
arbitration is to allow the expeditious determination of a dispute. Clearly, the issue before us could not
be speedily and efficiently resolved in its entirety if we allow simultaneous arbitration proceedings and
trial, or suspension of trial pending arbitration. Accordingly, the interest of justice would only be served
if the trial court hears and adjudicates the case in a single and complete proceeding.

Sea-land vs CA

In the light of the Agreement clauses aforequoted, it is clear that arbitration is the mode provided by
which respondent AMML as Principal Carrier can seek damages and/or indemnity from petitioner, as
Containership Operator. Stated differently, respondent AMML is barred from taking judicial action against
petitioner by the clear terms of their Agreement.

As the Principal Carrier with which Florex directly dealt with, respondent AMML can and should be held
accountable by Florex in the event that it has a valid claim against the former. Pursuant to Clause 16.3 of
the Agreement, respondent AMML, when faced with such a suit "shall use all reasonable endeavours to
defend" itself or "settle such suits for as low a figure as reasonably possible". In turn, respondent AMML
can seek damages and/or indemnity from petitioner as Containership Operator for whatever final
judgment may be adjudged against it under the Complaint of Florex. The crucial point is that collection of
said damages and/or indemnity from petitioner should be by arbitration.

All told, when 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. 11 Arbitration being the mode of
settlement between the parties expressly provided for by their Agreement, the Third Party Complaint
should have been dismissed.

Magellan Capital vs Zosa

From the foregoing arbitration clause, it appears that the two (2) defendants [petitioners] (MCMC and
MCHC) have one (1) arbitrator each to compose the panel of three (3) arbitrators. As the defendant MCMC
is the Manager of defendant MCHC, its decision or vote in the arbitration proceeding would naturally and
certainly be in favor of its employer and the defendant MCHC would have to protect and preserve its own
interest; hence, the two (2) votes of both defendants (MCMC and MCHC) would certainly be against the
lone arbitrator for the plaintiff [herein defendant]. Hence, apparently, plaintiff [defendant] would never
get or receive justice and fairness in the arbitration proceedings from the panel of arbitrators as provided
in the aforequoted arbitration clause. In fairness and justice to the plaintiff [defendant], the two
defendants (MCMC and MCHC) [herein petitioners] which represent the same interest should be
considered as one and should be entitled to only one arbitrator to represent them in the arbitration
proceedings. Accordingly, the arbitration clause, insofar as the composition of the panel of arbitrators is
concerned should be declared void and of no effect, because the law says, “Any clause giving one of the
parties power to choose more arbitrators than the other is void and of no effect” (Article 2045, Civil Code).

“The dispute or controversy between the defendants (MCMC and MCHC) [herein petitioners] and the
plaintiff [herein defendant] should be settled in the arbitration proceeding in accordance with the
Employment Agreement, but under the panel of three (3) arbitrators, one (1) arbitrator to represent the
plaintiff, one (1) arbitrator to represent both defendants (MCMC and MCHC) [herein petitioners] and the
third arbitrator to be chosen by the plaintiff [defendant Zosa] and defendants [petitioners].

We need only to emphasize in closing that arbitration proceedings are designed to level the playing field
among the parties in pursuit of a mutually acceptable solution to their conflicting claims. Any arrangement
or scheme that would give undue advantage to a party in the negotiating table is anathema to the very
purpose of arbitration and should, therefore, be resisted.

Cargill vs San Fernando Regala

CIVIL LAW - Arbitration; alternative dispute resolution; contracts 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. 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. 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.

RCBC vs BDO

ERROR OF JUDGEMENT. As a rule, the award of an arbitrator cannot be set aside for mere errors of
judgment either as to the law or as to the facts.Courts are without power to amend or overrule merely
because of disagreement with matters of law or facts determined by the arbitrators.They will not review
the findings of law and fact contained in an award, and will not undertake to substitute their judgment
for that of the arbitrators, since any other rule would make an award the commencement, not the end,
of litigation.Errors of law and fact, or an erroneous decision of matters submitted to the judgment of the
arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial review of an
arbitration is, thus, more limited than judicial review of a trial.

INJUNCTION. Before an injunctive writ can be issued, it is essential that the following requisites are
present: (1) there must be a right inesse or the existence of a right to be protected; and (2) the act against
which injunction to be directed is a violation of such right. The onus probandi is on movant to show that
there exists a right to be protected, which is directly threatened by the act sought to be enjoined. Further,
there must be a showing that the invasion of the right is material and substantial and that there is an
urgent and paramount necessity for the writ to prevent a serious damage.

EVIDENT PARTIALITY. Evident partiality is not defined in our arbitration laws. As one of the grounds for
vacating an arbitral award under the Federal Arbitration Act (FAA) in the United States (US), the term
"encompasses both an arbitrator’s explicit bias toward one party and an arbitrator’s inferred bias when
an arbitrator fails to disclose relevant information to the parties." Issuance of the Second Partial Award
are not in issue here. Courts are generally without power to amend or overrule merely because of
disagreement with matters of law or facts determined by the arbitrators. They will not review the findings
of law and fact contained in an award, and will not undertake to substitute their judgment for that of the
arbitrators. A contrary rule would make an arbitration award the commencement, not the end, of
litigation.101 It is the finding of evident partiality which constitutes legal ground for vacating the Second
Partial Award and not the Arbitration Tribunal’s application of the ICC Rules adopting the "contractual
approach" tackled in Secomb’s article.

ARBITRATION AGREEMENT
BF Corp vs CA

A contract need not be contained in a single writing. It may be collected from several different writings
which do not conflict with each other and which, when connected, show the parties, subject matter, terms
and consideration, as in contracts entered into by correspondence.A contract may be encompassed in
several instruments even though every instrument is not signed by the parties, since it is sufficient if the
unsigned instruments are clearly identified or referred to and made part of the signed instrument or
instruments. Similarly, a written agreement of which there are two copies, one signed by each of the
parties, is binding on both to the same extent as though there had been only one copy of the agreement
and both had signed it.

Philippine Economic Zone vs Edison

The doctrine of separability, or severability as other writers call it, enunciate 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.

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

Bengson vs Chan

DOMESTIC ARBITRATION. SEC. 7. Stay of civil action. -­­ If any suit or proceeding be brought upon an issue
arising out of an agreement providing for the arbitration thereof, the court in which such quit or
proceeding is pending, upon being satisfied that the issue involved in such suit or proceeding is referable
to arbitration, shall stay the action or proceeding until an arbitration has been had in accordance with the
terms of the agreement: Provided, That the applicant for the stay is not in default in proceeding with such
arbitration.

Within the meaning of section 6, the failure of Soledad F. Bengson to resort to arbitration may be regarded
as a refusal to comply with the stipulation for arbitration. And defendants p interposition of the defense
that arbitration is a condition precedent to the institution of a court action may be interpreted as a
petition for an order that arbitration should proceed as contemplated in section 15.

Therefore, instead of dismissing the case, the proceedings therein should be suspended and the parties
should be directed to go through the motions of arbitration at least within a sixty-­­day period. With the
consent of the parties, the trial court may appoint a third arbitrator to prevent a deadlock between the
two arbitrators. In the event that the disputes between the parties could not be settled definitively by
arbitration, then the hearing of the instant case should be resumed.

General Insurance vs Union Insurance

CIVIL LAW; CONTRACT; PROVISION THAT DISPUTES ARISING FROM AGREEMENTS MUST BE SUBMITTED
TO ARBITRATIONS GIVEN EFFECT IN CASE AT BAR. — A cursory reading of the petitions (complaints) in
the trial court and the answers thereto will readily reveal that indeed, a valid controversy existed between
the parties, which is a proper subject for arbitration. The two (2) civil cases brought by herein respondents
alleged that there was still some amount payable in pounds sterling due to it from the herein petitioner.
This allegation was denied by petitioner in its answer. Since it was not disputed that in both the First
Surplus Reinsurance Agreement and the Retrocession Quota Share Fire Pool Agreement the parties had
agreed that any dispute arising from these agreements shall be referred to a set of arbitrators, the trial
court correctly ordered the parties to submit to arbitration. The language of the reinsurance contract on
arbitration of any dispute between them which may arise before or after the termination of the
agreement is clear, (Article XII of the Reinsurance Agreement). In the case of Mindanao Portland Cement
Corp. v. Mc Donough Construction Co. of Florida, L- 23390, April 24, 1967, (19 SCRA 814, 815), We ruled
that where there is an agreement to arbitrate and one party puts up a claim which the other disputes, the
need to arbitrate is imperative.

REMEDIAL LAW; CIVIL PROCEDURE; MOTION TO DISMISS; DEFENSES AND OBJECTIONS NOT PLEADED
THEREIN OR IN THE ANSWER ARE DEEMED WAIVED. — Petitioner's invocation of R.A. 529 as a defense
was raised for the first time only in its memorandum. It is a basic rule in procedure that defenses and
objections not pleaded either in a motion to dismiss or in the answer are deemed waived, the only
exceptions recognized under the rule being: 1) a failure to state a cause of action; and 2) lack of jurisdiction
(Sec. 2, Rule 9, Rules of Court).

ENFORCE THE ARBITRATION AGREEMENT. Since there obtains herein a written provision for arbitration
as well as failure on respondent's part to comply therewith, the court a quo rightly ordered the parties to
proceed to arbitration in accordance with the terms of their agreement (Sec. 6, Rep. Act 876).
Respondents' arguments touching upon the merits of the dispute are improperly raised herein. They
should be addressed to the arbitrators. This proceedings is merely a summary remedy to enforce the
agreement to arbitrate. The duty of the court in this case is not to resolve the merits of the parties' claims
but only to determine if they should proceed to arbitration or not. And although it has been ruled that a
frivolous or patently baseless claim should not be ordered to arbitration, it is also recognized that the
mere fact that a defense exists against a claim does not make it frivolous or baseless (Butte Minors' Union
No. 1, et al. v. Anaconda Co., 159 I Supp. 431, affirmed in 267 F. 2d. 941).

Tuna Processing vs. Phil Kingford

FOREIGN CORPORATION NOT LICENSED TO DO BUSINESS IN THE PH CAN SUE FOR ENFORCEMENT OF
FOREIGN AWARD. The petitioner counters, however, that it is entitled to seek for the recognition and
enforcement of the subject foreign arbitral award in accordance with Republic Act No. 9285 (Alternative
Dispute Resolution Act of 2004), the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards drafted during the United Nations Conference on International Commercial Arbitration in 1958
(New York Convention), and the UNCITRAL Model Law on International Commercial Arbitration (Model
Law), as none of these specifically requires that the party seeking for the enforcement should have legal
capacity to sue. It anchors its argument on the following:

In the present case, enforcement has been effectively refused on a ground not found in the [Alternative
Dispute Resolution Act of 2004], New York Convention, or Model Law.It is for this reason that TPI has
brought this matter before this most Honorable Court, as it [i]s imperative to clarify whether the
Philippines’ international obligations and State policy to strengthen arbitration as a means of dispute
resolution may be defeated by misplaced technical considerations not found in the relevant laws.

Pertinent provisions of theSpecial Rules of Court on Alternative Dispute Resolution,31 which was
promulgated by the Supreme Court, likewise support this position.

Rule 13.1 of the Special Rules provides that "[a]ny party to a foreign arbitration may petition the court
to recognize and enforce a foreign arbitral award." The contents of such petition are enumerated in
Rule 13.5.32 Capacity to sue is not included. Oppositely, in the Rule on local arbitral awards or
arbitrations in instances where "the place of arbitration is in the Philippines,"33 it is specifically
required that a petition "to determine any question concerning the existence, validity and
enforceability of such arbitration agreement" 34 available to the parties before the commencement of
arbitration and/or a petition for "judicial relief from the ruling of the arbitral tribunal on a preliminary
question upholding or declining its jurisdiction" 35 after arbitration has already commenced should
state "[t]he facts showing that the persons named as petitioner or respondent have legal capacity to
sue or be sued."36

Indeed, it is in the best interest of justice that in the enforecement of a foreign arbitral award, we deny
availment by the losing party of the rule that bars foreign corporations not licensed to do business in
the Philippines from maintaining a suit in our courts. When a party enters into a contract containing a
foreign arbitration clause and, as in this case, in fact submits itself to arbitration, it becomes bound by
the contract, by the arbitration and by the result of arbitration, conceding thereby the capacity of the
other party to enter into the contract, participate in the arbitration and cause the implementation of
the result.

Clearly, on the matter of capacity to sue, a foreign arbitral award should be respected not because it is
favored over domestic laws and procedures, but because Republic Act No. 9285 has certainly erased any
conflict of law question.

Principle of Kompetenz-Kompetenz
Mabuhay Holdings vs Sembcorp

SPECIAL ADR RULES, RETROACTIVE EFFECT. 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.

KOMPETENZ-KOMPETENZ PRINCIPLE. 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.

Confidential Information
DFA vs BCA

DELIBERATIVE PROCESS PRIVILEGE. "Deliberative process privilege contains three policy bases: first, the
privilege protects candid discussions within an agency; second, it prevents public confusion from
premature disclosure of agency opinions before the agency establishes final policy; and third, it protects
the integrity of an agency's decision; the public should not judge officials based on information they
considered prior to issuing their final decisions." Stated differently, the privilege serves "to assure that
subordinates within an agency will feel free to provide the decision[-]maker with their uninhibited
opinions and recommendations without fear of later being subject to public ridicule or criticism; to protect
against premature disclosure of proposed policies before they have been finally formulated or adopted;
and to protect against confusing the issues and misleading the public by dissemination of documents
suggesting reasons and rationales for a course of action which were not in fact the ultimate reasons for
the agency's action."

Under RA 9285, orders of an arbitral tribunal are appealable to the courts. If an official is compelled to
testify before an arbitral tribunal and the order of an arbitral tribunal is appealed to the courts, such
official can be inhibited by fear of later being subject to public criticism, preventing such official from
making candid discussions within his or her agency. The decision of the court is widely published, including
details involving the privileged information. This disclosure of privileged information can inhibit a public
official from expressing his or her candid opinion. Future quality of deliberative process can be impaired
by undue exposure of the decision-making process to public scrutiny after the court decision is made.

Accordingly, a proceeding in the arbitral tribunal does not prevent the possibility of the purpose of the
privilege being defeated, if it is not allowed to be invoked. In the same manner, the disclosure of an
information covered by the deliberative process privilege to a court arbitrator will defeat the policy bases
and purpose of the privilege.

WAIVER OF DELIBERATIVE PROCESS PRIVILEGE. Thus, the deliberative process privilege cannot be
waived. As we have held in Akbayan v. Aquino, the deliberative process privilege is closely related to the
presidential communications privilege and protects the public disclosure of information that can
compromise the quality of agency decisions:

Closely related to the "presidential communications" privilege is the deliberative process privilege
recognized in the United States. As discussed by the U.S. Supreme Court in NLRB v. Sears, Roebuck & Co,
deliberative process covers documents reflecting advisory opinions, recommendations and deliberations
comprising part of a process by which governmental decisions and policies are formulated. Notably, the
privileged status of such documents rests, not on the need to protect national security but, on the
"obvious realization that officials will not communicate candidly among themselves if each remark is a
potential item of discovery and front page news," the objective of the privilege being to enhance the
quality of agency decisions.

CHAVES VS PUBLIC ESTATE AUTHORITY NOT APPLICABLE. In the present case, considering that the RTC
erred in applying our ruling in Chavez v. Public Estates Authority,and both BCA's and DFA's assertions of
subpoena of evidence and the deliberative process privilege are broad and lack specificity, we will not be
able to determine whether the evidence sought to be produced is covered by the deliberative process
privilege. The parties are directed to specify their claims before the RTC and, thereafter, the RTC shall
determine which evidence is covered by the deliberative process privilege, if there is any, based on the
standards provided in this Decision. It is necessary to consider the circumstances surrounding the demand
for the evidence to determine whether or not its production is injurious to the consultative functions of
government that the privilege of non-disclosure protects.

Federal Express Corp vs Air21

CONFIDENTIAL INFORMATION. Section 3(h) of Republic Act (R.A.) No. 9285 or the Alternative Dispute
Resolution of 2004 (ADR Act) defines confidential information as follows:

"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.

REQUISITES FOR THE APPLICATION OF “CONFIDENTIAL INFO”. 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 x x x 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.

WAIVER OF CONFIDENTIAL INFO. Article 5.42 of the Implementing Rules and Regulations (IRR)[21] 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 [i] with the
consent of the parties; or [ii] for the limited purpose of disclosing to the court relevant documents where
resort to the court is allowed.

“RELATIVE” DEFINITION. 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. 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.

RATIO OF CONFIDENTIAL INFO. 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.

Principle of Separability
Strickland vs EYPLL

Cargill Phil vs San Fernando Regala