Arbitration in the Philippines

Arbitration in the Philippines is governed by three main pieces of legislation. The

New Civil Code (RA 386), the Arbitration Law of 1953 (RA 876), and the Alternative
Dispute Resolution Act of 2004 (RA 9285). Construction is specifically governed by the
Construction Industry Arbitration Law of 1985 (EO 1008). Arbitration in the Philippines is
also governed by the Special Rules of Court on Alternative Dispute Resolution and
Department of Justice (DOJ), promulgated by the Supreme Court and the Department
of Justice, respectively, all of which underscore state policy in favor of arbitration. 
The state support accorded to arbitration is further highlighted by the state policy of
implementing the competence-competence principle, which accords to the arbitral
tribunal the first opportunity or competence to rule on the issue of its own jurisdiction to
decide a dispute submitted to it for decision, including any objection with respect to the
existence or validity of the arbitration agreement. Courts are even mandated to exercise
judicial restraint and defer to the arbitral tribunal in ruling on such issues.  This is in line
with the state policy to respect party autonomy, with the greatest cooperation and least
intervention from the courts.  To this end, court intervention is limited by RA 9285 and
the Special ADR Rules in very specific instances. Where the parties have agreed to
submit their dispute to arbitration, courts shall refer the parties to arbitration bearing in
mind that such arbitration agreement is the law between the parties and that they are
expected to abide by it in good faith.  The state policy favoring arbitration,
notwithstanding, there are a few matters that cannot be subject to arbitration in the
Philippine setting:
 labor disputes covered by the Philippine Labor Code;

 civil status of persons;

 validity of marriage;

 any grounds for legal separation;

 jurisdiction of courts;

 future legitime;

 criminal liability,

 future support; and

 those which by law cannot be compromised. 

Commencing an arbitration proceeding

The principle of party autonomy empowers the parties to agree on the rules
governing the arbitral proceedings. In its absence, domestic arbitration proceedings are
commenced by the serving of a demand for arbitration by either party upon the
other.  Similarly, international arbitration is commenced by sending a request for the
referral of a dispute to arbitration.  In conformity with the state’s pro-arbitration policy,
where a party fails, neglects or refuses to perform an agreement for arbitration, the
aggrieved party may secure a court order directing the parties to proceed to arbitration
in accordance with the terms of the agreement.  In contrast, no such mechanism
appears to be available in international arbitration. Rather, the rules on waiver and
default, which allow the continuation of the arbitral proceedings in the absence of a
party provided that due notice has been given, shall apply.

Court action in breach of an arbitration agreement

Consistent with the pro-arbitration state policy, a party in a pending action in

violation of an arbitration agreement can request the court to refer the parties to
arbitration in accordance with such agreement.  Where such a request for referral to
arbitration is made, the courts shall refer the parties to arbitration, subject only to a
finding that the agreement is null and void, inoperative or incapable of being performed. 
In such a case, the suit or proceeding before the court shall be stayed.   Thus, in one
case, the parties were referred to arbitration upon elevation of the case before the
Supreme Court, notwithstanding the conduct of trial on the merits by the trial court. In
that case, the court emphasized that since the petitioner filed a complaint without prior
recourse to arbitration, the proper procedure to enable the Construction Industry
Arbitration Commission (CIAC) to decide on the dispute is to request the stay or
suspension of such action, as provided under RA 876.  Should a party to an arbitration
agreement question the existence, validity and enforceability of the arbitration
agreement, judicial relief may be sought prior to the commencement of the
arbitration.  The filing of such petition does not prevent the commencement of arbitral
proceedings and requires the courts to make no more than a prima facie determination
of that issue. While the rules provide for judicial relief even in cases where an arbitration
proceeding has been commenced and the arbitral tribunal has ruled upon a preliminary
question on jurisdiction, this does not seem to be at odds with the competence-
competence principle. The Special ADR Rules itself require the courts to exercise
judicial restraint and defer to the competence or jurisdiction of the arbitral tribunal by
allowing the tribunal the first opportunity to rule on such issues.  Moreover, the rules
implement a no injunction policy such that judicial recourse to the court shall not prevent
the arbitral tribunal from continuing the proceedings and rendering its award. In fact,
courts are mandated not to enjoin the arbitration proceedings during the pendency of
the action. 

Selection of and challenge to arbitrators

Party autonomy also extends to the parties’ selection and challenge to

arbitrators, subject to a few restrictions concerning arbitrator qualifications and the
prohibition against any clause giving a party the power to choose more arbitrators than
the other. Where the parties have agreed to submit their dispute to institutional
arbitration rules, and unless they agree otherwise, the institution’s arbitration rules for
the selection and appointment of arbitrators shall be followed. In ad hoc arbitration, and
absent the parties’ agreement on the selection and appointment of arbitrators, the
default appointment shall be made by the national president of the Integrated Bar of the
Philippines or his or her duly authorized representative. This rule appears to have
modified the rule in section 8 of RA 876, providing for the role of courts in the
appointment of arbitrators in domestic arbitration in the absence of the parties’
agreement. As it now stands, courts shall act, as appointing authority, only on specified
grounds.  If an appointed arbitrator does not possess qualifications or circumstances
exist that give rise to justifiable doubts as to an arbitrator’s impartiality or independence,
a party may challenge the appointment of an arbitrator. It bears noting that judicial
recourse in challenging the appointment of an arbitrator may only be had when such
appointing authority fails or refuses to act on the challenge within the proper period. 
In the event of an arbitrator’s failure or impossibility to act, or for other reasons, acts
with undue delay, the arbitrator’s mandate shall terminate upon his or her withdrawal or
upon the parties’ agreement on the termination. As with the other remedies provided
under the Special ADR Rules, the termination of the mandate of an arbitrator in the
aforementioned circumstances may only be sought upon the appointing authority’s
failure or refusal to decide the matter within the proper period. 

Interim measures

Pursuant to the Model Law and RA 9285, requests for interim measure of protection

before a court is not incompatible with an arbitration agreement. In Transfield
Philippines, Inc v Luzon Hydro Corporation, the Supreme Court explicitly recognized
that the pendency of an arbitral proceeding does not foreclose resort to the courts for
provisional reliefs. In such cases, or where the arbitration proceedings have been
initiated, requests for interim measures of protection or modification thereof may only be
made and acted upon by the court to the extent that the arbitral tribunal has no power to
act on any such interim measure, or is unable to act effectively,  or for assistance in
implementing or enforcing an interim measure ordered by an arbitral tribunal.  In
addition to the grounds for the grant of interim measures of protection by courts, an
arbitral tribunal may order any party to take such interim measure of protection as it may
consider necessary in respect of the subject-matter of the dispute. It may also require
any party to provide appropriate security in connection with such measure. On the other
hand, relief for interim measure shall be granted by the courts to prevent irreparable
loss or injury, to provide security for the performance of any obligation, to produce or
preserve any evidence, or to compel any other appropriate act or omission.  On this
score, it is observed that deference is afforded to the tribunal in respect of granting or
denying measures of protection. The Philippine procedural rules provide not only for
deferral of court action on any pending petition for an interim measure where a tribunal
has been constituted, but it also provides that court orders granting or denying interim
measures of protection may be subject to the arbitral tribunal’s subsequent grant,
modification, amendment, revision or revocation. In fact, an interim measure of
protection issued by the arbitral tribunal shall, upon its issuance, be deemed to have
ipso jure modified, amended, revised or revoked an interim measure of protection
previously issued by the court in case of inconsistencies between the two, and any such
inconsistency is within the authority of the arbitral tribunal to decide. 
Domestic arbitration 

Under RA 9285, domestic arbitration shall continue to be governed by RA 876. Further,

RA 9285 incorporates, by specific reference, certain provisions of the Model Law that
likewise apply to domestic arbitration. Under RA 876, any party to the controversy may
apply for an order confirming the domestic arbitral award ‘at any time within one month
after the award is made’.  It is curious to note, however, that under the Special ADR
Rules, a petition to confirm a domestic arbitral award may be filed ‘at any time after the
lapse of 30 days from receipt of the arbitral award’.  A party may also petition the court
to correct or modify the award, which must be filed ‘not later than 30 days from receipt
of the arbitral award’.  Such petition to correct may be included as part of a petition to
confirm the arbitral award or as a petition to confirm that award.  The court may correct
and modify or order the arbitral tribunal to correct and modify the arbitral award in any of
the cases mentioned in the Special ADR Rules. A few points stand out as regards
petitions to correct or modify. First, the Special ADR Rules provide for an additional
ground not found in RA 876: where the arbitrators have omitted to resolve an issue
submitted to them for resolution. Second, it is worth mentioning that the Special ADR
Rules allow the court to ‘order’ the arbitral tribunal to correct and modify the arbitral
award. The petition to vacate a domestic arbitral award may be filed in opposition to a
petition to confirm the arbitral award or it may be filed ahead of any petition to confirm. 
In the latter case, the petition to confirm the arbitral award must be filed, by way of
opposition, to such petition to vacate. Otherwise, the petition to confirm is vulnerable to
a dismissal for violating the rule on forum shopping, unless the court allows
consolidation.  The same rule applies in case a petition to confirm is filed ahead of a
petition to vacate.
In all instances, a petition to vacate shall be filed ‘not later than 30 days from
receipt of the arbitral award’ and any petition filed beyond the 30-day period shall be
dismissed. The dismissal, however, of any petition to vacate filed beyond the
reglementary period shall not result in the dismissal of the petition to confirm filed by
way of opposition. 
The grounds to vacate a domestic arbitral award under RA 876 and Special ADR Rules
differ from the grounds to set aside an arbitral award under Model Law.  There seems to
be no inconsistency since the Special ADR Rules provide that the grounds under the
Model Law can be invoked to vacate a domestic arbitral award.  In deciding the petition
to vacate the arbitral award, the court shall disregard any other ground other not
mentioned except on grounds of public policy. 
The court shall not vacate the award of the arbitral tribunal merely on the ground
that the arbitral tribunal committed errors of fact, of law or of fact and law, as the court
cannot substitute its judgment for that of the arbitral tribunal.  Further, it should be noted
that the failure of the tribunal to rule on matters submitted for their resolution is not a
ground to vacate a domestic arbitral award. Rather, it is a ground to correct and modify
a domestic arbitral award.