Chapter 2: FUNDAMENTALS OF ALTERNATIVE DISPUTE RESOLUTION

Alternative Dispute Resolution (ADR)

I. Definition:
- A system using means and methods allowed by law and approved by the parties without
resorting to court adjudication to resolve or facilitate the resolution of disputes and
controversies between the parties in an expeditious and speedy manner
- Section 3 (a) of R. A. 9285 otherwise known as, “Alternative Dispute Resolution Act of
2004”, ADR means any process or procedure used to resolve a dispute or controversy, other
than by adjudication of a presiding judge of a court or an officer of a government agency, as
defined in this Act, in which a neutral third party participates to assist in the resolution of
issues, which includes the following:

a. Arbitration
- An arrangement for taking and abiding by the judgment of selected persons in
some disputed manner, instead of carrying it to established tribunals of justice
and is intended to avoid the formalities, the delay, the expense and vexation of
ordinary litigation.
- A voluntary dispute resolution process in which one or more arbitrators
resolve the dispute by rendering an award. Note that appointment of arbitrators
should be in accordance with the agreement of the parties.

b. Mediation
- A voluntary process in which a mediator facilitates communication and
negotiation, and assists the parties in reaching a voluntary agreement regarding
a dispute.

c. Conciliation
- The adjustment and settlement of a dispute in a friendly, unantagonistic
manner.

d. Neutral and early neutral evaluation

- An ADR process wherein the parties and their lawyers are brough together to
present summaries of their cases and receive a non-binding assessment by an
experienced neutral person with expertise on the matter.
- It is an early neutral evaluation if availed of early in the pre-trial phase.

e. Mini-trial
- A structured dispute resolution method in which the merits of the case are
argued before a panel composed of senior decision-makers. After this, the
parties seek negotiated settlement. It can be done in the with or without a
neutral third person.
 f. Any combination thereof
- Any combination of the foregoing ADR forms may be implemented and are
approved by the parties. It should not be contrary to law, morals, good customs,
public order or public policy.
- Example:
o Combination of mini-trial conducted as a continuation of mediation,
neutral or early neutral evaluation or any other ADR process.

g. Any other ADR form (Innominate ADR Form)

- Any arrangement agreed upon by the parties that satisfies the requisites of ADR,
complies with the essential requisites of a valid contract and is not contrary to
law, morals, good customs, public order, and public policy.

Arbitration
An arbitral tribunal or arbitrator evaluates
evidence and the merits of the case
An arbitral award is rendered by the third-
party arbitral tribunal or arbitrator based on
his appreciation of the evidence and merits of
the case.
Mediation
A mediator convinces the parties to settle their
controversy through a voluntary agreement
executed by the parties themselves called
“mediated settlement agreement.”
The concluding mediated settlement
agreement is the voluntary agreement
executed by the parties themselves.

NOTE: Exception to the Application of this Act on ADR

Generally, all adversarial disputes can be subject matter of ADR. However, under Section 6 of the
said Act, ADR shall not apply to resolution or settlement of the following:
a. the civil status of persons
- a matter determined by law and is not subject to the discretion of the parties.
b. the validity of marriage or any ground for legal separation
- matters which the State has a keen interest to protect.
c. the jurisdiction of courts
- subject matter of a case is determined by law and is not dependent upon the
allegations of the parties, except in estoppel.
d. future legitime
- inexistent and hence cannot be waived.
e. criminal liability
- the only subject of ADR is the civil liability arising from the offense and the
separate civil liability for quasi-delict based on the act or omission consisting
the offense, and not criminal liability itself.
f. those which by law cannot be compromised
- it is against the public policy to waive or enter into a compromise regarding the
future support.
 g. labor disputes covered by Presidential Decree No. 442, otherwise known as the Labor
Code of the Philippines, as amended and its Implementing Rules and Regulations;
II. State Policy on ADR
Under Section 2 of the ADR Act of 2004, the purpose of enacting the said law are the following:

 To actively promote party autonomy in the resolution of disputes of the freedom of

the parties to make their own arrangements to resolve their disputes.
 To encourage and promote the use of ADR as an important means to achieve speedy and
impartial justice to declog court dockets.
 The state shall provide means for the use of ADR as an efficient tool and an alternative
procedure for the resolution of appropriate cases.
 The State shall enlist active private sector participation in the settlement of disputes
through ADR.

III. Principles of ADR

1. Promotion of party autonomy and self-determination in the resolution of disputes
- The parties are given the freedom to choose the form of ADR they desire to avail of. They
are also given the discretion to prescribe the procedure to govern the ADR process.

2. Recognition of ADR as an efficient tool and an alternative procedure for the resolution of cases.
- ADR does not altogether do away with the court trial system. ADR merely provides the
parties with an alternative means of settling their disputes in a manner that is different,
separate and independent from the court trial system.

3. Enlisting of Private Sector participation.

- ADR usually requires the participation of third parties who do not necessarily dispense
public service. Many are from the private sector in various field.

IV. Objective and Benefits of ADR

1. Speedy and impartial justice
- ADR has been judicially recognized as a tool for the speedy, inexpensive and amicable
settlement of disputes.
2. Declogging of court dockets
- ADR and the court trial system, one being the alternative to the other, work hand-in-hand to
maximize the benefits from each other

V. Features of ADR
1. ADR is a means used to resolve a dispute or controversy
- The objective of the ADR forms, method, and processes is to solve or facilitate the
resolution of a dispute or controversy in a speedy, amicable, and inexpensive manner.
 - It is NOT ADR when the motive is to delay or suspend the proceedings rather than to put
an end of the controversy.
2. ADR utilizes means and methods allowed by law.
- The ADR Act of 2004 did not limit the forms of ADR to arbitration, mediation, conciliation,
early neutral evaluation, or mini-trial.
- Any means and method aimed at resolving disputes outside the court trial system may be
recognized as an ADR as long as it is not contrary to law, morals, good customs, public order
or public policy.

3. ADR is contractual in nature

- Since the parties to a dispute are given the freedom to agree to resolve their dispute and
decide on the procedure for it, ADR and its procedures are therefore contractual in
character, provided that it satisfies the requisites of a contract and is not contrary 1 to law,
morals, good customs, public order or public policy.

4. ADR avoids court trial

- ADR is conducted outside of the court trial system
- It is conducted to avoid trial.
- ADR is also conducted as part of court proceedings which requires judges to conduct
mediation between the parties as part of the pre-trial and prior to the start of the trial stage.
The court does not lose jurisdiction over the case when ADR is availed of during the
pendency of an action in court.

5. ADR usually involves the participation of a neutral third party.

- The third-party participant may either be the arbitrator, mediator, conciliator, or neutral
evaluator.
- The third-party participant must observe neutrality at all times. He is required to disclose
any factor that may influence the performance of his duties; these may include relationship
or affiliation, etc.

VI. Sources of Alternative Dispute Resolution

1. Domestic laws and rule
a. General ADR laws – those applicable to all forms of ADR
- Example: Article III, Sec. 16, 1987 Constitution; Chapters 1 and 2, Title XIV,
Book IV, Civil Code of the Philippines; the Arbitration law
b. Special ADR Laws – those that pertain to specific subject matters
- Example: Local Government Code of 1991, Labor Code and its IRR, etc.

1
Art. 1316 of the Civil Code of the Philippines
Requisites of a contract:
1. Consent of the contracting parties
2. Object certain which is the subject matter of the contract
3. Cause of the obligation which is established
2. Acts of the Executive Branch
- Examples: Rules of ADR for Disputes Between National Government Agencies enacted on 22
March 2010, and EO No. 1008 creating the Construction Industry Arbitration Commission

3. Decisions of the Supreme Court

- Forms part of the law of the land

4. International Laws
- Example: UNCITRAL “Model Law on International Commercial Arbitration

5. General Principles of Law and Equity

VII. Classification of forms of ADR

1. As to number of parties
- Bilateral or bi-party when only two (2) contending parties are involved
- Multi-lateral or multi-party when more than two (2) contending parties are involved
2. As to the number of issues involved
- Simple when only a single issue is involved
- Complex when there are two (2) or more issues are involved
3. As to the extent of the conclusion
- Complete when all the issues are resolved
- Partial when only one or some of the issues are resolved.
4. As to the role of the evidence in the proceedings
- Evidentiary or merit-based when the resolution of the dispute or controversy requires the
presentation of evidence and evaluation of the merits of the case like in arbitration
- Non-evidentiary or non-merit if the merits of the case is not indispensable in the resolution
of the dispute like in mediation.
5. As to the pendency of a court case
- Case-related if conducted in connection with or as a pre-requisite to trial as in the case of
court-annexed mediation or court-referred mediation
- Independent if conducted irrespective of any pending court case involving the issue.
6. As to the applicable law
- Domestic if the parties’ places of business, place of arbitration and place of performance of
the obligation involved or subject matter of the dispute are located in the Philippines
- International if the parties’ places of business are in different states or the place of
arbitration is outside the Philippines.
7. As to the permanence of the ADR provider or practitioner
- Ad hoc if the existence of the ADR provider is only temporary for purpose of particular
dispute
- Institutional if the ADR provider’s existence is permanent in character and is not dependent
on any dispute.
VIII. Components of ADR
1. Contending parties who are involved in a dispute.
2. Dispute, which is susceptible of being subjected to ADR.
3. Form of ADR, which may either, be arbitration, mediation, conciliation, early neutral evaluation,
mini-trial or any combination of the foregoing.
4. ADR provider or practitioner
- ADR Provider is an institution or person accredited as mediator, conciliator, arbitrator,
neutral party evaluator or any person exercising similar functions in any ADR system
- ADR Practitioner is an individual acting as mediator, conciliator, arbitrator, or neutral
evaluator who is not necessarily accredited as an ADR provider.

IX. Seat and Venue of ADR

 The seat of ADR is the jurisdiction under whose law the proceeding is being conducted.
 The venue or place of ADR is the actual site where the arbitration is being conducted. It is
possible for the venue or place of arbitration to be in a country different from where the
arbitration has its seat.

X. Basic Concepts
1. Concluding Acts or Agreements
ADR is completed upon the execution of concluding act or agreement. These concluding acts
or agreements are not forms of ADR, instead they constitute the part of the ADR proceeding
that completes it. These may take the form of the following:
a. Arbitral award – partial or final decision by an arbitrator in resolving the issue in a
controversy.
b. Mediated Settlement agreement – a contract executed by the mediating parties with the
assistance of their respective counsel, certified by the mediator, evidencing a successful
mediation.
c. Compromise agreement – a contract whereby the parties making reciprocal
concessions, avoid litigation or put an end to one already existing.
 Judgment based on compromise – an approval containing the compromise
agreement when the controversy subject matter is also the subject of litigation.
d. Waiver or quitclaim – a statement renouncing any right or claim involved in a
controversy by one party in favor of the other.

2. ADR Providers and Practitioners

The civil liability of ADR providers and practitioners for acts done in the performance of
their duties is the same as that for public officers as provided for under Section 38 (1),
Chapter 9, Book I of the Administrative Code of 1987 which provides that, “A public officer
shall not be civilly liable for acts done in the performance of his official duties, unless there
is a clear showing of bad faith, malice or gross negligence.”
 The following neutral third persons are authorized to consider the merits of the
controversy and required to render a binding resolution of the dispute:
1. Arbitrator;
2. Mediator-arbitrator;
3. The neutral third persons in a mini-trial, neutral evaluation (neutral evaluator),
combination of ADR forms, or innominate ADR form, who, upon agreement of the
parties, is directed to render a binding assessment.

NOTE:
 Arbitrator and arbitral tribunals do not fall under the classification of quasi-judicial
bodies since they are constituted by virtue of an arbitration agreement rather than by
law.
 Hence, their arbitral awards are not reviewable through a petition fore review or
petition for certiorari under Rules 43 and 65, respectively, of the Rules of Court.

3. Preference for ADR

Article 2030 of the Civil Code of the Philippines already instructs the court to suspend proceedings
if the possibility of settlement through the different modes of ADR is present. It states that every
civil action or proceeding shall be suspended if:
1. Willingness to discuss a possible compromise is expressed by one or both parties; or
2. If it appears that one of the parties offered to discuss a possible compromise but the other
party refused the offer, before the commencement of the action or proceeding.

As long as the court is apprised of the existence of an arbitration agreement, trial should be
suspended to allow arbitration to proceed.

Koppel, Inc. vs. Makati Rotary Club Foundation, Inc:

- Judicial proceedings disregarding arbitration agreements, conducted beyond the point
when the parties should have been referred to arbitration, are null and void, and the
decisions rendered therein shall be set aside in order to allow the remand of the case to the
trial court and the referral of the dispute to arbitration in accordance with the arbitration
agreement.