GONZALES, FRANCISCO JEREMIAH SANTOS QUIZ NO.

1. How many forms, processes or procedures are there in the Alternative Dispute
Resolution (“ADR”) System?

Under the definition of the Alternative Dispute Resolution System provided by Section 3
(a) of the Alternative Dispute Resolution Act of 2004, this particular provision reveals
that there are six (6) forms, processes or procedures in the ADR System which includes
arbitration, mediation, conciliation, early neutral evaluation, mini-trial, and any
combination of the foregoing.

Further, an additional form, process, or procedure in the ADR System is revealed by

Section 18 of the same act, and this refers to Other Forms of ADR, considering of the
phrase “… such as but not limited to …”.

Thus, as a whole, there are seven (7) forms, processes, or procedures in the ADR
System.

2. What confers jurisdiction on ADR Providers or practitioners in the ADR System?

Under the case of Fruehauf Electronics Philippines Corporation vs. Technology

Electronics Assembly and Management Pacific Corporation, the Alternative Dispute
Resolution Providers acquires jurisdiction over the parties and the subject matter
through stipulation if the arbitration is voluntary or consensual, and if the submission to
the Alternative Dispute Resolution is statutory or compulsory, the jurisdiction of which is
conferred by law and exists independently from the will of the parties.

3. What is or should be the default place and language of a mini-trial with the presence
of a neutral third person?

First, the default place of a mini-trial with the presence of a neutral third person shall be
any convenient and appropriate to all parties.

Under Article 7.1, Chapter 7 of Department of Justice Department Circular No. 98, Series
of 2009, a Mini-Trial is considered to be an Other ADR Form. Further, Article 7.7 of the
same chapter state that in cases where a neutral third person is appointed, the neutral
third person shall assist the proceedings shall be governed by Chapter 3 of Mediation.

Thus, applying the provisions governing mediation, the default place, in case of failure
on agreement of both parties, shall be any convenient and appropriate to all parties.

Lastly, said Chapter 3 that governs mini-trial with a presence of neutral third person is
silentas to the default language, however, the provision on the Enforcement of
Mediated Settlement Agreement, particularly Article 3.2 tells us that the language of the
settlement agreement shall be known to the parties. Thus, it is my presumption that the
default language in mini-trial with a presence of a third neutral person shall be known to
the parties.
4. Why is one of the issues in Teodora Vega v. The San Carlos Milling, Co. Ltd. (G.R. No. L-
21549, October 22, 1924), on whether valid stipulations on arbitration constitute a
condition precedent to suit or litigation, no longer an issue today?

Valid stipulations on arbitration, constituting a condition precedent to suit or litigation is

no longer an issue today because the Supreme Court of the Philippines did not find any
reason in many cases such as Korea Technologies Co. Ltd., vs. Judge Lerma, Gonzales vs.
Climax Mining Ltd., and Del Monte Corporation-USA vs. Court of Appeals, why the
arbitration clause should not be respected and complied by the parties; that the
submission is a contract and that a clause in a contract providing that all matters in
dispute between the parties shall be referred to arbitration is a contract, and it itself is a
contract.

In fact, the Supreme Court declared in the 2011 case of Cargill Philippines, Inc. vs. San
Fernando Regala Trading, Inc., that Arbitration, as an alternative mode of settling
disputes, has long been recognized and accepted in our jurisdiction; that R.A. 876
authorizes arbitration of domestic disputes, and even foreign arbitration are recognized
that lead to the enactment of R.A 9285 that further institutionalizes the use of
alternative dispute resolution systems, such as arbitration, in the settlement of disputes.

5. How are Department of Justice Department Circular No. 98 (Rules) and A.M. No. 07-
11-08-SC (Special ADR Rules) different from each other?

The DOJ Department Circular No. 98 is the Implementing Rules and Regulations of R.A.
9285 or known as the Alternative Dispute Resolution Act of 2004. It is the procedural
aspect of the latter law, while the A.M. No. 07-11-08-SC or known as Special Rules of
Court on Alternative Dispute Resolution are also procedural in nature but this special
rule is like the Provisional Remedies and Special Proceedings under the Rules of Court,
thus, while the arbitration proceeding proper, either it is not yet instituted or is already
pending or the dispute is prematurely filed before a court of justice, the aggrieved party
may seek protection from the Special Rules of Court on Alternative Dispute Resolution.

6. What are the pros and cons or advantages and disadvantages of arbitration?

Under R.A. 9285, the following are the advantages of the arbitration:

a) Considering that arbitration promotes or encourages both parties in dispute to

establish their own terms and provisions leading to settlement, this has
favorable effects on the part of the Judiciary System as this will reduce any
prospective suits if the dispute will be resolved as early as in the arbitration
stage;
b) With the same consideration, the impending expensive litigation would be
avoided if settlement would be already reached in the arbitration, and the time
and the budget of the courts of justice will be spent to other important cases;
c) Further, with the same consideration, the speedy disposition of the dispute will
be attained by a successful arbitration; and
d) The constitutional right to privacy of the parties regarding their dispute will be
protected as the arbitration proceeding is confidential in nature.
 However, disadvantages of the arbitration are inevitable in the following cases:

a) If there will be a failed arbitration, it will increase the amount of expenses and
time as the dispute will be brought up to further expenses and longer disposition
by bringing the case before the courts of justice;
b) If the award of the Arbitrator or Panel of Arbitrators would be agreed to be final
and binding, the aggrieved party will have a limited remedies to reconsider the
unfavorable award; and
c) The evaluation and assessment of the evidentiary value of evidence presented
into the arbitration proceeding may not be likewise as best in the judicial
proceeding.

7. In Oil and Natural Gas Commission v. Court of Appeals (G.R. No. 114323, July 23,
1998), if the contract between the parties and the arbitration clause it contained
(Clause 16) were governed by Philippine laws, what objection could be made against
the said Clause?

If the Clause 16 in the contract between Oil and Natural Gas Commission and Pacific
Cement Company, Inc. is governed by Philippine Laws, I will raise the unconstitutionality
of said Clause and being contrary to law.

Under Section 10 of R.A. 876, one of the disqualifications of being arbitrator is that he or
she has or has had financial, fiduciary or other interest in the controversy or cause to be
decided or in the result of the proceeding, or has any personal bias, which might
prejudice the right f any party to a fair and impartial award.

In the instant case, when Clause 16 stated that there will be no objection whenever the
arbitrator so appointed is a Commission Employer, a violation to constitutional right to
due processwhich guarantees to be heard by an impartial tribunal is committed. Clause
16 clearly deprived the Pacific Cement Company to object. This, without question, leads
or tend to lead to bias and partiality on the part of Oil and Natural Gas Commission, and
in effect, it defeats the very purpose of Section 10 of securing impartiality.

8. Why has Article 2044, R.A. 386 become redundant?

Under the case of Fruehauf Electronics Philippines Corporation vs. Technology

Electronics Assembly and Management Pacific Corporation, Article 2044 of the New Civil
Code of the Philippine become redundant because of the existence of Sec. 41 of the
Alternative Dispute Resolution Act of 2004 and Rule 19.10 of the Special Rules of Court
on Alternative Dispute Resolution.

Said provisions give us a connotation that irrespective of the validity of the agreement
that any stipulation that the arbitrator’s award or decision shall be final, as provided by
Article 2044 of the New Civil Code, the arbitral award is still not absolute as said award
can still be vacated or set aside by Judicial Review upon a clear showing that the award
suffers from any of the infirmities or grounds for vacating an award under Section 24 of
R.A. 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 if
the arbitral award amounts to a violation of public policy.

Thus, the winning party can generally expect the enforcement of the award but because
of the foregoing, Art. 2044 of the New Civil Code of the Philippine regarding the finality
of an arbitral award becomes redundant.

9. What is the principle of separability, and how was it uniquely applied in Korea
Technologies Co., Ltd. v. Hon. Alberto A. Lerma, et. al. (G.R. No. 143581, January 7,
2008)?

In accordance with the case of Gonzales vs. Climax Mining Ltd. and Gonzales vs. Judge
Pimentel, the doctrine of separability or is called as severability, is the separable or
independent character of the arbitration clause or agreement. It enunciates that an
arbitration agreement is independent of the main contract, and it 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 or severability of the arbitration clause is confirmed in Rule 2.2 of

Special Rules of Court on Alternative Dispute Resolution, Art. 16 (1) of the UNCITRAL
Model Law and Art. 21(2) of the UNCITRAL Arbitration Rules.

This principle of separability is uniquely applied in the case of Korea Technologies vs.
Judge Lerma in a manner that when the private respondent, Pacific General
Manufacturing Corp. attacked the contract that contains the arbitration clause by
unilaterally declaring it as rescinded due to alleged infractions committed by the Korea
Technologies, the Supreme Court enunciated that the arbitration clause shall be uphold,
thus both parties are ordered to submit themselves to the arbitration of their dispute
and differences, irrespective of the legality or illegality of unilateral rescission by said
private respondent considering the existence of a valid arbitration clause.

10. Can arbitrators validly rule or decide upon the nullity or termination of a contract on
the grounds of fraud and oppression attendant to the execution of the said contract?
Why or why not?

No. The Arbitrators cannot validly rule or decide upon the nullity or termination of a
contract on the grounds of fraud and oppression attendant to the execution of the said
contract.

Under the case of Gonzales vs. Climax Mining Ltd., et. al., the Supreme Court declared
that the case filed by Gonzales for the nullification of the Addendum Contract should
not be filed before the DENR Panel of Arbitrators; that such issue for nullification on the
ground of fraud and oppression should have been brought before the regular courts
involving as it did judicial issues, or such allegations of fraud or misrepresentation in the
execution of Addendum Contract entail legal questions which are within the jurisdiction
of the courts.
 Thus, any arbitral decision, nullifying the contract on the grounds of fraud or oppression
shall not be recognized.

11. Mr. X, a Filipino citizen, who has businesses both in the Philippines and Vietnam, and
his estranged wife, Mrs. Y, also a Filipino citizen, but who lives half of the year in the
Philippines and half of the year in Hong Kong to be with her parents, entered into a
parenting agreement in Singapore, over their only child, Baby Z, who was studying in
the Philippines. The parenting agreement contained an arbitration clause, which
provided that “Any dispute, controversy or claim arising out of or relating to this
agreement, or the breach termination or invalidity thereof shall be settled by a sole
arbitrator to be appointed by the Dean of the Philippine Law School, in accordance
with DOJ Department Circular No. 98.”

a) Is the arbitration valid?

The arbitration is not valid because of the presence of the stipulation that the
breach termination or invalidity of the parenting agreement shall be settled by a
sole arbitrator.

Under the case of Gonzales vs. Climax Mining Ltd., et. al., the Supreme Court
declared that the case filed by Gonzales for the nullification of the Addendum
Contract should not be filed before the DENR Panel of Arbitrators; that such
issue for nullification on the ground of fraud and oppression should have been
brought before the regular courts involving as it did judicial issues, or such
allegations of fraud or misrepresentation in the execution of Addendum Contract
entail legal questions which are within the jurisdiction of the courts.

Thus, letting the arbitrator to make his or her decision on the validity or invalidity
of the parenting contract shall not be recognized as such legal issues are within
the ambit of the courts of justice. Further, the parenting agreement cannot be
interpreted as stipulations on civil status of persons, validity of marriage, any
ground for legal separation, and future legitimate, thus, a valid agreement.

b) Assuming it is valid, will the arbitration pursuant thereto be domestic or

international?

The arbitration clause in the parenting agreement shall be subject to domestic

arbitration.

Under 1.6 (C) of the DOJ Circular No. 98, international arbitration means an
arbitration, where: (a) the parties to an arbitration agreement have, at the time
of the conclusion of that agreement, their places of business in different states;
or (b) one of the following places is situated outside the Philippines in which the
parties have their places of business: (i) the place of arbitration if determined in,
or pursuant to, the arbitration agreement; or (ii) any place where a substantial
part of the obligations of the commercial relationship is to be performed or the
place with the subject matter of the dispute is most closely connected; or (c) the
parties have expressly agreed that the subject matter of the arbitration
agreement relates to more than one country.
 In the instant case, the fact that Mr. X has businesses in the Philippines and
Vietnam, while Mrs. Y is residing half of the year in Hong Kong, this does not
make the parenting agreement international in nature as international
arbitration arises out of commercial activities or transactions.

c) Under the same assumption, will it be commercial?

No. The same shall not be commercial.

In accordance with Section 21 of R.A. 9285, an arbitration is "commercial" if it

covers matters arising from all relationships of a commercial nature, whether
contractual or not. Relationships of a transactions: any trade transaction for the
supply or exchange of goods or services; distribution agreements; construction
of works; commercial representation or agency; factoring; leasing, consulting;
engineering; licensing; investment; financing; banking; insurance; joint venture
and other forms of industrial or business cooperation; carriage of goods or
passengers by air, sea, rail or road.

In the instant case, common sense dictates that parenting agreement is not
commercial in nature; it is civil but is focused on family matters.

d) Will it be ad hoc or institutional?

The arbitration depends upon the arbitration to be administered by an

institution, whether it is permanent/regular arbitration in the Philippines, or not.

Under the Article 1.6 (D) of DOJ Circular No. 98, Ad Hoc Arbitration means
arbitration administered by an arbitrator and/or the parties themselves. An
arbitration administered by an institution shall be regarded as ad hoc arbitration
if such institution is not a permanent or regular arbitration institution registered
with the Securities and Exchange Commission in the Philippines.

In the instant case, if the appointed institution, appointed by the Dean of

Philippine Law School, is a regular or permanent arbitration institution, the case
shall be Ad Hoc Arbitration. Otherwise, it is institutional arbitration.

e) Who is the appointing authority in this case?

The appointing authority is the Dean of the Philippine Law School.

Under Article 4.11 (b) of DOJ Circular No. 98, the parties are free to agree on a
procedure of appointing the arbitrator or arbitrators, subject to the provision of
paragraphs (d) and (e) of this Article.

Thus, being stipulated in the subject Arbitration Clause on how the arbitrators be
appointed, the arbitrator so appointed by the Dean of Philippine Law School
shall be respected.
12. The parties included a clause in their contract, which provided that “[a]ny dispute,
controversy or claim arising out of or relating to this contract shall be settled by
arbitration.” Is this a valid arbitration clause? What stipulations might be added
thereto, and why?

The foregoing arbitration clause is valid as nothing in the said clause violates any law,
and it doesn’t, in any way, absolutely closes the doors of the court to hear and decide it.

Under Section 2 of R.A. 876, two or more persons or parties may submit to the
arbitration of one or more arbitrators any controversy existing between them at the
time of the submission and which may be the subject of an action, or the parties to any
contract may in such contract agree to settle by arbitration a controversy thereafter
arising between them. Such submission or contract shall be valid, enforceable and
irrevocable, save upon such grounds as exist at law for the revocation of any contract.

Such submission or contract may include question arising out of valuations, appraisals or
other controversies which may be collateral, incidental, precedent or subsequent to any
issue between the parties.

Further, the following stipulations might be added thereto as these are provided by R.A.
9285 and R.A. 876:

a) Both parties may stipulate on the place of and the language to be used in
arbitration;
b) Both parties may stipulate the name or the method of appointing the arbitrator
or arbitrators; and
c) Both parties may stipulate the numbers of arbitrator.