CHAPTER 4: International Commercial Arbitration

SECTION 19. Adoption of the Model Law on International Commercial

Arbitration. — International commercial arbitration shall be governed by the Model Law on
International Commercial Arbitration (the "Model Law") adopted by the United Nations
Commission on International Trade Law on 21 June 1985 (United Nations Document A/40/17)
and recommended for enactment by the General Assembly in Resolution No. 40/72 approved on
11 December 1985, copy of which is hereto attached as Appendix "A".

- 2006 Amendments to the Model Law:

o Not adopted by RA 9285; law is specific & no applicable in ADR 2004
o 2006 Amendments to Model Law provides the adopting State with 2 options (Chapter
II. Arbitration Agreement: Option I (a) to (5) & Option 2.11

Note: WAIVER OF FORUM NON CONVENIENS:

- in adopting the MODEL LAW, the Philippines in effect waives the right of a Philippine
Court to invoke forum non conveniens as a ground if its aid is sought in support of an
arbitration in the Philippines between parties who may have their place or places of
business in the Philippines.

Note: the definition of International Arbitration was necessary to:

1. Distinguish it from domestic arbitration
2. Isolate it from laws & rules which are to apply to domestic arbitration.
3. Court intervention is reduced to the barest minimum.

TESTS FOR INTERNATIONALITY: (see section 32)'

1. Place of Business
2. Place of Arbitration
3. Place of Performance
4. Subject Matter of the Agreement

International Origin
Need for uniformity

SECTION 20. Interpretation of Model Law.— In interpreting the Model law, regard shall
be had to its international origin and to the need for uniformity in its interpretation and resort
may be made to the travaux preparatoires and the report of the Secretary General of the
United Nations Commission on International Trade Law dated 25 March 1985 entitled,
"International Commercial Arbitration: Analytical Commentary on Draft Text identified by
reference number a/CN. 9/264."

TRAVAUX PRÉPARATOIRE
- (french) Preparatory works
- Official records of a negotiation

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This term typically refers to a collection of records relating to a negotiation of a treaty. These
records can take the form of:
• treaty drafts;
• transcripts or minutes of oral negotiations between countries;
• substantive reports prepared by international organizations, and more.

They can be valuable research material not only for scholars but also for lawyers and courts
interpreting the meaning of treaty provisions.

If published, Travaux are usually available in a UN depository library (e.g., UHM•s Hamilton
Library). They may also be found on official UN sites for the treaty, which may require searching
in the general records of the organization involved in drafting and negotiating the treaty. There
might even be records published for a specific treaty.

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.

DEFINITION BY INCLUSION:
Non-Contractual relationships of a commercial nature: torts, damages, ship
Spillages

Commercial:

Trade transactions for supply or exchange of goods or services

Distribution agreements Factoring

licensing Leasing
Construction works insurance
investments Consulting
Commercial representation or agency JVA (Joint Venture Agreements)
financing Industrial/ Business cooperation
banking Engineering

Carriage of Goods or Passengers by Air, Sea, Rail, Road

SECTION 22. Legal Representation in International Arbitration.— In international

arbitration conducted in the Philippines, a party may be represented by any person of
his choice: Provided, That such representative, unless admitted to the practice of law in
the Philippines, shall not be authorized to appear as counsel in any Philippine
court, or any other quasi-judicial body whether or not such appearance is in relation to
the arbitration in which he " appears.
o Not allowed to appear ELSEWHERE i.e. courts.

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SECTION 23. Confidentiality of Arbitration Proceedings.The arbitration proceedings,
including the records, evidence and the arbitral award, shall be considered confidential and shall
not be published except (1) with the consent of the parties, or (2) for the limited purpose of
disclosing to the court of relevant documents in cases where resort to the court is allowed
herein: Provided, however, That the court in which the action or the appeal is pending may issue
a PROTECTIVE ORDER to prevent or prohibit disclosure of documents or information
containing secret processes, developments, research and other information where it is shown
that the applicant shall be materially prejudiced by an authorized disclosure thereof.

General Rule: Confidentiality is strictly enforced;

Exceptions:
1. Consent of parties
2. limited purpose
3. relevant documents
4. court case

3. PROTECTIVE ORDER: WHERE THE ACTION OR APPEAL IS PENDING;

may issue a PROTECTIVE ORDER to prevent material prejudice in case
of disclosure
- prevent/prohibit
- disclosure of documents/information
- containing secret processes, development, research, information

Compare with Court proceedings:

1. public in nature
2. court records : access to public documented
3. disclosure is discretionary & belongs both to the court & parties

Stay of Civil Action:

SECTION 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,
(1) if at least one party so requests not later than the pre-trial conference, or
(2) 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.

R.A. No. 876: Arbitration Law

Section 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 suit 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

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accordance with the terms of the agreement: Provided, That the applicant for the stay is
not in default in proceeding with such arbitration.

Rule:
- AN ARBITRATION PROCEEDING IS NOT MANDA TORY BECAUSE IT IS SUBJECT
TO THE WILL OF THE PARTIES TO A CONTROVERSY.

- IT IS STRICTLY CONSENSUAL.

Contract with Arbitration Agreement:

Arbitration available:
1. Not later than Pre-trial
a. ONE PARTY
i. Before case is filed
ii. Even after case is filed but before pre-trial

b. BOTH PARTIES
i. After pre-trial
li. During trial

EXCEPTIONS:

Arbitration agreement:
1. Null & void
2. Inoperative
3. incapable of being performed
4. Without consent parties

KOPPEL, INC. V. MAKATI ROTARY CLUB FOUNDATION, INC., G,R. No. 198075,
[September 4, 2013], 717 PHIL 337-365

Attention must be paid, however, to the salient wordings of Rule 4.1. It reads:
"[aJ 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.

In this case, it is conceded that petitioner was not able to file a separate "request" of arbitration
before the MeTC. However, it is equally conceded that the petitioner, as early as in its Answer

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with Counterclaim bad already apprised the MeTC of the existence of the arbitration clause in
the 2005 Lease Contract and, more significantly, of its desire to have the same enforced in this
case. This act of petitioner is enough valid invocation of his right to arbitrate.

MeTC, however, did not do so in violation of the law — which violation was, in
turn, affirmed by the RTC and Court of Appeals on appeal.

The violation by the MeTC of the clear directives under R.A. Nos. 876 and 9285 renders invalid
all proceedings it undertook in the ejectment case after the filing by petitioner of
its Answer with Counterclaim--the point when the petitioner and the respondent should
have been
referred to arbitration, This case must, therefore, be remanded to the MeTC and be suspended at
said point. Inevitably, the decisions of the MeTC, RTC and the Court of Appeals must all be
vacated and set aside.

The petitioner and the respondent must then be referred to arbitration pursuant to the
arbitration clause of the 2005 Lease Contract.

This Court is not unaware of the apparent harshness of the Decision that it is about to
make. Nonetheless, this Court must make the same if only to stress the point that, in our
jurisdiction, bonafide arbitration agreements are recognized as valid; and that laws,
rules and regulations do exist protecting and ensuring their enforcement as a matter of state
policy. Gone should be the days when courts treat otherwise valid arbitration agreements with
disdain and hostility, if not outright "jealousy, " and then get away with it. Courts should
instead learn to treat alternative means of dispute resolution as effective partners
in the administration of justice and, in the case of arbitration agreements, to
afford them judicial restraint. Today, this Court only performs its part in upholding a once
disregarded state policy.

[Commencement of ARBITRATION AS PER AGREEMENT OF PARTIES:)

SECTION 25. Interpretation of the Act.— In interpreting the Act, the court
shall have due regard to the policy of the law in favor of arbitration. Where
(1) action is commenced by or against multiple parties,
(2) one or more of whom are parties to an arbitration agreement, the
(3) court shall refer to arbitration those parties who are bound by the arbitration
agreement
(4) although the civil action may continue as to those who are not bound by such
arbitration agreement.

INTERPRETATION: in favor of arbitration

In case some of the parties are not part of the arbitration, the civil action may
proceed as amongst them
- NOT INDEFINITE

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Q: which case shall be prioritized?
The Arbitration case or the Civil/commercial case?

Q: Can a party refuse to enter into arbitration despite an arbitration agreement on

the ground that arbitration is strictly consensual as compliant
with arbitration & the proceedings are not mandatory?

SECTION 26. Meaning of "Appointing Authority".

"Appointing Authority" as used in the Model Law shall mean:
(1) the person or institution named in the arbitration agreement as the appointing
authority; or the
(2) regular arbitration institution under whose rules the arbitration is agreed to be
conducted.
Note
Where the parties have agreed to submit their dispute to institutional arbitration rules, and
unless they have agreed to a different procedure, they shall be deemed to have agreed to the
procedure under such arbitration rules for the selection and appointment of arbitrators.

AD HOC ARBITRATION: IBP National President

In ad hoc arbitration the default appointment of an arbitrator shall be made by the National
President of the Integrated Bar of the Philippines (IBP) or his duly authorized representative.

Who is your ARBITRATOR?

1. Person or Arbitration Body Indicated in the Contract's Arbitration Agreement
2. Regular Arbitration Institution under whose rules the arbitration is agreed to be
conducted

Presumption: deemed to have agreed to procedures under such arbitration rules for the
selection & appointment of arbitrators

AD HOC ARBITRATION: (in Ph) default appointment by IBP President or representative

SECTION 27. What Functions May be Performed by Appointing Authority.—

The functions referred to in Articles 11(3), 11(4), 13(3) and 14(1) of the Model Law shall
performed by the Appointing Authority, unless the latter shall fail or refuse to act within thirty
(30) days from receipt of the request in which case the applicant may renew the application with
the Court.

(1) No person shall be precluded by reason of his nationality from acting as

an arbitrator, unless otherwise agreed by the parties.

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 (2) The parties are free to agree on a procedure of appointing the arbitrator
or arbitrators, subject to the provisions of paragraphs (4) and (5) of this
article.
(3) Failing such agreement,
(a) in an arbitration with three arbitrators:
- each party shall appoint one arbitrator, and
- the two arbitrators thus appointed shall appoint the third arbitrator;
[1] if a party fails to appoint the arbitrator within thirty days of receipt
of a request to do so from the other party, or
[2] if the two arbitrators fail to agree on the third arbitrator within thirty
days of their appointment, the appointment shall be made, upon
request of a party, by the court or other authority specified in
article 6;
(b) in arbitration with a sole arbitrator, if the parties are unable to agree on
the arbitrator, he shall be appointed, upon request of a party, by the court or
other authority specified in article 6.
(4) Where, under an appointment procedure agreed upon by the parties,
(a) a party fails to act as required under such procedure, or
(b) the parties, or two arbitrators, are unable to reach an agreement expected of
them under such procedure, or
(c) a third party, including an institution, fails to perform any function entrusted
to it under such procedure, any party may request the court or other
authority specified in article 6 to take the necessary measure, unless
the agreement on the appointment procedure provides other means
for securing the appointment.

NECESSARY MEASURE = iNTERIM MEASURE OF PROTECTION

INTERIM MEASURE OF PROTECTION:

What are Interim Measures

INTERIM MEASURES aim to protect the parties' rights before or during

arbitration proceedings, to regulate the terms of an ongoing relationship, or to
avoid frustration of the final award.

They are sometimes called CONSERVATORY MEASURES, provisional relief, or

provisional measures, but it is always the same procedural mechanism which is
considered.

SECTION 28. Grant of Interim Measure of Protection.—

(a) It is not incompatible with an arbitration agreement for a party to request,

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 (1) before constitution of the tribunal from a Court an interim measure of
protection and for the Court to grant such measure.
(2) After constitution of the arbitral tribunal & durin arbitral proceedings, a
request for an interim measure of protection, or modification thereof, may be
made with the arbitral tribunal or to the extent that the arbitral tribunal has no power to
act or is unable to act effectively, the request may be made with the Court. The arbitral
tribunal is deemed constituted when the sole arbitrator or the third arbitrator, who has
been nominated, has accepted the nomination and written communication of said
nomination and acceptance has been received by the party making the request.

(b) The following rules on interim or provisional relief shall be observed:

(1) Any party may request that provisional relief be granted against the adverse party.

(2) Such relief may be granted:

(i) to prevent irreparable loss or injury;(i.e. restraining order)
(ii) to provide security for the performance of any obligation; i.e. attachment)
(iii) to produce or preserve any evidence; or
(i.e. search warrants: civil search warrants in Intellectual Property Law:
1) antonpiller order
2) saiziecontrefacon both
(iv) to compel any other appropriate åct or omission (i.e.mandamus)

(3) The order granting provisional relief may be conditioned upon the provision of
security or any act or omission specified in the order.
• Surety, cash or property BOND

(4) Interim or provisional relief is requested by written application transmitted by

reasonable means to the Court or arbitral tribunal as the case may be and the party
against whom the relief is sought, describing in appropriate detail the precise relief, the
party against whom the relief is requested, the grounds for the relief, and the evidence
supporting the request.

Q: MAY THE COURT GRANT AN EX PARTE APPLICATION & GRANT OF IMP?

An EX PARTE INTERIM MESURE OF PROTECTION Where a party is not notified

of an application & not given a right to defend its case at the ISt stage of the
proceedings.

ANS: in cases of extreme urgency and cases in which the very purpose of the
requested interim measure could be Jeopardized by giving an advance notice of
the request to the other party

(5) The order shall be binding upon the parties.

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 (6) Either party may apply with the Court for assistance in implementing or enforcing an
interim measure ordered by an arbitral tribunal.

(7) A party who does not comply with the order shall be liable for all damages resulting
from noncompliance, including all expenses, and reasonable attorney's fees, paid in
obtaining the order's judicial enforcement.
When is an Arbitral Tribunal deemed constituted?
1. when the sole arbitrator or the third arbitrator, who has been nominated,
2. has accepted the nomination and
3. written communication of said nomination and acceptance has been received by the
party making the request.
Nature of Arbitral Tribunal:

FRUEHAUF ELECTRONICS PHILIPPINES CORP. V. TECHNOLOGY

ELECTRONICS ASSEMBLY & MANAGEMENT PACIFIC CORP., G.R. No. 204197,
[November 23, 20161, 800 PHIL 721-768)

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ADR20’21- Someros (transcription of March 15, ‘21 class)