FIRST DIVISION

[ G.R. No. 212734. December 05, 2018 ]

MABUHAY HOLDINGS CORPORATION, PETITIONER, VS. SEMBCORP LOGISTICS
LIMITED, RESPONDENT.

Facts:
● Dispute over a joint venture agreement between Mabuhay Holdings Corporation (Mabuhay)
and Sembcorp Logistics Limited (Sembcorp)
● Mabuhay and Infrastructure Development & Holdings, Inc. (IDHI) incorporated Water Jet
Shipping Corporation (WJSC) and Water Jet Netherlands Antilles, N.V. (WJNA) for inter-island
fast ferry venture
● Shareholders' Agreement entered into by Mabuhay, IDHI, and Sembcorp, with arbitration
clause
● Sembcorp requested payment of Guaranteed Return, Mabuhay admitted liability for only 50%
● Sembcorp filed Request for Arbitration before ICC, Final Award rendered in favor of
Sembcorp

Issue:
● Whether the RTC correctly refused to enforce the Final Award

Ruling:
● Supreme Court denied the petition and affirmed the CA's decision
● Mabuhay failed to establish grounds for refusing enforcement and recognition of the Final
Award
● Emphasized pro-arbitration policy of the State and presumption in favor of enforcement of
foreign arbitral award
● Composition of arbitral authority in accordance with agreement, dispute not intra-corporate,
enforcement not contrary to public policy
● Mabuhay's arguments on violation of partnership law and imposition of interest found without
merit
● CA's ruling on attorney's fees and exemplary damages affirmed
● Article XIX. APPLICABLE LAW; ARBITRATION

Ratio:
● Pro-arbitration policy of the State and presumption in favor of enforcement of foreign arbitral
award emphasized
● Enforcement of foreign arbitral award can only be refused if grounds under Article V of New
York Convention fully established
● Principle of competence-competence recognized, allowing arbitral tribunal to rule on its own
jurisdiction
● Narrow approach in determining if enforcement of award contrary to public policy, requiring
threshold of illegality or immorality against State's fundamental tenets of justice and morality
● Violations of law, such as partnership law, may not necessarily be contrary to public policy.

Parties and Joint Venture Agreement

● The case involves a dispute between Mabuhay Holdings Corporation and Sembcorp
Logistics Limited over a joint venture agreement.
● The joint venture agreement was entered into by the parties to engage in the venture of
carrying passengers on a common carriage by inter-island fast ferry.
● The agreement included an arbitration clause, stating that any dispute arising from the
agreement shall be settled through arbitration.

Request for Payment and Arbitration

● After special audits, it was revealed that the joint venture corporations incurred losses.
● Sembcorp requested payment of its guaranteed return from Mabuhay and IDHI.
● Mabuhay admitted liability but asserted that it is only liable for fifty percent of the claim.
● Sembcorp filed a request for arbitration before the International Court of Arbitration of
the International Chamber of Commerce (ICC) seeking payment of the guaranteed
return, damages, interest, and costs of arbitration.

Appointment of Arbitrator and Final Award

● The ICC appointed Dr. Anan Chantara-Opakorn as the sole arbitrator.
● The arbitrator rendered a final award in favor of Sembcorp.
● The final award directed Mabuhay to make the payment of the guaranteed return,
interest, and costs of arbitration.

Petition for Recognition and Enforcement

● Sembcorp filed a petition for recognition and enforcement of the foreign arbitral award
before the Regional Trial Court (RTC) of Makati City.
● The RTC dismissed the petition.
● Sembcorp appealed to the Court of Appeals (CA), which reversed the RTC decision
and remanded the case for proper execution.

Supreme Court Decision

● Mabuhay filed a petition before the Supreme Court, arguing that the CA erred in not
dismissing the appeal for lack of jurisdiction and in recognizing and enforcing the
foreign arbitral award.
● The Supreme Court held that the CA had jurisdiction to act on the appeal and that
Mabuhay failed to establish any ground for refusing the enforcement of the foreign
arbitral award.
● The Court emphasized the pro-arbitration policy of the State and the presumption in
favor of enforcement of a foreign arbitral award.
● The Court discussed the grounds for refusing enforcement or recognition of an arbitral
award, including incapacity of the parties, lack of proper notice or opportunity to
present a case, exceeding the scope of the submission to arbitration, improper
composition of the arbitral authority, non-binding or set aside award, and violation of
public policy.

Rejection of Mabuhay's Arguments

● Mabuhay raised several arguments, including the composition of the arbitral authority,
the nature of the dispute as an intra-corporate controversy, and the imposition of
interest.
● The Court rejected these arguments, stating that the composition of the arbitral
authority was in accordance with the agreement of the parties and the ICC rules, the
dispute was not an intra-corporate controversy as ruled by the arbitral tribunal, and the
imposition of interest was not contrary to public policy.

Attorney's Fees and Exemplary Damages

● Mabuhay claimed that it is not liable for attorney's fees and exemplary damages.
● The Court affirmed the CA's findings that there was no sufficient showing of Mabuhay's
bad faith in refusing to abide by the provisions of the final award.
● Therefore, Mabuhay is not liable for attorney's fees and exemplary damages.

Conclusion
● The Supreme Court denied Mabuhay's petition and affirmed the CA decision,
recognizing and enforcing the foreign arbitral award in favor of Sembcorp.
● The Court emphasized the pro-arbitration policy of the State and the presumption in
favor of enforcement of a foreign arbitral award.