GONZALES vs. CLIMAX MINING LTD.

G.R. No. 161957

February 28, 2005

FACTS:
Gonzales filed a complaint before the Panel of Arbitrators, Region II, Mines and Geosciences
Bureau, of the Department of Environment and Natural Resources (DENR) against respondents
Climax- Mining Ltd, Climax-Arimco and Australasian Philippines Mining Inc, seeking the
declaration of nullity or termination of the addendum contract and the other contracts emanating
from it on the grounds of fraud and oppression. The Panel dismissed the complaint for lack of
jurisdiction. However, the Panel, upon petitioner's motion for reconsideration, ruled that it had
jurisdiction over the dispute maintaining that it was a mining dispute, since the subject complaint
arose from a contract between the parties which involved the exploration and exploitation of
minerals over the disputed area. Respondents assailed the order of the Panel of Arbitrators via a
petition for certiorari before the CA. The CA granted the petition and declared that the Panel of
Arbitrators did not have jurisdiction over the complaint, since its jurisdiction was limited to the
resolution of mining disputes, such as those which raised a question of fact or matter requiring
the technical knowledge and experience of mining authorities and not when the complaint
alleged fraud and oppression which called for the interpretation and application of laws. The CA
further ruled that the petition should have been settled through arbitration under R.A. No. 876 −
the Arbitration Law − as provided under the addendum contract.

ISSUE:
Whether or not an agreement to arbitrate is a separate and distinct contract from the main
contract and whether POA has exclusive and original jurisdiction to hear and decide mining
disputes?

HELD:
Panel of Arbitrators who, under R.A. No. 7942 of the Philippine Mining Act of 1995, has
exclusive and original jurisdiction to hear and decide mining disputes, such as mining areas,
mineral agreements, FTAAs or permits and surface owners, occupants and
claimholders/concessionaires, is bereft of jurisdiction over the complaint for declaration of
nullity of the addendum contract; thus, the Panels' jurisdiction is limited only to those mining
disputes which raised question of facts or matters requiring the technical knowledge and
experience of mining authorities.

An agreement to arbitrate is a separate and distinct contract from the main contract. Further a
submission to arbitration is a contract. A clause in a contract providing that all matters in dispute
between the parties shall be referred to arbitration is a contract. The provision to submit to
arbitration any dispute arising therefrom and the relationship of the parties is a part of that
contract and is itself a contract.

The doctrine of separability, or severability as other writers call it, enunciates that an arbitration
agreement is independent of the main contract. The arbitration agreement 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 of the arbitration agreement is especially significant to the determination of

whether the invalidity of the main contract also nullifies the arbitration clause. Indeed, the
doctrine denotes that the invalidity of the main contract, also referred to as the "container"
contract, does notaffect the validity of the arbitration agreement. Irrespective of the fact that the
main contract is invalid, the arbitration clause/agreement still remains valid and enforceable.