CHINA CHANG JIANG ENERGY CORPORATION (PHILIPPINES), petitioner v.

ROSAL INFRASTRUCTURE
BUILDERS, REPRESENTED BY ITS GENERAL MANAGER, ALBERTO S. SURLA, CONSTRUCTION
INDUSTRY ARBITRATION COMMISSION, PRUDENCIO F. BARANDA, AND THE COURT OF APPEALS,
respondents.
GR. No. 125706 1996, Sept 30 NOTICE
Sobere

SUBJECT MATTER: Choice of Law – Issues in Conflicts Contracts Cases

DOCTRINE: As long as the parties agree to submit to voluntary arbitration, regardless of what forum they may
choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if they specifically choose another
forum, the parties will not be precluded from electing to submit their dispute before the CIAC because this right has
been vested upon each party by law (E.O. No. 1008).

SUMMARY
FACTS:
 Petitioner China Chang Jiang Energy Corp. – operator of the Binga Hydroelectric Plant in Itogon, Benguet
under a Rehabilitate Operate and Leaseback Contract (ROL Contract) with the National Power
Corporation.
 [ ARBITRATION CLAUSE ] Petitioner engaged the services of respondent Rosal Infrastructure Builders
(RIB) as sub-contractor, executing a contract for the construction of Check Dam No. 1. In the contract,
the parties agreed to submit disputes arising therefrom to arbitration before the Arbitration of the
International Chamber of Commerce.
 [ COMPLAINT BEFORE CIAC ] Dispute arose between the parties  RIB filed a complaint before
respondent Construction Industry Arbitration Commission (CIAC) for arbitration  Petitioner raised the
issue of lack of jurisdiction of CIAC.
 CIAC: Considered the question of jurisdiction merely as a special defense which can be included as part
of the issues in the Terms of Reference.
 CA: Dismissed the petition
 [ PETITIONER’S ARGUMENTS ]:
a. That the SC had already interpreted Sec 4 of EO 1008 in Tesco Service, Inc. v. Vera to mean
that respondent CIAC can acquire jurisdiction over the dispute only when the parties have
agreed to submit their dispute to voluntary arbitration before CIAC itself.
b. That CIAC Resolution No. 3-93 is null and void insofar as it prohibits the parties from submitting
the dispute for arbitration to an arbitral body other than respondent CIAC because, so it is
contended, it goes beyond the basic law it seeks to implement, E.O. No. 1008.

ISSUE: Whether the CIAC has jurisdiction over the case? – YES.

RATIO:
1. The case of Tesco, invoked by the petitioner, is inapplicable. Tesco must be read in the light of
facts obtaining and the governing law in relation to the applicable rules in force during that
period.
 In Tesco, CIAC had no jurisdiction over the dispute because the Court were applying the
prevailing rules of procedure duly promulgated by the CIAC. Sec 1 therein specifically required
that a party to a construction contract wishing to have recourse to arbitration by the CIAC shall
submit its Request for Arbitration in sufficient copies to the Secretariat of the CIAC.
 Court found that there was no Request for Arbitration filed with the Secretariat of the CIAC
because private respondent LAROSA filed a petition for injunction with the RTC, the inevitable
conclusion had to be that CIAC did not acquire jurisdiction over the disputes arising from the
sub-contract agreement between TESCO and LAROSA in said case.
2. 1988 CIAC Rules of Procedure, applied in Tesco, had been duly amended by CIAC Resolution
Nos. 2-91 and 3-93.
 Sec 1. Submission to CIAC Jurisdiction. An arbitration clause in a construction contract or a
submission to arbitration of a construction dispute shall be deemed an agreement to submit an
existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a different
arbitral institution or arbitral body in such contract or submission. When a contract contains a
clause for the submission of a future controversy to arbitration, it is not necessary for the parties
to enter into a submission agreement before the claimant may invoke the jurisdiction of the
CIAC.

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 3. Sec 1 of the CIAC Rules, as amended by Resolution 3-93, revels no restriction whatsoever on any
party from submitting a dispute for arbitration to an arbitral body other than the CIAC. On the
contrary, the new rule, as amended, merely implements the letter and the spirit of its enabling law,
E.O. No. 1008.
 What the law merely requires for a particular construction contract to fall within the jurisdiction of
CIAC is for the parties to agree to submit the same to voluntary arbitration. Unlike in the original
version of Section 1, as applied in the Tesco case, the law does not mention that the parties
should agree to submit disputes arising from their agreement specifically to the CIAC for the
latter to acquire jurisdiction over such disputes.
 As long as the parties agree to submit to voluntary arbitration, regardless of what forum they
may choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if they
specifically choose another forum, the parties will not be precluded from electing to submit their
dispute before the CIAC because this right has been vested upon each party by law (E.O. No.
1008).
 Voluntary arbitration (Hi-Precision Steel Center v. Lim Kim Steel Builders): involves
the reference of a dispute to an impartial body, the members of which are chosen by
the parties themselves which parties freely consent in advance to abide by the arbitral
award issued after proceedings where both parties had the opportunity to be heard.
The basic objective is to provide a speedy and inexpensive method of settling disputes
by allowing the parties to avoid the formalities, delay, expenses and aggravation which
commonly accompany ordinary litigation, especially litigation which goes through the
entire hierarchy of courts.
4. This should not be understood to mean that the parties may no longer stipulate to submit their
disputes to a different forum or arbitral body. Parties may continue to stipulate as regards their
preferred forum in case of voluntary arbitration, but in so doing, they may not divest the CIAC of
jurisdiction as provided by law.
 Under the elementary principle on the law on contracts that laws obtaining in a jurisdiction form
part of all agreements, when the law provides that the Board acquires jurisdiction when the
parties to the contract agree to submit the same to voluntary arbitration, the law in effect,
automatically gives the parties an alternative forum before whom they may submit their disputes.
That alternative forum is the CIAC.

RULING: Petition DISMISSED.

ANTECEDENT FACTS:
 Petitioner China Chang Jiang Energy Corp. – operator of the Binga Hydroelectric Plant in Itogon, Benguet
under a Rehabilitate Operate and Leaseback Contract (ROL Contract) with the National Power Corporation
o Mandated to engage in the rehabilitation of the power plant, inc. the construction of check dams
 Feb 21, 1994: Petitioner engaged the services of respondent Rosal Infrastructure Builders (RIB) as sub-
contractor, executing a contract for the construction of Check Dam No. 1
o [ ARBITRATION CLAUSE ] In the contract, the parties agreed to submit disputes arising therefrom
to arbitration before the Arbitration of the International Chamber of Commerce
 Dispute arose between the parties  RIB filed a complaint before respondent Construction Industry
Arbitration Commission (CIAC) for arbitration
o Petitioner filed its answer with compulsory counterclaim and raised the issue of lack of jurisdiction
on the part of CIAC
 CIAC: Aug 1, 1995: CIAC considered the question of jurisdiction merely as a special defense which can be
included as part of the issues in the Terms of Reference.
o Petitioner filed an MR  denied by the CIAC
o Petitioner filed a petition for certiorari and prohibition, with a prayer for a TRO and writ of
preliminary injunction with respondent CA
 CA: Feb 27, 1996: Dismissed the petition.
o Petitioner filed an MR  denied by the CA
 Hence, this petition by the Petitioner.
o Petitioner’s arguments:
 That the SC had already interpreted Sec 4 of EO 1008 in Tesco Service, Inc. v. Vera to
mean that respondent CIAC can acquire jurisdiction over the dispute only when the parties
have agreed to submit their dispute to voluntary arbitration before CIAC itself.

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  That CIAC Resolution No. 3-93 is null and void insofar as it prohibits the parties from
submitting the dispute for arbitration to an arbitral body other than respondent CIAC
because, so it is contended, it goes beyond the basic law it seeks to implement, E.O. No.
1008.

Whether the CIAC has jurisdiction over the case? – YES.

RULE:
[Jurisdiction of CIAC] EO 1008. Construction Industry Arbitration Law.
Sec 4. Jurisdiction. The CIAC shall have original and exclusive jurisdiction over disputes arising from, or
connected with, contracts entered into by parties involved in construction in the Philippines, whether the dispute
arises before or after the completion of the contract, or after the abandonment or breach thereof. These disputes
may involve government or private contracts. For the Board to acquire jurisdiction, the parties to a dispute must
agree to submit the same to voluntary arbitration…

APPLICATION:
5. The case of Tesco, invoked by the petitioner, is inapplicable. Tesco must be read in the light of
facts obtaining and the governing law in relation to the applicable rules in force during that period.
 In Tesco, CIAC had no jurisdiction over the dispute because the Court were applying the
prevailing rules of procedure duly promulgated by the CIAC. Sec 1 therein specifically required
that a party to a construction contract wishing to have recourse to arbitration by the CIAC shall
submit its Request for Arbitration in sufficient copies to the Secretariat of the CIAC.
 Court found that there was no Request for Arbitration filed with the Secretariat of the CIAC
because private respondent LAROSA filed a petition for injunction with the RTC, the inevitable
conclusion had to be that CIAC did not acquire jurisdiction over the disputes arising from the sub-
contract agreement between TESCO and LAROSA in said case.
6. 1988 CIAC Rules of Procedure, applied in Tesco, had been duly amended by CIAC Resolution Nos.
2-91 and 3-93.
 Sec 1. Submission to CIAC Jurisdiction. An arbitration clause in a construction contract or a
submission to arbitration of a construction dispute shall be deemed an agreement to submit an
existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a different
arbitral institution or arbitral body in such contract or submission. When a contract contains a
clause for the submission of a future controversy to arbitration, it is not necessary for the parties
to enter into a submission agreement before the claimant may invoke the jurisdiction of the CIAC.
7. Sec 1 of the CIAC Rules, as amended by Resolution 3-93, revels no restriction whatsoever on any
party from submitting a dispute for arbitration to an arbitral body other than the CIAC. On the
contrary, the new rule, as amended, merely implements the letter and the spirit of its enabling law,
E.O. No. 1008.
 What the law merely requires for a particular construction contract to fall within the jurisdiction of
CIAC is for the parties to agree to submit the same to voluntary arbitration. Unlike in the original
version of Section 1, as applied in the Tesco case, the law does not mention that the parties
should agree to submit disputes arising from their agreement specifically to the CIAC for the latter
to acquire jurisdiction over such disputes.
 As long as the parties agree to submit to voluntary arbitration, regardless of what forum they may
choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if they
specifically choose another forum, the parties will not be precluded from electing to submit their
dispute before the CIAC because this right has been vested upon each party by law (E.O. No.
1008).
 Voluntary arbitration (Hi-Precision Steel Center v. Lim Kim Steel Builders): involves the
reference of a dispute to an impartial body, the members of which are chosen by the
parties themselves which parties freely consent in advance to abide by the arbitral award
issued after proceedings where both parties had the opportunity to be heard. The basic
objective is to provide a speedy and inexpensive method of settling disputes by allowing
the parties to avoid the formalities, delay, expenses and aggravation which commonly
accompany ordinary litigation, especially litigation which goes through the entire
hierarchy of courts.
8. This should not be understood to mean that the parties may no longer stipulate to submit their
disputes to a different forum or arbitral body. Parties may continue to stipulate as regards their
preferred forum in case of voluntary arbitration, but in so doing, they may not divest the CIAC of
jurisdiction as provided by law.
 Under the elementary principle on the law on contracts that laws obtaining in a jurisdiction form

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 part of all agreements, when the law provides that the Board acquires jurisdiction when the
parties to the contract agree to submit the same to voluntary arbitration, the law in effect,
automatically gives the parties an alternative forum before whom they may submit their disputes.
That alternative forum is the CIAC.

Note: This is not a reversal of a previous pronouncement in the Tesco case necessitating a ruling by the Court En
Banc, considering the variance in the factual circumstances, as well as the governing procedural rules applicable to
the two distinct cases.

DISPOSITIVE: WHEREFORE, premises considered, the instant petition is hereby DISMISSED and the appealed
decision is hereby AFFIRMED. SO ORDERED.

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