Philippines

Asia Pacific

Key points
International and domestic arbitrations in the Philippines are governed by different statutes: the Alternative Dispute Resolution Act 2004 (ADR Act), the Arbitration Law, the UNCITRAL model law and the Special Rules of Court on Alternative Dispute Resolution along with the draft Implementing Rules and Regulations of the ADR Act (currently pending approval). The Philippine Supreme Court is supportive of arbitration and has confirmed that courts should not generally review the findings of law and fact in an award, and should not undertake to substitute their judgment for that of the arbitrators. The Philippines is a party to the New York Convention. Under the ADR Act of 2004 a party may be represented by any person of its choice, both in domestic arbitration and in international commercial arbitration held in the Philippines. This representative, unless admitted to the practice of law in the Philippines, may not appear as counsel in any Philippine court or any other quasi-judicial body, even if such an appearance is in relation to the arbitration. The Construction Industry Arbitration Commission (CIAC) has exclusive jurisdiction over any construction disputes which are subject to an arbitration clause or arbitration agreement.

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Confidentiality The arbitration proceedings, including the records, evidence and award, are confidential and should not be published except with the consent of the parties; or for the limited purpose of disclosing to the court relevant documents in cases where resort to the court is allowed. For a model confidentiality clause, see the Arbitration section on drafting arbitration clauses.

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Model arbitration clause

Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the PDRCI Arbitration Rules as at present in force. the appointing authority shall be institution/person) the number of arbitrators shall be the place of arbitration shall be (name of

(one or three) (city or country)

the language to be used in the arbitral proceedings shall be (language). Philippine Dispute Resolution Center, Inc. (PDRCI) See the Arbitration section for best practice in drafting arbitration clauses. Weblink www.PDRCI.org The Philippine Dispute Resolution Center, Inc.

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What arbitration bodies are there within the jurisdiction?

The Philippine Chamber of Commerce and Industry has established the Philippine Dispute Resolution Center, Inc. (PDRCI). The Center was created to encourage the use of arbitration, mediation and other modes of alternative dispute resolution for the settlement of domestic and international disputes in the Philippines. It provides dispute resolution services to the public. The Philippine Clearing House Corporation (PCHC) has established an Arbitration Committee. Member banks cannot invoke the jurisdiction of the trial courts without prior recourse to the PCHC Arbitration Committee. In the public sector, the Office for Alternative Dispute Resolution, an agency attached to the Department of Justice (DOJ), promotes the use of ADR in the private and public sectors and assists the government in evaluating the use by both public and private sectors of ADR, and recommends to Congress statutory changes to improve ADR practices. The Construction Industry Arbitration Commission (CIAC) has exclusive jurisdiction over any construction disputes which are subject to an arbitration clause or arbitration agreement. The CIAC was created by the Construction Industry Arbitration Law of 1985 (Executive Order No. 1008). Other arbitration bodies include the Philippine Chapter of The Chartered Institute of Arbitrators, East Asia region, and the Philippine Institute of Arbitrators. The latter is primarily a learned society that promotes arbitration as a mode of alternative dispute resolution in the Philippines.

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Is there an Arbitration Act governing arbitration proceedings, and is it based on the UNCITRAL model law?

The Alternative Dispute Resolution Act of 2004 (ADR Act) took effect in April 2004. Under the ADR Act, the Philippines adopted the UNCITRAL model law to govern international commercial arbitration. The ADR Act declared that domestic arbitration would continue to be governed by the 1953 Arbitration Law (Arbitration Law), as amended by chapter 5 of the ADR Act. It also made applicable certain provisions of the UNCITRAL model law. Under the ADR Act, a committee convened by the Secretary of Justice will formulate the regulations necessary for the implementation of the ADR Act, to be approved by a Joint Congressional Oversight Committee. To date, these regulations still have to be approved. What follows covers international commercial arbitration and domestic arbitration under the ADR Act, the Arbitration Law, the UNCITRAL model law and the Special Rules of Court on Alternative Dispute Resolution (Special ADR Rules) with some notes from the draft Implementing Rules and Regulations of the ADR Act (draft Implementing Rules) which is pending approval.

What are the available rules?

Each arbitration body has its own set of arbitration rules, which the parties can choose to adopt in full or in part. Where the rules adopted by the parties do not provide for a particular procedure, the provisions of the ADR Act (and the Arbitration Law for domestic arbitration and the UNCITRAL model law for international commercial arbitration) apply as appropriate.

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The CIAC Rules of Arbitration are usually applied in construction disputes. Regardless of the choice of arbitration rules of the parties to a construction contract, the CIAC will take jurisdiction of the arbitration if one of the parties first submits a request for arbitration to the CIAC. For commercial disputes, the parties usually apply the ICC Rules of Arbitration (for institutional arbitration) or the UNCITRAL Arbitration Rules (for ad hoc arbitration), which have gained international acceptance. In recent years, however, more and more parties have chosen to apply the PDRCI Arbitration Rules. The PDRCI has played an important role in private sector-regulated arbitration in providing dispute resolution services to the business community. Its arbitration rules are based on the UNCITRAL Rules. Among the minor differences between the PDRCI Arbitration Rules and the UNCITRAL Rules are the following provisions in the absence of an agreement by the parties: the choice of Metro Manila as the default place of arbitration; the choice of English as the default language of the arbitration; and the choice of PDRCI as the default appointing authority.

What supervision is there of arbitrators and their awards?

Parties may request the termination of the mandate of an arbitrator in the event that someone becomes unable to perform their function or for other reasons fails to act without undue delay. If an arbitrator refuses to withdraw and the appointing authority (defined below) fails or refuses to decide on the termination, any party may file a petition to terminate the mandate of the arbitrator with the court. The order of the court resolving the petition is not subject to judicial review.

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Under the PDRCI Arbitration Rules The PDRCI may act as the appointing authority when: a party requests that the PDRCI appoint an arbitrator on its behalf the parties are unable to select or appoint and request that the PDRCI appoint the arbitrator the arbitration agreement between the parties provides that the PDRCI will act as the appointing authority or that the arbitration shall be conducted under PDRCI arbitration rules. Where there is an unsuccessful challenge involving an arbitrator unsuccessful because either the arbitrator or the other party refuses the challenge the challenging party may apply to the PDRCI to rule on the challenge. Supreme Court The Supreme Court has expressed support for arbitration and declared that, in general, courts should not review the findings of law and fact contained in an award and should not undertake to substitute their judgment for that of the arbitrators. The arbitration award is not absolute: it may be the subject of judicial review on limited grounds. International arbitration An arbitration award may in certain circumstances be set aside by the trial court, upon the application of a party to the dispute (where there is, for example, incapacity of a party, invalidity of the agreement, lack of notice of the proceedings or conflict with Philippine public policy) (UNCITRAL model law, article 34).

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Domestic arbitration The appropriate trial court may issue an order vacating the award (where there is, for example, corruption, fraud, misconduct by the arbitrators) (Arbitration Law, section 24) or modifying or correcting the award (where there is, for example, evident miscalculation of the figures, an award upon a matter not submitted to the arbitrators or a failure to resolve an issue submitted to the arbitrators) (section 25). If the arbitration award is made through mistake, violence, intimidation, undue influence or fraud, it may be subject to annulment or rescission.

How quickly can a tribunal be set up?

Under the ADR Act, the parties are free to agree on a procedure for appointing arbitrators, including time frames. Unless an earlier period is provided in the arbitration agreement, if a party fails to appoint an arbitrator within 30 days from receipt of a request to do so from the other party, or if the arbitrators fail to appoint the presiding arbitrator within 30 days from their own appointment, a party may request the appropriate appointing authority to make the appointment. According to the Philippine Civil Code and the draft Implementing Rules, any clause giving one of the parties power to choose more arbitrators than the other is void. Under the ADR Act, the appointing authority is the person or institution named in the agreement as the appointing authority, or the institution under whose rules the arbitration is agreed to be conducted, or, in ad hoc arbitration, the National President of the Integrated Bar of the Philippines. Generally, when the appointing authority fails or is unable to perform its duty within the applicable period from the receipt of request for appointment, the applicant may renew the application with the

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appropriate trial court. Trial courts may be able to act on an application within 60 days from the filing. The proceedings for the appointment of arbitrator (and challenge to the appointment) before the trial court are summary in nature. Under the Special ADR Rules, the decision of the trial court appointing an arbitrator is not subject to appeal. The PDRCI has a list of accredited arbitrators from which a party may, if it wishes, choose an arbitrator. A party to an arbitration under the PDRCI Arbitration Rules need not choose from the list. The CIAC has a list of accredited arbitrators, from which all arbitrators, in an arbitration under the CIAC Rules of Arbitration, are to be chosen.

What happens if one party refuses to participate in the process?

International arbitration Applying the UNCITRAL model law, if a party fails to act as required under an agreed appointment procedure, any party may request the appointing authority to take necessary measures, unless the agreement provides other means for securing the appointment. If the claimant fails to communicate its statement of claim within the period agreed upon by the parties or determined by the arbitral tribunal, the tribunal will terminate the proceedings. If the respondent fails to communicate its statement of defence, the tribunal will continue the proceedings, without treating this as an admission of the claimants allegations. If any party fails to appear at a hearing or to produce documentary evidence, the tribunal may continue the proceedings and make the award on the evidence before it.

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The PDRCI rules follow in large part the UNCITRAL Arbitration Rules and therefore provide for a similar procedure with reference to international commercial arbitration, in case of a partys failure to participate in the arbitration proceedings. The tribunal will terminate the proceedings upon default of the claimant and continue with the proceedings upon default of the respondent (in the absence of sufficient cause for the default from the defaulting party). Domestic arbitration Under the Arbitration Law, if one party neglects, fails or refuses to arbitrate, the aggrieved party may file with the trial court a copy of the demand for arbitration under the contract to arbitrate (with a notice that the original demand was sent by registered mail or delivered in person to the party against whom the claim is asserted) in a petition for an order directing that the arbitration proceeds as originally agreed. If there is an issue as to the making of the agreement or as to the fact of default, the court will summarily hear such issue. If a party fails to appoint an arbitrator, any party may request the appointing authority to take the necessary measures, unless the agreement on the appointment procedure provides other means for securing the appointment. The hearings may proceed in the absence of any party who, after due notice, fails to attend or fails to obtain an adjournment. The award cannot be made solely on the default of a party. The arbitrators will require the other party to submit any evidence they may require for making an award.

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What interim measures are available?

The following measures are available: injunctive relief security for costs pre-arbitration disclosure of documents preservation of evidence.

Before the arbitral tribunal is constituted, a party may apply to the appropriate trial court for an interim measure of protection (ADR Act, section 28). After the constitution of the tribunal and during the proceedings, a party may request an interim measure of protection (or a variation of an existing order) from the tribunal or the appropriate trial court. Under the Special ADR Rules, a court order granting or denying an interim measure is issued without prejudice to subsequent changes by the arbitral tribunal; an interim measure issued by an arbitral tribunal is therefore deemed to have amended or revoked a measure previously issued by the court where there is any inconsistency. The tribunal, or the appropriate trial court, may grant interim relief: to prevent irreparable loss or injury to provide security for the performance of any obligation to produce or preserve any evidence to compel any other appropriate act or omission.

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A tribunal may grant interim measures concerning preliminary injunctions, appointment of receivers, and the detention, preservation and inspection of property. A court may also grant a preliminary attachment against property or garnishment of funds in the custody of a bank or a third person. A decision of the trial court granting or denying an interim measure may be subject to further judicial review. Under the Arbitration Law (which, under the ADR Act, is still applicable to domestic arbitration), arbitrators can require any person to attend a hearing as a witness when the relevancy of the testimony has been demonstrated to the tribunal (Arbitration Law, section 14). No similar power is granted under the UNCITRAL model law. Parties must apply to the appropriate court for a subpoena to compel a witness to testify or present a document. Under the Special ADR Rules, a party to an arbitration may request the court to provide assistance in taking evidence (to comply with a subpoena, to appear as witness, to allow inspection, etc.) whenever the need arises. The order of the court granting assistance in taking evidence is not subject to reconsideration or appeal but if the court declines to grant assistance in taking evidence, the applicant may file an appeal. Any person who disobeys the order of the court to testify when required may be subject to sanctions through contempt proceedings.

What right is there to challenge the appointment of an arbitrator?

Under the Arbitration Law any person appointed to serve as an arbitrator must be of legal age, in full enjoyment of their civil rights and literate. Arbitrators must not be related to either party to the controversy; and they must not have (or have had) financial, fiduciary or other interest in the dispute or in the result of the proceedings, or have any personal bias,

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which might prejudice the right of any party to a fair and impartial award. No party may select as an arbitrator any person to act as its champion or to advocate its cause. Under the ADR Act, an arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to that individuals impartiality or independence, or if the arbitrator does not possess qualifications agreed to by the parties. A party may challenge an arbitrator it has appointed, or in whose appointment it has participated, only for reasons of which it becomes aware after the appointment has been made. The draft Implementing Rules also allow challenge when an arbitrator refuses to respond to questions by a party regarding the nature and extent of any dealings with a party or its counsel. The ADR Act also provides that the parties are free to agree on a procedure for challenging an arbitrator. In the absence of an agreement, a party who intends to challenge an arbitrator must, within 15 days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any disqualification, send a written statement of the reasons for the challenge to the tribunal. The tribunal must decide on the challenge (unless the challenged arbitrator withdraws or the other party agrees to the challenge). If the challenge is not successful, the challenging party may request the appointing authority within 30 days from receipt of the decision rejecting the challenge to decide on the challenge. This decision cannot be appealed. If the appointing authority fails or refuses to act on the challenge within the agreed period, within 30 days from receipt of request, any party may renew the challenge with the appropriate trial court. Under the Special ADR Rules, the decision of the court is not subject to further judicial review.

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Can a party appeal the arbitrators decision and, if so, are there any time limits to be aware of or unusual provisions?

An agreement to refer a dispute to arbitration means that the arbitration award will be final and binding. A party to an arbitration is therefore precluded from filing an appeal questioning the merits of an award. For both domestic and international arbitrations, the trial court will not set aside an arbitration award on any ground other than those provided under the Arbitration Law or the UNCITRAL model law, unless there has been a violation of public policy. A decision of the trial court confirming, vacating, setting aside, modifying or correcting an arbitration award may be appealed to the Court of Appeals in accordance with the Special ADR Rules. International arbitration An arbitration award may be set aside by the trial court only on specified grounds (UNCITRAL model law, article 34). An application for setting aside an award may not be made after three months have elapsed from the date on which the party making the application received the award, or from the date on which a request for correction or interpretation of an award, or for an additional award, was disposed of by the arbitral tribunal. Domestic arbitration Under the Arbitration Law, any party may apply to the trial court for an order confirming the award. The application may be made at any time after the lapse of 30 days from receipt by the applicant of the arbitration award (in accordance with the Special ADR Rules). The court must grant the order unless the award is vacated, modified or corrected.

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A petition to vacate, modify or correct the award must be filed not later than 30 days from the receipt of the arbitral award. The Special ADR Rules provide that where there is an action to vacate, the prevailing party may oppose the action if the grounds cited do not affect the merits of the case and may be remedied. The party may request the court to suspend the proceedings for vacation for a period of time and to direct the arbitral tribunal to reopen and conduct a new hearing and take any other action needed to eliminate the grounds for vacation of the award. Under the draft Implementing Rules, the tribunal is given the power, upon request of a party within 30 days from receipt of the award, to correct or to interpret the award or to make an additional award regarding claims presented in the proceedings but omitted from the award.

10 Is the Philippines a party to the New York Convention?

Yes. The Philippines has exercised both the reciprocity and the commerciality reservations. an arbitration award be enforceable in the Philippines and, 11 ifWill so, what is the procedure? The Philippines is committed to enforcing foreign arbitration awards as a result of its adherence to the New York Convention. It is presumed that a foreign arbitration award was made and released in due course of arbitration and is subject to enforcement by the court. A Philippine court is not allowed to set aside a foreign arbitration award but may refuse recognition and enforcement based on the limited grounds provided under the New York Convention.

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Under the ADR Act, the recognition and enforcement of such awards must be filed with the appropriate regional trial court in accordance with the Special ADR Rules. The petition to recognise and enforce a foreign arbitration award may be filed at any time after the receipt of the award. If an application for rejection or suspension of enforcement of an award has been made, the court may vacate its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the party to provide security. The Special ADR Rules allow a court where the action for recognition is pending to defer or suspend the proceedings before it if an application for the setting aside or suspension of the award has been made with a competent authority in the country where the award is made. The court may also require the party to give suitable security. As regards foreign arbitration awards not covered by the New York Convention, their recognition and enforcement must follow the rules set out in the Special ADR Rules. The Philippine courts may, on grounds of comity and reciprocity, recognise and enforce a non-Convention award as a Convention award. A party to a foreign arbitration may oppose an application for recognition and enforcement of the foreign arbitration award only on those grounds set out in article 5 of the New York Convention. The trial court must disregard any other ground raised. A foreign arbitration award, when confirmed by a court of a foreign country, must be recognised and enforced as a foreign arbitration award, and not as a judgment of a foreign court. A foreign arbitration award, when confirmed by the appropriate Philippine trial court, must be enforced in the same manner as final decisions of courts of law of the Philippines.

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Whilst no figures are available to indicate the likelihood of judicial enforcement of an arbitration award, the Supreme Court has demonstrated a reluctance to interfere, anticipate or nullify the proceedings or results of a voluntary arbitration.

12 What are the likely costs of the arbitration?

For arbitrations administered by the PDRCI, the tribunal will fix the costs in its award. These will include: tribunal fees travel and other expenses incurred by arbitrators costs of expert advice and other assistance required by arbitrators travel and other expenses of witnesses (where approved by the tribunal) costs for legal representation and assistance of the successful party (if claimed during the proceedings and seen as reasonable) fees and expenses of the appointing authority expenses of the PDRCI committee constituted to designate the appointing authority. The tribunal fees should be fixed in consultation with the parties at the preliminary conference. They should be reasonable in amount, taking into account the amount in dispute, the complexity of the subject matter, the time spent by the

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arbitrators and any other circumstances. The tribunal should take the PDRCI schedule of fees into account and should fix its fees only after consultation with PDRCI. Under the draft Implementing Rules, the enumeration above, aside from the last item on the expenses of the PDRCI committee, also applies to domestic arbitration and other international commercial arbitration not administered by PDRCI. It also allows the tribunal to request from each party deposits for certain costs. The Special ADR Rules require the payment of filing fees, the amount of which depends on the amount of the award, for actions to confirm or enforce, vacate or set aside an arbitration award in a domestic arbitration or in an international commercial arbitration.

13 Are split clauses valid and enforceable?

Split clauses allow one or more parties to elect arbitration or litigation after the dispute arises. There is no prohibition on split clauses and similar agreements under Philippine laws or existing Supreme Court decisions. It is the policy of the State to promote party autonomy in the resolution of disputes or the freedom of the parties to make their own arrangements to resolve disputes (ADR Act). It is also the policy of the State to recognise the basic contractual freedom of the parties to establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy (Philippine Civil Code). The availability of the option to resort to court or arbitration by either party would largely depend on the terms and conditions of the arbitration agreement.

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The concept of a split clause has not yet been tested before the Philippine courts and there have been no Supreme Court decisions on the matter. Considering Philippine policy on autonomy (with reference to the terms and conditions in a contract and ways by which parties wish to resolve their disputes), a split clause may be regarded as enforceable in the Philippines. The exception would be cases where it may be considered against public policy or inequitable, depending on the terms of the clause. In the view of some jurisdictions, arbitration clauses which give only one party the option to choose whether to resort to court are invalid. It is likely that the Philippine courts would take the same view. I

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