International Commercial Arbitration

Jesse Neil Cruz Eustaquio Notes; ALS2014B; International Commercial Arbitration; Atty.
Rico-Pamfilo
and Atty. Jun Bautista
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ATENEO DE MANILA UNIVERSITY SCHOOL OF LAW
International Commercial Arbitration
Course Outline Second Semester, School Year 2013-2014
Atty. Rico-Pamfilo and Atty. Jun Bautista

I. OVERVIEW
1. Introduction
Redfern & Hunter, Redfern and Hunter on International Arbitration,
2009, Chapter 1 [except sections 1.126 to 1.151, 1.178 onwards]

A. xxx
B. Why Arbitrate?
a. Introduction
b. the Main Reasons

1.89 There are two main reasons. The first is neutrality; the second is enforcement. As to
neutrality, international arbitration gives the parties an opportunity to choose a neutral place
for the resolution of their dispute and to choose a neutral tribunal. As to enforcement, an
international arbitration, if carried through to the end, leads to a decision which is enforceable
against the losing party not only in the place where it is made but also internationally, under the
provisions of such treaties as the New York Convention.

c. Additional reasons

1.94 There are other reasons which make arbitration an attractive alternative to litigation, of
which at least four are worth listing.

i. Flexibility
ii. Confidentiality
iii. Additional powers of arbitrators

There may be situations in which, somewhat unusually, an arbitral tribunal has greater powers
than those possessed by a judge. For example, under some systems of law, or some rules of
arbitration, an arbitral tribunal may be empowered to award compound interest, (114) rather
than simple interest, in cases where the relevant court has no power to do so. In an article which,
amongst other things, looks at the history of awards of interest, a leading commentator
concludes:
... where compound interest would provide a fair and reasonable element of compensation to the
innocent victim of a contract breaker, it is increasingly awarded by international commercial
arbitrators either as trade usage, re!gle materielle de droit internationalor under an expressly
agreed provision e.g. Article 26 of the LCIA Rules. In Switzerland and England, as with other
European countries hospitable to international arbitration, the award of such compound interest
is not contrary to public policy, ordre publicor other mandatory law ... (

iv. Continuity of role

Finally, there is a continuity of role in an arbitration, since the arbitral tribunal is appointed to
deal with one particular case and to follow it from beginning to end. This enables the arbitral
tribunal to get to know the parties, their advisers, andthe case as it develops through the
documents, the pleadings, and the evidence. It should speed the process; and the familiarity with
the case which is engendered may facilitate a settlement of the dispute.

d. Perceived disadvantages of arbitration
Jesse Neil Cruz Eustaquio Notes; ALS2014B; International Commercial Arbitration; Atty. Rico-Pamfilo
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1.99 Not everything in the garden is lovely. Arbitration has its critics. A glance at the arbitration
journals, or a day at one of the many seminars and conferences on arbitration, will show that
amongst the matters that are most frequently criticised are: (1) the costs of arbitration; (2) limits
on arbitrators' powers; (3) the difficulty of bringing multi-party disputes before the same tribunal
or (4) joining third parties; (5) conflicting awards; and (6) what is generally referred to as the
judicialisation of international arbitration. These are now discussed in turn.

i. costs of arbitration
ii. delay
iii. limits in arbitrators powers
iv. multi-party arbitrators/bi-polar arbitrators
v. non-signatories
vi. consolidation
vii. third-parties
viii. conflicting awards
ix. judicialization

i. Alternative Dispute Resolution (General)

Republic Act No. 9285, April 2, 2004
SECTION 1. Title. - This act shall be known as the "Alternative Dispute Resolution Act of 2004."

SEC. 3. Definition of Terms. For purposes of this Act, the term: Alternative Dispute
Resolution System means any process or procedure used to resolve a dispute or controversy,
other than by adjudication of a presiding judge of a court or an officer of a government agency, as
defined in this Act, in which a neutral third party participates to assist in the resolution of issues,
which includes arbitration, mediation, conciliation, early neutral evaluation, mini-trial, or any
combination thereof;

ii. Meaning of arbitration
a. Section 3(d), RA 9285

SECTION 3. Definition of Terms. For purposes of this Act, the term:
(d) Arbitration means a voluntary dispute resolution process in which one or more
arbitrators, appointed in accordance with the agreement of the parties, or rules promulgated
pursuant to this Act, resolve a dispute by rendering an award.

iii. Relationship between arbitration and the Courts

International commercial arbitration is a hybrid. It begins as a private agreement between the
parties. It continues by way of private proceedings, in which the wishes of the parties play a
significant role. Yet it ends with an award that has binding legal force and effect and which, on
appropriate conditions, the courts of most countries of the world will recognise and enforce. In
short, this essentially private process has a public effect, implemented with the support of the
public authorities of each State and expressed through that State's national law. This
interrelationship between national law and international treaties and conventions is of vital
importance to the effective operation of international arbitration. (Refern & Hunter, 2009)

iv. International Conventions
a. Convention on the Recognition and Enforcement of Foreign
Arbitral Awards 1958 (The New York Convention 1958)

Objectives:
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Recognizing the growing importance of international arbitration as a means of settling
international commercial disputes, the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (the Convention) seeks to provide common legislative standards for the
recognition of arbitration agreements and court recognition and enforcement of foreign and non-domestic
arbitral awards. The term "non-domestic" appears to embrace awards which, although made in the
state of enforcement, are treated as "foreign" under its law because of some foreign element in the
proceedings, e.g. another State's procedural laws are applied.

The Convention's principal aim is that foreign and non-domestic arbitral awards will not be
discriminated against and it obliges Parties to ensure such awards are recognized and generally
capable of enforcement in their jurisdiction in the same way as domestic awards. An ancillary
aim of the Convention is to require courts of Parties to give full effect to arbitration agreements
by requiring courts to deny the parties access to court in contravention of their agreement to refer
the matter to an arbitral tribunal.

State Notes Signature Ratification,
Accession(*),
Approval(),
Acceptance() or
Succession()
Entry into force
Philippines (a), (c) 10/06/1958 06/07/1967 04/10/1967
(a) This State will apply the Convention only to recognition and enforcement of awards made in the
territory of another contracting State.
(b) With regard to awards made in the territory of non-contracting States, this State will apply the
Convention only to the extent to which those States grant reciprocal treatment.
(c) This State will apply the Convention only to differences arising out of legal relationships, whether
contractual or not, that are considered commercial under the national law.
Source: http://uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html

b. Convention on the Settlement of Investment Disputes
between States and Nationals of States 1965 or ICSID
Convention or Washington Convention

ICSID is an autonomous international institution established under the Convention on the
Settlement of Investment Disputes between States and Nationals of Other States with over one
hundred and forty member States. The Convention sets forth ICSID's mandate, organization and
core functions. The primary purpose of ICSID is to provide facilities for conciliation and
arbitration of international investment disputes.
Source: https://icsid.worldbank.org/ICSID/Index.jsp

v. UNCITRAL Model Law on International Commercial Arbitration
[ML Appendix A, R.A. 9285]; 2006 amendments

The Model Law is designed to assist States in reforming and modernizing their laws on arbitral
procedure so as to take into account the particular features and needs of international commercial
arbitration. It covers all stages of the arbitral process from the arbitration agreement, the
composition and jurisdiction of the arbitral tribunal and the extent of court intervention through
to the recognition and enforcement of the arbitral award. It reflects worldwide consensus on key
aspects of international arbitration practice having been accepted by States of all regions and the
different legal or economic systems of the world.

Amendments to articles 1 (2), 7, and 35 (2), a new chapter IV A to replace article 17 and a new
article 2 A were adopted by UNCITRAL on 7 July 2006. The revised version of article 7 is
intended to modernise the form requirement of an arbitration agreement to better conform with
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international contract practices. The newly introduced chapter IV A establishes a more
comprehensive legal regime dealing with interim measures in support of arbitration. As of 2006,
the standard version of the Model Law is the amended version. The original 1985 text is also
reproduced in view of the many national enactments based on this original version.
Source: http://uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration.html

a. international Art. 3(1) of ML

CHAPTER I. GENERAL PROVISIONS
Article 1. Scope of application
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(1) This Law applies to international commercial
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arbitration, subject to any agreement in force
between this State and any other State or States.

(2) The provisions of this Law, except articles 8, 9, 17 H, 17 I, 17 J, 35 and 36, apply only if the
place of arbitration is in the territory of this State. (Article 1(2) has been amended by the Commission
at its thirty-ninth session, in 2006)

(3) An arbitration is international if:
(a) the parties to an arbitration agreement have, at the time of the conclusion of that
agreement, their places of business in different States; or
(b) one of the following places is situated outside the State in which the parties have their
places of business:
(i) the place of arbitration if determined in, or pursuant to, the arbitration
agreement;
(ii) any place where a substantial part of the obligations of the commercial
relationship is to be performed or the place with which the subject-matter of the
dispute is most closely connected; or
(c) the parties have expressly agreed that the subject-matter of the arbitration agreement
relates to more than one country.

(4) For the purposes of paragraph (3) of this article:
(a) if a party has more than one place of business, the place of business is that which has
the closest relationship to the arbitration agreement;
(b) if a party does not have a place of business, reference is to be made to his habitual
residence.

(5) This Law shall not affect any other law of this State by virtue of which certain disputes may
not be submitted to arbitration or may be submitted to arbitration only according to provisions
other than those of this Law.

b. commercial Footnote to Art 1(1) ML

The term commercial should be given a wide interpretation so as to cover matters arising from
all relationships of a commercial nature, whether contractual or not. Relationships of a
commercial nature include, but are not limited to, the following transactions: any trade

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Article headings are for reference purposes only and are not to be used for purposes of interpretation.
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The term "commercial" should be given a wide interpretation so as to cover matters arising from all relationships of a
commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the
following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement;
commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing;
investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of
industrial or business co-operation; carriage of goods or passengers by air, sea, rail or road.
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transaction for the supply or exchange of goods or services; distribution agreement; commercial
representation or agency; factoring; leasing; construction of works; consulting; engineering;
licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint
venture and other forms of industrial or business co-operation; carriage of goods or passengers
by air, sea, rail or road.

2. National legislation in Arbitration
i. Single/unified regime: e.g. England, India
ii. Separate domestic and international regimes: e.g. Philippines,
Australia, Singapore, New Zealand, Canada
iii. Multiple regimes: domestic, foreign related and international: e.g.
China
iv. Relevant legislation:
a. The Arbitration Law, RA 876
b. ADR Act of 2004, RA 9285

Art 1(3) ML international

(3) An arbitration is international if:
(a) the parties to an arbitration agreement have, at the time of the conclusion of that
agreement, their places of business in different States; or
(b) one of the following places is situated outside the State in which the parties have their
places of business:
(i) the place of arbitration if determined in, or pursuant to, the arbitration
agreement;
(ii) any place where a substantial part of the obligations of the commercial
relationship is to be performed or the place with which the subject-matter of the
dispute is most closely connected; or
(c) the parties have expressly agreed that the subject-matter of the arbitration agreement
relates to more than one country.

Scope of Application what is international under Model Law?
Vanol Far East Marketing Pte Ltd v Hin Leong Trading (Pte) Ltd [1997]
3 SLR 484

[Notes: Only the (1) contract of carriage, (2) nomination of the vessel/proper shipping
instructions, (3) opening of the letter of credit, and the (4) tender of payment and documents had
Singapore as the place of performance. The (1) provision of cargo in conformity with the fob
contract, (2) the licensing, authorizations, & formalities, (3) insurance coverage on cargo, (4)
acceptance of vessel by oil terminal, (5) Tender of nor once vessel an arrived ship, (6) acceptance
of nor, (7) berthing of vessel at place of delivery stipulated in fob contract (8) delivery of cargo on
board the vessel (9) acceptance of cargo and/transfer of risks (9) procurement of bill of lading
had Korea as the place of performance.]

Christopher Lau, Judicial Commissioner (JC), dismissed the appeal by Vanol rejecting its claim
that Singapore is the place where a substantial part of the obligations of the commercial relationship is
to be performed under 5(2)(b)(ii) of the the International Arbitration Acts of 1994. [He wrote: I
am not however persuaded that the payment and nomination obligation of the applicants, which
are important obligations, solely determine the issue has to be examined in detail ]

Mitsui Engineering & Shipbuilding Co Ltd v PSA Corporation Limited
and Keppel Engineering Pte Ltd [2003] 1 SLR 446

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5(3)(a) of the Internation Artbitration Agreement of 1994 provides that (a) if a party has more than
one place of business, the place of business shall be that which has the closest relationship to the
arbitration agreement; An instance of such close relationship would be that a contract, including an
arbitration clause, is fully negotiated by the branch or office in question, even if it is signed at another
place (e.g. the principal place of business.)

As for the negotiations, I was of the view that it was the head offices Mr. Shirai who was in
charge of negotiations. It is who is in charge of negotiations and not the number of people involved
in the negotiations that is important. The place of negotiations and execution of the Consortium
Agreements is less important given that Mr. Shirai had from time to time flown from Japan to
Singapore. I also took into account the fact that Mitsuis address, and not in Singapore, was used
for the Consortium Agreements and more importantly, that any formal communication to Mitsui
was to be sent to its head office

v. Special Rules of Court on Alternative Dispute Resolution (October
2009)
3. Distinction between Rules of Arbitration and Law
i. UNCITRAL Rules (1976) (2010) (for ad hoc arbitration) and
UNCITRAL Model Law
4. Institutional and ad hoc arbitrations (Redfern & Hunter)

C. What Kind of Arbitration?

a. Introduction

1.152 Any arbitration, wherever it is conducted, is subject to the mandatory rules of the lex
arbitrithat is to say, the law of the place of arbitration. Generally, however, these mandatory
rules will be broad and non-specific. They will say, for instance, that the parties must be treated
with equality, (173) but they will not go into the details of how this is to be achieved, in terms of
the exchange of statements of case and defence, witness statements, documents, and so forth. For
this, more specific rules will be required; and here, the parties have a choice. Should the
arbitration be conducted ad hocthat is, without the involvement of an arbitral institutionor
should it be conducted according to the rules of one of the established arbitral institutions?

b. Ad hocarbitration

1.153 An ad hocarbitration is one which is conducted pursuant to rules agreed by the parties
themselves or laid down by the arbitral tribunal. (174) Parties to an ad hocarbitration may
establish their own rules of procedure (provided that the rules page "52"they devise treat the
parties with equality and allow each party a reasonable opportunity of presenting its case).
Alternatively, and more usually, the parties may agree that the arbitration will be conducted
(without involving an arbitral institution) according to an established set of rules, such as the
UNCITRAL Rules. This ensures a sensible framework within which the Tribunal and the parties
can devise detailed rules; and it saves spending time and money in drafting a special set of rules.

1.154 However, if the case is important enough (and in particular if a State or State entity is
involved) it may be worth negotiating and agreeing special rules, which take into account the
status of the parties and the circumstances of the particular case: for example, the right to
restitution may be expressly abandoned in favour of an award of damages. Such a specially
drawn set of rules will usually be set out in a formal Submission to Arbitration, which will be
negotiated and agreed once a dispute has arisen. Amongst other things, it will usually confirm
the establishment of the arbitral tribunal, set out the substantive law and the place (or seat) of
the arbitration, and detail any procedural rules upon which the parties have agreed for the
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exchange of documents, witness statements, and so forth. It may also provide for the Tribunal to
be assisted by an administrative assistant. (175)

c. Ad hocarbitrationadvantages and disadvantages

i. Advantages

1.155 A distinct advantage of an ad hocarbitration is that it may be shaped to meet the wishes of
the parties and the facts of the particular dispute. For this to be done efficiently and effectively,
the co-operation of the parties and their advisers is necessary; but if such co-operation is
forthcoming, the difference between an ad hocarbitration and an institutional arbitration is like
the difference between a tailor-made suit and one that is bought off-the-peg. The greater
flexibility offered by ad hocarbitration means that many important arbitrations involving a State
party are conducted on this basis. Many of the well-known arbitrations under oil concession
agreements (including the Sapphire, Texaco, BP, Liamco, and Aminoilarbitrations) were ad
hocarbitrations. (176)

1.156 There is much to be said in favour of ad hocarbitration where the sums at stake are large
and in particular, perhaps, where a State or State entity is involved, and issues of public policy
and sovereignty are likely to arise, since in an ad hocarbitration, it is possible for an experienced
tribunal and counsel to devise a procedure (177) page "53"which is sensitive to the particular
status and requirements of the State party, whilst remaining fair to both parties.

ii. Disadvantages

1.157 The principal disadvantage of ad hocarbitration is that it depends for its full effectiveness
on cooperation between the parties and their lawyers, backed up by an adequate legal system in
the place of arbitration. It is not difficult to delay arbitral proceedingsfor instance, by refusing
to appoint an arbitrator, so that at the very outset of the proceedings there will be no arbitral
tribunal in existence, and no book of rules available to deal with the situation. (178) It will then be
necessary to rely on such provisions of law as may be available to offer the necessary support.
(179) It is only when an arbitral tribunal is in existence, and a proper set of rules has been
established, that an ad hocarbitration will proceed as smoothly as an institutional arbitration, if
one of the parties fails or refuses to play its part in the proceedings.

d. Institutional arbitration

1.158 An institutional arbitration is one that is administered (180) by a specialist arbitral
institution, under its own rules of arbitration. There are many such institutions. Amongst the
better known are the ICC, the International Centre for Dispute Resolution (ICDR), (181) the
International Centre for Settlement of Investment Disputes (ICSID), and the LCIA. There are also
regional arbitral institutions (for instance, in Beijing and Cairo) and there are Chambers of
Commerce page "54"with an established reputation, including those of Stockholm, Switzerland,
and Vienna. (182)

1.159 The rules of these arbitral institutions tend to follow a broadly similar pattern. (183) They
are formulated for arbitrations that are to be administered by the institution concerned; and they
are usually incorporated into the main contract between the parties by means of an arbitration
clause. The clause recommended by the ICC, for instance, states:

All disputes arising in connection with the present contract shall be finally settled under
the Rules of Conciliation and Arbitration of the International Chamber of Commerce by
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one or more arbitrators appointed in accordance with the said Rules.

1.160 In common with other institutional clauses, this clause is a convenient, short-form method
of incorporating into the contract between the parties a detailed book of rules, which will govern
any arbitration that may take place in the future. If, at some future stage, one party proves
reluctant to go ahead with arbitration proceedings, it will nevertheless be possible for the party or
parties who wish to bring a claim to do so effectively, because there will be a set of rules to
regulate both the way in which the arbitral tribunal is to be appointed and the way in which the
arbitration is to be conducted and carried through to its conclusion.

e. Institutional arbitrationadvantages and disadvantages

i. Advantages

1.161 Rules laid down by the established arbitral institutions (for instance, those of the ICC, the
ICDR, ICSID, and the LCIA) will generally have proved to work well in practice; and they will
have undergone periodic revision in consultation with experienced practitioners, to take account
of new developments in the law and practice of international arbitration. As already mentioned,
the rules themselves are generally set out in a small booklet. Parties who agree to submit any
dispute to arbitration in accordance with the rules of a named institution effectively incorporate
that institution's book of rules into their arbitration agreement.

1.162 This automatic incorporation of an established book of rules is one of the principal
advantages of institutional arbitration. Suppose, for instance, that there is a challenge to an
arbitrator, on the grounds of lack of independence or impartiality; or suppose that the arbitration
is to take place before an arbitral tribunal of three arbitrators and the defending party is
unwilling to arbitrate and fails or refuses to appoint an arbitrator? The book of rules will provide
for this situation. It will also page "55"contain provisions under which the arbitration may
proceed in the event of any other default by one of the parties. The ICC Rules, for instance,
stipulate that:
If any of the parties, although duly summoned, fails to appear without valid excuse, the
Arbitral Tribunal shall have the power to proceed with the hearing. (184)
In a default situation, such rules are of considerable value.

1.163 Another advantage of institutional arbitration is that most arbitral institutions provide
trained staff to administer the arbitration. They will ensure that the arbitral tribunal is appointed,
that advance payments are made in respect of the fees and expenses of the arbitrators, that time
limits are kept in mind, and, generally, that the arbitration is run as smoothly as possible. If an
arbitration is not administered in this way, the work of administration will have to be undertaken
by the arbitral tribunal itselfor by a registrar or tribunal secretary appointed by the tribunal for
that purpose.

1.164 A further advantage of institutional arbitration is where the institution itself reviews the
arbitral tribunal's award in draft form, before it is sent to the parties. Such a review, which is
undertaken with particular attention to detail by the ICC, serves as a measure of quality control.
The institution does not comment on the substance of the award, or interfere with the decision of
the arbitral tribunal, but it does ensure that the tribunal has dealt with all the issues before it and
that its award also covers such matters as interest and costs (which are frequently forgotten, even
by experienced arbitrators).

1.165 Finally, the assistance which an arbitral institution can give to the parties and their counsel
in the course of the arbitral proceedings is not to be underestimated. Even lawyers who are
experienced in the conduct of arbitrations sometimes run into problems that they are grateful to
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discuss with the arbitral institution's secretariat.

ii. Disadvantages

1.166 Under some institutional rules, (185) the parties pay a fixed fee in advance for the costs of
the arbitrationthat is to say, the fees and expenses of the institution and of the arbitral tribunal.
This fixed fee is assessed on an ad valorembasis. If the amounts at stake in the dispute are
considerable, and the parties are represented by advisers experienced in international commercial
arbitration, it may be less expensive to conduct the arbitration ad hoc. (186) On the other hand,
the ability page "56"to pay a fixed fee for the arbitration, however long it takes, may work to the
parties' advantage (and to the disadvantage of the arbitrators, in terms of their remuneration).
1.167 The need to process certain steps in the arbitral proceedings through the machinery of an
arbitral institution inevitably leads to delay in the proceedings. Conversely, the time limits
imposed by institutional rules are often unrealistically short. A claimant is unlikely to be troubled
by this, since a claimant usually has plenty of time in which to prepare its case before submitting
it to the respondent or to the relevant arbitral institution, and so set the clock running. However,
a respondent is likely to be pressed for time, particularly in a case (such as a dispute under an
international construction contract) which involves consideration of voluminous documents and
where the claim that is put forward may, in fact, prove to be a whole series of claims on a series
of different grounds.

1.168 Although extensions of time will usually be granted, either by the institution concerned or
by the arbitral tribunal, the respondent is placed in the invidious position of having to seek
extensions of time from the outset of the case. The respondent starts on the wrong foot, so to
speak. The problem is worse if the respondent is a State or State entity. The time limits laid down
in institutional rules usually fail to take account of the time which a State or State entity needs to
obtain approval of important decisions, through its own official channels. In the ICC Rules, for
example, the time limit for rendering a final award is six months, although this may be (and
generally is) extended by the ICC. (187)

i. Role of institutions
ii. Institutional Rules
iii. Relevant Institutions/facility/associations (examples):
a. Arbitration Institutions
(a) Philippine Dispute Resolution Centre, Inc (PDRCI)
(b) Singapore International Arbitration Centre (SIAC)
(c) ICC International Court of Arbitration in Paris (ICC)-
First established as an arbitration branch of ICC in
1923.
(d) American Arbitration Association(AAA) they have
more than 33 offices throughout the United States. The
AAA was founded in 1926.
International cases of AAA are handled by
International Centre for Dispute Resolution (ICDR)
(e) China International Economic and Trade Arbitration
Commission (CIETAC)
(f) London Court of International Arbitration(LCIA)
(g) Japan Commercial Arbitration Association (JCAA)\
b. Associations
(a) Institute of Arbitrators and Mediators Australia
(IAMA) (1975)
(b) Arbitrators and Mediators Institute of New Zealand
(AMINZ)
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(c) Asia-Pacific Regional Arbitration Group (APRAG)
(d) Chartered Institute of Arbitrators (CIArb)
5. UNCITRAL Model Law Jurisdictions
List available at www.uncitral.org; also indicates which jurisdictions
have adopted 2006 Model Law
6. Overview of the Arbitral Process
i. Arbitration agreement/clause
ii. Dispute
iii. Reference to arbitration
iv. Constituting the tribunal
v. Preliminary meeting
vi. Applicable law, procedure
vii. Settling the schedule
viii. Dealing with documents
ix. Hearings
x. Award
xi. Enforcement/challenge

II. FRAMEWORK OF LAWS APPLICABLE TO THE ARBITRATION
1. Laws which may impact an arbitration
i. Law governing the parties capacity to enter into an arbitration
agreement (personal law)
ii. Law governing the agreement to arbitrate
iii. Law governing the procedure of the arbitration the curial law of the
arbitration or the lex arbitri
iv. Law governing the underlying commercial contract (Dicey & Morris:
proper law)
v. Law governing the supportive and enforcement measures
2. Lex Arbitri
Vs. Venue
Vs. Procedural Rules
Vs. Substantive Law

Section 30, RA 9285

SEC. 30. Place of Arbitration. - The parties are free to agree on the place of arbitration. Failing
such agreement, the place of arbitration shall be in Metro Manila, unless the arbitral tribunal,
having regard to the circumstances of the case, including the convenience of the parties shall
decide on a different place of arbitration.

The arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers
appropriate for consultation among its members, for hearing witnesses, experts, or the parties, or
for inspection of goods, other property or documents.

Art 20 Model Law

Article 20. Place of arbitration
(1) The parties are free to agree on the place of arbitration. Failing such agreement, the place of
arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the
case, including the convenience of the parties.
(2) Notwithstanding the provisions of paragraph (1) of this article, the arbitral tribunal may,
unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation
among its members, for hearing witnesses, experts or the parties, or for inspection of goods, other
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property or documents.

[Note: CLOUT 480: The Court found that the place of arbitration was neither agreed upon by the
parties, nor was it determined by the arbitrator in accordance with section 1043 (article 20 MAL), as
required by section 1054 (3) (article 31 (3) MAL). The award merely stated the arbitrators
address. Under these circumstances, the Court defined the place of arbitration to be the actual,
effective place of arbitration. Only if no particular place could be determined, the place of the last oral
hearing was considered the place of arbitration.

Union of India v McDonnell Douglas Corp [1993] 2 LLR 48}

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[To emphasize: (2) the fact that Indian law was the proper law {law to govern the rights and
obligations arising out of their commercial bargain but also the rights and obligations arising out of their
agreement to arbitrate} of the arbitration agreement did not necessarily entail that the law
governing the arbitration proceedings themselves was also Indian law, unless there was in that
agreement some effective express or implied term to that effect.] {Queens bench ruled that
English courts have supervisory jurisdiction of the English Courts.} {Today, there is no such
supervisory jurisdiction considering the substantive provisions of the New York Convention.}

PT Garuda Indonesia v Birgen Air (OM 600001/2001;Unreported, 11 Sep
2001 Woo Bih Li JC)

Jurisdiction: Singapore;
Date: 2002
Court: Court of Appeals

The facts giving rise to the institution of this Originating Motion were largely undisputed. The
appellant (Garuda), an Indonesian company, and the respondent (Birgen), a Belgium company,
entered into an agreement dated 20 January 1996 whereby Birgen agreed to lease one DC 10-30
aircraft to Garuda for use by pilgrims to Saudi Arabia for the Hajj (the lease agreement). The lease
agreement expressly provided that the governing law would be the law of Indonesia and that
disputes arising therefrom were to be referred for arbitration in Jakarta.

The arbitral tribunal consisted of Dr Clyde Croft, as Chairman, and Professor Priyatna
Abdurrasyid and Professor Nurkut Inan as co-arbitrators. From February 1999, the tribunal,
through its Chairman, Dr Croft, sought to set dates for the hearing of the arbitration. Dr Croft
proposed that the hearing of the arbitration be carried out in Singapore rather than in Zurich.
lawyers for Birgen agreeable, inter alia, that "Jakarta is not an appropriate place for the hearing
and accepts the tribunals proposal to sit in Singapore." "tribunal had decided that this matter
will be heard on 4, 5 and 6 August 1999 in Singapore". On 10 June 1999 Gani Djemat & Partners
(Gani Djemat), lawyers for Garuda, wrote indicating, inter alia, that they agreed that "the hearing
to take place on 4, 5 and 6 August 1999 in Singapore."

Garuda filed a Notice of Originating Motion (OM) in the High Court in Singapore to set aside the
Final Award and the Addendum, and for various other reliefs.

Issues:
There were, therefore, three main issues before us. First, whether there was an agreement
between the parties, in the light of the correspondence referred to above, followed by the actual
hearing of the arbitration in Singapore, to alter the place of the arbitration from Jakarta to
Singapore. Second, whether Singapore was the place most clearly connected with the arbitration
14
and whether this was the most appropriate forum to hear the application in the OM. Third,
whether there was a material non-disclosure on the part of Garuda in their application for leave
to serve out of jurisdiction and, if this were the case, what should be the consequence thereof.

Article 20: Place of arbitration
(1) The parties are free to agree on the place of arbitration. Failing such agreement, the place of
arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the
case, including the convenience of the parties.
(2) Notwithstanding the provisions of paragraph (1) of this Article, the arbitral tribunal may, unless
otherwise agreed by the parties, meet at any place it considers appropriate for consultation among
members, for hearing witnesses, experts or parties, or for inspection of goods, property or
documents."

It should be apparent from Article 20 that there is a distinction between "place of arbitration" and
the place where the arbitral tribunal carries on hearing witnesses, experts or the parties, namely,
the "venue of hearing". The place of arbitration is a matter to be agreed by the parties. Where they have so
agreed, the place of arbitration does not change even though the tribunal may meet to hear witnesses or do
any other things in relation to the arbitration at a location other than the place of arbitration.

citing Redfern & Hunter:
"Finally, as I mentioned at the outset, it seems clear that the submissions advanced below
confused the legal seat etc. of an arbitration with the geographically convenient place or
places for holding hearings. This distinction is nowadays a common feature of international
arbitrations and is helpfully explained in Redfern and Hunter at p.69 in the following passage
under the heading The Place of Arbitration:

The preceding discussion has been on the basis that there is only one place of arbitration.
This will be the place chosen by or on behalf of the parties; and it will be designated in the
arbitration agreement or the terms of reference or the minutes of proceedings or in some other
way as the place or seat of the arbitration. This does not mean, however, that the arbitral
tribunal must hold all its meetings or hearings at the place of arbitration. International
commercial arbitration often involves people of many different countries. In these
circumstances, it is by no means unusual for an arbitral tribunal to hold meetings -or even
hearings in a place other than the designated place of arbitration, either for its own
convenience or for the convenience of the parties or their witnesses ... It may be more
convenient for an arbitral tribunal sitting in one country to conduct a hearing in another
country for instance, for the purpose of taking evidence ... In such circumstances, each move
of the arbitral tribunal does not of itself mean that the seat of the arbitration changes. The seat
of the arbitration remains the place initially agreed by or on behalf of the parties." (emphasis
added).

It will be seen that the English concept of "seat of arbitration" is the same as "place of
arbitration" under the Model Law.

Contract clauses:
Clause 16.9: Arbitration
In the event that a commercial controversy or claim .... such controversy or claim shall
be settled by arbitration held before a board of three qualified arbiters. The parties agree
that such arbitration shall be held in Jakarta, Indonesia and conducted in the English
language in accordance with the Rules of Conciliation and Arbitration of the
International Chamber of Commerce. (emphasis added).
6.1 The place of arbitration is Jakarta, Indonesia.

. Garuda seemed to have placed great emphasis on the fact that the hearing of the arbitration
was held entirely in Singapore and nowhere else. But an arbitration proceeding does not
comprise only of the oral hearing and the submission. It encompasses an entire process,
15
commencing from the appointment of the arbitrator or arbitrators to the rendering of the final
award.

While both Amazonica and Union Bank of India {cited by Garuda} did not involve the Model Law,
and could be distinguished on that basis, the real differentiating feature there lies in the fact that
in both those cases the relevant clauses were far from clear. We have alluded to that before. But in
the instant case, the lease agreement was abundantly clear: the lease agreement was to be
governed by Indonesian law and the place of arbitration was Jakarta, which must also mean that
the arbitration proceedings were subject to Indonesian law.

Case 6 Sch 2/99 (Germany: Higher Regional Court Dsseldorf, 2000)
CLOUT Case 408 A/CN.9/SER.C/ABSTRACTS/35

Case 408: Art. 1(2), 20, 34 MAL
Germany: Higher Regional Court Du!sseldorf; 6 Sch 2/99
place of arbitration
23 March 2000

The decision, arising out of an action to set aside an award, concerns the determination the place
of arbitration. Although the award made reference to the sole arbitrators domicile in Du!sseldorf,
the Court declined its jurisdiction because it concluded the award was a foreign arbitral award.

The parties disputed the value of two business partnerships after the withdrawal by one of the
parties. In the course of the negotiations over the value of the two partnerships, the parties
agreed on a particular expert to conduct an appraisal. Both parties declared in separate written
statements that they would accept the decision by the expert, acting as a single arbitrator. Though
the parties exchanged several drafts of an arbitration agreement, no formal agreement was ever
signed. After an unsuccessful settlement attempt in Du!sseldorf, the arbitrator undertook an audit
of the partnerships at their places of business in Zurich, Switzerland. Further negotiations took
place for more than two years. Finally, upon motion of the Claimant, the arbitrator rendered an
arbitral award.

The Respondent filed an application to set aside the award before the Court where the award was
executed. The Court declined its own jurisdiction to rule on the validity of the award. It held that
the arbitral award at issue was not a German domestic arbitral award but a foreign arbitral
award.

The Court based its decision on the German arbitration law that was in effect until December
1997, since the new provisions, adapted from the MAL, became effective after the arbitration
proceedings had commenced. Applying the standard of the previous law, the Court considered
that the award was foreign because, according to the draft arbitration agreements exchanged by
the parties, both parties intended the dispute to be decided under Chapter 12 of the Swiss
Federal Statute on Private International Law.

Moreover, the Court also held that it lacked jurisdiction under the current arbitration law.
According to section 1025 (1) German Code of Civil Procedure the provisions on arbitration only
apply if the place of arbitration is situated in Germany. This rule also applies to the proceedings
for setting aside an award pursuant to section 1059 (adapted from article 34 MAL). The Court
found that the place of arbitration was neither agreed upon by the parties, nor was it determined by the
arbitrator in accordance with section 1043 (article 20 MAL), as required by section 1054 (3) (article 31 (3)
MAL). The award merely stated the arbitrators address. Under these circumstances, the Court defined the
place of arbitration to be the actual, effective place of arbitration. Only if no particular place could be
determined, the place of the last oral hearing was considered the place of arbitration.
16

In the case at issue, all relevant actions the auditing and the subsequent negotiations with both parties
took place in Zurich {Switzerland}. Therefore, and regardless of where the award itself was issued, the
effective place of arbitration was not situated in Germany.

3. Importance of Lex Arbitri

from Redfern & Hunter; Chapter 3
a. Introduction

3.34 An international commercial arbitration usually takes place in a country that is neutral, in
the sense that none of the parties to the arbitration has a place of business or residence there. (28)
This means that in practice the law of the country in whose territory the arbitration takes place,
the lex arbitri, will generally be different from the law that governs the substantive matters in
dispute. An arbitral tribunal with its seat in the Netherlands, for example, may be required to
decide the substantive issues in dispute between the parties in accordance with the law of
Switzerland or the law of the State of New York or some other law, as the case may be. page
"173"Nevertheless, the arbitration itself, and the way in which it is conducted, will be governed (if
only in outline) by the relevant Dutch law on international arbitration.

3.35 This difference between the lex arbitri (the law of the place or seat of the arbitration) and the
law governing the substance of the dispute, was part of the juridical tradition of continental
Europe, but is now firmly established in international commercial arbitration. (29)

3.36 It is right that there should be a distinction between the lex arbitriand the substantive law of
the contract. Where parties to an international arbitration agreement choose for themselves a seat
of arbitration, they usually choose a place that has no connection with either themselves or their
commercial relationship. They choose a neutral place. (30) By doing so, they do not necessarily
intend to choose the law of that place to govern their relationship. (31) Indeed, as well as
choosing a place of arbitration, they may well choose a substantive law that has no connection
with that place.

3.37 If the parties do not make an express choice of the place of arbitration, the choice will have to
be made for them, either by the arbitral tribunal itself or by a designated arbitral institution.

b. What is the lex arbitri?

3.39 It is appropriate, at this stage, to consider what is meant by the lex arbitri. The question was
posed rhetorically by a distinguished English judge:

What then is the law governing the arbitration? It is, as the present authors trenchantly explain, a
body of rules which sets a standard external to the arbitration agreement, and the wishes of the
parties, for the conduct of the arbitration. The law governing the arbitration comprises the
{1} rules governing interim measures (eg Court orders for the preservation or storage of goods),
the
{2} rules empowering the exercise by the Court of supportive measures to assist an
arbitration which has run into difficulties (eg filling a vacancy in the composition of the
arbitral tribunal if there is no other mechanism) and
{3} the rules providing for the exercise by the Court of its supervisory jurisdiction over
arbitrations (eg removing an arbitrator for misconduct).

c. The content of the lex arbitri

17
3.40 Each State will decide for itself what laws it wishes to lay down to govern the conduct of arbitrations
within its own territory. Some States will wish to build an element of consumer protection into
their law, so as to protect private individuals. For example, the Swedish Arbitration Act 1999
provides (38) that an arbitration agreement with a consumer involving goods or services for
private use is invalid if made before a dispute arises. Again, for example, the Swedish Act
provides that the arbitral tribunal must set out in its award its decision as to the fees payable to
each of the arbitrators; (39) and the arbitral tribunal must notify the parties of the steps that may
be taken to appeal to the district court against this decision. (40)

3.51 The concept that an arbitration is governed by the law of the place in which it is held, which
is the seat (or forum or locus arbitri) of the arbitration, is well established in both the theory
and practice of international arbitration.

The arbitral procedure, including the constitution of the arbitral tribunal, shall be governed by the
will of the parties and by the law of the country in whose territory the arbitration takes place. (52)

i. Curial support
ii. Setting Aside of Award
iii. Nationality of the Award (Enforcement)

4. Substantive law in arbitration
Article 28(2) ML

CHAPTER VI. MAKING OF AWARD AND TERMINATION OF PROCEEDINGS
Article 28. Rules applicable to substance of dispute

(1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen
by the parties as applicable to the substance of the dispute. Any designation of the law or legal
system of a given State shall be construed, unless otherwise expressed, as directly referring to the
substantive law of that State and not to its conflict of laws rules.

(2) Failing any designation by the parties, the arbitral tribunal shall apply the law determined by
the conflict of laws rules which it considers applicable.

(3) The arbitral tribunal shall decide ex aequo et bono
3
or as amiable compositeur
4
only if the parties
have expressly authorized it to do so.

(4) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and
shall take into account the usages of the trade applicable to the transaction.

Conflict of law rules - Dicey and Morris, The Conflict of Laws (13
th

ed),
recommends the following rules:

3
Ex aequo et bono (Latin for "according to the right and good" or "from equity and conscience") is a phrase derived
from Latin that is used as a legal term of art. In the context of arbitration, it refers to the power of the arbitrators to
dispense with consideration of the law and consider solely what they consider to be fair and equitable in the case at
hand.
4
Clauses in arbitration agreements allowing the arbitrators to act as "amiables compositeurs", permit the arbitrators to
decide the dispute according to the legal principles they believe to be just, without being limited to any particular
national law. The resulting arbitral awards are frequently based on equity or on the lex mercatoria. The arbitrators are
authorized, as "amiables compositeurs", to disregard legal technicalities and strict constructions which they would be
required to apply in their decisions if the arbitration agreement contained no "amiable compositeur" clause. "Amiable
compositeur" clauses in arbitration agreements are expressly permitted by art. 28(3) of the UNCITRAL Model Law on
International Commercial Arbitration 1985 (infra), as well as in both domestic and international arbitration procedures.
18

Rule 145 The term proper law of a contract means the system of law by which the parties
intended the contract to be governed, or, where their intention is neither expressed nor to be
inferred from the circumstances, the system of law with which the transaction has its closest and
most real connection.

Sub-rule 1. When the intention of the parties to a contract, as to the law governing the
contract, is expressed in words, this expressed intention, in general, determines the
proper law of the contract.

Sub-rule 2. When the intention of the parties to a contract with regard to the law
governing the contract is not expressed in words, their intention is to be inferred from the
terms and nature of the contract, and from the general circumstances of the case, and
such inferred intention determines the proper law of the contract.

Sub-rule 3. When the intention of the parties to a contract with regard to the law
governing it is not expressed and cannot be inferred from the circumstances, the contract
is governed by the system of law with which the transaction has its closest and most real
connection.

Compagnie dArmement Maritime SA v Compagnie Tunisienne de
Navigation SA [1971] AC 572 (per Lord Wilberforce)

19

20
III. THE ARBITRATION AGREEMENT
Redfern & Hunter, Redfern and Hunter on International Arbitration, 2009,
Chapter 2 [2.01 to 2.105; for reference only Sections 2.106 onwards]

A. Overview
a. Introduction

Nevertheless, the consent of the parties remains the essential basis of a voluntary system of
international commercial arbitration. (4)

b. Categories of Arbitration Agreements

An arbitration clause looks to the future, whereas a submission agreement looks to the past. The first,
which is most common, is usually contained in the principal agreement between the parties and
is an agreement to submit future disputes to arbitration. The second is an agreement to submit
existing disputes to arbitration.

c. International Conventions
d. International Standards
B. The Validity of an Arbitration Agreement
a. formal validity the need for writing
b. a defined legal relationship
c. a subject-matter capable of settlement by arbitration
C. Parties to an Arbitration Agreement
a. Capacity
i. Natural Persons
ii. Corporations
iii. States and State Agencies
b. Third-parties to the Arbitration Agreement
i. Piercing the Veil within groups of companies
ii. Assignment, Agency, and Succession
1. Assignment
2. Arbitration Agreements concluded by agents
3. Succession and Novation
c. Joinder and Intervention
D. Analysis of an Arbitration Agreement
a. Scope
i. forms of wording
b. Basic Elements
i. a valid arbitration agreement
ii. the number of arbitrators
iii. establishment of the arbitral tribunal
iv. ad hoc or institutional arbitration
v. filling vacancies in the tribunal
vi. place of arbitration
vii. governing law
viii. default clauses
ix. language
x. multi-tier clauses
xi. other procedural matters
c. Separability
d. Summary

21
[Optional reading hereonout. For reference only.]

E. Submission Agreements
a. Introduction
b. Drafting a Submission Agreement
i. An Illustration
F. Arbitrability
a. Introduction
b. Categories of Dispute for which questions of arbitrability arise
i. patents, trade marks, and copyright
ii. antitrust and competition laws
iii. securities transactions
iv. insolvency
v. bribery and corruption
vi. fraud
vii. natural resources
c. Conclusion
G. Confidentiality
a. Privacy and Confidentiality
i. Article 21 Hearings
ii. Article 25.4
b. Confidentiality the classical postion
c. Confidentiality the current trend
d. the award
e. Confidentiality in investor State arbitrations
f. Revisions to rules of arbitration
i. LCIA Rules
ii. The WIPO Arbitration Rules
g. Conclusion
H. Defective Arbitration Clauses
a. Inconsistency
b. Uncertainty
c. Inoperability
d. Repudiation and waiver of arbitration agreements
I. Multi-party Arbitrations
a. Introduction
i. several parties to one contract
ii. several contracts with different parties
b. Class arbitrations
c. String arbitrations
d. Concurrent hearings
e. Court-ordered consolidation
f. Consolidation by consent
i. under an arbitration agreement
ii. under institutional rules

1. Types
Ad hoc submission
Separate arbitration agreement

what arbitration clause submission agreement
looks to future past
usually contained in the principal not contained in the principal
22
agreement agreement
agreement to submit to future disputes existing dispute
what ad hoc arbitration institutional arbitration
tribunal created by the parties exisiting institutional mechanism

2. Definitions of arbitration agreement
UNCITRAL Model Law Art. 7

Option I
Article 7. Definition and form of arbitration agreement
(As adopted by the Commission at its thirty-ninth session, in 2006)
(1) Arbitration agreement is an agreement by the parties to submit to arbitration all or certain
disputes which have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not. An arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a separate agreement.
(2) The arbitration agreement shall be in writing.
(3) An arbitration agreement is in writing if its content is recorded in any form, whether
or not the arbitration agreement or contract has been concluded orally, by conduct, or by
other means.
(4) The requirement that an arbitration agreement be in writing is met by an electronic
communication if the information contained therein is accessible so as to be useable for subsequent
reference; electronic communication means any communication that the parties make
by means of data messages; data message means information generated, sent, received
or stored by electronic, magnetic, optical or similar means, including, but not limited to,
electronic data interchange (EDI), electronic mail, telegram, telex or telecopy.
(5) Furthermore, an arbitration agreement is in writing if it is contained in an exchange of
statements of claim and defence in which the existence of an agreement is alleged by one party and
not denied by the other. {Wow, just have exchange of statements and you now have an
arbitration agreement.}
(6) The reference in a contract to any document containing an arbitration clause constitutes an
arbitration agreement in writing, provided that the reference is such as to make that clause
part of the contract.

Option II
Article 7. Definition of arbitration agreement
Arbitration agreement is an agreement by the parties to submit to arbitration all or certain
disputes which have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not.

Excerpt from the UNCITRAL Model Law (as updated, 2006) Explanatory note:

2. Arbitration agreement
18. Chapter II of the Model Law deals with the arbitration agreement, including its recognition by
courts.

a. Definition and form of arbitration agreement
19. The original 1985 version of the provision on the definition and form of arbitration agreement
(article 7) closely followed article II (2) of the New York Convention, which requires that an
arbitration agreement be in writing. If the parties have agreed to arbitrate, but they entered into
the arbitration agreement in a manner that does not meet the form requirement, any party may
have grounds to object to the jurisdiction of the arbitral tribunal. It was pointed out by
practitioners that, in a number of situations, the drafting of a written document was impossible or
23
impractical. In such cases, where the willingness of the parties to arbitrate was not in question,
the validity of the arbitration agreement should be recognized. For that reason, article 7 was
amended in 2006 to better conform to international contract practices. In amending article 7, the
Commission adopted two options, which reflect two different approaches on the question of
definition and form of arbitration agreement. The first approach follows the detailed structure of
the original 1985 text. It confirms the validity and effect of a commitment by the parties to submit
to arbitration an existing dispute (compromis) or a future dispute (clause compromissoire). It
follows the New York Convention in requiring the written form of the arbitration agreement but
recognizes a record of the contents of the agreement in any form as equivalent to traditional
writing. The agreement to arbitrate may be entered into in any form (e.g. including orally) as
long as the content of the agreement is recorded. This new rule is significant in that it no longer requires
signatures of the parties or an exchange of messages between the parties. It modernizes the language
referring to the use of electronic commerce by adopting wording inspired from the 1996
UNCITRAL Model Law on Electronic Commerce and the 2005 United Nations Convention on the
Use of Electronic Communications in International Contracts. It covers the situation of an
exchange of statements of claim and defence in which the existence of an agreement is alleged by
one party and not denied by another. It also states that the reference in a contract to a
document (for example, general conditions) containing an arbitration clause constitutes an
arbitration agreement in writing, provided that the reference is such as to make that clause part
of the contract. It thus clarifies that applicable contract law remains available to determine the
level of consent necessary for a party to become bound by an arbitration agreement allegedly
made by reference. The second approach defines the arbitration agreement in a manner that
omits any form requirement. No preference was expressed by the Commission in favour of either
option I or II, both of which are offered for enacting States to consider, depending on their
particular needs, and by reference to the legal context in which the Model Law is enacted,
including the general contract law of the enacting State.
Both options are intended to preserve the enforceability of arbitration agreements under the New
York Convention.
20. In that respect, the Commission also adopted, at its thirty-ninth session in 2006, a
Recommendation regarding the interpretation of article II, paragraph 2, and article VII,
paragraph 1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards,
done in New York, 10 June 1958 (A/61/17, Annex 2). The General Assembly, in its resolution
61/33 of 4 December 2006 noted that in connection with the modernization of articles of the
Model Law, the promotion of a uniform interpretation and application of the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, done in New York, 10 June 1958, is
particularly timely. The Recommendation was drafted in recognition of the widening use of
electronic commerce and enactments of domestic legislation as well as case law, which are more
favourable than the New York Convention in respect of the form requirement governing
arbitration agreements, arbitration proceedings, and the enforcement of arbitral awards. The
Recommendation encourages States to apply article II (2) of the New York Convention
recognizing that the circumstances described therein are not exhaustive. In addition, the
Recommendation encourages States to adopt the revised article 7 of the Model Law. Both options
of the revised article 7 establish a more favourable regime for the recognition and enforcement of
arbitral awards than that provided under the New York Convention. By virtue of the more
favourable law provision contained in article VII (1) of the New York Convention, the
Recommendation clarifies that any interested party should be allowed to avail itself of rights
it may have, under the law or treaties of the country where an arbitration agreement is sought to
be relied upon, to seek recognition of the validity of such an arbitration agreement.

New York Convention Art. II

Article II
1. Each Contracting State shall recognize an agreement in writing under which the parties
24
undertake to submit to arbitration all or any differences which have arisen or which may arise
between them in respect of a defined legal relationship, whether contractual or not, concerning a
subject matter capable of settlement by arbitration.
2. The term agreement in writing shall include an arbitral clause in a contract or an arbitration
agreement, signed by the parties or contained in an exchange of letters or telegrams.
3. The court of a Contracting State, when seized of an action in a matter in respect of which the
parties have made an agreement within the meaning of this article, shall, at the request of one of
the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void,
inoperative or incapable of being performed.

3. in writing and written agreement
Art. 7 Model Law, supra
Art. II New York Convention, supra
Consmaremma-Consorzion tra produttori agricoli Societa Cooperativa
v Hermanos Escot Madrid SA (Tribunal Supremo, Spain)
Yearbook Com Arb XXVi (2001) p 858

Consmaremma bought certain goods from Escot through its brokers. The brokers sent Escot sales
confirmation no. 025/95 on August 30, 1995. The sales confirmation contained a clause referring
all disputes to arbitration at the Chamber of Arbitration of Paris and further referred to Form no.
13 Paris FOB Maritime, which also contains a clause for arbitration at the Chamber of Arbitration
of Paris.

A dispute arose between the parties. An arbitral panel of the Chamber of Arbitration of Paris
rendered an award in favor of Consmaremma on August 22, 1997.

Cosmaremma sought enforcement of the award in Spain. The Supreme Court granted the
enforcement, holding that, although the sales confirmation, which was signed only by Cosmaremma
and the brokers, was not a written agreement to arbitrate, it appeared in the award that the parties
had later concluded a contract to complement the contractual relationship that had arisen under
the sales confirmation. As this later contract, which explicitly referred to the sales confirmation,
was signed by both parties, the Supreme Court held that there was an agreement in writing as
required by the Convention.

[Note: Excerpt from the Explanatory Note to the 2006 UNCITRAL Model Law: It follows the New
York Convention in requiring the written form of the arbitration agreement but recognizes a
record of the contents of the agreement in any form as equivalent to traditional writing.
The agreement to arbitrate may be entered into in any form (e.g. including orally) as long as the
content of the agreement is recorded. This new rule is significant in that it no longer requires
signatures of the parties or an exchange of messages between the parties.]

II ZR 37 3/98 (Germany SupCt: Bundesgerichtshof) CLOUT Case 406:
A/CN.9/SER.C/ABSTRACTS/35

Case 406: Art. 7 UNCITRAL Model Law (MAL) April 2000
The decision by the Federal Supreme Court concerns the binding effect that an arbitration clause
in the statute of an association can have on members that have not consented to it. Although the
ruling is based on provisions of the German Code of Civil Procedure in force before the
adaptation of the UNCITRAL Model Law (MAL), the decision is also relevant to cases decided
pursuant to the MAL.

The plaintiff is a member of the registered association for the breeding of German Shepherd dogs.
The Association, the defendant in these proceedings, introduced an arbitration clause into its
25
rules through a majority vote by its members without Plaintiffs assent.

When a penalty was imposed on the Plaintiff by the Association, the Plaintiff filed a claim in the
Regional Court (LG Augsburg). The Court declined jurisdiction because of the arbitration clause
contained in the rules. On appeal, the Higher Regional Court of Munich affirmed the decision
(OLG Mnchen, 30 U 709/97; 09. February 1999). The Federal Supreme Court reversed and
remanded the case to the Higher Regional Court.

The Supreme Court stated that the provisions of the Civil Code of Procedure in force before the
adaptation of the MAL applied, since the arbitration clause had been included into the statute
when these provisions were still in force.

The Court held that while an arbitration clause could generally be introduced into the rules of an
association under 1048 (now 1066) of the German Code of Civil Procedure, this did not necessarily
mean that a member of the Association would automatically be subject to the clause if it was later added
without its assent. The Court stressed that the rights to be judged by ones lawful judge and to
have recourse to state courts were constitutional rights. These constitutional rights could only be
waived by a conscious decision based on the free will of the concerned party. The members who had
assented to the arbitration clause had made this conscious decision. However, the dissenting
members had not. A waiver of the mentioned constitutional rights could only be construed if a
member still chose to remain a member of the Association even though it had the possibility of
resigning its membership. The Court, however, emphasized that such a construction could not be
contemplated in the case of an association whose members were not in a position to decide about
their membership free from economic, social or other constraints. Since it was not possible to
breed German Shepherd dogs outside the Defendants Association, the factual consequences of
resigning its membership would have been unbearable for the Plaintiff. Accordingly, the fact that
the Plaintiff had remained a member of the Defendants Association could not be construed as a
waiver of its right to have recourse to state courts.

Case 407: November 2000
The decision of the Federal Supreme Court of Germany (Bundesgerichtshof) concerns the
question on which grounds a declaration of enforceability of an award on agreed terms may be refused.

The case arose out of a contract for the sale of shares by the Applicant to the Respondent. When a
dispute arose, the parties started arbitration proceedings which resulted in a settlement recorded
in the form of an arbitral award on agreed terms pursuant to section 1053 (1) of the German Code
of Civil Procedure (ZPO) (adapted from Art. 30 MAL). In this settlement, the parties agreed that
the Applicant would transfer all of its remaining shares to the Respondent. The price had been
determined on the basis of a balance sheet audit. The Applicant transferred the shares and the
Respondent paid two thirds of the agreed price. When the remaining third was not paid, the
Applicant moved for a declaration of enforceability before the competent Higher Regional Court.
In defence, the Respondent submitted that the balance sheets presented by the Applicant had been
falsified.

The Higher Regional Court ruled that a damages claim based on the falsification of the balance
sheets did not justify interference with a valid award and declared the award enforceable. On
appeal, the Federal Supreme Court reversed and remanded the case to the Higher Regional Court
for further trial.

The Federal Supreme Court held that grounds for the setting aside of the award under section
1059 (2) ZPO, which would lead to a denial of a declaration of enforceability under section 1060
(2) ZPO, could not be ruled out on the basis of the facts established by the Higher Regional Court.

26
The Court found itself barred from considering whether an avoidance of the settlement might
justify a refusal of enforcement under section 1059 (2) (1) (b) ZPO [ML. Art. 36 (1) (a) (iv)] since
that ground was not properly invoked by Respondent. It furthermore held that the enforcement
of the award could also not be resisted on the basis of section 1059 (2) No.2 lit.b, ZPO, a violation
of the ordre public. Under German law a violation of the ordre public is assumed if one of the grounds
which justify a reopening of a case under section 580 ZPO exists. Criminal acts, as alleged by
Respondent, only justify a reopening of a case according to section 581 ZPO if they already
resulted in a conviction which was not the case.

The Court held, however, that in analogy to the provisions of section 1059 of the Code of Civil
Procedure, an award may also be set aside if it is based on a wilfull and intentional violation of public
policy pursuant to section 826 of the German Civil Code. According to the submissions by the
Respondent, this was the case here. Therefore, the Supreme Court remanded the case to the
Higher Regional Court for further trial in order to ascertain the relevant facts.

[Note: This is a case of vitiated consent through fraud by falsification of financial statements.
Enforcement of the award was thereby set aside.]

APC Logistics Pty Ltd and Phoenix International Freight Services
Limited v. CJ Nutracon Pty Ltd and Multisource Network
Corporation, Federal Court of Australia, Queensland District
Registry, 16 February 2007, VID 978 of 2006

Freight forwarders APC Logistics Pty LTD and Phoenix International Freight Services Limited
(collectively, the applicants) entered into a contract with CJ Nutracon Pty Ltd (the first
respondent) and Multisource Network Corporation (the second respondent) for the
transportation of machinery and equipment from the United States to Australia. A dispute arose
in respect of charges the applicants claimed from both respondents and of a claim the second
respondent had against the first respondent arising out of their contractual arrangements relating
to the carriage of the goods. 331On 12 September 2006, the parties held a meeting in Los
Angeles. At that meeting, according to the applicants, the parties orally agreed to undertake mediation
and, if mediation was not successful, to refer the dispute to arbitration, both to be conducted in the United
States. According to the second respondent, that agreement was only in principle. On 22
September 2006, the first respondent reached an agreement with the applicants that was recorded
in an Interlocutory Settlement Deed. The Deed provided that the first respondent 26ecogniz to
persuade the second respondent to undertake alternative dispute resolution. To this aim, the first
respondent sent a draft arbitration agreement to the second respondent, combining mediation
and arbitration. The second respondent recommended in reply that the two methods be split and
the focus be put on mediation. On 6 December 2006, the first respondent and the second
respondent participated in a mediation meeting in which the applicants did not appear. The
second respondent subsequently filed a request for arbitration. In the meantime, proceedings
were commenced in the Federal Court of Australia, Queensland District Registry. The applicants
and the second respondent sought an order from the Court staying proceedings pending
arbitration.

The Federal Court, per Kiefel, J, denied the request, holding that there was no arbitration
agreement in writing between the parties within the meaning of the 1958 New York Convention.
The Court examined the correspondence among the parties and concluded that though an
agreement can be validly reached through an exchange of correspondence, in the present case there was no
confirmation or acceptance by the parties that they agreed on all terms of a dispute resolution mechanism
and considered themselves bound to perform it.

[Note: Although even an exchange of correspondence may be deemed a written arbitration
27
agreement, such correspence should still show consent.]
[Class notes: Would have been way easier if the agreed on an arbitration clause before the
dispute arose. This case is an example.]

UNCITRAL Model Law 2006 Art. 7, supra
4. Elements of a Valid Arbitration Agreement
Redfern & Hunter, Law & Practice of International Commercial
Arbitration, Chapter 2, Section 2.11 to 2.12

2.11 In seeking to establish the international requirements, the starting point has to be the New
York Convention. This has been described as the single most important pillar on which the
edifice of international arbitration rests, (16) and one which perhaps could lay claim to be the
most effective instance of international legislation in the entire history of commercial law. (17)
Under the Convention each Contracting State undertakes to recognise and give effect to an
arbitration agreement when the following requirements are fulfilled:

(1) the agreement is in writing;
(2) it deals with existing or future disputes;
(3) these disputes arise in respect of a defined legal relationship, whether contractual or not; and
(4) they concern a subject-matter capable of settlement by arbitration.
(5) the parties to the arbitration agreement must have legal capacity under the law applicable to
them;
(6) the arbitration agreement must be valid under the law to which the parties have subjected it
or, failing any indication thereon, under the law of the country where the award was made. In
the words used earlier in the New York Convention (in Article II(3)), the agreement must not be
null and void, inoperative or incapable of being performed.

2.12 These {first} four {i.e., (1)-(4)} are positive requirements of a valid arbitration agreement, laid
down in Article II(1) of the New York Convention. {The} further two requirements {(5) and (6)}
are, in effect, added by the provisions of Article V(1)(a), (19) which stipulates that recognition or
enforcement of an award may be refused if the party requesting refusal is able to prove that the
arbitration agreement was made by a person under incapacity, or that the agreement was invalid
under the applicable law.

2.68 There follows a note of the key elements of an arbitration clause, including those that may
usefully supplement a model clause. Since these key elements have already been discussed,
either in this chapter or in the preceding chapters, the note is brief.

i. A valid arbitration agreement

2.69 First, there must be a valid arbitration agreement. In particular it must be made clear, as it is
in the model clauses, that the parties intend that any and all disputes between them shall be
finally resolved by arbitration. Examples of defective clauses, in which such an intention was not
made clear, are given later in this chapter.

ii. The number of arbitrators

2.70 In an international commercial arbitration there should be an uneven number of arbitrators;
and it is suggested that, in general, three at most will be sufficient. (120) The system of appointing
only two arbitrators, with an umpire or referee to adjudicate between them if they cannot
agree, may be appropriate for arbitrations within a defined trade or commodity association, but
is impracticable for the generality of international commercial arbitrations.

28
iii. Establishment of the arbitral tribunal

2.71 This important subject is dealt with in Chapter 4.

5. Clauses which give a choice
The Dai Yun Shan [1992] 2 SLR 508

The plaintiffs, a Canadian Company with a representative office in Singapore, had shipped cargo
on board the Dai Yun Shan (the vessel) for carriage from Singapore to Guangzhou, China. On
arrival, the cargo was discharged into warehouses. The cargo was eventually released by the
defendants agent on presentation by the consignee of a copy rather than the original bill of
lading and a letter of indemnity. The plaintiffs did not receive payment for the cargo and
commenced proceedings in rem against the defendants. as owners of the vessel.

The defendants applied to stay all proceedings pending arbitration in the Peoples Republic of China or
pending reference to the courts in China, relying on a choice of forum clause (cl.2) in the bill of lading. The
clause provided that all disputes arising under and in connection with the bill of lading would be
determined by Chinese law in the courts of, or by Arbitration in China. Pending the hearing of
the application for stay, the defendants applied, inter alia, for security for their costs of the
application for stay. Security for costs was awarded. The defendants application for stay was
granted by the registrar for terms that the defendants provide security in the amount of the bail
bond. The plaintiffs appealed against the stay. The defendants cross-appealed against the
conditions for stay. The plaintiffs argued that there cannot be any dispute on the liability of the
defendants for releasing the cargo without production of the bill of lading. One of the questions
of the court was whether the dispute was one required to be referred to arbitration under the
Arbitration (Foreign Awards) Act (Cap10A) (the Act.)

Held: Dismissing both the appeal and the cross-appeal:
(1) So long as the claim is not admitted, a dispute exists.
(2) If the arbitration agreement in cl.2 of the bill of lading falls within 4 of the Act, then the court shall
make an order of stay but may impose conditions. Since under cl.2 the plaintiffs have a choice of either
proceeding to arbitration in China or prosecuting their claim in the Chinese courts, the dispute is not once
that is required to be referred to arbitration. Therefore the Act does not apply to the dispute.
[Note: Arbitration not mandatory. Therefore the stay was denied.]
(3) In this case, the applicable law in the law of China, the evidence of misdelivery is in China
and the parties have agreed to have all disputes determined in China. There is no evidence that
the defendants are seeking a procedural advantage.
(4) The defendants application for security for costs was limited to the costsof the application for
a stay. By doing so, they have not taken a step in the proceedings.

Guangdong Agriculture Co Ltd v Conagra international (Far East) Ltd
[1993] ADRLJ 100

The plaintiff contracted to buy and the defendant to sell certain goods. The contract contained an
arbitration agreement. The plaintiff alleged short and delayed delivery and sought summary
judgment in respect of the short delivery claim under R.S.C., Order 14. The defendant sought a
stay to arbitration. It was not disputed that the arbitration agreement was governed by the
UNCITRAL Model Law.

There were two issues before the court:
(1) whether, upon construction, the arbitration agreement was too uncertain to be enforceable;
(2) whether there was a dispute between the parties capable of being referred to arbitration.

29
Held:
(1) The parties by their contract showed a clear intention to go to arbitration. Any uncertainty
over the number of arbitrators to be appointed could be resolved, failing agreement, under the
provisions of the Model Law.
(2) [Yes, in order to proceed to arbitration.] The wording of Article 8(1) of the Model Law was
different from that in Section 6A of the Arbitration Ordinance and 1 of the Arbitration Act of
1975, on which section 6A was based. Under Article 8(1) of the Model Law, it was unnecessary
for the court to examine the nature and extent of the dispute between the parties. A non-admission
of the claim was sufficient for the matter to be referred to arbitration. It was for the arbitrator to
examine the merits for each side.

[Note: Read this case again. Was not able to find: what was the clause which gave a choice?]

William Co v Chu Kong Agency Co Ltd [1993] 2 HKC 377

The plaintiff brought a claim in the high court for damages under the Hague-Visby Rules for
damage to its cargo on board a vessel under a bill of lading issued by the first defendant but not
signed by the plaintiff. The bill of lading contained a clause that all disputes shall, in accordance
with Chinese law, be resolved in the court of the Peoples Republic of China or be arbitrated in China.
After the dispute had arisen, there was correspondence between the parties solicitors, and an
affidavit by the plaintiffs solicitor, all of which made references to that clause. The defendants
also argued that the points of claim of the plaintiff were based on the bill of lading.

Further, the bill of lading contained clauses excluding or limiting the carriers liability beyond the
limits laid down in the Hague-Visby Rules.

It was accepted that the UNCITRAL Model Law applied. The defendants applied for a stay of
proceedings in favour of arbitration in China, or on the grounds of a Chinese exclusive jurisdiction
clause or forum non conveniens.

Held, allowing the defendants application:
(1) Although the clause provided for either litigation or arbitration, it was not void for
uncertainty. Under the clause, the claimant in a dispute had a choice, which would be binding on the
defending party, either to seek arbitration or litigation in China. The plaintiffs choice of litigation in Hong
Kong was not a method within the contract and was invalid. {This case was decided in 1992. Hong
Kong was ceded by the British to China in 1997. Hong Kong was then not yet a special
administrative region of China.} It was therefore open to the defendants to choose. The defendants had
opted for arbitration by seeking a stay under Article 8 of the Model Law and were prima facie entitled to
stay.
(2) Correspondence contemporaneous with or which post dated the arbitration agreement, could be a record
of the agreement within Article 7(2) of the Model Law. The materials before the court showed that the
plaintiff agreed to arbitration through its solicitors in the correspondence and affidavit. Such material
contained a record of that agreement. and could further be described as a statement of case an defense. This
was so even though the materials did not refer to arbitration as such but only to the choice of law and
jurisdiction clause. Article 7(2) had therefore been complied with. Dictum of Mayo J in Hissan Trading
Co v. Orkin Shipping (Comm L 39/92) not followed.
(3) Article 8 of the Model Law was mandatory in terms. Once the court was satisfied there was an
arbitration clause within Art. 7(2) of the Model Law, the court should not concern itself with how
the arbitrations would treat the terms of the bill of lading. The choice of law was a matter for the
Chinese arbitrators. The fact that they would probably apply the terms of the bill of lading which
were more generous to the carrier than the Hague-Visby Rules was the natural consequence of
the agreement in the bill of lading.
(4) It might be that the plaintiffs expert evidence of Chinese law did not comply with the
30
requirements for the reception of expert evidence, in which case the presumption applied that
foreign law was the same as Hong Kong law, and it followed that the arbitrators would not apply
the restrictive clauses in the bill of lading. because of the Hague-Visby Rules.

Obiter: The court would have exercised its discretion against granting a stay on the basis of the
exclusive jurisdiction clause and forum non conveniens because of the substantial juridical
disadvantage to the plaintiff if the matter were to be tried in China.

Where agreement provides for alternative seats: Tema-Frugoli SpA v
Hubei Space Quarry Industry Co Ltd (Corte di Appello, Italy CA,
1999) ), Yearbook Com Arb XXVI (2001) p 807-811)

Tema, the Italian seller, and Hubei, the Chinese buyer, concluded a sales contract on October 5,
1990. The contract provides that claims filed by Tema were to be settled by arbitration at the
Stockholm Arbitration Institute, whereas claims filed by Hubei were to be heard by China
International Economic Trade Arbitration Commission (CIETAC) arbitrators in Beijing.

A dispute arose concerning Temas performance under the contract, and Tema commenced
arbitration in Stockholm seeking a declaration that it had performed correctly, payment of the
sale price and damages. Both parties participated in the proceedings, which led to an award in
favor of Tema.

A few weeks after Tema filed a request for arbitration in Stockholm, Hubei also commenced
arbitration, at CIETAC, seeking damages for breach of contract. Though duly notified, Tema did
not appear, in the CIETAC proceedings. An award in favor of Hubei was eventually rendered in
Beijing.

Tema sought and obtained enforcement of the Swedish award in Italy by decree of the President
of the Rome Court of Appeal; enforcement became final because the Chinese company did not
file opposition as provided for in Article 840 of the Code of Civil Procedure.

Hubei also sought and obtained enforcement of the CIETAC award by decree of the President of
the Milan Court of Appeal. Tema filed opposition against the enforcement of the Chinese Award,
arguing that the award was contrary to the Swedish award, which had already been recognized
in Italy, and that the CIETAC tribunal was not constituted in accordance with the agreement of
the parties. Tema alleged that once the arbitral tribunal had been established, in Stockholm, the
arbitral clause precluded the parties from commencing the proceedings in Beijing.

The Milan Court of Appeal dismissed the opposition. It held that the text of the arbitral clause did not
rule out the possibility to commence parallel arbitration proceedings, as the sole criterion for jurisdiction
was the identity of the claimant, and that the alleged contrast of the CIETAC award with the Swedish
award was irrelevant in enforcement proceedings as it is not one of the grounds for refusing enforcement in
Art. 839 and 840 of the CCP.

[Class Notes: This is not how to draft an arbitration clause.]

6. Pathological Arbitration Clauses: e.g. Selecting Non-existent arbitration
institutions, arbitration rules; vague language
Lucky Goldstar v Ng Mook Kee Ltd [1993] 2 HKLR 73

By a written agreement dated December 3, 1990, the plaintiff sold to the defendant five (5) sets of
elevators. The contract contained the following arbitration clause:

31
Claims: Any dispute or difference arising out of or relating to this contract, or breach thereof
which cannot be settled amicably without under delay of the interested parties shall be arbitrated
in the 3
rd
Country, under the rule of the 3
rd
Country and in accordance with the rule of procedure
of the International Commercial Arbitration Association. The award shall be final and binding
upon both parties.

The arbitration agreement was international. The defendant sought a stay of proceedings under
Article 8 of the Model Law.

It was argued by the Plaintiff that there was no binding agreement on the grounds that a
common mistake had been made since the International Commercial Arbitration Association did
not exist. It was said that when the parties have agreed to arbitration only in certain
circumstances which turn out to be non-existent, the consent to arbitration is therefore nullified.
Alternatively, it was argued that the arbitration agreement was inoperative or incapable of being
performed in terms of Article 8 because it would be impossible to arbitrate under the rules of the
International Commercial Arbitration Association.

Held:
(1) It is perfectly clear that the parties, by this clause, intended to arbitrate any disputes that
might arise under this contract. This argument is not nullified because they chose the rules of a
non-existent organization. As there are no rules of this non-existent organization the arbitration
has to be conducted under the law of the 3
rd
Country chosen by the plaintiff.
(2) It cannot be said that the arbitration clause is inoperative or incapable of being performed.
While there will be no arbitration under the rules of the International Commercial Arbitration
Association, there will be an arbitration under the law of the place of arbitration chosen by the
plaintiff.
(3) The correct approach is for the court to satisfy itself that the parties have clearly expressed the
intention to arbitrate any dispute which may arise under the contract. The court is satisfied so
here. As to the reference to the non-existent arbitration institution and rules, the correct approach
is to ignore it.
Stay granted.

[Note: In pro-arbitration countries, all they would need to see is an intent to submit to
arbitration.]

ICC Case 7920

The distribution contract between the parties contained the following clause: In case of
litigation, parties hereby agree to appeal to International Chamber of Commerce of Geneva
(Switzerland) according to international rules of arbitration.

When a dispute arose, the Spanish party commenced ICC arbitration. Maintaining that the clause
in the contract referred to arbitration before the Geneva Chamber of Commerce, the Italian
defendant refused to take part in the proceedings.

In a partial award on the issue of jurisdiction, the sole arbitrator held that, although the arbitral
clause was ambiguous, ICC arbitration in Geneva complied with the parties unambiguous intention to
have their disputes settled by international arbitration in Geneva. Subsidiarily, the arbitrator also
applied general principles of contract interpretation, and reached the same result that he had
jurisdiction to hear the dispute.

[Class Notes: Principle of effectiveness. Where there is doubt in the construction of an
arbitration agreement, the doubt must be interpreted in a way that would give effect to the
32
arbitration clause.]

7. Subject-matter Arbitrability
Section 6, RA. 9285

SEC. 6. Exception to the Application of this Act. The provisions of this Act shall not apply to
resolution or settlement of the following:
(a) labor disputes covered by Presidential Decree No. 442, otherwise known as the Labor Code of
the Philippines, as amended and its Implementing Rules and Regulations;
(b) the civil status of persons;
the validity of a marriage;
(d) any ground for legal separation;
(e) the jurisdiction of courts;
(f) future legitime;
(g) criminal liability; and
(h) those which by law cannot be compromised.

Article 2035 in relation to Article 2043, Civil Code

TITLE XIV COMPROMISES AND ARBITRATIONS
CHAPTER 1 Compromises
Article 2035. No compromise upon the following questions shall be valid:
(1) The civil status of persons;
(2) The validity of a marriage or a legal separation;
(3) Any ground for legal separation;
(4) Future support;
(5) The jurisdiction of courts;
(6) Future legitime. (1814a)

Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue
influence, or falsity of documents, is subject to the provisions of article 1330 of this Code.
However, one of parties cannot set up a mistake of fact as against the other if the latter, by virtue
of the compromise, has withdrawn from a litigation already commenced. (1817a)
Article 2039. When the parties compromise generally on all differences which they might have
with each other, the discovery of documents referring to one or more but not to all of the
questions settled shall not itself be a cause for annulment or rescission of the compromise, unless
said documents have been concealed by one of the parties.
But the compromise may be annulled or rescinded if it refers only to one thing to which one of
the parties has no right, as shown by the newly-discovered documents. (n)
Article 2040. If after a litigation has been decided by a final judgment, a compromise should be
agreed upon, either or both parties being unaware of the existence of the final judgment, the
compromise may be rescinded.
Ignorance of a judgment which may be revoked or set aside is not a valid ground for attacking a
compromise. (1819a)
Article 2041. If one of the parties fails or refuses to abide by the compromise, the other party may
either enforce the compromise or regard it as rescinded and insist upon his original demand. (n)

CHAPTER 2 Arbitrations
Article 2042. The same persons who may enter into a compromise may submit their controversies
to one or more arbitrators for decision. (1820a)
Article 2043. The provisions of the preceding Chapter upon compromises shall also be applicable to
arbitrations. (1821a)
Article 2044. Any stipulation that the arbitrators award or decision shall be final, is valid,
33
without prejudice to articles 2038, 2039, and 2040. (n)
Article 2045. Any clause giving one of the parties power to choose more arbitrators than the other
is void and of no effect. (n)
Article 2046. The appointment of arbitrators and the procedure for arbitration shall be governed
by the provisions of such rules of court as the Supreme Court shall promulgate. (n)

Possible non-arbitrable subject matters:-
(1) insolvency (e.g. companies winding-up bankruptcies)
(2) contracts contrary to public policy (e.g. money laundering;
corruption/bribery arrangements)
(3) intellectual property rights (e.g. patents validity and
trademarks)
(4) anti-trust/competition [permissible in Australia e.g. Trade
Practices Act; see QH Tours; Ferris below];
(5) consumer protection;
(6) environmental protection and planning.

8. Doctrine of Separability
i. Article 16 (1) Model Law

CHAPTER IV. JURISDICTION OF ARBITRAL TRIBUNAL
Article 16. Competence of arbitral tribunal to rule on its jurisdiction
The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the
existence or validity of the arbitration agreement. For that purpose, an arbitration clause which
forms part of a contract shall be treated as an agreement independent of the other terms of the
contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso
jure the invalidity of the arbitration clause.

ii. Cargill Philippines, Inc. vs. San Fernando Regala Trading Inc. G.R. No.
175404 January 31, 2011

San Fernando bought molasses from Cargill. San Fernando filed suit for rescission. Cargill
questioned the existence of the contract claiming San Fernando never returned the agreement
bearing its written acceptance. Cargill also claimed the contract had an arbitration clause.

Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be
settled by arbitration in the City of New York before the American Arbitration Association. The
Arbitration Award shall be final and binding on both parties.

that respondent must first comply with the arbitration clause before resorting to court, thus,
the RTC must either dismiss the case or suspend the proceedings and direct the parties to
proceed with arbitration, pursuant to Sections 6
6
and 7
7
of Republic Act (R.A.) No. 876, or the
Arbitration Law.

Cargills opposition and Motion To Dismiss/Suspend Proceedings and To Refer Controversy To
Voluntary Arbitration was denied by the RTC. It was directed to file answer.

the RTC did not find the suspension of the proceedings warranted, since the Arbitration Law
contemplates an arbitration proceeding that must be conducted in the Philippines under the
jurisdiction and control of the RTC; and before an arbitrator who resides in the country; and that
the arbitral award is subject to court approval, disapproval and modification, and that there must
be an appeal from the judgment of the RTC. The RTC found that the arbitration clause in
question contravened these procedures, i.e., the arbitration clause contemplated an arbitration
34
proceeding in New York before a non-resident arbitrator (American Arbitration Association); that
the arbitral award shall be final and binding on both parties. The RTC said that to apply Section 7
of the Arbitration Law to such an agreement would result in disregarding the other sections of
the same law and rendered them useless and mere surplusages.

MR Denied.
CA, certiorari denied. The CA found that there was nothing in the Civil Code, or R.A. No. 876,
that require that arbitration proceedings must be conducted only in the Philippines and the
arbitrators should be Philippine residents. Notwithstanding such findings, the CA still held
that the case cannot be brought under the Arbitration Law for the purpose of suspending the
proceedings before the RTC, since in its Motion to Dismiss/Suspend proceedings, petitioner
alleged, as one of the grounds thereof, that the subject contract between the parties did not exist
or it was invalid; [Court of Appeals ruled that] Arbitration is not proper when one of the parties
repudiated the existence or validity of the contract. MR denied.

Decision:
However, the Gonzales case,
25
which the CA relied upon for not ordering arbitration, had been
modified upon a motion for reconsideration in this wise:
x x x The adjudication of the petition in G.R. No. 167994 effectively modifies part of the
Decision dated 28 February 2005 in G.R. No. 161957. Hence, we now hold that the validity of
the contract containing the agreement to submit to arbitration does not affect the applicability
of the arbitration clause itself. A contrary ruling would suggest that a partys mere repudiation
of the main contract is sufficient to avoid arbitration. That is exactly the situation that the
separability doctrine, as well as jurisprudence applying it, seeks to avoid.

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 a 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
not affect 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.

Moreover, it is worthy to note that respondent filed a complaint for rescission of contract and
damages with the RTC. In so doing, respondent alleged that a contract exists between respondent
and petitioner. The arbitration agreement clearly expressed the parties intention that any
dispute between them as buyer and seller should be referred to arbitration. It is for the arbitrator
and not the courts to decide whether a contract between the parties exists or is valid.

[On the Gonzales v. Climax Mining case,] We found that since the complaint filed before the DENR
Panel of Arbitrators charged respondents with disregarding and ignoring the addendum
contract, and acting in a fraudulent and oppressive manner against petitioner, the complaint filed
before the Panel was not a dispute involving rights to mining areas, or was it a dispute involving
claimholders or concessionaires, but essentially judicial issues. We then said that the Panel of
Arbitrators did not have jurisdiction over such issue, since it does not involve the application of
technical knowledge and expertise relating to mining. It is in this context that we said that:

Arbitration before the Panel of Arbitrators is proper only when there is a
35
disagreement between the parties as to some provisions of the contract between
them, which needs the interpretation and the application of that particular
knowledge and expertise possessed by members of that Panel. It is not proper when
one of the parties repudiates the existence or validity of such contract or agreement
on the ground of fraud or oppression as in this case. The validity of the contract
cannot be subject of arbitration proceedings. Allegations of fraud and duress in the
execution of a contract are matters within the jurisdiction of the ordinary courts of
law. These questions are legal in nature and require the application and
interpretation of laws and jurisprudence which is necessarily a judicial function.
29

Petition is granted. CA decision reversed and set aside.

[Class Notes: Provides muscle to the Arbitration Clause.]

IV. ISSUES ON THE ARBITRATION AGREEMENT
1. Public Policy
Korea Technologies Co., Ltd. vs. Lerma; G.R. No. 143581, 7 January 2008

In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly in
civil and commercial disputes. Arbitration along with mediation, conciliation, and negotiation,
being inexpensive, speedy and less hostile methods have long been favored by this Court.

Established in this jurisdiction is the rule that the law of the place where the contract is made
governs. Lex loci contractus. The contract in this case was perfected here in the Philippines.
Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the Civil Code sanctions the
validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award.
Art. 2044 provides, Any stipulation that the arbitrators award or decision shall be final, is valid,
without prejudice to Articles 2038, 2039 and 2040. (Emphasis supplied.)

Arts. 2038 [footnote 31] 2039, [footnote 32] and 2040 [footnote 33] abovecited refer to instances
where a compromise or an arbitral award, as applied to Art. 2044 pursuant to Art. 2043 [footnote
34], may be voided, rescinded, or annulled, but these would not denigrate the finality of the
arbitral award.

[The word compromise has been replaced with the word [arbitral award] to facilitate
understanding.]

footnote 31 Art. 2038. A[n] [arbitral award] in which there is mistake, fraud, violence,
intimidation, undue influence, or falsity of documents is subject to the provisions of Article
1330 [voidable] of this Code.

However, one of the parties cannot set up a mistake of fact as against the other if the latter, by
virtue of the [arbitral award], has withdrawn from a litigation already commenced.

footnote 32 Art. 2039. When the parties [arbitral award] generally on all differences which
they might have with each other, the discovery of documents referring to one or more but not
to all of the questions settled shall not itself be a cause for annulment or rescission of the
[arbitral award], unless said documents have been concealed by one of the parties.

But the [arbitral award] may be annulled or rescinded if it refers only to one thing to which
one of the parties has no right, as shown by the newly-discovered documents.

footnote 33 Art. 2040. If after a litigation has been decided by a final judgment, a[n] [arbitral
award] should be agreed upon, either or both parties being unaware of the existence of the
final judgment, the [arbitration] may be rescinded.
36

Ignorance of a judgment which may be revoked or set aside is not a valid ground for
attacking an [arbitral award].

footnote 34 Art. 2043. The provisions of the preceding Chapter upon compromises shall also
be applicable to arbitrations.

Art. 2044 provides, Any stipulation that the arbitrators award or decision shall be final, is
valid, without prejudice to Articles 2038, 2039 and 2040.

The arbitration clause was mutually and voluntarily agreed upon by the parties. It has not been
shown to be contrary to any law, or against morals, good customs, public order, or public policy.
There has been no showing that the parties have not dealt with each other on equal footing. We
find no reason why the arbitration clause should not be respected and complied with by both
parties. In Gonzales v. Climax Mining Ltd., we held that submission to arbitration is a contract and
that a clause in a contract providing that all matters in dispute between the parties shall be
referred to arbitration is a contract. Again in Del Monte Corporation-USA v. Court of Appeals, we
likewise ruled that [t]he provision to submit to arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is itself a contract.

As signatory to the Arbitration Rules of the UNCITRAL Model Law on International Commercial
Arbitration41 of the United Nations Commission on International Trade Law (UNCITRAL) in the
New York Convention on June 21, 1985, the Philippines committed itself to be bound by the
Model Law. We have even incorporated the Model Law in Republic Act No. (RA) 9285, otherwise
known as the Alternative Dispute Resolution Act of 2004 entitled An Act to Institutionalize the
Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office for
Alternative Dispute Resolution, and for Other Purposes, promulgated on April 2, 2004. Secs. 19
and 20 of Chapter 4 of the Model Law are the pertinent provisions: [omitted, suffice to say that
RA 9285 incorporated, by reference, the UNCITRAL Model law.]

While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a procedural
law which has a retroactive effect.

a. The RTC must refer to arbitration in proper cases

Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of
arbitration pursuant to an arbitration clause, and mandates the referral to arbitration in such
cases, thus:

SEC. 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, if at least one party so requests not later than
the pre-trial conference, or 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.

(2) Foreign arbitral awards must be confirmed by the RTC

Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be
final and binding are not immediately enforceable or cannot be implemented immediately. Sec.
3543 of the UNCITRAL Model Law stipulates the requirement for the arbitral award to be
recognized by a competent court for enforcement, which court under Sec. 36 of the UNCITRAL
Model Law may refuse recognition or enforcement on the grounds provided for. RA 9285
incorporated these provisos to Secs. 42, 43, and 44 relative to Secs. 47 and 48, thus:

37
SEC. 42. Application of the New York Convention.The New York Convention shall govern
the recognition and enforcement of arbitral awards covered by said Convention.

The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial
Court in accordance with the rules of procedure to be promulgated by the Supreme Court.
Said procedural rules shall provide that the party relying on the award or applying for its
enforcement shall file with the court the original or authenticated copy of the award and the
arbitration agreement. If the award or agreement is not made in any of the official languages,
the party shall supply a duly certified translation thereof into any of such languages.

The applicant shall establish that the country in which foreign arbitration award was made in
party to the New York Convention.

x x x x

SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New
York Convention.The recognition and enforcement of foreign arbitral awards not covered
by the New York Convention shall be done in accordance with procedural rules to be
promulgated by the Supreme Court. The Court may, on grounds of comity and reciprocity,
recognize and enforce a non-convention award as a convention award.

SEC. 44. Foreign Arbitral Award Not Foreign Judgment.A foreign arbitral award when
confirmed by a court of a foreign country, shall be recognized and enforced as a foreign
arbitral award and not as a judgment of a foreign court.

A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced in the
same manner as final and 37ecogniz decisions of courts of law of the Philippines

x x x x

SEC. 47. Venue and Jurisdiction.Proceedings for recognition and enforcement of an
arbitration agreement or for vacations, setting aside, correction or modification of an arbitral
award, and any application with a court for arbitration assistance and supervision shall be
deemed as special proceedings and shall be filed with the Regional Trial Court (i) where
arbitration proceedings are conducted; (ii) where the asset to be attached or levied upon, or
the act to be enjoined is located; (iii) where any of the parties to the dispute resides or has his
place of business; or (iv) in the National Judicial Capital Region, at the option of the applicant.

SEC. 48. Notice of Proceeding to Parties.In a special proceeding for recognition and
enforcement of an arbitral award, the Court shall send notice to the parties at their address of
record in the arbitration, or if any part cannot be served notice at such address, at such partys
last known address. The notice shall be sent al least fifteen (15) days before the date set for the
initial hearing of the application.

It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a
judgment of a foreign court but as a foreign arbitral award, and when confirmed, are enforced as
final and 37ecogniz decisions of our courts of law.

Thus, it can be gleaned that the concept of a final and binding arbitral award is similar to
judgments or awards given by some of our quasi-judicial bodies, like the National Labor
Relations Commission and Mines Adjudication Board, whose final judgments are stipulated to be
final and binding, but not immediately 37ecogniz in the sense that they may still be judicially
reviewed, upon the instance of any party. Therefore, the final foreign arbitral awards are
similarly situated in that they need first to be confirmed by the RTC.

(3) The RTC has jurisdiction to review foreign arbitral awards

Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific authority
38
and jurisdiction to set aside, reject, or vacate a foreign arbitral award on grounds provided under
Art. 34(2) of the UNCITRAL Model Law. Secs. 42 and 45 provide:

SEC. 42. Application of the New York Convention.The New York Convention shall govern
the recognition and enforcement of arbitral awards covered by said Convention.

The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial
Court in accordance with the rules of procedure to be promulgated by the Supreme Court.
Said procedural rules shall provide that the party relying on the award or applying for its
enforcement shall file with the court the original or authenticated copy of the award and the
arbitration agreement. If the award or agreement is not made in any of the official languages,
the party shall supply a duly certified translation thereof into any of such languages.

The applicant shall establish that the country in which foreign arbitration award was made is

If the application for rejection or suspension of enforcement of an award has been made, the
Regional Trial Court may, if it considers it proper, vacate its decision and may also, on the
application of the party claiming recognition or enforcement of the award, order the party to
provide appropriate security.

x x x x

SEC. 45. Rejection of a Foreign Arbitral Award.A party to a foreign arbitration proceeding
may oppose an application for recognition and enforcement of the arbitral award in
accordance with the procedures and rules to be promulgated by the Supreme Court only on
those grounds enumerated under Article V of the New York Convention. Any other ground
raised shall be disregarded by the Regional Trial Court.

Thus, while the RTC does not have jurisdiction over disputes governed by arbitration mutually
agreed upon by the parties, still the foreign arbitral award is subject to judicial review by the RTC
which can set aside, reject, or vacate it. [What is the differences between set aside, reject, and
vacate?] In this sense, what this Court held in Chung Fu Industries (Phils.), Inc. relied upon by
KOGIES is applicable insofar as the foreign arbitral awards, while final and binding, do not oust
courts of jurisdiction since these arbitral awards are not absolute and without exceptions as they
are still judicially reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral awards,
whether domestic or foreign, are subject to judicial review on specific grounds provided for.

(4) Grounds for judicial review different in domestic and foreign arbitral awards

The differences between a final arbitral award from an international or foreign arbitral tribunal
and an award given by a local arbitral tribunal are the specific grounds or conditions that vest
jurisdiction over our courts to review the awards.

For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for
setting aside, rejecting or vacating the award by the RTC are provided under Art. 34(2) of the UNCITRAL
Model Law.
5

5
(2) An arbitral award may be set aside by the court specified in article 6 only if:
a) the party making the application furnishes proof that:
i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said
agreement is not valid under the law to which the parties have subjected it or, failing any
indication thereon, under the law of this State; or
ii) the party making the application was not given proper notice of the appointment of an arbitrator
or of the arbitral proceedings or was otherwise unable to present his case; or
iii) the award deals with a dispute not contemplated by or not falling within the terms of the
submission to arbitration, or contains decisions on matters beyond the scope of the
39

For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA
87644 and shall be recognized as final and 39ecogniz decisions of the RTC,45 they may only be assailed
before the RTC and vacated on the grounds provided under Sec. 25 of RA 876.46

(5) RTC decision of assailed foreign arbitral award appealable

Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in
cases where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award, thus:

SEC. 46. Appeal from Court Decision or Arbitral Awards.A decision of the Regional Trial
Court confirming, vacating, setting aside, modifying or correcting an arbitral award may be
appealed to the Court of Appeals in accordance with the rules and procedure to be
promulgated by the Supreme Court.

The losing party who appeals from the judgment of the court confirming an arbitral award
shall be required by the appellate court to post a counterbond executed in favor of the
prevailing party equal to the amount of the award in accordance with the rules to be

Thereafter, the CA decision may further be appealed or reviewed before this Court through a
petition for review under Rule 45 of the Rules of Court.

RTC has interim jurisdiction to protect the rights of the parties

Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for
PGSMC to dismantle and transfer the equipment and machineries, we find it to be in order
considering the factual milieu of the instant case.

Firstly, while the issue of the proper installation of the equipment and machineries might well be
under the primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA
9285 has jurisdiction to hear and grant interim measures to protect vested rights of the parties.
Sec. 28 pertinently provides:

SEC. 28. Grant of interim Measure of Protection.
(a) It is not incompatible with an arbitration agreement for a party to request, before constitution of the
tribunal, from a Court to grant such measure. After constitution of the arbitral tribunal and
during arbitral proceedings, a request for an interim measure of protection, or modification
thereof, may be made with the arbitral or to the extent that the arbitral tribunal has no power to act
or is unable to act effective[ely], 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

submission to arbitration, provided that, if the decisions on matters submitted to arbitration
can be separated from those not so submitted, only that part of the award which contains
decisions on matters not submitted to arbitration may be set aside; or
iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the
agreement of the parties, unless such agreement was in conflict with a provision of this Law
from which the parties cannot derogate, or, failing such agreement, was not in accordance
with this Law; or
(b) the court finds that:
i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of this
State; or
ii) the award is in conflict with the public policy of this State.
40
has been received by the party making the request.
(b) The following rules on interim or provisional relief shall be observed:
Any party may request that provisional relief be granted against the adverse party.
Such relief may be granted:
b. to prevent irreparable loss or injury;
(ii) to provide security for the performance of any obligation;
(iii) to produce or preserve any evidence; or
(iv) to compel any other appropriate act or omission.
The order granting provisional relief may be conditioned upon the provision of security or
any act or omission specified in the order.
(d) 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.
(e) The order shall be binding upon the parties.
(f) Either party may apply with the Court for assistance in implementing or enforcing an
interim measure ordered by an arbitral tribunal.
(g) A party who does not comply with the order shall be liable for all damages resulting from
noncompliance, including all expenses, and reasonable attorneys fees, paid in obtaining the
orders judicial enforcement. (Emphasis ours.)

Art. 17(2) of the UNCITRAL Model Law on ICA defines an interim measure of protection as:

Article 17. Power of arbitral tribunal to order interim measures

xxx xxx xxx

(2) An interim measure is any temporary measure, whether in the form of an award or in
another form, by which, at any time prior to the issuance of the award by which the dispute is
finally decided, the arbitral tribunal orders a party to:

(a) Maintain or restore the status quo pending determination of the dispute;

(b) Take action that would prevent, or refrain from taking action that is likely to cause, current
or imminent harm or prejudice to the arbitral process itself;

Provide a means of preserving assets out of which a subsequent award may be satisfied; or

(d) Preserve evidence that may be relevant and material to the resolution of the dispute.

Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue
interim measures:

Article 17 J. Court-ordered interim measures

A court shall have the same power of issuing an interim measure in relation to arbitration
proceedings, irrespective of whether their place is in the territory of this State, as it has in
relation to proceedings in courts. The court shall exercise such power in accordance with its
own procedures in consideration of the specific features of international arbitration.

In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were
explicit that even the pendency of an arbitral proceeding does not foreclose resort to the courts
for provisional reliefs. We explicated this way:

As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the
courts for provisional reliefs. The Rules of the ICC, which governs the parties arbitral dispute,
allows the application of a party to a judicial authority for interim or conservatory measures.
41
Likewise, Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law) recognizes the rights of
any party to petition the court to take measures to safeguard and/or conserve any matter which
is the subject of the dispute in arbitration. In addition, R.A. 9285, otherwise known as the
Alternative Dispute Resolution Act of 2004, allows the filing of provisional or interim measures
with the regular courts whenever the arbitral tribunal has no power to act or to act effectively.50

It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of
protection.

Secondly, considering that the equipment and machineries are in the possession of PGSMC, it has
the right to protect and preserve the equipment and machineries in the best way it can.
Considering that the LPG plant was non-operational, PGSMC has the right to dismantle and
transfer the equipment and machineries either for their protection and preservation or for the
better way to make good use of them which is ineluctably within the management discretion of
PGSMC.

Thirdly, and of greater import is the reason that maintaining the equipment and machineries in
Worths property is not to the best interest of PGSMC due to the prohibitive rent while the LPG
plant as set-up is not operational. PGSMC was losing PhP322,560 as monthly rentals or PhP3.87M
for 1998 alone without considering the 10% annual rent increment in maintaining the plant.

Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the
preservation or transfer of the equipment and machineries as an interim measure, yet on
hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the equipment and
machineries given the non-recognition by the lower courts of the arbitral clause, has accorded an
interim measure of protection to PGSMC which would otherwise been irreparably damaged.

Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based
on the contract. Moreover, KOGIES is amply protected by the arbitral action it has instituted
before the KCAB, the award of which can be enforced in our jurisdiction through the RTC.
Besides, by our decision, PGSMC is compelled to submit to arbitration pursuant to the valid
arbitration clause of its contract with KOGIES.

PGSMC to preserve the subject equipment and machineries

Finally, while PGSMC may have been granted the right to dismantle and transfer the subject
equipment and machineries, it does not have the right to convey or dispose of the same
considering the pending arbitral proceedings to settle the differences of the parties. PGSMC
therefore must preserve and maintain the subject equipment and machineries with the diligence
of a good father of a family51 until final resolution of the arbitral proceedings and enforcement of
the award, if any.

2. Incorporation by Reference
National Union Fire Insurance Company, et al v. Stolt-Nielsen
Philippines, Inc. and Court of Appeals, G.R. NO. 87958, 6 April
1990, 180 SCRA 682 (1990)

Clearly, the Bill of Lading incorporates by reference the terms of the Charter Party. It is settled law that
the charter may be made part of the contract under which the goods are carried by an
appropriate reference in the Bill of Lading . This should include the provision on arbitration even
without a specific stipulation to that effect. The entire contract must be read together and its clauses
interpreted in relation to one another and not by parts. As the respondent Appellate Court
found, the INSURER cannot feign ignorance of the arbitration clause since it was already
42
charged with notice of the existence of the charter party due to an appropriate reference thereof
in the bill of lading and, by the exercise of ordinary diligence, it could have easily obtained a copy
thereof either from the shipper or the charterer.

We hold, therefore, that the INSURER cannot avoid the binding effect of the arbitration clause. By
subrogation, it became privy to the Charter Party as fully as the SHIPPER before the latter was
indemnified, because as subrogee it stepped into the shoes of the SHIPPER-ASSURED and is
subrogated merely to the latters rights.

BF CORPORATION vs. COURT OF APPEALS, G.R. No. 120105 March
27, 1998, 288 SCRA 267

In other words, petitioner denies the existence of the arbitration clause primarily on the ground
that the representatives of the contracting corporations did not sign the Conditions of Contract
that contained the said clause. Its other contentions, specifically that insinuating fraud as regards
the alleged insertion of the arbitration clause, are questions of fact that should have been
threshed out below.

This Court may as well proceed to determine whether the arbitration clause does exist in the
parties contract. Republic Act No. 876 provides for the formal requisites of an arbitration
agreement as follows:

Sec. 4. Form of arbitration agreement. A contract to arbitrate a controversy thereafter arising
between the parties, as well as a submission to arbitrate an existing controversy, shall be in writing
and subscribed by the party sought to be charged, or by his lawful agent.

The making of a contract or submission for arbitration described in section two hereof, providing
for arbitration of any controversy, shall be deemed a consent of the parties of the province or city
where any of the parties resides, to enforce such contract of submission. (Emphasis supplied.).

The formal requirements of an agreement to arbitrate are therefore the following: (a) it must be in
writing and (b) it must be subscribed by the parties or their representatives. There is no denying
that the parties entered into a written contract that was submitted in evidence before the lower
court. To subscribe means to write underneath, as ones name; to sign at the end of a
document. That word may sometimes be construed to mean to give consent to or to attest.

The Court finds that, upon a scrutiny of the records of this case, these requisites were complied
with in the contract in question. The Articles of Agreement, which incorporates all the other contracts
and agreements between the parties, was signed by representatives of both parties and duly notarized. The
failure of the private respondents representative to initial the Conditions of Contract would therefor not
affect compliance with the formal requirements for arbitration agreements because that particular portion of
the covenants between the parties was included by reference in the Articles of Agreement.

Petitioners contention that there was no arbitration clause because the contract incorporating
said provision is part of a hodge-podge document, is therefore untenable. A contract need not
be contained in a single writing. It may be collected from several different writings which do not
conflict with each other and which, when connected, show the parties, subject matter, terms and
consideration, as in contracts entered into by correspondence. 13 A contract may be encompassed
in several instruments even though every instrument is not signed by the parties, since it is
sufficient if the unsigned instruments are clearly identified or referred to and made part of the signed
instrument or instruments. Similarly, a written agreement of which there are two copies, one
signed by each of the parties, is binding on both to the same extent as though there had been only
one copy of the agreement and both had signed it. 14

43

This Court likewise does not find that the Court of Appeals erred in ruling that private
respondents were not in default in invoking the provisions of the arbitration clause which states
that (t)he demand for arbitration shall be made within a reasonable time after the dispute has
arisen and attempts to settle amicably had failed. [This was ruled to be a valid stipulation.]

English CA: Two divergent views.
Aughton Ltd v MFKent Services Ltd (1991) 57 Build. L. R. 1

Case before the Court of Appeal.

Kent applied for stay on the basis that the arbitration clause contained in Kents sub-contract with
Press Construction had been incorporated into sub-sub-contract No. 2, and that No. 4 was an
agreed extension or variation of the work under No. 2.

(11) Our previous correspondence and the documentation encompassed in our enquiry forms
part of our agreement.

The previous correspondence and documentation included oral discussions and reference to
[the arbitration clause between Press and Kent.]

Court of Appeal held that it would be perverse for the court to treat two commercial parties as
having incorporated all the Press/Kent conditions (suitably modified) except an arbitration
clause, the existence of which in such contracts most businessmen are aware. The parties have
sufficiently expressed their intention to incorporate all the Press/Kent conditions, and that
included the arbitration clause. However the requirement for a written agreement for arbitration ,
or a written direction to a place where the arbitration clause could be found, was not satisfied in
this case. Distinct and specific words were required to incorporate an arbitration clause as
opposed to these provisions from another contract and there were no such words so that the
clasue was not incorporated. an arbitration agreement is a self-contained contract collateral or
ancillary to and of a different nature from any other types of contracts or clauses.

Giffen (Electrical Contractors) Ltd v Drake & Scull Engineering
Ltd (1993) 37 Con LR 84.

The main contract contained an elaborate arbitration clause. The sub-contract also contained a
substantial arbitration clause. The sub-sub-contract was in Drake-and-Sculls in-house form.
Drake-and-Scull contended that an arbitration clause was to be incorporated in each sub-sub-
contract by reference, relying in particular on the language of the clause 3 incorporation.

The main contract arbitration clause was not incorporated. The language did not point plainly to
an intention of the parties to incorporate the main contract arbitration clause.

3. Scope of arbitration clause in relation to dispute
SP Chua Pte Ltd V Lee Kim Tah (Pte) Ltd [1993] 3 SLR 122

The wording of the arbitration clause 14, viz. arising out of or in connection with this sub-
contract or under of or in connection with the subcontract works or as to any certificated decision
direction or instruction of the architect was wide enough to cover any dispute, except a dispute
whethere there was any contract at all. The clause is also wide enough to cover the dispute in
relation to the question of the oral arrangement made by the plaintiffs with tohe defendants to
supply the former with materials and labor should the plaintiffs become financially strapped
44
during the course of the sub-contract. Futhermore, the set-off over these payments was in
connection with the sub-contract works because the materials supplied was for the sub-contract
and not otherwise.

Sabah Shipyard (Pakistan) Ltd v Government of the Islamic Republic of
Pakistan [2004] SGHC 109

In 2002, the respondent commenced a second set of international arbitration proceedings against
the applicant under the ICC Rules (the Second Arbitration), seeking an order for its costs
incurred in respect of the First Arbitration. The applicant challenged the jurisdiction of the
arbitral tribunal in the Second Arbitration before the ICC Court, but failed. The applicant then
asked this court for a declaration that the arbitral tribunal had no jurisdiction over the dispute in
the Second Arbitration.

Held: dismissing the motion with costs:
(1) The phrase arising out of was generally held to have a more limited ambit than in
connection with, as the former phrase usually required a more direct connection between the
dispute and the contract than the latter phrase:
(2) In agreeing to dispute resolution by an ICC arbitration, the parties must have known that the
costs of the resolution would also be settled in the arbitration. As such, a dispute over the costs of
the arbitration held to resolve a dispute over the issue of whether the IA had been properly
terminated was a dispute arising in connection with the IA. Hence, the arbitral tribunal in the
Second Arbitration had jurisdiction to adjudicate on the dispute over the costs of the First
Arbitration.

Fiesta World Mall Corporation vs. Linberg Philippines, Inc. G.R. No.
152471. August 18, 2006.

The Contract reads:

7.4 Disputes
If FIESTA WORLD disputes the amount specified by any invoice, it shall pay the undisputed
amount on or before such date(s), and the disputed amount shall be resolved by arbitration of
three (3) persons, one (1) by mutual choice, while the other two (2) to be each chosen by the
parties themselves,

17.2 Amicable Settlement
The parties hereto agree that in the event there is any dispute or difference between them
arising out of this Agreement or in the interpretation of any of the provisions hereto, they
shall endeavor to meet together in an effort to resolve such dispute by discussion between
them but failing such resolution the Chief Executives of LINBERG and FIESTA WORLD shall
meet to resolve such dispute or difference and the joint decision of such shall be binding upon
the parties hereto, and in the event that a settlement of any such dispute or difference is not
reached, then the provisions of Article XXI shall apply.

ARTICLE XXI: JURISDICTION

The parties hereto submit to the exclusive jurisdiction of the proper courts of Pasig City,
Republic of the Philippines for the hearing and determination of any action or proceeding
arising out of or in connection with this Agreement.

The parties, in incorporating such agreement in their Contract, expressly intended that the said
matter in dispute must first be resolved by an arbitration panel before it reaches the court. They
45
made such arbitration mandatory.

It is clear from the records that petitioner disputed the amount of energy fees demanded by
respondent. However, respondent, without prior recourse to arbitration as required in the
Contract, filed directly with the trial court its complaint, thus violating the arbitration clause in
the Contract.

Moreover, we note that the computation of the energy fees disputed by petitioner also involves
technical matters that are better left to an arbitration panel who has expertise in those areas.
Alternative dispute resolution methods or ADRs like arbitration, mediation, negotiation and
conciliation are encouraged by this Court. By enabling the parties to resolve their disputes
amicably, they provide solutions that are less time-consuming, less tedious, less confrontational,
and more productive of goodwill and lasting relationships.[9]

Its potentials as one of the alternative dispute resolution methods that are now rightfully vaunted
as the wave of the future in international relations, is recognized worldwide.

4. Referral of Proceedings in Favor of Arbitration
Article 8, Model Law

Article 8. Arbitration agreement and substantive claim before court

(1) A court before which an action is brought in a matter which is the subject of an arbitration
agreement shall, if a party so requests not later than when submitting his first statement on the
substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null
and void, inoperative or incapable of being performed.

(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral
proceedings may nevertheless be commenced or continued, and an award may be made, while
the issue is pending before the court.

Section 24, RA 9285

SEC. 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, if at least one party so requests not later that
the pre-trial conference, or 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.

Equitable Insurance and Casualty Company v. Rural Insurance and
Surety Company, G.R. No. L-17436, 31 January 1962

ARTICLE VIII In the event of any question arising as to the meaning of, or any way connected
with or relating to this Agreement, whether before or after its termination, the parties shall
endeavor to arrive at a satisfactory compromise by amicable settlement rather than by court
action. The dispute shall be referred to the decision of two arbitrators, of whom one shall be
appointed in writing by each of the parties

It is contended that this agreement, not being contrary to law, moral or public policy but, on the
other hand, dictated by wisdom and propriety in insurance contracts because losses by fire can
duly be determined by competent men who have technical knowledge on how to determine
losses by fire, non-compliance therewith is fatal to the claim of plaintiff-appellee.

46
We find no merit in this contention. Under the abovequoted provision of the Reinsurance
Agreement, it would seem clear that the requirement of submitting for decision to two arbitrators
or an umpire the matter of losses by fire or the liability of the parties thereto arises only if and
when the same is disputed by one of the parties. It does not appear in the instant case that appellant
did dispute appellees claims. [During the court proceedings, all material facts were admitted by
defendant. Only enforcement against defendant and Insurance Commissioner.]

Mindanao Portland Cement Corporation vs. McDonough Construction
Company of Florida, L- 23390, 24 April 1967, 19 SCRA 808 (1967)

39. In the event of disagreement between the Owner and the Contractor in respect of the rights
or obligations of either of the parties hereunder except the interpretation of the plans and
specifications and questions concerning the sufficiency of materials, the time, sequence and method of
performing the work, which questions are to be finally determined by the Engineer, they shall submit the
matter to arbitration, the Owner choosing one arbitrator, the Contractor one, and the two so
chosen shall select a third. The decision of such arbitrators or a majority of them shall be made in
writing to both parties and when so made shall be binding upon the parties thereto. (Emphasis
supplied).

Respondent, herein appellant, contends first, that there is no showing of disagreement; and
second, that if there is, the same falls under the exception, to be resolved by the engineer.

As to the first point, the fact of disagreement has been determined by the court below upon the
stipulation of facts and documentary evidence submitted.

Regarding the second point, the parties agreed by way of exception that disagreements with
respect to the following matters shall be finally resolved by the engineer, instead of being
submitted to arbitration: (1) The interpretation of plans and specifications; (2) sufficiency of
materials; and (3) the time, sequence and method of performing the work.

The disputes involved here, on the other hand, are on (1) the proper computation of the total
contract price, including the cost of additional or extra work; and (2) the liability for alleged delay
in completing the project and for alleged losses due to change in the plans and specifications.

To none of the exceptions then do the disagreements in question belong, the rule of arbitration
therefore applies. The reason, moreover, for the exceptions interpretation of plans and
specifications; sufficiency of materials; sequence, time and method of performing the work is
the need to decide these matters immediately, since the progress of the work would await their
determination. The same is not true as to matters relating to the liability for delay in the projects
completion; these are questions that the engineer does not have to resolve before the project can
go on. Consequently, We view that it is not included in the exceptions, as indeed the related
provisions of their agreement indicate.

This proceeding is merely a summary remedy to enforce the agreement to arbitrate. The duty of
the court in this case is not to resolve the merits of the parties claims but only to determine if
they should proceed to arbitration or not

Wherefore, the judgment appealed from, ordering the parties to proceed to arbitration according
to the terms of their agreement, is hereby affirmed, with costs against appellant. So ordered.

V. THE ARBITRATION PROCEEDINGS AND THE ARBITRAL TRIBUNAL
47
1. Commencement of Arbitration
i. Institutional rules:
SIAC Rules (2010)
ICC Rules (2012)
For ad hoc arbitration: UNCITRAL Rules (1976) (2010)
ii. Law of situs ; Lex Arbitri
Art 21, Model Law

Article 21. Commencement of arbitral proceedings
Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute
commence on the date on which a request for that dispute to be referred to arbitration is received
by the respondent.

{Put your money where your mouth is. Make sure I receive your referral to arbitration.}

Case 4ZSH/99 (Germany: Highest Regional Court of Bavaria, 2000
(CLOUT Case 402)

The decision, arising out of an action to have a foreign award declared enforceable, concerns the
question of whether the Respondent was duly informed about the arbitration, or whether his due
process rights were violated.

The dispute arose out of a sales contract between a Russian seller (Claimant) and a German buyer
(Respondent) which provided for arbitration before the Court of Arbitration of the Chamber of
Commerce of the Russian Federation. Since the buyer withheld part of the purchase price,
invoking a set-off with a claim for damages, the seller initiated an arbitration proceeding. The
buyer did not attend the oral hearing and a decision in favour of Claimant was rendered by
default.

Claimant sought enforcement of that award in Germany under the bilateral Agreement on Trade
and Maritime Shipping between Germany and Russia of 1958. According to this Agreement,
recognition and enforcement of an arbitral award may only be refused if the award is either not
considered final in the country where it was rendered or violates public policy in the country
where enforcement is sought. Respondent requested that enforcement be denied because he was
not duly summoned to the arbitration proceeding.

The Court decided that the award which was final and enforceable in Russia should not be
recognized in Germany as the arbitral proceeding violated the principle of due process. The right to be
heard is fundamental to public policy and, as recognized by article V (1) (b) New York Convention,
encompasses the right to be informed and to be summoned to a hearing in due time. Since Claimant did
not contest Respondents allegation that he never received a notice of arbitration, and on the basis
of the evidence, the Court concluded that Respondents right to be heard was violated. The
Russian court never demanded any evidence that Claimant actually received a notice of arbitration because,
according to article 3 (1) of the Russian Law on International Arbitration, the dispatch of the notice was
considered sufficient. Under German law, however, the legal fiction of receipt is not sufficient for valid
notice. Moreover, the Court stated that a duly dispatched notice should have resulted in a
successful delivery as Respondent did not change its place of business. Finally, the Court held
that Respondent was not restricted to legal remedies against the award in the country where it
was rendered. Since Claimant availed itself of enforcement procedures in Germany, Respondent must not
be deprived of its remedies under the same law.

Skorimpex Foreign Trade Co v Lelovic Co (Ontario-General Division,
1991) CLOUT Case 384
48

Skorimpex, a Polish state trading company and Lelovic Co., a Canadian importer based in
Ontario, have been dealing with each other since 1957. Lelovic Co. purchased mens and
womens footwear manufactured in Poland.

Following a dispute between the parties, an arbitration was undertaken and an award rendered
in Skorimpexs favour. Lelovic objected to the enforcement of the award in Ontario on the
ground that it had not received notice of the arbitration procedure. Skorimpex replied that it had
taken all reasonable steps to notify Lelovic, in accordance with art. 3 of the Model Law.

The Arbitrators held that notices had been sent to Lelovic Co. at three addresses and that Skorimpex had
made a reasonable inquiry as to Lelovics address and had used all known addresses. As a result, the
arbitration proceeded in the absence of the defendant.

The court agreed that the requirements of art. 3 of the Model Law had been met on the issue and
agreed with the finding of the arbitral tribunal that the claimant used all addresses known.

{Notes: Article 3 under the 2006 ML:
Article 3. Receipt of written communications
(1) Unless otherwise agreed by the parties:
(a) any written communication is deemed to have been received if it is delivered to the
addressee personally or if it is delivered at his place of business, habitual residence or
mailing address;
if none of these can be found after making a reasonable inquiry, a written communication
is deemed to have been received if it is sent to the addressees last-known place of
business, habitual residence or mailing address by registered letter or any other
means which provides a record of the attempt to deliver it;
(b) the communication is deemed to have been received on the day it is so delivered.
(2) The provisions of this article do not apply to communications in court proceedings.}

2. Appointment of the Arbitral Tribunal
Magellan Capital Management Corporation et. al. vs Zosa et al., G.R.
No. 129916. March 26, 2001.

Held: It is error for the petitioners to claim that the case should fall under the jurisdiction of the
Securities and Exchange Commission [SEC, for brevity]. The controversy does not in anyway
involve the election/appointment of officers of petitioner MCHC, as claimed by petitioners in
their assignment of errors. Respondent Zosas amended complaint focuses heavily on the
illegality of the Employment Agreements Arbitration Clause initially invoked by him in seeking
his termination benefits under Section 8 of the employment contract. And under Republic Act
No. 876, otherwise known as the Arbitration Law, it is the regional trial court which exercises
jurisdiction over questions relating to arbitration.

Furthermore, the decision of the Court of Appeals in CA-G.R. SP No. 43059 affirming the trial
courts assumption of jurisdiction over the case has become the law of the case which now
binds the petitioners. The law of the case doctrine has been defined as a term applied to an
established rule that when an appellate court passes on a question and remands the cause to the
lower court for further proceedings, the question there settled becomes the law of the case upon
subsequent appeal.
27
To note, the CAs decision in CA-G.R. SP No. 43059 has already attained
finality as evidenced by a Resolution of this Court ordering entry of judgment of said case..

Relevant part of the Decision: Equally unavailing for the petitioners is the review by this Court,
via the instant petition, of the factual findings made by the trial court that the composition of the
49
panel of arbitrators would, in all probability, work injustice to respondent Zosa. this Court
finds the trial courts observations on why the composition of the panel of arbitrators should be
voided, incisively correct so as to merit our approval. Thus,

From the foregoing arbitration clause, it appears that the two (2)
defendants [petitioners] (MCMC and MCHC) have one (1) arbitrator
each to compose the panel of three (3) arbitrators. As the defendant
MCMC is the Manager of defendant MCHC, its decision or vote in the
arbitration proceeding would naturally and certainly be in favor of its
employer and the defendant MCHC would have to protect and
preserve its own interest; hence, the two (2) votes of both defendants
(MCMC and MCHC) would certainly be against the lone arbitrator for
the plaintiff [herein defendant]. Hence, apparently, plaintiff [defendant]
would never get or receive justice and fairness in the arbitration
proceedings from the panel of arbitrators as provided in the
aforequoted arbitration clause. In fairness and justice to the plaintiff
[defendant], the two defendants (MCMC and MCHC) [herein
petitioners] which represent the same interest should be considered as
one and should be entitled to only one arbitrator to represent them in
the arbitration proceedings. Accordingly, the arbitration clause, insofar
as the composition of the panel of arbitrators is concerned should be
declared void and of no effect, because the law says, Any clause giving
one of the parties power to choose more arbitrators than the other is
void and of no effect (Article 2045, Civil Code).

The dispute or controversy between the defendants (MCMC and
MCHC) [herein petitioners] and the plaintiff [herein defendant] should
be settled in the arbitration proceeding in accordance with the
Employment Agreement, but under the panel of three (3) arbitrators,
one (1) arbitrator to represent the plaintiff, one (1) arbitrator to
represent both defendants (MCMC and MCHC) [herein petitioners] and
the third arbitrator to be chosen by the plaintiff [defendant Zosa] and
defendants [petitioners].

Secondly, employment agreements such as the one at bar are usually contracts of adhesion. Any
ambiguity in its provisions is generally resolved against the party who drafted the document.
And, finally, respondent Zosa never submitted himself to arbitration proceedings (as there was
none yet) [Neil: I do not agree with this. From time of receipt, A21 of the model law.] before
bewailing the composition of the panel of arbitrators. He in fact, lost no time in assailing the
arbitration clause upon realizing the inequities that may mar the arbitration proceedings if the
existing line-up of arbitrators remained unchecked.
We need only to emphasize in closing that arbitration proceedings are designed to level the
playing field among the parties in pursuit of a mutually acceptable solution to their conflicting
claims. Any arrangement or scheme that would give undue advantage to a party in the
negotiating table is anathema to the very purpose of arbitration and should, therefore, be
resisted.

[Class notes: Atty. Jun Bautista does not agree to how the decision was framed. Why? See ICC
Rules, Article 12(6), which reads:
Article 12
6. Where there are multiple claimants or multiple respondents, and where the dispute is to be
referred to three arbitrators, the multiple claimants, jointly, and the multiple respondents,
jointly, shall nominate an arbitrator for confirmation pursuant to Article 13.
6

7. Where an additional party has been joined, and where the dispute is to be referred to three
arbitrators, the additional party may, jointly with the claimant(s) or with the respondent(s),

6
Article 13 pertain to Appointment and Confirmation of the Arbitrators.
50
nominate an arbitrator for confirmation pursuant to Article 13.
8. In the absence of a joint nomination pursuant to Articles 12(6) or 12(7) and where all parties
are unable to agree to a method for the constitution of the arbitral tribunal, [Class Note: is this
not a violation of mutuality? One side may sabotage the appointment if they do not want who
the other party is appointing by not nominating and not agree to a method of constitution of
the arbitral tribunal.] the Court may appoint each member of the arbitral tribunal and shall
designate one of them to act as president. In such case, the Court shall be at liberty to choose
any person it regards as suitable to act as arbitrator, applying Article 13 when it considers this
appropriate. (Emphasis supplied)

i. Appointing Procedure
Article 10, Model Law

Article 10. Number of arbitrators
(1) The parties are free to determine the number of arbitrators.
(2) Failing such determination, the number of arbitrators shall be three.

Art 11, Model Law

Article 11. Appointment of arbitrators
(1) No person shall be precluded by reason of his nationality from acting as an arbitrator, unless
otherwise agreed by the parties.
(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; if a party fails to appoint
the arbitrator within thirty days of receipt of a request to do so from the other party, or 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;
7

(b) in an 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.
8

(4) Where, under an appointment procedure agreed upon by the parties,
(1) (a) a party fails to act as required under such procedure, or
(2) (b) the parties, or two arbitrators, are unable to reach an agreement expected of
them under such procedure, or
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
9
to take the necessary
measure, unless the agreement on the appointment procedure provides other means for
securing the appointment.
(5) A decision on a matter entrusted by paragraph (3) or (4) of this article to the court or other
authority specified in article 6 shall be subject to no appeal. [Wow! Can this be abused? No.
Unless the Clerk of Court has been bribed, in which case, a disciplinary action may be taken, and
Rule 65 may be invoked.] The court or other authority, in appointing an arbitrator, shall have due
regard to any qualifications required of the arbitrator by the agreement of the parties and to such

7
Article 6. Court or other authority for certain functions of arbitration assistance and supervision
The functions referred to in articles 11(3), 11(4), 13(3), 14, 16(3) and 34(2) shall be performed by ... [Each State
enacting this model law specifies the court, courts or, where referred to therein, other authority competent to perform
these functions.] {In the Philippines, it is the Clerk of Court of the RTC, as specified in Art. 5(b) of R.A. No. 876.
8
Id.
9
Id.
51
considerations as are likely to secure the appointment of an independent and impartial arbitrator
and, in the case of a sole or third arbitrator, shall take into account as well the advisability of
appointing an arbitrator of a nationality other than those of the parties.

Section 26, RA 9285

SEC. 26. Meaning of Appointing Authority.. Appointing Authority as used in the Model
Law shall mean the person or institution named in the arbitration agreement as the appointing
authority; or the regular arbitration institution under whose rules the arbitration is agreed to be
conducted. 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 procedure under such arbitration rules for the selection and appointment of arbitrators. 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) [National President of the IBP. First time I
encountered this. He has default power of arbitration appointment in ad hoc arbitration? Cool
power.] or his duly authorized representative.

List procedure Article 6-8, UNCITRAL Rules (1976)

Designating and appointing authorities
Article 6
1. Unless the parties have already agreed on the choice of an appointing authority, a party may at
any time propose the name or names of one or more institutions or persons, including the
Secretary-General of the Permanent Court of Arbitration at The Hague (hereinafter called the
PCA), one of whom would serve as appointing authority.
2. If all parties have not agreed on the choice of an appointing authority within 30 days after a
proposal made in accordance with paragraph 1 has been received by all other parties, any
party may request the Secretary-General of the PCA to designate the appointing authority.
3. Where these Rules provide for a period of time within which a party must refer a matter to an
appointing authority and no appointing authority has been agreed on or designated, the
period is suspended from the date on which a party initiates the procedure for agreeing on or
designating an appointing authority until the date of such agreement or designation.
4. Except as referred to in article 41, paragraph 4, if the appointing authority refuses to act, or if it
fails to appoint an arbitrator within 30 days after it receives a partys request to do so, fails to
act within any other period provided by these Rules, or fails to decide on a challenge to an
arbitrator within a reasonable time after receiving a partys request to do so, any party may
request the Secretary- General of the PCA to designate a substitute appointing authority.
5. In exercising their functions under these Rules, the appointing authority and the Secretary-
General of the PCA may require from any party and the arbitrators the information they deem
necessary and they shall give the parties and, where appropriate, the arbitrators, an
opportunity to present their views in any manner they consider appropriate. All such
communications to and from the appointing authority and the Secretary-General of the PCA
shall also be provided by the sender to all other parties.
6. When the appointing authority is requested to appoint an arbitrator pursuant to articles 8, 9, 10
or 14, the party making the request shall send to the appointing authority copies of the notice
of arbitration and, if it exists, any response to the notice of arbitration.
7. The appointing authority shall have regard to such considerations as are likely to secure the
appointment of an independent and impartial arbitrator and shall take into account the
advisability of appointing an arbitrator of a nationality other than the nationalities of the
parties.

Section II. Composition of the arbitral tribunal
Number of arbitrators
52
Article 7
1. If the parties have not previously agreed on the number of arbitrators, and if within 30 days
after the receipt by the respondent of the notice of arbitration the parties have not agreed that
there shall be only one arbitrator, three arbitrators shall be appointed.
2. Notwithstanding paragraph 1, if no other parties have responded to a partys proposal to
appoint a sole arbitrator within the time limit provided for in paragraph 1 and the party or
parties concerned have failed to appoint a second arbitrator in accordance with article 9 or 10, the
appointing authority may, at the request of a party, appoint a sole arbitrator pursuant to the
procedure provided for in article 8, paragraph 2, if it determines that, in view of the
circumstances of the case, this is more appropriate.

Appointment of arbitrators (articles 8 to 10)
Article 8
1. If the parties have agreed that a sole arbitrator is to be appointed and if within 30 days after
receipt by all other parties of a proposal for the appointment of a sole arbitrator the parties have
not reached agreement thereon, a sole arbitrator shall, at the request of a party, be appointed by
the appointing authority.
2. The appointing authority shall appoint the sole arbitrator as promptly as possible. In making
the appointment, the appointing authority shall use the following list-procedure, unless the
parties agree that the list-procedure should not be used or unless the appointing authority
determines in its discretion that the use of the list-procedure is not appropriate for the case:
(3) (a) The appointing authority shall communicate to each of the parties an identical list
containing at least three names;
(4) (b) Within 15 days after the receipt of this list, each party may return the list to the
appointing authority after having deleted the name or names to which it objects and
numbered the remaining names on the list in the order of its preference;
After the expiration of the above period of time the appointing authority shall appoint
the sole arbitrator from among the names approved on the lists returned to it and in
accordance with the order of preference indicated by the parties;
(d) If for any reason the appointment cannot be made according to this procedure, the
appointing authority may exercise its discretion in appointing the sole arbitrator.

ii. Default appointment by statutory authority
Article 11(3) and (4) Model Law

Article 11. Appointment of arbitrators
(1) No person shall be precluded by reason of his nationality from acting as an arbitrator, unless
otherwise agreed by the parties.
(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; if a party fails to appoint
the arbitrator within thirty days of receipt of a request to do so from the other party, or 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;
10

(b) in an 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

10
Article 6. Court or other authority for certain functions of arbitration assistance and supervision
The functions referred to in articles 11(3), 11(4), 13(3), 14, 16(3) and 34(2) shall be performed by ... [Each State
enacting this model law specifies the court, courts or, where referred to therein, other authority competent to perform
these functions.] {In the Philippines, it is the Clerk of Court of the RTC, as specified in Art. 5(b) of R.A. No. 876.
53
specified in article 6.
11

(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
12
to take the necessary
measure, unless the agreement on the appointment procedure provides other means for
securing the appointment.
(5) A decision on a matter entrusted by paragraph (3) or (4) of this article to the court or other
authority specified in article 6 shall be subject to no appeal. [Wow! Can this be abused? No.
Unless the Clerk of Court has been bribed, in which case, a disciplinary action may be taken, and
Rule 65 may be invoked.] The court or other authority, in appointing an arbitrator, shall have due
regard to any qualifications required of the arbitrator by the agreement of the parties and to such
considerations as are likely to secure the appointment of an independent and impartial arbitrator
and, in the case of a sole or third arbitrator, shall take into account as well the advisability of
appointing an arbitrator of a nationality other than those of the parties.

Section 26 and 27, RA 9285

SEC. 26. Meaning of Appointing Authority.. Appointing Authority as used in the Model Law
shall mean the person or institution named in the arbitration agreement as the appointing
authority; or the regular arbitration institution under whose rules the arbitration is agreed to be
conducted. 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 procedure under such arbitration rules for the selection and appointment of arbitrators. 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.

SEC. 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 be 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.

iii. Appointment under arbitration rules
ICC Rules
SIAC Rules
UNCITRAL Rules
iv. IBA Rules on Conflict of Interest
3. Jurisdiction of Tribunal: kompetenz-kompetenz/ competence-competence
Article 16 (1), Model Law

Article 16. Competence of arbitral tribunal to rule on its jurisdiction
The arbitral tribunal may rule on its own jurisdiction, [only in arbitration law! is this a matter of
necessity? considering there are no alternatives in arbitration, if local court, then renders the
purpose of arbitration of expeditious litigation nugatory.] including any objections with respect
to the existence or validity of the arbitration agreement. [even validity of arbitration agreement! a
corollary of power to determine own jurisdiction.] For that purpose, an arbitration clause which
forms part of a contract shall be treated as an agreement independent of the other terms of the

11
Id.
12
Id.
54
contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso
jure the invalidity of the arbitration clause. [Doctrine of separability, Cargill v. San Fernando
Regala, otherwise mere challenge to validity of underlying agreement gives jurisdiction to courts
bypassing the arbitration clause.]

[Class Notes:
Options of respondent party when faced with notice to arbitrate: (1) go to local court; (2)
constitute tribunal, and let them decide; (3) do nothing {only a good idea if the case of the
petitioner is weak. Since there is no default in arbitral proceedings, the tribunal will conduct the
cross-examination. No objections.]

[Class Notes: Q: Reconcile Art. 16(1), ML with Article II(3) of the New York Convention. Note
that similar provisions exists in the SIAC, ICC and UNCITRAL Rules]

[A: The court decides using a prima facie standard to decide in a motion to dismiss whether the
agreement is valid. The court becomes the first line of defense.]

Fung Sang Trading Ltd v Kai Sun Sea Products & Food Co Ltd [1992]
ADRLJ 93

55

4. Duties of the Arbitral Tribunal
i. In General
Consider all evidence: Article 18 Model Law

CHAPTER V. CONDUCT OF ARBITRAL PROCEEDINGS
Article 18. Equal treatment of parties
The parties shall be treated with equality and each party shall be given a full opportunity of
presenting his case.

ii. Duties are not-delegable
56
The Eastern Counties Railway Co. v Eastern Union Railway Co.
(1863) 3 De GJ & S 610; 46 ER 773

57

58

Luzon Hydro Corp v Transfield Philippines Inc [2004] SGHC 204

Facts:
This application concerned an arbitral award (the Award) made in arbitration proceedings
between the applicant and the respondent. As the dispute had been highly technical, the parties
and arbitral tribunal had agreed to engage an expert, Mr Rohan D Shorland (Shorland) to assist
the tribunal. The letter of engagement provided generally that Shorland would perform such
work as directed by the tribunal from time to time and that if a written opinion was sought,
copies of it would be given to the parties for their comment.

During the arbitration proceedings, Shorland identified and collated all the expert evidence and
technical issues, and responded to the tribunals technical queries. The tribunal listed in a letter
dated 14 October 2003 (the letter) the tasks it had assigned to Shorland and indicated that it
found it unnecessary to seek any written opinion from him.

The tribunal subsequently made the Award which was favourable to the respondent, allowing it
extensions of time and recovery of certain outstanding payments. Dissatisfied with the Award,
the applicant took out the present application to set it aside pursuant to 24(b) of the
International Arbitration Act (Cap 143A, 2002 Rev Ed) (the Act). The grounds of the application
were that the arbitral procedure was not in accordance with the agreement of the parties and that
a breach of the rules of natural justice had occurred in the making of the Award.

The applicant argued that the tribunal had failed to make certain findings on the relevant
evidence and had failed to consider the applicants defences to the respondents claims properly.
The applicant also doubted the truth of the letter setting out the work done by Shorland. It
further contended that the tribunal had not exercised its functions diligently and had effectively
abdicated its responsibility to Shorland as the technical expert. In particular, it considered that
Shorland had performed tasks which ought properly to have been carried out by the tribunal and
that the applicant had not been given the opportunity to comment on his reports to the tribunal,
which was a breach of natural justice.

Held, dismissing the application:
59
(1) The applicants argument that the tribunal had failed to make certain findings or had failed to
consider its defences properly could not be grounds for setting aside the Award as they arose
from the merits of the case as determined by the tribunal. Under the Act, there was no appeal
against any determination on the merits of an arbitration proceeding: at [11].

(2) Although Shorland did spend many hours completing his tasks, he did not go beyond the
bounds of assisting the tribunal. It was not surprising that he took a long time in view of the
voluminous amount of evidence involved. The tribunal had also indicated that it found it
unnecessary to seek any written opinion from Shorland. There was therefore no opinion that the
parties could comment on: at [16] and [17].

(3) The applicants suspicions as to the veracity of the letter did not provide a sufficient basis for
implying that the tribunal had not been telling the truth when it listed the types of assistance
given by Shorland. The panel of arbitrators consisted of professional and independent men and
their integrity could not be impugned on such flimsy grounds. Unless there was strong and
unambiguous evidence of irregularity in the manner in which the arbitration had been
conducted, no aspersions should be cast on what the tribunal did or said that it did. As such, the
integrity of the tribunal should not be questioned: at [17] and [18].

(4) Both parties had agreed to the appointment of Shorland as an expert technical assistant for the
tribunal. At the time, they had 59ecognized the value to the arbitration proceedings of having
someone versed in technical matters to help sort out the complex mass of technical evidence.
There was no evidence that the expert had done anything other than play the role required of
him: at [20].

(5) However well founded its grounds for dissatisfaction, the applicant had to accept the
tribunals decision, as under the Act there was no avenue for appeal. The applicant could not be
permitted to have a back-door appeal by attacking the manner in which the tribunal had made
use of the expert when there was no evidence but only speculation that the expert had
overstepped his bounds: at [20].

iii. Ethical Duties
Article 12(1) of the Model Law

Article 12. Grounds for challenge
(1) When a person is approached in connection with his possible appointment as an arbitrator, he
shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or
independence. An arbitrator, from the time of his appointment and throughout the arbitral
proceedings, shall without delay disclose any such circumstances to the parties unless they have
already been informed of them by him.
(2) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts
as to his impartiality or independence, or if he does not possess qualifications agreed to by the
parties. A party may challenge an arbitrator appointed by him, or in whose appointment he has
participated, only for reasons of which he becomes aware after the appointment has been made.

[Class notes: Question, can a party call a possible arbitrator and ask him about your case then
appoint him? Answer, no, that would be impartiality. Question, youve read articles favorable to
your side by a possible arbitrator. Can you appoint him? Answer. Yes. Its a different case.]

[Class notes: independence refers to relationship with the party, impartiality refers to a side on
the merits of a case. This is a tricky are in arbitration. Arbitration is a small community. There are
less than 100 arbitrators. The same arbitrators are appointed over and over again by the same
counsel. IBA Guidelines in Conflicts of Interest in ICA arbitration. Green-no-need-to-disclose
60
Orange-better-to-disclose Red-should-disclose Non-waivable-red-in-no-circumstaces-not-
disclosed]

Veritas Shipping Corp v Anglo-Canadian Cement Ltd
[1966] 1 LLR 76

61
62

HSMV Corp v ADI Ltd (USDC, Central California, 1999)
Yearbook Com Arb XXV(2000) p 1074 1084

63

5. Courts power to remove/Challenge to Arbitrators
64
Art 13(3), Model Law

Article 13. Challenge procedure
(1) The parties are free to agree on a procedure for challenging an arbitrator, subject to the
provisions of paragraph (3) of this article.
(2) Failing such agreement, a party who intends to challenge an arbitrator shall, within fifteen
days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of
any circumstance referred to in article 12(2), send a written statement of the reasons for the
challenge to the arbitral tribunal. Unless the challenged arbitrator withdraws from his office or
the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. [again,
allows the tribunal to decide a challenge against its own arbitrator. may be for expeditious
litigation and the idea that there is no hierarchy of tribunals in arbitration.]
(3) If a challenge under any procedure agreed upon by the parties or under the procedure of
paragraph (2) of this article is not successful, the challenging party may request, within thirty
days after having received notice of the decision rejecting the challenge, the court or other
authority specified in article 6 to decide on the challenge, which decision shall be subject to no
appeal; while such a request is pending, the arbitral tribunal, including the challenged arbitrator,
may continue the arbitral proceedings and make an award.

SIAC Rules
ICC Rules
6. Immunity of arbitrators & arbitral institution
Section 5, RA 9285

SEC. 5. Liability of ADR Provider and Practitioner. The ADR providers and practitioners shall have
the same civil liability for the Acts done in the performance of then duties as that of public
officers as provided in Section 38 (1), Chapter 9, Book of the Administrative Code of 1987.
13

[
SIAC Rules
ICC Rules

VI. CONDUCT OF THE ARBITRATION
1. General
Art 19, Model Law

Article 19. Determination of rules of procedure
(1) Subject to the provisions of this Law, the parties are free to agree on the procedure to be
followed by the arbitral tribunal in conducting the proceedings.
(2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law,
conduct the arbitration in such manner as it considers appropriate. The power conferred upon
the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and
weight of any evidence.

13
Section 38. Liability of Superior Officers. -
(1) A public officer shall not be civilly liable for acts done in the performance of his official duties, unless there is a
clear showing of bad faith, malice or gross negligence.
(2) Any public officer who, without just cause, neglects to perform a duty within a period fixed by law or regulation, or
within a reasonable period if none is fixed, shall be liable for damages to the private party concerned without prejudice
to such other liability as may be prescribed by law.
(3) A head of a department or a superior officer shall not be civilly liable for the wrongful acts, omissions of duty,
negligence, or misfeasance of his subordinates, unless he has actually authorized by written order the specific act or
misconduct complained of.
65

Oral hearings - Art 24(1) Model Law;


Article 24. Hearings and written proceedings
(1) Subject to any contrary agreement by the parties, the arbitral tribunal shall decide whether to
hold oral hearings for the presentation of evidence or for oral argument, or whether the
proceedings shall be conducted on the basis of documents and other materials. However, unless
the parties have agreed that no hearings shall be held, the arbitral tribunal shall hold such
hearings at an appropriate stage of the proceedings, if so requested by a party.
(2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the
arbitral tribunal for the purposes of inspection of goods, other property or documents.
(3) All statements, documents or other information supplied to the arbitral tribunal by one party
shall be communicated to the other party. Also any expert report or evidentiary document on
which the arbitral tribunal may rely in making its decision shall be communicated to the parties.

SIAC Rules
Period stipulated by law, rules for completion of hearings: see
Indonesian Arb Act, art 48 hearings to be completed within 180
days
2. Evidence in arbitration
Art 19, Model Law

Article 19. Determination of rules of procedure
(1) Subject to the provisions of this Law, the parties are free to agree on the procedure to be
followed by the arbitral tribunal in conducting the proceedings.
(2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law,
conduct the arbitration in such manner as it considers appropriate. The power conferred upon
the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and
weight of any evidence.

[Class notes: By reason of the wide discretion as to evidence in ICA, the IBA Rules were
conceived to fill in this gap. Soft law-not binding. Most adopt we will look to them for
guidance but effectively they refer to it.]

Use of experts: Luzon Hydro Corp v Transfield Philippines Inc [2004]
SGHC 204 (see above)
Discovery of documents within the parties possession or control,
Witnesses may be subpoenaed: Section 28, 29, RA 9285

SEC. 28. Grant of Interim Measure of Protection. -
(a) It is not incompatible with an arbitration agreement for a party to request, before constitution
of the tribunal, from a Court an interim measure of protection and for the Court to grant such
measure. After constitution of the arbitral tribunal and during 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 request.
66
(1) Any party may request that provision relief be granted against the adverse party:
(2) Such relief may be granted:
(i) to prevent irreparable loss or injury:
(3) The order granting provisional relief may be conditioned upon the provision of
security or any act or omission specified in the order.
(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 evidence
supporting the request.
(5) The order shall be binding upon the parties.
(6) Either party may apply with the Court for assistance in Implementing or enforcing an
(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.

SEC. 29. Further Authority for Arbitrator to Grant Interim Measure of Protection. - Unless otherwise
agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take
such interim measures of protection as the arbitral tribunal may consider necessary in respect of
the subject matter of the dispute following the rules in Section 28, paragraph 2. Such interim
measures may include but shall not be limited to preliminary injuction directed against a party,
appointment of receivers or detention, preservation, inspection of property that is the subject of
the dispute in arbitration. Either party may apply with the Court for assistance in implementing
or enforcing an interim measures ordered by an arbitral tribunal.

[Atty. Bautista: One party may request the other party to provide them with the evidence that the
requesting party does not have, however, it must be very specific. The other party may object.
(See IBA Rules in taking evidence, Art.9(2) for grounds to object.) General Rule: you can withhold
evidence, unless the other party asks for it. In the US, rules of court mandates full disclosure.]

Courts power to give assistance in the taking of evidence: Art 27
Model Law

Article 27. Court assistance in taking evidence
The arbitral tribunal or a party with the approval of the arbitral tribunal may request from a
competent court of this State assistance in taking evidence. The court may execute the request
within its competence and according to its rules on taking evidence.

IBA Rules on Taking of Evidence
3. Statutory powers of tribunal
Section 28, RA 9285

67
making request.

Default Process: Art 25 ML

Article 25. Default of a party
Unless otherwise agreed by the parties, if, without showing sufficient cause,
(a) the claimant fails to communicate his statement of claim in accordance with article 23(1), the
arbitral tribunal shall terminate the proceedings;
(b) the respondent fails to communicate his statement of defence in accordance with article 23(1),
the arbitral tribunal shall continue the proceedings without treating such failure in itself as an
admission of the claimant's allegations;
(c) any party fails to appear at a hearing or to produce documentary evidence, the arbitral
tribunal may continue the proceedings and make the award on the evidence before it.

4. Interim measures of protection, preservation
RA 9285: Section 28, 29

making request.
68

SEC. 29. Further Authority for Arbitrator to Grant Interim Measure of Protection. - Unless otherwise
agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take
such interim measures of protection as the arbitral tribunal may consider necessary in respect of
the subject matter of the dispute following the rules in Section 28, paragraph 2. Such interim
measures may include but shall not be limited to preliminary injuction directed against a party,
appointment of receivers or detention, preservation, inspection of property that is the subject of
the dispute in arbitration. Either party may apply with the Court for assistance in implementing
or enforcing an interim measures ordered by an arbitral tribunal.

SIAC Rules
ICC Rules
UNCITRAL Model Law 2006, Article 17, 17A-J

CHAPTER IV A. INTERIM MEASURES AND PRELIMINARY ORDERS
Section 1. Interim measures
Article17. Powerof arbitral tribunalto order interim measures
Article 17 A. Conditions for granting interim measures
Section 2. Preliminary orders
Article 17 B. Applications for preliminary orders and conditions for granting preliminary orders
Article17C. Specific regime for preliminary orders
Section 3. Provisions applicable to interim measures and preliminary Orders
Article 17 D. Modification, suspension, termination
Article17E. Provision of security
Article17F. Disclosure
Article17G. Costs and damages
Section 4. Recognition and enforcement of interim measures
Article17H. Recognition and enforcement
Article 17 I. Grounds for refusing recognition or enforcement
Section5. Court-ordered interim measures
Article17J. Court-ordered interim measures

Dermajaya Properties Sdn Bhd v Premium Properties Sdn Bhd & Anor
[2002] 2 SLR 164
Singapore High Court
Facts:
69
By an agreement dated 4 October 1996 (`the agreement`), the claimant agreed to buy from the
respondents 100% of the paid-up capital in President Hotel Sdn Bhd. Disputes arose between the
parties and an arbitrator was appointed. The arbitrator made an interim award under which the
claimant was to deposit $200,000 as security for the respondents` costs in the arbitration. The
claimant appealed to the High Court against the arbitrator`s decision. The primary issue was
whether the arbitrator had jurisdiction to order security for costs against the claimant.
Under s 3 of the International Arbitration Act (Cap 143A, 1995 Ed) (`IAA`) the Model Law, save
for Ch VIII thereof, is to have the force of law in Singapore. Section 5 provides that Pt II of the
IAA and the Model Law, which is set out in the First Schedule to the IAA, shall not apply to an
arbitration which is not an international one. Part II of the IAA provides for the power of the
arbitrator to make orders for security for costs under s 12. The Arbitration Rules of the United
Nations Commission on International Trade Law (`the UNCITRAL Rules`), however, do not
enable the arbitrator to order security for costs against the claimant. The pre- amendment s 15 of
the IAA, which was applicable here, states that if the parties agreed that the dispute is to be
settled or resolved otherwise than in accordance with Pt II or the Model Law, Pt II and the Model
Law shall not apply. The claimant submitted that by adopting the UNCITRAL Rules, which are
incompatible with the Model Law, the parties have by implication opted out of the Model Law
and Pt II of the IAA. According to the claimant, this is sufficient to constitute the agreement of
exclusion under s 15 of the IAA.
Two other issues were involved in this case: the first one being whether the pre-amendment s 15
allowed an implied opting out, that is, the choice of a set of rules incompatible with the Model
Law meant that the parties had agreed that the arbitration be resolved otherwise than in
accordance with the Model Law. The second issue was whether an opting out of the Model Law
or Pt II would necessarily mean that both have been excluded. After the amendment to the IAA, s
15(1) provides that if the parties have expressly agreed that the Model Law or Pt II of the IAA
shall not apply to the arbitration, then both the Model Law and Pt II will not apply to the
arbitration. Section 15(2) states that an adoption of any rules of an arbitral institution shall not of
itself be sufficient to exclude the application of the Model Law or Pt II to the arbitration.

Holdings:
Held , dismissing the appeal:
(1).In this case, Singapore was the seat or place of arbitration. Since the curial law of Singapore
applied and the arbitration was an international one, the IAA prima facie applied. Given that the
IAA incorporates the Model Law, the Model Law had also been effectively chosen by the parties,
even though they might have been unaware of it (see [para ]57 and 59).
(2).According to the speech made by the Minister of State for Law in respect of the amending Act,
the amendments to s 15 were to clarify Parliament`s intention behind the original s 15 and not to
change it. Therefore as regards the first issue, an express agreement to exclude the Model Law or
Pt II of the IAA was required. The mere adoption of the rules of an arbitral institution would not
be sufficient to constitute such an exclusion. Accordingly, the Model Law and Pt II of the IAA
applied to the arbitration in this case. The inclusion of the UNCITRAL Rules in the agreement did
not oust their application (see [para ]67, 68 and 87).
(3).Where the Model Law applies, the other incompatible set of rules will be completely
excluded. Thus the UNCITRAL Rules did not apply in this case but it was open to the parties to
agree that such rules will apply to fill any vacuum in the Model Law and Pt II or to apply such
rules on an ad hoc basis (see [para ]69 and 87).
(4).Parliament`s intention and preference was and is that, where Singapore is the place of
arbitration and the arbitration is an international one, both the Model Law and Pt II should be
read and be applied together. Even if the arbitration were a domestic one and the parties agree
that the Model Law or Pt II is to apply, then both the Model Law and Pt II should be read and be
applied together. In addition, the amendments to s 15 were to clarify and not to change the law.
Accordingly, as regards the second issue, if the Model Law or Pt II were expressly excluded, both
would not apply. This was and is the position under s 15 (see [para ]84-86).
70
(5).The arbitrator therefore had the power to make the order for security for costs in this case. The
arbitrator had also not exceeded his jurisdiction when his award for security for costs included
the arbitrator`s fees and SIAC costs (see [para ]90-92).

[Atty. Jun Bautista: Security of Costs. In arbitration, this is the trend. Loser pays for the costs for
litigation of the prevailing party. Except when the costs exceed the claim due diproportionality]

Department of Foreign Affairs and Bangko Sentral ng Pilipinas vs.
Falcon and BCA International Corporation G.R. No. 176657.
September 1, 2010

Held:
[no showing of irreparable injury]

In all, we agree with petitioners DFA and BSP that the trial courts issuance of a writ of
preliminary injunction, despite the lack of sufficient legal justification for the same, is tantamount
to grave abuse of discretion.

To be very clear, the present decision touches only on the twin issues of (a) the jurisdiction of the
trial court to issue a writ of preliminary injunction as an interim relief under the factual milieu of
this case; and (b) the entitlement of BCA to injunctive relief. The merits of the DFA and BCAs
dispute regarding the termination of the Amended BOT Agreement must be threshed out in the
proper arbitration proceedings. The civil case pending before the trial court is purely for the
grant of interim relief since the main case is to be the subject of arbitration proceedings.

BCAs petition for interim relief before the trial court is essentially a petition for a provisional
remedy (i.e., preliminary injunction) ancillary to its Request for Arbitration in PDRCI Case No.
30-2006/BGF. BCA specifically prayed that the trial court grant it interim relief pending the
constitution of the arbitral tribunal in the said PDRCI case. Unfortunately, during the pendency of
this case, PDRCI Case No. 30-2006/BGF was dismissed by the PDRCI for lack of jurisdiction, in view of
the lack of agreement between the parties to arbitrate before the PDRCI. In Philippine National Bank v.
Ritratto Group, Inc.,[85] we held:

A writ of preliminary injunction is an ancillary or preventive remedy that may only be resorted to
by a litigant to protect or preserve his rights or interests and for no other purpose during the
pendency of the principal action. The dismissal of the principal action thus results in the denial
of the prayer for the issuance of the writ. x x x. (Emphasis supplied.)

In view of intervening circumstances, BCA can no longer be granted injunctive relief and the civil
case before the trial court should be accordingly dismissed. However, this is without prejudice to
the parties litigating the main controversy in arbitration proceedings, in accordance with the
provisions of the Amended BOT Agreement, which should proceed with dispatch.

It does not escape the attention of the Court that the delay in the submission of this controversy
to arbitration was caused by the ambiguity in Section 19.02 of the Amended BOT Agreement
regarding the proper body to which a dispute between the parties may be submitted and the
failure of the parties to agree on such an arbitral tribunal. However, this Court cannot allow this
impasse to continue indefinitely. The parties involved must sit down together in good faith and
finally come to an understanding regarding the constitution of an arbitral tribunal mutually
acceptable to them.

VII. THE AWARD
1. Scope and nature of an award
Definition: Section 3, RA 9285
71
SEC. 3. Definition of Terms. - For purposes of this Act, the term:
(f) "Award" means any partial or final decision by an arbitrator in resolving the issue in a
controversy;

(i) "Convention Award" means a foreign arbitral award made in a Convention State;
(j) "Convention State" means a State that is a member of the New York Convention;

(x) "Non-Convention Award" means a foreign arbitral award made in a State which is not a
Convention State;
(y) "Non-Convention State" means a State that is not a member of the New York Convention.

[Atty. Bautista:
Covention Award 3, RA 9284.
Domestic award decided in the PH.
International Arbitral award. Art. 1(3) of ML]

[Bautista: There is no universally accepted definition for partial or final award. PH is one of the
few states that define award.]
(1) Partial v. generally, an award that completely disposes a part of the
- interim temporary, and will be revisted later at the final decision
(2) Final Award - ]
- quantum
Re Arbitration Between Mohamed Ibrahim & Koshi Mohamed (1963) 29
MLJ 32

72

73

74

To quote the decision: Award is not a term of art; and it seems to me that the test as to whether
an award, be it final or interim, has been made, must depend upon whether the order in question
amounts to a decision. The principle is stated in the 16
th
edition of Mr. Russels book on
Arbitration at p.224: any form of words amounting to a decision of the questions referred will be
good as an award. No technical expressions are necessary.

It seems to me that the order of the 25
th
of September does amount to a decision of some of the
questionsr referred, and that although the order is of interim nature, in nonetheless should be
regarded as an award.

For these reasons I am of the opinion that the appeal fails and must be dismissed with costs.

[I order that X owns the business, and well address the issues later. This is an award. It
decides a question or issue in controversy.]

2. Essential features of an award
Art 31(1) Model Law

Article 31. Form and contents of award
(1) The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In
arbitral proceedings with more than one arbitrator, the signatures of the majority of all members
of the arbitral tribunal shall suffice, provided that the reason for any omitted signature is stated.
(2) The award shall state the reasons upon which it is based, unless the parties have agreed that
no reasons are to be given or the award is an award on agreed terms under article 30.
(3) The award shall state its date and the place of arbitration as determined in accordance with
article 20(1). The award shall be deemed to have been made at that place.
(4) After the award is made, a copy signed by the arbitrators in accordance with paragraph (1) of
this article shall be delivered to each party.

Lock v Vulliamy (1883) 5 B & Ad 600; 110 ER 912

INDEBITATUS ASSUMPSIT, remedies, pleadings. That species of action of assumpsit, in which
the plaintiff alleges in his declaration, first a debt, and then a promise in consideration of the
debt, that the defendant, being indebted, he promised the plaintiff to pay him. The promise so
laid is, generally, an implied one only. Vide 1 Chit. Pl. 334; Steph. Pl. 318; Yelv. 21; 4 Co. 92 b. For
the history of this form of action, see 3 Reeves' Hist. Com. Law; 2 Comyn on Contr. 549 to 556; 1
H. Bl. 550, 551; 3 Black Com. 154; Yelv. 70. Vide Pactum Constituae Pecuniae.
Source: http://legal-dictionary.thefreedictionary.com/Indebitatus+assumpsit
75

76

77

[Should pay is not an award.]

Jeeram v National Union of Plantation Workers [1993] 3 MLJ 104

[Jeeram: arbitrators misconducted themselves because of failure to deal with the underlying
issues, questions sought to be determined were left undetermined therefore the award was
void, and the court has jurisdiction.]

Jeffrey Tang v Stanley Tan [Neil: added this case. Not in syllabus, but
in file. Discussed in class.]

[There was an award for liability and quantum .. but there was no award for costs. The losing
party argued there was no final award as of yet, considering that there has still a determination to
be made on award costs. The Singaporean Court agreed with the losing party.]
[Jeffrey was a stray decision. Because of Jeffrey Tang, the Singaporean Arbitration Act was
amended. Had this been decided by the ICC, the award on liability and quantum must have been
appealed within 30 days.]
[Costs: really depends on the arbitrators.
(1) arbitration costs (usually paid by losing party; split during proceedings, then reimbursed by
the losing party.)
- filing fees
- trancripts
78
- hearing venue
- arbitrators fees
(2) legal costs (same)
- expert
- travels
- lawyers fees
Ian MacDonald Library Services Ltd v PZ Resort Systems Inc {1987] 14
BCLR (2d) 273, BC

FIAT SpA v Republic of Suriname (USDC, South New York,1989)
Yearbook Com Arb XXIII(1998) p 880-885)

79

3. Reliefs and Remedies
Any relief or remedy as the court could if the dispute had been the
subject of a civil proceeding in court. e.g.
- Award for payment of money
- Specific performance
80
- Declaratory relief - e.g. whether a party is entitled to reject
goods; meaning of certain clauses in a lease. Must be a final
declaration which determines the rights of the parties 'once
and for all'.
- Indemnity - against liability to third parties which have yet
to be established or incurred
4. Costs of award and the reference
Cost of award - incurred jointly by the parties, such as fees of tribunal,
or institution, room hire, transcripts
Cost of reference - costs and expenses of a party (other than the costs of
the award) in the preparation and conduct of the arbitration e.g. fees of
counsel (or representative), expert witnesses, travelling expenses of
witnesses, or advisers consulted.
General rule (common law) costs follows the event
Patroclos Shipping Co. v. Societe Secopa [1980] 1 Lloyd's Rep. 405

[Atty. Bautista: Two traditions (1) loser pays, and (2) both parties bear their costs. In Atty.
Bautistas practice, rarely full costs. Usually subject to reasonableness, and is factually driven.
E.g. 1.5M for one party an 0.5M for the other. The losing party was only allowed to pay 1M.]

[On grounds in Singapore to set aside an award is natural justice. As in a case where the costs
greatly exceed the claim, i.e. $900 v. $2.5M.]

Arbitration -- Costs -- Award -- Charter-party dispute -- Charterers' claim wholly failed - - Award
required each party to pay own costs -- Whether award as to costs justified -- Whether award
should be remitted for reconsideration.

A dispute arose between the owners and charterers in which the owners claimed $33,552.09 and
the charterers counter-claimed $31,118.04 in respect of shortage. The dispute was referred to
arbitration and the owners' claim succeeded before the umpire to the extent of $32,086.82 while
the charterers' claim wholly failed. On Dec. 21, 1978, the umpire published his award in which,
inter alia, he awarded as to costs that-- . . . each party do bear and pay their own costs of the Reference
and that Owners do bear and pay one third and Charterers two thirds of this my award. . . . The owners
applied for the award to be remitted for reconsideration on the ground that the umpire in
awarding costs had to exercise his discretion judicially and had to show good reason for
departing from the ordinary rule (i.e., that the award of costs should have been made in favour of the
owners) and there was none here.
Held, by Q.B. (Com. Ct.) (PARKER, J.) that
(1) the evidence disclosed nothing which appeared to amount to a good reason for departing
from the ordinary rule and there were no reasons shown in the award (see p. 406, col. 1); if the
order was to be justified, powerful reasons would be required for its justification (see p. 406, col.
1);
--Tramountana Armadora S.A. v. Atlantic Shipping Co. S.A. [1978] 1 Lloyd's Rep. 391, applied.
(2) the award would be remitted for reconsideration on the matter of costs with a direction to the
umpire that if and insofar as he wished to depart from the ordinary rule[,] justification for such
departure had to exist and ought to be stated in any fresh order which he might make which did
so depart (see p. 406, col. 1).
Award remitted.

The following case was referred to in the judgment:
Tramountana Armadora, S.A. v. Atlantic Shipping Co. S.A., [1978] 1 Lloyd's Rep. 391..
This was an application by the plaintiff owners, Patroclos Shipping Co., that the award of the
umpire, Mr. Selwyn, dated Dec. 21, 1978, in an arbitration between the owners and the charterers,
81
Societe Secopa, in which he awarded that each party in the arbitration was to pay their own costs
be remitted for reconsideration on the ground that there was no justification for departing from
the ordinary rule which would have resulted in the award of costs being made in favour of the
owners.
Mr. Martin Moore-Bick (instructed by Messrs. Richards, Butler & Co.) for the plaintiff owners.
The defendants did not appear and were not represented.
The further facts are stated in the judgment of Mr. Justice Parker.

JUDGMENT
Mr. Justice PARKER:
This is an application to remit for reconsideration an award of Mr. Selwyn dated Dec. 21, 1978, in
which in an arbitration he awarded as to costs--
. . . that each party do bear and pay their own costs of the Reference and that Owners do bear and
pay one third and Charterers two thirds of this my Award which I hereby tax and settle at
<<PoundsSterling>> 1050.00 (including my disbursements and the fees of the Arbitrators). . .
and then there is the usual provision for contribution if one party pays the whole.
The position was that the owners were claiming $33,552.09, and the charterers counterclaimed in
respect of shortage the sum of $31,118.04. The owners' claim succeeded before the umpire to the
extent of $32,086.82. The charterers' claim wholly failed. Apart therefore from a small reduction
in the amount of the owners' claim, the owners can be regarded as having been wholly
successful.
The ordinary rule in those circumstances would result in the award of costs being made in favour
of the owners. That being so, a departure from the ordinary rule requires to be justified. Where
the success is so nearly total, as it was in this case, the departure which the umpire made is, on
the face of it, insupportable.*406 An arbitrator or umpire is, however, not ordinarily obliged to
give his reasons, and it is conceivable that some very exceptional circumstance might exist, albeit
on the evidence before me I find it difficult to see that there is any such reason.
The Court--and this has frequently been stressed--is not to substitute its own discretion for that of
the umpire. The discretion is for the umpire to exercise, but he must exercise it judicially and in
the circumstances of this case it means that he must show good reason for departing from the
ordinary rule. As I say, no reason is shown in the award itself. The evidence discloses nothing
which appears to me to amount to a good reason, albeit that the umpire, if the matter is referred,
may find or disclose some good reason. That is a matter upon which I am wholly unable to
pronounce. I can only say that if the order can be justified, it will require powerful reasons for its
justification. I do not read any passages from the authorities; the principles are well known, and
are most recently summarised in Tramountana Armadora S.A. v. Atlantic Shipping Co. S.A.,
[1978] 1 Lloyd's Rep. 391, and I do not take up time reading out the appropriate passages.
I therefore order that the award be remitted for reconsideration on the matter of costs with a
direction to the umpire that if and in so far as he wishes to depart from the ordinary rule,
justification for such a departure must exist and should be stated in any fresh order which he
may make which does so depart.
Mr. MOORE-BICK: My Lord, I ask that the award be remitted and I ask for the costs of the
application.
Mr. Justice PARKER: Well, there is nobody to resist you, but if there was, they could not resist it
so you have the costs.
(c) Lloyds of London Press Limited
[1980] 1 Lloyd's Rep. 405

[Bautista: In some jurisdictions, the deliberations of arbitrators may be used as evidence; in other
jurisdictions, not.]

5. Reasons for Award
Art 31(2), Model Law
82

(2) The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons
are to be given or the award is an award on agreed terms under article 30.
14

article 20(1).
15
The award shall be deemed to have been made at that place.

[Bautista: Place now, due to amendments, seat of arbitration is the place.]

6. Effect of the award
6.1 Enforceable against the party against whom it is made.
6.2 If the award is the final award,
- it terminates the arbitration.
- extinguishes the original cause of action.
6.3 Arbitrator becomes functus officio
MCIS Insurance Bhd v Associated cover Sdn Bhd [2001] 2 MLJ 561;

functus officio - Functus officio, a branch of the doctrine of res judicata prevents the re-opening of
a matter before the same court, tribunal or other statutory actor which rendered the final decision
in the absence of statutory authority. However, there is an important difference between "res
judicata" and "functus officio". "Res judicata" refers to the end of a case; "functus officio" refers to
the expiration of an office. "Functus officio" derives from "fungere": to perform, end, expire. It is
cognate to the ordinary English word "defunct". "Res judicata" means "the thing has been
decided". "Res judicata" derives from the principle "interest reipublicae ut sit finis litium" (it is for
the good of the commonwealth that there be a terminus to litigation.
Source: http://en.wikipedia.org/wiki/Functus_officio

14
Article 30. Settlement
(1) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and,
if requested by the parties and not objected to by the arbitral tribunal, record the settlement in the form of an arbitral
award on agreed terms.
(2) An award on agreed terms shall be made in accordance with the provisions of article 31 and shall state that it is an
award. Such an award has the same status and effect as any other award on the merits of the case.
15
Article 20. Place of arbitration
(1) The parties are free to agree on the place of arbitration. Failing such agreement, the place of arbitration shall be
determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the
parties.
(2) Notwithstanding the provisions of paragraph (1) of this article, the arbitral tribunal may, unless otherwise agreed by
the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses,
experts or the parties, or for inspection of goods, other property or documents.
83

[Bautista: In a case Luzon Hydro v. Judge Baybay, Court of Appeals set aside a foreign award. This
case spawned a lot of cases. Due to this case, the ADR rules of court was amended to explicitly
state that local jurisdiction has no power to set aside a foreign judgment.]

VIII. RECOURSE AGAINST THE AWARD
1. Mistakes and Omissions; Interpretation and additional awards
Art 33 Model Law

Article 33. Correction and interpretation of award; additional award
84
(1) Within thirty days of receipt of the award, unless another period of time has been agreed
upon by the parties:
(a) a party, with notice to the other party, may request the arbitral tribunal to correct in
the award any errors in computation, any clerical or typographical errors or any errors of
similar nature;
(b) if so agreed by the parties, a party, with notice to the other party, may request the
arbitral tribunal to give an interpretation of a specific point or part of the award.
If the arbitral tribunal considers the request to be justified, it shall make the correction or
give the interpretation within thirty days of receipt of the request. The interpretation
shall form part of the award.
(2) The arbitral tribunal may correct any error of the type referred to in paragraph (1)(a) of this
article on its own initiative within thirty days of the date of the award.
(3) Unless otherwise agreed by the parties, a party, with notice to the other party, may request,
within thirty days of receipt of the award, the arbitral tribunal to make an additional award as to
claims presented in the arbitral proceedings but omitted from the award. If the arbitral tribunal
considers the request to be justified, it shall make the additional award within sixty days.
(4) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a
correction, interpretation or an additional award under paragraph (1) or (3) of this article.
(5) The provisions of article 31
16
shall apply to a correction or interpretation of the award or to an
additional award.

2. Recourse Against Award
Section 24 28, RA 876

Section 24. Grounds for vacating award. - In any one of the following cases, the court must make
an order vacating the award upon the petition of any party to the controversy when such party
proves affirmatively that in the arbitration proceedings:

(a) The award was procured by corruption, fraud, or other undue means; or

(b) That there was evident partiality or corruption in the arbitrators or any of them;
or

(c) That the arbitrators were guilty of misconduct in refusing to postpone the
hearing upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy; that one or more of the arbitrators was disqualified to act as
such under section nine hereof, and wilfully refrained from disclosing such
disqualifications or of any other misbehavior by which the rights of any party have been
materially prejudiced; or

(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that
a mutual, final and definite award upon the subject matter submitted to them was not
made.

16
(1) The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In arbitral proceedings with
more than one arbitrator, the signatures of the majority of all members of the arbitral tribunal shall suffice, provided
that the reason for any omitted signature is stated.
(2) The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be
given or the award is an award on agreed terms under article 30.
(3) The award shall state its date and the place of arbitration as determined in accordance with article 20(1). The award
shall be deemed to have been made at that place.
(4) After the award is made, a copy signed by the arbitrators in accordance with paragraph (1) of this article shall be
delivered to each party.
85

Article 25. Default of a party

Unless otherwise agreed by the parties, if, without showing sufficient cause,

(a) the claimant fails to communicate his statement of claim in accordance with article
23(1)
17
, the arbitral tribunal shall terminate the proceedings;

(b) the respondent fails to communicate his statement of defence in accordance
with article 23(1), the arbitral tribunal shall continue the proceedings without treating
such failure in itself as an admission of the claimant's allegations;

(c) any party fails to appear at a hearing or to produce documentary evidence, the
arbitral tribunal may continue the proceedings and make the award on the evidence
before it.

Article 26. Expert appointed by arbitral tribunal

(1) Unless otherwise agreed by the parties, the arbitral tribunal

(a) may appoint one or more experts to report to it on specific issues to be determined by
the arbitral tribunal;

(b) may require a party to give the expert any relevant information or to produce, or to
provide access to, any relevant documents, goods or other property for his inspection.

(2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal
considers it necessary, the expert shall, after delivery of his written or oral report, participate in a
hearing where the parties have the opportunity to put questions to him and to present expert
witnesses in order to testify on the points at issue.

Article 27. Court assistance in taking evidence

The arbitral tribunal or a party with the approval of the arbitral tribunal may request from a
competent court of this State assistance in taking evidence. The court may execute the request
within its competence and according to its rules on taking evidence.

CHAPTER VI. MAKING OF AWARD AND TERMINATION OF PROCEEDINGS

Article 28. Rules applicable to substance of dispute

(1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as
are chosen by the parties as applicable to the substance of the dispute. Any designation of
the law or legal system of a given State shall be construed, unless otherwise expressed, as

17
Article 23. Statements of claim and defence
(1) Within the period of time agreed by the parties or determined by the arbitral tribunal, the claimant shall state the
facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence
in respect of these particulars, unless the parties have otherwise agreed as to the required elements of such statements.
The parties may submit with their statements all documents they consider to be relevant or may add a reference to the
documents or other evidence they will submit.
(2) Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the
course of the arbitral proceedings, unless the arbitral tribunal considers it inappropriate to allow such amendment
having regard to the delay in making it.
86
directly referring to the substantive law of that State and not to its conflict of laws rules.

(2) Failing any designation by the parties, the arbitral tribunal shall apply the law
determined by the conflict of laws rules which it considers applicable.

(3) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if
the parties have expressly authorized it to do so.

(4) In all cases, the arbitral tribunal shall decide in accordance with the terms of the
contract and shall take into account the usages of the trade applicable to the transaction.

Section 41, RA 9285

SEC. 41. Vacation Award. - A party to a domestic arbitration may question the arbitral award
with the appropriate regional trial court in accordance with the rules of procedure to be
promulgated by the Supreme Court only on those grounds enumerated in Section 25 of Republic
Act No. 876. Any other ground raised against a domestic arbitral award shall be disregarded by
the regional trial court.

3. Setting aside under the Model LawArt 34, Model Law

CHAPTER VII. RECOURSE AGAINST AWARD
Article 34. Application for setting aside as exclusive recourse against arbitral award
(1) Recourse to a court against an arbitral award may be made only by an application for setting
aside in accordance with paragraphs (2) and (3) of this article.
18
18

(2) An arbitral award may be set aside by the court specified in article 6 only if:

a) the party making the application furnishes proof that:

i) a party to the arbitration agreement referred to in article 7 was under some
incapacity; or the said agreement is not valid under the law to which the parties
have subjected it or, failing any indication thereon, under the law of this State; or

ii) the party making the application was not given proper notice of the
appointment of an arbitrator or of the arbitral proceedings or was otherwise
unable to present his case; or

iii) the award deals with a dispute not contemplated by or not falling within the
terms of the submission to arbitration, or contains decisions on matters beyond
the scope of the submission to arbitration, provided that, if the decisions on
matters submitted to arbitration can be separated from those not so submitted,
only that part of the award which contains decisions on matters not submitted to
arbitration may be set aside; or

iv) the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties, unless such agreement was in
conflict with a provision of this Law from which the parties cannot derogate, or,
failing such agreement, was not in accordance with this Law; or

18
Article 18. Equal treatment of parties
The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case.
87

(b) the court finds that:

i) the subject-matter of the dispute is not capable of settlement by
arbitration under the law of this State; or

ii) the award is in conflict with the public policy of this State.

(3) An application for setting aside may not be made after three months have elapsed
from the date on which the party making that application had received the award or, if a
request had been made under article 33, from the date on which that request had been
disposed of by the arbitral tribunal.

(4) The court, when asked to set aside an award, may, where appropriate and so
requested by a party, suspend the setting aside proceedings for a period of time
determined by it in order to give the arbitral tribunal an opportunity to resume the
arbitral proceedings or to take such other action as in the arbitral tribunal's opinion will
eliminate the grounds for setting aside.

Asset Privatization Trust v Court of Appeals, 300 SCRA 579 (1998)

In 1968, the government undertook to support the financing of Marinduque Mining and
Industrial Corporation (MMIC). The government then issued debenture bonds in favor of MMIC
which enable the latter to take out loans from the Development Bank of the Philippines (DBP)
and the Philippine National Bank (PNB). The loans were mortgaged by MMICs assets. In 1984
however, MMICs indebtedness reached P13.7 billion and P8.7 billion to DPB and PNB
respectively. MMIC had trouble paying and this exposed the government, because of the
debenture bonds, to a P22 billion obligation.

In order to mitigate MMICs loan liability, a financial restructuring plan (FRP) was drafted in the
presence of MMICs representatives as well as representatives from DBP and PNB. The two
banks however never formally approved the said FRP. Eventually, the staggering loans became
overdue and PNB and DBP chose to foreclose MMICs assets, FRP no longer feasible at that point.
So the assets were foreclosed and were eventually assigned to the Asset Privatization Trust
(APT).

Later, Jesus Cabarrus, Sr., a stockholder of MMIC initiated a derivative suit against PNB and DBP
with APT being impleaded as the successor in interest of the two banks. The suit basically
questioned the foreclosure as Cabarrus asserted that the foreclosure was invalid because he
insisted that the FRP was adopted by PNB and DBP as a consequence of the presence of the
banks representatives when the said FRP was drafted. Cabarrus asserts that APT should restore
the assets to MMIC and that PNB and DBP should honor the FRP. The suit was filed in the RTC
of Makati but while the case was pending, the parties agreed to submit the case for arbitration.
Hence, Makati RTC dismissed the case upon motion of the parties.

The Arbitration Committee (AC) which heard the case ruled in favor of Cabarrus. The AC
granted Cabarrus prayer and at the same time awarded him P10 million in moral damages. Not
only that, the AC also awarded P2.5 billion in moral damages in favor of MMIC to be paid by the
government. APTs MFR was denied. Cabarrus then filed before the Makati RTC a motion to
confirm the arbitration award. APT opposed the same as it alleged that the motion is improper.
Makati RTC denied APTs opposition and confirmed the arbitration award. The Court of Appeals
affirmed the ruling of the RTC.

88

ISSUE: Whether or not the ruling of the Arbitration Committee as affirmed by the Regional Trial
Court of Makati (Branch 62) and the Court of Appeals is correct.

HELD: No.

The award of damages in favor of MMIC is improper. First, it was not made a party to the case.
The derivative suit filed by Cabarrus failed to implead MMIC. So how can an award for damages
be awarded to a non-party? Second, even if MMIC, which is actually a real party in interest, was
impleaded, it is not entitled to moral damages. It is not yet a well settled jurisprudence that
corporations are entitled to moral damages. While the Supreme Court in some cases did award
certain corporations moral damages for besmirched reputations, such is not applicable in this
case because when the alleged wrongful foreclosure was done, MMIC was already in bad
standing hence it has no good wholesome reputation to protect. So it could not be said that there
was a reputation besmirched by the act of foreclosure. Likewise, the award of moral damages
in favor of Cabarrus is invalid. He cannot have possibly suffered any moral damages because the
alleged wrongful act was committed against MMIC. It is a basic postulate that a corporation has a
personality separate and distinct from its stockholders. The properties foreclosed belonged to
MMIC, not to its stockholders. Hence, if wrong was committed in the foreclosure, it was done
against the corporation.

The FRP is not valid hence the foreclosure is valid. The mere presence of DBPs and PNBs
representatives during the drafting of FRP is not constitutive of the banks formal approval of the
FRP. The representatives are personalities distinct from PNB and DBP. PNB and DBP have their
own boards and officers who may have different decisions. The representatives were not shown
to have been authorized by the respective boards of the two banks to enter into any agreement
with MMIC.

Further, the proceeding is procedurally infirm. RTC Makati had already dismissed the civil case
when the parties opted for arbitration. Hence, it should have never took cognizance of the
Cabarrus motion to confirm the AC award. The same should have been brought through a
separate action not through a motion because RTC Makati already lost jurisdiction over the case
when it dismissed it to give way for the arbitration. The arbitration was a not a continuation of
the civil case filed in Makati RTC.

[Atty. Pamfilo This is re: ground of tribunal exceeded its powers. SC substituted its own
judgment. Atty. Pamfilo agrees with the Dissent of J. Romero. If tribunal got it wrong, court has
no power to supplant the wrong decision. Unfortunately, no decision yet under ADR act.]

Available only to awards made in the seat of arbitration:
PT Garuda Indonesia v Birgen Air [2002 CA]

DMC/SandT/03/02
PT Garuda Indonesia v Birgen Air
Singapore Court of Appeal: [2002] 1 SLR 393
WHETHER AGREEMENT TO CHANGE SEAT OF ARBITRATION: WHETHER
INTERNATIONAL ARBITRATION ACT 1994 OR THE MODEL LAW APPLIES: SERVICE OUT
OF JURISDICTION OF ORIGINATING PROCESS UNDER O.69A, R.4 OF THE RULES OF
COURT

Summary
In this case, the Singapore Court of Appeal affirmed the decision of the High Court that the
UNCITRAL Model Law, which is given the force of law in Singapore by the International
89
Arbitration Act 1994, applies only to arbitrations in Singapore except in a few specified instances.
The court also pointed out the difference between the legal seat, or place, of the arbitration and a
venue chosen to conduct arbitral hearings or meetings as a matter of convenience.

This case note has been supplied by Ang and Partners, the International Contributors for
Singapore

DMC Rating Category: Developed

For a note on the case at first instance, see Garuda v. Birgen - I

Facts
PT Garuda Indonesia ("Garuda"), an Indonesian company, had a dispute with Birgen Air, a
Turkish company, over an aircraft lease agreement. The Lease Agreement provided that any
dispute should be settled by arbitration before a board of three qualified arbiters, such arbitration
to be held in Jakarta, Indonesia in accordance with the ICC Rules. The law governing the arbitral
procedure (if any) was to be determined by the arbitral tribunal.

A tribunal of three arbiters was appointed. The venue of the hearing of the arbitration was
Singapore. The tribunal took the view that the procedural rules applicable to the arbitration were
contained in the ICC Rules. There was no specific reference to any curial law in the award. The
Final Award was signed by two members. The third member declined to sign it. The majority of
the tribunal subsequently rendered an Addendum to Final Award and a Decision With Respect
of Final Award.

Garuda filed a Notice of Originating Motion in the High Court of Singapore to set aside the
Award, the Addendum and the Decision and for various other relief. Garuda applied for leave to
serve the motion on Birgen Air out of Singapore and also for leave for substituted service within
Singapore. The application for service out of jurisdiction relied on Order 69A, rule 4 of the Rules
of Court, which provides that service out of an originating process (in relation to the International
Arbitration Act 1994) "is permissible with leave of the Court whether or not the arbitration was
held or the award was made within the jurisdiction."

Garudas application was heard ex parte [namely, not in the presence of the other side] and an
Order was granted for service out of jurisdiction and substituted service on Birgen Airs solicitors
in Singapore. Birgen Air applied to set aside the Order and all other subsequent proceedings.

At first instance, the High Court granted Birgens application and set aside the Order for service
out and all subsequent proceedings, on the grounds that there was material non-disclosure by PT
Garuda and also that this was not a proper case for service out of jurisdiction.

PT Garudas appeal to the Court of Appeal was dismissed.

Judgment
1. The Court of Appeal agreed with the High Court that the test for what constitutes a proper
case for service out of jurisdiction under O 69A r 4 is identical to the test in O 11 r 2(2) (O 11 is the
general provision on service out of jurisdiction and r 2(2) states that no leave shall be granted
unless it shall be made sufficiently to appear to the Court that the case is a proper one for service
out of Singapore under the Order. The guide for a proper case is that the forum chosen must be
the most appropriate forum in which the case can most suitably be tried in the interests of all the
parties and for the ends of justice.)

2. There is a distinction between "place of arbitration" and the place where the arbitral tribunal
90
carries on hearing witnesses, experts or the parties, namely the "venue of hearing". Where parties
have agreed on the place of arbitration, it does not change even though the tribunal may need to
hear witnesses or do any other things in relation to the arbitration in a different location. After
considering the correspondence, the Court of Appeal rejected the argument by PT Garuda that
the parties had changed the place of arbitration from Jakarta to Singapore. Singapore became the
venue of the hearing but the place of arbitration remained Jakarta.

3. As the place of arbitration was Indonesia, the arbitration proceedings were subject to
Indonesian law.

4. Article 34(iv) of the Model Law, which is given the force of law in Singapore by Part I of the
International Arbitration Act 1994, provides grounds for setting aside of an award. It was held
that Article 34 applies only if an arbitration has its "place of arbitration" in Singapore. Singapore
courts can only intervene in relation to an arbitration governed by the Model Law in the limited
instances set out in Articles 8, 9, 35 and 36.

5. Section 24 of the Act gives additional grounds to the High Court to set aside an award. The
Court of Appeal agreed with the High Court that section 24 and Article 34 of the Model Law are
closely linked, so that if Article 34 is not applicable, then section 24 will also not be applicable.

6. As there was no basis for PT Garuda to file the Originating Motion in Singapore under Article
34 or Section 24, and as Indonesian law governed both the lease agreement and the arbitration
proceedings and the award was rendered in Jakarta, Indonesia was clearly the most appropriate
forum. Accordingly, this was not a proper case where leave to serve the notice of Originating
Motion out of jurisdiction should be granted.

7. In view of the findings above, the Court of Appeal did not consider it necessary to go into the
issue of whether there had been material non-disclosure on the part of PT Garuda in their
application for leave to serve out of jurisdiction.

Case 6 Sch 2/99 (Germany: Higher Regional Court Dsseldorf,
2000) CLOUT Case 408 A/CN.9/SER.C/ABSTRACTS/35

Case 408: Art. 1(2), 20, 34 MAL
Germany: Higher Regional Court Du!sseldorf; 6 Sch 2/99
place of arbitration
23 March 2000

The decision, arising out of an action to set aside an award, concerns the
determination the place of arbitration. Although the award made reference to the
sole arbitrators domicile in Du!sseldorf, the Court declined its jurisdiction
because it concluded the award was a foreign arbitral award.

The parties disputed the value of two business partnerships after the
withdrawal by one of the parties. In the course of the negotiations over the value
of the two partnerships, the parties agreed on a particular expert to conduct an
appraisal. Both parties declared in separate written statements that they would
accept the decision by the expert, acting as a single arbitrator. Though the parties
exchanged several drafts of an arbitration agreement, no formal agreement was
ever signed. After an unsuccessful settlement attempt in Du!sseldorf, the
arbitrator undertook an audit of the partnerships at their places of business in
Zurich, Switzerland. Further negotiations took place for more than two years.
Finally, upon motion of the Claimant, the arbitrator rendered an arbitral award.
91

The Respondent filed an application to set aside the award before the
Court where the award was executed. The Court declined its own jurisdiction to
rule on the validity of the award. It held that the arbitral award at issue was not a
German domestic arbitral award but a foreign arbitral award.

The Court based its decision on the German arbitration law that was in
effect until December 1997, since the new provisions, adapted from the MAL,
became effective after the arbitration proceedings had commenced. Applying the
standard of the previous law, the Court considered that the award was foreign
because, according to the draft arbitration agreements exchanged by the parties,
both parties intended the dispute to be decided under Chapter 12 of the Swiss
Federal Statute on Private International Law.

Moreover, the Court also held that it lacked jurisdiction under the
current arbitration law. According to section 1025 (1) German Code of Civil
Procedure the provisions on arbitration only apply if the place of arbitration is
situated in Germany. This rule also applies to the proceedings for setting aside
an award pursuant to section 1059 (adapted from article 34 MAL). The Court
found that the place of arbitration was neither agreed upon by the parties, nor
was it determined by the arbitrator in accordance with section 1043 (article 20
MAL), as required by section 1054 (3) (article 31 (3) MAL). The award merely
stated the arbitrators address. Under these circumstances, the Court defined the
place of arbitration to be the actual, effective place of arbitration. Only if no
particular place could be determined, the place of the last oral hearing was
considered the place of arbitration.

In the case at issue, all relevant actions the auditing and the subsequent
negotiations with both parties took place in Zurich {Switzerland}. Therefore,
and regardless of where the award itself was issued, the effective place of
arbitration was not situated in Germany.

"Only recourse" - Art 5 and 34(1) Model Law

Article 5. Extent of court intervention
In matters governed by this Law, no court shall intervene except where so provided in this Law.

(2) The award shall state the reasons upon which it is based, unless the parties have agreed that
no reasons are to be given or the award is an award on agreed terms under article 30.
article 20(1). The award shall be deemed to have been made at that place.

4. Grounds for setting aside
Slaney v IAAF (USCA 2
nd
Cir, 2001) Yearbook Com Arb XXVi (2001) p
1091

92

93

[Atty: Pamfilo: Lesson - If party participates, the principle of estoppel applies.]

Re Corporacion Transnacional de Inversiones, S.A. de C.V. et al. and
STET International, S.p.A. et al. (Canada: Superior Court,
1999) CLOUT Case 391, A/CN.9/SER.C/ABSTRACTS/34}

Case 391: MAL 7, 18, 25, 27, 34
Canada: Superior Court of Justice (Lax J.)
September 22, 1999
Re Corporacion Transnacional de Inversiones, S.A. de C.V. et al. and STET International, S.p.A. et
al. Original in English
Published in English: 45 O.R. (3d) 183, affirmed (2000) 49 O.R. (3d) 414, O.J. No. 3408 (C.A.,
Catzman, Abella & Rosenberg JJ.A.), leave to appeal to the Supreme Court of Canada sought:
[2000] S.C.C.A. No. 581.
The respondents, together referred to as STET, are an Italian company and its Netherlands
subsidiary. They commenced the arbitration against the four corporate applicants (collectively
referred to as COTISA) who are Mexican companies that are owned and/or controlled by the
personal applicant, Javier Garza Caldern ( Garza). STET had entered into a share subscription
agreement with COTISA to purchase an indirect interest in the Cuban national telephone
company. In June 1999, pursuant to the arbitration clause in the subscription agreement, STET
sought rescission of the subscription agreement. A three-person I.C.C. arbitral tribunal was
constituted and arbitration proceedings were held in Ottawa. The arbitral tribunal concluded that
it had jurisdiction in respect of all the parties and issues presented to it and went on to find that
the applicants were all jointly and severally liable to compensate STET for losses of
approximately US$305-million incurred as a result of breaches of the subscription agreement.
Before the Ontario court, the applicants sought to have the award set aside while the respondents
asked for its enforcement.

The applicants challenged the arbitral award on several grounds provided for in articles
34(2)(a)(ii) and (b)(ii) of the Model Law: namely that the tribunal was without jurisdiction over
three of the parties, that they had been denied equality of treatment and opportunity to present their
case contrary to Article 18 of the Model Law; and that the award was in conflict with public policy in
94
Ontario, which is a ground for setting aside an award.

The Court held that under Article 34 of the Model Law, the applicant had the onus of proving that the
award should be set aside. If the applicants fails to do so, then Articles 35 and 36 require the court
to recognize and enforce the award. The court also noted that the grounds for refusing to enforce
an award are to be construed narrowly and that the public policy ground for resisting enforcement
should apply only where enforcement would violate basic notions of morality and justice of
which corruption, bribery or fraud are examples. The Court also held that the due process
protection of art. 34(2)(a)(ii) included both procedural and substantive fairness, which made it overlap with
the public policy defense in 34(2)(b)(ii).

After considering the facts of the case, the Court found that the applicants failed to establish
grounds to set aside the award. In particular, there was no unfairness in the Arbitral Tribunal's
handling of the applicants' request that STET disclose certain purchase agreements involving the
shares in the Cuban telephone company. In the circumstances, there was a fair balancing of the
considerations of both sides. The applicants' arguments that the Arbitral Tribunal's decision
about rescission was wrong on the facts and the law was no more than the presentation of
evidence and arguments that COTISA could have presented. The Court noted that a party that
refuses to participate in an arbitration is deemed to have forfeited the opportunity to be heard
(art. 25 MAL). The purpose of Article 18, in the Courts view, is to protect a party from egregious
and injudicious conduct by a tribunal. It is not intended to protect a party from its own failures or
strategic choices. Further, that the award might be legally or factually wrong was not, in the
Courts view, grounds for setting it aside. On the issue of compelling testimony, the Court held
that the arbitral tribunal had no power, under art. 27 of the MAL, to compel witnesses to testify.
Failure of the applicant to seek judicial assistance cannot be imputed to the tribunal. Finally, the
Court found that the tribunal had jurisdiction over all of the applicants because Article 7 of the
Model Law and the Mexican law both contemplate that parties may enter into a valid arbitration
agreement by entering into a contract that incorporates by reference another document that
provides for arbitration.

Zimbabwe Electricity Supply Authority v. Genius Joel Maposa
(Zimbabwe: Supreme Court, 1999) CLOUT Case 323:

Case 323: MAL 34
Zimbabwe: Supreme Court (Chief Justice Gubbay and Judges of Appeal Ebrahim and Sandura);
Judgment No. S.C. 114/99
21 October and 21 December 1999
Zimbabwe Electricity Supply Authority v. Genius Joel Maposa Original in English
Unpublished
An employee had been suspended from duty by his employer pending a disciplinary hearing
into alleged misconduct. According to the terms of the applicable code of conduct, the matter was
required to be referred to a disciplinary committee within 10 days. However, before the 10 days
period elapsed, the employee applied to the High Court for an order that the dispute be referred
to arbitration instead of being decided by the disciplinary committee under the code of conduct.

The High Court granted the order and the issue was referred to arbitration. By then, the 10 days
period had elapsed. The arbitral tribunal, basing its decision on a mistake as to the date of the
suspension, held that such suspension was unlawful, as the matter had not been referred to a
disciplinary hearing within the 10 days period. As a result, the arbitral tribunal did not
appreciate and did not consider the effect of the employees application to the High Court,
namely that it precluded the employer from complying with the code of conduct.

95
The employer applied to the High Court to have the arbitral award set aside on the basis that it
was contrary to the public policy of Zimbabwe pursuant to article 34 MAL. The employee sought
an order for the enforcement of the arbitral award in accordance with article 35 MAL. The High
Court dismissed both applications (see CLOUT Case No. 267). The employer next appealed to the
Supreme Court on the same grounds and, in his notice of cross-appeal, the employee contended
that the High Court, having correctly refused to set aside the arbitral award, should accede to the
enforcement thereof.

The Supreme Court discussed the public policy under article 34 MAL. Whilst upholding the
principle that it must be construed narrowly, the Supreme Court held that where an award was
based on so fundamental an error, as in this case, that it constituted a palpable inequity that was
so far reaching and outrageous in its defiance of logic or accepted moral standards that a sensible
and fair minded person would consider that the conception of justice in Zimbabwe would be
intolerably hurt by the award, then it should be contrary to public policy to uphold it. It further
held that although no moral turpitude attached to the conduct of the arbitrator, the arbitral
award was contrary to the public policy of Zimbabwe in terms of article 34(2)(b)(ii) MAL.
Accordingly, the Supreme Court set aside the arbitral award and dismissed the employees cross-
appeal.

[Atty. Pamfilo: The fundamental error of the arbitration tribunal was that the ruling against the
employers amounted to an injustice against the employer. The reason why the employer was not
able to comply with the 10-day hearing with the disciplinary committee was not their fault. The
court referred the case to arbitration.]

Netherlands Coffee Trade Yearbook Com Arb XII (1987) p 487-489

96

97

IX. ENFORCEMENT OF AWARDS
Transfield vs. Luzon Hydro Corporation; G.R. No. 146717, 19 May 2006

98

#$ %&' '()*++, #-./0%*1% ()'$%#/1 /2 -/1'%*0, *3*04$ %/ %&' *550#'6'4 .*0%,7

Tuna Processing, Inc. vs. Philippine Kingford, Inc. G.R. No. 185582. February 29,
2012

Simply put, how do we reconcile the provisions of the Corporation Code of the Philippines on
one hand, and the Alternative Dispute Resolution Act of 2004, the New York Convention and the
99
Model Law on the other? In several cases, this Court had the occasion to discuss the nature and
applicability of the Corporation Code of the Philippines, a general law, viz-a-viz other special
laws. The Corporation Code, however, is a general law applying to all types of corporations,
while the New Central Bank Act regulates specifically banks and other financial institutions,
including the dissolution and liquidation thereof. As between a general and special law, the
latter shall prevail generalia specialibus non derogant. (Emphasis supplied)

Following the same principle, the Alternative Dispute Resolution Act of 2004 shall apply in this
case as the Act, as its title - An Act to Institutionalize the Use of an Alternative Dispute
Resolution System in the Philippines and to Establish the Office for Alternative Dispute
Resolution, and for Other Purposes - would suggest, is a law especially enacted to actively
promote party autonomy in the resolution of disputes or the freedom of the party to make their
own arrangements to resolve their disputes.[29] It specifically provides exclusive grounds
available to the party opposing an application for recognition and enforcement of the arbitral
award.[30]

Inasmuch as the Alternative Dispute Resolution Act of 2004, a municipal law, applies in the
instant petition, we do not see the need to discuss compliance with international obligations
under the New York Convention and the Model Law. After all, both already form part of the
law.

The core issue in this case is whether or not the court a quo was correct in so dismissing the
petition on the ground of petitioners lack of legal capacity to sue.

Sec. 45 of the Alternative Dispute Resolution Act of 2004 provides that the opposing party in an
application for recognition and enforcement of the arbitral award may raise only those grounds
that were enumerated under Article V of the New York Convention. Clearly, not one of these
exclusive grounds touched on the capacity to sue of the party seeking the recognition and
enforcement of the award.

Article V
1. Recognition and enforcement of the award may be refused, at the request of the party
against whom it is invoked, only if that party furnishes to the competent authority where the
recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to
them, under some incapacity, or the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the law of the country
where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the
appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to
present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms
of the submission to arbitration, or it contains decisions on matters beyond the scope of the
submission to arbitration, provided that, if the decisions on matters submitted to arbitration
can be separated from those not so submitted, that part of the award which contains
decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in
accordance with the agreement of the parties, or, failing such agreement, was not in
accordance with the law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or
suspended by a competent authority of the country in which, or under the law of which,
that award was made.
2. Recognition and enforcement of an arbitral award may also be refused if the competent
authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under
the law of that country; or
100
(b) The recognition or enforcement of the award would be contrary to the public policy of
that country.

[This is an important case. This is an exception to the rule to the Corp Code rule that a foreign
corporation which does business in the PH without a license. The benefit is to avoid taxes.
Royalties is doing business in the PH. With this case, just add an arbitration clause in your
contract, and a foreign corp can do business in the PH, not pay taxes, and enforce an arbitral
award in the PH.]

1. Enforcement of an Award as a Foreign Judgment
Oil and Natural Gas Commission v. Court of Appeals, G.R. No. 114323,
23 July 1998;

The dispute between the parties had its origin in the non-delivery of the 4,300 metric tons of oil
well cement to the petitioner. The primary question that may be posed, therefore, is whether or
not the non-delivery of the said cargo is a proper subject for arbitration under the above-quoted
Clause 16. The petitioner contends that the same was a matter within the purview of Clause 16,
particularly the phrase, ". . . or as to any other questions, claim, right or thing whatsoever, in any
way arising or relating to the supply order/contract, design, drawing, specification, instruction . .
.". 12 It is argued that the foregoing phrase allows considerable latitude so as to include non-
delivery of the cargo which was a "claim, right or thing relating to the supply order/contract".
The contention is bereft of merit. First of all, the petitioner has misquoted the said phrase,
shrewdly inserting a comma between the words "supply order/contract" and "design" where
none actually exists. An accurate reproduction of the phrase reads, ". . . or as to any other
question, claim, right or thing whatsoever, in any way arising out of or relating to the supply
order/contract design, drawing, specification, instruction or these conditions . . .". The absence of
a comma between the words "supply order/contract" and "design" indicates that the former
cannot be taken separately but should be viewed in conjunction with the words "design,
drawing, specification, instruction or these conditions". It is thus clear that to fall within the
purview of this phrase, the "claim, right or thing whatsoever" must arise out of or relate to the
design, drawing, specification, or instruction of the supply order/contract. The petitioner also
insists that the non-delivery of the cargo is not only covered by the foregoing phrase but also by
the phrase, ". . . or otherwise concerning the materials or the execution or failure to execute the
same during the stipulated/extended period or after completion/abandonment thereof . . .".

The doctrine of noscitur a sociis, although a rule in the construction of statutes, is equally
applicable in the ascertainment of the meaning and scope of vague contractual stipulations, such
as the aforementioned phrase. According to the maxim noscitur a sociis, where a particular word
or phrase is ambiguous in itself or is equally susceptible of various meanings, its correct
construction may be made clear and specific by considering the company of the words in which it
is found or with which it is associated, or stated differently, its obscurity or doubt may be
reviewed by reference to associated words. 13 A close examination of Clause 16 reveals that it
covers three matters which may be submitted to arbitration namely,

(1) all questions and disputes, relating to the meaning of the specification designs, drawings
and instructions herein before mentioned and as to quality of workmanship of the items ordered;
or

(2) any other question, claim, right or thing whatsoever, in any way arising out of or relating
to the supply order/contract design, drawing, specification, instruction or these conditions; or

(3) otherwise concerning the materials or the execution or failure to execute the same during
stipulated/extended period or after the completion/abandonment thereof.
101

The first and second categories unmistakably refer to questions and disputes relating to the
design, drawing, instructions, specifications or quality of the materials of the supply/order
contract. In the third category, the clause, "execution or failure to execute the same", may be read
as "execution or failure to execute the supply order/contract". But in accordance with the
doctrine of noscitur a sociis, this reference to the supply order/contract must be construed in the
light of the preceding words with which it is associated, meaning to say, as being limited only to
the design, drawing, instructions, specifications or quality of the materials of the supply
order/contract. The non-delivery of the oil well cement is definitely not in the nature of a dispute
arising from the failure to execute the supply order/contract design, drawing, instructions,
specifications or quality of the materials. That Clause 16 should pertain only to matters involving
the technical aspects of the contract is but a logical inference considering that the underlying
purpose of a referral to arbitration is for such technical matters to be deliberated upon by a
person possessed with the required skill and expertise which may be otherwise absent in the
regular courts.

This Court agrees with the appellate court in its ruling that the non-delivery of the oil well
cement is a matter properly cognizable by the regular courts as stipulated by the parties in Clause
15 of their contract:

All questions, disputes and differences, arising under out of or in connection with this supply
order, shall be subject to the exclusive jurisdiction of the court, within the local limits of whose
jurisdiction and the place from which this supply order is situated. 14

The petitioner then asseverates that granting, for the sake of argument, that the non-delivery of
the oil well cement is not a proper subject for arbitration, the failure of the replacement cement to
conform to the specifications of the contract is a matter clearly falling within the ambit of Clause
16. In this contention, we find merit. When the 4,300 metric tons of oil well cement were not
delivered to the petitioner, an agreement was forged between the latter and the private
respondent that Class "G" cement would be delivered to the petitioner as replacement. Upon
inspection, however, the replacement cement was rejected as it did not conform to the
specifications of the contract. Only after this latter circumstance was the matter brought before
the arbitrator. Undoubtedly, what was referred to arbitration was no longer the mere non-
delivery of the cargo at the first instance but also the failure of the replacement cargo to conform
to the specifications of the contract, a matter clearly within the coverage of Clause 16.

In the instant case, the private respondent does not deny the fact that it was notified by the
foreign court to file its objections to the petition, and subsequently, to pay legal fees in order for
its objections to be given consideration. Instead of paying the legal fees, however, the private
respondent sent a communication to the foreign court inquiring about the correct amount of fees
to be paid. On the pretext that it was yet awaiting the foreign court's reply, almost a year passed
without the private respondent paying the legal fees. Thus, on February 2, 1990, the foreign court
rejected the objections of the private respondent and proceeded to adjudicate upon the
petitioner's claims. We cannot subscribe to the private respondent's claim that the foreign court
violated its right to due process when it failed to reply to its queries nor when the latter rejected
its objections for a clearly meritorious ground. The private respondent was afforded sufficient
opportunity to be heard. It was not incumbent upon the foreign court to reply to the private
respondent's written communication. On the contrary, a genuine concern for its cause should
have prompted the private respondent to ascertain with all due diligence the correct amount of
102
legal fees to be paid. The private respondent did not act with prudence and diligence thus its plea
that they were not accorded the right to procedural due process cannot elicit either approval or
sympathy from this Court. 36

The private respondent bewails the presumed bias on the part of the arbitrator who was a former
employee of the petitioner. This point deserves scant consideration in view of the following
stipulation in the contract:

. . . . It will be no objection any such appointment that the arbitrator so appointed is a
Commission employer (sic) that he had to deal with the matter to which the supply or contract
relates and that in the course of his duties as Commission's employee he had expressed views on
all or any of the matter in dispute or difference. 37 (Emphasis supplied.)

A foreign judgment is presumed to be valid and binding in the country from which it comes,
until the contrary is shown. It is also proper to presume the regularity of the proceedings and the
giving of due notice therein.

Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal
of a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right
as between the parties and their successors-in-interest by a subsequent title. The judgment may,
however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court, whether of the
Philippines or elsewhere, enjoys the presumption that it was acting in the lawful exercise of
jurisdiction and has regularly performed its official duty. 39

Consequently, the party attacking a foreign judgment, the private respondent herein, had the
burden of overcoming the presumption of its validity which it failed to do in the instant case.

Oil and Natural Gas Commission v. Court of Appeals, G.R. No. 114323,
Resolution on Motion for Reconsideration September 28, 1999

The foreign court explicitly declared in its Order that Award Paper No. 3/B-1 shall be part of
the decree. This curt ruling of the foreign court may be categorized in the nature of
memorandum decisions or those which adopt by reference the findings of facts and conclusions
of law of inferior tribunals. In this jurisdiction, it has been held that memorandum decisions do
not transgress the constitutional requirement in Article VIII, Section 14, on clearly and distinctly
stating the facts and the law on which the decision is based.[16] Nonetheless, it would be more
prudent for a memorandum decision not to be simply limited to the dispositive portion but to
state the nature of the case, summarize the facts with references to the record, and contain a
statement of the applicable laws and jurisprudence and the tribunals assessments and
conclusions on the case. This practice would better enable a court to make an appropriate
consideration of whether the dispositive portion of the judgment sought to be enforced is
consistent with the findings of facts and conclusions of law made by the tribunal that rendered
the decision. This is particularly true where the decisions, orders, or resolutions came from a
court in another jurisdiction. Otherwise, the enforcement of the decisions would be based on
presumptions that laws in other jurisdictions are similar to our laws, at the expense of justice
based on the merits.

Moreover, the constitutional guideline set forth in Article VIII, Section 14 cannot prevail over the
fundamental elements of due process. Matters of procedure even if laid down in the Constitution
must be tempered by substantial justice provided it has factual and legal basis. Considering that
103
the case involves significant properties, the overriding consideration of a judgment based on the
merits should prevail over the primordial interests of strict enforcement on matters of
technicalities. Procedural lapses, absent any collusion or intent to defraud the parties or mislead
the tribunals, should not be allowed to defeat the claim of a party who is not well-informed in the
technical aspects of the case but whose interest is merely to enforce what he believes to be his
rightful claim.

In this case, considering that petitioner simply prayed for the remand of the case to the lower
court, the outright ruling and adherence to the foreign courts order adopting by reference
another entitys findings and conclusion was misplaced. The adjudication of this case demands a
full ventilation of the facts and issues and the presentation of their respective arguments in
support and in rebuttal of the claims of the contending parties. This is all the more applicable
herein since the Court is not a trier of facts,[17] but oftentimes simply relies on the cold pages of
the silent records of the case.

ACCORDINGLY, in the interest of due process, the case is REMANDED to the Regional Trial
Court of Surigao City for further proceedings.

2. Enforcement of Awards made in the jurisdiction

[Important Class Notes:]
[Domestic Award? Apply RA 876 as amended RA 9285.]
[International Arbitration Award? i.e. foreign party, seat in the PH, enforced in the PH, Apply
Art. 36 of ML]
[Foreign Arbitral Award? NY Convention applies.]
[If a country not a party to the NY Convention sought to be enforced in the PH? Special Rules
of Court for ADR, enforced on the basis of reciprocity.]
[Between Intl Arbit Award and Foreign Award, an academic distinction because the grounds
in MP and NYC are exactly the same, however, this distinguishes the excellent counsels from
the regular counsels.]
[When enforcing a foreign judgment, apply Rule 39, 48. This should have been applied in Oil
and Natural Gas Commission. Grounds: Mistake of Fact or Law to refuse enforcement.]

2.1 Award under domestic arbitration proceedingsSection 23, 27, 28,
RA 876; Section 40, RA 9285

RA 876; Arbitration Law
Section 23. Confirmation of award. - At any time within one month after the award is made, any
party to the controversy which was arbitrated may apply to the court having jurisdiction, as
provided in section twenty-eight, for an order confirming the award; and thereupon the court
must grant such order unless the award is vacated, modified or corrected, as prescribed herein.
Notice of such motion must be served upon the adverse party or his attorney as prescribed by
law for the service of such notice upon an attorney in action in the same court.

Section 27. Judgment. - Upon the granting of an order confirming, modifying or correcting an
award, judgment may be entered in conformity therewith in the court wherein said application
was filed. Costs of the application and the proceedings subsequent thereto may be awarded by
the court in its discretion. If awarded, the amount thereof must be included in the judgment.

Section 28. Papers to accompany motion to confirm, modify, correct, or vacate award. - The party
moving for an order confirming, modifying, correcting, or vacating an award, shall at the time
that such motion is filed with the court for the entry of judgment thereon also file the following
papers with the Clerk of Court;
104

(a) The submission, or contract to arbitrate; the appointment of the arbitrator or arbitrators;
and each written extension of the time, if any, within which to make the award.
(b) A verified of the award.
(c) Each notice, affidavit, or other paper used upon the application to confirm, modify,
correct or vacate such award, and a copy of each of the court upon such application.

The judgment shall be docketed as if it were rendered in an action.

The judgment so entered shall have the same force and effect in all respects, as, and be subject to
all the provisions relating to, a judgment in an action; and it may be enforced as if it had been
rendered in the court in which it is entered.

Republic Act No. 9285; April 2, 2004; ADR Law
SEC. 40. Confirmation of Award. - The confirmation of a domestic arbitral award shall be
governed by Section 23 of R.A. 876.

A domestic arbitral award when confirmed shall be enforced in the same manner as final and
executory decisions of the Regional Trial Court.

The confirmation of a domestic award shall be made by the regional trial court in accordance
with the Rules of Procedure to be promulgated by the Supreme Court.

A CIAC arbitral award need not be confirmed by the regional trial court to be executory as
provided under E.O. No. 1008.

2.2. Award under international arbitration proceedingsin accordance
with the rules promulgated by the Supreme Court (special
proceeding, file with the RTC)

3. Enforcement of Foreign Arbitral Awards

3.1 Section 42-48, RA9285

B. FOREIGN ARBITRAL AWARDS

SEC. 42. Application of the New York Convention. - The New York Convention shall govern the
recognition and enforcement of arbitral awards covered by the said Convention.

The recognition and enforcement of such arbitral awards shall be filled with regional trial court
in accordance with the rules of procedure to be promulgated by the Supreme Court. Said
procedural rules shall provide that the party relying on the award or applying for its enforcement
shall file with the court the original or authenticated copy of the award and the arbitration
agreement. If the award or agreement is not made in any of the official languages, the party shall
supply a duly certified translation thereof into any of such languages.

The applicant shall establish that the country in which foreign arbitration award was made is a

If the application for rejection or suspension of enforcement of an award has been made, the
regional trial court may, if it considers it proper, vacate its decision and may also, on the
application of the party claiming recognition or enforcement of the award, order the party to
provide appropriate security.
105

SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York
Convention. - The recognition and enforcement of foreign arbitral awards not covered by the
New York Convention shall be done in accordance with procedural rules to be promulgated by
the Supreme Court. The Court may, grounds of comity and reciprocity, recognize and enforce a
nonconvention award as a convention award.

SEC. 44. Foreign Arbitral Award Not Foreign Judgment. - A foreign arbitral award when
confirmed by a court of a foreign country, shall be recognized and enforced as a foreign arbitral
award and not a judgment of a foreign court.

A foreign arbitral award, when confirmed by the regional trial court, shall be enforced as a
foreign arbitral award and not as a judgment of a foreign court.

A foreign arbitral award, when confirmed by the regional trial court, shall be enforced in the
same manner as final and executory decisions of courts of law of the Philippines.

SEC. 45. Rejection of a Foreign Arbitral Award. - A party to a foreign arbitration proceeding may
oppose an application for recognition and enforcement of the arbitral award in accordance with
the procedural rules to be promulgated by the Supreme Court only on those grounds enumerated
under Article V of the New York Convention. Any other ground raised shall be disregarded by
the regional trial court.

SEC. 46. Appeal from Court Decisions on Arbitral Awards. - A decision of the regional trial court
confirming, vacating, setting aside, modifying or correcting an arbitral award may be appealed to
the Court of Appeals in accordance with the rules of procedure to be promulgated by the
Supreme Court.

The losing party who appeals from the judgment of the court confirming an arbitral award shall
required by the appealant court to post counterbond executed in favor of the prevailing party
equal to the amount of the award in accordance with the rules to be promulgated by the Supreme
Court.

SEC. 47. Venue and Jurisdiction. - Proceedings for recognition and enforcement of an arbitration
agreement or for vacation, setting aside, correction or modification of an arbitral award, and any
application with a court for arbitration assistance and supervision shall be deemed as special
proceedings and shall be filled with the regional trial court (i) where arbitration proceedings are
conducted; (ii) where the asset to be attached or levied upon, or the act to be enjoined is located;
(iii) where any of the parties to the dispute resides or has his place of business; or (iv) in the
National Judicial Capital Region, at the option of the applicant.

SEC. 48. Notice of Proceeding to Parties. - In a special proceeding for recognition and
enforcement of an arbitral award, the Court shall send notice to the parties at their address of
record in the arbitration, or if any party cannot be served notice at such address, at such party's
last known address. The notice shall be sent at least fifteen (15) days before the date set for the
initial hearing of the application.

3.2 UN Convention for the Recognition and Enforcement of Foreign
Arbitral Awards 1958 (New York Convention 1958)
4. Under the New York Convention 1958
4.1 Procedural requirements: Art. IV, NYC
106

Bergensen v Joseph Muller Corp 710 F. 2d 928 (2
nd
Cir 1983);

[Class Notes: This does not apply in the Philippines, because: (1) Bergesen was decided prior
to the UNITRAL ML, and (2) under the Federal law, NYC applies.]

107

Guangdong New Technology Import & Export Corp v Chiu
108
Shing t/a B C Property & Trading Co (HKHC, 1993)
Yearbook Com Arb 1993, p 385

[Now, authentication services by arbitration institutions offered.]
109

R SA v A Ltd (Cour de Justice, Geneva Court of Appeal, 1999)
Yearbook Com Arb XXVI (2001)

Investor v Republic of Poland (Bundesgerichtshof Germany
Supreme Court, 2000) Yearbook Com Arb XXVI (2001)
110

4.2 Grounds for refusal of enforcement are exhaustive Article V, New
York Convention

111

4.3 Discretionary
112
China Nanhai Oil Joint Service Corp. v Gee Tai Holding Co. Ltd
[1995] ADRLJ 127

[Class Notes: Check the NYC V wording, if, discretionary. Lesson, when met with a glaring
and erroneous ruling by the tribunal, do not participate? continuing objection? The counsel
here objected. However he participated. Now, the course used by counsel is to register a
continuing objection. Object repeatedly, in all pleadings, and every hearing, over and over, so
that the trial court cannot deem that you waived your right.]

Hebei Import & Export Corporation v Polytek Engineering Co
Ltd [1999] 14 Mealeys Int Rep (no.2)
113

114

115

4.4 Burden of proof
Hebei Import & Export Corporation v Polytek Engineering Co
Ltd [1999] 14 Mealeys Int Rep (no.2)

See above.

5. Grounds for refusal under NY Convention (Article V)
5.1 Art V (1) (a)
Incapacity of parties - under personal law (law applicable to
them)
Agreement invalid
(7) under the law, parties have subjected to it
(8) where the award was made
5.2 Art V (1) (b)
Party not given proper notice
Guangdong New Technology Import and Export Corp Jiangmen
Branch v Chiu Shing [1991] 2 HKC 459 (High Court, Hong
Kong)

116

Otherwise unable to present his case -
Minmetals Germany GmbH v Ferco Steel Ltd [1999] All ER
(Comm) 317

117

118

5.3 Art V (1) (c)
- award deals with matters in excess of jurisdiction
5.4 Art V (1) (d)
- arbitral tribunal not constituted in accordance with agreement;
or
- where there is no agreement in relation to the composition of
the tribunal, it was not in accordance with the law
where the arbitration took place; or
- irregularity in the arbitral procedure

China Agribusiness Development Corp. v Balli Trading [1998] 1
LLR 76.

119

120
121

5.5 Art V (1) (e)
- award has not become binding
- award set aside or suspended
Spier v Calzaturicio YB 2000 p 1042

122

Pabalk Ticaret Ltd. Sirketi v. Norsolor SA, Cour de Cassation
(1st Civ. Ch.), 9 October 1984, Rev. Arb. 431 (1985), 2 J. Int'l
Arb. 67 (1985), 3 Crit. Droit Int'l Priv 555 (1985), Yearbook
Com Arb XI pg 484 (1986)

[Class Notes: Here we have a very active French court. Usually, unlike in this case, courts have
a very neutral attitude from courts.]

123

124

125

126

127

128
129

130

In Re Chromalloy Aeroservices 939 F Supp 907 5.6

131

[Class Notes: There are other cases like this. Another US and another French case. Usually, in
these cases, courts look into the why the award was refused. This is an issue. If set aside,
there is no award. So what is enforced?]

5.6 Article V (2) {Section 31(4), IAA}
- Subject matter not arbitrable
- Enforcement of award contrary to public policy
Aloe Vera of America, Inc v Asianic Food (S) Pte Ltd and
Another [2006] SGHC 78

132

Aloe Vera of America, Inc v Asianic Food (S) Pte Ltd and Another
[2006] SGHC 78

Back
Information

Suit No: OS 762/2004, RA 327/2005
Decision Date: 10 May 2006
Court: High Court
Coram: Judith Prakash J
Counsel: Dinesh Dhillon and Rachel Chong (Wong & Leow LLC) for the
plaintiff, Quentin Loh SC, Kirindeep Singh and Edwin Lee (Rajah &
Tann) for the defendants
Related
Documents:
Academy Digest
Reference
Trace:
Cases, Legislation and References
Catchwords

Arbitration - Agreement - Definition - Second defendant objecting to enforcement of
foreign award in Singapore on ground that no arbitration agreement existing between
plaintiff and second defendant - Principles applicable in determining whether "arbitration
agreement" existing - Whether enforcement process a mechanistic or substantive one -
Whether court had residual discretion to refuse enforcement - Sections 19, 29, 30
International Arbitration Act (Cap 143A, 2002 Rev Ed), O 69A r 6 Rules of Court (Cap
322, R 5, 2004 Rev Ed)
Arbitration - Enforcement - Foreign Award - Application to set aside Singapore court
order granting leave to enforce arbitration award in Singapore - Procedure for enforcing
foreign arbitral award - Whether second defendant satisfying one or more grounds set out
in ss 31(2) and/or 31(4) International Arbitration Act - Whether court should refuse
enforcement of foreign award on such grounds - Sections 31(2)(b), 31(2)(d), 31(4)(a),
31(4)(b) International Arbitration Act (Cap 143A, 2002 Rev Ed)

Case Summary

Aloe Vera of America, Inc v Asianic Food (S) Pte Ltd and Another
[2006] SGHC 78

Back
Information

Suit No: OS 762/2004, RA 327/2005
Decision Date: 10 May 2006
Court: High Court
Coram: Judith Prakash J
Counsel: Dinesh Dhillon and Rachel Chong (Wong & Leow LLC) for the
plaintiff, Quentin Loh SC, Kirindeep Singh and Edwin Lee (Rajah &
Tann) for the defendants
Related
Documents:
Academy Digest
Reference
Trace:
Cases, Legislation and References
Catchwords

Arbitration - Agreement - Definition - Second defendant objecting to enforcement of
foreign award in Singapore on ground that no arbitration agreement existing between
plaintiff and second defendant - Principles applicable in determining whether "arbitration
agreement" existing - Whether enforcement process a mechanistic or substantive one -
Whether court had residual discretion to refuse enforcement - Sections 19, 29, 30
International Arbitration Act (Cap 143A, 2002 Rev Ed), O 69A r 6 Rules of Court (Cap
322, R 5, 2004 Rev Ed)
Arbitration - Enforcement - Foreign Award - Application to set aside Singapore court
order granting leave to enforce arbitration award in Singapore - Procedure for enforcing
foreign arbitral award - Whether second defendant satisfying one or more grounds set out
in ss 31(2) and/or 31(4) International Arbitration Act - Whether court should refuse
enforcement of foreign award on such grounds - Sections 31(2)(b), 31(2)(d), 31(4)(a),
31(4)(b) International Arbitration Act (Cap 143A, 2002 Rev Ed)

Case Summary

133

Facts
The plaintiff had entered into an agreement with the first defendant (the Agreement).
The second defendant had signed the Agreement on the first defendants behalf as its
manager, but was not expressly stated to be a contracting party to the Agreement. The
Agreement provided for disputes between the parties to be mediated, and if mediation
was unsuccessful, to be arbitrated. The Agreement was also expressed to be governed by
the law of the state of Arizona in the US.
Following the termination of the Agreement, the plaintiff commenced arbitration
proceedings and obtained a Final Arbitration Award against both the first and second
defendants (the Award). The plaintiff successfully took out an originating summons, on
an ex parte basis, to obtain leave to enforce the Award against the defendants in
Singapore. The second defendant applied to set aside the order granting leave but this
was dismissed by an assistant registrar. The second defendant then appealed against the
assistant registrars decision.
The second defendant alleged that leave should have been refused, as the plaintiff had not
crossed the preliminary hurdle of establishing that there was an arbitration agreement
between the parties. Alternatively, enforcement should have been refused because the
second defendant was able to satisfy one or more of the grounds set out in s 31(2) and/or
s 31(4) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (the Act).
Held, dismissing the appeal:
(1) Where an arbitral award had been granted overseas and where the law governing the
arbitration was not Singapore law, a pragmatic approach had to be taken when
determining if an arbitration agreement existed between the parties. This was so as to
give effect to arbitral awards granted outside Singapore. Thus, the correct part of the Act
to apply was Pt III which contained ss 27 and 29 and was entitled Foreign Awards: at
[17] and [18].
(2) Section 30 of the Act and O 69A r 6 of the Rules of Court (Cap 322, R 5, 2004 Rev
Ed) required the party seeking enforcement to produce the arbitration agreement. The
enforcement process was a mechanistic one and did not require judicial investigation by
the court of the jurisdiction in which enforcement was sought. It would thus suffice for
the plaintiff to prove that the second defendant was mentioned in the arbitration
agreement exhibited by the plaintiff, and that the arbitral tribunal had made a finding that
the second defendant was a party to the arbitration agreement: at [39] and [42].
(3) The mechanistic nature of the enforcement process was also supported by s 31(1) of
the Act, which stated that the court could only refuse enforcement if one of the grounds
in s 31(2) or s 31(4) was established. The court thus had no residual discretion to refuse
enforcement if one of those grounds was not established: at [46].
Facts
The plaintiff had entered into an agreement with the first defendant (the Agreement).
The second defendant had signed the Agreement on the first defendants behalf as its
manager, but was not expressly stated to be a contracting party to the Agreement. The
Agreement provided for disputes between the parties to be mediated, and if mediation
was unsuccessful, to be arbitrated. The Agreement was also expressed to be governed by
the law of the state of Arizona in the US.
Following the termination of the Agreement, the plaintiff commenced arbitration
proceedings and obtained a Final Arbitration Award against both the first and second
defendants (the Award). The plaintiff successfully took out an originating summons, on
an ex parte basis, to obtain leave to enforce the Award against the defendants in
Singapore. The second defendant applied to set aside the order granting leave but this
was dismissed by an assistant registrar. The second defendant then appealed against the
assistant registrars decision.
The second defendant alleged that leave should have been refused, as the plaintiff had not
crossed the preliminary hurdle of establishing that there was an arbitration agreement
between the parties. Alternatively, enforcement should have been refused because the
second defendant was able to satisfy one or more of the grounds set out in s 31(2) and/or
s 31(4) of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (the Act).
Held, dismissing the appeal:
(1) Where an arbitral award had been granted overseas and where the law governing the
arbitration was not Singapore law, a pragmatic approach had to be taken when
determining if an arbitration agreement existed between the parties. This was so as to
give effect to arbitral awards granted outside Singapore. Thus, the correct part of the Act
to apply was Pt III which contained ss 27 and 29 and was entitled Foreign Awards: at
[17] and [18].
(2) Section 30 of the Act and O 69A r 6 of the Rules of Court (Cap 322, R 5, 2004 Rev
Ed) required the party seeking enforcement to produce the arbitration agreement. The
enforcement process was a mechanistic one and did not require judicial investigation by
the court of the jurisdiction in which enforcement was sought. It would thus suffice for
the plaintiff to prove that the second defendant was mentioned in the arbitration
agreement exhibited by the plaintiff, and that the arbitral tribunal had made a finding that
the second defendant was a party to the arbitration agreement: at [39] and [42].
(3) The mechanistic nature of the enforcement process was also supported by s 31(1) of
the Act, which stated that the court could only refuse enforcement if one of the grounds
in s 31(2) or s 31(4) was established. The court thus had no residual discretion to refuse
enforcement if one of those grounds was not established: at [46].
134

AJT v. AJU AS, High Court 16 July 2010

(4) A party seeking to challenge an award under the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards concluded on 10th June 1958 (the
Convention) had two courses of action open to him: he could apply to the supervising
court to set aside the award and he could also apply to the enforcement court to set aside
any leave granted to the opposing party to enforce the award. An application to a
supervisory court to set aside an award had to be based on one of the grounds which the
jurisdiction of that court provided for such an order. Similarly, an application to the
enforcement court to resist a grant of leave to enforce had to be based on one of the
grounds that the jurisdiction of that court provided for such setting aside: at [55].
(5) Thus, the fact that the Award may be final in Arizona did not necessarily mean that
the second defendant was excluded from resisting enforcement in Singapore. As an
enforcement court, a Singapore court could only permit the second defendant to resist
enforcement of the Award if he satisfied one of the Convention grounds under s 31(2) of
the Act. Except to the extent permitted by those grounds, a Singapore court could not
look into the merits of the Award and allow the second defendant to re-litigate issues that
he could have brought up either before the arbitrator or the supervisory court: at [56].
(6) The second defendant had not shown that the Agreement was not valid under the law
of Arizona, such that enforcement of the Award could be resisted under s 31(2)(b) of the
Act. The court would only review the arbitrators findings if extraordinary circumstances
existed. No such extraordinary circumstances existed since the second defendant had not
adduced expert evidence to show that the arbitrators findings were incorrect under
Arizona law: at [61] to [63].
(7) The second defendant had not established that the Award went beyond the scope of
the submission to arbitration such that enforcement of the Award could be resisted under
s 31(2)(d) of the Act. This ground of challenge was inapplicable to the second defendant
as it related to the scope of the arbitration agreement rather than to whether a particular
person was a party to that agreement: at [69].
(8) The second defendant had not proven that the subject-matter of the dispute between
the parties to the Award was incapable of settlement by arbitration, such that s 31(4)(a) of
the Act applied. The determination of whether a matter was arbitrable was governed by
Singapore law. While no specific statutory guidelines existed, the issue of alter ego
would generally be arbitrable, because a finding of whether a person was the alter ego of
a company was an issue which did not have a public interest element. It normally arose in
a commercial transaction in which one party was trying to make an individual responsible
for the obligations of a corporation: at [72].
(9) The second defendant had not shown that the enforcement of the Award would be
contrary to the public policy of Singapore. Arbitration awards would be enforced unless
they offended against our basic notions of justice and morality, and the second defendant
had not established on the facts that the Award was of such an offensive nature: at [75]
and [76].
135


Michael Hwang, Michael Hwang S.C.; Zihua Su, Michael Hwang Chambers
Headnote
In AJT v. AJU, the High Court has set aside an SIAC arbitral award upholding the
legality of an agreement to drop criminal proceedings relating to forgery in Thailand on
the basis that the enforcement of the award would be in breach of public policy
(16 July 2010)

Digest
This case pertains to the setting aside of an Interim Award issued by the SIAC (the
Award). The plaintiff, AJT (a BVI company) and the defendant, AJU (a Thai TV
producer) were parties to an agreement which contained an arbitration clause. Disputes
subsequently arose and AJT commenced arbitration and a tribunal was constituted (the
Tribunal). Shortly later, AJU lodge a complaint of fraud, forgery and use of a forged
document by AJT's sole director and shareholder and AJT-related companies to the Thai
police. Note that while fraud is a compoundable offence under Thai law, forgery and use
of a forged document are non-compoundable offences. While the police investigations
were underway, the parties negotiated a settlement of their disputes and entered into a
settlement agreement (the Concluding Agreement). Under the Concluding Agreement,
AJU was to take all such steps as are necessary to irrevocably terminate,
withdraw and discontinue all actions, claims and counterclaims as applicable to the
respective Parties in the Proceedings and in any other form of legal or other action .
AJU subsequently withdrew all charges against AJT and the Thai police issued a
statement that charges were dropped due to insufficient evidence. AJT took the view
that AJU had failed to comply with the Concluding Agreement as a mere statement from
the Thai police that charges were dropped due to insufficient evidence was insufficient
as the Thai police retained the prerogative to reactivate investigations if new evidence
surfaced. Consequently, AJT refused to terminate the arbitration.
AJU applied to the Tribunal to terminate the Arbitration on the grounds that the parties
had entered into a full and final settlement. AJT initially took the position that the Tribunal
had no jurisdiction to determine the validity of the Concluding Agreement. However, the
parties subsequently agreed that the Tribunal should determine the preliminary question
of whether the Concluding Agreement was void on the basis of illegality, among other
grounds. The parties also agreed that if the Concluding Agreement was found valid, the
Arbitration would terminate automatically with immediate effect. Conversely, if the
Tribunal found that the Concluding Agreement was void, the Arbitration would continue.
The Tribunal eventually found that the Concluding Agreement was valid and this
decision was recorded in the Award (with the consequence that the Arbitration was
come to an end, since the Concluding Agreement was found valid).

Michael Hwang, Michael Hwang S.C.; Zihua Su, Michael Hwang Chambers
Headnote
In AJT v. AJU, the High Court has set aside an SIAC arbitral award upholding the
legality of an agreement to drop criminal proceedings relating to forgery in Thailand on
the basis that the enforcement of the award would be in breach of public policy
(16 July 2010)

Digest
This case pertains to the setting aside of an Interim Award issued by the SIAC (the
Award). The plaintiff, AJT (a BVI company) and the defendant, AJU (a Thai TV
producer) were parties to an agreement which contained an arbitration clause. Disputes
subsequently arose and AJT commenced arbitration and a tribunal was constituted (the
Tribunal). Shortly later, AJU lodge a complaint of fraud, forgery and use of a forged
document by AJT's sole director and shareholder and AJT-related companies to the Thai
police. Note that while fraud is a compoundable offence under Thai law, forgery and use
of a forged document are non-compoundable offences. While the police investigations
were underway, the parties negotiated a settlement of their disputes and entered into a
settlement agreement (the Concluding Agreement). Under the Concluding Agreement,
AJU was to take all such steps as are necessary to irrevocably terminate,
withdraw and discontinue all actions, claims and counterclaims as applicable to the
respective Parties in the Proceedings and in any other form of legal or other action .
AJU subsequently withdrew all charges against AJT and the Thai police issued a
statement that charges were dropped due to insufficient evidence. AJT took the view
that AJU had failed to comply with the Concluding Agreement as a mere statement from
the Thai police that charges were dropped due to insufficient evidence was insufficient
as the Thai police retained the prerogative to reactivate investigations if new evidence
surfaced. Consequently, AJT refused to terminate the arbitration.
AJU applied to the Tribunal to terminate the Arbitration on the grounds that the parties
had entered into a full and final settlement. AJT initially took the position that the Tribunal
had no jurisdiction to determine the validity of the Concluding Agreement. However, the
parties subsequently agreed that the Tribunal should determine the preliminary question
of whether the Concluding Agreement was void on the basis of illegality, among other
grounds. The parties also agreed that if the Concluding Agreement was found valid, the
Arbitration would terminate automatically with immediate effect. Conversely, if the
Tribunal found that the Concluding Agreement was void, the Arbitration would continue.
The Tribunal eventually found that the Concluding Agreement was valid and this
decision was recorded in the Award (with the consequence that the Arbitration was
come to an end, since the Concluding Agreement was found valid).
136

6. Appeal from Decision of RTC on confirmation or setting aside of an arbitral
award
Section 46, RA 9285

SEC. 46. Appeal from Court Decisions on Arbitral Awards. - A decision of the regional trial court
confirming, vacating, setting aside, modifying or correcting an arbitral award may be appealed to
the Court of Appeals in accordance with the rules of procedure to be promulgated by the
Supreme Court.

The losing party who appeals from the judgment of the court confirming an arbitral award shall
required by the appealant court to post counterbond executed in favor of the prevailing party
equal to the amount of the award in accordance with the rules to be promulgated by the Supreme
Court.

AZT sought to set aside the Award on various grounds, one of which was that the Award
was contrary to public policy under Art 34(2)(b)(ii) of the Model Law as
(i) the Concluding Agreement, which the Award seeks to uphold, sought to stifle the
prosecution of a non-compoundable offence; and
(ii) the Award sought to enforce a contract that was illegal and unenforceable in Thailand
The Award was set aside on the basis that it was contrary to public policy. The judgment
suggests that the Award was contrary to public policy on two counts.
(iii) Under Singapore law, agreements to stifle the prosecution of non-compoundable
offences contravened public policy as they undermined the public interest in the
maintenance of justice and the basic purpose of criminal law and the administration
of justice would be defeated if such agreements were upheld (and are essentially,
illegal). As the effect of the Concluding Agreement was essentially to stifle the
prosecution of the forgery offences (non-compoundable offences), and the Award
sought to validate the Concluding Agreement, the Award conflicted with public policy
and had to be set aside.
(iv) Second, the Concluding Agreement was also illegal under Thai law. Case law has
established that an agreement whose object is a breach of international comity
would be regarded by the courts as being against public policy and void. To uphold
the Award would constitute a breach of international comity as it would mean the
enforcement of a contract which was illegal under the law of the place of
performance (Thailand). Consequently, the Award had to be set aside for being
contrary to public policy.
Reporter's comments: This case is significant in that it may suggest that, in deciding
whether or not to set aside an award, the Singapore courts may conduct re-hearings of
issues canvassed in arbitrations as long as they fall within the grounds for setting aside
(rather than limit themselves to reviews of the correctness on the Tribunal's decision on
the relevant issues, which is the traditional position). However, it appears that a very
high threshold nevertheless has to be met before the courts will set aside an arbitral
award.
This case also marks the extension of the principle that the Singapore courts may
conduct re-hearings of issues canvassed in arbitration (as opposed to a limited review of
the award) to setting aside applications. The courts had previously only conducted re-
hearings of issues in challenges against enforcement applications. Parties: AJT v. AJU,
Originating Summons No 230 of 2010, Singapore.
Full text
Chan Seng Onn J:
1 The plaintiff, AJT, took out Originating Summons No 230 of 2010 to set aside the
Interim Award issued on 1 December 2009 (the Award) in SIAC Arbitration ARB No 86
of 2006 (the Arbitration), on the grounds that the Award is contrary to:
137
Equitable PCI Banking Corporation v.RCBC Capital Corporation, G.R.
No. 182248, 18 December 2008

The Courts Ruling

The petition must be denied.

On Procedural Misstep of Direct Appeal to This Court

As earlier recited, the ICC-ICAs Partial Award dated September 27, 2007 was confirmed by
the RTC in its first assailed order of January 8, 2008. Thereafter, the RTC, by order of March 17,
2008, denied petitioners motion for reconsideration. Therefrom, petitioners came directly to this
Court on a petition for review under Rule 45 of the Rules of Court.

This is a procedural miscue for petitioners who erroneously bypassed the Court of Appeals
(CA) in pursuit of its appeal. While this procedural gaffe has not been raised by RCBC, still we
would be remiss in not pointing out the proper mode of appeal from a decision of the RTC
confirming, vacating, setting aside, modifying, or correcting an arbitral award.

Rule 45 is not the remedy available to petitioners as the proper mode of appeal assailing the
decision of the RTC confirming as arbitral award is an appeal before the CA pursuant to Sec. 46
of Republic Act No. (RA) 9285, otherwise known as the Alternative Dispute Resolution Act of
2004, or completely, An Act to Institutionalize the Use of an Alternative Dispute Resolution
System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for
other Purposes, promulgated on April 2, 2004 and became effective on April 28, 2004 after its
publication on April 13, 2004.

In Korea Technologies Co., Ltd v. Lerma, we explained, inter alia, that the RTC decision of
an assailed arbitral award is appealable to the CA and may further be appealed to this Court,
thus:

Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved
party in cases where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award,
thus:

SEC. 46. Appeal from Court Decision or Arbitral Awards.A decision of the Regional
Trial Court confirming, vacating, setting aside, modifying or correcting an arbitral award may be
appealed to the Court of Appeals in accordance with the rules and procedure to be promulgated
by the Supreme Court.

The losing party who appeals from the judgment of the court confirming an arbitral
award shall be required by the appellate court to post a counterbond executed in favor of the
prevailing party equal to the amount of the award in accordance with the rules to be

Thereafter, the CA decision may further be appealed or reviewed before this Court
through a petition for review under Rule 45 of the Rules of Court.[15]

It is clear from the factual antecedents that RA 9285 applies to the instant case. This law
was already effective at the time the arbitral proceedings were commenced by RCBC through a
request for arbitration filed before the ICC-ICA on May 12, 2004. Besides, the assailed
confirmation order of the RTC was issued on March 17, 2008. Thus, petitioners clearly took the
138
wrong mode of appeal and the instant petition can be outright rejected and dismissed.

Even if we entertain the petition, the outcome will be the same.

The Court Will Not Overturn an Arbitral Award
Unless It Was Made in Manifest Disregard of the Law

In Asset Privatization Trust v. Court of Appeals,[16] the Court passed on similar issues as the
ones tendered in the instant petition. In that case, the arbitration committee issued an arbitral
award which the trial court, upon due proceedings, confirmed despite the opposition of the
losing party. Motions for reconsideration by the losing party were denied. An appeal interposed
by the losing party to the CA was denied due course. On appeal to this Court, we established the
parameters by which an arbitral award may be set aside, to wit:

As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either as to
the law or as to the facts. Courts are without power to amend or overrule merely because of
disagreement with matters of law or facts determined by the arbitrators. They will not review the
findings of law and fact contained in an award, and will not undertake to substitute their
judgment for that of the arbitrators, since any other rule would make an award the
commencement, not the end, of litigation. Errors of law and fact, or an erroneous decision of
matters submitted to the judgment of the arbitrators, are insufficient to invalidate an award fairly
and honestly made. Judicial review of an arbitration is, thus, more limited than judicial review of
a trial.

Nonetheless, the arbitrators awards is not absolute and without exceptions. The arbitrators
cannot resolve issues beyond the scope of the submission agreement. The parties to such an
agreement are bound by the arbitrators award only to the extent and in the manner prescribed
by the contract and only if the award is rendered in conformity thereto. Thus, Sections 24 and 25
of the Arbitration Law provide grounds for vacating, rescinding or modifying an arbitration
award. Where the conditions described in Articles 2038, 2039 and 2040 of the Civil Code
applicable to compromises and arbitration are attendant, the arbitration award may also be
annulled.

x x x x

Finally, it should be stressed that while a court is precluded from overturning an award for errors
in determination of factual issues, nevertheless, if an examination of the record reveals no
support whatever for the arbitrators determinations, their award must be vacated. In the same
manner, an award must be vacated if it was made in manifest disregard of the law.[17]
(Emphasis supplied.)

Following Asset Privatization Trust, errors in law and fact would not generally justify the
reversal of an arbitral award. A party asking for the vacation of an arbitral award must show that
any of the grounds for vacating, rescinding, or modifying an award are present or that the
arbitral award was made in manifest disregard of the law. Otherwise, the Court is duty-bound to
uphold an arbitral award.

The instant petition dwells on the alleged manifest disregard of the law by the ICC-ICA.
The US case of Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros[18] expounded on the phrase
manifest disregard of the law in the following wise:

This court has emphasized that manifest disregard of the law is a very narrow standard of
139
review. Anaconda Co. v. District Lodge No. 27, 693 F.2d 35 (6th Cir.1982). A mere error in
interpretation or application of the law is insufficient. Anaconda, 693 F.2d at 37-38. Rather, the
decision must fly in the face of clearly established legal precedent. When faced with questions of
law, an arbitration panel does not act in manifest disregard of the law unless (1) the applicable
legal principle is clearly defined and not subject to reasonable debate; and (2) the arbitrators
refused to heed that legal principle.

Thus, to justify the vacation of an arbitral award on account of manifest disregard of the law,
the arbiters findings must clearly and unequivocally violate an established legal precedent.
Anything less would not suffice.

In the present case, petitioners, in a bid to establish that the arbitral award was issued in manifest
disregard of the law, allege that the Partial Award violated the principles of prescription, due
process, and estoppel. A review of petitioners arguments would, however, show that their
arguments are bereft of merit. Thus, the Partial Award dated September 27, 2007 cannot be
vacated.

We close this disposition with the observation that a member of the three-person arbitration
panel was selected by petitioners, while another was respondents choice. The respective interests
of the parties, therefore, are very much safeguarded in the arbitration proceedings. Any
suggestion, therefore, on the partiality of the arbitration tribunal has to be dismissed.

WHEREFORE, the instant petition is hereby DENIED.

[Class Notes: Remedy is to Appeal to the CA. However, ground of manifest disregard of the
law is not a ground in any arbitration treaty or law. This is a precarious ruling.]

CLOUT 1294.

V.13-86861 3

Cases Relating to the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards - The ~New York Convention (NYC)

Case 1293: NYC IV(1); IV(2)
Republic oI Korea
Busan District Court Decision 2011Gahap8532
26 October 2011
Original in Korean
Abstract prepared by Haemin Lee, National Correspondent
In the case at hand the plaintiII was seeking enIorcement oI an arbitration decision
by the Tokyo Maritime Arbitration Commission in Busan, South Korea. As per
Article IV (1) NYC, the plaintiII was to submit the Iollowing: (a) the duly
authenticated original award or a duly certiIied copy thereoI, and (b) the original
agreement reIerred to in article II NYC or a duly certiIied copy thereoI. Further, as
required under Article IV (2), the plaintiII should have submitted a translation oI the
award, because in this case the award was not made in the oIIicial language oI the
country in which the award was being relied upon.
Though the plaintiII Iailed to submit a translation oI the award, the court ruled that
the award could be enIorced, unless other exceptional circumstances existed,
because the deIendant did not Iile any objection concerning the existence or content
oI the award, and the mere Iailure to submit a translated copy is not a suIIicient
ground to reject a demand oI execution.

Case 1294: NYC V(1)(d)
Republic oI Korea
Supreme Court 2011Da41352
19 August 2011
(First instance Seoul Central District Court 2010Gahap17142, Second instance
Seoul High Court 2010Na72375)
Original in Korean
Abstract prepared by Haemin Lee, National Correspondent
The plaintiII, a company Irom the Philippines, initiated action Ior enIorcement oI
the arbitral award decided against the deIendant, a Korean company, by the
Construction Industry Arbitration Commission (CIAC) in the Philippines.
The Korean court Iound that the plaintiII and the deIendant had originally
contracted to submit any dispute to arbitration subject to the arbitration provisions
oI the ICC (International Chamber oI Commerce) and that an award rendered under
the CIAC arbitration rules Iell outside this agreement. The court held that the case
was within the scope oI Art V (1)(d) NYC, according to which iI the composition oI
the arbitral authority or the arbitral procedure is not in accordance with the
agreement oI the parties or, Iailing such agreement, with the law oI the country
where the arbitration took place, enIorcement oI the award can be reIused. On this
basis the court rejected the plaintiII`s claim Ior enIorcement oI the award.

140
[Class Notes: This is a problem. Erroneous ruling that CIAC will always have jurisdiction.
Thesis topic. Even if there is an arbitration clause, CIAC will still have jurisdiction over
construction contracts. However, it could only be enforced in the Philippines. Other countries
will refuse.]

[Note that Grounds to set aside is not equal to Grounds to refuse enforcement.]

X. INVESTOR-STATE AND STATE-TO-STATE ARBITRATION

I. In General:
1. Chapter 18 of Gary G. Born's International Arbitration: Law and Practice (2012)
covers Investor-State and State-to-State arbitrations

Investment Arbitration = Investor-State Arbitration

Interstate Arbitration = State-to-State arbitrations

18.01 INVESTOR-STATE ARBITRATION
[A]. INTRODUCTION

FDI is a major component of the world economy. $1.5 trillion annually. From infrastructure to
financial investments.
Host State forums unsatisfactory. Not neutral.

[1]. Contemporary Foreign Investment Treaties
[i]. International Center for Settlement of Investment Disputes (ICSID Convention)
A central pillar of the international investment treaty regime.
administers arbitrations and conciliations pursuant to the Convention or
otherwise
provides only for a specialized dispute resolution mechanism
147 Contracting States
usu. institutional arbitration
usu. subject to specialized and sui generis dispute resolution mechanisms
immediate recognition and enforcement
appointing authority for arbitrators
Special Legal Regime detached or autonomous from national law
(a) institutional arbitration authority with international financing and
immunities (Article 1-24)
(b) prohibition against invertors pursuit of other remedies, including
national courts for matter submitted to ICSID arbitration (A26)
(c) no role for national courts in the arbitral seat in constituting tribunal
(d) exclusive competence over jurisdiction disputes [competent to
determine its own jurisdiction] (A41)
(e) no review by national courts (either by court in seat, or otherwise).
Instead, ICSID annulment committees, and only for the limited
grounds provided in the convention.
(f) mandatory recognition of awards in national courts
[ii]. North American Free Trade Agreement (NAFTA)
between Canada, Mexico, and the US
contains substantive provisions on
(1) non-discrimination by nationality,
(2) unfair on inequitable treatment, or
(3) expropriation without compensation
no separate consent is required of a NAFTA investor
Canada and Mexico not parties the ICSID Convention
141
NAFTA awards not subject to ICSID convention, instead subject to national
courts of the arbitral seat.
[iii]. ASEAN Comprehensive Investment Agreement (ASEAN CIA)
signed in 2009
substantive protections and dispute resolution mechanisms
[iv]. Energy Charter Treaty
investor from a Contracting Party
in the energy sector
50 States, including European Community and Eu. Atomic Enery Committee
substantive and procedural provisions
no separate consent required
[v]. Bilateral Investment Treaties
bilateral (only two contracting parties)
tailored to the circumstances of the two parties
but must have common structure and common provisions (model BIT
published by other States
approx. 2,800 BITs in force
contains substantive provisions on
(1) non-discrimination by nationality,
(2) unfair on inequitable treatment, or
(3) expropriation without compensation
usu. exclusion to arbitration are tax disputes
usu. arbitration without privity [treaty serves as consent?]
however sometimes BIT separate arbitration agreement
some provide for ICSID arbitration of investment disputes (e.g. Fraport v. RP)
others, UNItednationsCommissiononIntlTRAdeLaw or some form of
institutional arbitration (e.g. ICC or SCC)
others, ad hoc arbitration.
[vi]. Investment Protection Legislation

[2]. Distinguishing Characteristics of Investor-State Arbitration
Similarites against International Commercial Arbitration (ICA)
(a) consensual
(b) decided by arbitrators in adjudicatory procedures
(c) final and binding
(d) specialized or generally applicable institutional rules
Differences against ICA
Attribute Investment Arbitration ICA
(1) parties state and investor private parties, however may
also be state or state-related
entity
(2) claims and
defenses
usu. under substantive provisions
of BIT or multilateral treaty
(NAFTA, ECT, and less
commonly, customary
international law)
also usu. implicate state interests,
e.g. regulations,
contractual claims (although
in a minority of cases, IL is
involved)
(3) legal regime often subject to special legal
regime that is detached or
autonomousfrom national law
esp. ICSIP, however, BIT
arbitrations conducted under
UNCITRAL or Institutional
arbitration rules (e.g. SCC
[Stockholm Chamber of
?
142
Commerce?] ICSID additional
facility rules) [Class Note: You
have to hurdle the requirements
of the host country, e.g. what is
investment legal dispute
nationality]
(4) way often one-way in favor of the
investor in asserting claims (usu.
because the BITs state so); at
most States assert counterclaims
or under a contract covered by an
umbrella clause.
both parties free to assert
claims
(5) confidentiality reduced confidentiality;
publication of excerpts of
tribunals reasoning, awards in
ICSID usu. made public. [Class
Note: In Fraport, their dirty
laundry was exposed]

[3]. Popularity of Investor State Arbitration
ICSID 390 arbitrations recorded since it started
[4]. Criticism of Investor State Arbitration
opponents of liberal international system for trade and investment
Bolivia, Ecuador, and Venezuela have withdraw from ICSID.
claims favors foreign investors
[B]. JURISDICTIONAL ISSUES IN INVESTMENT ARBITRATION

Usu. international law applies, e.g. VCLT, relevant treaty or BIT.

[1] ICSID Jurisdictional Requirements
Article 25 of ICSID
[i]. Legal Dispute Arising out of Investment
no standard definition for investment or legal dispute
some on investment: (a) money or property (b) risk (c) host states development
thus, preparatory work towards an investment is not an investment
[ii]. Nationality Requirement
nationality of a local subsidiary of a foreign corp in a host state raises issues
parties must have agreed to treat the subsidiary as foreign see Article
25(2)(b)
cases are divergent on the matter
effective nationality principles in IL
good faith or bad faith in creating the subsidiary
dual citizenship raises issues
In Trading v. Egypt, claim was dismissed
[iii]. Written Consent to ICSID Arbitration
consent in writing, both parties must submit to the Centre
must make a showing of the written consent for ICSID to have jurisdiction
[iv]. ICSID Additional Facility Rules
[2] BIT Jurisdictional Requirements
[i] No Separate Consent by Host State
[ii]. Nationality Requirement
[iii]. Investment
[iv]. Compliance with the Host State Law
[v]. Exclusions
[3] Notice and Other Requirements
[i] Notice and Cooling Off Periods
143
[ii]. Fork in the Road Provisions
[iii]. Exhaustion Requirements

[C]. Umbrella Clauses
permits investors to arbitrate on a wide range of disputes against host state
including contractual claims
typically host state must honor its obligations to investors who are nationals of a contracting
state
usu. breach of contract amounts to breach of investment obligation
usu. in a breach of contract, issue on whether to arbitrate on contractual forum (where there is a
choice-of-forum) or BIT forum
[D]. Substantive Issues in Investor-State Disputes

[1]. Substantive Claims in Investor-State Arbitrations
(a) Fair and Equitable Treatment
(b) No Expropriation without Compensation
(c) Full Protection and Security
(d) National Treatment
(e) Most Favored Nation Treatment
(f) Free Transfer of Funds Related to Investments
(g) Residual Protections of Customary International Law
(h) Umbrella Clauses
[2]. Defenses in Favor of Investor-State Arbitration
(a) Permitted Regulation
(b) Exceptions
(c) Investors Unlawful Conduct
(d) Necessity
(e) Exhaustion of Local Remedies
(f) International Obligation
(g) Time Bar

[E]. Arbitral Procedures in Investor-State Arbitration
[F]. Applicable Law in Investment Arbitration
[G]. Finality of Awards
[1]. ICSID Awards
[2]. Non-ICSID Awards
[H]. Enforcement of Awards

18.02 STATE-TO-STATE ARBITRATION

[A]. Historical Background
The Jay Treaty between Great Britain and the United States ushered in the modern era of interstate
arbitration. Three arbitral mechanisms for Debts, Claims, and Boundaries.
The Treaty of Washington for the U.S. Civil War
including the Alabama Arbitration on damages for the British Warship sold the
Confederacy in violation of neutrality
The Trail Smelter Arbitration
Territorial Boundary Disputes and post-conflict settlements as common subjects of interstate
arbitration.
Permanent Court of Arbitration (20 cases in 30 years). Has been revived in 1990s, and has
resolved interstate arbitrations, including Eretrea and Yemen etc.
Ad hoc Tribunals.
[B]. Reasons for State-to-State Arbitration
If dispute cannot be resolved by negotiation, a neutral party allows resolution of sensitive political
issues. May carve out less sensitive issues for resolution to improve overall relations.
Alternative is a political impasse or trade pressure.
144
Highly technical issues. e.g. Trail Smelter Arbitration
[C]. Jurisdiction in State-to-State Arbitration
Requires the consent of the parties.
To delimit international boundaries.
Post-war claims.
Standing Arbitral Bodies such as NAFTA
Arbitration Clause
No basis under IL to annul an award on jurisdictional grounds.
Doubtful that national courts would grant applications to enforce internstate arbitration
agreements.
[D]. Procedures in State-to-State Arbitration
Often agree to arbitrate pursuant to institutional rules. Optional Rules of the PCA or ILC model
rules for Arbitral Procedure.
Write written submissions.
appoint an equal number of members
impartial arbitrators
generally larger tribunals (compared to ICA and investor arbitration)
[E]. Applicable Law in State-to-State Arbitration
virtually always international law, unless exceptionally agreed upon, e.g. Trail Smelter Case (US
and IL)
agreement to arbitration ex aqueo et bono (i.e. on the basis of fairness rather than legal rules)

[F]. Finality of Awards and Enforcement
GR: Awards are final and binding.
EX: Courts provide a review mechanism
tribunal has exceeded its powers
corruption is involved
serious departure from a fundamental rule of procedure
Usual response is refusal to comply with award.
Principal mechanism for enforcement has been diplomatic persuasion and counter-measures.
Egregious non-compliance exist.

2. ICSID Convention (pages 12-33 only, just the ICSID convention not the rules and
regulations)

Preamble
Chapter I: International Centre for Settlement of Investment Disputes
Section 1: Establishment and Organization
Seat at the International Bank of Reconstruction and Development (Washington)
Section 2: Administrative Council
Section 3: The Secretariat
Section 4: The Panels
Section 5: Financing the Centre
Section 6: Status, Immunities and Privileges
Chapter II: Jurisdiction of the Centre
any legal dispute arising directly out of an investment, between a Contracting State (or any
constituent subdivision or agency of a Contracting State designated to the Centre by that
State) and a national of another Contracting State, which the parties to the dispute
consent in writing to submit to the Centre.
When the parties have given their consent, no party may withdraw its consent unilaterally.
Consent of the parties to arbitration under this Convention shall, unless otherwise stated, be
deemed consent to such arbitration to the exclusion of any other remedy.
A Contracting State may require the exhaustion of local administrative or judicial remedies as
a condition of its consent to arbitration under this Convention.
No Contracting State shall give diplomatic protection unless such other Contracting State
shall have failed to abide by and comply with the award rendered in such dispute.
145
Chapter III: Conciliation
Section 1: Request for Conciliation
Section 2: Constitution of the Conciliation Commission
Section 3: Conciliation Proceedings
Chapter IV: Arbitration
Section 1: Request for Arbitration
Section 2: Constitution of the Tribunal
Section 3: Powers and Functions of the Tribunal
Section 4: The Award
Section 5: Interpretation, Revision and Annulment of the Award
Section 6: Recognition and Enforcement of the Award
Chapter V: Replacement and Disqualification of Conciliators and Arbitrators
Chapter VI: Cost of Proceedings
Chapter VII: Place of Proceedings
Chapter VIII: Disputes Between Contracting States
Chapter IX: Amendment
Chapter X: Final Provisions

II. Example of an Investor-State Arbitration: ICSID
1. Fraport AG Frankfurt Airport Services Worldwide (Claimant) v. Republic of the
Philippines (Respondent)

I. Procedure
A. Overview
B. Registration of the Request for Arbitration
C. Constitution of the Tribunal and Commencement of the Proceeding
D. Written and Oral Phases of the Proceeding
II. Factual Background
A. Introduction
B. Terminal 3 Project
a. The Original Proposal
b. The Concession Agreement
c. The Amended and Restated Concession Agreement
d. The ARCA Supplements
C. Fraports Investment in the Terminal 3 Project
a. The Initial 1999 Investments
b. The Subsequent 2000-2001 Investments
D. Opposition to the Terminal 3 Project
a. The Transfer of International Operations to Terminal 3 and PALs Emergence from
Bankruptcy
b. The Maso Campaign
E. The Collapse of Fraports Investment
a. Early Discussions with Secretary Climaco
b. Secretary Climacos Negotiations with Fraport and PIATCO
c. Secretary Climacos Null and Void Assessment
d. Secretary Climacos Appearance before the Senate Blue Ribbon Committee
e. President Macapagal-Arroyo's Declaration That Her Government Would Not Honour
the Terminal 3 Contracts
f. Fraport's Continued Efforts to Find a Solution
g. The Philippine Supreme Court's Decision that the Terminal 3 Contracts Are Null and
Void ab Initio
F. The Aftermath
III. The Philippine Expropriation Proceedings
A. Introduction
B. The Background to the Philippine Expropriation Proceedings
C. The Right of Eminent Domain or Expropriation Generally
146
D. The Initial Expropriation Proceedings Before the Regional Trial Court
E. The Republic's Petition Before the Supreme Court
F. The Subsequent Proceedings Before the Regional Trial Court
G. The Valuation Proceedings by the Court-Appointed Commissioners
IV. Respondent Jurisdictional Objection
A. The Treaty
B. The Respondents Position
C. The Claimants Position
V. Analysis and Findings on Jurisdiction
A. Preliminary Observations
B. The Pertinent Facts
C. The Applicable Legal Standards
D. The Tribunals Interpretation of the ADL
E. The ADL Proceedings in the Philippines
F. The Claimants Concealment of the Secret Shareholder Agreements
G. Conclusion
VI. Costs
VII. Award

[Personal Notes]

PIATCO entered into an agreement with RP.
Construction of International Passenger Terminal at NAIA (Terminal 3).
Fraport AG, German company acquired direct and indirect interests in PIATCO.
Confidential shareholder agreement for Fraport the exercise managerial control of PIATCO.
Petitions to the SC for nullification of Terminal 3 contracts.
Illegality during procurement and subsequent negotiation of the concession agreement.
SC: contracts void for serious violations of PH law and policy, including the failure to properly pre-qualify
the project concessionaire.
Fraport discussions with PH postponed indefinitely.
The BIT contained ICSID arbitration provisions.
Request for arbitration to ICSID, for violation of bilateral investment treaty (BIT) between Germany and
PH.
PH ground to contest ICSID jurisdiction: Article 1(1) of the BIT which provided that protections afforded
by the BIT did not extend to investments made in violation of PH law. Fraport structured the
investment to evade Anti-Dummy laws (ADL) through indirect forms of ownership and the use of
secret shareholder agreements. ADL prohibited foreign entities from managing public utilities.
Fraports defense is that it is legal.
(1) The PH was aware or has had knowledge of the shareholder structure but never charged Fraport for
violation of foreign ownership laws. [Estoppel?]
(2) 60% Filipino ownership is deemed Filipino.
(3) BIT created obligation for PH to admit foreign investments.
Tribunal decided against Fraport.
Fraports investment is accepted in accordance with Philippine laws. Thus falls under Article
1(1) of the BIT.
Issues:
(1) W/N failure to comply with PH law would deprive the tribunal of jurisdiction under
Article 1(1) of the BIT
a. YES.
b. Estoppel as to illegality defense.
c. But no indication that Fraport was aware of covert arrangements which were not
inaccordance with PH law. (NBI and Prosecutors Office did not know.)
d. Failure to prosecute for violation of ADL could cause an investor to reasonably
infer that it was acting lawfully, therefore ICSID with jurisdiction.
e. however, Fraport was found to have consciously concealed, its violations. Thus,
not in good faith. [Thus, in effect, in pari delicto. Though this is not the wording
147
used by ICSID.]
(2) W/N Fraport exercise managerial control over PIATCO [Thus, the answer to the first issue
becomes relevant.]
a. Fraports interest did not exceed foreign ownership limitation for public utilities.
b. ownership not determinative of managerial control
c. the July 1999 Shareholders agreement established the fact of managerial control
the moment of actual decision
i. That agreement also made Fraports view the controlling view with
respect to , among other matters, the operation, maintenance, and
management of the Terminal Complex.
ii. shows Fraport understood the legal prohibition on foreign ownership,
knew and planned for it
Decision:
ICSID has NO JURISDICTION over Fraports claim because the investment was
unlawful, therefore not falling under the coverage of the BIT.
Considering that there is no lawful party to on te merits, each party is to bear his own
costs.

III. Example of a State-to-State Arbitration: Philippines vs China West Philippine Sea
Dispute

See. Part XV (Settlement of Disputes p.129) and Annex VII (Arbirtration, p. 188) of UNCLOS Text

1. Philippines vs China UNCLOS dispute news articles

Institution of UNCLOS arbitration proceedings.
Ad Hoc Arbitration as default procedure, Annex VII of the Convention
Rudiger Wolfrum as PH nominee.
Chiina has 30 days to appoint nominee.
Failure to agree, ITLOS President nominates.
China opted out of and UNCLOS Article prescribing mandatory arbitration of disputes over sea boundaries
and military activities in 2006. Article 268. Thus the tribunal will not make determinations on
sovereignty, but only on the validity of Chinas claim. China accused PH of being self-
contradictory for not seeking a durable solution without determination of soveriegnty.
China claims islands, which as land territory are not covered by UNCLOS.
200 BC
Michief Reef in the Spratlys Islands
Illegal act of Chinas Administrative unit in Hainan in June
Team led by Paul Reicher

China rejects and returns notice of arbitration.
Arbitration will continue.

Chrisp Pinto of Sri Lanka steps down as chair of the panel hearing because of his wifes Filipino
nationality, May 21, 2013.
Presdient of ITLOS, Hamburg, must appoint replacement within 30 days.
Oil reserves of 11M barrels, natural gas reserves of 266T cu ft.
France, Poland, Netherlands, members of ad hoc tribunal. Ghana. Germany by PH. 3 are members of
ITLOS.
Kuala Lumpur suggests joint development zone.

Thomas Mensah of Ghana, 81, ITLOSs first president, as Chair of panel hearing. Former ITLOS president.
Current ITLOS president is Shunhi Yanai.
China wishes to resolve the dispute through separate bilateral negotiations. Taiwan, Vietnam, PH.
Second Thomas Shoal Reef near Spratlys island. navy transport ship crashed.

148
Case underway without China 29 August 2013.
Laid down timetable. Submission of memorial on March 30, 2014 addressing all issues, including
jurisdiction, admissibility, and merits.
China issued a note verbale to the PCA on August 1 on its refusal.
Carpio: This maritime dispute is an acid test to the very survival of UNCLOS and the rule of law, whether
the rule of the naval cannon will prevail

2. Philippines' Notification and Statement of Claim on West Philippine Sea dispute

3. China's Note Verbale on West Philippine Sea dispute

Claim of sovereignty of Nanhai islands.
Arbitration is counter to the Declaration of conduct of parties in the South China Sea. friendly consultations
and negotiations
Notification ans Statement of Claim contain grave errors.
Proposed to resume operation of the Confidence Building Measures Mechanism to which PH failed to
participate.

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Jesse Neil Cruz Eustaquio Notes; ALS2014B; International Commercial Arbitration; Atty.

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