This country-specific Q&A provides an overview of the legal framework and key issues surrounding arbitration law in Philippines.
This Q&A is part of the global guide to Arbitration.
For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/arbitration/
What legislation applies to arbitration? Are there any mandatory laws?
Arbitration in the Philippines is regulated by the:
- Civil Code of the Philippines;
- Republic Act No. 876 (“Arbitration Law”);
- Republic Act No. 9285 or the “Alternative Dispute Resolution Act of 2004” (“ADR Act”) and its Implementing Rules and Regulations;
- Philippine Supreme Court's A.M. No. 07-11-08-SC dated 01 September 2009 or the “Special Rules of Court on Alternative Dispute Resolution” (“Special ADR Rules”);
- Executive Order No. 1008 for the construction industry; and
- Philippine Supreme Court Decisions.
Philippine law, under the ADR Act, has adopted in its entirety the UNCITRAL Model Law on International Commercial Arbitration, as adopted by the United Nations Convention on International Trade Law on 21 June 1985 (“1985 UNCITRAL Model Law”). Accordingly, some provisions of the 1985 UNCITRAL Model Law, such as the definition of international arbitration, appointment of arbitrators, and jurisdiction of the arbitral tribunal, have been made applicable to domestic arbitration.
Is the country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?
The Philippine is a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards signed in New York on 10 June 1958 (“New York Convention”) which governs the recognition and enforcement of foreign arbitral awards in the Philippines since its ratification of the same on 06 July 1967. The Philippines made the Reservation that the Philippine delegation signs ad referendum with the reservation that it does so on the basis of reciprocity. As provided in Article 1, paragraph 3 of the New York Convention, the Philippines made a Declaration upon ratification of the New York Convention that the Philippines, on the basis of reciprocity, will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State and only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration.
However, the Philippine courts can, on grounds of comity and reciprocity, recognise and enforce a foreign arbitral award made in a country that is not a signatory to the New York Convention. Therefore, countries that are not a party to the New York Convention can still be accorded the privileges under the New York Convention if they accord the Philippines the same treatment.
Further, the Philippine courts may refuse recognition and enforcement of an arbitral award if: (a) the subject matter of the dispute is not capable of settlement by arbitration in the Philippines; and (b) the recognition or enforcement of the award would be contrary to the public policy of the Philippines.
What other arbitration-related treaties and conventions is the country a party to?
The Philippines is a party to the ASEAN Comprehensive Investment Agreement and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).
Is the law governing international arbitration based on the UNCITRAL Model Law? Are there significant differences between the two?
The Philippines expressly adopted the 1985 UNCITRAL Model Law through the ADR Act.
Are there any impending plans to reform the arbitration laws?
In order to promote alternative dispute resolution, there is currently proposed legislation to impose lower penalties to the accused in criminal cases where the civil aspect of the case has been settled through alternative dispute resolution. Also, there is currently proposed legislation to adopt the 07 July 2006 amendments to the 1985 UNCITRAL Model Law.
What arbitral institutions (if any) exist? Have there been any amendments to their rules or are there any being considered?
The CIAC (“Construction Industry Arbitration Commission”) and PDRCI (“Philippine Dispute Resolution Center Inc.”) are the arbitral institutions commonly used to resolve large commercial disputes in the Philippines.
The subject matter of arbitration proceedings conducted by the CIAC is limited to disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines. Arbitration proceedings in the CIAC have been considered by the Philippine Supreme Court as part of traditional judicial proceedings. Therefore, the decisions of CIAC may be appealed to the Court of Appeals and thereafter, to the Supreme Court on pure questions of law. The CIAC rules were last amended in 2011.
PDRCI is the arbitral organization that most commonly administers arbitration proceedings, involving all kinds of subject matter, primarily commercial arbitration. The rules of the PDRCI have just been recently amended and these became effective in 2015.
However, it is also noteworthy that the ICC International Court of Arbitration, the Singapore International Arbitration Centre (SIAC) and the Hong Kong International Arbitration Centre (HKIAC) are arbitration institutions that are commonly specified in contracts in the Philippines that have an international component.
What are the validity requirements for an arbitration agreement?
An arbitration agreement can arise in the following ways:
- Two or more persons can agree to submit to an arbitration of one or more arbitrators, any controversy existing between them at the time of the submission, which may be the subject of an action.
- The parties to any contract can agree to settle by arbitration a controversy thereafter arising between them.
Such submission or contract will be valid, enforceable, and irrevocable, save on such grounds that exist under the law for revocation of any contract.
A contract or a submission to arbitrate, must be in writing and signed by the parties or their lawful agents.
Separate arbitration agreement
Under the law, an arbitration agreement is valid so long as it is in writing and signed by the parties to the agreement, or by their lawful agents. Therefore, a clause in the main contract is sufficient and a separate arbitration agreement is not needed, so long as the requirements for a contract are met.
Furthermore, the ADR Act (which adopted the 1985 UNCITRAL Model Law in its entirety) provides that an arbitration agreement can be in the form of an arbitration clause in a contract or in a separate agreement.
The 1985 UNCITRAL Model Law states that the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement, provided that the contract is in writing and the reference is such as to make that clause part of the contract.
In addition to the foregoing rules, the arbitration agreement must also satisfy the requirements under the general law on contracts:
a. It must be mutually agreed upon by the parties;
b. It must not be contrary to any law, morals, good customs, public order, or public policy;
c. There must be no showing that the parties have not dealt with each other on equal footing.
Are arbitration clauses considered separable from the main contract?
Yes. The Special ADR Rules expressly recognizes the principle of separability of the arbitration clause. The arbitration clause is an agreement independent of the other terms of the contract of which it forms part.
Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?
Where an action is commenced by or against multiple parties, one or more of whom are parties who are bound by the arbitration agreement, the civil action may continue as to those who are not bound by such arbitration agreement.
However, Philippine courts shall not decline to refer some or all of the parties to arbitration for any of the following reasons:
a. Not all of the disputes subject of the civil action may be referred to arbitration; or
b. Not all of the parties to the civil action are bound by the arbitration agreement and referral to arbitration would result in multiplicity of suits; or
c. The stay of the action would prejudice the rights of the parties to the civil action who are not bound by the arbitration agreement.
In addition, the court may issue an order directing the inclusion in arbitration of those parties who are not bound by the arbitration agreement but who agree to such inclusion provided those originally bound by it do not object to their inclusion.
How is the law applicable to the substance determined?
The Philippines follows Article 28 of the 1985 UNCITRAL Model Law, that is:
(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 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.
Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?
The following matters cannot be the subject of arbitration:
- Labor disputes covered by the Labor Code (Pursuant to the Labor Code of the Philippines, there are separate rules for labor disputes under which parties undergo either compulsory or voluntary arbitration);
- Civil Status of persons;
- Validity of marriage;
- Any grounds for legal separation;
- Jurisdiction of courts;
- Future legitime or the future right of an heir to the portion of the deceased’s property which he or she is entitled under the law regardless of the provisions in the predecessor’s will;
- Criminal liability;
- Future support or the right to support of spouses, descendants, ascendants and siblings at some future time.
Are there any restrictions in the appointment of arbitrators?
For domestic arbitration, no person appointed to serve as an arbitrator shall be related by blood or marriage within the sixth degree to either party to the controversy. No person shall serve as an arbitrator in any proceeding if he has or has had financial, fiduciary or other interest in the controversy or cause to be decided or in the result of the proceeding, or has any personal bias, which might prejudice the right of any party to a fair and impartial award.
For international commercial arbitration, following the 1985 UNCITRAL Model Law, no person shall be precluded by reason of his nationality from acting as an arbitrator, unless otherwise agreed by the parties. The parties are free to agree on a procedure of appointing the arbitrator or arbitrators.
Are there any default requirements as to the selection of a tribunal?
Yes, there are default requirements to the selection of a tribunal. Any person appointed to serve as an arbitrator must be of legal age, in full enjoyment of his civil rights and know how to read and write.
Can the local courts intervene in the selection of arbitrators? If so, how?
Yes, local courts can intervene in the selection of arbitrators:
a. Where any of the parties in an institutional arbitration failed or refused to appoint an arbitrator or when the parties have failed to reach an agreement on the sole arbitrator (in an arbitration before a sole arbitrator) or when the two designated arbitrators have failed to reach an agreement on the third or presiding arbitrator (in an arbitration before a panel of three arbitrators), and the institution under whose rules arbitration is to be conducted fails or is unable to perform its duty as appointing authority within a reasonable time from receipt of the request for appointment;
b. In all instances where arbitration is ad hoc and the parties failed to provide a method for appointing or replacing an arbitrator, or substitute arbitrator, or the method agreed upon is ineffective, and the National President of the Integrated Bar of the Philippines (IBP) or his duly authorized representative fails or refuses to act within such period as may be allowed under the pertinent rules of the IBP or within such period as may be agreed upon by the parties, or in the absence thereof, within thirty (30) days from receipt of such request for appointment;
c. Where the parties agreed that their dispute shall be resolved by three arbitrators but no method of appointing those arbitrators has been agreed upon, each party shall appoint one arbitrator and the two arbitrators thus appointed shall appoint a third arbitrator. If a party fails to appoint his arbitrator within thirty (30) 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 a reasonable time from their appointment, the appointment shall be made by the Appointing Authority. If the latter fails or refuses to act or appoint an arbitrator within a reasonable time from receipt of the request to do so, any party or the appointed arbitrator/s may request the court to appoint an arbitrator or the third arbitrator as the case may be.
Can the appointment of an arbitrator be challenged? What is the procedure for such challenge? Has there been an increase in number of challenges in your jurisdiction?
The appointment of an arbitrator can be challenged 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.
a. The parties are free to agree as to the procedure to challenge the arbitrators. If no agreement has been made as to procedure, a party who intends to challenge an arbitrator shall, within fifteen (15) days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties, send a written statement of the reasons for the challenge to the arbitral tribunal. If the challenge is unsuccessful, the challenging party may request, within thirty (30) days after having received notice of the decision rejecting the challenge, the appointing authority to decide the challege. It is only when such Appointing Authority fails or refuses to act on the challenge within such period as may be allowed under the applicable rule or in the absence thereof, within thirty (30) days from receipt of the request, that the aggrieved party may renew the challenge in court.
There does not appear to be an increase in the number of challenges to arbitrators.
What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?
While a challenge is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.
Are arbitrators immune from liability?
Arbitrators are not immune from liability. ADR providers and practitioners (including arbitrators) shall have the same civil liability for acts done in the performance of their duties as that of public officers, as provided in Section 38 (1), Chapter 9, Book I of the Philippine Administrative Code of 1987. Thus, arbitrators shall be civilly liable for acts done in the performance of official duties if there is a clear showing of bad faith, malice or gross negligence.
Is the principle of competence-competence recognised? What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?
The principle of competence-competence is recognized in the Philippines.
The arbitral tribunal shall be accorded the first opportunity or competence to rule on the issue of whether or not it has the competence or jurisdiction to decide a dispute submitted to it for decision, including any objection with respect to the existence or validity of the arbitration agreement. When a court is asked to rule upon issue/s affecting the competence or jurisdiction of an arbitral tribunal in a dispute brought before it, either before or after the arbitral tribunal is constituted, the court must exercise judicial restraint and defer to the competence or jurisdiction of the arbitral tribunal by allowing the arbitral tribunal the first opportunity to rule upon such issues.
Where the court is asked to make a determination of whether the arbitration agreement is null and void, inoperative or incapable of being performed, under this policy of judicial restraint, the court must make no more than a prima facie determination of that issue. Unless the court, pursuant to such prima facie determination, concludes that the arbitration agreement is null and void, inoperative or incapable of being performed, the court must suspend the action before it and refer the parties to arbitration pursuant to the arbitration agreement.
Where parties have agreed to submit their dispute to arbitration, the local courts must refer the parties to arbitration, bearing in mind that the arbitration agreement is the law between the parties and they are expected to abide by it in good faith.
How are arbitral proceedings commenced? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?
For domestic arbitration, in the case of a contract to arbitrate future controversies, through the service by either party upon the other of a demand for arbitration in accordance with the contract. In the case of a submission of an existing controversy, by the filing of the submission agreement with the clerk of the Philippine court having jurisdiction.
For international commercial arbitration, unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for referral to arbitration is received by the respondent.
Philippine law does not provide for default rules governing the commencement of arbitral proceedings. The parties are free to agree on the rules governing the commencement of arbitral proceedings. However, arbitration must commence by service to the other party of a demand for arbitration.
As to limitation periods or time bars, there is no specific Philippine legal provision that governs limitation periods in arbitration proceedings. However, as the right to arbitrate arises from a written contract between the parties, the general law of limitation may apply, which states that proceedings must be commenced within ten years from the date the right to institute arises under the written contract of the parties.
Further, nothing prohibits the parties from agreeing on a different period of limitation as well as the grounds for suspension of the time limits. The usual causes like force majeure are applicable and contracting parties can establish such stipulations, clauses, terms and conditions as they deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
The Philippine Supreme Court also recognizes the equitable defense of laches (that is, the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence could or should have been done earlier).
What happens when a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate? Can they order third parties to participate in arbitration proceedings?
For domestic arbitration, a party aggrieved by the failure, neglect or refusal of another to perform under an agreement for arbitration, may petition the court for an order directing that such arbitration proceed in the manner provided for in such agreement. Five (5) days notice in writing of the hearing of such application shall be served either personally or by registered mail upon the party in default. The court shall hear the parties, and upon being satisfied that the making of the agreement or such failure to comply therewith is not in issue, shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the agreement or default be in issue, the court shall proceed to summarily hear such issue. If the finding be that no agreement in writing providing for arbitration was made, or that there is no default in the proceeding thereunder, the proceeding shall be dismissed. If the finding be that a written provision for arbitration was made and there is a default in proceeding thereunder, an order shall be made summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.
For international commercial arbitration, unless otherwise agreed by the parties, if, without showing sufficient cause,
(a) the claimant fails to communicate his statement of claim within the period of time agreed by the parties or determined by the arbitral tribunal, the arbitral tribunal shall terminate the proceedings; or
(b) the respondent fails to communicate his statement of defence within the period of time agreed by the parties or determined by the arbitral tribunal, the arbitral tribunal shall continue the proceedings without treating such failure in itself as an admission of the claimant’s allegations; or
(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.
It is a right to demand recourse to arbitration because the arbitration agreement is the law between the parties and they are expected to abide by it in good faith. Thus, a party may compel the other to arbitrate. If such party refuses to arbitrate, he shall suffer the consequences of his failure and Philippine courts may issue an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof.
As to ordering third parties to participate in arbitration proceedings, Philippine courts may issue an order directing the inclusion in arbitration of those parties who are bound by the arbitration agreement directly or by reference thereto.
In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?
The application of the doctrine of immunity from suit has been restricted to sovereign or governmental activities. The mantle of state immunity does not extend to commercial, private and proprietary acts.
In what instances can third parties or non-signatories be bound by an arbitration agreement or award?
As a general rule, an arbitration agreement is consensual and therefore only binding on the contracting parties. Therefore, parties who did not sign the contract cannot be compelled to arbitrate disputes relating to the contract except when the contract contains a reference to a document containing an arbitration clause to which the third party is a signatory. However, a third party that did not sign a contract incorporating an arbitral clause may compel a party that did sign the contract to arbitrate if the contract contains a reference to a document containing an arbitral clause and the reference is such as to make that arbitration clause part of the contract.
The court may also issue an order directing the inclusion in arbitration of those parties who are not bound by the arbitration agreement but who agree to such inclusion provided those originally bound by it do not object to their inclusion.
In addition, preliminary attachment as an interim measure of protection may issue against property or funds in the custody of a third person.
Further, in cases of arbitration involving a third-party provider of security, an arbitration agreement contained in a contract of loan between the lender and the borrower extends to and covers an accessory contract securing the loan, such as a pledge, mortgage, guaranty or suretyship, executed by a person other than the borrower only if such third-party securing the loan has agreed in the accessory contract, either directly or by reference, to be bound by such arbitration agreement.
What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?
The following, among others, are the interim measures of protection that a court may grant:
a. Preliminary injunction directed against a party to arbitration;
b. Preliminary attachment against property or garnishment of funds in the custody of a bank or a third person;
c. Appointment of a receiver;
d. Detention, preservation, delivery or inspection of property; or,
e. Assistance in the enforcement of an interim measure of protection granted by the arbitral tribunal, which the latter cannot enforce effectively.
Section 28(a) of the ADR Act provides that after the constitution of the arbitral tribunal and during arbitral proceedings, a request for an interim measure of protection or modification of that measure can be made to the arbitral tribunal. A petition for interim measure of protection can be made with the court after the constitution of the arbitral tribunal and at any time during the arbitral proceedings, but only to the extent that the arbitral tribunal has no power to act or is unable to act effectively.
The court can only issue interim remedies in the following instances:
- Before arbitration is commenced.
- After arbitration is commenced, but before the constitution of the arbitral tribunal.
- After the constitution of the arbitral tribunal and at any time during arbitral proceedings but, at this stage, only to the extent that the arbitral tribunal has no power to act or is unable to act effectively.
Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence?
Arbitrators are likely to follow the 1985 UNCITRAL Rules of Procedure, International Chamber of Commerce Rules of Procedure, IBA Rules on the Taking of Evidence in International Arbitration and the PDRCI Rules of Procedure. The parties are also free to agree on the procedure to be followed in the conduct of arbitral proceedings, including the adoption of procedural rules of institutional arbitration.
If parties fail to agree on the procedure to be followed, the arbitral tribunal can conduct arbitration in the manner it considers appropriate, taking into account the provisions of the Arbitration Law and the ADR Act.
Also, any party to an arbitration, whether domestic or foreign, may request the court to provide assistance in taking evidence.
A party requiring assistance in the taking of evidence may petition the court to direct any person, including a representative of a corporation, association, partnership or other entity (other than a party to the ADR proceedings or its officers) found in the Philippines, for any of the following:
a. To comply with a subpoena ad testificandum and/or subpoena duces tecum;
b. To appear as a witness before an officer for the taking of his deposition upon oral examination or by written interrogatories;
c. To allow the physical examination of the condition of persons, or the inspection of things or premises and, when appropriate, to allow the recording and/or documentation of condition of persons, things or premises (i.e., photographs, video and other means of recording/documentation);
d. To allow the examination and copying of documents; and
e. To perform any similar acts.
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings?
ADR providers and practitioners shall have the same civil liability for acts done in the performance of their duties as that of public officers, as provided in Section 38 (1), Chapter 9, Book I of the Administrative Code of 1987. Thus, they shall be civilly liable for acts done in the performance of official duties if there is a clear showing of bad faith, malice or gross negligence.
For counsel in arbitration proceedings, the Code of Professional Responsibility applies.
How are the costs of arbitration proceedings estimated and allocated?
There is no law providing for how to estimate the costs of arbitration proceedings and these are subject to the rules of arbitral institutions.
For instance, the PDRCI has its own Guidelines on Fees for the computation of fees where one can compute the arbitrator’s fees, administrative fees and fees in connection with emergency relief proceedings. The schedule of fees are based on the parties’ claims.
The costs of the ADR proceedings shall be borne by the parties equally, unless otherwise agreed upon or directed by the arbitrator or arbitral tribunal.
The arbitral tribunal has discretion as to how the costs of the arbitration process are awarded.
Awarded costs usually include:
- The expenses (or a portion of them) of any party against another party.
- The arbitral tribunal may only render an award on issues or on the subject matters brought before it for resolution. Hence, it can award damages, interest or other monetary amount so long as it is within the scope of the issues raised by the parties.
- Following the general rule in evidence, the party who asserts that he is entitled to costs has the burden of proving the same. Absent such proof of the actual costs, the arbitral tribunal is precluded from awarding costs.
Can pre- and post-award interest be included on the principal claim and costs incurred?
There is no specific provision on pre- and post-award interest under the ADR Act, Arbitration Law, and the Special ADR Rules. However, this may be subject to the agreement of the parties in the arbitration clause or submission agreement.
What legal requirements are there for the recognition of an award?
Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?
In general, there are no limitations to the remedies that can be awarded by the arbitral tribunal as long as these are within the reliefs agreed upon by the parties and subject to the general rule that parties cannot agree on contractual stipulations that are contrary to law, morals, good customs, public order and public policy.
Can arbitration proceedings and awards be appealed or challenged in local courts? What are the grounds and procedure?
Challenging Awards in Court
For awards in domestic arbitration, the arbitral award may be vacated on the following grounds:
a. The arbitral award was procured through corruption, fraud or other undue means;
b. There was evident partiality or corruption in the arbitral tribunal or any of its members;
c. The arbitral tribunal was guilty of misconduct or any form of misbehavior that has materially prejudiced the rights of any party such as refusing to postpone a hearing upon sufficient cause shown or to hear evidence pertinent and material to the controversy;
d. One or more of the arbitrators was disqualified to act as such under the law and willfully refrained from disclosing such disqualification; or
e. The arbitral tribunal exceeded its powers, or so imperfectly executed them, such that a complete, final and definite award upon the subject matter submitted to them was not made.
The award may also be vacated on any or all of the following grounds:
a. The arbitration agreement did not exist, or is invalid for any ground for the revocation of a contract or is otherwise unenforceable; or
b. A party to arbitration is a minor or a person judicially declared to be incompetent.
The petition to vacate an arbitral award on the ground that the party to arbitration is a minor or a person judicially declared to be incompetent shall be filed only on behalf of the minor or incompetent and shall allege that (a) the other party to arbitration had knowingly entered into a submission or agreement with such minor or incompetent, or (b) the submission to arbitration was made by a guardian or guardian ad litem who was not authorized to do so by a competent court.
In deciding the petition to vacate the arbitral award, the court shall disregard any other ground than those enumerated above.
Not later than thirty (30) days from receipt of the arbitral award, a party may file a Petition to Vacate the Award. A Petition to Vacate the Arbitral Award may also be filed in opposition to a Petition to Confirm the Arbitral Award, not later than thirty (30) days from receipt of the award by the petitioner. The other party, after due notice, shall be given fifteen (15) days from receipt to file a Comment or Opposition to the Petition to Vacate or in lieu of opposition, the other party may file a Petition in Opposition to the Petition. The petitioner may, within fifteen (15) days from receipt of the Petition in Opposition thereto, file a Reply. The court may require the parties to simultaneously submit the affidavits of their witnesses within fifteen (15) days from receipt of such order and to submit reply affidavits thereto within ten (10) days from receipt of the affidavits being replied to. In either case, there must be attached to the affidavits or reply affidavits the documents relied upon in support of the statement of facts in such affidavits or reply affidavits. Unless a ground to vacate an arbitral award as enumerated above is fully established, the court shall confirm the award.
For an award in an international commercial arbitration conducted in the Philippines, the court may set aside or refuse the enforcement of the arbitral award only if:
a. The party making the application furnishes proof that:
(i) A party to the arbitration agreement 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 thereof, under Philippine law; or
(ii) The party making the application to set aside or resist enforcement 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 only that part of the award which contains decisions on matters submitted to arbitration may be enforced; 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 Philippine law from which the parties cannot derogate, or, failing such agreement, was not in accordance with Philippine law;
b. The court finds that:
(i) The subject-matter of the dispute is not capable of settlement by arbitration under the law of the Philippines; or
(ii) The recognition or enforcement of the award would be contrary to public policy.
In deciding the petition, the Court shall disregard any other ground to set aside or enforce the arbitral award other than those enumerated above.
The petition to set aside or a pleading resisting the enforcement of an arbitral award on the ground that a party was a minor or an incompetent shall be filed only on behalf of the minor or incompetent and shall allege that (a) the other party to arbitration had knowingly entered into a submission or agreement with such minor or incompetent, or (b) the submission to arbitration was made by a guardian or guardian ad litem who was not authorized to do so by a competent court.
A Petition to Set Aside an Arbitral Award may only be filed within three (3) months from the time the petitioner receives a copy of the Arbitral Award. Such Petition shall be verified by a person who has personal knowledge of the facts stated therein. The other party, after due notice, shall be given fifteen (15) days from receipt to file an Opposition to the Petition to Set Aside or in lieu of opposition, the other party may file a Petition to Set Aside in opposition to a Petition to Recognize and Enforce or a Petition to Recognize and Enforce in opposition to a Petition to Set Aside. The petitioner may file a Reply within fifteen (15) days from receipt of such Opposition of Petition. If the court finds that the issue between the parties is mainly one of law, the parties may be required to submit briefs of legal arguments, not more than fifteen (15) days from receipt of the order, sufficiently discussing the legal issues and the legal basis for the relief prayed for by each of them. If the court finds that there are issues of fact, it shall require the parties to simultaneously submit the affidavits of their witnesses within fifteen (15) days from receipt of such Order and to submit reply affidavits thereto within ten (10) days from receipt of the affidavits being replied to. In either case, there must be attached to the affidavits or reply affidavits the documents relied upon in support of the statement of facts in such affidavits or reply affidavits. If it deems necessary, the court may conduct oral hearing. Unless a ground to set aside as enumerated above is fully established, teh court shall dismiss the Petition.
For foreign arbitral awards, a Philippine court shall not set aside a foreign arbitral award but may refuse its recognition and enforcement on any or all of the grounds similar to the grounds for setting aside or refusal of enforcement of an award in an international commercial arbitration conducted in the Philippines, as previously enumerated. However, as an additional ground, a foreign arbitral award may be refused recognition and enforcement if the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which that award was made.
The court shall disregard any ground for opposing the recognition and enforcement of a foreign arbitral award other than those enumerated above.
At anytime after receipt of a foreign arbitral award, any party to the arbitration may Petition the proper trial court to recognize and enforce such award. The other party, after due notice, shall be given thirty (30) days from receipt of the Notice and Petition, to file a Verified Opposition. If the court finds that the issue between the parties is mainly one of law, the parties may be required to submit briefs of legal arguments, not more than thirty (30) days from receipt of the order, sufficiently discussing the legal issues and the legal basis for the relief prayed for by each of them. If the court finds that there are issues of fact, it shall require the parties to simultaneously submit the affidavits of their witnesses within a period of not less than fifteen (15) days nor more than thirty (30) days from receipt of the Order. The court may allow the submission of reply affidavits thereto within a period of not less than fifteen (15) days nor more than thirty (30) days from receipt of the Order granting the request. In either case, there must be attached to the affidavits or reply affidavits the documents relied upon in support of the statement of facts in such affidavits or reply affidavits. If it deems necessary, the court may conduct oral hearing. It is presumed that a foreign arbitral award was made and released in due course of arbitration and is subject to enforcement by the court.
Right of appeal
There is no right of appeal against an arbitral award. An arbitral award is final and binding. Consequently, a party to an arbitration proceeding is precluded from filing an appeal under Rules 41 and 45, Rules of Court or a Rule 65 petition for certiorari (by alleging grave abuse of discretion amounting to lack or excess of jurisdiction was committed in the rendition of the Arbitral Award), questioning the merits of an arbitral award with the courts. However, an arbitral award can be vacated, modified, corrected, or set aside under very limited specified grounds by court action.
The exception to the general rule is an arbitral award rendered by the Construction Industry Arbitration Commission (CIAC), which is appealable to the Court of Appeals.
As just-stated, arbitral awards are final and binding, thus, not appealable. However, a party to an arbitration may petition the Regional Trial Court to confirm, correct or vacate an arbitral award in accordance with the Special ADR Rules. The decision and orders of the Regional Trial Court relating to the arbitral award may be reviewed by the Court of Appeals and subsequently by the Supreme Court.
An appeal to the Court of Appeals through a petition for review is allowed only from the following final orders/decisions of the Regional Trial Court:
a. Granting or denying an interim measure of protection;
b. Denying a petition for appointment of an arbitrator;
c. Denying a petition for assistance in taking evidence;
d. Enjoining or refusing to enjoin a person from divulging confidential information;
e. Confirming, vacating or correcting/modifying a domestic arbitral award;
f. Setting aside an international commercial arbitration award;
g. Dismissing the petition to set aside an international commercial arbitration award even if the court does not decide to recognize or enforce such award;
h. Recognizing and/or enforcing an international commercial arbitration award;
i. Dismissing a petition to enforce an international commercial arbitration award;
j. Recognizing and/or enforcing a foreign arbitral award;
k. Refusing recognition and/or enforcement of a foreign arbitral award;
l. Granting or dismissing a petition to enforce a deposited mediated settlement agreement; and
m. Reversing the ruling of the arbitral tribunal upholding its jurisdiction.
Moreover, when the Regional Trial Court, in making a ruling under the Special ADR Rules, has acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law, a party may file a special civil action for certiorari with the Court of Appeals to annul or set aside certain orders of the Regional Trial Court, to wit:
a. Holding that the arbitration agreement is inexistent, invalid or unenforceable;
b. Reversing the arbitral tribunal’s preliminary determination upholding its jurisdiction;
c. Denying the request to refer the dispute to arbitration;
d. Granting or refusing an interim relief;
e. Denying a petition for the appointment of an arbitrator;
f. Confirming, vacating or correcting a domestic arbitral award;
g. Suspending the proceedings to set aside an international commercial arbitral award and referring the case back to the arbitral tribunal;
h. Allowing a party to enforce an international commercial arbitral award pending appeal;
i. Adjourning or deferring a ruling on whether to set aside, recognize and/or enforce an international commercial arbitral award;
j. Allowing a party to enforce a foreign arbitral award pending appeal; and
k. Denying a petition for assistance in taking evidence.
A party, who is not satisfied with the decision of the Court of Appeals, may appeal to the Supreme Court. However, review by the Supreme Court is not a matter of right, but of sound judicial discretion, which will be granted only for serious and compelling reasons resulting in grave prejudice to the aggrieved party. The following, while neither controlling nor fully measuring the court's discretion, indicate the serious and compelling, and necessarily, restrictive nature of the grounds that will warrant the exercise of the Supreme Court’s discretionary powers, when the Court of Appeals:
a. Failed to apply the applicable standard or test for judicial review prescribed in these Special ADR Rules in arriving at its decision resulting in substantial prejudice to the aggrieved party;
b. Erred in upholding a final order or decision despite the lack of jurisdiction of the court that rendered such final order or decision;
c. Failed to apply any provision, principle, policy or rule contained in these Special ADR Rules resulting in substantial prejudice to the aggrieved party;
d. Committed an error so egregious and harmful to a party as to amount to an undeniable excess of jurisdiction; and
e. Any ground closely analogous to the above.
Grounds and procedure
Arbitral Awards made by the CIAC are appealable through the regular procedure for appeal of decisions of quasi-judicial bodies to the Court of Appeals under Rule 43 of the Rules of Court of the Philippines. Such appeal must be initiated within fifteen (15) days from receipt of the Arbitral Award by filing a verified Petition for Review and payment of proper docket and other lawful fees. The Court of Appeals may require the respondent to file a Comment on the Petition for Review within ten (10) days from notice. The Court of Appeals may also require the parties to file their respective Memorandum within fifteen (15) days from notice or set the case for oral arguments. Thereafter, the case will be submitted for Decision. However, the appeal will not stay the execution of the award unless the Court of Appeals directs otherwise. The decision of the Court of Appeals may be reviewed by the Supreme Court under a Petition for Review.
Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?
Under the Civil Code of the Philippines, any stipulation that the arbitrators’ award or decision shall be final, is valid. Arbitration is a consensual agreement between the parties. Therefore, parties may include a stipulation regarding the waiver of rights to challenge an award.
However, this waiver may possibly be questioned in court as being contrary to “morals, good customs, public order, or public policy”.
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
State liability is not conceded by the mere fact that it has allowed itself to be sued. State funds and properties may not be enforced upon absent a corresponding appropriation under law since such enforcement may be considered as a disbursement of public funds. The Philippine Commission on Audit must first adjudicate the claim before execution may proceed.
To what extent might a third party challenge the recognition of an award?
There is no specific provision in the ADR Act, Arbitration Law and the Special ADR Rules that allows a third party to challenge the recognition of an award. Moreover, the provisions on confirmation, recognition and enforcement, vacation, setting aside and refusal of recognition in the Special ADR Rules refer only to a party to the arbitration proceedings. Thus, considering that a third person is not privy to the arbitral award, such third party does not have basis to challenge the recognition of an award.
Have there been any significant developments with regard to third party funding recently?
There is currently no express rule on third party funding in the Philippines. However, the Philippine legal profession adheres to the rule against champertous contracts.
Is emergency arbitrator relief available? Is this frequently used?
There are no specific provisions on emergency arbitrator proceedings in the ADR Act, Arbitration Law and the Special ADR Rules.
However, under the Arbitration Rules of the PDRCI, a party may apply for an Interim Measure concurrent with or following the filing of a Notice of Arbitration but prior to the constitution of the arbitral tribunal (“Emergency Relief”) by submitting an application for the appointment of an emergency arbitrator (“Emergency Arbitrator”) to PDRCI.
Are there arbitral laws or arbitration institutional rules providing for simplified or expedited procedures for claims under a certain value? Are they often used?
The Arbitration Rules of the PDRCI provides expedited procedure for claims which do not exceed Twenty-Five Million Pesos (Php25,000,000.00 or approximately US$500,000.00).
Have measures been taken by arbitral institutions to promote transparency in arbitration?
The arbitration proceedings, including the records, evidence and the arbitral award, are confidential and must not be published.
Information is deemed confidential if it is intended by the source not to be disclosed, or obtained under circumstances that would create a reasonable expectation on behalf of the source that the information must not be disclosed. This includes:
- Communications (oral or written) made in a dispute resolution proceedings, including memoranda, notes or work products of the neutral party or non-party participant.
- Pleadings, motions, manifestations, witness statements, reports filed or submitted in arbitration.
The restriction on confidentiality applies to all the participants in the arbitration proceedings, including parties, arbitrators and non-party participants such as witnesses, resource persons or experts and institutions.
Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted? If so, how?
The nationality or professional qualification of an arbitrator is not a ground to challenge an arbitrator unless the parties have specified in their arbitration agreement a specific nationality and/or professional qualification as a ground for appointment of an arbitrator.
Have there been any developments regarding mediation?
Just like arbitration, mediation is one of the preferred modes of dispute settlement in the Philippines. To further this, the Philippine Supreme Court issued A.M. No. 11-1-6-SC-PHILJA or the Consolidated and Revised Guidelines to Implement the Expanded Coverage of Court-Annexed Mediation (CAM) and Judicial Dispute Resolution (JDR) (“Consolidated Guidelines on CAM and JDR”), which mandates that the following cases must be brought to mediation before commencing trial:
(1) All civil cases;
(2) Civil liability of the following crimes :
i. Where payment may prevent criminal prosecution or may extinguish criminal liability, such as violations of Batas Pambansa Blg. 22 (Bouncing Checks Law), Republic Act 1161, as amended by Republic Act 8282 (SSS Law) and Republic Act 9679 (PAG-IBIG Law) ;
ii. Crimes against property under Title 10 of the Philippine Revised Penal Code, where the obligation may be civil in nature such as : Theft under Article 308, Philippine Revised Penal Code, Estafa under Article 315 (1), Philippine Revised Penal Code except Estafa under Article 315(2) and (3), Philippine Revised Penal Code ; Others forms of Swindling under Article 316, Philippine Revised Penal Code ; Swindling a minor under Article 317, Philippine Revised Penal Code, Other deceits under Article 318, Philippine Revised Penal Code ; and Malicious Mischief under Article 327, Philippine Revised Penal Code ;
iii. Crimes agains honor under Title 13, Philippine Revised Penal Code where the liability may be civil in nature, such as :
a. Libel by means of writings or similar means under Article 355, Philippine Revised Penal Code;
b. Threatening to publish and offer to present such publication for a compensation under Article 356, Philippine Revised Penal Code;
c. Prohibited publication of acts referred to in the course of official proceedings under Article 357, Philippine Revised Penal Code;
d. Grave Slander (Grave Oral Defamation) — of serious and insulting nature under Article 358, paragraph 1, Philippine Revised Penal Code;
e. Simple Slander (Oral Defamation) — not of a serious and insulting nature under Article 358, paragraph 2, Philippine Revised Penal Code;
f. Grave Slander by Deed — of a serious nature under Article 359, paragraph 1, Philippine Revised Penal Code;
g. Simple Slander by Deed — not of a serious nature under Article 359, paragraph 2, Philippine Revised Penal Code;
h. Incriminating innocent person under Article 363, Philippine Revised Penal Code;
i. Intriguing against honor under Article 364, Philippine Revised Penal Code;
iv. Libel under Republic Act 10175 (Cybercrime Prevention Act of 2012) where the liability may be civil in nature;
iv. Criminal negligence under Title 14, Philippine Revised Penal Code, where the liability may be civil in nature; and
v. Intellectual property rights cases where the liability may be civil in nature.
(3) Special proceedings for the settlement of estates;
(4) All civil cases filed with a certificate to file action issued by the Punong Barangay or the Pangkat ng Tagapagkasundo under the Revised Katarungang Pambarangay Law;
(5) All civil cases and probate proceedings, testate and intestate, brought on appeal from the exclusive and original jurisdiction granted to the first level courts;
(6) All cases of forcible entry and unlawful detainer brought on appeal from the exclusive and original jurisdiction of first level courts;
(7) All civil cases involving title to or possession of real property or an interest therein brought on appeal from the exclusive and original jurisdiction granted to the first level courts; and
(8) All habeas corpus cases decided by the first level courts in the absence of the Regional Trial Court judge, that are brought up on appeal from the special jurisdiction granted to the first level courts.
Under the Consolidated Guidelines on CAM and JDR, court diversion is a “three-stage process”. The first stage is the CAM where the judge refers the parties to the Philippine Mediation Center for the mediation of their dispute by trained and accredited mediators. Upon failing to secure a settlement of the dispute during the first stage, a second attempt is made at the JDR stage, where the JDR judge becomes a mediator-conciliator-early neutral evaluator in a continuing effort to secure a settlement. Still failing that second attempt, the mediator-judge must turn over the case to another judge (a new one by raffle or nearest/pair judge) who will continue with the regular trial of the unsettled case. The third stage is during the appeal where covered cases are referred to the Philippine Mediation Center of the Appeals Court Mediation Unit for mediation.
Have there been any recent court decisions considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?
There has been no recent court decision considering the setting aside of an award that has been enforced in another jurisdiction or vice versa.