Philippines: Arbitration (3rd edition)

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This country-specific Q&A provides an overview of the legal framework and key issues surrounding arbitration law in the 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/

  1. What legislation applies to arbitration in your country? Are there any mandatory laws?

    The following laws and rules govern arbitration in the Philippines:

    a) Republic Act No. 976- An Act to Authorize the Making of Arbitration and Submission Agreements, to Provide for the Appointment of Arbitrators and the Procedure for Arbitration in Civil Controversies, and for Other Purposes, otherwise known “The Arbitration Law” of 1953;
    b) Republic Act No. 9285- 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, also known “ADR Act of 2004”;
    c) UNCITRAL Model Law on International Commercial Arbitration;
    d) New York Convention;
    e) Special Rules of Court in Alternative Dispute Resolution otherwise known “Special ADR Rules”;
    f) Executive Order No. 1008- Creating an Arbitration Machinery for the Philippine Construction Industry. This law mandated arbitration as mode for settling disputes in construction industry; and
    g) Philippine Jurisprudence or Supreme Court Decisions on arbitrations.

  2. Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?

    The New York Convention governs the recognition and enforcement of foreign arbitral awards in the Philippines. It was concurred in by the Philippine Senate on 10 May 1965, and was ratified by the President on the same year, 11 October 1965.

    Rule 13.4 of the Special ADR Rules explicitly provides that the recognition and enforcement of foreign arbitral awards shall be governed by the New York Convention.

  3. What other arbitration-related treaties and conventions is your country a party to?

    Aside from the foregoing, there are none as of this writing.

  4. Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?

    Yes, the Philippines adheres to the UNCITRAL Model Law for Commercial Arbitration. Section 19 of Republic Act No. 9285 provides that international commercial arbitration shall be governed by the UNCITRAL Model Law for Commercial Arbitration.

  5. Are there any impending plans to reform the arbitration laws in your country?

    There are several bills currently pending in both houses of the Philippine Congress. Notably, these bills are:

    a.) Senate Bill No. 2033 - An Act Creating The Philippine Arbitration Commission And Institutionalizing Compulsory Arbitration For Specific Areas Of Dispute, And For Other Purposes, otherwise known “Philippine Arbitration Commission Act Of 2017”. This bill introduces mandatory arbitration to disputes involving medical malpractice, insurance law, maritime laws, intellectual property laws, and intra-corporate matters or collectively defined as “Areas of Dispute”; and
    b.) House Bill No. HB04072 - An Act Further Strengthening Voluntary Arbitration As The Preferential Mode Of Labor Dispute Settlement, Amending For This Purpose Articles 217, 260, 261, 262-A, 262-B, 263(G) And Article 277(F), And Incorporating A New Article 262-D Of Presidential Decree No. 442, Otherwise Known As The Labor Code Of The Philippines, As Amended.

  6. What arbitral institutions (if any) exist in your country? Have there been any amendments to their rules or are there any being considered?

    One of these institutions is the Philippine Dispute Resolution Center, Inc. (“PDRCI”). As an arbitral institution, it does not directly resolve conflicts. While it administers arbitration, the function of resolving disputes remains with the appointed arbitrators. PDRCI ensures that the rules are complied with during arbitration proceedings.

    The 2015 PDRCI Administrative Guidelines contain the latest amendment to its rules, superseding prior Administrative Guidelines. PDRCI has likewise coordinated with the Intellectual Property Office of the Philippines (“IPOPHL”) to establish a complete alternative dispute resolution system involving intellectual property disputes.

    The Construction Industry Arbitration Commission (“CIAC”) has exclusive original jurisdiction over disputes involving construction contracts in the Philippines.

    CIAC recently issued the Revised Rules of Procedure Governing Commercial Arbitration last 09 November 2017. Amendments were made to align CIAC’s arbitration practices with international standards.

  7. What are the validity requirements for an arbitration agreement under the laws of your country?

    Under Section 2 of Republic Act No. 876, otherwise known as the Arbitration Law, arbitration agreements may arise either through a submission to arbitrate, or through an arbitration agreement incorporated in a contract. Such submission or contract shall be valid, enforceable and irrevocable, except if a ground for revoking a contract exists. Section 4 of the Arbitration Law further requires the submission or contract to be in writing and signed by the parties or their lawful agents.

  8. Are arbitration clauses considered separable from the main contract?

    Yes, an arbitration agreement is considered separable from the main contract under the Special ADR Rules and Philippine jurisprudence .

  9. Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?

    In the Philippines, international commercial arbitrations are principally governed by the Model Law on International Commercial Arbitration (“Model Law”).

    Arbitration agreements are consensual contracts under Philippine laws. Thus, they take effect only between the parties to the agreement. However, a stranger to the contract may be bound by the arbitration agreement if the contract refers to a document containing an arbitral clause, and the reference makes the arbitration clause part of the contract.

  10. How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?

    Under the Model Law, arbitral tribunals decide a case primarily based on the law chosen by the parties as applicable to the substance of the dispute.

  11. Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?

    The following matters are non-arbitrable under Philippine laws:

    a.) labor disputes;
    b.) civil status of persons;
    c.) validity of a marriage;
    d.) any grounds for legal separation;
    e.) jurisdiction of courts;
    f.) future legitime;
    g.) criminal liability;
    h.) future support; and
    j.) those which by law cannot be compromised. There has been no amendment on the cases that are non-arbitrable in the recent years.

  12. In your country, are there any restrictions in the appointment of arbitrators?

    For domestic arbitration, the ADR Law requires an arbitrator to be of legal age, in full enjoyment of his/her civil rights, and literate.

    No arbitrator shall be:

    1. related by blood or marriage within the sixth degree to either party to the controversy;
    2. has or has had financial, fiduciary or other interest in the controversy; or
    3. has any personal bias, which might prejudice the right of any party to a fair and impartial award.

    For international arbitration, the UNCITRAL Model Law allows an arbitrator to be challenged only if circumstances exist giving rise to justifiable doubts as to his/her impartiality or independence, or if he/she does not possess the qualifications agreed to by the parties.

  13. Are there any default requirements as to the selection of a tribunal?

    Under the UNCITRAL Model Law, the parties can agree on the number of arbitrators. In the absence of an agreement, the default number of arbitrators shall be three (3).

    The parties can likewise agree on the procedure for appointing the arbitrator(s). In the absence of an agreement, the following rules shall be observed: 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; or 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.

  14. Can the local courts intervene in the selection of arbitrators? If so, how?

    Under the Special ADR Rules, local courts may appoint the arbitrators in the following instances:
    a.) a party fails or refuses to appoint his/her own arbitrator;
    b.) in a three-arbitrator panel, the two arbitrators fail or refuse to appoint the third arbitrator, and
    c.) in an ad hoc arbitration, the National President of the Integrated Bar of the Philippines (“IBP”) fails or refuses to appoint an arbitrator.

  15. Can the appointment of an arbitrator be challenged? What are the grounds for such challenge? What is the procedure for such challenge? Has there been an increase in number of challenges in your jurisdiction?

    Yes, the appointment of an arbitrator may be challenged on any of the following grounds:

    a.) if circumstances exist that give rise to justifiable doubts as to impartiality and independence;
    b.) if they do not possess the qualifications in the law and in the implementing rules and regulations; or
    c) if they refuse to respond to questions on their professional dealing. The challenge may only be for reasons arising after the arbitration agreement or were unknown during the arbitration.
    Under the ADR Law, the challenge shall be made before the tribunal, should the arbitrator challenged not yield, the challenging party may renew the challenge before the Court of First Instance of the province or city in which the challenged arbitrator, or, any of them, if there be more than one, resides.

    Under the UNCITRAL Model Law, the parties can agree on the procedure for the challenge. In the absence of an agreement, a party intending to challenge an arbitrator shall, within fifteen (15) days after becoming aware of the arbitral tribunal’s constitution or of any circumstance which would subject him/her to a challenge, send to the arbitral tribunal a written statement of the reasons for the challenge. If the challenge is unsuccessful, the challenging party may, within thirty (30) days after receiving the notice of the decision rejecting the challenge, request the court or other authority specified in Article 6 of the UNCITRAL Model Law to decide on the challenge. The decision shall be unappealable. While such request is pending, the arbitral tribunal, including the challenged arbitrator, may continue the arbitral proceedings and make an award.

  16. What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?

    Where the mandate of an arbitrator is terminated or he/she withdraws from office, a substitute arbitrator shall be appointed according to the rules applicable to the appointment of the arbitrator being replaced.

  17. Are arbitrators immune from liability?

    Arbitrators are not personally liable. However, it may be a cause for voiding the arbitral proceedings or the arbitral award.

  18. Is the principle of competence-competence recognised in your country?

    Yes, the principle of competence-competence is recognized under Philippine Arbitration Law and its Implementing Rules.

  19. What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?

    The local courts shall refer the parties to arbitration pursuant to Republic Act No. 9285. The arbitration agreement is a contract. Hence, it is the law between the parties and they must comply with it in good faith, as mandated by the Philippine Civil Code.

  20. How are arbitral proceedings commenced in your country? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?

    The manner of commencing arbitration proceedings depends on the rules adopted by the parties. In case of domestic or international institutional arbitration, the procedure of the arbitration institution chosen by the parties shall be observed. For an ad hoc arbitration, the law provides the manner for its commencement. In case of ad hoc domestic arbitration, Section 5(a) of R.A. 876 requires the initiating party to serve a demand for arbitration upon the other party. Such demand should contain the nature of the controversy, the amount involved, if any, and the relief sought, together with a true copy of the contract providing for arbitration. The demand shall be served upon any party either in person or by registered mail.

  21. What happens when a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate?

    In domestic arbitration, Section 6 of R.A. 876 empowers local courts to compel the parties to arbitrate upon petition of the other party in case of failure, neglect or refusal of another to participate under their arbitration agreement. A party may compel the other party to arbitrate because an arbitration agreement is the law between them and they are expected to abide by it in good faith . For international commercial arbitration, the UNCITRAL Model Law allows the arbitral tribunal to continue with the proceedings and render an award despite a party’s non-participation.

  22. 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.

  23. In what instances can third parties or non-signatories be bound by an arbitration agreement or award? Can local courts order third parties to participate in arbitration proceedings in your country?

    Generally, an arbitration agreement is only binding upon the parties to the contract containing the agreement. Thus, a third party cannot be compelled to arbitrate under the contract, except when the contract refers to a document containing an arbitration clause to which the third party is a signatory.

    Philippine courts may order third parties to participate in arbitration proceedings under Rule 4.7 of the Special ADR Rules. Local courts may also, issue an order directing the inclusion of third parties in arbitration but who agree to such inclusion, provided those originally bound by it do not object to their inclusion.

  24. What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?

    Section 14 of R.A. 876 empowers the arbitrators to issue subpoenas duces tecum and subpoenas ad testificandum. R.A. 876 also authorizes the arbitral tribunal and the local courts to grant interim relief to the parties regardless if the arbitration is presently conducted or still being instituted. Further, the arbitral tribunal and the local courts have concurrent powers to grant interim relief without any qualification.

    Section 28 of R.A. 9285 allows the Regional Trial Court to grant interim or provisional relief, including preliminary injunction, to the parties in an arbitration even prior to the constitution of the arbitral tribunal.

    Rule 5.6 of the Special ADR Rules enumerates the types of interim reliefs that may be granted:

    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.

  25. Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence?

    The Special ADR Rules authorizes the local courts to assist in the taking of evidence in an arbitration, since the arbitral tribunal does not possess compulsory processes unlike the local courts. The assistance may be sought at any time during the course of the arbitral proceedings when the need arises .

  26. What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your country?

    The Philippines abide by the International Bar Association’s (“IBA”) Guidelines on Party Representation in International Arbitration.

  27. How are the costs of arbitration proceedings estimated and allocated?

    The costs of the proceedings shall be borne by the parties equally, unless otherwise agreed upon or directed by the arbitrator or arbitral tribunal.

    When the case is submitted for decision, the party praying for a foreign arbitral award’s recognition and enforcement shall submit a sworn statement confirming the incurred costs of the proceedings in the Philippines. The prevailing party shall be entitled to an award of costs, including the reasonable attorney’s fees. The court shall determine the reasonableness of the claim for attorney’s fees. The same rule applies in cases wherein the party is praying for confirmation or vacation of an arbitral award.

  28. Can pre- and post-award interest be included on the principal claim and costs incurred?

    R.A. 876, R.A. 9285, and the Special ADR Rules do not specifically state that pre- and post-award interest can be included in the principal claim and costs incurred. However, it may be agreed upon by the parties.

  29. What legal requirements are there in your country for the recognition of an award?

    First, the petition must be filed in accordance with the rules on venue under the Special ADR Rules. Second, it must contain the following: the addresses of the parties to the arbitration; in the absence of any indication in the award, the country where the arbitral award was made and whether such country is a signatory to the New York Convention; and the relief sought. Third, it must also have the following attachments: an authentic copy of the arbitration agreement; and an authentic copy of the arbitral award. If the foreign arbitral award or agreement to arbitrate or submission is not made in English, the petitioner shall also attach to the petition a translation of these documents into English. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.

  30. What is the estimated timeframe for the recognition and enforcement of an award? May a party bring a motion for the recognition and enforcement of an award on an ex parte basis?

    A domestic arbitral award generally does need court approval for its validity. However, a judicial confirmation of the arbitral award may be needed in the event that the losing party refuses to voluntarily comply. Under Rule 11.2(a) of the Special ADR Rules, the winning party may petition the court to confirm the award at any time after the lapse of thirty (30) days from receipt of the arbitral award.

    A party cannot file an ex parte motion for the recognition and enforcement of an award because Rule 11.7 of the Special ADR Rules explicitly states that the court shall notify the respondent and be allowed to comment on or oppose it.

  31. Does the arbitration law of your country provide a different standard of review for recognition and enforcement of a foreign award compared with a domestic award?

    Under Section 42 of R.A. 9285, the New York Convention governs the recognition and enforcement of foreign arbitral awards in the Philippines.

    If the foreign arbitral award is not covered by the New York Convention, a Philippine court may recognize and enforce it as a convention award on the grounds of comity and reciprocity. However, if the foreign country does not extend comity and reciprocity to awards made in the Philippines, the court may treat such award as a foreign judgment enforceable under Section 48, Rule 39 of the Rules of Court.

  32. Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?

    The remedies are provided in the ADR Act of 2004 and special law. Normally, an arbitral award may be enforced by regular court except when there is a ground to vacate the same.

  33. Can arbitration proceedings and awards be appealed or challenged in local courts? What are the grounds and procedure?

    Under the ADR of 2004, both domestic and foreign arbitral awards cannot be appealed with the regular courts. The law limits the regular court’s intervention over arbitral awards to confirmation, enforcement and recognition.

    It is important to note that it is the decision of the Regional Trial Court confirming, vacating, setting aside, modifying or correcting an arbitral award that 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 be shall 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 promulgated by the Supreme Court. [Section 46. ADR Act of 2004]

  34. 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)?

    Consistent with the principle that arbitration is a creature of contract, the parties to an arbitration agreement can agree that the decision by an arbitral tribunal is final and executory. In any case, no appeal on the merits can be made to a court of law from an abitral tribunal award.

    As such, the Philippine courts can only vacate or set aside the decision of an arbitral tribunal upon a clear showing that the award suffers from infirmities defined under the law and the Special ADR Rules.

  35. To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

    The Philippine Supreme Court has ruled that an agreement to submit disputes to arbitration may be construed as a waiver of immunity from suit. (China National Machinery Equipment Corp (Group) vs. Santa Maria et al. G.R. No. 185572, 7 February 2012)

  36. To what extent might a third party challenge the recognition of an award?

    Under the Implementing Rules and Regulations of R.A. 9285, third parties may challenge the award’s recognition on jurisdictional grounds regarding their inclusion in the arbitration.

  37. Have there been any significant developments with regard to third party funding in your jurisdiction recently?

    Third party funding is neither expressly prohibited nor allowed in the Philippines. However, champertous contracts are still expressly prohibited for public policy reasons. A champertous contract is an agreement whereby an attorney agrees to pay the costs of the proceedings in consideration of a part of the litigation’s proceeds. Regardless, this rule merely applies to contracts between lawyers

  38. Is emergency arbitrator relief available in your country? Is this frequently used?

    Yes, emergency arbitrator relief is available under the PDRCI rules.

  39. Are there arbitral laws or arbitration institutional rules in your country providing for simplified or expedited procedures for claims under a certain value? Are they often used?

    Yes, expedited procedures are also available under the PDRCI rules.

  40. Have there been any mass (arbitration) claims in your jurisdiction?

    We are unaware of mass arbitration claims in the Philippines.