1. DFA v. BCA International Corporation, GR 225051, July 19, 2017, Peralta, J.

, Second
Div, (Appeal by certiorari under rule 65 directly to SC from an interlocutory order of an
arbitral tribunal is improper)
FACTS:
DFA awarded the Machine Readable Passport and Visa Project to respondent BCA under an
Amended Build-Operate-Transfer Agreement. Conflict arose. DFA sought to terminate the
agreement. BCA filed a request for arbitration. The arbitral tribunal was constituted. Among
other reliefs, in a statement of claims on August 24, 2009, BCA sought judgment ordering DFA
to pay P100M damages to BCA.

On October 25, 2013, BCA filed an amended statement of claims, praying for judgment of
P1.6B and P100M damages. DFA objected, averring that its belated filing violates its due
process rights. BCA withdrew the amended statement of claims to avoid further delay in the
arbitration of its claims.

But on May 04, 2015, BCA filed anew a motion to admit amended statement of claims,
increasing the actual damages sought to P390M plus P10M damages. DFA opposed the motion.
In Procedural Order 11, the Arbitral Tribunal granted the motion to admit the amended claims on
the premise that BCA would no longer present additional evidence to prove the additional
claims. DFA moved to reconsider PO 11.

The tribunal then issued PO 12 on June 08, 2016, directing the parties to submit additional
documentary evidence in support of their respective positions in relation to the amended
statement of claims. PO 12 allowed the amendment to conform to the evidence presented by
BCA but still disallowed BCA from presenting additional evidence.

Since PO 12 denied DFA’s MR of PO 11, DFA filed this petition for certiorari directly with the
SC under Rule 65 with application for TRO and WPI, seeking to annul PO 11 and PO 12.

ISSUE:
Whether the Supreme Court should give due course to the Rule 65 petition from the procedural
order of the arbitral tribunal, granting the amended statement of claims of BCA.
HELD: NO.
1) The parties’ Agreement provides for resolution of dispute in S19.02 thereof:
If the Dispute cannot be settled amicably within ninety (90) days by mutual discussion as
contemplated under Section 19.01 herein, the Dispute shall be settled with finality by an
arbitrage tribunal operating under International Law, hereinafter referred to as the
"Tribunal," under the UNCITRAL Arbitration Rules contained in Resolution 31/98
adopted by the United Nations General Assembly on December 15, 1976, and entitled
"Arbitration Rules on the United Nations Commission on the International Trade Law."
The DFA and BCA undertake to abide by and implement the arbitration award. The place
of arbitration shall be Pasay City, Philippines, or such other place as may mutually be
agreed upon by both parties. The Arbitration proceeding shall be conducted in the
English language.
2) Under Art. 33 of the UNCITRAL Arbitration Rules governing the parties, "the arbitral
tribunal shall apply the law designated by the parties as applicable to the substance of the
dispute." "Failing such designation by the parties, the arbitral tribunal shall apply the law
determined by the conflict of laws rules which it considers applicable." In PH, the rule is that the
law of the place where the contract is made governs or lex loci contractus. As the parties did not
designate the applicable law and the Agreement was perfected in PH, our arbitration laws, RA
876, RA 9285, its IRR, and Special ADR Rules, apply. The IRR of RA No. 9285 provides that
"[t]he arbitral tribunal shall decide the dispute in accordance with such law as is chosen by the
parties. In the absence of such agreement, Philippine law shall apply."

3) RA 9285 applies to pending arbitration proceedings since it is a procedural law, which has
retroactive effect provided no vested rights are impaired (consistent with Art. 2046 of NCC).

4) Under RA 9285, court intervention is allowed in these instances: (1) when a party in the
arbitration proceedings requests for an interim measure of protection; (2) judicial review of
arbitral awards by the Regional Trial Court (RTC); and (3) appeal from the RTC decisions on
arbitral awards to the Court of Appeals.

In the IRR of RA 9285:

Art. 5.4. Extent of Court Intervention. In matters governed by this Chapter, no court shall
intervene except in accordance with the Special ADR Rules.

4.1) Court intervention in the Special ADR Rules is allowed thru these remedies:
(1) Specific Court Relief, which includes Judicial Relief Involving the Issue of Existence,
Validity and Enforceability of the Arbitral Agreement, Interim Measures of
Protection, Challenge to the Appointment of Arbitrator, Termination of Mandate of
Arbitrator, Assistance in Taking Evidence, Confidentiality/Protective Orders, Confirmation,
Correction or Vacation of Award in Domestic Arbitration, all to be filed with the RTC; (2) a
motion for reconsideration may be filed by a party with the RTC on the grounds specified in
Rule 19.1; (3) an appeal to the Court of Appeals through a petition for review under Rule
19.2 or through a special civil action for certiorari under Rule 19.26; and (4) a petition
for certiorari with the Supreme Court from a judgment or final order or resolution of the Court
of Appeals, raising only questions of law.

4.2) Under the Special ADR Rules:

RULE 19.36. Review Discretionary. - A 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; and

d. Committed an error so egregious and harmful to a party as to amount to an

undeniable excess of jurisdiction.
The mere fact that the petitioner disagrees with the Court of Appeals' determination of
questions of fact, of law or both questions of fact and law, shall not warrant the exercise
of the Supreme Court's discretionary power. The error imputed to the Court of Appeals
must be grounded upon any of the above prescribed grounds for review or be closely
analogous thereto.

A mere general allegation that the Court of Appeals has committed serious and
substantial error or that it has acted with grave abuse of discretion resulting in substantial
prejudice to the petitioner without indicating with specificity the nature of such error or
abuse of discretion and the serious prejudice suffered by the petitioner on account
thereof, shall constitute sufficient ground for the Supreme Court to dismiss outright the
petition.

RULE 19.37. Filing of Petition with Supreme Court. - A party desiring to appeal

by certiorari from a judgment or final order or resolution of the Court of Appeals issued
pursuant to these Special ADR Rules may file with the Supreme Court a verified petition
for review on certiorari. The petition shall raise only questions of law, which must be
distinctly set forth.

5) Thus, an appeal by certiorari to the Supreme Court is from a judgment or final order or
resolution of the Court of Appeals and only questions of law may be raised. There are instances
when we overlooked the rule on hierarchy of courts and took cognizance of a petition for
certiorari against RTC when it granted interim relief to a party considering the transcendental
importance of the issue therein involved. But here, the appeal by certiorari is not from a final
Order of the Court of Appeals or the Regional Trial Court, but from an interlocutory
order of the Arbitral Tribunal; hence, the petition must be dismissed.

1.1 DFA v. BCA International Corporation, GR 210858, June 29, 2016, Carpio, J., Second
Division.
FACTS:
In an amended BOT Agreement, DFA awarded the Machine Readable Passport and Visa Project
(MRPN project) to BCA. During implementation, DFA sought to terminate the agreement. BCA
opposed and filed a request for arbitration according to S19.02 of the Agreement:
Section 19.02. Failure to Settle Amicably - If the Dispute cannot be settled amicably
within ninety (90) days by mutual discussion as contemplated under Section 19.01 herein,
the Dispute shall be settled with finality by an arbitrage tribunal operating under
International Law, hereinafter referred to as the "Tribunal", under the UNCITRAL
Arbitration Rules contained in Resolution 31/98 adopted by the United Nations
General Assembly on December 15, 1976, and entitled "Arbitration Rules on the
United Nations Commission on the International Trade Law". Xxx
On June 29, 2009, the ad hoc tribunal was constituted. It approved BCA’s request to apply in
court for issuance of subpoena. BCA thus filed in RTC a petition for assistance in taking
evidence pursuant to the IRR of ADR Act of 2004, RA 9285. BCA sought issuance of subpoena
ad testificandum and duces tecum for witnesses Secretary of FA, of Finance, chairman of
Commission of Audit, and documents in their possession. DFA filed its comment alleging that
the presentation of the witnesses and documents was protected by the deliberative process
privilege.

RTC ruled for BCA and held that the evidence was not protected by the deliberative process
privilege. It issued subpoenas duces tecum and ad testificandum. Hence, DFA filed this petition
with prayer for TRO.

DFA claims that the 1976 UNCITRAL Arbitration Rules and Rules of Court apply, not RA 9285
and Special ADR Rules.

ISSUE:
Whether RA 9285 applies to an agreement entered into in 2002 where RA 9285 was
promulgated in 2004.
HELD: YES.
1) While enacted only in 2004, RA 9285 applies to pending arbitration proceedings since it is a
procedural law which has retroactive effect. Thus, contrary to DFA’s contention, RA 9285, its
IRR, and the Special ADR Rules are applicable. The arbitration between DFA and BCA is still
pending since no award has yet been rendered. DFA did not also allege any vested rights
impaired by the application of those procedural rules.

2) RA 9285, its IRR, and the Special ADR Rules provide that any party to an arbitration, whether
domestic or foreign, may request the court to provide assistance in taking evidence such as the
issuance of subpoena ad testificandum and subpoena duces tecum. The Special ADR Rules
specifically provide that they shall apply to assistance in taking evidence, and the RTC order
granting assistance in taking evidence shall be immediately executory and not subject to
reconsideration or appeal. An appeal with the Court of Appeals (CA) is only possible where the
RTC denied a petition for assistance in taking evidence.  An appeal to the Supreme Court from
the CA is allowed only under any of the grounds specified in the Special ADR Rules. DFA failed
to follow the procedure and hierarchy of courts in RA 9285, its IRR, and Special ADR Rules
when DFA directly appealed to SC the RTC orders granting assistance in taking evidence.

3) But even without applying RA 9285 and Special ADR Rules, RTC still has authority to issue
subpoenas. The 1976 UNCITRAL Arbitration Rules agreed by the parties to govern them state
that the arbitral tribunal shall apply the law designated by the parties, or without such
designation, the tribunal shall apply the law determined by the conflict of laws rules. In this
jurisdiction, lex loci contractus- the law of the place where the contract is made governs. Since
there is no law designated by the parties and the Agreement was perfected in PHL, RA 876 or
Arbitration Law applies.
RA 876 empowered arbitrators to subpoena witnesses and documents when the materiality of the
testimony has been demonstrated to them. S14 of RA 876 recognizes the right of any party to
take measures to safeguard any matter which is subject of the dispute in arbitration.

4) Deliberative process privilege can also be invoked in arbitration proceedings under RA 9285.
The privilege serves to assure that subordinates within an agency will feel free to provide the
decision-maker with uninhibited opinions without fear of later being subject to public ridicule or
criticism. Under RA 9285, orders of an arbitral tribunal are appealable to the courts. If an
official is compelled to testify before an arbitral tribunal and the order of an arbitral tribunal is
appealed to the courts, such official can be inhibited by fear of later being subject to public
criticism. The decision of the court is widely published including details involving the
privileged information. Future quality of deliberative process can be impaired by undue
exposure of the decision-making process to public scrutiny.

5) As a qualified privilege, the burden falls upon the government agency asserting the
deliberative process privilege to prove that the information in question satisfies both requires that
it be predecisional (Antecedent to adoption of an agency policy) and deliberative (a direct part of
the deliberative process in that it makes recommendations or expresses opinions on legal or
policy matters.). Here, since both BCA and DFA’s assertions of subpoena and privilege lack
specificity, the parties are directed to specify their claims before RTC and thereafter, RTC shall
determine which evidence is covered by the deliberative process privilege.

2. Heirs of Salas Jr. v. Laperal Realty Corporation, et al., GR 135362, December 13, 1999,
De Leon, Jr., J. Second Div. (Arbitration Agreement/Clause is a contract binding only on
the contract’s parties, their assigns and heirs; Even if a party may compel arbitration first,
if other persons not parties/assigns/heirs are involved, in the interest of justice it would be
better to hear the case involving all of them in the RTC to prevent multiplicity of suits
[**but see 2009 Special ADR Rules, Rule 4.7 b.])
FACTS:
Salas Jr. owned a land in Lipa Batangas. He entered into an Owner-Contractor Agreement with
Laperal Realty to provide construction services on his land. Salas Jr. left his home for a business
trip and never returned. Missing for more than 7 years, he was declared upon petition in RTC as
presumed dead.

Meanwhile, Laperal Realty sold subdivided portions thereof to respondents Rockway real Estate
Corporation, Sps. Dacillo, and Eduardo, Florante, and Jesus Vicente Capalan (respondent
buyers). Heirs of Salas filed in RTC a complaint for declaration of nullity of sale, reconveyance
etc. Laperal realty moved to dismiss on the ground that petitioners failed to submit their
grievance to arbitration as required under their Owner-Contractor Agreement:
All cases of dispute between CONTRACTOR and OWNER’S representative shall be
referred to the committee represented by: xxx.
RTC dismissed the case for non-compliance with the arbitration clause. Hence this petition for
review on certiorari.

ISSUE:
Whether the submission to arbitration binds the respondent lot buyers who purchased the lots
from Laperal, original party to the agreement containing the arbitration clause.
HELD: NO.
1) This Court has recognized arbitration agreements as valid, binding, enforceable and not
contrary to public policy so much so that when there obtains a written provision for arbitration
which is not complied with, the trial court should suspend the proceedings and order the parties
to proceed to arbitration in accordance with the terms of their agreement.

2) However, a submission to arbitration is a CONTRACT. Thus, the stipulation on arbitration

binds the parties thereto, their assigns and heirs. But only they. Heirs of Salas and Laperal
are certainly bound by the Agreement. If Laperal assigned its rights under the Agreement to a
third party, such assignee would also be bound by the arbitration provision since assignment
involves such transfer of rights as to vest in the assignee the power to enforce them to the same
extent as the assignor could have.

2.1) However, respondents Rockway et al. (respondent lot buyers) are not assignees of the rights
of Laperal under the Agreement to develop Salas Jr.’s land and sell the same. They are buyers of
the land that Laperal was given authority to develop and sell. Thus, they are not “assigns” in
Art. 1311 of NCC (contracts take effect only between the parties, their assigns, and heirs).

3) Petitioners claim that they suffered lesion of more than ¼ of the value of Salas’ land and thus
their cause of action is rescission, which falls under the exception clause in S2, RA 876 (“such
submission [to] or contract [of arbitration] shall be valid, enforceable and irrevocable, save, upon
such grounds as exist at law for the revocation of any contract").

But while rescission is an arbitrable issue, they impleaded in the suit for rescission respondent lot
buyers who are not parties to the Agreement nor an assign or heir. Thus, the right to arbitrate in
the Agreement was never vested in respondent lot buyers.

4) Laperal, as contracting party to the Agreement, has the right to compel petitioners to first
arbitrate before seeking judicial relief. However, to split the proceedings into arbitration for
respondent Laperal and trial for respondent lot buyers, or to hold trial in abeyance pending
arbitration, would result in MULTIPLICITY OF SUITS. It would be in the interest of justice
if the trial court hears the complaint against all respondents herein in a single proceeding.

3. Home Bankers Savings and Trust Company v. CA, GR 115412, November 19, 1999,
Buena, J., Second Division (Even while arbitration proceedings are pending, a party
thereto may file an action in court to safeguard/conserve “any matter which is the subject
of dispute in arbitration”, like an action for writ of preliminary attachment [S14, RA 876])
FACTS:
Victor Tancuan issued HBSTC check for P25,250,000 while Eugene Arriesgado issued 3 Far
East Bank and Trust Company (FEBTC) checks for P25,200,000. Tancuan and Arriesgado
exchanged checks and deposited them with their banks for collection. Respondent FEBTC
presented Tancuan’s check to HBSTC for clearing, but HBSTC dishonored for insufficient
funds. HBSTC sent Arriesgado’s 3 FEBTC checks thru PH Clearing House Corporation (PCHC)
to FEBTC, but these were returned drawn against insufficient funds. HBSTS refused to accept
the checks and returned them to FEBTC for “Beyond Reglementary Period”, implying that
HBSTC already treated the 3 FEBTC checks as cleared and allowed the proceeds thereof to be
withdrawn. FEBTC demanded reimbursement for the returned checks and inquired from HBSTC
whether it allowed withdrawal of funds against the unfunded checks. HBSTC refused to
reimburse and provide FEBTC with the needed information.

Thus, FEBTC submitted the dispute for arbitration in the PCHC Arbitration Committee under
PCHC’s Supplementary Rules on Regional Clearing to which both HBSTC and FEBTC are
bound.

While the arbitration proceedings was still pending, FEBTC filed an action for sum of money
with preliminary attachment against HBSTC et al. in RTC. HBSTC moved to dismiss but was
denied. CA dismissed HBSTC’s petition for certiorari. Hence this appeal by certiorari in Rule
45.

ISSUE:
Whether FEBTC, while the arbitration proceedings is still pending, may file with the RTC an
action for sum of money with preliminary attachment.
HELD: YES.
1) S14 of RA 876, Arbitration Law, allows the party to the arbitration proceeding to petition the
court to take measures to safeguard and/or conserve any matter which is the subject of the
dispute in arbitration:
Section 14. Subpoena and subpoena duces tecum. - Arbitrators shall have the power to
require any person to attend a hearing as a witness. They shall have the power to
subpoena witnesses and documents when the relevancy of the testimony and the
materiality thereof has been demonstrated to the arbitrators. Arbitrators may also require
the retirement of any witness during the testimony of any other witness. All of the
arbitrators appointed in any controversy must attend all the hearings in that matter and
hear all the allegations and proofs of the parties; but an award by the majority of them is
valid unless the concurrence of all of them is expressly required in the submission or
contract to arbitrate. The arbitrator or arbitrators shall have the power at any time, before
rendering the award, without prejudice to 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.
1.1) Here, private respondent filed an action for a sum of money with prayer for a writ of
preliminary attachment. Such action involved the same subject matter as that in arbitration, i.e.,
the sum of P25,200,000 which was allegedly deprived from private respondent in what is known
in banking as a "kiting scheme." The civil action was not a simply case of money claim since
FEBTC included a prayer for preliminary attachment, which is sanctioned by S14 of the
Arbitration Law.

2) HBSTC cites Associated Bank v. CA and Puromines v. CA in contending that “when

arbitration is agreed upon and suit is filed without arbitration having been held and terminated,
the case should be dismissed.” But the cases are not in point. In Associated Bank, we held:
Under the rules and regulations of the Philippine Clearing House Corporation (PCHC),
the mere act of participation of the parties concerned in its operations in effect amounts to
 a manifestation of agreement by the parties to abide by its rules and regulations. As a
consequence, a party cannot invoke the jurisdiction of courts over xxx controversies
which fall under the PCHC rules xxx without first going through the arbitration processes
laid out by the body.

We concluded that the “jurisdiction of PCHC under the rules is clear and applicable to all parties
xxx under their obligation to first seek redress of their disputes with PCHC before going to
the trial court.

2.1) Here, FEBTC sought relief from the trial court for measures to safeguard/conserve the
subject of dispute under arbitration, as sanctioned by S14 of the Arbitration Law and otherwise
not shown to be contrary to PCHC rules and regulations.

4. LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc.,

GR 141833, March 26, 2003, Panganiban, J., Third Division (Arbitration agreements
should be interpreted in favor of arbitration. As long as the clause is susceptible of
interpretation that covers the asserted dispute, an order to arbitrate should be granted)
FACTS:
LM and Capitol entered into a Subcontract Agreement involving electrical work at the third port
of Zamboanga. Capitol took over some of the work contracted to LM. Allegedly, LM failed to
finish it due to inability to procure materials. Upon completion of its task in the contract, LM
billed Capitol P6.7M. contesting the accuracy of the billable accomplishments listed by LM,
Capitol refused to pay. Capitol also took refuge in the termination clause of the Agreement
allowing it to set off the cost of work that LM failed to undertake due to the take-over against the
amount it owed LM.

LM filed with RTC a complaint for collection of the amount. Capitol moved to dismiss alleging
that the complaint was premature as there was no prior recourse to arbitration. RTC denied the
motion to dismiss on the ground that the dispute did not involve interpretation or implementation
of the agreement. CA reversed and ordered referral to arbitration. Hence this petition.

ISSUE:
Whether the dispute should first be arbitrated before the court involvement.
HELD: YES.
1) The Subcontract has the following arbitral clause:
"6. The Parties hereto agree that any dispute or conflict as regards to interpretation and
implementation of this Agreement which cannot be settled between [respondent] and
[petitioner] amicably shall be settled by means of arbitration.
2) The dispute arose from the parties’ incongruent positions on whether certain provisions of
their Agreement could be applied to the facts. The instant case involves technical discrepancies
that are better left to an arbitral body that has expertise in those areas. In any event, the inclusion
of an arbitration clause in a contract does not ipso facto divest the courts of jurisdiction to pass
upon the findings of arbitral bodies, because the awards are still judicially reviewable under
certain conditions. 
2.1) Within the scope of the arbitration clause are discrepancies as to the amount of advances and
billable accomplishments, the application of the provision on termination, and the consequent
set-off of expenses. A review of the factual allegations of the parties reveals that they differ on
the following questions: (1) Did a take-over/termination occur? (2) May the expenses incurred
by respondent in the take-over be set off against the amounts it owed petitioner? (3) How much
were the advances and billable accomplishments? The resolution of the foregoing issues lies in
the interpretation of the provisions of the Agreement. 

3) Consistent with the policy of encouraging alternative dispute resolution methods, courts
should liberally construe arbitration clauses. Provided such clause is susceptible of an
interpretation that covers the asserted dispute, an order to arbitrate should be granted any
doubt should be resolved in favor of arbitration.

4) LM argues that even if the dispute is arbitrable, there is a need to file a request for arbitration
with the Construction Industry Arbitration Commission (CIAC). But this requirement was under
S1, Art. II of the old Rules of Procedure Governing Construction Arbitration. S1, Art. III of the
New Rules of Procedure Governing Construction Arbitration has dispensed with this
requirement:
"SECTION 1. Submission to CIAC Jurisdiction — An arbitration clause in a construction
contract or a submission to arbitration of a construction dispute shall be deemed an
agreement to submit an existing or future controversy to CIAC jurisdiction,
notwithstanding the reference to a different arbitration institution or arbitral body in such
contract or submission. When a contract contains a clause for the submission of a future
controversy to arbitration, it is not necessary for the parties to enter into a submission
agreement before the claimant may invoke the jurisdiction of CIAC."

Under the present rules, for a construction contract to fall within CIAC jurisdiction, it is merely
required that the parties agree to submit the same to voluntary arbitration regardless of what
forum they may choose, such that even if they choose another forum, the parties are not
precluded from electing to submit their dispute in CIAC.

5. Luzon Iron Development Group Corp. v. Bridestone Mining and Dev’t Corp, GR
220546, December 07, 2016, Mendoza, J., Second Division. (Arbitration agreement
construed liberally in favor of arbitration, if such interpretation is possible)
FACTS:
Respondents Bridestone Mining and Anaconda Mining and Development Corp. filed complaints
in RTC for rescission against petitioners Luzon Iron and Consolidated Iron Sands, Ltd., seeking
the rescission of the Tenement Partnership and Acquisition Agreement (TPAA) entered into
between petitioners on one hand and respondents on the other for assignment of the Exploration
Permit Application of the former to the latter. Petitioners moved to dismiss, citing lack of
jurisdiction over the subject matter because of an arbitration clause in the TPAA.

RTC denied the motion to dismiss, ruling that it had jurisdiction because under clause 14.8 of
TPAA, the parties could go directly to courts when a blatant violation of the TPAA is committed.
CA affirmed. Hence this appeal.
ISSUE:
Whether under the TPAA, the parties may go directly to court in case of blatant violation of the
TPAA provisions.
HELD: NO.
1) Par. 15.1 of TPAA reads:
If, for any reasonable reason, the Parties cannot resolve a material fact, material event or
any dispute arising out of or in connection with this TPAA, including any question
regarding its existence, validity or termination, within 90 days from its notice, shall be
referred to and finally resolved by arbitration in Singapore in accordance with the
Arbitration Rules of the Singapore International Arbitration Centre ("SIAC Rules") for
the time being in force, which rules are deemed to be incorporated by reference in this
clause 15.1.30
RTC and CA counter that par. 14.8 of TPAA allowed the parties to directly resort to courts in
case of direct or blatant violation of TPAA:
Each Party agrees not to commence or procure the commencement of any challenge
or claim, action, judicial or legislative enquiry, review or other investigation into the
sufficiency, validity, legality or constitutionality of (i) the assignments of the Exploration
Permit Applications(s) (sic) to LIDGC, (ii) any other assignments contemplated by this
TPAA, and/or (iii) or (sic) any agreement to which the Exploration Permit Application(s)
may be converted, unless a direct and/or blatant violation of the provisions of the TPAA
has been committed.

2) The state adopts a policy in favor of arbitration. RA 9285, S2 expresses this policy (Towards
this end, the State shall encourage xxx). Arbitration agreements are liberally construed in favor
of proceeding to arbitration. We adopt the interpretation that would render effective an
arbitration clause if the terms of the agreement allow for such interpretation.

2.1) Thus, pars. 14.8 and 15.1 of TPAA should be harmonized as to give life to the arbitration
clause, especially since such construction is possible in this case. A synchronized reading of
these TPAA provisions shows that a claim raising the sufficiency, validity etc. of (i), (ii), and
(iii) in par. 14.8 may be instituted only when there is a direct/blatant violation of the TPAA. In
turn, said action or claim is commenced by proceeding with arbitration as espoused by TPAA.

The Court disagrees that par. 14.8 of TPAA should be construed as exception to the arbitration
clause where direct court action may be resorted to in case of blatant violation of TPAA. Such
interpretation would render inutile the arbitration clause as practically all matters may be directly
brought before the courts.

3) Petitioner’s failure to refer the case for arbitration does not render the arbitration clause
inoperative. In Koppel v. Makati Rotary, we explained that an arbitration clause becomes
operative notwithstanding lack of formal request when a party has appraised the trial court of
the existence of an arbitration clause. S24, RA 9285 reads:
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.
This request is implemented by Rules 4.1 to 4.1 of the Special ADR Rules:
RULE 4: REFERRAL TO ADR
Rule 4.1. Who makes the request. — A party to a pending action filed in violation of the
arbitration agreement, whether contained in an arbitration clause or in a submission
agreement, may request the court to refer the parties to arbitration in accordance with
such agreement.
The use of “may” to qualify the act of filing a “request” in S24, RA 9285 means that the Special
ADR Rules did not intend to limit invocation of an arbitration agreement solely via such
“request”. In Koppel, petitioner, in its answer with counterclaim, had already apprised MeTC of
the arbitration clause. This is enough valid invocation of his right to arbitrate.

3.1) Here, petitioners never made any formal request for arbitration, but this is not the sole
means of invoking an arbitration clause. Petitioners made the RTC aware of the existence of the
arbitration clause in TPAA as they repeatedly raised this as an issue in all their motions to
dismiss. Thus, it was enough to activate the arbitration clause and thus should have alerted
RTC in proceeding with the case.

4) Also, judicial restraint should be exercised pursuant to the competence-competence principle

in Rule 2.4 of Special ADR Rules.

6. Steamship Mutual Underwriting Association (Bermuda) Limited v. Sulpicio Lines, Inc.,

GR 196072, September 20, 2017, Third Division. (The arbitration agreement may be
incorporated in a main contract by reference to another document containing such
agreement)
FACTS:
Steamship Mutual insures its members-shipowners against third party risks and liabilities.
Sulpicio Lines insured its fleet of vessels with Steamship, among which was MV Princess of the
World as evidenced by a Certificate of Entry and Acceptance issued by Steamship. MV
Princess was gutted by fire while on voyage. Sulpicio claimed indemnity from Steamship.
Steamship denied the claim and rescinded the insurance coverage on the ground that Sulpicio
was grossly negligent in conducting its business. Sulpicio thus filed a complaint with RTC.
Steamship moved to dismiss and to refer case to arbitration pursuant to Rule 47 of the
2005/2006 Club Rules.

RTC denied the motion to dismiss, holding that arbitration “did not appear to be the most
prudent action considering that other defendants had already filed their answers”. CA affirmed.
Hence this petition for review.

ISSUE:
Whether the arbitration agreement in the 2005/2006 Club Rules, referenced by the Certificate of
Entry and Acceptance which was agreed to and accepted by Sulpicio, is binding.
HELD: YES.
1) By entering its vessels in Steamship, Sulpicio also becomes a member of Steamship. A
protection and indemnity club like Steamship is an association composed of shipowners for the
purpose of providing insurance cover of its members. A shipowner wishing to enter its fleet of
vessels to Steamship must fill in an application for entry form and sign it. Steamship then issues
a Certificate of Entry and Acceptance of the vessels, showing its acceptance of the entry. Such
certificate for MV Princess states:
NOTES  
1. REFERENCE IS 2. THE RULES ARE PRINTED ANNUALLY
REQUESTED TO THE IN BOOK FORM, INCORPORATING ALL
RULES AS TO THE PREVIOUS ALTERATIONS AND A COPY
CIRCUMSTANCES OF IS SENT TO EACH MEMBER.
ENTRY BEING CANCELLED ALTERATIONS CAN BE MADE BY
AND AS TO ORDINARY RESOLUTION FOLLOWING
THE CIRCUMSTANCES OF A GENERAL MEETING NOTIFIED TO
AN ALTERATION IN THE ALL MEMBERS
RULES OR BY(E)-LAWS.
The certificate of entry and acceptance provides that coverage would be to the extent specified in
the By-Laws and the Rules of the Club. Sulpicio’s acceptance of the Certificate of Entry and
Acceptance manifests its acquiescence to all its provisions. Its acceptance also operated as
acceptance of the entire provisions of the Club Rules.

When a contract is in 2 or more writings, the writings should be read and interpreted together.
The Certificate of Entry does not contain the details of the insurance coverage, which are in the
Club Rules. The arbitration clause is in 2005/2006 Club Rules, Rule 47. Under Rule 47, any
dispute concerning the insurance afforded by Steamship must first be brought by a claiming
member to the Directors for adjudication. If this member disagrees with the decision of the
Director, the dispute must be referred to arbitration in London. Despite the member's
disagreement, the Managers of Steamship may refer the dispute to arbitration without
adjudication of the Directors. This procedure must be complied with before the member can
pursue legal proceedings against Steamship.

2) CA ruled that the arbitration agreement in the 2005/2006 Club Rules is not valid since it was
not signed by the parties. In domestic arbitration, the formal requirements of an arbitration
agreement are that it must “be in writing and subscribed by the party sought to be charged, or
by his lawful agent." In international commercial arbitration, it is likewise required that the
arbitration agreement must be in writing. An arbitration agreement is in writing if it is contained
(1) in a document signed by the parties, (2) in an exchange of letters, telex, telegrams or other
means of telecommunication which provide a record of the agreement, or (3) in an exchange of
statements of claim and defense in which the existence of an agreement is alleged by a party and
not denied by another. 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.

Thus, an arbitration agreement that was not embodied in the main agreement but set forth in
another document is binding upon the parties, where the document was incorporated by
reference to the main agreement. The arbitration agreement contained in the Club Rules, which
in turn was referred to in the Certificate of Entry and Acceptance, is binding upon Sulpicio even
though there was no specific stipulation on dispute resolution in this Certificate.

3) Also, Sulpicio became a member of Steamship by making an insurance contract with it. It is
bound by the Club Rules. In Associated Bank v. CA, applicable by analogy, We held that mere
participation by the banks in the clearing operations of the PCHC manifest their consent to
the PCHC Rules, including the binding effect of the arbitration agreements under these Rules.
Here, by accepting the certificate of entry and acceptance, Sulpicio consented to be bound by the
Club Rules.

4) RTC should suspend proceedings to give way to arbitration even if there are other
defendants not parties to the arbitration agreement. S25, RA 9285 states:
[W]here action is commenced by or against multiple parties, one or more of whom are
parties to an arbitration agreement, the court shall refer to arbitration those parties who
are bound by the arbitration agreement although the civil action may continue as to those
who are not bound by such arbitration agreement.

Rule 4.7 of the 2009 Special ADR Rules further expresses:

The court 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;
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;
c. The issues raised in the civil action could be speedily and efficiently resolved in its
entirety by the court rather than in arbitration;
d. Referral to arbitration does not appear to be the most prudent action; or
e. The stay of the action would prejudice the rights of the parties to the civil action who
are not bound by the arbitration agreement.

Thus, SC’s ruling in European Resources v. Ingenieuburo Birkhann is abrogated.

7. DPWH v. CMC, GR 179732, September 13, 2017, Leonen, J., Third Division. (Factual
findings of CIAC generally binding, may be set aside only for compelling reasons;
Commercial vs Voluntary (labor) vs Construction arbitration)
FACTS:
The Republic of PH, thru DPWH, and CMC/Monark/Pacific/Hi-Tri J.V. (the Joint Venture)
executed “Contract Agreement for the Construction of Contract xxx”. While the project was
ongoing, the Joint Venture’s truck and equipment were set on fire and bombed by members of
the Moro Islamic Liberation Front. The Joint Venture made several demands for extension and
payment of the foreign component of the Contract. The Joint Venture then filed a complaint
against DPWH before the Construction Industry Arbitration Commission (CIAC).

CIAC directed DPWH to pay the Joint Venture its money claims plus interest, but denied the
Joint Venture’s claim for price adjustment. Both parties filed their petitions for review in CA.
CA sustained CIAC’s award. Hence this petition.
ISSUE:
Whether the factual findings of CIAC may be reviewed by the courts.

HELD: Generally NO.

1) DPWH claims that CA overlooked or misappreciated facts (based on CIAC findings). Before
delving into the issues raised, it is imperative to understand CIAC’s role as arbitral tribunal.

2) CIAC was created under Executive Order No. 1008, or the "Construction Industry Arbitration
Law." It was originally under the administrative supervision of the Philippine Domestic
Construction Board which, in turn, was an implementing agency of the Construction Industry
Authority of the Philippines. The Construction Industry Authority of the Philippines is presently
a part of the Department of Trade and Industry as an attached agency.

S4 of EO 1008 lays out CIAC’s jurisdiction:

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

The jurisdiction of the CIAC may include but is not limited to violation of specifications
for materials and workmanship; violation of the terms of agreement; interpretation and/or
application of contractual time and delays; maintenance and defects; payment, default of
employer or contractor and changes in contract cost.

Excluded from the coverage of this law are disputes arising from employer-employee
relationships which shall continue to be covered by the Labor Code of the Philippines.
RA 9184, Government Procurement Reform Act, recognized CIAC’s competence in arbitrating
contractual disputes within the construction industry:
Section 59. Arbitration, Any and all disputes arising from the implementation of a
contract covered by this Act shall be submitted to arbitration in the Philippines according
to the provisions of Republic Act No. 876, otherwise known as the "Arbitration
Law": Provided, however, That, disputes that are within the competence of the
Construction Industry Arbitration Commission to resolve shall be referred thereto. The
process of arbitration shall be incorporated as a provision in the contract that will be
executed pursuant to the provisions of this Act: Provided, That by mutual agreement, the
parties may agree in writing to resort to alternative modes of dispute resolution.
RA 9285 (ADR Act) incorporated CIAC’s authority to arbitrate construction disputes:
CHAPTER 6 - ARBITRATION OF CONSTRUCTION DISPUTES

Section 34. Arbitration of Construction Disputes: Governing Law. - The arbitration of

construction disputes shall be governed by Executive Order No. 1008, otherwise known
as the Constitution Industry Arbitration Law.

Section 35. Coverage of the Law. - Construction disputes which fall within the original
 and exclusive jurisdiction of the Construction Industry Arbitration Commission (the
"Commission") shall include those between or among parties to, or who are otherwise
bound by, an arbitration agreement, directly or by reference whether such parties are
project owner, contractor, subcontractor, quantity surveyor, bondsman or issuer of an
insurance policy in a construction project.

The Commission shall continue to exercise original and exclusive jurisdiction over
construction disputes although the arbitration is "commercial" pursuant to Section 21
of this Act.
3) As a general rule, findings of fact of CIAC, a quasi-judicial tribunal which has expertise on
matters regarding the construction industry, should be respected and upheld. CIAC’s factual
findings as affirmed by CA will not be overturned except as to the most compelling of reasons,
like when such factual findings were drawn from a vacuum or arbitrarily reached, or are
grounded entirely on speculation or conjectures, are conflicting or are premised on the supposed
evidence and contradicted by the evidence on record or when the inference made is manifestly
mistaken or absurd.

4) In distinguishing commercial arbitration, voluntary arbitration in Art. 219(14) of the

Labor Code, and construction arbitration, Freuhauf Electronics PH Corporation v.
Technology Electronics Assembly and Management Pacific ruled that commercial arbitral
tribunals are purely ad hoc bodies operating through contractual consent, hence, they
are not quasi-judicial agencies. In contrast, voluntary arbitration under the Labor Code and
construction arbitration derive their authority from statute in recognition of the public interest
inherent in their respective spheres. Furthermore, voluntary arbitration under the Labor Code and
construction arbitration exist independently of the will of the contracting parties.

Voluntary arbitrators resolve labor disputes arising from interpretation of CBAs, which disputes
were specifically excluded from the coverage of the Arbitration Law and ADR Law. Unlike
purely commercial relationships, the relationship between capital and labor are impressed with
public interest. Thus, voluntary arbitrators authorized to resolve labor disputes are clothed with
quasi-judicial authority. On the other hand, commercial relationships, covered by commercial
arbitration laws, are purely private and contractual in nature. They do not possess the same
compelling state interest to justify state interference into autonomy of contracts. Thus,
commercial arbitration is a purely private system of adjudication facilitated by private
citizens instead of government instrumentalities with quasi-judicial powers.

CIAC is also a government agency attached to DTI. Its jurisdiction is likewise conferred by
statute. In contrast, the subject-matter jurisdiction of commercial arbitrators is stipulated by the
parties.

5) SC then proceeds to uphold the factual findings of CIAC as affirmed by CA.

8. Bases Conversion Development Authority v. DMCI Project Developers, Inc., GR 173137,

January 11, 2016, Leonen, J., Second Division (When the first agreement contains an
arbitration clause, the parties of the other agreements that form part of the first agreement
and thus should be read together with it are also bound by the arbitration clause)
FACTS:
BCDA entered into a JVA with PNR and other foreign corporations. Under the JVA, the parties
agreed to construct a railroad system from Manila to Clark, Subic Bay and La Union, and later to
Ilocos Norte and Nueva Ecija. BCDA shall establish North Luzon Railways Corporation
(Northrail) for constructing and managing the railroad system. The JVA contained this
provision:

16. If any dispute arise hereunder which cannot be settled by mutual accord between the
parties to such dispute, then that dispute shall be referred to arbitration. The
arbitration shall be held in whichever place the parties to the dispute decide and
failing mutual agreement as to a location within twenty-one (21) days after the
occurrence of the dispute, shall be held in Metro Manila and shall be conducted in
accordance with the Philippine Arbitration Law (Republic Act No. 876)
supplemented by the Rules of Conciliation and Arbitration of the International
Chamber of Commerce. All award of such arbitration shall be final and binding upon
the parties to the dispute.5
BCDA incorporated Northrail. It was registered with SEC. The JVA was amended (Amended
JVA, AJVA) to include DM Consunji, Inc. and/or its nominee as party. Later, BCDA and
other parties to the JVA entered into a MOA. The parties agreed that the initial seed capital of
P600m shall be infused to Northrail. DM Consunji’s share was P300M.

DMCI Project Developers, Inc (DMCI-PDI) deposited P300M into Northrail’s bank account for
“future subscription for Northrail shares of stocks”. At that time, Northrail’s application to
increase its authorized capital stock was still pending with SEC. DM Consunji informed PNR
and the other parties that DMCI-PDI shall be its nominee for the agreements.

Later, Northrail withdrew from SEC its application for increased authorized capital stock. Thus,
DMCI-PDI demanded from BCDA and Northrail the return of its P300M deposit for failure to
increased its authorized capital stock. BCDA and Northrail refused to return the deposit, saying
that the P300M was a contribution, not deposit for future subscription and that as joint venture
partner, DMCI must share in profits and losses.

DMCI-PDI filed in RTC a petition to compel arbitration against BCDA and Northrail pursuant to
the arbitration clause in the JVA. BCDA moved to dismiss on the ground that DMCI-PDI was
not a party to the JVA containing the arbitration clause. RTC granted the petition. Hence this
petition.

ISSUE:
Whether the arbitration clause in the JVA covers DMCI-PDI who is DM Consunji, Inc.’s
nominee.
HELD: YES.
1) There is no rule that a contract should be contained in a single document. A whole contract
may be in several documents that are consistent with one another. Amendments may also be
executed by the parties to address circumstances or issues that arise while a contract subsists.
Here, all documents were executed by the same parties. Initially, the JVA was executed only by
BCDA, PNR et al. when the JVA was amended, DM Consunji Inc. and/or its nominee were
deemed to have also been a party to the original JVA. DM Consunji and its nominee became
bound by the terms of the JVA and its amendments.

1.1) Each document was executed to achieve the single purpose of implementing the railroad
project. The JVA defined the project, its purpose, the parties etc. the AJVA changed equity
participation and included DM Consunji and its nominee as party. The third agreement, the
MOA, raised seed capitalization of Northrail from P100M to P600M. the MOA implements the
JVA and AJVA. It could not exist without referring to the provisions of the original and
amended JVA. It assumes prior knowledge of its terms. Each document represents a step
toward implementing the project, such that the 3 agreements must be read together for a
complete understanding of the parties’ whole agreement. The JVA, AJVA, and MOA should
be treated as one contract as they all form part of the whole agreement.

1.2) Thus, the arbitration clause in the JVA should not be interpreted as applicable only to the
JVA’s original parties. The other agreements are part of the JVA. The arbitration clause should
extend to all the agreements and its parties since it is still consistent with the terms and
conditions of the amendments.

2) BCDA and Northrail argue that they did not consent to DM Consunji’s assignment of rights
to DMCI-PDI and thus, DMCI-PDI did not become a party to the agreements under S17.1 of
JVA.

However, S17.2 of JVA provides that the agreement is binding on nominees. The amended JVA
included DM Consunji and/or its nominee. DM Consunji designated DMCI-PDI as its nominee.
Thus, lack of consent to the assignment is irrelevant as there was no assignment to DMCI-PDI.
DMCI-PDI is DM Consunji’s nominee. Assignment involves the transfer of rights after the
perfection of a contract. Nomination pertains to the act of naming the party with whom it has a
relationship of trust or agency.

2.1) A nominee is one designated to act for another as his representative in a rather limited sense.
The term connoted delegation of authority to the nominee in a representative or nominal capacity
only and does not connote transfer or assignment to the nominee of any property or right.
Thus, the JVA’s prohibition against assignment without consent does not apply to nomination.

Since DMCI-PDI is party to all the agreements, including the arbitration agreement in the JVA,
it may invoke the arbitration clause against all the parties.

3) Northrail, although not signatory to the contracts, is bound by the arbitration agreement.
Among the instances when a non-signatory to a contract may be compelled to submit to
arbitration is when the non-signatory is allowed to invoke rights or obligations based on
the contract. Northrail was established under the agreement of BCDA and DM Consunji to
construct a railroad system. Northrail, pursuant to the JVA and AJVA, demanded from DM
Consunji the infusion of its shares in subscription. This demand proved that it was bound by the
agreements’ terms and is deemed to have accepted the term that such funds shall be used for its
privatization. It cannot choose to demand the enforcement of some of its provisions if it is in its
favor, and then later by whim, deny being bound by its terms. Thus, when BCDA and Northrail
decided not to proceed with Northrail’s privatization, any obligation to return the subscription
attached not only to BCDA as party but primarily to Northrail as beneficiary that impliedly
accepted the terms of the JVA and received DM Consunji’s funds.

9. Fruehauf Electronics PH Corporation v. Technology Electronics Assembly and

Management Pacific Corporation, GR 204197, November 23, 2016, Brion, J., Second
Division. (Only remedy against arbitral award is to file a petition to vacate or
modify/correct award not later than 30 days from receipt of award; Not Rule 43, Rule 65;
grounds to vacate/modify award exclusive)
FACTS:
Fruehauf leased several lands to Signetics Filipinas Corporation. Signetics constructed a factory
thereon. Signetics ceased operations. Technology Electronics Assembly and Management Pacific
Corp. (TEAM) bought Signetics. Fruehauf filed an unlawful detainer case against TEAM. In an
effort to amicably settle, both parties executed a MOA where TEAM undertook to pay Fruehauf
unpaid rent from Dec. 1986 to June 1988. They also entered into a 15-year lease contract. The
contract included an arbitration clause. It also authorized TEAM to sublease the property.
TEAM subleased it to Capitol Publishing House after notifying Fruehauf.

In May 31, 2003, the sublease between TEAM and Capitol expired. But Capitol vacated only on
March 05, 2005. Meanwhile, the master lease between TEAM and Fruehauf expired on June 09,
2003.

On March 9, 2004, Fruehauf filed a “Submission of existing controversy for arbitration” before
RTC, alleging that TEAM did not restore the property to its original condition as required in the
contract. RTC directed the parties to comply with the arbitration clause.

Thus, an arbitration tribunal was formed, TEAM and Fruehauf selecting one member each and
the chairman selected by these 2 members. The arbitral tribunal awarded Fruehauf P8M as
unpaid rent and P46.8M damages. Thus, TEAM petitioned RTC to partially vacate or modify
arbitral award, arguing that the tribunal failed to properly appreciate the facts and terms of the
lease contract.

RTC denied and confirmed the arbitral award. TEAM filed a notice of appeal. RTC refused to
give due course to the notice of appeal, saying that under S29, S35 of Arbitration Law, ordinary
appeal under Rule 41 is not the proper mode of appeal against an order confirming arbitral
award. TEAM filed a petition for certiorari in CA. TEAM argued that it was appealing RTC’s
order denying the petition to partially vacate/modify the award, not the arbitral award itself.

CA revisited the merits of the arbitral award and found several errors in law and fact. Thus, it set
aside the award. Hence this petition.

ISSUE:
1) Whether an arbitral tribunal exercises quasi-judicial powers such that its award may be
appealed in the same way as that of a quasi-judicial agency.
2) Whether courts have the power to review the merits of an arbitral award.
HELD:

1) NO.
Quasi-judicial power is the power (1) to hear and determine questions of fact to which legislative
policy is to apply, and (2) to decide in accordance with the standards laid down by the law itself
in enforcing and administering the same law. A quasi-judicial body’s jurisdiction over a subject
matter is conferred by law and exists independently form the will of the parties. Quasi-ujdicial
bodies are creatures of LAW.

1.1) As a contractual and consensual body, the arbitral tribunal does not have any inherent
powers over the parties. The tribunal acquires jurisdiction over the parties and subject matter
thru stipulation. An arbitral tribunal is a creature of CONTRACT.

1.2) In ABSCBN v. WINS Japan, the late CJ Corona opined that a voluntary arbitrator is a “quasi-
judicial instrumentality” of the government. Thus, voluntary arbitrators are included in Rule 43
jursidiction of CA. Thus, the losing party in an arbitration proceeding may avail of 3 remedies:
1) petition to vacate arbitral award in RTC, 2) Rule 43 raising questions of fact, law, or both, and
Rule 65 if the arbitrator acts with gadalej.

However, this is wrong.

1.2.1) The pronouncements made in ABSCBN and in Insular Savings v. FEBTC cited by
ABSCBN were both obiter dicta.

1.2.2) Even if these were not obiter, ABSCBN committed the fallacy of equivocation by
equating “voluntary arbitrator” in Rule 43, S1 with the term “ arbitrator/arbitration
tribunal”. Notable, all the cases cited in ABSCBN involved labor disputes. “Voluntary
arbitrator” does not refer to an ordinary “arbitrator”. It is a technical term with a specific
definition under the Labor Code:
Art. 212 Definitions. xxx
14. "Voluntary Arbitrator" means any' person accredited by the Board as such or any
person named or designated in the Collective Bargaining Agreement by the parties to act
as their Voluntary Arbitrator, or one chosen with or without the assistance of the National
Conciliation and Mediation Board, pursuant to a selection procedure agreed upon in the
Collective Bargaining Agreement, or any official that may be authorized by the Secretary
of Labor and Employment to act as Voluntary Arbitrator upon the written request and
agreement of the parties to a labor dispute. 
Voluntary arbitrators resolve labor disputes in interpretation of CBAs, which were excluded
from the coverage of both the Arbitration Law and ADR Law. Unlike purely commercial
relationships, the relationship between capital and labor are heavily impressed with public
interest. Thus, Voluntary arbitrators have been clothed with quasi-judicial authority. Commercial
arbitration is a purely private system of adjudication facilitated by private citizens.

1.2.3) Also, Rule 43, S1 enumerates quasi-judicial tribunals whose decisions are appealable to
CA instead of RTC. Where legislation provides appeal from decisions of administrative bodies to
CA, it means such bodies are co-equal with RTC in terms of rank and stature, placing them
beyond the control of the latter. Arbitral tribunals and the RTC are not co-equal bodies since
RTC is authorized to confirm or vacate (but not reverse) arbitral awards.

2) NO. The right to appeal is a mere statutory privilege. Under the Special ADR Rules:
Rule 2.1 “Courts shall intervene only in the cases allowed by law or these Special
ADR Rules.”
Rule 19.7. No appeal or certiorari on the merits of an arbitral award - An agreement to
refer a dispute to arbitration shall mean that the arbitral award shall be final and binding.
Consequently, a party to an arbitration is precluded from filing an appeal or a petition
for certiorari questioning the merits of an arbitral award.

2.1) But an arbitral award is not absolute:

Rule 19.10. Rule on judicial review on arbitration in the Philippines. - As a general
rule, the court can only vacate or set aside the decision of an arbitral tribunal upon a clear
showing' that the award suffers from any of the infirmities or grounds for vacating an
arbitral award under Section 24 of Republic Act No. 876 or under Rule 34 of the
Model Law in a domestic arbitration, or for setting aside an award in an international
arbitration under Article 34 of the Model Law, or for such other grounds provided under
these Special Rules.
If the Regional Trial Court is asked to set aside an arbitral award in a domestic or
international arbitration on any ground other than those provided in the Special ADR
Rules, the court shall entertain such ground for the setting aside or non-recognition of the
arbitral award only if the same amounts to a violation of public policy.

Under S24 of Arbitration Law, these are the grounds for VACATING a domestic arbitral award:
(a) when the award is procured by corruption, fraud, or other undue means; or
(b) there was evident partiality or corruption in the arbitrators or any of them; or
(c) the arbitrators were guilty of misconduct that materially prejudiced the rights of any
party; or
(d) 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.
The award may also be vacated if an arbitrator who was disqualified to act willfully refrained
from disclosing his disqualification to the parties (Art. 5.35, IRR of ADR Act).

The grounds in Art. 34 of UNCITRAL Model Law are reproduced in Chapter 4 of the IRR of the
2004 ADR Act:
(i) the party making the application furnishes proof that:
(aa) 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 thereon, under the law of the Philippines; or
(bb) 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
(cc) 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 the
part of the award which contains decisions on matters not submitted to arbitration
may be set aside; or
(dd) 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 ADR Act from which the parties cannot derogate, or,
failing such agreement, was not in accordance with ADR Act; or
(ii) The Court finds that:
(aa) the subject-matter of the dispute is not capable of settlement by arbitration
under the law of the Philippines; or
(bb) the award is in conflict with the public policy of the Philippines.

While Chapter 4 of the IRR applies to international commercial arbitration, these are made
applicable to domestic arbitration specifically by the Special ADR Rules.

2.2) These grounds are not concerned with the correctness of the award. They go into the
validity of the arbitration agreement or regularity of the arbitration proceedings. These
grounds for vacating arbitral award are EXCLUSIVE. ADR Law provides:
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. 

2.3) Special ADR Rules allow RTC to MODIFY arbitral award pursuant to S25 of the
Arbitration Law. But this cannot be interpreted as jurisdiction to review the merits of the award.
The grounds are:
a. Where there was an evident miscalculation of figures or an evident mistake in the
description of any person, thing or property referred to in the award;
b. Where the arbitrators have awarded upon a matter not submitted to them, not affecting
the merits of the decision upon the matter submitted;
c. Where the arbitrators have omitted to resolve an issue submitted to them for resolution;
or
d. Where the award is imperfect in a matter of form not affecting the merits of the
controversy, and if it had been a commissioner's report, the defect could have been
amended or disregarded by the Court

2.4) Also, because an arbitral tribunal is not a government organ exercising judicial or
quasi-judicial powers, it is removed from the ambit of RULE 65. The Court’s expanded
certiorari jurisdiction in the constitution is limited to review of acts of “any branch or
instrumentality of the government.”
2.5) Lastly, the Special ADR Rules are a self-contained body of rules. The parties cannot invoke
remedies and other provisions from the Rules of Court unless they were incorporated in the
Special ADR Rules:
Rule 22.1. Applicability of Rules of Court. - The provisions of the Rules of Court that
are applicable to the proceedings enumerated in Rule 1.1 of these Special ADR Rules
have either been included and incorporated in these Special ADR Rules or
specifically referred to herein.
Thus, Special ADR Rules forecloses against other remedies outside of itself. The remedies of
Rule 43 petition for review and Rule 65 are not permitted in Special ADR Rules.

In sum, the only remedy against a final domestic arbitral award is to file a petition to vacate or
to modify/correct the award not later than 30 days from receipt of the award.

3) The remedy against an order confirming, vacating, correcting, or modifying arbitral award
include a motion for reconsideration within a non-extendible 15 days from receipt of the order.
The losing party may also appeal from the RTC ruling under the Arbitration Law:
Section 29. Appeals. - An appeal may be taken from an order made in a proceeding
under this Act, or from a judgment entered upon an award
through certiorari  proceedings, but such appeals shall be limited to questions of
law. The proceedings upon such appeal, including the judgment thereon shall be
governed by, the Rules of Court in so far as they are applicable.
As the appeal was limited to questions of law and described as “certiorari proceedings”, this can
be interpreted as an appeal by “”certiorari under RULE 45.

4) Here, CA reversed the arbitral award, an act that it has no power to do, because it disagreed
with the tribunal’s factual findings. The incorrectness of the award is insufficient cause to vacate
the award. The errors would have been merely simple errors of law. It was the tribunal, not RTC
or CA, that had jurisdiction over the issue.

10. Lanuza Jr. v. BF Corporation, GR 174938, October 01, 2014, Leonen, J., Second
Division. (Corporate officers/directors must be included in the arbitration proceeding even
if only the corporation is a party to the arbitration agreement so that the arbitration
tribunal may determine if there are circumstances that warrant piercing the veil of
corporate entity)
FACTS:
BF Corporation filed a collection complaint against Shangrila and members of its board of
directors, including petitioners Antonio Olbes and Gerardo Lanuza. BF alleged that it undertook
to construct for Shangrila a mall and parking structure along EDSA. Shangrila paid BF in
accordance with its progress billings, but by October 1991, Shangrila started defaulting in
payment. BF completed construction upon Shangrila’s assurance that the delay in payments was
only due to delayed processing and that Shangrila had funds. Shangrila took possession of the
buildings while still owing BF.

RTC, eventually affirmed by SC, ruled that the parties should submit the dispute to arbitration in
accordance with the arbitration clause in the contract.
BF and Shangrila failed to agree as to what law should govern the arbitration proceedings. RTC
issued an order directing the parties to follow RA 876. Shangrila and BF filed motions, seeking
to clarify the term “parties” and whether Shangrila’s directors should be included in the
arbitration proceedings. Petitioners prayed that they be excluded. RTC ruled that petitioners
should be included in the arbitration. CA affirmed, ruling that Shangrila’s directors were
necessary parties in the arbitration proceedings. Hence this petition for review.

ISSUE:
Whether Shangrila’s directors at the time of the contract should be made parties to the arbitration
proceedings.
HELD: YES.
Petitioners argue that they are third parties to the contract between BF and Shangrila. Provisions,
including arbitration stipulations, should bind only the parties. Meanwhile, the arbitration
tribunal already promulgated its decision, but SC said this does not moot the case, and SC will
decide the case for guidance of the bench and bar.

1) The policy in favor of arbitration has been affirmed by NCC. This was institutionalized in RA
876. In view of our policy to adopt arbitration, arbitration clauses are liberally construed to favor
arbitration. A more clear-cut statement of state policy to encourage arbitration is in RA 9285, S2.
Thus, if there is an interpretation that would render effective an arbitration clause to avoid
litigation and expediting resolution of the dispute, that interpretation should be adopted.

2) Petitioners’ personalities as directors of Shangrila are separate and distinct from Shangrila. A
corporation is an individual with a personality separate and distinct from other persons including
its stockholders, officers, directors, and representatives. Thus, consent by a corporation thru its
representatives is not consent of the representative personally. Thus, a corporation’s
representatives are generally not bound by the terms of contract executed by the corporation.

As a general rule, therefore, a corporation’s representative who did not personally bind
himself to an arbitration agreement cannot be forced to participate in arbitration
proceedings made pursuant to an agreement entered into by the corporation.

3) However, there are instances when piercing the corporate veil is warranted. When the veil is
pierced, the corporation and persons who are normally treated as distinct form the corporation
are treated as one person, such that when the corporation is adjudged liable, these persons too
become liable as if they were the corporation. Among the persons who may be treated as the
corporation itself are the directors. S31 of the Corporation Code provides for instances when
directors, trustees, officers may be liable for corporate acts:
a) The director or trustee willfully and knowingly voted for or assented to a
patently unlawful corporate act; 
b) The director or trustee was guilty of gross negligence or bad faith in directing
corporate affairs; and
c)  The director or trustee acquired personal or pecuniary interest in conflict with
his or her duties as director or trustee.
4) When there are allegations of bad faith or malice against corporate directors or
representatives, it becomes the duty of courts or tribunals to determine if these persons and
the corporation should be treated as one. Without a trial, courts and tribunals have no basis
to determine whether the veil of corporate fiction should be pierced. Courts or tribunals do not
have such prior knowledge. Thus, the courts/tribunals must first determine if there are
circumstances to warrant piercing of corporate veil. The determination of these circumstances
must be made in a proceeding participated in by all parties involved.

Thus, when the directors, as here, are impleaded in a case against a corporation, alleging malice
or bad faith on their part in directing the affairs of the corporation, complainants are effectively
alleging that the directors are not acting as separate entities. In that case, complainants have no
choice but to institute only one proceeding against the parties as filing of multiple suits for a
single cause of action is prohibited.

5) We are not overturning Heirs of Angus to Salas where we held that only parties to an
arbitration agreement may be compelled to submit to arbitration. In that case, this court
recognized that persons other than the main party may be compelled to submit to arbitration, e.g.,
assignees and heirs. Assignees and heirs may be considered parties to an arbitration agreement
entered into by their assignor because the assignor's rights and obligations are transferred to them
upon assignment. In other words, the assignor's rights and obligations become their own rights
and obligations. In the same way, the corporation's obligations are treated as the representative's
obligations when the corporate veil is pierced.

11. Koppel, Inc. v. Makati Rotary Club Foundation, Inc., GR 198075, September 04, 2013,
Perez, J., Second Division.
FACTS:
In 1975, Fedders Koppel Inc. (FKI) conditionally donated a land in Paranaque to Makati Rotary
Club Foundation (MRC) thru a deed of donation. The donation required MRC to lease the land
back to FKI under the terms of the deed, which were that 1) The lease is for 25 years until May
25, 2000, 2) Rent for the first 25 years is P40k per annum, 3) The lease is renewable for another
25 years upon mutual agreement.

On May 23, 2000, 2 days before the expiration of lease, FKI and MRC executed another lease
contract. The new lease is for 5 years to take effect on May 26, 2000 with annual rents of P4M to
P4.9M. The 2000 lease contract had an arbitration clause.

After the 2000 lease contract expired, FKI and MRC agreed to renew the lease for 5 years. This
2005 lease contract required FKI to pay a fixed annual rent of P4.2M plus a yearly donation of
P3M to P3.9M. This also contained an arbitration clause. FKI paid the rents yearly “donations”
until 2008. In 2008, it sold its rights to petitioner Koppel, Inc. Koppel discontinued payment of
the rent and donation, believing that the rental stipulations of the 2005 lease contract violated the
conditions of the donation in 1975. According to Koppel, the deed of donation established 2
lease agreements between FKI and MRC- from 1975-2000 and renewable to 2000-2025.

MRC demanded for payment. Koppel refused to comply and instead filed a complaint for
rescission or cancellation of the deed of donation against MRC.
MRC filed an unlawful detainer case against Koppel in the MeTC. Petitioner filed an answer
with compulsory counterclaim. In the answer, Koppel also argued that MeTC cannot exercise
jurisdiction until the disagreement is first referred to arbitration pursuant to the arbitration clause
in the 2005 lease contract. MeTC did not dismiss the case on the ground that the dispute is
subject to arbitration but ruled for Koppel. RTC reversed and ordered Koppel’s eviction. CA
affirmed. Hence this petition.

ISSUE:
Whether the required request for arbitration under the Special ADR Rules had been complied
with despite lack of a formal request such that MeTC should have referred the case to arbitration.
HELD: YES.
1) The arbitration clause in the 2005 lease contract stipulates that “any disagreement” as to the
“interpretation, application, or execution” of the 2005 lease contract should be submitted to
arbitration. This is comprehensive enough to include any kind of conflict.

2) These arguments were offered against the application of the arbitration clause of the 2005
lease contract:

a) The disagreement is non-arbitrable as it touched the validity of the 2005 lease contract and in
Gonzales v. Climax Mining Ltd., it was held that the “validity of contract cannot be the subject of
arbitration proceedings.”

However, in Gonzales, it was ruled that the Panel of Arbitrators of the Mines and Geosciences
Bureau (PA-MGB) did not have jurisdiction only because RA 7942, or the Mining Act of 1995,
granted it only over mining disputes. Since the complaint for arbitration in Gonzales did not raise
mining disputes but only issues relating to the validity of certain mining related agreements, SC
held that the complaint could not be arbitrated before PA-MGB. It is in this context that we said
“
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.
The real consideration for rejecting the complaint for arbitration is the limitation under RA 7942
upon PA-MGB’s jurisdiction as an arbitral body.

b) Koppel cannot invoke the arbitration agreement while at the same time impugning the
contract’s validity.

But under the doctrine of separability, an arbitration agreement is considered as independent of

the main contract. Being a separate contract in itself, the arbitration agreement may thus be
invoked regardless of the possible nullity or invalidity of the main contract. Thus, even the party
who repudiates the main contract may invoke its arbitration clause.

c) S24, RA 9285 requires the party seeking arbitration to file a “request” with the court not later
than the preliminary conference, which Koppel failed to do.
S24, RA 9285 states:
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.
Special ADR Rules state:
Rule 4.1. Who makes the request. - A party to a pending action filed in violation of the
arbitration agreement, whether contained in an arbitration clause or in a submission
agreement, may request the court to refer the parties to arbitration in accordance with
such agreement.
Rule 4.1 uses “may”. In using “may” to qualify the act of filing a request in S24, RA 9285, the
Special ADR Rules clearly did not intend to limit the invocation of an arbitration agreement
in a pending suit solely via such “request”. Non-compliance with an arbitration agreement is a
valid defense in any offending suit and, thus, may even be raised in an answer.

Here, while Koppel was not able to file a separate “request” of arbitration in MeTC, it is also
conceded that Koppel, as early as in its answer with counterclaim, had already apprised
MeTC of the existsnce of the arbitration clause in the 2005 lease contract. This is enough
valid invocation of its right to arbitrate.

d) The parties underwent JDR already. Further referral to arbitration would thus be circuitous.
Also, in view of the summary nature of an ejectment case, the purpose of arbitration is fulfilled
(expedient method to resolve disputes).

That the parties already underwent JDR proceedings in RTC will not make the subsequent
arbitration between the parties unnecessary as JDR and arbitration are different. The JDR
framework is based on the processes of mediation, conciliation or early neutral evaluation which
entails the submission of a dispute before a “JDR judge” who shall merely “facilitate settlement”
between the parties in conflict or make a “non-binding evaluation or assessment of the chances
of each party’s case.” Thus in JDR, the JDR judge lacks the authority to render a resolution
of the dispute that is binding upon the parties in conflict. In arbitration, on the other hand, the
dispute is submitted to an arbitrator/s—a neutral third person or a group of thereof—who shall
have the authority to render a resolution binding upon the parties

Thus, JDR would not render arbitration a mere surplusage.

3) Since there are no legal impediments to the application of the arbitration clause, the unlawful
detainer action was filed in violation of such clause.
R.A. No. 876

Section 7. Stay of civil action. - If any suit or proceeding be brought upon an issue arising
out of an agreement providing for the arbitration thereof, the court in which such suit or
proceeding is pending, upon being satisfied that the issue involved in such suit or
 proceeding is referable to arbitration, shall stay the action or proceeding until an
arbitration has been had in accordance with the terms of the agreement: Provided,
That the applicant for the stay is not in default in proceeding with such arbitration.

R.A. No. 9285

Section 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.
Under the law, the unlawful detainer case should have been stayed and the parties referred to
arbitration. The violation of the MeTC in not doing so, affirmed by RTC and CA, renders
INVALID all proceedings it undertook in the ejectment case after the filing by Koppel of its
answer with counterclaim, the point when the parties should have been referred to arbitration.

SC thus remamded the case to MeTC, set aside all proceedings after the filing of answer with
counterclaim, and suspended proceedings at the point of after the filing of the answer with
counterclaim. SC also remanded the parties to arbitration.

12. Korea Technologies Co., Ltd. V. Hon. Lerma, GR 143581, January 07, 2008, Velasco,
Jr., J., Second Division.
FACTS:
Korea Technologies (KOGIES) is a Korean corporation engaged in the supply and installation of
LPG cylinder manufacturing plants. Private respondent Pacific General Steel Manufacturing
Corp. (PGSMC) is a domestic corporation. PGSMC and KOGIES entered into a contract where
KOGIES would set up an LPG Cylinder manufacturing plant in Carmona Cavite. The contract
was executed in PHL.

PGSMC leased the land of Worth Properties to house the manufacturing plant. It paid P322k
monthly rental. PGSMC paid KOGIES $1,224,000. For the remaining $306k for the installation
of the plant, PGSMC issued two postdated BPI checks for P4.5M each. These checks were
dishonored for “payment stopped”. PGSMC informed KOGIES that it was cancelling the
contract because KOGIES had altered the quantity and lowered the quality of machineries and
equipment it delivered to PGSMC and that PGSMC would dismantle and transfer the
machineries.

KOGIES insisted that their dispute should be settled by arbitration as agreed upon in Art. 15,
arbitration clause in their contract. KOGIES filed an application for arbitration before the Korean
Commercial Arbitration Board (KCAB). KOGIES also filed a complaint for specific
performance against PGSMC in RTC. KOGIES averred that PGSMC violated Art. 15 of their
contract by unilaterally rescinding the contract without resorting to arbitration. KOGIES also
asked that PGSMC be restrained from dismantling and transferring the machinery in the plant.
PGSMC opposed the TRO and argued that the arbitration clause was void for being against
public policy since it ousts local courts of jurisdiction over the controversy. RTC held that Art.
15, arbitration clause, was void as it tended to oust the courts of jurisdiction. KOGIES’ prayer
for injunctive writ was denied. CA affirmed RTC and declared the arbitration clause against
public policy. Hence this petition under Rule 45.

ISSUE:
Whether an arbitration clause for arbitration designating a foreign arbitral tribunal is void for
being against public policy.
HELD: NO.
Art. 15 of the contract states:
Article 15. Arbitration.—All disputes, controversies, or differences which may arise
between the parties, out of or in relation to or in connection with this Contract or for the
breach thereof, shall finally be settled by arbitration in Seoul, Korea in accordance with
the Commercial Arbitration Rules of the Korean Commercial Arbitration Board. The
award rendered by the arbitration(s) shall be final and binding upon both parties
concerned. 
1) Lex Loci contractus. The contract was perfected in PHL, so our laws govern. Art. 2044
provides “Any stipulation that the arbitrators’ award or decision shall be final, is valid.”

2) The clause stipulates that the arbitration must be done in Seoul, Korea. This is not contrary to
public policy. An arbitration clause to resolve differences of mutually agreed contractual terms is
valid.

3) In case a foreign arbitral body is chosen by the parties, the arbitration rules of our domestic
arbitration bodies would not be applied. As signatory to the UNCITRAL Model Law on
International Commercial Arbitration, PH bound itself to the Model Law. We incorporated the
Model Law in RA 9285. S19 of RA 9285 states that an ICA shall be governed by the Model
Law. Among the features of RA 9285 incorporating the UNCITRAL Model Law are:

a) RTC must refer to arbitration in proper cases:

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.

b) Foreign arbitral awards must be confirmed by RTC:

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.
xxxx
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 executory decisions of courts of law of the Philippines
xxxx
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
party’s last known address. The notice shall be sent al least fifteen (15) days before the
date set for the initial hearing of the application.
The final foreign arbitral awards need first to be confirmed by RTC.

c) RTC has jurisdiction to review foreign arbitral awards. S42 in relation to S45 of RA 9285
vested RTC with authority and jurisdiction to set aside, reject, or vacate a foreign arbitral
award on grounds provided in Art. (2) of UNCITRAL Model Law. Thus, while RTC does
not have jurisdiction over disputes governed by arbitration mutually agreed upon by the parties,
the foreign arbitral award is subject to judicial review by RTC. Thus, foreign arbitral awards,
while final and binding, do not oust courts of jurisdiction since these awards are not absolute
and without exceptions as they are still judicially reviewable.

d) The grounds for judicial review in domestic arbitral awards are in S25, RA 876 while for
foreign awards, the grounds for rejecting or vacating are in Art. 34(2) of UNCITRAL Model
Law.

4) S46 of RA 9285 provides for an appeal in CA as remedy of an aggrieved party in case RTC
sets aside or modifies the arbitral award. The CA decision may further be appealed to SC thru
petition for review under Rule 45.
5) Thus, PGSMC must submit to the foreign arbitration as it bound itself thru the contract. While
it may have misgivings on the foreign arbitration by KCAB, it has available remedies under
RA 9285. Its interests are duly protected by the law which requires the award to be confirmed by
RTC. The arbitration clause thus does not oust our courts of jurisdiction as the award is still
judicially reviewable under certain conditions provided in the Model Law on ICA.

13. Gonzales v. Climax Mining, Ltd., GR 161957, February 28, 2005, Tinga, J., Second
Division.
FACTS:
Petitioner Jorge Gonzales, as claimowner of mineral deposits in Dipidio, Nueva Vizcaya, entered
into a joint venture agreement designated as the May 14, 1987 Letter of Intent with
GeoPhilippines, Inc. Gonzales granted GeoPH the exclusive right to explore the mining claims
for 36months. A February 28, 1989 Agreement extended the exploration by another 3 years.

Later, Gonzales, respondent Climax-Arimco Mining, GeoPH, and Aumex PH Inc. signed an
Addendum to the May 14, 1987 LoI and February 28, 1989 Agreement. Under the Addendum
contract, Climax-Arimco Mining would apply to the PHL government for permission to mine the
claims as the government’s contractor under a Financial and Technical Assistance Agreement
(FTAA). Arimco obtained the FTAA and carried out work thereunder.

Respondent Climax Mining Corporation and respondent Australasian PH Mining Inc. (APMI)
entered into a MOA whereby Climax transferred its FTAA to the latter.

Gonzales filed before the panel of arbitrators, Mines and Geosciences Bureau of DENR against
respondents Climax-Arimco, Climax, and APMI a complaint seeking to nullify the addendum
contract, FTAA, MOA, and other agreements. Gonzales seeks reliefs on the ground of "FRAUD,
OPPRESSION and/or VIOLATION of Section 2, Article XII of the CONSTITUTION
perpetrated by these foreign RESPONDENTS, conspiring and confederating with one another
and with each other.”

The panel dismissed the complaint for lack of jurisdiction. Upon MR, it reconsidered. CA
declared that the panel did not have jurisdiction as what is involved is not a mining dispute.
Hence this petition for review on certiorari under Rule 45.

ISSUE:
Whether the DENR-MGB panel of arbitrators has jurisdiction over a dispute involving validity
of contracts where there is allegation of violation of the constitution and fraud.
HELD: NO.
1) A judicial question is raised when the question involves determination of what the law is and
what the legal rights of the parties are with respect to the matter in controversy. A mining dispute
is a dispute involving (a) rights to mining areas, (b) mineral agreements, FTAAs, or permits, and
(c) surface owners, occupants and claimholders/concessionaires. Under RA 7942, PH Mining
Act of 1995, the panel of arbitrators has exclusive original jurisdiction to hear and decide these
mining disputes. Its jurisdiction is limited only to those mining disputes which raise questions of
fact or matters which requires application of technological knowledge.
2) In its complaint, petitioner alleges that respondents, conspiring and confederating with one
another, misrepresented under the Addendum Contract and FTAA that respondent Climax-
Arimco possessed financial and technical capacity to put the project into commercial production,
when in truth it had no such qualification whatsoever to do so.

3) The panel of arbitrators has no jurisdiction over the complaint. The basic issue in the
complaint is the presence of fraud or misrepresentation allegedly attendant to the execution
of the addendum contract and other contracts, rendering them invalid. This constitutes fraud
which vitiated petitioner’s consent, and in Art. 1390 of NCC, is one of the grounds to annul a
voidable contract.

4) Petitioner claims that his complaint is one for declaration of nullity of void contracts (Art.
1409), arguing that respondents do not qualify to enter into joint venture agreement with the
government in violation of S2, Art. XII of the constitution. But whether the case involves void or
voidable contracts is still a judicial question. The resolution of validity of the contracts remains
a judicial question as it requires exercise of a judicial function. Clearly, the dispute is NOT a
mining conflict. The complaint was not for determination of rights under the mining contracts
since the very validity of those contracts is put in issue.

The main question is the validity of the Addendum contract, FTAA, and subsequent contracts.

5) The complaint raised the issue of constitutionality of FTAA which is a judicial question. The
Panel of Arbitrators does not have jurisdiction over such an issue since it does not involve the
application of technical knowledge and expertise relating to mining.

6) Arbitration before the Panel of Arbitrators is proper only when there is a 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. 

7) Gonzales argues that CA erred in ruling that the case should be brought for arbitration under
RA 876 pursuant to the arbitration clause in the Addendum Contract. But we agree that the
dispute should not be brought under the ambit of the arbitration law since the question of
validity of the contract containing the agreement to submit to arbitration will affect the
applicability of the arbitration clause itself. A party cannot rely on the contract and claim
rights or obligations under it and at the same time impugn its existence or validity. The
complaint should be filed in the regular courts.

13.1 Gonzales v. Climax Mining Ltd., GR 161957, January 22, 2007, Tinga, J., Second
Division.
FACTS:
Respondents Climax et al. filed a partial MR, seeking reconsideration of that part of the decision
holding that the case should not be brought for arbitration under RA 876. They claim that the
arbitration clause in the Addendum Contract should be treated as an agreement independent of
the other terms of the contract and that a claimed rescission of the main contract does not avoid
the duty to arbitrate.

HELD:
1) Disputes do not go to arbitration unless and until the parties have agreed to abide by the
arbitrator’s decision. Necessarily, a contract is required for arbitration to take place and to be
binding. R.A. No. 876 recognizes the contractual nature of the arbitration agreement, thus:
Sec. 2. Persons and matters subject to arbitration.—Two or more persons or parties may
submit to the arbitration of one or more arbitrators any controversy existing between
them at the time of the submission and which may be the subject of an action, or the
parties to any contract may in such contract agree to settle by arbitration a controversy
thereafter arising between them. Such submission or contract shall be valid, enforceable
and irrevocable, save upon such grounds as exist at law for the revocation of any
contract.
The special proceeding under Sec. 6 of R.A. No. 876 recognizes the contractual nature of
arbitration clauses or agreements. It provides: 
Sec. 6. Hearing by court.—A party aggrieved by the failure, neglect or refusal of another
to perform under an agreement in writing providing for arbitration may petition the court
for an order directing that such arbitration proceed in the manner provided for in such
agreement. Five 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.
2) This special proceeding is the procedural mechanism for enforcement of the contract to
arbitrate. RA 876 confines the court’s authority only to the determination of whether there is an
agreement in writing providing for arbitration. If there is, the court shall issue an order directing
the parties to proceed with arbitration. If there is no agreement, the proceeding shall be
dismissed. The proceedings are summary in nature. This proceeding is only a summary
remedy to enforce the agreement to arbitrate.

3) Implicit in the summary nature of this proceeding is the separable or independent character
of the arbitration agreement. The doctrine of separability enunciates that an arbitration
agreement is independent of the main contract. It shall be treated as a separate agreement and the
arbitration agreement does not automatically terminate when the contract of which it is
part comes to an end. The invalidity of the main contract (container contract) does NOT
AFFECT the validity of the arbitration agreement. This doctrine is confirmed in Art. 16(1) of
UNCITRAL Model Law.

4) Thus, Gonzales’ argument that the addendum contract is void, and thus the arbitration clause
therein is void also, is untenable. First, the proceeding in a petition for arbitration in RA 876 is
limited only to resolve the question of whether the arbitration agreement exists. Second, the
separability of the arbitration clause from the addendum contract means that validity or
invalidity thereof will not affect the enforceability of the agreement to arbitrate.

4.1) 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 party’s mere repudiation of the main contract is sufficient to avoid
arbitration. 

When it was declared in the Feb. 28, 2005 decision that the case should not be brought for
arbitration, it must be clarified that the case referred to is the one filed by Gonzales in DENR
Panel of arbitrators, as the case should have been filed in the regular courts involving as it did
judicial issues.

14. Del Monte Corporation-USA v. CA, GR 136154, February 07, 2001, Bellosillo, J.,
Second Division.
FACTS:
Del Monte Corporation-USA (DMC-USA) appointed private respondent Montebueno
Marketing, Inc. (MMI) as exclusive distributor of DMC products in PHL for 5 years renewable
for 2 consecutive 5 year perios with consent of the parties. The agreement had an arbitration
clause this appointment as exclusive distributor was published in newspapers. Respondent
Sabrosa Foods Inc. (SFI) was made the marketing arm of MMI.

Later, MMI, SFI, and MMI’s managing director Lily Sy filed a complaint against DMC-USA,
Paul Derby (managing director for export sales), Daniel Collins, and Luis Hidalgo, and Dewey
Ltd. in RTC Malabon. They contend that petitioners violated Arts. 20, 21, and 23 of NCC since
DMC-USA products continued to be brought into PH by parallel importers despite appointment
of MMI as exclusive distributor, causing MMI embarrassment and damage. They claim that
DMC-USA ‘s bad faith was motivated by their determination to squeeze MMI out of the
distributorship agreement in favor of another party.

Petitioners filed a motion to suspend proceedings, invoking the arbitration clause in their
agreement. RTC denied, ruling that the suspension will only delay determination of the issues.
CA affirmed, holding that the interpretation of Art. 21 of NCC requires full blown trial. Hence
this petition for review.

ISSUE:
Whether the dispute should be referred to arbitration.
HELD: NO.
1) The arbitration clause in the distributorship agreement between DMC-USA and MMI is valid
and the dispute arbitrable. But the petition is denied. The agreement is a contract. The arbitration
clause is part of that contract and is itself a contract. Contracts are binding between the
contracting parties, their assigns, and heirs. Clearly, only parties to the agreement, DMC-USA
and its managing director for export sales Paul Derby and MMI and its managing director
Lily Sy are bound by the agreement and its arbitration clause since they are the only
signatories thereto. Petitioners Daniel Collins and Luis Hidalgo, and private respondent SFI are
not parties to the agreement and not assigns and heirs of the parties. They are NOT
BOUND by the agreement and arbitration clause. Thus, referral to arbitration in California and
suspension of the proceedings in the civil case 2637 pending return of the arbitral award could be
called for but ONLY as to DMC-USA and MMI and their managing directors.

1.1) In Toyota Motor PH v. CA, the contention that the arbitration clause is dysfunctional
because of the presence of third parties was held untenable since "[c]ontracts are respected as the
law between the contracting parties" and that "[a]s such, the parties are thereby expected to abide
with good faith in their contractual commitments." But in Salas Jr. v. Laperal Realty, we held
that the splitting of proceedings to arbitration as to some parties on one hand and trial for the
others, or suspension of trial pending arbitration between some of the parties should not be
allowed as it would result in multiplicity of suits.

Thus, the issue in this case could not be speedily and efficiently resolved if we allow
simultaneous arbitration proceedings and trial, or suspension of trial pending arbitration .
The interest of justice would be served if the trial court hears and adjudicates the case in a single
and complete proceeding.

15. Sea-Land Service, Inc. v. CA, GR 126212, March 02, 2000, Ynares-Santiago, J., First
Division.
FACTS:
Sea Land (SLS) and private respondent AP Moller/Maersk Line (AMML), both cargo carriers,
entered into a contract “Cooperation in the pacific”, a vessel-sharing agreement whereby they
mutually agreed to purchase, share, and exchange cargo space in their containerships. Under the
agreement, either party could be a principal carrier or containership operator (operator of
containership on which the cargo is carried).

Florex International, Inc. delivered to AMML cargo for delivery to San Francisco. The bill of
lading was issued to Florex by AMML. AMML, pursuant to the agreement, loaded the cargo on
MS Sealand Pacer, a vessel owned by SLS. Under this arrangement, AMML is the principal
carrier while SLS was the containership operator.

The consignee refused to pay for the cargo, alleging that delivery was delayed. Florex thus filed
a complaint against Maersk-Tabacalera Shipping Agency for reimbursement. AMML filed a
third-party complaint against SLS, claiming that whatever damage Flores sustained were caused
by SLS which actually transported Florex’s cargo,.

SLS moved to dismiss on the ground that there is an arbitration agreement between SLS and
AMML. RTC denied the motion to dismiss. CA affirmed. Hence this petition.

ISSUE:
Whether the third-party complaint filed by AMML against SLS may be allowed under their
agreement.
HELD: NO.
1) The “Cooperation in the Pacific Contract provides:
16.2 For the purposes of this agreement the Containership Operator shall be deemed to
have issued to the Principal Carrier for good consideration and for both loaded and empty
containers its non-negotiable memo bills of lading xxx.
16.3 The Principal Carrier shall use all reasonable endeavours to defend all
in personam and in rem suits for loss of or damage to cargo carried pursuant to bills of
lading issued by it, or to settle such suits for as low a figure as reasonably possible. The
Principal Carrier shall have the right to seek damages and/or an indemnity from the
Containership Operator by arbitration pursuant to Clause 32 hereof. Notwithstanding the
provisions of the Lines' memo bills of lading or any statutory rules incorporated therein
or applicable thereto, the Principal Carrier shall be entitled to commence such arbitration
at any time until one year after its liability has been finally determined by agreement,
arbitration award or judgment, such award or judgment not being the subject of appeal,
provided that the Containership Operator has been given notice of the said claim in
writing by the Principal Carrier within three months of the Principal Carrier receiving
notice in writing of the claim. 

From clauses 16 and 32, it is clear that: First, disputes between the Principal Carrier and the
Containership Operator arising from contracts of carriage shall be governed by the provisions of
the bills of lading issued to the Principal Carrier by the Containership Operator. Second, the
Principal Carrier shall use its best efforts to defend or settle all suits against it for loss of or
damage to cargo pursuant to bills of lading issued by it. Third, the Principal Carrier shall have
the right to seek damages and/or indemnity from the Containership Operator by arbitration,
pursuant to Clause 32 of the agreement. Fourth, the Principal Carrier shall have the right to
commence such arbitration any time until one year after its liability has been finally determined
by agreement, arbitration award or judgment, provided that the Containership Operator was
given notice in writing by the Principal Carrier within three months of the Principal Carrier
receiving notice in writing of said claim.

2) Allowing AMML’s third party complaint against SLS would violate clause 16.2. This
provides that the bills of lading issued to the principal carrier (AMML) by the containership
operator (SLS) shall govern in disputes between the parties. The third party complaint would
allow AMML to hold SLS liable under the bill of lading issued by the principal carrier to Florex,
under which Florex is suing.

3) CA ruled that the terms of the agreement required the principal carrier’s claim against the
containership operator to first be determined by, among others, a court judgment before the right
to arbitration accrues. But precisely arbitration is the mode by which liability of the
containership operator may be determined. This is clear from Clause 16.3.

It is wrong to say that the contract does not require arbitration as condition precedent to judicial
action. It is clear that arbitration is the mode provided in the agreement for AMML, principal
carrier, to seek damages from SLS, as containership operator. AMML is barred from taking
judicial action against SLS by the clear terms of their agreement.

4) As principal carrier with which Florex directly dealt with, AMML can be held liable by Florex
if it has a valid claim against AMML. Pursuant to Clause 16.3 of the Agreement, respondent
AMML, when faced with such a suit "shall use all reasonable endeavours to defend" itself or
"settle such suits for as low a figure as reasonably possible". In turn, respondent AMML can seek
damages and/or indemnity from petitioner as Containership Operator for whatever final
judgment may be adjudged against it under the Complaint of Florex. The crucial point is that
collection of said damages and/or indemnity from petitioner should be by arbitration.

When the contract is explicit and leaves no doubt as to its intention, the court may not read into it
any other intention contradicting its plain import. The third-party complaint should thus be
dismissed.

16. Magellan Capital Management Corporation v. Zosa, GR 129916, March 26, 2001,
Buena, J., Second Division.
FACTS:
Magellan Capital Holdings Corporation (MCHC) appointed Magellan Capital Management
Corporation (MCMC) as manager for its business affairs. MCMC, MCHC, and Rolando Zosa
entered into an employment agreement designating Zosa as CEO of MCHC. The term of Zosa’s
employment is coterminous with the management agreement until March 1996. But on May 10,
1995, the MCHC board of directors decided not to re-elect Zosa as CEO due to loss of trust and
confidence. Nonetheless, Zosa was elected to a new position as MCHC’s vice chairman for new
ventures development.

On September 26, 1995, Zosa communicated his resignation as vice chairman on the ground that
the position had less responsibility than CEO. He demanded that he be given termination benefits
under the employment agreement. MCHC communited its non-acceptance of Zosa’s resignation,
informed him that the employment agreement is terminated on account of breach of S12 thereof.

Zosa thus invoked the arbitration clause in the agreement:

xxx. Arbitration shall be effected by a panel of three arbitrators. The Manager, Employee
and Corporation shall designate one (1) arbitrator who shall, in turn, nominate and elect
who among them shall be the chairman of the committee. xxx
Zosa designated his brother Atty. Zosa as representative in the arbitration panel. MCHC
designated Atty. Fojas. MCMC nominated Atty. Quiason.

But instead of submitting the dispute to arbitration, Zosa filed an action for damages in RTC to
enforce his benefits under the employment agreement. Petitioners MCMC and MCHC moved to
dismiss. RTC denied the motion to dismiss, ruling that the validity of the arbitration clause can
only be determined after trial.

Petitioners filed a motion ad cautelam for the parties to file memoranda to support their stands on
the issue of validity of the arbitration clause. RTC denied. CA ordered RTC to resolve the issue
of validity of arbitration clause. Thus, RTC ruled that the arbitration clause is partially void
insofar as it concerns the composition of the panel of arbitrators, since MCHC and MCMC
represent the same interest and they each have 1 arbitrator. Hence this petition.

ISSUE:
Whether the arbitration clause as to the composition of the panel of arbitrators granting 1
arbitrator each to MCMC and MCHC, and one arbitrator to Zosa, is valid.
HELD: NO.
1) MCMC claims that the case falls under the jurisdiction of SEC. But the dispute does not
involve election/appointment of officers of MCHC. Zosa’s complaint focuses on the illegality of
the arbitration clause initially invoked by him. Under RA 876, Arbitration Law. It is RTC which
exercises jurisdiction over questions relating to arbitration. Although the controversy which
spawned the action concerns the validity of the termination of the service of a corporate officer,
the issue on the validity and effectivity of the arbitration clause is determinable by the regular
courts.

2) RTC found that the composition of the panel of arbitrators would in all probability work
injustice to respondent Zosa. While SC does not review factual findings in Rule 45, even if we
do so, RTC’s observations on why the composition of the panel should be voided is correct.
MCMC and MCHC represent the same interest. From the arbitration clause, MCMC and MCHC
have 1 arbitrator each to compose the panel of 3 arbitrators. As MCMC is the manager of
MCHC, its vote in the arbitration proceeding would naturally be in favor of its employer MCHC
and MCHC would protect its own interest. Thus, 2 votes, of MCHC and MCMC, would certainly
be against the lone arbitrator for Zosa. Thus, Zosa would never get justice or fairness in the
arbitration proceedings. Thus, the arbitration clause, insofar as the composition of the panel, is
void because Art. 2045 of NCC provides: "Any clause giving one of the parties power to
choose more arbitrators than the other is void and of no effect"

The panel should be composed of 1 arbitrator for Zosa, one for both MCMC and MCHC, and the
third arbitrator to be chosen by petitioners and respondent.

17. Cargill PHL, Inc. v. San Fernando Regala Trading, Inc., GR 175404, January 31, 2011,
Peralta, J., Second Division.
FACTS:
Respondent San Fernando (SFRT) filed in RTC Makati a complaint for rescission of contract
with damages against Cargill, alleging that it was engaged in buying and selling molasses and
Cargill was one of its sources from whom it purchased molasses. SFRT alleged that it entered
into a contract with Cargill where SFRT would purchase 12,000 metric tons of blackstrap
molasses at $192 per metric ton. Payment was by irrevocable letter of credit payable at sight.
Cargill failed to comply with its obligations despite demands from SFRT.

Cargill moved to dismiss/suspend proceedings and refer controversy to arbitration, alleging that
the contract was never consummated since SFRT did not return the proposed agreement bearing
its written acceptance nor did SFRT open the letter of credit. It claimed that the contract had an
arbitration clause and that SFRT must first comply with this before resorting to court. Thus, RTC
must either dismiss or suspend and direct the parties to proceed to arbitration under S6 and 7 of
RA 876.
RTC denied the motion to dismiss/suspend. CA affirmed. Hence this petition.

ISSUE:
Whether RTC acted correctly in denying the motion to dismiss.
HELD: NO.
1) SFRT claims that Cargill’s Rule 65 petition in the CA against an RTC order denying a motion
to dismiss/suspend proceedings and refer controversy to voluntary arbitration was a wrong
remedy under S29, RA 876:
Section 29.
xxx An appeal may be taken from an order made in a proceeding under this Act, or from
a judgment entered upon an award through certiorari proceedings, but such appeals shall
be limited to question of law. xxx
SFRT cites Gonzales v. Climax Mining where SC ruled the impropriety of Rule 65 as a mode of
appeal from an RTC order directing the parties to arbitration. But this case is not in point.

1.1) In Gonzales, the certiorari petition raises a question of law, but not a question of jurisdiction.
The judge therein acted in accord with RA 876 when he ordered Gonzales to proceed with
arbitration after determining that there was an arbitration agreement. As long as courts act within
its jurisdiction and do not gravely abuse its discretion, any error it commits will be merely an
error of judgment reviewable by appeal and not thru special civil action of certiorari.

1.2) Here, RTC found the existence of the arbitration clause. However, notwithstanding the
finding that an arbitration agreement existed, RTC denied the motion of Cargill to suspend
proceedings and ordered Cargill to file answer. RA 876 confines the court’s authority only to
the determination of whether there is an agreement in writing providing for arbitration. In
the affirmative, the statute ordains that the court issue an order summarily directing the
parties to proceed with arbitration. If none, the proceedings shall be dismissed.

In denying the motion to suspend proceedings and refer to arbitration, RTC went beyond its
authority of determining only the issue of whether there is an arbitration agreement by directing
Cargill to file answer, instead of ordering the parties to proceed to arbitration. In so doing it
acted in excess of jurisdiction. Rule 65 is the proper remedy since there is no plain, speedy, and
adequate remedy in the ordinary course of law.

2) CA ruled that arbitration cannot be ordered in this case since Cargill alleged that the contract
between the parties did not exist or was invalid and arbitration is not proper where one party
repudiates the existence/validity of the contract. CA cites Gonzales v. Climax Mining.

2.1) But the Gonzales case relied upon by CA had been modified upon MR: 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 party's
mere repudiation of the main contract is sufficient to avoid arbitration. In so ruling, we applied
the doctrine of separability.
3) SFRT argues that the separability doctrine is not applicable in Cargill’s case since in this case,
Cargill, who is insistent on arbitration, claims that the contract sought by SFRT to be rescinded
did not exist or was not consummated. Thus, the separability doctrine is inapplicable as there is
no container contract or arbitration clause to speak of.

Applying Gonzales, an arbitration clause shall not be regarded non-existent just because the main
contract is invalid since it shall be treated as a separate agreement independent of the main
contract. Thus, even a party who has repudiated the main contract is not prevented from
enforcing its arbitration clause.

4) SFRT claims that even if the existence of arbitration clause is conceded, CA’s declining to
refer to arbitration is correct since in its complaint in RTC, it presents the issue of whether it is
entitled to rescind the contract with damages, which is a judicial question. SFRT cites Gonzales.

In Gonzales, we found that since the complaint filed with DENR Panel of Arbitrators charged
respondents with disregarding the addendum contract and acting in a fraudulent manner against
petitioner Gonzales, the complaint filed in the panel was not a dispute involving rights to mining
areas, but essentially judicial issues. We then said that the panel did not have jurisdiction over
such issue since it did not involve application of technical knowledge and expertise relating to
mining. It is in this context that we said that arbitration before the panel is not proper when:

“one of the parties repudiates the existence or validity of such contract on the ground of
fraud or oppression. 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.”

4.1) In fact, We even clarified in our resolution on Gonzales’ motion for reconsideration that
"when we declared that the case should not be brought for arbitration, it should be clarified that
the case referred to is the case actually filed by Gonzales before the DENR Panel of Arbitrators,
which was for the nullification of the main contract on the ground of fraud, as it had already been
determined that the case should have been brought before the regular courts involving as it did
judicial issues." We made such clarification in our resolution of the motion for reconsideration
after ruling that the parties in that case can proceed to arbitration under the Arbitration Law, as
provided under the Arbitration Clause in their Addendum Contract.

18. RCBC Capital Corporation v. BDO Unibank Inc., GR 196171, December 10, 2012,
Villara, Jr., J., First Division.
FACTS:
RCBC entered into a Share Purchase Agreement (SPA) with Equitable PCI Bank (EPCIB),
George Go., and shareholders of Bankard Inc. for the sale to RCBC of 226,460,000 shares of
Bankard, 67% of Bankard’s capital stock. After payment of P1.7B, the deeds of sale over the
shares were executed. The dispute between the parties arose when in May 2003, RCBC informed
EPCIB and other selling shareholders of an overpayment of the shares, claiming there was
overstatement of valuation of P478M and that the sellers violated their warranty under S5(g) of
the SPA.

RCBC commenced arbitration with the International Chamber of Commerce-International Court

of Arbitration (ICC-ICA) in accordance with S10 of the SPA. In its request for arbitration,
RCBC charged Bankard with contravening generally accepted accounting principles due to
which the financial statements of Bankard before the stock purchase were inaccurate and resulted
in P556M overpayment. Thus, RCBC sought rescission of the SPA and damages of P573M.
EPCIB, Go, and other selling shareholders, respondents, claim that RCBC’s claim is one for
overpayment or price reduction and is already time-barred in S5(h) of the SPA.

The arbitration tribunal was constituted. Mr. Neil Kaplan was nominated by RCBC; Justice
Kapunan by respondents; and Sir Ian Barker was appointed by ICC-ICA as chairman.

1) ICC-ICA informed the parties that they are required to pay $350k as advance on costs under
Art. 30(3) of ICC Rules. RCBC paid its share. Respondents did not, claiming that to make them
share equally with RCBC when RCBC’s claim is 40 times that of their counterclaims would be
unfair. ICC-ICA thus instructed the tribunal to suspend its work. RCBC objected to cancellation
of the hearings, arguing that respondents have been given ample time to submit their brief. It
argues that respondents should be declared in default. Costs advances were increased to $450k.
Respondents refused to pay still. RCBC reiterated its request to declare respondents in default
and their counterclaims be dismissed. Chairman Barker, in a letter, said that the tribunal has no
power to give RCBC any relief against respondents’ refusal to pay. Thus, RCBC paid the whole
amount of cost advances to prevent suspension of hearings.

The tribunal rendered its first partial award. RCBC filed a motion to confirm the award and
respondents a motion to vacate in RTC Makati. RTC confirmed the award in SP Proc. Case
6046.

The cost advances were increased to $580k RCBC paid the whole increment. It reiterated its plea
that respondents be held in default. In a December 18, 2007 letter, Chairman Barker said that
“the tribunal interprets claimant (RCBC)’s letter as an application for partial award against
respondents.”

2) In a letter dated March 13, 2008, Chairman Barker advised the parties:
2. The Tribunal notes that neither party has referred to an article by Mat[t]hew
Secomb on this very subject which appears in the ICC Bulletin Vol. 14 No.1 (Spring
2003). To assist both sides and to ensure that the Tribunal does not consider material on
which the parties have not been given an opportunity to address, I attach a copy of this
article, which also contains reference to other scholarly works on the subject.

The arbitration tribunal then rendered its second partial award the bases of which were in the
article by Secomb. The award ordered respondents to refund the costs that were paid by RCBC
for them of $290k. This was confirmed by RTC Branch 148. EPCIB filed in CA a petition for
review with application for TRO. (CA Case 113525) CA reversed the second partial award.
RCBC filed a petition for review with SC (GR 196171).
The tribunal issued the final award, ruling in favor of RCBC. BDO (EPCIB merged with
BDO).Branch 148 in Case 6046 confirmed the final award. George Go, for respondents, filed a
petition in CA seeking to set aside the confirmation. Branch 148 then issued an order granting
RCBC’s motion to execute against respondents. To avert the sale of BDO properties and prevent
disruption of BDO operations, respondents paid under protest by tendering a manager’s check of
P637M which was accepted by RCBC as full payment of the writ of execution. CA also denied
BDO’s application for TRO for non-compliance with Rule 19.25 of Special ADR Rules. Hence,
BDO filed a petition for certiorari with application for WPMI (GR 199238).

ISSUE:
Whether the second award’s reversal by the CA was proper.
HELD: YES.
1) In their Terms of Reference (TOR), the parties agreed on the governing law and rules:
Governing law: Republic of the PHL.
Procedure: ICC Rules of Arbitration (January 1, 1998) and the law currently applicable to
arbitration in PHL.

2) Although the parties provided in S10 of SPA that the arbitration shall be conducted under ICC
Rules, it was nonetheless arbitration under PHL Law since both parties are residents of this
country. RA 876 as amended by RA 9285 principally applied in the arbitration between the
parties.

3) In RA 9285:
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. Xxx
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.

Rule 11.4 of Special ADR Rules sets forth the grounds for vacating an arbitral award:
Rule 11.4. Grounds.—(A) To vacate an arbitral award. – 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.
xxxx
In deciding the petition to vacate the arbitral award, the court shall disregard any other
ground than those enumerated above.
4) Review brought to SC under Special ADR Rules is not a matter of right. Rule 19,36 states:
Rule 19.36.Review discretionary.—A 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; and
d. Committed an error so egregious and harmful to a party as to amount to an undeniable
excess of jurisdiction.
The mere fact that the petitioner disagrees with the Court of Appeals’ determination of
questions of fact, of law or both questions of fact and law, shall not warrant the exercise
of the Supreme Court’s discretionary power. The error imputed to the Court of
Appeals must be grounded upon any of the above prescribed grounds for review or
be closely analogous thereto. xxx

5) In Rule 19,10, the court can only vacate the decision of an arbitral tribunal upon clear showing
of the grounds in S24 of RA 876 or under Rule 34 of the Model Law in a domestic arbitration.
The court “shall not set aside or vacate the award xxx merely on the ground that the arbitral
tribunal committed errors of fact, or of law” or both as the court cannot substitute its judgment
for that of the arbitral tribunal.

Thus, awards cannot be set aside for mere errors of judgment. Courts will not review findings
of law and fact in the award.

6) The ground raised to vacate the second partial award is evident partiality under S24(b) of RA
876 and Rule 11.4 (b) of Special ADR Rules.
The common meaning of “partiality” is inclination to favor one side.” “Inclination” means “a
disposition of mind or character; propensity.” “Evident” means “capable of being perceived
especially by sight; discernable; obvious; manifest; apparent.” Evident partiality in its common
definition thus implies the “existence of signs and indications that must lead to an
identification or inference of partiality.”

6.1) In Morelite Construction Corp. v. NY District Council Carpenters Benefit Funds, the second
circuit held that:
Bias is always difficult and often impossible to “prove”. If the standard of "appearance of
bias" is too low for the invocation of  Section 10, and "proof of actual bias" too high , with
what are we left? Thus, “evident partiality” will be found where a reasonable person
would have to conclude that an arbitrator was partial to one party to the
arbitration.
The myriad of judicial interpretations and approaches to evident partiality resulted in a lack of
uniform standard, leaving courts to examine evident partiality on a case-by-case basis.

6.2) Chairman Barker’s partiality is indicative of bias. Although RCBC repeatedly asked for
reimbursement and withdrawal of BDO’s counterclaims, it is baffling why only in the December
18, 2007 letter of Barker that RCBC’s prayer was given a complexion of being an application for
partial award. To this Court, the letter signaled a preconceived course of action that the relief
prayed for by RCBC will be granted.

6.3) Barker furnished the parties with a copy of the Secomb Article. This article ultimately
favored RCBC by advancing its cause. Barker makes it appear that he intended good to be
done in doing so but due process dictates the cold neutrality of impartiality. This act established
that he had pre-formed opinions. That he provided copies of the article is interpretable that he
had prejudged the matter before him. The Secomb article tackled the bases upon which the
Second Partial Award was founded. Thus, the article reflected in advance the disposition of the
ICC arbitral tribunal.

6.4) The Court adopts the reasonable impression of partiality standard, which requires a
showing that a reasonable person would have to conclude that an arbitrator was partial to the
other party to the arbitration. Moreover, such bias must be “direct, definite, capable of
demonstration rather than remote, uncertain, or speculative.” We agree with CA that Barker’s
furnishing of the Secomb article is indicative of partiality such that a reasonable man would
conclude that he was favoring RCBC. That Barker was predisposed to grant relief to RCBC
was shown by his act of interpreting RCBC’s letter as an application, which merely reiterated its
plea to declare BDO in default, to issue partial award.

6.5) The Court clarifies that the merits in the issuance of the second partial award are not in
issue. Courts will not review findings of law and fact of an award. It is the finding of evident
partiality which constitutes legal ground to vacate the second partial award.

7) As to injunction in execution of arbitral award, before injunctive writ can be issued, these
requisites must be present: 1) right to be protected; 2) an act in violation of such right. Special
ADR Rules states:
 Rule 19.22. Effect of appeal.—The appeal shall not stay the award, judgment, final order
or resolution sought to be reviewed unless the Court of Appeals directs otherwise upon
such terms as it may deem just.
CA did not abuse its discretion in denying the application for TRO upon its finding that BDO
failed to establish a clear legal right to enjoin execution of the final award. But since BDO
already paid P637M under protest to RCBC, which RCBC accepted, there is no more act to be
enjoined.

b. Arbitration Agreement
19. BF Corporation v. CA, GR 120105, March 27, 1998, Romero, J., Third Division.
FACTS:
Petitioner BFC and respondent Shangri-la Properties, Inc. (SPI) entered into an agreement where
SPI engaged BFC to construct EDSA Plaza Project, a shopping mall in Mandaluyong. While the
construction was in progress, SPI expanded the project by engaging BFC again. The parties
entered into an agreement for the main contract works.BFC incurred delay that SPI considered
serious and substantial. But according to BFC, the construction progressed in faithful compliance
with the first agreement until a fire broke out, damaging Phase I of the project. SPI proposed the
renegotiation of the agreement.

On May 30, 1991, BFC and SPI entered into a written agreement, “Agreement for Execution of
Builder’s Work.” SPI claims that BFC failed to complete the construction and abandoned the
project. This resulted in disagreements between the parties as to their liabilities under the
contract. The parties met in conference on July 12, 1993, but they failed to come to an
agreement.

On July 14, BFC filed in RTC a complaint for collection of the balance due under the
construction agreement. SPI moved to suspend proceedings alleging that the formal trade
contract for construction had an arbitration clause. (*The arbitration clause was in the Conditions
of Contract.)

RTC found that there was an arbitration clause but denied the motion to suspend. It found that:
Defendants submitted a copy of a trade contract- Contract Documents for Builder’s
Work- page 2 of which is entitled “Contents of Contract Documents”, Section A of which
consists of the “Agreement for Execution of Builder’s Work” dated May 30 1991.
Section C is entitled Articles of Agreement and Conditions of Contract. The Articles of
Agreement were signed by the parties and notarized. The Articles also provides that the
“Contract documents” therein listed “shall be deemed an integral part of this Agreement.”
However, RTC said the ”Conditions of Contract” (which had the arbit clause) is not signed,
having only the initials of BFC’s representatives, without that of any representative of SPI.

SPI filed a Rule 65 special civil action for certiorari with CA. CA annulled the RTC orders and
stayed the proceedings therein. (See text for CA ruling)

The arbitration agreement stated:

"Notice of the demand for arbitration of a dispute shall be filed in writing with the other
party to the contract and a copy filed with the Project Manager. The demand for
 arbitration shall be made within a reasonable time after the dispute has arisen and
attempts to settle amicably have failed; in no case, however, shall the demand he made be
later than the time of final payment except as otherwise expressly stipulated in the
contract."
ISSUE:
Whether the arbitration clause complied with the formalities required by RA 876.
HELD: YES.
1) Rule 65 to CA of RTC order denying motion to suspend proper- BFC claims that the RTC
order is a resolution of an incident on the merits, after which RTC would decide on the merits
that may rule on the existence of an arbitration. This decision can be appealed. Thus, BFC claims
CA should have dismissed the Rule 65 certiorari since the remedy of appeal would still be
available to respondents at the proper time. This is without merit.

The special civil action of certiorari (Rule65) may not be invoked as substitute for the remedy of
appeal. It is available only when there is “no appeal or any plain, speedy, and adequate remedy in
the ordinary course of law.” Rule 65 will not be issued to cure erroneous conclusions of law or
fact. But here, the issue is whether RTC prematurely assumed jurisdiction over the case. If it did,
then it becomes an error of jurisdiction which is a proper subject of Rule 65 in CA. If RTC has
no jurisdiction, any decision it may render may be annulled.

1.1) Question of law was involved- The question of jurisdiction, which is a question of law,
depends on the determination of the existence of the arbitration clause, which is a question of
fact. In effect, the issue posed in CA was likewise a question of law. Thus, respondents rightfully
invoked Rule 65. SC holds that the question of existence of the arbitration clause in the contract
is a legal issue that must be determined in this petition for review on certiorari.

2) Form of arbitration agreement- BFC claims that there is no arbitration clause considering that
the “conditions of contract” embodying said clause is not duly signed by the parties.

RA 876 provides for the formal requisites of an arbitration agreement:

"Section 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 formal requirements thus are: 1) It must be in writing and 2) subscribed by the parties or
their representatives. To subscribe means to write underneath as one’s name; to sign at the end of
a document. These were complied with.

2.1) Articles of Agreement incorporating other contracts was signed- The articles of Agreement,
which incorporates all other agreements between the parties, was signed and duly notarized. The
failure of respondent’s representative to initial the “conditions of contract” would thus not affect
compliance with the formal requirements since that portion of the covenants was included by
reference in the articles.

2.2) Contract may be in several documents- A contract need not be contained in a single writing.
It may be collected from several writings which do not conflict with each other. 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 insturments. BFC admits the execution of the articles of agreement, which
provides that the “contract documents” shall be “deemed an integral part of this agreement.” The
contract documents contains the arbitration clause.

3) RTC proceedings stayed during arbitration- It bears stressing that the lower court has not lost
its jurisdiction over the case. S7, RA 876 provides that proceedings therein have only been
stayed. After the arbitration is completed, the lower court may confirm the award made by the
arbitrator.

20. Steamship Mutual Underwriting Association (Bermuda) Limited v. Sulpicio Lines, Inc.,
GR 196072, September 20, 2017, Third Division. (See case #6)

21. Cargill PHL, Inc. v. San Fernando Regala Trading, Inc., GR 175404, January 31, 2011,
Peralta, J., Second Division. (See case #17)

22. PEZA v. Edison (Bataan) Cogeneration Corporation, GR 179537, October 23, 2009,
Carpio-Morales, J., Second Division.
FACTS:
PEZA and Edison (respondent) entered into a Power Supply and Purchase Agreement (PSPA)
for a 10-year period where respondent undertook to construct, operate, and maintain a power
plant which would sell, supply, and deliver electricity to PEZA for resale to business locators in
the Bataan Economic Processing Zone. In the course of discharging the obligation, respondent
requested PEZA for a tariff increase, which request was reiterated on March 5, 2004. PEZA did
not respond. Respondent thus wrote PEZA on May 3, 2004, citing a tariff increase which PEZA
granted to East Asia Utilities Corporation (EAUC), another electricity supplier in the Mactan
Economic Zone. Respondent said that PEZA violated its obligation under Clause 4.9 of PSPA
not to give preferential treatment to other power suppliers.

After 90 days, respondent terminated PSPA and demanded P708M as pre-termination fee. PEZA
disputed respondent’s right to terminate the agreement and refused to pay. Respondent requested
PEZA to submit the dispute to arbitration pursuant to the arbitration clause of PSPA. PEZA
refused to submit the dispute to arbitration.

Respondent filed a complaint against PEZA for specific performance in RTC, alleging that:
4. Under Clauses 14.1 and 14.2 of the Agreement, the dispute shall be resolved through
arbitration before an Arbitration Committee.
In its answer, PEZA admitted the allegation in paragraph 4 of the complaint, but arguing that the
dispute subject of the request for arbitration is not an arbitrable issue since the provision on pre-
termination fee in the PSPA is gravely onerous and disadvantageous to the government, against
public policy, and thus invalid.

Respondent moved to render judgment on the pleadings. RTC granted, ruling for respondents,
and appointing 3 arbitrators – retired SC justice Narvasa and Gutierrez, and Justice Feria. CA
affirmed RTC. Hence this petition.
ISSUE:
Whether RTC’s referral of the case to arbitration was proper.
HELD: YES.
RA 876 provides:
SECTION 6. Hearing by court. — A party aggrieved by the failure, neglect or refusal of
another to perform under an agreement in writing providing for arbitration may petition
the court for an order directing that such arbitration proceed in the manner provided for in
such agreement. xxx. 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.
1) PEZA admitted existence of written arbitration clause- RA 876 explicitly confines the court’s
authority only to the determination of whether there is an agreement in writing providing for
arbitration. Given PEZA’s admission of the allegations in respondent’s complaint, including the
existence of a written agreement to resolve disputes thru arbitration, CA’s affirmance of RTC’s
grant of the motion for judgment on the pleadings is in order.

2) Doctrine of separability- PEZA argues that it tendered an issue in its answer as it disputed the
legality of the pre-termination fee clause of PSPA. But even assuming that the clause is illegal, it
would not affect the agreement between the parties to resolve the dispute by arbitration. The
doctrine of separability denotes that the invalidity of the main contract (container contract)
does NOT affect the validity of the arbitration agreement.

3) Doctrine of separability applied upon MR of Gonzales- PEZA claims that the legality of the
pre-termination fee clause is not arbitrable, citing Gonzales v. Climax Mining, which held that
the complaint should be brought before the regular courts, not before an arbitration tribunal, as it
involved a judicial issue. Therein, We said, “The question of validity of the contract containing
the agreement to submit to arbitration will affect the applicability of the arbitration clause itself.”

But the Gonzales ruling was modified on MR: “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.” “ when it was declared in [the Gonzales ruling before MR] that the case
should not be brought for arbitration, the case referred to is the case filed by Gonzales in DENR
Panel of Arbitrators which was for the nullification of the main contract on the ground of fraud,
as it had already been determined that the case should have been brought before the courts as it
involved judicial issues.”

4) Respondent does not seek to nullify the main contract. It merely submits issues like Whether
PEZA accorded preferential treatment to EAUC in violation of the agreement (see text for other
issues raised). These are all subject to arbitration in accordance with the parties’ arbitration
clause.

23. Benguet Corporation v. DENR, GR 163101, February 13, 2008, Velasco, Jr., J., Second
Division.
FACTS:
Benguet and JR Realty and Mining Corporation entered into a Royalty Agreement with Option
to Purchase (RAWOP) where JG Realty was acknowledged as owner of 4 mining claims named
as Bonito-I to Bonito-IV with area of 288ha in Camarines Norte. In the RAWOP, Benguet
obligated itself to examine the mining claims within 24 months to determine whether they are
worth developing, to, after examination, conduct exploration, and that if the mining claims were
put into commercial production by Benguet, JG Realty will be entitled to 5% royalte.

On Aug. 9, 1989, EVP of Benguet Tachuing sent a letter to JG informing it of Benguet’s

intention to develop the mining claims. But on Feb. 09, 1999, JG sent a letter to Benguet
informing Benguet that it was terminating the RAWOP due to failure to undertake development
works within 2 years from the execution of RAWOP and non-payment of royalties. Benguet
replied, alleging compliance and that the commercial operation was hampered by the non-
issuance of a Mines Temporary Permit by MGB, which is force majeure entitled it to extension
of time. (See text for other grounds of cancelling RAWOP by JG)

JG filed a petition for declaration of nullity of RAWOP with the Legaspi City Minings
Adjudication Board(MAB)-Panel of Arbitrators (POA). POA declared RAWOP cancelled.
MAB affirmed. Hence this petition.

ISSUE:
Whether the controversy should have been first submitted to arbitration before POA took
cognizance of the case.
HELD: YES, but Benguet now estopped as it participated in POA and MAB proceedings.
S11.01 and 11.02 of RAWOP provides for an arbitration clause and that no court action shall be
instituted except to enforce the decision of the majority of the arbitrators. Benguet argues that
POA should have first referred the case to voluntary arbitration, citing S2, RA 876.

POA denied this argument, saying that the terms of contract cannot be contrary to public policy
and that RA 7942, PHL Mining Act of 1995, is a special law which prevails over the stipulations
of the parties and over a general law, like RA 876.

MAB also denied on the ground of estoppel in questioning the jurisdiction of POA. MAB also
said that the arbitration clause merely provided for an additional forum and did not divest POA
of jurisdiction.

JG Realty also argues that jurisprudence saying that prior resort to arbitration before filing a case
with courts is inapplicable as POA is itself already engaged in arbitration.

1) Arbitration clauses in PHL valid, encouraged- We rule for Benguet. S2, RA 876 states:
 Section 2. Persons and matters subject to arbitration.––Two or more persons or parties
may submit to the arbitration of one or more arbitrators any controversy existing between
them at the time of the submission and which may be the subject of an action, or the
parties to any contract may in such contract agree to settle by arbitration a controversy
thereafter arising between them. Such submission or contract shall be valid, enforceable
and irrevocable, save upon such grounds as exist at law for the revocation of any
contract.
RA 9285 reiterated the efficacy of arbitration as an alternative mode of dispute resolution by
stating in S32 that domestic arbitration shall still be governed by RA 876. Thus, an arbitration
clause is not illegal and is in fact promoted by the state.

2) No conflict between RA 7942 and 876- The contention that RA 7942 prevails over RA 876
presupposes a conflict between the two laws. To reiterate, availment of voluntary arbitration
before resort is made to the courts or quasi-judicial agencies of the government is a valid
stipulation. As stated in S6 and 7 of RA 876:
Section 6. Hearing by court xxx.
Section 7. Stay of civil action.––If any suit or proceeding be brought upon an issue
arising out of an agreement providing for the arbitration thereof, the court in which such
suit or proceeding is pending, upon being satisfied that the issue involved in such suit or
proceeding is referable to arbitration, shall stay the action or proceeding until an
arbitration has been had in accordance with the terms of the agreement: Provided, That
the applicant, for the stay is not in default in proceeding with such arbitration.
In other words, where a case that should be subject of voluntary arbitration is erroneously filed
with the courts/quasi-judicial agencies, on motion of defendant, the court/quasi-judicial agency
shall determine whether the arbitration clause is sufficient and effective. If yes, the
court/agency shall order enforcement of said provision. In BF Corporation v. CA, we held
that the lower court “has not lost its jurisdiction over the case. S7 of RA 876 provides that
proceedings therein have only been stayed.”

3) Compulsory vs voluntary arbitration- JG’s contention that prior resort to arbitration is

unavailing since POA’s mandate is to arbitrate disputes involving mineral agreements is
misplaced. A distinction must be made between voluntary and compulsory arbitration.
Compulsory arbitration has been defined both as "the process of settlement of labor disputes by a
government agency which has the authority to investigate and to make an award which is
binding on all the parties, and as a mode of arbitration where the parties are compelled to accept
the resolution of their dispute through arbitration by a third party." While a voluntary arbitrator
is not part of the governmental unit or labor department’s personnel, said arbitrator renders
arbitration services provided for under labor laws.

The arbitration provided by POA is compulsory while the arbitration in the RAWOP is
voluntary, not involving any government agency.

4) RAWOP prohibits filing to administrative agencies w/o arbitration- As to JG’s contention that
RA 876 does not apply since the case involves an administrative agency, S11.01 of RAWOP
states:
 [Any controversy with regard to the contract] shall not be cause of any action of any kind
whatsoever in any court or administrative agency but shall xxx be referred to a board of
arbitrators xxx.
POA is a quasi-judical body, an administrative agency.

5) But Benguet is already estopped from questioning POA’s jurisdiction. When JG filed DENR
Case 2000-01, Benguet filed its answer and participated in the proceedings in POA. When it
appealed to MAB, it also participated in its proceedings. When the adverse MAB decision was
promulgated and after its MR was also denied, Benguet filed a petition with SC under S79 of RA
7942, impliedly recognizing MAB’s jurisdiction. Benguet should have immediately challenged
POA’s jurisdiction.

(SC ruled that the cancellation of RAWOP was supported by evidence and that there was no
unjust enrichment since the cancellation of RAWOP was due to Benguet’s violation of
RAWOP.)

24. Bengson v. Chan, GR L-27283. July 29, 1977, Aquino, J., Second Division.
FACTS:
Soledad Bengson and Mariano Chan entered into a construction of a 6-story building on
Bengson’s lot in San Fernando, La Union. Bengson bound herself to pay Chan P352k. It was
stipulated that the construction would start July 5, 1965, that the 1st and 2nd stories should be
completed and available for use within 5 months, and that construction should be finished within
12 calendar months. The contract has an arbitration clause in par.15:
15. Any and all questions, disputes or differences arising between the parties hereto
relative to the construction of the BUILDING shall be determined by arbitration of two
persons, each chosen by the parties themselves.
On May 24, 1966, Bengson filed an action for damages against Chan and sureties on his
performance bond, alleging that Chan violated the contract by not constructing the 1st and 2nd
stories within 5 months and that she suffered damages. Chan claims that he stopped construction
as Bengson refused to pay for 90% of the work already accomplished and that construction
actually began in February 1966 due to changes requested by Bengson.

In an amended answer, Chan alleged as additional affirmative defense that the complaint states
no cause of action since Soledad did not first submit the controversy for arbitration.

Trial court dismissed the complaint, sustaining the new defense of arbitration. Hence this
petition.

ISSUE:
1) Whether Par.15 covers the dispute in question.
2) Whether trial court was correct in dismissing the action.
HELD:
Bengson claims that her causes of action do not involve disputes relative to the construction of
the building and thus should not be submitted for arbitration, and that par. 15 refers to disputes as
to the “technical process of putting up the building,” and that her causes for damages do not
involve questions as to the construction of the building but is based on violation of the contract
for construction. Alternatively, Bengson argues that if arbitration is proper, trial court should
have required the parties to proceed to arbitration under S6, RA 876.

Chan argues that par. 15 embraces all breaches of contract

1) YES. Par. 15 covers all disputes- Par. 15 expresses the intent of the parties that all disputes
between them should first be arbitrated before court action can be taken. Bengson’s
interpretation of par.15 has a sophistical flavor. Her distinction between the contract for
construction of the building and construction of the building is specious but not convincing.

2) NO. Trial Court should refer parties to arbitration, not dismiss the case- But although the
causes of action in Bengson’s complaint are covered by par. 15, her failure to resort to arbitration
does not warrant dismissal of her complaint. We agree with her alternative contention that
arbitration may be resorted to during pendency of the case. RA 876, S6 and 7 provides xxx.

Under S6, the failure of Bengson to resort to arbitration may be regarded as refusal to comply
with the stipulation for arbitration. Chan’s interposition of the defense that arbitration is a
condition precedent to court action may be interpreted as a petition for an order that arbitration
should proceed. Thus, instead of dismissing the case, the proceedings should have been
suspended and the parties directed to go thru arbitration. With the parties’ consent, trial
court may appoint a 3rd arbitrator to prevent deadlock between the 2 arbitrators.

25. General Insurance & Surety Corporation v. Union Insurance Society of Canton, Ltd.,
GR L-30475, November 22, 1989. Medialdea, J., First Division.
FACTS:
Union Insurance and British Traders’ Insurance Co., Ltd. (respondents) Are insurance
corporations organized under the laws of Great Britain and licensed to do business in PHL.

In Civil case 68558, respondents and General (petitioner) entered into a First Surplus
Reinsurance Agreement (FSRA), agreeing on reciprocal reinsurance payable in pounds sterling
commencing on Janaury 1, 1959 until Dec. 31, 1961. The agreement had an arbitration clause in
Art. XII. This was terminated on Dec. 31, 1961. Respondents claim that there was due from
General under treaties negotiated between respondents as ceding companies and General as
reinsurer the sum of 4,784.51, which General should pay to respondents in Pounds Sterling at the
rate of exchange prevailing at time of payment. General refused to pay in pound sterling and
insisted that it should pay in PHL pesos at the old exchange rate of P2.015 to $1. Respondents
made demand upon General to proceed with arbitration. General refused, contending that there
was no controversy and thus there was no need for arbitration. Respondents filed the civil case
praying for declaration that a dispute exists between the parties.

In Civil Case 68559, the parties entered into a Retrocession Quota Share Fire Pool Agreement
(RQSFPA) where they agreed on reciprocal reinsurance arrangements payable in pounds sterling
to commence Jan. 1, 1960 until Dec. 31, 1961. This also had an arbitration agreement. RQSFPA
was terminated Dec. 31, 1961, on which respondents claim the sum of 1,035 from General in
pounds sterling or PHL pesos at the exchange rate at time of payment. General refused to pay in
pounds and insisted to pay in PHL pesos at the old exchange rate of P2.015 to $1. General also
refused to proceed to arbitration for the same reason. Respondents thus filed the civil case
praying for declaration that a dispute exists between the parties.

Trial court declared that a valid controversy existed and General was ordered to submit to
arbitration. Hence this petition for review.
ISSUE:
Whether there was a controversy subject to arbitration.
HELD: YES.
1) There is a dispute properly subject of arbitration- The complaints and answers in the trial
court reveals that a valid controversy existed between the parties which is a proper subject for
arbitration. The 2 civil cases brought by respondents alleged that there was still some amount
payable in pounds sterling due to it from petitioner. Petitioner denied this, anchoring its defenses
on 3 grounds- that the arbitration clause can no longer be enforced 5 years after termination of
both agreements, that it was respondents who owe petitioner some amount, and a previous
agreement that starting Jan. 1, 1959, the balance under the agreement will be made payable in
US dollars. Since it is undisputed that in both the FSRA and RQSFPA, the parties agreed that
any dispute arising from these agreements shall be referred to a set of arbitrators, trial court
correctly ordered the parties to submit to arbitration.

2) Under RA 529, payment in PHL currency at rate of exchange at time of payment- Petitioner
belatedly invokes RA 529 as defense, which declares as against public policy provisions in
agreements which purports to give the oblige the right to require payment in gold or currency
other than PHL currency. But RA 529 does not invalidate the whole contract, only the provision
to such effect. The most that could be demanded is to pay in PHL currency. In Kalalo v. Luz, we
held that if the obligation was incurred prior to enactment of RA 529 (June 16, 1950) and require
payment in a currency other than PHL currency, the same shall be paid in PHL currency at the
prevailing rate of exchange at the time the obligation was incurred. Since the obligation here was
incurred between 1958-1961, the rate of exchange shall be that prevailing at the time of payment.

3) No time restriction contemplated by agreements- As to the contention that the arbitration

clause cannot be enforced 5 years after termination of both contracts, the language of the
reinsurance contract on arbitration of any dispute between them which may arise before or after
termination of the agreement is clear:
ARTICLE XII
"In the event of any dispute at any time arising out of or in any way connected with or
relating to this Agreement, whether before or after the termination of notice under the
agreement, the same shall be referred to the decision of two arbitrators,
The retrocession agreement is also clear that all differences of whatever nature arising out of the
agreement shall be submitted to a court of arbitration. No restriction as to time was contemplated
by the parties:
'All differences of whatever nature arising out of this Agreement shall be settled
according to an equitable rather than a strictly legal interpretation of its provisions. Such
differences shall be submitted to a Court of Arbitration in London
26. Tuna Processing Inc. v. PHL Kingford, Inc., GR 185582, February 29, 2012, Perez, J.,
Second Division.
FACTS:
Kanemitsu Yamaoka (Licensor), co-patentee of a US Patent and Indonesian Patent, and 5 PHL
tuna processors, including respondent Kingford (licensees), entered into a MOA. They agreed
therein that: 1) the parties shall establish (petitioner) Tuna Processing Inc. (TPI), a corporation
established in the State of California, to implement the MOA; 2) TPI shall be owned by the
licensors and licensees (See text for other paragraphs of MOA). Due to events not mentioned in
the petition, the licensees, including Kingford, withdrew from petitioner TPI and reneged on
their obligations. TPI submitted the dispute for arbitration in the International Centre for Dispute
Resolution in the State of California, US and won against Kingford. The tribunal awarded sums
of money to TPI against Kingford.

To enforce the award, TPI filed a petition for confirmation, recognition, and enforcement of
foreign arbitral award in RTC Makati. Kingford moved to dismiss. RTC dismissed on the ground
of lack of legal capacity of TPI to sue in PHL. Hence this Rule 45 petitoin.

ISSUE:
Whether TPI, foreign corporation not licensed to do business in PHL, can sue in PHL to enforce
a foreign arbitral award.
HELD: YES.
The Corporation Code of PHL provides:
Sec. 133. Doing business without a license. — No foreign corporation transacting
business in the Philippines without a license, or its successors or assigns, shall be
permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines;
Pursuant to this, RTC dismissed the petition. TPI counters that it is entitled to seek recognition of
the arbitral award under RA 9285, Convention on Recognition and Enforcement of Foreign
Arbitral Awards (New York Convention, 1958) and UNCITRAL Model Law on ICA, as none of
these require the party seeking enforcement to have legal capacity to sue. How do we reconcile
Corpo Code with RA 9285, New York Convention, and Model Law?

1) General/special law- In Koruga v. Arcenas Jr, SC rejected the application of the Corporation
Code and applied the New Central Bank Act (NCBA) since Corporation Code is a general law
applying to all types of corporations while NCBA regulates specifically banks and other
financial institutions. Generalia specialibus non derogant. In Hacienda Luisica Inc. v.
Presidential Agrarian Reform Council, SC held: Corporation Code is the general law providing
for the formation and regulation of private corporatiosn while RA 6657 is the special law on
agrarian reform.

1.1) ADR Act applies, special law- Following this, RA 9285, ADR Act of 2004, shall apply in
this case as the Act, “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” 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.”

1.2) NY Convention, Model Law, form part of RA 9285- Since RA 9285, a municipal law,
applies, we do not see the need to discuss compliance with international obligations like New
York Convention and Model Law. After all, both already form part of the law. Particularly, ADR
Act incorporated the New York Convention by specifically providing:
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.
xxx xxx xxx
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.

It expressly adopted the Model Law also:

Sec. 19. Adoption of the Model Law on International Commercial Arbitration. —
International commercial arbitration shall be governed by the Model Law on
International Commercial Arbitration (the "Model Law") adopted by the United Nations
Commission on International Trade Law on June 21, 1985

2) Incapacity to sue not one of the grounds to refuse recognition of award- A foreign corporation
not licensed to do business in PHL has legal capacity to sue under ADR Act of 2004. S45 of
ADR Act of 2004 provides that the opposing party in an application for recognition/enforcement
may only raise those grounds enumerated under Art. V of the NY Convention:

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
(b) The recognition or enforcement of the award would be contrary to the public policy of
that country.
Clearly, not one of these exclusive grounds touched on the capacity to sue of the party
seeking recognition of the award.

2.1) Special ADR Rules supports this position- Special ADR Rules, Rule 13.1 provides that any
party to a foreign arbitration may petition the court to recognize and enforce a foreign arbitral
award." The contents of such petition are enumerated in Rule 13.5. Capacity to sue is not
included.

2.2) Foreign corporation has capacity- It is in the best interest of justice that in the enforcement
of a foreign arbitral award, we deny availment by the losing party of the rule that bars foreign
corporations not licensed to do business in PHL from maintaining a suit in our courts. On the
matter of capacity to sue, a foreign arbitral award should be respected not because it is favored
over domestic laws and procedures, but because RA 9285 has erased any conflict of law
question.

The Model Law prescribes substantially identical exclusive grounds for refusing recognition or
enforcement (Art. 36).

c. Principle of Kompetenze-Kompetenz
27. Mabuhay Holdings Corporation v. Sembcorp Logistics, ltd., GR 212734, December 05,
2018, Tijam, J., First Division.
FACTS:
Petitioner Mabuhay and Infrastructure Development & Holdings Inc. (IDHI) are corporations
organized under PH Laws. Respondent Sembcorp is a company incorporated under Singapore
Laws. Mabuhay and IDHI incorporated Water Jet Shipping Corporation(WJSC) to engage in the
venture of carrying passengers on a common carriage by inter-island fast ferry. They also
incorporated Water Jet Netherlands Antilles (WJNA). Mabuhay, IDHI, and Sembcorp entered
into a Shareholders’ Agreement. Sembcorp decided to invest in said corporations and thus
acquired shares in WJSC and WJNA.

Under the Agreement, Mabuhay and IDHI voluntarily agreed to jointly guarantee that Sembcorp
would receive a minimum accounting return of US$929k (Guaranteed Return) at the end of the
24th month after full disbursement of Sembcorp’s investment. The agreement has an arbitration
clause:
19.1 This Agreement and the validity and performance thereof shall be governed by the
laws of the Republic of the Philippines.
19.2 Any dispute, controversy or claim arising out of or relating to this Agreement, or a
breach thereof, other than intra-corporate controversies, shall be finally settled by
arbitration in accordance with the rules of conciliation and arbitration of the International
 Chamber of Commerce by one arbitrator with expertise in the matter at issue appointed in
accordance with said rules.

Sembcorp fully paid its investment on Dec. 06, 1996. Audits of WJNA and WJSC were
completed on January 8, 1999 which showed that WJSC and WJNA incurred losses. Sembcorp
requested payment of its Guaranteed Return from Mabuhay and IDHI. But Mabuhay failed to
pay. Sembcorp filed a request for arbitration before the International Court of Arbitration of the
International Chamber of Commerce (ICC) seeking payment of $929k and damages etc. Dr.
Chantara-Opakorn, appointed by the ICC, issued a Final Award that: 1) The sole arbitrator
Opakorn had jurisdiction over the dispute, 2) Half of the guaranteed return ($464k) must be paid
by Mabuhay, 3) Interest of 12% per annum on the $464k from the final award’s date.

Sembcorp filed a petition for recognition and enforcement of foreign arbitral award in RTC
Makati. Mabuhay opposed (see HELD part for grounds relied upon). RTC ruled that the final
award could not be enforced. Sembcorp filed a notice of appeal under Rule 41. CA reversed.
Hence this petition.

ISSUE:
Whether the Final Award must be recognized in PHL.
HELD: YES.
1) PH arbitration laws—ADR Act incorporating NY Convention and Model Law, its IRR,
Special ADR Rules- PHL is a signatory to the 1958 NY Convention and acceded thereto in 1967
Singapore became a contracting state in 1986. PHL also adopted UNCITRAL Model Law as
governing law on ICA. RA 9285, ADR Act, S19 adoptes the Model Law to govern ICAs and
S42 adopts the NY Convention to govern recognition and enforcement of arbitral awards, which
shall be filed with RTCs “in accordance with the rules of procedure to be promulgated by SC.” 5
years after ADR Act, DOJ issued its IRR and SC issued the Special ADR Rules. The IRR,
Special ADR Rules, the ADR Act incorporating the NY Convention and Model Law are
our arbitration laws.
2) Agreed upon substantive/procedural law- As agreed upon by the parties under the arbitral
clause in their agreement, the SUBSTANTIVE law of the contract is PH law and the
PROCEDURAL rules are the ICC Rules. During the filing of the request for arbitration, the
ICC Rules in effect was the ICC Rules of Arbitration of 1998.

3) Special ADR Rules, not retroactive if vested rights may be impaired- Mabuhay claims that CA
had no jurisdiction since Sembcorp filed a notice of appeal under Rule 41, S2 and not a petition
for review as required under Rule 19.12 of Special ADR Rules. But the notice of appeal was
filed in 2008 and Special ADR Rules took effect in 2009. ADR Act did not provide the proper
remedy of appeal from RTC to CA. Special ADR Rules shall retroactively apply to all pending
cases provided no vested rights are impaired. Here, Sembcorp filed notice of appeal under S2,
Rule 41, as this was the only applicable rule at that time. Sembcorp had a vested right to due
process in relying on this rule.

3.1) Exclusive grounds to refuse recognition of foreign award- The PHL adopts a policy in favor
of arbitration. This policy is evidenced by the presumption in favor of enforcement of a foreign
arbitral award in Special ADR Rules:
 Rule 13.11. Court action. —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.
Xxx The court shall not disturb the arbitral tribunal's determination of facts and/or
interpretation of law.
Under Art. V of NY Convention, the grounds to refuse recognition of a foreign arbitral award
are:
Xxx
(c) The award deals with a difference not contemplated by or not falling within the terms
of the submission to arbitration, xxx.
(d) The composition of the arbitral authority or the arbitral procedure was not in
accordance with the agreement of the parties, xxx.
2. xxx.
(b) The recognition or enforcement of the award would be contrary to the public policy of
that country.
These are essentially the same grounds under S36 of Model Law. The list is exclusive. S45 of
ADR Act states:
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.
Mabuhay failed to establish any of these grounds.

4) Appointment of arbitrator was under ICC Rules- The first ground of Mabuhay is Art. V (d) of
NY Convention on the composition of the arbitral authority. It claims that the parties stipulated
that the sole arbitrator should have “expertise in the matter at issue” and since they agreed that
the agreement shall be governed by PH law, such expertise means expertise in PHL Law. Dr.
Opakorn, a Thai national, does not have any training in PHL law.

But the Agreement provides that the arbitrator with expertise on the matter shall be appointed in
accordance with the ICC Rules. The ICC is thus the appointing authority agreed upon by the
parties. The “appointing authority” is the regular arbitration institution under whose rule the
arbitration is agreed to be conducted. The ICC Arbitration Rules of 1998 states:
5. The sole arbitrator or the chairman of the Arbitral Tribunal shall be of a nationality
other than those of the parties. Xxx
In accordance with these rules, Dr. Chantara-Opakorn was appointed.

4.1) Procedure agreed upon includes appointment- Rule 2.3 of Special ADR Rules provides that
the parties are free to agree on the procedure to be followed in the conduct of arbitral
proceedings. The procedure to be followed on the appointment of arbitrator are among such
procedural rules.

4.2) Mabuhay able to challenge appointment- Under Rule 7.2 of the Special ADR Rules, a
challenge to the appointment of an arbitrator may be raised in court only when the 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. This
is clearly not the case for Mabuhay as it was able to challenge the appointment of Dr. Chantara-
Opakorn in accordance with Article 11 of the ICC Rules, but the ICC Court rejected the same.

5) Kompetenz-Kompetenz- The next ground is Art. V (1)(c). Mabuhay argues that the dispute is
intra-corporate which is expressly excluded from the scope of disputes arbitrable under the
Agreement (a)ny dispute, controversy or claim arising out of or relating to this Agreement, or
breach thereof, other than intra- corporate controversies, shall be finally settled by arbitration.)

CA correctly applied the Kompetenz-Kompetenz principle under Rule 2.2, the implementation
of which is expounded in Rule 2.4 of Special ADR Rules:
Rule 2.2. The Special ADR Rules recognize the principle of competence- competence,
which means that the arbitral tribunal may initially rule on its own jurisdiction,
including any objections with respect to the existence or validity of the arbitration
agreement or any condition precedent to the filing of a request for arbitration.
Rule 2.4. Policy implementing competence-competence principle. — 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.
5.1) Courts must respect tribunal’s finding of fact/interpretation of law- Among the settled issues
in the Final Award of Dr. Opakorn is whether the dispute is an intra-corporate controversy. Dr.
Opakorn ruled that it is not as there was no transfer of shares from IDHI to the claimant. Special
ADR Rules provides that in resolving the petition for recognition of foreign arbitral award, the
court shall not disturb the arbitral tribunal’s determination of facts/interpretation of law.
RTC could not rule on the issue of whether the dispute is intra-corporate.

6) Definition of Public Policy; narrow approach adopted- The next ground is Art. V(2)(b) of the
NY Convention (public policy). Neither NY Convention or Model Law defines “public policy”.
Most arbitral jurisdictions adopt a narrow/restrictive approach in defining public policy
pursuant to the pro-enforcement policy of NY Convention. The public policy exception is thus a
“safety valve in those exceptional circumstances when it would be impossible for a legal system
to recognize an award without abandoning the very fundaments on which it is based.”

In an old case (Gabriel v. Monte de Piedad), Justice Laurel elucidated on “public policy” for
purposes of declaring a contract void:
“A court, in order to declare a contract void as against public policy, must find that the
contract as to the consideration or thing to be done, has a tendency to injure the public, is
against the public good, or contravenes some established interests of society, or is
inconsistent with sound policy and good morals, or tends clearly to undermine the
security of individual rights, whether of personal liability or of private property. “
In Ferrazzini v. Gsell, an older case, it was held:
 By “public policy” xxx is intended that principle of the law which holds that no subject or
citizen can lawfully do that which has a tendency to be injurious to the public or against
the public good, xxx.
Pursuant to state policy in favor of arbitration, SC adopts the narrow approach. The
illegality/immoraility of the award must reach a threshold such that its enforcement would be
against our state’s fundamental tenets of justice and morality, or would be blatantly injurious to
the public or interests of the society.

6.1) Not all violations of law is contrary to public policy under narrow approach- Mabuhay
claims that it entered into a joint venture akin to a partnership with Sembcorp. The payment of
guaranteed return is a violation of Art. 1799 of NCC as it shields Sembcorp from sharing in the
losses. Thus, the final award’s enforcement is contrary to public policy as it upholds a void
stipulation. But the restrictive approach implies that not all violations of law may be deemed
contrary to public policy. At any rate, the use of a joint venture corporation allows the co-
venturers to take full advantage of the limited liability feature of the corporate vehicle which is
not present in a formal partnership arrangement. Art. 1799 is inapplicable.

6.2) 12% annual interest in award, not contrary to public policy- Mabuhay argues that the 12%
annual interest is contrary to PH law. But mere incompatibility of a foreign award with domestic
mandatory rules on interest rates is not a breach of public policy. The 12% interest is not
unreasonably high as to violate our fundamental notions of justice.

d. Confidential Information
28. DFA v. BCA International Corporation, GR 225051, July 19, 2017, Peralta, J., Second
Div, (See Case #1)

28.1 DFA v. BCA International Corporation, GR 210858, June 29, 2016, Carpio, J., Second
Division. (See Case 1.1)
HELD:
4.1) The disclosure of information covered by the deliberative process privilege to a court
arbitrator will defeat the policy bases and purpose of the privilege.

6) Disclosure of confidential information cannot be compelled under the agreement- The

agreement between the parties provides:
Section 20.02  None of the parties shall, at any time, before or after the expiration or
sooner termination of this Amended BOT Agreement, without the consent of the other
party, divulge xxx any of the contents of this Amended BOT Agreement or any
information relating to the negotiations concerning the operations, contracts,
commercial or financial arrangements or affair[s] of the other parties hereto.
Section 20.03 The restrictions imposed in Section 20.02 herein shall not apply to the
disclosure of any information:
xxxx
C. To a court arbitrator or administrative tribunal the course of proceedings before it to
which the disclosing party is party; xxx
S20.02 merely allows, with the consent of the other party, disclosure by a party to a tribunal of
the contents of the amended BOT agreement or information relating to the negotiations. There is
no express waiver of information forming prt of DFA’s predecisional deliberative or decision-
making process. S20.03 only allows a party, if it chooses, without the consent of the other party,
to disclose to the tribunal privileged information in such party’s possession. But a party cannot
be compelled by the other to disclose privileged information to the tribunal where such
privileged information is in its possession and not in the possession of the party seeking
disclosure.

6.1) Deliberative process privilege cannot be waived- There is a public policy involved in a
claim of deliberative process privilege- the policy of open, frank discussion between subordinate
and chief concerning administrative action. Rights cannot be waived if it is contrary to law,
public order, public policy, morals, or good customs, or prejudicial to a third person with a right
recognized by law. Thus, deliberative process privilege cannot be waived.

29. Federal Express Corporation v. Airfreight 2100, GR 216600, November 21, 2016,
Mendoza, J., Second Division.
FACTS:
FedEx lost its International Freight Forwarder’s (IFF) license to engage in international freight
forwarding in PHL. So, it executed various Global Service Program (GSP) contracts with Air21.
Under the GSP arrangement, the packages sent by FedEx customers from abroad would be
picked up at a Philippine airport and delivered by Air21 to its respective consignees. Conversely,
packages from Philippine clients would be delivered by Air21 to the airport and turned over to
FedEx for shipment to consignees abroad. But in implementing the GSP contracts, issues relating
to money remittance, VAT, fuel charge, trucking costs, interests, and penalties ensued between
the parties. FedEx and Air21 agreed to submit themselves to arbitration before the PH Dispute
Resolution Center (PDRC).

Jennings, Holmes (of FedEx) and Ross (VP operations, FedEx) executed their statements as
witnesses of FedEx, deposing that FedEx’s IFF license was suspended pending a case in court
filed by Merit International Inc. and Ace Logistics, Inc, both freight forwarding companies,
questioning the issuance of the IFF to FedEx. They averred that Ace and Merit were owned or
controlled by Air21 employees or persons connected with the Lina Group of Companies,
including Air 21.

Jennings, in his cross-examination, said that Merit and Ace were Air21’s proxies. In re-direct,
he said that Merit and Ace were just very small companies with meager resources, yet they were
able to finance and file a case to oppose the grant of IFF to FedEx. Jennings also said that one of
Ace’s directors was a friend of Lina.

Thus, Lina for himself and on behalf of Air21, filed a complaint for grave slander against
Jennings in the Taguig City Prosecutor’s office. Later, FedEx and Jennings, petitioners, filed
their petition for issuance of a confidentiality/protective order with application for order of
protection in RTC, alleging that all information and documents related to the arbitration
proceedings were confidential. Meanwhile, the tribunal rendered an award in favor of FedEx.

RTC denid FedEx’s petition, saying that the arbitration documents and statements were not
confidential information since these are not related in any way to the subject under arbitration.
CA affirmed, saying that Jenning’s declarations were not confidential as they were not related
to the subject of arbitration as the proceedings revolved around the parties’ claims for sum of
money. Hence this petition.

ISSUE:
Whether Jenning’s statements in the arbitration proceedings are confidential information such
that they cannot be disclosed in the criminal case for grave slander.
HELD: YES.
1. Confidential information- S3(h) of RA 9285, ADR Act, defines confidential information:
"Confidential information" means any information, relative to the subject of mediation or
arbitration, expressly 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 shall not be disclosed. It shall include (1) communication, oral or written,
made in a dispute resolution proceedings, including any memoranda, notes or work
product of the neutral party or non-party participant, as defined in this Act; (2) an oral or
written statement made or which occurs during mediation or for purposes of considering,
conducting, participating, initiating, continuing of reconvening mediation or retaining a
mediator; and (3) pleadings, motions manifestations, witness statements, reports filed or
submitted in an arbitration or for expert evaluation.
This list is not exclusive as long as they satisfy the requirements of express/implied
confidentiality.

2) Ross, Holmes, Jennings testimony/written statements are confidential- Rule 10.1 of Special
ADR Rules allows “a party, counsel, or witness who disclosed or was compelled to disclose
information relative to the subject of ADR under circumstances that would create a reasonable
expectation xxx that the information shall be kept confidential xxx the right to prevent such
information from being further disclosed without the express written consent of the source or the
party who made the disclosure.” Thus, the rules on confidentiality and protective orders apply
when:
1. An ADR proceeding is pending;
2. A party, counsel or witness disclosed information or was otherwise compelled to
disclose information;
3. The disclosure was made under circumstances that would create a reasonable
expectation, on behalf of the source, that the information shall be kept confidential;
4. The source of the information or the party who made the disclosure has the right to
prevent such information from being disclosed;
5. The source of the information or the party who made the disclosure has not given his
express consent to any disclosure; and
6. The applicant would be materially prejudiced by an unauthorized disclosure of the
information obtained, or to be obtained, during the ADR proceeding.
The written statements of witnesses Ross, Holmes, and Jennings, and the latter’s oral testimony
in the April 25, 2013 arbitration hearing, both fall under S3(b) [1] and [3]. Both parties and the
tribunal also agreed to the Terms of Reference (TOR) that the arbitration proceedings “should be
kept strictly confidential as provided in S23 of ADR Act and Art. 25-A of PDRCI Arbitration
rules (Rules) xxx.” ADR Act and the Rules repeatedly use “shall” which is one of mandatory
character.
2.1) General rule—confidential- Thus, the general rule is that information disclosed by a
party or witness in an ADR proceeding is considered privileged and confidential.

Rule 10.8 of Special ADR Rules also provides:

Rule 10.8. Court action. — If the court finds the petition or motion meritorious, it shall
issue an order enjoining a person or persons from divulging confidential information.
In resolving the petition or motion, the courts shall be guided by the following principles
applicable to all ADR proceedings: Confidential information shall not be subject to
discovery and shall be inadmissible in any adversarial proceeding, whether judicial or
quasi judicial. Xxx.
Art. 5.42 of IRR of the ADR Act (also S23 of ADR Act) also echoes that arbitration proceedings,
records, evidence and the arbitral award and other confidential information are privileged and
confidential and shall not be published except 1) with the consent of the parties; or 2) for the
limited purpose of disclosing to the court relevant documents where resort to the court is
allowed. The presence of these criteria must be apparent. Otherwise, the general rule should be
applied. Here, only a perceived imputation of wrongdoing was alleged by respondents.

3) Relevance of statements best left to arbitrator’s judgment; statements were connected to

issue- RTC and CA did not consider the declarations in the witness statements and testimony to
be related to the subject of arbitration and denied the confidentiality order application. SC does
not agree.

The phrase” relative to the subject of mediation or arbitration” need not be strictly confined to
the discussion of the core issues in the arbitral dispute. “Relative” simply means “connected to,”
which means the parties in arbitration are encouraged to discuss openly their grievances. An
ADR proceeding was not designed to be strictly technical or legally confined at all times.

Here, when Jennings was asked by arbitrator Panga to expound on how the opposition of Ace
and Merit could be related to the ongoing arbitration, Jennings replied that, to his mind, it was
indicative of the leverage that Air21 had over FedEx as Air21 was able to withhold large sums of
money. The relevance or materiality of said statements should be best left to the
arbitrator’s sound judgment. But even if the statements were not fundamental to the issues,
nonetheless they were still connected to and propounded by a witness who relied on the
confidentiality of the proceedings.

4) Intent behind arbitration- Arbitration, being an ADR proceeding, is primarily designed to be a

prompt, economical and amicable forum for the resolution of disputes. It guarantees
confidentiality in its processes to encourage parties to ventilate their claims or disputes in a less
formal, but spontaneous manner. The very soul of an arbitration proceeding would be rendered
useless if it would be simply used as an avenue for evidence gathering or an entrapment
mechanism to lure the other unsuspecting party into conveying information that could be
potentially used against him in another forum or in court. the RTC and the CA failed to consider
the fact that an arbitration proceeding is essentially a unique proceeding that is non-litigious in
character where the parties are bound by a different set of rules as clearly encapsulated under the
Special ADR Rules.
e. Principle of Separability
30. Dale Strickland v. Ernst & Young LLP, GR 193782, August 1, 2018, Jardeleza, J., First
Division.
FACTS:
National Home Mortgage Finance Corporation (NHMFC) and Punongbayan & Araullo (PA)
entered into a Financial Advisory Services Agreement (FASA) for liquidation of NHMFC’s
Unified Home Lending Program (UHLP). PA was then member of respondent global company
EYLLP. PA confirmed to NHMFC its engagement as exclusive financial advisor for the UHLP
Project.

Strickland was a partner of EYLLP seconded to respondent Ernst & Young Asia Pacific
Financial Solutions (EYAPFS) who was listed in the FASA as member of the engagement
team.Strickland played a role in negotiating FASA between PA and NHMFC. On June 6, 2002,
EYLLP wrote PA of the termination of its membership in EYLLP, but the working relationship
among the parties continued. EYLLP assigned Strickland to Manila as partner.

In July 2004, notice was given to NHMFC of PA’s intention to remove Strickland from NHMFC
engagement team due to Strickland’s resignation from EYLLP/EYAPFS. But since NHMFC was
intent on retaining Strickland’s services despite his separation from EYLLP and EYAPFS, the
parties negotiated to define Strickland’s possible continued participation in UHLP.

PA had met with NHMFC president where PA accepted NHMFC’s proposal that NHMFC will
hire Strickland for a nominal compensation so that Strickland can continue to participate in the
project. PA drew up a draft agreement and submitted it to both NHMFC and Strickland for their
review. Conflict arose on Strickland’s actual participation in the project among PA, NHMFC,
and Strickland as reflected in the proposed revisions to the “Draft Financial Advisory Services”
initially prepared by PA. PA objected to Strictland’s proposed amendments on the terms of
compensation which now contemplated PA’s engaged of Strickland as subcontractor for the
closing of the UHLP Project.

Strickland filed a complaint against EYAPFS, PA, and NHMFC, praying for P18M as equitable
compensation for services rendered. EYLLP and EYAPFS moved to refer to arbitration. RTC
held that the dispute is domestic and not international nor commercial, so referral to US pursuant
to the inoperative arbitration clause is uncalled for. CA reversed, referring the dispute between
Strickland and EYLLP to arbitration, and ordering EYLLP be dropped as defendant.

Thus, PA moved to suspend proceedings in RTC. But RTC denied, saying that CA referred the
dispute between Strickland and EYLLP only to arbitration since PA is not a party thereto. CA
reversed, ordering RTC to suspend its proceedings. Hence these consolidated petitions by
Strickland.

ISSUE:
Whether the partnership agreement’s presentation as an actionable document complied with R8,
S7.
HELD: YES.
Strickland claims that CA’s referral to arbitration of the dispute is wrong since EYLLP failed to
properly allege the partnership agreement as actionable document under R8, S7. But EYLLP,
while initially quoting only the provision of the partnership agreement on dispute resolution,
eventually submitted a copy thereof, complying with R8, S7 ultimately:
Sec. 7. Action or defense based on document. — Whenever an action or defense is based
upon a written instrument or document, the substance of such instrument or document
shall be set forth in the pleading, and the original or a copy thereof shall be attached to
the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said
copy may with like effect be set forth in the pleading.

1) Separability doctrine- Thus, EYLLP ultimately complied with R8, S7 given that Strickland
himself does not even deny the partnership agreement nor the arbitration clause. In Cargill PHL
Inc. v. San Fernando Regala Trading, Inc., we discussed the nature of an arbitration clause as a
contract in itself and the continued referral to arbitration despite a party’s repudiation of the main
contract:

“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 party's mere
repudiation of the main contract is sufficient to avoid arbitration. That is exactly the situation that
the separability doctrine seeks to avoid. The doctrine of separability 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.

1.1) R8, S7 complied with; arbitration clause not specifically denied- Here, we consider the
Partnership Agreement which provides for alternative dispute resolution. Since the arbitration
clause is in itself a contract, the setting forth of its provisions in EYLLP’s answer and motion to
refer to arbitration, and the actual submission by EYLLP of the partnership agreement, complies
with S7, R8 which Strickland should have specifically deined.

2) Commercial relationships covered by our arbitration laws are purely private and contractual in
nature. Commercial arbitration is a purely private system of adjudication facilitated by private
citizens which we have consistently recognized as valid. Thus, we agree with CA’s ruling and its
application of our commercial arbitration laws:

2.1) Dispute is international- “To determine the applicable law, the nature of arbitration sought
to be undertaken must be looked at. ADR Act defines domestic arbitration negatively by saying
that it is one that is not international as defined in the Model Law. Art. 1(3) of Model Law
provides that an arbitration is international if:
(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.
The arbitration in this case is international for falling under Art. 1(3)(b)(ii) of Model Law. The
place of business of EYLLP is in USA. It is in PHL that the services for which Strickland seeks
remuneration were rendered.

2.2) Dispute is commercial- For Model Law to apply, the arbitration should also be commercial.
The explanatory footnote to Art.1(1) of Model Law explains that “commercial” should be given
a wide interpretation as to cover matters arising from all relationships of a commercial nature,
contractual or not. Relationships of a commercial nature, it states, includes:
"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.
Thus, “Commercial” is broad enough to cover a partnership.” (Strickland’s insistence on PH
courts to primarily adjudicate his claims of tortious conduct, and not commercial arbitration *is
thus wrong.)

CA thus correctly referred the dispute to arbitration.

3) PA is agent of EYLLP- PA is an agent of EYLLP when it executed, as PH member of

EYLLP, the FASA with NHMFC for UHLP project. In two documents, PA represented
EYLLP/EYAPFS in the FASA:
In the April 15, 2002 letter of PA to Strickland: “PA acted as the contracting party on behalf of
EYAPFS xxx.” This fact of agency relationship between PA and EYLLP cannot be avoided by
Strickland given Arts. 1868 and 1873 of NCC (Art. 1873- if a person specifically informs
another xxx that he has given a power of attorney to a third person xxx.). Thus, PA cannot sue or
be sued on the contract of employment between Strickland and EYAPFS.

4) PA bound by arbitration agreement in Partnership Agreement- That PA is not signatory to the

Partnership Agreement containing the arbitration clause is of no moment. It is applicable to PA
and effectively stays the proceedings against it. In BF Corporation v. CA, we held: “A contract
need not be contained in a single writing. It may be collected from several different writings
xxx.”

31. Cargill PHL, Inc. v. San Fernando Regala Trading, Inc., GR 175404, January 31, 2011,
Peralta, J., Second Division. (See case #17)

f. Court Assistance in Arbitration

32. Aboitiz Transport System Corporation v. Gothong, GR 198226, July 18, 2014, Perlas-
Bernabe, J., Second Division.
FACTS:
Aboitiz Shipping Corporation (ASC), Carlos A. Gothong Lines, Inc. (CAGLI), and William
Lines, Inc. (WLI), principally owned by the Aboitiz, Gothong, and Chiongbian families, entered
into an Agreement, signed by Aboitiz for ASC, Gothong for CAGLI, and respondent Chiongbian
for WLI. ASC and CAGLI agreed to transfer their shipping assets to WLI in exchange for WLI
shares. WLI would run the merged shipping business and be renamed “WG&A, Inc.” S11.06 of
the Agreement provides that disputes under the agreement shall be settled by arbitration under
RA 876.

An attachment to the Agreement was a letter written by Chiongbian to Gothong, saying that WLI
committed to acquire from CAGLI’s inventory certain spare parts and materials not exceeding
P400M. A valuation of CAGLI’s inventory was done and showed it to be P514M. thereafter,
WLI received inventory valued at P558M, but it only paid CAGLI P400M as agreed upon. In
2002, Chiongbian and Gothong families sold their interests in WLI/WG&A to the Aboitiz
family. Aboitiz Equity Ventures (AEV) agreed to purchase WLI/WG&A shares of the 2 families.
WLI/WG&A’s corporate name was changed to Aboitiz Transport System Corporation (ATSC,
petitioner).

In 2008, CAGLI sent a letter demanding ATSC to pay the excess inventory it delivered to WLI
amounting to P158M. CAGLI also demanded AEV and Chiongbian to refer the dispute to
arbitration. AEV countered that the excess inventory was already returned. Thus, CAGLI filed a
complaint in RTC against Chiongbian, ATSC, ASC, to compel them to submit to arbitration.

RTC issued an order, directing CAGLI, Chiongbian, ATSC, and ASC to submit to arbitration.
CAGLI filed a notice of dismissal, averring that it decided to withdraw its complaint due to the
fact that the opposing parties had not filed their responsive pleadings. RTC granted and ordered
the case dismissed. ATSC and ASC’s MR was denied. ATSC had also moved to exclude
Chiongbian from the arbitration proceedings, but RTC denied, saying that the motion is moot
due to confirmation of the notice of dismissal. Hence this petition.

ISSUE:
1) Whether the grant of the notice of dismissal was proper.
2) Whether Chiongbian msut be included in the arbitration proceedings.
HELD:
1) NO. S6, RA 876, enforcement of arbitration agreement, court does not rule on merits- The
nature of the complaint filed by CAGLI in RTC is for the enforcement of an arbitration
agreement governed by S6, RA 876:
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.
In Gonzales v. Climax Mining, Ltd, the special proceeding in S6 was held to be the procedural
mechanism for the enforcement of the contract to arbitrate. RA 876 explicitly confines the
court’s authority only to pass upon the issue of whether there is or there is no agreement in
writing providing for arbitration. If there is, the court shall order the parties to proceed with
arbitration. Otherwise, the proceeding shall be dismissed. The duty of the courts is not to resolve
the merits of the parties’ claims but only to determine if they should proceed to arbitration
or not.
1.1) RTC erred in granting notice of dismissal- Here, the primary relief sought by CAGLI’s
complaint, to compel the parties to submit to arbitration, has already been granted by RTC in its
Feb. 26, 2010 order. Such partakes of a judgment on the merits of the complaint for enforcement
of the arbitration agreement. Upon the rendition of a judgment or final order, the period "before
service of the answer or of a motion for summary judgment," mentioned in S1 R17 of RoC when
a notice of dismissal may be filed by the plaintiff, no longer applies. The notice of dismissal
should no longer be entertained.

2) NO. Chiongbian not a party to the agreement- Only those parties who have agreed to submit a
controversy to arbitration may be compelled to submit to arbitration. Here, S11.06 of the
Agreement embodies the arbitration agreement. The 3 parties thereto and necessarily to the
arbitration agreement are: ASC, CAGLI, and WLI/WG&A/ATSC. Contracts like the arbitration
agreement take effect only between the parties, their assigns and heirs. Respondent Chiongbian,
having merely physically signed the agreement as representative of WLI, is not a party thereto
nor is he an assignee or heir of any party. Thus, he cannot be included in the arbitration
proceedings.

33. Home Bankers Savings and Trust Company v. CA, GR 115412, November 19, 1999,
Buena, J., Second Division (See case #3)

34. DFA v. BCA International Corporation, GR 225051, July 19, 2017, Peralta, J., Second
Div, (See case #1)

34.1 DFA v. BCA International Corporation, GR 210858, June 29, 2016, Carpio, J., Second
Division. (See case #1.1)

35. Transfield PHL, Inc. v. Luzon Hydro Corporation, GR 146717, May 19, 2006, Tinga, J.,
Special Second Division.
FACTS:
Luzon Hydro Corporation (LHC) claims that Transfield PHL, Inc. (TPI) is guilty of forum
shopping when it filed these suits:
1) Civil Case 332 in RTC for confirmation, recognition, and enforcement of third partial
award in ICC Case 11264, TPI v. LHC;
2) ICC Case 11264 filed in the International Court of Arbitration, International Chamber
of Commerce (ICC), a request for arbitration pursuant to the Turnkey Contract between
TPI and LHC;
3) GR 146717, TPI v. LHC, an appeal by certiorari from CA-GR 61901, which is a
petition for review of Civil Case 1312 wherein TPI claimed that LHC’s call on the
securities was premature. Case 1312 is also a complaint for injunction with prayer for
TRO or WPI.
ISSUE:
Whether the petition for WPI with RTC while the international arbitration was pending was
proper.
HELD: YES.
1) Forum Shopping not present- For forum shopping to exist, there must be: 1) identity of
parties, or at least such parties as represent the same interests in both actions; (b) identity of
rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the
identity of the two preceding particulars is such that any judgment rendered in the other action
will, regardless of which party is successful, amount to res judicata in the action under
consideration.

There is no identity of causes of action between the arbitration case, this petition, and Civil Case
04-332. ICC Case 11264 was filed to determine the primary issue of whether the delays in the
construction project were excused delays which would render TPI’s claims for extension of time
to finish the project valid. Civil Case 1312 is to enjoin LHC from calling on the securities and
respondent banks, New Zealand Banking Group and Security Bank, from transferring or paying
the securities in case LHC calls them.

Neither is there identity of parties. The ICC case involves TPI and LHC only as parties to the
Turnkey Contract. This petition includes Security bank and ANZ Bank sought to be enjoined
from releasing the funds of the letter of credit. It would be ineffectual to ask ICC to issue writs
of preliminary injunction against ANZ Bank and Security Bank as these are not parties to
the arbitration case, and the ICC tribunal would not be able to compel LHC to obey.

2) Provisional reliefs from courts, available during arbitration- The pendency of arbitral
proceedings does not foreclose resort to the courts for provisional reliefs. The ICC Rules,
which governs the parties’ arbitral dispute, allows a party to apply to a judicial authority for
interim or conservatory measures. S14, RA 876 recognizes the right of any party to petition the
court to take measures to safeguard or conserve any matter subject of the dispute in
arbitration. RA 9285 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.

3) Petition to enforce partial award premature; no order to pay therein- New York Convention’s
applicability is confirmed in S42 of RA 9285. This provides that the application for recognition
and enforcement of foreign arbitral awards shall be filed in RTC. But while TPI’s resort to RTC
for recognition and enforcement of Third Partial Award is sanctioned by NY Convention and RA
9285, the application for enforcement was premature since the Third Partial Award had no order
for payment or return of the proceeds of the securities.

The Final Award issued by ICC awarded US$24M, including TPI’s claim of $17M for return of
the securities from LHC. That the proceeds of securities was included shows that ICC intended
to make a final determination only in the Final Award, not in previous partial awards.

j. Other forms of ADR in the PHL

PD 242 in relation to Book IV, Chapter 14, Administrative Code
36. Power Sector Assets and Liabilities Management Corporation v. CIR, GR 198146,
August 08, 2017, Carpio, J., En Banc.
FACTS:
Petitioner PSALM is a GOCC created under RA 9136 or Electric Power Industry Reform Act of
2001 (EPIRA). S50 of RA 9136 states that the principal purpose of PSALM is to manage the
orderly sale and privatization of the National Power Corporation (NPC) assets with the objective
of liquidating all NPC financial obligations. PSALM conducted public biddings for the
privatization of the Pantabangan-Masiway Hydroelectric Power Plant and Magat Hydroelectric
Power Plant. The winning bidders were $129M and $530M respectively.

BIR demanded payment of P3,813,080,472 deficiency VAT for these sales from NPC. NPC
indorsed the BIR letter to PSALM. BIR, NPC, and PSALM executed a MOA where they agreed
that 1) NPC/PSALM shall pay the P3.8B under protest, 2) A ruling from the DOJ that is
favorable to NPC/PSALM shall be tantamount to the filing of an application for refund/tax credit
certificate; and BIR undertakes to immediately process and approve this application. 3) Either
party may appeal any adverse decision against. Thus, PSALM paid under protect the P3.8B.

PSALM filed with DOJ a petition for adjudication of the dispute with BIR to resolve the issue of
whether the power plants sales should be subject to VAT. DOJ ruled in favor of PSALM, saying
that under EPIRA, the properties are transferred to PSALM and thus PSALM was the seller; the
sale, a one-time sale, was not in the regular pursuit of a commercial activity but effected thru the
mandate of EPIRA.

BIR appealed to CA, arguing that DOJ has no jurisdiction. CA held that jurisdiction is conferred
by law. The parties cannot stipulate on it by conferring jurisdiction in a body that has none.
Under NIRC, it is CIR that is the proper body to resolve cases involving disputed assessments.
DOJ has no jurisdiction.

Hence this petition.

ISSUE:
Whether the DOJ has jurisdiction over the dispute.
HELD: YES.
1) DOJ has jurisdiction under PD 242- We agree with CA that jurisdiction is conferred by law.
This case involves a dispute between PSALM and NPC, both wholly government-owned
corporations, and BIR, a government office. S 1, 2, and 3 of PD 242 states:
Section 1. Provisions of law to the contrary notwithstanding, all disputes, claims and
controversies solely between or among the departments, bureaus, offices, agencies
and instrumentalities of the National Government, including constitutional offices
or agencies, arising from the interpretation and application of statutes, contracts or
agreements, shall henceforth be administratively settled or adjudicated as provided
hereinafter: xxx.
Section 2. In all cases involving only questions of law, the same shall be submitted to
and settled or adjudicated by the Secretary of Justice, as Attorney General and ex
officio adviser of all government owned or controlled corporations and entities, in
consonance with Section 83 of the Revised Administrative Code. His ruling or
determination of the question in each case shall be conclusive and binding upon all
the parties concerned.
Section 3. Cases involving mixed questions of law and of fact or only factual
issues shall be submitted to and settled or adjudicated by:
(a) The Solicitor General, with respect to disputes or claims [or] controversies between or
among the departments, bureaus, offices and other agencies of the National Government;
 (b) The Government Corporate Counsel, with respect to disputes or claims or
controversies between or among the government-owned or controlled corporations or
entities being served by the Office of the Government Corporate Counsel; and
(c) The Secretary of Justice, with respect to all other disputes or claims or controversies
which do not fall under the categories mentioned in paragraphs (a) and (b).
1.1) “Shall”- The use of “shall” in S1 means that it administrative settlement or adjudication of
disputes between government agencies and offices is not merely permissive but mandatory.
When the law says “all disputes, claims, and controversies solely” among government agencies,
the law means all without exception.

1.2) Purpose- The purpose of PD 242 is to provide for a speedy and efficient administrative
adjudication of disputes between government offices or agencies under the Executive branch and
to filter cases to lessen the clogged dockets of the courts. PD 242 is not unconstitutional. It does
not diminish the jurisdiction of courts but only prescribes an administrative procedure for
settlement of disputes among departments, bureaus, offices, agencies, and instrumentalities
of the National Government, including GOCCs, so that they need not always repair to the
courts for the settlement of controversies. The procedure is not much different than the
arbitration procedures in RA 876 and Labor Code.

1.3) “Solely”- PD 242 will only apply when all the parties involved are purely government
offices and GOCCs. Here, PSALM and NPC are GOCCs and BIR is a national government
office. PD 242 applies. SOJ has jurisdiction PSALM, NPC, and BIR acknowledged in their
MOA that SOJ indeed has jurisdiction over their dispute.

This case is unlike PNOC v. CA where the parties were BIR (government bureau), PNOC, and
PNB (both GOCCs), and Tirso Savellano (private citizen) and where we thus held that PD 242 is
inapplicable. It was Savellano who gave BIR the information that resulted in the investigation of
PNOC and PNB.

In contrast, this case is a dispute solely between PSALM and NPC, and BIR. PD 242 applies.

2) President’s power of control; alter-ego- It is only proper that intra-governmental disputes be

settled administratively since the opposing government offices, agencies and instrumentalities
are all under the President's executive control and supervision. S17, Art. VII of the constitution
states that: "The President shall have control of all the executive departments, bureaus and
offices. He shall ensure that the laws be faithfully executed." 

Thus, if two executive offices cannot agree, it is only logical that the president, as the sole
executive who has control over both offices in dispute, should resolve the dispute instead of the
courts. Only after the president has settled the dispute can the courts’ jurisdiction be invoked.
Under the doctrine of qualified political agency, “all executive organizations are adjuncts of the
Executive Department, the heads of the various executive departments are assistants and agents
of the Chief Executive xxx. The acts of the Secretaries of such departments, performed and
promulgated in the regular course of business, are, unless disapproved or reprobated by
the Chief Executive presumptively the acts of the Chief Executive."
3) Exhaustion of administrative remedies- Under this doctrine, where a remedy before an
administrative body is provided by statute, relief must be sought by exhausting this remedy prior
to bringing an action in court in order to give the administrative body every opportunity to decide
a matter that comes within its jurisdiction. A litigant cannot go to court without first pursuing his
administrative remedies, otherwise his action is premature. PD 242 (now Chapter 14, Book IV,
EO 292) provides for such administrative remedy.

4) CA ruled that under NIRC, the dispute is within CIR’s authority to resolve:
SEC 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. -
The power to interpret the provisions of this Code and other tax laws shall be under the
exclusive and original jurisdiction of the Commissioner, subject to review by the
Secretary of Finance.
The power to decide disputed assessments, refunds in internal revenue taxes, fees or other
charges. penalties imposed in relation thereto, or other matters arising under this Code or
other laws or portions thereof administered by the Bureau of Internal Revenue is vested
in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax
Appeals
The first paragraph subjects his decision to review by the secretary of finance, alter ego of the
president. Thus, the president’s constitutional power of control is preserved. This power of
control cannot be limited or withdrawn by congress.

The second paragraph is in conflict with PD 242. To harmonize, this interpetation should be
adopted: 1) As to private entities and BIR, the power to decide disputed assessments etc. or other
matters arising under NIRC or other laws administered by BIR is vested in CIR subject to
exclusive appellate jurisdiction of CTA in accordance with S4, NIRC. 2) Where the disputing
parties are all public entities, the case shall be governed by PD 242.

Also, NIRC is a general law while PD 242 is a special law that applies only to disputes involving
solely government offices, agencies, instrumentalities.

5) PD 242 is now embodied in Chapter 14, Book IV, EO 292 or Administrative Code of 1987,
which took effect Nov. 24, 1989.

SC reinstated the SOJ decision, holding that the sale is not subject to VAT.

37. Philippine Veterans Investment Development Corp. v. Hon. Velez, GR 84295, July 18,
1991, Griño-Aquino, J., First Division.
FACTS:
Respondent PH Veterans Assistance Commission (PVAC) filed in RTC a complaint for
foreclosure of mortgage against petitioners PHIVIDEC and PHIVICEC Industrial Authority
(PIA). PHIVIDEC and PIA filed an answer with counterclaim, alleging lack of jurisdiction of
RTC since the case is covered by the arbitration powers of the Government Corporate Counsel
under PD 242 S3(b) and 6:
Sec. 1. Provisions of law to the contrary notwithstanding, all disputes, claims and
controversies solely between or among the departments, bureaus, offices, agencies and
instrumentalities of the National Government, including government-owned or controlled
 corporations but excluding constitutional offices or agencies, arising from
the interpretation and application of statutes, contracts or agreements, shall henceforth
be administratively settled or adjudicated as provided hereinafter: xxx.
Sec. 3. . . .
(b) The Government Corporate Counsel, with respect to disputes or claims or
controversies between or among the government-owned or controlled corporations or
entities being served by the Office of the Government Corporate Counsel;
Sec. 6. The final decisions rendered in the settlement or adjudication of all such disputes,
claims or controversies shall have the same force and effect as final decisions of the court
of justice. 

Judge Velez denied the motion to dismiss on the ground that PD 242 is unconstitutional for
emasculating and impairing judicial power.

Petitioners filed a petition for certiorari with SC. SC required PHIVIDEC, PIA, and PVAC to
inform SC whether they are government agencies or GOCCs. PHIVIDEC and PIA manifested
that they are GOCCs created under PD 243 and 538 respectively. PVAC manifested that under
PD 244, it is a government office or agency.

ISSUE:
Whether PD 242 is unconstitutional for emasculating judicial power.
HELD: NO.
Since the foreclosure proceeding filed by PVAC against PHIVIDEC and PIA arose from the
interpretation and application of the mortgage contract between them, P.D. No. 242 applies to the
case.

PD 242 does not diminish the jurisdiction of courts but only prescribes
an administrative procedure for the settlement of certain types of disputes between or among
departments, bureaus, offices, agencies, and instrumentalities of the National Government,
including GOCCs, so that they need not always repair to the courts for the settlement of
controversies arising from the interpretation and application of statutes, contracts or agreements.
The procedure is not much different, and no less desirable, than the arbitration procedures
provided in Republic Act No. 876 (Arbitration Law) and in Section 26, R.A. 6715 (The Labor
Code). It is an alternative to, or a substitute for, traditional litigation in court with the added
advantage of avoiding the delays, vexations and expense of court proceedings. Or, as P.D. No.
242 itself explains, its purpose is "the elimination of needless clogging of court dockets to
prevent the waste of time and energies not only of the government lawyers but also of the courts,
and eliminates expenses incurred in the filing and prosecution of judicial actions.

The notion that PD 242 would emasculate court jurisdiction is erroneous. In fact, RoC make
spre-trial mandatory so that the parties may consider, among others, the possibility of a
submission to arbitration.

P.D. No. 242 is a valid law prescribing an administrative arbitration procedure for certain
disputes among offices, agencies and instrumentalities under the executive control and
supervision of the President of the Philippines. Since PVAC filed Civil Case No. 11157 against
PHIVIDEC and PIA without first passing through the administrative channel, the judicial action
was premature for non-exhaustion of administrative remedies, hence, dismissible on that
account 

Katarungang Pambarangay
38. Chavez v. CA, GR 159411, March 18, 2005, Puno, J., Second Division.
FACTS:
Petitioner Teodoro Chavez and respondent Jacinto Trillana entered into a contract of lease
whereby Chavez leased to Trillana his fishpond in Taliptip, Bulacan for 6 years from Oct. 23,
1994 to Oct. 23, 2000. The rental for the whole term was P2,240,000. Paragraph 5 of the contract
states that respondent shall undertake all construction and preservation of improvements in the
fishpond that may be destroyed during the lease at his expense.

In Aug. 1996, a typhoon damaged the fishpond. Respondent did not immediately undertake
repairs as the water level was still high. 3 weeks later, respondent was informed by a barangay
councilor that major repairs were being undertaken with a crane at the instance of petitioner who
had grown impatient with his delay in commencing the work.

Respondent filed a complaint in the office of the barangay captain, complaining about the
unauthorized repairs and the ouster of his personnel from the leased premises and its unlawful
taking by petitioner despite the subsisting lease. After conciliation proceedings, a
“KASUNDUAN” was reached, stating that Chavez will return P150k for the unexpired period of
the lease to Trillana as follows:
Ang ₱50,000.00 ay ibibigay bago sumapit o pagsapit ng ika-31 ng Oktubre 1996 at ang
balanseng ₱100,000.00 ay ibibigay sa loob ng isang taon subalit magbibigay ng
promissory note si G. Chavez at kung mabubuwisang ang kanyang palaisdaan ay
ibibigay lahat ni G. Chavez ang buong ₱150,000.00 sa lalong madaling panahon.
Kung magkakaroon ng sapat at total na kabayaran si G. Chavez kay G. Trillana ang huli
ay lalagda sa kasulatan bilang waiver o walang anumang paghahabol sa nabanggit na
buwisan.
Alleging non-compliance with the lease contract and this “kasunduan”, respondent filed a
complaint against Chavex in RTC Valenzuela for P300k reimbursement of rentals for unexpired
portion of the lease, P500k unrealized profits, P200k moral damages, P200k exemplary, P100k
attorney’s fees.

RTC ruled for Trillana. CA deleted the P500k unrealized profits. Hence this petition for review.

Chavez claims that RTC had no jurisdiction since his alleged violation of the contract was
already amicably settled. The procedure should have been for enforcement of the settlement as
provided n the Revised Katarungang Pambarangay Law. Assuming RTC had jurisdiction, it
cannot award more than P150k.

ISSUE:
Whether RTC had jurisdiction.
HELD: YES.
1) Choices under Art. 2041, NCC- Under the Revised Katarungang Pambarangay Law, an
amicable settlement has the force and effect of a final judgment if not repudiated within 10 days
from its date. It may be executed by the lupong tagapamayapa within 6 months from its date or
by action in the municipal court if beyond such 6-month period. This follows Art. 2037 of NCC:
A compromise has upon the parties the effect and authority of res judicata; but there shall
be no execution except in compliance with a judicial compromise.
But the broad precept in Art. 2037 is qualified by Art. 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.
1.1) Before NCC, there was no right to rescind compromise agreements. The only recourse was
to enforce its terms in case of violation. NCC created for the first time the right of rescission in
Art. 2041, which should be deemed to qualify the broad precept in Art. 2037.

2) Can enforce settlement or regard it as rescinded- Here, the Revised Katarungang

Pambarangay Law provides for a two-tiered mode of enforcement of an amicable settlement,
to wit: (a) by execution by the Punong Barangay which is quasi-judicial and summary in nature
on mere motion of the party entitled thereto; and (b) an action in regular form, which remedy is
judicial. But this does not rule out the right of rescission under Art. 2041 of NCC.

Thus, although the “Kasunduan” has the force and effect of a final judgment of a court, Chavez’s
non-compliance paved the way for the application of Art. 2041. Trillana chose to regard the
“Kasunduan as rescinded and insist upon his original demand when he filed his complaint for
recovery of unrealized profits and reimbursement of advance rentals, and damages. Respondent
was not limited to claiming ₱150,000.00 because although he agreed to the amount in
the "Kasunduan," it is axiomatic that a compromise settlement is not an admission of liability but
merely a recognition that there is a dispute and an impending litigation  which the parties hope to
prevent by making reciprocal concessions, adjusting their respective positions in the hope of
gaining balance by the danger of losing.