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ADR AND ARBITRATIONIN THE PHILIPPINES

A Lecture by:ATTY VICTOR P LAZATIN

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Primary Domestic Sourcesof Arbitration LawA. Republic Act 9285 (RA 9285)The ADR Act of 2004

which is UNCITRAL based. For international

arbitration, the UNCITRAL MODEL LAW was adopted as

an Annex to the law and the travaux preparatorieswere expressly referred to in interpreting the same.

B. Republic Act 876 (RA 876) - The Philippine

Arbitration Law which is based on the U.S. FederalArbitration Law. It continues to govern domestic

arbitrations as modified by RA 9285, including portions

of the UNCITRAL MODEL LAW

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ADR Act of 2004Declaration of PolicySEC. 2 It is hereby declared the policy of the State to actively promote

party autonomy in the resolution of disputes or the freedom of theparty to make their own arrangements to resolve their disputes.Towards this end, the State shall encourage and actively promote theuse of Alternative Dispute Resolution (ADR) as an important means to

achieve speedy and impartial justice and declog court dockets. Assuch, the State shall provide means for the use of ADR as an efficienttool and an alternative procedure for the resolution of appropriatecases. Likewise, the State shall enlist active private sectorparticipation in the settlement of disputes through ADR. This Act shallbe without prejudice to the adoption by the Supreme Court of any

ADR system, such as mediation, conciliation, arbitration, or anycombination thereof as a means of achieving speedy and efficientmeans of resolving cases pending before all courts in the Philippineswhich shall be governed by such rules as the Supreme Court mayapprove from time to time.(RA 9285)

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ADR Forms1. Mediation

2. International Arbitration

3. Domestic Arbitration

4. CIAC Arbitration

5. Other Forms of ADR

a. Early Neutral Evaluation

b. Mini-Trial

c. Mediation-Arbitration

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MEDIATION"Mediation" means a voluntary process in which

a mediator, selected by the disputing parties,

facilitates communication and negotiation,

and assist the parties in reaching a voluntary

agreement regarding a dispute. (R.A. 9285,

Sec. 3 [q])

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INTERNATIONALCOMMERCIAL ARBITRATION

When is arbitration international?

1. Ifthe parties to an arbitration agreement have, at the time

of the conclusion of that agreement, their places ofbusiness in different States. (UML, Article 1[3])

2. If the place of arbitration, contract performance, or the place

of the subject matter of the dispute is situated in a Stateother than the place of business of the parties

3. The parties expressly agree that subject matter isinternational

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DOMESTIC ARBITRATIONScope: Domestic Arbitration means anaribtration that is not international, as

defined in Article 1(3) of the UML (ADR

Law, Sec. 32)

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Law Governing Domestic Arbitration

- Republic Act No. 876, otherwise known as TheArbitration Law, as amended by Chapter 5 of the ADRLaw on Domestic Arbitration

- Selected sections of the UML- Articles 8, 10, 11, 12 ,13, 14, 18 and 19

- Articles 29 to 32

- Sections 22 to 31 of Chapter 4 of the ADR Lawon International Arbitration

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CONSTRUCTIONARBITRATION

The arbitration of construction disputes shallbe governed by Executive Order No. 1008,

otherwise known as the Construction Industry

Arbitration Law. (R.A. 9285, Sec. 34)

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Construction disputes which fall within the original

and exclusive jurisdiction of the ConstructionIndustry Arbitration Commission (the "Commission")shall include those between or among parties to, orwho are otherwise bound by, an arbitration

agreement, directly or by reference whether suchparties are project owner, contractor, subcontractor,quantity surveyor, bondsman or issuer of aninsurance policy in a construction project.

The Commission shall continue to exercise originaland exclusive jurisdiction over construction disputesalthough the arbitration is "commercial" pursuant toSection 21 of this Act. (R.A. 9285, Sec. 35)

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OTHER ADR FORMSEARLY NEUTRAL EVALUATION" means an ADR

process wherein parties and their lawyers are

brought together early in a pre-trial phase to

present summaries of their cases and receive

a nonbinding assessment by an experienced,

neutral person, with expertise in the subject inthe substance of the dispute.(R.A. 9285, Sec.

3 [n])

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MINI-TRIAL" means a structured disputeresolution method in which the merits of a

case are argued before a panel comprising

senior decision makers with or without the

presence of a neutral third person after

which the parties seek a negotiated

settlement.(R.A. 9285, Sec. 3 [u])

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MEDIATION-ARBITRATION" or Med-Arb is a

step dispute resolution process involving

both mediation and arbitration. (R.A.

9285, Sec. 3 [f])

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Advantages of Arbitration1. Neutrality of Arbitrators

2. Technical Expertise of Arbitrators

3. Privacy and Confidentiality

4. Speed of the Disposition

5. Non-Formal and More Flexible Procedure

6. Flexibility in the Choice of Law/s

7. Better Enforcement of Arbitral Awards vs. JudicialDecisions

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Advantages of Arbitration1. Neutrality

- Fear of Patriotic or Hometown decisions

- IndependentOther National

- Freedom of Choice

- Familiarity with UNCITRAL Model Law

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Advantages of Arbitration2. Technical Expertise of Arbitrators

Selection is usually based on special knowledge orexpertise of the arbitrator (s)

a. No time is wasted in educating the arbitrators

b. More focused and pro-active inquiry results

c. In arbitral tribunals3 heads are better than 1.

i. Synergy is engendered by multi-disciplinaryand differing approaches and perspectivesof arbitrators

ii. Efficient division of labor is generated alonglines of each arbitrators specialization

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Advantages of Arbitration3. Privacy and Confidentiality

- Privacy is invariably insured by limiting theproceedings to the parties, their representatives

and witnesses

- Confidentiality

- Protective orders

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Advantages of ArbitrationConfidentiality of Arbitration Proceedings

The arbitration proceedings, including the records,evidence and the arbitral award, shall be consideredconfidential and shall not be published except (1) with

the consent of the parties, or (2) for the limited purposeof disclosing to the court of relevant documents in caseswhere resort to the court is allowed herein. Provided,however, that the court in which the action or the appealis pending may issue a protective order to prevent or

prohibit disclosure of documents or informationcontaining secret processes, developments, research andother information where it is shown that the applicantshall be materially prejudiced by an authorized disclosurethereof. (R.A. 9285, Section 23)

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Advantages of Arbitration4. Speed of the Disposition

A. Due principally to

i. Expertise of Arbitratorsii. Non-Formal and More Flexible Procedures

iii. No clogged dockets

iv. Good case management in

Institutional/Administered Arbitration (vs.AdHocProceedings)

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Advantages of ArbitrationB. Non-availability of Protracted Pre-Trial Discovery

Procedures

i. Waiver of Judicial Proceduresii. Check Applicable Rules/Law on

Available/Limited Modes

iii. Arbitrators Discretion/Sanctions

- Lack of Coercive Power

- Voluntary Compliance/Adverse Inference

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Advantages of Arbitration5. Non-Formal and More Flexible Procedure

- Not bound by the technical rules of

procedure/rules of evidence

- Parties shall be treated with equality and eachparty shall be given a full opportunity of presenting

his case. (UML, Article 18)

- Example: Witness Conferencing

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Advantages of ArbitrationWitness Conferencing or Round-table hearing

involves:

- Witnesses for both parties (for a particular issue)are required to be present and exchange testimony

- In response to a specific question on a disputedissue, the arbitrator will allow the witnesses toexchange testimony (giving each party equaltime and opportunity to do so) until he is satisfied

that both parties have sufficiently stated theiropposing views/evidence on said issue.

- The lawyers will conduct their examination, cross- examination, re-direct, and re-cross after

arbitrators have finished their clarification.

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Advantages of Arbitration6. Flexibility in the Choice of Law/s

- Law of the place (seat) of arbitration; aka the LexArbitri or Curial law

- Procedural law of the place of arbitration- Governing Law: The proper law of the contract

governing substantive issue, merits

- Law governing enforcement of the Award

- New York Convention- Bilateral, multi-lateral treaties

- civil procedure law, arbitration law of theplace of enforcement

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Advantages of Arbitration- Law governing the Arbitration agreement

- arbitrability. Is the subject matter onewhich can be arbitrated, e.g. anti-trustclaims, divorce, etc.?

- Law governing the capacity of the parties to enter into agreements to arbitrate (restriction imposedby domestic law)

- state agencies

- age of party

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Advantages of Arbitration7. Better Enforcement of Arbitral Awards vs. Judicial

Decisions

A. New York Convention of 1958- Reservations on Reciprocity and Commercial

Issues

Limited Grounds for Refusal

1. By Challenging Party:

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Advantages of Arbitrationi. Incapacity of a Party to, and Invalidity of,Arbitration Agreement

ii. No proper notice/Inability to present case

iii. Beyond Scope of Arbitration Agreement

iv. Composition of Arbitral Tribunal not inaccord with Agreement/Law of Place ofArbitration

v. Award not yet binding or final

2. By Court of Enforcement Forum

i. Non-arbitrable matters

ii. Contrary to Public Policy

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Advantages of ArbitrationB. There is no equivalent International Convention on

the Enforcement of Judicial decisions similar to theNY Convention. In the Philippines, a foreign

judgment is merely a presumptive evidence of a

right as between the parties and may be repelledby evidence of a want of jurisdiction, want of noticeto the party, collusion, fraud or clear mistake oflaw or fact.

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Advantages of ArbitrationC. The court shall in no case substitute its own

judgment for that of the arbitral tribunal. SeeAssetPrivatization Trust v. Court of Appeals, 300 SCRA579 (1998) where the Court ruled that courts willnot review the findings of law and fact contained in

an award, and will not undertake to substitute theirjudgment for that of the arbitrators, since any otherrule would make an award the commencement,not the end, of litigation. Errors of law and fact, oran erroneous decision on matters submitted to the

judgment of the arbitrators, are insufficient toinvalidate an award fairly and honestly made. 300SCRA at 601-602.