Law 160A Alternative Dispute Resolution (Prof. A. Autea)2

ALTERNATIVE DISPUTE RESOLUTION

Relevant Laws / Rules1) RA 876 Arbitration Law

2) EO No 1008 CIA Law

3) RA 9285 - ADR Act of 2004

4) UNCITRAL Model Law

5) Special ADR Rules

6) UNCITRAL Arbitration Rules

7) ICC Arbitration Rules

Cases

1) Vega v. San Carlos Milling Co. Ltd, 51 Phil 908 (1924)

2) California & Hawaiian Sugar Co. v. Pioneer Insurance & Surety Corp. 346 SCRA 214 (2000)

3) Associated Bank v. CA, 233 SCRA 137 (1994)

4) Bloomfield Academy v. CA, 237 SCRA 43 (1994)

5) Mindanao Portland Cement Corporation v. McDonough Construction Co. of Florida, 90 SCRA 808 (1967)

6) Gonzales v. Climax Mining Ltd., 512 SCRA 148 (2007)

7) Oil & Natural Gas Commission v. CA, 293 SCRA 26 (1998)

8) Magellan Capital Mgt. Corp. v. Zosa, 355 SCRA 157 (2001)

9) BF Corporation v. CA, 288 SCRA 267 (1998)

10) Korea Technologies Co. Ltd. v. Lerma, 542 SCRA 1 (2008)

11) Luzon Development Bank v. Luzon Development Bank Employees, 249 SCRA 162 (1995)12) Toyota Motor Phils. Corp. V. CA, 216 SCRA 336

13) Heirs of Agusto L. Salas, Jr. v. Laperal Realty Corp., 302 SCRA 620

14) Del Monte Corp. USA v. CA, 351 SCRA 373 - WRONG15) Homebankers Savings and Trust Co. v. CA, 318 SCRA 55816) Chung Fu Industries Inc. V. CA, 206 SCRA ___17) Adamson v. CA, 232 SCRA 602 (1994)

18) National Steel Corp. v. RTC of Lanao del Norte, 304 SCRA 595 (1999)

19) Asset Privatization Trust v. CA, 300 SCRA 579

20) China Chiang Jiang Energy Corp (Phils) v. Rosal Infrastructure Builders, G.R. 125706, 30 September 1996

21) Hi Precision Steel, 228 SCRA 397

22) ABS CBN v. World, 544 SCRA 308

INTRODUCTION TO ALTERNATIVE MODES OF DISPUTE RESOLUTION

ADR alternative to conventional litigation

Arbitration only form of ADR that will result in a final, binding and enforceable award

Mediation facilitate communication, cannot impose resolution of the mediator

Conventional LitigationArbitration

JudgmentAward

Final JudgmentFinal Award

Interlocutory OrderInterim Award

P v. D / P v. R Claimant v. Respondent

StenographersCourt Reporters

Arbitration clause stipulation that parties wil submit dispute to arbitration

Request for Arbitration arbitrable dispute

Legislative History:

1) RA 876 (1953) Arbitration Law

2) New York Convention (1958)

a) Convention on the recognition & enforcement of foreign arbitral awards

b) Need to prove authenticity only

e.g. NAIA 3 case

3) RA 9285 (2004) ADR Act of 2004

a) Covers domestic & international arbitration

b) Covers all forms of ADR

4) EO No. 1008 (1985) CIAC

a) Covers all disputes in the construction industry

5) Special ADR Rules (October 13, 2009)

a) Clarified problems in RA 876 and RA 9285

6) UNCITRAL MODEL LAW part of Philippine law

a) Sec. 33 of ADR Act of 2004

Sec. 33 Applicability to Domestic Arbitration

Uncitral Model LawPreceding Ch. 4

8 Arbitration Agreement + Substantive Claim

10 No. of arbitrators

11 Appointment

12 Grounds for challenge

13 Procedure for challenge

14 Unable to perform

18 Conduct of hearings

19 Determination of rules

29 to 32 Termination of proceedingsSec. 22 Legal Representation in International Arbitration

Sec. 23 Confidentiality in Arbitration Proceedings

Sec. 24 Referral to Arbitration

Sec. 25 Interpretation of the Act

Sec. 26 Meaning of Appointing Authority

Sec. 27 What Functions May be Performed by Appointing Authority

Sec. 28 Grant of Interim Measure of Protection

Sec. 29 Further Authority for Arbitrator to Grant Interim Measure of Protection

Sec. 30 Place of Arbitration

Sec. 31 Language of the Arbitration

ARBITRATION

Arbitration v. Litigation {PALPVA}ArbitrationLitigation

Private & confidentialPublic

Parties may select arbitratorParties cannot agree on presiding officer; Judge is raffled

Parties can select governing law that will determine their substantive rightsPhilippine law governs

Procedure depends on agreementRules of Court applies

Venue depends on agremeentRules of Court governs; Venue may also depend on agreement

ConsensualNot consensual

Note: A voluntary arbitrator has the same status as an RTC judge.What is the nature of ADR?

Consensual cannot be compelled to submit to arbitration; but once you agree, youre bound by it

What is an arbitration agreement? Arbitration agreement determines the rights, obligations, procedure & rules;

- may be in a separate agreement or may be a clause in a contract

1) Arbitration clause

Any dispute arising out of this contract shall be resolved by arbitration.

2) Container contract

Contract containing the arbitration clause

Note: Doctrine of separability applies.

Rule 2.2. Policy on arbitration. XXX The Special ADR Rules recognize the principle of separability of the arbitration clause, which means that said clause shall be treated as an agreement independent of the other terms of the contract of which it forms part. A decision that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. Domestic v. International Arbitration

1) Domestic not International (RA 9285)2) International Article 1.3 (UNCITRAL Model Law)RA 9285, Sec. 32. Law Governing Domestic Arbitration. - Domestic arbitration shall continue to be governed by Republic Act No. 876, otherwise known as "The Arbitration Law" as amended by this Chapter. The term "domestic arbitration" as used herein shall mean an arbitration that is not international as defined in Article (3) of the Model Law.

Uncitral Model Law, Article 1 - xxx

3) An arbitration is international if:

a) the parties to an arbitration agreement have at the time of the conclusion of that agreement, their places of business in different States; or

b) one of the following places is situated outside the State in which the parties have their places of business:

i) the place of arbitration if determined in, or pursuant to, the arbitration agreement:

ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or

c) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country.

4) For the purposes of paragraph (3) of this article:

a) if a party has more than one place of business, the place of business is that which has the closest relationship to the arbitration agreement;

b) if a party does not have a place of business, reference is to be made to his habitual residence.Institutional v. Adhoc Arbitration

1) Adhoc arbitration -

2) Institutional conducted under the auspices of an institution

Examples:

International Chamber of Commerce

CIAC

PDRCI

Singapore International Arbitration Centre

Hongkong International Arbitration Centre

ICSPI Disp.

American Arbitration Association

Japan Commercial Arbitration

Kuala Lumpur RCA

KCAB

ICC International Court of Arbitration

ICA not a court of adjudication

Sample arbitration clause:

Any dispute arising out of this contract shall be resolved by arbitration under the ICC Rules of Arbitration.

Overview ICC Arbitration Rules / Principles:1) Submit request for arbitration

2) Assessment of non-refundable fee + cost of arbitration

a) Non-refundable fee - $2,500

b) Arbitration cost

i) Fees of arbitrators professional fees

(1) 40% - chair

(2) 30% - members

ii) Claimant 1

iii) Respondent 1

iv) Appointee of Appointing Authority - 1v) Administrative expenses

3) Highly confidential4) Counsel in arbitration does not have to be a lawyer

a) ADR Rates - $300 / hour

b) IBP Rates P3,000 / appearance

i) Senior - P7 to 10T / hour

ii) Associate P1-1,500 / hour

5) ICA can modify the form of the award

See provisions, page 31.

What is the principle of Party Autonomy?

Party autonomy freedom of the parties to determine the rules / law governing the mode of resolving their dispute

Rule 2.1. General policies. It is the policy of the State to actively promote the use of various modes of ADR and to respect party autonomy or the freedom of the parties to make their own arrangements in the resolution of disputes with the greatest cooperation of and the least intervention from the courts. To this end, the objectives of the Special ADR Rules are to encourage and promote the use of ADR, particularly arbitration and mediation, as an important means to achieve speedy and efficient resolution of disputes, impartial justice, curb a litigious culture and to de-clog court dockets.

RA 9285, Sec. 2 Declaration of Policy

-To actively promote party autonomy in the resolution of disputes or the freedom of the parties to make their own arrangements to resolve their disputes

-To encourage and actively promote the use of

ADR to achieve speedy and impartial justice & de-clog court dockets

Uncitral Model Law, Article 19 - [Determination of rules of procedure]

1) Subject to the provisions of this Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings.

2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law, conduct the arbitration in such manner as it considers appropriate. The power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence.

Uncitral Model Law, Article 28 - [Rules applicable to substance of dispute]

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

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

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

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

Uncitral Arbitration Rules, Applicable law, amiable compositeur, Article 33

1. 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.

2. The arbitral tribunal shall decide as amiable compositeur or ex aequo et bono only if the parties have expressly authorised the arbitral tribunal to do so and if the law applicable to the arbitral procedure permits such arbitration.

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

ICC Rules, Article 15: Rules Governing the Proceedings 1. The proceedings before the Arbitral Tribunal shall be governed by these Rules, and, where these Rules are silent, by any rules which the parties or, failing them, the Arbitral Tribunal may settle on, whether or not reference is thereby made to the rules of procedure of a national law to be applied to the arbitration.

2. In all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party has a reasonable opportunity to present its case.

ICC Rules, Article 17: Applicable Rules of Law 1. The parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall apply the rules of law which it determines to be appropriate.

2. In all cases the Arbitral Tribunal shall take account of the provisions of the contract and the relevant trade usages.

3. The Arbitral Tribunal shall assume the powers of an amiable compositeur or decide ex aequo et bono only if the parties have agreed to give it such powers.

Next meeting:

RA 876

RA 9285

Special ADR Rules

UNCITRAL Model Law

Appointment of Arbitrators (Domestic)ADR Law Sec. 5 & Sec. 8

RA 876, Sec. 8 Appointment of arbitrators

If, in the contract for arbitration or in the submission described in section two, provision is made for a method of naming or appointing an arbitrator or arbitrators, such method shall be followed; but if no method be provided therein the Court of First Instance shall designate an arbitrator or arbitrators.

The Court of First Instance shall appoint an arbitrator or arbitrators, as the case may be, in the following instances:

(a) If the parties to the contract or submission are unable to agree upon a single arbitrator; or

(b) If an arbitrator appointed by the parties is unwilling or unable to serve, and his successor has not been appointed in the manner in which he was appointed; or

(c) If either party to the contract fails or refuses to name his arbitrator within fifteen days after receipt of the demand for arbitration; or

(d) If the arbitrators appointed by each party to the contract, or appointed by one party to the contract and by the proper Court, shall fail to agree upon or to select the third arbitrator.

(e) The court shall, in its discretion appoint one or three arbitrators, according to the importance of the controversy involved in any of the preceding cases in which the agreement is silent as to the number of arbitrators.

(f) Arbitrators appointed under this section shall either accept or decline their appointments within seven days of the receipt of their appointments. In case of declination or the failure of an arbitrator or arbitrators to duly accept their appointments the parties or the court, as the case may be, shall proceed to appoint a substitute or substitutes for the arbitrator or arbitrators who decline or failed to accept his or their appointments.

Sec. 9 Appointment of addnal arbitrators

Where a submission or contract provides that two or more arbitrators therein designated or to be thereafter appointed by the parties, may select or appoint a person as an additional arbitrator, the selection or appointment must be in writing. Such additional arbitrator must sit with the original arbitrators upon the hearing.

RULE 6: APPOINTMENT OF ARBITRATORS

Rule 6.1. When the court may act as Appointing Authority. The court shall act as Appointing Authority only in the following instances:

a. Where any of the parties in an institutional arbitration failed or refused to appoint an arbitrator or when the parties have failed to reach an agreement on the sole arbitrator (in an arbitration before a sole arbitrator) or when the two designated arbitrators have failed to reach an agreement on the third or presiding arbitrator (in an arbitration before a panel of three arbitrators), and the institution under whose rules arbitration is to be conducted fails or is unable to perform its duty as appointing authority within a reasonable time from receipt of the request for appointment;

b. In all instances where arbitration is ad hoc and the parties failed to provide a method for appointing or replacing an arbitrator, or substitute arbitrator, or the method agreed upon is ineffective, and the National President of the Integrated Bar of the Philippines (IBP) or his duly authorized representative fails or refuses to act within such period as may be allowed under the pertinent rules of the IBP or within such period as may be agreed upon by the parties, or in the absence thereof, within thirty (30) days from receipt of such request for appointment;

c. Where the parties agreed that their dispute shall be resolved by three arbitrators but no method of appointing those arbitrators has been agreed upon, each party shall appoint one arbitrator and the two arbitrators thus appointed shall appoint a third arbitrator. If a party fails to appoint his arbitrator within thirty (30) days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within a reasonable time from their appointment, the appointment shall be made by the Appointing Authority. If the latter fails or refuses to act or appoint an arbitrator within a reasonable time from receipt of the request to do so, any party or the appointed arbitrator/s may request the court to appoint an arbitrator or the third arbitrator as the case may be.

Rule 6.2. Who may request for appointment. Any party to an arbitration may request the court to act as an Appointing Authority in the instances specified in Rule 6.1 above.

Rule 6.3. Venue. The petition for appointment of arbitrator may be filed, at the option of the petitioner, in the Regional Trial Court (a) where the principal place of business of any of the parties is located, (b) if any of the parties are individuals, where those individuals reside, or (c) in the National Capital Region.

Rule 6.4. Contents of the petition. The petition shall state the following:

a. The general nature of the dispute;b. If the parties agreed on an appointment procedure, a description of that procedure with reference to the agreement where such may be found; c. The number of arbitrators agreed upon or the absence of any agreement as to the number of arbitrators;d. The special qualifications that the arbitrator/s must possess, if any, that were agreed upon by the parties;e. The fact that the Appointing Authority, without justifiable cause, has failed or refused to act as such within the time prescribed or in the absence thereof, within a reasonable time, from the date a request is made; andf. The petitioner is not the cause of the delay in, or failure of, the appointment of the arbitrator.

Apart from other submissions, the petitioner must attach to the petition (a) an authentic copy of the arbitration agreement, and (b) proof that the Appointing Authority has been notified of the filing of the petition for appointment with the court.

Rule 6.5. Comment/Opposition. The comment/opposition must be filed within fifteen (15) days from service of the petition.

Rule 6.6. Submission of list of arbitrators. The court may, at its option, also require each party to submit a list of not less than three (3) proposed arbitrators together with their curriculum vitae.

Rule 6.7. Court action. After hearing, if the court finds merit in the petition, it shall appoint an arbitrator; otherwise, it shall dismiss the petition.

In making the appointment, the court shall have regard to such considerations as are likely to secure the appointment of an independent and impartial arbitrator.

At any time after the petition is filed and before the court makes an appointment, it shall also dismiss the petition upon being informed that the Appointing Authority has already made the appointment.

Rule 6.8. Forum shopping prohibited. When there is a pending petition in another court to declare the arbitration agreement inexistent, invalid, unenforceable, on account of which the respondent failed or refused to participate in the selection and appointment of a sole arbitrator or to appoint a party-nominated arbitrator, the petition filed under this rule shall be dismissed.

Rule 6.9. Relief against court action. If the court appoints an arbitrator, the order appointing an arbitrator shall be immediately executory and shall not be the subject of a motion for reconsideration, appeal or certiorari. An order of the court denying the petition for appointment of an arbitrator may, however, be the subject of a motion for reconsideration, appeal or certiorari.

How do you commence arbitration? (domestic)

Sec. 5 Preliminary procedure

Arbitration AgreementSubmission Agreement

(a) (c)

(b) Default ((d) Neglect / Fail / Refuse to arbitrate ( Follow (a) and (b)

RA 876, Sec. 5. Preliminary procedure. An arbitration shall be instituted by:

(a) In the case of a contract to arbitrate future controversies by the service by either party upon the other of a demand for arbitration in accordance with the contract. Such demand shall be set forth the nature of the controversy, the amount involved, if any, and the relief sought, together with a true copy of the contract providing for arbitration. The demand shall be served upon any party either in person or by registered mail. In the event that the contract between the parties provides for the appointment of a single arbitrator, the demand shall be set forth a specific time within which the parties shall agree upon such arbitrator. If the contract between the parties provides for the appointment of three arbitrators, one to be selected by each party, the demand shall name the arbitrator appointed by the party making the demand; and shall require that the party upon whom the demand is made shall within fifteen days after receipt thereof advise in writing the party making such demand of the name of the person appointed by the second party; such notice shall require that the two arbitrators so appointed must agree upon the third arbitrator within ten days from the date of such notice.

(b) In the event that one party defaults in answering the demand, the aggrieved party may file with the Clerk of the Court of First Instance having jurisdiction over the parties, a copy of the demand for arbitration under the contract to arbitrate, with a notice that the original demand was sent by registered mail or delivered in person to the party against whom the claim is asserted. Such demand shall set forth the nature of the controversy, the amount involved, if any, and the relief sought, and shall be accompanied by a true copy of the contract providing for arbitration.

(c) In the case of the submission of an existing controversy by the filing with the Clerk of the Court of First Instance having jurisdiction, of the submission agreement, setting forth the nature of the controversy, and the amount involved, if any. Such submission may be filed by any party and shall be duly executed by both parties.

(d) In the event that one party neglects, fails or refuses to arbitrate under a submission agreement, the aggrieved party shall follow the procedure prescribed in subparagraphs (a) and (b) of this section.

Arbitration v. Adjudication

Sir thinks the difference is only in the terminology, until he saw the FIDIC.

Arbitration - (d) "Arbitration" means a voluntary dispute resolution process in which one or more arbitrators, appointed in accordance with the agreement of the parties, or rules promulgated pursuant to this Act, resolve a dispute by rendering an award (RA 9285)In arbitration an independent, impartial third party hears both sides in a dispute and makes a decision to resolve it. In most cases the arbitrator's decision is legally binding on both sides, so it is not possible to go to court if you are unhappy with the decision.

Arbitration is in many ways an alternative form of court with procedural rules which govern issues such as disclosure of documents and evidence. But arbitration is private rather than public. Hearings are less formal than court hearings, and some forms of arbitration do not involve hearings but are decided on the basis of documents only.

Adjudication - Adjudication involves an independent third party considering the claims of both sides and making a decision. The adjudicator is usually an expert in the subject matter in dispute. Adjudicators are not bound by the rules of litigation or arbitration. Their decisions are often interim ones, ie they can be finalised using arbitration or another process. Adjudication decisions are usually binding on both parties by prior agreement.

In relation to construction contracts, adjudication is a statutory procedure by which any party to the contract has a right to have a dispute decided by an adjudicator, normally used to ensure payment. It is intended to be quicker and more cost effective than litigation or arbitration. The right arises by virtue of the Housing Grants Construction and Regeneration Act 1996.

Adjudication is also sometimes used to describe a non-specific alternative dispute resolution process in which a third party makes a decision as to the best way to resolve the dispute. In this sense, ombudsmen, arbitrators and judges are all types of adjudicators.

The aim of adjudication is to resolve disputed issues in order to enable work to continue (either indefinitely or while awaiting the decision of a judge or arbitrator). Arbitration is a more formal process, and the arbitrator's decision is legally binding.

FIDIC (Federacion Internationale Des Ingenieurs Conseil)

1) Dispute Adjudication Board

2) Relevant in contract negotiation

3) Different colors

a) Red

b) Blue

c) Green

d) Pink

e) Silveri) 2 parties:

(1) Project owner employer

(2) Contractor

ii) Contains an interesting provision saying that an employer would not be liable even if wrong information was given

iii) Contains an adjudication clause in the following tenor: Appeal from adjudication may be taken to the arbitrational panel under ICC Rules.

iv) Three levels:(1) Amicable settlement

(2) Adjudication

(3) Arbitration

MINI-TRIAL

What is a Mini-Trial?"Mini-Trial" means a structured dispute resolution 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 (RA 9285, Sec. 3(u))

Note:

Senior decision makers meet, negotiated settlement

EARLY NEUTRAL EVALUATION

What is Early Neutral Evaluation?

"Early 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 in the substance of the dispute

Note:

Similar to a pre-trial; before the filing of the complaint

MEDIATION

How are mediated-settlements enforced?

By depositing in court (RA 9285, Sec. 17)Court-Annexed Mediation v. Court-Ordered Mediation

"Court-Annexed Mediation" means any mediation process conducted under the auspices of the court, after such court has acquired jurisdiction of the dispute (RA 9285, Sec. 3 (l))Note: governed by SC issuances

Court-Referred Mediation" means mediation ordered by a court to be conducted in accordance with the Agreement of the Parties when as action is prematurely commenced in violation of such agreement (RA 9285, Sec. 3 (m))Notes:

- ground for stay of civil action- related to Art. 1159 CC

Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

Principle of confidentiality in mediation

Extends to admissions made in mediation

Sec. 9 - Confidentiality of Information

Information obtained through mediation proceedings shall be subject to the following principles and guidelines:

(a) Information obtained through mediation shall be privileged and confidential.

(b) A party, a mediator, or a nonparty participant may refuse to disclose and may prevent any other person from disclosing a mediation communication.

(c) Confidential Information shall not be subject to discovery and shall be inadmissible if any adversarial proceeding, whether judicial or quasi-judicial, However, evidence or information that is otherwise admissible or subject to discovery does not become inadmissible or protected from discovery solely by reason of its use in a mediation.

(d) In such an adversarial proceeding, the following persons involved or previously involved in a mediation may not be compelled to disclose confidential information obtained during mediation: (1) the parties to the dispute; (2) the mediator or mediators; (3) the counsel for the parties; (4) the nonparty participants; (5) any persons hired or engaged in connection with the mediation as secretary, stenographer, clerk or assistant; and (6) any other person who obtains or possesses confidential information by reason of his/her profession.

(e) The protections of this Act shall continue to apply even of a mediator is found to have failed to act impartially.

(f) a mediator may not be called to testify to provide information gathered in mediation. A mediator who is wrongfully subpoenaed shall be reimbursed the full cost of his attorney's fees and related expenses.

Sec. 10 Waiver of Confidentiality

A privilege arising from the confidentiality of information may be waived in a record, or orally during a proceeding by the mediator and the mediation parties.

A privilege arising from the confidentiality of information may likewise be waived by a nonparty participant if the information is provided by such nonparty participant.A person who discloses confidential information shall be precluded from asserting the privilege under Section 9 of this Chapter to bar disclosure of the rest of the information necessary to a complete understanding of the previously disclosed information. If a person suffers loss or damages in a judicial proceeding against the person who made the disclosure.

A person who discloses or makes a representation about a mediation is preclude from asserting the privilege under Section 9, to the extent that the communication prejudices another person in the proceeding and it is necessary for the person prejudiced to respond to the representation of disclosure.

Sec. 11 Exceptions to Privilege {RPTCPM}

(a) There is no privilege against disclosure under Section 9 if mediation communication is:

(1) in an agreement evidenced by a record authenticated by all parties to the agreement;

(2) available to the public or that is made during a session of a mediation which is open, or is required by law to be open, to the public;

(3) a threat or statement of a plan to inflict bodily injury or commit a crime of violence;

(4) internationally used to plan a crime, attempt to commit, or commit a crime, or conceal an ongoing crime or criminal activity;

(5) sought or offered to prove or disprove abuse, neglect, abandonment, or exploitation in a proceeding in which a public agency is protecting the interest of an individual protected by law; but this exception does not apply where a child protection matter is referred to mediation by a court or a public agency participates in the child protection mediation;

(6) sought or offered to prove or disprove a claim or complaint of professional misconduct or malpractice filed against mediator in a proceeding; or

(7) sought or offered to prove or disprove a claim of complaint of professional misconduct of malpractice filed against a party, nonparty participant, or representative of a party based on conduct occurring during a mediation.

(b) There is no privilege under Section 9 if a court or administrative agency, finds, after a hearing in camera, that the party seeking discovery of the proponent of the evidence has shown that the evidence is not otherwise available, that there is a need for the evidence that substantially outweighs the interest in protecting confidentiality, and the mediation communication is sought or offered in:

(1) a court proceeding involving a crime or felony; or

(2) a proceeding to prove a claim or defense that under the law is sufficient to reform or avoid a liability on a contract arising out of the mediation.

(c) A mediator may not be compelled to provide evidence of a mediation communication or testify in such proceeding.

(d) If a mediation communication is not privileged under an exception in subsection (a) or (b), only the portion of the communication necessary for the application of the exception for nondisclosure may be admitted. The admission of particular evidence for the limited purpose of an exception does not render that evidence, or any other mediation communication, admissible for any other purpose.

Sec. 12 Prohibited Mediator Reports

A mediator may not make a report, assessment, evaluation, recommendation, finding, or other communication regarding a mediation to a court or agency or other authority that make a ruling on a dispute that is the subject of a mediation, except:

(a) Where the mediation occurred or has terminated, or where a settlement was reached.

(b) As permitted to be disclosed under Section 13 of this Chapter.

RULE 10: CONFIDENTIALITY/PROTECTIVE ORDERS

Rule 10.1. Who may request confidentiality. A party, counsel or witness who disclosed or who was compelled to disclose information relative to the subject of ADR under circumstances that would create a reasonable expectation, on behalf of the source, that the information shall be kept confidential has 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.

Rule 10.2. When request made.A party may request a protective order at anytime there is a need to enforce the confidentiality of the information obtained, or to be obtained, in ADR proceedings.

Rule 10.3. Venue. A petition for a protective order may be filed with the Regional Trial Court where that order would be implemented.

If there is a pending court proceeding in which the information obtained in an ADR proceeding is required to be divulged or is being divulged, the party seeking to enforce the confidentiality of the information may file a motion with the court where the proceedings are pending to enjoin the confidential information from being divulged or to suppress confidential information.

Rule 10.4. Grounds. A protective order may be granted only if it is shown that the applicant would be materially prejudiced by an unauthorized disclosure of the information obtained, or to be obtained, during an ADR proceeding.

Rule 10.5. Contents of the motion or petition. The petition or motion must state the following:

a. That the information sought to be protected was obtained, or would be obtained, during an ADR proceeding; b. The applicant would be materially prejudiced by the disclosure of that information;c. The person or persons who are being asked to divulge the confidential information participated in an ADR proceedings; andd. The time, date and place when the ADR proceedings took place.

Apart from the other submissions, the movant must set the motion for hearing and contain a notice of hearing in accordance with Rule 15 of the Rules of Court.

Rule 10.6. Notice. Notice of a request for a protective order made through a motion shall be made to the opposing parties in accordance with Rule 15 of the Rules of Court.

Rule 10.7. Comment/Opposition. The comment/opposition must be filed within fifteen (15) days from service of the petition. The opposition or comment may be accompanied by written proof that (a) the information is not confidential, (b) the information was not obtained during an ADR proceeding, (c) there was a waiver of confidentiality, or (d) the petitioner/movant is precluded from asserting confidentiality. 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. However, evidence or information that is otherwise admissible or subject to discovery does not become inadmissible or protected from discovery solely by reason of its use therein.

For mediation proceedings, the court shall be further guided by the following principles:

a. Information obtained through mediation shall be privileged and confidential.b. A party, a mediator, or a nonparty participant may refuse to disclose and may prevent any other person from disclosing a mediation communication.c. In such an adversarial proceeding, the following persons involved or previously involved in a mediation may not be compelled to disclose confidential information obtained during the mediation: (1) the parties to the dispute; (2) the mediator or mediators; (3) the counsel for the parties: (4) the nonparty participants; (5) any persons hired or engaged in connection with the mediation as secretary, stenographer; clerk or assistant; and (6) any other person who obtains or possesses confidential information by reason of his/ her profession.d. The protection of the ADR Laws shall continue to apply even if a mediator is found to have failed to act impartially. e. A mediator may not be called to testify to provide information gathered in mediation. A mediator who is wrongfully subpoenaed shall be reimbursed the full cost of his attorney fees and related expenses.

Rule 10.9. Relief against court action. The order enjoining a person or persons from divulging confidential information shall be immediately executory and may not be enjoined while the order is being questioned with the appellate courts.If the court declines to enjoin a person or persons from divulging confidential information, the petitioner may file a motion for reconsideration or appeal.

Rule 10.10. Consequence of disobedience. Any person who disobeys the order of the court to cease from divulging confidential information shall be imposed the proper sanction by the court.

No Class - June 25, 2010Class Notes - July 2, 2010ARBITRATION

What is ADR?

"Alternative Dispute Resolution System" means any process or procedure used to resolve a dispute or controversy, other than by adjudication of a presiding judge of a court or an officer of a government agency, as defined in this Act, in which a neutral third party participates to assist in the resolution of issues, which includes arbitration, mediation, conciliation, early neutral evaluation, mini-trial, or any combination thereof (Sec. 3a, RA 9285)

What is Arbitration?

"Arbitration" means a voluntary dispute resolution process in which one or more arbitrators, appointed in accordance with the agreement of the parties, or rules promulgated pursuant to this Act, resolve a dispute by rendering an award (Sec. 3d, RA 9285)

What distinguishes Arbitration from other forms of ADR? Final, binding and enforceable through the following procedures:

1) Confirmation of award

2) Judgment is capable of enforcement

PROCESS OF ARBITRATIONArbitration agreement

|Dispute

|Selection of arbitrators

|Conduct of arbitration proceedings

|Arbitral Award

|Confirmation &/or Enforcement

FIRST PART: ARBITRATION AGREEMENT

Arbitration Agreement v. Submission Agreement

Arbitration AgreementSubmission Agreement

Before occurence of disputeAgreement to submit dispute to arbitration; no previous arbitration clause

A party may invoke this at any time before pre-trial, after which, both parties must invoke it May be entered into at any time, even after pre-trial

Petition for Enforcement of Arbitration Agreement (See end)Notice Requirements

Depends on whether or not the petition / motion filed is covered by Summary Procedure.

Covered by Summary Procedure:

1) Judicial Relief Involving the Issue of Existence, Validity or Enforceability of the Arbitration Agreement;

2) Referral to ADR;

3) Interim Measures of Protection;

4) Appointment of Arbitrator;

5) Challenge to Appointment of Arbitrator;

6) Termination of Mandate of Arbitrator;

7) Assistance in Taking Evidence;

8) Confidentiality/Protective Orders; and

9) Deposit and Enforcement of Mediated Settlement Agreements.

Not Covered by Summary Procedure:

1) Confirmation, Correction or Vacation of Award in Domestic Arbitration2) Recognition and Enforcement or Setting Aside of an Award in International Commercial Arbitration3) Recognition and Enforcement of a Foreign Arbitral AwardNotes:

*Petition to correct / vacate does not touch upon the merits of the award.

*Petition to vacate (domestic) depends on grounds to vacate

*Petition to set aside (international) See UNCITRAL A.34 & 36

Pop Quiz - July 9, 2010Petition to Enforce Arbitation Agreement using the case of Mindanao Portland Cement Corporation v. McDonough Construction Co. of Florida, 90 SCRA 808 (1967)

Class Notes - July 16, 2010THIRD PART: COMMENCEMENT OF ARBITRATION &CONSTITUTION OF ARBITRAL TRIBUNAL

How do you commence arbitration?

1) Adhoc by a demand to arbitrate2) Institutional - very similar to a demand to arbitrate, addressed to the institution; called a Request for Arbitration or Notice of Arbitration

What is the significance of filing a Request for Arbitration or Notice of Arbitration?Whether conventional litigation or ADR, the filing of the initiatory complaint / request for arbitration is significant in the area of interim measures of protection. It could be obtained from:

General Rule: the arbitral tribunal

Except: the court, in the following instances:1) Before commencement of arbitration2) After arbitration is commenced, but before the constitution of the arbitral tribunal;3) After the constitution of the arbitral and at any time during arbitral proceedings but, at this stage, only to the extent that the arbitral tribunal has no power to act or is unable to act effectively.

RA 876, Sec. 14 xxx 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.

RA 9285, Sec. 28 Grant of Interim Measure of Protection

(a) It is not incompatible with an arbitration agreement for a party to request, before constitution of the tribunal, from a Court an interim measure of protection and for the Court to grant such measure. After constitution of the arbitral tribunal and during arbitral proceedings, a request for an interim measure of protection or modification thereof, may be made with the arbitral tribunal or to the extent that the arbitral tribunal has no power to act or is unable to act effectively, the request may be made with the Court. The arbitral tribunal is deemed constituted when the sole arbitrator or the third arbitrator who has been nominated, has accepted the nomination and written communication of said nomination and acceptance has been received by the party making request.

(b) The following rules on interim or provisional relief shall be observed:

(1) Any party may request that provision relief be granted against the adverse party:

(2) Such relief may be granted:

(i) to prevent irreparable loss or injury:

(ii) to provide security for the performance of any obligation;

(iii) to produce or preserve any evidence; or

(iv) to compel any other appropriate act or omission.

(3) The order granting provisional relief may be conditioned upon the provision of security or any act or omission specified in the order.

(4) Interim or provisional relief is requested by written application transmitted by reasonable means to the Court or arbitral tribunal as the case may be and the party against whom the relief is sought, describing in appropriate detail the precise relief, the party against whom the relief is requested, the grounds for the relief, and evidence supporting the request.

(5) The order shall be binding upon the parties.

(6) Either party may apply with the Court for assistance in Implementing or enforcing an interim measure ordered by an arbitral tribunal.

(7) A party who does not comply with the order shall be liable for all damages resulting from noncompliance, including all expenses, and reasonable attorney's fees, paid in obtaining the order's judicial enforcement.

RA 9285, Sec. 29 Further Authority for Arbitrator to Grant Interim Measure of Protection

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

Uncitral Model Law, Article 17 - [Power of arbitral tribunal to order interim measures]

Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute. The arbitral tribunal may require any party to provide appropriate security in connection with such measure.

Uncitral Arbitration Rules, Interim measures of protection, Article 26

1. At the request of either party, the arbitral tribunal may take any interim measures it deems necessary in respect of the subject-matter of the dispute, including measures for the conservation of the goods forming the subject-matter in dispute, such as ordering their deposit with a third person or the sale of perishable goods.

2. Such interim measures may be established in the form of an interim award. The arbitral tribunal shall be entitled to require security for the costs of such measures.

3. A request for interim measures addressed by any party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate, or as a waiver of that agreement.

ICC Rules, Article 23, Conservatory and Interim Measures 1. Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the Arbitral Tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject to appropriate security being furnished by the requesting party. Any such measure shall take the form of an order, giving reasons, or of an Award, as the Arbitral Tribunal considers appropriate.

2. Before the file is transmitted to the Arbitral Tribunal, and in appropriate circumstances even thereafter, the parties may apply to any competent judicial authority for interim or conservatory measures. The application of a party to a judicial authority for such measures or for the implementation of any such measures ordered by an Arbitral Tribunal shall not be deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the relevant powers reserved to the Arbitral Tribunal. Any such application and any measures taken by the judicial authority must be notified without delay to the Secretariat. The Secretariat shall inform the Arbitral Tribunal thereof.

Upon receipt:

1) WON a dispute is arbitable the first thing that an institution should determine2) Assess an non-refundable fee of $2500.

3) Inform the prospective respondent that a Request for Arbitration was received4) Prospective respondent answers

5) Assess the fees

Period for rendering an Award:1) Stipulation

2) To be determined by the arbitral tribunal during the preliminary conference

Less than 60 days Summary (ADR Rules)15 days from service to file Comment/Opposition1 hearing day, only for the purpose of clarifications

Resolution 30 days from the time the petition is submitted for resolution

10 days - ADR LawFour courses of action by the CourtDetermine existence of AA

If no, dismiss (1)

If yes, determine if there was default or not in the compliance with the Arbitration Agreement (2)

If there is no default, (dismiss)

If there was default, Court to

Challenge of arbitrator

If a party renews his challenge in Court arbitration proceedings are suspended

But under Special ADR Rules proceed

International Bar Association (IBA) Rules of Evidence

Green List list of factors that may or may not be disclosed but will not affect the fitness of

Red List list of prohibited factors

FOURTH PART:

CONDUCT OF ARBITRATION PROCEEDINGS

CONFIDENTIALITY

Why is there no publication of awards of arbitral tribunals?

Because of the principle of confidentiality of arbitration proceedings (Sec. 23, RA 9285).

Sec. 23 Confidentiality in Arbitration Proceedings

The arbitration proceedings, including the records, evidence and the arbitral award, shall be considered 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 of relevant documents in cases where resort to the court is allowed herein. Provided, however, that the court in which the action or the appeal is pending may issue a protective order to prevent or prohibit disclosure of documents or information containing secret processes, developments, research and other information where it is shown that the applicant shall be materially prejudiced by an authorized disclosure thereof.

Exception to confidentiality:

1) Application for Interim Measure of Protection

2) Appoint Arbitrator

3) Challenge Arbitrator

4) Ask to Vacate / Modify Award

5) Ask to Enforce the Award

What is the consequence of breach of confidentiality?

Claim for damages.Where do you file the action for damanges arising from breach of confidentiality?

RTC, not arbitral tribunal. Because the jurisdiction of the arbitral tribunal over issues is defined by the arbitration agreement. Issue of breach of confidentiality is usually involved in other causes of actions or pending actions. e.g. transactions with 3rd persons.

Note:

Breach of confidentiality covers mere disclosure of fact of pendency of arbitration proceedings.COMPETENCE-COMPETENCE PRINCIPLE

What is the Competence-Competence Principle?

Power of arbitral tribunal to initially rule on the question of its jurisdiction over a dispute including any objections with respect to the existence or validity of the arbitration agreement or any condition precedent to the filing of a request of arbitration.Restatement of the Rule: Before the arbitral tribunal is constituted, the regular courts have jurisdiction to determine the issue of competence of a tribunal. The moment the arbitral tribunal is constituted, the arbitral tribunal has jurisdiction.There arises a policy of judicial restraint, such that the finding of the court on the jurisdiction of the arbitral tribunal is at best prima facie.

Note:There is a before AT, after ATs finding, and after-after.

Does the prima facie finding of the court mean that the arbitral tribunal can still be formed?

Yes. If the court finds that the arbitration agreement is null and void, inoperative or incapable of being performed, a party may nevertheless commence arbitration and constitute the arbitral tribunal.So where does prima facie finding of the court come in? How is it prima facie?This means that the same issue may be passed upon by the arbitral tribunal, which has the effect of superseding the previous of the court. (This is the AFTER ruling.)

What about the after-after ruling?

The same issue may be passed upon in an action to vacate or set aside the arbitral award (Rule 3.11) In this case, it is no longer a prima facie determination of such issue or issues, but shall be a FULL REVIEW of such issue or issues with due regard, however, to the standard of review for arbitral awards.

But how may arbitration commence if it the court has made a prima facie finding that ithe arbitration agreement is found null and void, inoperative or incapable of being performed? Will the other party who got the favorable ruling of the court participate / cooperate?Get an appointment of arbitrator - sole arbitrator, ad-hoc, institutional. Illustration:

Its possible for A to get a ruling from the court that the arbitration agreement is null and void, and B may commence arbitration in an institution in another country. B now asked to appoint arbitrator for A contesting the arbitration agreement.What is the remedy of A?

a) Get an injunction from RTC Philippines. Next step is contempt. (Although the exercise of a legal right is not contemptuous) There may also be problem in getting injunction. Plus theres a provision in Special ADR Rules prohibiting injunction against arbitration. Finally, A can later on file a petition to set aside the award.b) Challenge jurisdiction of arbitral tribunal constituted by institution in foreign country.

UNCITRAL:

1) Petition to Set Aside

2) Petition to Refuse Recognition

What is the Principle of Separability?Arbitration clause is treated as an agreement independent of the other terms of the contract of which it forms part. A decision that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. (Uncitral Model Law, Sec. 16(1); Special ADR Rules 2.2)What is the effect of multiple actions and parties?Rule 4.7.Would Rule 4.7 result in multiplicity of suits?

Yes. But this does not prevent arbitration from being commenced. Cases for next meeting (August 6, 2010):

1) Vega v. San Carlos Milling Co. Ltd, 51 Phil 908 (1924) no digest2) California & Hawaiian Sugar Co. v. Pioneer Insurance & Surety Corp. 346 SCRA 214 (2000)

3) Associated Bank v. CA, 233 SCRA 137 (1994)4) Bloomfield Academy v. CA, 237 SCRA 43 (1994)5) Mindanao Portland Cement Corporation v. McDonough Construction Co. of Florida, 90 SCRA 808 (1967)6) Gonzales v. Climax Mining Ltd., 512 SCRA 148 (2007)

7) Oil & Natural Gas Commission v. CA, 293 SCRA 26 (1998)

8) Magellan Capital Mgt. Corp. v. Zosa, 355 SCRA 157 (2001)

9) BF Corporation v. CA, 288 SCRA 267 (1998)

10) Korea Technologies Co. Ltd. v. Lerma, 542 SCRA 1 (2008)

11) Luzon Development Bank v. Luzon Development Bank Employees, 249 SCRA 162 (1995) In re: multiplicityIs there a counterpart of the principle of confidentiality in Sec. 23 RA 9285 in RA 876?

Sec. 14? (UNANSWERED)What is the Judicial Relief After Commencement of Arbitration (Rule 3, Special ADR Rules)?A party may ask that the ruling of the arbitral tribunal on a preliminary question upholding or declining its jurisdiction be declared null and void, inexistent or unenforceable. This is premised on the fact that the jurisdiction of the arbitral tribunal is defined by the arbitration agreement. The determination of the court is no longer a prima facie finding.

But would that not violate the Competence-Competence Principle?

The determination of the court after the commencement of arbitration proceedings

Illustration

August 6 Commencement of Arbitration

Scenario A:

On May 6, the determination of the court is merely prima facie and the parties may still commence arbitration.

Scenario B:

On November 6, the determination of the court is no longer prima facie. What would be the remedy of the claimant?

Not final may still be reviewed by MR, appeal, certiorari.

Rule 3.19

1) MR - yes2) Certiorari yes

a) Affirming ATs jurisdiction not subject to certiorari

b) AT has no jurisdiction certiorari available

Note: How many days?

3) Appeal yes dawVega v. San Carlos Milling Co. Ltd, 51 Phil 908 (1924)

Petitioners: Teodoro Vega

Respondent: San Carlos Milling Co., Ltd.

Facts:

Defendant-appellant contends that Sec. 23 of the Mills covenant and Sec. 14 of the Planters covenant, as such stipulations on arbitration are valid, and constitute a condition precedent, to which the plaintiff should have resorted before applying to the courts, as he prematurely did. This, more so, if these two provisions are read with the reciprocal covnenant in Sec. 7 of the Mills covenant.

It is an admitted fact that the differences which later arose between the parties, and which are the subject of the present litigation have not been submitted to arbitration provided for in the above quoted clauses.

Plaintiff filed an action for the recovery of 32,959 kilos of centrifugal sugar, or its value, P6,252, plus the payment of P500 damages and the costs.

The lower court decided in favor of the plaintiff.

Issue:

WON the lower court erred in having held itself with jurisdiction to take cognizance of and render judgment in the cause

Held: NO. Ratio:

1) The defendant is right in contending that clause 23 of the Mill's covenant and clause 14 of the Planter's Covenant on arbitration are valid, but they are not for that reason a bar to judicial action, in view of the way they are expressed:

"An agreement to submit to arbitration, not consummated by an award, is no bar to a suit at law or in equity concerning the subject matter submitted. And the rule applies both in respect of agreements to submit existing differences and agreements to submit differences which may arise in the future." (5 C. J., 42.)

And in view of the terms in which the said covenants on arbitration are expressed, it cannot be held that in agreeing on this point, the parties proposed to establish the arbitration as a condition precedent to judicial action, because these clauses quoted do not create such a condition either expressly or by necessary inference."Submission as Condition Precedent to Suit. Clauses in insurance and other contracts providing for arbitration in case of disagreement are very dissimilar, and the question whether submission to arbitration is a condition precedent to a suit upon the contract depends upon the language employed in each particular stipulation. Where by the same agreement which creates the liability, the ascertainment of certain facts by arbitrators is expressly made a condition precedent to a right of action thereon, suit cannot be brought until the award is made. But the courts generally will not construe an arbitration clause as ousting them of their jurisdiction unless such construction is inevitable, and consequently when the arbitration clause is not made a condition precedent by express words or necessary implication, it will be construed as merely collateral to the liability clause, and so no bar to an action in the courts without an award." (2 R. C. L., 362, 363.)

2) Neither does the reciprocal covenant No. 7 of the Mills covenant expressly or impliedly establish the arbitration as a condition precedent.

The expression "subject to the provisions as to arbitration, hereinbefore appearing" does not declare such to be a condition precedent. This phrase does not read "subject to the arbitration," but "subject to the provisions as to arbitration hereinbefore appearing." And, which are these "provisions as to arbitration hereinbefore appearing?" Undoubtedly clauses 23 and 14 quoted above, which do not make arbitration a condition precedent.

Disposition. Affirmed.

Separate Opinions

AVANCEA, J., concurring:

1) Inasmuch as clause 23 of the Mill's Covenants, and clause 14 of the Planter's Covenants provide that the parties should respect and abide by the decision of the arbitrators, they bar judicial intervention and consequently are null and void in accordance with the ruling of this court in the case of Wahl and Wahl vs. Donaldson, Sims & Co. (2 Phil., 301).

2) Clause 7 of the Mutual Covenants, naming the Court of First Instance of Iloilo as the one with jurisdiction to try such cases as might arise from the parties' contractual relations, by the very fact that it was made subject to the arbitration clauses previously mentioned, does not render such arbitration merely a condition precedent to judicial action, nor does it change its scope, as clearly indicated by its wording and the intention of the parties. Said clause 7 was doubtless added in case it became necessary to resort to the courts for the purpose of compelling the parties to accept the arbitrators' decision in accordance with the contract, and not in order to submit anew to the courts what had already been decided by the arbitrators, whose decision the contracting parties had bound themselves to abide by and respect.

MALCOLM, J., dissenting:

1) Defendant is not bound to furnish cars free of charge for use on the plaintiff's portable railway tracks, in relation with its corollary, that the letter written by the manager of the defendant's mill on March 18, 1916, does not estop the defendant from demanding compensation for the future use of the cars.

2) The parties having formally agreed to submit their differences to arbitrators, while recognizing the jurisdiction of the courts, arbitration has been made a condition precedent to litigation, and should be held valid and enforceable.

a) In the Philippines fortunately, the attitude of the courts toward arbitration agreements is slowly crystallizing into definite and workable form. The doctrine announced in Wahl and Wahl vs. Donaldsono. ([1903], 2 Phil., 301), was that a clause in a contract providing that all matters in dispute shall be referred to arbitrators and to them alone, is contrary to public policy and cannot oust the courts of jurisdiction. But the rule now is that unless the agreement is such as absolutely to close the doors of the courts against the parties, which agreement would be void, the courts will look with favor upon such amicable arrangements and will only with great reluctance interfere to anticipate or nullify the action of the arbitrator.

b) The new point of the judiciary in the progressive jurisdiction of Pennsylvania, in England, and under the Civil Law, is also worthy of our serious consideration.

i) It is the rule in Pennsylvania that when the persons making an executory contract stipulate in it that all disputes and differences between them, present or prospective, in reference to such contract or any sum payable under it, shall be submitted to the arbitrament of a named individual, or specifically designated persons, they are effectually bound irrevocably by that stipulation, and precluded from seeking redress elsewhere until the arbiter or arbiters agreed upon have rendered an award or otherwise been discharged.

ii) In England, the view seems now to prevail that a contractual stipulation for a general arbitration, constitutes a condition precedent to the institution of judicial proceedings for the enforcement of the contract.

iii) Finally, it is within our knowledge that the Spanish civil law wisely contains elaborate provisions looking to the amicable adjustment of controversies out of court. Litigation by means of friendly adjusters was formerly well known. The procedure in this kind of litigation was minutely outlined in the Ley de Enjuiciamiento Civil. Two articles of the Civil Code, namely, articles 1820 and 1821, were given up to the subject of arbitration, and expressly confirmed this method of settling differences.

c) It was plainly the solemn purpose of the parties to settle their controversies amicably if possible before resorting to the courts. They provided for themselves by mutual consent a method which was speedier and less expensive for all concerned and less likely to breed that ill-feeling which is often the consequence of hotly contested litigation. All this was done by the Planters on the one hand and by the Milling Company on the other, to the end that justice might guide them and possible differences be quickly adjusted.

d) It is clear, by paragraph 7 of the Mutual Covenants, that these parties did not intend that the decision of the arbitrators should prevent resort to the courts, for they expressly agreed to carry litigation between them to the courts of Iloilo. Acting under legal rules, even in their most restrictive form, disputes arising out of the contract, were to be referred to arbitration so that the damages sustained by a breach of the contract, could be ascertained by specified arbitrators before any right of action arose; but the matters in dispute were not to be referred to arbitrators and to them alone, to the utter exclusion of the courts. It is exactly correct to state that the clauses of the Covenants hereinbefore quoted, were meant as a condition precedent to litigation, which accordingly should be given effect.

STUDY NOTES

Rule 2.2. Policy on arbitration. (A) Where the parties have agreed to submit their dispute to arbitration, courts shall refer the parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith. Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not limited to, the following:

a. The referral tends to oust a court of its jurisdiction

d. The arbitration proceeding has not commenced

CLASS NOTES1) Court was already talking about arbitration agreement, etc. as early as 1924.

2) Malcolm dissent:

3 jurisdictions:

*Pensylvannia irrevocably bound by stipulation, precluded from seeking redress to the courts; but makes a distinction between (a) did not name arbitrator; (b) *England even a general reference to arbitration is a condition precedent (liberal)*Spain (Ley de Enjuiciamiento Civil) detailed amicable settlement + arbitration- Respect solemn purpose of the parties- Not null and void for absolutely ousts the courts of jurisdiction.

Is an arbitration agreement a condition precedent to the filing of an action in court?Rule 16.1 (j) of the Rules of Court MTD on the ground of failure to comply with a condition precedentIs this an absolute rule?

No. It can be waived. R.A. 9285, Sec. 24. Referral to Arbitration. - A court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if at least one party so requests not later that the pre-trial conference, or upon the request of both parties thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

Sec. 7 Stay of civil action

Relate to Referral to ADR (Special Rules)

Depends on the request of a party, because party may decide not to undergo ADR

- Related to Section 24 of RA 9285

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.

Rule 4.2. When to make request. (A) Where the arbitration agreement exists before the action is filed. The request for referral shall be made not later than the pre-trial conference. After the pre-trial conference, the courthuj will only act upon the request for referral if it is made with the agreement of all parties to the case.

Conclusion: An arbitration clause is NOT a condition precedent such that it is a ground for dismissal, because it is an alternative mode of dispute resolution. Hence, a party goes to court not to pass upon the merits or to have resolve it resolved, but for other reasons, such as to have the arbitration agreement enforced, modified, set aside, etc. It is a ground to STAY civil action (Sec. 7, RA 876; Sec. 24, RA 9285), not to dismiss it. Malcolm: Condition precedent if it is more of a fact-finding task.Can you be bound by an arbitration clause by subrogation?

See California & Hawaiian Sugar Co. v. Pioneer Insurance & Surety Corp (2000)California & Hawaiian Sugar Co. v. Pioneer Insurance & Surety Corp., 346 SCRA 214 (2000)

Petitioners: California Hawaiian Sugar Company, Pacific Gulf Marine Inc and CF Sharp and Co

Respondent: Pioneer Insurance and Surety Corporation

Facts:

On November 27, 1990, the vessel MV SUGAR ISLANDER arrived at the port of Manila carrying a cargo of soybean meal in bulk consigned to several consignees, one of which was the Metro Manila Feed Millers Association. Discharging of cargo from vessel to barges commenced. From the barges, the cargo was allegedly offloaded, rebagged and reloaded on consignees delivery trucks.

Respondent, however, claims that when the cargo was weighed on a licensed truck scale a shortage of 255.051 metric tons valued at P1,621,171.16 was discovered. The shipment was insured with Pioneer against all risk in the amount of P19,976,404.00.

Due to the alleged refusal of petitioners to settle their respective liabilities, respondent, as insurer, paid the consignee Metro Manila Feed Millers Association.

Pioneer filed a complaint for damages against petitioners. Petitioners filed a Motion to Dismiss the complaint on the ground that respondents claim is premature, the same being arbitrable.

The RTC ordered to defer the hearing of the MTD and directed petitioners to file their Answer.

Petitioners filed their answer with counterclaim and crossclaim alleging that Pioneer did not comply with the arbitration clause.

Petitioners filed a Motion to Defer Pre-Trial and Motion to Set for Preliminary Hearing the Affirmative Defense of Lack of Cause of Action for Failure to comply with Arbitration Clause, respectively.

The RTC denied.

The CA affirmed. It ruled that petitioner cannot set the case for preliminary hearing as an MTD was filed. Also, the arbitration clause in the charter party did not bind Pioneer. The right of Pioneer to file a complaint against petitioners is not dependent upon the charter party, nor does it grow out of any privity contract. It accrues simply upon payment.

Citing Pan Malayan Insurance Corporation v. CA, the CA ruled that the right of respondent insurance company as subrogee was not based on the charter party or any other contract; rather, it accrued upon the payment of the insurance claim by private respondent to the insured consignee.

Issue: WON the arbitration clause was binding upon Pioneer

Held:YES

Ratio: The CA erred when it held that the arbitration clause was not binding on Pioneer.

There was nothing in Pan Malayan, however, that prohibited the applicability of the arbitration clause to the subrogee. That case merely discussed, inter alia, the accrual of the right of subrogation and the legal basis therefor. This issue is completely different from that of the consequences of such subrogation; that is, the rights that the insurer acquires from the insured upon payment of the indemnity.

(Pan Malayan: The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer.)

As to the preliminary hearing: True, Section 6, Rule 16 specifically provides that a preliminary hearing on the affirmative defenses may be allowed only when no motion to dismiss has been filed. Section 6, however, must be viewed in the light of Section 3 which requires courts to resolve a motion to dismiss and prohibits them from deferring its resolution on the ground of indubitability. Section 6 disallows a preliminary hearing of affirmative defenses once a motion to dismiss has been filed because such defense should have already been resolved. In the present case, however, the trial court did not categorically resolve petitioners Motion to Dismiss, but merely deferred resolution thereof.

STUDY NOTES

Rule 2.2. Policy on arbitration. (A) Where the parties have agreed to submit their dispute to arbitration, courts shall refer the parties to arbitration pursuant to Republic Act No. 9285 bearing in mind that such arbitration agreement is the law between the parties and that they are expected to abide by it in good faith. Further, the courts shall not refuse to refer parties to arbitration for reasons including, but not limited to, the following:

c. The referral would result in multiplicity of suits;

Rule 4.7. Multiple actions and parties. 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.

The court may, however, issue an order directing the inclusion in arbitration of those parties who are not bound by the arbitration agreement but who agree to such inclusion provided those originally bound by it do not object to their inclusion.

CLASS NOTESCan you be bound by an arbitration clause in subrogation?

No express ruling in California & Hawaiian Sugar Co. v. Pioneer Insurance & Surety Corp (2000), citing Pan Malayan, saying that a subrogee is bound. Theres only the accrual of the right of subgrogation and the legal basis therefor.Was there consent on the part of the insurance company?

Yes, on the basis of the principle of subrogation and its effects.Will Article 1311 of the Civil Code apply here?

Art. 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent.

If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.Can Assignment in A1311 be equated with Subrogation?

No. The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer. (Pan Malayan)c.f.

Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.Can a party be bound by the Arbitration Clause by statutory provision?

Xam: Analogous to heirs in the sense that the subrogee acquires the transmissible rights of the original party. (UNANSWERED).

See however, Bloomfield Academy Sec. 10 on Consultation of RA 6728, also commonly known as "An Act Providing Government Assistance to Students and Teachers in Private Education, And Appropriating Funds Therefor"Xam: See also, Associated Bank case Sec. 3 (Agreement to the PCHC Rules) in relation to Sec. 36 on Arbitration.Bloomfield Academy v. CA, 237 SCRA 43 (1994)

Petitioners: Bloomfield Academy and Rodolfo Lagera

Respondents: CA, Bloomfield Academy Parents Advisory Association Inc, et al

Facts:

The petition originated in a complaint for injunction filed on April 6, 1990 by private respondent, the association of parents and guardians of students enrolled in petitioner. One of the defendants in the case is petitioner which is a non-stock, non-profit educational institution. What is being disputed before the court is the increase in tuition fee. The petitioners contend that the increase is essential due to the increase of the minimum wage under RA 6727.

Private respondents alleged that the 21.22% increase was made without prior consultation with the parents required by law and that, in any case, the approved increase was exorbitant (at 21.22%).

They sent a letter to the DECS Secretary complaining that the tuition fee increase was without valid basis already, after both parties agreed on 50% of the increase which was implemented and paid by the students during the school year with the clear understanding that the other 50% is waived by the defendant.

Petitioners, on their part, contended that the parties did, in fact, hold consultations at which the wage increase for teachers mandated by RA6727 and the resulting increase in tuition fees allowed by RA 6728 were discussed at length.

The DECS however affirmed the tuition fee increase.

The court issued an order enjoining petitioners and Secretary Cario and/or their agents, representatives or persons acting in their behalf from implementing the increase in tuition fees, and not withholding their release of the report cards and/or other papers necessary for the students desiring to transfer to other schools until further orders from the court. The application for injunction was set for hearing on April 19, 1990 at 2:00 p.m.

Answer to the complaint was filed by petitioners on April 19, 1990. On the same date, the court conducted the first hearing on the application for a writ of preliminary injunction which hearing was followed by settings on April 25, 26 and 27, 1990.

The court thereafter issued an order granting the writ of preliminary injunction.

On certiorai, the CA affirmed and ruled that the grant or denial of an injunction rests upon the sound discretion of the court.

Issue:WON the court erred in granting the injunction

Held:Ratio: The pertinent provisions RA 6728, also commonly known as "An Act Providing Government Assistance to Students and Teachers in Private Education, And Appropriating Funds Therefor," provide:

Sec. 9. Further Assistance To Students in Private Colleges and Universities. . . . .

(b) For students enrolled in schools charging above one thousand five hundred pesos (P1,500.00) per year in tuition and other fees during the school year 1988-1989 or such amount in subsequent years as may be determined from time to time by the State Assistance Council, no assistance for tuition fees shall be granted by the Government: Provided, however, That the schools concerned may raise their tuition fees subject to Section 10 hereof.xxx xxx xxx

Sec. 10. Consultation. In any proposed increase in the rate of tuition fee, there shall be appropriate consultations conducted by the school administration with the duly organized parents and teachers associations and faculty associations with respect to secondary schools, and with students governments or councils, alumni and faculty associations with respect to colleges. For this purpose, audited financial statements shall be made available to authorized representatives of these sectors. Every effort shall be exerted to reconcile possible differences. In case of disagreement, the alumni association of the school or any other impartial body of their choosing shall act as arbitrator.xxx xxx xxx

Sec. 14. Program Administration/Rules and Regulations. The State Assistance Council shall be responsible for policy guidance and direction, monitoring and evaluation of new and existing programs, and the promulgation of rules and regulations, while the Department of Education, Culture and Sports shall be responsible for the day to day administration and program implementation. Likewise, it may engage the services and support of any qualified government or private entity for its implementation.

The judicial action initiated by private respondent before the court appears to us to be an inappropriate recourse. It remains undisputed that the DECS Secretary has, in fact, taken cognizance of the case for the tuition fee increase and has accordingly acted thereon. We can only assume that in so doing the DECS Secretary has duly passed upon the relevant legal and factual issues dealing on the propriety of the matter. In the decision process, the DECS Secretary has verily acted in a quasi-judicial capacity.

The remedy from that decision is an appeal. Conformably with BP 129, the exclusive appellate jurisdiction to question that administrative action lies with the CA, not with the court a quo. If we were to consider, upon the other hand, the case for injunction filed with the court a quo to be a ordinary action solely against herein petitioner (with DECS being then deemed to be merely a nominal party), it would have meant the court's taking cognizance over the case in disregard of the doctrine of primary jurisdiction.

Neither can we treat the case as a special civil action for certiorari or prohibition as the complaint filed by private respondent with the court a quo, contains no allegation of lack, or grave abuse in the exercise, of jurisdiction on the part of DECS nor has there been any finding made to that effect by either the court a quo or the appellate court that could warrant the extraordinary remedy. A special civil action, either for certiorari or prohibition, can be grounded only on either lack of jurisdiction or grave abuse of discretion.

In passing, we also observe that the parties have both remained silent on the provisions of Republic Act No. 6728 to the effect that in case of disagreement on tuition fee increases (in this instance by herein private parties), the issue should be resolved through arbitration. Although the matter has not been raised by the parties, it is an aspect, nevertheless, in our view, that could have well been explored by them instead of immediately invoking, such as they apparently did, the administrative and judicial relief to resolve the controversy.

All told, we hold that the court a quo has been bereft of jurisdiction in taking cognizance of private respondent's complaint. We see no real justification, on the basis of the factual and case settings here obtaining, to permit a deviation from the long standing rule that the issue of jurisdiction may be raised at any time even on appeal.CLASS NOTES

Take Note of Sec. 10:

In case of disagreement, the alumni association of the school or any other impartial body of their choosing shall act as arbitratorIs Sec. 10 an effective arbitration clause? Is the designation of the alumni association in Sec. 10 an appointment of arbitrator? Statutory arbitration clause?A republic act meddled with the legal relationship.

Sir, too broad, too vague. Consent is absent.

If yes, party may move to stay civil action.

If not, theres no arbitrable dispute and theres no basis to stay civil action.

Take Note of the the ff. provisions:

R.A. 9285, Sec. 24. Referral to Arbitration. - A court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if at least one party so requests not later that the pre-trial conference, or upon the request of both parties thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

Sec. 7 Stay of civil action

Relate to Referral to ADR (Special Rules)

Depends on the request of a party, because party may decide not to undergo ADR

- Related to Section 24 of RA 9285

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.

Rule 4.2. When to make request. (A) Where the arbitration agreement exists before the action is filed. The request for referral shall be made not later than the pre-trial conference. After the pre-trial conference, the courthuj will only act upon the request for referral if it is made with the agreement of all parties to the case.

Take Note of the SC Ruling:

Although the matter has not been raised by the parties, it is an aspect, nevertheless, in our view, that could have well been explored by them instead of immediately invoking, such as they apparently did, the administrative and judicial relief to resolve the controversy.

Remedies available:

1) Move to dismiss2) Ground to stay

Can the Court proceed to decide the case on the merits in the interest of justice?

No, This proceeding [Petition for Enforcement of Agreement to Arbitrate] is merely a summary remedy to enforce the agreement to arbitrate. The duty of the court in this case is not to resolve the merits of the parties' claims but only to determine if they should proceed to arbitration or not. (Mindanao Portland Cement Corporation v. McDonough Construction Co. of Florida, 90 SCRA 808 (1967)).Mindanao Portland Cement Corporation v. McDonough Construction Co. of Florida, 90 SCRA 808 (1967)

Petitioner appellee: Mindanao Portland Cement Corporation

Respondent appellant: McDonough Construction

Facts:

Petitioner and respondent McDonough executed a contract for the construction by the respondent for the petitioner of a dry portland, cement plant at Iligan City. In a separate contract, Turnbull, Inc. the "engineer" was engaged to design and manage the construction of the plant, supervise the construction, schedule deliveries and the construction work as well as check and certify ill contractors' progress and fiscal requests for payment.

Alterations in the plans and specifications were subsequently made during the progress of the construction. Due to this and to other causes deemed sufficient by Turnbull, Inc., extensions of time for the termination of the project, initially agreed to be finished on December 17, 1961, were granted.

Respondent finally completed the project on October 22, 1962. Differences later arose.

Petitioner claimed from respondent damages in the amount of more than P2,000,000 allegedly occasioned by the delay in the project's completion.

Respondent in turn asked for more than P450,000 from petitioner for alleged losses due to cost of extra work and overhead as of April 1962.

A conference was held between petitioner and Turnbull, Inc., on one hand, and respondent on the other, to settle the differences, but no satisfactory results were reached.

Petitioner sent respondent written invitations to arbitrate, invoking a provision in their contract regarding arbitration of disputes. Instead of answering said invitations, respondent, with Turnbul