comparative analysis of pal and model law

8/19/2019 Comparative Analysis of PAL and Model Law

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Comparative Analysis of the Philippine Arbitration Law and the UNCITRAL Model Law on

International Commercial Arbitration (Part I

I. Introduction

This paper presents a comparative analysis of two arbitration laws, namely, Republic Act No. 876,otherwise nown as the !"hilippine Arbitration #aw$ and the %nited Nations &ommission onInternational Trade #aw '%N&ITRA#( )odel #aw on International &ommercial Arbitration. The former was enacted on *une +, +- while the latter was approved by the %nited Nations /eneral

Assembly on 0ecember ++, +8-.

The 1rowin1 need for a law re1ulatin1 arbitration in 1eneral was acnowled1ed when R.A. No. 876was passed. 2aid Act was adopted to supplement and not to supplant the New &ivil &ode provisionson arbitration. 3ith its enactment, the "hilippine 2upreme &ourt statedin a case that &on1ress had officially adopted the modern view that arbitration as an ine4pensive,

speedy and amicable method of settlin1 disputes and as a means of avoidin1 liti1ation should

receive every encoura1ement from the courts.

5n the other hand, the %N /eneral Assembly recommended that all states 1ive due consideration to

the )odel #aw in view of the desirability of uniformity of the law of arbitral procedures and the

specific needs of international commercial arbitration practice. The twin obectives of the law are the

harmoniation of national arbitration laws for international arbitration and the settin1 up of rules

which will meet the present reuirements of international arbitration.

Ii. )aor 0ifferences

A( 2ubect )atter

3ith respect to the scope of application, the "hilippine Arbitration #aw differs from the %N&ITRA#)odel #aw in that the former applies to any controversy e4istin1 between the parties involved. The

submission or contract may include uestions arisin1 out of valuations, appraisals or other

controversies which may be collateral, incidental, precedent or subseuent to any issue between the

parties. The )odel #aw, on the other hand, applies only to international arbitration as provided for in

Article +. 2aid article states9

Article +. 2cope of Application.

This law applies to international commercial arbitration.

The )odel #aw definition of !international commercial arbitration$ includes situations in which theparties have their place of business in different states, or in which the place of arbitration or

performance is a state different than that of the parties: place of business.

;( <ualifications of Arbitrators

Republic Act No. 876 differs from the )odel #aw with respect to the reuirements of the persons

actin1 as arbitrators. %nder the latter, there are no specific reuirements that ou1ht to be possessed



by the arbitrator as the parties are free to a1ree on his ualifications. %nder the "hilippine Arbitration

#aw, on the other hand, the minimum reuirements for the appointment of a person as an arbitrator

are that he be of le1al a1e, in full enoyment of his civil ri1hts and must now how to read and write.

An arbitrator is to be neutral and impartial. No party shall select as arbitrator any person to act as his

champion or to advocate his cause. A 1round for the disualification of an arbitrator is his personal

bias which mi1ht preudice the ri1ht of a party to a fair and impartial award. This bias is presumedwhere the arbitrator is related by blood or marria1e to a party within the si4th de1ree= or where he

has financial, fiduciary or other interest in the controversy or cause to be decided or in the result of

the proceedin1. %nder the )odel #aw, a person may be precluded by a reason of his nationality from

actin1 as an arbitrator, if such is a1reed upon by the parties 'Art. ++(.

&( &ourt Intervention

The present "hilippine Arbitration #aw also differs from the %N&ITRA# )odel #aw on the aspect of

court intervention. Republic Act No. 876 allows broad intervention by the courts. It allows the courts

to intervene in arbitral proceedin1s and review arbitral awards on the 1round of 1rave abuse of

discretion committed by the Arbitral Tribunal and other 1rounds. In the case of &hun1 >u Industries,Inc. vs. &ourt of Appeals '?@6 2&RA --( involvin1 a special civil action of certiorari, it was held that

the 2upreme &ourt will not en1a1e in a review of the facts found nor even of the law as interpreted

or applied by the arbitrator, unless there be on the part of the arbitrator a 1rave abuse of discretion

or that he has acted without or in e4cess of urisdiction. There will be a udicial review of the award9

'+( 3hen the supposed errors of fact or of law are so patent, 1ross and preudicial to a party. '&hun1

>u Industries, Inc. vs. &ourt of Appeals, ?@6 2&RA --(.

'?( 3hen the arbitrator failed to apply the a1reement of the parties the breach of which 1ave rise to

the dispute submitted to arbitration. '&hun1 >u Industries, Inc. vs. &ourt of Appeals, ?@6 2&RA

--(.

'( 3hen the arbitrator 1ave one party unustified e4tra compensation for certain items of wor.

'&hun1 >u Industries, Inc. vs. &ourt of Appeals, ?@6 2&RA --(.

'( 3hen one party has been deprived of a fair opportunity to present his position before the arbitral

tribunal. 'Bi "recision 2teel &enter, Inc. vs. #im Cim 2teel ;uilders, 0ec. +, +(.

'-( 3hen the award was obtained throu1h fraud or corruption of the arbitrator, or there was evident

partiality of the arbitrator, or the arbitrator was 1uilty of misconduct, or that the arbitrator e4ceed his

powers. 'Bi "recision 2teel &enter, Inc. vs. #im Cim 2teel ;uilders, 0ec. +, +(.

5n the other hand, Article - of the %N&ITRA# )odel #aw e4pressly states that no court shall

intervene e4cept where so provided in the law. The only way to uestion the award or action of the

tribunal will be an application for settin1 aside the award on the 1rounds provided for in Article of

the said law. The arbitral award may be set aside by the court only if9

a( the party to the arbitration a1reement was under some incapacity=



b( the party was unable to present his case= or

c( the award was beyond the terms of the submission to arbitration= or

d( the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the

a1reement of the parties.

e( the court finds the subectDmatter of the dispute is not capable of settlement by arbitration under

the law of this 2tate= or

f( the award is in conflict with the public policy of the state.

>urther, udicial intervention is limited to those aspects relatin1 to the arbitral processes, e.1., the

issuance of provisional relief pendin1 the arbitral proceedin1s, assistance in the tain1 of evidence,

and enforcement of arbitral awards. The )odel #aw limits udicial review in reco1nition of the limited

connection of international commercial arbitration to any particular domestic le1al system. There is,

therefore, no provision for appeal to the courts on substantive matters. Recourse is limited to anapplication for settin1 aside the award. %nder the "hilippine Arbitration #aw, appeal may be taen

from a ud1ment or order confirmin1 the award, or vacatin1 or modifyin1 it, throu1h a certiorari on

uestions of law. *udicial review of an arbitral award may be made by petition under Rule 6- to the

&ourt of Appeals. Althou1h the parties may stipulate that the arbitrator:s decision or award shall be

final, it has been held in the case of &hun1 >u that the finality of the arbitrator:s award is not

absolute.

0( 2tatus of Arbitration "roceedin1s

The "hilippine Arbitration #aw also differs from the )odel #aw with respect to the status of the

arbitration proceedin1s when an action is brou1ht before the courts. %nder the former, a party to anarbitration proceedin1 which uestions its actions may 1o to court and secure a temporary inunction

prohibitin1 the arbitral tribunal from proceedin1 with the arbitration until the court has ruled on the

action. 5n the other hand, under the %N&ITRA# )odel #aw where an action has been brou1ht

before a court, arbitral proceedin1s may nevertheless be commenced or continued, and an award

may be made, while the issue is pendin1 before the court 'Article 8, par.?(.

E( 0isclosure Reuirement

Another aspect wherein the "hilippine Arbitration #aw differs from the )odel #aw is on the disclosure

obli1ations of the arbitrators. %nder the former, no person shall serve as an arbitrator if he has

financial, fiduciary or other interest in the controversy or has a personal bias, which mi1ht preudicethe ri1ht of any party to a fair and impartial award '2ection +@(. This, however, does not reuire prior

disclosure as in the )odel #aw. %nder the )odel #aw, when a person is approached in connection

with his possible appointment as an arbitrator, he shall disclose any circumstances liely to 1ive rise

to ustifiable doubts as to his impartiality or independence. An arbitrator, from the time of his

appointment and throu1hout the arbitral proceedin1s, shall without delay disclose any such

circumstances to the parties unless they have already been informed of them by him 'Article +?, par.

+(.



>( "lace of Arbitration

3ith respect to the desi1nation of the place of arbitration there e4ists a mared difference between

the "hilippine Arbitration #aw and the %N&ITRA# )odel #aw. The former does not provide for ruleson the desi1nation of the place of arbitration, whereas the latter provides that where the parties have

failed to a1ree on the place of arbitration, the place shall be determined by the arbitral tribunal

havin1 re1ard to the circumstances of the case, includin1 the convenience of the parties. It further

provides that the arbitral tribunal may meet at any place it considers appropriate for consultation

amon1 its members, for hearin1 witnesses, e4perts of the parties, or for an inspection of 1oods,

other property or documents. %nder the )odel #aw, the parties are 1iven broad autonomy. Aside

from the place of arbitration, the parties can select their own rules of procedure, includin1 the

number of arbitrators, the lan1ua1e of the arbitral proceedin1, and the type of hearin1 which may

either be an oral or written presentation. 2ubect to certain mandatory provisions, the parties are free

to determine the procedure to be followed by the arbitral tribunal in conductin1 the proceedin1s.

They may do so by reference to a set of institutional or ad hoc arbitration rules, or by developin1specific procedural rules tailored to their particular needs.

/( Applicable #aw

Another area of difference between the two laws is the desi1nation of the particular law to 1overn the

dispute. The "hilippine Arbitration #aw does not specify the procedure for determinin1 the law to

1overn the case. This is in mared contrast with the )odel #aw which provides that the arbitral

tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties.

This authories the parties to select not only a particular urisdiction:s law, but the laws of several

urisdictions, or even 1eneral international le1al principles. >ailin1 any desi1nation by the parties, the

arbitral tribunal shall apply the law determined by the conflict of laws rules which it considersapplicable. In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract

and shall tae into account the usa1es of the trade applicable to the transaction 'Article ?8(.

B( &orrection or Interpretation of Award

The "hilippine Arbitration #aw can be considered deficient for the reason that it does not e4tend to

the arbitral tribunal the ri1ht to correct or modify its award as first resort, unlie the )odel #aw which

authories the parties to apply to the arbitral tribunal for correction or modification of the award.

Article of which provides that9

3ithin thirty days of receipt of the award, unless another period of time has been a1reed upon by theparties, a party, with notice to the other party, may reuest the arbitral tribunal to correct in the award

any errors in computation, any clerical or typo1raphical errors or any errors of similar nature.

The )odel #aw, in addition, allows the parties to reuest the arbitral tribunal to 1ive an interpretation

of a specific point or part of the award. The same article 1ives the parties the opportunity to reuest

from the arbitral tribunal additional awards as to claims presented in the proceedin1s but omitted

from the award.



Arbitration !ers"s Mediation

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Many have heard the term #alternative disp"te resol"tion$ associated with both arbitration

and mediation% b"t may not have "nderstood the difference& Indeed% many "se the terms

interchan'eably even tho"'h they are very different proced"res&

;oth arbitration and mediation were historically voluntary, in that neither could occur without the

a1reement of all the parties to the dispute 'usually via a contract between the parties entered into

before the dispute occurred(. Bowever, this is chan1in1, as many statutes now reuire mediation or

arbitration as a prereuisite to filin1 a lawsuit. ;oth arbitration and mediation are private= a si1nificant

advanta1e when parties do not want to air their dirty laundry in public. ;oth can occur relatively

uicly after the dispute arises, and both can be accomplished for a fraction of the cost of court

liti1ation.

Bowever, that is about all that the two processes have in common.

)ediation

In mediation, a neutral third party called 'not surprisin1ly( a !mediator$ tries to facilitate ne1otiations

between the parties. Typically, a mediation will follow the same 1eneral a1enda. >irst, the parties will

meet to1ether with the mediator and everyone is 1iven an opportunity to introduce themselves and

e4plain their position. The mediator will then usually brea up the parties so sFhe can meet with them

individually. At this point, the mediator will normally try to better understand each sideGs position while

simultaneously pointin1 out any weanesses in their cases with the 1oal of main1 the parties

reco1nie the benefit of comin1 to1ether in a settlement rather than proceedin1 to trial and hopin1 to

achieve the best possible day in court. After some discussion, the mediator will see what sort of

terms one party wishes to offer the other, and will then meet with the other party to convey this offer.

This bac and forth will usually continue until the parties have an a1reement or until it becomes

apparent that no resolution will be possible. If a settlement is reached, an a1reement is put to paper

and si1ned by the parties 'and in a number of urisdictions by the mediator, as well(. If a party

violates the settlement, it will 1ive rise to a cause of action for breach of contract. If no settlement is

achieved, the mediator will declare an impasse, and the case can proceed to trial.

Arbitration

Arbitration, on the other hand, is a much more involved process. 3hen parties to a dispute select

arbitration, a person 'or sometimes a panel of three or more( called an !arbitrator$ acts to investi1atethe facts, analye the dispute, and render a decision on the matter. %sually, this is done in a process

very similar to a trial, thou1h with looser procedural reuirements and shorter time frames. The

parties a1ree to accept the decision of the arbitrator as final and bindin1 and that the decision will be

enforced by the courts if either party violates it.

An arbitrator presides over a hearin1 'the arbitration( in which witnesses testify and documents are



considered, much lie court liti1ation. 0iscovery and preDhearin1 procedures are typically limited

and

abbreviated to accelerate the process and eep costs down, but this can be e4tended by a1reement

of the parties. 2imilarly, the parties can institute other costDsavin1 measures such as eliminatin1

transcripts and briefs if they are able to a1ree to these measures. Appeals from arbitration decisions

are only available on very limited 1rounds and are rarely successful. Althou1h arbitration is more

formal and e4pensive than mediation, it is still less e4pensive and more e4peditious than liti1ation.

The bi11est distinction between mediation and arbitration, aside from the differin1 procedures, is that

an arbitrator 1ets to mae a formal decision about how the partiesG dispute should be resolved.

%nlie a mediation, where a disa1reement between the parties merely results in an impasse, in an

arbitration the parties never have to a1ree to the outcome because it is decided for them by the

mediator.

>inal Thou1hts

There is no doubt that both mediation and arbitration can be useful tools to resolvin1 disputes,

particularly if time and money are serious concerns. ;ut, as with anythin1, there can be drawbacs,

as well. There is no 1uarantee of a resolution in mediation, and mediator and attorney fees can

become uite si1nificant if the mediation dra1s on for any len1th of time. 2imilarly, arbitrators are not

bound by the same reuirements or oversi1ht of law ud1es, so their rulin1s can often be

unpredictable. As someone once said it best, the root word of !arbitration$ is !arbitrary$ and that is

ust the ind of result you may 1et. ;ut, as noted, both procedures may be reuired by contract or

statute, and in most civil cases before a re1ular law court, a mediation will be ordered by the court at

some point before the case can proceed to trial.

As always, if you have uestions about the process or laws related to any form of alternative dispute

resolution, your best bet is to contact a local, e4perienced attorney. Hour attorney will be able to

answer your uestions and help 1uide you throu1h the process of resolvin1 your case or main1

plans to move forward to trial if that is the best option.

comparative analysis of pal and model law

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