ADR - Based on Capellan Notes

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CHAPTER 1 – THE ARBITRATION AGREEMENTParty Autonomy - Arbitration Agreement is the Law between the Contracting Parties

o Ra 9285, SEC. 2. Declaration of Policy . - it is hereby declared the policy of the State to actively

promote party autonomy in the resolution of disputes or the freedom of the party to make their own arrangements to resolve their disputes. Towards this end the State shall encourage and

actively promote the use of Alternative !ispute "esolution #A!"$ as an important means toachieve speedy and impartial %ustice and declog court dockets. As such the State shall providemeans for the use of A!" as an efficient tool and an alternative procedure for the resolution of appropriate cases. Likewise the State shall enlist active private sector participation in thesettlement of disputes through A!". This Act shall be without pre%udice to the adoption by theSupreme Court of any A!" system such as mediation conciliation arbitration or anycombination thereof as a means of achieving speedy and efficient means of resolving casespending before all courts in the Philippines which shall be governed by such rules as theSupreme Court may approve from time to time.

&'ception

o Labor disputes covered by Presidential !ecree (o. ))* otherwise known as the Labor Code of

the Philippines as amended and its +mplementing "ules and "egulations,o Civil status of persons,

o alidity of a marriage,

o Any ground for legal separation,

o urisdiction of courts,

o /uture legitime,

o Criminal liability,

o And those which by law cannot be compromised. #Sec. 0 ".A. (o. 1*23$

/ormal "e4uisites of Arbitration Agreement

/5"6S7o Arbitral Agreement or Clause,

o

Submission Agreement,

A"8+T"AL A9"&&6&(T 5" CLA:S& !+ST+(9:+S;&! /"56 S:86+SS+5(.o Arbitral Agreement or Clause #Pre-causal consent $ < the parties to any contract agree in

such contract to settle by arbitration a controversy thereafter arising between them.o Submission Agreement #Present causal consent $ < no pre-e'isting arbitration agreement

but parties subse4uently agree to submit to arbitration any controversy e'isting betweenthem at the time of the submission and which may be the sub%ect of an action.

BF Corporation v . Court of Appeals

Associated Bank v . Court ofAppeals

Ormoc Sugarcane Planters ' Association , Inc . v . Court ofAppeals

Principle of Separability of Arbitration Clause

o :nder the doctrine of separability an arbitration agreement is considered as independent of the

main contract. 8eing a separate contract in itself the arbitration agreement may thus be invokedregardless of the possible nullity or invalidity of the main contract.

o &ven the very party who repudiates or assails the validity of such contract may invoke the

arbitration clause.



o The operation of the arbitration clause is not at all defeated by the failure of the party to file a

formal =re4uest= or application therefor. The filing of a =re4uest= pursuant to Section *) of ".A.(o. 1*23 is not the sole means by which an arbitration clause may be validly invoked in apending suit. #>oppel +nc. vs. 6akati "otary Club /oundation +nc. 9.". (o. ?12@3 September ) *@?B.

on!ales v . Clima" # ining $td

"esolution "escission of Arbitration Agreement %orea &ecnologies Co ., $td . v . $erma

Arbitration Cla!" i! #ali$ A"T ?3 C5(T"ACTDEall disputes controversies or differences shall be settled by arbitration in Seoul>orea. Award rendered by arbitration shall be final and binding upon both parties concernedF.

Law of place where contract is made governs. Le' loci contractus. Contract was perfected in thePhilippines. Therefore our laws ought to govern. (onetheless A"T *@)) sanctions validity of mutuallyagreed arbitral clause or finality and binding effect of an arbitral award. A"T *@B2 *@B1 and *@)@ refer toinstances where a compromise or an arbitral award may be voided rescinded or annulled but thesewould not denigrate the finality of the arbitral award. Arbitration clause was mutually and voluntarily

agreed upon parties.

ArbitrationDwhile it is the law of place where the contract is made governs #le' loci contractus$ A"T*@)) CC5!& sanctions the validity of mutually agreed arbitral clause or finality and binding effect of anarbitral award. Any stipulation that the arbitratorGs award or decision shall be final is valid withoutpre%udice to A"T *@B2 *@B1 and *@)@.

A(& )*+. A compromise in ic tere is mistake, fraud, violence, intimidation, undue influence orfalsit of documents, is su/0ect to A(& 1++* of tis Code.2oever, one of te parties cannot set up a mistake of fact as against te oter if te latter, / virtue ofcompromise, as itdran from a litigation alread commenced.

A(& 1++*. A contract ere consent is given troug mistake, violence, intimidation, undue influence orfraud is voida/le.

A(& )*+3. 4en parties compromise generall on all differences ic te migt ave it eac oter,te discover of documents referring to one or more /ut not to all 5uestions settled sall not itself /e acause for annulment or rescission of te compromise, unless said documents ave /een concealed /one of parties.But te compromise ma /e annulled or rescinded if it refers onl to one ting to ic one of te partiesas no rigt, as son / nel-discovered documents.

A(& )*6*. If after a litigation as /een decided / a final 0udgment, a compromise sould /e agreedupon, eiter or /ot parties /eing unaare of te e"istence of te final 0udgment, compromise ma /erescinded.Ignorance of 0udgment ic ma /e revoked or set aside is not a valid ground for attacking acompromise.

Arbitration %la!" not %ontrar& to 'bli% 'oli%& An arbitration clause to resolve differences and breaches of mutually agreed contractual terms is valid.&ven before the approval of Arbitration Law #"A 20# Court has countenanced the settlement of disputesthrough arbitration.

RA 9285 in%or'orat"$ (NICTRA) MO*E) )A+ to -i%- " ar" !inator&



Hhile "A 1*23 was passed only in *@@) it applies in instant case since it is a procedural law which has aretroactive effect. >59+&S filed its application before >CA8 on uly ?112 and it is still pending becauseno arbitral award has yet been rendered. Thus "A 1*23 is applicable to this case.9"7 procedural laws are construed to be applicable to actions pending and undetermined at the time oftheir passage and are deemed retroactive in that sense and to that e'tent.9"7 retroactive application of procedural laws does not violate any personal rights because no vested hasyet attached nor arisen from them./eatures of "A 1*237

?. "TC must refer to arbitration in proper casesS&C *)DE"TC shall refer the parties to arbitration unless it finds that arbitrationagreement is null and void inoperative or incapable of being performedF.

*. /oreign arbitral awards must be confirmed by "TCS&C B0 :(C+T"ALDcourt may refuse recognition or enforcement on grounds providedin "A 1*23 incorporated these provisions in S&C )* )B )) relative to S&C ) and )2

S&C )* Application of (I ConventionD"ecognition and enforcement of such arbitralawards shall be filed with "TC in accordance with rules of procedure to be promulgatedby SC.

S&C )B "ecognition and &nforcement of /oreign Arbitral Awards not covered by (IConventionDrecognition and enforcement of foreign arbitral awards not covered by (IConvention shall be done in accordance with procedural rules to be promulgated by SC.

S&C )) /oreign Arbitral Award (ot /oreign udgmentDforeign arbitral award whenconfirmed by a court of forign country shall be recogniJed and enforced as a foreignarbitral award and not as a %udgment of foreign court.

S&C ) enue and %urisdictionDproceedings for recognition and enforcement of anarbitral agreement and any application with a court for arbitration assistance shall bedeemed as special proceedings and shall be filed with "TC whereD

a. Hhere arbitration proceedings are conductedb. Hhere asset to be attached or levied upon or act to be en%oined is located

c. Hhere any of the parties to the dispute resides or has his place of businessd. +n national %udicial capital region at the option of applicant

S&C )2 (otice of proceeding to partiesDin a special proceeding for recognition andenforcement of an arbitral award Court shall send notice to parties at their address ofrecord in the arbitration or last known address.

∴ +t can be gleaned that concept of a final and binding arbitral award is similar to %udgments or awards

given by some of our 4uasi-%udicial bodies. Therefore the final foreign arbitral awards are similarlysituated that they need first to be confirmed by "TC.

:(+C+T"AL 65!&LDPhilippines committed itself to be bound by the 6odel Law. +n case a foreignarbitral body is chosen by parties arbitration rules of our domestic arbitration would not be applied.

"A 1*23 is a procedural law which has a retroactive effectDHhile "A 1*23 was passed only in *@@) +tapplies to the case since it is a procedural law which has a retroactive effect. >59+&S filed its applicationfor arbitration before >CA8 on uly ?112 and it is still pending because no arbitral award has yet beenissued. Thus "A 1*23 is applicable to the instant case. Procedural laws are construed to be applicable toactions pending and undetermined at the time of their passage and are deemed retroactive.9"7 retroactive application of procedural laws does not violate any personal rights because no vestedrights has yet been attacked or arisen from them.



S&C *) "A 1*23 "TC does not have %urisdiction over disputes that are sub%ect of arbitration pursuant toany arbitration clause and mandates the referral to arbitration in such casesDEA court before which anaction is brought in a matter which is the sub%ect matter of an arbitration agreement shall if at least oneparty so re4uests not later than the pre-trial conference or upon re4uest of both parties refer the partiesto arbitration unless it finds that the arbitration agreement is null and void inoperative or incapable ofbeing performed.

udicial reviewDeven if foreign arbitral awards are mutually stipulated by parties in the arbitration clauseto be final and binding same are not immediately enforceable or cannot be implemented immediatelythey must still be confirmed by "TC.S&C B3 :(C+T"AL 65!&L LAHDre4uirement for arbitral award to be recogniJed by a competent courtfor enforcement which under S&C B0 :(C+T"AL may refuse recognition or enforcement on groundsprovide for.

/oreign arbitral awards when confirmed by "TC are deemed not as a %udgment of a foreign court but as aforeign arbitral award and when confirmed are enforced as final and e'ecutor decisions of our courts oflawDconcept of a final and binding arbitral award is similar to %udgments or awards given by some 4uasi-

%udicial bodiesDwhen confirmed by "TC are deemed not as a %udgment of a foreign court but as aforeign arbitral award are enforced as final and e'ecutory decisions of our courts of law.

RTC -a! /ri!$i%tion to r"#i" 0or"in arbitral aar$!.S&C )* in relation to S&C )3 "A 1*23Ddesignated and vested "TC the specific authority and

%urisdiction to set aside re%ect and vacate foreign arbitral award on grounds under A"T B)#*$ :(C+T"AL.

S&C )*. Application of (I ConventionDEif application for re%ection or suspension of enforcementof an award has been made "TC may vacate its decision and may also on application of theparty claiming recognition or enforcement of the award order party to provide appropriatesecurityF.

S&C )3. "e%ection of foreign arbitral awardDEa party to a foreign arbitration proceeding mayoppose an application for recognition and enforcement of arbitral award in accordance withprocedures and rules to be promulgated by SC only on those ground enumerated under A"T 3 of (I Convention. Any other ground raised shall be disregarded by "TCF.

Hhile "TC does not have %urisdiction over disputes governed by arbitration mutually agreed upon byparties still foreign arbitration award is sub%ect to %udicial review by "TC which can set aside re%ect orvacate itDforeign arbitral awards while final and binding do not oust courts of %urisdiction since these arenot absolute and without e'ceptions as they are still %udicially reviewable.C;APT&" "A 1*23 has made it clear that all arbitral awards whether domestic or foreign are sub%ectto %udicial review on specific grounds provided for.

Gron$! 0or /$i%ial r"#i" $i00"r"nt in $o"!ti% an$ 0or"in arbitral aar$!.9rounds for %udicial review are different between domestic and foreign arbitral awards7

A"T B)#*$ :(C+T"AL 65!&LDforeignS&C *3 "A20Ddomestic

RTC $"%i!ion o0 a!!ail"$ 0or"in arbitral aar$ a''"alabl"S&C )0 "A 1*23 provides for appeal before CA as remedy of an aggrieved party in cases where "TCsets aside re%ects vacates modifies or corrects an arbitral award.

PGSCM -a! r""$i"! to 'rot"%t it! int"r"!t!P9S6C must submit to foreign arbitration as it bound itself through the contract.+tGs interests are protected by law which re4uires that arbitral award that may be rendered by >CA8 mustbe confirmed here by "TC before it can be enforced.



Arbitration clause does not oust our courts of %urisdiction as the international arbitral award is still %udiciallyreviewable under certain conditions in :(C+T"AL 6odel as applied and incorporated in "A 1*23Dforeign arbitral award is still %udicially reviewable.

There is nothing in the Contract which provides that parties may dispense with arbitration clause.

CHAPTER 2 – *OMESTIC AN* INTERNATIONA) COMMERCIA) ARBITRATION+mportance of !istinguishing Type of Arbitration

o To know the law which should be applied

o /5"&+9( A"8+T"AL AHA"! "ecognition and enforcement of a foreign arbitral award shall

be governed by the ?132 (ew Iork Convention on the "ecognition and &nforcement of /oreign Arbitral Awards #the =(ew Iork Convention=$ and the Special A!" "ules.

o !56&ST+C A"8+T"AL AHA"! governed by "A 1*23 and Special A!" "ules

!istinction between !omestic and +nternational Commercial Arbitration

CHAPTER – COMMENCEMENT O3 ARBITRATION6ode of Commencement of Arbitration !emand for Arbitration "e4uest for Arbitration

1. P"&LL+6+(A"I P"5C&!:"&71.1. +( CAS& 5/ A"8+T"AL A9"&&6&(TCLA:S&7

1.1.1. !emandre4uest for arbitration, #(ot applicable in controversies covered byC+AC$

1.1.2. Statement of the nature of the controversy,1.1.. Amount involved if applicable,1.1.4. "elief sought,1.1.5. Attached true copy of the contract providing the arbitration,1.1.. !emand shall be served in person or registered mail,1.1.6. Should the contract provides for the appointment of single arbitrator7

a. +ndicate the time and date within which the parties shall agree upon sucharbitrator,

1.1.8. Should the contract provides for the appointment of three arbitrators7a. +ndicate the name of the arbitrator appointed,b. "e4uire the other party within ?3 days from noticereceipt to make an advice in

writing the name of the person appointed by the second party,1.2. The * arbitrators appointed must agree on the third arbitrator within ?@ days from the

date of such notice,1.. +n case of default by the other party in answering the demand aggrieved party may file

through a verified petition with the "TC having %urisdiction of the parties71..1. A copy of the demandre4uest for arbitration,1..2. A statement that an original demand was sent and which set forth7

a. The nature of the action,b. Amount involved if applicable,%. "elief sought,$. Attached true copy of the contract providing for arbitration,

2. SA6& P"5C&!:"& T5 8& /5LL5H&! +( S:86+SS+5( A9"&&6&(TS.

. ;&A"+(9 8I C5:"T +( CAS& 5/ /A+L:"& (&9L&CT 5" "&/:SAL T5 A"8+T"AT&.



.1. /ile an application by way of a verified petition with the "TC for an order directing thatsuch arbitration to proceed in the manner provided in the agreement,

.2. (otice to the defaulting party,.. "TC shall summarily hear the parties7

..1. +f the "TC is satisfied that the making of the agreement or such failure to complytherewith is not in issue it shall issue an order directing the parties to proceed toproceed to arbitration in accordance with the terms of the agreement,

..2. +f the making of the agreement or default be in issue the "TC shall proceed tosummarily hear such issue,

.4. Should it be found that there is no agreement or no default the proceeding shall bedismissed,

.5. Should it be found that there was written provision for arbitration was made or there is adefault in proceeding thereunder the "TC shall direct the parties to proceed with thearbitration in accordance with the terms thereof,

udicial "elief 8efore Commencement of Arbitration

1.1.:!+C+AL 8&/5"& T;& C56&(C&6&(T 5/ A"8+T"AT+5(.1.1.1. Service of verified petition upon the respondent.1.1.2. /iling of verified petition with certification against forum shopping before the

"TC.1.1.. "espondent has ?3 days from notice to take a comment opposition.1.1.4. "TC must e'ercise %udicial restraint conformably with the policy on competence-

competence principle.1.1.5. Arbitral proceedings may nevertheless commenced and render an arbitral award

despite pendency of %udicial relief.1.1.. "TC prima facie determination upholding the e'istence validity or validity of

arbitration agreement is not sub%ect to motion for reconsideration appeal or certiorari.

a. 8ut same issue#s$ may still be raised before the arbitral tribunal,b. 5r in a latter action to vacate or set aside the arbitral award.

Competence -Competence Principle

"ule *.). Policy implementing competence-competence principle. - The arbitral tribunalshall be accorded the first opportunity or competence to rule on the issue of whether or not it hasthe competence or %urisdiction to decide a dispute submitted to it for decision including anyob%ection with respect to the e'istence or validity of the arbitration agreement. Hhen a court isasked to rule upon issues affecting the competence or %urisdiction of an arbitral tribunal in adispute brought before it either before or after the arbitral tribunal is constituted the court must e'ercise %udicial restraint and defer to the competence or %urisdiction of the arbitral tribunal byallowing the arbitral tribunal the first opportunity to rule upon such issues.

Hhere the court is asked to make a determination of whether the arbitration agreement isnull and void inoperative or incapable of being performed under this policy of %udicial restraintthe court must make no more than a prima facie determination of that issue.

:nless the court pursuant to such prima facie determination concludes that thearbitration agreement is null and void inoperative or incapable of being performed the court mustsuspend the action before it and refer the parties to arbitration pursuant to the arbitration

agreement.&ffect of Prima Facie !etermination 8efore Commencement of Arbitration

udicial "elief After Arbitration Commences

1.1.:!+C+AL "&L+&/ A/T&" T;& C56&(C&6&(T 5/ A"8+T"AT+5(.



1.1.1. Hithin B@ days from notice file a verified petition #with certification against forumshopping$ assailing the ruling of the arbitral tribunal on the preliminary 4uestionupholding or declining its %urisdiction.

1.1.2. "espondent has ?3 days from notice to take a commentopposition.1.1.. Arbitration proceedings shall continue and render its award thereon.1.1.4. (o court may en%oin the arbitration proceedings pending the petition in court.

Court Action After Arbitration Commences

(o +n%unction of Arbitration Proceedings

"elief Against Court Action

1.1."&L+&/S /"56 A C5:"T ACT+5(71.1.1. 6otion for reconsideration,1.1.2. 8ut not sub%ect to appeal,1.1.. A ruling by the court affirming the %urisdiction of the arbitral tribunal shall not be

sub%ect to petition for certiorari #under "ule 03$.1.1.4. A ruling by the court denying the %urisdiction of the arbitral tribunal may be the

sub%ect of petition for certiorari #under "ule 03$.

Hhen the Tribunal "enders Award Ahead of Court Action

Hhen the Tribunal !efers Preliminary

"uling on urisdiction

(ature of Courts urisdiction Hhether 8efore or After Arbitration Commences

CHAPTER 4 – APPOINTMENT O3 ARBITRATORS!efinition of Arbitrator

Liability of Arbitrators

Parties K Participation in the Appointment of Arbitrators

#agellan Capital #anagement Corporation v . 7osa.........

Oil and 8atural as Commission v . Court ofAppeals

Hhen the Court 6ay Act as Appointing Authority ..

Petition for Appointment of Arbitrator #s $

"elief Against Court Action

1.1. Relief against court action:

1.1.1. 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.



1.1.2. An order of the court denying the petition for appointment of an arbitrator

may be the subject of a motion for reconsideration, appeal or certiorari.

(Rule 6.9.ualifications and !is4ualifications

1.1. !"A#I$I%A&I'):

1.1.1. *ust be of legal age+

1.1.2. In fullenjoyment of his ci-il rights+

1.1.3. no/s ho/ to read and /rite+

1.1.4. ot related by blood or marriage /ithin the sixth degree to either party to

the contro-ersy+

1.1.5. o financial, fiduciary or other interest in the contro-ersy or cause to be

decided or in the result of the proceeding, or

1.1.6. 0as any personal bias, /hich might prejudice the right of any party to afair and impartial a/ard+

1.2. If, after appointment but before or during hearing, a person appointed to ser-e as

an arbitrator shall disco-er any circumstances li1ely to create a presumption of

bias, or /hich he belie-es might dis2ualify him as an impartial arbitrator, thearbitrator shall immediately disclose such information to the parties. &hereafter

the parties may agree in /riting:

1.2.1. to /ai-e the presumpti-e dis2ualifying circumstances+ or

1.2.2. to declare the office of such arbitrator -acant. Any such -acancy shall

be filled in the same manner as the original appointment /as made.

()ec. 34, R.A. o. 56

Challenge to Appointment of Arbitrators

1.1. &he arbitrators may be challenged only for the reasons mentioned in )ec 34, R.A.

o. 56 /hich may ha-e arisen after the arbitration agreement or /ere un1no/nat the time of arbitration.

&he challenge shall be made before them.If they do not yield to the challenge, the challenging party may rene/ the

challenge before the R&% of the pro-ince or city in /hich the challenged

arbitrator, or, any of them, if there be more than one, resides. 7hile thechallenging incident is discussed before the court, the hearing on arbitration

shall be suspended, and it shall be continued immediately after the court has

deli-ered an order on the challenging incident. ()ec.33, R.A. o. 56

3.6. 8R'") $'R %0A##8 ("nder the *odel #a/

3.6.1. 7hen the person is approached in connection /ith a possible appointment

as an arbitrator, he shall disclose any circumstances li1ely to gi-e rise to justifiable doubts as to his impartiality or independence. An arbitrator from the time of his appointment and throughout the arbitral proceedings,

shall /ithout delay disclose any such circumstances to the parties unless

they ha-e already been informed of them by him.

3.6.2. An arbitrator may be challenged only if circumstances exist that gi-e rise

to justifiable doubts as to his impartiality or independence, or if he does

not possess 2ualifications agreed to by the parties. A party may challenge



an arbitrator appointed by him, or in /hose appointment he has

participated, only for reasons of /hich he becomes a/are after the

appointment has been made.

Court Action on the Challenge

1.1. %0A##8 ;R'%"R. ("nder the *odel #a/1.1.1. &he parties are free to agree on a procedure for challenging an arbitrator,

subject to the pro-isions of paragraph (< of thia article.

1.1.2. $ailing such agreement, a party /ho intends to challenge an arbitrator

shall, /ithin 3= days after becoming a/are of the constitution of the

arbitral tribunal or after becoming a/are of any circumstance referred toin article 3>.>., send a /ritten statement of the reasons for the challenge to

the arbitral tribunal. "nless the challenged arbitrator /ithdra/s from his

office or the other party agrees to the challenge, the arbitral tribunal shalldecide on the challenge.

1.1.3. If a challenge under any procedure agreed upon by the parties or the

procedure of paragraph (> of this article is not successful, the challenging party may re2uest, /ithin <4 day after ha-ing recei-ed notice of the

decision rejecting the challenge, the court or other authority specified in

article 6 to decide on the challenge, /hich decision shall be subject to noappeal+ /hile such a re2uest is pending, the arbitral tribunal, including the

challenge arbitrator, may continue the arbitral proceedings and ma1e an

a/ard.

Appointment of Substitute Arbitrator "esulting from Challenge

Termination of the 6andate of Arbitrator

Court Action on the +ssue of Termination of 6 a n d a t e

ADR - Based on Capellan Notes

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Transcript of ADR - Based on Capellan Notes