CHAPTER 4 INTERNATIONAL COMMERCIAL ARBITRATION |. Introduction Sources of Governing Law Model Law, Defined and How to Interpret International commercial arbitration is governed by the Model Law on International Commercial Arbitration (the “Model Law”) adopted by the United Nations Commission on International Trade Law on June 21, 1985 (United Nations Document A/40/17) and recommended approved on December 11, 1985.' In interpreting the Model Law, its international origin and the need for uniformity in its interpretation shall be considered. Parties may resort to the official records (the “travaux preparatories”) and the report of the Secretary General of the United Nations Commission on International Trade Law dated March 25, 1985 entitled, “International Commercial Arbitration: Analytical Commentary on Draft Trade identified by reference number A/CN. 9/264.”2 The Implementing Rules and Regulations (IRR) of the ADR Act applies only if the place or seat of arbitration is the Philippines and in default of any agreement of the parties on the applicable rules? In matters governed by the IRR of the ADR Act, no court shall intervene except where 0 provided in the ADR Act. Resort to Philippine courts for matters within the scope of the ADR Act shall be governed by the Special ADR Rules.‘ Sree a TRA. No, 9285, Chapter 4, Section 19- "RA. No, 9285, Chapter 4, Section 20. / *DOJ Department Circular No. 98, §- 2009, Chapter 4, Rule 1, Article 4.1(b). ‘DOJ Department Circular No. 9, #. 2009, Chapter 4, Rule 1, Article 4.5. 53a4 LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLUTION Model Act, Defined and Distinguished from Model Law A Model Act is a statute drafted b; y the National Confere, of Commissioners in Uniform State Laws for adoption by eis legislatures, modifying it to some extent to meet its own needs. It jg different from Model Law as defined in Republic Act No. 9285. Commercial Arbitration, Defined. Arbitration is “commercial” if it covers matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include: any trade transaction for the supply or exchange of goods or services; distribution agreements; construction of works; commercial representation or agency; factoring; leasing, consulting; engineering; licensing; investment; financing; banking; insurance; joint venture and other forms of industrial or business cooperation; carriage of goods or passengers by air, sea, rail or road.° Appointing Authority, Defined. Appointing Authority shall mean the person or institution named in the arbitration agreement as the appointing authority; or the regular arbitration institution under whose rules the arbitration is agreed to be conducted. When parties agree to submit their dispute to institutional arbitration rules, they are deemed to have agreed to procedure under such arbitration rules for the selection and appointment of arbitrators. In ad hoc arbitration, the default appointment of an arbitrator shall be made by the National President of the Integrated Bar of the Philippines (IBP) or his duly authorized representative.” International Arbitration, Defined. International Arbitration means arbitration where: m the 1. the parties to an arbitration agreement aeaay time of the conclusion of that agreement, their plac business in different states; or , «ip ypines 2. — oneofthe following placesis situated outside the Philipp! in which the parties have their places of business:_ CHAPTER 4 55 INTERNATIONAL COMMERCIAL ARBITRATION a. the place of arbitration if determined in, or pursuant to, the arbitration agreement; b. 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 3. the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.* New York Convention, Defined. The United Nations Convention on the Recognition and En- forcement of Foreign Arbitral Awards (the “New York Convention”) was approved in 1958 and ratified by the Philippine Senate under Senate Resolution No. 71.° It provides for the recognition and en- forcement of foreign and non-domestic arbitral awards and obliges courts of Convention States to recognize arbitration agreements and arbitral awards as binding, under conditions no more onerous than those under domestic arbitration. “Convention State” means a state that is a member of the New York Convention, and a “Convention Award” means a foreign arbitral award made in a Convention State. A “Non-Convention State” means a state that is not a member of the New York Convention, and a “Non-Convention Award” means a foreign arbitral award made in a state, which is not a Convention State. Confidential Nature of Arbitration ion proceedings, including the Information obtained in arbitrati ; records, evidence and the arbitral award, is confidential and shall not be published. Arbitration proceedings may be published only with the consent of the parties, or for the disclosing to the court of relevant documents in cases where resort to the court is allowed. The court may then 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.” s, 2009, Chapter 1, Rule 2, Article 1.6(C)(8). Chapter 1, Rule 2, Article 1.6(C)(9). "DOJ Department Circular No. 98, INA Nanantmant Circular No. 98, 8. 2009,LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLUTION Interpretation of R.A. No. 9285 In interpreting the Act, the court sh: | i all have due Palisy of the law in favor of arbitration. Where action is aie ee y or against multiple parties, one or more of whom are parties wrt are bound by the arbitration agreement although the civil action ini continue as to those who are not bound by such arbitration agreement," The Court will not countenance the effort of any party to subvert or defeat the objective of voluntary arbitration for its own private motives. After submitting itself to arbitration proceedings and Actively participate therein, the petitioner is stopped from assailing the jurisdiction of the CIAC [Construction Industry Arbitration Commission], merely because the latter rendered an adverse decision,"? R.A. No, 9285 is a procedural law which has a retroactive effect." ll. The Arbitration Process Referral to Arbitration An arbitration proceeding is not mandatory because it is subject to the will of the parties to a controversy. It is strictly consensual. But a court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if at least one party so requests not later than the pre-trial conference, or upon the request of both parties thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed." Interim Measure of Protection Provisional relief may be granted to prevent irreparable loss . injury, to provide security for the performance of any ubligelion produce or preserve any evidence or to compel any other appropri! act or omission.’® UR.A. No. 9285, Chapter 4, Section 25. 1gee Spouses Benitez v. Court of Appeals, . CIAC, 359 SCRA 633. ‘ Korea Technologies Co., Ltd. v. Lerma, 542 SCRA 1, supra. «R.A. No. 9285, Chapter 4, Section 24. 4 Gantion 08 266 SCRA 242 and Philrock, In-CHAPTER 4 87 INTERNATIONAL COMMERCIAL ARBITRATION A party may request, before constitution of the tribunal, from a Court an interim measure of protection and the Court may 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 order granting provisional relief may be conditioned upon the provision of security or any act or omission specified in the order.!® 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. Such interim measures may include but shall not be limited to preliminary injunction, appointment of receivers or detention, preservation, inspection of property that is the subject of the dispute in arbitration.!” R.A. No. 9285 allows the filing of provisional or interim measures with the regular courts whenever the arbitral tribunal has no power to act or to act effectively. It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of protection.'® The UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim measures, thus: A court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of whether their place is in the territory of this State, as it has in relation to proceedings in court. The court shall exercise power in accordance with its own procedure in consideration of the specific features of international arbitration. Place of Arbitration The parties are free to agree on the place of arbitration. If the Parties do not agree on a place, the place of arbitration shall be in Metro Manila, unless the arbitral tribunal decides on a different Place of arbitration, considering the circumstances of the case and the convenience of the parties.” NRA, ‘No, 9285, Chapter 4, Section 28. "R.A. No. 9285, Chapter 4, Section 29. supra. See also Transfild Philip- Korea Technologies Co., Ltd. v. Lerma, Pines, I i SCRA 14. Ine. v. Luzon Hydro Corporation, 499 O17 paw on ICA.58 LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLUTION Language of the Arbitration Parties are free to agree on the language or languages to be used in the arbitral proceedings. If the parties do not agree ona language, the language to be used shall be English, unless the arbitral tribunal shall determine differently. This agreement or determination shall apply to any written statement by a party, any hearing and any award, decision or other communication by the arbitral tribunal. The arbitral tribunal may order that any documentary evidence shall be accompanied by a translation into the language or languages to be used in the arbitral proceedings.2" Judicial Review in Foreign Arbitral Awards An arbitration clause stipulating that the arbitral award is final and binding does not oust our courts of jurisdiction as the international arbitral award, the award of which is not absolute and without exceptions, is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285.” Grounds for Judicial Review Different in Domestic and Foreign Arbitral Awards The differences between a final arbitral award from an international or foreign arbitral tribunal and an award given by a local arbitral tribunal are the specific grounds or conditions that vest jurisdiction over our courts to review the awards. For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for setting aside, rejecting or vacating the award by the RTC are provided under Art. 34(2) of the UNCITRAL Model Law. For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA 876 and shall be recognized as final and executory decisions of the RTC, they may only be assailed before the RTC and vacated on the grounds provided under Sec. 25 of RA 876.CHAPTER 4 59 INTERNATIONAL COMMERCIAL ARBITRATION Arbitral Tribunal Parties are free to determine the number of ‘arbitrators, Failing such determination, the number of arbitrators shall be three (3).* Appointment of Arbitrators No person shall be precluded by reason of his/her nationality from acting as an arbitrator, unless otherwise agreed by the parties. Parties are free to agree on a procedure of appointing the arbitrator or arbitrators. Failing such agreement in an arbitration with three (8) arbitrators, each party shall appoint one arbitrator, and the two (2) arbitrators thus appointed shall appoint the third arbitrator; if a party fails to appoint the arbitrator within thirty (30) days of receipt of a request to do so from the other party, or if the two (2) arbitrators fail to agree on the third arbitrator within thirty (30) days of their appointment, the appointment shall be made, upon request of a party, by the appointing authority. In arbitration with a sole arbitrator, parties are free to agree on an arbitrator, otherwise he or she shall be appointed, upon request of a party, by the appointing authority. Where, under an appointment procedure agreed upon by the parties, there is failure to act as required under such procedure, or inability to reach an agreement, or, failure to perform any function entrusted to it under such procedure, any party may request the appointing authority to appoint an arbitrator, unless otherwise provided, Decisions on the appointment procedure entrusted to the appointing authority shall be immediately executory and not be subject to a motion for reconsideration or appeal. The appointing authority shall have in appointing an arbitrator, due regard to any qualifications required of the arbitrator by the agreement of the parties and to such considerations as are likely to secure the appointment of an independent and impartial arbitrator and, in the case of a sole or third arbitrator, shall take into account as well the advisability of appointing an arbitrator of a nationality other than those of the parties.”6 LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLL TION, Grounds for Challenge _When @ person is approached in connection with possible appointment as an arbitrator, he/she shall circumstance likely to give rise to justifiable doubts as to his/her impartiality or independence. An arbitrator, from the time of his/her appointment and throughout the arbitral proceedings shall, without delay, disclose any such circumstance to the parties unless they have already been informed of them by him/her. ith hinher disclone any An arbitrator may be challenged only if circumstances exist that, give rise to justifiable doubts as to his/her impartiality or independence, or if he/she does not possess qualifications agreed to by the parties. A party may challenge an arbitrator appointed by him/her, or in whose appointment he/she has participated, only for reasons of which he/she becomes aware after the appointment has been made.”* Challenge Procedure The parties are free to agree on a procedure for challenging an arbitrator. Failing such agreement, a party who intends to challenge an arbitrator shall, within fifteen (15) days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance that constitutes a ground for challenge, send a written statement of the reasons for the challenge to the arbitral tribunal. Unless the challenged arbitrator withdraws from his/her office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. If a challenge is not successful, the challenging party may request the appointing authority, within thirty (30) days after er received notice of the decision rejecting the challenge, to deci a 4 the challenge, which decision shall be immediately exec | not subject to motion for reconsideration or appeal. Ayer a request is pending, the arbitral tribunal, including 8 ar i arbitrator, may continue the arbitral proceedings and m award.’7 Failure or Impossibility to Act . nction# If an arbitrator becomes unable to perform iether ‘ or for other reasons fails to act without undue delay, vad 1D. CHAPTER 4 61 INTERNATIONAL COMMERCIAL ARBITRATION mandate terminates if he/she withdraws from his/her office or if the parties agree on the termination, Otherwise, if a controversy remains concerning any of these grounds, any party may request the appointing authority to decide on the termination of the mandate, which decision shall be immediately executory and not subject to motion for reconsideration or appeal.*s Appointment of Substitute Arbitrator Where the mandate of an arbitrator terminates under the challenge procedure or failure or impossibility to act or because of his/her withdrawal from office for any other reason or because of the revocation of his/her mandate by agreement of the parties or in any other case of termination of his/her mandate, a substitute arbitrator shall be appointed following the rules on appointment of the arbitrator being replaced.” Jurisdiction of Arbitral Tribunal Competence of Arbitral Tribunal to Rule on its Jurisdiction The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement or any condition precedent to the filing of a request for arbitration. For that purpose, an arbitration clause, which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. Aplea that the arbitral tribunal does not have jurisdiction shall e raised not later than the submission of the statement of defense Ge, in an Answer or Motion to Dismiss). A party is not precluded m raising such plea by the fact that he/she has appointed, or Participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be Faised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral ‘tribunal may, in either case, admit a later plea if it considers the delay justified.62 LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLUTION The arbitral tribunal may rule on a plea either as a prelimi question or in an award on the merits, If the arbitral tribunal ruleg a preliminary question that it has jurisdiction, any party may equa within thirty (30) days after having received notice of that ruling, the Regional ‘Trial Court to decide the matter, which decision shall be immediately executory and not subject to motion for reconsideration or appeal. While such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.” Determination of Rules of Procedure Parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. Failing such agreement, the arbitral tribunal may, subject to this Chapter, conduct the arbitration in such manner as it considers appropriate. Unless the arbitral tribunal considers it inappropriate, the UNCITRAL Arbitration Rules adopted by the UNCITRAL on 28 April 1976 and the UN General Assembly on 15 December 1976 shall apply subject to the following clarification: All references to the “Secretary-General of the Permanent Court of Arbitration at the Hague” shall be deemed to refer to the appointing authority. The power conferred upon the arbitral tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence." Statements of Claim and Defense Within the period of time agreed by the parties or determined by the arbitral tribunal, the claimant shall state the facts supporting his/her/its claim, the points at issue and the relief or remedy sous! o and the respondent shall state his/her/its defense in respect of Te particulars, unless the parties have otherwise agreed a8 2 required elements of such statements. The parties may submit oy their statements, all documents they consider to be relevant 0” nit add a reference to the documents or other evidence they will su! Unless otherwise agreed by the parties, either party may al or supplement his/her claim or defense during the course’ of the a proceedings, unless the arbitral tribunal considers it inappror’ 2 allow such amendment having regard to the delay in making ® +4 Arti je 416CHAPTER 4 63 INTERNATIONAL COMMERCIAL ARBITRATION Hearing and Written Proceedings Subject to any contrary agreement by the parti qxbitral tribunal shall decide whether to hold oral hearings a the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials. However, unless the parties have agreed that no hearings shall be held, the arbitral tribunal shall hold such hearings at an appropriate stage of the proceedings, if so requested by a party. The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of goods, other property or documents. All statements, documents or other information supplied to the arbitral tribunal by one party shall be communicated to the other party. Also, an expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties. Default of a Party The following rules apply in cases of default, unless otherwise agreed by the parties, if, without showing sufficient cause: 1. When the claimant fails to communicate his statement of claim, the arbitral tribunal shall terminate the proceedings. 2. When the respondent fails to communicate his/herlits statement of defense, the arbitral tribunal shall continue the proceedings without treating such failure in itself as an admission of the claimant’s allegations. 3. When any party fails to appear at a hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the award on the evidence before it.™ Expert Appointed by the Arbitral Tribunal Unless otherwise agreed by the parties, the arbitral tribunal, (a) may appoint one or more experts to report to iton specific issues to be determined by the arbitral tribunal; or (b) may require a party to give the expert any relevant information or to produce, or toa4 LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLUTION provide access to, any relevant documents, goods or other Property for his/her inspection. Unless otherwise agreed by the parties, if a party 60 requests or if the arbitral tribunal considers it necessary, the expert shal after delivery of his/her written or oral report, participate jn x hearing where the parties have the opportunity to put questions tp him and to present expert witnesses in order to testify on the point, at issue. Court Assistance in Taking Evidence The arbitral tribunal or a party with the approval of the arbitral tribunal may request from a court of the Philippines assistance in taking evidence. The court may execute the request within its competence and according to its rules on taking evidence, The arbitral tribunal shall have the power to require any person to attend a hearing as a witness. The arbitral tribunal shall have the power to subpoena witnesses and documents when the relevancy of the testimony and the materiality thereof has been demonstrated to it. The arbitral tribunal may also require the retirement of any witness during the testimony of any other witness.** Settlement If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate the proceedings. If requested by the parties and not objected to by the arbitral tribunal, the settlement shall be recorded in the form of an arbitral award 0 agreed terms. Such an award has the same status and effect as a award on the merits of the case.*” Form and Contents of Award The award shall be made in writing and shall be signe’ the arbitrator or arbitrators. In arbitral proceedings with than one arbitrator, the signatures of the majority of all mem ef the arbitral tribunal shall suffice, provided that the reaso for omitted signature is stated. The award shall state the reasons ie which it is based, unless the parties have agreed that no reas? id bY mreCHAPTER 4 INTERNATIONAL COMMERCIAL ARBITRATION a to be given or the award is an award on a: : greed terms. The award shall state its date and the place of arbitration, and the award shall be deemed to have been made at that place. After the award is made, a copy signed by the arbitrators shall be delivered to each party.®® Termination of Proceedings The arbitral proceedings are terminated by the final award or by an order of the arbitral tribunal. The arbitral tribunal shall issue an order for the termination of the arbitral proceedings when: Gi) The claimant withdraws hishher/its claim, unless the respondent objects thereto and the arbitral tribunal recognized a legitimate interest on his/her/its part in obtaining a final settlement of the dispute; (ii) The parties agree on the termination of the proceedings; (ii) The arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible. ‘The mandate of the arbitral tribunal ends with the termination of the arbitral proceedings. Notwithstanding the foregoing, the arbitral tribunal may reserve in the final award or order, a hearing to determine costs and responsibility therefore. Pending determination of this issue, the award shall not be deemed final for purposes of appeal, vacation, correction, or any post-award proceedings. Correction and Interpretation of Award, Additional Award Within thirty (30) days from receipt of the award, unless another period of time has been agreed upon by the parties, a party may, with notice to the other party, request the arbitral tribunal to correct in the award any errors in computation, any clerical or typographical errors or any errors of similar nature. The arbitral tribunal may also correct any error of this type on its own initiative within thirty (30) days from the date of the award. If the arbitral tribunal considers the request for correction to be justified, it shall make the correction within thirty (30) days from receipt of the request.66 LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLUTION Within thirty (30) days from receipt of the award, unless another period of time has been agreed upon by the parties, a party may, if so agreed by the parties and with notice to the other party, request the arbitral tribunal to give an interpretation of a specific point or part of the award. If the arbitral tribunal considers the request to be justified, it shall give the interpretation within thirty (30) days from receipt of the request. The interpretation shall form part of the award. Unless otherwise agreed by the parties, a party may, with notice to the other party, request, within thirty (30) days of receipt of the award, the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award. If the arbitral tribunal considers the request to be justified, it shall make the additional award within sixty (60) days. The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, interpretation or an additional award.” Ill. Challenges, Enforcement and Recognition of Arbitral Awards Application for Setting Aside an Exclusive Recourse against Arbitral Award An arbitral award may be set aside by the Regional Trial Court only if there is proof that: 1. A party to the arbitration agreement was under some incapacity; or the said agreement is not valid under the Jaw to which the parties have subjected it or under the law of the Philippines; or 2. The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or 3. ‘The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only the part of the awardCHAPTER 4 & INTERNATIONAL COMMERCIAL ARBITRATION which contains decisions on matters not submitted to arbitration may be set aside; or 4, The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of ADR Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with ADR Act. The arbitral award may also be set aside by the Regional Trial Court only if the court finds that the subject-matter of the dispute is not capable of settlement by arbitration under the law of the Philippines; or the award is in conflict with the public policy of the Philippines. The court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal's opinion will eliminate the grounds for setting aside." Recognition and Enforcement of Awards A foreign arbitral award shall be recognized as binding and, upon petition in writing to the Regional Trial Court, shall be enforced subject to the provisions of the IRR of the ADR Act. Convention Award The New York Convention shall govern the recognition and enforcement of arbitral awards covered by said Convention. The Petitioner shall establish that the country in which the foreign arbitration award was made is a party to the New York Convention. Non-Convention Award The recognition and enforcement of foreign arbitral awards not “*Vered by the New York Convention shall be done in accordance Th, Procedural rules to be promulgated by the Sumeme Cour ean Court may, on grounds of comity and reciprocity, recognize an\ ‘tee a non-convention award as a convention award. sa neat68 LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLUTION A foreign arbitral award when confirmed by a court of a foreign country, shall be recognized and enforced as a foreign arbitral award and not as a judgment of a foreign court. A foreign arbitral award when confirmed by the Regional Trial Court, shall be enforced in the same manner as final and executory decisions of courts of law of the Philippines.” Grounds for Refusing Recognition or Enforcement of a Convention Award Recognition or enforcement of a convention award, may be refused only if the party furnishes to the Regional Trial Court proof that: 1. The parties to the arbitration agreement were, under the law applicable to them, under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or 2, The party against whom the award is invoked was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or 8. Theaward deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or 4. The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration place; or 5. The award has not yet become binding on the parties has been set aside or suspended by a court of the coum in which, or under the law of which, that award was mae"CHAPTER 4 69 INTERNATIONAL COMMERCIAL ARBITRATION Recognition and enforcement of an arbitral award may also be refused if the Regional Trial Court where recognition and enforcement is sought finds that: 1. The subject-matter of the dispute is not capable of settlement by arbitration under the law of the Philippines; or 2. The recognition or enforcement of the award would be contrary to the public policy of the Philippines. A party to a foreign arbitration proceeding may oppose an application for recognition and enforcement of the arbitral award jn accordance with the Special ADR Rules only on the grounds enumerated. Any other ground raised shall be disregarded by the Regional Trial Court. Grounds for Refusing Recognition or Enforcement of a Non- Convention Award A non-convention foreign arbitral award will be recognized upon proof of the existence of comity and reciprocity and may be treated as a convention award. If not so treated and if no comity or reciprocity exists, the non-convention award cannot be recognized and/or enforced but may be deemed as presumptive evidence of a right as between the parties in accordance with Section 48 of Rule 39 of the Rules of Court.“ Appeal from Court Decision on Arbitral Awards A decision of the Regional Trial Court recognizing, enforcing, vacating or setting aside an arbitral award may be appealed to the Court of Appeals in accordance with the rules of procedure to be promulgated by the Supreme Court. The losing party who appeals from the judgment of the court recognizing and enforcing an arbitral award shall be required by the Court of Appeals to post a counter- bond executed in favor of the prevailing party equal to the amount of the award in accordance with the Special ADR Rules. Any stipulation by the parties that the arbitral tribunal's award or decision shall be final, and therefore not appealable, is Valid. Such stipulation carries with it a waiver of the right to appeal70 LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLUTION from an arbitral award but without prejudice to judicial review by way of certiorari under Rule 65 of the Rules of Court.5 Summary Nature of Proceedings before the Court A petition for recognition and enforcement of awards brought before the court shall be heard and dealt with summarily in accordance with the Special ADR Rules.“° Common Procedure for Recognition and Enforcement or Setting Aside of an International Commercial Arbitration Award or a Foreign Arbitral Award When to file petition Any party to an international commercial arbitration in the Philippines or foreign arbitration may petition the proper court to recognize and enforce or set aside an arbitral award anytime from receipt of the award.*” Venue The petitioner may choose to file a petition to recognize and enforce an international commercial arbitral award or a foreign arbitral award with the Regional Trial Court: (a) where arbitration proceedings were conducted; (b) where any of the assets to be attached or levied upon is located; (c) where the act to be enjoined will be or is being performed; (d) where any of the parties to arbitration resides or has its place of business; or (e) in the National Capital Judicial Region.*® Exclusive recourse against arbitral award Recourse to a court against an arbitral award shall be made only through a petition to set aside the arbitral award and a grounds prescribed by the law that governs international commercial arbitration. Any other recourse from the arbitral award, such as by appeal or petition for review or petition for certiorari or otherwise, shall be dismissed by the court.” “DOJ Department Circular No. 98, s. 2009, Chapter 4, Rule 6, Article e 46N0.1 Nenartment Cirenlar No 98 = 9009 Chanter 4. Rule 6. Article 4.42-CHAPTER 4 INTERNATIONAL COMMERCIAL ARBITRATION a Presumption in favor of Confirmation It is presumed that an arbitral award was in due course and is subject to enforcement by MSc atees the adverse party is able to establish a ground for setting aside or not enforcing an arbitral award.” There is a presumption that a foreign arbitral award was made and released in due course of arbitration and is subject to enforcement by the court, The court shall recognize and enforce a foreign arbitral award unless a ground to refuse recognition or enforcement of. the foreign arbitral award under this rule is fully established. The decision of the court recognizing and enforcing a foreign arbitral award is immediately executory. In resolving the petition for recognition and enforcement of a foreign arbitral award in accordance with these Special ADR Rules, the court shall either [a] recognize and/or enforce or [b] refuse to recognize and enforce the arbitral award. The court shall not disturb the arbitral tribunal’s determination of facts and/or interpretation of law,®! Grounds to set aside or resist enforcement Unless a ground to set aside an arbitral award is fully established, the court shall dismiss the petition. If, in the same proceedings, there is a petition to recognize and enforce the arbitral award filed in opposition to the petition to set aside, the court shall recognize and enforce the award. In resolving the petition or petition in opposition thereto in accordance with the Special ADR Rules, the court shall either set aside or enforce the arbitral award. The court shall not disturb the arbitral tribunal’s determination of facts and/ or interpretation of law.” Recognition and Enforcement of a Foreign Arbitral Award Governing Law The recognition and enforcement of a foreign arbitral award shall be governed by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the— New York Convention) and this Rule. The court may, upon grounds of comity and reciprocity, recognize and enforce a foreign arbitral eee “A.M. No. 07-11-08-SC, Part 2, Rule 12, Rule 12.12 and 13,11, 1AM. No. 07-11-08-SC, Part 2, Rule 13, Rule 13.11. Mane we fone OM Dont 0 Dela 19 Rela 19:19,14 LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLUTION award made in a country that is not a signatory to the New York Convention as if it wore a Convention Award, Recognition and enforcement of non-convention award ‘The court shall, only upon grounds provided by these Special ADR Rules, recognize and enforce a foreign arbitral award made in a country not a signatory to the New York Convention when such country extends comity and reciprocity to awards made in the Philippines, If that country does not extend comity and reciprocity to awards made in the Philippines, the court may nevertheless treat such award as a foreign judgment enforceable as such under Rule39, Section 48, of the Rules of Court. Absence of license to do business in the Philippines not a bar to enforcement of foreign arbitral award A foreign corporation not licensed to do business in the Philippines, but which collects royalties from entities in the Philippines, can sue to enforce a foreign arbitral award. The Alternative Dispute Resolution Act of 2004 provides that the opposing party in an application for recognition and enforcement of the arbitral award may raise only those grounds that were enumerated under Article V of the New York Convention, and these exclusive grounds do not specify the capacity to sue of the party seeking the recognition and enforcement of the award. When a party enters into a contract containing a foreign arbitration clause and, as in this case, in fact submits itself to arbitration, it becomes bound by the contract, by the arbitration and by the result of arbitration, conceding thereby the capacity of the other party to enter into the contract, participate in the arbitration and cause the implementation of the result.54 1V. Investor-State Dispute Settlement and the Philippines The International Centre for Settlement of Investment Disputes ef the World Bank (ICSID) 7. it The ICSID, an institution to resolve international investmer disputes, was established under the Convention on the SettlemCHAPTER 4 18. INTERNATIONAL COMMERCIAL ARBITRATION of Investment Disputes between States and Nationals of States (the ICSID Convention). The ICSID cantata ea eae ratified by 150 Contracting States, which entered into force on October 14, 1966. The ICSID is a leading forum for investor-State dispute eettlement in snot international investment treaties and in numerous investment laws and contracts. The Philippines signed the ICSID convention on September 26, 1978, Ghat attained tie status of Contracting State by the entry into force of the Convention on December 17, 1978. ICSID Jurisdiction The jurisdiction of the ICSID extends to any legal dispute arising directly out of an investment, between a Contracting State and a national of another Contracting State. Parties consent to the jurisdiction of the ICSID in writing; thereafter, parties may not unilaterally withdraw its consent. Fraport AG Frankfurt Services Worldwide v. Republic of the Philippines A dispute on the invalidation of a concession to build and operate anew international terminal at Ninoy Aquino International Airport (NAIA Terminal 3) arose between the claimant Fraport AG Frankfurt Services Worldwide, a company incorporated in Germany, and the Republic of the Philippines. In July 1997, pursuant to a concession agreement, the Philippines International Air Terminals Co., Inc, (PIATCO) was awarded the NAIA Terminal 3 Concession. In 1999, Fraport, an experienced airport operator, became a direct and indirect investor in PIATCO. In November 2002, as construction of Terminal 3 neared completion, the Philippine President announced had determined that the concession that the Philippine Government contracts were legally invalid and would not be honored. On May 5, 2008, the Philippine Supreme Court declared that the award of the contract for the construction, operation and maintenance of the NAIA Terminal was null and void due to the absence of the requisite i 55 financi 7 decessor consortium of PIATCO: a a Oe ossession of Terminal 3 in The Re + Haiti took public of the Philippines took P Of 3 December 2004, instituted domestic court expen a propatanet in December 2004, and began operating the Termin’ in 2008.4 LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLUTION t In September 2003, Fraport initiated arbitral Proceedings against the Philippines by submitting its Request for Arbitration to ICSID (ICSID Case [Link]/03/25). The Request for Arbitration was made pursuant to arbitration provisions contained in the Agreement between the Federal Republic of Germany and the Republic of the Philippines on the Promotion and Reciprocal Protection of Investments GIT), dated April 18, 1997 and in force since February 2, 2000. The Republic of the Philippines challenged the Arbitral Tribunal’s jurisdiction on the basis that the protections afforded by the BIT did not extend to investments made in violation of Philippine law - Fraport’s investment in PIATCO sought to evade the nationality requirement governing the NAIA Terminal 3 concession, a public utility, through the device of “indirect” ownership coupled with the secret shareholder agreements to exert financial dominance and effective corporate control of PIATCO. In July 2007, the Tribunal agreed with the assertion of the Republic of the Philippines, declared that it did not have jurisdiction to hear the dispute, and dismissed the claim of Fraport. Fraport filed for the annulment of the 2007 award with an ICSID ad hoc committee. The annulment of the award was based on three separate grounds provided for in Article 52 of the ICSID Convention: that the Tribunal manifestly exceeded its powers [Article 52(1)(b)], that there has been a serious departure from a fundamental rule of procedure [Article 52(1)(d)], and that the award has failed to state the reasons on which it is based [Article 51(1)(e)]. The committee rendered a decision annulling the 2007 Award on December 23, 2010. On March 30, 2011, the ICSID received a new request for the institution of arbitration proceedings submitted by Fraport against the Republic of the Philippines (ICSID Case No. ARB/11/12). On December 10, 2014, the Tribunal rendered a decision finding that Fraport violated Philippine anti-dummy laws at the time of its initial investment, and that the illegality of the investment consequently excluded it as an investment protected by ne BIT. The Tribunal thus dismissed Fraport’s claims for lack i jurisdiction. The Tribunal also deviated from the principle fe parties should bear their own legal costs and share equally i costs of the arbitration, and ordered Fraport to reimburse 1 Republic of the Philippines for part of the latter's fees and costs the amount of US $5 million.CHAPTER 4 15 INTERNATIONAL COMMERCIAL ARBITRATION Baggerwerken Decloedt En Zoon NV v. Republic of the Philippines On October 11, 2011, the ICSID registered a request for the institution of arbitration proceedings from claimant Baggerwerken Decloedt En Zoon NV (BDC) against the Republic of the Philippines (ICSID Case No. ARB/11/27). The dispute concerned claims arising out of the Philippine government’s unilateral termination of a contract entered into by the previous administration with the claimant for the rehabilitation of Laguna Lake. BDC invokes the BLEU (Belgium-Luxembourg Economic Union) - Philippines Bilateral Investment Treaty (1998) as the international investment agreement in filing its claims. To date, the arbitration proceedings still remain pending with the ICSID. Framework for ASEAN Investor-State Dispute Resolution: the ASEAN Comprehensive Investment Agreement (ACIA) The ASEAN Comprehensive Investment Agreement (ACIA) is ASEAN’s main economic instrument to realize a free and open investment regime. The ACIA aims to create a free and open investment regime in the ASEAN in order to achieve the end goal of economic integration under the ASEAN Economic Community. Article 33 of the ACIA allows investors to submit claims not just to courts or administrative tribunals, but also the ICSID (under the ICSID Convention), the UNCITRAL (under UNCITRAL Arbitration Rules), regional centres for arbitration in ASEAN, or to any other arbitration institution upon agreement of the parties. V. International Commercial Arbitration in Asia List of International Arbitral Institutions Leading international arbitral institutions include: Asia * Singapore International Arbitration Centre (SIAC) * Hong Kong International Arbitration Centre (HKIAC) nomic and Trade Arbitration China International Ec: Commission (CIETAC)LAW AND JURISPRUDENCE ON ALTERNATIVE DISPUTE RESOLUTION Japanese Commercial Arbitration Association (CAA) Korean Commercial Arbitration Board (KCAB) Europe ‘The International Court of ‘Arbitration of the Internationa] Chamber of Commerce (icc) . The Arbitration Institute of the Stockholm Chamber of Commerce (SCC) The London Court of International Arbitration (LCIA) USA American Arbitration Association (AAA) Background on Arbitral Institutes The two leading international commercial arbitration institutes in Asia are the Hong Kong International Arbitration Centre (HIKIAC) and the Singapore International Arbitration Centre (SIAC). HETAC was founded in 1985, while SIAC was founded in 1991. Both institutions are among the longest-standing arbitral institutions in the Asia-Pacific region and have more established rules and organizations, Choice of Arbitration Institutes Parties should consider their administrative and substantive requirements in the choice of arbitration institute, some of which include: Reputation in the International Community Both Hong Kong and Singapore are consistently ranked among the top nations with the least corrupt public sector in the world in the Corruption Perceptions Index (CPI). Singapore is also consistently ranked as the least corrupt public sector in Asia in the CPI, with Hong Kong not far behind in second place,5” Support Services The HKTAC Secrotariatcomprises multilingualindividualsfrom diverse backgrounds from both civil and common law jurisdictions,CHAPTER 4 7 INTERNATIONAL COMMERCIAL ARBITRATION any of whom may be appointed as a tribunal secretary to perform organizational and administrative tasks, including conducting legal research and preparing drafts of non-substantive documents. SIAC provides for the appointment of administrative secretaries to assist the arbitral tribunal with administrative matters." Choice of Arbitrators HKIAC provides an online database of arbitrators included on its Panel and List of Arbitrators which allows parties to search for potential arbitrators according to qualifications such as nationality, practice location, jurisdiction of admission, arbitration expertise, other ADRskills and language. SIAC hasan experienced international panel of over 400 expert arbitrators from 40 jurisdictions. Enforceability of Awards Both Hong Kong and Singapore are parties to the 1958 New York Convention on the enforcement of arbitration awards. Arbitral awards from both Hong Kong and Singapore are enforceable in over 150 countries worldwide. Rules Each arbitration institution is governed by its own rules: the HKIAC Administered Arbitration Rules, 2013 edition and the SIAC Arbitration Rules, 2013 edition. Differences in the HKIAC and SIAC Rules include, among others: provisions on the commencement of arbitration, reglementary periods on responding to the notice of arbitration, and reglementary periods on the issuance of awards. For example, the SIAC Rules provide that the arbitral tribunal shall submit the draft award within 45 days from the declaration of the proceedings as closed.” In contrast, the HKIAC Rules are silent on prescribing a time limit within which an arbitral award must be made. "See HKIAC Guidelines on the Use of a Secretary to the Arbitral Tribunal