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    Korea Technologies Co. v. Lerma

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    Myrah
    This document summarizes a court case between KOGIES, a Korean corporation, and PGSMC, a Philippine corporation. [1] KOGIES and PGSMC entered into contracts for KOGIES to set up an LPG manufacturing plant in the Philippines, with total payment of $1.53 million. [2] After PGSMC paid $1.224 million, financial difficulties arose and PGSMC issued bounced checks for the remaining balance. [3] The court ruled that the arbitration clause specifying disputes be resolved in Korea was valid and did not oust the jurisdiction of Philippine courts. Foreign arbitral awards confirmed by Philippine courts would be enforced as final decisions.

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    Korea Technologies Co. v. Lerma

    Uploaded by

    Myrah
    172 views3 pages
    This document summarizes a court case between KOGIES, a Korean corporation, and PGSMC, a Philippine corporation. [1] KOGIES and PGSMC entered into contracts for KOGIES to set up an LPG manufacturing plant in the Philippines, with total payment of $1.53 million. [2] After PGSMC paid $1.224 million, financial difficulties arose and PGSMC issued bounced checks for the remaining balance. [3] The court ruled that the arbitration clause specifying disputes be resolved in Korea was valid and did not oust the jurisdiction of Philippine courts. Foreign arbitral awards confirmed by Philippine courts would be enforced as final decisions.

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    case digest for ADR

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    This document summarizes a court case between KOGIES, a Korean corporation, and PGSMC, a Philippine corporation. [1] KOGIES and PGSMC entered into contracts for KOGIES to set up an LPG manufacturing plant in the Philippines, with total payment of $1.53 million. [2] After PGSMC paid $1.224 million, financial difficulties arose and PGSMC issued bounced checks for the remaining balance. [3] The court ruled that the arbitration clause specifying disputes be resolved in Korea was valid and did not oust the jurisdiction of Philippine courts. Foreign arbitral awards confirmed by Philippine courts would be enforced as final decisions.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    172 views3 pages

    Korea Technologies Co. v. Lerma

    Uploaded by

    Myrah
    This document summarizes a court case between KOGIES, a Korean corporation, and PGSMC, a Philippine corporation. [1] KOGIES and PGSMC entered into contracts for KOGIES to set up an LPG manufacturing plant in the Philippines, with total payment of $1.53 million. [2] After PGSMC paid $1.224 million, financial difficulties arose and PGSMC issued bounced checks for the remaining balance. [3] The court ruled that the arbitration clause specifying disputes be resolved in Korea was valid and did not oust the jurisdiction of Philippine courts. Foreign arbitral awards confirmed by Philippine courts would be enforced as final decisions.

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    © All Rights Reserved
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    of 3

    1. KOREA TECHNOLOGIES CO., LTD. v.

    LERMA and PACIFIC GENERAL STEEL


    MANUFACTURING CORP.

    Petitioner: KOGIES
    - Korean corporation engaged in the supply and installation of LPG
    Cylinder Manufacturing Plants
    Respondent: PGSMC, a domestic corporation

    TIMELINE OF EVENTS:

    March 5, 1997 Parties executed a contract in the Philippines whereby KOGIES


    would set up a manufacturing plant in Carmona, Cavite
    April 7, 1997 Parties executed a contract in Korea amending the first contract
    Amendments:
    - Terms of payment
    - Petitioner shall ship the machinery& facilities necessary for
    the manufacturing LP cylinders for which PGSMC would pay
    USD 1, 224, 000
    - Petitioners would install and initiate the operation of the plant
    for which PGSMC would bound itself to pay USD 306, 000 upon
    the plants production of the 11 kg. LPG cylinder samples
    - Total contract price is USD 1, 530, 000
    October 14, PGSMC entered into a contract of lease with 10% annual
    1997 incremental clause with Worth Properties Inc. for the use of the
    latter’s warehouse building to house the LPG manufacturing
    plant.

    - - Subsequently, machineries and equipments were shipped,


    delivered, and installed to the said warehouse, and PGSMC paid
    USD 1, 224, 000
    January 2, PGSMC financial difficulties
    1998 - Parties agreed to have complied the first contract (since it was
    already paid in full by PGSMC)

    - For the remaining balance of USD 306, 000 for the installation and
    operation of the plant, PGSMC issued two postdated checks.
    - Checks were dishonored, thus, KOGIES sent a demand letter to PGSMC
    threatening a criminal action for violation of bouncing checks law. (may 8,
    1998)
    - On same date, PGSMC faxed a letter dated May 7, 1998 to KOGIES
    President complaining that petitioner did not deliver equipment parts paid for.
    Hence, PGSMC replied to the demand letter stating that the checks were
    actually fully funded but payments were stopped for reasons previously made
    known to petitioner.
    - PGSMC then cancelled their contract dated March 5, 197 on the ground
    that KOGIES had altered the quantity and lowered the quality of the
    machineries it delivered, and that PGSMC would dismantle and transfer the
    same from the Carmona plant.
    - Petitioner insisted that their disputes should be settled by arbitration per
    the arbitration clause in their contract. Thus, KOGIEs instituted an
    Application for Arbitration before the Korean Commercial Arbitration Board
    (KCAB).
    - KOGIES filed a complaint for specific performance against PGSMC alleging
    that PGSMC violated their contract by unilaterally rescinding the contract
    without resorting to arbitration (TRO was issued to retrained PGSMC from
    dismantling and transferring the machinery and equipment)
    - PGSMC opposed contending that the arbitration clause was void for being
    against public policy as it oust local courts of their jurisdiction.

    RTC: denied KOGIES TRO


    - Petitioner has no longer proprietary rights over the said machineries
    and equipments as it was already paid in full by PGSMC
    - Held that art. 15 of the contract as amended was invalid as it tended
    to oust the trial court of their jurisdiction
    - Granted PGSMC’s motion for inspection, denying KOGIES motions,
    and directed the Branch sheriff with the inspection (October 19 order)
    - Prior to October 19, KOGIES filed on October 12 with the CA an
    urgent motion for reconsideration seeking annulment of the RTC
    orders
    CA: affirmed the RTC ruling and declared the arbitration clause as against
    public policy since it provided for a final determination of the legal rights of the
    partied to the contract.

    ISSUE and RULING:

    1. WON the arbitration clause is against public policy for ousting the courts
    of jurisdiction. – NO

    Established in this jurisdiction is the rule that the law of the place where the contract
    is made governs. The contract in this case was perfected in the Philippines, therefore,
    our laws ought to govern. Nonetheless, art. 2044 of the civil code sanctions the validity
    of mutually agreed arbitral clause or the finality and binding effect of an arbitral
    award. Art. 2044 provides, “any stipulation that the arbitrators award or decision shall
    be final, is valid, without prejudice to articles 2038, 2039, and 2040.”

    The arbitration clause was mutually and voluntarily agreed upon by the parties. It has
    not been shown to be contrary to any law, morals, good customs, public order, and
    public policy. We held that submission to arbitration is a contract and that a clause in
    a contract providing that all matters in dispute between the parties shall be referred to
    arbitration is a contract.

    2. What governs an arbitration clause specifying that in case of any dispute


    arising from the contract, an arbitral panel will be constituted in a foreign
    country…..

    In case of foreign arbitral body is chosen by the parties, the arbitration rules of our
    domestic arbitration bodies would not be applied. As signatory to the UNCITRAL Model
    Law on June 21, 1985, the Philippines is committed to be bound by the model law.
    While RA 9285 was passed only in 2004, it applies in the case since it is a procedural
    law which has a retroactive effect. Likewise, KOGIES files its application for arbitration
    with KCAB but still pending because no arbitral award has yet been rendered. As a
    general rule, the retroactive application of procedural laws does not violate any
    personal rights because no vested right has yet attached.

    Salient features of RA 9285:


    1. RTC must refer to arbitration in proper cases.
    2. Foreign arbitral awards must be confirmed by the RTC. FOREIGN ARBITRAL
    AWARDS WHEN CONFIRMED BY THE RTC ARE DEEMED NOT AS A
    JUDGMENT OF A FOREIGN COURT BUT AS A FOREIGN ARBITRAL AWARD,
    AND WHEN CONFIRMED, ARE ENFORCED AS FINAL AND EXECUTORY
    DECISIONS OF OUR COURTS OF LAW.
    3. RTC has jurisdiction to review foreign arbitral awards. FOREIGN ARBITRAL
    AWARD IS SUBJECT TO JUDICIAL REVIEW BY THE RTS WHICH CAN SET
    ASIDE, REJECT, OR VACATE IT.
    4. Grounds for judicial review are provided under Art 34 (2) of the Model Law.
    5. Rtc decision of assailed foreign arbitral award appealable to the CA.

    Therefore, the arbitration clause does not oust the courts of jurisdiction as the
    international arbitral award is not without exceptions since it is still judicially
    reviewable. Further, a party may not unilaterally terminate the contract for whatever
    cause without first resorting to arbitration.

    6. RTC has interim jurisdiction to protect the rights of the parties.


    While the issue of the proper installation of the equipment and machineries
    might well be under the primary jurisdiction of the arbitral body to decide, yet
    the RTC has jurisdiction to hear and grant interim measures to protect vested
    rights of the parties.

    Interim measure – any temporary measure, whether in the form of an award on


    in another form, by which, at any time to the issuance of the award by which
    the dispute is finally decided, the arbitral tribunal orders a arty to: xxx xxx

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