International Commercial Arbitration Atty.

Louie Ogsimer

INTERNATIONAL COMMERCIAL ARBITRATION

Atty. Louie Ogsimer
Based on the Syllabus for Second Semester, AY 2014-2015

I. INTRODUCTION  ADR Act  An arbitration is international if it is not domestic.

 International Arbitral Award  one rendered in international arbitration
1. What is “Arbitration”?  Domestic Arbitral Award  one rendered in domestic arbitration
 Foreign Arbitral Award  an award may be domestic in another country,
 Redfern/Hunter  a private method of dispute resolution chosen by the parties but foreign in another country when enforced (Check NY Convention)
themselves as an effective way of putting an end to disputes between them o Anything issued outside PH is foreign arbitral award
without recourse to the courts of law.
 ADR Act (RA 9285)  a voluntary dispute resolution process in which one or 3. When is arbitration “Commercial?”
more arbitrators, appointed in accordance with the agreement of the parties, or
rules promulgated pursuant to this Act, resolve a dispute by rendering an award  UNCITRAL Model Law (footnote to Art. 1(3)  ** The term "commercial"
 Sir: Essentially, arbitration is a contract. There is consent, object, consideration. should be given a wide interpretation so as to cover matters arising from all
relationships of a commercial nature, whether contractual or not. Relationships of
2. When is arbitration “International?” a commercial nature include, but are not limited to, the following transactions: any
trade transaction for the supply or exchange of goods or services; distribution
For ‘international’ – Refer to and MEMORIZE Art. 1(3) (UNCITRAL Model Law) agreement; commercial representation or agency; factoring; leasing; construction
For ‘commercial’ – Refer to footnote of Art. 1(1) of works; consulting; engineering; licensing; investment; financing; banking;
insurance; exploitation agreement or concession; joint venture and other forms of
industrial or business co-operation; carriage of goods or passengers by air, sea, rail
UNCITRAL Model Law or road.
Art. 1. Scope of application
(1) This Law applies to international commercial** arbitration, subject to any
 ADR Act  An arbitration is "commercial if it covers matter arising from all
agreement in force between this State and any other State or States.
relationships of a commercial nature, whether contractual or not.
o Examples given in the law: Relationships of a transactions: any trade
(2) The provisions of this Law, except articles 8, 9, 35 and 36, apply only if the place
transaction for the supply or exchange of goods or services; distribution
of arbitration is in the territory of this State.
agreements; construction of works; commercial representation or agency;
factoring; leasing, consulting; engineering; licensing; investment; financing;
(3) An arbitration is international if:
banking; insurance; joint venture and other forms of industrial or business
(a) the parties to an arbitration agreement have, at the time of the conclusion of
cooperation; carriage of goods or passengers by air, sea, rail or road.
that agreement, their places of business in different States; or
(b) one of the following places is situated outside the State in which the parties
4. What “laws” govern International Commercial Arbitration?
have their places of business:
(i) the place of arbitration if determined in, or pursuant to, the arbitration
International Conventions:
agreement;
(ii) any place where a substantial part of the obligations of the commercial  United Nations Commission on International Trade (UNCITRAL) Model Law on
relationship is to be performed or the place with which the subject-matter of the International Commercial Arbitration (1985, amended in 2006)
dispute is most closely connected; or  Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New
(c) the parties have expressly agreed that the subject-matter of the arbitration York Convention) (1958)
agreement relates to more than one country. o Ratified by the Philippine Senate under Senate Resolution No. 71

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 1
International Commercial Arbitration Atty. Louie Ogsimer

 Convention on the Settlement of Investment Disputes between States and Nationals of  When parties do not express a choice of place, arbitral tribunal or arbitral institution
States (ICSID Convention / Washington Convention) (1965) designates
o Redfern/Hunter  It gave both private individuals and corporations who were
“investors” in a foreign state the right to bring legal proceedings against that Lex Arbitri
state, before an international arbitral tribunal. It was no longer necessary for  law of the place or seat of arbitration; “curial law” for English lawyers)
such investors to ask their own government to take up their case at an inter-  “body of rules which sets a standard external to the arbitration agreement, and the
state level: the so-called method of “diplomatic protection”. They now had wishes of the parties for the conduct of arbitration”
the right of direct recourse against the foreign state in their own name and on  “law of the country where the arbitration takes place”
their own behalf.
Relevant Sections in the ADR Act:
National Legislation: SEC. 19. Adoption of the Model Law on International Commercial Arbitration . -
 Single/unified regime: England, India International commercial arbitration shall be governed by the Model Law on International
 Separate ‘domestic’ and ‘international’ regimes: e.g. Philippines, Australia, Singapore, Commercial Arbitration (the "Model Law") adopted by the United Nations Commission on
New Zealand, Canada International Trade Law on June 21, 1985 (United Nations Document A/40/17) and
 Multiple regimes: ‘domestic’, ‘foreign related’ and ‘international’: e.g. China recommended approved on December 11, 1985, copy of which is hereto attached as Appendix
 Relevant legislation (in the Philippines): "A".
o The Arbitration Law, R.A. 876 (June 19, 1953) SEC. 20. Interpretation of Model Law. - In interpreting the Model Law, regard shall be had to
o The ADR Act of 2004, R.A. 9285 (April 2, 2004) its international origin and to the need for uniformity in its interpretation and resort may be
o Special Rules of Court on ADR, AM No. 07-11-08 (Sept. 1, 2009) made to 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
Laws which may impact an arbitration: Commercial Arbitration: Analytical Commentary on Draft Trade identified by reference number
a. Personal Law  Law governing the parties’ capacity to enter into an arbitration A/CN. 9/264."
agreement
b. Procedural Law  Law governing procedure of arbitration = curial law of Place of Arbitration under the ADR Act (Sec. 30) and the Model Law (Art. 20)
arbitration/lex arbitri (law of the seat of arbitration) + procedural rules decided upon by
the parties (whether ad hoc or institutional Section 30 (RA 9285) Art. 20 (UNCITRAL Model Law)
 The procedural rules granted by the parties is limited to what the parties can
grant the arbitral tribunal; anything outside what they can give is governed by The parties are free to agree on the place The parties are free to agree on the place
lex arbitri of arbitration. of arbitration.
Failing such agreement, the place of Failing such agreement, the place of
 Ad Hoc (For This) Arbitration  One which is conducted pursuant to
arbitration shall be in Metro Manila, unless arbitration shall be determined by the
rules agreed by the parties themselves or laid down by the arbitral tribunal.
Parties are free to work out and establish rules of procedure for themselves, the arbitral tribunal, having regard to the arbitral tribunal having regard to the
so long as these rules treat the parties with equality and allow an opportunity circumstances of the case, including the circumstances of the case, including the
convenience of the parties shall decide on convenience of the parties.
for each party to present their case. Alternatively, the relevant arbitration
a different place of arbitration.
clause can also provide for the arbitration to be conducted according to an
established set of rules, like the UNCITRAL Arbitration Rules The arbitral tribunal may, unless agreed by Notwithstanding the provisions of
the parties, meet any place it considers paragraph (1) of this article, the arbitral
 Institutional Arbitration  One that is administered by a specialist arbitral
appropriate for consultation among its tribunal may, unless otherwise agreed by
institution under its own rules of arbitration.
members, for hearing witnesses, experts or the parties, meet at any place it considers
c. Substantive Law  Law governing agreement to arbitrate and the merits of the case the parties, or for the inspection of goods, appropriate for consultation among its
d. Proper Law  Law governing the underlying commercial contract (Dicey & Morris) other property or documents members, for hearing witnesses, experts
e. Law governing supportive and enforcement measures (usually the lex arbitri) or the parties, or for inspection of goods,
other property or documents.
 When parties choose a place, they choose a “neutral” place

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 2
International Commercial Arbitration Atty. Louie Ogsimer

ARBITRATION IN THE PHILIPPINES (ADR Act)  In the PH, there are some laws which require mediation (e.g labor, family disputes)
o Under an SC Circular
SEC. 32. Law Governing Domestic Arbitration. - Domestic arbitration shall continue to be o Why? Mediation is fit for our culture.
governed by Republic Act No. 876, otherwise known as "The Arbitration Law" as amended by o BUT! You cannot compel the parties to settle!
this Chapter. The term "domestic arbitration" as used herein shall mean an arbitration that is not o But if an agreement is reached, it may be enforced. It is a contract
international as defined in Article (3) of the Model Law.  Essential difference from arbitration:
o It does not produce a final third-party decision
SEC. 33. Applicability to Domestic Arbitration. - Article 8, 10, 11, 12, 13, 14, 18 and 19 and o The mediator simply discusses and negotiates with the parties in an effort
29 to 32 of the Model Law and Section 22 to 31 of the preceding Chapter 4 shall apply to to persuade them to reach a mutually agreeable resolution of the dispute
domestic arbitration.
3. Conciliation  *Sec 7 of ADR Act provides that “The term ‘mediation' shall include
 Thus: conciliation”
o Domestic Arbitration  governed by Arbitration Law (RA 876)
o International Arbitration  governed by Model Law 4. Early Neutral Evaluation  an ADR process wherein parties and their lawyers are
 However, some provisions of the ADR Act are applicable to both brought together early in a pre-trial phase to present summaries of their cases and
receive a nonbinding assessment by an experienced, neutral person, with expertise in
the subject in the substance of the dispute
II. DIFFERENT MODES OF ALTERNATIVE DISPUTE RESOLUTION
 A third party hears the parties’ presentations, on either their dispute or
*All definitions below take from the ADR Act (RA 9285, April 2, 2004) selected issues, and provides neutral assessment of the strengths and
weaknesses of each parties’ position. (Born)
Alternative Dispute Resolution System  any process or procedure used to resolve a
dispute or controversy, other than by adjudication of a presiding judge of a court or an 5. Mini-Trial  a structured dispute resolution method in which the merits of a case are
officer of a government agency, as defined in this Act, in which a neutral third party argued before a panel comprising senior decision makers with or without the presence
participates to assist in the resolution of issues, which includes arbitration, mediation, of a neutral third person after which the parties seek a negotiated settlement
conciliation, early neutral evaluation, mini-trial, or any combination thereof;
 Involves relatively brief presentations of each party’s case to a “judge” or
Kinds of ADR: panel of judges who are authorized to make an advisory decision or otherwise
encourage settlement. (Born)
1. Arbitration  a voluntary dispute resolution process in which one or more
arbitrators, appointed in accordance with the agreement of the parties, or rules 6. Others
promulgated pursuant to this Act, resolve a dispute by rendering an award  Expert Determination  Wherein some commercial contracts contain
provisions for the resolution of certain categories of disputes by an expert selected
2. Mediation  a voluntary process in which a mediator, selected by the disputing by or for the parties & authorized to render a binding decision on an issue. ( Born)
parties, facilitates communication and negotiation, and assist the parties in reaching a  Baseball or Final-Offer Arbitration  a process where, at the conclusion of the
voluntary agreement regarding a dispute. parties’ submissions, each side submits its “final offer” (or “best offer”) in a sealed
envelope. The tribunal is then authorized only to select one “offer” to resolve the
i. Court-Annexed Mediation  any mediation process conducted under the dispute instead of making an independent determination.
auspices of the court, after such court has acquired jurisdiction of the dispute
ii. Court-Referred Mediation  mediation ordered by a court to be conducted
in accordance with the Agreement of the Parties when as action is EXCEPTIONS TO APPLICABILITY OF THE ADR ACT: (Sec. 6)
prematurely commenced in violation of such agreement Sec. 6. The provisions of this Act shall not apply to resolution or settlement of the ff:
i. labor disputes covered by the Labor Code

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 3
International Commercial Arbitration Atty. Louie Ogsimer

ii. civil status of persons

iii. validity of a marriage Centralized Dispute Resolution
iv. any ground for legal separation  Avoids the jurisdictional disputes, choice-of-law debates and multiplicitous litigation in
v. jurisdiction of courts different national courts.
vi. future legitime  It centralizes the dispute in a single contractually selected forum.
vii. criminal liability
viii. those which by law cannot be compromised. Other reasons:
 Commercial Competence and Expertise
o Many national court systems are ill-equipped to resolve international commercial
III. WHY ARBITRATE? disputes
o In arbitration, parties can select the members of the tribunal. This enables them to
Origins of Arbitration: choose those who are knowledgeable and capable to decide the dispute.
 Originated as a rudimentary method of settling disputes among merchants and traders;  Finality of Decisions
 Used to be seen as an institution of peace because its purpose was not to grant that one o There is an absence of extensive review of arbitral awards.
is better than the other but to maintain harmony. o Judicial review is usually limited to issues of jurisdiction, procedural fairness and
 The arbitration agreement was looked down upon by early legal systems, but to get public policy.
around this problem, parties would make a double promise (“com-promissum”) to o Courts are usually deferential to the substantive merits of the award
honor the arbitration agreement or else pay a penalty. It essentially evolved into a system  Procedural Flexibility / Party Autonomy
of private justice. To be able to regulate it, national courts began to step in o Parties are accorded autonomy to agree upon the substantive laws and procedures
applicable to the arbitration
o So long as the parties are treated fairly, arbitration can be tailored to meet the
WHY ARBITRATE? specific requirements of the dispute, rather than accordance with fixed rules of
civil procedure.
Advantages:  Confidentiality
Neutrality o Privacy is usually afforded to arbitral proceedings, compared to court proceedings
 Gives the parties an opportunity to choose a “neutral” place for the resolution of their o This reduces the risks of aggravating the parties’ dispute, limits the collateral
dispute and to choose a “neutral” tribunal. damage of a dispute and focuses the parties on an amicable resolution.
 Neutral forum  Arbitration to be held in the place/seat of arbitration chosen by the  Additional powers of arbitrators
parties rather than on the home ground of one party or another. o There are some situations where a tribunal has greater powers than a judge (e.g.
o It is detached from the parties and their home-State governments may award compound interest instead of mere simple interest
 Neutral tribunal  Each party will be given equal opportunity to participate in the  Continuity of role
selection of the tribunal o The tribunal is appointed to deal with one particular case and to follow it from
beginning to end.
Enforcement o It gets to know the parties, thus speeding up the case.
 Arbitration, if carried through the end, leads to a decision which is enforceable against o Its familiarity with the case may also facilitate a settlement of the dispute.
the losing party not only in the place where it is made but also internationally (NY  Arbitration involving State & State-Entities
Convention) o A State’s agreement to arbitrate constitutes a waiver of sovereign immunity
o The award will be a binding decision and not a recommendation that the parties o This ensures the enforceability of awards against State assets
are free to accept or reject as they please.
o It is final. Disadvantages:
o Once the award has been made, it will be directly enforceable by court action,  Costs of arbitration
both nationally and internationally. o Fees and expenses of the arbitrators must be paid by the parties (unlike a judge)
 As per NY Convention, it has international enforceability. o Necessary to pay the administrative fees and expenses of arbitral institution.

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 4
International Commercial Arbitration Atty. Louie Ogsimer

o Hire rooms for meetings and hearings, appoint a secretary or registrar o Changes in arbitration
o However, the cost of arbitration is a form of “one-stop shopping.” Although the  From a simple rudimentary system  now a big business
initial cost is less than that of court proceedings, the award of arbitrators is  From being a system in which the arbitrator was expected to devise a
unlikely to be followed by a series of costly appeals to superior local courts satisfactory solution to the dispute  now arbitrator is required to render a
 Delay decision in accordance with the law.
o Occurs at the beginning and end of the arbitral process  In reaching a decision, arbitrator has to proceed judicially  it has to observe
o Beginning  the time it may take to constitute an arbitral tribunal due process, lest risk having the award set aside from procedural irregularity
o End  the time it takes before the tribunal renders its award
 Limits of Arbitrator’s Power
o Powers accorded to arbitrators falls short of those conferred upon a court of law IV. TYPES OF ARBITRATION
 Ex: no power to compel attendance of witness under sanctions; attachment
o If necessary for the tribunal to take coercive action, it usually goes through the Domestic v. International
machinery of local courts, rather than direct tribunal action *see above
 Multi-party arbitrations/bi-polar arbitrations
o Bi-polar arbitration  based on the traditional concept of arbitration, as being Ad Hoc v. Institutional
similar to a game in which the players are conveniently grouped on one side of the 1. Ad Hoc
net or the other  Conducted without the benefit of an appointing authority or pre-existing
o Problems arise as when the parties on the same side cannot agree among arbitration rules of an institution
themselves how to appoint an arbitrator / tribunal  Subject only to the parties’ arbitration agreement and applicable national
o Logistical problems of several parties arbitration legislation.
 Non-signatories  Parties will sometimes select a pre-existing set of procedural rules designed for ad
o Arises when an individual or legal entity not party to the arbitration agreement hoc arbitration like the UNCITRAL Arbitration Rules
wishes to join the proceedings o Promulgated by UNGA in 1976, revised in 2010
o Ex: joining the parent company of a signatory subsidiary in the arbitration o Creates a predictable procedural framework for international arbitratioons
o Issue: is there a deemed or assumed consent to arbitration? acceptable to common law, civil law and other legal systems
 Theories used to join a non-signatory: “group of companies” doctrine,  Parties usually designate an appointing authority to select the arbitrators if the
reliance theory, agency, piercing the corporate veil, estoppel parties cannot agree themselves
o Bringing all the relevant parties into the same proceedings reduces risk of o If the parties fail to select the appointing authority, some domestic arbitration
conflicting decisions. laws permit national courts to appoint the arbitrators.
 This is only possible if all parties are included in the arbitration agreement  Advantages: more flexible and confidential
 Consolidation
o Involves several contracts with different parties, all related to the same issue 2. Institutional
 Third-parties  Conducted pursuant to institutional arbitration rules properly incorporated by the
o Joinder issues involving third-parties parties’ arbitration agreement
 Conflicting Awards  Almost always overseen by an appointing authority with responsibility for
o No res judicata / system of binding precedents in international arbitration constituting the arbitral tribunal fixing their compensation and other matters
o Each award stands on its own  Leading ICA institutions:
o Also affected by the confidential nature of arbitral proceedings o International Centre for Settlement of Investment Disputes (ICSID)
 Judicialisation o Permanent Court of Arbitration (PCA)
o The current trend where arbitrations tend to be conducted more frequently with o International Chamber of Commerce (ICC)
the procedural intricacy and formality more native to court litigation, and that they o American Arbitration Association (AAA)
are more often subjected to judicial intervention and control o International Centre for Dispute Resolution (ICDR)
o Ex: application of modes of discovery in arbitration proceedings in the US o London Court of International Arbitration (LCIA)

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 5
International Commercial Arbitration Atty. Louie Ogsimer

o Singapore International Arbitral Centre (SIAC) UNCITRAL Model Law

Art. 7. Definition and form of arbitration agreement
 These institutions have promulgated set of procedural rules incorporated by the
(1) "Arbitration agreement" is an agreement by the parties to submit to arbitration
parties in their arbitration agreements
all or certain disputes which have arisen or which may arise between them in
 Advantages: Reduced risk of procedural breakdowns and technical defects. Many respect of a defined legal relationship, whether contractual or not. An
institutional rules also make the process more effective because of provisions arbitration agreement may be in the form of an arbitration clause in a contract
concerning competence-competence, separability, provisional measures, or in the form of a separate agreement.
disclosure, impartiality, corrections and changes to awards, replacement, and costs.
(2) The arbitration agreement shall be in writing. An agreement is in writing if it is
contained in a document signed by the parties or in an exchange of letters,
V. THE ARBITRATION AGREEMENT telex, telegrams or other means of telecommunication which provide a record
of the agreement, or in an exchange of statements of claim and defence in
1. What is an “arbitration agreement” which the existence of an agreement is alleged by one party and not denied by
another. The reference in a contract to a document containing an arbitration
It is a creature of CONTRACT! clause constitutes an arbitration agreement provided that the contract is in
 Unless it is void or against public policy, it must be enforced. writing and the reference is such as to make that clause part of the contract.

Key Elements of an International Arbitration

 However  The Revised Model Law (2006) recognized two options for State:
 Arbitration agreement
o Option 1: Adhere to the writing requirement, with the definition of
 Need for a dispute “writing” extended to include electronic communications of all types
 Appointment of an arbitral tribunal o Option 2: Dispense altogether with the requirement that it should be in
 Arbitral proceedings writing (hence, oral agreements are allowed)
 Decision of the tribunal
 Enforcement of the Award RA 876 / Arbitration Law
Section 2. Persons and matters subject to arbitration. - Two or more persons or parties may
The Arbitration Agreement submit to the arbitration of one or more arbitrators any controversy existing between
 Foundation of modern international arbitration them at the time of the submission and which may be the subject of an action, or the
 Types (see infra) parties to any contract may in such contract agree to settle by arbitration a controversy
o Arbitration Clause thereafter arising between them. Such submission or contract shall be valid, enforceable
o Submission Agreement and irrevocable, save upon such grounds as exist at law for the revocation of any
 Importance of arbitration agreements: contract.
o Making it clear that the parties have consented to resolve their dispute by means of Such submission or contract may include question arising out of valuations, appraisals or
arbitration other controversies which may be collateral, incidental, precedent or subsequent to any
o Without consent, there can be no arbitration! issue between the parties.
o Party autonomy  arbitration is an expression of the will of the parties A controversy cannot be arbitrated where one of the parties to the controversy is an
o Once consent is given, it cannot be unilaterally withdrawn. It is an obligation infant, or a person judicially declared to be incompetent, unless the appropriate court
separable from the rest of the contract. having jurisdiction approve a petition for permission to submit such controversy to
 Essential Elements (NY Convention, Art. 2) arbitration made by the general guardian or guardian ad litem of the infant or of the
o Agreement to submit the dispute in arbitration (evincing capacity of parties) incompetent.
o Must be capable of being enforced at law (enforcement) But where a person capable of entering into a submission or contract has knowingly
o Must confer power to the arbitral tribunal (must establish its jurisdiction) entered into the same with a person incapable of so doing, the objection on the ground
 Parties may decide the number of arbitrators, how the tribunal is appointed, of incapacity can be taken only in behalf of the person so incapacitated.
the seat/country of arbitration, its powers, and the procedure to be followed.

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 6
International Commercial Arbitration Atty. Louie Ogsimer

2. Arbitration Clause v. Submission Agreement agreement whereby the latter engaged the former to construct the main structure of the
“EDSA Plaza Project,” a shopping mall complex in Mandaluyong.
Types of Arbitration Agreements  The construction work was in progress when SPI decided to expand the project by
 Arbitration Clause (clause compromissoire)  they make it clear that the parties have engaging the services of BF again. Thus, the parties entered into an agreement for the
agreed that any dispute which arises out of or in connection with the contract will be main contract works after which construction work began.
referred to arbitration, either ad hoc or institutional.  BF incurred delay in the construction work that SPI considered as “serious and
o Since they are drafted together with the contract, they look to the future. substantial.” However, according to BF, the construction works “progressed in faithful
o It is usually short compliance with the First Agreement until a fire broke out damaging Phase I” of the
Project. Hence, SPI proposed the re-negotiation of the agreement between them.
 Submission Agreement (compromis)  Pertains to existing disputes. one made after a  Consequently, BF & SPI entered into a written agreement denominated as “Agreement
dispute has actually arisen for the Execution of Builder’s Work for the EDSA Plaza Project.” Said agreement
o It looks to the past. would cover the construction work on said project until its eventual completion.
o It is usually long because it is a reflection of the practicalities of the situation  According to SPI, BF “failed to complete the construction works and abandoned the
project.” This resulted in disagreements between the parties as regards their respective
 Agreement to arbitrate  deemed to arise under international instruments, such as liabilities under the contract. Upon SPI’s initiative, the parties’ respective
BITs. Thus usually State-investor disputes. representatives met in conference but they failed to come to an agreement.
 BF filed with the RTC Pasig a complaint for collection of the balance due under the
Reckoning Point: When the dispute arose. construction agreement. Named defendants were SPI and Board members (see above)
Note: The subject matter of the arbitration agreement and the subject matter of the contract are  SPI filed a motion to suspend proceedings instead of filing an answer. The motion was
different. Arbitration agreement is a separate, independent contract. anchored on SPI’s allegation that the formal trade contract for the construction of the
project provided for a clause requiring prior resort to arbitration before judicial
3. Form intervention could be invoked in any dispute arising from the contract. The following
day, SPI submitted a copy of the conditions of the contract containing the arbitration
RA 876 / Arbitration Law clause that it failed to append to its motion to suspend proceedings.
Section 4. Form of arbitration agreement. - A contract to arbitrate a controversy thereafter arising  BF opposed  no formal contract between the parties although they entered into an
between the parties, as well as a submission to arbitrate an existing controversy shall be in agreement defining their rights and obligations in undertaking the project. The
writing and subscribed by the party sought to be charged, or by his lawful agent. agreement did not provide for arbitration and therefore the court could not be
deprived of jurisdiction conferred by law by the mere allegation of the existence of an
The making of a contract or submission for arbitration described in section two hereof, arbitration clause in the agreement between the parties.
providing for arbitration of any controversy, shall be deemed a consent of the parties to the  In its sur-rejoinder, SPI pointed out the significance of BF’s admission of the due
jurisdiction of the Court of First Instance of the province or city where any of the parties execution of the “Articles of Agreement.” On page D/6 thereof, the signatures of
resides, to enforce such contract or submission. Rufo Colayco (SPI president) & Bayani Fernando (BF president) appear, while page
D/7 shows that the agreement is a public document duly notarized
CASE:
BF Corporation v. Court of Appeals  RTC  Found that an arbitration clause indeed exists but denied the motion to
288 SCRA 267 | March 27, 1998 | Justice Romero suspend proceedings, because such was not binding on BF.
o The said Articles of Agreement also provides that the `Contract Documents'
Petitioner: BF Corporation therein listed `shall be deemed an integral part of this Agreement’, and one of the
Respondents: Court of Appeals, Shangri-La Properties, Colayco, Alfredo Ramos, Inc. Rufo B. said documents is the `Conditions of Contract’ which contains the Arbitration
Colayco, Maximo G. Licauco III & Benjamin C. Ramos Clause relied upon by SPI in their Motion to Suspend Proceedings.
o The Conditions of Contract provides that three copies of the Contract Documents
Facts: referred to in the Articles of Agreement shall be signed by the parties to the
contract and distributed to the Owner and the Contractor for their safe keeping.
 Petitioner BF and respondent Shangri-la Properties, Inc. (SPI) entered into an o Here, the `Conditions of Contract’ is not duly signed by the parties on any page ---

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 7
International Commercial Arbitration Atty. Louie Ogsimer

although it bears the initials of BF’s representatives (Bayani Fernando and the parties, as well as a submission to arbitrate an existing controversy, shall be in
Reynaldo de la Cruz) without the initials thereon of any SPI representative. writing and subscribed by the party sought to be charged, or by his lawful agent.
o Considering that the Conditions of Contract was not duly executed or signed by The making of a contract or submission for arbitration described in section two hereof,
the parties, and the failure of SPI to submit any signed copy of the said document, providing for arbitration of any controversy, shall be deemed a consent of the parties
there is serious doubt whether or not the arbitration clause found in the said of the province or city where any of the parties resides, to enforce such contract of
Conditions of Contract is binding upon the parties to the Articles of Agreement. submission.”
o Assuming that the arbitration clause was valid and binding, still, it was too late in  The formal requirements of an agreement to arbitrate are the following:
the day for SPI to invoke arbitration.  It is in default already, considering that o (a) it must be in writing and
under the Arbitration Clause invoked by SPI, it is required that Notice of the o (b) it must be subscribed by the parties or their representatives.
demand for arbitration shall be filed in writing with the other party no later than  There is no denying that the parties entered into a written contract that was submitted
the time of final payment which, had elapsed, not only because SPI had taken in evidence before the lower court. To “subscribe” means to write underneath, as one’s
possession of the finished works and BF’s billings for the payment thereof had name; to sign at the end of a document. That word may sometimes be construed to
remained pending since November, 1991 up to the filing of this case on July 14, mean to give consent to or to attest.
1993, but also for the reason that SPI failed to file any written notice of any  These requisites were complied with in the contract in question. The Articles of
demand for arbitration during the said long period of one year and eight months, Agreement, which incorporates all the other contracts and agreements between the
 CA  Granted SPI’s petition for certiorari. It annulled the RTC’s order parties, was signed by representatives of both parties and duly notarized. The failure of
o The notarized copy of the Articles of Agreement attached to BFs’ reply has been the private respondent’s representative to initial the `Conditions of Contract’ would
submitted by them to the RTC. It bears the signature of Rufo Colayco, president therefor not affect compliance with the formal requirements for arbitration agreements
of BF Shangri-La Properties, Inc., and of Bayani Fernando, president of BF. At because that particular portion of the covenants between the parties was included by
page D/4 of said articles of agreement it is expressly provided that the conditions reference in the Articles of Agreement.
of contract are `deemed an integral part’ thereof. And it is at pages D/42 to D/44  BF’s contention that there was no arbitration clause because the contract incorporating
of the conditions of contract that the provisions for arbitration are found (under said provision is part of a “hodge-podge” document, is therefore untenable. A
Clause No. 35, disputes are to settled under RA 876). contract need not be contained in a single writing. It may be collected from several
o The fact that said conditions of contract containing the arbitration clause bear only different writings which do not conflict with each other and which, when connected,
the initials of BF’s representatives, Fernando and de la Cruz, without that of the show the parties, subject matter, terms and consideration, as in contracts entered into
representative of BF-SPI does not militate against its effectivity. BF having by correspondence. A contract may be encompassed in several instruments even
categorically admitted that the document is the agreement between the parties, the though every instrument is not signed by the parties, since it is sufficient if the
initial of BF’s representative to signify conformity to arbitration is not necessary. unsigned instruments are clearly identified or referred to and made part of the signed
o SPI is not in default. It was only two days after the settlement of the dispute did instrument or instruments. Similarly, a written agreement of which there are two
BF resort to file action before the court, during which SPI requested arbitration. copies, one signed by each of the parties, is binding on both to the same extent as
This was a reasonable time as per the contract. though there had been only one copy of the agreement and both had signed it.
 In other words, the subscription of the principal agreement effectively covered
Issue: W/N the contract for the construction of the EDSA Plaza between BF & SPI embodies
the other documents incorporated by reference therein.
an arbitration clause in case of disagreement between the parties in the implementation of
contractual provisions. YES!  Further, SPI was not in default.  Under the factual milieu, SPI should have paid its
liabilities under the contract in accordance with its terms. However, misunderstandings
Ratio: appeared to have cropped up between the parties ostensibly brought about by either
delay in the completion of the construction work or by force majeure or the fire that
 BF’s Contentions  BF denies the existence of the arbitration clause primarily on the
partially gutted the project. The almost two-year delay in paying its liabilities may
ground that the representatives of the contracting corporations did not sign the
not therefore be wholly ascribed to SPI.
“Conditions of Contract” that contained the said clause. Its other contentions,
specifically that insinuating fraud as regards the alleged insertion of the arbitration  Besides, SPI’s initiative in calling for a conference between the parties was a step
clause, are questions of fact that should have been threshed out below. towards the agreed resort to arbitration. However, BF posthaste filed the complaint
before the lower court. Thus, while SPI’s request for arbitration on August 13, 1993
 RA 876 provides for the formal requisites of an arbitration agreement  Sec. 4. Form of
might appear an afterthought as it was made after it had filed the motion to suspend
arbitration agreement. – A contract to arbitrate a controversy thereafter arising between

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 8
International Commercial Arbitration Atty. Louie Ogsimer

proceedings, it was because BF also appeared to act hastily in order to resolve the o Arising under this Agreement
controversy through the courts. o Arising in connection with this Agreement
 The arbitration clause provides for a “reasonable time” within which the parties may o Relating to this Agreement
avail of the relief under that clause. “Reasonableness” is a relative term and the
question of whether the time within which an act has to be done is reasonable c. Applicable Arbitration Rules
depends on attendant circumstances. Here, a one-month period from the time the  For institutional arbitrations  every arbitral institution provides its own
parties held a conference on July 12, 1993 until SPI notified BF that it was invoking the model arbitration clause
arbitration clause, is a reasonable time. Indeed, BF may not be faulted for resorting to  For ad hoc arbitrations  usually the UNCITRAL Rules
the court to claim what was due it under the contract. However, we find its denial of
the existence of the arbitration clause as an attempt to cover up its misstep in hurriedly d. Seat of Arbitration or Arbitral Seat
filing the complaint before the lower court.  This is the State where the arbitration has its formal legal or juridical seat, and
 It bears stressing that the RTC has not lost its jurisdiction over the case. Sec. 7 of RA where the arbitral award will formally be made.
876 provides that proceedings therein have only been stayed. After the special  Ex: “The seat of the arbitration shall be [Singapore].”
proceeding of arbitration has been pursued and completed, then the lower court may  The selection of the arbitral seat is important because of the ff consequences:
confirm the award made by the arbitrator. o Selection of the arbitration’s procedural law
 In this jurisdiction, arbitration has been held valid and constitutional. Even before the o National courts responsible for applying that law
approval on June 19, 1953 of RA 876, this Court has countenanced the settlement of o Courts responsible for issues relating to the tribunal’s constitution
disputes through arbitration. RA 876 was adopted to supplement the Civil Code’s o Courts responsible for annulling the award.
provisions on arbitration. Its potentials as one of the ADR methods that are now
rightfully vaunted as “the wave of the future” in international relations, is recognized UNCITRAL Model Law
worldwide. To brush aside a contractual agreement calling for arbitration in case of Art. 20. Place of arbitration
disagreement between the parties would therefore be a step backward. (1) The parties are free to agree on the place of arbitration. Failing such agreement, the
place of arbitration shall be determined by the arbitral tribunal having regard to the
Held: WHEREFORE, the questioned Decision of the CA is hereby AFFIRMED and the circumstances of the case, including the convenience of the parties.
petition for certiorari DENIED. This Decision is immediately executory. Costs against BF. (2) Notwithstanding the provisions of paragraph (1) of this article, the arbitral tribunal
may, unless otherwise agreed by the parties, meet at any place it considers
appropriate for consultation among its members, for hearing witnesses, experts or
4. Elements of International Arbitration Agreements the parties, or for inspection of goods, other property or documents.
Study Model Arbitration Clauses RA 9285 / ADR Act
SEC. 30. Place of Arbitration. - The parties are free to agree on the place of arbitration.
a. Agreement to Arbitrate Failing such agreement, the place of arbitration shall be in Metro Manila, unless the arbitral
 Any arbitration clause must set forth the parties’ agreement to arbitrate tribunal… *same as Model Law
 Expressly stating “arbitration,” and not other forms of ADR
 Ex: “all disputes shall be finally resolved by arbitration”
o “shall”  must be mandatory, and not a mere alternative e. Arbitrators
o “finally”  binding and final. Not merely advisory i. Number
 The parties usually agree on the number
b. Scope of the Dispute(s) Submitted to Arbitration  If none, institutional rules provide for such number
 Category of disputes to be subjected to arbitration  Otherwise, national courts decide, pursuant to local arbitration laws
 Maybe everything or only particular disputes ii. Qualifications
 In case of a submission agreement  only a single dispute that arose iii. Procedure for Appointment/Selection
 Various formulations: “any” or “all” disputes  An “appointing authority” is usually designated, which will select a sole

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 9
International Commercial Arbitration Atty. Louie Ogsimer

arbitrator / presiding arbitrator in the event that the parties cannot do so. (4) Where, under an appointment procedure agreed upon by the parties
(a) a party fails to act as required under such procedure, or
 In three-person tribunals, many arbitration clauses permit each party to
(b) the parties, or two arbitrators, are unable to reach an agreement expected of
select a party-nominated arbitrator, with the appointing authority
them under such procedure, or
choosing the presiding arbitrator
(c) a third party, including an institution, fails to perform any function entrusted to
iv. Replacement
it under such procedure, any party may request the court or other authority
 An arbitrator may be replace because his appointment has been specified in article 6 to take the necessary measure, unless the agreement on the
successfully challenged or because he has died, or becomes incapacitated. appointment procedure provides other means for securing the appointment.
 Rules of the established arbitral institutions contain detailed provisions to
cover such contingencies, as do modern laws of arbitration. (5) A decision on a matter entrusted by paragraph (3) or (4) of this article to the court
 Where there is a submission agreement, provisions for filling any or other authority specified in article 6 shall be subject to no appeal. The court or
vacancies in the tribunal must be spelt out in some detail. other authority, in appointing an arbitrator, shall have due regard to any
 If there is failure or refusal to act, the arbitrator concerned should be qualifications required of the arbitrator by the agreement of the parties and to
called upon to withdraw from the arbitration in order that an alternative such considerations as are likely to secure the appoint- ment of an independent
appointment may be made. and impartial arbitrator and, in the case of a sole or third arbitrator, shall take into
 If he or she refuses to do so, it may well be necessary to apply to a account as well the advisability of appoint- ing an arbitrator of a nationality other
national court at the place of arbitration for his or her removal. than those of the parties.

UNCITRAL Model Law – Composition of Arbitral Tribunal Art. 12. Grounds for challenge
Art. 10. Number of arbitrators (1) When a person is approached in connection with his possible appointment as an
(1) The parties are free to determine the number of arbitrators. arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts
(2) Failing such determination, the number of arbitrators shall be three. 
 as to his impartiality or independence. An arbitrator, from the time of appointment
and throughout the arbitral proceedings, shall without delay disclose any such
Art. 11. Appointment of arbitrators circumstances to the parties unless they have already been informed of them by him.
(1) No person shall be precluded by reason of his nationality from acting as an (2) An arbitrator may be challenged only if circumstances exist that give rise to justifiable
arbitrator, unless otherwise agreed by the parties. doubts as to his impartiality or independence, or if he does not possess qualifications
agreed to by the parties. A party may challenge an arbitra- tor appointed by him, or in
(2) The parties are free to agree on a procedure of appointing the arbitrator or whose appointment he has participated, only for reasons of which he becomes aware
arbitrators, subject to the provisions of paragraphs (4) and (5) of this article. after the appointment has been made.

(3) Failing such agreement, Art. 13. Challenge procedure

(1) The parties are free to agree on a procedure for challenging an arbitrator, subject to
(a) in an arbitration with three arbitrators, each party shall appoint one arbitrator,
and the two arbitrators thus appointed shall appoint the third arbitrator; if a the provisions of paragraph (3) of this article.
(2) Failing such agreement, a party who intends to challenge an arbitrator shall, within
party fails to appoint the arbitrator within thirty days of receipt of a request to
do so from the other party, or if the two arbitrators fail to agree on the third fifteen days after becoming aware of the constitution of the arbitral tribunal or after
arbitrator within thirty days of their appointment, the appointment shall be becoming aware of any circumstance referred to in article 12(2), send a written
made, upon request of a party, by the court or other authority specified in statement of the reasons for the challenge to the arbitral tribunal. Unless the
article 6 challenged arbitrator withdraws from his office or the other party agrees to the
(b) in an arbitration with a sole arbitrator, if the parties are unable to agree on the challenge, the arbitral tribunal shall decide on the challenge.
(3) If a challenge under any procedure agreed upon by the parties or under the procedure
arbitrator, he shall be appointed, upon request of a party, by the court or other
authority specified in article 6. of paragraph (2) of this article is not successful, the challeng- ing party may request,
within thirty days after having received notice of the decision rejecting the challenge,
the court or other authority specified in article 6 to decide on the challenge, which
decision shall be subject to no appeal; while such a request is pending, the arbitral
tribunal, including the challenged arbitrator, may continue the arbitral proceedings
and make an award.
Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 10
International Commercial Arbitration Atty. Louie Ogsimer

Art. 14. Failure or impossibility to act Section 9. Appointment of additional arbitrators. - Where a submission or contract provides
(1) If an arbitrator becomes de jure or de facto unable to perform his functions or for other that two or more arbitrators therein designated or to be thereafter appointed by the
reasons fails to act without undue delay, his mandate terminates if he withdraws from parties, may select or appoint a person as an additional arbitrator, the selection or
his office or if the parties agree on the termination. Otherwise, if a controversy appointment must be in writing. Such additional arbitrator must sit with the original
remains concerning any of these grounds, any party may request the court or other arbitrators upon the hearing.
authority specified in article 6 to decide on the termination of the mandate, which
decision shall be subject to no appeal. Section 10. Qualifications of arbitrators. –
(2) If, under this article or article 13(2), an arbitrator withdraws from his office or a party Any person appointed to serve as an arbitrator must be:
agrees to the termination of the mandate of an arbitrator, this does not imply  of legal age,
acceptance of the validity of any ground referred to in this article or article 12(2).  in full-enjoyment of his civil rights and
 know how to read and write.
Art. 15. Appointment of substitute arbitrator
Where the mandate of an arbitrator terminates under article 13 or 14 or because of his No person appointed to served as an arbitrator shall:
withdrawal from office for any other reason or because of the revocation of his mandate by
 be related by blood or marriage within the sixth degree to either party to the
agreement of the parties or in any other case of termination of his mandate, a substitute
controversy.
arbitrator shall be appointed according to the rules that were applicable to the appointment of
the arbitrator being replaced.  serve as an arbitrator in any proceeding if he has or has had financial, fiduciary
or other interest in the controversy or cause to be decided or in the result of
the proceeding,
RA 876 – Arbitration Law  or has any personal bias, which might prejudice the right of any party to a fair
Section 8. Appointment of arbitrators. - If, in the contract for arbitration or in the submission and impartial award.
described in section two, provision is made for a method of naming or appointing an arbitrator No party shall select as an arbitrator any person to act as his champion or to advocate his
cause.
or arbitrators, such method shall be followed; but if no method be provided therein the Court
of First Instance shall designate an arbitrator or arbitrators.
If, after appointment but before or during hearing, a person appointed to serve as an
The Court of First Instance shall appoint an arbitrator or arbitrators, as the case may be, in the arbitrator shall discover any circumstances likely to create a presumption of bias, or
which he believes might disqualify him as an impartial arbitrator, the arbitrator shall
following instances:
(a) If the parties to the contract or submission are unable to agree upon a single immediately disclose such information to the parties. Thereafter the parties may agree in
arbitrator; or writing:
(b) If an arbitrator appointed by the parties is unwilling or unable to serve, and his (a) to waive the presumptive disqualifying circumstances; or
(b) to declare the office of such arbitrator vacant. Any such vacancy shall be filled
successor has not been appointed in the manner in which he was appointed; or
(c) If either party to the contract fails or refuses to name his arbitrator within fifteen in the same manner as the original appointment was made.
days after receipt of the demand for arbitration; or
(d) If the arbitrators appointed by each party to the contract, or appointed by one party to Section 11. Challenge of arbitrators. - The arbitrators may be challenged only for the
reasons mentioned in the preceding section which may have arisen after the arbitration
the contract and by the proper Court, shall fail to agree upon or to select the third
arbitrator. agreement or were unknown at the time of arbitration.
The challenge shall be made before them.
The court shall, in its discretion appoint one or three arbitrators, according to the importance of If they do not yield to the challenge, the challenging party may renew the challenge
before the Court of First Instance of the province or city in which the challenged
the controversy involved in any of the preceding cases in which the agreement is silent as to the
number of arbitrators. arbitrator, or, any of them, if there be more than one, resides. While the challenging
Arbitrators appointed under this section shall either accept or decline their appointments within incident is discussed before the court, the hearing or arbitration shall be suspended, and
seven days of the receipt of their appointments. In case of declination or the failure of an it shall be continued immediately after the court has delivered an order on the
challenging incident.
arbitrator or arbitrators to duly accept their appointments the parties or the court, as the case
may be, shall proceed to appoint a substitute or substitutes for the arbitrator or arbitrators who
decline or failed to accept his or their appointments.

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 11
International Commercial Arbitration Atty. Louie Ogsimer

RA 9285 – ADR Act

SEC. 26. Meaning of "Appointing Authority.". - "Appointing Authority" as used in the g. Governing Law
Model Law shall mean the person or institution named in the arbitration agreement as the
 Arbitration agreements specify the substantive law applicable
appointing authority; or the regular arbitration institution under whose rules the arbitration is
agreed to be conducted. Where the parties have agreed to submit their dispute to institutional  Common formulation: “This Agreement will be governed by, and all disputes
arbitration rules, and unless they have agreed to a different procedure, they shall be deemed to relating to or arising in connection with this Agreement shall be resolved in
have agreed to procedure under such arbitration rules for the selection and appointment of accordance with, the laws of [State X].”
arbitrators. In ad hoc arbitration, the default appointment of an arbitrator shall be made by the  3 classifications: Contract, Arbitration Agreement. Proceedings
National President of the Integrated Bar of the Philippines (IBP) or his duly authorized
representative. UNCITRAL Model Law
 Person or institution named in the AA Art. 28. Rules applicable to substance of dispute
 The regular arbitration institution selected
(1) The arbitral tribunal shall decide the dispute in accordance with such rules of
 If ad hoc  National President of the IBP law as are chosen by the parties as applicable to the substance of the dispute.
Any designation of the law or legal system of a given State shall be construed,
SEC. 27. What Functions May be Performed by Appointing Authority. - The functions unless otherwise expressed, as directly referring to the substantive law of that
referred to in Articles 11(3), 11(4), 13(3) and 14(1) of the Model Law shall be performed by the State and not to its conflict of laws rules.
Appointing Authority, unless the latter shall fail or refuse to act within thirty (30) days from
receipt of the request in which case the applicant may renew the application with the Court. (2) Failing any designation by the parties, the arbitral tribunal shall apply the law
determined by the conflict of laws rules which it considers applicable.

(3) The arbitral tribunal shall decide ex aequo et bono or as amiable com- positeur only if
the parties have expressly authorized it to do so.
f. Language of Arbitration
 Provided for in the arbitration agreement (usually the contract’s language) (4) In all cases, the arbitral tribunal shall decide in accordance with the terms of the
 Can have a practical effect on selection of arbitrators and the character of contract and shall take into account the usages of the trade applicable to the
arbitral proceedings transaction.
 Absent a stipulation, institutional rules usually authorize the tribunal to select
 If institutional rules don't provide for such, national laws can fill the void

UNCITRAL Model Law i. Governing Law of the Contract/Merit of Parties’ Disputes

Art. 22. Language  The parties’ underlying dispute will ordinarily be resolved under the rules
(1) The parties are free to agree on the language or languages to be used in the arbitral of substantive law of a particular national legal system.
proceedings. Failing such agreement, the arbitral tribunal shall determine the language o Why ordinarily? Sometimes, parties agree for arbitration to proceed
or languages to be used in the proceedings. This agreement or determination, unless without reference to law, through equity (ex aequo et bono).
otherwise specified therein, shall apply to any written statement by a party, any hearing  Generally: Arbitral wards give effect to the parties’ agreements on the
and any award, decision or other communication by the arbitral tribunal. applicable substantive law (“choice-of-law clauses”)
(2) The arbitral tribunal may order that any documentary evidence shall be accompanied o Exception: Where the stipulation runs counter to mandatory
by a translation into the language or languages agreed upon by the parties or national laws or public policy
determined by the arbitral tribunal.
 If no law stipulated: Tribunal must select such a law, taking into
account relevant conflict of laws rules.
RA 9285 – ADR Act
o Traditional: Apply national conflict of laws rules of the arbitral seat
SEC. 31. Language of the Arbitration. - The parties are free to agree on the language or
o Recently: Conflicts rules of all states connected to the dispute
languages to be used in the arbitral proceedings. Failing such agreement, the language to be used
o Additionally: International conflicts rules or validation principles
shall be English in international arbitration, and English or Filipino for domestic
arbitration, unless the tribunal… *same as Model Law
Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 12
International Commercial Arbitration Atty. Louie Ogsimer

ii. Governing Law of the Arbitration Agreement a. Sharing of costs (p. 298)
 Since the AA is a separate contract from the main agreement, it maybe  Model Law  silent regarding awards of legal costs incurred in arbitration.
governed by a different national law. o However, arbitrators are permitted to make awards of the costs of
 Chosen by the parties, or determined by applying conflict of laws rules. arbitration and the legal costs (absent contrary agreement by parties)
 Arbitration agreements sometimes address the issue of costs in legal
iii. Procedural Law Governing the Arbitral Proceedings representation.
 Also known as: o This is true where the parties agree that the arbitrators shall have the
o Curial law power to make such awards, or exclude the possibility of such.
o Lex arbitri o An application of party autonomy.
 These are legal rules governing the arbitral proceedings, including both o Tribunals will give effect to the parties’ terms.
internal procedural matters and external relations between the arbitration  Institutional Rules  most institutional rules grant tribunals the power to
and national courts. award the costs of legal representation.
 Usually, this is the arbitration statute of the arbitral seat. o Common principle: the prevailing party will be entitled to its costs (found
o Many countries have adopted the UNCITRAL Model Law as their in UNCITRAL Rules, LCIA Rules)
national law on arbitration. o ICC Rules  final award “shall fix the costs of the arbitration and decide
o But some jurisdictions allow parties to select the procedural law. which of the parties shall bear them or in what proportion they shall be
 Some national law imposes significant limits on requirements on the borne by the parties”
conduct of the arbitration, with the supervision of local courts o Common theme of most institutional rules is to grant the tribunal broad
powers to award legal costs, largely according to standards established by
 But in most developed jurisdictions, local law affords freedom to
the arbitrators; exercise of these powers is left almost entirely to them.
conduct the arbitral process, subject only to basic requirements of
o Most institutional rules also expressly confirm the arbitrators’ authority
procedural regularity (“due process” or “natural justice”)
to “apportion” legal costs, allowing awards of less than 100% of a party’s
 Importance of lex arbitri: reasonable costs.
o Curial support / interim relief
 In the absence of applicable institutional rules, arbitration agreements should
o Setting aside / annulment of award
be interpreted to impliedly grant such authority
o Nationality of award (enforcement)
o Follows from the basic principle that the right to compensation for
wrongful damage includes the costs of righting that damage.
o A party who loses is, in principle, ordered to pay the costs.
5. Scope of Arbitration Agreement
o However, other criteria can be taken into account, notably the manner in
which the case was conducted and the costs caused by the reckless or
 An arbitration agreement confers a mandate upon an arbitral tribunal to decide abusive requests or delaying tactics
any and all of the disputes that come within the ambit of that agreement.
 Most awards simply award a “reasonable” or “appropriate” amount.
 An arbitrator should not go beyond this mandate. If he does, there is a risk that
his award will be refused recognition and enforcement under the provisions of the b. Discovery
New York Convention.
 Discovery in international arbitration is less extensive than in litigation
 Model Law  An award may be set aside by the competent court [Art.
 There is no automatic right to disclosure in arbitration. Rather, parties must
34(2)(a)(iii)], as well as being refused recognition and enforcement [Art.
seek leave from the tribunal to obtain procedural orders allowing disclosure
36(1)(a)(iii)], if it: deals with a dispute not contemplated by or not falling within
the terms of the submission to arbitration or contains decisions on matters beyond  It is possible under some national laws for either the parties, or the tribunal,
the scope of the submission to arbitration. to seek judicial assistance in obtaining coercive discovery.

c. Currency of Awards & Interests (p. 295)

6. Other Significant Clauses in an Arbitration Agreement  Most awards involve determinations that a specified monetary sum is payable

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 13
International Commercial Arbitration Atty. Louie Ogsimer

by one party to another.  Ex: jurisdictional issues, choice-of-law questions, and separation of liability
 Most national laws grant tribunals the power to denominate an award in any and damages.
currency for which the parties’ contract and/or governing law provides
 It depends on applicable legislative provisions or judicial practice. f. Finality of Award
 Interest  most arbitration statutes are silent on award of interests
o Model Law is silent on this. g. Confidentiality (p. 195)
o Some states provide for the award of interest in their legislations,
and tribunals apply them by analogy. 7. Interpretation
o Alternatively, tribunals look to contractually-specified rates of 8. Effect/Consequences of an Arbitration Agreement
interest or treat interest as an element of contractual damages, 9. Arbitrability
looking to commercially-prevailing interest rates during the period in a. What cannot be arbitrated?
question. b. Who determines arbitrability?

d. Monetary Thresholds (p. 296) Born  pp. 43-67

 Compensatory damages are recognized, Redfern  85-95
 However, the award of punitive damages / exemplary damages depend on the
CASES:
arbitral seat / jurisdictions involved.
i. Frabelle v. Phil. American Life Insurance
RA 9285 – ADR Act 530 SCRA 543
SEC. 23. Confidential of Arbitration Proceedings. - The arbitration proceedings,
including the records, evidence and the arbitral award, shall be considered confidential Petitioner: Frabelle Fishing Corporation
and shall not be published except: Respondents: PhilAm Life, PhilAm Properties, Perf Realty Corp.
(1) with the consent of the parties, or
(2) for the limited purpose of disclosing to the court of relevant documents in Facts:
cases where resort to the court is allowed herein.  Philam Properties Corp, PhilAm Life Insurance, and PERF Realty Corp. entered into a
 Provided, however, that the court in which the action or the appeal is Memorandum of Agreement (1996 MOA) whereby each agreed to contribute cash,
pending may issue a protective order to prevent or prohibit disclosure of property, and services for the construction and development of Philamlife Tower, a 45-
documents or information containing secret processes, developments, storey office condominium along Paseo de Roxas, Makati City.
research and other information where it is shown that the applicant shall On December 6, 1996, respondents executed a Deed of Assignment (1996 DOA)[3]
be materially prejudiced by an authorized disclosure thereof. wherein they assigned to Frabelle Properties Corporation (Frabelle) their rights and obligations
under the 1996 MOA with respect to the construction, development, and subsequent ownership
o Common law states  U.S. case held that particular arbitration
of Unit No. 38-B located at the 38th floor of Philamlife Tower. The parties also stipulated that
agreements validly provide for the arbitration of punitive damages claims.
the assignee shall be deemed as a co-developer of the construction project with respect to Unit
o Civil law states  punitive damages are arguably contrary to public
No. 38-B.[4]
policy in some states.
Frabelle, in turn, assigned to Frabelle Fishing Corporation (Frabelle Fishing), petitioner
o Better view  the public policies of the arbitral seat should not herein, its rights, obligations and interests over Unit No. 38-B.
automatically apply to limit a tribunal’s remedial authority; arbitrators On March 9, 1998, petitioner Frabelle Fishing and respondents executed a Memorandum
should instead undertake a conflict of laws analysis, applying the public of Agreement (1998 MOA)[5] to fund the construction of designated office floors in Philamlife
policy of the jurisdiction most closely connected to the parties’ dispute. Tower.
The dispute between the parties started when petitioner found material concealment on
e. Bifurcation of Proceedings the part of respondents regarding certain details in the 1996 DOA and 1998 MOA and their
 “bifurcation”  division of something into parts gross violation of their contractual obligations as condominium developers. These violations
 Efficiency of an arbitration may be improved by identifying preliminary or are: (a) the non-construction of a partition wall between Unit No. 38-B and the rest of the floor
“cut-across” issues, whose prompt resolution will avoid wasted expense area; and (b) the reduction of the net usable floor area from four hundred sixty eight (468)

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 14
International Commercial Arbitration Atty. Louie Ogsimer

square meters to only three hundred fifteen (315) square meters. The petition lacks merit.
Dissatisfied with its existing arrangement with respondents, petitioner, on October As the records show, the complaint filed by petitioner with the HLURB is one for
22, 2001, referred the matter to the Philippine Dispute Resolution Center, Inc. (PDRCI) for reformation of instruments. Petitioner claimed that the terms of the contract are not clear
arbitration.[6] However, in a letter[7] dated November 7, 2001, respondents manifested their and prayed that they should be reformed to reflect the true stipulations of the
refusal to submit to PDRCI’s jurisdiction. parties. Petitioner prayed:
On February 11, 2002, petitioner filed with the Housing and Land Use Regulatory WHEREFORE, in view of all the foregoing, it is
Board (HLURB), Expanded National Capital Region Field Office a complaint[8] for reformation respectfully prayed of this Honorable Office that after due notice and
of instrument, specific performance and damages against respondents, docketed as HLURB hearing, a judgment be please rendered:
Case No. REM-021102-11791. Petitioner alleged, among others, that the contracts do not
reflect the true intention of the parties; and that it is a mere buyer and not co-developer and/or 1. Declaring that the instruments executed by the
co-owner of the condominium unit. complainant FRABELLE and respondent PHILAM to have been
After considering their respective memoranda, HLURB Arbiter Atty. Dunstan T. in fact a Contract to Sell. The parties are thereby governed by the
San Vicente, with the approval of HLURB Regional Director Jesse A. Obligacion, issued an provisions of P.D. 957 entitled, “Regulating the Sale of Subdivision
Order[9] dated May 14, 2002, the dispositive portion of which reads: Lots and Condominiums, Providing Penalties for Violations Thereof”
Accordingly, respondents’ plea for the outright dismissal of as buyer and developer, respectively, of a condominium unit and not as
the present case is denied. Set the initial preliminary hearing of this co-developer and/or co-owner of the same;
case on June 25, 2002 at 10:00 A.M.
IT IS SO ORDERED. x x x (Emphasis supplied)

Respondents then filed with the Court of Appeals a petition for prohibition with
prayer for the issuance of a temporary restraining order and/or writ of preliminary We hold that being an action for reformation of instruments, petitioner’s complaint
injunction,[10] docketed as CA-G.R. SP No. 71389. Petitioner claimed, among others, that the necessarily falls under the jurisdiction of the Regional Trial Court pursuant to Section 1, Rule 63
HLURB has no jurisdiction over the subject matter of the controversy and that the contracts of the 1997 Rules of Civil Procedure, as amended, which provides:
between the parties provide for compulsory arbitration. SECTION 1. Who may file petition. – Any person interested
On December 2, 2002, the Court of Appeals rendered its Decision[11] granting the under a deed, will, contract or other written instrument, whose rights
petition, thus: are affected by a statute, executive order or regulation, ordinance, or
WHEREFORE, premises considered, the petition is any other governmental regulation may, before breach or violation
GRANTED. Public respondents Atty. Dunstan San Vicente and Jesse thereof, bring an action in the appropriate Regional Trial Court to
A. Obligacion of the Housing and Land Use Regulatory Board, determine any question of construction or validity arising, and for a
Expanded National Capital Region Field Office are hereby permanently declaration of his rights or duties thereunder.
ENJOINED and PROHIBITED from further proceeding with and An action for the reformation of an instrument, to quiet
acting on HLURB Case No. REM-021102-11791. The order of May title to real property or remove clouds therefrom, or to consolidate
14, 2002 is hereby SET ASIDE and the complaint is DISMISSED. ownership under Article 1607 of the Civil Code, may be brought under
SO ORDERED. this Rule. (Emphasis ours)

In dismissing petitioner’s complaint, the Court of Appeals held that the HLURB has As correctly held by the Court of Appeals, any disagreement as to the nature of the
no jurisdiction over an action for reformation of contracts. The jurisdiction lies with the parties’ relationship which would require first an amendment or reformation of their
Regional Trial Court. contract is an issue which the courts may and can resolve without the need of the expertise and
Forthwith, petitioner filed a motion for reconsideration[12] but it was denied by the specialized knowledge of the HLURB.
appellate court in its Resolution[13] dated May 30, 2003. With regard to the second and last issue, paragraph 4.2 of the 1998 MOA mandates
Hence, the instant petition for review on certiorari. that any dispute between or among the parties “shall finally be settled by arbitration
The issues for our resolution are: (1) whether the HLURB has jurisdiction over the conducted in accordance with the Rules of Conciliation and Arbitration of the
complaint for reformation of instruments, specific performance and damages; and (2) whether International Chamber of Commerce.”[14] Petitioner referred the dispute to the PDRCI but
the parties should initially resort to arbitration. respondents refused to submit to its jurisdiction.

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 15
International Commercial Arbitration Atty. Louie Ogsimer

It bears stressing that such arbitration agreement is the law between the
parties. They are, therefore, expected to abide by it in good faith.[15]
This Court has previously held that arbitration is one of the alternative methods of
dispute resolution that is now rightfully vaunted as “the wave of the future” in international
relations, and is recognized worldwide. To brush aside a contractual agreement calling for
arbitration in case of disagreement between the parties would therefore be a step backward.[16]
WHEREFORE, we DENY the petition. The challenged Decision and Resolution of the Court
of Appeals in CA-G.R. SP No. 71389 are AFFIRMED.

ii. Fiesta World v. Linberg

499 SCRA 332

iii. Korea Technologies Co. Ltd. v. Lerma

542 SCRA 1

iv. Maria Luisa Park Association, Inc. v. Almendras

588 SCRA 663

v. Ormoc Sugarcane Planters’ Association, Inc. v. CA

596 SCRA 630

p
10. Hi

VI. I’M SO HOT

VII. YEAH

Is it a domestic or international arbitration?

There are provisions of the model law applicable to international arbitration

Arbit clausies of
ICC
SIAC
HKIAC
LCIA
AAA
PDRC
Construction Industry AC

Carlo Agdamag, A2015 + notes from A2012 Reviewer (Alvarez, Crisologo, Dimaculangan, Eleazar, Lagarde, Maniego, Montano, Sobrepeña, Yoro) 16