IAN RAY N.

PAGLINAWAN ALTERNATIVE DISPUTE RESOLUTION

TUNA PROCESSING, INC.,

G.R. No. 185582

February 29, 2012

Can a foreign corporation not licensed to do business in the Philippines, but which collects
royalties from entities in the Philippines, sue here to enforce a foreign arbitral award?
In this Petition for Review on Certiorari under Rule 45, petitioner Tuna Processing, Inc.
(TPI), a foreign corporation not licensed to do business in the Philippines, prays that the
Resolution dated 21 November 2008 of the Regional Trial Court (RTC) of Makati City be declared
void and the case be remanded to the RTC for further proceedings. In the assailed Resolution,
the RTC dismissed petitioners Petition for Confirmation, Recognition, and Enforcement of Foreign
Arbitral Award against respondent Philippine Kingford, Inc. (Kingford), a corporation duly
organized and existing under the laws of the Philippines, on the ground that petitioner lacked
legal capacity to sue.
The Antecedents
On 14 January 2003, Kanemitsu Yamaoka (hereinafter referred to as the licensor), co-
patentee of U.S. Patent No. 5,484,619, Philippine Letters Patent No. 31138, and Indonesian
Patent No. ID0003911 (collectively referred to as the Yamaoka Patent), and five (5) Philippine
tuna processors, namely, Angel Seafood Corporation, East Asia Fish Co., Inc., Mommy Gina Tuna
Resources, Santa Cruz Seafoods, Inc., and respondent Kingford (collectively referred to as the
sponsors/licensees) entered into a Memorandum of Agreement (MOA), pertinent provisions of
which read:
1. Background and objectives. The Licensor, co-owner of U.S. Patent No. 5,484,619, Philippine
Patent No. 31138, and Indonesian Patent No. ID0003911 xxx wishes to form an alliance with
Sponsors for purposes of enforcing his three aforementioned patents, granting licenses under
those patents, and collecting royalties.
The Sponsors wish to be licensed under the aforementioned patents in order to practice
the processes claimed in those patents in the United States, the Philippines, and Indonesia,
enforce those patents and collect royalties in conjunction with Licensor.
xxx
4. Establishment of Tuna Processors, Inc. The parties hereto agree to the establishment of Tuna
Processors, Inc. (TPI), a corporation established in the State of California, in order to implement
the objectives of this Agreement.
5. Bank account. TPI shall open and maintain bank accounts in the United States, which will be
used exclusively to deposit funds that it will collect and to disburse cash it will be obligated to
spend in connection with the implementation of this Agreement.
6. Ownership of TPI. TPI shall be owned by the Sponsors and Licensor. Licensor shall be assigned
one share of TPI for the purpose of being elected as member of the board of directors. The
remaining shares of TPI shall be held by the Sponsors according to their respective equity shares.
xxx
The parties likewise executed a Supplemental Memorandum of Agreement dated 15
January 2003 and an Agreement to Amend Memorandum of Agreement dated 14 July 2003.
Due to a series of events not mentioned in the petition, the licensees, including
respondent Kingford, withdrew from petitioner TPI and correspondingly reneged on their
obligations. Petitioner submitted the dispute for arbitration before the International Centre for
Dispute Resolution in the State of California, United States and won the case against respondent.
Pertinent portions of the award read:
13.1 Within thirty (30) days from the date of transmittal of this Award to the Parties,
pursuant to the terms of this award, the total sum to be paid by RESPONDENT KINGFORD to
CLAIMANT TPI, is the sum of ONE MILLION SEVEN HUNDRED FIFTY THOUSAND EIGHT HUNDRED
FORTY SIX DOLLARS AND TEN CENTS ($1,750,846.10).
(A) For breach of the MOA by not paying past due assessments, RESPONDENT KINGFORD shall
pay CLAIMANT the total sum of TWO HUNDRED TWENTY NINE THOUSAND THREE HUNDRED AND
FIFTY FIVE DOLLARS AND NINETY CENTS ($229,355.90) which is 20% of MOA assessments since
September 1, 2005;
(B) For breach of the MOA in failing to cooperate with CLAIMANT TPI in fulfilling the objectives
of the MOA, RESPONDENT KINGFORD shall pay CLAIMANT the total sum of TWO HUNDRED
SEVENTY ONE THOUSAND FOUR HUNDRED NINETY DOLLARS AND TWENTY CENTS ($271,490.20);
and
(C) For violation of THE LANHAM ACT and infringement of the YAMAOKA 619 PATENT,
RESPONDENT KINGFORD shall pay CLAIMANT the total sum of ONE MILLION TWO HUNDRED
FIFTY THOUSAND DOLLARS AND NO CENTS ($1,250,000.00).
To enforce the award, petitioner TPI filed on 10 October 2007 a Petition for Confirmation,
Recognition, and Enforcement of Foreign Arbitral Award before the RTC of Makati City. The
petition was raffled to Branch 150 presided by Judge Elmo M. Alameda.
At Branch 150, respondent Kingford filed a Motion to Dismiss. After the court denied the
motion for lack of merit, respondent sought for the inhibition of Judge Alameda and moved for
the reconsideration of the order denying the motion. Judge Alameda inhibited himself
notwithstanding the unfounded allegations and unsubstantiated assertions in the motion. Judge
Cedrick O. Ruiz of Branch 61, to which the case was re-raffled, in turn, granted respondents
Motion for Reconsideration and dismissed the petition on the ground that the petitioner lacked
legal capacity to sue in the Philippines.
Petitioner TPI now seeks to nullify, in this instant Petition for Review on Certiorari under
Rule 45, the order of the trial court dismissing its Petition for Confirmation, Recognition, and
Enforcement of Foreign Arbitral Award.

Issue
The core issue in this case is whether or not the court a quo was correct in so dismissing
the petition on the ground of petitioners lack of legal capacity to sue.
Our Ruling
The petition is impressed with merit.
The Corporation Code of the Philippines expressly provides:
Sec. 133. Doing business without a license. - No foreign corporation transacting business in the
Philippines without a license, or its successors or assigns, shall be permitted to maintain or
intervene in any action, suit or proceeding in any court or administrative agency of the
Philippines; but such corporation may be sued or proceeded against before Philippine courts or
administrative tribunals on any valid cause of action recognized under Philippine laws.
It is pursuant to the aforequoted provision that the court a quo dismissed the petition. Thus:
Herein plaintiff TPIs Petition, etc. acknowledges that it is a foreign corporation established
in the State of California and was given the exclusive right to license or sublicense the Yamaoka
Patent and was assigned the exclusive right to enforce the said patent and collect corresponding
royalties in the Philippines. TPI likewise admits that it does not have a license to do business in
the Philippines.
There is no doubt, therefore, in the mind of this Court that TPI has been doing business
in the Philippines, but sans a license to do so issued by the concerned government agency of the
Republic of the Philippines, when it collected royalties from five (5) Philippine tuna processors
namely, Angel Seafood Corporation, East Asia Fish Co., Inc., Mommy Gina Tuna Resources, Santa
Cruz Seafoods, Inc. and respondent Philippine Kingford, Inc. This being the real situation, TPI
cannot be permitted to maintain or intervene in any action, suit or proceedings in any court or
administrative agency of the Philippines. A priori, the Petition, etc. extant of the plaintiff TPI
should be dismissed for it does not have the legal personality to sue in the Philippines.
The petitioner counters, however, that it is entitled to seek for the recognition and
enforcement of the subject foreign arbitral award in accordance with Republic Act No. 9285
(Alternative Dispute Resolution Act of 2004), the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards drafted during the United Nations Conference on
International Commercial Arbitration in 1958 (New York Convention), and the UNCITRAL Model
Law on International Commercial Arbitration (Model Law), as none of these specifically requires
that the party seeking for the enforcement should have legal capacity to sue. It anchors its
argument on the following:
In the present case, enforcement has been effectively refused on a ground not found in
the [Alternative Dispute Resolution Act of 2004], New York Convention, or Model Law. It is for
this reason that TPI has brought this matter before this most Honorable Court, as it is imperative
to clarify whether the Philippines international obligations and State policy to strengthen
arbitration as a means of dispute resolution may be defeated by misplaced technical
considerations not found in the relevant laws.
Simply put, how do we reconcile the provisions of the Corporation Code of the Philippines
on one hand, and the Alternative Dispute Resolution Act of 2004, the New York Convention and
the Model Law on the other?
In several cases, this Court had the occasion to discuss the nature and applicability of the
Corporation Code of the Philippines, a general law, viz-a-viz other special laws. Thus, in Koruga v.
Arcenas, Jr., this Court rejected the application of the Corporation Code and applied the New
Central Bank Act. It ratiocinated:
 Korugas invocation of the provisions of the Corporation Code is misplaced. In an earlier
case with similar antecedents, we ruled that:
The Corporation Code, however, is a general law applying to all types of corporations,
while the New Central Bank Act regulates specifically banks and other financial institutions,
including the dissolution and liquidation thereof. As between a general and special law, the latter
shall prevail generalia specialibus non derogant.
Further, in the recent case of Hacienda Luisita, Incorporated v. Presidential Agrarian
Reform Council, this Court held:
Without doubt, the Corporation Code is the general law providing for the formation,
organization and regulation of private corporations. On the other hand, RA 6657 is the special
law on agrarian reform. As between a general and special law, the latter shall prevail generalia
specialibus non derogant.
Following the same principle, the Alternative Dispute Resolution Act of 2004 shall apply
in this case as the Act, as its title - An Act to Institutionalize the Use of an Alternative Dispute
Resolution System in the Philippines and to Establish the Office for Alternative Dispute
Resolution, and for Other Purposes - would suggest, is a law especially enacted to actively
promote party autonomy in the resolution of disputes or the freedom of the party to make their
own arrangements to resolve their disputes. It specifically provides exclusive grounds available
to the party opposing an application for recognition and enforcement of the arbitral award.
In as much as the Alternative Dispute Resolution Act of 2004, a municipal law, applies in
the instant petition, we do not see the need to discuss compliance with international obligations
under the New York Convention and the Model Law. After all, both already form part of the law.
In particular, the Alternative Dispute Resolution Act of 2004 incorporated the New York
Convention in the Act by specifically providing:
SEC. 42. Application of the New York Convention. - The New York Convention shall govern the
recognition and enforcement of arbitral awards covered by the said Convention.
xxx
SEC. 45. Rejection of a Foreign Arbitral Award. - A party to a foreign arbitration proceeding may
oppose an application for recognition and enforcement of the arbitral award in accordance with
the procedural rules to be promulgated by the Supreme Court only on those grounds enumerated
under Article V of the New York Convention. Any other ground raised shall be disregarded by the
regional trial court.
It also expressly adopted the Model Law, to wit:
Sec. 19. Adoption of the Model Law on International Commercial Arbitration. International
commercial arbitration shall be 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 xxx.
Now, does a foreign corporation not licensed to do business in the Philippines have legal
capacity to sue under the provisions of the Alternative Dispute Resolution Act of 2004? We
answer in the affirmative.
Sec. 45 of 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, to wit:
Article V
1. Recognition and enforcement of the award may be refused, at the request of the party
against whom it is invoked, only if that party furnishes to the competent authority where the
recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II 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
(b) The party against whom the award is invoked was not given proper notice of the
appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to
present his case; or
(c) The award deals with a difference 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
(d) The composition of the arbitral authority 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 took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by
a competent authority of the country in which, or under the law of which, that award was
made.
2. Recognition and enforcement of an arbitral award may also be refused if the competent
authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the
law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that
country.
Clearly, not one of these exclusive grounds touched on the capacity to sue of the party
seeking the recognition and enforcement of the award.
Pertinent provisions of the Special Rules of Court on Alternative Dispute Resolution, which
was promulgated by the Supreme Court, likewise support this position.
Rule 13.1 of the Special Rules provides that any party to a foreign arbitration may petition the
court to recognize and enforce a foreign arbitral award. The contents of such petition are
enumerated in Rule 13.5. Capacity to sue is not included. Oppositely, in the Rule on local arbitral
awards or arbitrations in instances where the place of arbitration is in the Philippines, it is
specifically required that a petition to determine any question concerning the existence, validity
and enforceability of such arbitration agreement available to the parties before the
commencement of arbitration and/or a petition for judicial relief from the ruling of the arbitral
tribunal on a preliminary question upholding or declining its jurisdiction after arbitration has
already commenced should state the facts showing that the persons named as petitioner or
respondent have legal capacity to sue or be sued.
 Indeed, it is in the best interest of justice that in the enforcement of a foreign arbitral
award, we deny availment by the losing party of the rule that bars foreign corporations not
licensed to do business in the Philippines from maintaining a suit in our courts. 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. Although not on all
fours with the instant case, also worthy to consider is the wisdom of then Associate Justice Flerida
Ruth P. Romero in her Dissenting Opinion in Asset Privatization Trust v. Court of Appeals, to wit:
Xxx
Arbitration, as an alternative mode of settlement, is gaining adherents in legal and judicial
circles here and abroad. If its tested mechanism can simply be ignored by an aggrieved party, one
who, it must be stressed, voluntarily and actively participated in the arbitration proceedings from
the very beginning, it will destroy the very essence of mutuality inherent in consensual contracts.
Clearly, on the matter of capacity to sue, a foreign arbitral award should be respected not
because it is favored over domestic laws and procedures, but because Republic Act No. 9285 has
certainly erased any conflict of law question.
Finally, even assuming, only for the sake of argument, that the court a quo correctly
observed that the Model Law, not the New York Convention, governs the subject arbitral award,
petitioner may still seek recognition and enforcement of the award in Philippine court, since the
Model Law prescribes substantially identical exclusive grounds for refusing recognition or
enforcement.
Premises considered, petitioner TPI, although not licensed to do business in the
Philippines, may seek recognition and enforcement of the foreign arbitral award in accordance
with the provisions of the Alternative Dispute Resolution Act of 2004.
II
The remaining arguments of respondent Kingford are likewise unmeritorious.
First. There is no need to consider respondents contention that petitioner TPI improperly
raised a question of fact when it posited that its act of entering into a MOA should not be
considered doing business in the Philippines for the purpose of determining capacity to sue. We
reiterate that the foreign corporations capacity to sue in the Philippines is not material insofar as
the recognition and enforcement of a foreign arbitral award is concerned.
Second. Respondent cannot fault petitioner for not filing a motion for reconsideration of
the assailed Resolution dated 21 November 2008 dismissing the case. We have, time and again,
ruled that the prior filing of a motion for reconsideration is not required in certiorari under Rule
45.
Third. While we agree that petitioner failed to observe the principle of hierarchy of
courts, which, under ordinary circumstances, warrants the outright dismissal of the case, we
opt to relax the rules following the pronouncement in Chua v. Ang, to wit:
It must be remembered that the principle of hierarchy of courts generally applies to cases
involving conflicting factual allegations. Cases which depend on disputed facts for decision
cannot be brought immediately before us as we are not triers of facts. A strict application of this
rule may be excused when the reason behind the rule is not present in a case, as in the present
case, where the issues are not factual but purely legal. In these types of questions, this Court has
the ultimate say so that we merely abbreviate the review process if we, because of the unique
circumstances of a case, choose to hear and decide the legal issues outright.
Moreover, the novelty and the paramount importance of the issue herein raised should
be seriously considered. Surely, there is a need to take cognizance of the case not only to guide
the bench and the bar, but if only to strengthen arbitration as a means of dispute resolution, and
uphold the policy of the State embodied in the Alternative Dispute Resolution Act of 2004, to wit:
Sec. 2. Declaration of Policy. - It is hereby declared the policy of the State to actively promote
party autonomy in the resolution of disputes or the freedom of the party to make their own
arrangements to resolve their disputes. Towards this end, the State shall encourage and actively
promote the use of Alternative Dispute Resolution (ADR) as an important means to achieve
speedy and impartial justice and declog court dockets.
Fourth. As regards the issue on the validity and enforceability of the foreign arbitral
award, we leave its determination to the court a quo where its recognition and enforcement is
being sought.
Fifth. Respondent claims that petitioner failed to furnish the court of origin a copy of the
motion for time to file petition for review on certiorari before the petition was filed with this
Court. We, however, find petitioners reply in order. Thus:
26. Admittedly, reference to Branch 67 in petitioner TPIs Motion for Time to File a Petition for
Review on Certiorari under Rule 45 is a typographical error. As correctly pointed out by
respondent Kingford, the order sought to be assailed originated from Regional Trial Court, Makati
City, Branch 61.
27. Upon confirmation with the Regional Trial Court, Makati City, Branch 61, a copy of petitioner
TPIs motion was received by the Metropolitan Trial Court, Makati City, Branch 67. On 8 January
2009, the motion was forwarded to the Regional Trial Court, Makati City, Branch 61.
All considered, petitioner TPI, although a foreign corporation not licensed to do business
in the Philippines, is not, for that reason alone, precluded from filing the Petition for
Confirmation, Recognition, and Enforcement of Foreign Arbitral Award before a Philippine court.
WHEREFORE, the Resolution dated 21 November 2008 of the Regional Trial Court, Branch
61, Makati City in Special Proceedings No. M-6533 is hereby REVERSED and SET ASIDE. The case
is REMANDED to Branch 61 for further proceedings.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice