RA 876j

7/28/2019 RA 876j

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RA 876. Arbitration

Law1 . W h a t i s a r b i t r a

t i o n ?

Arbitration has been defined under the ADR Act as

a voluntary dispute resolution process in which one

or more arbitrators appointed inaccordance with the

agreement of the parties resolve a dispute byrenderingan award. It is a non-adversarial

settlement wherein the parties are freeto choose

the arbitrators that will compose the tribunal, the

procedureto be followed in the proceedings, the

venue of arbitration, and

the substantive law that will govern theproceedings.

2 . B e n e f i t s o f A r b i t r a

t i o n :

a.

Fast, quick and easy :

The number-one benefit of arbitration is that it

serves as a forum toresolve disputes outside of the

judicial system. Arbitration can be fast, quick and

easy,whereas lawsuits can drag on for years and

years. Since the rules of evidence and procedureare

usually relaxed in arbitration proceedings, the

parties are also in a better position torepresent

themselves without having to get lawyers involved.

b.

Less expensive:

It naturally follows that arbitration also tends to be

less expensive thanpursuing a lawsuit. While the

parties will usually end up having to pay the

arbitrator, his or her fees will inevitably be less than

the attorneys' fees that they may have to pay to takethesame case to trial.

c.

Gives parties gliimpse of where things are headed:

Even in non-binding arbitration, abenefit can be that

it serves to bridge the gap in an adversarial

proceeding so that the partiescan get a better

glimpse of where things are headed if they are

unable to resolve their differences. Most cases

settle, but many times it is not until the parties are

"on the courthousesteps." Non-binding arbitration

may help to facilitate a settlement sooner rather

than later.

d.

Not bound by strict rules of procedure:

Another good thing about arbitration is that

anarbitrator is typically not bound by the strict rules

of procedure in reaching a decision. He or she can

consider a lot more facts and circumstances than

a judge or jury. Arbitrators typicallytry to be practical

and oftentimes look at compromise as being

inherently fair. Thus, thelikelihood is that an

arbitrator's decision will award something to at least

one of the parties.However, you would not expect

that damages would be awarded that were

anywhere near what a jury might have awarded if

(and that is a big if) the matter were to have been

triedbefore a jury.

e.Brings finality:

Arbitration can also bring finality. Sometimes for the

better, a decision on abinding arbitration cannot be

appealed or overturned in the absence of a showing

of extraordinary circumstances (for example, fraud,

bias or other inappropriate actions on thepart of the

arbitrator). Thus, once a decision is rendered, the

case is over. The losing partywill typically not be able

to appeal (which can make the matter drag on

for years and years).

f.

Privacy and confidentiality:

Unlike in court litigation, greater confidentiality can

be enjoyedby the parties.

3 . P o l i c y t o p r o m o t e a r b i t r a t i o n :

The constitution provides in Article VIII section 5 par

5 which mandates the Supreme Court to

promulgaterules that shall provide a simplified and

inexpensive procedure for the speedy disposition of

cases.Arbitration proceedings are designed to level

the playing field among the parties in pursuit of

mutuallyacceptable solution to their conflicting

claims, and any arrangements or scheme that would

give undueadvantage to a party in negotiating table

is anathema to the very purpose of arbitration andshould beresisted.

4 . K i n d s o f a r b i t r a t i o n

There are two types of Arbitration:1. Voluntary

Arbitration2. Compulsory ArbitrationVoluntary

Arbitration is a binding, adversarial dispute

resolution process in which the disputing

partieschoose one or more arbitrators to hear their

dispute and to render a final decision or award after

anexpedited hearingVoluntary arbitration implies

that the two contending parties, unable

to compromise their differences bythemselves or

with the help of mediator or conciliator, agree

to submit the conflict/ dispute to

an impartialauthority, whose decisions they are

ready to accept. In other words, under voluntary

arbitration the partiesto the dispute can and do

they refer voluntarily and dispute to arbitration

before it is referred for adjudication. This type of

reference is known as “voluntary reference”, for

the parties themselvesvolunteer to come to a

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settlement though an arbitration machinery.The

essential elements in voluntary arbitration are :§ The

voluntary submission of dispute to an arbitrator.§

The subsequent attendance of witnesses and

investigations.§ The enforcement of an award may

not be necessary and binding because there is no

compulsion.§ Voluntary arbitration may be speciallyneeded for disputes arising

under agreements.Compulsory Arbitration is a non-

binding, adversarial dispute resolution process

in which one or morearbitrators hear arguments,

weigh evidence and issue a non-binding judgment on

the merits after anexpedited hearing. The

arbitrator's decision addresses only the disputed

legal issues and applies legalstandards. Either party

may reject the ruling and request a trial de novo in

court.Compulsory arbitration is one where

the parties are required to accept arbitration

without any willingnesson their part. When one of

the parties to an industrial dispute feels aggrieved by

an act of the other, it mayapply to the appropriate

government to refer the dispute to adjudication

machinery. Such reference of adispute is known

as “compulsory” or “involuntary” reference, because

reference in such circumstancesdoes not depend on

the sweet will of either the contending parties or any

party to the dispute. It is entirelythe discretion of the

appropriate govt. based on the question of existing

dispute, or on the apprehensionthat industrial

dispute will emerge in particular

establishment.Under compulsory arbitration, the

parties are forced to arbitration by the state when:§The parties fail to arrive at a settlement by a

voluntary method§ When there is a national

emergency which requires that the wheels of

production should not beobstructed by frequent

work-stoppages§ The country is passing through a

grave economic crisis§ There is a grave public

dissatisfaction with the existing industrial relations§

Public interest and the working conditions have to

be safeguarded and regulated by the state.Modes of

arbitration:1. For ad hoc arb itr ati on,

Philippine law grants the parties the right to

select anarbitrator or arbitrators and to choose

procedures to govern the proceedings, including

rulesof arbitration institutions. So long as the main

requirement for arbitration, namely consent,is

present, the State allows the parties to conduct

the arbitration in any manner theystipulate,

provided that the arbitration process is not "contrary

to law, morals, goodcustoms, public order or

public policy."2.In stitu tiona lized arbit ratio n is

conducted through organized bodies such as

co ur ts of arbitration, trade associations, and

arbitration centers and institutes, each prescribing

its own

different arbitration procedure. Foremost among

these institutions in the Philippines is thePhilippine

Dispute Resolution Center Inc. ("PDRCI").These

institutions do not actually participate in settling thedispute but help administer the arbitration

andprovide a set of rules to govern the proceedings.

For international arbitration, the popular

institutionalrulesreferred to are those of the

International Chamber of Commerce ("ICC"),

the HongkongInternational Arbitration Centre

("HKIAC") and the Singapore International

ArbitrationCentre ("SIAC").3.Specialized

arbitration involves particular industries

or kin ds of dis put es. For example, banking

disputes on check clearing are resolved by a

specialized systemadministered under the auspices

of the Bankers' Association of the Philippines. In

theconstruction industry, the Construction

Industry Arbitration Commission (“CIAC”)

wascreated in 1985 by Executive Order No. 1008

("E.O. No. 1008")in recognition of theneed for

technical expertise to resolve various factual

questions in construction disputes.Subject to the

agreement of the parties to submit the dispute to

voluntary arbitration, theCIAC was given original and

exclusive jurisdiction over all construction disputes.

Indeed, socomprehensive is the jurisdiction of

the CIAC over construction controversies, that it

hasbeen decreed that “as long as the parties agreeto submit to voluntary arbitration, regardlessof what

forum they may choose, their agreement will fall

within the jurisdiction of theCIAC, such that, even if

they specifically choose another forum, the parties

will not beprecluded from electing to submit their

dispute before the CIAC because this right has

beenvested upon each party by law.” (This ruling

could be reconsidered in the light of the NewYork

Convention to enforce the international

arbitration agreements between parties of different

nationalities made within a contracting state.) As

such, the CIAC has become oneof the premier

specialized arbitration institutions in the Philippines.

F

5.

Form of Arbitration Agreement

Requisites: Section 4 RA 876a ) I t s h a l l b e i n

w r i t i n g b)Subscr ibed by the party sought to

be charged or by his lawful agent

6 . W h o m a y b e p a r t i e s

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a.Two or more persons or parties to any

controversy existing between them at the

ti me of submission which may be the subject of an

actionb.Parties to a contract with an

agreement in such contract to settle by

arbitration any controversythereafter arising

between them.Exceptions:a. O n e o f t h ep a r t i e s t o t h e con t r o ve r sy i s : a .1 infanta.2

person judicially declared to be

incompetentException to exception:a.Submission

to controversy was made by a general

guardian or gaurdian adlitem of the infant

or incompetent and court approved such petition

for permission to submit to arbitration

7 . W h a t m a t t e r s a r e s u b j e c t o f

a r b i t r a t i o n

a.Controversy arising from contract with

arbitration clauseb.Any controversy between

two or more persons which may be the

subject of an action

c.Includes valuation, appraisals or other

controveries which may be collateral,

incidental,precedent, subsequent to any issue

between the parties.Exceptions:a.Cases subject

to jurisdiction of CIR (Court of Industrial

Relations)

8.

Institution of Arbitration of a dispute how made:

a.In case of a contract to arbitrate future

controversies – by the service of the other

party uponthe other of a demand for arbitration in

accordance with the contract( in person orbyregisteredd mail).Contents of demand:-

N a t u r e o f c o n t r o v e r s y -

A m o u n t i n v o l v e d -

R e l i e f s o u g h t - T r u e c o p y o f

t h e c o n t r a c t p r o v i d i n g f o r a r b i t r a t i o n In

case the contract between the parties provides for

appointment of a single arbitrator – demand shall

setforth a specific time within which the parties shall

agree upon such arbitrator In case the contract

between the parties provides for the appointment of

three arbitrators, one to beselected by each party –

demand shall name the arbitrator appointed by the

party making the demandaand shall require that the

party upon whom the demand is made shall within

fifteen days after the receiptthereof advise in writing

the party making such demand of the name of the

person appointed by thesecond party. Two

arbitrators shall appoint the third within 10 days

form such date or notice.b.I n cas e of an exi stin g

controversy to be submitted to arbitration –

by fil ing wit h t he cle rk of court of CFI having

jurisdiction of the submission agreement –setting

forth nature of cont,amount involved. – may be filed

by any party

9 . P r o c e d u r e i n a d m i n i s t e r e d

a r b i t r a t i o n

If in the contract for arbitration or in the submission

to arbitration, a provision is made for a methodof naming or appointing an arbitrator or arbitrators

– such method shall be followed. Otherwise, the CFI

shalldesignate an arbitrator or arbitrators.The CFI

shall appoint an arbitrator or arbitrators in the

following instances:a)If the parties are unable

to agree upon a single arbitrator b)If an

arbitrator appointed by the parties is

unwilling or unable to serve, and his

successor has notbeen appointed in the manner

in which he was appointedc) If eit he r pa rt y to

the contract fails or refuses to name his

arbitrator within 15 days after receipt of the

demand for arbitrationd)If the arbitrators

appointed by each party to the contract or

appointed by one party to the contractand by

the proper Court, shall fail to agree upon or to select

the third arbitrator e)W her e the agr eem ent is

silent as to number of arbitrators in the

preceeding cases, the court shallappoint the

third arbitrator f)A rbi tra tor s app ont ed ude r

this section shall either accept or decline

their appointments withinseven days of the

receipts of their appointements. In case of

declination or the failure of anarbitrators to

duly accept their appointment the parties or courtshall appoint their substitute.

10.Special proceeding to compel arbitration

In the event that one party defaults in answering the

demand – aggrieved party may file with the clerk

of court of CFI having jurisdiction over the parties a

copy of the demand for arbitration under the

contract toarbitrate with a notice that the original

demand was sent by registered mail or delivered in

person to theparty against whom the claim is

asserted.Demand shall set forth:-

N a t u r e o f c o n t r o v e r s y -

A m o u n t i n v o l v e d -

R e l i e d s o u g h t

A t t a c h t r u e c o p y o f t h e c o n t r a c t

p r o v i d i n g f o r a r b i t r a t i o n

11.Remedy for failure or refusal to arbitrate

In the event that one party neglects, fails or refuses

to arbitrate under a submission agreement –

theaggrieved party shall serve the other by a

demand for arbitration and in case of default file a

copy with theclerk of court

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12.

When court may be involved

Sec 6: Failure, neglect or refusal of another to

perform under an agreement un writing providing

for arbitration gives a right to the aggrieved party to

petition the court for an order directing that

sucharbitration may proceed in the manner set forthin the agreement.-5 days notice of the hearing of

such application shall be served to the party in

default.-Court shall hear the parties-Court shall

order the parties to proceed to arbitration upon

being satisfied that the making of theagreement is

not an issue- if the making of the agreement is in

issue, court shall summarily hear such issue- if the

finding is that there is no written arbitration

agreement – court shall dismiss the proceeding-

court has 10 days to resolve motions, petitions heard

by it.

13.Enforcement of arbitration agreement

Sec 4 par 2 of RA 876 provides that the making of

the contract or submission for arbitration of any

controversy shall be deemed a consent of the parties

to the jurisdiction of the Court of First Instanceof the

province or City where any of the parties resides, to

enforce such contract orsubmission

14.Existence of arbitration agreement

In case of a suit arising out of an agreement with

arbitration clause, the court in which the suit is

pending,upon being satisfied that the suit is

referable to arbitration shall stay the action or

proceeding until anarbitration has been had.

Provided: the applicant for stay is not in default inarbitration proceeding.Toyota Motor Philippines

Corp. r. Court of Appeals, G.R. No. 102881, Dec. 7,

1992, 216 SCRA236.Teresita V. Idolor v. Court of

Appeals, et al., G.R. No. 141853, February

7, 20026China Chiang Jiang Energy Corp. v. Court of

Appeals, et al., G.R. No. 125706, Sept. 30,

1996;National Irrigation Administration v. Court

of Appeals, CIAC, et al., G.R. No. 129169, Nov.

17, 1999, 318SCRA255, 268

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RA 876j