PHILIPPINES

Guide to Arbitration Rules and Procedures in the Philippines

Our Country Chapters set out key aspects of the arbitration framework of each jurisdiction highlighted in our website, covering basics like judicial hierarchy and domestic arbitral institutions to substantive issues such as conflicts of laws and the extent of adoption of the UNCITRAL Model Law.

1. Legal System and Framework

The Philippine legal system represents a mix of the civil law and common law systems. The primary sources of Philippine law are the 1987 Philippine Constitution and statutes enacted by Congress. That said, decisions of the Philippine Supreme Court applying or interpreting the laws or the Constitution also form part of the legal system of the Philippines.

Local government units also have the authority to enact ordinances which are effective within their respective territories. Regulatory or administrative agencies may also issue rules and regulations that have the force and effect of law. The Constitution likewise vests in the Supreme Court the authority to promulgate rules governing pleadings and court practice and procedure.

The Philippine Judiciary mainly consists of the Supreme Court, the Court of Appeals, and the trial courts (particularly the Regional Trial Courts (“RTCs“) and the Municipal Trial Courts). Other specialised courts have been created by law for the resolution of specific disputes (such as the Court of Tax Appeals for tax disputes).

Actions for the recognition and enforcement of international and foreign arbitral awards fall within the original jurisdiction of RTCs. Decisions of RTCs on these matters may be appealed to the Court of Appeals, and thereafter, to the Supreme Court. An appeal to the Court of Appeals will generally not stay the RTC’s decision or ruling. Moreover, a review by the Supreme Court is not a matter of right but of sound judicial discretion, and will be granted only for serious and compelling reasons.

The main sources of law on international arbitration in the Philippines are (a) Republic Act No. 9285, or the Alternative Dispute Resolution Act of 2004 (“ADR Act“); (b) the ADR Act’s implementing rules and regulations issued by the Philippine Department of Justice (“ADR Act IRR“); and (c) A.M. No. 07-11-08-SC, or the Special Rules of Court on Alternative Dispute Resolution issued by the Supreme Court (“ADR Rules“).

Section 19 of the ADR Act provides that international commercial arbitration shall be governed by the UNCITRAL Model Law. In Mabuhay Holdings Corp. v. Sembcorp Logistics Limited, G.R. No. 212734, 5 December 2018, the Supreme Court affirmed that the UNCITRAL Model Law has been incorporated in its entirety in the ADR Act.

Philippine laws distinguish between domestic, international, and foreign arbitration. Among others, Philippine laws provide different procedures for confirmation, recognition, and/or enforcement, and different grounds for opposing the confirmation, recognition, and/or enforcement of these awards, depending on whether these are domestic, international, or foreign arbitral awards.

Matters concerning domestic arbitration are governed by the Arbitration Law (Republic Act No. 876), as amended by the ADR Act. In turn, matters concerning international arbitration are governed by the ADR Act, the ADR Act IRR, and the ADR Rules. The ADR Act and the ADR Act IRR have adopted the definition of international arbitration in the UNCITRAL Model Law.  Accordingly, an international arbitration is one where:

  • The parties to an arbitration agreement, at the time of the conclusion of that agreement, have their places of business in different countries; or
  • One of the following places is situated outside the country in which the parties have their places of business: (i) the place of arbitration if determined in, or pursuant to, the arbitration agreement; or (ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject matter of the dispute is most closely connected; or
  • The parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.

Matters concerning foreign arbitration are also governed by the ADR Act and the ADR Rules. In particular, the ADR Rules define a foreign arbitral award (and implicitly, a foreign arbitration) as one that is made or conducted in a country other than the Philippines.

The Supreme Court has declared that the Philippines has adopted a policy in favour of arbitration. This is manifest in the ADR Rules’ adoption of the “competence-competence” principle, and its allowance of measures aimed at supporting the arbitration process. These measures include the provision of assistance by courts in taking evidence (e.g. under ADR Rule 9, these measures include courts directing persons to comply with a subpoena, appear before an officer for the taking of depositions, or allow the examination or photocopying of documents), and in the enforcement of interim measures of protection that may be issued by arbitral tribunals (ADR Rule 5.16).

That said, the ADR Rules contain provisions allowing parties to question the existence, validity, and enforceability of arbitration agreements prior to the commencement of arbitration (ADR Rule 3.2). Parties are also allowed to seek judicial relief from the ruling of an arbitral tribunal on a preliminary question upholding or declining its jurisdiction (ADR Rule 3.12).         

2. Arbitral Institutions

The Construction Industry Arbitration Commission (“CIAC“) is a specialised arbitral institution created by Executive Order No. 1008. CIAC exercises jurisdiction over construction disputes, or those which arise from, or are connected with, contracts entered into by parties involved in construction in the Philippines, where the parties agree that disputes between them shall be resolved through arbitration. 

Apart from CIAC, the other significant arbitral institutions in the Philippines are the Philippine Dispute Resolution Centre, and the Philippine International Centre for Conflict Resolution.

3. Confidentiality

Section 23 of the ADR Act provides that arbitral proceedings, including the records, evidence, and the arbitral award, are considered confidential and may not be published except (a) with the consent of the parties, or (b) for the limited purpose of disclosing relevant documents to the courts in cases where resort to the courts is allowed. Courts may also issue confidentiality or protective orders to prevent or prohibit the disclosure of documents or information containing secret processes, developments, research, and other information where it is shown that the applicant shall be materially prejudiced by the disclosure thereof.

4. The Law of the Arbitration and Conflicts of Law

The parties are free to agree on the system of laws applicable to the arbitral proceedings. Absent an agreement in this respect, the basic position under Philippine law is that the law of the place (or seat) of arbitration shall govern its procedural aspects. 

Philippine law recognises the freedom of contracting parties to establish such stipulations, clauses, terms and conditions as they may deem convenient, provided that these are not contrary to law, morals, good customs, public order or public policy (article 1306, Civil Code). This freedom includes the ability of parties to choose the law that shall apply to their contracts or in the resolution of contractual disputes, by inserting “choice-of-law” provisions in their agreements. Article 4.28 of the ADR Act IRR also provides that tribunals in international arbitrations shall decide disputes in accordance with the parties’ chosen law. In the absence of an agreement on the applicable law, the tribunal shall apply the law which it considers applicable, as determined by the conflict of laws rules.

Yes. As mentioned above in question 4.2, article 4.28 of the ADR Act IRR provides that tribunals in international arbitrations in the Philippines shall decide disputes in accordance with the parties’ chosen law. In the absence of an agreement on the applicable law, the tribunal shall apply the law determined by the conflict of laws rules, which it considers applicable.

The ADR Act does not provide for mandatory rules of substantive law that would apply to the parties’ rights and obligations solely by virtue of the fact that the arbitration is seated in the Philippines. 

In Saudi Arabian Airlines v. Court of Appeals, [1998] G.R. No. 122191, the Supreme Court applied the “State of the most significant relationship” rule in determining the law that applies to tort claims. The Supreme Court identified the following factors which may be considered in determining the State which has the most significant relationship to a tort case: (a) the place where the injury occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centred.

The Philippines recognises a distinction between the laws applicable to international arbitral proceedings, which are set out in the ADR Act, the ADR Act IRR, and the ADR Rules, and the law applicable to the arbitration agreement (or the substance of the dispute), which may be stipulated by the parties.

Provisions of Philippine law on limitation periods have been characterised by the Supreme Court as forming part of substantive law. Article 1139 of the Philippine Civil Code also provides that actions prescribed by the mere lapse of time is fixed by law. Thus, if the parties select Philippine law as the law applicable to the contract or dispute, then Philippine laws on limitation periods may apply. 

5. Arbitration Agreements

Article 4.7 of the ADR Act IRR requires that arbitration agreements be in writing. This requirement is satisfied if the agreement is contained:

  1. in a document signed by the parties; or
  2. in an exchange of letters, telex, telegrams, or other means of communication which provide a record of the agreement; or
  3. in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.

Electronic arbitration agreements may be recognised in the Philippines. Republic Act No. 8792, or the Electronic Commerce Act, provides that electronic documents shall have the same legal effect and validity as any other document or legal writing as long as the integrity and reliability of the document can be authenticated so as to be useable for subsequent reference.

Article 4.7 of the ADR Act IRR provides that a reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement, provided that the contract referred to is in writing and the reference is such as to make the arbitration clause a part of the referring document.

Any dispute that may be compromised may be the subject of an arbitration agreement. The following disputes or matters, however, have been expressly excluded from the scope or coverage of the ADR Act, and may thus not be the subject of an arbitration agreement: (a) labour disputes; (b) the civil status of persons; (c) the validity of a marriage; (d) any ground for legal separation; (e) the jurisdiction of courts; (f) future legitime; and (g) criminal liability (section 6, ADR Act). 

Philippine law recognises the separability of arbitration agreements. In Koppel, Inc. v. Makati Rotary Club Foundation, Inc., [2013] G.R. No. 198075, the Supreme Court ruled that an arbitration agreement is independent of the main contract, and may be invoked regardless of the possible nullity or invalidity of the main contract. The Supreme Court also affirmed its earlier pronouncement that even the party who repudiates the main contract may still invoke the arbitration clause in that agreement. 

Please contact the editorial team of Arbitration Asia at arbitrationasia@rajahtannasia.com.