The Law on Alternative Dispute Resolution: Private Justice in the Philippines

(Book Summary and Cases)

by: Marian Jane Alumbro

University of Cebu College of Law

Based on the book of Jim Lopez

Caveat: This is merely a summary of the book. You should read the book at least once. This reviewer does not contain some essential definitions because such are already defined in the

law, RA 9285. No copyright infringement is intended.

CHAPTER 1

The Law’s delay: An introduction

History of ADR

Pre-hispanic era-Jose Rizal noted the custom of the inhabitants of the Philippines before the Spaniards reached its shores. They submitted the decision of their elders, which they respected and carried out. According to Jose Rizal, it was better that the “..Judges were persons of the locality, forming a jury, elected by both parties who knew the case, the customs and usages better than the gowned judge from the outside to make his fortune, to judge the case he does not know and who does not know the usage customs and language of the locality”. It is easy to surmise that our ancestors practiced ADR.

Hispanic Era-Discontented parties had to resort to going to the SC of spain which was a 36-day trip. Procedure for civil action, akthough similar to the criminal cases, was definitely more costly and drawn-out. The high cost and unwarranted delays ensured that only the Europeans and the rich merchants in the city and the wealthy landowners in the rural areas could afford the prosecution of the civil suit.

Our primitive ancestors were ahead of their times!

Problems of judicial delay according to Marcos (1967):

1) The misuse of the due process and the abuse of legal technicalities;

2) The intervention of the political pressure in the court cases;

3) Sheer weight of the court litigations arising from development and growth;

4) Dilatory tactics of lawyers;

5) Neglect and laxity on the part of the judges.

The “Law’s delay” according to Florentino P. Feliciano:

1) An efficient and mismanaged court system that fails to act promptly on legal issues ;

2) The disorganized state of the court-connected agencies;

3) The lack of preparation on the part of the litigants and lawyers;

4) The trigger-happy mind frame of lawyers to engage in long-winded examinations of witnesses; and

5) The lawyers propensity to elevate their cases to the appellate courts and needlessly filing petitions for mandamus, prohibition and certiorari for the purpose of reviewing the interlocutory orders of the lower courts.

But a more serious factor behind the “law’s delay” in the Philippines involves the billing practice of lawyers. (Billable hours, number of court appearances) Delaying tactics to consume time.

The choice between a litigation and settlement is clear. He would rather cut through the chase and solve his disputes swiftly and move on with his life.

AGAN v. PIATCO (GR> NO. 15501)-SC ordered all affected parties to comment made by one of the parties that PIATCO commences arbitration proceedings by filing a request for arbitration with the secretariat of the Internation chamber of commerce, International Court of arbitration.

Private Justice-the concept is fairly recent development in the administration of justice.

-Private “Courts” are managed by private organizations, called ADR providers to serve those who need to resolve most types of consumer, civil, corporate and commercial disputes.

-Parties generally agree to enter the private court system for one main reason: the public court system is too chaotic and unwieldly.

-“vigilante justice”

-Judges, selected by the parties and are paid on an hourly or a per session basis, are for rent not for sale. They are paid for their time and their expertise, not their expected favors.

CON: Creates a dual court system-one rich and one poor. No means a perfect system, it offers enormous savings in time, effort, anxiety, money in the long haul.

CHAPTER 2

The litigation of conflict: A Confucian Confusion

Two fundamental reasons for failure of trial courts according to Ralph Warner and Stephen Elias:

1) Court Rules and Procedures are so complicated and inefficient that lawyer fees and other costs end up being a bigger problem than the dispute itself.

2) Winner take-all sustem defies logic, encourages lying and generally brings out the worst in all participants.

The Nature of Conflict

Conflict- clash of divergence of opinions, values and interests and emotions.

Several phases of the conflict process by Peter Condiffe (1995)

1) Conflict starts when parties perceive their differences-they go though feelings of anziety and frustration.

2) Realization or expression of grievances and the assessment of all angles in the conflict.

-some parties get afflicted with AVOIDANCE SYNDROME (disregarding the existence of the problem because of relative powerlessness high risks and costs involved)

3) Parties choose their conflict resolution methods and select their strategies to settle their disagreements.

4) Evaluation of outcomes and the analysis of all ramifications of full implementation of the chosen methods of conflict management.

ADR aims to solve the conflict not win the lawsuit which is the aim of litigation.

Conflict is a contest and a problem to solve (Bill Withers)

Modes of Resolving Conflict (Blake and Moulton)

1) Withdrawal-Avoidance behavior on one or both parties

2) Smoothing-emphasis of common interest and yielding by one or both parties.

3) Compromising-each side obtains a part of what it wants.

4) Forcing-forcing the other to acquiesce.

5) Problem solving-involves an agreement in which both sides meet their objective and affective needs.

When a person wins through a lawsuit can compare it as a Pyrrhic victory (pronounced /ˈpɪrɪk/) which is a victory with devastating cost to the victor; it carries the implication that another such will ultimately cause defeat.

Importance of Litigation (Peter Lovenheim)

1) When you need to establish a legal precedent, such as the validity of the patent which your company holds;

2) When you need to publicy prove the truth, such as when a customer’s complaint about the product quality or safety has received wide attention in the media product’s good name;

3) When your company’s legal rights have been infringed and you stand a good chance of collecting substantial damages in court;

4) When your opponent is unable and unwilling to participate in ADR; and

5) When serious crimes are involved in the dispute.

CHAPTER 3

The Grand Misnomer: “Alternative” Dispute Resolution”

Legal Basis of ADR:

ART. VIII, Sec. 5 (5) 1987 Consitution

-Mandating the SC to promulgate rules that shall “provide a simplified and inexpensive procedure for the speedy disposition of cases.

Rule 18, Sec 2(a) 1997 Rules of Civil Procedure

-Requiring the courts to “consider the possibility of an amicable settle or of a submission to alternative modes of resolution.”

“Alternative” comes from the word “alternate” which means substitute, spare tire, a second stringer, a fallback position.

Which is wrong because litigation should be the LAST option not ADR.

Limitations of ADR

Cases that involve:

1) Constitutional law issues

2) Anti-trust suits

3) Probate

4) Adoption

5) Precedent-setting cases that involve punitive damages

6) Actions of equitable relief, and

7) nuisance

are beyond the scope of arbitration.

ART. 2035 of the Civil Code

If related issues of the following are matters in controversy may not be capable of being referred to arbitration:

1) Civil Status of persons;

2) Validity of Marriage;

3) And legal separation;

4) Futures support;

5) Future legitime;

6) Jurisdiction of the courts;

7) Future jurisdiction of the courts.

CHAPTER IV

The Settlement of dispute in the Philippines:

A culture of PAKIKISAMA

Many Filipinos readily overcome conflict through pragmatic means.

Gini Graham’s techniques in Resolving Conflict:

1) Identify the source of the problem

2) Applying the appropriate problem solving techniques:

a. Creative visualization-examine the reasons for the problem

b. Brain-storming-come up with alternatives

c. Automatic writing-ask inner self for reactions of those possibilities

d. Mental Imaging-ask inner expert for advice in making choices.

Litigation is what many Filipino Lawyers do best. Students of law are trained to think like lawyers, but they are not prepared to deal with they should do best: solve their client problems and resolve their disputes with the least amount of time and expense. The key to decongest the courts is that students should be trained to be sensitive to their client’s wishes to settle their conflict or dispute swiftly and without expense to court trials.

Filipino Conflict Management System

Filipino Values

1) Pakikiusap-request and

2) Pakikisama-Companionship

Keep communication lines open.

1) Amor Proprio (self-respect)

2) Pasikaban (one-upmanship)

3) Bahala na (fatalism)

4) Gantihan (retaliation)

Impede settlement and plays key roles in clogging the courts with frivolous suits that are brought just to “Save face” or to give a “lesson to the opposing party.

But, positive aspects of Filipino culture that may tend to mitigate the Filipino propensity to litigate disputes:

1) Kamag-anak network (close family ties)

2) Tulungan (mutual aid)

3) Bigayan (give and take)

4) Palabra de Honor (Word of Honor)

5) Bayanihan (cooperative endeavor)

6) Hiya (shame of doing something wrong)

7) Utang na loob (recognition of a debt or obligation)

8) Paggalang (respect or honor)

9) Kompadre (godfather system)

10) Delikadesa (“Being proper”)

The Katarungan Pambarangay was seen by legislators as a means to decongest the courts’ dockets, by encouraging the settlement of minor cases at the barangay level, which will in turn allow the courts to speed up the adjudication of already pending cases. This again relates to the access-to-justice problem in the country.

To ensure that the goal is met, the Local Government Code makes KP mediation and conciliation a condition precedent to

the filing of cases in court. 7 Though non-compliance does not result in jurisdictional defect thereby rendering the court proceedings void ab initio, such failure, if seasonably raised, makes the case vulnerable to a motion to dismiss on the ground of prematurity (Garces v. CA, 162 SCRA 504). (TAKEN FROM AN ONLINE PRIMER OF THE KATARUNGAN PAMBARANGAY Published by the UP-College of Law)

Types of Arbitration in the Philippines:

1) Labor Arbitration

The Labor Code of the Philippines makes arbitration mandatory in cases involving the interpretation and implementation of collective bargaining agreements (CBA) and the interpretation or enforcement of company personnel policies. The original and exclusive jurisdiction of which falls with the Voluntary Arbitrators. (Sanyo v. Canizares)

2) Construction Arbitration

The creation of the Construction Industry Arbitration Commission (CIAC) ushered the birth of arbitration in the construction industry.(EO. 1008)

Private or Government-entered construction contracts can be submitted.

Tesco v. Vera-While it is true that the CIAC shall have original and exclusive jurisdiction over disputes connected with contracts entered into by parties involved in the construction industry in the Philippines,

the parties must first agree to do so before the CIAC can acquire jurisdiction to arbitrate the matter.

3) Consumer Arbitration

Consumer Act of the Philippines (RA no. 7394) provides for the creation of a consumer arbitration program to handle consumer complaints. They have original and exclusive jurisdiction to mediate, conciliate hear and adjudicate all consumer complaints xxx.

4) Matrimonial Mediation

Disputes between couples that are civil in nature may be the subject of court-referred mediation, subject to the limitations of Art. 2035 of the Civil Code.

The ff. disputes may not be compromised:

a) civil status of persons

b) validity of marriage or legal separation

c) any ground for legal separation

d) future support

e) future legitime

f) jurisdiction of the courts.

5) Corporate Arbitration

Corporation Code provides for the mechanism to resolve corporate disputes. The SEC can exercise its power to arbitrate the dispute upon written petition by any stockholder. (read more about powers of the SEC)

6) Partnership Arbitration

The CC states that is beyond the authority of one or more but less than all the partners to enter into a compromise or submit to arbitration a partnership claim or liability. When it comes to ADR, unanimous consent of partners is needed to carry out the plant to resolve partnership disputes without a court trial.

7) Administrative Arbitration

Doctrine of Non-exhaustion of administrative remedies

8) Environmental Mediation

9) Executive Arbitration

10) Foreign Arbitration

11) Banking Arbitration

12) Mining Arbitration

13) Maritime Arbitration

14) Insurance Arbitration

15) IP Arbitration

16) Securities Arbitration

Six-Step Structure of a face-to-face mediation meeting

(I-H-I-M-I-S)

1) Introduction and agreeing of ground rules

2) Hearing what has happened or summarizing the facts

3) Identifying the issues

4) Mutual understanding and communicating feelings

5) Ideal storming of a win/win solution

6) Signing of voluntary agreement.

Causes of Court Delays (Justice Myrna Dimaranan Vidal)

1) the misuse of the due process and the abuse of

legal technicalities;

2) the intervention of political pressure

in court cases;

3) the sheer weight of court litigations arising

from development and growth;

4) the dilatory tactics of lawyers;

5) neglect and laxity on the part of judges; and

6) Court vacancies.

Definition of Terms:

Alternative Dispute Resolution

It is defined as any process or procedure used to resolve a dispute or controversy, other than by adjudication of a presiding judge of a court or an officer of a government agency, in which a neutral third party participates to assist in the resolution of issues. It includes arbitration, mediation or conciliation, mini-trial, early neutral evaluation, or any combination thereof.

Arbitration

A voluntary dispute resolution process in which one or more arbitrators, appointed in accordance with the agreement of the parties resolve a dispute by rendering an award. It is the reference by mutual agreement or consent of the parties of a controversy or dispute to selected persons for an informal hearing and extra-judicial determination and resolution. The hearing is usually held in private and the decision of the persons selected will be a substitute for a court judgment. This avoids the formalities, delay and expenses of ordinary litigation.

Mediation

A dispute resolution procedure in which an impartial third party, mutually chosen by the parties, acts as the referee to help the contending parties settle their dispute. The mediator, unlike the arbitrator, has no authority to make the parties reach an agreement. He serves as a clarifier and

facilitator without dictating settlement. The term mediation used under ADR Lawincludes conciliation.

Mini-trial

A dispute resolution method in which the merits of a case are argued before a panel created by agreement of the parties comprising senior decision makers with or without the presence of a neutral third person after which the parties seek a negotiated settlement.

Early neutral evaluation

An alternative dispute resolution process whereby parties and their lawyers are brought together early in a pre-trial phase to present summaries of their cases and receive a non-binding assessment by an experienced, neutral person with expertise in the subject of the dispute.

Combination of Alternative Dispute Resolution

A particular alternative dispute resolution may be combined with the other types of alternative dispute resolutions. The most common is the mediation-arbitration (Med-Arb). In this kind of combination, parties first proceed to mediation to define the dispute and settle as many issues as possible, and then they engage in arbitration to settle issues that remain unresolved by the mediator.

Class Action Administration

Method of resolving the claims of a huge class of claimants with the least possible litigation expenditures and court cost through an administrative agency in charge of maintaining and tracking statistical days as well as overseeing restitution payments, appointed by the court or chosen by the parties design a set of claims procedures.

Voluntary Settlement Conference

just like mediation it is a non binding hearing; the neutral party is allowed to express his opinions and views about the case and will be obligated to formulate an advisory opinion to be submitted to the parties for review and approval.

Mass Tort ADR Projects (Manville Personal Injury Settlement Trust and A.H Robbins bankruptcy for claims of asbestos sufferers and for claims related to the Dalkon shield, respectively)

Referee or “Rent a Judge”

a practicing attorney or a retired judge usually acts as a referee who conducts a “trial” that incorporates the formalities of a regular court trial, complete with a court reporter and the observance of the strict rules of evidence.

Mock-Jury trial

a “mock jury contract” sets forth all the provisions government the dispute resolution process chosen by them, including how the mock jury proceedings will be conducted.

Ombudsman

he is a fact finder or referee hired by businesses to deal with disputes inside the organization. The objective is to solve problems and disputes quickly and informally by hearing and investigating disputes between workers.

Process Consultation

this is used if there is a long-standing relationship between the parties and they encounter problems in resolving the disputes. Process consultants act as counselors who focus on the process of negotiation, assisting the parties in enhancing or restoring communication lines .

Court-Annexed Mediation

means any mediation process conducted under the auspices of the court, after such court has acquired jurisdiction of the dispute

Court-Referred Mediation

means mediation ordered by a court to be conducted in accordance with the Agreement of the Parties when as action is prematurely commenced in violation of such agreement.

Chapter V

The Mitigation of Litigation:

A Cornucopia of Non-litigative Processes

Motivating Factors that contribute to the rise in demand ADR processes:

1) Avoidance of high expense of litigation

2) Fear of lawsuit will result in an outcome far more adverse than reasonably anticipated

3) Need to return workers involved in the law suit to more productive activities

4) Wish to preserve and re-establish the business or inter-personal relationship that was temporarily disturbed by the conflict.

Med/Arb (Already defined in this reviewer) The parties go through a phase where parties in crafting a compromise agreement only if this goes down in flames, the mediator will change colors-may not render a binding award as an arbitrator pursuant to the agreement. However, Sec. 20 of RA 876 states, “No Arbitrator shall act as a mediator in any proceedings in which he is acting as an arbitrator;xxx” is subject to strict interpretation.

Facilitation is a less active form of mediation. The neutral third party or facilitator acts as a moderator in large meetings, acting as traffic police officer directing the flow of traffic in the

meeting and seeing to it that everyone says his piece during the forum.

Mini-trials is not a trial but a rational and voluntary manner in structuring a settlement of disputes between two big companies that are at loggerheads over sticky business issues. This is otherwise known as “rent-a-judge”.

Besides, mini-trial is a voluntary, confidential and non-binding procedure that effects a speedy, cost-effective resolution of corporate conflict. Lawyers present summaries of their cases to chief executives or other key decision-makers representing both clients. (Linda Singer)

Mini-trial contract This is signed by the parties that contains provisions governing the conduct of discovery, how hearing will be handled and a few more important stipulations.

Class action administration is a sensible approach at dispute resolution is to have an administrative agency, that is in charge of maintaining and tracking statistical data as well as overseeing restitution payments, appointed by the court or chosen by the parties design a set of claims procedures and forms that will be sent out to all the claimants.

Voluntary settlement conference is where the neutral party, unlike mediation, is allowed to express his opinions and views about the case and will be obligated to formulate an advisory opinion to be submitted to the parties for review and approval.

Conciliation uses a neutral third party to clarify issues in dispute so that the parties concerned may themselves arrive at a mutually acceptable agreement.

Mass tort ADR projects

Rent-A-Judge incorporates the formalities of a regular court trial, complete with a court reporter and the observance of the strict rule of evidence but the parties may agree to modify or disregard most formal rules of procedure, evidence and pleading with some limitations.

Mock Jury Trial

Ombusdman

Process consultation the process consultants (PC) differs from the meditator in that there is no discussion of the specific issues or any attempt to solve them. Thus, process consultants are often more like counselors who help parties to get along better so that they can engage in better negotiation and problem-solving.

ADR processes in US Government Agencies

International Commercial Arbitration

Small claims courts

Neighborhood dispute centers

Regulatory negotiation

Chapter VI

The sport of Nonadversarial lawyers

Leigh Steinberg, “Effective negotiation is about exhaustive preparation, utter clarity, heartfelt communication, and a sincere, demonstrated desire to fully understand not just your own needs but the needs of other party.xxx”

Jesus and Socrates were two of the best negotiators of history. One is a form of syllogism, the other in the form of parables.

Rock and a Hard Place- The rock is litigation, which as a means of resolving a dispute is frustrating, time comsuiming, expensive and full of friction. The hard place is negotiation, which can often prove unavailing as a means of reaching accord between two disputants, each of whome has strong feelings about the matter. (Freund, Smart Negotiating, 1992)

LITI-GOTATION (Marc Deiner) Litigation is often used for leveraging. A lawsuit is filed and pushed to the limit to force a favorable settlement agreement.

Negotiation is a problem solving operation. (Romance Languages means “to do business”)

Lawyers have a role to play in at least two crucial negotiation schemes:

1) Dispute or litigation settlement

2) Transaction-planning to preventive law negotiations

Basic Negotiation Tactics

1) The wince

Well-timed flinch at the exact moment when the other party announces his terms.

2) Silence

Staying absolutely quiet after making your offer or when the other party says something that you find disagreeable

3) Good guy/bad-guy

Working with an actual partner to make it appear to the other party that accepting the offer of the “good guy” is a much better alternative than giving in the harsher terms “bad guy”

4) Limited authority

Buying time to obtain more authority from an imaginary principal or a real person with greater discretion

5) Red Herring

Creating distraction to muddle the real issues

6) Trial Balloon

Raising questions designed to peek into the other party’s position without revealing your true objectives

7) Lowballing-agreeing to the offer made by the other part and then start chipping away at the terms of the original offer until the offer has been severely altered

8) The Bait and switch-advertising one product to bring people inside the store and finding excuses to explain the unavailability of the advertised product then quickly suggest that a different product be bought instead.

9) Outrageous behavior-exhibiting socially unacceptable demeanor to rattle the other party

10) Written work-presenting adhesion contracts to discourage question about the deal

11) The vise-applying verbal pressure to force the other party “To do better” than what is being offered and to gain concessions.

12) Trade off-splitting the difference and seeking the midpoint

13) Nibble-waiting for the major terms of the deal to be settled then asking for the “minor” concessions to be included in the deal

14) Funny Money-making mathematical calculations and dividing the payments over a period of time to convey the impression that the other party is getting a “good deal”.

Two major types of unassisted negotiations:

1) Combative Negotiator- who will emphasize only his own gains at the expense of the other and employ hard line tactics, such as exaggerating claims or even threatening to abandon the discussion if he does not get his way.

2) Conciliatory negotiator-who will assume the role of a “problem solver” rather than an intimidator.

Class of negotiations

1) Position-based negotiations often involves hard-ball methods because it is premised on the presumed superiority of one’s position.

2) Interest-based negotiation is much more candid and amiable technique that involves the willing disclosure of all germane information to the other party so as to explore all avenues of satisfying the needs and interests of the other side of the least possible cost and at the shortest possible time.

Leonard Koren and Peter Goodman’s dead-lock breaking techniques (1991)

1) Be positive and don’t be put off by the good word “no”

2) Agree on easier terms first and skip over the points that are bogging you down and come back to them late

3) Emphasize shared goals, get back to common ground and start building up again

4) Reduce complexity, break down complicated negotiations into pieces and solve each piece one at a time

5) Brainstorm with your opponent to generate various alternatives

6) Fine tune your agreement so that there is something that both of you can find acceptable

7) Passing written proposals back and forth for comment

8) Calling a time out when things get rough and not going your way.

EXHAUST ADR PROCESSES BEFORE LITIGATION.