CHAPTER 7 - JUDICIAL REVIEW OF ARBITRAL AWARDS

CHAPTER 7 - JUDICIAL REVIEW OF ARBITRAL AWARDSA. DOMESTIC AWARDSSEC. 40, RA 9285. Confirmation of Award. - The confirmation of a domestic arbitral award shall be governed by Section 23 of R.A. 876.A domestic arbitral award when confirmed shall be enforced in the same manner as final and executory decisions of the Regional Trial Court.The confirmation of a domestic award shall be made by the regional trial court in accordance with the Rules of Procedure to be promulgated by the Supreme Court.A CIAC arbitral award need not be confirmed by the regional trial court to be executory as provided under E.O. No. 1008.Notes:A. ON DOMESTIC ARBITRAL AWARDSSection 23, R.A. 876 (Arbitration Law) Confirmation of award. - At any time within one month after the award is made, any party to the controversy which was arbitrated may apply to the court having jurisdiction, as provided in section twenty-eight, for an order confirming the award; and thereupon the court must grant such order unless the award is vacated, modified or corrected, as prescribed herein. Notice of such motion must be served upon the adverse party or his attorney as prescribed by law for the service of such notice upon an attorney in action in the same court.By Sec. 23 & Sec. 28 of the RA 876 and the pertinent provisions of the Special Rules of Court on ADR (Rule 11), the petition to confirm an Arbitral Award (a) (Who) May be filed by any party to the domestic arbitration.(b) (When) At any time after the lapse of thirty (30) days from receipt by the petitioner of the arbitral award. (Venue) - The petition for confirmation of the domestic arbitral award may be filed with the Regional Trial Court having jurisdiction over the place in which one of the parties is doing business, where any of the parties reside or where arbitration proceedings were conducted.(d) (Section 28). The petition to confirm shall be accompanied with the (i) The submission, or contract to arbitrate; the appointment of the arbitrator or arbitrators; and each written extension of the time, if any, within which to make the award and a (ii) A verified copy of the award.(e) Entry of judgment. For purpose of entry of judgment of the confirmed arbitral award, the documents submitted in the petition to confirm shall likewise be filed including each notice, affidavit, or other paper used upon the application to confirm such award, and a copy of each order of the court upon such application.(f) (Writ of Execution) The arbitral award, once confirmed, has the same force and effect as a judgment in an action and it may be enforced as if it had been rendered in the court in which it is entered. Arbitral proceedings terminated by issuance of Arbitral Award -> Confirmation of Arbitral Award (RTC) -> Judgment (Award confirmed) -> Entry of judgment -> Execution -> Satisfaction of claims.======B. ON CIAC ARBITRAL AWARDS(1) Sec. 40, RA 9285. A CIAC arbitral award need not be confirmed by the regional trial court to be executory as provided under E.O. No. 1008.(2) SEC. 19, EO No. 1008. FINALITY OF AWARDS. The arbitral award shall be binding upon the parties. It shall be final and inappealable except on questions of law which shall be appealable to the Supreme Court(3) SEC. 20, EO No. 1008. EXECUTION & ENFORCEMENT OF AWARD. As soon as a decision, order or award has become final and executory, the Arbitral Tribunal or the single arbitrator with the concurrence of the CIAC shall motu propio, or on motion of any interested party, issue a writ of execution requiring any sheriff or other proper officer to execute said decision, order or award.Q: Can the sole arbitrator or the arbitral tribunal order the execution or enforcement of the CIAC arbitral award?SEC. 41, RA 9285. Vacation Award. - A party to a domestic arbitration may question the arbitral award with the appropriate regional trial court in accordance with the rules of procedure to be promulgated by the Supreme Court only on those grounds enumerated in Section 25 of Republic Act No. 876. Any other ground raised against a domestic arbitral award shall be disregarded by the regional trial court.Notes:(1) Vacate/vacation of award, meaning.(2) Grounds for vacating a domestic arbitral award. The grounds enumerated in Section 25, RA No. 876 shall also be the grounds for vacating an arbitral award, which are :(a) (MISTAKE/ERRORS) Where there was an evident miscalculation of figures, or an evident mistake in the description of any person, thing or property referred to in the award; or (b) (GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION) Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits of the decision upon the matter submitted; or (c) (INCOMPLETENESS/ERRORS) Where the award is imperfect in a matter of form not affecting the merits of the controversy, and if it had been a commissioner's report, the defect could have been amended or disregarded by the court.(3) The grounds are exclusive. Any other grounds should not be entertained by the court.B. FOREIGN ARBITRAL AWARDSSEC. 42, RA 9285. Application of the New York Convention. - The New York Convention shall govern the recognition and enforcement of arbitral awards covered by the said Convention.The recognition and enforcement of such arbitral awards shall be filed with regional trial court in accordance with the rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly certified translation thereof into any of such languages.The applicant shall establish that the country in which foreign arbitration award was made is a party to the New York Convention.If the application for rejection or suspension of enforcement of an award has been made, the regional trial court may, if it considers it proper, vacate its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the party to provide appropriate security.NOTES:(1) Foreign arbitral award one made in a country other than the Philippines.(2) Convention award(3) Article I(1) of the New York Convention. This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.(4) Article III, New York Convention. Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.

(5) The procedure for the recognition and enforcement of a foreign arbitral award shall be in accordance with RULE 13: RECOGNITION AND ENFORCEMENT OF A FOREIGN ARBITRAL AWARD (A.M. No. 07-11-08-SC; Special Rules of Court On ADR)Rule 13.1. Who may request recognition and enforcement. - Any party to a foreign arbitration may petition the court to recognize and enforce a foreign arbitral award.Rule 13.2. When to petition. - At any time after receipt of a foreign arbitral award, any party to arbitration may petition the proper Regional Trial Court to recognize and enforce such award.Rule 13.3. Venue. - The petition to recognize and enforce a foreign arbitral award shall be filed, at the option of the petitioner, with the Regional Trial Court (a) where the assets to be attached or levied upon is located, (b) where the act to be enjoined is being performed, (c) in the principal place of business in the Philippines of any of the parties, (d) if any of the parties is an individual, where any of those individuals resides, or (e) in the National Capital Judicial Region.SEC. 43, RA 9285. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York Convention. - The recognition and enforcement of foreign arbitral awards not covered by the New York Convention shall be done in accordance with procedural rules to be promulgated by the Supreme Court. The Court may, on grounds of comity and reciprocity, recognize and enforce a non-convention award as a convention award.

Rule 13.12. Recognition and enforcement of non-convention award. - The court shall, only upon grounds provided by these Special ADR Rules, recognize and enforce a foreign arbitral award made in a country not a signatory to the New York Convention when such country extends comity and reciprocity to awards made in the Philippines. If that country does not extend comity and reciprocity to awards made in the Philippines, the court may nevertheless treat such award as a foreign judgment enforceable as such under Rule 39, Section 48, of the Rules of Court.Rule 39, Section 48, of the Rules of Court.

Sec. 48. Effect of foreign judgments or final orders. The effect of a judgment or final order of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is as follows: (a) In case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title to the thing; and (b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title. In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.

NOTES:

CASE: Oil & natural gas commission vs. CA, et. al., G.R. No. 114232; July 23, 1998. The issue revolves around whether or not the judgment of the foreign court (Civil Court of India) is enforceable in this jurisdiction in view of the private respondents allegation that it is bereft of any statement of facts and law upon which the award in favor of the petitioner was based.

Ruling: Yes. (1) The decision rendered by the court of India may not have specifically discussed the facts but it has incorporated it by reference. In our jurisdiction, incorporation by reference is allowed if only to avoid the cumbersome reproduction of the decision of the lower courts, or portions thereof, in the decision of the higher court specially so if the decision sought to be incorporated is a lengthy and thorough discussion of the facts and conclusions arrived. (Award Paper No. 3/B-1 consists of eighteen (18) single spaced pages.)

(2) The recognition accorded a foreign judgment is not necessarily affected by the fact that the procedure in the courts of the country in which such judgment was rendered differs from that of the courts of the country in which the judgment is relied on (in this case the Philippines). This Court has held that matters of remedy and procedure are governed by the lex fori or the internal law of the forum. Thus, if under the procedural rules of the Civil Court of Dehra Dun, India, a valid judgment may be rendered by adopting the arbitrators findings, then the same must be accorded respect. In the same vein, if the procedure in the foreign court mandates that an Order of the Court becomes final and executory upon failure to pay the necessary docket fees, then the courts in this jurisdiction cannot invalidate the order of the foreign court simply because our rules provide otherwise.

(3) A foreign judgment is presumed to be valid and binding in the country from which it comes, until the contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of due notice therein.

Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal of a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their successors-in-interest by a subsequent title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful exercise of jurisdiction and has regularly performed its official duty.

Consequently, the party attacking a foreign judgment, the private respondent herein, had the burden of overcoming the presumption of its validity which it failed to do in the instant case.

The foreign judgment being valid, there is nothing else left to be done than to order its enforcement, despite the fact that the petitioner merely prays for the remand of the case to the RTC for further proceedings. As this Court has ruled on the validity and enforceability of the said foreign judgment in this jurisdiction, further proceedings in the RTC for the reception of evidence to prove otherwise are no longer necessary.

The doctrine of comity is the legal principle which dictates that a jurisdiction recognize and give effect to judicial decrees and decisions rendered in other jurisdictions unless to do so would offend its public policy. Although rooted in the middle ages, comity continues to be a viable doctrine, because it facilitates the achievement of a primary objective of law the orderly, consistent and final resolution of disputes.

Doctrine of reciprocity

SEC. 44, RA 9285. Foreign Arbitral Award Not Foreign Judgment. - A foreign arbitral award when confirmed by a court of a foreign country, shall be recognized and enforced as a foreign arbitral award and not a judgment of a foreign court.A foreign arbitral award, when confirmed by the regional trial court, shall be enforced as a foreign arbitral award and not as a judgment of a foreign court.A foreign arbitral award, when confirmed by the regional trial court, shall be enforced in the same manner as final and executory decisions of courts of law of the Philippines.Notes:a) Foreign Arbitral Award (say, U.S.) -> Confirmed by a U.S. court = recognized and enforced as a foreign arbitral award.b) Foreign arbitral award (Singapore) -> Confirmed by the RTC (Phils.) = enforced as a final and executory judgment of a Philippine court.SEC. 45, RA 9285. 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.Rule 13.4. Governing law and grounds to refuse recognition and enforcement. - The recognition and enforcement of a foreign arbitral award shall be governed by the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention") and this Rule. The court may, upon grounds of comity and reciprocity, recognize and enforce a foreign arbitral award made in a country that is not a signatory to the New York Convention as if it were a Convention Award.A Philippine court shall not set aside a foreign arbitral award but may refuse its recognition and enforcement on any or all of the following grounds: (i). (Lack of capacity) A party to the arbitration agreement was under some incapacity; or (Illegality) the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereof, under the law of the country where the award was made; or(ii). (Lack of due process) The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or(iii). (Grave abuse of discretion amounting to lack of jurisdiction) The award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or 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, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or(iv). The composition of the arbitral tribunal 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 arbitration took place; or(v). (Premature filing) (The award is not yet final and executory) The award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which that award was made; or (vi). The subject-matter of the dispute is not capable of settlement or resolution by arbitration under Philippine law; or(vii). The recognition or enforcement of the award would be contrary to public policy.The court shall disregard any ground for opposing the recognition and enforcement of a foreign arbitral award other than those enumerated above.SEC. 46. Appeal from Court Decisions on Arbitral Awards. - A decision of the regional trial court confirming, vacating, setting aside, modifying or correcting an arbitral award may be appealed to the Court of Appeals in accordance with the rules of procedure to be promulgated by the Supreme Court.The losing party who appeals from the judgment of the court confirming an arbitral award shall be required by the appellate court to post counterbond executed in favor of the prevailing party equal to the amount of the award in accordance with the rules to be promulgated by the Supreme Court.Case: Equitable PCIBanking Co., et. al. vs. RCBC CAPITAL CORPORATION, G.R. No. 182248; December 18, 2008 (including Korea Technologies Limited vs. Lerma, ___ and Asset Privatization Trust vs. CA, ____; CARGILL, PHILS. VS. SAN FERNANDO REGALA TRADING, January 31, 2011)The proper mode of appeal assailing a decision of the RTC confirming, vacating, setting aside, modifying, or correcting an arbitral award is an appeal before the CA pursuant to Sec. 46, of RA 9285. In Korea Technologies Co., Ltd v. Lerma, the Court stated that the remedy of an aggrieved party in cases where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award is an appeal to the Court of Appeals based on Sec. 46 of RA 9285 which provides: A decision of the Regional Trial Court confirming, vacating, setting aside, modifying or correcting an arbitral award may be appealed to the Court of Appeals in accordance with the rules and procedure to be promulgated by the Supreme Court. The rules being referred to here is the Special Rules of Court on ADR which became effective last October 30, 2009. Of course, it is required that the losing party who makes the appeal must post a counterbond in favor of the prevailing party. Thereafter, the CA decision may further be appealed or reviewed before this Court through a petition for review under Rule 45 of the Rules of Court.In Korea Technologies Co., Ltd v. Lerma, the Court stated that the remedy of an aggrieved party in cases where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award is an appeal to the Court of Appeals based on Sec. 46 of RA 9285 which provides: A decision of the Regional Trial Court confirming, vacating, setting aside, modifying or correcting an arbitral award may be appealed to the Court of Appeals in accordance with the rules and procedure to be promulgated by the Supreme Court. The rules being referred to here is the Special Rules of Court on ADR which became effective last October 30, 2009. Of course, it is required that the losing party who makes the appeal must post a counterbond in favor of the prevailing party. Thereafter, the CA decision may further be appealed or reviewed before the Supreme Court through a petition for review under Rule 45 of the Rules of Court.One of the basis for the dismissal of the petition of EPCIB which was not discussed in the case is the principle of hierarchy of courts. One must respect the hierarchy of courts. Another is, as stated by the Court: The Court will not overturn an arbitral award unless it was made in manifest disregard of the law. This was also discussed in Asset Privatization Trust v. Court of Appeals. In that case, the arbitration committee issued an arbitral award which the trial court, upon due proceedings, confirmed despite the opposition of the losing party. Motions for reconsideration by the losing party were denied. An appeal interposed by the losing party to the CA was also denied. On appeal to the Supreme Court, the Court established the parameters by which an arbitral award may be set aside, explained as : As a rule, the award of an arbitrator cannot be set aside for mere errors of judgment either as to the law or as to the facts. Courts are without power to amend or overrule merely because of disagreement with matters of law or facts determined by the arbitrators. They will not review the findings of law and fact contained in an award, and will not undertake to substitute their judgment for that of the arbitrators. To do so would make an award the commencement, not the end, of litigation. Errors of law and fact, or an erroneous decision of matters submitted to the judgment of the arbitrators, are insufficient to invalidate an award fairly and honestly made. Judicial review of an arbitration is, thus, more limited than judicial review of a trial.(EXCEPTIONS) The Court continued [N]onetheless, the arbitrators awards is not absolute and without exceptions. The arbitrators cannot resolve issues beyond the scope of the submission agreement. The parties to such an agreement are bound by the arbitrators award only to the extent and in the manner prescribed by the contract and only if the award is rendered in conformity thereto. Thus, Sections 24 and 25 of the Arbitration Law provide grounds for vacating, rescinding or modifying an arbitration award. Where the conditions described in Articles 2038, 2039 and 2040 of the Civil Code applicable to compromises and arbitration are attendant, the arbitration award may also be annulled.Remember that the grounds enumerated in Sec. 24 and 25, of RA 9285 are exclusive and the court will not entertain any other grounds. However, despite this exclusivity, if the conditions described in Art. 2038, 2039 and 2040 of the Civil Code on compromise and arbitration are present, then the arbitration award may be annulled on those grounds. Why? Because of Art. 2044 of the Civil Code which provides: Any stipulation that the arbitrators award or decision shall be final is valid without prejudice to Articles 2038, 2039 and 2040.Art. 2038: a compromise in which there is mistake, fraud, violence, intimidation, undue influence, or falsity of documents, is voidable under Art. 1330 of the NCC.Art. 2039 where documents are discovered, which if it had not concealed by one of the parties, could have resulted in a different interpretation of an issue or a question resulting in a different compromise agreement.Art. 2040. If after a litigation has been decided by a final judgment, a compromise should be agreed upon, either or both parties being unaware of the existence of the final judgment, the compromise may be rescinded.Finally, it should be stressed that while a court is precluded from overturning an award for errors in determination of factual issues, nevertheless, if an examination of the record reveals no support whatever for the arbitrators determinations, their award must be vacated. In the same manner, an award must be vacated if it was made in manifest disregard of the law.(italics mine for emphasis)SEC. 47. RA 9285, Venue and Jurisdiction. - Proceedings for recognition and enforcement of an arbitration agreement or for vacation, setting aside, correction or modification of an arbitral award, and any application with a court for arbitration assistance and supervision shall be deemed as special proceedings and shall be filed with the regional trial court (i) where arbitration proceedings are conducted; (ii) where the asset to be attached or levied upon, or the act to be enjoined is located; (iii) where any of the parties to the dispute resides or has his place of business; or (iv) in the National Judicial Capital Region, at the option of the applicant.SEC. 48. Notice of Proceeding to Parties. - In a special proceeding for recognition and enforcement of an arbitral award, the Court shall send notice to the parties at their address of record in the arbitration, or if any party cannot be served notice at such address, at such party's last known address. The notice shall be sent at least fifteen (15) days before the date set for the initial hearing of the application.NOTES:I. DOMESTIC Arbitration AWARD1) Arbitration proceedings terminated by the issuance of the Domestic Arbitral Award2) Party file a Request or Petition to confirm Arbitral Award;3) Court sets the petition for hearing; Notifies the parties of the date of hearing. 4) Hearing (Summary proceedings) a. No problem, no oppositionb. With motion to correct, amendi. Corrected, amended, no problemc. With opposition, motion to vacate award5) Issues judgment confirming the arbitral award.6) Enforcement by writ of Execution7) Satisfaction of Claims4) Hearing. With opposition or motion to vacate award grounded on the enumerations in Sec. 25, RA 876;5) Court denies the motion to Vacate; proceeds to confirm the award or Grants the motion to vacate; denies the motion to confirm the award6) Aggrieved party files a Motion for ReconsiderationMotion granted; No problem7) Motion denied, aggrieved party appeals to the Court of Appeals under Rule 46, RA 9285 cf Special Rules of Court on ADR)8) CA ruling, aggrieved party files a petition for review on Certiorari with the Supreme Court. (Regular Rules)

II. FOREIGN ARBITRAL CONVENTION AWARD(1) Arbitration proceedings terminated by issuance of award(2) Confirmation of Foreign Arbitral Award by a foreign courta. Recognition and enforcement as a foreign arbitral award by RTC (Phils)(3) Confirmation of foreign Arbitral Award with RTC (Phils)a. Enforcement as a foreign arbitral award by RTC (Phils)(4) Petitions/motion questioning the decision of the RTC will be by

ADDITIONAL NOTES:(1) Case: CARGILL, PHILS. VS. SAN FERNANDO REGALA TRADING, January 31, 2011In this case, the issue brought for resolution revolved around the arbitration clause which provides that: Any dispute which the Buyer and Seller may not be able to settle by mutual agreement shall be settled by arbitration in the City of New York before the American Arbitration Association. The Arbitration Award shall be final and binding on both parties.San Fernando Regala trading entered into a purchase contract with Cargills, Phil. Claiming violations of the provisions of the contract, Regala filed with the RTC a complainant for the rescission of the contract and payment of damages against CARGILL. CARGILL, claiming that that the contract contained an arbitration clause, filed a Motion to Dismiss/Suspend Proceedings and To Refer Controversy to Voluntary Arbitration and that respondent must first comply with the arbitration clause before resorting to court, thus, the RTC must either dismiss the case or suspend the proceedings and direct the parties to proceed with arbitration, pursuant to Sections 6[6] and 7[7] of Republic Act (R.A.) No. 876, or the Arbitration Law. After an exchange of pleadings, the RTC rendered an Order denying the motion and ordered CARGILL to file its answer. A motion for reconsideration was likewise denied. CARGILL appeal by petition on certiorari to the Court of Appeals likewise resulted in an unfavorable decision as the CA said that Arbitration is not proper when one of the parties repudiated the existence or validity of the contract. It sustained the RTCs decision.On appeal to the Supreme Court, the following principles were discussed:(1)Re application of Section 29 of R.A. No. 876 which provides: x x x An appeal may be taken from an order made in a proceeding under this Act, or from a judgment entered upon an award through certiorari proceedings, but such appeals shall be limited to question of law. x x x.CARGILL is questioning before the CA its contention that the RTC (respondent Judge) acted in excess of jurisdiction or with grave abuse of discretion in refusing to dismiss, or at least suspend, the proceedings a quo, despite the fact that the partys agreement to arbitrate had not been complied with. Despite the RTCs finding of the existence of the arbitration agreement, it denied CARGILLs motion and directed it to file an answer.The Court said: In issuing the Order which denied petitioner's Motion to Dismiss/Suspend Proceedings and to Refer Controversy to Voluntary Arbitration, the RTC went beyond its authority of determining only the issue of whether or not there is an agreement in writing providing for arbitration by directing petitioner to file an answer, instead of ordering the parties to proceed to arbitration. In so doing, it acted in excess of its jurisdiction and since there is no plain, speedy, and adequate remedy in the ordinary course of law, petitioners resort to a petition for certiorari is the proper remedyIn the said case, the Court cited La Naval Drug Corporation v. Court of Appeals,[ G.R. No. 103200, August 31, 1994, 236 SCRA 78, 91] where it was held that R.A. No. 876 explicitly confines the courts authority only to the determination of whether or not there is an agreement in writing providing for arbitration. In the affirmative, the statute ordains that the court shall issue an order summarily directing the parties to proceed with the arbitration in accordance with the terms thereof. If the court, upon the other hand, finds that no such agreement exists, the proceedings shall be dismissed. [italics mine for emphasis](2)In resolving the issue that even if there is an arbitration clause in the contract, the same should not be resorted to considering that the main contract is invalid and has not been consummated nor complied with, the Court relied on the Doctrine of Separability. The Court held that the validity of the contract containing the agreement to submit to arbitration does not affect the applicability of the arbitration clause itself. A contrary ruling would suggest that a party's mere repudiation of the main contract is sufficient to avoid arbitration. That is exactly the situation that the separability doctrine, as well as jurisprudence applying it, seeks to avoid.(3) The doctrine of separability, or severability enunciates that an arbitration agreement is independent of the main contract. The arbitration agreement is to be treated as a separate agreement and the arbitration agreement does not automatically terminate when the contract of which it is a part comes to an end. The doctrine denotes that the invalidity of the main contract, also referred to as the "container" contract, does not affect the validity of the arbitration agreement. Irrespective of the fact that the main contract is invalid, the arbitration clause/agreement still remains valid and enforceable.II. BENGUET CORPORATION vs. DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES-MINES ADJUDICATION BOARD and J.G. REALTY AND MINING Co. ; February 13, 2008 G.R. No. 163101 The case relates to the cancellation of the Royalty Agreement with Option to Purchase (RAWOP) between Benguet and J.G. Realty, and excluded Benguet from the joint Mineral Production Sharing Agreement (MPSA) application over four mining claims. J.G. Realty filed for cancellation with the POA which canceled the RAWOP. Therefrom, Benguet filed a Notice of Appeal with the MAB which sustained the decision of the POA. Benguets motion for reconsideration was denied hence, Benguet filed a petition for certiorari under Rules 65 of the Rules of Court.Before we proceed to the issue related to our subject matter, I would like to call your attention to the following facts why the petition was dismissed, which is on jurisdiction. The petition of Benguet was dismissed because it failed to follow procedure, basically, the giving of due respect to the hierarchy of courts. In the said case, the Court discussed that:(a)Section 79 of Republic Act No. (RA) 7942 or the Philippine Mining Act of 1995 which states that A petition for review by certiorari and question of law may be filed by the aggrieved party with the Supreme Court within thirty (30) days from receipt of the order or decision of the [MAB] was already declared invalid in Carpio v. Sulu Resources Development Corp. ruling that a decision of the MAB must first be appealed to the Court of Appeals (CA) under Rule 43 of the Rules of Court, before recourse to this Court may be had. The invalidity is grounded on the following: (i) Section 30 of Article VI of the 1987 Constitution, mandates that [n]o law shall be passed increasing the appellate jurisdiction of the Supreme Court as provided in this Constitution without its advice and consent. Section 79 of RA No. 7942 which provides that decisions of the MAB may be reviewed by the Supreme Court on a petition for review by certiorari is obviously an expansion of the Courts appellate jurisdiction, an expansion to which this Court has not consented. (ii)Second, the Supreme Court has already transferred to the CA pending cases involving a review of a quasi-judicial bodys decisions. Such transfer relates only to procedure and will not impair the substantive and vested rights of the parties. The aggrieved partys right to appeal is preserved. The parties still have a remedy and a competent tribunal to grant this remedy.(iii)The Revised Rules of Civil Procedure included Rule 43 to provide a uniform rule on appeals from quasi-judicial agencies. Under the rule, appeals from their judgments and final orders are now required to be brought to the CA on a verified petition for review. A quasi-judicial agency or body has been defined as an organ of government, other than a court or legislature, which affects the rights of private parties through either adjudication or rule-making to which MAB belongs.(iv)Under Batas Pambansa (BP) Blg. 129 as amended by RA No. 7902, factual controversies are usually involved in decisions of quasi-judicial bodies and an appeal from quasi-judicial agencies to the CA includes issues involving questions of fact, of law or mixed questions of fact and law as provided in Section 3, of Rule 43 of the rules of Court. Rule 43, [a]n appeal under this Rule may be taken to the Court of Appeals within the period and in the manner herein provided whether the appeal involves questions of fact, of law, or mixed questions of fact and law. Hence, appeals from quasi-judicial agencies even only on questions of law may be brought to the CA.(v)The judicial policy of observing the hierarchy of courts dictates that direct resort from administrative agencies to this Court will not be entertained, unless the redress desired cannot be obtained from the appropriate lower tribunals, or unless exceptional and compelling circumstances justify availment of a remedy falling within and calling for the exercise of our primary jurisdiction.On the issue of whether there was serious and palpable error when the Honorable Board failed to rule that the contractual obligation of the parties to arbitrate under the Royalty Agreement is mandatory:The questioned arbitration clause of the RAWOP are Sec. 11.01 Arbitration. Any disputes, differences or disagreements between BENGUET and the OWNER with reference to anything whatsoever pertaining to this Agreement that cannot be amicably settled by them shall not be cause of any action of any kind whatsoever in any court or administrative agency but shall, upon notice of one party to the other, be referred to a Board of Arbitrators consisting of three (3) members, one to be selected by BENGUET, another to be selected by the OWNER and the third to be selected by the aforementioned two arbitrators so appointed.11.02 Court Action. No action shall be instituted in court as to any matter in dispute as hereinabove stated, except to enforce the decision of the majority of the Arbitrators.To backtrack, POA held that the arbitration clause is invalid as it is tying the hands of the parties, i.e., preventing them from availing of court action if they did not undergo arbitration. The MAB denied arbitration on ground of estoppel.The Court ruled that the parties should have submitted their dispute to voluntary arbitration grounded on Sec. 2 of RA 876 which elucidates the scope of arbitration as follows: Persons and matters subject to arbitration.Two or more persons or parties may submit to the arbitration of one or more arbitrators any controversy existing between them at the time of the submission and which may be the subject of an action, or the parties to any contract may in such contract agree to settle by arbitration a controversy thereafter arising between them. Such submission or contract shall be valid, enforceable and irrevocable, save upon such grounds as exist at law for the revocation of any contract.The issues to be submitted for resolution may include question[s] arising out of valuations, appraisals or other controversies which may be collateral, incidental, precedent or subsequent to any issue between the parties.The court held that in RA 9285 recognizes the efficacy of arbitration as an alternative mode of dispute resolution by stating in Sec. 32 thereof that domestic arbitration shall still be governed by RA 876. Clearly, a contractual stipulation that requires prior resort to voluntary arbitration before the parties can go directly to court is not illegal and is in fact promoted by the State. So that if a case which is properly the subject of voluntary arbitration is erroneously filed with the courts or quasi-judicial agencies, on motion of the defendant, the court or quasi-judicial agency shall determine whether such contractual provision for arbitration is sufficient and effective. If in affirmative, the court or quasi-judicial agency shall then order the enforcement of said provision. In this situation, the lower court has not lost its jurisdiction over the case, since Section 7 of Republic Act No. 876 provides that the court proceedings have only been stayed. After the special proceeding of arbitration has been pursued and completed, then the lower court may confirm the award made by the arbitrator.In the same case, the Court had the occasion to discuss the difference between a compulsory arbitration from a voluntary arbitration. Compulsory arbitration refers to the the process of settlement of labor disputes by a government agency which has the authority to investigate and to make an award which is binding on all the parties, and as a mode of arbitration where the parties are compelled to accept the resolution of their dispute through arbitration by a third party. Whereas, a voluntary arbitrator is not part of the governmental unit or labor departments personnel, said arbitrator renders arbitration services provided for under labor laws. The court continued that ( T)here is a clear distinction between compulsory and voluntary arbitration. The arbitration provided by the POA is compulsory, while the nature of the arbitration provision in the RAWOP is voluntary, not involving any government agency.The arbitration under the POA which is a quasi-judicial body , being part of the DENR, is mandatory in nature and having freely entered into by the parties, must be held binding against them. However, on the issue of whether POA should have referred the case to voluntary arbitration, POA has no jurisdiction over the dispute which is governed by RA 876, the arbitration law. The dispute between Benguet and J.G. Realty should have been referred to voluntary arbitration under the Arbitration Law and in accordance with the agreement of the parties. However, Benguet, having participated in all the proceedings undertaken that led to the filing of a petition before the Supreme Court, is already estopped from questioning the POAs jurisdiction. The question on the jurisdiction of the POA should have been brought at the first opportunity and not as late as the Supreme Court petition. To redo the proceedings fully participated in by the parties after the lapse of seven years from date of institution of the original action with the POA would be anathema to the speedy and efficient administration of justice, the Supreme Court held.

III. KOREA TECHNOLOGIES CO., LTD. Vs. Hon. Alberto Lerma,et. al., G.R. No. 143581, Jan. 7, 2008Cases prefatory statement: In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly in civil and commercial disputes. Arbitration along with mediation, conciliation, and negotiation, being inexpensive, speedy and less hostile methods have long been favored by this Court. The petition before us puts at issue an arbitration clause in a contract mutually agreed upon by the parties stipulating that they would submit themselves to arbitration in a foreign country. Regrettably, instead of hastening the resolution of their dispute, the parties wittingly or unwittingly prolonged the controversy. I enjoin you to read this case at source as it discussed basic principles of civil procedures and almost one half of RA 9285.BRIEF STATEMENT OF FACTS: Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic corporation. KOGIES and PGSMC executed a Contract whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona, Cavite. The contract was executed in the Philippines. Later, the parties executed, in Korea, an amendment to the contract regarding the terms of payment. The contract and its amendment stipulated that KOGIES will ship the machinery and facilities necessary for manufacturing LPG cylinders for which PGSMC would pay USD 1,224,000. KOGIES would install and initiate the operation of the plant for which PGSMC bound itself to pay USD 306,000 upon the plants production of the 11-kg. LPG cylinder samples. Thus, the total contract price amounted to USD 1,530,000.PGSMC then proceeded to provide for the real estate where KOGIES would install the LPG Cylinder manufacturing of PGSMC in Carmona, Cavite. PGSMC paid KOGIES USD 1,224,000.Unfortunately, PGSMC encountered financial difficulties affecting the supply of materials. The checks used to pay for its balances bounced. On the other hand, PGSMC complained that not only did KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not delivered several equipment parts already paid for. PGSMC then informed KOGIES that PGSMC was canceling their Contract dated March 5, 1997 on the ground that KOGIES had altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would dismantle and transfer the machineries, equipment, and facilities installed in the Carmona plant. PGSMC later filed before the Office of the Public Prosecutor an Affidavit-Complaint for Estafa docketed as I.S. No. 98-03813 against Mr. Dae Hyun Kang, President of KOGIES. On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their contract nor dismantle and transfer the machineries and equipment on mere imagined violations by KOGIES. It also insisted that their disputes should be settled by arbitration as agreed upon in Article 15, the arbitration clause of their contract.On July 1, 1998, KOGIES instituted an Application for Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract as amended.Basically, this was what happened. There are other exchanges between the parties as can be seen from the discussion of the issues, inter alia:(1)Reason for requiring the filing of a Motion for reconsideration prior to filing an appeal: The reason behind the rule is to enable the lower court, in the first instance, to pass upon and correct its mistakes without the intervention of the higher court.(2) The Core Issue: Validity of Article 15 of the Contract which provides:Article 15. Arbitration.All disputes, controversies, or differences which may arise between the parties, out of or in relation to or in connection with this Contract or for the breach thereof, shall finally be settled by arbitration in Seoul, Korea in accordance with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board. The award rendered by the arbitration(s) shall be final and binding upon both parties concerned. The Court ruled that Art. 15 is VALID grounded on:.(1) The principle of Lex loci contractus. Established in this jurisdiction is the rule that the law of the place where the contract is made governs. Since the contract case was perfected in the Philippines, our laws ought to govern. And in our jurisdiction, the law provides in Art. 2044 of the Civil Code that Any stipulation that the arbitrators award or decision shall be final, is valid, without prejudice to Articles 2038, 2039 and 2040. These provisions sanction the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. Arts. 2038, 2039, and 2040 refer to instances where a compromise or an arbitral award, may be voided, rescinded, or annulled. The arbitration clause which was mutually and voluntarily agreed upon by the parties has not been shown to be contrary to any law, or against morals, good customs, public order, or public policy. Neither is there any showing that the parties have not dealt with each other on equal footing hence, there is no reason why the arbitration clause should not be respected and complied with by both parties. In a number of cases, the Supreme Court has sustained the ruling that submission to arbitration is a contract and that a clause in a contract providing that all matters in dispute between the parties shall be referred to arbitration is a contract. In short, the arbitration clause is a contract within the main contract.(2) The Arbitration clause is not contrary to public policy. The arbitration clause stipulating that arbitration must be done in Seoul, Korea in accordance with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is not contrary to public policy. In a number of cases since 1953 when the Arbitration law was enacted, the Supreme Court has been consistent in ruling that arbitration clauses are valid and constitutional; that disputes can be settled by arbitration. In this case, the Supreme Court reiterated that: Being an inexpensive, speedy and amicable method of settling disputes, arbitrationalong with mediation, conciliation and negotiationis encouraged by the Supreme Court. Aside from unclogging judicial dockets, arbitration also hastens the resolution of disputes, especially of the commercial kind. It is thus regarded as the wave of the future in international civil and commercial disputes. Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward. And consistent with the states policy of encouraging alternative dispute resolution methods, courts should liberally construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an order to arbitrate should be granted. Any doubt should be resolved in favor of arbitration.(3) On the question of what governs an arbitration clause specifying that in case of any dispute arising from the contract, an arbitral panel will be constituted in a foreign country and the arbitration rules of the foreign country would govern and its award shall be final and binding.Before we proceed, the question why RA 9285 which was enacted in 2004 was made applicable to this case when KOGIES filed for arbitration in 1998 (but still pending in 2004), should first be answered. Well-settled is the rule that procedural laws are construed to be applicable to actions pending and undetermined at the time of their passage, and are deemed retroactive in that sense and to that extent. As a general rule, the retroactive application of procedural laws does not violate any personal rights because no vested right has yet attached nor arisen from them. Now, take note that RA 9285 incorporated the UNCITRAL Model law to which the Philippines is a signatory. As signatory to the Arbitration Rules of the UNCITRAL Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (UNCITRAL) in the New York Convention on June 21, 1985, the Philippines committed itself to be bound by the Model Law. (Being a signatory, even without RA 9285, the Philippines is bound by the Model law). Where a foreign arbitral body is chosen by the arbitration parties, the arbitration rules of our domestic arbitration bodies would not be applied. (the arbitration is international and not domestic). What would govern would be the pertinent provisions of RA 9285 INCORPORATING THEREIN the provisions of the Model Law particularly Secs. 19 and 20 of Chapter 4 of RA 9285 providing that:CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATIONSEC. 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 (United Nations Document A/40/17) and recommended for enactment by the General Assembly in Resolution No. 40/72 approved on December 11, 1985, copy of which is hereto attached as Appendix A.SEC. 20. Interpretation of Model Law.In interpreting the Model Law, regard shall be had to its international origin and to the need for uniformity in its interpretation and resort may be 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 Commercial Arbitration: Analytical Commentary on Draft Trade identified by reference number A/CN. 9/264.(4) Additional features of RA 9285 applying and incorporating the UNCITRAL Model Law are the following:(1) The RTC must refer to arbitration in proper cases. Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of arbitration pursuant to an arbitration clause, and mandates the referral to arbitration in such cases, thus:SEC. 24. Referral to Arbitration.A court before which an action is brought in a matter which is the subject matter of an arbitration agreement shall, if at least one party so requests not later than the pre-trial conference, or upon the request of both parties thereafter, refer the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.(2) Foreign arbitral awards must be confirmed by the RTC. Foreign arbitral awards though agreed upon by the parties to be final and binding cannot be immediately be enforced or implemented. In Sec. 35 and 36 of the Model Law, the foreign arbitral award must first be recognized by a competent court for enforcement and which court may refuse recognition or enforcement on grounds provided . Sec. 35 and 36 of the UNCITRAL Model Law are incorporated as Sec. 42, 43, & 44 cf Sec. 47 & 48 of RA 9285.SEC. 42. Application of the New York Convention.The New York Convention shall govern the recognition and enforcement of arbitral awards covered by said Convention.The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly certified translation thereof into any of such languages.The applicant shall establish that the country in which foreign arbitration award was made in party to the New York Convention. Xx xxSEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the New York Convention.The recognition and enforcement of foreign arbitral awards not covered by the New York Convention shall be done in accordance with procedural rules to be promulgated by the Supreme Court. The Court may, on grounds of comity and reciprocity, recognize and enforce a non-convention award as a convention award.SEC. 44. Foreign Arbitral Award Not Foreign Judgment.A foreign arbitral award when confirmed by a court of a foreign country, shall be recognized and enforced as a foreign arbitral award and not as a judgment of a foreign court.A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced in the same manner as final and executory decisions of courts of law of the Philippines x x x xSEC. 47. Venue and Jurisdiction.Proceedings for recognition and enforcement of an arbitration agreement or for vacations, setting aside, correction or modification of an arbitral award, and any application with a court for arbitration assistance and supervision shall be deemed as special proceedings and shall be filed with the Regional Trial Court (i) where arbitration proceedings are conducted; (ii) where the asset to be attached or levied upon, or the act to be enjoined is located; (iii) where any of the parties to the dispute resides or has his place of business; or (iv) in the National Judicial Capital Region, at the option of the applicant.SEC. 48. Notice of Proceeding to Parties.In a special proceeding for recognition and enforcement of an arbitral award, the Court shall send notice to the parties at their address of record in the arbitration, or if any part cannot be served notice at such address, at such partys last known address. The notice shall be sent al least fifteen (15) days before the date set for the initial hearing of the application.Therefore, foreign arbitral awards even if final and binding can not yet be executed until it passes confirmation by the RTC. Thereafter, it can now be enforced as final and executory decisions of our courts of law. (3) The RTC has jurisdiction to review foreign arbitral awardsSec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific authority and jurisdiction to set aside, reject, or vacate a foreign arbitral award on grounds provided under Art. 34(2) of the UNCITRAL Model Law. SEC. 42. Application of the New York Convention.The New York Convention shall govern the recognition and enforcement of arbitral awards covered by said Convention.The recognition and enforcement of such arbitral awards shall be filed with the Regional Trial Court in accordance with the rules of procedure to be promulgated by the Supreme Court. Said procedural rules shall provide that the party relying on the award or applying for its enforcement shall file with the court the original or authenticated copy of the award and the arbitration agreement. If the award or agreement is not made in any of the official languages, the party shall supply a duly certified translation thereof into any of such languages.The applicant shall establish that the country in which foreign arbitration award was made is party to the New York Convention.If the application for rejection or suspension of enforcement of an award has been made, the Regional Trial Court may, if it considers it proper, vacate its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the party to provide appropriate security. x x x x 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 procedures and 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.Thus, while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by the parties, still the foreign arbitral award is subject to judicial review by the RTC which can set aside, reject, or vacate it. In this sense, what this Court held in Chung Fu Industries (Phils.), Inc. relied upon by KOGIES is applicable insofar as the foreign arbitral awards, while final and binding, do not oust courts of jurisdiction since these arbitral awards are not absolute and without exceptions as they are still judicially reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subject to judicial review on specific grounds provided for.(4) Grounds for judicial review different in domestic and foreign arbitral awards The differences between a final arbitral award from an international or foreign arbitral tribunal and an award given by a local arbitral tribunal are the specific grounds or conditions that vest jurisdiction over our courts to review the awards.For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for setting aside, rejecting or vacating the award by the RTC are provided under Art. 34(2) of the UNCITRAL Model Law.For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA 876 and shall be recognized as final and executory decisions of the RTC, they may only be assailed before the RTC and vacated on the grounds provided under Sec. 25 of RA 876. (5) The RTC decision setting aside, rejecting, vacating, modifying or correcting an arbitral award may be appealed by the aggrieved party to the Court of Appeals as provided in Sec. 46 of RA 9285.SEC. 46. Appeal from Court Decision or Arbitral Awards.A decision of the Regional Trial Court confirming, vacating, setting aside, modifying or correcting an arbitral award may be appealed to the Court of Appeals in accordance with the rules and procedure to be promulgated by the Supreme Court.The losing party who appeals from the judgment of the court confirming an arbitral award shall be required by the appellate court to post a counterbond executed in favor of the prevailing party equal to the amount of the award in accordance with the rules to be promulgated by the Supreme Court.Thereafter, the CA decision may further be appealed or reviewed before this Court through a petition for review under Rule 45 of the Rules of Court.The stipulation between the parties that the arbitral award is final and binding, does not oust our courts of jurisdiction as the international arbitral award is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285. Where there is a valid and binding arbitration contract, the parties are bound by it and a party may not unilaterally rescind or terminate the contract for whatever cause without first resorting to arbitration.. Where an arbitration clause in a contract is availing, neither of the parties can unilaterally treat the contract as rescinded since whatever infractions or breaches by a party or differences arising from the contract must be brought first and resolved by arbitration, and not through an extrajudicial rescission or judicial action.(6) From Sec. 28, RA 9285, the RTC can likewise provide for interim measures of protection. Art. 17(2) of the UNCITRAL Model Law on ICA defines an interim measure of protection as: xxx 2) An interim measure is any temporary measure, whether in the form of an award or in another form, by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to:(a) Maintain or restore the status quo pending determination of the dispute;(b) Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself;(c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or(d) Preserve evidence that may be relevant and material to the resolution of the dispute.Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim measures: Article 17 J. Court-ordered interim measuresA court shall have the same power of issuing an interim measure in relation to arbitration proceedings, irrespective of whether their place is in the territory of this State, as it has in relation to proceedings in courts. The court shall exercise such power in accordance with its own procedures in consideration of the specific features of international arbitration.As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the courts for provisional reliefs. The Rules of the ICC, which governs the parties arbitral dispute, allows the application of a party to a judicial authority for interim or conservatory measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law) recognizes the rights of any party to petition the court to take measures to safeguard and/or conserve any matter which is the subject of the dispute in arbitration. In addition, R.A. 9285, otherwise known as the Alternative Dispute Resolution Act of 2004, allows the filing of provisional or interim measures with the regular courts whenever the arbitral tribunal has no power to act or to act effectively.

TUNA PROCESSING, INC.,-versus-PHILIPPINE KINGFORD, INC., G.R. No. 185582; February 29, 2012

When the dispute between the parties was submitted for arbitration, the International Centre for Dispute Resolution in the State of California, United States ruled in favor of TPI, granting the payment by Kingford of computed monetary award and damages to TPI. 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. 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 and the case was re-raffled to Judge Cedrick O. Ruiz of Branch 61, who 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 (R/C), the order of the trial court dismissing its Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral Award.

Issue. Can a foreign corporation (Tuna Processing) 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?

Ruling: YES(1) Provisions of law that were discussed in this case:(a) Sec. 133, The Corporation Code of the Philippines which provides: 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.

This was the basis for the dismissal of the complaint by the RTC. Apparently, there is a conflict between the provisions of the Corporation Code and that of Ra 9285, the New York Convention and the Model Law. To this question, the Court held that the Corporation Code is a general law applying to all types of corporations. It is the general law providing for the formation, organization and regulation of private corporations. On the other hand, the Alternative Dispute Resolution Act of 2004, 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 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. As between a general and special law, the latter shall prevailgeneralia specialibus non derogant.

The court continued: Inasmuch 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.xxxSEC. 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.

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.

The above-given grounds did not include lack of 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 [a]ny 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[34] 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[35] after arbitration has already commenced should state [t]he 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 enforecement 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.