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DOMESTIC ARBITRATION

RA 876 Sec 1-7

Domestic Arbitration
o An arbitration that is not
international (ADR Act)
o Arbitration being conducted
in the Philippines
o Where the parties have
agreed that the Philippines
shall be the place of
arbitration, the arbitration
shall be considered a
domestic arbitration
Benefits of Arbitration (Why Parties
Resort to Arbitration)
o Inexpensive, speedy and
amicable methods of settling
disputes
o Unclogs court dockets and
hastens the resolution
o Secure streamlined
proceedings and expeditious
results
o Avoid costs of judicial
resolutions
o Trade the procedures and
opportunity for review of the
courtroom for the simplicity,
informality, and expedition
of arbitration
Policy to promote Arbitration
o SC said that courts should
liberally construe arbitration
clause
o Promote party autonomy in
the resolution of disputes
o Court shall have due regard
in favour of arbitration
Kinds of Arbitration
o Binding- if it results in an
award which is subject to
confirmation, and when
confirmed by a court, is
subject to enforcement like
any judgment of the court
o Non binding- if the award, by
agreement of the parties, or
by law, is not subject to
confirmation and
enforcement

Arbitration Agreement
o Agreement by the parties to
submit to arbitration all or
certain disputes which have
arisen or which may arise
between them in respect of
a defined legal relationship,
whether contractual or not

Two kinds of Arbitration Agreement


o Compromissoire- an
arbitration agreement
usually embedded in a
contract in effect providing
that any future controversy
arising from such contract
shall be subject to
settlement by arbitration
o Compromis- an arbitration
agreement to submit an
existing dispute to
arbitration

Form of Arbitration Agreement


o Arbitration agreement or a
submission to arbitration
shall be in writing and
subscribed by the party
sought to be charged or by
his lawful agent
o May be in the form of an
arbitration clause in a
contract or in the form of a
separate agreement

Arbitration Agreement is a Contract


o An arbitration agreement is
valid, binding, and
enforceable and not contrary
to public policy, the court
before which a civil action is
instituted in violation of the
arbitration agreement should
suspend the proceedings
and refer the parties in
arbitration in accordance
with their agreement

Enforcement of Arbitration
Agreement
o Arbitration Agreement is
enforceable as any other
contract but only against
those who re parties thereto
or their assigns a valid

arbitration clause is binding


upon them and they are
expected to abide by it in
good faith
Where the suit has been
instituted prematurely, the
court shall suspend the
same and the parties shall
be directed forthwith to
proceed to arbitration

Duty of Court in Summary


Proceeding
o When a petition to compel
arbitration is filed, the duty
of the court is to determine
whether or not there exists
between the parties a valid
arbitration agreement
o Proceeding before the
courtis merely a summary
remedy to enforce the
agreement to arbitrate. The
duty of the court is not to
resolve the merits of the
parties claims but only to
determine if they should
proceed to arbitration
o Arbitration Law explicitly
confines trial courts
authority to pass only upon
the issue of whether there is
or there is no agreement in
writing providing for
arbitration
Grounds for Resisting Arbitration
a) There is no arbitration
agreement between the parties
b) The arbitration agreement
invoked by the claimant is
invalid or is otherwise
unenforceable
c) The arbitration agreement
invoked by the claimant is not
binding on the respondent
resisting arbitration
d) Arbitration of the dispute would
be contrary to public policy
because it tends to oust the
courts of its jurisdiction
e) The dispute is not arbitrable
f) Arbitration of the dispute would
result in duplitious procedure

g) Arbitration would be
prohibitively expensive
h) Dispute is not arbitrable under
the rules of the arbitration
institution to which it has been
submitted
i) The claims submitted to
arbitration has been waived or
is barred by estoppel,
prescription or prior judgment
j) Right to arbitration has been
waived

There is No Arbitration Agreement


Between the Parties
o Persons who are neither
parties nor heirs or assigns
of such parties cannot be
made parties to an
arbitration under the
agreement
The Arbitration Agreement is Not
Valid Nor Enforceable Between the
Parties
o Contract Containing the
Arbitration Clause had Long
Expired
o Defective Arbitration Clause
Reformed to Make it
Enforceble
Arbitration of the Dispute would be
Contrary to Public Policy Because it
Tends to Oust the Court of its
Jurisdiction
o Art 2044 of NCC, the finality
of the arbitrators award is
not absolute and without
exceptions
o The decision of the
arbitration is subject to
judicial review
Dispute is Not Arbitrable Because:
o Under the applicable law,
the subject matter thereof
cannot be submitted to
arbitration
Labor disputes
Civil status of persons
Validity of marriage
Grounds for legal
separation
Jurisdiction of courts

Future legitime
Criminal liability
Those which by law
cannot be
compromised
Dispute submitted is outside
the scope of the arbitration
agreement
Whether or not a
dispute is within the
scope of the
arbitration agreement
is an issue that
involves the
competence of an
arbitral tribunal to
resolve. The court is
advised to exercise
judicial restraint and
defer to the
competence of the
arbitral tribunal

Arbitration of the Dispute would


Result in Duplicitous Procedure
Because Not All the Affected
Parties are Bound by the
Arbitration Agreement
o Rules of Court not only
permits but encourages the
joining together in one
complaint all such persons
as plaintiffs or defendants in
a civil action. Arbitration ,
however, is only contractual
and only persons bound by
an arbitration agreement
can be included in an
arbitration proceeding under
that agreement.
o A court may refuse to
enforce Arbitration
Agreement where it would
result in the splitting of the
proceeding to resolve the
dispute by arbitration as to
some of the parties on one
hand and by trial for the
others. SC said this should
not be allowed as it will
result to multiplicity of suits,
duplicitous procedure and
unnecessary delay.

Claim Submitted to Arbitration has


been Waived or is barred by
Estoppel, Prescription, or Prior
Judgment
o There is waiver when other
party fails or refuses to
object to a judicial forum or
resolution of such dispute
and this is manifested when
the defendant fails to raise
the defense in the answer or
to file a motion to dismiss or
to stay the civil action in
favour of arbitration
Arbitration would be Prohibitively
Expensive
Arbitration Lacked Mutuality
o Doctrine of mutuality
requires a contract to be
based on an exchange of
reciprocal promises
Unconscionability
o Defensive contractual
remedy which serves to
relieve the partyfrom an
unfair contract or from an
unfair portion of a contract
o Procedural
Unconscionability- pertains
to the process by which an
agreement Is reached and
the form of an agreement,
including the use therein of
fine print and convoluted or
unclear language.
o Substantial
Unconscionability- refers to
contractual terms that are
unreasonablyor grossly
favourable to one side and
to which the disfavoured
party does not assent
Arbitration Agreement is Ambigous
o Provision is ambiguous when
it is poorly drafted or nearly
illegible
o However it is still
enforceable
o The party seeking resistance
from arbitration shall prove
ambiguity sufficient enough
to resist arbitration

Party Waived Arbitration


o Waiver is the voluntary
relinquishment of the right
for arbitration
o There is no requirement for
proof of prejudice in order
for there to be an effective
right to arbitrate
Presence of a Condition Precedent
o Under a contract, a condition
which must occur prior to an
obligation under contract
arising
o A contract that the parties
resort to good faith
settlement of disputes
outside the courts prior to
litigation. (or arbitration)
Who are bound by Arbitration
Agreement?
Parties to the contract
Heirs of the parties to the
contract
Assigns
When non signatory bound by
arbitration agreement?
Gen Rule: Only signatories
are bound
However, a party can agree
to submit to arbitration by
means other than personally
signing the contract
containing an arbitration
clause
5 Theories Arising out of Common
Law Principles for Binding Nonsignatories to Arbitration
Agreements

1. Incorporation by referencecontract term meaning that


something is included by its
mention or being referred to
within the document
2. Assumption- a successor to a
signatory can compel
arbitration
3. Agency- can bind the
principal by its agents acts
4. Veil piercing- a corporations
separate juridical personality
may be disregarded when
the corporate identity is
used to defeat public
convenience, justify wrong,
protect fraud, or defend
crime.
5. Estoppel- precludes a party
from asserting rights
Nature and Scope of Judicial
Review 0f Arbitration Agreement
1. It is for the court to decide in
the first instance whether
the dispute is to be resolved
through arbitration. Court
should engage in limited
review to ensure that the
dispute is arbitrable
2. Courts role is limited to
interpretation and
enforcement of the terms
agreed to by the parties; it
does not include the
rewriting of their contract
and the imposition of
additional terms.