Venice Joy Santisteban

LLB 1: Room EH301MC

ADR LAW (Finals)
Legal Opinion

March 3, 2012

Mr. X
President
Superwire U.S.A

Dear Mr. X,
This is in reply to your inquiry regarding your construction contract with Superphone Ltd.,
Philippines in 2002.
Here are the facts you have provided:
1. The Contract provided that:
a. 15% of the contract price shall be paid in advance of and during the
construction of the network
b. 85% of the contract price shall be paid by semi annual instalments over 7
years.
c. Superphone agreed to provide a performance guarantee form its parent
company (SuperHolding) and a chattel mortgage over the supplied
equipment.
2. In 2008, when the project was 99% complete and only few lines were left to install
because the engineer left the project. Superphone then provided its own engineer to
fill in the position.
3. Superphone requested to reschedule payment plan due to monetary cash flow
difficulties so both parties entered into a Supplemental Contract which contains
no schedule of installments.
4. Superphone only paid the first two instalments and stopped any further payment
and requested another reschedule of payment plan.
5. Superwire requested the execution of the chattel mortgage.
6. Meanwhile, May 27, 2011, Superwire sent a letter to Superphone demanding that
the deferment contract being negotiated be executed already or the performance of
the latters obligation under the Contract and Supplemental Contract to avoid from
being declared in default.
7. In reply, Superphone expressed its repugnance to being forced to agree to
unreasonable terms and to execute the contracts by threat.
8. Superphone even stated on the same letter that they have complied with their
material obligation under the Contract and that in fact Superwires failure to deliver
the contracted subscriber lines in accordance to with the agreed time schedule has
resulted to the formers loss of millions of revenue and substantial market share was
overtaken by the cellular operators because of the latters delay.

9. Because of the supervening events, parties agreed to go through arbitration.

Superwire insist that International Chamber of Commerce (ICC) has jurisdiction
because of the stipulation in their supplemental contract that in case arbitration is
needed, they will follow the Rules of Conciliation and Arbiration of the the ICC.
Superphone however insist that it is the Construction Industry Arbitration
Commission (CIAC) who has the jurisdiction.
10. Superwire (as claimant) requested that
a. A temporary Award requesting Superphone pay the advance on cost of the
arbitration
b. A temporary Award enjoining the Superphone from selling, disposing, or
encumbering the Equipment Supplied by Superwire
c. A partial final award in respect of sums for which there is no defense
d. A temporary award into escrow to secure the sums in dispute pending the
Trinbunals final determination.
Based on your statements, you wish to know your footing regarding the following:
1. Whether or not CIAC has the jurisdiction as compared to ICC
2. Whether or not Superphone should temporarily shoulder the entire advance on cost
of arbitration
3. Whether or not Superphone should be enjoined from disposing, selling, or
encumbering the equipment supplied by the contractor.

On the first issue regarding which arbitration body you are to submit yourselves for arbitration,
I need to let you know that it is not favorable to your choice since your Supplemental Contract
with Superphone only provided that in case of disputes, you will follow the Rules of
Conciliation and Arbitration of the ICC and not jurisdiction. Say for the sake of argument
that indeed the intention of such stipulation is to submit to the jurisdiction of the ICC, such
stipulation is invalid since Article 17 of the Civil Code of the Philippines states that The forms
and solemnities of contracts, wills, and other public instruments shall be governed by the laws
of the country in which they are executed. (as your contract is executed here in the
Philippines) and Article 1306 of the same code states that The contracting parties may
establish such stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order, or public policy.
According to E.O. 1008 Section 4., The CIAC shall have the original and exclusive jurisdiction
over disputes arising from, or connected with, contracts entered into by parties involved in
construction in the Philippines. Further, the Rules of Procedures Governing Construction
Arbitration Article III Section 1 provides that An arbitration clause in a construction contract or
a submission to arbitration of a construction dispute shall be deemed an agreement to submit
an existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a
different arbitration institution or arbitral body I n such contract or submission. It is a basic
principle in Statutory Construction that when International Law and Domestic Law cannot be
reconciled, International Law must yield. Furthermore, even if you refuse to arbitrate under the
jurisdiction of CIAC, Rules of Procedures Governing Construction Arbitration Article III Section 2
provides that refusal will not affect the proceeding and CIAC will appoint a sole arbitrator from
among its list of accredited arbitrators
On the second issue regarding the advance on cost of arbitration, According to Rules of
Conciliation and Arbitration of the ICC the advance on costs fixed by the Court shall be payable
in equal shares by the claimant and the respondent The amount of any advance on costs fixed
by the Court pursuant to this Article 36 of the ICC Rules on arbitration may be subject to
readjustment at any time during the arbitration. In all cases, any party shall be free to pay any
other partys share of any advance on costs should such other party fail to pay its share. Note
however that when a request for an advance on costs has not been complied with, and after
consultation with the arbitral tribunal, the arbitral tribunal may suspend its work and set a time
limit, which must be not less than 15 days, on the expiry of which the relevant claims shall be
considered as withdrawn. Should the party in question wish to object to this measure, it must

make a request within the aforementioned period for the matter to be decided by the Court.
Such party shall not be prevented, on the ground of such withdrawal, from reintroducing the
same claims at a later date in another proceeding. If one of the parties claims a right to a setoff with regard to any claim, such set-off shall be taken into account in determining the
advance to cover the costs of the arbitration in the same way as a separate claim insofar as it
may require the arbitral tribunal to consider additional matters.
Finally on the third issue regarding the request to enjoin Superphone from disposing, selling,
encumbering the equipment you supplied. According to Art 1234 of the Civil Code, If the
obligation has been substantially performed in good faith, the obligor may recover
as though there had been a strict and complete fulfilment, less damages suffered by
the obligee.

In order that there may be substantial performance of an obligation, there must

have been an attempt in good faith to perform, without any wilful or intentional
departure therefrom. All you have to do is to establish that you were religious to the
words you have stipulated in your contracts with Superphone.
The party who has substantially performed may enforce specific performance of the
obligation of the other party or may recover damages for their breach upon an
allegation of performance, without proof of complete fulfilment. Therefore, there
is a good chance that the arbitral body will enjoin Superphone from
disposing the equipment you have provided. Well for the sake of not being
over confident, in case Superphone succeeds in disposing the said equipments,
according to you statements, Superphones mother company provided for a chattel
mortgage for the equipments you provided. So it should not be difficult for you to
recover what Superphone owes you.
Take note however that, Superphone, on the other hand, may by an independent
action before he is sued, or by a counterclaim after commencement of a suit against
him, recover from the first party the damages which he has sustained by the latters
failure to completely fulfilled his obligation

Now Mr X, based on Laws, CIAC has jurisdiction over your construction dispute with
Superphone even if you and Superphone prefers to use the CIAC Rules on Arbitration.
Regarding the advance on cost, following the ICC Rules on arbitration, unless there are 3 of
more parties involved (which requires a different set of rules on cost), the claimant and the
respondent will share in equal parts the advance cost on arbitration fixed by the Court.
Regarding the danger of Superphone disposing the equipment you provided, worst comes to
worst; the chattel mortgage of Superphones mother company will cover for what is due to your
company.