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ARBITRATION MACHINERY

FOR THE CONSTRUCTION INDUSTRY

* Executive Order No. 1008


* CIAC Revised Rules of Procedure Governing
Construction Arbitration ( 28 January 2011)
* DOJ Circular No. 98 (IRR of the ADR Law)

Executive Order No. 1008


(Construction Industry Arbitration Law)
Salient Features:

Created the establishment of Construction Industry


Arbitration Commission (CIAC), under the administrative
supervision of the Philippine Domestic Construction Board
(PDCB);
Authorizing CIAC to formulte and adopt necessary rules and
procedure for construction arbitration.

What is Construction Dispute?

Construction Dispute
- refers to those arising from all on-site works
on buildings or altering structures, from land
clearance
through
completion
including
excavation, erection and assembly and
installation of components and equipment.
(Hi-Precision Steel Center, Inc. v. Lim Kim Steel Builders, Inc., G.R. No. 110434, December 13,
1993)

Jurisdiction of Construction Industry Arbitration Commission

(CIAC)
It has original and exclusive jurisdiction over:

Disputes arising from, or connected with, contracts involving construction;

Disputes arising after the abandonment or breach of said contract;

Violations of specifications of materials and workmanship'

Violations of the terms of agreement agreed upon in the said contract;

Interpretation and/or application of:

Contractual provisions;

Amount of Damages and Penalties;

Commencement time and delays;

Maintenance and defects;

Payment of default of Employer; and

Changes of construction cost.

Jurisdiction of Construction Industry Arbitration Commission

(CIAC)
It has original and exclusive jurisdiction over:

Construction disputes, although the arbitration is commercial;

Exception:

Construction disputes arising from Employer-Employee relationship.

Jurisdiction of Construction Industry Arbitration Commission

(CIAC)
A and B entered into a Water Supply Contract wherein B shall supply potable water to
A. In the said contract, an arbitration clause stated that both shall settle any dispute
arising from said contract to the CIAC, pursuant to EO 1008.
B failed to comply with his obligations. A filed a complaint against B to CIAC pursuant
to the arbitration clause. B filed an answer together with its Motion To Dismiss stating
CIAC does not have jurisdiction as the dispute is not a construction or infrastructure
dispute.
CIAC ordered denying the Motion and further ordered the parties to a preliminary
conference for the review and signing of Terms of Reference (TOR).
B filed a Petition for Certiorari unde Rule 65 to the CA questioning the jurisdiction of
CIAC. CA ruled in favor of CIAC, stating it has jurisdicition over the dispute. B filed a
Motion for Reconsideration.
Meanwhile, CIAC proceeded with the prelim. Conference and signing of TOR.
Thereafter, A submitted Formal Offer of Evidence, Memorandum of Arguments, and
subesequently, rendered the award in favor of A. B did not attend any of these
proceedings.

Jurisdiction of Construction Industry Arbitration Commission

(CIAC)
CA dismiss the Motion for Reconsideration filed by B. B, filed an Appeal on the Award
rendered by CIAC to A, but did not make an appeal on the denial of MR on the
ground of lack of jurisdiction. Thus, the CA's decision as regards the jurisdiction
issue became final and executory.
Issue: Whether or not CIAC has jurisdiction?
Held: SC affirmed the ruling of the CA.

The parties treated their contract as one of a construction contract.

The CA's decision has become final and executory.

(Metropolitan Cebu Water District vs. Mactan Rock Industries, Inc., G.R. No. 172438,
July 4, 2012)

Coverage of Construction Industry Arbitration Commission

(CIAC)
Construction dispute shall include those:

Between and among the parties;


Who are bound by an Arbitration Agreement, directly or by
reference, whether such parties are:

Project owner; - Project Manager;


Contractor;
- Design Professional;
Sub-contractor; - Consultant;
Fabricator;
- Quantity Surveyor;
Bondsman or Issuer of an Insurance Policy in
a construction project

How CIAC acquires jurisdiction?

Arbitration Agreement
in the Contract
- a stipulation in the
contract
involving
construction that any
dispute
shall
be
resolved
through
arbitration.

Submission
to
Arbitration as agreed
by both parties
- may be an exchange of
communication
between
parties, or some other forms
showing that the parties
have agreed to submit their
dispute to resolution.

Conditions for exercise of


jurisdiction

the Arbitration Agreement or Submission for Arbitration


MUST be alleged in the complaint.
Failure to allege in the complaint, CIAC Secretariat shall
within three (3) days from such filing, notify the Respondent
that, if he/it is willing to have the dispute be resolved by
arbitration or, in case of Arbitration Agreement, such
agreement must be clearly expressed in his Answer.
Failure to do so or Respondent instead files a Motion to
Dismiss shall be deemed as a refusal to submit to arbitration.
In either case, CIAC shall dismiss the Complaint without
prejudice to its refilling upon a subsequent submission.

Jurisdictional Challenge
Arbital Tribunal shall have the full authority to resolve all
issues raised in the Motion To Dismiss for lack of jurisdiction
on the following grounds:

Dispute is not a construction dispute;


Respondent was not represented by one w/out capacity to
enter into a binding arbitration agreement;
Submission or agreement is not valid for some other
reasons;
Issue is not covered by a particular dispute sought to be
arbitrated.

Non-Waiver of Jurisdictional
Challenge
A party does not waive its right to challenge the jurisdiction of
CIAC by any of the following acts:

Participating in the nomination process including challenging


the qualifications of a nominee;
Praying for extension of
pleading/motion to dismiss;

time

to

Opposing an application for interim relief;

Filing of a Motion To Dismiss/Suspend.

file

appropriate

Venue

Mutually agreed upon


by the parties

Choice of the Arbitral


Tribunal in case of the
absence or
disagreement.

ARBITRATORS IN CIAC

QUALIFICATIONS

Men of distinction in whom the business sector and the gov't


can have confidence;
Technically qualified to resolve any construction dispute
expeditiously and equitably;
Arbitrators, as the case may be, must come from different
profession familiar with the construction industry or who are
experienced in construction disputes;
Must be CIAC-Accredited, except:

He is the parties' common nominee;

Possesses technical/legal competence to handle the construction dispute involved; and

Has signified his availability/acceptance of his possible appointments.

NOMINATION AND APPOINTMENT OF


ARBITRATORS

Nomination and Appointment of Arbitrators when parties


agree on number of Arbitrators in a Tribunal

Parties shall:

Submit the names of not


more than six (6)
nominees from CIACAccredited arbitrators;
Indicate, together with the
above submission, the
order
of
their
preference
for
appointment
as
arbitrators.

CIAC shall appoint the common


nominees
subject
to
their
availability
and
other
considerations.
The third arbitrator shall be
selected by the two arbitrators
within 15 days from their
acceptance.
The Three Arbitrators shall decide
among themselve who shall be the
Chairman.

Nomination and Appointment of Arbitrators in the Absence


of an Agreement on the number of Arbitrators

CIAC has the option to appoint a Sole Arbitrator or an Arbitral Tribunal


consisting of three Arbitrators, taking into consideration the
complexities and intricacies of the dispute or sum involved.

Nomination and Appointment of Arbitrators in case of


Multiple Parties to an arbitration

Parties shall submit the names of the nominees and order of their
preference for appointment of arbitrators.
If the parties do not or are unable to agree to a method for constitution
of the Tribunal, CIAC shall appoint the arbitrators.

Nomination and Appointment of a Sole Arbitrator

When?

If the parties have agreed to settle the dispute by a Sole Arbitrator.


How?

Parties shall submit the names of the nominees;

CIAC shall apoint the Sole Arbitrator from the nominees submitted.

In case, parties or one of them fails to submit the nominee, CIAC shall
appoint the Sole Arbitrator.

Nomination and Appointment of a Sole Arbitrator

When?

If the parties have agreed to settle the dispute by a Sole Arbitrator.


How?

Parties shall submit the 6 names of the nominees;


CIAC shall apoint the Sole Arbitrator who is the common nominee from the
nominees submitted.
If the common nominee is unavailable for arbitration of disqualified, CIAC shall:

Return the list submitted by the parties;


Ask the parties to make an agreement on a common nominee within
48 hours;

In case, parties or one of them fails to submit the nominee, CIAC shall appoint
the Sole Arbitrator.

Foreign Arbitrator

Who?

Maybe accrediter or not with the CIAC as an arbitrator or chairman


provided:

One of the parties in the dispute is an international party


whose place of business is outside the Phils., excluding
domestic subsidiary or a co-venturer in a joint venture with
a party which has its place of business in the Phils.
He is not a national of the Phils. And is not of the same
nationality as the international party in this dispute.

Foreign Arbitrator

How?

Must be nominated by the parties; or


Common choice of the two CIAC-Accredited arbitrators one of whom
was nominated by the international party;

The nomination must be accompanied by:

A resume or bio-data of the nominee indicating the


qualifications as a construction arbitrator; and
A signed undertaking of the nominee to abide by CIAC
arbitration rules and policies.

Disqualification of Nominees
Challenge must be done before the lapse of the original 10-day period for submission
of Memoranda or Draft Decision. A Motion to Extend to File Memoranda or Draft
Decision does not extend the time to challenge the appointment of an arbitrator.
An Arbitrator may be challenged on the following grounds:

Relationship by either consanguinity or affinitiy within the sixth civil degree


of either party to the controversy, or to counsels within the fourth civil
degree;

Financial, fiduciary, or other interests in the controversy;

Partiality or bias;

Incompetence or professional misconduct;

Upon other just and valid reasons affecting independence, integrity,


impartiality and interest.

Disqualification of Nominees

An Arbitrator who acted as a conciliator/mediator in a case previously brought before


him for conciliation/mediation cannot act as an arbitrator for the same case when
brought to arbitration, unless both parties consented to his appointment in writing.

Inhibitions
An arbitrator may inhibit under the ff.
circumstances:

Under the grounds for challenges, the arbitrator may initiate the inhibition.
If he acted as a conciliator/mediator in a previous case involving the same issue and
parties.
Any circumstance that may create in either party a presumption of bias or which he
believes might disqualify him as an impartial arbitrator, subject to approval of CIAC.

Vacancies

If vacancy occured before an award has been


rendered

CIAC may within 5 days of the vacancy appoint a


substitute to be chosen from the list of
alternatives previously agreed upon by the
parties.
If there is no list, CIAC shall fill the vacancy from
the list of accredited arbitrators.

Vacancies

If vacancy occured after an award has been


rendered but before jurisdiction of arbitrator has
been terminated

CIAC may, on its own initiative or upon request of the parties, appoint a
replacement from the list of alternatives previously agreed upon or from the list of
accredited arbitrators.
If the request of the parties is unmeritorious, the CIAC shall deny the same, refund
the deposit made, and direct the remaining arbitrator/s to act on pending matters.

(Decision of the CIAC on Vacancies shall be final)

AWARD

Shall be in writing;
Signed by the Tribunal or majority of its
members;

Filing

Answer

Yes/no

Dismissed

Preliminary
Confer.

Formal Offer
Of Evidence

Signing of
Terms of
Reference

Submission of Memoranda/
Draft Decisions

AWARD

Execution of Award