Arbitrations

Article 2042 to Article 2047 Of the Civil Code speaks of Arbitrations.

In addition, there had been relevant laws passed that provided for a more specific and comprehensive
guideline on the subject of arbitrations, relevant to this discussion are certain provisions of the following
statutes and Executive Order.

 The Arbitration Law of 1953 R.A. 876– as far as Domestic Arbitrations are concerned

 Alternative Dispute Resolution (ADR Act of 2004 ) – for INTERNATIONAL COMMERCIAL

ARBITRATION

 Executive Order 1008 – Confers jurisdiction to the Construction Industry Arbitration

Commission, where there is agreement for the Parties to the Construction

In the course of discussing the civil code provisions, there may be provisions from these special rules
that may also be relevant to our discussions.

Let us discuss some basic definitions on the subject matter

Arbitration has been defined in the Alternative Dispute Resolution Act as a Voluntary dispute
resolution process in which one or more arbitrators, appointed in accordance with the
agreement of the parties, or rules promulgated pursuant to the ADR Act to resolve a dispute
by rendering an Award;

Arbitrator means the person appointed to render an award, alone or with others, in a dispute that is the
subject of an arbitration agreement;

Award" means any partial or final decision by an arbitrator in resolving the issue in a controversy;

Commercial Arbitration an arbitration is "commercial if it covers matter arising from all relationships of
a commercial nature, whether contractual or not;

Arbitration Law R.A. 876

Controversies or cases not subject to the provisions of this Act. - This Act shall not apply to
controversies and to cases which are subject to the jurisdiction of the Court of Industrial
Relations – Now NLRC ( Labor Cases ) or which have been submitted to it as provided by
Commonwealth Act Numbered One hundred and three, as amended.
Section 4. Form of arbitration agreement. - A contract to arbitrate a controversy thereafter
arising between the parties, as well as a submission to arbitrate an existing controversy shall be
in writing and subscribed by the party sought to be charged, or by his lawful agent.

The making of a contract or submission for arbitration described in section two hereof, providing
for arbitration of any controversy, shall be deemed a consent of the parties to the jurisdiction of
the Court of First Instance of the province or city where any of the parties resides, to enforce
such contract or submission.

Section 10. Qualifications of arbitrators. - Any person appointed to serve as an arbitrator must
be of legal age, in full-enjoyment of his civil rights and know how to read and write. No person
appointed to served as an arbitrator shall be related by blood or marriage within the sixth degree
to either party to the controversy. No person shall serve as an arbitrator in any proceeding if he
has or has had financial, fiduciary or other interest in the controversy or cause to be decided or
in the result of the proceeding, or has any personal bias, which might prejudice the right of any
party to a fair and impartial award.

No party shall select as an arbitrator any person to act as his champion or to advocate his
cause.

If, after appointment but before or during hearing, a person appointed to serve as an arbitrator
shall discover any circumstances likely to create a presumption of bias, or which he believes
might disqualify him as an impartial arbitrator, the arbitrator shall immediately disclose such
information to the parties. Thereafter the parties may agree in writing:

(a) to waive the presumptive disqualifying circumstances; or

(b) to declare the office of such arbitrator vacant. Any such vacancy shall be filled in the
same manner as the original appointment was made.

"Alternative Dispute Resolution System" means any process or procedure used to resolve a
dispute or controversy, other than by adjudication of a presiding judge of a court or an officer of
a government agency, as defined in this Act, in which a neutral third party participates to assist
in the resolution of issues, which includes arbitration, mediation, conciliation, early neutral
evaluation, mini-trial, or any combination thereof;

(b) "ADR Provider" means institutions or persons accredited as mediator, conciliator, arbitrator,
neutral evaluator, or any person exercising similar functions in any Alternative Dispute
Resolution system. This is without prejudice to the rights of the parties to choose nonaccredited
individuals to act as mediator, conciliator, arbitrator, or neutral evaluator of their dispute.

Whenever reffered to in this Act, the term "ADR practitioners" shall refer to individuals acting as
mediator, conciliator, arbitrator or neutral evaluator;
Civil Code Provisions

ARTICLE 2042. “The same persons who may enter into a compromise may submit their
controversies to one or more arbitrators for decision.”
- The Chapter on Compromise mentions some of these parties namely

Guardians
Parents
Absentee’s Representatives Article 2032 NCC
Administrators or
Executor of Decedent’ Estates

Juridical Persons - -------------------------------- Article 2033 NCC

Two or more persons or parties Arbitration Law R.A. 876

parties to any contract

Article 2043. “The provisions of the preceding Chapter upon compromises shall also be
applicable to arbitrations.”
The Chapter on Compromise is by express provision of the law is made also applicable to the
chapter on arbitration.

ARTICLE 2044. States as a GENERAL RULE that any stipulation in the arbitration clause that
the arbitrators’ award or decision shall be FINAL and VALID.
The EXCEPTION however to the GENERAL RULE is lies in the following preceding Articles
namely ;
1. Article 2038 – which provides that compromise agreement where consent is vitiated by
FRAUD
UNDUE INFLUENCE (also known as Vices of Consent in OBLICON)
MISTAKE also renders the award or decision VOIDABLE by express
INTIMIDATION provision of Art. 2038 in relation to Art. 1330
VIOLENCE

2nd part of Article 2083 also stated that one cannot assert mistake of fact as against the
other if the latter because of the compromise has withdrawn litigation already
commenced.
 2. Article 2039 – states as a General Rule that discovery of documents referring to 1 or
more but not all of the questions settled through compromise Shall NOT be a cause of
Annulment or Rescission of the compromise agreement UNLESS there has been
PRIOR CONCEALMENT of the document by one of the parties.

Exception : If the newly discovered evidence refers to only 1 thing to which one of the
parties has no right

3. Article 2040 – States that 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.
Ignorance of a judgment which may be revoked or set aside is not a valid ground for
attacking a compromise.
Application
The rule as applied to arbitrations would mean that if and when there was a PRIOR
FINAL JUDGMENT whose existence the parties were unaware of (at the time an award
or decision has been rendered by the arbitrator) such award may then be rescinded.
Accordingly, a judgment which is NOT yet final final CANNOT be a valid ground for
setting aside an award rendered by the arbitrator.

ARTICLE 2046. “The appointment of arbitrators and the procedure for arbitration shall be
governed by the provisions of such rules of court as the Supreme Court shall promulgate.”
The appoint of Arbitrators under the Sec. 8 of the Arbitration Law (R.A. 876) essentially states
that appointment is made in accordance with the contract of arbitration or in accordance to the
submission absent such, the following shall apply. The Court shall appoint an arbitrator or
arbitrators, as the case may be, in the following instances:

(a) If the parties to the contract or submission are unable to agree upon a single
arbitrator; or

(b) If an arbitrator appointed by the parties is unwilling or unable to serve, and his
successor has not been appointed in the manner in which he was appointed; or

(c) If either party to the contract fails or refuses to name his arbitrator within fifteen days
after receipt of the demand for arbitration; or

(d) If the arbitrators appointed by each party to the contract, or appointed by one party to
the contract and by the proper Court, shall fail to agree upon or to select the third
arbitrator.

(e) The court shall, in its discretion appoint one or three arbitrators, according to the
importance of the controversy involved in any of the preceding cases in which the
agreement is silent as to the number of arbitrators.
 (f) Arbitrators appointed under this section shall either accept or decline their
appointments within seven days of the receipt of their appointments. In case of
declination or the failure of an arbitrator or arbitrators to duly accept their appointments
the parties or the court, as the case may be, shall proceed to appoint a substitute or
substitutes for the arbitrator or arbitrators who decline or failed to accept his or their
appointments.

Alternative Dispute Resolution Act (r.a. 9285) - International Commercial Arbitration

Appointing Authority" as used shall mean the person or institution named in the arbitration
agreement as the appointing authority; or the regular arbitration arbitration institution under
whose rules the arbitration is agreed to be conducted. Where the parties have agreed to submit
their dispute to institutional arbitration rules, and unless they have agreed to a different
procedure, they shall be deemed to have agreed to procedure under such arbitration rules for
the selection and appointment of arbitrators. In ad hoc arbitration, the default appointment of an
arbitrator shall be made by the National President of the Integrated Bar of the Philippines (IBP)
or his duly authorized representative.

Alternative Dispute Resolution Act (r.a. 9285) - Arbitration in Construction Disputes

SEC. 36. Authority to Act as Mediator or Arbitrator. - By written agreement of the parties to a
dispute, an arbitrator may act as mediator and a mediator may act as arbitrator. The parties may
also agree in writing that, following a successful mediation, the mediator shall issue the
settlement agreement in the form of an arbitral award.

SEC. 37. Appointment of Foreign Arbitrator. - The Construction Industry Arbitration

Commission (CIAC) shall promulgate rules to allow for the appointment of a foreign arbitrator or
coarbitrator or chairman of a tribunal a person who has not been previously accredited by CIAC:
Provided, That:

(a) the dispute is a construction dispute in which one party is an international party

(b) the person to be appointed agreed to abide by the arbitration rules and policies of
CIAC;

(c) he/she is either coarbitrator upon the nomination of the international party; or he/she
is the common choice of the two CIAC-accredited arbitrators first appointed one of whom
was nominated by the international party; and

(d) the foreign arbitrator shall be of different nationality from the international party.