BALAODAN, Fernando Jr.

Grounds for Vacating Award Under RA 876

The grounds for vacating an award in RA 876 arbitration cannot be invoked in a
petition to set aside a Model Law award. Rule 1.24 of the Special ADR Rules excludes even
the use of RA 876, Section 24 grounds for setting aside a Model Law award. This clarification
needs to be made because, in resolving appeals, appellate courts appeared not to have made a
distinction between Model Law award and RA 876 awards.

Forms and Contents of Petition to Set Aside

A. Petition Regarded as Special Proceeding

Like an RA 876 award, a petition to confirm or set aside a Model Law award shall be
filed with the RTC as a special proceeding (Art. 4.34 (b) ADR IRR). Also, Section 47 of ADR
Act provides that arbitration for assistance and supervision shall be deemed as special
proceedings. This is reiterated in Rule 1.2 of the SADR that all proceedings under the SADR are
special proceedings. They are not to be treated as if they are civil actions.

B. Venue

The venue of such proceeding may be the place where:

a. The arbitration proceedings were conducted;
b. Where the asset to be attached or levied upon, or the act to be enjoined is
located;
c. Where any of the parties to the dispute resides or has his place of business;
or
d. In the National Judicial Capital Region, at the option of the applicant. (Section
47, ADR Act; Rule 12.3, SADR)
This is particularly important to the party in arbitration whose place of business is outside
the Philippines who may encounter difficulty in establishing the place of business of the
respondent in the Philippines.

C. Who May File Petition

Any party to an international commercial arbitration in the Philippines may petition the
proper court to recognize and enforce or set aside an arbitral award. (Rule 12.1, SADR; Art 4.34
(e), ADR IRR)

D. Period of Filing Petition

The prevailing party may file a petition seeking recognition and enforcement of a Model
Law award at any time after it is received but the party seeking to have it set aside must
do so within three (3) months from its receipt. A petition to set aside the award beyond the 3-
month period from receipt shall be time-barred and the affected party shall be precluded from
raising grounds to resist its enforcement. (Rule 12.2 (B), SADR; Art. 4.34 (c), ADR IRR)

Article 4.33. Correction and Interpretation of Award, Additional Award.

(a) Within thirty (30) days from receipt of the award, unless another period of time has
been agreed upon by the parties:
(i) A party may, with notice to the other party, request the arbitral tribunal to
correct in the award any errors in computation, any clerical or typographical
errors or any errors of similar nature;
(ii) A party may, if so agreed by the parties and with notice to the other party,
request the arbitral tribunal to give an interpretation of a specific point or part of
the award.
(b) If the arbitral tribunal considers the request to be justified, it shall make the correction
or give the interpretation within thirty (30) days from receipt of the request. The
interpretation shall form part of the award.
(c) The arbitral tribunal may correct any error of the type referred to in paragraph (a) of
this Article on its own initiative within thirty (30) days from the date of the award.
(d) Unless otherwise agreed by the parties, a party may, with notice to the other party,
request, within thirty (30) days of receipt of the award, the arbitral tribunal to make an
additional award as to claims presented in the arbitral proceedings but omitted from the
award. If the arbitral tribunal considers the request to be justified, it shall make the
additional award within sixty (60) days.
(e) The arbitral tribunal may extend, if necessary, the period of time within which it shall
make a correction, interpretation or an additional award under paragraphs (a) and (b) of
this Article.
(f) The provisions of Article 4.31 (Form and Contents of Award) shall apply to a
correction or interpretation of the award or to an additional award.

E. Court Cannot Review Findings of Fact and/or Law

An arbitral award is presumed to have been made in due course of arbitration and is
subject to confirmation by the court. It is the party who seeks to set it aside or is resisting
enforcement that has the burden to establish a ground for setting aside the arbitral award. (Rule
12.12, SADR)

A Model Law award gives the court only two (2) options. If a ground for setting it aside is
fully established, the court shall set aside the award; otherwise, the court shall recognize and
enforce the award. The court, under the Model Law Article 34, may not entertain any application
to amend or modify the award which thereby would disturb the arbitral tribunal’s determination
of facts and/or interpretation of law.

F. Petitions and Counter-Petitions

The petition to recognize and enforce a Model Law award may be opposed by the
adverse party who may file a timely counter-petition to set it aside. Conversely, if a timely
petition to set aside the award is filed, the prevailing party may file a counter-petition to
recognize and enforce it. (Rule 12.2 (A) & (B), SADR)
In addition to the usual contents of a petition identifying the parties, it is important to
allege:
a. Their addresses of record to show that the arbitration is international,
b. That an arbitration agreement exists between the parties,
c. The names of the arbitrators and proof of their appointment,
d. That an award was made, and
e. The relief sought which is either to recognize and enforce it or to set it aside.
Authentic copies of the arbitral award shall be attached to the petition. If the petition is
one to set aside the award, it shall also state the grounds relied upon.

G. Suspension of Proceedings to Set Aside

When an application to set aside an arbitral award is made by a party resisting its
recognition, either party to the proceedings may request the court to suspend the proceedings
to set it aside and to remit the case to the arbitral tribunal to resume the arbitral proceedings or
to take such action as in the arbitral tribunal’s opinion may eliminate the ground for setting
aside the arbitral award. (Art. 4.34 (d), ADR IRR) The court, in referring the case back to the
arbitral tribunal, may not direct the latter to receive the evidence in a particular way, or to revise
its findings of fact or conclusion of law, or otherwise encroach upon the independence of the
arbitral tribunal in the making of its final award.

H. Procedure where Tribunal Makes Preliminary Ruling in Favor of its Own

Jurisdiction

The second part of Rule 12.11 of the SADR contemplates a situation where earlier, in an
arbitral proceeding, the arbitral tribunal makes a preliminary ruling in favor of its own jurisdiction
and this preliminary ruling is appealed to the RTC.

I. Notice and Hearing

The RTC, upon finding that the petition is sufficient both in form and substance shall
cause a copy of the petition to be served on the respondent, together with a notice directing him
to file an opposition to the petition within 15 days from receipt thereof. (Rule 2.8, SADR)
If the RTC finds that the issue between the parties is one of law, it may require the
parties to submit briefs of legal arguments which should sufficiently discuss the legal issues and
the legal bases of the reliefs prayed for. If there are issues of fact, the RTC may require
submission of affidavits, attached to which shall be the documents relied upon to support the
petition or opposition. (Rule 2.9, SADR) An oral hearing is not required.

J. Motion for Reconsideration; When Allowed

A party may file a motion for reconsideration of a decision or order of an RTC

recognizing and/or enforcing or dismissing a petition to recognize and enforce a Model Law
award, or adjourning or deferring a ruling on a petition to set aside or to recognize and enforce a
Model Law award. (Rule 19.1 a(n) & (O), SADR) The motion shall be made in writing setting forth
the grounds upon which it is based. The adverse party may file its opposition or comment within
a non-extendible period of 15 days from receipt of the motion.
The RTC shall resolve the motion within 30 days from receipt of the opposition or
comment within 30 days from receipt of the opposition or comment or upon the lapse of that
period. A second motion for reconsideration is not allowed.

K. Appeal to Court of Appeals

The decision of the RTC recognizing and enforcing or setting aside a Model Law award
may be appealed in the form of a petition for review to the Court of Appeals on the following
grounds which are exclusive:
(i) the party making the application furnishes proof that:
(aa) a party to the arbitration agreement was 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 Philippines; or
(bb) 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
(cc) 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 the part of the award which contains decisions on matters not
submitted to arbitration may be set aside; or
(dd) the composition of the arbitral tribunal or the arbitral procedure was not
in accordance with the agreement of the parties, unless such agreement was
in conflict with a provision of ADR Act from which the parties cannot derogate, or,
failing such agreement, was not in accordance with ADR Act; or
(ii) the Court finds that:
(aa) the subject-matter of the dispute is not capable of settlement by
arbitration under the law of the Philippines; or
(bb) the award is in conflict with the public policy of the Philippines. (Art. 4.34
(B)(i) & (ii), ADR IRR)

L. Appeal by Certiorari

The Special ADR Rules allow an appeal in the form of a petition for certiorari against an
RTC order suspending the proceedings to set aside a Model Law award and referring the case
back to the arbitral award.
RCBC CAPITAL CORP. v. BDO, G.R. No. 196171, 10 December 2012.
Question: When may an international arbitral award be set aside by the courts?
Answer: The court shall not set aside or vacate the award of the arbitral tribunal merely on the
ground that the arbitral tribunal committed errors of fact, or of law, or of fact and law, as the
court cannot substitute its judgment for that of the arbitral tribunal.
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 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, since any other rule 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. (Asset Privatization Trust v. Court of Appeals)

Judicial Review of Arbitral Awards in the Philippines: A Look into the Application of the
Public Policy Exception Under the New York Convention Applying United States
Precedents by MARY JUDE CANTORIAS

 The US is recognized as a leading jurisdiction for international arbitration

 There is no Philippine Supreme Court case law that specifically refers to non-
enforcement of foreign arbitral awards on grounds of violation of public policy.

 The Philippines may benefit from US civilization given its courts’ wealth of experience in
deciding complex international arbitration issues.

 Congress passed the Philippine Alternative Dispute Resolution Act of 2004 (ADR Act),
regulating the enforcement of awards in international commercial and foreign arbitration,
in an effort to reflect the country’s pro-arbitration policy.

 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:

o The subject matter of the difference is not capable of settlement by arbitration

under the law of that country; or
o The recognition or enforcement of the award would be contrary to the public
policy of that country.

 An arbitrator’s manifest disregard of the law, which constitutes a ground for vacating
domestic arbitral awards under the United States Federal Arbitration Act, could also
constitute a ground for refusing to enforce a foreign arbitral award under the Convention.
 The US is recognized as a leading jurisdiction for international arbitration, influencing
arbitral laws around the world; insofar as the Philippines is concerned, US case laws have
persuasive effect.
The concept of public policy, as it applies to enforcement actions in international arbitral
awards, is not well established in the Philippines. Nonetheless, it has made efforts to harmonize
its rules with existing international instruments to which it is a signatory, in hopes of obtaining a
competitive advantage as arbitration seat. Recognizing this need, congress passed the
Philippine Alternative Dispute Resolution Act of 2004 (ADR Act), regulating the enforcement of
awards in international commercial and foreign arbitration, in an effort to reflect the country’s
pro-arbitration policy.
Understanding the interplay of varying interests of nations involved in an international
arbitration, a national court enforcing or setting aside an arbitral award must endeavor to
balance and harmonize these interests when applying its domestic public policy limitations. To
date, there is no Philippine Supreme Court case law that specifically refers to non-
enforcement of foreign arbitral awards on grounds of violation of public policy. This
scarcity of case law in the Supreme Court adds to the difficulty for lower courts in finding
guidance when faced with the public policy defense against enforcement, especially so that
adherence to judicial precedents is embodied in Article 8 of the Philippine Civil Code; hence, the
need to develop an arbitration civilization by looking to well-evolved jurisdictions like the US.
The seminal US case in this area of law is Parsons v. RAKTA, where the Second Circuit
Appeals Court affirmed an arbitral award despite claims of public policy violation on the ground
that diplomatic relations between Egypt (the respondent's state) and the US had been severed.
The court held that the public policy defense is not meant to merely protect national interests; an
action that violates American public policy may not necessarily violate international public policy.
Despite the fact that the enforcing courts must necessarily draw from public policy notions of
“that State”— that is “essentially national (i.e., it is considered in a national context, namely in
the national legal system of the forum)”, a distinction must still be made where public policy is
invoked in the field of international commercial arbitration, i.e. beyond mere contravention of
[domestic] law.
The public policy defense should be narrowly construed, especially so where the public
policy allegedly violated is not well defined and dominant, taking into account one of the
overriding purposes of the Convention to unify the standards by which arbitral awards are
enforced in signatory countries. These parameters are consistent with the pro-enforcement bias
of the New York Convention. The court concluded that refusal to enforce a foreign arbitral award
should only be premised on violation of the enforcing state's “most basic notions of morality and
justice.”
In subsequent cases, US Federal courts have likewise narrowly interpreted the public
policy defense. The Seventh and Ninth Circuit Court of Appeals, respectively, upheld the narrow
construction of the public policy defense. In Baxter v. Abbott, the court affirmed the arbitral
award despite claims of violation of US antitrust laws, i.e. the award itself created an anomaly
that required Baxter to violate the antitrust law. The United States District Court for the Northern
District of Illinois, Eastern Division dismissed Baxter's contention that the award violated US
public policy (Art. V(2)(b)) because the award-preventing Baxter from selling in the US market
the 3-step process produced sevoflurane, a fluorine-based inhalation an aesthetic- as opposed
to the one-step process which Abbott is under licensed with Baxter to sell, created an illegal
market allocation agreement in violation of the Sherman Act, which forbids every agreement “in
restraint of trade”. The district court found that the non-competition covenant in this case was
ancillary to a valid transaction originally entered into between Baxter and Maruishi (the
Japanese company to whom Baxter granted worldwide rights to its sevoflurane one-step
process patents) and reasonable in its scope and thus valid under Illinois law. Finding no
violation of public policy the district court denied the motion to set aside the award and granted
the motion to confirm it.
On appeal, the United States Court of Appeals for the Seventh Circuit affirmed the lower
court's decision. First the court held that Baxter cannot reargue before the enforcing court an
issue that was already decided conclusively by the arbitral tribunal, i.e. antitrust issues are
arbitrable. Baxter cannot do indirectly what it cannot do directly, i.e. since the arbitrators had
already ruled that the Baxter-Maruishi license does not violate the Sherman Act and Baxter
cannot now argue that the award preventing its sale of the 3-step process produced sevoflurane
created antitrust law violation.
In Northrop v. Triad, the court enforced the arbitral award despite the illegality, under
Saudi Arabian Regulations, of paying commissions by Northrop to Triad for soliciting
government contracts with the Saudi Arabian Air Force. The court ruled that the “relevant public
policy” in this case was that of the country of enforcement (US) and not that of the country of
performance (Saudi Arabia), bearing in mind that the parties agreed to conduct arbitration in
California, the laws of which governed the arbitration. These two rulings, consistent with the
principles laid down in Parson, reflect US courts embracing international, and not domestic,
public policy as applicable in cases involving Article V (2)(b). In rare instances though, US
courts may refuse enforcement of an arbitral award for being contrary to public policy.
In Laminoirs v. Southwire Co., a US Federal District Court sitting in Georgia enforced the
arbitral award rendered under French Law but struck down the portion imposing additional
interests for delay in the payment of the award. The court, taking heed of the state of Georgia’s
public policy, deemed this portion as penal in nature and not merely compensatory, therefore
contrary to public policy.
Likewise, the approach of Philippine court decisions interpreting national public policies
should be consistent with the objectives of the Convention and the public policy interests of
other Contracting States, not merely advancing “parochial, local interests.” Philippine court
decisions should add to the growing development of an “arbitration civilization” in the Philippines
by providing guidance in defining this area of law and recognizing what is merely frivolous
opposition clutching at the public policy “straw”.
Finally, it may be an interesting innovation to have specific Supreme Court justices
tasked to oversee the development of Philippine jurisprudence in the arbitration field. Such
expertise will help in the speedy disposition of arbitration matters brought to court, helping the
Philippines emerge as a sophisticated international arbitration hub.

Judicial Review of International Arbitral Awards: Preserving Independence in

International Commercial Arbitrations by Jessica L. Gelande
The strong policy supporting international arbitration dictates that courts preserve the
independence of arbitral tribunals and effectuate the intent of parties to finalize their disputes
through arbitration. Although there are dangers inherent in an unchecked system of dispute
resolution, parties to an arbitration agreement are free to balance the costs and benefits of
arbitration and overseas litigation.
The advantages of arbitration in an international commercial context are strong,
eliminating a great deal of cost and uncertainty. Parties involved in international trade realize the
benefit of arranging a neutral, efficient, and final method of resolving commercial disputes.
Accordingly, they voluntarily submit to the arbitral process. It is imperative that both domestic
and foreign parties remain confident in the predictability and autonomy of international
arbitration if the United States is to continue to develop its international markets. Imposing
national review onto international arbitral awards will only produce skepticism and reluctance to
submit to international commercial arbitration.