Arbitration Law in Philippines
In the Philippines, arbitration is governed by Republic Act No. 9285 (The Alternative Dispute Resolution (ADR) Act of 2004), which is the primary legal framework for both domestic and international arbitration. The law was created to encourage the use of alternative methods of dispute resolution, including arbitration, to resolve disputes more efficiently outside the court system.
The law is aligned with international arbitration principles, particularly the UNCITRAL Model Law on International Commercial Arbitration and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), which the Philippines ratified in 1975.
Key Features of Arbitration in the Philippines:
Alternative Dispute Resolution (ADR) Act of 2004 (Republic Act No. 9285):
- This Act recognizes and promotes arbitration as a preferred method of dispute resolution and governs both domestic and international arbitration.
- The law includes provisions for the enforcement of arbitration agreements and arbitral awards, including the recognition of foreign arbitral awards, as well as the establishment of the Office for Alternative Dispute Resolution (OADR).
Arbitration Agreements:
- Arbitration agreements are enforceable under Philippine law. If a dispute arises and the parties have previously agreed to arbitration, the courts will generally uphold the agreement and refer the case to arbitration.
- Arbitration clauses in contracts are commonly used, and if one party tries to bring the case to court despite an arbitration clause, the court will typically stay the litigation and direct the parties to arbitration.
- Arbitration can be agreed upon in advance (through an arbitration clause) or after the dispute arises (through a submission agreement).
Arbitration Procedure:
- The procedure for arbitration is flexible. Parties are free to agree on the arbitration rules and the procedure to be followed, including the appointment of arbitrators, venue, language, and time frame.
- In the absence of agreement, the rules of an institution (e.g., the Philippine Dispute Resolution Center, Inc. (PDRCI)) may apply, or the arbitrators themselves may establish the rules.
- Institutional Arbitration: Parties may opt for institutional arbitration, where arbitration is administered by an institution such as the PDRCI or the Philippine Chamber of Commerce and Industry (PCCI). Institutional arbitration provides a structured framework and established procedures.
- Ad-hoc Arbitration: If the parties choose ad-hoc arbitration, they must agree on procedural rules and appoint the arbitrators themselves.
Arbitrators:
- Arbitrators in the Philippines must be neutral and impartial, and they are selected by the parties involved. If the parties cannot agree on the selection of arbitrators, the courts can appoint them.
- Arbitrators can be chosen from lists of certified arbitrators provided by institutions like the PDRCI or may be chosen independently.
Recognition and Enforcement of Arbitral Awards:
- Domestic Arbitration: Arbitral awards in domestic arbitration are generally binding and enforceable. If one party fails to comply with an arbitral award, the other party can petition the court for enforcement.
- International Arbitration: The Philippines is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which means foreign arbitral awards are recognized and enforceable in the Philippines, subject to limited exceptions, such as violation of Philippine public policy.
- The Philippine courts have the power to recognize and enforce both domestic and foreign arbitral awards, though enforcement can be challenged on limited grounds, such as if the award violates public policy or fundamental principles of law.
Court's Role:
- Courts in the Philippines play a supportive role in arbitration by:
- Enforcing arbitration agreements: Courts will compel parties to proceed with arbitration if they try to litigate a matter that is subject to an arbitration agreement.
- Appointing arbitrators: If the parties fail to agree on an arbitrator, the court can step in and make the appointment.
- Setting aside awards: Courts can annul or refuse to enforce an arbitral award in limited cases, such as when the award is contrary to public policy or when there are procedural irregularities (e.g., lack of due process).
- Granting interim measures: Courts may issue interim measures to preserve the status quo during arbitration proceedings, such as orders for the preservation of assets or evidence.
Public Policy Exception:
- The public policy exception is a common feature in arbitration law. Under Philippine law, an arbitral award may not be recognized or enforced if it conflicts with the public policy of the Philippines.
- This includes awards that violate constitutional principles, laws, or public morals.
Advantages of Arbitration in the Philippines:
- Cost-effective: Arbitration is often cheaper and faster than traditional court proceedings, especially in commercial disputes.
- Confidentiality: Arbitration proceedings are generally private, which is an attractive feature for businesses concerned with the confidentiality of their disputes.
- Flexibility: The arbitration process is more flexible than litigation, as parties have more control over the procedures and can choose arbitrators with expertise in the subject matter of the dispute.
- Finality: Arbitral awards are generally final and binding, with limited grounds for appeal, which provides certainty and avoids prolonged litigation.
Recent Developments:
- ADR Law Amendments: The government of the Philippines continues to refine and expand the legal framework surrounding alternative dispute resolution to make it more attractive and effective. There have been ongoing efforts to improve the training of arbitrators, streamline processes, and attract international arbitration cases.
- The creation of the Office for Alternative Dispute Resolution (OADR) in the Philippines has helped institutionalize ADR mechanisms and promote arbitration, further developing the country's arbitration infrastructure.
Summary:
Arbitration in the Philippines is governed by the ADR Act of 2004 (Republic Act No. 9285), which encourages the use of arbitration as a method for resolving disputes outside the courts. The law provides a framework for both domestic and international arbitration, with a strong emphasis on party autonomy, flexibility, and efficiency. Arbitration agreements are enforceable, and the courts play a supportive role in ensuring that arbitration proceedings are followed, including the recognition and enforcement of arbitral awards. The Philippines is a signatory to the New York Convention, which facilitates the enforcement of foreign arbitral awards in the country. Arbitration in the Philippines is seen as a cost-effective, confidential, and flexible alternative to traditional litigation.
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