RA 876. Arbitration Law1 . W h a t i s a r b i t r a t i o n ?

Arbitration has been defined under the ADR Act as a voluntary dispute resolution process in which one or more arbitrators appointed inaccordance with the agreement of the parties resolve a dispute by renderingan award. It is a non-adversarial settlement wherein the parties are freeto choose the arbitrators that will compose the tribunal, the procedureto be followed in the proceedings, the venue of arbitration, and the substantive law that will govern theproceedings. 2 . B e n e f i t s o f A r b i t r a t i o n : a. Fast, quick and easy : The number-one benefit of arbitration is that it serves as a forum toresolve disputes outside of the judicial system. Arbitration can be fast, quick and easy,whereas lawsuits can drag on for years and years. Since the rules of evidence and procedureare usually relaxed in arbitration proceedings, the parties are also in a better position torepresent themselves without having to get lawyers involved. b. Less expensive: It naturally follows that arbitration also tends to be less expensive thanpursuing a lawsuit. While the parties will usually end up having to pay the arbitrator, his or her fees will inevitably be less than the attorneys' fees that they may have to pay to take thesame case to trial. c. Gives parties gliimpse of where things are headed: Even in non-binding arbitration, abenefit can be that it serves to bridge the gap in an adversarial proceeding so that the partiescan get a better glimpse of where things are headed if they are unable to resolve their differences. Most cases settle, but many times it is not until the parties are "on the courthousesteps." Non-binding arbitration may help to facilitate a settlement sooner rather than later. d. Not bound by strict rules of procedure: Another good thing about arbitration is that anarbitrator is typically not bound by the strict rules of procedure in reaching a decision. He or she can consider a lot more facts and circumstances than a judge or jury. Arbitrators typicallytry to be practical and oftentimes look at compromise as being inherently fair. Thus, thelikelihood is that an

arbitrator's decision will award something to at least one of the parties.However, you would not expect that damages would be awarded that were anywhere near what a jury might have awarded if (and that is a big if) the matter were to have been triedbefore a jury. e. Brings finality: Arbitration can also bring finality. Sometimes for the better, a decision on abinding arbitration cannot be appealed or overturned in the absence of a showing of extraordinary circumstances (for example, fraud, bias or other inappropriate actions on thepart of the arbitrator). Thus, once a decision is rendered, the case is over. The losing partywill typically not be able to appeal (which can make the matter drag on for years and years). f. Privacy and confidentiality: Unlike in court litigation, greater confidentiality can be enjoyedby the parties. 3.Policy to promote arbitration: The constitution provides in Article VIII section 5 par 5 which mandates the Supreme Court to promulgaterules that shall provide a simplified and inexpensive procedure for the speedy disposition of cases.Arbitration proceedings are designed to level the playing field among the parties in pursuit of mutuallyacceptable solution to their conflicting claims, and any arrangements or scheme that would give undueadvantage to a party in negotiating table is anathema to the very purpose of arbitration and should beresisted. 4.Kinds of arbitration There are two types of Arbitration:1. Voluntary Arbitration2. Compulsory ArbitrationVoluntary Arbitration is a binding, adversarial dispute resolution process in which the disputing partieschoose one or more arbitrators to hear their dispute and to render a final decision or award after anexpedited hearingVoluntary arbitration implies that the two contending parties, unable to compromise their differences bythemselves or with the help of mediator or conciliator, agree to submit the conflict/ dispute to an impartialauthority, whose decisions they are ready to accept. In other words, under voluntary arbitration the partiesto the dispute can and do they refer voluntarily and dispute to arbitration before it is referred for adjudication. This type of reference is known as voluntary reference, for the parties themselvesvolunteer to come to a

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settlement though an arbitration machinery.The essential elements in voluntary arbitration are : The voluntary submission of dispute to an arbitrator. The subsequent attendance of witnesses and investigations. The enforcement of an award may not be necessary and binding because there is no compulsion. Voluntary arbitration may be specially needed for disputes arising under agreements.Compulsory Arbitration is a nonbinding, adversarial dispute resolution process in which one or morearbitrators hear arguments, weigh evidence and issue a non-binding judgment on the merits after anexpedited hearing. The arbitrator's decision addresses only the disputed legal issues and applies legalstandards. Either party may reject the ruling and request a trial de novo in court.Compulsory arbitration is one where the parties are required to accept arbitration without any willingnesson their part. When one of the parties to an industrial dispute feels aggrieved by an act of the other, it mayapply to the appropriate government to refer the dispute to adjudication machinery. Such reference of adispute is known as compulsory or involuntary reference, because reference in such circumstancesdoes not depend on the sweet will of either the contending parties or any party to the dispute. It is entirelythe discretion of the appropriate govt. based on the question of existing dispute, or on the apprehensionthat industrial dispute will emerge in particular establishment.Under compulsory arbitration, the parties are forced to arbitration by the state when: The parties fail to arrive at a settlement by a voluntary method When there is a national emergency which requires that the wheels of production should not beobstructed by frequent work-stoppages The country is passing through a grave economic crisis There is a grave public dissatisfaction with the existing industrial relations Public interest and the working conditions have to be safeguarded and regulated by the state.Modes of arbitration:1. For ad hoc arbitration, Philippine law grants the parties the right to select anarbitrator or arbitrators and to choose procedures to govern the proceedings, including rulesof arbitration institutions. So long as the main requirement for arbitration, namely consent,is present, the State allows the parties to conduct the arbitration in any manner theystipulate, provided that the arbitration process is not "contrary to law, morals, goodcustoms, public order or public policy."2.Institutionalized arbitration is conducted through organized bodies such as

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courts of arbitration, trade associations, and arbitration centers and institutes, each prescribing its own different arbitration procedure. Foremost among these institutions in the Philippines is thePhilippine Dispute Resolution Center Inc. ("PDRCI").These institutions do not actually participate in settling the dispute but help administer the arbitration andprovide a set of rules to govern the proceedings. For international arbitration, the popular institutionalrulesreferred to are those of the International Chamber of Commerce ("ICC"), the HongkongInternational Arbitration Centre ("HKIAC") and the Singapore International ArbitrationCentre ("SIAC").3.Specialized arbitration involves particular industries or kinds of disputes. For example, banking disputes on check clearing are resolved by a specialized systemadministered under the auspices of the Bankers' Association of the Philippines. In theconstruction industry, the Construction Industry Arbitration Commission (CIAC) wascreated in 1985 by Executive Order No. 1008 ("E.O. No. 1008")in recognition of theneed for technical expertise to resolve various factual questions in construction disputes.Subject to the agreement of the parties to submit the dispute to voluntary arbitration, theCIAC was given original and exclusive jurisdiction over all construction disputes. Indeed, socomprehensive is the jurisdiction of the CIAC over construction controversies, that it hasbeen decreed that as long as the parties agree to submit to voluntary arbitration, regardlessof what forum they may choose, their agreement will fall within the jurisdiction of theCIAC, such that, even if they specifically choose another forum, the parties will not beprecluded from electing to submit their dispute before the CIAC because this right has beenvested upon each party by law. (This ruling could be reconsidered in the light of the NewYork Convention to enforce the international arbitration agreements between parties of different nationalities made within a contracting state.) As such, the CIAC has become oneof the premier specialized arbitration institutions in the Philippines. F 5. Form of Arbitration Agreement Requisites: Section 4 RA 876a ) I t s h a l l b e i n w r i t i n g b)Subscribed by the party sought to be charged or by his lawful agent 6.Who may be parties

a.Two or more persons or parties to any controversy existing between them at t he time of submission which may be the subject of an actionb.Parties to a contract with an agreement in such contract to settle by arbitration any controversy thereafter arising between them.Exceptions:a . O n e of the p a r t i e s t o t h e c o n t r o v e r s y i s : a.1 infanta.2 person judicially declared to be incompetentException to exception:a.Submission to controversy was made by a general guardian or gaurdian adlitem of the infant or incompetent and court approved such petition for permission to submit to arbitration 7.What matters are subject of arbitration a.Controversy arising from contract with arbitration clauseb.Any controversy between two or more persons which may be the subject of an action c.Includes valuation, appraisals or other controveries which may be collateral, incidental,precedent, subsequent to any issue between the parties.Exceptions:a.Cases subject to jurisdiction of CIR (Court of Industrial Relations) 8. Institution of Arbitration of a dispute how made: a.In case of a contract to arbitrate fut ure controversies by the service of the other party uponthe other of a demand for arbitration in accordance with the contract( in person or byregisteredd mail).Contents of demand:Nature of controversyA m o u n t i n v o l v e d R e l i e f s o u g h t -True copy of t h e c o n t r a c t p r o v i d i n g f o r a r b i t r a t i o n In case the contract between the parties provides for appointment of a single arbitrator demand shall setforth a specific time within which the parties shall agree upon such arbitrator In case the contract between the parties provides for the appointment of three arbitrators, one to beselected by each party demand shall name the arbitrator appointed by the party making the demandaand shall require that the party upon whom the demand is made shall within fifteen days after the receiptthereof advise in writing the party making such demand of the name of the person appointed by thesecond party. Two arbitrators shall appoint the third within 10 days form such date or notice.b.In case of an existing controversy to be submitted to arbitration by filing with the clerk of court of CFI having

jurisdiction of the submission agreement setting forth nature of cont,amount involved. may be filed by any party 9.Procedure in administered arbitration If in the contract for arbitration or in the submission to arbitration, a provision is made for a method of naming or appointing an arbitrator or arbitrators such method shall be followed. Otherwise, the CFI shalldesignate an arbitrator or arbitrators.The CFI shall appoint an arbitrator or arbitrators in the following instances:a)If the parties are unable to agree upon a single arbitrator b)If an arbitrator appointed by the parties is unwilling or unable to serve, and his successor has notbeen appointed in the manner in which he was appointedc)If either party to the contract fails or refuses to name his arbitrator within 15 days after receipt of the demand for arbitrationd)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)Where the agreement is silent as to number of arbitrators in the preceeding cases, the court shall appoint the third arbitrator f)Arbitrators apponted uder this section shall either accept or decline their appointments within seven days of the receipts of their appointements. In case of declination or the failure of anarbitrators to duly accept their appointment the parties or court shall appoint their substitute. 10.Special proceeding to compel arbitration In the event that one party defaults in answering the demand aggrieved party may file with the clerk of court of CFI having jurisdiction over the parties a copy of the demand for arbitration under the contract toarbitrate with a notice that the original demand was sent by registered mail or delivered in person to theparty against whom the claim is asserted.Demand shall set forth:Nature of controversyA m o u n t i n v o l v e d R e l i e d s o u g h t Attach true copy of the contract providing for arbitration 11.Remedy for failure or refusal to arbitrate In the event that one party neglects, fails or refuses to arbitrate under a submission agreement theaggrieved party shall serve the other by a demand for arbitration and in case of default file a copy with theclerk of court

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12. When court may be involved Sec 6: Failure, neglect or refusal of another to perform under an agreement un writing providing for arbitration gives a right to the aggrieved party to petition the court for an order directing that sucharbitration may proceed in the manner set forth in the agreement.-5 days notice of the hearing of such application shall be served to the party in default.-Court shall hear the parties-Court shall order the parties to proceed to arbitration upon being satisfied that the making of theagreement is not an issue- if the making of the agreement is in issue, court shall summarily hear such issue- if the finding is that there is no written arbitration agreement court shall dismiss the proceedingcourt has 10 days to resolve motions, petitions heard by it. 13.Enforcement of arbitration agreement Sec 4 par 2 of RA 876 provides that the making of the contract or submission for arbitration of any controversy shall be deemed a consent of the parties to the jurisdiction of the Court of First Instanceof the province or City where any of the parties resides, to enforce such contract orsubmission 14.Existence of arbitration agreement In case of a suit arising out of an agreement with arbitration clause, the court in which the suit is pending,upon being satisfied that the suit is referable to arbitration shall stay the action or proceeding until anarbitration has been had. Provided: the applicant for stay is not in default in arbitration proceeding.Toyota Motor Philippines Corp. r. Court of Appeals, G.R. No. 102881, Dec. 7, 1992, 216 SCRA236.Teresita V. Idolor v. Court of Appeals, et al., G.R. No. 141853, February 7, 20026China Chiang Jiang Energy Corp. v. Court of Appeals, et al., G.R. No. 125706, Sept. 30, 1996;National Irrigation Administration v. Court of Appeals, CIAC, et al., G.R. No. 129169, Nov. 17, 1999, 318SCRA255, 268

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