ADR

1. Heirs of Augusto Salas vs. Laperal Realty Corp

FACTS: Salas, Jr. was the registered owner of a vast tract of land in Lipa City, Batangas spanning
1,484,354 square meters.
On May 15, 1987, he entered into an Owner-Contractor Agreement (hereinafter referred to as the
Agreement) with respondent Laperal Realty Corporation (hereinafter referred to as Laperal Realty)
to render and provide complete (horizontal) construction services on his land.
On September 23, 1988, Salas, Jr. executed a Special Power of Attorney in favor of respondent Laperal
Realty to exercise general control, supervision and management of the sale of his land, for cash or on
installment basis.
On June 10, 1989, Salas, Jr. left his home in the morning for a business trip to Nueva Ecija. He never
returned.
On August 6, 1996, Teresita Diaz Salas filed with the Regional Trial Court of Makati City a verified
petition for the declaration of presumptive death of her husband, Salas, Jr., who had then been
missing for more than seven (7) years. It was granted on December 12, 1996.
Meantime, respondent Laperal Realty subdivided the land of Salas, Jr. and sold subdivided portions
thereof to respondents Rockway Real Estate Corporation and South Ridge Village, Inc. on February
22, 1990; to respondent spouses Abrajano and Lava and Oscar Dacillo on June 27, 1991; and to
respondents Eduardo Vacuna, Florante de la Cruz and Jesus Vicente Capalan on June 4, 1996
On April 24, 1998, respondent Laperal Realty filed a Motion to Dismiss on the ground that petitioners
failed to submit their grievance to arbitration as required under Article VI of the Agreement
In a catena of cases inspired by Justice Malcolms provocative dissent in Vega v. San Carlos Milling Co.,
this Court has recognized arbitration agreements as valid, binding, enforceable and not contrary to
public policy so much so that when there obtains a written provision for arbitration which is not
complied with, the trial court should suspend the proceedings and order the parties to proceed to
arbitration in accordance with the terms of their agreement Arbitration is the wave of the future in
dispute resolution.
ISSUE: Whether or not the buyers are bound by their arbitration agreement
HELD: NO, As such, the Agreement, containing the stipulation on arbitration, binds the parties thereto, as
well as their assigns and heirs. But only they.Petitioners, as heirs of Salas, Jr., and respondent Laperal
Realty are certainly bound by the Agreement. If respondent Laperal Realty, had assigned its rights
under the Agreement to a third party, making the former, the assignor, and the latter, the assignee,
such assignee would also be bound by the arbitration provision since assignment involves such
transfer of rights as to vest in the assignee the power to enforce them to the same extent as the assignor
could have enforced them against the debtor. They are, rather, buyers of the land that respondent Laperal
Realty was given the authority to develop and sell under the Agreement. As such, they are not assigns
contemplated in Art. 1311 of the New Civil Code which provides that contracts take effect only between
the parties, their assigns and heirs.
2. Del Monte Corp-USA vs. CA, MONTEBUENO MARKETING, INC., LIONG LIONG C. SY and
SABROSA FOODS, INC
FACTS 1 July 1994 - in a Distributorship Agreement, Del Monte Corporation-USA (DMC-USA)
appointed Montebueno Marketing, Inc. (MMI) as the sole and exclusive distributor of its Del Monte
products in the Philippines for a period of five (5) years, renewable for two (2) consecutive five (5)
year periods with the consent of the parties.

Said agreement provided for an arbitration clause, which states:

This Agreement shall be governed by the laws of the State of California and/or, if applicable, the
United States of America.

All disputes arising out of or relating to this Agreement or the parties’ relationship, including the
termination thereof, shall be resolved by arbitration in the City of San Francisco, State of California, under
the Rules of the American Arbitration Association. The arbitration panel shall consist of three members,
one of whom shall be selected by DMC-USA, one of whom shall be selected by MMI, and third of whom
shall be selected by the other two members and shall have relevant experience in the industry

October 1994 - appointment of MMI as the sole and exclusive distributor of Del Monte products in the
Philippines was published in several newspapers in the country. Immediately after its appointment, MMI
appointed Sabrosa Foods, Inc. (SFI), with the approval of DMC-USA, as MMI’s marketing arm to
concentrate on its marketing and selling function as well as to manage its critical relationship with
the trade.

3 October 1996 - MMI, SFI and MMI’s Managing Director Liong Liong C. Sy (LILY SY) filed a
Complaint against DMC-USA, Managing Director of Del Monte Corporation’s Export Sales
Department Paul E. Derby, Jr., Regional Director of Del Monte Corporation’s Export Sales
Department Daniel Collins, Head of Credit Services Department of Del Monte Corporation Luis
Hidalgo and Dewey Ltd. before Malabon RTC.

MMI et al. predicated their complaint on the alleged violations by Del Monte et al. of Articles 20, 21 and
23 of the Civil Code. According to them, DMC-USA products continued to be brought into the country
by parallel importers despite the appointment of MMI as the sole and exclusive distributor of Del
Monte products thereby causing them great embarrassment and substantial damage. They alleged
that the products brought into the country by these importers were aged, damaged, fake or counterfeit, so
that in March 1995 they had to cause, after prior consultation with Antonio Ongpin, Market Director for
Special Markets of Del Monte Philippines, Inc., the publication of a "warning to the trade" paid
advertisement in leading newspapers. DMC-USA and Paul E. Derby, Jr., apparently upset with
the publication, instructed private respondent MMI to stop coordinating with Antonio Ongpin and to
communicate directly instead with DMC-USA through Paul E. Derby, Jr.

RTC: deferred consideration of DMC-USA et al.’s Motion to Suspend Proceedings as the grounds alleged
therein did not constitute the suspension of the proceedings considering that the action was for damages
with prayer for the issuance of Writ of Preliminary Attachment and not on the Distributorship Agreement.
MR – denied

CA: affirmed

ISSUE: Whether or not the dispute between the parties warrant an order compelling to submit arbitration
HELD: There is no doubt that arbitration is valid and constitutional in our jurisdiction. Even before
the enactment of RA 876, this Court has countenanced the settlement of disputes through
arbitration. Unless the agreement is such as absolutely to close the doors of the courts against the parties,
which agreement would be void, the courts will look with favor upon such amicable arrangement and will
only interfere with great reluctance to anticipate or nullify the action of the arbitrator. Moreover, as RA
876 expressly authorizes arbitration of domestic disputes, foreign arbitration as a system of settling
commercial disputes was likewise recognized when the Philippines adhered to the United
Nations "Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of
1958" under the 10 May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal recognition
and allowing enforcement of international arbitration agreements between parties of different nationalities
within a contracting state.
A careful examination of the instant case shows that the arbitration clause in the Distributorship
Agreement between petitioner DMC-USA and private respondent MMI is valid and the dispute between
the parties is arbitrable. However, this Court must deny the petition.
The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is
part of that contract and is itself a contract. As a rule, contracts are respected as the law between the
contracting parties and produce effect as between them, their assigns and heirs. Clearly, only parties to
the Agreement, i.e., petitioners DMC-USA and its Managing Director for Export Sales Paul E.
Derby, Jr., and private respondents MMI and its Managing Director LILY SY are bound by the
Agreement and its arbitration clause as they are the only signatories thereto. Petitioners Daniel
Collins and Luis Hidalgo, and private respondent SFI, not parties to the Agreement and cannot
even be considered assigns or heirs of the parties, are not bound by the Agreement and the
arbitration clause therein. Consequently, referral to arbitration in the State of California pursuant to the
arbitration clause and the suspension of the proceedings in Civil Case No. 2637-MN pending the return of
the arbitral award could be called for but only as to petitioners DMC-USA and Paul E. Derby, Jr., and
private respondents MMI and LILY SY, and not as to the other parties in this case.
3. National Steel Corp vs. The RTC of Lanao del Norte
FACTS: Respondent Edward Willkom Enterprises Inc. (EWEI) and Ramiro Construction executed
a contract with petitioner National Steel Corporation (NSC) whereby the former jointly undertook
the Contract for Site Development for the latter’s Integrated Iron and Steel Mills Complex.
Sometime in 1983, the services of Ramiro Construction was terminated and EWEI took over the
contractual obligation. Due to this and to other causes deemed sufficient by EWEI, extensions of
time for the termination of the project were granted by NSC. Differences later arose, EWEI filed a
case before the RTC praying essentially for payments with interest from the time of delay; the price
adjustment as provided by PD 1594; and exemplary damages and attorney’s fees. NSC filed an answer
with counterclaim to plaintiffs complaints. The court upon joint motion of both parties had issued an
order dismissing the said complaint and counterclaim in view of the desire of both parties to implement
Sec. 19 of the contract, providing for a resolution of any conflict by arbitration. In accordance with
the aforesaid order and pursuant to Sec. 19 of the Contract, herein parties constituted an Arbitration Board
after which of a series of hearings, rendered the decision directing NSC to pay EWEI. The RTC affirmed
and confirmed the award of the arbitrators. NSC’s Motion for Reconsideration was denied, hence has
come to this court via the present petition.
ISSUE: Whether or not the lower court acted with grave abuse of discretion in not vacating the
arbitrator’s award.
HELD:NO, Thus, in a Petition to Vacate Arbitrator’s Decision before the trial court, regularity in the
performance of official functions is presumed and the complaining party has the burden of proving the
existence of any of the grounds for vacating the award, as provided for by Sections 24 of the
Arbitration Law, to wit: (CPME) (a) The award was procured by corruption, fraud or other undue
means; (b) That there was evident partiality or corruption in the arbitrators of any of them; or (c)
That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient
cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or
more of the arbitrators was disqualified to act as such under section nine hereof, and wilfully
refrained from disclosing such disqualification or of any other misbehavior by which the rights of
any party have been materially prejudiced; or (d) That the arbitrators exceeded their powers, or so
imperfectly executed them, that a mutual, final and definite award upon the subject matter
submitted to them was not made. . . .
The grounds relied upon by the petitioner were the following (a) That there was evident partiality in the
assailed decision of the Arbitrators in favor of the respondent; and (b) That there was mistaken
appreciation of the facts and application of the law by the Arbitrators.
Petitioner’s allegation that there was evident partiality is untenable. It is anemic of evidentiary
support. In the case of Adamson vs. Court of Appeals, in upholding the decision of the Board of
Arbitrators, this Court ruled that the fact that a party was disadvantaged by the decision of the
Arbitration Committee does not prove evident partiality. Proofs other than mere inference are
needed to establish evident partiality. Here, petitioner merely averred evident partiality without
any proof to back it up. Petitioner was never deprived of the right to present evidence nor was there
any showing that the Board showed signs of any bias in favor of EWEI.
4. Asset Privatization Trust vs. CA
FACTS: Pursuant to a Mortgage Trust Agreement, the Development Bank of the Philippines and
the Philippine National Bank foreclosed the assets of the Marinduque Mining and Industrial
Corporation. The assets were sold to Philippine National Bank and later transferred to the Asset
Privatization Trust (APT).
In February 1985, Jesus Cabarrus, Sr., together with other stockholders of Marinduque Mining
and Industrial Corporation, filed a derivative suit against Development Bank of the Philippines and
Philippine National Bank before the Regional Trial Court of Makati for Annulment of
Foreclosures, Specific Performance and Damages. In the course of the trial, Marinduque Mining and
Industrial Corporation and Asset Privatization Trust as successor in interest of Development Bank
of the Philippines and Philippine National Bank, agreed to submit the case to arbitration by entering
into a Compromise and Arbitration Agreement. This agreement was approved by the trial court and the
complaint was corollarily dismissed.
Thereafter, the Arbitration Committee rendered a decision ordering Asset Privatization Trust to
pay Marinduque Mining and Industrial Corporation damages and arbitration costs in the amount
of P2.5 Billion, P13,000,000.00 of which is for moral and exemplary damages.
On motion of Cabarrus and the other stockholders of Marinduque Mining and Industrial Corporation, the
trial court confirmed the Arbitration Committee’s award. Its motion for reconsideration having been
denied, Asset Privatization Trust filed a special civil action for certiorari with the Court of Appeals. It was
likewise denied.
Hence, this petition for review on certiorari.
ISSUE: 1. Whether or not Makati branch 62 which previously dismissed the case lost its jurisdiction over
the case
2. THE COURT OF APPEALS LIKEWISE ERRED IN HOLDING THAT PETITIONER WAS
ESTOPPED FROM QUESTIONING THE ARBITRATION AWARD, WHEN PETITIONER
QUESTIONED THE JURISDICTION OF THE RTC-MAKATI, BRANCH 62 AND AT THE SAME
TIME MOVED TO VACATE THE ARBITRAL AWARD
HELD:

1. Branch 62 made the fatal mistake of issuing a final order dismissing the case. While Branch
62 should have merely suspended the case and not dismissed it, neither of the parties questioned
said dismissal. Thus, both parties as well as said court are bound by such error.
It is erroneous then to argue, as private respondents do, that petitioner APT was charged with the
knowledge that the case was merely stayed until arbitration finished, as again, the order of Branch
62 in very clear terms stated that the complaint was dismissed. By its own action, Branch 62 had
lost jurisdiction over the vase. It could not have validly reacquired jurisdiction over the said
case on mere motion of one of the parties. The Rules of Court is specific on how a new case
may be initiated and such is not done by mere motion in a particular branch of the RTC.
Consequently, as there was no pending action to speak of, the petition to confirm the arbitral award
should have been filed as a new case and raffled accordingly to one of the branches of the Regional
Trial Court.
2. The rule is that Where the court itself clearly has no jurisdiction over the subject matter or the
nature of the action, the invocation of this defense may de done at any time. It is neither for the
courts nor for the parties to violate or disregard that rule, let alone to confer that jurisdiction, this
matter being legislative in character. As a rule the, neither waiver nor estoppel shall apply to
confer jurisdiction upon a court barring highly meritorious and exceptional
circumstances. One such exception was enunciated in Tijam vs. Sibonghanoy, where it was
held that after voluntarily submitting a cause and encountering an adverse decision on the
merits, it is too late for the loser to question the jurisdiction or power of the court."
Petitioners situation is different because from the outset, it has consistently held the position that
the RTC, Branch 62 had no jurisdiction to confirm the arbitral award; consequently, it cannot be
said that it was estopped from questioning the RTCs jurisdiction. Petitioners prayer for the setting
aside of the arbitral award was not inconsistent with its disavowal of the courts jurisdiction.
3. The arbitrators shall have the power to decide only those matters which have been submitted to them. The
terms of the award shall be confined to such disputes. (Underscoring ours).

xxx.

Section 24 of the same law enumerating the grounds for vacating an award states:

SEC. 24. Grounds for vacating award. In any one of the following cases, the court must make an order
vacating the award upon the petition of any party to the controversy when such party proves affirmatively
that in the arbitration proceedings:
(a) The award was procured by corruption, fraud, or other undue means; or
(b) That there was evident partiality or corruption in arbitrators or any of them; or
(c) That the arbitrators were guilty of misconduct in refusing to postpone the hearing upon sufficient
cause shown, or in refusing to hear evidence pertinent and material to the controversy; that one or
more of the arbitrators was disqualified to act as such under section nine hereof, and willfully
refrained from disclosing such disqualifications or any other misbehavior by which the rights of any
party have been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly executed them, that a mutual, final
and definite award upon the subject matter submitted to them was not made. (Underscoring ours).

xxx.

Section 25 which enumerates the grounds for modifying the award provides:

SEC. 25. Grounds for modifying or correcting award In anyone of the following cases, the court must
make an order modifying or correcting the award, upon the application of any party to the controversy
which was arbitrated: (MisSubImp)
(a) Where there was an evident miscalculation of figures, or an evident mistake in the description of
any person, thing or property referred to in the award; or
(b) Where the arbitrators have awarded upon a matter not submitted to them, not affecting the merits
of the decision upon the matter submitted; or
(c) Where the award is imperfect in a matter of form not affecting the merits of the controversy, and
if it had been a commissioners report, the defect could have been amended or disregarded by the
court.

x x x.

Finally, it should be stressed that while a court is precluded from overturning an award for errors in
determination of factual issues, nevertheless, if an examination of the record reveals no support whatever
for the arbitrators determinations, their award must be vacated. In the same manner, an award must be
vacated if it was made in manifest disregard of the law

5. NATIONAL IRRIGATION ADMINISTRATION (NIA), petitioner, vs. HONORABLE COURT

OF APPEALS (4th Division), CONSTRUCTION INDUSTRY ARBITRATION COMMISSION,
and HYDRO RESOURCES CONTRACTORS CORPORATION

FACTS: Records show that in a competitive bidding held by NIA in August 1978, Hydro Resources
Contractors Corporation (hereafter HYDRO) was awarded Contract MPI-C-2 for the construction
of the main civil works of the Magat River Multi-Purpose Project. The contract provided that
HYDRO would be paid partly in Philippine pesos and partly in U.S. dollars. HYDRO substantially
completed the works under the contract in 1982 and final acceptance by NIA was made in 1984. HYDRO
thereafter determined that it still had an account receivable from NIA representing the dollar rate differential
of the price escalation for the contract.

After unsuccessfully pursuing its case with NIA, HYDRO, on 7 December 1994, filed with the CIAC
a Request for Adjudication of the aforesaid claim. HYDRO nominated six arbitrators for the
arbitration panel, from among whom CIAC appointed Engr. Lauro M. Cruz. On 6 January 1995, NIA
filed its Answer wherein it questioned the jurisdiction of the CIAC alleging lack of cause of action, laches
and estoppel in view of HYDROs alleged failure to avail of its right to submit the dispute to arbitration
within the prescribed period as provided in the contract. On the same date, NIA filed a Compliance
wherein it nominated six arbitrators, from among whom CIAC appointed Atty. Custodio O. Parlade, and
made a counterclaim for P1,000,000 as moral damages; at least P100,000 as exemplary
damages; P100,000 as attorneys fees; and the costs of the arbitration.

The two designated arbitrators appointed Certified Public Accountant Joven B. Joaquin as Chairman of
the Arbitration Panel. The parties were required to submit copies of the evidence they intended to present
during the proceedings and were provided the draft Terms of Reference.

At the preliminary conference, NIA through its counsel Atty. Joy C. Legaspi of the Office of the
Government Corporate Counsel, manifested that it could not admit the genuineness of HYDROs
evidence since NIAs records had already been destroyed. NIA requested an opportunity to examine
the originals of the documents which HYDRO agreed to provide.

After reaching an accord on the issues to be considered by the arbitration panel, the parties scheduled the
dates of hearings and of submission of simultaneous memoranda

On 13 March 1995, NIA filed a Motion to Dismiss alleging lack of jurisdiction over the disputes. NIA
contended that there was no agreement with HYDRO to submit the dispute to CIAC for arbitration
considering that the construction contract was executed in 1978 and the project completed in 1982,
whereas the Construction Industry Arbitration Law creating CIAC was signed only in 1985; and
that while they have agreed to arbitration as a mode of settlement of disputes, they could not have
contemplated submission of their disputes to CIAC. NIA further argued that records show that it had
not voluntarily submitted itself to arbitration by CIAC

ISSUE: Whether or not CIAC acquire jurisdiction over the dispute

HELD: Contrary to the claim of NIA, the CIAC has jurisdiction over the controversy. Executive Order
No.1008, otherwise known as the Construction Industry Arbitration Law which was promulgated on 4
February 1985, vests upon CIAC original and exclusive jurisdiction over disputes arising from, or
connected with contracts entered into by parties involved in construction in the Philippines, whether
the dispute arises before or after the completion of the contract, or after the abandonment or breach
thereof. The disputes may involve government or private contracts.For the Board to acquire
jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration

NIAs argument that CIAC had no jurisdiction to arbitrate on contract which preceded its existence is
untenable. E.O. 1008 is clear that the CIAC has jurisdiction over all disputes arising from or connected
with construction contract whether the dispute arises before or after the completion of the contract. Thus,
the date the parties entered into a contract and the date of completion of the same, even if these occurred
before the constitution of the CIAC, did not automatically divest the CIAC of jurisdiction as long as
the dispute submitted for arbitration arose after the constitution of the CIAC. Stated differently, the
jurisdiction of CIAC is over the dispute, not the contract; and the instant dispute having arisen when
CIAC was already constituted, the arbitral board was actually exercising current, not retroactive,
jurisdiction. As such, there is no need to pass upon the issue of whether E.O. No. 1008 is a substantive or
procedural statute.

NIA also contended that the CIAC did not acquire jurisdiction over the dispute since it was only HYDRO
that requested for arbitration. It asserts that to acquire jurisdiction over a case, as provided under E.O.
1008, the request for arbitration filed with CIAC should be made by both parties, and hence the
request by one party is not enough.
It is undisputed that the contracts between HYDRO and NIA contained an arbitration clause
wherein they agreed to submit to arbitration any dispute between them that may arise before or
after the termination of the agreement.

Under the present Rules of Procedure, for a particular construction contract to fall within the
jurisdiction of CIAC, it is merely required that the parties agree to submit the same to voluntary
arbitration. Unlike in the original version of Section 1, as applied in the Tesco case, the law as it now
stands does not provide that the parties should agree to submit disputes arising from their agreement
specifically to the CIAC for the latter to acquire jurisdiction over the same. Rather, it is plain and clear
that as long as the parties agree to submit to voluntary arbitration, regardless of what forum they
may choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if they
specifically choose another forum, the parties will not be precluded from electing to submit their dispute
before the CIAC because this right has been vested upon each party by law, i.e., E.O. No. 1008.[31]

Moreover, it is undeniable that NIA agreed to submit the dispute for arbitration to the CIAC. NIA
through its counsel actively participated in the arbitration proceedings by filing an answer with
counterclaim, as well as its compliance wherein it nominated arbitrators to the proposed panel,
participating in the deliberations on, and the formulation of, the Terms of Reference of the
arbitration proceeding, and examining the documents submitted by HYDRO after NIA asked for
the originals of the said documents.

6. Agan vs. Phil. Intl Air Terminals Co., Inc (PIATCO)

FACTS: On October 5, 1994, AEDC submitted an unsolicited proposal to the Government

through the DOTC/MIAA for the development of NAIA International Passenger Terminal
III (NAIA IPT III).

DOTC constituted the Prequalification Bids and Awards Committee (PBAC) for the
implementation of the project and submitted with its endorsement proposal to the NEDA, which
approved the project.

On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers
of an invitation for competitive or comparative proposals on AEDC’s unsolicited proposal,
in accordance with Sec. 4-A of RA 6957, as amended.

On September 20, 1996, the consortium composed of People’s Air Cargo and Warehousing
Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank
Corp. (Security Bank) (collectively, Paircargo Consortium) submitted their competitive
proposal to the PBAC. PBAC awarded the project to Paircargo Consortium. Because of that, it
was incorporated into Philippine International Airport Terminals Co., Inc.

AEDC subsequently protested the alleged undue preference given to PIATCO and
reiterated its objections as regards the prequalification of PIATCO.

On July 12, 1997, the Government and PIATCO signed the “Concession Agreement for the
Build-Operate-and-Transfer Arrangement of the NAIA Passenger Terminal III” (1997
Concession Agreement). The Government granted PIATCO the franchise to operate and
maintain the said terminal during the concession period and to collect the fees, rentals and
other charges in accordance with the rates or schedules stipulated in the 1997 Concession
Agreement. The Agreement provided that the concession period shall be for twenty-five
(25) years commencing from the in-service date, and may be renewed at the option of the
Government for a period not exceeding twenty-five (25) years. At the end of the concession
period, PIATCO shall transfer the development facility to MIAA.

On November 26, 1998, the Government and PIATCO signed an Amended and Restated
Concession Agreement (ARCA). Among the provisions of the 1997 Concession Agreement that
were amended by the ARCA were: Sec. 1.11 pertaining to the definition of certificate of
completion; Sec. 2.05 pertaining to the Special Obligations of GRP; Sec. 3.02 (a) dealing with
the exclusivity of the franchise given to the Concessionaire; Sec. 4.04 concerning the assignment
by Concessionaire of its interest in the Development Facility; Sec. 5.08 (c) dealing with the
proceeds of Concessionaires insurance; Sec. 5.10 with respect to the temporary take-over of
operations by GRP; Sec. 5.16 pertaining to the taxes, duties and other imposts that may be levied
on the Concessionaire; Sec. 6.03 as regards the periodic adjustment of public utility fees and
charges; the entire Article VIII concerning the provisions on the termination of the contract; and
Sec. 10.02 providing for the venue of the arbitration proceedings in case a dispute or controversy
arises between the parties to the agreement.

Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA
Terminals I and II, had existing concession contracts with various service providers to offer
international airline airport services, such as in-flight catering, passenger handling, ramp
and ground support, aircraft maintenance and provisions, cargo handling and
warehousing, and other services, to several international airlines at the NAIA.On September
17, 2002, the workers of the international airline service providers, claiming that they would lose
their job upon the implementation of the questioned agreements, filed a petition for prohibition.
Several employees of MIAA likewise filed a petition assailing the legality of the various
agreements.

On March 6, 2003, respondent PIATCO informed the Court that on March 4, 2003
PIATCO commenced arbitration proceedings before the International Chamber of
Commerce, International Court of Arbitration (ICC) by filing a Request for Arbitration
with the Secretariat of the ICC against the Government of the Republic of the Philippines
acting through the DOTC and MIAA.

ISSUE: Whether or not other parties are bound by the arbitration agreement
HELD: NO, It is established that petitioners in the present cases who have presented legitimate
interests in the resolution of the controversy are not parties to the PIATCO Contracts. Accordingly,
they cannot be bound by the arbitration clause provided for in the ARCA and hence, cannot be compelled
to submit to arbitration proceedings. A speedy and decisive resolution of all the critical issues in the present
controversy, including those raised by petitioners, cannot be made before an arbitral tribunal. The object of
arbitration is precisely to allow an expeditious determination of a dispute. This objective would not be met
if this Court were to allow the parties to settle the cases by arbitration as there are certain issues involving
non-parties to the PIATCO Contracts which the arbitral tribunal will not be equipped to resolve.
7. LM POWER ENGINEERING CORPORATION, petitioner, vs. CAPITOL INDUSTRIAL
CONSTRUCTION GROUPS, INC.
FACTS: On February 22, 1983, Petitioner LM Power Engineering Corporation and Respondent
Capitol Industrial Construction Groups Inc. entered into a Subcontract Agreement involving
electrical work at the Third Port of Zamboanga.
On April 25, 1985, respondent took over some of the work contracted to petitioner. Allegedly, the
latter had failed to finish it because of its inability to procure materials.
Upon completing its task under the Contract, petitioner billed respondent in the amount
of P6,711,813.90. Contesting the accuracy of the amount of advances and billable accomplishments
listed by the former, the latter refused to pay. Respondent also took refuge in the termination clause
of the Agreement. That clause allowed it to set off the cost of the work that petitioner had failed to
undertake -- due to termination or take-over -- against the amount it owed the latter.
Because of the dispute, petitioner filed with the Regional Trial Court (RTC) of Makati (Branch 141) a
Complaint for the collection of the amount representing the alleged balance due it under the
Subcontract. Instead of submitting an Answer, respondent filed a Motion to Dismiss, alleging that the
Complaint was premature, because there was no prior recourse to arbitration.
In its Order dated September 15, 1987, the RTC denied the Motion on the ground that the dispute did not
involve the interpretation or the implementation of the Agreement and was, therefore, not covered by the
arbitral clause.
After trial on the merits, the RTC ruled that the take-over of some work items by respondent was
not equivalent to a termination, but a mere modification, of the Subcontract. The latter was ordered
to give full payment for the work completed by petitioner
On appeal, the CA reversed the RTC and ordered the referral of the case to arbitration. The appellate
court held as arbitrable the issue of whether respondents take-over of some work items had been
intended to be a termination of the original contract under Letter K of the Subcontract. It ruled
likewise on two other issues: whether petitioner was liable under the warranty clause of the Agreement, and
whether it should reimburse respondent for the work the latter had taken over.
ISSUE: 1. whether respondents take-over of some work items had been intended to be a termination of the
original contract under Letter K of the Subcontract
2. Whether or not request is needed first to enter arbitration
HELD:
1. YES, We side with respondent. Essentially, the dispute arose from the parties ncongruent positions on
whether certain provisions of their Agreement could be applied to the facts.The instant case involves
technical discrepancies that are better left to an arbitral body that has expertise in those areas. In
any event, the inclusion of an arbitration clause in a contract does not ipso facto divest the courts of
jurisdiction to pass upon the findings of arbitral bodies, because the awards are still judicially
reviewable under certain conditions.
Clearly, the resolution of the dispute between the parties herein requires a referral to the provisions of their
Agreement. Within the scope of the arbitration clause are discrepancies as to the amount of advances and
billable accomplishments, the application of the provision on termination, and the consequent set-off of
expenses.
A review of the factual allegations of the parties reveals that they differ on the following questions: (1) Did
a take-over/termination occur? (2) May the expenses incurred by respondent in the take-over be set off
against the amounts it owed petitioner? (3) How much were the advances and billable accomplishments?
Being an inexpensive, speedy and amicable method of settling disputes,[24] arbitration -- along with
mediation, conciliation and negotiation -- is encouraged by the Supreme Court. Aside from unclogging
judicial dockets, arbitration also hastens the resolution of disputes, especially of the commercial kind.[25] It
is thus regarded as the wave of the future in international civil and commercial disputes.[26] Brushing aside
a contractual agreement calling for arbitration between the parties would be a step backward
2. NO, According to petitioner, assuming arguendo that the dispute is arbitrable, the failure to file a
formal request for arbitration with the Construction Industry Arbitration Commission (CIAC)
precluded the latter from acquiring jurisdiction over the question. To bolster its position, petitioner
even cites our ruling in Tesco Services Incorporated v. Vera.[30] We are not persuaded.
On the other hand, Section 1 of Article III of the new Rules of Procedure Governing Construction
Arbitration has dispensed with this requirement and recourse to the CIAC may now be availed of
whenever a contract contains a clause for the submission of a future controversy to arbitration, in
this wise:

SECTION 1. Submission to CIAC Jurisdiction An arbitration clause in a construction contract or a

submission to arbitration of a construction dispute shall be deemed an agreement to submit an
existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a different
arbitration institution or arbitral body in such contract or submission. When a contract contains a clause
for the submission of a future controversy to arbitration, it is not necessary for the parties to enter
into a submission agreement before the claimant may invoke the jurisdiction of CIAC.

Clearly, there is no more need to file a request with the CIAC in order to vest it with jurisdiction to
decide a construction dispute.