BEFORE THE INTERNATIONAL COURT OF ARBITRATION OF THE

HONG KONG INTERNATIONAL ARBITRATION CENTRE

IN THE MATTER OF AN ARBITRATION PURSUANT TO THE RULES OF THE

HONG KONG INTERNATIONAL ARBITRATION CENTRE

CASE NO. 123456

BETWEEN

PAMPANGA ENERGY COMPANY

(Philippines)

(Claimant)

V.

CONSTRUCTION COMPANY

(Philippines)

(Respondent)

_____________________________________________

THE RESPONDENT’S SUBMISSION RELATING

TO THE HKIAC ARBITRAL TRIBUNAL’S JURISDICTION

________________________________________________

AUGUST 30, 2015

I. INTRODUCTION
1. In response to Procedural Order No 1, the Respondent for the defence submits

herewith the factual and legal basis for its objection regarding the Tribunal’s

jurisdiction and the effect of the anti-suit injunction issued by the Regional Trial

Court of Manila, Philippines.

II. BACKGROUND TO THE DISPUTE
2. Claimant Pampanga Energy Company is a corporation organized and duly

existing under Philippine law, engaged in sale and distribution of energy,

products and services. Claimant is the owner of a power station located in the

Province of Pampanga, Philippines.

3. Respondent Construction Company, also a Philippine company corporation

organized and duly existing under Philippine law. Respondent is primarily on

general engineering and building construction services, road and highway

pavement, demolition works and hauling of debris and excess soil and bulk

excavation.
4. In October 2012, Claimant and Respondent entered into an engineering

procurement and construction contract. Claimant employed Respondent to

design, construct, commission, test, complete and handover a power station.

III. DISAGREEMENT
5. In mid-2013, disputes arose between Claimant and Respondent. Claimant

asserts to be entitled to liquidated damages while Respondent argued that it

asked for numerous extensions of time that it was entitled, but Claimant did not

grant its request.

6. Respondent demanded for Claimant to pay the large sums of money it owed

under the contract. However, Claimant resists the demand claiming that there

were many technical design and construction defects in various parts of the

project.
 IV. ACTIONS TAKEN BY THE PARTIES
7. On November 4, 2013, Claimant commenced arbitration proceedings against

Respondent and filed a Notice of Arbitration with the Hong Kong International

Arbitration Centre (“HKIAC”).

8. On November 18, 2013, Respondent commenced its own arbitration proceedings

against Claimant and submitted its Request for Arbitration to the Construction

Industry Arbitration Commission (“CIAC”). On the same day, Respondent also

filed a case before the Regional Trial Court of Manila, Philippines and asked for

an anti-suit injunction to be issued in relation to the HKIAC proceedings.

9. On November 25, 2013, the Regional Trial Court of Manila granted Respondent’s

application and issued an anti-suit injunction.

10. On November 29, 2013, Respondent served its answer to the Notice of

Arbitration. Respondent contended that the HKIAC Arbitral Tribunal has no

jurisdiction. Respondent also pointed out that Manila Regional Trial Court of

Manila has issued an anti-suit injunction.

V. JURISDICTION

Arbitrator’s responsibility to uphold the choice of law of the parties and the duty

to render an enforceable award

11. An arbitrator has a duty to make best efforts to render an award that is

enforceable. To render an enforceable award, an arbitrator must understand that

 for an award to survive either a motion to vacate or an opposition to enforcement,

it must generally meet formal requirements and not be against public policy.

Although an arbitrator’s award usually cannot be reversed for a mistake of law, it

can be challenged if it is against the public policy of a jurisdiction. The award and

the underlying arbitration agreement must therefore comply with the lex arbitri

and with other relevant mandatory laws. 1

12. Under the principle of lex arbitri, the arbitration agreement should be valid and

the subject matter should be arbitrable in order to prevent an award from being

vacated at the seat of arbitration or be refused enforcement in the enforcing

jurisdiction. On the other hand, mandatory and public policy dictates that a

tribunal must consider the public interest in ways expected under the enacted

statutes in order to prevent the risks of offending the public policy in the

jurisdiction of enforcement and thereby rendering an unenforceable award. 2

13. The engineering procurement and construction contract between Claimant and

Respondent provides that:

“31.1 Any unresolved dispute shall be referred to and finally

resolved by arbitration administered by the Hong Kong

International Arbitration Centre under the Rules, except as

the Rules may be modified herein. The arbitration

proceedings shall be conducted, and the award shall be

1 Margaret Moses, The Principles and Practice of International Commercial Arbitration (Cambridge
University Press, 2012)

2 Id.
 rendered, in the English language. The seat of arbitration

shall be Hong Kong.

31.2 This clause and the parties’ agreement to arbitrate

herein shall be governed by the laws of Hong Kong.”

14. The law expressly chosen by the parties to govern the arbitration agreement and

the lex arbitri is Hong Kong law. In effect, the laws of Hong Kong governs the

formation, validity, effect and interpretation of the arbitration agreement.

15. If arbitration will ensue and the Tribunal will render an arbitral award, it can be

deduced that the award will be enforced in the Philippines since both the parties

are Philippine corporations located in the Philippines and the contract involves

the construction of a power station situated at a province in the Philippines.

16. The Respondent would like to invite the Tribunal’s attention to clause 31.10 of the

engineering procurement and construction contract which states that:

31.10. For the avoidance of doubt, the parties agree, to the

extent permitted by applicable Laws or international

conventions, that the application of:

(i) Executive Order No. 1008, otherwise known as the

“Construction Industry Arbitration Law”;

(ii) the provisions of Republic Act No. 9285, otherwise

known as “Alternative Dispute Resolution Act of 2004”,

relating to construction arbitration shall not be applicable to

 this Agreement or to any dispute that may arise in

connection therewith and are hereby irrevocably waived by

the parties and shall not be invoked by them."

17. Under the laws of Hong Kong, such stipulation is valid in view of the principle that

the contract between the parties is the law which governs their relation. It was

mutually agreed upon and therefore binds the parties up to its fulfillment.

18. On the other hand, clause 31.10 is invalid under the Philippine laws. Article 1306

of the Civil Code of the Philippines provides that:

Article 1306. The contracting parties may establish such

stipulations, clauses, terms and conditions as they may

deem convenient, provided they are not contrary to law,

morals, good customs, public order, or public policy.

19. Although parties may freely stipulate the terms and conditions of the contract,

such autonomy is limited by law and public policy. 3 In the present case, the

parties cannot waive the application of laws on arbitration in the Philippines

because they are the laws which grants jurisdiction to the Construction Industry

Arbitration Commission. As a rule, jurisdiction is conferred by law and cannot be

defeated by the agreement of the parties.4

20. As a result, the Tribunal is confronted with an issue concerning the duty to

uphold the parties’ agreement in one hand, and the duty to render an enforceable

3 Id.
4 Willard Riano, “Civil Procedure (The Bar Lectures Series), Vol.1”, (Rex Bookstore, 2011)
 award on the other. Therefore, application of rules on conflict of laws is called for

in order to determine which law is most appropriate.

Application of Conflict of Laws

21. One of the possible laws that could govern the questions relating to the intrinsic

validity of contracts is Lex Loci Contractus, which refers to the law of the place

where the contract is made. 5 In the present case, the contract is celebrated in the

Philippines. Using this principle, the Philippine law shall govern.

22. Another law that can be considered is Lex Loci Solutionis, which is the law

governing the place of performance. 6 All the matters relating to the time, place

and manner of performance, sufficiency of performance and valid excuses for

non-performance are determined by lex loci solutionis which is useful because it

is undoubtedly always connected to the contract in a significant way. In the

present case, the obligation of the Respondent to design, construct, commission,

test, complete and hand over the power station to the Claimant is to be

performed. Under this principle, the Philippine law shall govern.

23. Lastly, the intrinsic validity of a contract may be governed by the law intended by

the parties or Lex Loci Intentionis. However, there is a limitation to this principle.

The parties may not select a law to govern their contract if said law selected has

no connection at all with the transaction or the parties. 7 In the present case, the

law intended by the parties to govern their arbitration agreement is the law of

5 Jorge Coquia, “Conflict of Laws: Cases, Materials and Comments” (Central Book Supply Inc.,2000)
6 Id.
7 Id
 Hong Kong. However, it can be gleaned from the facts that such law is in no way

connected to the transaction involved since the perfection of the contract and the

performance of the obligation is done in the Philippines. Furthermore, the parties

are both Philippine companies. Therefore, Lex Loci Intentionis cannot be applied

in the present case.

Philippine law is the governing law in determining the validity of the arbitration

agreement.

24. Under the cumulative approach, when all the relevant conflicts rules points to the

same law, that law becomes the applicable law. Considering that both lex loci

contractus and lex loci solutionis points to the same law, which is the Philippine

law, it is clear that it must be the governing law in determining the validity of the

arbitration agreement.

Arbitration agreement is invalid under the Philippine law

25. Under the Philippine law, clause 31.3 of the contract which provides that:

31.3 PEC and CC hereby expressly agree that, to the fullest

extent permitted by law, leave to appeal may not be sought

with respect to any question of law arising in the course of

the arbitration or with respect to any award made.

Furthermore, each of PEC and CC hereby waives

irrevocably any rights of application or appeal to the courts

of the Philippines (or of any other country having jurisdiction

 over any of the parties or their dispute) to the fullest extent

permitted by law in connection with any questions of law

arising in the course of the arbitration or with respect to any

award made.

is invalid because it waives irrevocably any rights of application or to

appeal to the courts of the Philippines in connection with any question of

law arising in the course of the arbitration. This is contrary to the clear

mandate of Article 6 of the Civil Code of the Philippines which provides

that Rights may be waived, unless the waiver is contrary to law, public

order, public policy, morals, or good customs, or prejudicial to a third

person with a right recognized by law.

26. Furthermore, clause 31.3 is in conflict with clause 31.4 which provides

that:
31.4 The award shall be final and binding upon the parties,

and shall be the sole and exclusive remedy between the

parties regarding any claims, counterclaims, issues, or

accountings presented to the arbitral tribunal. Judgment

upon any award may be entered in any court having

jurisdiction.

The above quoted clause allows judgment upon any award to be entered

in any court having jurisdiction while clause 31.3 expressly prohibits any

rights of application to the Philippine courts. If the Philippine courts is

 covered under the stipulation in clause 31.4, such would defeat the

limitation provided in clause 31.3. In effect, the contract is ambiguously

worded thereby creating conflicting stipulations which makes the contract

unenforceable.

27. The clause 31.9 which provides that:

31.9 Performance of this Agreement shall continue during

any reference to arbitration, provided, that performance of

that part of the Works in dispute shall only continue if, and in

the manner, PEC so directs. No payments due or payable by

PEC (other than payments which are the subject of the

dispute) shall be withheld on account of a pending reference

to arbitration.

This stipulation is invalid because it effectively gave the Claimant

discretion to allow the performance of the part of the works in

dispute to continue or not regardless who is at fault. The

performance of the obligation in the contract cannot depend on the

will of one party alone, as provided for by the Civil Code of the

Philippines.

28. The clause 31.10 of the contract is also invalid because it effectively waives the

jurisdiction of the CIAC. Since the jurisdiction of CIAC is conferred by law 8, it

cannot be subjected to any condition; nor can it be waived or diminished by the

8 Executive Order 1008

 stipulation.9 It is stressed that jurisdiction is vested by law and cannot be

conferred or waived by any or all of the parties. 10 Hence, the waiver of the

applicability Philippine laws concerning dispute resolution is contrary to law and

public policy and is therefore invalid.

29. Considering the fact that pertinent provisions of the arbitration clause were

invalid under the Philippine laws, it is clear that the arbitration agreement can be

considered invalid in its entirety. Since the substantial parts of the arbitration

agreement is invalid, the contract can no longer stand to effectively render its

objective which is to provide for a contract that will govern the arbitration

proceeding between the parties.

30. If the arbitration agreement is not valid, then there is no legal basis for the

Tribunal to take jurisdiction over the present dispute.

VI. EFFECT OF ANTI SUIT INJUNCTION

31. An anti-suit injunction is a court order rendered against a private party with the

intention of either to prevent that party from commencing an action in another

forum, or forcing that party to discontinue such an action if already started. 11

32. The Respondent invites the Tribunal’s attention to the recent case decided by the

Hong Kong Court of First Instance (HKFCI), Ever Judger Holding Company

9 China Chang Jiang Energy Corporation v Rosal Infrastructure Builders; G.R. No. 125706; September
30, 1996
10 Willard Riano, “Civil Procedure (The Bar Lectures Series), Vol.1”, (Rex Bookstore, 2011)
11 Neil A Dowers, The Anti-Suit Injunction and the EU: Legal Tradition and Europeanisation in
International Private Law, Cambridge Journal of International and Comparative Law (2)4: 960-973 (213),
p. 960 (“Dowers”).
 Limited v Kroman Celik Sanayii Anonim Sirketi. 12 The HKCFI, speaking through

Mr. Justice Godfrey Lam, granted an anti-suit injunction to restrain the further

conduct of litigation commenced in a foreign jurisdiction. It followed a line of

recent decisions in England 13 and Singapore14 affirming the court’s powers to

grant an anti-suit injunction to restrain a party from commencing foreign court

proceedings.
33. The introduction of anti-suit injunctions, directed at arbitral proceedings or at

court proceedings surrounding an international arbitration, into international

arbitration is a recent trend.

34. The Regional Trial Court of Manila granted Respondent’s application and issued

an anti-suit injunction. The Respondent’s acquisition of an anti-suit injunction

directed to the Tribunal involves no disrespect. Moreover, the Respondent does

not assert that the Philippine court is superior to the Tribunal.

35. The Respondent, nevertheless, pleads to the Tribunal to revere the injunction

addressed to it.
36. The case of Ever Judger re-affirms the Hong Kong courts’ pro-arbitration

approach and its willingness to grant anti-suit injunctions against foreign

jurisdiction. The anti-suit injunction, as sought by the Respondent on the account

of its submission to arbitrate under another forum which is the CIAC, is akin to

such purpose.

Jurisdiction of the Construction Industry Arbitration Commission (CIAC)

12 HCCT 6/2015
13 AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] 1
WLR 1889
14 R1 International Pte Ltd v Lonstroff AG[2014] 3 SLR 166
 37. EO 1008 expressly vests in the Construction Industry Arbitration

Commission (CIAC) original and exclusive jurisdiction over disputes arising from

or connected with construction contracts entered into by parties that have agreed

to submit their dispute to voluntary arbitration. Section 4 of Executive Order No.

1008, Series of 1985 (E.O. No. 1008) sets forth the jurisdiction of CIAC. To wit:

SECTION 4. Jurisdiction.—The CIAC shall have 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. These 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.

38. Construction has been defined as referring to "all on-site works on buildings or

altering structures, from land clearance through completion including excavation,

erection and assembly and installation of components and equipment. 15 The

Respondent was employed to design, construct, commission, test, complete and

hand over the power station to it. It is clear that the present dispute concerning

the engineering procurement and construction contract between Claimant and

Respondent is a construction contract.

15 Stronghold Insurance Company Inc. v Spouses Stroem; G.R. No. 204689; January 21, 2015
 39. 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. 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.
40. Based on the foregoing, there are two acts which may vest the CIAC with

jurisdiction over a construction dispute. One is the presence of an arbitration

clause in a construction contract, and the other is the agreement by the parties to

submit the dispute to the CIAC.16

41. The first act is applicable to the case at bar. The bare fact that the parties

incorporated an arbitration clause in the engineering procurement and

construction contract is sufficient to vest the CIAC with jurisdiction over any

construction controversy or claim between the parties. The rule is explicit that the

CIAC has jurisdiction notwithstanding any reference made to another arbitral

body.

Waiver of applicable Philippine laws is invalid

42. Since the jurisdiction of CIAC is conferred by law, it cannot be subjected to any

condition; nor can it be waived or diminished by the stipulation, act or omission of

the parties, as long as the parties agreed to submit their construction contract

16 Heunghwa Industry Co., Ltd v DJ Builders Corporation; G.R. No. 169095; December 8, 2008
 dispute to arbitration, or if there is an arbitration clause in the construction

contract.17
43. The stipulation under clause 31.10 of the contract directly contravenes to the

express mandate of the law prohibiting any waiver by stipulation of the CIAC’s

jurisdiction. The clause provided that:

31.10. For the avoidance of doubt, the parties agree, to the

extent permitted by applicable Laws or international

conventions, that the application of:

(i) Executive Order No. 1008, otherwise known as the

“Construction Industry Arbitration Law”;

(ii) the provisions of Republic Act No. 9285, otherwise

known as “Alternative Dispute Resolution Act of 2004”,

relating to construction arbitration shall not be applicable to

this Agreement or to any dispute that may arise in

connection therewith and are hereby irrevocably waived by

the parties and shall not be invoked by them."

44. It is clear that such waiver cannot stand because under the elementary

principle on the law on contracts, that laws obtaining in a jurisdiction form

part of all agreements. When the law provides that the Board acquires

jurisdiction when the parties to the contract agree to submit the same to

voluntary arbitration, the law in effect, automatically gives the parties an

alternative forum before whom they may submit their disputes. That

alternative forum is the CIAC. 18

17 Golangco v Ray Burton Development Corporation, G.R. No. 163582; August 9, 2010

18 China Chang Jiang Energy Corporation v Rosal Infrastructure Builders; G.R. No. 125706; September
30, 1996
 CIAC has the jurisdiction to take cognizance of the case

45. The CIAC was created in recognition of the fact that delays in the resolution

of construction industry disputes would also hold up the development of the

country, Executive Order No. 1008 expressly mandates the CIAC to

expeditiously settle construction industry disputes and, for this purpose, vests

in the CIAC original and exclusive jurisdiction over disputes arising from, or

connected with, contracts entered into by the parties involved in construction

in the Philippines.19 Since both parties are Philippine based companies, it is

not only practical but also in accordance with the objective of voluntary

arbitration that in resolving their disputes they shall proceed before the CIAC.
46. Although the arbitration clause is invalid, CIAC still have jurisdiction over the

dispute because mere intent of the parties to submit the case to arbitration is

sufficient. Section 4.1.2 of the CIAC Revised Rules of Procedure Governing

Construction Arbitration provides that as long as the intent is clear that the parties

agree to submit a present or future controversy arising from a construction

contract to arbitration, CIAC can acquire jurisdiction over the dispute. To stress,

the CIAC was already vested with jurisdiction the moment both parties agreed to

incorporate an arbitration clause in engineering procurement and construction

contract.
47. Even if the Claimant commenced arbitration proceedings against

Respondent and filed a Notice of Arbitration with HKIAC ahead of the

latter, such does not bar the CIAC from acquiring jurisdiction over the case

19 Golangco v Ray Burton Development Corporation, G.R. No. 163582; August 9, 2010
 since the arbitration agreement is in fact invalid. Therefore, HKIAC has no

jurisdiction to take cognizance of the present dispute.

VII. ENFORCEMENT OF FOREIGN ARBITRAL AWARD
48. If the Tribunal, considering the position of the Respondent regarding its

jurisdiction, decided to continue the proceedings, such would be respected. The

award may be favorable to the Respondent or the Claimant or both.

49. The Respondent, however, would like the Tribunal to consider the rudiments

revolving recognition and enforcement of the award it will render.

50. As stated, both the Claimant and the Respondent, being duly formed and

organized under the Corporation Code, are to be located in the Philippines with

their assets and other properties. The construction contract was celebrated in the

Philippines. In addition, the object of the contract is to be located at a province in

the Philippines. Bearing in mind all these, it is safe to say that the enforcement of

the arbitral award will be effected also in the Philippines.

51. The Philippines, as a signatory, adopted, some pertinent provisions even

replicated, the United Nation Convention on the Recognition and Enforcement of

Foreign Arbitral Award or the New York Convention.

52. The recognition and enforcement of such award shall be filled with the Regional

Trial Court.
53. As provided for by Philippine law20, a party to a foreign arbitration proceeding

may oppose an application for recognition and enforcement of the arbitral award

in accordance with the procedural rules to be promulgated by the Supreme Court

only on those grounds enumerated under Article V of the New York Convention.

Article V. 2. Recognition and enforcement of an arbitral

award may also be refused if the competent authority in

20 Section 4, Republic Act 9285

 the country where recognition and enforcement is sought

finds that:

(a) The subject matter of the difference is not capable of

settlement by arbitration under the law of that country; or

(b) The recognition or enforcement of the award would be

contrary to the public policy of that country.

54. The Respondent reiterates that the arbitration clause of the construction contract

is invalid as it is contrary to Philippine law. Invalid clause must be considered as

non-existent or not written. Such is the case, the Tribunal cannot acquire

jurisdiction over the dispute.

55. Award made by tribunal not having jurisdiction will not be enforced by the

Philippine courts for recognition and enforcement will be contrary to public policy.
56. Thus, if the tribunal will exercise jurisdiction using a void arbitration clause under

Philippine laws, due to wide definition of public policy, enforcement may fall short,

HKIAC proceedings will be futile.

57. The CIAC, on the other hand, may be eyed as a more fitting forum.
58. CIAC is vested by law with powers for safety measures in assuring a tenacious

award. In the CIAC, as soon as a decision, order to award has become final and

executory, the Arbitral Tribunal or the single arbitrator with the occurrence of the

CIAC shall motu propio, or on motion of any interested party, issue a writ of

execution requiring any sheriff or other proper officer to execute said decision,

order or award.21
59. This indicates that the award, endowed with great respect, need not be

confirmed by the Regional Trial Court to be executory.

21 Section 20, Executive Order 1008
 60. As a doctrine of the conflict of laws, Forum Non Conveniens dictates that courts,

in this case the tribunal, may refuse to take jurisdiction over matters where there

is a more appropriate forum available to the parties.

VIII. REQUEST FOR RELIEF

61. The Respondent maintains its request for relief as set out in the Answer to the

Request for Arbitration, that the Tribunal recognize and respect the antisuit

injunction issued by the Manila Regional Trial Court and/or dismiss the arbitral

proceedings due to lack of jurisdiction.

IX. RESERVATION OF RIGHTS

62. The Respondent reserves the right to submit such further supplemental or

additional evidence or submissions as may be necessary or appropriate.

DATED: 30 August 2015 BONDOC-NAVARRO LAW OFFICES

(Sgd.) Maricar Bondoc

(Sgd.) Camille Navarro

(Counsel for Respondent)

Rm 210, Angeles University Foundation Professional

Schools Building, Mac-Arthur Highway, Angeles City,

Philippines 2009