HOW TO ENFORCE FOREIGN ARBITRAL AWARDS IN THE PHILIPPINES

By: Atty. Enrique V. dela Cruz, Jr.1

Claims and disputes involving business contracts tend to be technically

complex, factually intensive and costly to resolve through litigation. As a result,
contracting parties frequently agree to resolve their disputes by using alternative
dispute resolution processes such as arbitration.

International commercial arbitration is an alternative method of resolving

disputes between private parties arising out of commercial transactions conducted
across national boundaries that allows the parties to avoid litigation in national
courts.

International commercial arbitration is a relatively new area of practice in

the Philippines. While the Philippines became a signatory to the United Nations
Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of
1958 (the "New York Convention”) as early as 10 June 1958 -- no law was enacted
prescribing the mechanics for the conduct of international arbitration or for the
enforcement of foreign arbitral awards in the Philippines for almost fifty (50) years.
Parties to disputes had no choice then but to apply Republic Act 876 – a law for
domestic arbitration.

During the period of 1958 to 2003, parties dealing with disputes regarding
international contracts in the Philippines often resorted to dispute settlement by
arbitration in foreign countries under the rules of foreign arbitral institutions. Since
there was no law enacted in the Philippines providing a specific procedure for the
enforcement of foreign arbitral awards, Philippine courts treated these awards as
foreign judgments. Thus, foreign arbitral awards have sometimes been deemed only
presumptively valid, rather than conclusively valid, as required by the New York
Convention.

1
Atty. Enrique V. dela Cruz, Jr. is Senior Partner at Divina Law Office based in Makati City,
Philippines where he heads the Arbitration Law Group. He obtained his Master of Laws in
International & Comparative Business law (with Distinction) from the London Metropolitan
University as a Chevening scholar of the British government. He earned his Bachelor of Laws
degree (3rd Honors) in 2000 and his AB Legal Management degree (cum laude) in 1996, both from
the University of Santo Tomas as a Rector’s Scholar. He is currently a member of the London Court
of International Arbitration (LCIA). He was shortlisted as one of the finalists in the Arbitration
Lawyer of the Year category of the 2018 Asia Legal Business (ALB) Philippine Law Awards.
 It was only in 2004 that the Philippine Congress enacted Republic Act No.
9285, otherwise known as the Alternative Dispute Resolution Act of 2004. This new
law regulates national and international arbitration and constitutes a consolidated
and a relatively complete corpus for the recourse to arbitration and the enforcement
of its awards.

In a bid to set up a clearer legal framework for the enforcement of foreign

arbitral awards, the Philippine Supreme Court issued A.M. No. 07-11-08-SC
otherwise known as the Special Rules of Court on Alternative Dispute Resolution
(“Special ADR Rules”) in 2008 providing guidance on the interpretation of some
provisions of RA 9285.

Over the last ten (10) years, the Philippines has made great progress in the
area of international commercial arbitration. However, there are still a lot of efforts
needed to improve the enforceability of foreign awards. This article explores some
of the challenges facing enforcement of arbitral awards in the Philippines.

Recognition of Foreign Arbitral Award

Before a foreign arbitral award may be enforced in the Philippines, it must first be
confirmed by the Regional Trial Court (RTC). Sec. 35 of the UNCITRAL Model Law
stipulates the requirement for the arbitral award to be recognized by a competent
court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may
refuse recognition or enforcement on the grounds provided for. These provisos are
incorporated in Republic Act No. 9285 or the Alternative Dispute Resolution Act of
2004 (“ADR Act”).

Foreign Arbitral Award Not Foreign Judgment

Sec. 44 of the ADR Act states that a foreign arbitral award is not a foreign judgment.
It shall be enforced as a foreign arbitral award and not as a judgment of a foreign
court. For the recognition and enforcement of a foreign judgment, the applicable
rule is Sec. 48, Rule 39 of the Rules of Court. The Philippine Supreme Court has ruled
that ‘recognition and enforcement of a foreign judgment or final order requires only
proof of fact of the said judgment or final order’ and that once proven, the said
foreign judgment enjoys a disputable presumption of validity. (BPI Securities Corp.
v. Guevara, 752 SCRA 371 (2015))

Petition for the recognition and enforcement of foreign arbitral award

A petition for the recognition and enforcement of foreign arbitral award is a special
proceeding. Under Rule 13.3 of the Special ADR Rules, the petition shall, at the
petitioner’s option, be filed with the RTC (a) where the assets to be attached or
levied upon is located, (b) where the act to be enjoined is being performed, (c) in
the principal place of business in the Philippines of any of the parties, (d) if any of
the parties is an individual, where any of the individual resides, or (e) in the National
Capital Judicial Region.

Rule 1.4 of the Special ADR Rules requires that the petition be duly verified and
accompanied by a Certification Against Forum Shopping. Also, the requisite board
resolution or Secretary’s Certificate should be appended to the petition as evidence
of the authority of the affiant to verify the petition and execute the Certificate
Against Forum Shopping for and on behalf of the party seeking to recognize
and enforce the arbitral award in the Philippines.

Rule 13.5 of the Special ADR Rules further requires that the petitioner plead in the
petition the (i) addresses of the parties to arbitration, (ii) the country where the
arbitral award was made and whether such country is a signatory to the New York
Convention, and (iii) the relief sought. The petitioner is likewise required to attach
to the petition (i) an authentic copy of the arbitration agreement; and (ii) an
authentic copy of the arbitral award. The petitioner may elect to submit the original
arbitral award and the original arbitration agreement, as provided in Sec. 42 of the
ADR Act and Article 4.35 (c) of the Implementing Rules and Regulations thereof.

Filing fees

An action for recognition and enforcement of a foreign arbitral award is incapable

of pecuniary estimation. (Mijares v. Ranada, G.R. No. 139325, April 12, 2005) Hence,
under Rule 20.1 of the Special ADR Rules, the minimal filing fee payable in “all other
actions not involving property” shall be paid by the petitioner seeking to enforce
foreign arbitral awards under the New York Convention in the Philippines, i.e. Php
2,000.00 (Amended Admin. Circular 35-2004).

Notices and summons

Under Rule 13.6 of the Special ADR Rules, upon receipt of the petition, the court shall
initially determine whether it is sufficient in form and in substance, after which, the
court shall cause the service of a copy of the petition upon the respondent.

Under Rules 13.6 and 13.7, the court sends a notice to the respondent in the
proceeding for the recognition and enforcement of foreign arbitral award to file a
verified opposition within thirty (30) days from receipt of the notice and petition.
This thirty (30) day period is non-extendible since a motion for extension is a
prohibited pleading under Rule 1.6.

Under Rule 1.9, the court “acquires authority to act on the petition or motion upon
proof of jurisdictional facts, i.e. that the respondent was furnished with a copy of
the petition and the notice of hearing.” The burden of proof lies with the petitioner.

Hearing

The hearing referred to in Rule 1.9 is the initial hearing to prove the jurisdictional
facts. The notice of initial hearing contains a directive for the respondent to file an
opposition to the petition for recognition and enforcement of the foreign arbitral
award. Respondent’s failure to submit an opposition shall not be cause for a
declaration of default, as this is again, a prohibited pleading under Rule 1.6 (g).

Once the respondent has filed its opposition, the court determines whether the issue
between the parties is one of law or fact. Under Rule 13.8 of the Special ADR Rules,
if the issue is mainly one of law, the court will require the submission of a brief of
legal arguments not more than thirty (30) days from receipt of the order. Under Rule
1.4, the legal brief is required to be verified by the lawyer submitting it.

On the other hand, if there are issues of fact on grounds relied upon for the court to
refuse recognition and enforcement, the court, in accordance with Rule 13.8, shall,
motu proprio, or upon the request of a party, require the parties to simultaneously
submit the affidavits of their respective witnesses within a period of not less than
fifteen (15) days nor more than thirty (30) days from receipt of the order.

Costs

The petitioner need not plead the costs at the time of the filing of the petition for
recognition and enforcement of the foreign arbitral award. Rule 21.3 of the Special
ADR Rules allows the petitioner to submit, at the time the case is submitted to the
court for decision, a statement under oath confirming the costs incurred in the
proceedings in the Philippines for the recognition and enforcement of the foreign
arbitral award. The costs include the attorney’s fees that a party has paid or is
contractually committed to pay to the counsel of record.

Grounds for Denial of Recognition

Under Sec. 45 of the ADR Act, no other grounds, other than those enumerated in
Article V of the New York Convention, shall be considered by the RTC in determining
whether the arbitral award shall be recognized and enforced in the Philippines.
Further, under Rule 13.4 of A.M. No. 07-11-08-SC or the “Special ADR Rules”, which
incorporates Article V of the New York Convention, the RTC shall refuse recognition
and enforcement of the foreign arbitral award only upon proof that:

(i) 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 thereof, under the law of the country
where the award was made; or
(ii) 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
(iii) 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 that part of the award which contains
decisions on matters not submitted to arbitration may be set aside; or
(iv) The composition of the arbitral tribunal or the arbitral procedure was not
in accordance with the agreement of the parties or, failing such
agreement, was not in accordance with the law of the country where
arbitration took place; or
(v) The award has not yet become binding on the parties or has been set aside
or suspended by a court of the country in which that award was made; or

Rule 13.4(b) further provides that the foreign arbitral award may be refused
recognition and enforcement by the court if it finds that:

(i) The subject-matter of the dispute is not capable of settlement or

resolution by arbitration under Philippine law; or
(ii) The recognition or enforcement of the award would be contrary to public
policy.

Note that although the RTC can deny recognition and enforcement, it has no power
to vacate or set aside a foreign arbitral award (Rule 19.11, Special ADR Rules).

Appeal
An appeal from a final order of the RTC may be taken to the Court of Appeals via
petition for review under Rule 19.12 of the Special ADR Rules within fifteen (15) days
from notice of the RTC decision.

When the RTC, in making a ruling under the Special ADR Rules, has acted without
or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack
or excess of jurisdiction, and there is no appeal or any plain, speedy, and adequate
remedy in the ordinary course of law, a party may file a special civil action for
certiorari before the Court of Appeals to annul or set aside a ruling of the Regional
Trial Court (Rule 19.26, Special ADR Rules).

Decision Immediately Executory

The decision of the RTC is immediately executory (Rule 13.11 of the Special ADR
Rules). Rule 19.22 of the Special ADR Rules categorically states that: “The appeal shall
not stay the award, judgment, final order or resolution sought to be reviewed unless
the Court of Appeals directs otherwise upon such terms as it may deem just.”

Motion for Execution

A foreign arbitral award, when confirmed by the RTC, shall be enforced in the same
manner as final and executory decisions of courts of law of the Philippines. (Korea
Technologies Co., Ltd. v. Lerma, G.R. No. 143581, January 7, 2008)

Although the decision is immediately executory, a motion for execution under Rule
39, Sec. 1 of the Rules of Court a Motion for Execution should still be filed before
the RTC. The court sheriff or other proper officer will be directed to enforce the writ
according to its terms. To illustrate, if the judgment is a money award, the sheriff
shall demand, in writing, the payment from the judgment debtor of the judgment
award by cash or certified bank check payable to the judgment creditor (Rules of
Court, Rule 39, Sec. 9). If the judgment debtor cannot pay all or part of the obligation
in cash, certified bank check or other acceptable modes of payment, the sheriff shall
levy upon the properties, whether real or personal, of the judgment debtor, which
may be disposed of for value, sufficient to satisfy the judgment award (Rules of
Court, Rule 39, Sec. 9(b)).