March 23, 2012

Mr. Steven Nash SUPERWIRE Company Phoenix, Arizona, U.S.A.

Dear Sir: You have referred your case for my opinion on the legality or validity of submitting your claims under the jurisdiction of International Chamber of Commerce (ICC) acting as Arbitral Tribunal. In response to your request, I have made my analysis based on the following facts: that your company is an American producer of telecommunication equipment that entered into a contract with SUPERPHONE, a Philippine telephone company, for the construction of a telephone network in the Philippines. It was stipulated in your first contract that the contract price shall be paid in installment basis and SUPERPHONE shall provide a performance guarantee and a chattel mortgage but the latter allegedly failed to do so. Instead, it had requested for a reschedule of payment plan which led to the execution of a Supplemental Contract. However, SUPERPHONE allegedly stopped any further payments on installment after your company completed 99% of the construction. Subsequently, your company filed a Termination Notice while SUPERPHONE filed a permanent injunction until the matter is resolved by the Arbitral Tribunal. As provided in your arbitral clause, you have decided that all disputes regarding the contract will be settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The parties agreed on Hong Kong as the place of arbitration. It was the contention of SUPERPHONE Company that Construction Industry Arbitration Commission (CIAC) should take cognizance of the case pursuant to Executive Order 1008. It alleged that the works were defective and it declined to pay the advance of costs. However, the issue on jurisdiction was already settled, granting the said jurisdiction to the ICC. The hearing then took place in Hong Kong. Based on the facts and the claims you have presented, I find that the issues are: whether or not advance on costs and failure to pay can be claimed in the arbitration; whether or not the Arbitral Tribunal can grant interim and partial awards; and whether or not such awards will bind SUPERPHONE Company and be enforceable in the Philippines. Applicable rules and jurisprudence should be taken into consideration. Anent the first issue, Article Article 30 of ICC Rules of Arbitration provides for the rules regarding Advance to Cover the Costs of the Arbitration. This means that ICC can tackle the issue on advance on costs of arbitration and failure to pay. Being the Claimant in this case, one of

your claims is for an Interim Award requesting SUPERPHONE to pay the advance on costs or to secure the said sums into escrow. This is a valid claim that should prosper. Applying Article 30(1), your company may be asked to pay the provisional advance cost which will be considered as a partial payment of the cost of the arbitration proceeding. It was made clear in Article 30(3) of the same ICC Rules that the Claimant and the Respondent shall pay their equal shares of the advance on costs after the Court fixed the said amount. In case SUPERPHONE failed to pay, Article 30(2) will apply which allows you to pay the whole amount. But you can invoke Article 30(3) which provides that the advance on costs fixed by the Court shall be payable in equal shares by the Claimant and the Respondent... If it is still unavailing, you can refer Article 1(6) of Appendix III of the said ICC Rules for remedy. It states that a party that has already paid in full its share of the advance on costs fixed by the Court may, in accordance with Article 30(3) of the Rules, pay the unpaid portion of the advance owed by the defaulting party by posting a bank guarantee. Black's Law Dictionary defines escrow as a deed delivered by the grantor into the hands of a third person, to be held by the latter until the happening of a contingency or performance of a condition, and then by him delivered to the grantee. It is one of the alternative remedies available for you in case the SUPERPHONE does not pay its share on the advance on costs. You can avail it by requesting for an interim measure. Under the provisions on Arbitral Proceedings particularly under Article 13 of the same ICC Rules, the Secretariat shall transmit the file to the Arbitral Tribunal as soon as it has been constituted, provided the advance on costs requested by the Secretariat at this stage has been paid. Thus, non-payment of the advance on costs may bar the continuation of the proceeding and this substantial prejudice on your part as the Complainant can be used as a basis for requesting an interim award. The second issue should now be tackled. The power of the ICC as an Arbitral Tribunal to grant interim awards, unless the contrary was agreed upon by parties, is provided in Article 23(1) of ICC Rules of Arbitration. Furthermore, arbitral awards are binding between your company and the SUPERPHONE, being the parties therein pursuant to Article 28(6) of the same Rule. It was stated in the article authored by Babatunde Osadare entitled Interim Measures of Protection in International Investment Arbitration that there are preconditions for granting an interim measures such as urgency in the case at hand, that there will be substantial prejudice to the party seeking such measure if interim award is not granted, that it must preserve status quo wherein no improvement of any parties will occur, it must not prejudice the final decision, and the case must be a prima facie one. But granting interim measures is not mandatory nor preconditions are exhaustive and still subject to the discretion of the arbitral tribunal since Article 23(1) of the said ICC Rules states that ..the Arbitral Tribunal may, at the request of a party, order any interim or conservatory measure it deems appropriate. In your case, it was alleged that SUPERPHONE applied to the National Telecommunication Commission (NTC) to transfer the license to operate a mobile network to the sister company. The sister company could then easily be sold off. Thus, the claim requesting for an interim award enjoining SUPERPHONE from selling, disposing, or encumbering the Equipment

supplied by your company is likewise valid and should be given due course because of the urgency of the case and the substantial prejudice that your company may suffer if the Arbitral Tribunal will not grant such award. However, your claim for an interim award into escrow to secure the sums in dispute pending the Tribunals final determination will not prosper using the same argument. This is because the conditions for granting the interim award are not present in this situation. There is neither urgency nor substantial prejudice that may happen to you in this case. On the other hand, it will prejudice the final decision and will improve you contrary to the condition that it must preserve the status quo. Also, according to Blacks Law Dictionary a prima facie case is one which is established by sufficient evidence, and can be overthrown only by rebutting evidence adduced on the other side. Thus, this particular claim cannot be considered as a prima facie case since the sums in dispute must be determined only during the final judgment after SUPERPHONE presented its evidence supporting its counterclaims. With regards to partial final award, a book authored by Alan Redfern and his co-authors entitled Law and Practice of International Commercial Arbitration led me to conclude that such award is preconditioned, although still subject to ICC arbitral tribunals discretion pursuant to Article 23(1) of its rules, on the following: that the matter is susceptible to determination during course of proceeding, that it is one of or part of a partys substantial claims, and that the decision granting such award is likely to be enforceable under the law of the country to be enforced. Your claim for a partial final award in respect of sums for which there is no defense is likewise valid and will prosper since such monetary claim submitted by your company was not contested by the SUPERPHONE nor did they provide any counterclaim. Since it is not counter-argued upon, it is susceptible to determination during the course of proceeding without waiting for the final judgment. It is also part of your substantial claims based on your contract which is mainly for the collection of sums of money for your companys substantial compliance therewith. The question of whether or not the decision is likely to be enforceable under the law of the country to be enforced will lead us to the last issue. The Supreme Court of the Philippines held in the case of Korea Technologies, Co., Ltd. vs. Lerma, 542 SCRA 1 (2008) that it is now clear that foreign arbitral awards when confirmed by the Regional Trial Court (RTC) are deemed not as a judgment of a foreign court but as a foreign arbitral award, and when confirmed, are enforced as final and executory decisions of our courts of law- the concept of a final and binding arbitral award is similar to judgments or awards given by some quasi-judicial bodies. Furthermore, while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by the parties, still foreign arbitral award is subject to judicial review by the RTC. Thus, arbitral awards (interim, partial or final), once granted by the ICC and confirmed by the RTC will now bind the Philippine telephone company SUPERPHONE and will be enforceable in the Philippines, subject to judicial review. This remedy maybe utilized either by your company in case the awards leave you unsatisfied, or by SUPERPHONE Company itself if they are not amenable to it.

All premises considered, your company can claim advance on costs and failure to pay in the arbitration. Also, the Arbitral Tribunal can grant interim and partial awards, being discretionary on the part of the ICC. And finally, any arbitral awards will bind SUPERPHONE Company and be enforceable in the Philippines. The abovementioned opinion is based on the rules and the jurisprudence applicable to your case. I would highly recommend that you pursue your initial plan of submitting your claims under the jurisdiction of International Chamber of Commerce (ICC) acting as the Arbitral Tribunal. I am confident that the case will be decided accordingly and your claims for awards will be granted provided they are supported by sufficient bases. If there are any questions and/or clarifications that may arise from this legal opinion, be assured that my office is open to accommodate them.

Sincerely, Atty. Jovelle Carmel E. Rejuso