Special ADR Rules

The Special ADR Rules govern the various stages of court participation in arbitration
proceedings: challenge to the existence, validity, and enforceability of arbitration
agreements; referral to arbitration; interim measures of protection; appointment,
challenge, and termination of arbitrators; assistance in taking evidence;
confidentiality/protective orders; confirmation, correction, or vacation of award in
domestic arbitration; recognition and enforcement or setting aside of an
international commercial arbitration award; recognition and enforcement of foreign
arbitral award; and appeals to the Court of Appeals and the Supreme Court.
The Special ADR Rules reiterate the state policy of promoting arbitration: It is the
policy of the State to actively promote the use of various modes of ADR and to
respect party autonomy or the freedom of the parties to make their own
arrangements in the resolution of disputes with the greatest cooperation of and the
least intervention from the courts. To this end, the objectives of the Special ADR
Rules are to encourage and promote the use of ADR, particularly arbitration and
mediation, as an important means to achieve speedy and efficient resolution of
disputes, impartial justice, curb a litigious culture and to de-clog court dockets.
The following are some of the salient provisions of the Special ADR Rules:
A party may challenge before the courts the existence, validity, and enforceability
of an arbitration agreement. The challenge may be done either before or after the
commencement of the arbitration.
Despite the pendency of the petition for judicial determination of the existence,
validity, and/or enforceability of an arbitration agreement, the arbitral proceedings
may nevertheless be commenced and continue to the rendition of an award while
the issue is pending before the court.
In resolving the petition, the court must exercise judicial restraint, deferring as
much as possible to the competence or jurisdiction of the arbitral tribunal to rule on
its competence or jurisdiction.
A party to a pending action filed in violation of the arbitration agreement may
request the court to refer the parties to arbitration in accordance with such
agreement. The request for referral shall be made not later than the pretrial
conference. After the pretrial conference, the court will act upon the request for
referral only if it is made with the agreement of all parties to the case.
Despite the pendency of the court action, the arbitral proceedings may nevertheless
be commenced or continued, and an award may be made, while the action is
pending before the court.
A petition for an interim measure of protection may be made
(a) before arbitration is commenced,
(b) after arbitration is commenced but before the constitution of the arbitral
tribunal, or
(c) after the constitution of the arbitral tribunal and at any time during arbitral
proceedings but, at this stage, only to the extent that the arbitral tribunal has no
power to act or is unable to act effectively.
Any court order granting or denying interim measure/s of protection is issued
without prejudice to subsequent grant, modification, amendment, revision, or
revocation by the arbitral tribunal as may be warranted. An interim measure of
protection issued by the arbitral tribunal shall, upon its issuance, be deemed to
have ipso jure modified, amended, revised, or revoked an interim measure of
protection previously issued by the court to the extent that it is inconsistent with
the subsequent interim measure of protection issued by the arbitral tribunal.
The court shall assist in the enforcement of an interim measure of protection issued
by the arbitral tribunal which it is unable to enforce effectively.
Assistance may be sought at any time during the course of the arbitral proceedings
when the need arises.
Any party to an arbitration, whether domestic or foreign, may request the court to
provide assistance in taking evidence.
A party, counsel, or witness who disclosed or who was compelled to disclose
information under circumstances that would create a reasonable expectation, on
behalf of the source, that the information shall be kept confidential has the right to
prevent such information from being further disclosed without the express written
consent of the source or the party who made the disclosure.
A party could request a protective order any time there is a need to enforce the
confidentiality of the information obtained, or to be obtained, in the arbitration
proceedings.
The order enjoining a person or persons from divulging confidential information shall
be immediately executory and could not be enjoined while the order is being
questioned at the appellate courts.
Any person who disobeys the order of the court to cease from divulging confidential
information shall be given the proper sanction by the court.
In deciding the petition to vacate a domestic arbitral award, the court shall
disregard any grounds other than those specified in Republic Act No. 876.
If the court finds that there is a need to conduct an oral hearing, the court shall set
the case for hearing. This case shall have preference over other cases before the
court, except criminal cases.
Unless a ground to vacate an arbitral award is fully established, the court shall
confirm the award. An arbitral award shall enjoy the presumption that it was made
and released in due course of arbitration and is subject to confirmation by the court.
The court may set aside or refuse the enforcement of the international arbitral
award only on grounds under the Model Law.
The court shall disregard any grounds to set aside or enforce the arbitral award
other than those specified in the Model Law.
Recourse to a court against an arbitral award shall be made only through a petition
to set aside the arbitral award and on grounds prescribed by the law that governs
international commercial arbitration. Any other recourse from the arbitral award,
such as by appeal or petition for review or petition for certiorari or otherwise, shall
be dismissed by the court.4
The prevailing party shall be entitled to an award of costs, which shall include
reasonable attorneys fees of the prevailing party against the unsuccessful party.
The court shall determine the reasonableness of the claim for attorneys fees.
A Philippine court shall not set aside a foreign arbitral award but may refuse it
recognition and enforcement on any or all of the grounds under Section V of the
New York Convention.
The court shall disregard any grounds for opposing the recognition and enforcement
of a foreign arbitral award other than those specified in the New York Convention.
4 This provision effectively overturns previous court decisions holding that an
arbitral award may be questioned by directly filing a petition for review (on
questions of fact and law) or petition for certiorari (on a question of jurisdiction) with
the Court of Appeals.
The court shall give due priority to hearings on petitions under this rule.
The decision of the court recognizing and enforcing a foreign arbitral award is
immediately executory.
In resolving the petition for recognition and enforcement of a foreign arbitral award
in accordance with the Special Rules, the court shall either (a) recognize and
enforce or (b) refuse to recognize and enforce the arbitral award. The court shall not
disturb the arbitral tribunals determination of facts and/or interpretation of law.
An agreement to refer a dispute to arbitration shall mean that the arbitral award
shall be final and binding. Consequently, a party to an arbitration is precluded from
filing an appeal or a petition for certiorari questioning the merits of an arbitral
award.
As a general rule, the court may vacate or set aside the decision of an arbitral
tribunal only upon a clear showing that the award suffers from any of the infirmities
or grounds for vacating an arbitral award under Section 24 of Republic Act No. 876
or under Rule 34 of the Model Law in a domestic arbitration, or for setting aside an
award in an international arbitration under Article 34 of the Model Law, or for such
other grounds provided under these Special Rules.
The court shall not set aside or vacate the award of the arbitral tribunal merely on
grounds that the arbitral tribunal committed errors of fact, or of law, or of fact and
law, as the court may not substitute the arbitral tribunals judgment with that of its
own.
An appeal to the Court of Appeals 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.
The Court of Appeals shall render judgment within 60 days from the time the case is
submitted for decision.
If the decision of the Regional Trial Court refusing to recognize and/or enforce,
vacating, and/or setting aside an arbitral award is premised on a finding of fact, the
Court of Appeals may inquire only into such fact to determine the existence or
nonexistence of the specific ground under the arbitration laws of the Philippines
relied upon by the Regional Trial Court in refusing to recognize and/or enforce,
vacate, and/or set aside an award. Any such inquiry into a question of fact shall not
be resorted to for the purpose of substituting the courts judgment with that of the
arbitral tribunal as regards the latters ruling on the merits of the controversy.
The Court of Appeals shall require the party appealing from the decision or a final
order of the Regional Trial Court either confirming or enforcing an arbitral award, or
denying a petition to set aside or vacate the arbitral award, to post a bond equal to
the amount of the award executed in favor of the prevailing party. Failure of the
petitioner to post such bond shall be a ground for the Court of Appeals to dismiss
the petition.
When the Regional Trial Court, in making a ruling under the Special ADR Rules, has
acted without or in excess of its jurisdiction, or with grave abuse of discretion
resulting in 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 to annul or set aside a ruling of the Regional Trial
Court.
The Court of Appeals shall not, during the pendency of the proceedings before it,
prohibit or enjoin the commencement of arbitration, the constitution of the arbitral
tribunal, or the continuation of arbitration.
A party desiring to appeal by certiorari from a judgment or final order or resolution
of the Court of Appeals issued pursuant to the Special Rules may file with the
Supreme Court a verified petition for review of certiorari. The petition shall raise
only questions of law.
The fee5 for filing a petition to confirm or enforce, vacate, or set aside an arbitral
award in a domestic arbitration or in an international commercial arbitration shall be
as follows:
PhP10,000.00 if the award does not exceed PhP1,000,000.00
PhP20,000.00 if the award does not exceed PhP20,000,000.00
PhP30,000.00 if the award does not exceed PhP50,000,000.00
PhP40,000.00 if the award does not exceed PhP100,000,000.00
PhP50,000.00 if the award exceeds PhP100,000,000.00
The prevailing party shall be entitled to an award of costs with respect to the
proceedings before the court, which shall include the reasonable attorneys fees of
the prevailing party against the unsuccessful party.
5 Prior to the passage of the Special Rules, there was no standard or schedule for
computing the filing fees. Some courts charged fixed filing fees; others based the
computation of the filing fees on the amount found in the arbitral award.
At the time the case is submitted to the court for decision, the party praying for
confirmation or vacation of an arbitral award shall submit a statement under oath
confirming the costs he has incurred only in the proceedings for confirmation or
vacation of an arbitral award. The costs shall include the attorneys fees the party
has paid or is committed to pay to his counsel of record.
The court shall determine the reasonableness of the claim for attorneys fees.
Construction Industry Arbitration Commission
Executive Order No. 1008 established the Construction Industry Arbitration
Commission (CIAC). The CIAC has original and exclusive jurisdiction over
construction disputes, which shall include those between or among parties to, or
who are otherwise bound by, an arbitration agreement, directly or by reference
whether such parties are project owner, contractor, subcontractor, fabricator,
project manager, design professional, consultant, quantity surveyor, bondsman or
issuer of an insurance policy in a construction project.
The CIAC is a hybrid of voluntary arbitration and compulsory arbitration.
If the parties do not enter into an arbitration agreement, then the construction
dispute between them shall be resolved by the courts.
On the other hand, the Philippine Supreme Court has held that as long as the
parties agree to submit their dispute 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 by law. Thus, for example, if the parties to a construction contract
designate Singapore arbitration as the venue of any dispute that may arise between
them, either party may still elect to file a request for arbitration with the CIAC,
notwithstanding the agreement of the parties to submit their dispute to arbitration
in Singapore, and the CIAC shall assume jurisdiction over the dispute.
The CIAC is known for its efficiency. It takes the CIAC an average of around six
months from the time of filing of the request for arbitration to hear the case and
render an award.
Institutional and Ad Hoc Arbitration Philippine Dispute Resolution Center,
Inc.
The Philippine Dispute Resolution Center, Inc. (PDRCI) is a non- stock, nonprofit
organization incorporated in 1996 out of the Arbitration Committee of the Philippine
Chamber of Commerce and Industry. It was formed for the purpose of promoting
and encouraging the use of arbitration as an alternative mode of settling
commercial transaction disputes and providing dispute resolution services to the
business community. PDRCIs membership includes prominent lawyers and
members of the judiciary, private practitioners, academicians, arbitrators, bankers
and businessmen.
The arbitration rules of the PDRCI have been amended effective January 2015 to
include provisions relating to consolidation of arbitration, joinder of parties,
expedited arbitration and emergency relief, among others.
It takes the PDRCI an average of around 10 months from the time of filing of the
request for arbitration to hear the case and render an award.
Ad Hoc Arbitration
There is no prohibition in the Philippines regarding the recognition and conduct of
ad hoc arbitration in accordance with the existing policy in favor of arbitration.
Enforcement of Arbitration Awards
The Philippines is a party to the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards 1958. An action for enforcement of a foreign
arbitral award must be filed in the Philippine courts and copies of the award and the
original agreement must likewise be filed. If the said award or agreement is not
made in an official language of the Philippines, the party-applicant shall produce a
translation of the documents into the official language. The translation shall be
certified by an official or sworn translator or by a diplomatic or consular agent.
Mediation and Conciliation
Mediation or conciliation is a speedy, inexpensive and simplified mode of dispute
resolution. There have been increased efforts in recent years to institutionalize
mediation proceedings in the Philippine legal system to aid in the speedy
administration of justice.
Court-Annexed Mediation
In 2001, the Supreme Court, in the exercise of its supervisory and regulatory powers
over the Philippine judicial system, implemented a trial mediation or conciliation
proceedings in certain pilot areas in the Philippines.
By 2011, the Supreme Court has expanded the cases covered by the Court-Annexed
Mediation (CAM) to cover the following:
(1) all civil cases and the civil liability of criminal cases covered by the Rules on
Summary Procedure, including the civil liability for violation of the Bouncing Checks
Law,
(2) special proceedings for the settlement of estates,
(3) all civil and criminal cases requiring a certificate to file action under the Revised
Katarungang Pambarangay Law,
(4) the civil aspect of quasi-offenses under the Revised Penal Code,
(5) the civil aspect of less grave felonies not exceeding six years of imprisonment
where the offended party is a private person,
(6) civil aspect of estafa (swindling), theft and libel,
(7) all civil cases and probate proceedings brought on appeal from the first-level
courts,
(8) all cases of forcible entry and unlawful detainer brought on appeal from the
first-level courts,
(9) all civil cases involving title or possession of real property or interest therein
brought on appeal from first-level courts,
(10) habeas corpus cases brought up on appeal from the first-level courts.
On the other hand, the following cases cannot be subject of CAM:
(1) civil cases which by law cannot be compromised,
(2) other criminal cases not covered by numbers 3 to 6 above,
(3) habeas corpus petitions,
(4) all cases under the Violence Against Women and Children Act, and
(5) cases with pending applications for restraining orders or preliminary injunctions.
The court, before whom a case was filed involving any of the aforementioned
disputes, calls the parties to a conference before a mediator appointed by the trial
court from the list provided by the Supreme Court. During the mediation period, the
court orders the suspension of the proceedings before it for 30 days.
Individual parties are required to personally appear for mediation unless they send a
representative who is fully authorized to appear, negotiate and enter into a
compromise, through a special power of attorney. Corporations, partnerships or
other juridical entities shall be represented by a ranking corporate officer fully
authorized by a board resolution to offer, negotiate, accept, decide and enter into a
compromise agreement, without need of further approval by or notification to the
authorizing party.
In case a settlement is reached, the compromise agreement entered into between
the parties is submitted to the court and serves as basis for the rendition of a
judgment by compromise that may be enforced by execution. Otherwise, the case is
returned to the court.
The mediation proceedings and all incidents thereto are kept strictly confidential.
The period during which the case is undergoing mediation or conciliation is excluded
from the regular and mandatory periods for trial and rendition of judgment in
ordinary cases as well as in cases under summary procedure.
Judicial Dispute Resolution
Judicial Dispute Resolution (JDR) is governed by A.M. No. 11-1-6- SC-PHILJA and is
promulgated pursuant to the ADR Act of 2004.
Together with court-annexed mediation, JDR is intended to put an end to pending
litigation through a compromise agreement and help unclog court dockets in the
country. Cases covered by CAM are also subject to JDR.
Judicial proceedings covered by JDR shall be divided into two stages: (1) from the
filing of the complaint to the conduct of court-annexed mediation and JDR, and (2)
pretrial proper to trial and judgment. The judge to whom the case had been
originally raffled shall be referred as the JDR judge who shall preside over the first
stage. Another judge, who shall be called the trial judge, shall preside over the
second stage. At the initial stage of the preliminary conference, the JDR judge briefs
the parties of court-annexed mediation and JDR. Upon failing to secure a settlement
of the dispute during the court-annexed mediation, a second attempt of arriving at a
compromise agreement is done through the JDR. In the JDR, the JDR judge becomes
a mediator- conciliator-early neutral evaluator in a continuing effort to secure an
settlement. As mediator and conciliator, the judge facilitates the settlement
discussions between the parties and tries to reconcile their differences. As a neutral
evaluator, the judge assesses the relative strengths and weaknesses of each partys
case and makes a non-binding and impartial evaluation of the chances of each
partys success in the case. On the basis of such neutral evaluation, the judge
persuades the parties to a fair and mutually acceptable settlement of their dispute.
The JDR judge shall not preside over the trial of the case when the parties did not
settle their dispute at JDR.
To complete the JDR process, judges of the first-level courts shall have a period of
not exceeding 30 days, while judges of the second- level courts shall have a period
of not exceeding 60 days. A longer period, however, may be granted upon the
discretion of the JDR judge if there is a high probability of settlement and upon joint
written motion of the parties. Both periods shall be computed from the date when
the parties first appeared for JDR proceedings as directed in the respective orders
issued by the judge.
If full settlement of the dispute is reached, the parties, assisted by their respective
counsels, shall draft the compromise agreement which shall be submitted to the
court for a judgment upon compromise, enforceable by execution. Only upon failure
of the JDR will parties proceed to trial proper when the case is turned over to
another judge, the trial judge, who shall continue the pretrial proper and thereafter,
proceed to try and decide the case.
Any and all matters discussed or communications made, including requests for
mediation, and documents presented during the JDR proceedings before the trial
judge, shall be privileged and confidential, and the same shall be inadmissible as
evidence for any purpose in any other proceedings. Further, the JDR judge shall not
pass any information obtained in the course of conciliation and early neutral
evaluation to the trial judge or to any other person.
Philippine Mediation Center Appeals Court Mediation
During the appeal to the Court of Appeals, cases covered by court- annexed
mediation and JDR shall be referred to the Philippine Mediation Center Appeals
Court Mediation unit for mediation.
Commercial ADR
The ADR Act of 2004, without limiting the modes of ADR that the parties can avail
of, provide for, in addition to arbitration, the following modes of ADR:
Mediation
Mediation is a voluntary process in which a mediator, selected by the disputing
parties, facilitates communication and negotiation, and assists the parties in
reaching a voluntary agreement regarding a dispute. Information obtained through
mediation is privileged and confidential. A party, a mediator, or a non-party
participant may refuse to disclose and may prevent any other person from
disclosing a mediation communication.
A mediated settlement agreement may be deposited with the appropriate clerk of a
Regional Trial Court of the place where one of the parties resides. Where there is a
need to enforce the settlement agreement, a petition may be filed by any of the
parties with the same court. Pursuant to the Special ADR Rules, after a summary
hearing, if the court finds that the agreement is a valid mediated settlement
agreement, that there is no merit in any of the affirmative or negative defenses
raised, and the respondent has breached that agreement, in whole or in part, the
court shall order the enforcement thereof; otherwise, it shall dismiss the petition.
The parties may agree in the settlement agreement that the mediator shall become
a sole arbitrator for the dispute and shall treat the settlement agreement as an
arbitral award which shall be subject to enforcement.
Early Neutral Evaluation
Early neutral evaluation is an ADR process wherein parties and their lawyers are
brought together early in the pretrial phase to present summaries of their cases and
to receive a non-binding assessment by an experienced neutral person, with
expertise in the subject matter or substance of the dispute.
All papers and written presentations communicated to the neutral third person,
including any paper prepared by a party to be communicated to the neutral third
person or to the other party as part of the dispute resolution process, and the
neutral third persons written non-binding assessment or evaluation, shall be
treated as confidential.
The proceedings are governed by the rules and procedure agreed upon by the
parties. By default, the ADR Act IRR shall govern.
Mediation-Arbitration or Med-Arb
Med-Arb is a two-step dispute resolution process involving mediation and then
followed by arbitration. It is governed by the rules and procedure agreed upon by
the parties. Otherwise, the ADR Act IRR shall govern. As a general rule, a mediator
may not act as an arbitrator in respect of the same dispute, or vice-versa.
Mini-trial
Mini-trial is a structured dispute resolution method in which the merits of a case are
argued before a panel comprising of senior decision- makers, with or without the
assistance of a neutral third person, before which the parties seek a negotiated
settlement. It shall be governed by the rules and procedure agreed upon by the
parties. Otherwise, the ADR Act IRR shall govern.
Insolvency
There are three types of remedies available to a financially distressed individual or
juridical person: suspension of payments, corporate rehabilitation
(voluntary/involuntary, pre-negotiated, or out-of-court or informal restructuring
agreements) and insolvency. The applicable laws and regulations are the Civil Code
of the Philippines (Civil Code), the Financial Rehabilitation and Insolvency Act (FRIA),
Presidential Decree No. 902-A (PD 902-A)6 the FRIA Rehabilitation Rules of
Procedure (FRIA Rehabilitation Rules)7 and the Financial Liquidation and Suspension
of Payments Rules for Procedure for Insolvent Debtors (FLSP Rules).8 The type of
proceeding that applies to a debtor depends on the particular relief sought.
The FRIA became effective on 31 August 2010. It provides for a more
comprehensive framework for rehabilitation and liquidation of debtors, whether
corporate or individual. More importantly, the FRIA has made available to
partnerships and individuals, the benefits of rehabilitation proceedings. This is
advantageous for small businesses as they are more commonly formed as
partnerships or individual enterprises. Banks, insurance companies and pre-need
companies, and national and local government agencies or units, however, are not
covered under the FRIA.
On 27 August 2013, the Supreme Court promulgated the FRIA Rehabilitation Rules,
which provides for the procedure governing rehabilitation proceedings under the
FRIA. On 21 April 2015, the Supreme Court promulgated the FLSP Rules, which
outline the procedure in proceedings for financial liquidation, insolvency and
suspension of payments.
If what is sought is merely a little financial breathing space, then the remedy is a
suspension of payments, which provides for the deferment of payments and
temporary protection against actions/executions by unsecured creditors. If, on the
other hand, the rehabilitation of a company entails more radical measures such as
changes in organization, management and/or strategy, and requires
temporary protection against both secured and unsecured creditors, then the
remedy is to seek corporate rehabilitation. Finally, if the debtor company has
become insolvent and incapable of being rehabilitated, it may apply for liquidation
and have its assets distributed accordingly among its creditors.
6 After the promulgation of Republic Act 8799 or the Securities Regulation Code,
jurisdiction over petitions of corporations, partnerships or associations to be
declared in the state of suspension of payments was transferred from the SEC to
the Regional Trial Court. The SEC, however, retained jurisdiction over pending
suspension of payments and rehabilitation cases filed as of 30 June 2000 until final
disposition of such cases.
7 Supreme Court Administrative Matter No 12-12-11
8 Supreme Court Administrative Matter No. 15-04-06-SC.