The Supreme Court ruled that the controversy between Benguet Corporation and J.G. Realty regarding their Royalty Agreement should have first been submitted to arbitration, as stipulated in their agreement, before the Panel of Arbitrators took cognizance of the case. While arbitration clauses are generally upheld, the Court also ruled that Benguet was estopped from questioning the Panel of Arbitrators' jurisdiction since it had participated in the proceedings without objection.
The Supreme Court ruled that the controversy between Benguet Corporation and J.G. Realty regarding their Royalty Agreement should have first been submitted to arbitration, as stipulated in their agreement, before the Panel of Arbitrators took cognizance of the case. While arbitration clauses are generally upheld, the Court also ruled that Benguet was estopped from questioning the Panel of Arbitrators' jurisdiction since it had participated in the proceedings without objection.
The Supreme Court ruled that the controversy between Benguet Corporation and J.G. Realty regarding their Royalty Agreement should have first been submitted to arbitration, as stipulated in their agreement, before the Panel of Arbitrators took cognizance of the case. While arbitration clauses are generally upheld, the Court also ruled that Benguet was estopped from questioning the Panel of Arbitrators' jurisdiction since it had participated in the proceedings without objection.
The Supreme Court ruled that the controversy between Benguet Corporation and J.G. Realty regarding their Royalty Agreement should have first been submitted to arbitration, as stipulated in their agreement, before the Panel of Arbitrators took cognizance of the case. While arbitration clauses are generally upheld, the Court also ruled that Benguet was estopped from questioning the Panel of Arbitrators' jurisdiction since it had participated in the proceedings without objection.
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BENGUET CORPORATION v.
DEPARTMENT OF ENVIRONMENT AND NATURAL
RESOURCES -MINES ADJUDICATION BOARD and J.G. REALTY AND MINING CORPORATION, G.R. No. 163101, February 13, 2008
FACTS: Benguet Corporation and J.G. Realty and Mining entered into a Royalty Agreement with Option to Purchase (RAWOP), wherein J.G. Realty was acknowledged as the owner of four mining claims covered by MPSA Application No. APSA-V-0009 jointly filed by J.G. Realty as claim owner and Benguet as operator. The RAWOP, among others, provide that “any disputes between Benguet and J.G. Realty with reference to anything whatsoever pertaining to the RAWOP shall not be cause of any action in any court or administrative agency but shall be referred to a Board of Arbitrators consisting of three (3) members, one to be selected by Benguet, another to be selected by J.G. Realty and the third selected by the aforementioned two arbitrators so appointed.
J.G. Realty subsequently informed Benguet that it was terminating the RAWOP by reason of Benguet’s failure to comply with its obligations thereunder. J.G. Realty sought the cancellation of the RAWOP, filing a petition for this purpose with the Panel of Arbitrators (POA) having territorial jurisdiction over the mining area involved. In its Decision, the POA declared the RAWOP cancelled. Benguet then filed a notice of appeal with the MAB. The decision was affirmed on appeal to the MAB.
Benguet contended that the issue raised by the J.G. Realty should have been first raised with the arbitration before POA took cognizance of the case.
ISSUE: Should the controversy have first been submitted to arbitration before the POA took cognizance of the case?
HELD: YES. In RA 9285 or the "Alternative Dispute Resolution Act of 2004," the Congress reiterated the efficacy of arbitration as an alternative mode of dispute resolution by stating in Sec. 32 thereof that domestic arbitration shall still be governed by RA 876. Clearly, a contractual stipulation that requires prior resort to voluntary arbitration before the parties can go directly to court is not illegal and is in fact promoted by the State. Thus, petitioner correctly cites several cases whereby arbitration clauses have been upheld by this Court.
Moreover, the contention that RA 7942 prevails over RA 876 presupposes a conflict between the two laws. Such is not the case here. To reiterate, availment of voluntary arbitration before resort is made to the courts or quasi-judicial agencies of the government is a valid contractual stipulation that must be adhered to by the parties.
In other words, in the event a case that should properly be the subject of voluntary arbitration is erroneously filed with the courts or quasi-judicial agencies, on motion of the defendant, the court or quasi-judicial agency shall determine whether such contractual provision for arbitration is sufficient and effective. If in affirmative, the court or quasi-judicial agency shall then order the enforcement of said provision.
J.G. Realty’s contention, that prior resort to arbitration is unavailing in the instant case because the POA’s mandate is to arbitrate disputes involving mineral agreements, is misplaced. A distinction must be made between voluntary and compulsory arbitration. Compulsory arbitration has been defined both as "the process of settlement of labor disputes by a government agency which has the authority to investigate and to make an award which is binding on all the parties, and as a mode of arbitration where the parties are compelled to accept the resolution of their dispute through arbitration by a third party." While a voluntary arbitrator is not part of the governmental unit or labor department’s personnel, said arbitrator renders arbitration services provided for under labor laws.
There is a clear distinction between compulsory and voluntary arbitration. The
arbitration provided by the POA is compulsory, while the nature of the arbitration provision in the RAWOP is voluntary, not involving any government agency. Thus, J.G. Realty’s argument on this matter must fail.
However, we find that Benguet is already estopped from questioning the POA’s jurisdiction. As it were, when J.G. Realty filed DENR Case No. 2000-01, Benguet filed its answer and participated in the proceedings before the POA, Region V. Secondly, when the adverse March 19, 2001 POA Decision was rendered, it filed an appeal with the MAB in Mines Administrative Case No. R-M-2000-01 and again participated in the MAB proceedings.
