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REPUBLIC ACT NO. 876

AN ACT TO AUTHORIZE THE MAKING OF ARBITRATION AND SUBMISSIONAGREEMENTS, TO PROVIDE FOR THE APPOINTMENT OF ARBITRATORS AND

THE PROCEDURE FOR ARBITRATION IN CIVIL CONTROVERSIES, AND FOROTHER PURPOSES

Section 1. Short Title. - This Act shall be known as "The Arbitration Law."

Section 2. Persons and matters subject to arbitration. - Two or more personsor parties may submit to the arbitration of one or more arbitrators anycontroversy existing between them at the time of the submission and whichmay be the subject of an action, or the parties to any contract may in suchcontract agree to settle by arbitration a controversy thereafter arisingbetween them. Such submission or contract shall be valid, enforceable andirrevocable, save upon such grounds as exist at law for the revocation of anycontract.

Such submission or contract may include question arising out of valuations,appraisals or other controversies which may be collateral, incidental,precedent or subsequent to any issue between the parties.

A controversy cannot be arbitrated where one of the parties to thecontroversy is an infant, or a person judicially declared to be incompetent,unless the appropriate court having jurisdiction approve a petition forpermission to submit such controversy to arbitration made by the generalguardian or guardian ad litem of the infant or of the incompetent.

But where a person capable of entering into a submission or contract hasknowingly entered into the same with a person incapable of so doing, theobjection on the ground of incapacity can be taken only in behalf of theperson so incapacitated.

Section 3. Controversies or cases not subject to the provisions of this Act. -This Act shall not apply to controversies and to cases which are subject to the

jurisdiction of the Court of Industrial Relations or which have been submittedto it as provided by Commonwealth Act Numbered One hundred and three,

as amended.

Section 4. Form of arbitration agreement. - A contract to arbitrate acontroversy thereafter arising between the parties, as well as a submission toarbitrate an existing controversy shall be in writing and subscribed by theparty sought to be charged, or by his lawful agent.

The making of a contract or submission for arbitration described in sectiontwo hereof, providing for arbitration of any controversy, shall be deemed aconsent of the parties to the jurisdiction of the Court of First Instance of theprovince or city where any of the parties resides, to enforce such contract orsubmission.

Section 5. Preliminary procedure. - An arbitration shall be instituted by:

(a) In the case of a contract to arbitrate future controversies bythe service by either party upon the other of a demand forarbitration in accordance with the contract. Such demand shall beset forth the nature of the controversy, the amount involved, if any, and the relief sought, together with a true copy of thecontract providing for arbitration. The demand shall be servedupon any party either in person or by registered mail. In the eventthat the contract between the parties provides for theappointment of a single arbitrator, the demand shall be set forth aspecific time within which the parties shall agree upon sucharbitrator. If the contract between the parties provides for the

appointment of three arbitrators, one to be selected by eachparty, the demand shall name the arbitrator appointed by theparty making the demand; and shall require that the party uponwhom the demand is made shall within fifteen days after receiptthereof advise in writing the party making such demand of thename of the person appointed by the second party; such noticeshall require that the two arbitrators so appointed must agreeupon the third arbitrator within ten days from the date of suchnotice.

(b) In the event that one party defaults in answering the demand,

the aggrieved party may file with the Clerk of the Court of FirstInstance having jurisdiction over the parties, a copy of thedemand for arbitration under the contract to arbitrate, with anotice that the original demand was sent by registered mail ordelivered in person to the party against whom the claim isasserted. Such demand shall set forth the nature of thecontroversy, the amount involved, if any, and the relief sought,and shall be accompanied by a true copy of the contract providingfor arbitration.

(c) In the case of the submission of an existing controversy by thefiling with the Clerk of the Court of First Instance having

jurisdiction, of the submission agreement, setting forth the natureof the controversy, and the amount involved, if any. Suchsubmission may be filed by any party and shall be duly executed

by both parties.

(d) In the event that one party neglects, fails or refuses toarbitrate under a submission agreement, the aggrieved party shallfollow the procedure prescribed in subparagraphs (a) and (b) of this section.

Section 6. Hearing by court. - A party aggrieved by the failure, neglect orrefusal of another to perform under an agreement in writing providing forarbitration may petition the court for an order directing that such arbitrationproceed in the manner provided for in such agreement. Five days notice inwriting of the hearing of such application shall be served either personally orby registered mail upon the party in default. The court shall hear the parties,and upon being satisfied that the making of the agreement or such failure tocomply therewith is not in issue, shall make an order directing the parties to

proceed to arbitration in accordance with the terms of the agreement. If themaking of the agreement or default be in issue the court shall proceed tosummarily hear such issue. If the finding be that no agreement in writingproviding for arbitration was made, or that there is no default in theproceeding thereunder, the proceeding shall be dismissed. If the finding bethat a written provision for arbitration was made and there is a default inproceeding thereunder, an order shall be made summarily directing theparties to proceed with the arbitration in accordance with the terms thereof.

The court shall decide all motions, petitions or applications filed under theprovisions of this Act, within ten days after such motions, petitions, orapplications have been heard by it.

Section 7. Stay of civil action. - If any suit or proceeding be brought upon anissue arising out of an agreement providing for the arbitration thereof, thecourt in which such suit or proceeding is pending, upon being satisfied thatthe issue involved in such suit or proceeding is referable to arbitration, shallstay the action or proceeding until an arbitration has been had in accordancewith the terms of the agreement: Provided, That the applicant, for the stay isnot in default in proceeding with such arbitration.

Section 8. Appointment of arbitrators. - If, in the contract for arbitration or inthe submission described in section two, provision is made for a method of naming or appointing an arbitrator or arbitrators, such method shall befollowed; but if no method be provided therein the Court of First Instanceshall designate an arbitrator or arbitrators.

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The Court of First Instance shall appoint an arbitrator or arbitrators, as thecase may be, in the following instances:

(a) If the parties to the contract or submission are unable to agreeupon a single arbitrator; or

(b) If an arbitrator appointed by the parties is unwilling or unableto serve, and his successor has not been appointed in the mannerin which he was appointed; or

(c) If either party to the contract fails or refuses to name hisarbitrator within fifteen days after receipt of the demand forarbitration; or

(d) If the arbitrators appointed by each party to the contract, orappointed by one party to the contract and by the proper Court,shall fail to agree upon or to select the third arbitrator.

(e) The court shall, in its discretion appoint one or threearbitrators, according to the importance of the controversyinvolved in any of the preceding cases in which the agreement issilent as to the number of arbitrators.

(f) Arbitrators appointed under this section shall either accept ordecline their appointments within seven days of the receipt of their appointments. In case of declination or the failure of anarbitrator or arbitrators to duly accept their appointments theparties or the court, as the case may be, shall proceed to appointa substitute or substitutes for the arbitrator or arbitrators whodecline or failed to accept his or their appointments.

Section 9. Appointment of additional arbitrators. - Where a submission orcontract provides that two or more arbitrators therein designated or to bethereafter appointed by the parties, may select or appoint a person as anadditional arbitrator, the selection or appointment must be in writing. Suchadditional arbitrator must sit with the original arbitrators upon the hearing.

Section 10. Qualifications of arbitrators. - Any person appointed to serve asan arbitrator must be of legal age, in full-enjoyment of his civil rights and

know how to read and write. No person appointed to served as an arbitratorshall be related by blood or marriage within the sixth degree to either partyto the controversy. No person shall serve as an arbitrator in any proceeding if he has or has had financial, fiduciary or other interest in the controversy orcause to be decided or in the result of the proceeding, or has any personalbias, which might prejudice the right of any party to a fair and impartialaward.

No party shall select as an arbitrator any person to act as his champion or toadvocate his cause.

If, after appointment but before or during hearing, a person appointed toserve as an arbitrator shall discover any circumstances likely to create apresumption of bias, or which he believes might disqualify him as animpartial arbitrator, the arbitrator shall immediately disclose such

information to the parties. Thereafter the parties may agree in writing:

(a) to waive the presumptive disqualifying circumstances; or

(b) to declare the office of such arbitrator vacant. Any suchvacancy shall be filled in the same manner as the originalappointment was made.

Section 11. Challenge of arbitrators. - The arbitrators may be challenged onlyfor the reasons mentioned in the preceding section which may have arisenafter the arbitration agreement or were unknown at the time of arbitration.

The challenge shall be made before them.

If they do not yield to the challenge, the challenging party may renew thechallenge before the Court of First Instance of the province or city in whichthe challenged arbitrator, or, any of them, if there be more than one, resides.While the challenging incident is discussed before the court, the hearing orarbitration shall be suspended, and it shall be continued immediately afterthe court has delivered an order on the challenging incident.

Section 12. Procedure by arbitrators. - Subject to the terms of the submissionor contract, if any are specified therein, are arbitrators selected as prescribedherein must, within five days after appointment if the parties to thecontroversy reside within the same city or province, or within fifteen daysafter appointment if the parties reside in different provinces, set a time andplace for the hearing of the matters submitted to them, and must causenotice thereof to be given to each of the parties. The hearing can bepostponed or adjourned by the arbitrators only by agreement of the parties;otherwise, adjournment may be ordered by the arbitrators upon their ownmotion only at the hearing and for good and sufficient cause. Noadjournment shall extend the hearing beyond the day fixed in the submissionor contract for rendering the award, unless the time so fixed is extended bythe written agreement of the parties to the submission or contract or theirattorneys, or unless the parties have continued with the arbitration withoutobjection to such adjournment.

The hearing may proceed in the absence of any party who, after due notice,fails to be present at such hearing or fails to obtain an adjournment thereof.An award shall not be made solely on the default of a party. The arbitratorsshall require the other party to submit such evidence as they may require formaking an award.

No one other than a party to said arbitration, or a person in the regularemploy of such party duly authorized in writing by said party, or a practicingattorney-at-law, shall be permitted by the arbitrators to represent beforehim or them any party to the arbitration. Any party desiring to berepresented by counsel shall notify the other party or parties of suchintention at least five days prior to the hearing.

The arbitrators shall arrange for the taking of a stenographic record of thetestimony when such a record is requested by one or more parties, and whenpayment of the cost thereof is assumed by such party or parties.

Persons having a direct interest in the controversy which is the subject of arbitration shall have the right to attend any hearing; but the attendance of any other person shall be at the discretion of the arbitrators.

Section 13. Oath of arbitrators. - Before hearing any testimony, arbitratorsmust be sworn, by any officer authorized by law to administer an oath,faithfully and fairly to hear and examine the matters in controversy and tomake a just award according to the best of their ability and understanding.Arbitrators shall have the power to administer the oaths to all witnessesrequiring them to tell the whole truth and nothing but the truth in anytestimony which they may give in any arbitration hearing. This oath shall berequired of every witness before any of his testimony is heard.

Section 14. Subpoena and subpoena duces tecum. - Arbitrators shall have thepower to require any person to attend a hearing as a witness. They shall havethe power to subpoena witnesses and documents when the relevancy of thetestimony and the materiality thereof has been demonstrated to thearbitrators. Arbitrators may also require the retirement of any witness duringthe testimony of any other witness. All of the arbitrators appointed in anycontroversy must attend all the hearings in that matter and hear all theallegations and proofs of the parties; but an award by the majority of them isvalid unless the concurrence of all of them is expressly required in thesubmission or contract to arbitrate. The arbitrator or arbitrators shall havethe power at any time, before rendering the award, without prejudice to the

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rights of any party to petition the court to take measures to safeguard and/orconserve any matter which is the subject of the dispute in arbitration.

Section 15. Hearing by arbitrators. - Arbitrators may, at the commencementof the hearing, ask both parties for brief statements of the issues incontroversy and/or an agreed statement of facts. Thereafter the parties mayoffer such evidence as they desire, and shall produce such additionalevidence as the arbitrators shall require or deem necessary to anunderstanding and determination of the dispute. The arbitrators shall be thesole judge of the relevancy and materiality of the evidence offered orproduced, and shall not be bound to conform to the Rules of Court

pertaining to evidence. Arbitrators shall receive as exhibits in evidence anydocument which the parties may wish to submit and the exhibits shall beproperly identified at the time of submission. All exhibits shall remain in thecustody of the Clerk of Court during the course of the arbitration and shall bereturned to the parties at the time the award is made. The arbitrators maymake an ocular inspection of any matter or premises which are in dispute,but such inspection shall be made only in the presence of all parties to thearbitration, unless any party who shall have received notice thereof fails toappear, in which event such inspection shall be made in the absence of suchparty.

Section 16. Briefs. - At the close of the hearings, the arbitrators shallspecifically inquire of all parties whether they have any further proof orwitnesses to present; upon the receipt of a negative reply from all parties,the arbitrators shall declare the hearing closed unless the parties have

signified an intention to file briefs. Then the hearing shall be closed by thearbitrations after the receipt of briefs and/or reply briefs. Definite time limitfor the filing of such briefs must be fixed by the arbitrators at the close of thehearing. Briefs may filed by the parties within fifteen days after the close of the oral hearings; the reply briefs, if any, shall be filed within five daysfollowing such fifteen-day period.

Section 17. Reopening of hearing. - The hearing may be reopened by thearbitrators on their own motion or upon the request of any party, upon goodcause, shown at any time before the award is rendered. When hearings arethus reopened the effective date for the closing of the hearings shall be thedate of the closing of the reopened hearing.

Section 18. Proceeding in lieu of hearing. - The parties to a submission orcontract to arbitrate may, by written agreement, submit their dispute to

arbitration by other than oral hearing. The parties may submit an agreedstatement of facts. They may also submit their respective contentions to theduly appointed arbitrators in writing; this shall include a statement of facts,together with all documentary proof. Parties may also submit a writtenargument. Each party shall provide all other parties to the dispute with acopy of all statements and documents submitted to the arbitrators. Eachparty shall have an opportunity to reply in writing to any other party'sstatements and proofs; but if such party fails to do so within seven days afterreceipt of such statements and proofs, he shall be deemed to have waivedhis right to reply. Upon the delivery to the arbitrators of all statements anddocuments, together with any reply statements, the arbitrators shall declarethe proceedings in lieu of hearing closed.

Section 19. Time for rendering award. - Unless the parties shall havestipulated by written agreement the time within which the arbitrators must

render their award, the written award of the arbitrators shall be renderedwithin thirty days after the closing of the hearings or if the oral hearings shallhave been waived, within thirty days after the arbitrators shall have declaredsuch proceedings in lieu of hearing closed. This period may be extended bymutual consent of the parties. alf-itc

Section 20. Form and contents of award. - The award must be made inwriting and signed and acknowledged by a majority of the arbitrators, if morethan one; and by the sole arbitrator, if there is only one. Each party shall befurnished with a copy of the award. The arbitrators in their award may grantany remedy or relief which they deem just and equitable and within the

scope of the agreement of the parties, which shall include, but not be limitedto, the specific performance of a contract.

In the event that the parties to an arbitration have, during the course of sucharbitration, settled their dispute, they may request of the arbitrators thatsuch settlement be embodied in an award which shall be signed by thearbitrators. No arbitrator shall act as a mediator in any proceeding in whichhe is acting as arbitrator; and all negotiations towards settlement of thedispute must take place without the presence of the arbitrators.

The arbitrators shall have the power to decide only those matters which havebeen submitted to them. The terms of the award shall be confined to suchdisputes.

The arbitrators shall have the power to assess in their award the expenses of any party against another party, when such assessment shall be deemednecessary.

Section 21. Fees of arbitration. - The fees of the arbitrators shall be fiftypesos per day unless the parties agree otherwise in writing prior to thearbitration.

Section 22. Arbitration deemed a special proceeding. - Arbitration under acontract or submission shall be deemed a special proceeding, of which thecourt specified in the contract or submission, or if none be specified, the

Court of First Instance for the province or city in which one of the partiesresides or is doing business, or in which the arbitration was held, shall have

jurisdiction. Any application to the court, or a judge thereof, hereunder shallbe made in manner provided for the making and hearing of motions, exceptas otherwise herein expressly provided.

Section 23. Confirmation of award. - At any time within one month after theaward is made, any party to the controversy which was arbitrated may applyto the court having jurisdiction, as provided in section twenty-eight, for anorder confirming the award; and thereupon the court must grant such orderunless the award is vacated, modified or corrected, as prescribed herein.Notice of such motion must be served upon the adverse party or his attorneyas prescribed by law for the service of such notice upon an attorney in actionin the same court.

Section 24. Grounds for vacating award. - In any one of the following cases,the court must make an order vacating the award upon the petition of anyparty to the controversy when such party proves affirmatively that in thearbitration proceedings:

(a) The award was procured by corruption, fraud, or other unduemeans; or

(b) That there was evident partiality or corruption in thearbitrators or any of them; or

(c) That the arbitrators were guilty of misconduct in refusing topostpone the hearing upon sufficient cause shown, or in refusingto hear evidence pertinent and material to the controversy; that

one or more of the arbitrators was disqualified to act as suchunder section nine hereof, and wilfully refrained from disclosingsuch disqualifications or of any other misbehavior by which therights of any party have been materially prejudiced; or

(d) That the arbitrators exceeded their powers, or so imperfectlyexecuted them, that a mutual, final and definite award upon thesubject matter submitted to them was not made.

Where an award is vacated, the court, in its discretion, may direct a newhearing either before the same arbitrators or before a new arbitrator or

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arbitrators to be chosen in the manner provided in the submission orcontract for the selection of the original arbitrator or arbitrators, and anyprovision limiting the time in which the arbitrators may make a decision shallbe deemed applicable to the new arbitration and to commence from thedate of the court's order.

Where the court vacates an award, costs, not exceeding fifty pesos anddisbursements may be awarded to the prevailing party and the paymentthereof may be enforced in like manner as the payment of costs upon themotion in an action.

Section 25. Grounds for modifying or correcting award. - In any one of thefollowing cases, the court must make an order modifying or correcting theaward, upon the application of any party to the controversy which wasarbitrated:

(a) Where there was an evident miscalculation of figures, or anevident mistake in the description of any person, thing orproperty referred to in the award; or

(b) Where the arbitrators have awarded upon a matter notsubmitted to them, not affecting the merits of the decision uponthe matter submitted; or

(c) Where the award is imperfect in a matter of form not affecting

the merits of the controversy, and if it had been a commissioner'sreport, the defect could have been amended or disregarded bythe court.

The order may modify and correct the award so as to effect the intentthereof and promote justice between the parties.

Section 26. Motion to vacate, modify or correct award: when made. - Noticeof a motion to vacate, modify or correct the award must be served upon theadverse party or his counsel within thirty days after award is filed ordelivered, as prescribed by law for the service upon an attorney in an action.

Section 27. Judgment. - Upon the granting of an order confirming, modifyingor correcting an award, judgment may be entered in conformity therewith in

the court wherein said application was filed. Costs of the application and theproceedings subsequent thereto may be awarded by the court in itsdiscretion. If awarded, the amount thereof must be included in the

judgment.

Section 28. Papers to accompany motion to confirm, modify, correct, or vacate award. - The party moving for an order confirming, modifying,correcting, or vacating an award, shall at the time that such motion is filedwith the court for the entry of judgment thereon also file the followingpapers with the Clerk of Court;

(a) The submission, or contract to arbitrate; the appointment of the arbitrator or arbitrators; and each written extension of thetime, if any, within which to make the award.

(b) A verified of the award.

(c) Each notice, affidavit, or other paper used upon the applicationto confirm, modify, correct or vacate such award, and a copy of each of the court upon such application.

The judgment shall be docketed as if it were rendered in an action.

The judgment so entered shall have the same force and effect in all respects,as, and be subject to all the provisions relating to, a judgment in an action;

and it may be enforced as if it had been rendered in the court in which it isentered.

Section 29. Appeals. - An appeal may be taken from an order made in aproceeding under this Act, or from a judgment entered upon an awardthrough certiorari proceedings, but such appeals shall be limited to questionsof law. The proceedings upon such an appeal, including the judgmentthereon shall be governed by the Rules of Court in so far as they areapplicable.

Section 30. Death of party. - Where a party dies after making a submission ora contract to arbitrate as prescribed in this Act, the proceedings may bebegun or continued upon the application of, or notice to, his executor oradministrator, or temporary administrator of his estate. In any such case, thecourt may issue an order extending the time within which notice of a motionto confirm, vacate, modify or correct an award must be served. Uponconfirming an award, where a party has died since it was filed or delivered,the court must enter judgment in the name of the original party; and theproceedings thereupon are the same as where a party dies after a verdict.

Section 31. Repealing clause. - The provisions of chapters one and two, TitleXIV, of the Civil Code shall remain in force. All other laws and parts of lawsinconsistent with this Act are hereby repealed. If any provision of this Actshall be held invalid the remainder that shall not be affected thereby.

Section 32. Effectivity. - This Act shall take effect six months after itsapproval.

Approved: June 19, 1953

Effective Tool in Settlement of Business Disputes

(Excerpts of the lecture delivered during the Chamber-to-Chamber II-Dialogues with the Business Sector and Integration of Mediation in Businesson 29 March 2005 at the Xavier Sports and Country Club, Cagayan de Oro

City).

by: Justice Myrna Dimaranan Vidal

I. HISTORICAL BACKGROUND

History tells us that amicable settlement of litigious cases is a highly efficientand effective instrument in the settlement of disputes. Even the Holy Biblechronicled this mode in the Book of St. Matthew, Chapter 5:25-26 whereinOur Lord Jesus Christ preached the wisdom of going to and out of courtsettlement. Our Lord preached: Settle with your opponent quickly while on theway to court with him. Otherwise, your opponent will hand you over to the

judge, and the judge will hand you over to the guard, and you will be throwninto prison. Amen and I say to you, you will not be released until you have

paid the last penny.

Conflict is inherent in human society so much so that much effort has beenexpended in devising ways of resolving it. With the progress of civilization, physical fighting has been ruled out and instead, more pacific means have been evolved.

History dating back to the Golden Age of Rome reveals that the early judgescalled upon to solve private conflicts were primarily the arbiters, persons not

specially trained but in whose morality, probity and good sense the parties inconflict reposed full trust. Thus, in Republican Rome, arbiter and judge(judex) were synonymous. The magistrate or praetor, after noting down theconflicting claims of litigants, and clarifying the issues, referred them for decision to a private person designated by the parties, by common agreement,

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or selected by them from an apposite listing (the album judicium) or else byhaving the arbiter chosen by lot.

In the Philippines, alternative di spute resolutions have come about to addressthe perennial problem of court delays.

II. CAUSES OF COURT DELAYS

As far back as in 1967, a survey disclosed the problem of judicial delay in thePhilippines as due to such factors as the misuse of the due process and theabuse of legal technicalities; the intervention of political pressure in courtcases; the sheer weight of court litigations arising from development andgrowth; the dilatory tactics of lawyers; and neglect and laxity on the part of

judges.

We add to the list the matter of court vacancies which Associate JusticeArtemio Panganiban of the Supreme Court acknowledged in a speechdelivered during the 2005 anniversary celebration of Bantay Katarungan to bethe major cause of court delay. There are no less than 739 vacancies out of 2,153 judicial positions in the Philippines. This means that more than onethird of the judicial courts are vacant, or a vacancy rate of 34.3%.

III. LEGAL BASIS OF ALTERNATIVE DISPUTE RESOLUTION

o remedy the sad state of long-drawn-out court litigations, the 1987Constitution mandates the Supreme Court to promulgate rules that shall

provide a simplified and inexpensive procedure for the speedy disposition of cases. Pursuant to the constitutional provision, the Supreme Court issued S.C.Circulars, Memoranda and Administrative Orders of 2001 making mediationas mandatory in certain types of civil cases. The 1997 Rules of CivilProcedure requires the courts to consider the possibility of an amicable

settlement or of a submission to alternative modes of resolution.

On 19 July 1953, the Philippine Congress enacted RA 876 otherwise knownas the Arbitration Law which authorized the making of arbitration andsubmission agreements and provided for the appointment of arbitrators andthe procedure for the arbitration in civil controversies.

On 2 April 2004, Congress enacted RA 9285 or the Alternative DisputeResolution Act (ADR Law) of 2004 which declares that it is a policy of theState to encourage and actively promote the use of Alternative Dispute

Resolution systems as an important means to achieve speedy and impartial justice and declog court dockets.

IV. FORMS OF ALTERNATIVE DISPUTE RESOLUTIONS

What is Alternative Dispute Resolution? It is defined as any process or procedure used to resolve a dispute or controversy, other than by adjudicationof a presiding judge of a court or an officer of a government agency, in whicha neutral third party participates to assist in the resolution of issues. It includesarbitration, mediation or conciliation, mini-trial, early neutral evaluation, or any combination thereof.

A. Arbitration

Arbitration is defined by ADR Law as a voluntary dispute resolution processin which one or more arbitrators, appointed in accordance with the agreementof the parties resolve a dispute by rendering an award. It is the reference bymutual agreement or consent of the parties of a controversy or dispute toselected persons for an informal hearing and extra-judicial determination andresolution. The hearing is usually held in private and the decision of the

persons selected will be a substitute for a court judgment. This avoids theformalities, delay and expenses of ordinary litigation.

B. Mediation

Mediation is a dispute resolution procedure in which an impartial third party,mutually chosen by the parties, acts as the referee to help the contending

parties settle their dispute. The mediator, unlike the arbitrator, has no authorityto make the parties reach an agreement. He serves as a clarifier and facilitator without dictating settlement. The term mediation used under ADR Lawincludes conciliation.

C. Mini-trial

Mini-trial is defined under the ADR Law as a dispute resolution method inwhich the merits of a case are argued before a panel created by agreement of

the parties comprising senior decision makers with or without the presence of a neutral third person after which the parties seek a negotiated settlement.

D. Early neutral evaluation

Early neutral evaluation is an alternative dispute resolution process whereby parties and their lawyers are brought together early in a pre-trial phase to present summaries of their cases and receive a non-binding assessment by anexperienced, neutral person with expertise in the subject of the dispute.

E. Combination of Alternative Dispute Resolution

A particular alternative dispute resolution may be combined with the other types of alternative dispute resolutions. The most common is the mediation-arbitration (Med-Arb). In this kind of combination, parties fi rst proceed tomediation to define the dispute and settle as many issues as possible, and thenthey engage in arbitration to settle issues that remain unresolved by themediator.

V. ARBITRATION

One of the oldest forms of dispute resolution is arbitration which may beclassified as either international or domestic. International arbitration isgoverned by the Model Law on International Commercial Arbitration per Section 19 of the ADR Law, while domestic arbitration shall continue to begoverned by RA 876, as amended by the ADR Law. A highly specializedform of domestic dispute resolution involving construction disputes isgoverned by the Construction Industry Arbitration Law, EO No. 1008. Thisfalls within the exclusive jurisdiction of the Construction Industry ArbitrationCommission (CIAC).

VI. MEDIATION

A more popular form of alternative dispute resolution is mediation. The ADR Law mentions two kinds of mediation: court-annexed mediation and court-referred mediation.

Court-annexed mediation is defined under ADR Law as any mediat ion process conducted under the auspices of the court, after such court hasacquired jurisdiction of the dispute. It is mandatory, being part of pre-trial. Onthe other hand, court-referred mediation is mediation ordered by a court to beconducted in accordance with an agreement of the parties when an action is

prematurely commenced in violation of such agreement.

The distinction between court-annexed mediation and court-referredmediation is important. The provisions of the ADR Law do not apply to court-annexed mediation. They cover voluntary mediation only, not court-annexedmediation or mandatory mediation. Under this law, there must a bindingagreement of the parties to mediate their dispute. This usually results when the

parties insert a clause in their contract requiring a prior resort to mediation before the dispute may be brought to arbitration or filed in court.

VII. WAYS OF ENFORCEMENT OF SETTLEMENT AGREEMENTSIN MEDIATION UNDER ADR LAW (other than Court-Annexed)

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A. The parties may deposit the settlement agreement arrived at during themediation process under the ADR Law with the appropriate clerk of aRegional Trial Court of the place where one of the parties resides. Wherethere is a need to enforce the settlement agreement, a petition may be filed byany of the parties with the same court, in which case, the court shall proceedsummarily to hear the petition, in accordance with such rules of procedure asmay be promulgated by the Supreme Court.

B. The other mode of enforcing the settlement agreement is for the parties toagree that the mediator shall become a sole arbitrator for the dispute and totreat the settlement agreement as an arbitral award. This award shall besubject to enforcement under RA 876, otherwise known as the ArbitrationLaw wherein the party wishing to implement the agreement may apply to theRTC for an order confirming an award. Once granted, a judgment may beentered which shall have the same force and effect in all respects as a

judgment in an action; and it may be enforced as if it had been rendered in thecourt in which it is entered.

VIII. COURT ANNEXED MEDIATION UNDER SUPREME COURTGUIDELINES

A. Order of Mediation – The trial court for civil cases with stamped-mark Mediatable is mandated to issue an order during the pre-trial referringthe case to the Philippine Mediation Center (PMC) unit for mediation anddirecting the parties to proceed immediately to the PMC unit. The order will

be personally given to the parties during the pre-trial. There are PMC units incourthouses or near the court premises to mediate the parties.

In Cagayan de Oro City, the PMC unit was established on 18 October 2004. Itis heartening to note that as of January 2005, there were 376 cases received bythe Cagayan de Oro City Mediation Center and, out of these, 154 cases weresettled, and 102 cases were returned to court either because the parties did notwant to mediate or the parties mediated but failed to reach an amicablesettlement. It has only 120 cases pending.

Since mediation is part of pre-trial, the trial court will impose the appropriatesanction including but not limited to censure, reprimand, contempt and suchsanctions as are provided under the Rules of Court, in case any or both of the

parties absent himself/themselves, or for abusive conduct during mediation proceedings.

B. Selection of Mediator – The Supervisor of the PMC unit will assist the

parties to select a mutually acceptable mediator from the list of availablemediators. The mediator will be considered an officer of the court. Lawyersmay attend the mediation proceedings, but they must cooperate with themediator to reach an amicable settlement of the case.

C. Conference – The mediator will hold a conference with all the partiesinvolved in the case and will make serious attempts to settle the matter quickly.

If no settlement is reached, the mediator may, with the consent of both parties,hold separate caucuses with each party to enable the mediator to determinetheir respective real interests in the dispute. Thereafter, another jointconference may be held to consider various options proposed by the parties tothe mediator to resolve the dispute.

D. Submission of Report – The mediator will submit to the trial court statusreport on the progress of the proceedings at the end of the mediation period.The mediator is mandated not to record the proceedings in any manner, but hemay take down personal notes to guide him. The PMC will not keep a file of mediation proceedings except the report of the mediator. This is becausecourt-annexed mediation proceedings like those voluntary mediation

proceedings under the ADR Law are confidential.

E. Outcome of mediation – When the mediation results in realization of allclaims of the plaintiff, a motion to dismiss may be filed in court. If there areobligations still to be complied with, the parties may execute a compromiseagreement which will then be submitted to the court for approval. If the courtfinds the compromise agreement to be in order, judgment will be rendered in

accordance therewith. If mediation fails, the case will be returned to the courtof origin per a Certificate of Failed Mediation issued by the mediator.

IX. ADVANTAGES OF MEDIATION

1. It is effective – In a recent pilot project conducted by PHILJA,85% of cases referred for court-annexed mediation had reachedsettlement. Surveys conducted after mediation sessions reveal ahigh level of satisfaction among disputing parties. As a result of mediation, close to 100% comply with agreements reached inmediation.

2. It is faster – Many cases reached settlement in 1-2 sessions. Theenormous time and effort expended in litigation are avoided.

3. It is cost-saving – Unlike rigorous court proceedings, mediation isquick and devoid of legal intricacies.

4. It restores relationships – Mediation is a proven way to restorerelationships long torn by conflict. The process addresses deep-rooted sources of misunderstanding which are inimical to businessconcerns.

5. Is ADR a new concept in the Phil ippine sett ing?

6. No. ADR is already being practiced in labor proceedings under the

Labor Code (NLRC, Labor Relations cases, etc.); under the

Katarungang Pambarangay Law and even in cases already filed in

court, under the court-annexed mediation.

What laws govern the ADR practice in the Phil ippines?

R.A. No. 9285 – AN ACT TO INSTITUTIONALIZE THE USE OF

AN ALTERNATIVE DISPUTE RESOLUTION SYSTM IN THE

PHILIPPINES AND TO ESTABLISH THE OFFICE FOR

ALTERNATIVE DISPUTE RESOLUTION, AND FOR OTHER

PURPOSES

E.O. No. 1008 – CREATING AN ARBITRATION MACHINERY IN

THE CONSTRUCTION INDUSTRY OF THE PHILIPPINES

R.A. No. 876 – AN ACT TO AUTHORIZE THE MAKING OF

ARBITRATION AND SUBMISSION AGREEMENTS, TO

PROVIDE FOR THE APPOINTMENT OF ARBITRATORS AND

THE PROCEDURE FOR ARBITRATION IN CIVIL

CONTROVERSIES, AND FOR OTHER PURPOSES

UNCITRAL Law – the Model Law is designed to assist States in

reforming and modernizing their laws on arbitral procedure to

take into account the particular features and needs of international

commercial arbitration. It covers all stages of the arbitral process

from the arbitration agreement, the composition and jurisdiction

of the arbitral tribunal and the extent of court intervention

through to the recognition and enforcement of arbitral award. It

reflects worldwide consensus on key aspects of international

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arbitration practice having been accepted by States of all regions

and the different legal or economic systems of systems of the world.

No. R.A. No. 9285 did not repeal, amend or modify the jurisdiction

of the Katarungang Pambarangay Law under R.A. No. 7160 or the

Local Government Code of 1991.

at is party autonomy?

Party autonomy is the freedom of parties to draw the course towards the

resolution of their own conflicts. This may include the following:

Selection and appointment of a mediator, arbitrator, conciliator or an

early neutral evaluator;

Agreement on the place of the proceedings where the ADR shall take

place. If the parties fail to reach an agreement as to the venue, the place

of the ADR shall be any place convenient and appropriate to the

parties;

Agreement on the applicable rules to apply; and

Agreement on the language to be used in the proceedings.

2. Who can be an arbitrator, mediator or concil iator?

In mediation , a person does not need to possess special qualifications,

background or profession unless the special qualifications of a mediator are

required in the mediation agreement.

In arbitration, any person appointed to serve as an arbitrator must be of

legal age, in full enjoyment of civil rights and knows how to read and

write. No person appointed to serve as an arbitrator shall be related by

blood or marriage within the sixth civil degree to either of the party to the

controversy. Also, no person shall serve as an arbitrator in any

proceeding if he has or had financial or fiduciary or other interest in the

controversy or cause to be decided or in the result of proceeding, or has

any personal bias which might prejudice the right of any party to a fair

and impartial award.

What is the protection given to the part ies in the ADR process?

In mediation proceedings , the information obtained shall be privileged and

confidential.

In arbitration proceedings, the records, evidence and the arbitral awards

are confidential and shall not be published except with the consent of the

parties or for limited purpose of disclosing to the court relevant

documents in cases where resort to the court is allowed.

iat ion and arbitrat ion, what is the result i f the part ies reach an

amicable se t t l ement?

a. In Mediation , if the parties reach an agreement, the mediator shall issue a

settlement agreement which may be deposited with the appropriate Clerk of

Regional Trial Court in the place where the parties resides. Where there is a

need to enforce the settlement agreement, a petition may be filed with the

same court, in which case, the court shall summarily hear the petition in

accordance with the rules as may be promulgated by court.

b. In Arbitration , the arbitrator or arbitration panel shall issue an arbitration

award. At any time within one month after the award for issues arbitrated, is

made, any party to the controversy may apply to the court having jurisdiction

for an order confirming the award; and thereupon the court must grant such

order unless the award is vacated, modified or corrected.

hat are the remedies if one of the part ies fai led to comply with

the agreement?

A party who does not comply with the order shall be liable for all damages

resulting from non-compliance, including all expenses and reasonable

attorney’s fees, paid to obtain the judicial enforcement of the order.

In addition, any party to a mediated settlement agreement, which was

deposited with the Clerk of Regional Trial Court, may upon breach thereof,file a verified petition with the same court to enforce the said mediated

agreement.

rticle 4.7 Definition and Form of Arbitration Agreement . The Arbitration

agreement, as defined in Articles 1.6 A4, shall be in writing. An

agreement is in writing if it is contained in a document signed by the

parties or in an exchange of letters, telex, telegrams or other means of

telecommunication which provide a record of the agreement, or in an

exchange of statements of claim and defense in which the existence of

an agreement, or in an exchange of statements of claim and defense

in which the existence of an agreement is alleged by one party and not

denied by another. The reference in a contract to a document

containing an arbitration clause constitutes an arbitration agreement

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provided that the contracts is writing and the reference is such as to

make that clause part of the contract.

RULE 4 – Jurisdiction of Arbitral Tribunal

Article 4.16. Competence of Arbitral Tribunal to Rule on itsJurisdiction. (a) The arbitral tribunal may rule on its own jurisdiction,

including any objections with respect to the existence or validity of thearbitration agreement or any condition precedent to the filing of therequest for arbitration. For that purpose, an arbitration clause, whichforms part of a contract shall be treated as an agreement independentof the other terms of the contract. A decision by the arbitral tribunal thatthe contract is null and void shall not entail ipso jure the invalidity of thearbitration clause.

Article 4.37. Appeal from Court Decision on Arbitral Awards. Adecision of the Regional Trial Court recognizing, enforcing, vacating or setting aside an arbitral award may be appealed to the Court of

Appeals in accordance with the rules of procedure to be promulgatedby the Supreme Court.

The losing party who appeals from the judgment of the courtrecognizing and enforcing an arbitral award shall be required by theCourt of Appeals to post a counter-bond executed if favor of theprevailing party equal to the amount of the award in accordance withthe Special ADR Rules.

Any stipulation by the parties that the arbitral tribunal’s award or decision shall be final, and therefore not appealable, is valid. Suchstipulation carries with it a waiver of the right to appeal from an arbitralaward but without prejudice to judicial review by way of certiorari under Rule 65 of the Rules of Court.

Article 4.38. Venue and Jurisdiction. Proceedings for recognition andenforcement of an arbitration agreement or for vacation or settingaside of an arbitral award, and any application with a court for arbitration assistance and supervision, except appeal, shall be deemedas special proceedings and shall be filed with the Regional Trial Court

where:

(a) the arbitration proceedings are conducted;

(b) where the asset to be attached or levied upon, or the actto be enjoined is located;

(c) where any of the parties to the dispute resides or has itsplace of business; or

(d) in the National Capital Judicial Region at the option of theapplicant.

Article 4.39. Notice of Proceedings to Parties. In a special proceeding

for recognition and enforcement of an arbitral award, the court shallsend notice to the parties at their address of record in the arbitration, or if any party cannot be served notice at such address, at such party’slast known address. The notice shall be sent at least fifteen (15) daysbefore the date set

Article 4.34. Aplication for Setting Aside an Exclusive Recourseagainst Arbitral Award.

(a) Recourse to a court against an arbitral award may bemade only by application for setting aside in accordance withsecond and third paragraphs of this Article.

(b) An arbitral award may be set aside by the Regional TrialCourt only If:

(i) the party making the application furnishes proof that:

(aa) a party to the arbitration agreementwas under some incapacity ; or the saidagreement is not valid under the law towhich the parties have subjected it or,failing any indication thereon, under the

law of the Philippines; or

(bb) the party making the applicationwas not given proper notice of theappointment of an arbitrator or of thearbitral proceedings or was otherwiseunable to present his case; or

(cc) the award deals with a dispute notcontemplated by or not failing within theterms of the submission to arbitration, or contains, decisions on matters beyondthe scope of the submission toarbitration, provided that, if the decisionson matters submitted to arbitration canbe separated from those not sosubmitted, only the part of the awardwhich contains decisions on matters notsubmitted to arbitration may be setaside; or

(dd) the composition of the arbitraltribunal or the arbitral procedure was notin accordance with the agreement of theparties, unless such agreement was inconflict with a provision of ADR Act fromwhich the parties cannot derogate, or,falling such agreement, was not inaccordance with ADR Act; or

(ii) the Court finds that:

(aa) the subject-matter of the dispute isnot capable of settlement by arbitrationunder the law of the Philippines; or

(bb) the award is in conflict with thepublic policy of the Philippines.

(c) An application for setting aside may not be made after three months have elapsed from the date on which the partymaking that application had received the award or, If arequest had been made under Article 4.33 (Correction andInterpretation of Award, Additional Award) from the date onwhich that request has been disposed of by the Arbitraltribunal

(d) The court, when asked to set aside an award, may,where appropriate and so requested by a party, suspend thesetting aside proceedings for a period of time determined byit in order to give the arbitral tribunal an opportunity resumethe arbitral proceedings or take such other action as in thearbitral tribunal's opinion will eliminate the grounds for settingaside.

(e) A party may bring a petition under this Article before thecourt in accordance with the Special ADR Rules.

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RULE 6 – Recognition and Enforcement of Awards

Article 4.35. Recognition and Enforcement. (a) A foreign arbitral awardshall be recognized as binding and, upon petition in writing to theregional trial Court, shall be enforced subject to the provisions of this

Article and of Article 4.36 (Grounds for Refusing Recognition or Enforcement).

(b) The petition for recognition and enforcement of sucharbitral awards shall be filled with the Regional trial Court Inaccordance with Special ADR Rules.

(i) Convention Award - The New York Conventionshall govern the recognition and enforcement of arbitral awards covered by said Convention. Thepetitioner shall establish that the country in whichthe foreign arbitration award was made is a partyto the New York Convention

(ii) Non-Convention Award – The recognition andenforcement of foreign arbitral awards not coveredby the New York Convention shall be done inaccordance with procedural rules to bepromulgated by the Supreme Court. The courtmay, on grounds of comity and reciprocity,recognize and enforce a non-convention award asa convention award.

(c) The party relying on an award or applying for itsenforcement shall file with the Regional Trial Court theoriginal or duly authenticated copy of the award and theoriginal arbitration agreement or a duly authenticated copythereof. If the award or agreement is not made in an officiallanguage of the Philippines, the party shall supply a dulycertified translation thereof into such language.

(d) A foreign arbitral award when confirmed by a court of aforeign country, shall be recognized and enforced as aforeign arbitral award and not as a judgment of a foreigncourt.

(e) A foreign arbitral award when confirmed by the RegionalTrial Court, shall be enforced in the same manner as finaland executory decisions of courts of law of the Philippines.

(f) If the Regional Trial Court has recognized the arbitralaward but an application for rejection and/or) suspension of enforcement of that award is subsequently made, theRegional Trial Court may, if it considers the application to beproper, vacate or suspend the decision to enforce that awardand may also, on the application of the party claimingrecognition or enforcement of that award, order the other party seeking rejection or suspension to provide appropriatesecurity.

Article 4.36. Grounds for Refusing Recognition or Enforcement .

A CONVENTION AWARD.

Recognition or enforcement of an arbitral award, made in a state,which is a party to the New York Convention, may be refused, at therequest of the party against whom it is provoked, only if the partyfurnishes to the Regional Trial Court proof that:

(a) The parties to the arbitration agreement are, under thelaw applicable to them, under some incapacity; or the saidagreement is not valid under the law to which the parties

have subjected it or; failing any indication thereon, under thelaw of the country where the award was made; or

(b) the party against whom the award is invoked was notgiven proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise in able to presenthis case; or

(c) the award deals with dispute not contemplated by or notfailing within the terms of the submission to arbitration, or itcontains decisions on matters beyond the scope of the

submission to arbitration; provided that, if the decisions onmatters submitted to arbitration can be separated from thosenot so submitted, that part of the award which containsdecisions on matters submitted to arbitration may berecognized and enforced; or

(d) the composition of the arbitral tribunal or the arbitralprocedure was not in accordance with the agreement of theparties or, failing such agreement, was not in accordancewith the law of the country where the arbitration too place; or

(e) the award has not become binding on the parties or hasbeen set aside or suspended by a court of the country inwhich, or under the law of which, that award was made.

Recognition and enforcement of an arbitral award may also be refusedif the Regional Trial Court where recognition and enforcement issought finds that:

(a) the subject-matter of the dispute is not capable of settlement by arbitration under the law of Philippines; or

(b) the recognition or enforcement of the award would becontrary to the public policy of the Philippines.

A party to a foreign arbitration proceeding may oppose an applicationfor recognition and enforcement of the arbitral award in accordancewith the Special ADR Rules only on the grounds enumerated under paragraph (a) and (c) of Article 4.35 ( Recognition and Enforcement ).

Any other ground raised shall be disregarded by the Regional Trial

Court.

B. NON-CONVENTION AWARD.

(a) A foreign arbitral award rendered in a state which is not aparty to the New York Convention will be recognized uponproof of the existence of comity and reciprocity and may betreated as a convention award. If not so treated and if nocomity or reciprocity exists, the non-convention awardcannot be recognized and/or enforced but may be deemedas presumptive evidence of a right as between the parties inaccordance with Section 48 of the Rules of Court.

(b) If the Regional Trial Court has recognized the arbitralaward but a petition for suspension of enforcement of that

award is subsequently made, the Regional Trial Court may,if it considers the petition to be proper, suspend theproceedings to enforce the award, and may also, on theapplication of the party claiming recognition or enforcementof that award, order the other party seeking suspension toprovide appropriate security.

(c) If the petition for recognition or enforcement of the arbitralaward is filed by a party and a counter-petition for therejection of the arbitral award is filed by the other party, theRegional Trial Court may, if it considers the counter-petitionto be proper but the objections thereto may be rectified or cured, remit the award to the arbitral tribunal for appropriate

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action and in the meantime suspend the recognition andenforcement proceedings and may also on the application of the petitioner order the counter-petitioner to provideappropriate security.

Article 4.37. Appeal from Court Decision on Arbitral Awards. Adecision of the Regional Trial Court recognizing, enforcing, vacating or setting aside an arbitral award may be appealed to the Court of

Appeals in accordance with the rules of procedure to be promulgatedby the Supreme Court.

The losing party who appeals from the judgment of the courtrecognizing and enforcing an arbitral award shall be required by theCourt of Appeals to post a counter-bond executed if favor of theprevailing party equal to the amount of the award in accordance withthe Special ADR Rules.

Any stipulation by the parties that the arbitral tribunal’s award or decision shall be final, and therefore not appealable, is valid. Suchstipulation carries with it a waiver of the right to appeal from an arbitralaward but without prejudice to judicial review by way of certiorari under Rule 65 of the Rules of Court.

Article 4.38. Venue and Jurisdiction. Proceedings for recognition andenforcement of an arbitration agreement or for vacation or settingaside of an arbitral award, and any application with a court for arbitration assistance and supervision, except appeal, shall be deemedas special proceedings and shall be filed with the Regional Trial Courtwhere:

(a) the arbitration proceedings are conducted;

(b) where the asset to be attached or levied upon, or the actto be enjoined is located;

(c) where any of the parties to the dispute resides or has itsplace of business; or

(d) in the National Capital Judicial Region at the option of theapplicant.

Article 4.39. Notice of Proceedings to Parties. In a special proceedingfor recognition and enforcement of an arbitral award, the court shallsend notice to the parties at their address of record in the arbitration, or if any party cannot be served notice at such address, at such party’slast known address. The notice shall be sent at least fifteen (15) daysbefore the date set for the initial hearing of the application.

Article 4.42. Summary nature of proceedings before the court . Apetition for recognition and enforcement of awards brought before thecourt shall be heard and dealt with summarily in accordance with theSpecial ADR Rules.

Article 4.43. Death of a Party . Where a party dies after making asubmission or a contract to arbitrate as prescribed in these Rules, theproceedings may be begun or continued upon the application of, or

notice to, his/her executor or administrator, or temporary administrator of his/her estate. In any such case, the court may issue an order extending the time within which notice of a motion to recognize or vacate an award must be served. Upon recognizing an award, where aparty has died since it was filed or delivered, the court must enter

judgement in the name of the original party; and the proceedingsthereupon are the same as where a party dies after a verdict.