CHAPTER 5and 6

CHAPTER 5: ICA UNDER THE ADR ACT OF 2004 AND IRR

Overview of ADR Act of 2004

The Alternative Dispute Resolution (ADR) Act of 2004 was a pivotal legislative move in the Philippines as it adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (ICA) as its governing statute for ICA. This act not only establishes a legal framework for arbitration in the country but also aims to enhance the efficiency and effectiveness of dispute resolution. Key provisions of the ADR Act are designed to harmonize the principles established in the Model Law with existing Philippine laws and jurisprudence, ensuring that local legal practices are consistent with international standards.

Key topics covered in the ADR Act include:

• Legal Representation in International Arbitration: This provision ensures that parties have the right to legal representation of their choice, including representation by non-lawyers.

• Confidentiality of Proceedings: The Act mandates confidentiality in arbitration proceedings, protecting sensitive business information.

• Referral of Court Actions to Arbitration: Courts have the authority to refer certain disputes to arbitration, streamlining the resolution process.

• Definition/Function of Appointing Authority: It clarifies the role and responsibilities of the appointing authority in the arbitration process.

• Granting Interim Protection Measures: The Act empowers tribunals to grant interim measures necessary to protect the parties' interests.

• Governing Law, Place, and Language of Arbitration: Defines how parties can agree on these critical aspects of the arbitration process.

The Implementing Rules and Regulations (IRR), which were enacted on October 26, 2009, took effect on December 31, 2009, providing specific guidelines for the application of the ADR Act.

Definition of International Commercial Arbitration

An arbitration is classified as international under several conditions, which reflect its global nature:

• Parties' Places of Business: When the parties involved have business operations in different states at the time of the agreement.

• Place of Arbitration: If the selected place of arbitration is outside the Philippine jurisdiction.

• Performance of Obligations: When a substantial part of the contractual obligations is performed outside the Philippines, or when the subject matter has connections to multiple countries.

• Multi-Country Agreements: When the parties specifically agree that the subject matter relates to multiple jurisdictions.

ICA is deemed commercial when it arises from relationships of a commercial nature, whether contractual or otherwise, and it is governed by the ADR Act and IRR even if the seat of arbitration is situated outside the Philippines.

Provisions on ICA Under the IRR

The provisions detailed in the IRR are applicable solely to ICA under Philippine law, covering permissible disputes. These provisions are structured to be flexible, allowing parties to opt for different stipulations if they reach mutual agreements. The rules are categorized as default rules, which apply unless explicitly overridden by:

• Existing Agreements Between States: Agreements that may have precedence over the IRR.

• Agreement Between Parties: Specific agreements made between parties regarding applicable procedural rules or arbitration frameworks.

The IRR also empowers the Supreme Court to craft special rules for ADR, which may address particular needs and considerations synonymous with arbitration practices in the country.

Rules of Interpretation

The interpretation of the ADR Act necessitates:

• Favoring Arbitration: Adhering to a legal philosophy that favors arbitration as a resolution mechanism.

• Uniformity in Model Law: Emphasizing a uniform interpretation reflecting the international origins of the Model Law.

• Promoting Party Autonomy: The IRR emphasizes allowing parties the autonomy to make certain determinations, including the authority for third parties to intervene in specific cases.

• Equal Applicability: Any procedural rules should equally apply to both claims and counterclaims raised during arbitration.

Receipt of Written Communications in ICA

The receipt of written communications is critical within ICA due to its international aspects:

• Governing Rules: The rules apply based on party agreements regarding communication methods.

• Default Rules for Delivery and Receipt Include:

  • Personal delivery to either business or residential addresses.

  • Use of registered letters or other verifiable means if specific rules are not defined.

• Acknowledgment of Receipt: Under the IRR, communications are acknowledged upon delivery, differing from other legal contexts where acknowledgment follows mailing.

Waiver of Right to Object in ICA

The IRR expands the waiver principles to include objections related to non-compliance, mandating that these objections must be raised promptly to avoid being deemed waived:

• Equitable Estoppel: This principle helps prevent a party from contradicting facts it has previously accepted as true, ensuring fairness in proceedings.

Confidentiality in ICA

Confidentiality is a key aspect of ICA, whereby proceedings remain confidential unless:

• Parties Consent to Disclosure: Agreements are reached between parties regarding what can be disclosed.

• Court Orders: Courts may issue necessary protective orders to maintain the confidentiality of sensitive information during court proceedings.

Due Process in ICA (Article 4.18, IRR)

Due process must be upheld, providing both parties equitable treatment and opportunities to present their positions:

• Opportunity to Present Cases: While not guaranteeing actual presentation, it ensures procedural fairness is upheld.

• Notification Requirements: Obligation to provide notice of hearings and share relevant documents or information with the opposing party.

Place or Venue of ICA (Article 4.20, IRR)

The selection of the venue for ICA is determined by party agreement, with Metro Manila as the default location unless other arrangements are made. The arbitral tribunal is tasked with ensuring that the proceedings occur in an appropriate venue.”

Language in ICA (Article 4.22, IRR)

Parties are free to select the language applicable during arbitration; in the absence of a specific agreement, English is deemed the default language. All documentary evidence must be translated into the chosen arbitration language prior to submission to the tribunal.

Applicable Law in ICA (Article 4.28, IRR)

The law governing the arbitration proceedings may differ from the substantive laws applicable to the disputes;

• Parties' Choice: If the parties select governing law, that choice must be respected.

• Conflict of Laws: In the absence of a mutual choice, the conflict of law rules will determine the applicable law governing the arbitration process.

Appointing Authority in ICA (Article 1.2,C/1], IRR)

The appointing authority is outlined in either the arbitration agreement or through institutional rules. Its responsibilities include:

• Appointing Arbitrators: Selecting arbitrators suited for the case.

• Addressing Challenges: Managing any challenges to arbitrators to ensure objectivity.

• Ensuring Impartiality: Safeguarding the impartiality of the appointed arbitrators throughout the arbitration process.

Arbitrators and Arbitral Tribunals in ICA (Articles 4.10 to 4.12, IRR)

Parties are empowered to decide on the number of arbitrators, with a default of three (3) arbitrators. The appointment process typically involves each party designating one arbitrator, with the two-party-appointed arbitrators selecting the third:

• Challenge Procedures: Any appointment can be contested on grounds of bias or qualifications within a set timeframe.

Procedure for Challenges Against Arbitrators in ICA (Article 4.12, IRR)

Challenges regarding an arbitrator’s appointment must be submitted within 15 days of the challenging party becoming aware of the grounds for challenge. If a challenge is unsuccessful, the issue can be escalated to the establishing appointing authority for further consideration.

Jurisdiction of Arbitral Tribunal in ICA (Article 4.16, IRR)

Jurisdiction of the tribunal is conferred by law allowing it to rule on its jurisdiction autonomously. It has procedures in place to address any challenges concerning its jurisdiction, ensuring disputes over jurisdiction are resolved efficiently.

Interim Measures in ICA (Articles 4.9 and 4.17, IRR)

Both parties have the right to request interim measures from the tribunal, which are necessary to prevent harm or to preserve evidence relevant to the arbitration.

Legal Representation in ICA (Section 22, ADR Act; Article 4.40, IRR)

Parties in arbitration may choose their representatives, including individuals who are not lawyers, reflecting a commitment to accessible dispute resolution.

Rules of Procedure in ICA (Articles 4.19, 4.23, 4.24, 4.25, 4.29, and 4.30, IRR)

The parties have the autonomy to agree on procedural rules. In the absence of such an agreement, the UNCITRAL arbitration rules will apply by default, providing a structured approach to the arbitration process.

Conclusion

In conclusion, the Implementing Rules and Regulations (IRR) of the ADR Act of 2004 provide a comprehensive framework for International Commercial Arbitration (ICA) in the Philippines. It ensures compatibility with established international standards while taking into account local customs and regulations, facilitating a robust dispute resolution environment.