Arbitration in the Philippines When a Chinese Party Is Involved: Rules and Steps

When a dispute arises between a Chinese party and a Philippine party, the case is usually resolved by arbitration rather than by a Philippine court — provided the parties signed a written arbitration agreement. Republic Act No. 9285, the Alternative Dispute Resolution Act of 2004, adopts the UNCITRAL Model Law on International Commercial Arbitration for international commercial arbitration, and the New York Convention governs the recognition and enforcement of foreign arbitral awards. A Philippine court before which the dispute is filed must refer the parties to arbitration if at least one of them asks not later than the pre-trial conference.

When does the dispute count as international commercial arbitration?

Under Republic Act No. 9285, an arbitration is "commercial" if it covers matters arising from relationships of a commercial nature, whether contractual or not. The law lists examples: trade transactions for the supply or exchange of goods or services, distribution agreements, construction, commercial representation or agency, leasing, consulting, engineering, licensing, investment, financing, banking, insurance, joint ventures, and carriage of goods or passengers.

The law also defines an "international party" as an entity whose place of business is outside the Philippines. It expressly excludes a domestic subsidiary of that foreign entity, as well as a co-venturer in a joint venture with a party whose place of business is in the Philippines. Whether the arbitration is international or domestic matters because it determines which set of rules applies.

Which law governs the arbitration?

International commercial arbitration in the Philippines is governed by the Model Law, which Republic Act No. 9285 adopts and attaches to the statute. Domestic arbitration continues to be governed by Republic Act No. 876, the Arbitration Law, as amended by the ADR Act.

Construction disputes follow a separate track. Under Republic Act No. 9285, arbitration of construction disputes is governed by Executive Order No. 1008, the Construction Industry Arbitration Law, and the Construction Industry Arbitration Commission exercises original and exclusive jurisdiction over those disputes even when the arbitration is commercial.

What the parties can agree on

Party autonomy is the declared policy of Republic Act No. 9285. The parties are free to agree on the place of arbitration; failing agreement, the place is Metro Manila, unless the arbitral tribunal decides otherwise after considering the circumstances, including the convenience of the parties. The tribunal may also meet elsewhere for consultations, hearings, or inspection of property.

The parties are likewise free to agree on the language of the arbitration. Failing agreement, the language is English in international arbitration, and English or Filipino in domestic arbitration, unless the tribunal determines otherwise. Documentary evidence may be ordered to be accompanied by a translation.

Who may represent a party, and who appoints the arbitrator?

In international arbitration conducted in the Philippines, a party may be represented by any person of its choice. However, a representative who is not admitted to the Philippine practice of law cannot appear as counsel before any Philippine court or quasi-judicial body, whether or not the appearance relates to the arbitration.

On appointments, the "appointing authority" is the person or institution named in the arbitration agreement, or the regular arbitration institution under whose rules the arbitration is conducted. In ad hoc arbitration, the default appointment is made by the National President of the Integrated Bar of the Philippines or a duly authorized representative. If the appointing authority fails or refuses to act within thirty days from receipt of the request, the applicant may renew the application with the court.

If a case is filed in court anyway

A Philippine court before which an action is brought on a matter covered by an arbitration agreement must refer the parties to arbitration if at least one party so requests not later than the pre-trial conference, or if both parties request it later. The court will not refer the case if it finds the arbitration agreement null and void, inoperative, or incapable of being performed.

Where an action involves multiple parties and only some are bound by an arbitration agreement, the court refers those who are bound, even as the civil action continues against those who are not.

Interim relief while the arbitration is pending

A party may ask a court for an interim measure of protection before the arbitral tribunal is constituted. After constitution, the request may be made to the tribunal, or to the court to the extent the tribunal cannot act effectively. The tribunal is deemed constituted once the sole or third arbitrator accepts the nomination and written notice of the nomination and acceptance is received by the requesting party.

Relief may be granted to prevent irreparable loss or injury, to secure performance of an obligation, to produce or preserve evidence, or to compel another appropriate act or omission. The order binds the parties, and either side may ask the court to help implement or enforce it. A party who does not comply is liable for damages resulting from noncompliance, including expenses and reasonable attorney's fees incurred in obtaining judicial enforcement.

Enforcing the award

For foreign arbitral awards, the New York Convention governs recognition and enforcement. The application is filed with the Regional Trial Court. The applicant must establish that the country where the award was made is a party to the New York Convention, and must file the original or authenticated copy of the award and the arbitration agreement, with a duly certified translation if these are not in an accepted language.

A party opposing enforcement may raise only the grounds enumerated under Article V of the New York Convention; any other ground is disregarded by the Regional Trial Court. Awards not covered by the New York Convention may still be recognized and enforced under procedural rules promulgated by the Supreme Court, and the court may, on grounds of comity and reciprocity, treat a non-convention award as a convention award.

A foreign arbitral award confirmed by a Philippine court is enforced in the same manner as a final and executory decision of a Philippine court. It is treated as a foreign arbitral award, not as a foreign judgment.

Frequently asked questions

Can a Philippine court hear the dispute instead of arbitration? If there is a valid arbitration agreement, the court must refer the parties to arbitration upon request made not later than the pre-trial conference, unless the agreement is null and void, inoperative, or incapable of being performed.

Can a Chinese party use its own lawyer in the arbitration? Yes. In international arbitration conducted in the Philippines, a party may be represented by any person of its choice. That representative cannot, however, appear as counsel before a Philippine court or quasi-judicial body unless admitted to the Philippine practice of law.

Where will the arbitration be held if the contract is silent? The place is Metro Manila, unless the arbitral tribunal decides on a different place after considering the circumstances, including the convenience of the parties.

Practical takeaways

• Put the arbitration agreement in writing and be specific about the seat, language, number of arbitrators, and appointing authority.
• Confirm whether the arbitration is international or domestic, since different rules govern each.
• Raise the arbitration agreement early — a court referral must be requested not later than the pre-trial conference.
• Consider interim relief from a court before the tribunal is constituted, especially where assets or evidence may be at risk.
• For enforcement, confirm that the country where the award was issued is a New York Convention state and prepare the award, the agreement, and certified translations.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• REPUBLIC ACT NO. 9285 - AN ACT TO INSTITUTIONALIZE THE USE OF AN ALTERNATIVE DISPUTE RESOLUTION SYSTEM IN THE PHILIPPINES AND TO ESTABLISH THE OFFICE FOR ALTERNATIVE DISPUTE RESOLUTION, AND FOR OTHER PURPOSES

• REPUBLIC ACT 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.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.