Commercial Arbitration in the Philippines: Legal Framework Under RA 9285

Commercial arbitration in the Philippines is governed principally by Republic Act No. 9285, the Alternative Dispute Resolution Act of 2004. The law treats an arbitration as "commercial" if it covers matters arising from relationships of a commercial nature, whether contractual or not. International commercial arbitration is governed by the Model Law on International Commercial Arbitration adopted by UNCITRAL on 21 June 1985, while domestic arbitration continues to be governed by Republic Act No. 876, the Arbitration Law, as amended by the ADR Act. Construction disputes fall under a separate regime, Executive Order No. 1008.

What makes an arbitration commercial

Section 21 of RA 9285 defines a commercial arbitration by its subject matter, not by the nationality of the parties. It covers matters arising from all 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 of works, commercial representation or agency, factoring, leasing, consulting, engineering, licensing, investment, financing, banking, insurance, joint ventures and other forms of industrial or business cooperation, and carriage of goods or passengers by air, sea, rail or road.

The list is expressly not exclusive, so the commercial character of a dispute turns on the nature of the underlying relationship.

International versus domestic arbitration

The dividing line matters because the governing law differs.

International commercial arbitration is governed by the Model Law, which RA 9285 adopted in Section 19. Section 20 directs that in interpreting the Model Law, regard must be had to its international origin and the need for uniformity in its interpretation, and that resort may be made to the travaux preparatoires and the UNCITRAL Secretary General's analytical commentary of 25 March 1985.

Domestic arbitration is defined in Section 32 as an arbitration that is not international as defined in Article 1(3) of the Model Law. It continues to be governed by the Arbitration Law, as amended by Chapter 5 of RA 9285. Section 33 makes certain Model Law provisions and Sections 22 to 31 of the international chapter applicable to domestic arbitration as well.

Construction disputes are governed by Executive Order No. 1008, the Construction Industry Arbitration Law, under. provides that the Construction Industry Arbitration Commission exercises original and exclusive jurisdiction over construction disputes even where the arbitration is commercial under Section 21.

The arbitration agreement and referral by the courts

Philippine policy favors arbitration. Section 2 of RA 9285 declares the State's policy of actively promoting party autonomy in dispute resolution and encouraging ADR to achieve speedy and impartial justice and to de-clog court dockets. Section 25 directs courts, in interpreting the Act, to have due regard to the policy of the law in favor of arbitration.

Under Section 24, a court before which an action is brought in a matter that is the subject of an arbitration agreement must refer the parties to arbitration if at least one party so requests not later than the pre-trial conference, or upon the request of both parties thereafter. The court will not refer the case only 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, Section 25 requires the court to refer those who are bound, even as the civil action continues against the others.

Choosing the arbitral tribunal and the place of arbitration

The parties may name an appointing authority in their arbitration agreement, or they may agree to arbitrate under the rules of a regular arbitration institution, in which case the institution's selection and appointment procedure applies unless the parties agreed otherwise. In ad hoc arbitration, Section 26 provides that the default appointment of an arbitrator is made by the National President of the Integrated Bar of the Philippines or his duly authorized representative. Section 27 assigns the appointing authority the functions referred to in Articles 11(3), 11(4), 13(3) and 14(1) of the Model Law, and 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.

On venue, Section 30 allows the parties 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. Section 31 leaves the language of the arbitration to the parties; failing agreement, it is English in international arbitration and English or Filipino in domestic arbitration, unless the tribunal determines otherwise.

Confidentiality and interim relief

Section 23 provides that arbitration proceedings, including the records, evidence and the arbitral award, are confidential and shall not be published, except with the consent of the parties or for the limited purpose of disclosing relevant documents to the court in cases where resort to the court is allowed. A court may issue a protective order to prevent disclosure of documents or information containing secret processes, developments, research and similar information where the applicant would be materially prejudiced.

On interim measures, Section 28 permits a party to ask a court for interim protection before the tribunal is constituted. After constitution and during the proceedings, the request may be made to the arbitral tribunal, or to the court to the extent the tribunal has no power to act or cannot act effectively. Section 29 allows the tribunal, unless the parties agree otherwise, to order interim measures such as a preliminary injunction against a party, the appointment of receivers, or the detention, preservation or inspection of property that is the subject of the dispute. A party that does not comply with the order is liable for damages resulting from noncompliance, including expenses and reasonable attorney's fees incurred in obtaining judicial enforcement.

Enforcement and challenge of awards

A domestic arbitral award, once confirmed, is enforced in the same manner as a final and executory decision of the Regional Trial Court. governs confirmation, referring to Section 23 of the Arbitration Law, while recognition and enforcement of an award in international commercial arbitration is governed by of the Model Law. A CIAC arbitral award does not need confirmation by the Regional Trial Court to be executory.

A party may question a domestic award before the appropriate Regional Trial Court only on the grounds enumerated in Section 25 of the Arbitration Law; requires the court to disregard any other ground. Foreign awards covered by the New York Convention are recognized and enforced under, with the application filed with the Regional Trial Court. A party opposing recognition and enforcement may raise only the grounds enumerated under Article V of the New York Convention; Section 45 requires the court to disregard any other ground. Awards not covered by the New York Convention are governed by Section 43, under which the court may, on grounds of comity and reciprocity, recognize and enforce a non-convention award as a convention award.

Under Section 47, proceedings for recognition and enforcement of an arbitration agreement, for vacation, setting aside, correction or modification of an award, and applications for court assistance and supervision are treated as special proceedings. They are filed with the Regional Trial Court where the arbitration proceedings are conducted, where the asset to be attached or levied upon or the act to be enjoined is located, where any party resides or has its place of business, or in the National Capital Judicial Region, at the option of the applicant.

Frequently asked questions

What law governs commercial arbitration in the Philippines? Republic Act No. 9285, the Alternative Dispute Resolution Act of 2004. International commercial arbitration is governed by the Model Law adopted in Section 19, domestic arbitration by the Arbitration Law as amended by Chapter 5, and construction disputes by Executive Order No. 1008.

Can a Philippine court refuse to refer a case to arbitration? Yes, but only on limited grounds. Under Section 24, the court refers the parties to arbitration unless it finds that the arbitration agreement is null and void, inoperative, or incapable of being performed.

Are arbitration proceedings in the Philippines confidential? Yes. Section 23 makes the proceedings, records, evidence and award confidential, subject to the consent of the parties and to limited disclosure of relevant documents to the court where resort to the court is allowed.

Practical takeaways

• RA 9285 institutionalizes ADR and expressly favors party autonomy and arbitration over litigation where the parties have agreed to arbitrate.
• The commercial character of a dispute depends on the nature of the underlying relationship, not on whether the parties are foreign or domestic.
• International, domestic and construction arbitrations follow different governing laws, so the applicable regime should be identified at the outset.
• Courts must refer covered disputes to arbitration when a party timely requests, and may refuse only on the narrow grounds stated in Section 24.
• Interim relief, confidentiality and the grounds for challenging an award are all governed by specific provisions of RA 9285.

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

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