CIAC Arbitration in the Philippines: How Construction Disputes Are Resolved

Construction disputes in the Philippines — unpaid progress billings, project delays, defective works, contract termination — are resolved not by the regular courts but by the Construction Industry Arbitration Commission (CIAC). Under Section 34 of Republic Act No. 9285 (the Alternative Dispute Resolution Act of 2004), the arbitration of construction disputes is governed by Executive Order No. 1008, the Construction Industry Arbitration Law. Section 35 of R.A. 9285 confirms that the CIAC exercises original and exclusive jurisdiction over construction disputes between or among parties bound by an arbitration agreement — project owners, contractors, subcontractors, fabricators, project managers, design professionals, consultants, quantity surveyors, bondsmen, and insurers.

What counts as a construction dispute

The CIAC's jurisdiction covers disputes arising from construction contracts, whether the parties are bound directly or by reference to an arbitration agreement. Section 21 of R.A. 9285 treats the construction of works as a commercial relationship, but Section 35 makes clear that the CIAC retains original and exclusive jurisdiction even where the arbitration is commercial in character.

The arbitration clause governs — even if it names another tribunal

A common misconception is that a clause referring disputes to a different arbitration body takes the case out of the CIAC. It does not. Under Article III, Section 1 of the CIAC Rules of Procedure, an arbitration clause in a construction contract — or a submission to arbitration of a construction dispute — is deemed an agreement to submit the controversy to CIAC jurisdiction, notwithstanding the reference to a different arbitration institution or arbitral body in the contract.

The same provision makes the process easier to start: when a contract contains a clause submitting a future controversy to arbitration, the parties need not execute a separate submission agreement before the claimant invokes CIAC jurisdiction. The arbitration agreement must be in writing, but it need not be signed, as long as the intent to arbitrate is clear. It may even take the form of an exchange of letters, telefax, telex, or telegram.

How a CIAC case begins

A claimant files a Request for Arbitration. Under Article II, Section 2 of the CIAC Rules, the Request must contain, among other things, the full names, descriptions, and addresses of the parties; a statement of the claimant's case; a copy of the construction contract; and the relevant agreements, including the agreement to arbitrate, plus documentation establishing the circumstances of the dispute.

For government construction contracts, Article II, Section 1 requires the claimant suing the government to state in the submission that all administrative remedies have been exhausted, or that the government office or officer has unreasonably delayed acting on the claim, or that exhaustion is not practicable because of an application for interim relief.

What happens if the other party refuses to arbitrate

Refusal does not stall the case. Under Article III, Section 2 of the CIAC Rules, once jurisdiction is properly invoked by filing the Request, the respondent's failure or refusal to arbitrate does not affect the proceedings. The CIAC appoints the sole arbitrator from its accredited list, or names the respondent's arbitrator if the clause provides for a three-member panel. Proceedings continue despite the respondent's absence, and an award may be made based on the claimant's evidence. If the respondent appears before award and offers evidence, the arbitrator reopens the proceedings, but evidence already received is not affected.

Choosing the arbitrator or tribunal

Parties may agree on a sole arbitrator or an arbitral tribunal. Under Article V, Section 2, each party may nominate three arbitrators from the CIAC-accredited list, and the CIAC chooses and appoints one from the nominees. If nominees are not submitted within fifteen (15) days from the respondent's answer, the CIAC appoints a sole arbitrator from the nominees submitted, or from its accredited list if none were submitted.

For a three-member tribunal, Article V, Section 3 allows each party to nominate six arbitrators. The CIAC appoints one from each side's nominees, and the two chosen arbitrators select the Third Arbitrator, who chairs the tribunal, within fifteen (15) days from acceptance of their appointment. Failing agreement, the CIAC appoints the Chairman within fifteen (15) days thereafter.

Arbitrators must be accredited by the CIAC and be members in good standing of the Philippine Institute of Construction Arbitrators (PICA). Article VI describes them as persons of distinction from different professions — engineers, architects, construction managers, project managers, engineering consultants, businessmen familiar with construction, and lawyers experienced in construction disputes. They are not permanently employed by the CIAC and serve only when called upon.

Terms of Reference, fees, and the award

Before hearing the case, the arbitrator or tribunal formulates the Terms of Reference (TOR) based on the documents and the preliminary conferences. Under Article IX, Section 1, the TOR includes the breakdown, schedule of payment, and sharing of arbitration fees, and other particulars needed to make the award enforceable. The TOR is signed by the parties and the arbitrator(s) within fifteen (15) days from the preliminary conference or the last meeting to finalize it.

On costs, Article XIII, Section 11 requires the claimant to pay an initial filing fee of P3,000 plus a deposit equivalent to 10% of expected arbitrator's fees based on the claim, or P5,000, whichever is higher, but not exceeding P50,000. Non-monetary claims follow the approved Table of Fees. A respondent raising a counterclaim pays a similar deposit under Article XI, Section 1.

The award must be rendered promptly — under Article XV, Section 1, within thirty (30) days from submission of the case for resolution, but not more than six (6) months from signing of the TOR, with no extensions unless approved by the CIAC. A motion for reconsideration may be filed within fifteen (15) days from notice of the award and stays the award; only one such motion is allowed without express leave.

Frequently asked questions

Is CIAC arbitration mandatory for construction disputes in the Philippines? Yes, where the parties are bound by an arbitration agreement. Section 35 of R.A. 9285 gives the CIAC original and exclusive jurisdiction over construction disputes between parties bound by such an agreement, and Article III, Section 1 of the CIAC Rules treats an arbitration clause as a submission to CIAC jurisdiction even if it names another arbitral body.

What if the other party refuses to participate in CIAC arbitration? The case proceeds. Under Article III, Section 2 of the CIAC Rules, the CIAC appoints the arbitrator for the non-participating respondent, hearings continue, and an award may be issued based on the claimant's evidence.

How long does a CIAC award take? Under Article XV, Section 1, the award is rendered within thirty (30) days from submission of the case for resolution, but not later than six (6) months from signing of the Terms of Reference, unless the CIAC approves an extension.

Practical takeaways

• The CIAC has original and exclusive jurisdiction over construction disputes under Executive Order No. 1008, as confirmed by Section 35 of R.A. 9285.
• An arbitration clause in a construction contract submits the dispute to the CIAC even if it names a different arbitration institution.
• A respondent's refusal to arbitrate does not stop the case; the CIAC appoints the arbitrator and proceedings continue.
• The claimant pays a P3,000 filing fee plus a deposit of 10% of expected arbitrator's fees (or P5,000, whichever is higher, capped at P50,000).
• The award is due within 30 days from submission, and no later than six months from signing of the TOR.

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

• CIAC RESOLUTION NO. 3-93, August 25, 1993

• EXECUTIVE ORDER NO. 876 - AMENDING EXECUTIVE ORDER NO. 868 WHICH REORGANIZED THE BOARD OF REVIEW FOR MOTION PICTURES AND TELEVISION

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