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BEFORE THE INTERNATIONAL COURT OF ARBITRATION OF THE

HONG KONG INTERNATIONAL ARBITRATION CENTRE

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IN THE MATTER OF AN ARBITRATION OF

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CASE NO. 15-NNNNN

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BETWEEN

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PAMPANGA ENERGY COMPANY

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(Claimant)

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V.

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CONSTRUCTION COMPANY

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(Respondent)

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AUGUST 30, 2015

I.

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BACKGROUND OF THE DISPUTE

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1. Claimant Pampanga Energy Company (hereinafter referred to as PEC) is a

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corporation organized and duly existing under Philippine laws engaged in sale

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and distribution of electric or power supply.

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2. Respondent Construction Company (hereinafter referred to as CC) also a

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corporation organized and duly existing under Philippine laws and is engaged on

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the business of construction and engineering.

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3. In October 2012, PEC entered into a contract with CC engaging the latter to

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design, construct, commission, test complete and hand over the power station in

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Pampanga.

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4. Sometime in September 2013, disputes arose between PEC and CC to the

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extent that PEC claimed to be entitled to liquidated damages while CC argued

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numerous extensions of time that had not been allowed by PEC.

5. CC also claimed that it was owed large sums of money under the contract while

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PEC claimed that there were many technical design and construction defects in

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various parts of the project.

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6. Pursuant to the engineering procurement and construction contract, any

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unresolved dispute between the parties shall be referred to and resolved by

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arbitration administered by the Hongkong International Arbitration Centre.

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7. By clause 31 of the engineering procurement and construction contract, the

parties agreed to the following:
"31.1 Any unresolved dispute shall be referred to and finally
resolved

by

arbitration

administered

by

the

Hong

Kong

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International Arbitration Centre under the Rules, except as the

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Rules may be modified herein. The arbitration proceedings shall be

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conducted, and the award shall be rendered, in the English

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language. The seat of arbitration shall be Hong Kong.

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be governed by the laws of Hong Kong.

8. On November 4, 2013 PEC commenced arbitration proceedings against CC and

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filed a Notice of Arbitration with the Hong Kong International Arbitration Centre

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(HKIAC).
9. On November 18, 2013 CC commenced its own arbitration proceedings against

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PEC and submitted its Request for Arbitration to the Construction Industry

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Arbitration Commission (CIAC).

10. On the same day, CC also filed a case before the Manila Regional Trial Court

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and asked for an anti-suit injunction to be issued in relation to the HKIAC

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proceedings.
11. On November 25, 2013, the Manila Regional Trial Court granted CCs application

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31.2 This clause and the parties agreement to arbitrate herein shall

and issued an anti-suit injunction.

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II.

ANSWER TO THE NOTICE OF ARBITRATION

A. PARTY AGREEMENT

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In response to the Notice of Arbitration, counsel for the defense respectfully submits

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its objection on the jurisdiction of HKIAC for the following reasons, to wit:

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The issue in the present case involves dispute

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arising from construction industry contract

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wherein

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original and exclusive jurisdiction

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12. Generally, when parties enter into a contract indicating therein terms and

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conditions of their transaction, such agreement is the substantive law which

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governs the relationship between the parties, such that if theres any arbitration

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agreement, the rules stated in the contract subject to the laws from which the

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parties derive their capacity must be adhered to.

under

Philippine

law,

CIAC

has

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13. This agreement however, is subject to limitations set by the national laws which

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has jurisdiction over the parties. While we respect the competence of the

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honorable tribunal to arbitrate, we submit that it has no jurisdiction over the

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claims of the parties.

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14. It must be noted that the issue in the case at bar involved construction disputes

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to which under Philippine law, the CIAC or Construction Industry Arbitration

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Commission has original and exclusive jurisdiction.

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15. The CIAC was created through Executive Order No. 1008 (E.O. 1008), in

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recognition of the need to establish an arbitral machinery that would

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expeditiously settle construction industry disputes. The prompt resolution of

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problems arising from or connected with the construction industry was

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considered of necessary and vital for the fulfillment of national development

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goals, as the construction industry provides employment to a large segment of

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the national labor force and is a leading contributor to the gross national product. 1

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16. Basic as a hornbook principle is that jurisdiction is conferred by law and cannot

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be defeated by the agreement of the parties. Since the jurisdiction of CIAC is

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conferred by law, it cannot be subjected to any condition; nor can it be waived or

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diminished by the stipulation, act or omission of the parties, as long as the parties

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agreed to submit their construction contract dispute to arbitration, or if there is an

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arbitration clause in the construction contract. 2 The parties upon agreeing that

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any unresolved dispute shall be resolved by the honorable tribunal is in effect

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divesting CIAC of its power to resolve and adjudicate disputes arising from

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construction contracts. This cannot be permitted. It must also be noted that the

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parties have agreed that the substantive law governing their contract is Philippine

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law.

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Section 4 of E.O 1008 provides:

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Sec. 4. Jurisdiction. The CIAC shall have original and exclusive

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jurisdiction over disputes arising from, or connected with, contracts

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entered into by parties involved in construction in the Philippines,

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whether the dispute arises before or after the completion of the

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contract, or after the abandonment or breach thereof. These

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disputes may involve government or private contracts. For the

11 E.O. 1008 (1985), Whereas clauses.

22 Buazon v. Court of Appeals, G.R. No. 97749, 19 March 1993

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Board to acquire jurisdiction, the parties to a dispute must agree to

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submit the same to voluntary arbitration.

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17. It bears stressing that the above-cited provision tells us that 1) any disputes

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arising from or connected with construction in the Philippines are within the

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original and exclusive jurisdiction of CIAC 2) that the only requirement to for the

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CIAC to acquire jurisdiction is that the parties must agree to submit their dispute

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to voluntary arbitration.

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18. By vesting in CIAC original and exclusive jurisdiction over construction disputes

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once such agreement exists, the arbitral proceeding becomes mandatory. 3

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Hence, we reiterate that the exclusivity clause of the law precludes HKIAC from

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assuming jurisdiction.

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19. Moreover, under Philippine law, the exclusive jurisdiction of CIAC is further
bolstered by Sec 34 of RA 9285:

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SEC. 34. Arbitration of Construction Disputes: Governing

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Law. - The arbitration of construction disputes shall be governed by

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Executive Order No. 1008, otherwise known as the Constitution

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Industry Arbitration Law.

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SEC. 35. Coverage of the Law. - Construction disputes which fall

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within the original and exclusive jurisdiction of the Construction

33 Philippine Airlines, Inc. v. NLRC (1989) 180 Scra 555

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Industry Arbitration Commission (the "Commission") shall include

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those between or among parties to, or who are otherwise bound by,

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an arbitration agreement, directly or by reference whether such

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parties are project owner, contractor, subcontractor, quantity

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surveyor, bondsman or issuer of an insurance policy in a

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construction project.

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The Commission shall continue to exercise original and exclusive

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jurisdiction over construction disputes although the arbitration is

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"commercial" pursuant to Section 21 of this Act.

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20. The basic objective of arbitration is to provide a speedy and inexpensive method

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of settling disputes by allowing the parties to avoid the formalities, delay, expense

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and an aggravation which commonly accompany ordinary litigation, especially

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litigation which goes through the entire hierarchy of courts. 4 Both the claimant

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and the respondent are Philippine based companies. Hence, it is not only

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practical but also in accordance with the objective of voluntary arbitration that in

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resolving their disputes they shall proceed before the CIAC

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21. When an arbitration pursuant to the arbitration agreement becomes prohibitively

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expensive, US courts have found such agreements unconscionable and for that

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reason unenforceable. What makes the agreement unconscionable is not the

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submission of a dispute to arbitration but the arbitration under rules or in a

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foreign venue which makes it prohibitively expensive. In such case, the court

44 Alternative Dispute Resolution Act of 2004 Annotated, Atty. Custodia O. Parlade, 2004 p
5492-493

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may compel arbitration but under the domestic arbitration law and in a more

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convenient and less expensive place5.

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22. Assuming arguendo that the HKIAC has jurisdiction, it only serves as an

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alternative forum to which if a party elected to submit their dispute before the

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CIAC, such party cannot be precluded to do so.

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23. As a matter of fact, the jurisdiction of CIAC was enunciated in the Philippine

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Supreme Court, Rather, it is plain and clear that as long as the parties agree to

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submit to voluntary arbitration, regardless of what forum they may choose,

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their agreement will fall within the jurisdiction of the CIAC, such that, even if they

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specifically choose another forum, the parties will not be precluded from

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electing to submit their disputed before the CIAC because this right has

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been vested upon each party by law, i.e. E.O. No. 1008. (China Chang Jiang

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Energy Corporation (Philippines) versus Rosal Infrastructure Builders, G.R. No.

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125706, Resolution dated September 30, 1996)

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Waiver of applicable Philippine

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laws E.O 1008, RA 9285 and

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other laws: invalid

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24. Under clause 31.10, it is stated that to the extent permitted by applicable laws or

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international conventions, E.O. 1008, otherwise known as the Construction

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Industry Arbitration Law, RA 9285 otherwise known as the Alternative Dispute

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Resolution Act of 20014 and other laws shall not be applicable to the agreement

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and is thereby irrevocably waived by the parties. These are the very substantive

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laws governing Arbitration Disputes in the Philippines.

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31.3 PEC and CC hereby expressly agree that, to the fullest extent

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permitted by law, leave to appeal may not be sought with respect to

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any question of law arising in the course of the arbitration or with

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respect to any award made. Furthermore, each of PEC and CC

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hereby waives irrevocably any rights of application or appeal to the

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courts of the Philippines (or of any other country having jurisdiction

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over any of the parties or their dispute) to the fullest extent

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permitted by law in connection with any questions of law arising in

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the course of the arbitration or with respect to any award made.

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extent permitted by applicable Laws or international conventions,

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that the application of:

(i)
Executive Order No. 1008, otherwise known as the

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Construction Industry Arbitration Law;

(ii) the provisions of Republic Act No. 9285, otherwise known as

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Alternative

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construction arbitration; and

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construction contract is Philippine law.

31.10

For the avoidance of doubt, the parties agree, to the

Dispute

Resolution

Act

of

2004,

relating

to

The substantive law of the engineering procurement and

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25. Such waiver is invalid, as evidenced in the case of William Golangco

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Construction Corporation vs Ray Burton Development Corporation, G.R. No,

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163582, August 9, 2010 citing HUTAMA-RSEA Joint Operations, Inc. v. Citra

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Metro Manila Tollways Corporation, the Court held that:

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Under Section 1, Article III of the CIAC Rules, an arbitration clause

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in a construction contract shall be deemed as an agreement to

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submit

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jurisdiction, notwithstanding the reference to a different arbitration

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institution or arbitral body in such contract x x x. Elementary is the

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rule that when laws or rules are clear, it is incumbent on the court

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to apply them. When the law (or rule) is unambiguous and

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unequivocal, application, not interpretation thereof, is imperative.

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Hence, the bare fact that the parties herein incorporated an

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arbitration clause in the EPCC is sufficient to vest the CIAC with

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jurisdiction over any construction controversy or claim between the

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parties. The arbitration clause in the construction contract ipso

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facto vested the CIAC with jurisdiction. This rule applies, regardless

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of whether the parties specifically choose another forum or make

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reference to another arbitral body. Since the jurisdiction of CIAC is

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conferred by law, it cannot be subjected to any condition; nor can it

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be waived or diminished by the stipulation, act or omission of

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the parties, as long as the parties agreed to submit their

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construction contract dispute to arbitration, or if there is an

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arbitration clause in the construction contract. The parties will not

an

existing

or

future

controversy

to

CIAC

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be precluded from electing to submit their dispute to CIAC,

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because this right has been vested in each party by law.

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xxxx

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It bears to emphasize that the mere existence of an arbitration

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clause in the construction contract is considered by law as an

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agreement by the parties to submit existing or future

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controversies between them to CIAC jurisdiction, without any

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qualification or condition precedent. To affirm a condition

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precedent in the construction contract, which would effectively

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suspend the jurisdiction of the CIAC until compliance therewith,

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would be in conflict with the recognized intention of the law and

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rules to automatically vest CIAC with jurisdiction over a dispute

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should the construction contract contain an arbitration clause.

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26. If the parties have expressly agreed that the substantive law of the Philippines

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shall govern, they shall not be permitted to divest the laws specifically mandated

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to govern them.

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purpose of establishing order and when they fail in this purpose they become the

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dangerously structured dams that block the flow of social progress.

To paraphrase Martin Luther King Jr., Law exist for the

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B. EFFECT OF ANTI-SUIT INJUNCTION

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24. In light of the foregoing, given that the claims of the parties shall be resolved

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by the CIAC, respondent CC prays to the honorable tribunal to dismiss the claim

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and respect the anti-suit injunction issued by Manila Regional Trial Court on

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November 25, 2013.

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25. Equity dictates that where the proceeding is oppressive and vexatious, an

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anti-suit injunction must be granted. In the principle of comity and reciprocity, an

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anti-suit injunction that has been granted by a court of competent jurisdiction

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must be respected.

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26. In fact, pursuant to Cap 609 Sec 45(2) of Arbitration Ordinance, the

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Hongkong Arbitration Law to which HKIAC adopts, interim measures obtain

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outside Hongkong may be respected.

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Sec 45 (2) On the application of any party, the

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Court

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proceedings which have been or are to be

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commenced in or outside Hong Kong, grant an

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interim measure.

may,

in

relation

to

any

arbitral

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27. Anti-suit injunctions are available in Hong Kong on an interim or permanent

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basis. Broadly speaking, the court will grant an anti-suit injunction when it is just

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to do so and the foreign proceedings are vexatious or oppressive but this

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jurisdiction will be exercised with caution (Airbus Industrie CIE v Patel &

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Ors [1999] 1 AC 119, applied in China Reit Ltd v Su Ping & Others [2007] HKEC

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576).

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C. AWARD, MANDATORY LAW AND PUBLIC POLICY

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27. According to Margaret L. Moses in her book, The Principles and Practice of

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International Commercial Arbitration, 2 nd Ed, Cambridge University Press 2012, it

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is stated that Although traditionally an arbitrator might not have been expected

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to take into account the law of the enforcing jurisdiction when rendering an

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award, increasingly, this is changing with regard to regulatory areas that fall

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under the heading of public policy, or order public. xxx

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to do more than just resolve a private dispute between parties. xxx

Although tribunals have usually seen their responsibility as primarily to the

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parties appearing before them, and have not generally assumed duty to enforce

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the public interest, the duty to render an enforceable award in case involving

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statutory and regulatory claims appears to impose new responsibilities. A

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tribunal that does not consider the public interest in ways expected under

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the enacted statutes, at issue in the arbitration risks offending the public

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policy in the seat or in the jurisdiction of enforcement and thereby

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rendering an unfavorable award.

These decisions indicate that courts, xxx expect an arbitrator to have obligations

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28. It cannot be denied that a contract involving the construction of a power station is

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imbued with public interest. Therefore, it is submitted that notwithstanding that

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the parties agreed to a seat of arbitration, arbitrators have the responsibility to

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apply mandatory laws, in this case, the E.O. 1008, because public interest so

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requires.

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29. The so called equity clauses mandate that the arbitrators shall decided

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according to an equitable rather than a strictly legal interpretation, or simply put,

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they shall decide as amiable compositeurs.6

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Relief sought

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2901. Finally, it is submitted that jurisdiction is conferred by law and not by the will of the
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parties. It is the law that imposes upon the parties the limits on which it can be

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subjected to their agreement.

2932. WHEREFORE, we pray that the tribunal immediately dismiss the arbitration
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proceedings, resolve the question as to its jurisdiction and recognize the anti-suit

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injunction from the Philippine court.

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297DATED: 30 August 2015

CALIGAGAN-PAROLI LAW OFFICES

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(Sgd.)Bianca Viel Caligagan

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(Sgd.) Ana Clarisa Paroli

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(Counsel for Respondent)

76 Law and Practice of International Commercial Arbitration, Alan Redfern et. Al, 2004. Pp 1408141

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Rm

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Highway,Angeles City, Philippines 2009

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210,

AUF

Professional

School,

Mac-Arthur