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Comparative Analysis of the Philippine Arbitration Law and the UNCITRAL Model Law on

International Commercial Arbitration (Part I)

I. Introduction
This paper presents a comparative analysis of two arbitration laws, namely, Republic Act No. 876,
otherwise known as the Philippine Arbitration Law and the United Nations Commission on
International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. The former
was enacted on June 19, 1953 while the latter was approved by the United Nations General
Assembly on December 11, 1985.
The growing need for a law regulating arbitration in general was acknowledged when R.A. No. 876
was passed. Said Act was adopted to supplement and not to supplant the New Civil Code provisions
on arbitration. With its enactment, the Philippine Supreme Court stated
in a case that Congress had officially adopted the modern view that arbitration as an inexpensive,
speedy and amicable method of settling disputes and as a means of avoiding litigation should
receive every encouragement from the courts.
On the other hand, the UN General Assembly recommended that all states give due consideration to
the Model Law in view of the desirability of uniformity of the law of arbitral procedures and the
specific needs of international commercial arbitration practice. The twin objectives of the law are the
harmonization of national arbitration laws for international arbitration and the setting up of rules
which will meet the present requirements of international arbitration.
Ii. Major Differences
A) Subject Matter
With respect to the scope of application, the Philippine Arbitration Law differs from the UNCITRAL
Model Law in that the former applies to any controversy existing between the parties involved. The
submission or contract may include questions arising out of valuations, appraisals or other
controversies which may be collateral, incidental, precedent or subsequent to any issue between the
parties. The Model Law, on the other hand, applies only to international arbitration as provided for in
Article 1. Said article states:
Article 1. Scope of Application.
This law applies to international commercial arbitration.
The Model Law definition of international commercial arbitration includes situations in which the
parties have their place of business in different states, or in which the place of arbitration or
performance is a state different than that of the parties place of business.
B) Qualifications of Arbitrators
Republic Act No. 876 differs from the Model Law with respect to the requirements of the persons
acting as arbitrators. Under the latter, there are no specific requirements that ought to be possessed

by the arbitrator as the parties are free to agree on his qualifications. Under the Philippine Arbitration
Law, on the other hand, the minimum requirements for the appointment of a person as an arbitrator
are that he be of legal age, in full enjoyment of his civil rights and must know how to read and write.
An arbitrator is to be neutral and impartial. No party shall select as arbitrator any person to act as his
champion or to advocate his cause. A ground for the disqualification of an arbitrator is his personal
bias which might prejudice the right of a party to a fair and impartial award. This bias is presumed
where the arbitrator is related by blood or marriage to a party within the sixth degree; or where he
has financial, fiduciary or other interest in the controversy or cause to be decided or in the result of
the proceeding. Under the Model Law, a person may be precluded by a reason of his nationality from
acting as an arbitrator, if such is agreed upon by the parties (Art. 11).
C) Court Intervention
The present Philippine Arbitration Law also differs from the UNCITRAL Model Law on the aspect of
court intervention. Republic Act No. 876 allows broad intervention by the courts. It allows the courts
to intervene in arbitral proceedings and review arbitral awards on the ground of grave abuse of
discretion committed by the Arbitral Tribunal and other grounds. In the case of Chung Fu Industries,
Inc. vs. Court of Appeals (206 SCRA 545) involving a special civil action of certiorari, it was held that
the Supreme Court will not engage in a review of the facts found nor even of the law as interpreted
or applied by the arbitrator, unless there be on the part of the arbitrator a grave abuse of discretion
or that he has acted without or in excess of jurisdiction. There will be a judicial review of the award:
(1) When the supposed errors of fact or of law are so patent, gross and prejudicial to a party. (Chung
Fu Industries, Inc. vs. Court of Appeals, 206 SCRA 545).
(2) When the arbitrator failed to apply the agreement of the parties the breach of which gave rise to
the dispute submitted to arbitration. (Chung Fu Industries, Inc. vs. Court of Appeals, 206 SCRA
(3) When the arbitrator gave one party unjustified extra compensation for certain items of work.
(Chung Fu Industries, Inc. vs. Court of Appeals, 206 SCRA 545).
(4) When one party has been deprived of a fair opportunity to present his position before the arbitral
tribunal. (Hi Precision Steel Center, Inc. vs. Lim Kim Steel Builders, Dec. 13, 1993).
(5) When the award was obtained through fraud or corruption of the arbitrator, or there was evident
partiality of the arbitrator, or the arbitrator was guilty of misconduct, or that the arbitrator exceed his
powers. (Hi Precision Steel Center, Inc. vs. Lim Kim Steel Builders, Dec. 13, 1993).
On the other hand, Article 5 of the UNCITRAL Model Law expressly states that no court shall
intervene except where so provided in the law. The only way to question the award or action of the
tribunal will be an application for setting aside the award on the grounds provided for in Article 34 of
the said law. The arbitral award may be set aside by the court only if:
a) the party to the arbitration agreement was under some incapacity;

b) the party was unable to present his case; or

c) the award was beyond the terms of the submission to arbitration; or
d) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the
agreement of the parties.
e) the court finds the subject-matter of the dispute is not capable of settlement by arbitration under
the law of this State; or
f) the award is in conflict with the public policy of the state.
Further, judicial intervention is limited to those aspects relating to the arbitral processes, e.g., the
issuance of provisional relief pending the arbitral proceedings, assistance in the taking of evidence,
and enforcement of arbitral awards. The Model Law limits judicial review in recognition of the limited
connection of international commercial arbitration to any particular domestic legal system. There is,
therefore, no provision for appeal to the courts on substantive matters. Recourse is limited to an
application for setting aside the award. Under the Philippine Arbitration Law, appeal may be taken
from a judgment or order confirming the award, or vacating or modifying it, through a certiorari on
questions of law. Judicial review of an arbitral award may be made by petition under Rule 65 to the
Court of Appeals. Although the parties may stipulate that the arbitrators decision or award shall be
final, it has been held in the case of Chung Fu that the finality of the arbitrators award is not
D) Status of Arbitration Proceedings
The Philippine Arbitration Law also differs from the Model Law with respect to the status of the
arbitration proceedings when an action is brought before the courts. Under the former, a party to an
arbitration proceeding which questions its actions may go to court and secure a temporary injunction
prohibiting the arbitral tribunal from proceeding with the arbitration until the court has ruled on the
action. On the other hand, under the UNCITRAL Model Law where an action has been brought
before a court, arbitral proceedings may nevertheless be commenced or continued, and an award
may be made, while the issue is pending before the court (Article 8, par.2).
E) Disclosure Requirement
Another aspect wherein the Philippine Arbitration Law differs from the Model Law is on the disclosure
obligations of the arbitrators. Under the former, no person shall serve as an arbitrator if he has
financial, fiduciary or other interest in the controversy or has a personal bias, which might prejudice
the right of any party to a fair and impartial award (Section 10). This, however, does not require prior
disclosure as in the Model Law. Under the Model Law, when a person is approached in connection
with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise
to justifiable doubts as to his impartiality or independence. An arbitrator, from the time of his
appointment and throughout the arbitral proceedings, shall without delay disclose any such
circumstances to the parties unless they have already been informed of them by him (Article 12, par.

F) Place of Arbitration
With respect to the designation of the place of arbitration there exists a marked difference between
the Philippine Arbitration Law and the UNCITRAL Model Law. The former does not provide for rules
on the designation of the place of arbitration, whereas the latter provides that where the parties have
failed to agree on the place of arbitration, the place shall be determined by the arbitral tribunal
having regard to the circumstances of the case, including the convenience of the parties. It further
provides that the arbitral tribunal may meet at any place it considers appropriate for consultation
among its members, for hearing witnesses, experts of the parties, or for an inspection of goods,
other property or documents. Under the Model Law, the parties are given broad autonomy. Aside
from the place of arbitration, the parties can select their own rules of procedure, including the
number of arbitrators, the language of the arbitral proceeding, and the type of hearing which may
either be an oral or written presentation. Subject to certain mandatory provisions, the parties are free
to determine the procedure to be followed by the arbitral tribunal in conducting the proceedings.
They may do so by reference to a set of institutional or ad hoc arbitration rules, or by developing
specific procedural rules tailored to their particular needs.
G) Applicable Law
Another area of difference between the two laws is the designation of the particular law to govern the
dispute. The Philippine Arbitration Law does not specify the procedure for determining the law to
govern the case. This is in marked contrast with the Model Law which provides that the arbitral
tribunal shall decide the dispute in accordance with such rules of law as are chosen by the parties.
This authorizes the parties to select not only a particular jurisdictions law, but the laws of several
jurisdictions, or even general international legal principles. Failing any designation by the parties, the
arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers
applicable. In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract
and shall take into account the usages of the trade applicable to the transaction (Article 28).
H) Correction or Interpretation of Award
The Philippine Arbitration Law can be considered deficient for the reason that it does not extend to
the arbitral tribunal the right to correct or modify its award as first resort, unlike the Model Law which
authorizes the parties to apply to the arbitral tribunal for correction or modification of the award.
Article 33 of which provides that:
Within thirty days of receipt of the award, unless another period of time has been agreed upon by the
parties, a party, with notice to the other party, may request the arbitral tribunal to correct in the award
any errors in computation, any clerical or typographical errors or any errors of similar nature.
The Model Law, in addition, allows the parties to request the arbitral tribunal to give an interpretation
of a specific point or part of the award. The same article gives the parties the opportunity to request
from the arbitral tribunal additional awards as to claims presented in the proceedings but omitted
from the award.

Arbitration Versus Mediation

Provided by

Many have heard the term alternative dispute resolution associated with both arbitration
and mediation, but may not have understood the difference. Indeed, many use the terms
interchangeably even though they are very different procedures.
Both arbitration and mediation were historically voluntary, in that neither could occur without the
agreement of all the parties to the dispute (usually via a contract between the parties entered into
before the dispute occurred). However, this is changing, as many statutes now require mediation or
arbitration as a prerequisite to filing a lawsuit. Both arbitration and mediation are private; a significant
advantage when parties do not want to air their dirty laundry in public. Both can occur relatively
quickly after the dispute arises, and both can be accomplished for a fraction of the cost of court
However, that is about all that the two processes have in common.
In mediation, a neutral third party called (not surprisingly) a mediator tries to facilitate negotiations
between the parties. Typically, a mediation will follow the same general agenda. First, the parties will
meet together with the mediator and everyone is given an opportunity to introduce themselves and
explain their position. The mediator will then usually break up the parties so s/he can meet with them
individually. At this point, the mediator will normally try to better understand each side's position while
simultaneously pointing out any weaknesses in their cases with the goal of making the parties
recognize the benefit of coming together in a settlement rather than proceeding to trial and hoping to
achieve the best possible day in court. After some discussion, the mediator will see what sort of
terms one party wishes to offer the other, and will then meet with the other party to convey this offer.
This back and forth will usually continue until the parties have an agreement or until it becomes
apparent that no resolution will be possible. If a settlement is reached, an agreement is put to paper
and signed by the parties (and in a number of jurisdictions by the mediator, as well). If a party
violates the settlement, it will give rise to a cause of action for breach of contract. If no settlement is
achieved, the mediator will declare an impasse, and the case can proceed to trial.
Arbitration, on the other hand, is a much more involved process. When parties to a dispute select
arbitration, a person (or sometimes a panel of three or more) called an arbitrator acts to investigate
the facts, analyze the dispute, and render a decision on the matter. Usually, this is done in a process
very similar to a trial, though with looser procedural requirements and shorter time frames. The
parties agree to accept the decision of the arbitrator as final and binding and that the decision will be
enforced by the courts if either party violates it.
An arbitrator presides over a hearing (the arbitration) in which witnesses testify and documents are

considered, much like court litigation. Discovery and pre-hearing procedures are typically limited
abbreviated to accelerate the process and keep costs down, but this can be extended by agreement
of the parties. Similarly, the parties can institute other cost-saving measures such as eliminating
transcripts and briefs if they are able to agree to these measures. Appeals from arbitration decisions
are only available on very limited grounds and are rarely successful. Although arbitration is more
formal and expensive than mediation, it is still less expensive and more expeditious than litigation.
The biggest distinction between mediation and arbitration, aside from the differing procedures, is that
an arbitrator gets to make a formal decision about how the parties' dispute should be resolved.
Unlike a mediation, where a disagreement between the parties merely results in an impasse, in an
arbitration the parties never have to agree to the outcome because it is decided for them by the
Final Thoughts
There is no doubt that both mediation and arbitration can be useful tools to resolving disputes,
particularly if time and money are serious concerns. But, as with anything, there can be drawbacks,
as well. There is no guarantee of a resolution in mediation, and mediator and attorney fees can
become quite significant if the mediation drags on for any length of time. Similarly, arbitrators are not
bound by the same requirements or oversight of law judges, so their rulings can often be
unpredictable. As someone once said it best, the root word of arbitration is arbitrary and that is
just the kind of result you may get. But, as noted, both procedures may be required by contract or
statute, and in most civil cases before a regular law court, a mediation will be ordered by the court at
some point before the case can proceed to trial.
As always, if you have questions about the process or laws related to any form of alternative dispute
resolution, your best bet is to contact a local, experienced attorney. Your attorney will be able to
answer your questions and help guide you through the process of resolving your case or making
plans to move forward to trial if that is the best option.