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RA 876.

Arbitration Law
RA 9285. ADR Act of 2004
Dept. Circ. No. 98 IRR of the ADR Act of 2004
UNCITRAL Model Law on International Commercial Arbitration (1985)

ADR Act, Section 33


Made Articles 10-14, among others, applicable to domestic arbitration.
Model Law, Articles 10-14
All matters related to the appointment, challenge or inhibition and replacement of an arbitrator
shall now be governed by these Model Law Provisions.
The procedure for the selection and appointment of an arbitrator, the grounds of challenge, and
the replacement of an arbitrator shall be the same whether the arbitration is an international commercial
arbitration governed by the Model Law, or a domestic arbitration governed by RA 876.
Important change brought about my Model Law Arts. 10-14:
A party cannot ignore a demand by the other party to arbitrate an unresolved dispute by refusing
to name his arbitrator.

ARBITRATION AGREEMENT, defined. (Model Law)


An agreement by the parties to submit to arbitration all or certain disputes which have arisen or
which may arise between them in respect of a defined legal relationship, whether contractual or not.
An arbitration agreement may be in the form of an arbitration clause in a contract or in the form
of a separate agreement.
The arbitration agreement shall be in writing.

COMPOSITION OF ARBITRAL TRIBUNALS


Appointment of Arbitrators
General Rule.
The parties are free to determine the number of arbitrators and the procedure for the
appointment of such arbitrator/s.
If the parties had no agreement on the number of arbitrators, it shall be understood that there
shall be three arbitrators.

APPOINTING AUTHORITY, defined. (ADR Act)


The appointing authority is the person or institution named in the arbitration agreement as the
appointing authority; or the regular arbitration institution under whose rules the arbitrations is agreed to
be conducted.
Default Appointment of an Arbitrator (“necessary measure”)
 Where, under an appointment procedure agreed upon by the parties:
a. A party fails to act as required under such procedure, or
b. The parties, or two arbitrators, are unable to reach an agreement, or
c. A third party, including an institution, fails to perform any function entrusted to it under such
procedure, or
d. The multiple claimants or the multiple respondents is/are unable to appoint its/their
respective arbitrator, any party may request the appointing authority to appoint an arbitrator.
 If there is an objection by a party on whose behalf the default appointment is to be made :
a. If the defaulting party requests for additional time to appoint his/her arbitrator – the
appointing authority may give the requesting party not more than 30 days to make the
appointment
b. If objection is based on the ground that the party did not fail to choose and appoint an
arbitrator – the appointment of an arbitrator together with the latter’s acceptance
thereof and curriculum vitae should be attached to the objection.
 Jurisdiction and authority of the RTC in respect of default appointment
 The court may act as appointing authority only when:
 The institutions constituted by the ADR act as appointing authority shall fail or refuse
to perform their functions within reasonable time from receipt of the request for
appointment
 In ad hoc arbitration, where the parties fail to provide a method for appointing an
arbitrator or substitute arbitrator, or the method agreed upon is ineffective, and the
National President of the IBP or his duly appointed representative fails or refuses to
act within such period as may be allowed by the rules of the IBP or as may be agreed
upon by the parties.

Default Appointment of Arbitrators


 Failure/absence of Appointment Procedure
a. Three arbitrators:
Each party shall appoint one arbitrator, the two appointed arbitrators shall appoint
the third arbitrator;
The appointing authority shall appoint, upon request of a party if:
 Party fails to appoint arbitrator within 30 days of receipt of request
 Two arbitrators fail to agree on the 3rd arbitrator within 30 days of their
appointment
b. Sole arbitrator:
He shall be appointed by the appointing authority, upon request of a party, if the
parties are unable to agree on the arbitrator
 Multiple Claimants/ Respondents

 Zosa Doctrine (Magellan Capital Management Corporation v. Zosa)


When there are multiple claimants or multiple respondents, it is assumed that there is a
commonality of interests among the multiple claimants or multiple respondents, and if each of
them insists upon the right to appoint an arbitrator for a tribunal, the arbitration clause shall be
construed as permitting the appointment of one arbitrator by all claimants and one arbitrator by
all respondents.

 Procedure/ Guidelines for Making Default Appointment


a. Request for Appointment
A letter-request of either or both parties to the Appointing Authority for the appointment
of arbitrator/s or of the two arbitrators first appointed by the parties for the appointment of the
a third member of an Arbitral Tribunal.
It shall include the following:
i. The demand for arbitration;
ii. The name/s and curricula vitae of the appointed arbitrator/s;
iii. The acceptance of appointment of the appointed arbitrator/s;
iv. Any qualification or disqualification of the arbitrator as provided in the arbitration
agreement;
v. An executive summary of the dispute which should indicate the nature of the dispute
and the parties thereto;
vi. Principal office and officers of a corporate party;
vii. The person/s appearing as counsel for the party/ies; and
viii. Information about arbitrator’s fees where there is an agreement between the parties
with respect thereto.

b. A copy for the Request for Appointment shall be delivered to the adverse party.
Proof of delivery

c. Party who received Request for Appointment, within 7 days of its receipt, may file with the
appointing authority his/her
objection/s to the request
extension of time to appoint an arbitrator, not exceeding 30 days from receipt of the
request or in accordance with the procedure agreed upon or provided by these Rules.

 Procedure Before the Appointing Authority


a. Cautionary Notice – notice by the applicant to the adverse party
b. RTC as Appointing Authority – if the arbitrators appointed by the parties disagree in the
selection of the third and presiding arbitrator.
c. Acceptance Letter – Acceptance of Appointment as Arbitrator (page 441)
d. Arbitral Ethics and Civil Liability of Arbitrators
- Would-be arbitrators are bound by rules on ethical conduct and, since they would be
performing adjudicatory functions, they are treated, to a limited extent, as public
officers.
e. Arbitral Immunity under the US Law
- An arbitrator’s role is functionally equivalent to a judge’s role.
- Arbitral immunity is necessary to protect decision makers from undue influence, and
the decision making process for attack by dissatisfied litigants.

 Qualification and Disqualification of Arbitrators


 of legal age
 in full enjoyment of his/her civil rights
 know how to read and write.
 not related by blood or marriage within the sixth degree to either party to the controversy
 has not or has not had any financial, fiduciary or other interest in the controversy or cause to be
decided or in the result of the proceeding
 has no personal bias, which might prejudice the right of any party to a fair and impartial award.

Duty of Disclosure
The Model Law as well as the IRR requires a disclosure not only of a prohibited
relationship with a party or interest in the matter in dispute but of any circumstances likely to give
rise to justifiable doubts as to his impartiality or independence.
 in writing
 a copy shall be provided to all parties in the arbitration
 assumed: disclosure should also be communicated to the co-arbitrators

 IRR: written disclosure is not required where it is made during the arbitration and it appears in a
written record of the arbitration proceedings

 Grounds for Challenge


 Any circumstances likely to create a Presumption of Bias
Disclosure
After receipt of disclosure – the parties may agree in writing:
a. To waive the presumptive disqualifying circumstances; or
b. To declare the office of such arbitrator vacant

 Appointment of Non-Neutral Arbitrator


When a party knowingly appoints an arbitrator who is or should be disqualified to act as
such by reason of relationship or interest and the arbitrator makes no disclosure of such
disqualifying relationship or interest because of the adverse party’s presumed awareness of such
circumstance, the right to object is deemed waived.
 Non-Neutral arbitrators may be predisposed toward the party who appointed them but in all
other respects are obligated to act in good faith and with integrity and fairness. (Code of Ethics
for Arbitration in Commercial Disputes)
 Non-Neutral arbitrators should disclose to all parties, and to the other arbitrators, all interests
and relationships which are required to be disclosed. This obligation is subject to the following
provisions:
a. Disclosure should be sufficient to describe the general nature and scope of any interest
or relationship
b. Non-neutral arbitrators are not obliged to withdraw if requested to do so by the party
who did not appoint them.

Appointment of Additional Arbitrators


RA 876, Section 9:
 allows the appointment of additional arbitrators only when it is so provided in the arbitration
agreement
 to be distinguished from those referred to in the IRR as substitute arbitrators
 JUSTIFICATION: if one or more arbitrators dies, resign or are otherwise removed during the
hearings but before award, there may not be enough arbitrators left to make an award
Additional Arbitrator
 must sit with the original arbitrators during hearing

Challenge of Arbitrators
Challenge, defined.
A formal request to the arbitrator to withdraw as such.
IRR of RA 9285
- an arbitrator may be challenged only if:
a. the circumstances exist that give rise to justifiable doubts as to his/her impartiality or
independence;
b. he/she does not possess qualifications as provided for in Chapter 5 of the IRR or those agreed
to by the parties;
c. he/she is disqualified to act as arbitrator under these Rules;
d. he/she refuses to respond to questions by a party regarding the nature and extent of his
professional dealings with a party or his counsel.

 The nationality or professional qualification of an arbitrator is not a ground to challenge an arbitrator


unless the parties have specified in their arbitration agreement a nationality and/or professional
qualification for appointment as arbitrator.

Special ADR Rules


A court shall not refuse to refer the parties to arbitration on the ground that one or more of
the arbitrators are not Philippine nationals or that since one or more of the issues are legal, one or
more of the arbitrators are not lawyers.
 Request for Inhibition
- if a request for inhibition is made, it shall be deemed as a challenge

 How and When Challenge is Made


 The parties are free to agree on a procedure for challenging an arbitrator.
 A challenged arbitrator shall be replaced if:
a. He/she withdraws as arbitrator, or
b. The parties agree in writing to declare the office of the arbitrator vacant, or
c. The arbitral tribunal decides the challenge and declares the office of the challenged arbitrator
vacant, or
d. The appointing authority decides the challenge and declares the office of the challenged
arbitrator vacant, or
e. In default of the appointing authority, the court decides the challenge and declares the office
of the challenged arbitrator vacant.

 Challenge
- In writing
- State specific facts that provide a basis for the ground relied upon
- Shall be made within 15 days from knowledge or from rejection by the arbitrator of the
party’s request for inhibition

 Challenged Arbitrator – has 15 days to reject or accept the challenge


- ACCEPT: shall voluntarily withdraw as arbitrator
- REJECT: shall communicate within the 15-day period, the rejection of the challenge shall
state facts and arguments relied upon for such rejection
 Parties or remaining members of the arbitral tribunal – may decide on the challenge within 30
days from receipt of the challenge, notwithstanding the rejection
- 30 day period: intended to give the challenged arbitrator the opportunity to decide to
accept or reject the challenge
 If the challenge is UNSUCCESSFUL
- May be RENEWED before the appointing authority--- if it is rejected by the challenged
arbitrator and the parties or the arbitral tribunal decline to act
- May be RENEWED with the court --- If the appointing authority fails to act

 Request to the court: shall be in the form of a petition attached to which shall be the challenge,
the reply or explanation of the challenged arbitrator and the relevant communication form either
party, or from the arbitral tribunal.

 The decision of the parties, the arbitral tribunal, the appointing authority or in proper cases, the
court, to accept the challenge is not subject to appeal or motion for reconsideration.
 When Challenge is raised before the Court

 “It is only when such Appointing Authority fails or refuses to act…., that the aggrieved party may
renew the challenge in court.”
 ADR Act: “any application with a court for arbitration assistance and supervision shall be deemed
as special proceedings.”
 Special ADR Rules: “ The court shall exercise the power of judicial review as provided by these
Special ADR Rules. Courts shall intervene only in the cases allowed by law or by these Special ADR
Rules.”
 Effect of Challenge Upon Arbitration Proceeding
 Model Law:
- While a request is pending before the appointing authority or the court, the arbitral
proceedings may continue and the arbitrators, including the challenged arbitrator, may
make the award.
 Arbitration Law:
- When the challenge is renewed before the court, the arbitration proceedings are
suspended until the challenge is resolved by the court.

 Arbitration Law – deemed superseded by the provisions of the Model Law.


- Suspending the proceedings while the challenge is pending resolution by the court, which
resolution is still subject to appeal, will delay arbitration proceedings contrary to the
intent and spirit particularly of the Model Law.
- Provisions of RA 876 in respect to appointment, challenge and replacement of arbitrators,
and the effect of a challenge upon the conduct or continuation of an arbitration
proceeding inconsistent with those of the Model Law are deemed repealed by the latter.
 Replacement of Incapacitated Arbitrator
 Article 5.13 of the IRR/ Model Law Art. 14(1)
- If an arbitrator becomes de jure or de facto unable to perform his/her function or for
other reasons fails to act without undue delay, his/her mandate terminates if he/she
withdraws from his/her office or if the parties agree on the termination.
 If a controversy remains concerning any of these grounds
- any party may request the appointing authority to decide on the termination, which
decision shall be made immediately executory and not subject to appeal or motion for
reconsideration.
 If an arbitrator withdraws from office or if a party agrees to the termination of the mandate of an
arbitrator, this does not imply acceptance of the validity of any ground referred to.

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