Benguet Corporation vs.

DENR
GR NO. 163101
VELASCO, JR., J.
FACTS:
Benguet Corporation (BenCorp) and J.G. Realty and Mining (“J.G. Realty”)
entered into a Royalty Agreement with Option to Purchase (“RAWOP”), wherein J.G.
Realty was acknowledged as the owner of four mining claims covered by Mineral
Production Sharing Agreement (“MPSA”) Application jointly filed by J.G. Realty as
claim owner and BenCorp as operator. The RAWOP, among others, provide that
“any disputes between BenCorp and J.G.with reference to anything whatsoever
pertaining to the RAWOP shall not be cause of any action in any court or
administrative agency but shall be referred to a Board of Arbitrators consisting of
three (3) members, one to be selected by BenCorp, another to be selected by [J.G.
Realty] and the third to be selected by the aforementioned two arbitrators so
appointed.”
J.G. Realty subsequently informed BenCorp that it was terminating the
RAWOP by reason of BenCorp’s failure to comply with its obligations thereunder.
J.G. Realty sought the cancellation of the RAWOP, filing a petition for this purpose
with the Panel of Arbitrators (“POA”) having territorial jurisdiction over the mining
area involved. In its Decision, the POA declared the RAWOP cancelled. Benguet
then filed a notice of appeal with the MAB. The decision was affirmed on appeal to
the Mines Adjudication Board (“MAB”). BenCorp contended that the issue raised by
the J.G. Realty should have been raised first with the arbitration before POA took
cognizance of the case.
ISSUE: Should the controversy have been submitted to arbitration before the POA?
HELD: YES.
Sec. 2 of RA 876 states:
Section 2. Persons and matters subject to arbitration. Two or more
persons or parties may submit to the arbitration of one or more arbitrators
any controversy existing between them at the time of the submission and
which may be the subject of an action, or the parties to any contract may in
such contract agree to settle by arbitration a controversy thereafter arising
between them. Such submission or contract shall be valid, enforceable and
irrevocable, save upon such grounds as exist at law for the revocation of any
contract.
Sec. 32 of the Alternative Dispute Resolution Act of 2004 states that domestic
arbitration shall still be governed by RA 876. A contractual stipulation that requires
prior resort to voluntary arbitration before the parties can go directly to court is not
illegal and is in fact promoted by the State.
 However, since BenCorp failed to show proof of respondent’s arbitrariness in
their decision and because no undue advantage exists in the case, the Court ruled
in favor of the respondent. Petition dismissed.