Construction Dispute Arbitration

Chapter 12

Submitted by: Jessa Y Mendoza, Andrew Ray Rosales, Stephanie Lorraine Yarte

Definition Construction Dispute: ● A quasi-judicial agency under the

It includes disputes between or among Construction Industry Authority of the
parties to, or who are otherwise bound Philippines (CIAP) and administratively
by, an arbitration agreement, directly or attached to the DTI.
by reference, whether such parties are ● Functions of the CIAC:
project owner, contractor, subcontractor, i. To formulate and adopt an
quantity surveyor, bondsman or issuer of an arbitration program for the
insurance policy in a construction project. construction industry
(Revised Rules of Procedure Governing ii. To enunciate policies and prescribe
Construction Arbitration) rules and procedures for
construction arbitration
Key Points on Construction Arbitration iii. To supervise the arbitration
under the ADR Act of 2004 program, and exercise such
● The Construction Industry Arbitration authority related thereto as regards
Commission (CIAC) has original and the appointment, replacement or
exclusive jurisdiction over challenging of arbitrators
construction disputes.1 iv. To direct its officers and employees
● The request for dismissal and referral to to perform functions as may be
the CIAC is in a verified motion. assigned to them from time to time.
[contents:]
i. Statement showing that it is a Jurisdiction of the CIAC
construction dispute ● Conferred by E.O. No. 1008, section 4
ii. Proof of the existence of arbitration provides that the CIAC has Original and
agreement (except if already part of exclusive jurisdiction over disputes
the records) arising from, or connected with,
iii. A notice of hearing contracts (government or private)
● If the RTC discovers that the parties entered into by parties involved in
entered into an arbitration agreement, it construction in the PH (before or after
must, motu propio or upon motion not the completion of the contract, or after
later than the pretrial, dismiss the case the abandonment or breach thereof).Ex:
and refer it to the CIAC.*Except when i. Violation of specifications of
all the parties, with the assistance of materials and workmanship
counsel, submit a written agreement ii. Violation of the terms of agreement
that the court shall resolve the dispute. iii. Interpretation and/or application of
● An order dismissing the case and construction provisions
referring the dispute to arbitration is iv. Amounts of damages and penalties
immediately executory. v. Commencement time and delays
vi. Maintenance and defects
The Construction Industry Arbitration vii. Payment default of employer or
Commission (CIAC) contractor and changes in contracts
● Created by virtue of E.O. No. 1008 cost
● Its rules of procedure were approved on viii. Payment defaults of employer or
Nov. 19, 2005, and took effect on Dec. contractor; and, (CIAC Primer)
15, 2005. ix. Changes in contract costs. (CIAC
Primer)
1
Section 2.2.1 of the CIAC Revised Rules of Procedure
(2019) provides that: “The CIAC shall continue to exercise
original and exclusive jurisdiction over construction disputes
although the arbitration is commercial pursuant to Section 21
of R.A. 9285 or the ADR Act of 2004.”
 LIMCOMCEN Inc. v. Foundations
Specialists Inc.
● The parties can neither expand nor
diminish the CIAC’s jurisdiction.
● Two acts that vest the CIAC with
jurisdiction:
i. The presence of an arbitration
clause in a construction contract
ii. The agreement of the parties to
submit the dispute to the CIAC.
**When there is an existing arbitration
agreement, a subsequent consent is
superfluous and unnecessary. Thus,
the consent is a pre-causal consent.
○ Excluded from its jurisdiction are
disputes arising from employer-
employee relationships, claims for
moral damages, exemplary damages,
and attorney’s fees, unless the parties
mutually agree to submit the issues on
damages for arbitration.
Advantages of Arbitration
● Confidentiality - The arbitration
proceedings shall be considered
confidential and shall not be
published except (i) with the consent
of the parties, or (ii) when necessary
in case resort to the Court is made
under the Rules of Court.2
● Interim Reliefs - The tribunal on
the request of any party or by its
own initiative may order reliefs that
include but shall not be limited to
preliminary injunction directed
against a party, appointment of
receivers or detention,
preservation, inspection of
property, that is the subject of
dispute in arbitration.3
● Challenge (Independence) - A
party may challenge an arbitrator
based only on:
a) Relationship by blood or marriage
within the sixth degree of either party
to the controversy, or to counsels
within the fourth degree, computed
according to the rules of civil law.
4
2 5
Rule 7
3 6
Rule 14
b) Financial, fiduciary or other
interest in the controversy
c) partiality or bias;
d) incompetence, or professional
misconduct.4
● Appoint of Experts - The service of
technical or legal experts may be
utilized if requested by any of the
parties or if deemed necessary by
the Arbitral Tribunal.
● Small Claims (Less than 1M) -
Cases where the claim does not
exceed P1 million shall be
categorized as a small claim thereby
entitled to special procedures of
disposition and reduced fees.
● Disclosures - Upon acceptance of
appointment, the Arbitrator shall
disclose in writing to CIAC any
circumstance likely to create in
either party a presumption of bias or
which he believes might disqualify
him as an impartial Arbitrator5.
Arbitrators shall disclose any
circumstance likely to give rise to
justifiable doubts as to impartiality or
independence, including financial or
personal interest in the outcome of
the arbitration and any existing or
past relationships with any individual
or corporate party together with their
respective relatives or principal
stockholders/officers or foreseeable
participant in the proceedings6
Procedure in CIA
1. Complaint/request for arbitration
2. Answer
3. Reply
4. Appointment and acceptance of
arbitrators
5. Challenge of arbitrators
6. Preliminary Conference and terms of
reference
7. Arbitration proceedings
Rule 9.6
Rule10.2
Rule 11.3
 8. Award
9. Execution of Award
Qualifications of Arbitrators
1) The Arbitrators shall be persons in
whom the business sector, particularly the
stakeholders of the construction
industry and the government can have
confidence. They shall possess the
competence, integrity, and leadership
qualities to resolve any construction
dispute expeditiously and equitably. The
Arbitrators shall come from different
professions. They may include engineers,
architects, construction managers,
engineering consultants, and
businessmen familiar with the construction
industry and lawyers who are experienced
in construction disputes.
2) The Arbitrators must be CIAC-
accredited - Only CIAC-accredited
arbitrators may be nominated by the parties
and appointed by CIAC as arbitrators.
Judicial Review of CIAC Decisions
● A petition for review from a final award
of the CIAC may be taken by any of the
parties to the Court of Appeals within
fifteen (15) days from receipt of the
decision in accordance with the Rules on
Civil Procedure.
● This petition is based on errors of fact, law
or mixed fact and law.
● The petition shall not stay the
execution of the final award unless the
Court of Appeals issues a temporary
restraining order and/or writ of preliminary
injunction.
● The petitioner may post a bond with the
CIAC..
● The execution of award shall be stayed
upon the approval of the bond by the
CIAC.
● Generally, in the absence of grave
abuse of discretion, courts must
sustain the factual finding of the CIAC
arbitrator based on the principle that the
determination of certain questions of fact
falling within the peculiar technical
expertise of an administrative agency,
must be accorded great respect, if not
finality by the courts.
Asian Construction and Development
Corporation v. Sumitomo Corporation
● Explained the development Judicial
Review from the decisions of the CIAC
● The development of the procedural rules
governing CIAC cases clearly shows
that decisions rendered by the Arbitral
Tribunal is not absolutely insulated from
judicial review.
Uniwide Sales Realty and Resources
Corporation v. Titan-Ikeda Construction
and Development Corporation
● The Court will not permit the parties to
relitigate the issues of facts presented
and argued before the Arbitral Tribunal,
except where it is shown that in
reaching its factual conclusions, the
Arbitral Tribunal committed an error so
egregious and hurtful to one party as to
constitute a grave abuse of discretion
resulting in lack or loss of jurisdiction.
Shinryo (Philippines) Company, Inc. v.
RRN Incorporated
● Decisions of arbitrators may be
reviewed by the SC based on the ff.:
i. The award was procured by
corruption, fraud or other undue
means;
ii. There was evident partiality or
corruption of the arbitrators or of any
of them;
iii. The arbitrators were guilty of
misconduct in refusing to hear
evidence pertinent and material to the
controversy;
iv. One of the arbitrators were disqualified
to act as such under Section nine of
the Republic Act No. 876 and wilfully
refrained from disclosing such
disqualification or of any other
misbehavior by which the rights of any
party have been materially prejudiced;
or
v. The arbitrators exceeded their powers,
or so imperfectly executed them, that
a mutual, final and definitive award
 upon the subject matter submitted to
them was not made.
·
Cost of Arbitration
● In respect of the costs of arbitration, Sec
5, Article XV of the Rules of Procedure
Governing Construction Arbitration
states:
● Decision as to Cost of Arbitration. – In
the case of non-monetary claims or
where the parties agreed that the
sharing of fees shall be determined by
the Arbitrator(s), the award shall, in
addition to dealing with the merits of the
case, fix the cost of arbitration, and/or
decide which of the parties shall bear
the cost(s) or in what proportion the
cost(s) shall be borne by each.
● Rule 142 of the Revised Rules of Court
governing the imposition of costs
likewise provides that costs shall be
allowed to the prevailing party as a
matter of course, unless otherwise
provided by the Rules.