ARBITRATION

FLOR, BIANCA MARIE E.

 ARBITRATION

 a voluntary dispute resolution process in

which one or more arbitrators, appointed in
accordance with the agreement of the parties,
or rules promulgated pursuant RA 9285, resolve
a dispute by rendering an award.

- RA 9285: Alternative Dispute Resolution Act of 2004

 ARBITRATION AGREEMENT

 An agreement, containing an arbitration clause, binds

the parties thereto, as well as their assigns and heirs.

 It shall be in writing and subscribed by the party

sought to be charged, or by his lawful agent.

 Courts have recognized arbitration agreements as

valid, binding, enforceable and not contrary to public
policy.
 ARBITRATION CLAUSE
 a clause in a contract that requires the parties to resolve their
disputes through an arbitration process

Doctrine of Separability
 an arbitration agreement is independent of the main
contract, hence, should be treated as a separate
agreement. The invalidity of the main contract
(container) does not affect the validity of the arbitration
agreement.
 COMMERCIAL ARBITRATION
 covers matters arising from all relationships of a
commercial nature, whether contractual or not.

RELATIONSHIPS OF A TRANSACTIONS: any trade

transaction for the supply or exchange of goods or services;
distribution agreements; construction of works;
commercial representation or agency; factoring; leasing,
consulting; engineering; licensing; investment; financing;
banking; insurance; joint venture and other forms of
industrial or business cooperation; carriage of goods or
passengers by air, sea, rail or road.
 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.

- UNCITRAL Model Law

 NEW CIVIL CODE
• Only persons with legal capacity may enter into
arbitration agreements. Minors and other incapacitated
persons shall be represented by their guardian(s).
• An arbitral award is not appealable, but may be vacated
or set aside by the court.
• Civil liability, unlike criminal penalty, can be subject to
arbitration.
• Each party must have the power to choose one
arbitrator.
 CONFLICT OF LAWS & ARBITRATION
1) Freedom of contract; Party autonomy; Restrictions – The
parties are free to expressly choose the law that will govern
their contract. However, it has to be a law that is closely
connected to the parties
2) Absence of choice of law; lex fori, delocalized – The
arbitrators will have to determine the conflict of law rules
which are applicable and, then, they will apply those rules to
decide which law should apply to this contract
3) Law of the proceedings – It shall be governed by the
agreement of the parties. In the absence thereof, the arbitral
tribunal may conduct the arbitration in such a manner as it
considers appropriate.
ARBITRATION
CASES
WAHL VS. DONALDSON, SIMS & CO.

A condition in a contract that disputes arising out of it shall

be referred to arbitration is good where the amount of damages
sustained by a breach of the contract is to be ascertained by
specified arbitration before any right of action arises, but that it
is illegal where all the matters in dispute of whatever sort
may be referred to arbitrators and to them alone. In the first
case a condition precedent to the accruing of a right of action is
imposed, while in the second it is attempted to prevent any
right of action accruing at all, and this can not be permitted.
INTL HARVESTER VS. HAMBURG-AMERICAN LINE

An express agreement tending to deprive a court

of jurisdiction conferred on it by law is of no effect.
(Molina vs. De la Riva, 6 Phil., 12.) Besides, whatever
the effect of this provision, the benefit of it was waived
when the defendant company appeared and answered
generally without objecting to the jurisdiction of the
court.
TEODORO VEGA VS. THE SAN CARLOS MILLING CO., LTD.

The question whether submission to arbitration is a condition

precedent to a suit upon the contract depends upon the language
employed in each particular stipulation. Where by the same
agreement which creates the liability, the ascertainment of certain facts
by arbitrators is expressly made a condition precedent to a right of action
thereon, suit cannot be brought until the award is made. But the courts
generally will not construe an arbitration clause as ousting them of their
jurisdiction unless such construction is inevitable, and consequently when
the arbitration clause is not made a condition precedent by express
words or necessary implication, it will be construed as merely collateral to
the liability clause, and so no bar to an action in the courts without an
award.
 NAT’L UNION VS. STOLT-NIELSEN PHILIPPINES, INC.

Arbitration, as an alternative mode of settling disputes, has long

been recognized and accepted in our jurisdiction (Chapter 2, Title
XIV, Book IV, Civil Code). Republic Act No. 876 (The Arbitration Law)
also expressly authorizes arbitration of domestic disputes. Foreign
arbitration as a system of settling commercial disputes of an
international character was likewise recognized when the Philippines
adhered to the United Nations "Convention on the Recognition and the
Enforcement of Foreign Arbitral Awards of 1958," under the 10 May
1965 Resolution No. 71 of the Philippine Senate, giving reciprocal
recognition and allowing enforcement of international arbitration
agreements between parties of different nationalities within a
contracting state.
 PUROMINES, INC. VS. CA & PHILIPP BROS. OCEANIC

Arbitration has been held valid and constitutional. Even before the
enactment of Republic Act No. 876, this Court has countenanced the
settlement of disputes through arbitration. The rule now is that unless the
agreement is such as absolutely to close the doors of the courts against
the parties, which agreement would be void, the courts will look with favor
upon such amicable arrangements and will only interfere with great
reluctance to anticipate or nullify the action of the arbitrator.

Since there obtains herein a written provision for arbitration as well as

failure on respondent's part to comply therewith, the court a quo rightly
ordered the parties to proceed to their arbitration in accordance with the
terms of their agreement
AIR TRANSPORTATION
CONTRACTS FOR INTL AIR TRANSPO
Claims for damages arising from contract of
international air transportation is a comparatively new
subject in Conflict of Laws. The Convention for the
Unification of Certain Rules Relating to International
Transportation by Air (1929 Warsaw Convention)
regulates and establishes uniform rules and regulations
on the liability of international airline carriers in cases of
death, injuries of passengers, or loss or damage of
cargo.
 INTL CARRIAGE
 any carriage in which, according to the contract made
by the parties, the place of departure and the place of
destination, whether or not there be a break in the
carriage or a transhipment, are situated either within the
territories of two High Contracting Parties, or within the
territory of a single High Contracting Party, if there is an
agreed stopping place within a territory subject to the
sovereignty, suzerainty, mandate or authority of another
Power, even though that Power is not a party to this
Convention.
 LIABILITY OF A CARRIER
(WARSAW CONVENTION)

The carrier is liable for damage sustained:

1) in the event of the death or wounding of a passenger or any other
bodily injury suffered by a passenger, if the accident which caused
the damage so sustained took place on board the aircraft or in the
course of any of the operations of embarking or disembarking.
2) in the event of the destruction or loss of, or of damage to, any
registered luggage or any goods, if the occurrence which caused
the damage so sustained took place during the carriage by air.
3) occasioned by delay in the carriage by air of passengers, luggage
or goods.
 LIMITATIONS
1) IN THE CARRIAGE OF PASSENGERS: the liability of the carrier for each
passenger is limited to the sum of 125,000 francs.
2) IN THE CARRIAGE OF REGISTERED LUGGAGE AND OF GOODS: the liability
of the carrier is limited to a sum of 250,000 francs per kilogram, unless the
consignor has made, at the time when the package was handed over to the carrier,
a special declaration of the value at delivery and has paid a supplementary sum if
the case so requires.
3) AS REGARDS OBJECTS OF WHICH THE PASSENGER TAKES CHARGE
HIMSELF: the liability of the carrier is limited to 5,000 francs per passenger.

NOTE:
Any provision tending to relieve the carrier of liability or to fix a lower limit than that
which is laid down in this Convention shall be null and void, but the nullity of any such
provision does not involve the nullity of the whole contract.
 ACTION FOR DAMAGES
1) VENUE (JURISDICTION) – at the plaintiff’s option, in the territory of one of the
High Contracting Parties:
a) either before the Court having jurisdiction where the carrier is ordinarily
resident
b) or has his principal place of business
c) or has an establishment by which the contract has been made
d) or before the Court having jurisdiction at the place of destination.

2) GOVERNING LAW: Questions of procedure shall be governed by the law of the

Court seized of the case.

3) PRESCRIPTIVE PERIOD: two years, reckoned from the date of arrival at the
destination, or from the date on which the aircraft ought to have arrived, or from the
date on which the carriage stopped.
AIRLINE CASES
 CHINA AIRLINES V. DANIEL CHIOK
Article 1, Section 3 of the Warsaw Convention states:

Transportation to be performed by several successive air carriers shall be deemed, for

the purposes of this Convention, to be one undivided transportation, if it has been
regarded by the parties as a single operation, whether it has been agreed upon under
the form of a single contract or of a series of contracts, and it shall not lose its
international character merely because one contract or a series of contracts is to be
performed entirely within a territory subject to the sovereignty, suzerainty, mandate, or
authority of the same High Contracting Party.

Article 15 of IATA-Recommended Practice similarly provides:

Carriage to be performed by several successive carriers under one ticket, or under a

ticket and any conjunction ticket issued therewith, is regarded as a single operation.
 KLM ROYAL DUTCH AIRLINES V. CA
The passage tickets of the respondents provide that the carriage to be
performed thereunder by several successive carriers "is to be regarded
as a single operation.“

The breach of that guarantee was aggravated by the discourteous and

highly arbitrary conduct of an official of the Aer Lingus which the KLM had
engaged to transport the respondents on the Barcelona-Lourdes segment
of their itinerary. It is but just and in full accord with the policy expressly
embodied in our civil law which enjoins courts to be more vigilant for the
protection of a contracting party who occupies an inferior position with
respect to the other contracting party, that the KLM should be held
responsible for the abuse, injury and embarrassment suffered by the
respondents at the hands of a supercilious boor of the Aer Lingus.
 CATHAY PACIFIC AIRWAYS V. CA
Although the Warsaw Convention has the force and effect of law in this country,
being a treaty commitment assumed by the Philippine government, said
convention does not operate as an exclusive enumeration of the instances for
declaring a carrier liable for breach of contract of carriage or as an absolute limit
of the extent of that liability.

The Warsaw Convention declares the carrier liable for damages in the
enumerated cases and under certain limitations. However, it must not be
construed to preclude the operation of the Civil Code and other pertinent laws. It
does not regulate, much less exempt, the carrier from liability for damages for
violating the rights of its passengers under the contract of carriage, especially if
wilful misconduct on the part of the carrier's employees is found or established.
 ALITALIA V. IAC
(same w/ Cathay) Otherwise, "an air carrier would be exempt from any
liability for damages in the event of its absolute refusal, in bad faith, to
comply with a contract of carriage, which is absurd.“The fact is,
nevertheless, that some special species of injury was caused to Dr. Pablo
because petitioner ALITALIA misplaced her baggage and failed to deliver
it to her at the time appointed — a breach of its contract of carriage, to be
sure. Apart from this, there can be no doubt that Dr. Pablo underwent
profound distress and anxiety, which gradually turned to panic and finally
despair.
Certainly, the compensation for the injury suffered by Dr. Pablo cannot
under the circumstances be restricted to that prescribed by the Warsaw
Convention for delay in the transport of baggage.
 KOREAN AIRLINES V. CA

This Court has held that a contract to transport passengers is different in

kind and degree from any other contractual relation. The business of the
carrier is mainly with the traveling public. It invites people to avail
themselves of the comforts and advantages it offers. The contract of air
carriage generates a relation attended with a public duty. Passengers
have the right to be treated by the carrier's employees with kindness,
respect, courtesy and due consideration. They are entitled to be
protected against personal misconduct, injurious language, indignities
and abuses from such employees. So it is that any discourteous conduct
on the part of these employees toward a passenger gives the latter an
action for damages against the carrier.
 TRANSWORLD AIRLINES V. CA
The discrimination is obvious and the humiliation to which private
respondent was subjected is undeniable. Consequently, the award of
moral and exemplary damages by the respondent court is in order.

Such inattention and lack of care for the interest of its passengers who
are entitled to its utmost consideration, particularly as to their
convenience, amount to bad faith which entitles the passenger to the
award of moral damages. More so in this case where instead of
courteously informing private respondent of his being downgraded
under the circumstances, he was angrily rebuffed by an employee of
petitioner.
 CATHAY PACIFIC V. SPS. VASQUEZ
The well-entrenched principle is that the grant of moral damages
depends upon the discretion of the court based on the circumstances of
each case. This discretion is limited by the principle that the amount
awarded should not be palpably and scandalously excessive as to
indicate that it was the result of prejudice or corruption on the part of the
trial court.

Passengers must not prey on international airlines for damage awards,

like trophies in a safari. After all neither the social standing nor prestige of
the passenger should determine the extent to which he would suffer
because of a wrong done, since the dignity affronted in the individual is a
quality inherent in him and not conferred by these social indicators.
 SANTOS V. NORTHWEST ORIENT
The place of destination, within the meaning of the Warsaw Convention,
is determined by the terms of the contract of carriage or, specifically in
this case, the ticket between the passenger and the carrier. Examination
of the petitioner's ticket shows that his ultimate destination is San
Francisco. Although the date of the return flight was left open, the
contract of carriage between the parties indicates that NOA was bound to
transport the petitioner to San Francisco from Manila. Manila should
therefore be considered merely an agreed stopping place and not the
destination.

It is the "destination" and not an "agreed stopping place" that controls for
purposes of ascertaining jurisdiction under the Convention.
THANK YOU!