ADR MECHANISMS

UNDER EO 78

Atty. Salvador S. Panga, Jr.

Vice-President
Philippine Dispute Resolution Center, Inc. (PDRCI)

Dispute Resolution Consultant

 What is ADR ?
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 ADR is:

 any process or procedure used to resolve a dispute or

controversy, other than by adjudication of a presiding judge of
a court or an officer of a government agency, in which a neutral
third party participates to assist in the resolution of issues

 these processes include arbitration, mediation, conciliation,

early neutral evaluation, mini-trial, or any combination
thereof.
 (Sec. 3[a], ADR Act of 2004).
 Essence of ADR
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 Party autonomy (Sec. 2, ADR Act).

 The right of disputing parties to make their own arrangements to
resolve their disputes.
 Promotion of party autonomy is state policy.
 Implications:
 Courts not exclusive fora
 Parties encouraged to submit to alternative modes
 Outcome of those processes are final and subject only to limited
judicial review
 Reason for ADR requirement under EO 78
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 Disputes brought to the courts take years to resolve

 Courts are congested

 Segmented trials
 Highly technical disputes require technical expertise which
courts are not equipped to resolve
 Appeals take years
 Effects of lengthy litigation
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 Projects are delayed

 Parties’ time and attention diverted to litigation

instead of project completion
 Deterioration of professional and personal
relationships
 Disincentive to investment because of cost,
inefficiency, delay and inability to recoup investment
within the anticipated time frame
 Advantages of ADR
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 Faster

 Cheaper

 Generally final

 Ability to select experienced neutrals

 Easily enforceable

 Flexible
 EO 78 Declaration of Policy
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 Declared it as a state policy to provide a more

inviting climate for private investments by making
the resolution of disputes arising out of contracts
especially for large-scale, capital-intensive
infrastructure and development contracts, less
expensive, tedious, complex and time-consuming.
 Declaration of Policy
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 To this end, provisions on ADR mechanisms shall be

included in all contracts involving PPP projects,
including among others,

 contracts entered into under BOT Law (RA 6957 as amended),

and

 JVAs entered into between the national government and

private entities, issued by NEDA pursuant to EO 423, s. 2005.
 Declaration of Policy
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• On the other hand, local government units (LGUs) are

encouraged to stipulate on the use of ADR mechanisms, in
accordance with their own rules, guidelines or procedures.
 How Policy Implemented
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 Requirement of ADR clause in all contracts covered

by EO 78 (Rule 3, IRR).

 Negotiation, conciliation / mediation and arbitration are all

encouraged in order to avoid expenses and adhere to
government’s austerity policy

 In case of international arbitration, requirement of separate

written agreement (“SWA”) (Annex “A”, IRR).

 Model ADR clauses contained in Annex “B”

 How Policy Implemented
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 Various ADR processes discussed in Annexes “C” to

“E” of IRR.

 Why is ADR clause important?

 ADR is contractual in nature.

 If no ADR clause, dispute automatically goes to court as

default option.
 ADR Mechanisms in the IRR
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 Negotiation

 Mediation

 Conciliation

 Early Neutral Evaluation

 ADR Mechanisms in the IRR
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 Arbitration

 Mediation – Arbitration

 Dispute Resolution Boards

 Adjudication

 Mini-Trial
 ADR Mechanisms in the IRR
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 Early Warning
 Risk management system that enables parties to take control of
disputes at earliest possible stage instead of merely reacting to
actions by other side and the courts.
 How it works:
 Assessment of the business’ dispute history

 Development of case assessment process

 Pre-dispute planning

 Post-dispute planning
 Separate Written Agreement for Arbitration
Disputes
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 Rationale / Concept

 Provide opportunity for parties to discuss and settle dispute

amicably before submission to international arbitration.

 Similar to pre-trial conference, where parties could, through a

written agreement executed prior to submission to arbitration:
 Forge a settlement
 Simplify issues
 Agree on such other matters as would aid in the prompt
disposition of the case
 Inter-Agency Committee
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 Established an IAC composed of:

 OP (Chair)

 BOI (Vice-Chair)

 DFA

 DOF
 Inter-Agency Committee
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 NEDA

 DOJ

 OSG

 Designated agency representative is the Secretary, who may be

represented by an officer not lower than Assistant Secretary.
 Powers and Functions
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 Negotiating team for the Philippine government

 Evaluate and consider the OSG’s report and recommendations

 Execute any amicable settlement subject to existing laws,

rules and regulations
 Prepare SWA upon request of investor in case settlement
negotiations fail
 Enlist the assistance of any department, office or bureau to
carry out its functions

 Perform all other functions necessary and consistent with its

functions as IAC
 Procedure for Consultation
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 Submission of notice of intent to DFA

 Endorsement to OSG, with copies to all IAC members

 OSG assessment of notice of intent, and may create a

task force for this purpose.
 Submission of OSG report and recommendations within
60 days
 Preparation of TOR by IAC for consultations

 Conduct of consultations
 Procedure for Consultation
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 Whenever feasible, forge an agreement with investor

within 180 days from DFA’s initial receipt of notice,
or within such period specified in relevant contract
 If no settlement, IAC to execute SWA upon investor’s
written consent, to include the following:
 Simplification of issues

 Possibility of securing admissions or stipulations of fact to

avoid unnecessary proof; and

 Such other matters as may aid prompt disposition of the case.

 Post-consultation
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 After execution of SWA, the investor may submit the

claim to international arbitration or conciliation.

 However, the execution of the SWA shall not

prejudice the right of the State under the arbitration
or conciliation process, including the right to raise
any objections at any stage. This proviso shall be
included in the SWA.
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