Legal Updates

Republic Act 9285, otherwise known as the Alternative Dispute Resolution Act of 2004, or ADR Law, provides the legal framework for alternative dispute resolution in the Philippines, including arbitration.

While construction contracts are considered as commercial in nature, the ADR Law recognizes that arbitration of construction disputes shall be governed by Executive Order No. 1008, otherwise known as the Constitution Industry Arbitration Law.

Thus, unlike ordinary commercial arbitrations – where the parties have the option to have either institutional or ad hoc arbitration, agree on the rules that will govern the arbitration, or full freedom to set  rules on the choice of arbitrators – construction arbitration in the Philippines is restricted by the  Constitution Industry Arbitration Law. The said law created the  Construction Industry Arbitration Commission (CIAC), which is vested with  original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof. 

In the landmark case of  China Chang Jiang Energy v Rosal Infrastructure Builders (1996), the Supreme Court enunciated the principle that mere existence of an arbitration clause in the construction contract or agreement is considered by law as an agreement by the parties to submit their existing or future controversies to CIAC jurisdiction.

Thus, there are three requisites for acquisition of jurisdiction by the CIAC:

1. There is a dispute arising from or connected with a construction contract;
2. The construction contract must have been entered into by parties involved in construction in the Philippines; and
3. There must be an agreement by the parties to submit their dispute to arbitration.

Relative to the foregoing, construction has been defined under Philippine jurisprudence as referring to all on-site works on buildings or altering structures, from land clearance through completion, including excavation, erection, and assembly and installation of components and equipment.

For construction arbitration under CIAC, the Revised Rules of Procedure Governing Construction Arbitration  (“Revised CIAC Rules”)  approved in January 2023 shall be applied. Below are some notable provisions under the Revised CIAC Rules:

1. Subject to a narrow exemption, the Revised CIAC Rules requires that only CIAC-accredited arbitrators may be nominated by the parties and appointed by CIAC as arbitrators. The Revised CIAC Rules likewise set the conditions for the appointment of foreign arbitrators.
2. Under Revised CIAC Rules, the Arbitral Tribunal has the power to issue subpoena and/or subpoena duces tecum requiring any person to attend the hearing as a witness or to produce relevant documents.
3. The filing and administrative fees and the schedules of payment therefor shall be in accordance with the CIAC-approved Table of Administrative Charges and Arbitrator’s Fees.
4. An arbitral award by the Arbitral Tribunal is immediately executory upon the lapse of fifteen (15) days from receipt thereof by the parties, unless a temporary restraining order or a writ of preliminary injunction is issued by a court. Likewise, a motion for for execution of the final award will be denied by the Arbitral Tribunal if the moving party has sought recourse against the award or any portion thereof.
5. The Revised CIAC Rules has incorporated the latest pronouncement of the Philippine Supreme Court in the case of Global Medical Center of Laguna, Inc. vs. Ross Systems International, Inc. (G.R. No. 230112, 11 May 2021)  with regard to recourse against a final award.

Based on the Revised CIAC Rules and the Global Case, recourse against a final award may only be taken through either of the following modes:

1. Where a party seeks to raise pure questions of law, by appeal to the Supreme Court through a petition for review under Rule 45 of the Rules of Court within 15 days from notice of the final award; or
2. Where a party seeks to appeal factual issues but only on the limited grounds that pertain to either a challenge on the integrity of the CIAC arbitral tribunal (i.e., allegations of corruption, fraud, misconduct, evident partiality, incapacity or excess of powers within the Tribunal) or an allegation that the arbitral tribunal violated the Constitution or positive law in the conduct of the arbitral process, by a petition for certiorari before the Court of Appeals in accordance with the provisions of Rule 65 of the Rules of Court, on grounds of grave abuse of discretion amounting to lack or excess in jurisdiction. The petition for certiorari to the Court of Appeals shall be filed within sixty (60) days from notice of the final award.

This article is only for informational and educational purposes.  It is not intended as a legal advice or opinion.

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As part of Siguion Reyna Montecillo and Ongsiako Law Offices’ (“SRMO”) general dispute resolution practice, SRMO provides specialized representation in commercial and construction arbitration.  SRMO has represented clients in both ad hoc arbitrations as well as institutional arbitrations administered by the Philippine Dispute Resolution Center, Inc. (“PDRCI”) and the Construction Industry Arbitration Commission (“CIAC”).

Under the auspices of PDRCI, SRMO handled commercial disputes, including international and local investment disputes as well as the interpretation, enforcement or termination of equipment supply agreements, procurement agreements, and other commercial contracts.

In the CIAC, SRMO represented clients in disputes involving, among others, termination of construction contracts, EOT claims, delays, variation costs, payments/progress billings, quality of works issues, liquidated damages, completion costs, and others. Post arbitration, our firm has also handled cases for recognition, vacation, and/or enforcement of arbitral awards.

Our ADR team is headed by and/or composed of lawyers trained by and who are members of the PDRCI.