Matters that are not arbitrable include labour disputes, the civil status of persons, the validity of a marriage, any grounds for legal separation, court jurisdiction, future legitime and criminal liability (Republic Act No. 9285 (the ADR Act), section 6).
What formal and other requirements exist for an arbitration agreement?
Arbitration agreements must be in writing (Republic Act No. 876, section 4; Implementing Rules and Regulations of the ADR Act (the ADR Act IRR), articles 4.7 and 5.6). An arbitration agreement is deemed to be in writing if it is contained in:
Besides the foregoing, there are no other particularities required for an arbitration agreement. In BF Corporation v Court of Appeals (GR No. 120,105, 27 March 1998), the Supreme Court upheld the arbitration agreement despite the fact that one of the parties failed to mark its initials in the main contract between them. In doing so, it referred to several other instruments between the parties that show that they intended to be bound by the contract containing the arbitration clause.
Arbitration agreements may be enforced even if they are made in general terms so long as the agreement is worded in mandatory and not merely permissive terms.
In what circumstances is an arbitration agreement no longer enforceable?
In Dupasquier v Ascend AS (Philippines) Corporation (GR No. 211,044, 24 July 2019), the Supreme Court ruled that an arbitration clause may not be enforced in the absence of the parties’ agreement on its continued applicability upon the expiration or lapse of the underlying contract. It stressed that the decision does not mean an abandonment of the principle of the separability of the arbitration clause; it is merely giving way to the contracting parties’ intention.
An arbitration agreement continues to be enforceable even after the death of a party as arbitration may commence or continue upon notice to the executor or administrator (ADR Act IRR, articles 4.43 and 5.43)
An arbitration agreement is in itself a contract that is separate and distinct from the main agreement in which it is contained. This is known as the principle of separability of the arbitration clause under Rule 2.2 of the Special Rules of Court on Alternative Dispute Resolution (the Special ADR Rules). As such, irrespective of the fact that the main contract is invalid, the arbitration clause remains valid and enforceable.
Being a separate agreement in itself, an arbitration clause must be declared null and void for it to be no longer enforceable; under the applicable law, the arbitration agreement must be proven to be invalid, void, unenforceable or inexistent.
Are there any provisions on the separability of arbitration agreements from the main agreement?
Rule 2.2 of the Special ADR Rules recognises the principle of separability of the arbitration clause, which means that the clause shall be treated as an agreement independent of the other terms of the contract in which it is contained. A decision that the main contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.
In Cagayan De Oro City Water District v Pasal (GR No. 202,305, 11 November 2021), the Supreme Court confirmed that the doctrine of separability implies that ‘the arbitration agreement is independent of the main contract. In other words, the supposed invalidity of the main contract does not ipso facto render the arbitration clause/agreement itself invalid or unenforceable’.
Third parties – bound by arbitration agreement
In which instances can third parties or non-signatories be bound by an arbitration agreement?
Under article 1311 of the Civil Code, contracts generally take effect only between the parties, their assignees and their heirs. This applies, with equal force, to arbitration agreements under which a third party, who is not a party to the arbitration agreement, is not bound by the agreement.
In BCDA v DMCI (GR No. 173,137, 11 January 2016), the Supreme Court ruled that a party (eg, a nominee of a party to and a beneficiary of a contract containing an arbitration clause, who is not otherwise a signatory to the original contract) may nonetheless be a party to a proceeding that has been initiated based on the arbitration clause.
In Lanuza v BF Corporation (GR No. 174,938, 1 October 2014), directors of a corporation may be compelled to submit to arbitration pursuant to a contract entered into by the corporation they represent if it is necessary to disregard the ‘veil of corporate fiction’ owing to allegations of bad faith and malice on their part.
In Heirs of Augusto Salas Jr v Laperal Realty Corporation (GR No. 135,362, 13 December 1999), heirs and assignees may be compelled to submit to arbitration.
Third parties – participation
Does your domestic arbitration law make any provisions with respect to third-party participation in arbitration, such as joinder or third-party notice?
The general laws on arbitration do not expressly state that third-party joinder or intervention are allowed in arbitration proceedings. However, in Federal Express Corp v Airfreight 2100, Inc (GR No. 225,050, 14 September 2021), the Supreme Court held that Rule 3 of the Amended Rules of Civil Procedure, which defines who may be considered as parties to civil actions, finds application to arbitration proceedings to be covered by the Special ADR Rules. In particular, section 7 of Rule 3 provides for the compulsory joinder of indispensable parties while section 8 provides for the joinder of a necessary party for complete relief to be accorded or for a complete determination or settlement of the subject of the action. It was further held that a motion for intervention by a third party is not among the prohibited submissions explicitly enumerated under Rule 1.6 of the Special ADR Rules; therefore, it is deemed to be permissible in arbitration proceedings.
Groups of companies
Do courts and arbitral tribunals in your jurisdiction extend an arbitration agreement to non-signatory parent or subsidiary companies of a signatory company, provided that the non-signatory was somehow involved in the conclusion, performance or termination of the contract in dispute, under the ‘group of companies’ doctrine?
Philippine law treats a corporation with a personality as separate and distinct from its stockholders and from other corporations to which it may be connected. There are circumstances in which the courts will pierce the corporate veil, such as when the corporate legal entity is used as a cloak for fraud or illegality.
The doctrine of piercing the corporate veil has yet to be applied in arbitration to extend the arbitration agreement entered into by the corporation to that corporation’s alter ego.
Multiparty arbitration agreements
What are the requirements for a valid multiparty arbitration agreement?
A multiparty arbitration agreement is allowed subject to modifications that the arbitral tribunal deem appropriate to address the possible complexities of multiparty arbitration (ADR Act IRR, articles 4.44 and 5.44). Modifications may include keeping confidential information on a need-to-know basis only or limiting a party’s involvement to issues relevant to it.
Can an arbitral tribunal in your jurisdiction consolidate separate arbitral proceedings? In which circumstances?
Consolidation and holding of concurrent hearings in arbitral proceedings are allowed if the parties and the arbitral tribunal agree to the same. Unless the parties agree to confer such power on the arbitral tribunal, the tribunal has no power to order consolidation of arbitration proceedings or concurrent hearings (ADR Act IRR, articles 4.45 and 5.45).
