Republic of the Philippines Supreme Court Manila Third Division
Gentlemen: Quoted hereunder, for your information, is a resolution of
the Third Division of this Court dated
September 30, 1996 G.R. No. 125706 CHINA CHANG JIANG
ENERGY CORPORATION (PHILIPPINES) versus ROSAL
INFRASTRUCTURE BUILDERS, represented by its General Manager,
ALBERTO S. SURLA, CONSTRUCTION INDUSTRY ARBITRATION
COMMISSION, PRUDENCIO F. BARANDA, and the COURT OF APPEALS.
Petitioner questions the validity of Construction Industry Arbitration
Commission (CIAC) Resolution 3-93 amending Section 1, Article III of
CIAC Rules of Procedure Governing Construction Arbitration
promulgated by the CIAC pursuant to its rule-making power granted
under Section 21 of Executive Order No. 1008, which pertinently
provides as follows:
Article III
Effect of the Agreement to Arbitrate
Section 1. Submission to CIAC Jurisdiction An arbitration clause in a
construction contract or a submission to arbitration of a construction
dispute shall be deemed an agreement to submit an existing or future
controversy to the CIAC jurisdiction, not withstanding the reference to a
different arbitral institution or arbitral body in such contract or submission
Petitioner is the operator of the Binga Hydroelectric Plant in Itogon,
Benguet, under a Rehabilitate Operate and Leaseback Contract ( ROL
Contract ) with the National Power Corporation whereby it is
mandated to engage in the rehabilitation of the power plant, including
the construction of check dams. On February 21, 1994, petitioner
engaged the services of respondent Rosal Infrustructure Builders
( RIB ) as sub-contractor, executing a contract for the
construction of Check Dam No. 1 along Sadyo River, Binga, Itogon,
Benguet. In this contract the parties agreed to submit disputes arising
therefrom to arbitration before the Arbitration of the International
Chamber of Commerce.
When a dispute arose between the parties, respondent RIB filed a
complaint before respondent CIAC for arbitration. Petitioner filed its
answer with compulsory counterclaim and raised therein the issue of
lack of jurisdiction on the part of CIAC. In its order dated August 1,
1995, respondent CIAC considered the question of jurisdiction merely as
a special defense which can be included as part of the issues of the
Terms of Reference. Petitioner filed a motion for reconsideration which
was denied by respondent CIAC in its order dated October 4, 1995.
Petitioner raised the sole issue of lack of jurisdiction in a petition for
certiorari and prohibition, with a prayer for a temporary restraining order
and writ of preliminary injunction with respondent Court of Appeals. In a
decision dated February 27, 1996, respondent court dismissed the
petition. Petitioner filed a motion for reconsideration but the same was
denied by respondent court in a resolution dated July 22, 1996.
Hence, the instant petition.
We find no meritorious basis in the petition to sustain a reversal of the
ruling of respondent court upholding the jurisdiction of the CIAC in this
case, Executive Order No. 1008, otherwise known as the
Construction Industry Arbitration Law defines the jurisdiction of
the CIAC thusly:
Section 4. Jurisdiciton The CIAC shall have 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. These disputes may involve government
or private contracts. For the Board to acquire jurisdiction, the parties to a
dispute must agree to submit the same to voluntary arbitration
Petitioner contends that this Court had already interpreted this
particular provision of the law in the case of Tesco Services Incorporated
v. Vera, 209 SCRA 440 (1994) to mean that respondent CIAC can acquire
jurisdiction over the dispute only when the parties have agreed to submit
their dispute to voluntary arbitration before respondent CIAC itself.
This contention is erroneous.
The ruling of this court in the above-cited Tesco case must be read in
light of facts obtaining and the governing law in relation to the applicable
rules in force during that period. When we ruled in Tesco that CIAC has
no jurisdiction over the dispute, we were applying the prevailing rules of
procedure duly promulgated by the CIAC pursuant to its rule making
power provided in Section 21 of its enabling law. Section 1 of the said
rules specifically required that a party to a construction contract wishing
to have recourse to arbitration by the CIAC shall submit its Request for
Arbitration in sufficient copies to the Secretariat of the CIAC. Since the
Court found that there was no Request for Arbitration filed with the
Secretariat of the CIAC because private respondent LAROSA in the case
filed a petition for injunction with the Regional Trial Court of Quezon
City, the inevitable conclusion had to be that CIAC did not acquire
jurisdiction over the disputes arising from the sub-contract agreement
between TESCO and LAROSA in said case. Accordingly, this Court
sustained the jurisdiction of the regular court in that particular instance.
The
Tesco ruling is not binding in the case at bench.
Significantly, the 1998 CIAC rules of procedure before the CIAC which
were applied by this Court in Tesco had been duly amended by CIAC
resolutions No. 2-91 and 3-93 to now read as follows:
Section 1. Submission to CIAC Jurisdiction An arbitration clause in a
construction contract or a submission to arbitration of a construction
dispute shall be deemed an agreement to submit an existing or future
controversy to CIAC jurisdiction, notwithstanding the reference to a
different arbitral institution or arbitral body in such contract or submission.
When a contract contains a clause for the submission of a future
controversy to arbitration, it is not necessary for the parties to enter into a
submission agreement before the claimant may invoke the jurisdiction of
the CIAC.
Petitioner submits that CIAC Resolution No. 3-93 is null and void
insofar as it prohibits the parties from submitting the dispute for
arbitration to an arbitral body other than respondent CIAC because, so it
is contended, it goes beyond the basic law it seeks to implement, E.O.
No. 1008 (Rollo, p.26).
We do not agree.
A mere cursory reading of Section 1, Article III, of the CIAC Rules, as
amended by Resolution No. 3-93 reveals no restriction whatsoever on
any party from submitting a dispute for arbitration to an arbitral body
other than the CIAC. On the contrary, the new rule, as amended merely
implements the letter and the spirit of its enabling law, E.O. No. 1008,
which vests jurisdiction upon the CIAC in the following manner
: Section 4. Jurisdiction The CIAC shall have 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. These disputes may involve government
or private contract. For the Board to acquire jurisdiction, the parties to a
dispute must agree to submit the same to voluntary arbitration
(Emphasis supplied.)
What the law merely requires for a particular construction
contract to fall within the jurisdiction of CIAC is for the parties to agree
to submit the same to voluntary arbitration. Unlike in the original
version of Section 1, as applied in the Tesco case, the law does not
mention that the parties should agree to submit disputes arising from
their agreement specifically to the CIAC for the latter to acquire
jurisdiction over such disputes. Rather, it is plain and clear that as long
s the parties agree to submit to voluntary arbitration, regardless of what
forum they may choose, their agreement will fall within the jurisdiction of
the CIAC, such that, even if they specifically choose another forum, the
parties will not be precluded from electing to submit their dispute before
the CIAC because this right has been vested upon each party by law, i.e.
E.O. No. 1008.
This Court s pronouncements in the case of Hi-Precision Steel voluntary arbitration, the law in effect, automatically gives the parties an
Center, Inc. vs. Lim Kim Steel Builders, Inc. 228 SCRA 397 (1993) find
relevance, to wit:
Voluntary arbitration involves the reference of a dispute to an
impartial body, the members of which are chosen by the parties
themselves which parties freely consent in advance to abide by the
arbitral award issued after proceedings where both parties had the
opportunity to be heard. The basic objective is to provide a speedy and
inexpensive method of settling disputes by allowing the parties to avoid
the formalities, delay, expenses and aggravation which commonly
accompany ordinary litigation, especially litigation which goes through
the entire hierarchy of courts. Executive Order No. 1008 created an
arbitration facility to which the construction industry in the Philippines
can have recourse. The executive order was enacted to encourage the
early and expeditious settlement of disputes in the construction
industry, a public policy the implementation of which is necessary and
important for the realization of national development goals.
These noble objectives are what Resolutions No. 2-91 and 3-93
seek to implement which Section 1, prior to its amendment, effectively
curtailed. Rather unfortunately, this particular provision of the CIAC
Rules was not the one at issue in the Tesco case. Thus, no ruling on that
point could be passed upon.
Now that Section 1, Article III, as amended, is submitted to test in
the present petition, we rule to uphold its validity with full certainty.
However, this should not be understood to mean that the parties may no
longer stipulate to submit their disputes to a different forum or arbitral
boy. Parties may continue to stipulate as regards their preferred forum in
case of voluntary arbitration, but in so doing, they may not divest the
CIAC of jurisdiction as provided by law. Under the elementary principle
on the law on contracts that laws obtaining in a jurisdiction form part of
all agreements, when the law provides that the Board acquires
jurisdiction when the parties to the contract agree to submit the same to
alternative forum before whom they may submit their disputes. That
alternative forum is the CIAC. This, to the mind of the Court, is the real
spirit of E.O. No. 1008, as implemented by Section 1, Article III of the
CIAC Rules.
The herein interpretation is not, in its strict sense, a reversal of a
previous pronouncement in the Tesco case necessitating a ruling by the
Court En Banc considering the variance in the factual circumstances, as
well as the governing procedural rules applicable to the two distinct
cases.
The Court also takes this opportunity to dispel any mistaken
notion that substantial rights were created or modified by the CIAC in its
Resolution No. 2-91 and 3-93, as regards matters of jurisdiction. We
would also like to clarify that such rights were vested as early as of the
time E.O. No. 1008 which took effect February 1985. Howeer, said
provision had not been properly implemented in the original version of
Section 1 of the CIAC Rules. Thus, amendments through Resolutions No.
2-91 and 3-93 were called for.
WHEREFORE, premises considered, the instant petition is hereby
DISMISSED and the appealed decision is hereby AFFIRMED. SO
ORDERED.