Written Report on Parlade’s Discussion on International Commercial Arbitration The Philippines has adopted a dual system of arbitration which

ation which makes it happen

that different rules apply depending whether the arbitration is domestic or
international, commercial or non-commercial. Under Philippine law, specifically
under the Alternative Dispute Resolution Act of 2004, international commericial
I. Introduction
arbitration shall be governed by the UNCITRAL Model law while domestic
The Model law was adopted by the United Nations Commission on International arbitration shall continue to be subject to the terms laid down under R.A. no. 876
Trade Law on June 21, 1985 and was recommended for enactment by the General or the Arbitration law.
Assembly in Resolution 40/72 on December 11,1985. The Philippines adopted the
b. Matters not covered by the Model law
Model Law; although amendments were made in 2006 and the Philippines had
not expressly adopted amendments, the Supreme Court applied and observed Matters not covered:
said amendments in its decisions made after the promulgation of the
amendments in the Model law. The Model Law constitutes a sound and promising  Arbitrability of the SM of the dispute
basis for the desired harmonization and improvement of national laws. It covers  Capacity of the parties to enter into arbitration agreement
all stages of the arbitral process from the arbitration agreement to the recognition  State immunity from suit
and enforcement of the arbitral award and reflects a worldwide consensus on the  Enforcement by national courts of interim measures of protection granted
principles and important issues of international arbitration practice. It is by an arbitrator
acceptable to States of all regions and the different legal or economic systems of  Competence of an arbitrator to reform the contract
the world.  Fixing of arbitration fees
 Request for and making a deposit for fees
The form of a model law was chosen as the vehicle for harmonization and
improvement in view of the flexibility it gives to States in preparing new  Time limit of an award
arbitration laws. It is advisable to follow the model as closely as possible since that  Consolidation of arbitral proceedings
would be the best contribution to the desired harmonization and in the best  Contractual relations between arbitrators and parties
interest of the users of international arbitration, who are primarily foreign parties  Security for fees or costs or period of time for the enforcement of arbitral
and their lawyers. awards
 The enforcement of interim measures of protection granted by arbitrators
As provided in the ADR Act of 2004, commercial arbitration in the Philippines shall  The manner of enforcing arbitral awards
be governed by the Model law as a response to the call of the United Nations for  Definition of arbitration
uniformity of provisions of member states regarding their legislations involving  Interpretation of arbitration agreements
commercial arbitration. The Model law is said to reflect a consensus on a world  Duties and liability of arbitrators
wide scale on the principles and issues covered by international arbitration  Remuneration of arbitrators
practice. The Model law which may be adopted by a State, is intended to apply as  Prescription
lex specialis. For instance, it is meant to exclude all other non-treaty laws  Res Judicata
wherever they may be contained. However, it may still be subject to other treaties  Costs, interest
on arbitration such as the UN Convention on Carriage of Goods by the Sea and
 Capacity
New York Convention
 Discharge of arbitration agreement
The following sections shall focus on the articles of the Model law and were  Multi-partite proceedings
categorized according to the nature of their concepts and discussions.  Court assistance in appointing arbitrators
 Dispute as to venue if not indicated
II. Scope of Application of the Model law (Article 1)

(1) This Law applies to international commercial arbitration, subject to any

agreement in force between this State and any other State or States. c. Territorial Criterion vs. Autonomy Criterion

(2) The provisions of this Law, except articles 8, 9, 35 and 36, apply only if the
place of arbitration is in the territory of this State.
(3) An arbitration is international if:
(a) the parties to an arbitration agreement have, at the time of the
conclusion of that agreement, their places of business in different States;
or
(b) one of the following places is situated outside the State in which the
parties have their places of business: (i) the place of arbitration if
determined in, or pursuant to, the arbitration agreement; (ii) any place
where a substantial part of the obligations of the commercial relationship
is to be performed or the place with which the subject-matter of the
dispute is most closely connected; or
(c) the parties have expressly agreed that the subject-matter of the
arbitration agreement relates to more than one country.
(4) For the purposes of paragraph (3) of this article:
Article 1 of the Model law adopts the territorial criterion which provides that the
applicability of the law shall be within the territory of the enacting state. As
opposed to autonomy criterion, this criterion applies to foreign arbitration if the
parties to the arbitration had decided to be governed by the arbitration law of
another enacting state.
According the working group, the territorial criterion is more widely accepted as
compared to the autonomy criterion.
Exceptions to the territorial criterion:
a) A national court is required to refer the parties to arbitration
b) A party to a foreign arbitration may apply with a national court before or
during arbitral proceedings for an interim measure of protection
c) A prevailing party in a foreign arbitration may apply with a national court for
recognition and enforcement of a foreign award
d) A national court may refuse an application for recognition and enforcement
of a foreign arbitral award.

(a) if a party has more than one place of business, the place of business is that d. Arbitrability of a Commercial Dispute and its status as being
which has the closest relationship to the arbitration agreement; “international”

(b) if a party does not have a place of business, reference is to be made to
his habitual residence.
(5) This Law shall not affect any other law of this State by virtue of which
certain disputes may not be submitted to arbitration or may be submitted
to arbitration only according to provisions other than those of this Law.
a. Dual System as adopted by the Philippines
A dispute shall be considered international in the following instances:
1) The parties to an arbitration agreement have, at the time of the conclusion
of that agreement, their places of business in different States; or
2) One of the following places is situated outside the State in which the parties
have their places of business:
a) the place of arbitration if determined in, or pursuant to, the arbitration
agreement;
 b) any place where a substantial part of the obligations of the commercial
relationship is to be performed or the place with which the subject-
matter of the dispute is most closely connected; or
c) the parties have expressly agreed that the subject matter of the
arbitration agreement relates to more than one country.
e. Test of internationality
1. Place of business – Are the places of business of the parties in different
states?
2. Place of arbitration – Is the stipulated venue in a foreign state?
3. Place of performance – Is the obligation to be performed outside the place
of business of the parties?
4. Place of Subject Matter of Arbitration Agreement – Is the subject matter of
the arbitration agreement related to more than one state?
f. Commercial Arbitration, defined and explained
An arbitration is "commercial" if it covers matters arising from all relationships of
a commercial nature, whether contractual or not.
g. The Concept of Travaux Preparatoires
This concept is very important in the sense of achieving the harmonization of
arbitration laws of the countries that have adopted the Model law. Under this
concept, Philippine courts are mandated not only to look for judicial precedents
as part of the law of the land but are also called to consider the decisions of other
states which have adopted the Model law into their own systems. The ADR Act of
2004 of the Philippines allows and accepts the interpretation and consideration
of other states’ courts regarding the Model law.
h. Definitions and Rules of Interpretation under the Model law (Article 2)
For the purposes of this Law:
(a) "arbitration" means any arbitration whether or not administered by a
permanent arbitral institution;
(b) "arbitral tribunal" means a sole arbitrator or a panel of arbitrators;
(c) "court" means a body or organ of the judicial system of a State;
(d) where a provision of this Law, except article 28, leaves the parties free to
determine a certain issue, such freedom includes the right of the parties to
authorize a third party, including an institution, to make that determination;
(e) where a provision of this Law refers to the fact that the parties have agreed
or that they may agree or in any other way refers to an agreement of the parties,
such agreement includes any arbitration rules referred to in that agreement;
(j) where a provision of this Law, other than in articles 25(a) and 32(2)(a), refers
to a claim, it also applies to a counter-claim, and where it refers to a defence, it
also applies to a defence to such counter-claim.
a. Definitions
The term arbitration has not been defined in the Model law because according to
the UNCITRAL Secretary General, it is already well-known and understood in many
jurisdictions and such definition is no longer necessary to be made part of the
Model law itself.
i. Receipt of Written Communications (Article 3)
(1) Unless otherwise agreed by the parties:
(a) any written communication is deemed to have been received if it is delivered
to the addressee personally or if it is delivered at his place of business, habitual
residence or mailing address; if none ofthese can be found after making a
reasonable inquiry, a written communication is deemed to have been received
if it is sent to the addressee's last-known place of business, habitual residence
or mailing address by registered letter or any other means which provides a
record of the attempt to deliver it;
(b) the communication is deemed to have been received on the day it is so
delivered.
(2) The provisions of this article do not apply to communications in court
proceedings.
a. Written Communications
Unless otherwise agreed by the parties:
a) any written communication is deemed to have been received if it is
delivered to the addressee personally or if it is delivered at his place of
business, habitual residence or mailing address;
b) if none of these can be found after making a reasonable inquiry, a written
communication is deemed to have been received if it is sent to the
addressee’s last-known place of business, habitual residence or mailing
address by registered letter or any other means which provides a record of
the attempt to deliver it
The communication is deemed to have been received on the day it is so delivered.
Exceptions: communications in court proceedings.
j. Waiver of Right to Object (Article 4)
A party who knows that any provision of this Law from which the parties may
derogate or any requirement under the arbitration agreement has not been
complied with and yet proceeds with the arbitration without stating his
objection to such non-compliance without undue delay or, if a time-limit is
provided therefor, within such period of time, shall be deemed to have waived
his right to object.
a. Waiver of Objections
A party who knows that any provision of this Law from which the parties may
derogate or any requirement under the arbitration agreement has not been
complied with and yet proceeds with the arbitration without stating his objection
to such non-compliance without undue delay or, if a time-limit is provided
therefor, within such period of time, shall be deemed to have waived his right to
object.
A party deems to waive his right to object if all these requisites are met:
A. There is a procedural requirement that has not been complied with which is
non-mandatory under the Model Law
B. The party knew of such compliance
C. The party proceeds with arbitration without objections
D. The party failed to state his objection within a reasonable period of time and
in the manner provided in the law or arbitration agreement
k. Extent of Court Intervention (Article 5)
In matters governed by this Law, no court shall intervene except where so
provided in this Law.
General Rule: Courts must yield to the primary jurisdiction of the Arbitral Tribunal
Exception (When can the RTC intervene): SADR, following Section 6 of the Model
Law, provides the following:
 Relief on the issue of Existence, Validity, or Enforceability of the Arbitration
Agreement;
 Referral to Alternative Dispute Resolution ("ADR");
 Interim Measures of Protection;
 Appointment of Arbitrator;
 Challenge to Appointment of Arbitrator;
 Termination of Mandate of Arbitrator;
 Confirmation, Correction or Vacation of Award in Domestic Arbitration;
 Recognition and Enforcement or Setting Aside of an Award in International
Commercial Arbitration;
 Recognition and Enforcement of a Foreign Arbitral Award;
 Confidentiality/Protective Orders; and
 Deposit and Enforcement of Mediated Settlement Agreements.
 Assistance in Taking Evidence;
 Confirmation, Correction or Vacation of Award in Domestic Arbitration;
 Recognition and Enforcement or Setting Aside of an Award in International
Commercial Arbitration;
 Recognition and Enforcement of a Foreign Arbitral Award;
 Confidentiality/Protective Orders; and
 Deposit and Enforcement of Mediated Settlement Agreements
l. Court or Other Authority for Certain Functions of Arbitration Assistance
and Supervision (Article 6)
The functions referred to in articles 11(3), 11(4), 13(3), 14, 16(3) and 34(2) shall
be performed by ... [Each State enacting this model law specifies the court,
courts or, where referred to therein, other authority competent to perform these
functions.]
a. Philippines as Place of Arbitration
The court in the place of arbitration shall have the competence to provide
assistance or intervention in the instances when court intervention is allowed. For
example, if the Philippines is a place of arbitration, then it can be said that the
Philippine courts if they have jurisdiction, shall have the competence to intervene
and thereafter apply the Philippine procedural law.
m. Definition and Form of Arbitration Agreement (Article 7)
(1) "Arbitration agreement" is an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which may arise between
them in respect of a defined legal relationship, whether contractual or not. An
arbitration agreement may be in the form of an arbitration clause in a contract
or in the form of a separate agreement.
(2) The arbitration agreement shall be in writing. An agreement is in writing if it
is contained in a document signed by the parties or in an exchange of letters,
telex, telegrams or other means of telecommunication which provide a record
of the agreement, or in an exchange of statements of claim and defence in which
the existence of an agreement is alleged by one party and not denied by another.
The reference in a contract to a document containing an arbitration clause
constitutes an arbitration agreement provided that the contract is in writing and
the reference is such as to make that clause part of the contract.
a. Form of Arbitration
They may be found in an arbitration clause within the contract of the parties, or
in a separate document.
Forms:
a) In a document duly signed by the parties;
b) In an exchange of letters, telegrams, telexes, or other means of
telecommunications that provide a record of the agreement;
c) In an exchange of statements of claims and defenses in which the existence
of an arbitration agreement is alleged by one party and not denied by
another;
d) In a document supplementing the original contract
b. 2006 Amendments
The ADR Act of the Philippines was approved in 2004.Under this law, international
commercial arbitration shall be governed by the UNCITRAL Model law. The 2006
amendments on the UNCITRAL Model law, as evident as it may seem, would not
form part of the Philippine laws on arbitration. States which have adopted the
2006 amendments are allowed to liberally construe and interpret the Model law.
In the Philippines, there are varying options on whether or not which option
should be adopted.
Under Option1, an arbitration agreement can be entered into in any form, even
orally, as long as there is a record of the agreement. Signatures to an agreement
or an exchange of messages between the parties confirming their agreement to
submit their dispute to arbitration is not required. The existence of this
agreement can be proved by electronic means. Under Option 2, there is an
omission as to any form requirement of the existence of any arbitration
agreement.
c. Typical Situations Where Validity of Agreement is raised
The Working Group and the UNCITRAL considered in several sessions the
following typical examples where validity of agreement is usually raised:
1. A contract containing an arbitration clause is formed by one party sending
written terms to the other, which performs its bargain under the contract
without returning or making any other exchange in writing in relation to the
terms of the contract;
2. A contract containing an arbitration clause is formed on the basis of the
contract text proposed by one party, which is not explicitly accepted in
writing by the other party, but the other party refers in writing to that
contract in subsequent correspondence, invoice or letter of credit by
mentioning, for example, its credit number;
3. A contract is concluded through a broker who issues the text evidencing the
agreement of the parties including the arbitration clause, without there
being any direct written communications between the parties;
4. Reference in an oral agreement to a written set of terms, which may be in
standard form, that contain an arbitration agreement.
d. When the agreement exists even though not signed and when
unenforceable
In the following situations:
 When there is partial performance of the contract
 By reason of custom, it is valid;
 When there is a failure to object within a period of time and in the required
form
Exception: When the contract is entered into by a broker or agent. In cases when
the principal is unaware or did not consent thereto, there is a void arbitration
agreement
e. When there is incorporation by reference
It may be valid if it is such as to make the subsequent document a part of the
former document.
n. Arbitration Agreement and Substantive Claim before court (Article 8)
(1) A court before which an action is brought in a matter which is the subject of
an arbitration agreement shall, if a party so requests not later than when
submitting his first statement on the substance of the dispute, refer the parties
to arbitration unless it finds that the agreement is null and void, inoperative or
incapable of being performed.
(2) Where an action referred to in paragraph (1) of this article has been brought,
arbitral proceedings may nevertheless be commenced or continued, and an
award may be made, while the issue is pending before the court.
Articles 8 and 9 deal with two important aspects of the complex issue of the
relationship between the arbitration agreement and resort to courts. Modelled
on article 11(3) of the 1958 New York Convention, article 8(1) of the Model Law
obliges any court to refer the parties to arbitration if seized with a claim on the
same subject-matter unless it finds that the arbitration agreement is null and void,
inoperative or incapable of being performed. The referral is dependent on a
request which a party may make not later than when submitting his first
statement on the substance of the dispute. While this provision, where adopted
by a State when it adopts the Model Law, by its nature binds merely the courts of
that State, it is not restricted to agreements providing for arbitration in that State
and, thus, helps to give universal recognition and effect to international
commercial arbitration agreements.
a. Same subject matter
Under the New York Convention, a Philippine court has the obligation to refer the
parties to a foreign arbitration. It provides that “the court of a contracting state,
when seized of an action in a matter in respect of which the parties have made an
agreement, shall at the request of one of the parties, refer the parties to
arbitration, unless it finds that the said agreement is null and void, inoperative, or
incapable of being performed.”
b. Referral to arbitration
The Special ADR Rules provide that the Philippine court shall make no more than
a prima facie determination of the issue of the validity of an arbitration agreement
based on the pleadings and the supporting documents as submitted by the
parties.
c. Validity of Arbitration Agreement
Article 8 of the UNCITRAL Model law allows the parties and the arbitral tribunal
to rule and find out whether or not the arbitration agreement is null and void,
inoperative, or incapable of being performed.
d. Applicable Law
In determining whether an arbitration agreement is null and void, inoperative, or
incapable of being performed, there shall be a reference to the national law of
the particular state involved. The working group realized that it is not the call of
the forum to decide such matter. Thus, it was left to the particular states which
have adopted the Model law to determine when an agreement is null and void,
inoperative, or incapable of being performed.

e. Presumption of Arbitrability

Under the presumption of arbitrability, a court is called to resolve the doubt in

favor of arbitration. However, there is an exception: “if, upon looking into the
facts and jurisprudence relating to the model law, the court can easily rule that it
is void, inoperative, or incapable of performance, then the court shall declare that
the agreement is null and void, inoperative, or incapable of performance.”

f. Compulsory Arbitration and Concurrent Proceedings

Although the term “arbitration” has a wide and extensive meaning, it shall not
cover compulsory arbitration because such is not based on the will or
voluntariness of the parties but rather it is required by statute.

The court may take jurisdiction and resolve the preliminary question involving the
validity of an arbitration agreement. Concurrently, the arbitration may be
commenced and an award may eventually be made. Also, when a question is
brought to the court, the arbitration proceedings shall not be deemed suspended
pending the court decision on the issue raised because such dilatory tactics have
been foreseen by the working group and are thus prevented.

g. Arbitration Commenced in a Foreign State

This is actually a serious problem the field of arbitration. This may take place when
arbitral proceedings are commenced abroad and the parties are represented by
foreign counsels and a similar action is commenced in the Philippines involving
similar parties and issues as those brought to arbitration abroad and a party is
represented by a Filipino counsel who is unaware of the arbitration proceedings
abroad. According to a report of the UNCITRAL Secretary General, “As regards the
effect of a party’s failure to invoke the arbitration agreement by way of a timely
request, that party is prevented, under Article 8, from invoking the agreement
during subsequent phases of the court proceedings.

o. Arbitration Agreement and Interim Measures by court (Article 9)

It is not incompatible with an arbitration agreement for a party to request,

before or during arbitral proceedings, from a court an interim measure of
protection and for a court to grant such measure.

Article 9 expresses the principle that any interim measures of protection that may
be obtained from courts under their procedural law (e.g. pre-award attachments)
are compatible with an arbitration agreement. Like article 8, this provision is
addressed to the courts of a given State, insofar as it determines their granting of
interim measures as being compatible with an arbitration agreement, irrespective
of the place of arbitration. Insofar as it declares it to be compatible with an
arbitration agreement for a party to request such measure from a court, the
provision would apply irrespective of whether the request is made to a court of
the given State or of any other country. Wherever such request may be made, it
may not be relied upon, under the Model Law, as an objection against the
existence or effect ofan arbitration agreement.

p. Section 19 of R.A. no. 9285 (ADR ACT OF 2004)

SEC. 19. Adoption of the Model Law on International Commercial Arbitration. -

International commercial arbitration shall be governed by the Model Law on
International Commercial Arbitration (the "Model Law") adopted by the United
Nations Commission on International Trade Law on June 21, 1985 (United Nations
Document A/40/17) and recommended approved on December 11, 1985.