ARBITRATION PANEL DECISION

1
2
3Complainant:

Pampanga Energy Company (PEC)

4
5Respondent:

Construction Company (CC)

6
7Case Number:

Case No. 15-NNNNN

8
9Panel Members:

Claveria, Carina Amor D.

10

Pineda, Paul Christopher G.

11

Rogel, Angeline P.

12
13
14

The dispute involved in this case relates to an alleged breach of a construction contract

15entered into by the parties. The complainant avers that respondent committed various defects in
16the technical design and construction of their power station. On the other hand, respondent
17claims it was owed large sums of money by complainant under the contract. In addition, the
18respondent raises an issue which threatens the very core of the present arbitral processthat the
19Tribunal has no jurisdiction over the matter at hand.
20

The Tribunal shall now resolve the issues presented before it.

21I. THE PARTIES

22

Pampanga Energy Company (PEC), a Philippine company, is the owner of a power

23station in Pampanga. Sometime in October 2012, PEC employed Construction Company (CC),

24also a Philippine company, to design, construct, commission, test, complete and hand over the
25power station to it.
26

In mid-2013, disputes arose between the parties. PEC claimed that it is entitled to

27liquidated damages while CC sought numerous extensions of time which the complainant
28refused to allow. It was alleged by CC that it was owed large sums of money by PEC under the
29Engineering and Procurement Contract (EPC). As a counterclaim, complainant PEC claimed
30that there were many technical design and construction defects in various parts of the project.
31II. PROCEDURAL HISTORY
32

On November 4, 2013 PEC commenced arbitration proceedings against CC and filed a

33Notice of Arbitration with the Hong Kong International Arbitration Centre (HKIAC). Fourteen
34days later, on November 18, CC commenced its own arbitration proceedings against PEC and
35submitted its Request for Arbitration to the Construction Industry Arbitration Commission
36(CIAC).
37

On the same day, CC applied for an anti-suit injunction against the HKIAC proceedings

38before the Regional Trial Court (RTC) of Manila. Such application was granted and
39consequently, the injunction was issued on November 25, 2013.
40

CC subsequently served its answer before the HKIAC on November 29, 2013. CC

41contended that this Arbitral Tribunal has no jurisdiction and that the RTC of Manila has issued an
42anti-suit injunction which deserves utmost respect from us on the ground of equity.
43III. PARTIES CONTENTIONS
441. The Respondent
45

Construction Company (CC) contends that since the case involves dispute arising from a

46construction industry contract entered into by parties relating to constructions in the Philippines,

47CIAC has original and exclusive jurisdiction. CC noted that jurisdiction is conferred by law and
48cannot be defeated by the agreement of the parties. Since the jurisdiction of CIAC is conferred
49by law, it cannot be subjected to any condition; nor can it be waived or diminished by the
50stipulation, act or omission of the parties, as long as the parties agreed to submit their
51construction contract dispute to arbitration, or if there is an arbitration clause in the construction
52contract.1
53CC cites Section 4 of Executive Order No. 1008 which provides:
54

Sec. 4. Jurisdiction. The CIAC shall have original and exclusive

55

jurisdiction over disputes arising from, or connected with,

56

contracts entered into by parties involved in construction in the

57

Philippines, whether the dispute arises before or after the

58

completion of the contract, or after the abandonment or breach

59

thereof. These disputes may involve government or private

60

contracts. For the Board to acquire jurisdiction, the parties to a

61

dispute must agree to submit the same to voluntary arbitration.

62

CC stressed that in effect, this provision makes it clear that the only requirement for

63CIAC to acquire jurisdiction is for the parties to agree to submit their dispute to voluntary
64arbitration. Thus, when the parties agreed to be bound by the arbitration agreement, they were
65deemed to have submitted their case under the CIAC.2
66In its answer, CC also alleged that the waiver by the parties of applicable Philippine laws such as
67Executive Order No. 1008 and Republic Act No. 9285 is invalid. According to CC, if the parties

31 See Respondents Paper, Page 5

42 See Respondents Paper, Page 6

68have expressly agreed that the substantive law of the Philippines shall govern, they shall not be
69permitted to divest the laws specifically mandated to govern them.3
70In the matter of the anti-suit injunction secured by CC before the RTC of Manila, CC would want
71this Tribunal to respect said relief and dismiss respondents claim lodged before the HKIAC. CC
72interposes the defense of equity that where the proceeding merely intended to oppress and vex
73the other party, an anti-suit injunction must be recognized. 4 CC emphasized that in the principle
74of comity and reciprocity, an anti-suit injunction that has been granted by a court of competent
75jurisdiction must be respected.
762. The Complainant
77Meanwhile, in its submission before the Arbitral Tribunal, Pampanga Energy Company (PEC)
78contended that CC made a distorted interpretation of the rulings of the Supreme Court of the
79Philippines when it stated that only the CIAC has exclusive and original jurisdiction over the
80dispute presented herein.5
81Citing the Philippine jurisprudence of China Chang Jiang Energy Corporation vs. Rosal
82Infrastracture Builders6, PEC refuted respondents claims by stating that the CIAC does not
83possess sole jurisdiction over construction disputes where parties have stipulated and filed for
84arbitration in another forum. In said case, the Philippine High Court held that notwithstanding
85the validity of Section 1, Article III, such does not mean that the parties may no longer stipulate

63 See Respondents Paper, Page 12

74 See Respondents Paper, Page 13
85 See Complainants Paper, Page 5
96 G.R. No. 125706, 30 September 1996

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86to submit their disputes to a different arbitral body. Instead, the law gives the parties an
87alternative forum before whom they may submit their controversies.
88PEC claims that for filing a Notice of Arbitration before the HKIAC several days before the
89respondent filed for arbitration before the CIAC, this Tribunal has first acquired jurisdiction on
90the matter.7 Also, the claimant submitted that under the doctrine of Kompetenz/Kompetenz, the
91arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the
92existence or validity of the arbitration agreement.8
93As to the matter of anti-suit injunction issued by the RTC of Manila, the claimant argues that
94such injunction may be validly disregarded by this Tribunal as the same is not a court of the seat
95of arbitration. According to PEC, only the courts of Hong Kong may issue such order since the
96seat of arbitration is Hong Kong, and not the Philippines.9
97IV. FINDINGS OF THE ARBITRAL TRIBUNAL
981. The Tribunal has jurisdiction over the dispute
99In resolving this dispute at hand, the Tribunal must first answer the question whether it has
100jurisdiction over the case since the other substantive issues raised in the pleadings are dependent
101to whether or not jurisdiction lies in the HKIAC.
102

True to the contentions of the claimant, the Tribunal, based on existing laws and

103jurisprudence, must answer the question on jurisdiction in the affirmative.

104

In claiming that the Tribunal has no jurisdiction in this case, the respondents cited

105Philippine laws and jurisprudence. One of this is E.O. No. 1008, Creating an Arbitration

117 See Complainants Paper, Page 7

128 See Complainants Paper, Page 11
139 See Complainants Paper, Page 11

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106Machinery in the Construction Industry of the Philippines. The respondent directed this Arbitral
107Tribunal to Section 4 which states:
108

The CIAC shall have original and exclusive jurisdiction over

109

disputes arising from, or connected with, contracts entered into by

110

parties involved in construction in the Philippines, whether the

111

dispute arises before or after the completion of the contract, or

112

after the abandonment or breach thereof. xxx

113

To further support their allegations that only the CIAC has original and exclusive

114jurisdiction over all construction disputes in the Philippines, the respondents relied on the CIAC
115Rules of Procedure Governing Construction Arbitration, particularly Section 1, Article III, (as
116cited in China Chang Jiang vs. Rosal Infrastracture Builders, HUTAMA-RSEA Joint Operations,
117Inc. v. Citra Metro Manila Tollways Corporation) to wit:
118

Effect of the Agreement to Arbitrate

119

Section 1. Submission to CIAC Jurisdiction An arbitration clause

120

in a construction contract or a submission to arbitration of a

121

construction dispute shall be deemed an agreement to submit an

122

existing or future controversy to the CIAC jurisdiction,

123

notwithstanding the reference to a different arbitral institution or

124

arbitral body in such contract or submission. xxxx

125

However, the law should be reconciled with the existing jurisprudence governing

126substantial issues involving jurisdiction in arbitral processes. It must be in the forefront of

127everyones minds that in relying on jurisprudence, it must be accentuated that pronouncements of

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128the Court should not be served in a piece-meal fashion and that the parties should not single out
129parts of the decision favorable to their position.
130

The Tribunal finds solace in the case of China Chang Jiang vs. Rosal Infrastracture

131Builders as cited by the petitioner.

132

In the abovementioned case, the Philippine Supreme Court enunciated:

133

Now that Section 1, Article III, as amended, is submitted to test in

134

the present petition, we rule to uphold its validity with full

135

certainty. However, this should not be understood to mean that the

136

parties may no longer stipulate to submit their disputes to a

137

different forum or arbitral body. Parties may continue to stipulate

138

as regards their preferred forum in case of voluntary arbitration,

139

but in so doing, they may not divest the CIAC of jurisdiction as

140

provided by law. xxx

141

xxx When the law provides that the Board acquires jurisdiction

142

when the parties to the contract agree to submit the same to

143

voluntary arbitration, the law in effect, automatically gives the

144

parties an alternative forum before whom they may submit their

145

disputes. That alternative forum is the CIAC. This, to the mind of

146

the Court, is the real spirit of E.O. No. 1008, as implemented by

147

Section 1, Article III of the CIAC Rules.

148

While both parties made reference to the case of China Chang Jiang, said case must be

149read in its entirety and not in a part and parcel form. While the Tribunal agrees with the
150respondents contention that a mere agreement to arbitrate vests CIAC the jurisdiction to take

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151over the case, such is only true when parties have not previously agreed to submit their dispute in
152a particular forum.10
153Thus, the respondents reliance on HUTAMA-RSEA Joint Operations, Inc. vs. Citra Metro
154Manila Tollways Corporation case is misplaced. In that case, the arbitration agreement in the
155contract did not provide for an institution where parties may submit their construction disputes.
156Said absence of a specific agreement on the appropriate institution/tribunal to handle the case
157automatically vests CIAC of original and exclusive jurisdiction over the matter.
158

The factual milieu in the case of HUTAMA is not present in the issue submitted before

159this Tribunal. In this case, it is clear that both parties agreed to submit their disputes to another
160forum, particularly the HKIAC. Therefore, when CC and PEC previously agreed to submit
161before the HKIAC tribunal, in effect, they have made CIAC as an alternative forum.
162

At this point, it may be relevant to define the Doctrine of Adherence of Jurisdiction. This

163rule states that once the jurisdiction of a court attaches, the court cannot be ousted by subsequent
164happenings or events, although of a character that would have prevented jurisdiction from
165attaching in the first instance; the court retains jurisdiction until it finally disposes of the case.11
166In the normal course of proceedings, a court or tribunal acquires jurisdiction over the person of
167the plaintiff through the submission of complaints or any initiatory pleading. When the claimant
168first submitted its Notice of Arbitration before this Tribunal, in effect, HKIAC being the agreed
169venue, already acquired jurisdiction. Applying the doctrine laid down in the China Chang Jiang
170case, CIAC becomes merely an alternative forum.

1710 China Chang Jiang vs. Rosal Infrastructure Builders, G.R. No. 125706, 30
18September 1996
1911 Regina Ongsiako Reyes vs. Commission on Elections and Joseph Socorro B. Ta,
20G.R. No. 207264, 22 October 2013

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171

In the same note, since HKIAC was first vested the authority to hear and determine the

172case, under the Doctrine of Adherence of Jurisdiction, it shall retain the authority to hear such
173until its final disposition. The mere objection of the respondents on jurisdiction is an event which
174would not oust the HKIAC tribunal of the power to render proper resolution of this controversy.
175

Moreover, to further bolster this Arbitral Tribunals jurisdiction in the present case, it is

176noteworthy to examine the very arbitration agreement entered into by PEC and CC. The records
177of this case provide:

178

By clause 31 of the engineering procurement and construction

179

contract, the parties agreed to the following:

180

31.1 Any unresolved dispute shall be referred to and finally

181

resolved by arbitration administered by the Hong Kong

182

International Arbitration Centre under the Rules, except as the

183

Rules may be modified herein. The arbitration proceedings shall

184

be conducted, and the award shall be rendered, in the English

185

language. The seat of arbitration shall be Hong Kong.

186

187

31.2 This clause and the parties agreement to arbitrate herein

188

shall be governed by the laws of Hong Kong.

189

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190

It is well emphasized that in arbitration proceedings, various laws, rules, and guidelines

191in the arbitral proceedings are observed in an order of hierarchy12 as follows:

192

I.Arbitration Agreement

193

II.

Arbitration Rules

194

III.

National Laws

195

IV.

International Arbitration Practice

196

V.

International Treaties

197

It is submitted that this hierarchy guidelines will help the arbitration tribunal to determine

198the existence and validity of arbitration agreements, jurisdiction, and granting of reliefs prayed
199for by the parties.

200

As exemplified in the above enumeration, the top of the hierarchy is the Arbitration

201Agreement, followed by Arbitration Rules, then by the National Laws, the International
202Arbitration Practice and the International Treaties.

203

The Arbitration agreement is the underpinning for the regulatory framework governing

204the private dispute resolution process 13 and it is the law between the parties. The agreement, as a
205binding stipulation between them, shall be followed by said parties in good faith. Since the
206arbitration agreement between PEC and CC clearly provided that Any unresolved dispute shall
2312 Moses, The Principles and Practice of International Commercial Arbitration (2012),
24Second Ed., p. 6
25
2613 Supra Note 4

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207be referred to and finally resolved by arbitration administered by the Hong Kong International
208Arbitration Centre under the Rules, except as the Rules may be modified herein, this stipulation
209validly consented by the parties, is dictated not only by public policy and also by law that it be
210faithfully recognized in any court to which this case is pending.

2112. Doctrine of Separability in relation to the Anti-suit Injunction

212In reality, the present controversy involves two distinct contracts in a single document. This is in
213conformity to the Doctrine of Separability which treats an arbitration agreement contained in a
214contract as a separate agreement from the contract itself.14

215When parties enter to a contract stipulating an agreement to arbitrate, they are in effect
216concluding two separate agreements.15 Both the Laws of Philippines and Hong Kong recognize
217this doctrine and are uniform in accepting and implementing this principle. This is elucidated in
218the case of Gonzales vs. Climax Mining Ltd16 which held:

219

The doctrine of separability, or severability as other writers call it,

220

enunciates that an arbitration agreement is independent of the main

221

contract. The arbitration agreement is to be treated as a separate

222

agreement and the arbitration agreement does not automatically

223

terminate when the contract of which it is part comes to an end.

224

2814 Greenberg, et al. International Commercial Arbitration An Asia-Pacific

29Perspective (2010). First Ed. Par. 4.36, p. 155.
3015Id at Par. 4.47, p. 158.
3116 G.R. No. 161957, 22 January 2007.

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225

The separability of the arbitration agreement is especially

226

significant to the determination of whether the invalidity of the

227

main contract also nullifies the arbitration clause. Indeed, the

228

doctrine denotes that the invalidity of the main contract, also

229

referred to as the "container" contract, does not affect the validity

230

of the arbitration agreement. Irrespective of the fact that the main

231

contract is invalid, the arbitration clause/agreement still remains

232

valid and enforceable.

233

234

The separability of the arbitration clause is confirmed in Art. 16(1)

235

of the UNCITRAL Model Law and Art. 21(2) of the UNCITRAL

236

Arbitration Rules.

237

238In the same way the High Court of Hong Kong ruled:

239

The problem with this argument is that it does not take into

240

account that the arbitration agreement contained in another

241

written agreement has a life of its own. The doctrine of

242

separability has now been enshrined in the Model Law and has

243

been fully accepted in case law in England and Hong Kong. x x x

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244

In effect, the arbitration clause contracted by the party is separate from the document

245where it is contained. Thus, the law that will govern the arbitration and the contract must be
246separate.17 Since the two agreements have different purposes, different laws must apply to each.18

247Considering the premises, the agreement entered and expressly stipulated by the parties, it can be
248now inferred that the Engineering and Procurement Contract (EPC), which is the main contract,
249is governed by the Philippine law. Meanwhile, Clause 31, another separate and distinct contract
250pertaining to the arbitration agreement, is governed by the laws of Hong Kong.

251

The contention of CC as to the invalidity of the arbitration clause supported by the cases

252held by the Supreme Court is misplaced. Considering that Hong Kong Law is the governing
253decree over the Arbitration Agreement (Clause 31) and Philippine Law applies only to the EPC
254Contract, and since the agreement not to apply E.O. No. 1008 and R.A. No. 9285 is contained in
255Clause 31, judicial pronouncements and laws of the Philippines are no longer controlling.
256

Furthermore, the Philippine cases cited by CC are not similar to facts and circumstances

257of the instant case. None of these cases portray a fact wherein the parties have chosen two
258different laws to separately govern their main contract and their arbitration agreement.
259

As evidenced by paragraph 31.1 of the arbitration clause, both parties have intended to be

260governed and be bound by the rules of HKIAC. And, to further clarify their intentions, they even
261agreed to submit to the domestic laws of Hong Kong, in case an arbitration proceeding is
262commenced, as what actually transpired in this case.

3417 Supra note 19 at Par. 4.50, p. 159.

3518Supra note 22 at Par. 4.50, pp. 159-160.

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263

Considering the principle of doctrine of separability and its effect to the contract, the

264claim of the respondent regarding the applicability of certain Philippine Laws supposedly
265conferring jurisdiction to the CIAC is untenable, since it is Hong Kong Law, not Philippine Law,
266which governs the Arbitration Agreement.
267

As to the matter of the Anti-suit injunction ordered by the Manila Court on November 25,

2682013, the Tribunal is of the opinion that the said order cannot stay, much less, intervene with the
269proceedings of this Arbitral Tribunal in determining jurisdiction and deciding upon the merits of
270the case.
271

The respondents prayer to recognize said anti-suit injunction order issued by the RTC of

272Manila on the basis of the Arbitration Ordinance of Hong Kong (CAP 609) stating that the relief
273granted by courts outside Hong Kong should be respected is a fact in which this Tribunal cannot
274agree.
275

Indeed, there is a clear misinterpretation of the Arbitration Ordinance in connection with

276the facts prevailing in this dispute. PEC and CC, as evidenced by their arbitration agreement,
277have clearly agreed to set Hong Kong as the seat of arbitration. Being the seat of arbitration it
278actually serves as the legal domicile of the arbitration. 19 Therefore, it is only the courts of Hong
279Kong that could provide interim reliefs, as in this case, the anti-suit injunction sought by the
280respondent.
281On the final note, this Tribunal, in finding that it has jurisdiction in this case, is guided by an
282established principle (Kompetenz/Kompetenz)20 in arbitration proceedings that arbitrators are

3719 Belohlavek, Importance of the Seat of Arbitration in International Arbitration:

38Delocalization and Denationalization of Arbitration as an Outdated Myth, 31 ASA
39BULLETIN 2/2013 (JUNE), at p. 263.

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283vested with the ability to rule on their own jurisdiction and such is almost fully accepted as a part
284of a long founded practice in international arbitration.21
285
286
287V. CONCLUSION
288PREMISES CONSIDERED, with the failure of the respondent Construction Company to prove
289that this Tribunal lacks jurisdiction to hear the dispute, the members of this Honorable Tribunal
290hereby GRANTS the petitioner Pampanga Energy Companys prayer to continue with the
291arbitral proceedings. The tribunal rules in the NEGATIVE as to the recognition of the anti-suit
292injunction filed by the respondent before the Regional Trial Court of Manila.
293

This Tribunal orders the petitioner and respondent to file their respective memoranda to

294support their position as to the merits of this case.

295

SO ORDERED

296
297
298
299

Rogel, Angeline P.
Chairman

300
301
302
4120 This empowers an arbitral tribunal to decide on any and all objections as to its
42own jurisdiction. This doctrine, which is followed in most jurisdictions, provides that
43arbitrators are competent to determine their own competence.
4421 Greenberg, et al. International Commercial Arbitration An Asia-Pacific
45Perspective (2010). First Ed. Par. 5.46, p. 214. Supra note at p. 91.

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303
304

Pineda, Paul Christopher G.

Arbitrator

305
306
307

Claveria, Carina Amor D.

308

Arbitrator

309
310
311
312

27th September 2015

313Hong Kong International Arbitration Centre

31438th Floor Two Exchange Square
3158 Connaught Place
316Hong Kong S.A.R.
317China
318Telephone: (852) 2525-2381
319Fax: (852) 2524-2171
320Email: sg@hkiac.org
321

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