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R.A. 9285 defined it as the freedom of the party (should be parties) to make their own arrangements to resolve their disputes (see Sec. 2).
It is contractual by nature.
It is an inherent right. Parties entered into contracts even before governments and courts came into being.
Accordingly, the law affirmed, rather than granted, the right or freedom.
BASIS
The basis is the underlying concept behind the freedom to contract: a party who reached the age of majority is an adult, and is presumed to have sufficient discretion to make informed decisions. He may, therefore, create legal relations by contract. In the same manner, he also has the freedom to make his own arrangements in resolving his private disputes.
Again, contractual. It is valid if valid as a contract. Note: Most of the grounds to challenge the jurisdiction of an arbitral tribunal and many of the grounds to challenge an award are grounds to attack a contract or based on contractual precepts. The other grounds are based on the judicial constituent element of an arbitration.
On the availability of a merits review of arbitral awards (in agreement based arbitration), for example, one will conclude that it is available if he were to look at the law first and the stipulation thereafter.
The correct approach is to look at the contract first, and thereafter determine if the contract contravened mandatory provisions of law. In agreement based arbitration, our example, the contract is to abide by the decision of the arbitral tribunal. The conclusion, therefore, is that a merits review is not available.
Principle of Finality of Award is Contractual x x x arbitrators are judges chosen by the parties to decide the matters submitted to . them, finally and without appeal x x x (Burchell v Marsh, 58 U.S.. 344, 15 L.Ed. 96 (1854).
The essence of the arbitration process is that an arbitral award shall put the dispute to rest x x x. Arbitral finality is a core component of the parties agreement to submit to arbitration. Thus, an arbitration decision is final and conclusive because the parties have agreed that it be so x x x. (Stasz v Schwab).
The applicable rules are the contractual precepts. Our interest, as a general proposition, should be on:
The age of consent, rule on capacity to act and the circumstances modifying/limiting capacity to act The principle of the autonomy of contracts The rule that contractual stipulations are the law between the parties The general limitation on contractual autonomy The other limitations on contractual autonomy
CORRELATIONS
Age of consent: formerly 21, but reduced to 18 by R.A. 6809. Capacity to act and circumstances limiting capacity to act see NCC Arts. 37 and 39. Note the rules involving corporations, government entities, the rule on agency. Note also that capacities are governed by the national/domiciliary law of the party involved.
CORRELATIONS
The autonomy of contracts contracting parties may freely stipulate, and as a general proposition their stipulation is the law between them. (see NCC Arts. 1159 and 1306).
CORRELATIONS
Just like contractual autonomy, party autonomy in the resolution of disputes is also not absolute.
Correlation: autonomy contrary to public order, 1306). The limits of contractual The stipulation must not be law, morals, good customs, and public policy (See NCC Art.
As a general proposition, the limitation refers to matters that are not subject to contract, e.g. most criminal (but not civil) liability, matrimonial disputes other than those involving property and custody of children, civil status of persons, the jurisdiction of courts, and future legitime (see R.A. No. 9285 Sec. 6). In certain instances, it may arise from the public policy to protect classes with weak bargaining positions, e.g., the labor contracts exception if covered by our Labor Code (ibid).
Consumer arbitration under the Consumers Act also limits party autonomy as consumers are classes with weak bargaining positions. This public policy may also prevent arbitration of disputes falling under the HLURB and DAR jurisdictions. The limitation may also arise from public policy declarations, such as in CIAC arbitration.
There is hereby declared to be the policy of the State to encourage the early and expeditious settlement of disputes in the Philippine Construction Industry (E.O. 1008, Sec. 2, Declaration of Policy)
Agreements cannot contravene mandatory provisions of law. The stipulation between the parties is the law between them as long as the stipulation does not contravene any mandatory provision of law. Many provisions in contract law are default provisions. They apply in the absence or deficiency of agreement.
One type renders the stipulation void but does not become part of the contract between the parties. Example: the not less than 1 yr. limitation re prescriptive period applicable to insurance contracts. The other type is part of the contract between the parties. Example: the provision granting CIAC exclusive and primary jurisdiction over domestic construction disputes if an arbitration clause were present. (But see China Chiang Jiang).
NOTE: In local text books, distinctions are drawn between mandatory and directory provisions. Directory provisions have a broader concept than default provisions. The concept of default provisions is included within the concept of directory provisions.
In agreement based arbitrations, UNCITRAL Model Law 1985 Art. 19.2 introduced the concept of arbitrator discretion.
Note that arbitrator discretion is available only if (1) its exercise will not contravene any mandatory provision of law; (2) there is no agreement on the matter; and (3) there is no default provision of law.
Mandatory provisions in arbitral institutions are few and far between. In ICC Rules the provisions concerning the fees and those involving the award, which should be reasoned, are mandatory. UNCITRAL Rules 1976 has a mandatory provisions clause in its Section I Article 1.2.
UNCITRAL Rules 1976 Section I Article 1.2. These Rules shall govern the arbitration except that where any of these Rules is in conflict with a provision of law applicable to the arbitration from which the parties cannot derogate, that provision shall prevail.
Arbitral institutions make use of default provisions those with the phrases unless otherwise agreed upon by the parties, subject to the agreement between the parties, and similar words. ICC Rules has several default provisions. UNCITRAL Rules 1976 has a general default provisions clause in its Sec. I Art. 1.1.
DYNAMICS: ILLUSTRATION
In their arbitration agreement, the parties agreed that one of them can appoint two out of the three arbitrators. Valid? Answer: No. This contravenes the principle of equality between the parties, a mandatory rule see MAL Art. 18, also NCC Art. 2045. (Magellan Capital Management Corporation vs. Zosa, 355 SCRA 157 [2001])
DYNAMICS: ILLUSTRATION
In an arbitration, the parties cannot agree on whether or not the award shall be a reasoned award. May the arbitrator in the exercise of his discretion insist that the award shall be without reason? Answer: No. The default legal provision is that the award should be with reasons. see MAL Art. 31.2; also R.A. 9285 Sec. 33.
DYNAMICS: ILLUSTRATION
In an ICC arbitration, the parties agreed that the award shall be without reason. Valid?
Answer: No. Under ICC Rules the rule that the award should be with reasons is mandatory. see ICC Rule Art. 25.2.
mode
of
dispute
Agree on the rules and procedures that will govern the chosen mode.
FIRST STEP
The first step involves making a choice from among the different modes of dispute resolution. Note that the choices involve varying degrees of party control, from almost unlimited to almost none.
Note also that, in certain instances, the parties have limited choices or no choice at all.
Jurisdictional
Arbitration
Statutory Arbitration
Litigation
SECOND STEP
Any
dispute arising out of or relation to this contract shall first referred to mediation before any the parties could go to court (or arbitration, as the case maybe).
in be of to
The clause left many unanswered questions that may become bones of contention once a dispute arises. It could in fact be used by a recalcitrant to delay the resolution of the dispute.
It is actually worse in Phl because of the definition of court referred mediation in .R.A. 9285 Sec. 3.m.
an
several
The difference is that, this time, our arbitration law provided default provisions.
The default provisions are the rules that will apply in the absence or in case of deficiency of agreement between the parties. They the default provisions fill-in the blanks to make the choice of the parties workable.
English as the default language in international arbitration; English or Filipino in domestic arbitration; in both cases also giving the arbitral tribunal some leeway by providing it with discretion to designate the language of arbitration (R.A. 9285, Sec. 31 and 33).
Metro Manila as the default place of arbitration but giving the arbitral tribunal some leeway by providing it with discretion to designate the place (R.A. 9285 Secs. 30 and 33).
The number of arbitrators (3); the manner of appointment (each party appoints one, and the appointed arbitrators to appoint the third); the institution of the appointing authority who will appoint the arbitrator for a recalcitrant or the third or sole arbitrator in default of agreement (Model Law Arts. 10 and 11).
Awards in international arbitrations are law based (Model Law Art. 33.1); R.A. 876 implies that awards in domestic arbitrations are equity based.
And thus, the unanswered questions in the sample clause were answered by the default provisions of law.
To allow viable choices To provide the rules, called default rules, that will apply should the agreement be deficient in the important categories of choice so as to make the choice of the parties workable.
Party autonomy has more to do with rights of choice, less with the problems of the judiciary. It is not intended to solve the problems of the judiciary.
Private disputes between private parties ought to be resolved through private means.
The connection is indirect and consequential, rather than direct. To the extent that parties would avail of dispute resolution methods other than litigation in resolving their disputes, to that extent also will courts have time for their more proper function, which is to resolve disputes involving public policy and interest.
BIBLIOGRAPHY
CIArb Teaching Manual (culled from various sources) PIArb Teaching Manual (culled from various sources) R.A. 876; UNCITRAL Model Law 1985; UNCITRAL RULES 1976; ICC Rules; R.A. 9285; New Civil Code; E.O. 1008