(ciac arbitration.ppt; a preferred alternative to court litigation).ppt

8/10/2019 (CIAC Arbitration.ppt; A Preferred Alternative to Court Litigation).ppt

1/38

Topic:

CIAC Arbitration: A Preferred

Alternative To Court Litigation

Lecturer:Atty. Eduardo R Ceniza


2/38

Atty. Eduardo R. CenizaFCIArb, FHKIArb, FSIArb, FPIArb

President, Philippine Institute ofConstruction Arbitrators & Mediators

Chairman, Philippine Institute of

Arbitrators

Chairman, Philippine Chapter (East Asia Branch), CharteredInstitute of Arbitrators

Vice President for External Relations, Philippine DisputeResolution Center

Managing Partner, The Law Firm of Eduardo R Ceniza &Partners


3/38

What is Arbitration?

Arbitration is "a voluntary dispute

resolution process in which one or morearbitrators, appointed in accordance withthe agreement of the parties, or rulespromulgated by the arbitral institution,resolves a dispute by rendering an award.Otherwise stated, arbitration is a voluntaryprocess of dispute resolution where a

neutral third party renders a final andbinding decision after each side has anopportunity to present its viewSection 3(d), ADR Act of 2004.


4/38

Relevance of CIAC Arbitration to

the Construction Industry

With the rapid growth and expansion of the

construction industry in the Philippines, it isincreasingly important for the stakeholders in theconstruction industry --builders, contactors, andsuppliers -- to have an established method of

resolving construction disputes speedily, efficientlyand cost-effectively. When disputes arise in thecourse of construction contract, parties often preferto settle them privately and informally, in a

businesslike fashion that will enable them tomaintain their business relationship. Arbitration isdesigned for just such occasions, in that it can bedesigned for quick, practical and efficient resolution.


5/38

Unlike a judicial process, arbitration isconducted outside the court system by

impartial arbitrators who are selected bythe parties based on criteria that best fitsthe nature of the contract. Arbitration isusually conducted by either one arbitrator

or a tribunal of three arbitrators with thescope of arbitration decided by the partiesand memorialized in the arbitration clauseof their contract. The parties usuallynegotiate the arbitration clause at thesame time they develop the initial contract.


6/38

Arbitration allows the parties greaterflexibility than a court proceeding. Parties

can decide to have abbreviated timeperiods in filing their submissions, theplace where the arbitration will be

conducted, the submission of affidavits inlieu of oral testimony of witness, and howformal the process will be.


7/38

Construction Arbitration In The Philippine

Recognizing the need to encourage the early andexpeditious settlement of disputes in the Philippine

construction industry, Executive Order No. 1008was

issued on February 4, 1985. This law vested the

Construction Industry Arbitration Commission (CIAC)

with original and exclusive jurisdiction over disputes

arising from, or connected with, contracts entered into

by parties involved in construction in the Philippines,provided the parties have agreed to submit the

dispute to voluntary arbitration. Sec. 4, EO No. 1008.


8/38

Republic Act No. 9285 (the ADR ACT of2004)specifically provides that arbitration of

construction disputes shall continue to begoverned by EO No. 1008. The ADR Act of2004 expanded the jurisdiction of CIAC byproviding that the original and exclusive

jurisdiction of CIAC over constructiondisputes shall include those who are boundby an arbitration agreement, directly or byreference whether such parties are projectowners, design professionals, consultants,quantity surveyors, bondsmen or issuers ofan insurance policy in a construction project.

Sections 34 & 35 ADR Act of 2004.


9/38

CIAC Arbitration versus Litigation

There is increasing recognition throughout

the modern world that arbitration is themost effective way of resolvingcommercial disputes, includingconstruction disputes. The demand for

commercial arbitration as a mode ofdispute resolution --- and particularlyinternational commercial arbitration --- is

growing year by year in line with theexpansion of transnational commerce andtrade and the rapid globalization of theworld economy.


10/38

The dispute resolution mechanisms provided byEO No. 1008, as supplemented by the ADR Actof 2004, were designed specifically for

construction disputes in both in the domesticand international context.The parties totransnational construction transactions, for

example, are invariably of different nationalities,with different linguistic, legal and culturalbackgrounds. As expected, they may havestrong distrust of a foreign judicial system,

accompanied by a lack of information about thecourse to follow. These difficulties arecompounded by the perceived disadvantagesone party may face in submitting to the judicialprocedure in the other partys home ground.


11/38

I shall now discuss with some detail some of

the important reasons why constructionarbitration, in the Philippine setting, ought tobe a preferable, if not an altogether a

compelling choice, as against court litigation,for the resolution of construction disputes.


12/38

Speed and Economy

It is a sad commentary that the wheels ofjustice in the Philippines grind ever so slowly.The principal reason for this is the clogged

dockets of the courts, from the lowest to thehighest court. As a result, litigation isinvariably long and protracted; and cases aredecided after many years. In contrast, in

CIAC arbitration are decided, on theaverage, very much faster. Let me share withyou some vital statistics from the records of

CIAC.


13/38

80% of arbitration cases in CIAC are resolvedwithin 6 months from the signing of the Terms ofReference.

80% of cases filed with CIAC for mediation aresettled within 30 days from acceptance of

appointment by the mediator.

20% of cases filed with the CIAC are resolvedbeyond 6 months from the signing of the Terms of

Reference; and the cause for the delay isinvariably due to the parties asking for extensionof time to file their submissions or moving forpostponement of hearing dates.


14/38

Arbitrators are required by the rules to decidethe case within the said 6 months period,although the Commission may grant

extensions for good reasons. Absent goodreasons, arbitrators are penalized withwarning, or partial/full forfeiture of their fees,or suspension to serve as arbitrators.

On the average, and depending on thecomplexity of the issues, cases are decidedby the sole arbitrator or the Tribunal between8 to 12 months from the filing of the requestfor arbitration.


15/38

I have been a litigator for the last 50 years;

and I dare say that I do not know of anytrail court in the Philippines today that canapproximate, and much less match, the

speed at which the CIAC is able toresolved cases filed with it.


16/38

Specialized Competence of Arbitrators

Judicial systems do not allow the parties toa dispute to choose their own judges. Incontrast, arbitration offers the parties the

unique opportunity to nominate persons oftheir choice as arbitrators, provided they areindependent and impartial. This enables the

parties to have their dispute resolved bypeople who have specialized competence inthe relevant field.


17/38

This advantage of arbitration over courtlitigation is of special importance in the

Philippines. In the particular case of CIACarbitration, the parties to a constructiondispute can choose their arbitrators from aroster of CIAC-accredited arbitrators. The

roster of arbitrators is composed ofprominent engineers, architects, lawyersand accountants who have undergone andpassed a special course in constructionarbitration administered by CIAC. They arearbitrators with specialized competence inresolving construction disputes


18/38

What about the courts? It used to be that onlythe most competent lawyers with

unquestionable integrity were appointed to thecourts. Unfortunately, things have changed.

Although the Judicial and Bar Council

recommends to the President of the Republicthe nominees for appointment to the courts,after supposedly reviewing and scrutinizing thequalifications of the candidates for appointment,

the President, in recent and contemporarytimes, has used the appointing power to rewardpolitical favors, without due consideration to the

merits of the appointee.


19/38

As a result, lawyers who are ill-equipped forthe bench, but who have strong political

backing, get appointed as judges. Pleasedont get me wrong. My statement is not to betaken as an indictment of all trial judges forincompetent. To be sure, there are many

judges trial judges are competent and whopossess a high degree of integrity. There areother judges who do not have the training, theaptitude or the experience to try complexcommercial cases and much less complexconstruction disputes. And for this reason,often times, they render atrociously wrong

decisions.


20/38

In arbitration, parties are allowed to choosearbitrators with expertise in their business. For

example, if the dispute deals with defects inthe architectural design of a building, theparties may want the Tribunal to be composedof a mix of an architect, a civil engineer and alawyer; or if the dispute relates to defects inthe structural design of a building, the partiesmay want the Tribunal to be composed of a

mix of a structural engineer, a civil engineerand a lawyer. These options are not availablein court litigation.


21/38

A judge, who is a lawyer with no exposure toconstruction, will have to decide construction

disputes that involved complex issues ofengineering, architecture, accounting andstandard conditions of contract, such as, forexample, FIDIC, and the danger is that hemay not be competent to properly evaluatethe technical evidence and the equallytechnical submission of the parties. This may

result in a technically defective or erroneousdecision.


22/38


23/38

(a) Place of arbitration--- by agreement of

the parties, the place of arbitration canbe seated in any city in the Philippines;

(b) Procedures to be applied--- may bestipulated by the parties in ad hocarbitration and even in institutional

arbitration the parties may by agreementmodify the rules of procedure of theinstitution;


24/38

(c) Nationality of the arbitrators--- in CIAC,

the Tribunal may be composed of

Filipino arbitrators as well a foreign

arbitrator; and

(d) Legal representation--- the parties can

be represented by Filipino lawyers or

foreign lawyers.


25/38

In contrast, these key factors are notwithin the control of the parties in court

litigation. In the Philippines, venue isgenerally fixed by the Rules of Court; theproceedings are governed by the Rules of

Court; all judges must be Filipino citizens;and only lawyers who are Filipino citizensand who have been admitted to thepractice of law in the Philippines canrepresent the parties in court.


26/38

Final, Binding Decisions

Unlike the decisions made by Regional TrialCourts which can be appealed to the Court of

Appeals by ordinary appeal, an appeal from aCIAC award can be appealed to the Court of

Appeals by petition for review only. In anordinary appeal, the party appealing can raisein the appeal errors of fact and errors of law;

and the appeal can drag on for many years.In the Courts of Appeals docket priorities,ordinary appeal ranks last, at the bottom of

cases to be decided.


27/38

In contrast, in a petition for review---which is the mode of appeal from a CIACaward --- the findings of fact of the ArbitralTribunal when supported by substantialevidence are usually adopted by the Courtof Appeals and the review is normally

limited to errors of law. For this reason, apetition for reviewis normally decided bythe Court of Appeals much more

expeditiously than it would an ordinaryappeal.


28/38

International Recognition and Enforcement ofArbitral Awards

International commercial arbitration is hailedas affording the most substantial benefit ofproducing an award that is entitled torecognition and enforcement in 134 countriesthat have acceded to the New YorkConvention of 1958. This regime of almostuniversal recognition and enforcement

compares most favorably with that regulatingthe recognition and enforcement of judgmentsrendered by foreign courts. Those judgmentsare recognized and enforced only when

domestic law or a relevant treaty so provides.


29/38

The general rule in civil law systems, like that of thePhilippines, is that foreign judgments are recognizedor enforced on the basis of reciprocity, with frequent

uncertainty as to what form of reciprocity is required.

In common law countries, foreign judgments aregenerally recognized and enforced, but courts retain a

significant measure of leeway.

Generally, however, the liberality in the recognitionand enforcement of foreign arbitral awards prescribedby the New York Convention stands in mark contrastto the uncertain fate that awaits foreign judgments indomestic courts


30/38

Let me illustrate my point. Supposing we have aconstruction contract between a PhilippineCompany, the owner, and a Korean

Construction Company, the contractor, for theconstruction of a power plant in Cebu. The totalcost of the project is, say, US$ one billion. Adispute arises between the owner and the

contractor and, despite negotiations made inearnest, they failed to resolve the disputeamicable. The Philippine Company has a claimof US$ 200 million against the contractor. If the

owner filed its claim in a Philippine court and,after long and protracted proceeds, gets ajudgment in the amount of US$ 200 million, plusattorneys fess and cost of suit, how does the

owner enforce the judgment?


31/38

B t if th t d f bit ti b f th


32/38

But if the owner opted for arbitration before theCIAC and obtained an award in the amount ofUS$ 200 million plus attorneys fees and cost of

arbitral proceedings, the final award can beenforced in South Korea as a foreign awardunder the provisions of the New YorkConvention, of which both the Philippines and

South Korea are signatories. The procedure forrecognition and enforcement under the NewYork Convention is quite simple. The partyapplying for recognition and enforcement shallattach to the application (i) the dulyauthenticated original award or a duly certifiedcopy thereof and (ii) the original arbitrationagreement or a duly certified copy thereof.


33/38

Private and Confidentiality

Arbitration proceedings are not open to thepublic, and only the parties themselves, theirwitnesses and their attorneys can attend the

proceedings. Only the parties, through theirrespective counsel, receive copies of theaward. Because of the confidentiality of theproceedings, the parties can expect to keep

their trade secrets private from third parties.In contrast, court proceedings are open tothe public, and court records are publicrecords.


34/38

CIAC: A Modern Arbitral Center

CIAC has adopted as its own Revised Rules

of Procedure Governing ConstructionArbitration, which in content,comprehensiveness, clarity and style can

very well compare with rules of procedure ofleading arbitral institutions, such as the ICCInternational Court of Arbitration, the HongKong International Arbitration Center, the

Singapore International Arbitration Centerand the Philippine Dispute ResolutionCenter.


35/38

I will give you four good reasonswhy youshould opt for CIAC arbitration of yourconstruction disputes, rather than tolitigate your disputes in the courts.


36/38

1. CIAC is a modern arbitration institution forconstruction arbitration.It was founded in1985 and its roster of accredited membersinclude retired judges and justices,prominent lawyers, distinguished professorsof law, prominent engineers, architects,

accountants and contractors.2. CIAC can provide parties with administrativeand physical facilities for arbitrationproceedings,including an experienced

secretariat, meetings rooms and the use ofcomputers, fax machines, photocopyingmachines, etc.


37/38

3. CIACs administrative fees as well asarbitrators fees are very reasonable

compared to the fees charged by the ICCInternational Court of Arbitration and theother arbitral institution in the region.

4. Finally, why litigate if you can arbitrate youconstruction disputes before the CIAC, with

all the advantages I have earliermentioned?


38/38

THANK YOU

(ciac arbitration.ppt; a preferred alternative to court litigation).ppt

Documents