The Philippines - Economic Growth - usaid

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SOUTHEAST ASIA COMMERCIAL LAW & INSTITUTIONAL REFORM AND TRADE DIAGNOSTICS JULY 2007 THE PHILIPPINES fault of the obligor. 6 Generally, fault is presumed to exist except in cases of earthquake, floods, storm, or other “natural calamity”. 7 Remedy and Enforcement. Philippine law recognizes commonly used remedies for breach, including: the right to damages, 8 including liquidated and penalty damages; 9 the right to specific performance; 10 and the right to seek deficiencies. 11 Rights are also generally assignable to third parties. 12 Implied warranties of title, condition, and fitness are generally recognized in contracts involving the sale of goods. 13 In a breach of warranty case, the buyer can either withdraw from the contract or demand a reduction in price and, in either case, will be entitled to damages. Damages available for non-warranty breaches of sale agreements are set forth in Articles 1594-1598. Those remedies are consistent with most modern commercial codes. If the buyer breaches, the seller has a right to the price of the goods or the right to rescission and repossession. If the seller breaches, the buyer may demand specific performance. 14 In short, the Civil Code and case law generally provides an adequate legal structure to determine the law on contracts. Arbitration Law In 2004, the Alternate Dispute Resolution Act was passed which adopted the Model Law in International Commercial Arbitration (Model Law) for international commercial arbitration. It also adopted sections of the Model Law in domestic arbitration proceedings which continue to be governed by the Arbitration law (R.A. 876). In addition, construction arbitrations are governed by a separate Construction Industry Arbitration Law (Executive Order 1008). The court system has, since approximately 2000, had a court-annexed mediation program which requires that almost all civil actions go through mediation. If that fails, such actions then go to a judge-led settlement conference. C. Implementing Institutions Courts The basic court structure includes municipal (outside Manila) and metropolitan trial courts (within Manila) (first instance courts), Regional Trial Courts (second instance courts), and Courts of Appeal. Because the First Instance Courts’ jurisdiction is limited to smaller amounts in controversy, most commercial contract disputes will fall within the jurisdiction of the Regional Trial Courts. Regional Trial Courts are courts of general jurisdiction which also handle criminal cases. In Manila, a typical Regional Trial Court’s caseload is approximately 30 percent civil cases. Even Regional Trial Courts that have been designated as special commercial courts to handle some intellectual property, 6 Id. at Article 1262. 7 Id. at Article 1262. 8 Id. at Article 1170. 9 Id. at Articles 1226-1230. 10 Id. at Article 1165. 11 Id. Article 1177. 12 Id. at Article 1112. 13 Id., Articles 1547, 1562-1566. 14 Id., Article 1598. 22
SOUTHEAST ASIA COMMERCIAL LAW & INSTITUTIONAL REFORM AND TRADE DIAGNOSTICS JULY 2007 THE PHILIPPINES corporate reorganization, and corporate disputes, are put on the case raffle and therefore carry criminal cases on their docket. The Regional Trial Courts face a number of challenges. They are not computerized and there is no uniform case management system. Judges handle their own calendaring systems. Continuous trial days do not exist at the Regional Trial Court level. The judges recently received living allowances which effectively doubled their pay, but their staffs are underpaid. Payment of facilitation fees to court staff and judges is presumed to be a fact of life, as described by many interviewed for this report. While the Philippines has a large number of law schools, judges are unable to use externs or volunteer law clerks to help them with research because the acceptance of such “free” services would violate the anti-corruption laws. According to some studies the situation is not improving. A checklist of steps needed to enforce a contract in the Philippine courts has been developed by the World Bank as part of its Doing Business reports. It includes 25 steps. The time needed to enforce a contract increased to 360 days in 2006 from 164 in 2004. While these numbers rank highly among the other countries assessed as part of the SEA CLIR process, they still present barriers to adequate contract enforcement in a modern trading country. 15 Because of clogged court dockets, the perception that many judges are not well acquainted with commercial law, and concerns about corruption and payment of “unofficial” fees, most lawyers interviewed indicated that they try to avoid the court system in resolving contract disputes. An exception exists for collection, property foreclosure, and rent eviction matters where the creditor/landlord may have few alternatives to the court and may also need to use the sheriff for executions and evictions. Government Procurement Policy Board Contracts which fall under the Government Procurement Act are subject to the regulatory authority of the Government Procurement Policy Board (GPPB), which has its own set of rules and regulations. The GPPB issues procurement manuals, public bidding documents, checklists, and sample forms. It also issues regulatory opinions about public contracts, such as opinions on the validity of contract extensions, setting prequalification procedures for certain bids, etc. Breaches of a Government Procurement Act contract are not resolved by the GPPB. Arbitration Boards Court-Annexed Mediation. Court-annexed mediation refers to the 2001 program of mediation mandated by the Supreme Court. It is administered by the Philippine Mediation Center (PMC), which is operated by the Philippine Judicial Academy, a body with the primary responsibility of selecting and training judges. PMC units have been established throughout the country. Initial success rates have been very high, especially in the courts of first instance. However, success rates in the Regional Trial Courts , especially the commercial courts, have not been as good. Alternate Dispute Resolution. The Alternative Dispute Resolution Act of 2004 created an office for Alternate Dispute Resolution, an agency attached to the Department of Justice. As of the date of this assessment, the office was not yet fully established. However, a number of business groups are supporting and apparently funding staff for a “National Center of Mediation” where over 30 business mediators have received training. Nine of those organizations, including the Philippine Chamber of Commerce, have reportedly entered into covenants to resolve disputes through the Center with other signers of the covenants. 15 See www.doingbusiness.org. Among the other countries in the SEA-CLIR assessment, the Philippines was first in terms of steps and second in time: Cambodia: 31 steps, 401 days; Indonesia 34 steps, 570 days; Lao People’s Democratic Republic (PDR) 53 steps, 443 days; and Vietnam 37 steps, 295 days. 23
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The Philippines - Economic Growth - usaid

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