The Philippines - Economic Growth - usaid

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SOUTHEAST ASIA COMMERCIAL LAW & INSTITUTIONAL REFORM AND TRADE DIAGNOSTICS JULY 2007 THE PHILIPPINES freedom of the party to make their own arrangements to resolve their disputes.” 62 Section 25 states that “[i]n interpreting the Act, the court shall have due regard to the policy of the law in favor of arbitration.” Several international actors, including USAID’s Legal Accountability and Dispute Resolution Project, helped craft the Act. The ADRA represents a major step toward institutionalizing ADR as part of the Philippine legal architecture. The ADRA modified the previous major arbitration law enacted in 1953, and provides more guidance for international arbitration than the 1953 law. As stated in the ADRA, however, domestic arbitration shall continue to be governed by the 1953 law as amended by the ADRA. 63 Importantly, that chapter of the law incorporates in domestic arbitration many of the elements that apply to international arbitration. 64 International Commercial Arbitration (ICA) is governed by chapter 4 of the ADRA, which states that the UN’s Model Law on International Commercial Arbitration will control the arbitration process. 65 Chapter 4 adopts a broad definition of “commercial”; it appears several types of international disputes will be subject to the Act. 66 (“An arbitration is ‘commercial’ if it covers matters arising from all relationships of a commercial nature, whether contractual or not.”) Chapter 4 leaves open for interpretation several issues regarding its relationship to the UN’s Model Law. These issues, relating to how the Model Law will be interpreted in the Philippines, presumably will be decided by the Supreme Court. 67 The ADRA also governs the recognition and enforcement of foreign arbitral awards, and states that the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) applies. 68 The Philippines acceded to the New York Convention in 1958, but the ADRA provides domestic implementing legislation for it. Foreign arbitral awards, when confirmed by the relevant Regional Trial Court in the Philippines, shall be enforced “in the same manner as final and executory decisions of courts of law of the Philippines.” 69 With this language, the ADRA distinguishes foreign arbitral awards from foreign judgments. 70 Decisions by Regional Trial Courts with respect to foreign arbitral awards may be appealed to the Court of Appeals. 71 Like the chapter on mediation, chapter 4 also provides for confidentiality of the proceedings. Section 23 states that the “arbitration proceedings, including the records, evidence and the arbitral award, shall be confidential and shall not be published except (1) with the consent of the parties, or (2) for the limited purpose of disclosing to the court relevant documents in cases where resort to the court is allowed 62 R.A. 9285 (Apr. 2, 2004) 63 ADRA Sec. 32. 64 Id. at Sec. 33. 65 Id. at Sec. 19. 66 Id. at Sec. 21. 67 See Leslie Chew, “The New Philippine Arbitration Law: Some Preliminary Observations,” 31 J. Integrated Bar of the Philippines 75, 77 (2005). 68 Id. at Sec. 42. 69 Id. at A Sec. 44. 70 See id. “A foreign arbitral award when confirmed by a court of a foreign country, shall be recognized and enforced as a foreign arbitral award and not a judgment of a foreign court.” 71 Id. at Sec. 46. 65
SOUTHEAST ASIA COMMERCIAL LAW & INSTITUTIONAL REFORM AND TRADE DIAGNOSTICS JULY 2007 THE PHILIPPINES herein.” 72 If the latter exception to confidentiality applies, the court to which the information has been disclosed may issue a protective order to prevent further disclosure. The Alternative Dispute Resolution Act of 2004 reaffirms that “[t]he arbitration of construction disputes shall be governed by Executive Order 1008, otherwise known as the Construction Industry Arbitration Law.” 73 E.O. 1008 grants original and exclusive jurisdiction of construction disputes to the Construction Industry Arbitration Commission. A party may appeal a Commission decision to the Court of Appeals. Chapter 2 of the ADRA governs non-court-annexed mediation. Among the highlights of this chapter is that a settlement agreement achieved through mediation may be deposited with the clerk of the appropriate Regional Trial Court; any party may petition this Court to enforce the settlement agreement. 74 Court-annexed mediation tends to focus less on complex commercial disputes and more on familial civil disputes, local civil disputes, collection cases, and other types of low-dollar value disputes. While the Supreme Court has begun to allow appeals in cases involving the ADRA, it is still unclear how the Court will interpret most of the provisions of this potentially sweeping law. 75 C. Implementing Institutions The Philippine judiciary is not well-equipped to handle complex commercial transactions. As a result, many foreign investors will either draft provisions to settle disputes outside of the Philippine court system or avoid the country entirely. The perception of a lack of transparency and accountability at all levels of government—including the judiciary—deters foreign capital from entering the Philippines. One recent survey of expatriate businessmen in Asia placed the Philippines at the top of the list of most corrupt countries in the region and toward the bottom of the list of FDI. 76 Besides corruption, the lack of specialized expertise in complex commercial matters has also hampered the development of CDR. Special Commercial Courts exist for particular types of commercial disputes such as intellectual property and insolvency. However, these courts do not have the capability or capacity to resolve commercial disputes to the extent that investors would view the Philippine court system as reliable and effective. Further, because these courts are still burdened by criminal cases, they are unable to specialize sufficiently. It should come as no surprise that there has been a strong push toward resolving commercial disputes outside of the court system. There remains a shortage of qualified individuals, however, to train commercial mediators and arbitrators. The lack of accredited mediators and arbitrators who can effectively and reliably adjudicate commercial disputes inhibits investors from choosing to have their disputes resolved in the Philippines. One expert interviewed for this assessment noted that the various types of ADR (e.g., mini-trials and early expert evaluation) are like “Latin or Greek” to most of the relevant actors. Many attorneys also suggested that commercial ADR is not as popular as court litigation because attorneys receive more fees by taking a case to trial. Various organizations are attempting to supply commercial mediators and arbitrators to fill this void. The Philippine Chamber of Commerce (PCC) has established the Philippine Dispute Resolution Center, Inc. 72 Id. at Sec. 23. 73 Id. at Sec. 34. 74 Id. at Sec. 17(c). 75 See, e.g., Gonzalez v. Climax Mining Ltd., G.R. No. 161957 (Jan. 22, 2007); Insular Savings Bank v. Far East Bank and Trust Co., G.R. No. 141818 (June 22, 2006); Transfield Philippines, Inc. v. Luzon Hydro Corp., G.R. No. 146717 (May 19, 2006). 76 “Philippines Most Corrupt, Survey Says,” International Herald Tribune (March 13, 2007). 66
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