Philippines – Direct To The Supreme Court.

25 August 2021

 

On 11 May 2021, the Supreme Court rendered a decision, entitled Global Medical Center of Laguna Inc. v Ross Systems International, Inc. (G.R. 230112/G.R. 230119), which strengthened the substantive right to avail of arbitration as an alternative mode of resolving disputes.
 

Prior to this decision, the Construction Industry Arbitration Commission (CIAC), under Rule 43 of the Rules of Court, was one of the quasi-judicial agencies the decisions of which may be appealed to the Court of Appeals (CA) with respect to issues of fact or law, or both. Direct recourse to the Supreme Court, regarding arbitral awards issued by the CIAC, could not be availed.
 

The Supreme Court noted that many parties prefer to avail of the speed, flexibility, cost efficiency, and industry knowledge that autonomous arbitration can provide in tribunals such as the CIAC.
 

The inclusion of the CIAC under Rule 43 was said to have “weakened if not, altogether destroyed the authoritative autonomy of the CIAC, as well as eroded if not totally obliterated its very nature as the expedited, economical, independent alternative dispute resolution to the otherwise protracted and costly court litigation.”
 

Hence, this over-inclusion was held to be invalid for overstepping the positive limitation of the rule-making power of the Supreme Court under Section 5(5), Article VIII of the Constitution on non-modification of substantive rights.
 

The Supreme Court en banc clarified that: “[f]or the avoidance of doubt, the Court now holds that judicial review of CIAC arbitral awards takes either of two remedial routes, depending on the issue being raised. First, if the issue raised is a pure question of law, the petition should be filed directly and exclusively with the Court, notwithstanding Rule 43. Second, in cases where the petition takes issue on the integrity of the arbitral tribunal and its decision, (i.e., allegations of corruption, fraud, misconduct, evident partiality, incapacity or excess of powers within the tribunal), or the unconstitutionality or invalidity of its actions in the arbitral process then the parties can and should appeal the CIAC the process then the parties can and should appeal the CIAC award before the CA under Rule 65, on grounds of grave abuse of discretion amounting to lack or excess in jurisdiction, where a factual review may then be had by the CA.”
 

This decision overrides Rule 19.7 of the Special ADR Rules which proscribes any filing of a special civil action of a petition for certiorari with the CA.
 

The Supreme Court elucidated that its: “act of including CIAC awards among those situations the appeal from which must be brought before the CA via Rule 43, instead of on a direct recourse to it as specified under E.O. 1008 [law creating the CIAC], did not provide a mere procedure of appeal of CIAC awards, but correspondingly diminished the substantive rights of parties who, pre-conflict, had elected arbitration as their speedier recourse in case of a dispute.
 

The Supreme Court added that this new precedent of carving out of the CIAC from the enumeration under Rule 43, along with the effective reversal of jurisprudence, should be applied prospectively.

To be clear, the decision enumerates the following guidelines with respect to the application of the ruling on modes of judicial review vis-à-vis CIAC arbitral awards:
 

1. For appeals from CIAC arbitral awards that have already been filed and are currently pending before the CA under Rule 43, the prior availability of the appeal on matters of fact and law thereon applies. This is only proper since the parties resorted to this mode of review as it was the existing procedural rules at the time of filing, prior to the instant amendment.

2. For future appeals from CIAC arbitral awards that will be filed after the promulgation of this Decision:
    

a. If the issue to be raised by the parties is a pure question of law, the appeal should be filed directly and exclusively with the [Supreme] Court through a petition for review under Rule 45.
 

b. If the parties will appeal factual issues, the appeal may be filed with the CA, but only on the limited grounds that pertain to either a challenge on the integrity of the CIAC arbitral tribunal (i.e., allegations of corruption, fraud, misconduct, evident partiality, incapacity or excess of powers within the tribunal) or an allegation that the arbitral tribunal violated the Constitution or positive law in the conduct of the arbitral process, through the special civil action of a petition for certiorari under Rule 65, on grounds of grave abuse of discretion amounting to lack or excess in jurisdiction.
 

The CA may conduct a factual review only upon sufficient and demonstrable showing that the integrity of the CIAC arbitral tribunal had indeed been compromised, or that it committed unconstitutional or illegal acts in the conduct of the arbitration.
 

3. Under no circumstances other than the limited grounds provided above may parties appeal to the CA a CIAC arbitral award.
 

This landmark decision is a welcome development for the speedy, efficient, and equitable resolution of disputes arising from construction contracts in the Philippines through the utilization of the technical expertise of the CIAC as a specialized institution.