The effects of globalization and the efforts of the government and the private sector to attract more foreign investments into the country have caused an influx of international commercial transactions. This heightened interest of foreign investors in the country certainly benefits the economy and can be sustained by making our business climate more conducive.

One way is to make our business processes adaptive to emerging trends and practices accepted by most jurisdictions in order for the Philippines to be globally competitive. This should also include our legal processes, particularly those involving modes of resolving international commercial disputes. 

Foreign parties normally look with disfavor toward court litigation before local courts in resolving disputes with local parties. Not only do they see court litigation as a slow process, they also perceive that local courts would have a natural bias in favor of local parties.

International commercial arbitration is an example of a legal process that has gained acceptance worldwide as the preferred mode of resolving disputes arising from global trade. Most international commercial contracts nowadays would provide for an arbitration clause among their standard provisions.

The Philippines is a signatory to the United Nations Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of 1958 (the New York Convention). Our arbitration laws have since been updated with the enactment of the Alternative Dispute Resolution (ADR) Act of 2004 (Republic Act 9285), which institutionalized international commercial arbitration. This law adopts the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (Uncitral) on June 21, 1985.

The ADR Act of 2004 declares the State policy to actively promote party autonomy in the resolution of disputes or the freedom of the parties to make their own arrangements to resolve their disputes, and encourages the use of arbitration and other modes of dispute resolution to achieve speedy and impartial justice and declog court dockets.

Arbitration is essentially a private process of resolving disputes. It is founded on party autonomy, which gives it distinct advantages over traditional court litigation.

In arbitration, the parties have the power, by agreement, to make their own arrangements in resolving their disputes. This is not possible in court litigation, where rigid rules of procedure are observed. Also, the proceedings, including the records, evidence and the arbitral award, being confidential, may not be published except with the consent of the parties or for the limited purpose of disclosing to the court relevant documents in cases where resort to the court is allowed.

International commercial arbitration, in particular, highlights the advantages of arbitration over court litigation in resolving disputes with a foreign element because the arbitration agreement can eliminate the intricate issues brought about by political and trade barriers and diverse legal systems of the contracting parties. Thus, the parties may agree, among other things, on the venue of the arbitration, which may be a neutral country and not any of the countries of the contracting parties; the law which is to govern dispute; the language to be used in the proceedings; and that the arbitrators be of a particular nationality or, conversely, that they be not of a certain nationality.

The Supreme Court, for its part, has expressly promoted resort to arbitration as a preferred mode of dispute resolution. In several decided cases, the Supreme Court recognized arbitration to be an inexpensive, speedy and amicable method of settling commercial disputes and helps unclog judicial dockets. It also regarded arbitration as the wave of the future in international civil and commercial disputes.

The Supreme Court has admonished courts to liberally construe arbitration clauses, and viewed the brushing aside of a contractual agreement calling for arbitration between the parties as a step backward. It, thus, laid down the doctrine that, provided an arbitration clause is susceptible to an interpretation that covers the asserted dispute, an order to arbitrate should be granted and any doubt should be resolved in favor of arbitration.

However, despite recent developments in our arbitration laws and jurisprudence, some are still unfamiliar with the processes involved in international commercial arbitration and its advantages over traditional court litigation. In entering into commercial contracts, parties are usually more concerned with the business aspect of the agreement and sometimes overlook the dispute-resolution clause, which is equally important.

They, thus, unwittingly accede to the dispute-resolution clause without fully understanding the process involved, and, consequently, fail to take full advantage of its benefits.

If properly advised on the matter, the parties, by agreeing to submit their dispute to arbitration, can anticipate potential problem areas, estimate the attendant costs and, in the process, agree on a procedure that suits their particular purpose. Thus, they can agree on a less rigid procedure for the submission of their claims and defenses, the presentation of witnesses, the authentication of documents or the inspection of goods or other property.

More important, the parties to an arbitration agreement can agree on the manner for the selection of impartial arbitrators who will decide the dispute. The costs and fees to be paid by the parties can also be estimated and agreed upon.

Information on the facilities and services offered by arbitration institutions administering international commercial arbitrations, such as the Philippine Dispute Resolution Center Inc. (PDRCI), the Singapore International Arbitration Centre, Hong Kong International Arbitration Centre, International Centre for Settlement of Investment Disputes, and others, are readily available. Thus, the parties can even simulate the arbitration process and estimate the costs before any dispute arises.  

Sadly, the dispute-resolution provision of a contract is sometimes closely examined by the parties only after the dispute has already arisen. In some instances, the party unfamiliar with the arbitration process would rather resort to the slower traditional court litigation in seeking redress. Indeed, a clearer understanding of international commercial arbitration and its benefits would afford parties to international commercial contracts with greater certainty and predictability, yet allowing the needed flexibility in resolving their disputes expeditiously and impartially through arbitration. This will lead to the greater acceptability of international commercial arbitration and will definitely be viewed positively by foreign investors when deciding to make investments in the country.

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Atty. Rafael Antonio Santos is a senior partner and the head of the Litigation Department of CVCLAW Villaraza Cruz Marcelo and Angangco (web site: www.cvclaw.com) and may be reached at rm.santos@cvclaw.com. His areas of practice are civil, criminal and corporate litigation, corporate rehabilitation, administrative law, telecommunications law, arbitration and alternative dispute resolution; and is a PDRCI-trained arbitrator. 

Disclaimer: This article has been prepared for informational purposes only and should not be treated as legal advice.

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