Philippines - Senate Bills Propose Mandatory ADR Mechanisms in Public-Private Partnerships

Legal News & Analysis – Asia Pacific - Phillipines - Dispute Resolution - International Arbitration

6 August, 2015

 

The Philippines has declared it a 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”. In recognition of this policy, the Philippine Supreme Court encourages the use of Alternative Dispute Resolution (“ADR”) mechanisms (particularly arbitration and mediation) in the resolution of disputes with the “greatest cooperation of and the least intervention from the courts”.  Interestingly, recent bills pending before the Philippine Congress on Public-Private Partnerships (“PPPs”) embody the state’s policy in favor of the use of ADR mechanisms. A PPP contract allows private participation in public infrastructure developments.

 

There are six PPP bills pending before the Philippine Congress all intended to update and replace the old Build-Operate-Transfer Law, by incorporating global best practices and valuable lessons learned from past PPP projects.

 

Notably, two of these bills, Senate Bill 2665 and Senate Bill 2672, provide for mandatory inclusion of ADR Mechanisms in all PPP contracts. These bills give the contracting parties “complete freedom to choose which venue and forum shall govern their dispute, as well as the rules or procedures to be followed in resolving the same”.

 

While welcome, the parties’ “freedom” to choose an ADR mechanism under these bills potentially clashes with the mandatory provisions of Executive Order No. 1008 (“E.O. No. 1008″) or the “Construction Industry Arbitration Law”.

 

Under E.O. No. 1008, the Construction Industry Arbitration Commission (“CIAC”) has “original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof.  These disputes may involve government or private contracts”.  The Philippine Supreme Court has held that “an arbitration clause in a construction contract shall be considered an agreement to submit an existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a different arbitration institution or arbitral body in such contract or submission”.[8]  Thus, CIAC is not divested of jurisdiction even if the parties refer their dispute to another arbitral body.  In this sense, and in so far as the dispute arising from a PPP contract may be considered as a construction dispute, the “freedom” to choose the rules, forum and venue for the ADR mechanism, under the proposed PPP laws, appear to be inconsistent with E.O. No. 1008.

 

The pending bills are currently being reviewed and deliberated on by the Senate’s Committee on Ways and Means.  It is hoped that this potential inconsistency will be addressed in the review process in Congress before either bill is approved.

 

 

For further information, please contact:

 

Donemark Calimon, Partner, Quisumbing Torres

Donemark.Calimon@quisumbingtorres.com 

 

Grace Ann Lazaro, Quisumbing Torres

GraceAnn.Lazaro@quisumbingtorres.com