P R I M E R
ARBITRATION, CONCILIATION/MEDIATION
Modes for Settling
Construction Disputes
The Construction Industry Arbitration Commission (CIAC), created by E.O. No. 1008, is tasked to provide the industry with the necessary facilities for the speedy and equitable settlement of disputes arising from, or connected with construction contracts in the Philippines. The facilities offer conciliation/mediation and arbitration as ways of reconciling differences between disputants with the help of people who are familiar with the nuances of the construction business.
This primer intends to inform the public of the significance and procedures of conciliation/mediation and arbitration as effective ways for settling construction disputes.
CONCILIATION/MEDIATION : An Attempt to Achieve an Amicable Settlement
What is conciliation/mediation?
Conciliation is a way of settling disputes between parties arising from, or connected with construction contracts in the Philippines (except labor disputes). The dispute is referred to a panel of conciliators tasked to bring the parties to an agreement.
Mediation is a way of settling disputes between parties arising from, or connected with construction contracts in the Philippines (except labor disputes). A single neutral third party, called a mediator, brings the disputing parties to a negotiation.
What cases are subject to conciliation/mediation?
All disputes brought to the CIAC may, if the parties agree, be made subject to conciliation/mediation before arbitration is resorted to by the disputants.
What are the documents required and the procedures to follow to avail oneself of conciliation/mediation?
1. The interested party shall submit to the CIAC a request for conciliation/mediation which shall contain the following:
a. The names and addresses of the parties;
b. A detailed statement of the claimant’s case;
c. A copy of the construction contract and other contracts in question; and
d. All other relevant documents/information.
2. The CIAC shall, immediately upon the request for conciliation/mediation is submitted, arrange for a meeting between the two parties to determine the issues as well as to negotiate on such issues, and to appoint from its list of accredited construction arbitrators a mediator (or conciliators as the case may be) acceptable to both parties.
3. The conciliators/mediator may meet with the parties jointly or separately as often as necessary to speed up the amicable settlement of the case.
4. The conciliators/mediator shall state the facts, help the parties to arrive at a speedy amicable settlement by making concrete proposals for resolving the issues involved, and report on such proposals to the CIAC and/or to both parties after every meeting either jointly or separately.
5. The proposals of the concilators/mediator shall be no more than advices or suggestions which, under no condition, shall be considered binding on the parties.
6. Where none of the proposals are acceptable to the parties, the conciliators/mediator shall submit a final report summarizing the proceedings to the CIAC and to the parties.
What are the remedies in case of a failure of the attempt at conciliation/mediation?
The parties may refer the dispute to arbitration.
ARBITRATION : A Machinery for Construction Disputes
What is arbitration?
Arbitration is defined as the investigation and determination of matters of differences between contending parties by one or more unofficial persons, called arbitrators or referees, chosen by the parties (Bouvier’s Law Dictionary 225). It is intended to avoid the formalities, the delay, the expense and vexation of ordinary litigation (Curtis-Castle Arbitration, 42 Am. St., Rep. 200).
In simple terms, arbitration is a way of settling dispute(s) between parties who agree to submit such dispute(s) for resolution by their chosen judges or arbitrators. Arbitration is a simple, speedy and less expensive alternative to court action.
What is the basis of construction arbitration?
Construction arbitration is based on the consent of the disputing parties, unless made compulsory by law.
Consent can be manifested in two ways:
1. Contracting parties provide for an arbitration clause in the construction contract;
2. If there is no arbitration clause in the contract, disputing parties may sign a joint statement of issues of the dispute(s) and/or a voluntary agreement to undertake construction arbitration.
What is the significance of arbitration in the construction industry?
Arbitration is considered a more reasonable alternative to court action. Persons who are knowledgeable of the construction business shall be appointed to act upon the cases. Hence, a prompt decision can be easily reached.
What body shall exercise construction arbitration?
The Construction Industry Arbitration Commission (CIAC) shall have original and exclusive jurisdiction over disputes arising from, or connected with contracts entered into by parties involved in construction in the Philippines, whether the disputes arise before or after contracts are completed or after they are breached.
What are the salient features of the Construction Industry Arbitration Law?
1. Construction Arbitration cases can be decided by a single arbitrator or an arbitral tribunal agreed upon by the parties.
2. The prevailing rules of evidence in the courts of law need not be controlling as the arbitrators will use all reasonable means to ascertain the facts in each case speedily and objectively in the interest of substantive due process.
Who can be accredited as arbitrators?
People from the government and the private sectors who meet the technical requirements by the CIAC shall be accredited and appointed by the CIAC as arbitrators.
How many arbitrators may settle a dispute?
A single arbitrator or an arbitral tribunal of three (3) arbitrators may settle a dispute.
What is the procedure in choosing or appointing the arbitrators?
1. Sole Arbitrator – where the parties have agreed that the dispute(s) shall be settled by a sole arbitrator, each shall choose at least three (3) from the list of accredited arbitrators. The CIAC shall appoint the arbitrator from the nominees of both parties. If the parties fail to nominate a sole arbitrator within fifteen (15) days from the date of receipt by the CIAC of respondent’s answer to claimant, the CIAC shall either appoint a sole arbitrator or if it deems necessary,the members of the Arbitral Tribunal..
2. Arbitral Tribunal – where the parties have agreed that the dispute(s) shall be settled by an arbitral tribunal, each party nominates at least six (6) arbitrators from the list of arbitrators accredited by the CIAC. The CIAC then appoints one arbitrator from the claimant’s nominees and another from the respondent’s list. The third arbitrator, who must be acceptable to both parties, shall be agreed upon by the two arbitrators first appointed and shall be the chairman. In case the parties fail to agree on the third member within fifteen (15) days from the date of submission, the CIAC shall appoint the chairman within fifteen (15) days from the date the parties failed to agree as to the third member.
What are the specific cases under which arbitration may be conducted?
Construction arbitration shall cover, among others, dispute(s) arising from:
1. Violations of specifications for materials and workmanship;
2. Violations of terms of agreement;
3. Interpretation and/or application of contractual provisions;
4. Commencement time and delays;
5. Maintenance and defects;
6. Payment defaults of employer or contractor; and
7. Changes in contract costs.
What cases are excluded from the coverage of E.O. 1008?
Disputes arising from employer-employee relationships shall be covered by the Labor Code of the Philippines.
What are the fees to be paid in arbitration cases?
Arbitration expenses shall cover the filing fee, administrative charges, arbitrator’s fees, fee and expenses of an expert (if needed) on any aspect of the case, and other fees as may be imposed by the CIAC. The fees and charges shall be computed on the basis of percentages of the sum in dispute to be fixed in accordance with the CIAC Table of Fees.
The CIAC shall also charge the claimant, or where a counterclaim is filed, the respondent, a deposit of ten (10) percent of the arbitrator’s fees or 5,000 whichever is higher, upon filing of the claim/counterclaim. Such deposit shall not, however, exceed 50,000.00. If the claim/counterclaim exceed 1 million, a special fee for the Arbitration Develoepement Fund (ADF) equivalent to one-ttenth (1/10) of 1% of the sum in dispute shall be imposed upon the parties in addition to the existing fees in the CIAC Table of Administrative Charges and Arbitrators’ Fees.
What are the documents required and the procedures to follow to avail of construction arbitration?
1. The interested party shall submit to the CIAC a request for arbitration which shall include the following:
a. The names and addresses of the parties;
b. A statement of the case;
c. The issues of the case;
d. The list of nominees for arbitrator(s); and
e. Other pertinent contract documents
2. The CIAC shall evaluate the documents submitted to determine if there is a sufficient ground for arbitration.
3. When the Commission deems it necessary, it shall invite the parties to a meeting to find ways of settling their differences amicably.
4. If an understanding cannot be reached at this point and the contract does not contain an arbitration clause, the parties shall be required to submit a duly accomplished “Agreement to Arbitrate”.
5. After the complaint has been filed together with the payment of the required deposits, CIAC shall notify the respondent and give him fifteen (15) days from receipt to file his answer with or without a counterclaim.
6. CIAC shall appoint the Sole Arbitrator or the members of the Arbitral Tribunal, as the case may be, pursuant to the Rules.
7. The appointed arbitrators(s) shall call the parties to a Preliminary Conference to make the Terms of Reference (TOR) based on the documents and/or personal accounts of the parties. The TOR shall include the following:
a. A summary of the parties’ respective claims;
b. The issues involved; and
c. Other particulars as may be relevant to make the arbitral award enforceable.
8. The Terms of Reference shall be signed by the parties and the arbitrator(s).
How soon should the award be rendered by the arbitrator(s)?
The award shall be rendered promptly by the arbitrator/arbitral tribunal as agreed upon by the parties, but in no case beyond thirty (30) days from the time the case is submitted for resolution or six (6) months from the date of signing of the TOR (or in cases where a TOR is absent, not more than 6 months from date of the last preliminary conference). Extensions of time shall be approved by the CIAC.
How shall the award be issued?
The award shall be in writing and signed by the arbitrator(s). If decided by the arbitral tribunal, each arbitrator must indicate his/her dissent. The decision of the majority shall prevail.
Generally, the award shall contain the issues involved, a brief statement and discussion of the facts, and the authority relied upon to resolve the issues.
When does the award become final?
The arbitral award becomes final upon the lapse of fifteen (15) days from receipt thereof with out an appeal being taken. If the award has been appealed, it sahll become final upon issuance of the entry of judgment by the appellate court.
When is appeal on the award possible?
Only questions of law are appealable to the Court of Appeals. An appeal should be effected before the award becomes final.
Who executes and enforces the award?
The award shall become executory upon the lapse of fifteen (15) days from receipt thereof even if it has been elevated on appeal. The arbitral tribunal or the sole arbitrator, with the concurrence of the CIAC shall, automatically, or upon motion of any of the parties, issue a writ of execution ordering any sheriff or proper officer to carry out said award.
What are the advantages of construction arbitration?
1. Arbitrators have technical expertise
Since disputes in the construction industry involve technical matters, the arbitrator(s) with the requisite technical knowledge can settle disputes as efficiently and equitably as possible.
2. Parties choose the arbitrators
Since the parties are given the opportunity to choose the arbitrator(s), they can designate those whom they deem to be qualified to conduct the proceedings.
3. Parties choose the terms of reference
Parties to a contract may specify the scope or nature of the dispute. They can choose from either broad or limited arbitration and stipulate the terms under which proceedings shall be conducted.
4. Proceedings are simple, faster and less expensive
Disputes can be resolved through arbitration much faster, simpler and less expensive than it would take if the parties resort to court action.
Being contractual in nature, arbitration permits the parties to specify the time and place for hearings. No special form is required in presenting a demand for arbitration or in responding thereto.
5. Proceedings are confidential
Arbitration is held in private. Pleadings are confidential except to the parties themselves. Awards are unpublished.
6. Arbitrator’s decision is binding
The arbitrator or arbitral tribunal is vested with the authority to decide, and such decision is binding on the parties. No appeal may be made from an award or a decision handed down by the arbitrator except on questions of law which are appealable to the Supreme Court.*
7. A single forum may be convened for all parties
One attractive feature of arbitration is the possibility of bringing together in one proceeding all the parties that may be involved.
8. Choice of counsel is not limited to lawyers
License to practise law is not required for counsel to appear before an arbitrator or arbitral tribunal. The parties, consequently, are not limited in the range of choice of who should represent them in arbitration.
9. Work on a contract may continue as arbitration proceeds
Since some construction projects cover large expenses and employ many people, it is often important to add in the contract a provision that work shall continue while arbitration proceeds. Such stipulation may not be effective when the parties resort to regular court hearings.
10. Arbitration preserves friendly relations
Arbitration proceedings are less formal, less adversarial and more speedy than court proceedings, thus helping to preserve a friendly relationship between disputants.
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* The 1997 Rules of Civil Procedure (as amended) provides for appeal from the decisions of the CIAC, among others, to the Court of Appeals.