Brief background of the case

Global Medical Center of Laguna, Inc. (GMCLI) engaged the services of Ross Systems International, Inc. (RSII) for a construction project valued at PhP 248,500,000.00. Among the issues raised are the inability of the parties to agree on the percentage of completion, belated withholding of taxes and disagreements on the amount of progress billings to be paid.

Since the construction contract had an arbitration clause, RSII commenced arbitration with the CIAC. An arbitral tribunal formed under the auspices of the CIAC then conducted the arbitration and issued an arbitral award which denied, in part, the reliefs sought by the parties. RSII appealed the award to the Court of Appeals through a petition for review under Rule 43 of the Rules of Court (which allows an appellant to raise issues of fact or law or both on appeal). The Court of Appeals issued a decision partially granting RSII's petition. 

Both GMCLI and RSII sought reconsideration of the decision and both were denied. GMCLI and RSII filed separate petitions with the Supreme Court, questioning the decision of the Court of Appeals.

Ruling of the Court in Global Medical Center of Laguna v. Ross Systems International

The Court revisited various laws and jurisprudence dealing with the appeal procedure and the extent of allowable judicial review of CIAC arbitral awards.

The Court recognized that while Executive Order No. 1008, the law governing construction arbitration ("EO 1008"), only allows appeal of CIAC arbitral awards on questions of law and requires the appeal to be filed directly with the Supreme Court, this  narrow remedy was broadened by various procedural rules. As a result,  EO 1008 notwithstanding, CIAC arbitral awards were subsequently allowed to be appealed to the Court of Appeals on questions of fact, law, or both.  

Guided by Republic Act No. 9285 or the Alternative Dispute Resolution Act and EO 1008 -- which rules out judicial review of the CIAC's factual findings and provides that appeal is to be made to the Supreme Court on pure questions of law -- the Court set out the following guidelines on appeal of CIAC arbitral awards:

• If the appeal involves pure question/s of law, it should be filed directly with the Supreme Court through a petition for review on certiorari under Rule 45 of the Rules of Court.
• If the appeal involves factual issues, the same should be brought to the Court of Appeals through a petition for certiorari under Rule 65 of the Rules of Court. The factual issues shall be limited to: (a) a challenge on the integrity of the composition of the tribunal; or (b) an allegation that the arbitral tribunal violated the Constitution or positive law in the conduct of the arbitral process.
• No other circumstances other than those provided above will be available to appeal a CIAC arbitral award.

Why this ruling is significant

Under EO 1008, when parties involved in construction in the Philippines contractually agree to submit their disputes to arbitration, the CIAC will have original and exclusive jurisdiction over such dispute. Hence, it is important for parties involved in construction in the Philippines to be aware of developments relating to judicial review of arbitral awards issued by CIAC arbitral tribunals.

Previously, an aggrieved party can bring both factual and legal issues to the Court of Appeals without specific limitation as to the nature of the factual issues that may be raised. In many cases, this has led to an extensive re-examination of the merits of an arbitral award issued by a tribunal in construction disputes.

The Court's ruling delimits the factual issues that may be brought to the Court of Appeals and clarifies that appeals on pure questions of law should be brought directly to the Supreme Court.

Actions to consider

Quisumbing Torres is closely monitoring the CIAC's response to the Supreme Court ruling, as the CIAC may need to amend its own arbitral rules, in order to reflect the Court's ruling. We will be publishing updates on this matter in due course, as developments arise.

*Authored by Quisumbing Torres, a member firm of Baker & McKenzie International, a Swiss Verein. Please contact QTInfoDesk@quisumbingtorres.com for inquiries.

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