PHILIPPINES Law and Practice Contributed by: Elaine A. Atienza and Bianca Georgia T. Paloma, Villaraza & Angangco
1. Dispute Resolution Methods 1.1 Main Dispute Resolution Methods Litigation, arbitration, administrative proceedings, and mediation and conciliation are the principal methods by which commercial disputes in the Philippines are resolved. Parties often employ more than one or a combination of these four principal mechanisms depending on their objectives. Litigation before the courts remains the default and most commonly used mechanism. Regional trial courts (RTCs) designated as “Special Commercial Courts” have jurisdiction over commercial matters including intra-corporate controversies, securities disputes, and corporate rehabilitation proceedings. Appeals are made to the Court of Appeals and ulti- mately, to the Supreme Court. Arbitration is increasingly the preferred method of resolution for parties who have agreed to it contrac- tually. The Alternative Dispute Resolution Act of 2004 (the “ADR Act”) or Republic Act (RA) No 9285 gov- erns domestic and international commercial arbitra- tion. The Revised Corporation Code (RCC) reinforced this by expressly recognising the arbitrability of intra- corporate disputes through arbitration clauses in cor- porate charters and by-laws (Section 181, RCC). Administrative proceedings before the Securities and Exchange Commission (SEC) provide resolution for violations of the RCC and related corporate govern- ance issues. The SEC exercises quasi-judicial author- ity and may impose administrative sanctions, issue cease and desist orders, and revoke corporate reg- istrations. Mediation and conciliation serve as mandatory pre- conditions to litigation in certain categories of dis- putes, including commercial disputes. Court-annexed mediation and judicial dispute resolution are also available once proceedings before the court have commenced. 1.2 Choice of Dispute Resolution Method Litigation before the Special Commercial Courts remains as the most frequently used mechanism for resolving commercial disputes in the Philippines.
Courts are the default forum for: (i) parties without a prior agreement to arbitrate; and (ii) disputes where statutory or regulatory jurisdiction vests exclusively in the courts. These include cases of fraud or mis- representation by directors or officers, controversies arising out of intra-corporate relations, disputes in the appointment of corporate officers, derivative suits, and violations of the right to inspect corporate books. Administrative proceedings before the SEC are com- monly pursued in cases involving regulatory compli- ance violations, including failure to submit the required reports. Criminal proceedings before the Office of the City or Provincial Prosecutor are reserved for felonies, including more serious violations of the RCC, such as obtaining corporate registration through fraud, fraudu- lent conduct of business, or tolerating graft and cor- rupt practices as provided in Sections 159 to 170 of the RCC. Arbitration is used when agreed by the parties. In corporations, it is a method of dispute resolution if the articles of incorporation or by-laws contain a valid arbitration agreement (Section 181, RCC). Mediation, while widely available, is most often used as a court- ordered mechanism pre-trial, rather than a standalone primary method of resolution. 1.3 Key Dispute Resolution Trends The prominent key trend is the rise of complex intra- corporate disputes involving closely held, family-con- trolled corporations. A substantial proportion of major Philippine businesses are family-owned or family- controlled, and disputes over succession, manage- ment control and shareholder rights have generated some of the most high-profile commercial litigation in recent years – including multibillion-peso battles over boards, hospitals, media companies and conglomer- ates. Additionally, more parties are entering into arbitration agreements by incorporating arbitration provisions in their contracts, allowing for a more flexible dispute resolution mechanism.
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