PHILIPPINES Law and Practice Contributed by: Elaine A. Atienza and Bianca Georgia T. Paloma, Villaraza & Angangco
Actual or Compensatory Damages Actual or compensatory damages are assessed based on the pecuniary loss actually suffered and proved by the claimant. The standard is strict: the courts will not award actual damages on the basis of speculation or conjecture. Documentary evidence, such as receipts, financial statements and expert accounting testimony, is typically required to establish actual loss. Where actual damages cannot be proved with certainty, the courts may award temperate damages in an amount that is reasonable under the circumstances. Moral Damages Moral damages are assessed based on the type of injury suffered – such as mental anguish, fright, seri- ous anxiety, besmirched reputation, or wounded feel- ings – and must fall within the specific instances enu- merated in Articles 2219 and 2220 of the Civil Code. While no proof of pecuniary loss is required for moral damages, the claimant must show the factual basis for such award. Exemplary Damages Exemplary damages are awarded as a public example and deterrent only where the defendant acted with gross negligence, fraud, oppression, malice, or wan- ton disregard of the claimant’s rights. The amount is left to the court’s discretion and must be reasonable relative to the actual damages awarded. Interest is also typically imposed on monetary awards from the date of the court decision or the date the obligation became due, in accordance with prevailing jurispru- dence on legal interest rates. Arbitration is gaining popularity as a method for resolv- ing commercial disputes in the Philippines, driven not only by legislation that actively promotes ADR and a growing body of jurisprudence supporting arbitration, but also by the practical advantages of confidentiality, speed and finality. The Construction Industry Arbitration Commission (CIAC) handles the largest volume of arbitration cases in the country. Given the Philippines’ ambitious infra- 3. Arbitration 3.1 Prevalence
structure programme – with the government allocat- ing PHP1.507 trillion for infrastructure development in 2025 – construction-related disputes have surged and are expected to continue multiplying. The Philippine Dispute Resolution Center, Inc. (PDRCI) handles the majority of non-construction commercial arbitrations, particularly in complex cross-border and high-value transactions. Intra-corporate arbitration has gained significant traction following the enactment of the RCC in 2019, Section 181 of which expressly authorises the inclusion of arbitration agreements in corporate char- ters and by-laws for unlisted corporations, providing a clear statutory basis for arbitrating disputes between stockholders, directors, officers, and the corporation itself. International commercial arbitration is also used where parties to cross-border contracts choose the Philippines as the seat of arbitration, although Sin- gapore and Hong Kong remain more commonly pre- ferred seats for international transactions involving Philippine parties. 3.2 Restrictions on Use of Arbitration While Philippine law broadly supports arbitration, several important restrictions apply. First and most fundamentally, arbitration requires the consent of the parties. A dispute may only be referred to arbitration if the parties have entered into a valid arbitration agree- ment, whether in a standalone agreement, a contract clause, or – in the case of intra-corporate disputes – in the corporation’s articles of incorporation or by-laws. Criminal offences are non-arbitrable as a matter of public policy. Similarly, disputes involving the interests of third parties who are not bound by the arbitration agreement cannot be submitted to arbitration with- out their consent. Certain disputes are subject to the exclusive jurisdiction of specific government bodies and cannot be withdrawn by private agreement to arbitration. These include disputes over intellectual property rights falling within the exclusive jurisdiction of the Intellectual Property Office, and labour disputes within the jurisdiction of the National Labor Relations Commission. 3.3 Advantages of Arbitration Arbitration is generally faster than court litigation for commercial disputes. CIAC awards, for instance, are required to be rendered within six months from the
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