PHILIPPINES Law and Practice Contributed by: Ricardo Ma P G Ongkiko, John Christian Joy A Regalado and Ma Patricia B Paz-Jacoba, SyCip Salazar Hernandez & Gatmaitan
Further, if the counsel or arbitrator is a Philippine lawyer, they are also bound to observe and comply with the Code of Professional Responsibility and Accountability promulgated by the Supreme Court in April 2023. Lawyers are subject to discipline when they violate or attempt to violate these rules, with the most severe penalty being disbarment. Lastly, the ADR Act expressly provides that ADR pro - viders (which include arbitrators) and practitioners (which include arbitration counsels) are deemed pub - lic officers. Thus, they can also be held civilly liable for acts performed during their official duties that clearly show bad faith, malice or gross negligence. 13.3 Third-Party Funding There are no Philippine laws expressly providing for rules or restrictions on third-party funders. However, the use of third-party funders may arguably be objec - tionable in that contracts with third-party funders may be deemed champertous, which is a kind of contract between a stranger and a party to a lawsuit in which the stranger pursues the party’s claim with the aim of receiving part or any of the proceeds recovered under the judgment. The Supreme Court ruled in RODCO Consultancy and Maritime Services Corp v Ross (GR No 259832, 6 November 2023) that cham - pertous contracts are void for being against public policy – because they are grossly disadvantageous to the party involved, and there is financial overreach by a third party with a superior bargaining position vis-a- vis a financially pressed litigant. In the same case, the Supreme Court also stated that prohibited champer - tous contracts do not only contemplate lawyers, but also third persons who fund the commencement of a suit or a dispute in exchange for a portion of the award that may later on be granted to the party. 13.4 Consolidation Article 4.45 of the ADR Act’s IRR expressly provides that there can be consolidation of arbitration proceed - ings only if the parties agree to the consolidation. The parties’ agreement is the operative fact that forms the basis for consolidation. Philippine arbitral institutions provide for the proce - dures for consolidation. For instance, at the request of a party, and after consulting with the parties and
any confirmed arbitrators, the PDRCI has the power to consolidate two or more arbitration proceedings provided that: • all parties agree to consolidate; • all claims are made under the same arbitration agreement; and • if claims are made under more than one arbitra - tion agreement, there is nevertheless a common question of law or fact, the rights claimed arise out of the same transaction and the PDRCI finds the An arbitration agreement generally can only bind and be invoked by those who are parties to the agreement. However, there are certain circumstances in which third parties, who are not parties to the arbitration agreement, may be bound by it. Similarly, only parties are generally bound by an arbitral award, yet there are certain exceptional instances where the arbitral award may be enforced against third parties. arbitration agreements compatible. 13.5 Binding of Third Parties In this regard, Rule A.6 of the Special ADR Rules pro - vides that third-party security providers will be bound by the arbitration agreement only if the third party that secures the loan has agreed in the accessory contract (either directly or by reference) to be bound by such arbitration agreement. Furthermore, heirs and assigns are generally bound by contracts (including arbitration agreements) entered into by their predecessors-in-interest, except when the rights and obligations arising therefrom are not transmissible by their nature, the parties’ stipulation or the provision of law. Another possible exception occurs if a representative of a corporation that is party to an arbitration agree - ment, and who signs the arbitration agreement or a contract in which an arbitration clause is contained, is then deemed to have agreed to such arbitration agreement or clause (see 5.7 Jurisdiction Over Third Parties ). On the other hand, an arbitral award may possibly be enforced on such third parties when the separate juridical personality of the corporation that is a party
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