Arbitration Clause (Philippines)

An Arbitration Clause in the Philippines records the terms on which the parties settle their dispute and bring the matter to a final, binding end.

An Arbitration Clause in the Philippines derives its legal force from Republic Act No. 9285 and the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 1985, which RA 9285 adopts for international commercial arbitration under Section 19. For domestic arbitration, the clause is governed by the Domestic Arbitration Rules set out in the Implementing Rules and Regulations of RA 9285 (2009, as amended). The Special Rules of Court on Alternative Dispute Resolution (A.M. No. 07-11-08-SC, 2009) govern judicial proceedings related to arbitration, including petitions to confirm, vacate, or enforce arbitral awards filed with the Regional Trial Court designated as Special Commercial Court.

An Arbitration Clause differs from an Arbitration Agreement (a freestanding contract to arbitrate an existing dispute) in that the clause is a provision within the main contract, while a standalone arbitration agreement is executed separately. Under the doctrine of separability affirmed by the Supreme Court in Del Monte Corporation-USA v. Court of Appeals (G.R. No. 136154, February 7, 2001), an arbitration clause is treated as an agreement independent of the main contract — invalidity of the main contract does not automatically render the arbitration clause void.

For construction contracts in the Philippines, the Construction Industry Arbitration Commission (CIAC) under Executive Order No. 1008 (1985) has original and exclusive jurisdiction over disputes arising from construction contracts containing an arbitration clause, regardless of the arbitral body named in the clause. The Supreme Court in DPWH v. CMC/Monark/Pacific/Hi-Tri (G.R. No. 179732, September 17, 2008) confirmed CIAC's exclusive jurisdiction over construction disputes.

The legal framework governing the Arbitration Clause (Philippines) in Philippines draws on several key statutes and regulatory bodies. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Parties executing a Arbitration Clause (Philippines) in Philippines should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Revised Corporation Code (RA 11232, 2019) sets the foundational requirements.

An Arbitration Clause is needed in any Philippine contract where the parties want to confirm that future disputes are resolved through private arbitration rather than through the court system of the Regional Trial Courts.

An Arbitration Clause is needed in construction contracts covered by Executive Order No. 1008 (1985). The Construction Industry Arbitration Commission (CIAC) has exclusive and original jurisdiction over disputes arising from construction contracts containing an arbitration clause, making its inclusion mandatory for parties who want CIAC's specialized technical expertise in resolving disputes.

An Arbitration Clause is needed in joint venture agreements and partnership agreements between foreign and Philippine investors under Republic Act No. 7042 (Foreign Investments Act of 1991, as amended by RA 11647, 2022), where parties need a neutral dispute resolution mechanism that avoids perceived bias toward either the foreign or local party.

An Arbitration Clause is needed in commercial contracts between large corporations where confidentiality of dispute proceedings is commercially important. Unlike court proceedings, which are generally public under the Philippine Constitution (Article III, Section 14 on open trial), arbitration proceedings are private and the award may be kept confidential under Section 23 of RA 9285.

An Arbitration Clause is needed in franchise agreements, distribution agreements, and technology licensing agreements involving intellectual property governed by the Intellectual Property Code of the Philippines (Republic Act No. 8293, 1997), where the parties prefer the technical expertise of arbitrators with IP backgrounds over general trial court judges.

An Arbitration Clause is needed in contracts with government-owned and controlled corporations (GOCCs) and government instrumentalities in the Philippines, subject to the limitations under Commission on Audit (COA) Circular No. 2012-003 on government settlement of monetary claims.

Parties in Philippines should prepare a Arbitration Clause (Philippines) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A valid and enforceable Arbitration Clause for Philippine contracts must include the following essential elements under Republic Act No. 9285 and A.M. No. 07-11-08-SC.

Scope of Arbitrable Disputes: A clear definition of which disputes are covered — typically 'any dispute, controversy, or claim arising out of or relating to this Agreement, or the breach, termination, or invalidity thereof.' Broad scope language is preferred to avoid arguments about whether a particular dispute falls within the clause, consistent with the pro-arbitration policy of RA 9285 as affirmed in LM Power Engineering Corp. v. Capitol Industrial Construction Groups (G.R. No. 141833, March 26, 2003).

Arbitral Institution: Name the specific arbitral institution whose rules will govern: Philippine Dispute Resolution Center, Inc. (PDRCI) for domestic commercial arbitration; Construction Industry Arbitration Commission (CIAC) for construction contracts under EO 1008; International Chamber of Commerce (ICC) for international commercial disputes; Singapore International Arbitration Centre (SIAC) for cross-border disputes with Singapore seat; or ad hoc arbitration under UNCITRAL Arbitration Rules (2013).

Seat of Arbitration: The city or country where arbitration proceedings will be conducted — this determines the curial law governing procedural matters. For domestic arbitration, specify Manila, Quezon City, or another Philippine city. For international arbitration, the seat determines which national courts have supervisory jurisdiction.

Number of Arbitrators: One arbitrator for disputes below PHP 5,000,000; three arbitrators (one per party plus a presiding arbitrator) for disputes above that threshold, consistent with PDRCI Arbitration Rules (2020, Rule 8).

Language: Specify English or Filipino as the language of arbitration proceedings. English is standard for commercial contracts in the Philippines.

Governing Law: State the substantive law governing the contract (Civil Code of the Philippines, specific statutes) and the procedural law governing the arbitration (RA 9285 and A.M. No. 07-11-08-SC for domestic; New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, to which the Philippines acceded in 1967, for international awards).

Additional compliance elements for a Arbitration Clause (Philippines) used in Philippines include: Under Philippine law, the Civil Code of the Philippines (Republic Act No. 386) governs contractual obligations. The Revised Corporation Code (Republic Act No. 11232) regulates corporate entities through the Securities and Exchange Commission (SEC). The Labor Code of the Philippines (Presidential Decree No. 442) and Department of Labor and Employment (DOLE) govern employment matters. The Data Privacy Act of 2012 (Republic Act No. 10173) and the National Privacy Commission (NPC) protect personal data. The Bureau of Internal Revenue (BIR) administers tax obligations under the National Internal Revenue Code. Forms-legal.com provides this template as a starting point for Philippines-compliant documentation.