Dispute resolution is the process whereby two or more parties attempt to solve a conflict, sometimes through the aid of a disinterested third party. Generally, this process is conducted so that a disagreement may not reach court.
There are four general methods of dispute resolution: negotiation, mediation, conciliation, and arbitration.
The primary law governing dispute resolution in the country is Republic Act No. 9285 or “An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes.” This act is also known as the Alternative Dispute Resolution Act of 2004.
Negotiation is the fundamental approach to solving conflicts. It is the process of directly communicating with the opposing party with the goal of finding a course of action that works for both.
There is no direct, formal, nor specified guidelines when conducting negotiations. Most people do it every day, sometimes without even thinking about it. In some circumstances, people in dispute might hire counsel to negotiate on their behalf.
The following are the defining characteristics of negotiations:
- private and confidential
- quick and inexpensive
- informal and unstructured
- negotiated agreements can be enforceable
- can result in a win-win solution
Mediation, as defined in the Alternative Dispute Resolution (ADR) Act of 2004, is a voluntary process wherein a mediator assists the disputing parties in reaching a voluntary agreement regarding an issue by facilitating communications and negotiations.
A mediator is simply the person who conducts the mediation. They are selected by the involved parties.
- ad hoc mediation any mediation other than institutional or court-annexed
- court-annexed mediation any mediation process conducted under the auspices of the court and in accordance with Supreme Court approved guidelines, after such court has acquired jurisdiction of the dispute
- court-referred mediation mediation ordered by a court to be conducted in accordance with the agreement of the parties when an action is prematurely commenced in violation of such agreement
- certified mediator a mediator certified by the Office for ADR as having successfully completed its regular professional training program
- institutional mediation any mediation administered by, and conducted under the rules of, a mediation institution
- mediation party a person who participates in a mediation and whose consent is necessary to resolve the dispute
- non-party participant a person, other than a party or mediator, who participates in a mediation proceeding as a witness, resource person or expert
During the mediation process, the disputing parties are actively involved in the proceedings and they decide the terms of the resolution or compromise.
However, a mediator is present during the dealings to act as a non-coercive neutral party that helps the disputants reach better terms to an agreement. This mediator is freely selected by the parties involved, but they may request the Office of ADR to provide them with a list of certified mediators.
The OADR can also help facilitate the communication between the parties and potential mediators, especially regarding their selection. The selected mediator is not required to act as such and they may withdraw or be compelled to withdraw from acting as such based on the following, according to the IRR of the ADR Act of 2004:
- if any of the parties requests the mediator to withdraw;
- the mediator does not have the qualifications, training and experience to enable him/her to meet the reasonable expectations of the parties;
- where the mediator’s impartiality is in question;
- if continuation of the process would violate any ethical standards;
- if the safety of any of the parties would be jeopardized;
- if the mediator is unable to provide effective services;
- in case of conflict of interest; and
- in any of the following instances, if the mediator is satisfied that:
- one or more of the parties is/are not acting in good faith;
- the parties’ agreement would be illegal or involve the commission of a crime;
- continuing the dispute resolution would give rise to an appearance of impropriety;
- continuing with the process would cause significant harm to a nonparticipating person or to the public; or
- continuing discussions would not be in the best interest of the parties, their minor children or the dispute resolution process.
As already mentioned, the mediator can withdraw or be compelled to withdraw if they are not qualified. However, mediators do not have a specialized background or profession. If they are competent, they can act as mediator unless the matter in question specifically requires special training or expertise.
The mediators oversee the process to ensure that it keeps going and support both parties so that they may find an understanding. As such, a mediator is required to act impartially and ethically. That said, they are not allowed to impose a solution to the dispute. Instead, the final resolution will still come from the disputing parties.
Conduct of Mediation
According to Rule 5 of the IRR of the ADR Act of 2004, a mediation process must be conducted thus:
- The mediator shall not make untruthful or exaggerated claims about the dispute resolution process, its costs and benefits, its outcome or the mediator’s qualifications and abilities during the entire mediation process.
- The mediator shall help the parties reach a satisfactory resolution of their dispute but has no authority to impose a settlement on the parties.
- The parties shall personally appear for mediation and may be assisted by a lawyer. A party may be represented by an agent who must have full authority to negotiate and settle the dispute.
- The mediation process shall, in general, consist of the following stages:
- opening statement of the mediator;
- individual narration by the parties;
- exchange by the parties;
- summary of issues;
- generation and evaluation of options; and
- The mediation proceeding shall be held in private. Persons, other than the parties, their representatives and the mediator, may attend only with the consent of all the parties.
- The mediation shall be closed:
- by the execution of a settlement agreement by the parties;
- by the withdrawal of any party from mediation; and
- by the written declaration of the mediator that any further effort at mediation would not be helpful.
Benefits of Mediation
Mediation allows the disputing parties to reach a resolution quickly, thus lessening the strains that the dispute might have put on their relationship. Furthermore, mediation is much cheaper than going to court to settle an issue.
Additionally, the process is entirely confidential. Per Sec. 9 of the ADR Act of 2004:
- Information obtained through mediation shall be privileged and confidential.
- A party, a mediator, or a nonparty participant may refuse to disclose and may prevent any other person from disclosing a mediation communication.
- Confidential information shall not be subject to discovery and shall be inadmissible in any adversarial proceeding.
- In such an adversarial proceeding, the following persons involved or previously involved in a mediation may not be compelled to disclose confidential information obtained during the mediation:
- (i) the parties to the dispute;
- (ii) the mediator or mediators;
- (iii) the counsel for the parties;
- (iv) the non-party participants;
- (v) any person hired or engaged in connection with the mediation as secretary, stenographer, clerk or assistant; and
- (vi) any other person who obtains or possesses confidential information by reason of his/her profession.
- The protections shall continue to apply even if a mediator is found to have failed to act impartially.
- A mediator may not be called to testify to provide confidential information gathered in mediation. A mediator who is wrongfully subpoenaed shall be reimbursed the full cost of his/her attorney’s fees and related expenses.
Mediations are conducted in an informal setting. This helps the disputing parties focus on solving the problem at hand and avoid confrontations.
Since the terms of agreement were decided by the disputing parties, the solutions tends to be more workable and permanent.
Conciliation is the process of settling disputes in a friendly manner. The goal of this process is to bring opposing parties to a compromise to avoid taking the case to court.
In this process, the conciliator is tasked with establishing a positive relationship between the opposing parties as well as creating solutions to the dispute. The parties do not seek out solutions themselves. Instead, this is done by the conciliator after meeting with the disputants.
Generally, conciliations are fast, amicable, and cost-efficient.
Arbitration, as defined in the ADR Act of 2004, is a voluntary dispute resolution process in which one or more arbitrators, appointed in accordance with the agreement of the parties or the rules stated in the IRR of the ADR Act of 2004, resolve a dispute by rendering an award.
- ad hoc arbitration arbitration administered by an arbitrator and/or the parties themselves; an arbitration conducted by an institution is can also be considered ad hoc arbitration if the institution is not a permanent or regular arbitration institution in the Philippines
- appointing authority in the absence of an agreement, the national president of the Integrated Bar of the Philippines (IBP) or his/her duly authorized representative
- arbitration agreement an agreement by the parties to submit to arbitration all or certain disputes which have arisen or may arise between them in respect of a defined legal relationship, whether contractual or not; it may be in the form of an arbitration clause in a contract or in the form of a separate agreement
- arbitral tribunal a sole arbitrator or a panel of arbitrators
- award any partial or final decision by an arbitrator in resolving an issue
- claimant an entity with a claim against another and who commence/s arbitration against the latter
- institutional arbitration arbitration administered by an entity which is registered as a domestic corporation with the Securities and Exchange Commission (SEC) and engaged in, among others, arbitration of disputes in the Philippines on a regular and permanent basis
- request for appointment the letter-request to the appointing authority of either or both parties for the appointment of arbitrator/s or of the two arbitrators first appointed by the parties for the appointment of the third member of an arbitral tribunal
- representative a person duly authorized in writing by a party to a dispute, who could be a counsel, a person in his/her employ or any other person of his/her choice, duly authorized to represent said party in the arbitration proceedings
- respondent the entity against whom the claimant commence/s arbitration
- written communication the pleading, motion, manifestation, notice, order, award and any other document or paper submitted or filed with the arbitral tribunal or delivered to a party
Conditions for Arbitration
- Agreement to arbitration must be in writing.
- The matter in question must involve a legal dispute.
- Once an arbitrator has made their decision, the legal outcome is final and cannot be appealed.
Benefits of Arbitration
- private, unless a limited court appeal is made
- less formal and less structured than court proceedings
- quicker and less expensive than going to court
- each party has an opportunity to present evidence and deliver arguments
- disputing parties have the right to choose their arbitrators
- Since the decision of the arbitrator is final, the issue can be closed permanently.
- The arbitrator’s award can be enforced in court.
Any person appointed to be an arbitrator must:
- be of legal age
- be in full enjoyment of their civil rights
- know how to read and write
- not be related by blood or marriage within the sixth degree to either of the disputing parties
- not have a financial, fiduciary, or other interest in the controversy
- not have any personal biases
The first three requirements establishes basic competency on the part of the arbitrator while the latter three requirements attempts to ensure that the arbitrator has no conflicting interest on the matter being settled.
Parties involved in the dispute are not allowed to select an arbitrator as a champion to their cause.
The parties can agree on the procedure for the appointment of the arbitrator/s. If they cannot come to an agreement, the rules stated in Paragraph (c), Article 5.10, Rule 3 of the IRR of the ADR Act of 2004 will be followed.
The rule states thus:
- In an arbitration with three (3) arbitrators, each party shall appoint one (1) arbitrator, and the two (2) arbitrators thus appointed shall appoint the third arbitrator. If a party fails to appoint the arbitrator within (30) days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within thirty (30) days of their appointment, the appointment shall be made, upon request of a party, by the appointing authority.
- In an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator, one shall be appointed, upon request of a party, by the appointing authority.
The Arbitral Tribunal
The disputing parties are allowed to decide the number of arbitrators they wish to handle their dispute. Should they be unable to decide, three (3) arbitrators will be assigned.
A person’s or entity’s nationality should not be a reason why they cannot be selected as arbitrator, unless agreed upon by both parties.
Disputing parties can decide the procedure of selecting their arbitrators, subject to the conditions of the IRR.
If they cannot agree:
- for an arbitration with three arbitrators, each party should appoint one and the third will be appointed by the two previously selected arbitrators
- if one party cannot choose within thirty (30) days after receiving the request to do so or the two arbitrators cannot agree on the third arbitrator within thirty (30) days of appointment, the appointing authority will make the necessary appointments upon request of any party
- for an arbitration with a sole arbitrator, if the parties are unable to select an arbitrator, the appointing authority will make the selection upon request of any party
Once an appointment procedure has been selected, any party can request the appointing authority to make the appointments if:
- a party fails to follow procedure, or
- the parties, or two arbitrators, cannot reach the agreement expected of them, or
- a third party, including an institution, fails to perform any function entrusted to it per terms of the agreed procedure
The appointment of arbitrators is not subject for motions for reconsideration nor appeals. That is, once the arbitrators are appointed, their appointment cannot be contested.
Grounds for Challenge
When a person is informed of their appointment as arbitrator, they must reveal any and all circumstances that could result in a justifiable doubt to their impartiality or independence. Should the conflicts of interest arise later in the proceedings, they should divulge them immediately.
Their appointment can then be challenged if these circumstances arise. Additionally, the appointment can also be challenged if it is revealed that they do not possess the qualifications required by the parties according to the appointment agreement.
The parties can agree on the procedure for challenging an arbitrator. If they cannot agree on the procedure, a party can send a written statement citing the reasons for the challenge to the arbitral tribunal within fifteen (15) days of becoming aware of such questionable circumstances.
When presented with a challenge, the challenged arbitrator can decide to withdraw from their office. Otherwise, the arbitral tribunal will decide on the challenge.
If a challenge is not successful, the challenging party can then request the appointing authority to decide on the challenge. The request must be made within thirty (30) days of receiving the notice of rejection. This decision by the appointing authority is immediately executory and not subject to motions for reconsideration nor appeals.
While the aforementioned request is pending, the tribunal, including the challenged member, can continue with the arbitral proceedings and make an award.
Any party may bring a petition under the challenge procedure to a court in accordance with the Rules of Court or the Special ADR Rules.
Failure or Impossibility to Act
If an arbitrator is unable to perform their duties, their appointment terminates if they withdraw from the office or if the parties agree to terminate. Otherwise, if there is an argument regarding this termination, a party may request the appointing authority to decide regarding the termination. This decision is immediately executory and not subject to motions for reconsideration nor appeals.
If an arbitrator is terminated through any of the above procedures or their personal decision to withdraw, a substitute will be appointed based on the rules applied to the arbitrator being replaced.
Conduct of Arbitration
All parties to an arbitration are treated equally. They are also given equal opportunity to present their case.
The procedure of the arbitration process will be based on the agreement of both parties. If they cannot agree, the arbitral tribunal will proceed with the arbitration according to what they deem appropriate.
Similar to a judge at court, the tribunal has the power to determine the admissibility, relevance, materiality, and weight of all evidence presented.
The arbitration parties can decide on the setting of their arbitration proceedings. If they cannot agree, it will be conducted in Metro Manila, unless the arbitral tribunal decides otherwise considering the circumstances of the case, including the convenience of the parties.
The arbitral tribunal may also meet anywhere with the relevant participants for consultation purposes, unless the parties have already agreed not to allow such.
Arbitral proceedings start on the date when the request for the proceedings was made unless the parties agreed otherwise.
Regarding the language, the parties can agree on which ones they prefer. If they cannot agree, the proceedings will be conducted in English. This will apply to any written statement, hearing, award, decision, or any other communications during the proceedings.
If necessary, a translation may be ordered by the tribunal into the language selected.
Presentation by the Parties
The claimant can present their side of the case during the period agreed by the parties or determined by the arbitral tribunal. They must present the following:
- the facts supporting their claim
- relief or remedy sought
The respondent, during the same time, will present their defense to each of the above, unless the parties have a separate agreement regarding the required elements of the defense.
During their statements, the parties may submit all relevant documents or add reference to these documents or any other evidence they will submit.
Unless otherwise agreed, the parties may add to their statements during the course of the proceedings, unless the arbitral tribunal considers it inappropriate.
The arbitral tribunal will decide whether to hold oral hearings for the presentation of evidence or for oral argument, unless the disputing parties have a contrary agreement. The tribunal may also decide whether the proceedings will be conducted on the basis of documents and other materials.
If the parties have agreed that no hearings will be held, the arbitral tribunal may still conduct them if requested by a party.
The disputing parties will be given sufficient advance notice of any hearing and of any meeting of the tribunal for the purposes of inspection of goods, other property, or documents.
All statements presented to the tribunal by one party will be communicated to the opposing party. Any expert reports or evidentiary document crucial to the decision-making of the tribunal will be communicated to the disputing parties as well.
A party is considered to have defaulted if, without sufficient cause:
- the claimant fails to communicate their statement of claim, the tribunal shall terminate the proceedings
- the respondent fails to communicate their statement of defense, the tribunal will continue with the proceedings, but without treating the lack of defense as an outright admission of the claimants allegations
- any party fails to appear at a hearing or produce documentary evidence, the tribunal will continue with the proceedings and make an award on the basis of the evidence available
Assistance from Experts
Unless the parties have already prohibited it in agreement, if an expert is required, the arbitral tribunal may:
- appoint one or more experts to assist them on specific issues; or
- require a party to give the expert all relevant information or grant access to any relevant evidence for their inspection of said items
The arbitral tribunal or any party may also request for the appearance of said expert at hearings to testify on the point in issue unless otherwise agreed by the parties.
Additionally, they may also seek the assistance of the court in taking evidence. The court may process said evidence according to their rules.
Regarding witnesses, the arbitral tribunal has the following powers:
- require any person to attend a hearing as a witness
- subpoena witnesses and documents
- require the retirement of any witness during the testimony of any other witness
Decision-Making in Arbitration
When the arbitration is conducted by a panel of more than one arbitrator, the decision will be made based on a majority unless otherwise agreed by the parties.
If, during the process of arbitration, the parties manage to settle the dispute, the tribunal will terminate the proceedings. If requested by the parties and not objected to by the tribunal, the settlement will be recorded in the form of an arbitral award on agreed terms.
Such an award has the same status and effects as any other award on the merits of the case.
Form and Contents of Award
The award must be done in writing and signed by the arbitral tribunal. If there is more than one arbitrator, the signature of the majority will suffice as long as the reason for the omission is stated.
It must contain the following:
- the reason on which the award was granted; unless it was previously agreed by the parties that the reasoning will not be given
- date and place of arbitration (The award is assumed to have been made at that place.)
A signed copy must be delivered to each party.
Termination of Proceedings
The arbitration can be terminated based if:
- a final award has already been granted; or,
- the arbitral tribunal orders the termination of the proceedings.
The tribunal may order termination when:
- a claimant withdraws their claim; unless the respondent objects and the tribunal recognized a legitimate on their part in obtaining a final settlement;
- the parties agree on the termination; or,
- the tribunal finds that continuation of the proceedings has become unnecessary or impossible.
When the arbitration is terminated, the mandate of the tribunal ends as well.
Nevertheless, the tribunal may hold the final award to make way for a hearing to determine the costs and identify which party will shoulder these costs or set an equitable division.
Within thirty (30) days from receipt of the award, unless otherwise agreed by both parties, a party may request the tribunal to correct the award for errors in computation, clerical or typographical errors, or any similar errors.
They may also request the tribunal to provide an interpretation of a specific point in the award.
In both instances, the opposing party must be notified of these requests.
If the tribunal decides that the request has merit, they must make the correction or give the interpretation within thirty (30) days from receipt of the request. If an interpretation was requested and provided, the interpretation will become part of the award.
The tribunal may also correct any errors they find themselves within thirty (30) days from the date of award.
If a party finds a claim to have been omitted in the final award, they can make a request to the tribunal to grant an additional award concerning this omission; unless previously agreed otherwise. This must be done within thirty (30) days from the receipt of the award and the opposing party must be notified of such a request.
The tribunal then has sixty (60) days to give an additional award if they find the request justified.
If necessary, the tribunal may extend the set time limits as aforementioned.