With Due Respect

Respect and obey arbitral decisions

Arbitration is becoming a popular mode of settling local and international disputes. The Supreme Court encourages it because it speedily dispenses justice and helps unclog judicial dockets.

Notable arbitration cases. Unlike in judicial cases, the arbitral parties select their judges. Usually, the two opposing sides nominate one judge each. The arbitral body that conducts the arbitration chooses the third judge who becomes the panel chair. Every arbitral tribunal handles only one case at a time. Its decision is final and unappealable.


The Philippines has participated in several arbitration cases. It won the arbitral case concerning the construction and operation of Terminal III of the Ninoy Aquino International Airport (Naia III) against the Philippine International Air Terminal Co. The International Chamber of Commerce (ICC) based in Paris was the arbitral body which selected the panel chair.

It won its arbitration case concerning Naia III also, this time against Fraport AG, a German company. The International Center for the Settlement of Disputes based in Washington appointed the panel chair.


Probably, our country’s most important arbitration case involves the Spratlys and several other isles in the West Philippine Sea. The Philippines sued China in the International Tribunal for the Law of the Sea (Itlos) headquartered in Hamburg, Germany. China is a member of the international group that created the Itlos and has a judge sitting in the tribunal. However, it refused to participate in the proceedings, claiming that Itlos has no jurisdiction since, allegedly, China exercises “indisputable sovereignty” over the isles.

Nonetheless, the Itlos continued the proceedings and is poised to issue its decision early next year. Our country is confident it will win the case. The problem, however, is whether China, given its superior military clout, will respect and obey an Itlos decision dislodging it from those isles.

Rule of law. Our government, through the Metropolitan Waterworks and Sewerage System (MWSS), likewise won its arbitration case against Manila Water Co. but lost to Maynilad Water Services in a separate case. The ICC, like in the Naia III case, appointed the chair of both panels.

While the MWSS promptly obeyed and enforced its victory over Manila Water, it refused to obey and enforce its loss to Maynilad, arguing that it had a duty to set “just and equitable rates” for all water consumers in Metro Manila.

In stark contrast, Manila Water laudably accepted (even if it disagreed with) the decision in which it lost. However, it reserved its right to compensation granted by its “concession agreement” with the MWSS.

Palpably unreasonable is this double-faced stance of the MWSS. It freely participated in the two arbitration cases with the full knowledge and acceptance of the finality and binding effect of whatever decisions may be rendered. Thus, it cannot accept and obey only the decision it won and ignore the decision it lost. That is the worst kind of selective justice.

Just because it exercises indisputable sovereignty and commands the police and the military, the government should not impose its will arbitrarily. It must set the example in following arbitral decisions regardless of their outcome. It must lead in observing the rule of law.


Otherwise, how can our government expect China to accept and obey an Itlos decision that is unfavorable to China if our government refuses to accept and obey arbitral decisions unfavorable to it?

What is good for the goose should also be good for the gander. The rule of law must be honored evenly and unconditionally. The government should not disobey an arbitral decision simply because it disagrees with it. Otherwise, it would be a worse violator of the rule of law for it willingly and actively participated in the arbitral proceedings while China did not.

Innocent bystanders. On the other hand, the arbitration between the government, represented by the Bases Conversion and Development Authority (BCDA), and CJH Development Corp. (CJHDevCo) ended in a draw. (The Philippine Dispute Resolution Center Inc. was the arbitral body that named the panel chair.)

The arbitral tribunal held that both parties mutually breached their lease agreement over Camp John Hay in Baguio. Consequently, it rescinded the agreement and directed CJHDevCo to deliver the leased area, together with all improvements and constructions thereon, to the BCDA, which, in turn, was ordered to return to CJHDevCo all the rentals the latter had paid, amounting to almost P1.5 billion.

While the arbitral decision may have settled the dispute between the two parties, it did not touch on the rights and obligations of the investors, locators and condominium owners in Camp John Hay who were not parties to the arbitration. But, in good faith, they paid CJHDevCo for their rights over the homes, condominiums, golf club shares and other improvements built thereon by the developer.

Their payments cannot just dissipate into nothingness. Surely, the BCDA which was adjudged to take over Camp John Hay should treat them reasonably, equitably and fairly. After all, when they contracted with CJHDevCo, the lease agreement between the two parties was still valid and existing. It became invalid only after it was rescinded by the arbitral tribunal last February. As innocent bystanders who were not parties to the arbitration, they should not be penalized and deprived of what they had paid for in good faith.

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TAGS: arbitration, BCDA, camp john hay, Itlos, Manila Water, Maynilad, MWSS, Naia, South China Sea, Supreme Court, West Philippine Sea
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