CHOOSING ARBITRATION over court litigation
has become increasingly popular. This has been the trend in other
countries and the Philippines is keeping up with the pace to
institutionalize arbitration. For construction disputes, parties may
choose the Construction Industry Arbitration Commission (CIAC) and for
other commercial disputes, they may choose the Philippine Dispute
Resolution Center, Inc. (PDRCI).
To choose arbitration as a dispute
resolution mechanism is deliberate because both or all parties must
agree to submit to arbitration. Their contract typically includes an
arbitration clause. Thus, in negotiating the commercial terms of a
contract, parties also negotiate whether a dispute will be submitted to
an arbitral tribunal or a court.
Why do parties choose arbitration over court litigation?
SPECIALIZED METHOD OF RESOLVING DISPUTES. In this era of globalization,
commercial transactions cover a wide variety of dealings such as mergers
and acquisitions, project finance, and distributorship. By virtue of
the complexity of contracts involved, parties have found the need for
their disputes to be resolved by individuals who are experts or well
versed in their respective industries. For example, in appreciating the
claims raised in a construction dispute, it is necessary that the
arbitrators are knowledgeable of the technical aspects of construction.
Thus, in disputes where the subject matter is highly technical, parties
in arbitration proceedings are able to appoint arbitrators who will
possess the appropriate degree of expertise to resolve their dispute.
EFFICIENCY. This is also the hallmark of arbitration proceedings.
Arbitrators have the authority to limit the number of witnesses to be
presented, taking into consideration the nature of the testimony to be
given and the time it would take to hear the testimony (even depositions
may be limited at the arbitrator’s own discretion). Moreover, unlike in
litigation where parties are usually just given a short amount of time
to be heard in a given hearing date (usually multiple cases are heard in
a day), in arbitration, the arbitrator may decide to conduct hearings
for that lone case for the entire day. While a judge has to consider all
the cases he has on his docket in a given day, an arbitrator can spend
time and focus on just one proceeding. Furthermore, arbitration
proceedings can be scheduled around the needs, availabilities and mutual
convenience of the parties and their witnesses. This may be
particularly important to parties who want minimal business disruptions
brought about by any dispute proceedings.
FINALITY. It is common that arbitration agreements include a clause
prohibiting appeals to an award. This gives parties a sense of finality
not easily given by regular court proceedings where multiple appeals are
available.
SECRECY. Arbitration proceedings are highly confidential. This means
that the proceedings, all the pleadings filed, and the arbitral award
are taken away from the public eye. Confidentiality of the proceedings
is vital especially when parties, such as multinational corporations,
try to avoid adverse public relations brought about by any litigation,
or when critical and important information such as trade secrets are
involved, parties can be assured that any information relayed is not for
public consumption. Such confidentiality is not always present in
judicial proceedings where courtrooms are open to the public and the
media.
LESS ADVERSARIAL. Arbitration proceedings are generally less adversarial
in contrast to traditional litigation. Unlike in litigation where
proceedings are held in a courtroom, an arbitration conference is
usually held in a boardroom where parties sit around a conference table
and the atmosphere, in general, is less rigid and formal. In fact, the
absence of formalities and hostility usually attributed to litigation
brings about a more cordial atmosphere conducive to settlement talks.
Parties are encouraged to participate and work together towards a swift
and equitable resolution of their differences. This may be particularly
important to parties such as multinational corporations which seek to
maintain good business relationships and not to “burn bridges”, so to
speak, in the course of resolving disputes.
While arbitration is by no means a flawless system in resolving a
dispute, there are factors worth every contracting party’s
consideration. Indeed, there are several benefits and advantages of
drafting and including an arbitration clause in future contracts and
agreements.
(Paul Rodulfo B. Imperial is an associate of the Angara Abello
Concepcion Regala & Cruz Law Offices. He obtained his LL.M. from
Columbia University and J.D. from the Ateneo de Manila University. He
can be contacted through e-mail at pbimperial@accralaw.com or tel. no. 830.8000.)
source: Businessworld Column of Amicus Curiae
