The Securities and Exchange Commission (SEC) has issued the guidelines that will allow corporations to resolve intra-corporate disputes promptly and without going to court through arbitration.
The Commission on September 19 issued SEC Memorandum Circular No. 8, Series of 2022, which provides for the Guidelines on Arbitration of Intra-Corporate Disputes for Corporations.
The guidelines operationalize Section 181 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines (RCC), which states that an arbitration agreement may be provided in the articles of incorporation or bylaws of a corporation.
The guidelines provide for the minimum provisions of the arbitration agreement that a corporation may execute, the place of arbitration if not specified in the arbitration agreement, the procedure for the appointment of arbitrators, the composition and powers of the arbitral tribunal, and disclosure requirements, among others.
The guidelines define arbitration as a voluntary dispute resolution process in which one or more arbitrators, appointed by the parties’ designated independent third party or in accordance with the rules, resolve a dispute by rendering an award.
A domestic corporation may provide an arbitration agreement in its articles of incorporation or bylaws, as well as in the form of a separate agreement.
An arbitration agreement must state the number of arbitrators; the designated independent third party who shall appoint the arbitrator/s; procedure for the appointment of the arbitrator/s; and the period within which the arbitrator/s should be appointed by the designated independent third party.
Arbitration agreements that do not comply with such requirements shall be unenforceable, although arbitration shall still proceed under Republic Act No. 9285, or the Alternative Dispute Resolution Act of 2004.
When such an agreement is in place, disputes between the corporation, its stockholders or members, which arise from the implementation of the articles of incorporation and bylaws, or from intra-corporate relations shall be referred to arbitration. However, disputes that involve criminal offenses and interests of third parties shall be excluded from arbitration.
When an intra-corporate dispute is filed with a regional trial court despite the adoption of an arbitration agreement in the corporation’s articles of incorporation, bylaws or in a separate agreement, the court shall act in accordance with the rules of procedure that the Supreme Court may promulgate to implement Section 181 of the RCC.
Unless the arbitration agreement states otherwise, the seat or place of arbitration shall be presumed to be the Philippines, or under the relevant law if the seat or place of arbitration is outside the Philippines.
Prior to arbitration, parties must comply with alternative forms of dispute resolution, such as negotiation or mediation, as prescribed under the agreement.
To proceed with arbitration, a designated independent party shall appoint arbitrators. The SEC may make the appointment should the designated appointing authority fail to appoint the arbitrators as specified in the arbitration agreement.
Arbitrators must be accredited by the Office for Alternative Dispute Resolution (OADR) under the Department of Justice or the Commission, or by organizations accredited by the OADR or the Commission for the purpose of arbitration.
A person who has been approached for his or her possible appointment as an arbitrator shall disclose any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence to the case. An arbitrator may likewise be challenged should there be doubts to his or her impartiality or independence.
The arbitral tribunal shall have the power to rule on its own jurisdiction and on questions relating to the validity of the arbitration agreement. It shall also have the power to grant the necessary interim measures to ensure enforcement of the award, prevent a miscarriage of justice, or otherwise protect the rights of the parties.
Interim measures may include preliminary injunction directed against a party to arbitration and preliminary attachment against property or garnishment of funds in the custody of a bank or third person, among others.
The final arbitral award under Section 181 of the RCC shall be considered as a commercial arbitration award and shall be executed in accordance with the rules of procedure promulgated by the Supreme Court to implement said provision.