NextGen Day

The Securities and Exchange Commission (SEC) guidelines will enable firms to arbitrate intra-corporate conflicts quickly and outside the courtroom.

SEC Memorandum Circular No. 8, Series of 2022, which lays out rules for corporate arbitration of intra-company disputes, was released by the Commission on September 19th.

The rules put into practice Section 181 of Republic Act No. 11232, often known as the Revised Corporation Code of the Philippines (RCC), provide that a corporation’s bylaws or articles of incorporation may include an arbitration clause.

The rules specify, among other things, the minimum terms of the arbitration agreement that a corporation may sign, the location of the arbitration if it is not stated in the arbitration agreement, the process for choosing the arbitrators, the makeup and authority of the arbitral tribunal, and the disclosure requirements.

According to the guidelines, arbitration is a voluntarily agreed-upon process for resolving disputes in which one or more arbitrators, chosen by the parties’ chosen neutral third party or by the rules, render an award.

A domestic corporation may include an arbitration clause in its bylaws, articles of incorporation, or in a separate agreement.

The arbitration agreement must include the number of arbitrators, the designated independent third party who will appoint the arbitrator(s), the method for doing so, and the deadline by which the designated independent third party must choose the arbitrator(s).

Even though arbitration will still take place by Republic Act No. 9285, also known as the Alternative Dispute Resolution Act of 2004, arbitration agreements that do not meet these conditions are not enforceable.

When such a contract exists, any disagreements relating to the application of the articles of incorporation and bylaws, intra-corporate relations, or conflicts between the corporation, its stockholders, or members shall be submitted to arbitration.

The arbitration shall not be used to resolve disputes involving criminal charges or the interests of third parties.

The regional trial court shall follow the rules of procedure that the Supreme Court may issue to implement Section 181 of the RCC when an intra-corporate dispute is brought before it despite adopting an arbitration agreement in the corporation’s articles of incorporation, bylaws, or in a separate agreement.

The Philippines will be assumed to be the seat or place of arbitration unless the arbitration agreement specifies otherwise or the applicable legislation if the seat or place of arbitration is outside of the Philippines.

Before the arbitration, the parties must adhere to any alternative dispute resolution procedures specified in the contract, including mediation or negotiation.

A recognized independent party shall appoint arbitrators before the arbitration may begin. If the authorized appointing authority neglects to select the arbitrators by the arbitration agreement, the SEC may do so.

The Office for Alternative Dispute Resolution (OADR), a division of the Department of Justice, the Commission, or entities designated by the OADR or the Commission as appropriate for the arbitration, must accredit arbitrators.

Anyone contacted about serving as an arbitrator must disclose any circumstances that could raise legitimate concerns about their objectivity or independence in the case.

Those questions may also be raised if there are questions regarding an arbitrator’s independence or impartiality.

The arbitral tribunal will have the authority to decide its jurisdiction and issues about the arbitration agreement’s legality. Additionally, it has the authority to order the interim measures required to guarantee the award’s enforcement, avoid a miscarriage of justice, or otherwise defend the parties’ interests.

Preliminary injunctions against arbitration participants, preliminary property attachments, and the garnishment of cash held by banks or other third parties are only a few examples of interim procedures.

The final arbitral award issued by Section 181 of the RCC shall be regarded as a commercial arbitration award. It shall be carried out in line with the rules of procedure established by the Supreme Court to carry out the foregoing provision.

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