SEC seeks to enable firms to resolve intra-corp disputes

Iris Gonzales (The Philippine Star) - June 25, 2021 - 12:00am

MANILA, Philippines — The Securities and Exchange Commission (SEC) is finalizing the guidelines that will allow firms to resolve intra-corporate disputes faster through arbitration.

The draft guidelines will operationalize Section 181 of Republic Act 11232 or the Revised Corporation Code of the Philippines (RCC), which allows corporations to refer intra-corporate disputes to arbitration.

An arbitration agreement may be provided in the articles of incorporation or bylaws of a corporation, according to Section 181 of the RCC.

“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, bylaws, or from intra-corporate relations shall be referred to arbitration,” the SEC said.

Under the draft guidelines, arbitration is defined 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.

According to the SEC, 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.

Such agreements must contain 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.

However, the SEC said disputes that involve criminal offenses and interests of third parties shall be non-arbitrable.

With an arbitration agreement in place, disputes among the corporation, its stockholders or members that arise from the implementation of the articles of incorporation, bylaws, or from intra-corporate relations, shall be referred to arbitration.

The seat of arbitration is presumed to be the Philippines, unless otherwise stated, according to the draft guidelines.

Further, an intra-corporate dispute filed with a regional trial court shall be dismissed before the termination of the pre-trial conference if the corporation has an arbitration agreement in place.

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.

“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,” the SEC said.

After the arbitration, the final arbitral award shall be executory after 15 days from receipt thereof by the parties and shall be stayed only by the filing of a bond or the issuance by the appellate court of an injunctive writ.

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