MANILA, Philippines — The Securities and Exchange Commission (SEC) has issued guidelines on the resolution of intra-corporate disputes outside the courts.
The so-called Guidelines on Arbitration of Intra-Corporate Disputes for Corporations will allow corporations to resolve intra-corporate disputes promptly and without going to court through arbitration.
According to a new circular issued last week, 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.
The guidelines operationalize Section 181 of Republic Act 11232, or the Revised Corporation Code of the Philippines (RCC) and provide for the minimum provisions of the arbitration agreement that a corporation may execute.
The SEC guidelines also provide the procedure for the appointment of arbitrators, the composition and powers of the arbitral tribunal, and disclosure requirements, among others.
Arbitration is 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 guidelines, an arbitration agreement must state the number of arbitrators; the designated independent third party who shall appoint the arbitrators; procedure for the appointment of the arbitrators; and the period within which the arbitrators 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 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,” the SEC said.
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 refers to a sole arbitrator or a panel of arbitrators, according to the guidelines.
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.
The arbitral tribunal shall have the power to rule on its own jurisdiction and on questions relating to the validity of the arbitration agreement.
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.