The Securities and Exchange Commission said Thursday it issued the guidelines allowing corporations to resolve intra-corporate disputes promptly and without going to court through arbitration.
The commission released SEC Memorandum Circular No. 8, Series of 2022, which provides for the guidelines on arbitration of intra-corporate disputes for corporations.
It said the guidelines operationalize Section 181 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines, 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, the procedure for appointing arbitrators, the composition and powers of the arbitral tribunal and disclosure requirements, among others.
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.
The SEC said a domestic corporation may provide an arbitration agreement in its articles of incorporation or bylaws and in the form of a separate agreement.
It said an arbitration agreement should state the number of arbitrators; the designated independent third party who will appoint the arbitrator/s; the procedure for the appointment of the arbitrator/s; and the period within which the designated independent third party should nominate the arbitrator/s.
“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,” the SEC said.
It said disputes between the corporation, stockholders or members, which arise from the implementation of the articles of incorporation and bylaws or intra-corporate relations, should be referred to arbitration.
The SEC said disputes involving criminal offenses and third parties’ interests would be excluded from arbitration.
The agency said that when an intra-corporate dispute was filed with a regional trial court despite adopting an arbitration agreement, the court should act under 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 should be presumed to be in the country or under the relevant law if the seat or place of arbitration is outside the Philippines.
The SEC said the parties should comply with alternative forms of dispute resolution, such as negotiation or mediation, as prescribed under the agreement before arbitration. To proceed with arbitration, a designated independent party will appoint arbitrators.
The SEC said it may make the appointment if the designated appointing authority failed to select the arbitrators specified in the arbitration agreement.
The Office for Alternative Dispute Resolution under the Department of Justice, the SEC, or organizations accredited by the OADR or the commission, should accredit the arbitrators for the 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 about 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 SEC said.
The arbitral tribunal will have the power to rule on its jurisdiction and questions relating to the validity of the arbitration agreement. It will 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 parties’ rights.
Interim measures may include preliminary injunction directed against a party to the 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 will be considered a commercial arbitration award. It will be executed under the rules of procedure promulgated by the Supreme Court to implement the said provision.