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In the past year, the Philippine Supreme Court has continued to issue jurisprudence that actively upholds the fundamental principles of arbitration in this jurisdiction.

The Philippine Construction Industry Arbitration Commission’s (CIAC) jurisdiction may be statutory in nature but is essentially grounded on party autonomy. Recently, the Supreme Court decided cases, which, taken together, affirm the essentially contractual nature of construction arbitration and the importance of the parties’ conduct in determining contractual intent.

CIAC jurisdiction

In Fleet Marine Cable Solutions Inc v MJAS Zenith Geomapping & Surveying Services et al (2024), the Supreme Court was confronted with the issue of whether the statutory jurisdiction of the CIAC over construction disputes would apply in respect of a subcontractor agreement covering technical services related to a future construction contract and project.

In this case, Fleet Marine Cable Solutions (FMCS) entered into a services agreement under which it undertook to perform certain technical services in relation to the intended construction of a new fibre-optic submarine cable network.

To fulfill its contractual obligations under the services agreement, FMCS entered into a subcontract agreement with MJAS Zenith Geomapping and Surveying Services (MJAS), under which FMCS subcontracted the performance of some of its tasks under the services agreement to MJAS. The subcontract agreement contained an arbitration clause that provided for resort to arbitration under the Rules of Arbitration of the International Chamber of Commerce.

FMCS eventually terminated the subcontract agreement on allegations of MJAS’s delay, deficient performance and abandonment of the project, and commenced arbitration against MJAS before the commission. MJAS assailed the jurisdiction of the CIAC on the grounds that the subcontract agreement was not a construction contract and that the dispute did not arise from, or was not connected with, construction in the Philippines.

The CIAC Arbitral Tribunal ruled in favour of MJAS and dismissed FMCS’s complaint for lack of jurisdiction. FMCS questioned the Arbitral Tribunal’s ruling before the Supreme Court.

The Supreme Court applied the competence-competence principle in affirming the CIAC Arbitral Tribunal’s lack of jurisdiction. For the CIAC’s statutory jurisdiction to apply, at minimum, there must be a construction contract in place, even if it is not the primary contract being contested.

Here, the transaction subject of the subcontract agreement and the dispute or controversy that arose were not construction-related, and the services agreement only contemplated the parties’ future intention to construct a fibre-optic submarine cable network. Neither the services agreement nor the subcontract agreement involved the performance of construction works, which the Supreme Court previously defined as “all on-site works on buildings or altering structures, from land clearance through completion, including excavation, erection and assembly and installation of components and equipment”.

On the other hand, in Local Water Utilities Administration v RD Policarpio & Co, Inc (2024), the Supreme Court held that an entity with approving authority over a construction contract should be deemed a party thereto and, therefore, subject to CIAC jurisdiction.

In this case, the Local Water Utilities Administration (LWUA), a chartered government-owned or controlled corporation, entered into a financial assistance contract with the Butuan City Water District (BCWD) for the implementation of a water supply system improvement project.

Under such a contract, the LWUA was constituted as an “agent” of BCWD, with specific authority to undertake bidding and awarding over the engineering and civil works of the project, grant approval for the project, and greenlight the commencement of construction.

The LWUA eventually opened bidding and awarded the project to RD Policarpio and Co (RDPC). The BCWD and RDPC executed the construction contract, which was then approved by the administration.

RDPC commenced arbitration against both the LWUA and the Butuan City Water District before the CIAC, alleging non-payment under the contract. The arbitral tribunal ruled in favour of RDPC and held that the water utilities agency was solidarily liable with the district for the company’s money claims. After losing on appeal (under the old remedial framework), the LWUA brought the matter to the Supreme Court.

The court found that, in facilitating and approving the construction contract between the BCWD and RDPC, the LWUA did not act pursuant to its regulatory or statutory functions under the law, but instead exercised a proprietary or private function. In doing so, the agency wittingly became a party to the construction contract to protect its interest as BCWD’s lender under their financial assistance contract.

Judicial remedies clarified

The court further found that the LWUA could not have been a mere agent of the water district, considering the nature and scope of the discretion granted to, and actually exercised by, the agency in the project. Given the nature of the parties’ contractual arrangement and obligations, as well as their contemporaneous and subsequent conduct, the LWUA should be held solidarily liable with the district.

The Supreme Court also clarified the nature and scope of the judicial remedies available to parties aggrieved by arbitral awards or their execution.

In Bases Conversion and Development Authority v CJH Development Corporation et al (2024), the Supreme Court clarified the applicability and scope of the remedy of certiorari (a court process seeking review of a lower court or government agency decision) in relation to the execution of a court-confirmed domestic arbitral award.

This case involved a final award issued in a domestic arbitration over a lease dispute. The arbitral tribunal directed the rescission of the lease agreement and directed CJH Development Corporation (CJH), as lessee, to vacate the premises and the Bases Conversion and Development Authority (BCDA), as lessor, to return rentals paid.

On the petition of both parties, the final award was judicially confirmed and a writ of execution issued. An issue arose when CJH questioned whether the notice to vacate issued by the court sheriff should cover sub-lessees occupying the lease premises who were not parties to the arbitration.

Court of Appeals

Without waiting for the resolution of such issue before the trial court, CJH brought the matter to the Court of Appeals on certiorari. The court nullified the writ of execution and the notice to vacate, finding that the final award could not be enforced against non-parties to the arbitration.

The court also modified the final award in ordering that CJH may only be made to vacate the premises on payment by the BCDA, and that the agency should respect the contracts of the sub-lessees. In this regard, the Court of Appeals directed CJH, the BCDA, and the sub-lessees to submit themselves to “compulsory arbitration” under the lease agreement for the determination of their respective rights.

The Supreme Court affirmed that certiorari was the proper remedy to question the execution of an arbitral award. However, the court found that CJH availed itself of this remedy prematurely, given the pendency of the issue before the trial court.

Further, the Court of Appeals was found to have overstepped its authority in nullifying the writ of execution, and the notice to vacate and modifying the final award. The Supreme Court emphasised that courts cannot make their own factual findings and legal conclusions over issues already resolved through arbitration. Under Philippine arbitration law and rules, judicial interference is restrained in favour of arbitration, which is meant to be the end (not the beginning) of litigation.

The Supreme Court also had an opportunity to clarify the scope of the limited judicial remedies against the CIAC arbitral awards, as previously delineated in Global Medical Centre of Laguna Inc v Ross Systems International Inc (2021), which has since been incorporated into the latest arbitration rules of the CIAC.

Specifically, in Grand Exploit Builder Development Inc v Hoegaarden Realty Corporation (2025), the Supreme Court emphasised the limited grounds to assail a CIAC arbitral award by way of certiorari before the Court of Appeals, which should be based on allegations of corruption, fraud, misconduct, evident partiality, incapacity or excess of powers within the arbitral tribunal.

In this case, the Supreme Court rejected allegations that the arbitral tribunal’s integrity was compromised, or that it demonstrated evident partiality over one party. The court once again stressed the principle of judicial restraint and deference in the review of arbitral awards. Absent any clear and categorical showing that the arbitral tribunal committed unconstitutional or illegal acts, its findings must be respected.

The above-mentioned cases show that, while arbitration practice in the Philippines has been dynamic and responsive to commercial devel-opments and exigencies, it remains grounded on robust and fundamental principles consistent with regional and international standards.

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