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In a case of first impression, the Philippine Supreme Court, in MAPFRE v Gulapa (18 November 2025), affirmed the authority of a rehabilitation court to refer a dispute relating to the rehabilitation plan to arbitration pursuant to section 26 of the Financial Rehabilitation and Insolvency Act (FRIA).

Following the devastation of Typhoon Yolanda, Philippine Phosphate Fertiliser Corporation (PhilPhos) filed a claim against its insurers, including MAPFRE Insular Insurance Corporation, for the damages to its buildings, machinery and equipment.

Because the pertinent insurance policies contain an arbitration clause in case of a dispute on the amount of loss or damage covered by the policies, PhilPhos sent a request for arbitration after the insurers only paid a fraction of the claim. The insurers insisted that the total indemnity owing to PhilPhos was only about 16% of the claim, following the appraisal of its loss adjuster.

Rehab court compels insurers’ arbitration

During the pendency of the insurance claim, PhilPhos filed a voluntary rehabilitation under the FRIA. When the insurers refused to settle the claims, the receiver filed a motion to compel the insurers to submit to arbitration, invoking section 26 of the FRIA and the arbitration clause in the policies. The insurers opposed the motion, citing the limited jurisdiction of the rehabilitation court.

The rehabilitation court granted the motion and directed the parties to proceed with arbitration,

following the arbitration clause in the insurance policy. MAPFRE eventually elevated the matter to the Supreme Court.

MAPFRE insisted that the rehabilitation court had no jurisdiction to grant the motion, citing Steel Corporation v MAPFRE (16 October 2013), where the Supreme Court ruled that a rehabilitation court had no subject-matter jurisdiction on the insurance claim of the debtor against the insurers (including MAPFRE).

The Supreme Court ruled that, notwithstanding the rehabilitation court’s limited jurisdiction, the FRIA allows a debtor to interpose claims that are incidental to the rehabilitation plan (City Government v Shoppers Paradise, 14 July 2021). The Supreme Court ruled section 26 of the FRIA allows the rehabilitation court to refer to arbitration any dispute relating to the rehabilitation plan.

Finally, the Court ruled that the motion is “inextricably related to the rehabilitation plan as it affects the viability of the plan”, and that “the final determination of the value of PhilPhos’s insurance claim in the arbitration proceedings can increase the resource pool of PhilPhos from which creditors may be paid.”

Rehab ruling expands claims, compels arbitration

The ruling may be problematic on two points. First is the expanded interpretation of incidental claims. There is a wide gap between the claim in the City Government case, where the claim was pursuant to an offsetting arrangement that was part of the rehabilitation plan (which binds the parties), and in the MAPFRE case, where the claim has not yet been resolved by a tribunal. The crossing of this chasm effectively increased the limited jurisdiction of rehabilitation courts.

Second, the concept of involuntary arbitration seems to contradict party autonomy in arbitration. The ADR Act defines arbitration as a “voluntary dispute resolution process”, while the New York Convention only allows recognition of an “agreement in writing” that has an arbitration clause.

Just to illustrate, suppose the debtor secures an arbitral award in its favour against a foreign entity, would a foreign court, applying the New York Convention, allow recognition and enforcement of an award in involuntary arbitration?

Arbitration clause should be in plan

To harmonise section 26 of the FRIA with party autonomy, the authors submit that there must be an arbitration clause in the rehabilitation plan. If the rehabilitation plan was confirmed, then it binds everyone; this should at least create the argument that the requirements of party autonomy had been satisfied, or, at the very least, that there is an “agreement in writing” that has an arbitration clause (if the plan was crammed down).

As an aside, the Supreme Court may have missed the fact that the policy already contains an arbitration clause, so there was no need to apply section 26 of the FRIA. The receiver could have simply commenced arbitration instead of filing the motion. Had the court recognised the existing arbitration agreement, it could have resolved the case on that basis and avoided a ruling that may now give rise to two problematic interpretations in future cases.

Anthony Jacoba is a partner, Ramiila Quinto is a senior associate and Marc Angelo Guibone is an associate at Ocampo & Suralvo in Manila

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