Hutama-rsea Joint Operations, Inc1

HUTAMA-RSEA JOINT OPERATIONS, INC., vs. CITRA METRO MANILA TOLLWAYS CORPORATION G.R. No. 180640.  April 24, 2009

Section 4 of Executive Order No. 1008 defines the jurisdiction of CIAC, thus: The CIAC shall have original and exclusive  jurisdiction over disputes arising from, or conn connec ecte ted d with with,, cont contrracts acts en ente tere red d into into by the the parties involved in construction in the Philippines, whether the disputes arises before or after the completion of the contract, or after the abandonment or breach thereof. These disputes may involve government or private contracts.  For the Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration.

The jurisdiction of CIAC may include but is not limited to: 1. Violation of the specification of materials or workmanship; 2. Violation of the terms of agreement; 3. Interpretation and/or application of contractual provisions; 4. Amount of damages and penalties; 5. Commencement and time delays; 6.  Maintenance and defects; 7.  Payment default of employer or contractor and changes in contract cost.

Section 1, Article III of the (CIAC Rules), provides:  An arbitration clause in a construction contract or a submission to arbitration of a construction dispute shall be deemed an agreement to submit an existing or future controversy to CIAC jurisdiction, notwithstanding the reference to a different arbitration institution or arbitral body in such contract or submission. When a contract contains a clause for the submission of a future controversy to arbitration, it is not necessary for the parties to enter into a submission agreement before the claimant may invoke the jurisdiction of CIAC.

FACTS: Citra Metro Manila Tollways Corporation General Contractor

Respondent

Engineering Procurement Construction Contract (EPCC) HUTAMA-RSEA Joint Operations Incorporation Sub-contractor

Petitioner

US$369,510,304.00

During the construction of the Skyway Project, petitioner Hutama wrote respondent Citra on several occasions requesting payment of the formers interim billings, pursuant to the provisions of the EPCC. Respondent Citra only partially paid the interim billings, thus, prompting petitioner Hutama to demand the payment of the outstanding balance. Respondent Citra however still failed to do so.

On  December 15, 1999, the Skyway Project was opened for public use, and toll fees were accordingly collected. After informing respondent Citra that the construction of the Skyway Project was already complete, petitioner Hutama reiterated its demand that respondent Citra pay the outstanding balance on the interim billings, as well as the Early Completion Bonus agreed upon in the EPCC. Respondent Citra refused to comply with petitioners demands.

On May 24, 2004, petitioner, through counsel, sent a letter to respondent Citra demanding payment of the following: (1) the outstanding balance on the interim billings; (2) the amount of petitioners final billing; (3) early completion bonus; and (4) interest charges on the delayed payment.

BEFORE THE CIAC Petitioner Hutama filed a Request for  Arbitration, seeking to enforce its money claims against respondent. Respondent Citra averred that the CIAC had no jurisdiction over the case as the filing by petitioner was premature because a condition precedent,   i.e.,   prior referral by the parties of their dispute to the Dispute  Adjudication Board (DAB), required by Clause 20.4 of the EPCC, had not been satisfied or complied with.

Clause 20.4 of the EPCC If a dispute arises between the Employer and the Contractor in connection with, or arising out of, the Contract or the execution of the Works, including any dispute as to any opinion, instruction, determination, certification or valuation of  the Employers Representative,  the dispute shall initially be referred in writing to the Dispute Adjudication Board for its decision, with a copy to the other party.

CIAC RULING The CIAC ruled that it had jurisdiction over the case, and that the determination of whether petitioner had complied with Clause 20.4 of the EPCC was a factual issue that may be resolved during the trial.

Respondent Citra filed a   Motion for Reconsideration of the CIAC Order. CIAC however  denied the motion as prior resort by the parties to DAB was not a condition precedent for it to assume  jurisdiction over CIAC.

BEFORE THE CA Respondent Citra filed a special civil action for certiorari and prohibition.

CA Ruling -   ruled in favour of respondent Citra. - it annulled the Order of the CIAC, and enjoined the said Commission from proceeding with the case until the dispute between petitioner and respondent had been referred to and decided by the DAB.

Petitioner Hutama filed a   Motion for Reconsideration. Denied. Petitioner filed the instant  petition for review   before the Supreme Court raising the issue of     whether CIAC has  jurisdiction over the case.

BEFORE THE SC Respondent’s Contention: The CIAC still cannot assume  jurisdiction over the case as petitioner has not yet referred its dispute with respondent to the DAB, as directed by Clause 20.4 of the EPCC. Prior resort of the dispute to DAB is a condition precedent and an indispensable requirement for the CIAC to acquire  jurisdiction over the case.

ISSUE: Whether prior referral to DAB as provided for in Clause 20.4 of EPCC is a condition precedent before CIAC can assume jurisdiction over the dispute in the case.

SC RULING: Prior referral to DAB as provided for in Clause 20.4 of EPCC is  not a condition precedent   before CIAC can assume  jurisdiction over the dispute in the case.

The CIAC shall have jurisdiction over a dispute involving a construction contract if: contract contains an arbitration 1. The clause (notwithstanding any reference by the same contract to another arbitration institution or arbitral body); 2.   Even in the absence of such a clause in the construction contract, the parties still agree to submit their dispute to arbitration.

In the case, it is true that Clause 20.4 of the EPCC states that a dispute between petitioner and respondent as regards the EPCC shall be initially referred to the DAB for decision, and only when the parties are dissatisfied with the decision of the DAB should arbitration commence. This does not mean, however, that  the CIAC is barred from assuming jurisdiction over the dispute if such clause was not complied with.

The bare fact that the parties herein incorporated an arbitration clause in the EPCC is sufficient to vest the CIAC with  jurisdiction over any construction controversy or claim between the parties. The arbitration clause in the construction contract  ipso facto  vested the CIAC with jurisdiction.

Since the jurisdiction of CIAC is conferred by law, it cannot be subjected to any condition; nor can it be waived or diminished by the stipulation, act or omission of the parties , as long as the parties agreed to submit their construction contract dispute to arbitration, or if there is an arbitration clause in the construction contract.

China Chang Jiang Energy Corporation (Philippines) v. Rosal Infrastructure Builders What the law merely requires for a particular construction contract to fall within the jurisdiction of CIAC is for the parties to agree to submit the same to voluntary arbitration.

 As long as the parties agree to submit to voluntary arbitration, regardless of what forum they may choose, their agreement will fall within the jurisdiction of the CIAC, such that, even if they specially choose another forum, the parties will not be precluded from electing to submit their dispute before the CIAC because this right has been vested upon each party by law. (National Irrigation Administration v. Court of Appeals).

It bears to emphasize that the mere existence of an arbitration clause in the construction contract is considered by law as an agreement by the parties to submit existing or future controversies between them to CIAC jurisdiction, without any qualification or condition precedent.

 A condition precedent in the construction contract, which would effectively suspend  the jurisdiction of the CIAC until compliance therewith, would be  in conflict  with the recognized intention of the law and rules to  automatically vest CIAC with jurisdiction over a dispute should the construction contract contain an arbitration clause.