LM Power Engineering Corporation Vs

LM Powe werEngi neeri ngCorpor at i on vs.Capi t olI ndus t r i alConst r uct i on Gr oups, I nc.G. R.No.141833 Mar ch26,2003) FACTS: LM PowerEngi neer i ngCorpor at i on andCapi t olI ndust ri alConst ruct i on Subcont r actAgr eeme ment Gr o ups ,I nc .e nt e r e di nt oa“ ”i nv ol v i ngel e ct r i c alwor katt he

 Thi r dPor tofZamboang a.Twoy ear st her eaf t er ,Respondentt ookov e rsomeoft hewor k c ont r a ct e dt oPe t i t i one r .Al l e ge dl y ,t hel at t e rhadf ai l e dt ofini s hi tbe caus eofi t s i nabi l i t yt opr o c ur ema mat e r i al s .  Whe nt as kwascompl e t e dPe t i t i one rbi l l e dRespondenti nt heamountofP6. 7M. Res pondent ,howev er ,r ef use dt o pay and cont es t ed t heaccur acyoft heamo mountof advances and bi l l abl e accomp mpl i shment sl i st ed by Pet i t i oner .Respondental so t ook r e f ug ei nt het e r mi mi na t i o nc l a us eo ft heAg r e e me me nt .Tha tc l a us ea l l o we di tt os e to fft he costoft hewor kt hatPet i t i onerhad f ai l edt ounder t ake— duet ot er mi nat i on ort akeover— agai nstt heamo mounti towedt hel at t er . mp mpl ai ntf o rCo l l e c t i o n  Pet i t i onerfil edwi t ht heRTC ofMakat iaCo oft heamo mount r epr esent i ngt heal l egedbal anceduei tundert heSubcont r act .I nst ead ofsubmi t t i ng  Answer i on t o Di smi mi ss,al an ,Res pondentfil ed a Mot l egi ng t hatt he Comp mpl ai ntwas pr ema mat ur ebecauset her ewasnopri orr ecour set oar bi t r at i on. i o nt oDi s mi mi s s  RTC deni edt heMot ont hegr oundt hatt hedi sput edi dnoti nvol ve t he i nt er pr et at i on ort he i mpl eme ment at i on oft he Agr eeme mentand was,t her ef or e,not cover edbyt hearbi t r alcl ause.TheRTC rul edt hatt het akeoverofsome mewor ki t ems msby Res pondentwas notequi val entt oat er mi nat i on,buta mer e modi ficat i on,oft he Subcont r act .Thel at t erwas or der ed t o gi vef ul lpayme mentf ort hewor k comp mpl et ed by Pe t i t i one r .

CA r ev er sedon appealt heRTC r ul i ngand or der ed t here f er r aloft hecaset o arbi t r at i on.TheCA hel dasarbi t r abl et hei ssueofwhet herRespondent ’ st akeoverof some mewor ki t ems mshadbeeni nt endedt obeat er mi nat i onoft heori gi nalcont r actunder Le t t e r“ K”o ft heSubc o nt r ac t . Pe t i t i o ne re l e v at e dt hec as et oSC.

I SSUES: 1.Whet her or not t her e exi st s a cont r ove r sy/di sput e bet wee n Pet i t i oner and Respondentr egar di ngt hei nt er pr et at i onandi mpl eme ment at i onoft heSubcont r act  Agr eementt hatr equi r e spr i orr ecour s et ov ol unt ar yar bi t r at i on?; 2.I nt heaffir ffir mat i ve ,whet herornott her ei saneedt ofil ear equestfir stwi t ht he CI AC i no r de rt ov e s ti twi t hj ur i s di c t i o nt ode c i deac o ns t r uc t i o ndi s put e ? RUL ULI NG:  ThePe t i t i on i s unmer i t or i ous ;hence ,DENI ED. Theassai l e d Deci si on oft heCA i s  AFFI RMED.

1.  YES.SC si deswi t hRespondent .Thei ns t antcasei nv ol v est ec hni caldi scr epanci est hat ar eb e t t e rl e f tt oanar bi t r a lbo dyt hathase xpe r t i s ei nt hos ear e a s. 2. NO.SC i sno tpe r s ua de d wi t h Pe t i t i o ne r ’ sc o nt e nt i o n.Se c t i o n 1o fAr t i c l eI I Io ft he NEW Rul esofProc edur eGove r ni ngConst r uct i on Ar bi t r at i on hasdi spense d wi t ht he r equi r ementt o submi ta r eques tf orar bi t r at i on.Rec our set ot heCI AC maynow be avai l ed ofwhenev era cont r act“ cont ai ns a cl ause f ort he submi ssi on ofa f ut ur e c ont r o v e r s yt oar bi t r a t i on. ” I nt hei ns t antc as e ,t heSubc o nt r ac thast hef o l l o wi ngar bi t r alc l aus e : “ 6.ThePa r t i e she r e t oag r e et ha ta nydi s put eo rc o nfli c ta sr e g a r ds t oi nt er pr et at i on andi mpl ement at i on oft hi sAgr eementwhi chcannotbe s e t t l e dbe t we e n[ r e s po nde nt ]and[ pe t i t i o ne r ]ami c abl ys hal lbes e t t l e dby me a nsofa r bi t r a t i o nxxx . ” Cl earl y ,t he r esol ut i on oft he di sput e bet ween t he part i es her ei nr equi r es a r e f e r r alt ot hepr o v i s i o nsoft he i rAg r e e me nt .Wi t hi nt hes c opeoft hear bi t r a t i o nc l aus e ar edi scr epanci esas t ot heamountofadvancesand bi l l abl eaccompl i shment s,t he a ppl i c a t i o no ft hepr o v i s i o no nt e r mi na t i o n,a ndt hec o ns e q ue nts e t o ffo fe x pe ns e s .  A r e vi e w oft he f act ualal l eg at i onsoft he par t i es r e v eal st hatt he y di fferon t he f ol l o wi ngque s t i o ns ,t her e s ol ut i o nsofwhi c hl i e si nt hei nt e r pr e t at i o no ft hepr o v i s i ons oft heSubcont r actAgr eement : 1.Di dat akeove r /t er mi nat i onoccur ? 2.Mayt hee xpensesi ncur r edbyRespondenti nt het akeoverbes etoffagai nstt he amount si towedPet i t i oner ? 3.How muc hwer et headvance sandbi l l abl eac co mpl i shment s? Be i ngani ne x pe ns i v e ,s pe e dyanda mi c a bl eme t ho do fs e t t l i ngdi s put e s ,a r bi t r a t i o n  — al ong wi t h medi at i on,c onci l i at i on and negot i at i on — i se ncour aged by t he SC.  Asi de f r om uncl oggi ng j udi ci aldocke t s,ar bi t r at i on al s o has t ens t he r esol ut i on of di sput es,especi al l yoft hecommer ci alki nd.I ti st husr egar ded as t he“ waveoft he f ut ur e”i ni nt er nat i onalc i vi land commer ci aldi sput es.Br ushi ngasi dea cont r act ual agr eementcal l i ngf orarbi t r at i onbet weent hepart i eswoul dbeast epbackward. Consi st entwi t ht heabovement i onedpol i cyofencour agi ngal t er nat i vedi sput e r e s o l ut i o n me t ho ds ,c o ur t ss ho ul dl i be r a l l yc o ns t r ue a r bi t r a t i o nc l aus e s .Pr o v i de d s uc hc l a us ei ss us c e pt i bl eo fa ni nt e r p r e t a t i o nt ha tc o v e r st hea s s e r t e d di s put e ,a n or der t o ar bi t r at e shoul d be gr ant ed. Any doubt shoul d be r es ol ve di nf avor of ar bi t r a t i on. 2.

Sect i on 1 ofAr t i cl eI I Ioft heNEW Rul esofPr ocedur eGover ni ngConst r uct i on  Ar bi t r at i onpr ovi des: “ SECTI ON 1.Submi ssi ont oCI AC Jur i sdi ct i on— Anarbi t r at i oncl ausei n ac o ns t r uc t i o nc o nt r a c to ras ubmi s s i o nt oar bi t r a t i o no fac o ns t r uc t i o n di s put e shal lbedeemed an agr eementt osubmi tan exi st i ngorf ut ur econt r over syt o CI AC j uri sdi ct i on,not wi t hst andi ng t he r ef er ence t o a di ffer ent arbi t r at i on i nst i t ut i on orarbi t r albodyi n such cont r actors ubmi ssi on.When a cont r act c ont ai nsac l aus ef o rt hesubmi s s i o no faf ut ur eco nt r o v e r s yt oar bi t r a t i o n,i ti s notnecessaryf ort hepart i est oent eri nt oasubmi ssi on agr eementbef oret he c l ai ma ntma yi nv o ket hej ur i s di c t i o no fCI AC. ”  Ascl ear l yexpl ai ned i n Chi naChangJi angEner gyCor por at i on ( Phi l i ppi nes)v . Ro s alI nf r as t r uc t ur eBui l de r se tal .( a ne x t e nde d uns i g ne d Re s o l ut i o n)a nd r e i t e r a t e d i nNa t i o na lI r r i g a t i o n Admi ni s t r a t i o nv .Co ur to fAppe a l s[ 1999] ,f r om whi chSC quot e thus: “ Undert he pr esentRul es ofPr ocedur e,f or a part i cul ar const r uct i on c ont r ac tt of al lwi t hi nt hej ur i s di c t i o no fCI AC,i ti sme r e l yr e qui r e dt hatt he pa r t i e sag r e et os ubmi tt hes amet ov o l unt ar yar bi t r a t i o n unl i k ei nt heor i g i nal  v er si onofSect i on1,asappl i edi nt heTescocase,t hel aw asi tnow s t andsdoes no tpr o v i det hatt hepa r t i e ss ho ul da gr e et os ubmi tdi s put e sar i s i ngf r o mt he i r ag r e e me nts pe c i fic al l yt ot heCI AC f o rt hel at t e rt oac q ui r ej ur i s di c t i o no v e rt he s a me .Ra t he r ,i ti spl a i na ndc l e a rt ha ta sl o ngast hepa r t i e sag r e et os ubmi tt o  v ol unt ar y ar bi t r at i on, r eg ar dl ess of what f or um t he y may c hoose, t hei r ag r e e me ntwi l lf al lwi t hi nt hej ur i s di c t i o no ft heCI AC,s uc ht hat ,e v e ni ft he y speci fical l y choose anot her f orum, t he part i es wi l l not be pr ecl uded f r om el ect i ngt o submi tt hei rdi sput ebef or et heCI AC becauset hi sr i ghthas been  v es t eduponeac hpar t ybyl aw,i . e. ,E. O.No.1008. ” Cl e ar l y ,t he r ei snomo r ene e dt ofil ear e q ue s twi t ht heCI AC i no r d e rt ov e s ti t  wi t hj ur i sdi ct i ont odeci deacons t r uct i ondi sput e.  Thear bi t r alcl ausei nt heAgr eementi sacommi t mentont hepar toft hepar t i e s t os ubmi tt oa r bi t r a t i o nt hedi s put e sc ov e r e dt he r e i n.Be c a us et ha tc l aus ei sbi ndi ng , t hey ar e expect ed t o abi de by i ti n good f ai t h.And because i tcov er st he di sput e  be t ween t he par t i es i nt he pr esentcase,ei t heroft hem may compelt he ot hert o ar bi t r at e .