korea technologies co., ltd. vs. lerma

8/18/2019 Korea Technologies Co., Ltd. vs. Lerma

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Doctrine: Established in this jurisdiction is the rule that the law of the place where the

contract is made governs. Lex loci contractus. A contract perfected in the Philippines will

be governed by Philippine laws. onetheless! Art. "#$$ of the %ivil %ode sanctions the

validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral

award without prejudice to Articles "#&'! "#&( and "#$#! which refer to instances where a compromise or an arbitral award! as applied to Art. "#$$ pursuant to Art. "#$&!

may be voided! rescinded! or annulled! but these would not denigrate the finality of the

arbitral award.

)hile the *+% does not have jurisdiction over disputes governed by arbitration mutually

agreed upon by the parties! still the foreign arbitral award is subject to judicial review by

the *+% which can set aside! reject! or vacate it.

,ummary: -orea +ech and Pacific eneral entered into a contract where -orea +ech

would set up an LP %ylinder /anufacturing Plant in %armona! %avite for Pacific

eneral. +he contract was executed in the Philippines and it contained an Arbitration

%lause which provided that disputes must be referred to a tribunal body in -orea. During

the performance of the contract! issues arose regarding the non0delivery of certain

e1uipment and the delivery of e1uipment of lesser 1uality than that agreed upon. Pacific

eneral wanted to unilaterally rescind the contract! while -orea +ech opposed! arguing

that the dispute should be referred to arbitration. Pacific eneral argued that the

arbitration clause was void for being violative of public policy as it oust jurisdiction from

the %ourts. *+% and %A ruled for Pacific eneral. ,% reversed upholding the validity of

the arbitration clause. 2t explained that by the principle of lex loci contractus! contract

executed in the Philippines should be governed by Philippine law! however! the law also

provides that where parties mutually agree on an arbitration clause! the courts must

refer such case to arbitration. +he arbitral award is however subject to judicialconfirmation to be final! binding and enforceable! thus! it is wrong to argue that the

courts are oust from jurisdiction. 3ence! the parties must submit to arbitration.

4acts:

5. Korea Technologies Co., Ltd. (Korea Tech), a Korean corporation, entered

into a contract with Pacifc General Steel Manuacturing Corporation

(Pacifc General), a doestic corporation. The contract was e!ecuted in

the Philippines. "t also contains an #r$itration Clause (#rt. %& o the

Contract) which pro'ided that disputes ust $e reerred to a tri$unal

$od in Korea.6Article 57. Arbitration.All disputes! controversies! or differences which may arise between theparties! out of or in relation to or in connection with this %ontract or for the breach thereof! shall

finally be settled by arbitration in ,eoul! -orea in accordance with the %ommercial Arbitration

*ules of the -orean %ommercial Arbitration 8oard. +he award rendered by the arbitration9s

shall be final and binding upon both parties concerned.;

". nder the contract, Korea Tech would set up an LPG Clinder

Manuacturing Plant in Carona, Ca'ite. The contract was later aended,


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which then pro'ided that Korea Tech undertoo* to ship and install in

Pacifc General+s site in Carona, Ca'ite the achiner and acilities

necessar or anuacturing LPG clinders, and to initiall operate the

plant ater it is installed.

&. The last paents ade $ Pacifc General to Korea Tech consisted o

postdated chec*s which were dishonored upon presentent $ reason o

stopped paent-. Pacifc General stopped paent $ecause it was

alleged that Korea Tech had deli'ered a hdraulic press which was

dierent in *ind and o lower /ualit than that agreed upon and that

Korea Tech also ailed to deli'er e/uipent parts alread paid or $

Pacifc General.

$. Pacific eneral later informed -orea +ech that it was was canceling their %ontract

on the ground that -orea +ech had altered the 1uantity and lowered the 1uality of

the machineries and e1uipment it delivered to Pacific eneral! and that Pacificeneral would dismantle and transfer the machineries! e1uipment! and facilities

installed in the %armona plant. 4ive days later! Pacific eneral filed before the . -orea +ech filed a %omplaint for ,pecific Performance against Pacific eneral before

the *+%. 2n its complaint! -orea +ech alleged that Pacific eneral had initially

admitted that the chec?s that were stopped were not funded but later on claimed

that it stopped payment of the chec?s for the reason that their value was not received

as the former allegedly breached their contract by altering the 1uantity and lowering

the 1uality of the machinery and e1uipment installed in the plant and failed to ma?e

the plant operational. Li?ewise! -orea +ech averred that Pacific eneral violated

Art. 57 of their %ontract! as amended! by unilaterally rescinding the contract withoutresorting to arbitration. +he %ourt granted a +*< which restrained Pacific eneral

from dismantling and transferring the machinery and e1uipment installed in the

plant.

'. Pacifc General opposed the application and argued that the ar$itration

clause was null and 'oid, $eing contrar to pu$lic polic as it ousts the

local court o 3urisdiction.


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(. The trial court denied the application or a writ o preliinar in3unction,

reasoning that Pacifc General had paid Korea Tech the 'alue o the

achineries and e/uipent as shown in the contract such that Korea

Tech no longer had proprietar rights o'er the. "t also ruled thatar$itration clause o the Contract as aended was in'alid as it tended to

oust the trial court or an other court 3urisdiction o'er an dispute that

a arise $etween the parties.

5#. The Court o #ppeals a4red the trial court and ound that Pacifc

General had paid the 'alue o the achineries and declared the

ar$itration clause against pu$lic polic.

2ssue:

567 the ar$itration clause stated in #rticle %& o the contract is to $e deeednull and 'oid or $eing against pu$lic polic 8 79, hence parties ust su$it

to ar$itration

567 the :TC is oust o its 3urisdiction on a oreign ar$itral award. 8 79,

although the court is andated to reer cases to ar$itration in proper cases,

oreign ar$itral awards ust still $e confred $ the :TC

;

55. +he arbitration clause not contrary to public policy. +he arbitration clause which

stipulates that the arbitration must be done in ,eoul! -orea in accordance with the%ommercial Arbitration *ules of the -%A8! and that the arbitral award is final and

binding! is not contrary to public policy. +his %ourt has sanctioned the validity of

arbitration clauses in a catena of cases.

5". Established in this jurisdiction is the rule that the law of the place where the contract

is made governs. Lex loci contractus. +he contract in this case was perfected here in

the Philippines. +herefore! our laws ought to govern. onetheless! Art. "#$$ of the

%ivil %ode sanctions the validity of mutually agreed arbitral clause or the finality and

binding effect of an arbitral award. Art. "#$$ provides! 6Any stipulation that the

arbitrators@ award or decision shall be final! is valid! without prejudice to Articles

"#&'! "#&( and "#$#.; Arts. "#&'! "#&(! and "#$# abovecited refer to instances where a compromise or an arbitral award! as applied to Art. "#$$ pursuant to Art.

"#$&! may be voided! rescinded! or annulled! but these would not denigrate the

finality of the arbitral award.

5&. +he arbitration clause was mutually and voluntarily agreed upon by the parties. 2t

has not been shown to be contrary to any law! or against morals! good customs!

public order! or public policy. +here has been no showing that the parties have not


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dealt with each other on e1ual footing. )e find no reason why the arbitration clause

should not be respected and complied with by both parties.

5$. 3aving said that the instant arbitration clause is not against public policy! we come

to the 1uestion on what governs an arbitration clause specifying that in case of any

dispute arising from the contract! an arbitral panel will be constituted in a foreign

country and the arbitration rules of the foreign country would govern and its award

shall be final and binding.

57. 4or domestic arbitration proceedings! we have particular agencies to arbitrate

disputes arising from contractual relations. 2n case a foreign arbitral body is chosen

by the parties! the arbitration rules of our domestic arbitration bodies would not be

applied. As signatory to the Arbitration *ules of the %2+*AL /odel Law on

2nternational %ommercial Arbitration of the nited ations %ommission on

2nternational +rade Law 9%2+*AL in the ew Bor? %onvention on Cune "5!

5('7! the Philippines committed itself to be bound by the /odel Law. )e have evenincorporated the /odel Law in *epublic Act o. 9*A ("'7! otherwise ?nown as the

Alternative Dispute *esolution Act of "##$ entitled An Act to 2nstitutionalie the

se of an Alternative Dispute *esolution ,ystem in the Philippines and to Establish

the . 4oreign arbitral awards while mutually stipulated by the parties in the arbitration

clause to be final and binding are not immediately enforceable or cannot be

implemented immediately. ,ec. &7F$&G of the %2+*AL /odel Law stipulates the

re1uirement for the arbitral award to be recognied by a competent court for

enforcement! which court under ,ec. &= of the %2+*AL /odel Law may refuse

recognition or enforcement on the grounds provided for. *A ("'7 incorporated

these provisos to ,ecs. $"! $&! and $$ relative to ,ecs. $> and $'

5'. )hile the *+% does not have jurisdiction over disputes governed by arbitration

mutually agreed upon by the parties! still the foreign arbitral award is subject to

judicial review by the *+% which can set aside! reject! or vacate it. 2n this sense! what

this %ourt held in %hung 4u 2ndustries 9Phils.! 2nc.! "#= ,%*A 7$7 95(("! relied

upon by -orea +ech is applicable insofar as the foreign arbitral awards! while final

and binding! do not oust courts of jurisdiction since these arbitral awards are not

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absolute and without exceptions as they are still judicially reviewable. %hapter > of

*A ("'7 has made it clear that all arbitral awards! whether domestic or foreign! are

subject to judicial review on specific grounds provided for.

5(. +hus! foreign arbitral awards when confirmed by the *+% are deemed not as a

judgment of a foreign court but as a foreign arbitral award! and when confirmed! are

enforced as final and executory decisions of our courts of law.

"#. 3aving ruled that the arbitration clause of the subject contract is valid and binding

on the parties! and not contrary to public policyH conse1uently! being bound to the

contract of arbitration! a party may not unilaterally rescind or terminate the contract

for whatever cause without first resorting to arbitration.

"5. +he issues arising from the contract between Pacific eneral and -orea +ech on

whether the e1uipment and machineries delivered and installed were properly

installed and operational in the plant in %armona! %aviteH the ownership of

e1uipment and payment of the contract priceH and whether there was substantial

compliance by -orea +ech in the production of the samples! given the alleged fact

that Pacific eneral could not supply the raw materials re1uired to produce the

sample LP cylinders! are matters proper for arbitration. 2ndeed! we note that on

Culy 5! 5(('! -orea +ech instituted an Application for Arbitration before the -%A8

in ,eoul! -orea pursuant to Art. 57 of the %ontract as amended. +hus! it is

incumbent upon Pacific eneral to abide by its commitment to arbitrate.

Korea Technologies Co., Ltd. vs. Lerma

Doctrine: Established in this jurisdiction is the rule that the law of the place where the

contract is made governs. Lex loci contractus. A contract perfected in the Philippines will

be governed by Philippine laws. onetheless! Art. "#$$ of the %ivil %ode sanctions the

validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral

award without prejudice to Articles "#&'! "#&( and "#$#! which refer to instances

where a compromise or an arbitral award! as applied to Art. "#$$ pursuant to Art. "#$&!

may be voided! rescinded! or annulled! but these would not denigrate the finality of the

arbitral award.

)hile the *+% does not have jurisdiction over disputes governed by arbitration mutually

agreed upon by the parties! still the foreign arbitral award is subject to judicial review by

the *+% which can set aside! reject! or vacate it.

4acts:


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Korea Technologies Co., Ltd. 1Korea Tech2, a Korean corporation,

entered into a contract with Pacifc General Steel Manuacturing

Corporation 1Pacifc General2, a doestic corporation. The contract

was e!ecuted in the Philippines. "t also contains an #r$itration Clause

which pro'ided that disputes ust $e reerred to a tri$unal $od inKorea.

Korea Tech undertoo* to ship and install in Pacifc General+s site in

Carona, Ca'ite the achiner and acilities necessar or

anuacturing LPG clinders, and to initiall operate the plant ater it

is installed. The last paents ade $ Pacifc General to Korea Tech consisted o

postdated chec*s which were dishonored upon presentent., it

stopped paent $ecause Korea Tech had deli'ered a hdraulic press

which was dierent in *ind and o lower /ualit than that agreed upon. Korea Tech also ailed to deli'er e/uipent parts alread paid or $ it.

Korea Tech initiated ar$itration $eore the Korea Coercial

#r$itration 0oard 1KC#02 in Seoul, Korea. Pacifc General opposed the application and argued that the ar$itration

clause was null and 'oid, $eing contrar to pu$lic polic as it ousts the

local court o 3urisdiction. The trial court declared the ar$itration agreeent null and 'oid.

Korea Tech fled a petition or certiorari $eore the Court o #ppeals

1C#2. The court disissed the petition and held that an ar$itration

clause which pro'ided or a fnal deterination o the legal rights o

the parties to the contract $ ar$itration was against pu$lic polic.

2ssue:

5hether or not the ar$itration clause stated in #rticle %& o the contract is

to $e deeed null and 'oid.

5hether or not the :TC is oust o its 3urisdiction on a oreign ar$itral

award.

;

Established in this jurisdiction is the rule that the law of the place where thecontract is made governs. Lex loci contractus. +he contract in this case was

perfected here in the Philippines. +herefore! our laws ought to govern.

onetheless! Art. "#$$ of the %ivil %ode sanctions the validity of mutually agreed

arbitral clause or the finality and binding effect of an arbitral award. Art. "#$$

provides! 6Any stipulation that the arbitrators@ award or decision shall be final! is

valid! without prejudice to Articles "#&'! "#&( and "#$#.; Arts. "#&'! "#&(! and

"#$# abovecited refer to instances where a compromise or an arbitral award! as


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applied to Art. "#$$ pursuant to Art. "#$&! may be voided! rescinded! or

annulled! but these would not denigrate the finality of the arbitral award.

4or domestic arbitration proceedings! we have particular agencies to arbitrate

disputes arising from contractual relations. 2n case a foreign arbitral body ischosen by the parties! the arbitration rules of our domestic arbitration bodies

would not be applied. As signatory to the Arbitration *ules of the %2+*AL

/odel Law on 2nternational %ommercial Arbitration of the nited ations

%ommission on 2nternational +rade Law 9%2+*AL in the ew Bor?

%onvention on Cune "5! 5('7! the Philippines committed itself to be bound by the

/odel Law. )e have even incorporated the /odel Law in *epublic Act o. 9*A

("'7! otherwise ?nown as the Alternative Dispute *esolution Act of "##$

entitled An Act to 2nstitutionalie the se of an Alternative Dispute *esolution

,ystem in the Philippines and to Establish the


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S


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"n our 3urisdiction, the polic is to a'or alternati'e ethods o resol'ing

disputes, particularl in ci'il and coercial disputes. #r$itration along with

ediation, conciliation, and negotiation, $eing ine!pensi'e, speed and less

hostile ethods ha'e long $een a'ored $ this Court. The petition $eore us

puts at issue an ar$itration clause in a contract utuall agreed upon $ the

parties stipulating that the would su$it thesel'es to ar$itration in a

oreign countr.:egretta$l, instead o hastening the resolution o their

dispute, the parties wittingl or unwittingl prolonged the contro'ers.

Petitioner Korea Technologies Co., Ltd. (K9G"


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Danuar %, %JJB with a %I annual increent clause. Su$se/uentl, the

achineries, e/uipent, and acilities or the anuacture o LPG clinders

were shipped, deli'ered, and installed in the Carona plant. PGSMC paid

K9G" (%) 0P" Chec*

7o. IA%F@%E dated Danuar AI, %JJB or PhP @,&II,III and (E) 0P" Chec*

7o. IA%F@%A dated March AI, %JJB or PhP @,&II,III.1&2ﾧ

5hen K9G"


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9n Dune %, %JJB, PGSMC inored K9G"


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the plant andailed to a*e the plant operational although it earlier certifed

to the contrar as shown in a Danuar EE, %JJB Certifcate. Li*ewise, K9G"


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o the Contract as aended was in'alid as it tended to oust the trial court or

an other court 3urisdiction o'er an dispute that a arise $etween the

parties. K9G"

5;


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anuacturing plant consisting o suppl o all the achiner and acilities

and transer o technolog or a total contract price o S= %,&AI,III such

that the disantling and transer o the achiner and acilities would result

in the disantling and transer o the 'er plant itsel to the great pre3udiceo K9G"


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7o. @JE@J, see*ing annulent o the Dul EA, %JJB and Septe$er E%, %JJB

:TC 9rders and praing or the issuance o writs o prohi$ition, andaus,

and preliinar in3unction to en3oin the :TC and PGSMC ro inspecting,

disantling, and transerring the achineries and e/uipent in the Caronaplant, and to direct the :TC to enorce the specifc agreeent on ar$itration

to resol'e the dispute.

"n the eantie, on 9cto$er %J, %JJB, the :TC denied K9G"


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9n Ma AI, EIII, the C# rendered the assailed =ecision1EE2ﾧ a4ring

the :TC 9rders and disissing the petition or certiorari fled $ K9G"


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;ence, we ha'e this Petition or :e'iew on Certiorari under :ule @&.

The "ssues

Petitioner posits that the appellate court coitted the ollowing

errors>

a. P:9797C"7G T;<


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e. P:9CL#"M"7G T;< T59 9:=


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#s aptl ruled $ the C#, the counterclais o PGSMC were

incorporated in its #nswer with Copulsor Counterclai dated Dul %H, %JJB

in accordance with Section B o :ule %%, %JJH :e'ised :ules o Ci'il

Procedure, the rule that was eecti'e at the tie the #nswer withCounterclai was fled. Sec. B on e!isting counterclai or cross8clai states,

# copulsor counterclai or a cross8clai that a deending part has at the

tie he fles his answer shall $e contained therein.

9n Dul %H, %JJB, at the tie PGSMC fled its #nswer incorporating its

counterclais against K9G"


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otion to /uash re/uired the accused to plead and to continue with the trial,

and whate'er o$3ections the accused had in his otion to /uash can then $e

used as part o his deense and su$se/uentl can $e raised as errors on his

appeal i the 3udgent o the trial court is ad'erse to hi. The general rule isthat interlocutor orders cannot $e challenged $ an appeal.1EH2ﾧ Thus, in

aao*a '. Pescarich Manuacturing Corporation, we held>

The proper reed in such cases is an ordinar appeal

ro an ad'erse 3udgent on the erits, incorporating in said

appeal the grounds or assailing the interlocutor orders.

#llowing appeals ro interlocutor orders would result in the

sorr spectacle o a case $eing su$3ect o a counterproducti'e

ping8pong to and ro the appellate court as oten as a trial

court is percei'ed to ha'e ade an error in an o its

interlocutor rulings. ;owe'er, where the assailed interlocutor

order was issued with gra'e a$use o discretion or patentl

erroneous and the reed o appeal would not aord ade/uate

and e!peditious relie, the Court allows certiorari as a ode o

redress.1EB2ﾧ

#lso, appeals ro interlocutor orders would open the oodgates to

endless occasions or dilator otions. Thus, where the interlocutor order

was issued without or in e!cess o 3urisdiction or with gra'e a$use o

discretion, the reed is certiorari.1EJ2ﾧ

The alleged gra'e a$use o discretion o the respondent court

e/ui'alent to lac* o 3urisdiction in the issuance o the two assailed orderscoupled with the act that there is no plain, speed, and ade/uate reed in

the ordinar course o law apl pro'ides the $asis or allowing the resort to

a petition or certiorari under :ule F&.

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Preaturit o the petition $eore the C#

7either do we thin* that K9G"


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5e now go to the core issue o the 'alidit o #rt. %& o the Contract,

the ar$itration clause. "t pro'ides>

#rticle %&. #r$itration.#ll disputes, contro'ersies, or

dierences which a arise $etween the parties, out o or in

relation to or in connection with this Contract or or the $reach

thereo, shall fnall $e settled $ ar$itration in Seoul, Korea in

accordance with the Coercial #r$itration :ules o the Korean

Coercial #r$itration 0oard. The award rendered $ the

ar$itration(s) shall $e fnal and $inding upon $oth parties

concerned. (


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pursuant to #rt. EI@A,1A@2ﾧ a $e 'oided, rescinded, or annulled, $ut these

would not denigrate the fnalit o the ar$itral award.

The ar$itration clause was utuall and 'oluntaril agreed upon $ the

parties. "t has not $een shown to $e contrar to an law, or against orals,

good custos, pu$lic order, or pu$lic polic. There has $een no showing that

the parties ha'e not dealt with each other on e/ual ooting. 5e fnd no

reason wh the ar$itration clause should not $e respected and coplied with

$ $oth parties. "n GonOales '. Clia! Mining Ltd.,1A&2 ﾧ we held that

su$ission to ar$itration is a contract and that a clause in a contract

pro'iding that all atters in dispute $etween the parties shall $e reerred to

ar$itration is a contract.1AF2ﾧ #gain in =el Monte Corporation8S# '. Court o

#ppeals, we li*ewise ruled that 1t2he pro'ision to su$it to ar$itration an

dispute arising therero and the relationship o the parties is part o that

contract and is itsel a contract.1AH2ﾧ

#r$itration clause not contrar to pu$lic polic

The ar$itration clause which stipulates that the ar$itration ust $e

done in Seoul, Korea in accordance with the Coercial #r$itration :ules o

the KC#0, and that the ar$itral award is fnal and $inding, is not contrar to

pu$lic polic. This Court has sanctioned the 'alidit o ar$itration clauses in a

catena o cases. "n the %J&H case o


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Power


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or doestic ar$itration proceedings, we ha'e particular agencies to

ar$itrate disputes arising ro contractual relations. "n case a oreign ar$itral

$od is chosen $ the parties, the ar$itration rules o our doestic ar$itration

$odies would not $e applied. #s signator to the #r$itration :ules o the7C"T:#L Model Law on "nternational Coercial #r$itration1@%2 ﾧ o the

nited 7ations Coission on "nternational Trade Law (7C"T:#L) in the 7ew

or* Con'ention on Dune E%, %JB&, the Philippines coitted itsel to $e

$ound $ the Model Law. 5e ha'e e'en incorporated the Model Law in

:epu$lic #ct 7o. (:#) JEB&, otherwise *nown as the #lternati'e =ispute

:esolution #ct o EII@ entitled #n #ct to "nstitutionaliOe the se o an

#lternati'e =ispute :esolution Sste in the Philippines and to

C;#PT


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5hile :# JEB& was passed onl in EII@, it nonetheless applies in the

instant case since it is a procedural law which has a retroacti'e eect.

Li*ewise, K9G"


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(E) oreign ar$itral awards ust $e confred $ the :TC

oreign ar$itral awards while utuall stipulated $ the parties in the

ar$itration clause to $e fnal and $inding are not iediatel enorcea$le or

cannot $e ipleented iediatel. Sec. A&1@A2 ﾧ o the 7C"T:#L Model

Law stipulates the re/uireent or the ar$itral award to $e recogniOed $ a

copetent court or enorceent, which court under Sec. AF o the 7C"T:#L

Model Law a reuse recognition or enorceent on the grounds pro'ided

or. :# JEB& incorporated these pro'isos to Secs. @E, @A, and @@ relati'e to

Secs. @H and @B, thus>

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! ! ! !

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Thus, while the :TC does not ha'e 3urisdiction o'er disputes go'erned$ ar$itration utuall agreed upon $ the parties, still the oreign ar$itral

award is su$3ect to 3udicial re'iew $ the :TC which can set aside, re3ect, or

'acate it. "n this sense, what this Court held in Chung u "ndustries (Phils.),

"nc. relied upon $ K9G"


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(&) :TC decision o assailed oreign ar$itral award appeala$le

Sec. @F o :# JEB& pro'ides or an appeal $eore the C# as the reed

o an aggrie'ed part in cases where the :TC sets aside, re3ects, 'acates,

odifes, or corrects an ar$itral award, thus>

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5ith our dis/uisition a$o'e, petitioner is correct in its contention that

an ar$itration clause, stipulating that the ar$itral award is fnal and $inding,

does not oust our courts o 3urisdiction as the international ar$itral award, the

award o which is not a$solute and without e!ceptions, is still 3udiciall

re'iewa$le under certain conditions pro'ided or $ the 7C"T:#L Model Law

on "C# as applied and incorporated in :# JEB&.

inall, it ust $e noted that there is nothing in the su$3ect Contract

which pro'ides that the parties a dispense with the ar$itration clause.

nilateral rescission iproper and illegal

;a'ing ruled that the ar$itration clause o the su$3ect contract is 'alid

and $inding on the parties, and not contrar to pu$lic polic conse/uentl,

$eing $ound to the contract o ar$itration, a part a not unilaterall

rescind or terinate the contract or whate'er cause without frst resorting toar$itration.

5hat this Court held in ni'ersit o the Philippines '. =e Los

#ngeles1@H2ﾧ and reiterated in succeeding cases,1@B2ﾧ that the act o treating

a contract as rescinded on account o inractions $ the other contracting

part is 'alid al$eit pro'isional as it can $e 3udiciall assailed, is not

applica$le to the instant case on account o a 'alid stipulation on ar$itration.

5here an ar$itration clause in a contract is a'ailing, neither o the parties

can unilaterall treat the contract as rescinded since whate'er inractions or$reaches $ a part or dierences arising ro the contract ust $e $rought

frst and resol'ed $ ar$itration, and not through an e!tra3udicial rescission or

3udicial action.

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The issues arising ro the contract $etween PGSMC and K9G"


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Petitioner assails the C# ruling that the issue petitioner raised on whether the

total contract price o S= %,&AI,III was or the whole plant and its

installation is $eond the a$it o a Petition or Certiorari.

Petitioners position is untena$le.

"t is settled that /uestions o act cannot $e raised in an original action or

certiorari.1@J2 ﾧ 5hether or not there was ull paent or the achineries

and e/uipent and installation is indeed a actual issue prohi$ited $ :ule

F&.

;owe'er, what appears to constitute a gra'e a$use o discretion is the order

o the :TC in resol'ing the issue on the ownership o the plant when it is the

ar$itral $od (KC#0) and not the :TC which has 3urisdiction and authorit o'er

the said issue. The :TCs deterination o such actual issue constitutes gra'e

a$use o discretion and ust $e re'ersed and set aside.

:TC has interi 3urisdiction to protect the rights o the parties

#nent the Dul EA, %JJB 9rder dening the issuance o the in3uncti'e

writ pa'ing the wa or PGSMC to disantle and transer the e/uipent and

achineries, we fnd it to $e in order considering the actual ilieu o the

instant case.

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irstl, while the issue o the proper installation o the e/uipent and

achineries ight well $e under the priar 3urisdiction o the ar$itral $od

to decide, et the :TC under Sec. EB o :# JEB& has 3urisdiction to hear and

grant interi easures to protect 'ested rights o the parties. Sec. EBpertinentl pro'ides>

S


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(c) The order granting pro'isional relie a $e

conditioned upon the pro'ision o securit or an act or oission

specifed in the order.

(d) "nteri or pro'isional relie is re/uested $ written

application transitted $ reasona$le eans to the Court or

ar$itral tri$unal as the case a $e and the part against who

the relie is sought, descri$ing in appropriate detail the precise

relie, the part against who the relie is re/uested, the

grounds or the relie, and the e'idence supporting the re/uest.

(e) The order shall $e $inding upon the parties.

()


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(E) #n interi easure is an teporar easure, whether in

the or o an award or in another or, $ which, at an tie

prior to the issuance o the award $ which the dispute is fnalldecided, the ar$itral tri$unal orders a part to>

(a) Maintain or restore the status /uo pending deterination o

the dispute

($) Ta*e action that would pre'ent, or rerain ro ta*ing action

that is li*el to cause, current or iinent har or pre3udice to

the ar$itral process itsel

(c) Pro'ide a eans o preser'ing assets out o which a

su$se/uent award a $e satisfed or

(d) Preser'e e'idence that a $e rele'ant and aterial to the

resolution o the dispute.

#rt. %H D o 7C"T:#L Model Law on "C# also grants courts power and

3urisdiction to issue interi easures>

#rticle %H D. Court8ordered interi easures

# court shall ha'e the sae power o issuing an interi

easure in relation to ar$itration proceedings, irrespecti'e o

whether their place is in the territor o this State, as it has in

relation to proceedings in courts. The court shall e!ercise such

power in accordance with its own procedures in consideration o

the specifc eatures o international ar$itration.


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"n the recent EIIF case o Transfeld Philippines, "nc. '. LuOon ;droCorporation, we were e!plicit that e'en the pendenc o an ar$itral

proceeding does not oreclose resort to the courts or pro'isional relies. 5e

e!plicated this wa>

#s a undaental point, the pendenc o ar$itral proceedings

does not oreclose resort to the courts or pro'isional relies. The

:ules o the "CC, which go'erns the parties ar$itral dispute,

allows the application o a part to a 3udicial authorit or interi

or conser'ator easures. Li*ewise, Section %@ o :epu$lic #ct

(:.#.) 7o. BHF (The #r$itration Law) recogniOes the rights o an

part to petition the court to ta*e easures to saeguard and6or

conser'e an atter which is the su$3ect o the dispute in

ar$itration. "n addition, :.#. JEB&, otherwise *nown as the

#lternati'e =ispute :esolution #ct o EII@, allows the fling o

pro'isional or interi easures with the regular courts

whene'er the ar$itral tri$unal has no power to act or to act

eecti'el.1&I2ﾧ

"t is thus $eond ca'il that the :TC has authorit and 3urisdiction to

grant interi easures o protection.

Secondl, considering that the e/uipent and achineries are in the

possession o PGSMC, it has the right to protect and preser'e the e/uipent

and achineries in the $est wa it can. Considering that the LPG plant was

non8operational, PGSMC has the right to disantle and transer the

e/uipent and achineries either or their protection and preser'ation or or

the $etter wa to a*e good use o the which is inelucta$l within the

anageent discretion o PGSMC.

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Thirdl, and o greater iport is the reason that aintaining the

e/uipent and achineries in 5orths propert is not to the $est interest o

PGSMC due to the prohi$iti'e rent while the LPG plant as set8up is not

operational.PGSMC was losing PhPAEE,&FI as onthl rentals or PhPA.BHM

or %JJB alone without considering the %I annual rent increent in

aintaining the plant.

ourthl, and corollaril, while the KC#0 can rule on otions or

petitions relating to the preser'ation or transer o the e/uipent and

achineries as an interi easure, et on hindsight, the Dul EA, %JJB 9rder

o the :TC allowing the transer o the e/uipent and achineries gi'en the

non8recognition $ the lower courts o the ar$itral clause, has accorded an

interi easure o protection to PGSMC which would otherwise $een

irrepara$l daaged.

ith, K9G"


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diligence o a good ather o a ail1&%2ﾧ until fnal resolution o the ar$itral

proceedings and enorceent o the award, i an.

5;


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P:

korea technologies co., ltd. vs. lerma

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