Yanga Barrion Arceo Submission - Claimant Pec

IN THE MATTER OF ARBITRATION OF

PAMPANGA ENERGY COMPANY,

Claimant,

v. Case No:

xxxxxxxx

CONSTRUCTICON COMPANY,

Respondent.

SUBMISSION of CLAIMANT

and

REPLY to COUNTERCLAIM

1. Claimant, Pampanga Energy Company (“PEC” for brevity), by counsel, unto this

Honourable Arbitral Tribunal, in compliance with the directives of this tribunal,

most respectfully submits this Submission (with Response to the Submission1 of

respondent, Constructicon Company, which is designated by the respondent as

“Motion to Dismiss on the Ground of Lack of Jurisdiction,” and is hereinafter

referred to as “CC’s Motion” for brevity) and Reply to the Counterclaim

contained in the same motion.

THE PARTIES

2. PEC, a Philippine company, is the owner of a power station in the province of

Pampanga, Philippines.

3. In October 2012, PEC employed another Philippine Company, herein respondent,

Constructicon Company (“CC” for brevity), to design, construct, commission,

test, complete and hand over the power station to it.

1 Submission of the Respondent designated as: “Motion to Dismiss on the Ground of Lack of Jurisdiction,” dated 30 August 2015.

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STATEMENT OF FACTS

4. For the convenience of the Honourable Arbitral Tribunal and, hopefully, to hasten

the disposition of the controversy at hand, PEC hereinafter admits and adopts in

toto the Statement of Facts2 (from paragraphs 1 – 7) asserted by CC. Hence, all

facts should now be clear and undisputed.

5. However, to stress the significance of the arguments of PEC, portions of the facts3

submitted by CC (and adopted, as aforesaid, by PEC) are reproduced in the

presentations of arguments for emphasis.

STATEMENT OF ISSUES

6. The main issues to be raised in the instant case, as ordered by this Honourable

Arbitral Tribunal, are as follows:

I. Whether the HongKong International Arbitration Centre (HKIAC) has

exclusive jurisdiction to settle the matter; and

II. Whether the Anti-suit Injunction issued by the Manila Regional Trial

Court (“Manila Court” for brevity) can effect and stay the current

proceedings conducted before the Knowledgeable Sole Arbitrator.

THE ARGUMENTS

I. JURISDICTION

7. It is most humbly submitted that, contrary to the assertion of respondent, this case

is within the ambit of this Honourable Tribunal’s jurisdiction.

A. Capacity of Parties

to Contract

8. PEC admits paragraphs 9 and 10 of CC’s motion4 regarding the parties’ capacity

to contract and their freedom to agree on stipulations of said contract. PEC also

admits paragraph 11 therein, in so far as Article 1306 of the New Civil Code of

the Philippines is made applicable in this matter.

2 I. Statement of Facts, id, pp. 1 – 5.3 Id.4 II. Answer to the notice of Arbitration on the matter of: 1.) Jurisdiction, supra note 1, p. 6.

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9. However, claimant vehemently denies the erroneous allegation of CC that the

subject agreement between the parties is contrary to law because the mandatory

law invoked by CC, i.e. Executive Order No. 1008 (a legislation in the

Philippines), which supposedly vested jurisdiction to the Construction Industry

Arbitration Commission, could never be applied in this matter for the simple

reason that the arbitration agreement entered into by the parties is governed by

Hong Kong Law. This topic will be discussed extensively below.

10. Further, an act or a contract that is illegal per se (under Philippine Law) is one

that by universally recognized standards is inherently or by its very nature, bad,

improper, immoral or contrary to good conscience.5 Certainly, the stipulations

agreed upon by the parties cannot be said to be inherently improper, much less,

universally recognized as being immoral or contrary to good conscience.

B. Interpretation of the

Contract Between

The Parties

11. The engineering procurement and construction contract (“EPC contract” for

brevity) is the main contract between the parties in this controversy. Being the

principal contract, it is also referred to as “matrix contract”6 or “container

contract.”7

12. The EPC Contract is undoubtedly governed by Philippine Law. As the facts

narrate:

“2. The substantive law of the engineering procurement and

construction contract is Philippine law.”

13. Since Philippine Law governs the EPC contract, the guideline in interpreting this

contract must come from the Philippine legal system. Under Article 1370 of the

New Civil Code of the Philippines:

“Art. 1370. If the terms of a contract are clear and leave no doubt

upon the intention of the contracting parties, the literal meaning of

its stipulations shall control.

5 Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines (2002), p.415.6 See Habas Sinai Ve Tibbi Istihsal Endustrisi As v VSC Steel Company Ltd [2013] EWHC 40717 See Gonzales vs. Climax Mining Ltd., G.R. No. 161957, January 22, 2007.

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If the words appear to be contrary to the evident intention of the

parties, the latter shall prevail over the former.” (Underscoring

supplied.)

14. The Philippine Supreme Court, in the case of Adriatico Consortium, Inc., et al. vs.

Land Bank of the Philippines,8 has discussed and explained the provision of law

quoted in the preceding paragraph, wit:

More importantly, a contract must be interpreted from the language

of the contract itself according to its plain and ordinary

meaning. This was elucidated by this Court in Abad v. Goldloop

Properties, Inc., to wit:

The cardinal rule in the interpretation of contracts is

embodied in the first paragraph of Article 1370 of the Civil

Code: [i]f the terms of a contract are clear and leave no

doubt upon the intention of the contracting parties, the

literal meaning of its stipulations shall control. This

provision is akin to the plain meaning rule applied

by Pennsylvania courts, which assumes that the intent of

the parties to an instrument is embodied in the writing

itself, and when the words are clear and unambiguous the

intent is to be discovered only from the express language of

the agreement. xxx A courts purpose in examining a

contract is to interpret the intent of the contracting parties,

as objectively manifested by them. xxx Where the written

terms of the contract are not ambiguous and can only be

read one way, the court will interpret the contract as a

matter of law. If the contract is determined to be

ambiguous, then the interpretation of the contract is left to

the court, to resolve the ambiguity in the light of the

intrinsic evidence. (Underscoring supplied.)

8 G.R. No. 187838, 23 December 2009.

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15. Following the above quoted provision of Philippine Law and judicial decision,

hereunder are the rules in interpreting the EPC contracts:

If the contract (or any stipulation therein) is clear, this Honourable

Tribunal must interpret the contract (or any of its stipulation) as a matter

of law, and the terms are to be understood literally just as they appear on

the face of the contract;

If, on the other hand, the contract is determined to be ambiguous, this

Honourable Tribunal must resolve the ambiguity in the light of the

intrinsic evidence to interpret the intent of the parties.

C. The Hierarchy of

Rules

16. PEC admits paragraph 12 of CC’s Motion, which provides:

“12. In arbitration, there are various laws, rules, and guidelines

governing arbitral process and these are observed in an order of

hierarchy as follows:

A. Arbitration Agreement

B. Arbitration Rules

C. National Laws

D. International Arbitration Practice

E. International Treaties

These guidelines will help the arbitration tribunal to determine the

existence and validity of arbitration agreements, jurisdiction,

applicability of laws and procedures and in awarding of monetary

awards.” (Underscoring supplied.)

17. As stated by CC, this list is not a mere enumeration of laws and rules, but is

actually a hierarchy of the governing laws, rules and guidelines. The order in the

above quoted paragraph shows that the top of the hierarchy is the Arbitration

Agreement, followed by Arbitration Rules, then by the National Laws, the

International Arbitration Practice thereafter, and lastly, the International Treaties.

18. The respondent was trying to show that it was actually applying the hierarchy in

its submission/ motion. This is evidenced by the sequential captioning (“A.

Arbitration Agreement,” “B. Arbitration Rules” and “C. National Law”) made on

pages 7 and 18 of CC’s motion. However, a perusal of the content of CC’s motion

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will show that the respondent has applied solely Philippine Law, which according

to them, is the only National Law that should govern this case. CC applied

Philippine legal system exclusively in the guise of the captioning made. CC has

totally disregarded the Arbitration Agreement and the Arbitration Rules set out

and agreed upon by the parties in the subject contract.

D. The Arbitration

Agreement

19. At the pinnacle of the hierarchy is the “Arbitration Agreement.” An "Arbitration

agreement" is an agreement by the parties to submit to arbitration all or certain

disputes which have arisen or which may arise between them in respect of a

defined legal relationship, whether contractual or not. It may be in the form of an

arbitration clause in a contract or in the form of a separate agreement.9 It is the

underpinning for the regulatory framework governing the private dispute

resolution process10 and it is the law between the parties. Since that agreement is

binding between them, they are expected to abide by it in good faith.11 The

Arbitration Agreement in the EPC contract between the parties of this case is

Clause 31.

D.1. Clause 31

20. The undisputed facts provide:

By clause 31 of the engineering procurement and construction contract,

the parties agreed to the following:

"31.1 Any unresolved dispute shall be referred to and finally

resolved by arbitration administered by the Hong Kong

International Arbitration Centre under the Rules, except as

the Rules may be modified herein. The arbitration proceedings

shall be conducted, and the award shall be rendered, in the English

language. The seat of arbitration shall be Hong Kong .

9 Article 7, United Nations Commission on International Trade Law (UNCITRAL), as amended in 2006. The same is adopted in the legal systems of Hong Kong and the Philippines thru Section 19, Arbitration Ordinance 609 and Section 19, R.A. 9285, respectively.10 Moses, The Principles and Practice of International Commercial Arbitration (2012), Second Ed., p. 611 Fiesta World Mall Corporation vs. Lindberg Philippines, Inc. G.R. No. 152471, 18 August 2006

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31.2 This clause and the parties’ agreement to arbitrate herein

shall be governed by the laws of Hong Kong” (Boldfacing and

underscoring supplied.)

21. At the outset, several principles of law should be expounded and used in

determining the nature of Clause 31 and the governing law for the same. These

principles are:

a. Plain Meaning;

b. Admission;

c. Effective Interpretation:

d. Separability; and

e. Express Choice.

These principles will be discussed seriatim.

a. PLAIN MEANING RULE

22. Using the rule of Philippine Construction of Contracts, as discussed in “A.

Interpretation of the Contract Between the Parties” of this Submission, since the

words of Clause 31 are clear and unambiguous, it is humbly submitted that the

Honourable Tribunal must interpret said clause as a matter of law, and the terms

are to be understood literally just as they appear on the face of the contract;

23. In reading Clause 31 in its plain meaning, there could be no doubt that the parties

intended and agreed that –

Clause 31 is the Arbitration Agreement because of the fact that paragraph

31.1 therein provides for arbitration in case of any unresolved dispute; and

that

Paragraph 31.2 provide that the Arbitration Agreement is governed by

Hong Kong Law;

b. ADMISSION

24. The content of paragraph 31.2, clause 31 (that the Arbitration Agreement is

governed by Hong Kong Law), is a fact averred by the respondent and

unquestionably admitted by herein claimant in this Submission. The assertion of

this fact made by respondent comes with no other discussion, much less a

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subsequent retraction from it.12 Claimant would not hesitate to admit and adopt

the same unconditionally. Since this fact is no longer disputed, it is submitted that

paragraph 31.2, clause 31, no longer needs to be proven.

c. PRINCIPLE OF EFFECTIVE

INTERPRETATION

25. In paragraph 32 of CC’s Motion,13 CC mentioned that the parties specifically

designated Philippine Law as the substantive law governing the contract. PEC

does not disagree with this view.

26. However, CC contended that E.O. 1008, CIAC Rules, and CIAC Resolutions are

all applicable in this case. In doing so, the respondent has further applied

Philippine Law to the extent of making the same as the only governing decree

over all controversies that have been raised in this case. This contention cannot

persuade.

27. In applying Philippine Law in all aspects of this case, CC has totally disregarded

the clear intention of the parties and their unambiguous agreement specifically

that the Arbitration Agreement is governed by Hong Kong Law. In effect, CC has

rendered salient provisions of the Arbitration Agreement ineffective and futile.

28. CC’s assertion is palpably contradictory to the universally accepted Principle of

Effective Interpretation.

29. This principle is inspired by provisions such as Article 1157 of the French Civil

Code, according to which ‘where a clause can be interpreted in two different

ways, the interpretation enabling the clause to be effective should be adopted in

preference to that which prevents the clause from being effective.’ This common-

sense rule whereby, if in doubt, one should ‘prefer the interpretation which gives

meaning to the words, rather than that which renders them useless or nonsensical,’

is widely accepted not only by the courts but also by arbitrators who readily

acknowledge it to be a ‘universally recognized rule of interpretation.’14

12 Averment of “paragraph 31.2, clause 31” was made by CC in supra note 3, p.2. No other discussion or a following withdrawal was made in the whole document (CC’s Motion).13 Page 1814 Insigma Technology Co Ltd v. Alstom Technology Ltd. [2009] 3 SLR 936; [2009] SGCA 24

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30. Even the Philippine legal system, which is the sole basis of all the contentions of

CC in this matter, indubitably adopts the principle.

31. Under Article 1374 of the New Civil Code of the Philippines:

“Article 1374. The various stipulations of a contract shall be

interpreted together, attributing to the doubtful ones that sense

which may result from all of them taken jointly.”

32. As aptly declared by the Philippine Supreme Court in the case of Saludo vs. Court

of Appeals:15

“The horn book rule on interpretation of contracts consecrates the

primacy of the intention of the parties, the same having the force of

law between them. When the terms of the agreement are clear and

explicit, that they do not justify an attempt to read into any alleged

intention of the parties, the terms are to be understood literally just

as they appear on the face of the contract. The various stipulations

of a contract shall be interpreted together and such a construction

is to be adopted as will give effect to all provisions thereof. A

contract cannot be construed by parts, but its clauses should be

interpreted in relation to one another. The whole contract must be

interpreted or read together in order to arrive at its true meaning.

Certain stipulations cannot be segregated and then made to

control; neither do particular words nor phrases necessarily

determine the character of a contract. The legal effect of the

contract is not to be determined alone by any particular provision

disconnected from all others, but in the ruling intention of the

parties as gathered from all the language they have used and from

their contemporaneous and subsequent acts.” (Underscoring and

boldfacing added.)

33. The contract must be construed in a way that would give effect to all its

provisions.16 In other words, the stipulations in a contract should be interpreted

together with the end in view of giving effect to all.17

15 G.R. No. 95536, 23 March 199216 Domingo Realty, Inc. vs. Court of Appeals, G.R. No. 126236, 26 January 2007.17 Manila International Airport Authority vs. Avia Filipinas International, Inc., G.R. No. 180168, 27 February 2012

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34. Applying the legal bases enumerated and discussed above, the EPC Contract must

be interpreted as a whole. In doing so, all of its stipulations must be given effect.

Thus:

The stipulation that the EPC Contract is governed by Philippine Law is

valid; and

That paragraph 31.2 of Clause 31, which makes said clause (which is the

Arbitration Agreement between the parties) ruled by Hong Kong Law is

just as valid.

35. There are therefore two different legal systems that should be reckoned in

interpreting and applying the stipulations of the whole document, contrary to the

assertion of CC, which focused and applied Philippine Law exclusively.

d. DOCTRINE OF SEPARABILITY

36. Technically speaking, notwithstanding the integrity of the whole document in

controversy, there are actually two distinct contracts in the said document.

37. The separation of these two contracts is in line with the “Doctrine of

Separability,” which treats an arbitration agreement contained in a contract as a

separate agreement from the contract itself.18 When the parties conclude a contract

containing an arbitration agreement, they are in effect concluding two separate

agreements.19 Both the Laws of Philippine and Hong Kong recognize this doctrine

and are uniform in accepting and implementing this principle.

38. The Supreme Court of the Philippines in Gonzales vs. Climax Mining Ltd.20 held:

“The doctrine of separability, or severability as other writers call it,

enunciates that an arbitration agreement is independent of the main

contract. The arbitration agreement is to be treated as a separate

agreement and the arbitration agreement does not automatically

terminate when the contract of which it is part comes to an end.

18 Greenberg, et al. International Commercial Arbitration – An Asia-Pacific Perspective (2010). First Ed. Par. 4.36, p. 155.19Id at Par. 4.47, p. 158.20 G.R. No. 161957, 22 January 2007.

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The separability of the arbitration agreement is especially

significant to the determination of whether the invalidity of the

main contract also nullifies the arbitration clause. Indeed, the

doctrine denotes that the invalidity of the main contract, also

referred to as the "container" contract, does not affect the validity

of the arbitration agreement. Irrespective of the fact that the main

contract is invalid, the arbitration clause/agreement still remains

valid and enforceable.

The separability of the arbitration clause is confirmed in Art. 16(1)

of the UNCITRAL Model Law and Art. 21(2) of the UNCITRAL

Arbitration Rules.” (Underscoring supplied.)

39. Similarly, in H Smal Ltd. v Goldroyce Garment Ltd.,21 the High Court of Hong

Kong held:

“The problem with this argument is that it does not take into

account that the arbitration agreement contained in another written

agreement has a life of its own. The doctrine of separability has

now been enshrined in the Model Law and has been fully accepted

in case law in England and Hong Kong. x x x” (Underscoring

supplied.)

e. EXPRESS CHOICE OF THE PARTIES

40. Since an arbitration clause is an agreement separate from that in which it is

contained, the determination of the law that governs the arbitration clause and that

which governs the contract must also be separate.22 Even if the Arbitration

Agreement forms part of the matrix contract (as is commonly the case), its proper

law may not be the same as that of the matrix contract.23 Since the two agreements

have different purposes, it is quite conceivable that a different law applies to

each.24

21 [1994] 2 HKC 52622 Supra note 19 at Par. 4.50, p. 159.23 Habas Sinai Ve Tibbi Gazlar Istihsal Endustrisi As v. VSC Steel Company Ltd. [2013] EWHC 4071 (Comm)24Supra note 22 at Par. 4.50, pp. 159-160.

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41. With this regard, the case of Sulamerica CIA Nacional De Seguros S.A. and

others v. Enesa Engenharia S.A. and others25 is enlightening. In this case, Lord

Justice Moore-Bick elucidated:

“11. In Channel Tunnel Group Ltd v Balfour Beatty Construction

Ltd [1993] A.C. 334 Lord Mustill said (at pages 357-8):

"It is by now firmly established that more than one national system

of law may bear upon an international arbitration. Thus, there is

the proper law which regulates the substantive rights and duties of

the parties to the contract from which the dispute has

arisen. Exceptionally, this may differ from the national law

governing the interpretation of the agreement to submit the dispute

to arbitration. Less exceptionally it may also differ from the

national law which the parties have expressly or by implication

selected to govern the relationship between themselves and the

arbitrator in the conduct of the arbitration: the "curial law" of the

arbitration, as it is often called."

xxx xxx xxx

25. Although there is a wealth of dicta touching on the problem, it

is accepted that there is no decision binding on this court.

However, the authorities establish two propositions that were not

controversial but which provide the starting point for any enquiry

into the proper law of an arbitration agreement. The first is that,

even if the agreement forms part of a substantive contract (as is

commonly the case), its proper law may not be the same as that of

the substantive contract. The second is that the proper law is to be

determined by undertaking a three-stage enquiry into (i) express

choice , (ii) implied choice and (iii) closest and most real

connection. xxx xxx xxx” (Italicization by the Court; boldfacing

and underscoring PEC.)

25 [2012] EWCA Civ 638.

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42. In line with the foregoing discussion, and the agreement entered and expressly

stipulated by the parties, it can be easily deduced that the EPC Contract, which is

the matrix contract, is governed by the law of the Philippines; while Clause 31,

another separate contract, which is the arbitration agreement, is governed by the

law of Hong Kong.

D.2. Construction and

Application of the

Arbitration Agreement

43. As discussed above, Hong Kong Law governs the Arbitration Agreement (Clause

31). Ergo, the Hong Kong legal system must be applied for the interpretation and

application of Clause 31. Most of Hong Kong’s contract law cannot be found in

legislation.26 Very few ordinances deal with contract principles,27 which can only

be found in the reported decisions of the courts in Hong Kong and other common

law jurisdictions.28

44. In Fully Profit (Asia) Ltd v. The Secretary for Justice,29 the Hong Kong Court of

Final Appeal discussed the fundamental rule in interpreting a contract. In this

case, Chief Justice Ma explained:

“15. xxx xxx xxx What emerges from these cases – and other

authorities on contractual interpretation – is the overall importance

of context when construing contractual terms. The statements of

principle in Investors Compensation Scheme and in Jumbo

King refer time and again to the relevant background against which

the relevant contract and contractual terms must be viewed. It is in

my view not particularly helpful in most cases to refer to the

“ordinary and natural meaning” of words because, as very often

experience tells us, there can be much debate over exactly what is

the ordinary or natural meaning of words. The surer guide to

interpretation is context. Here, I would just add that in the area of

statutory and constitutional interpretation, it is context that is key;

context is the starting point (together with purpose) rather than

26 Chui and Roebuck, Hong Kong Contracts (Second Ed.), p. 5. (1991)27 Id.28 Id at p. 1529 [2013] HKCFA 40; 16 HKCFAR 351; 6 HKC 374.

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looking at what may be the natural and ordinary meaning of

words.” (Underscoring supplied.)

45. As pointed out in the above Hong Kong Court of Final Appeal ruling, context and

purpose should be the main key in interpreting contracts. Hence the same

principle must be applied in reading the other provisions of the Arbitration

Agreement.

D.3. Parties’ Agreement to

make EO 1008 and RA

9285 Inapplicable is Valid

46. Paragraph 31.10 of Clause 31 provides:

“31.10 For the avoidance of doubt , the parties agree , to the

extent permitted by applicable Laws or international conventions,

that the application of :

(i) Executive Order No. 1008 , otherwise known as the

‘Construction Industry Arbitration Law;’

(ii) the provisions of Republic Act No. 9285, otherwise known

as ‘Alternative Dispute Resolution Act of 2004,’ relating to

construction arbitration; and

(iii) any other Laws prescribing a dispute resolution

mechanism contrary to or in any manner inconsistent with

that provided in this Agreement, shall not be applicable to

this Agreement or to any dispute that may arise in

connection therewith and are hereby irrevocably waived

by the parties and shall not be invoked by them . ”

(Boldfacing and underscoring supplied.)

47. Applying the principle of Hong Kong Law in contract construction, the intent of

the parties is very clear. There could be no question that the parties intend to make

E.O. No. 1008, R.A. 9285, etc. inapplicable, up to the extent that said laws

prescribe a dispute resolution mechanism inconsistent with that provided in

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Clause 31. The purpose of this waiver is to avoid doubt in applying the

Arbitration Agreement.

48. CC hypothesise that such waiver is invalid since the aforesaid laws are mandatory

in character due to the fact that they vest jurisdiction in another forum, and that

jurisdiction is conferred by law and cannot be waived by agreement.30 Respondent

tried to find support from Philippine Supreme Court cases by reproducing parts of

these cases lengthily in numerous pages of its submission / motion.31

49. It is most respectfully submitted that CC’s theory is misplaced.

50. CC’s theory and the application of its lengthy reproduction of Philippine court

rulings presuppose that the law governing the arbitration agreement is Philippine

Law. It has already been said that Hong Kong Law is the governing decree over

the Arbitration Agreement (Clause 31) and Philippine Law applies only to the

EPC Contract. Since the agreement not to apply EO 1008 and RA 9285 is

contained in Clause 31, the Law of the Philippines (including its judicial

pronouncements) no longer controls it.

51. Moreover, the Philippine cases insisted by CC are not similar to facts and

circumstances of the instant case. None of these cases portray a fact wherein the

parties have chosen two different laws to separately govern their matrix contract

and their arbitration agreement.

D.4. Other Laws and Rules

that should Govern the

Parties, Per the Latter’s

Agreement

52. The parties may make a choice of a law to govern their commercial bargain, of a

law to govern their arbitration agreement, and of a law to govern the procedures

in any arbitration held under that agreement. In theory, at least, the parties could

choose a different law for each of these purposes.32

30 Please see CC’s Motion, par. 20, pp. 10-11.31 Please see CC’s Motion, pp. 12-17.32 Union of India v. Mc Donnell Douglas Corp [1993] 2 LLR 48, at 50

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53. In this case, PEC and CC have chosen not only the governing laws for the matrix

contract and the arbitration agreement. The parties also expressly provided for the

applicable rules regarding the procedures of arbitration:

a. Paragraph 31.1 clearly provides that arbitration should be administered by

the Hong Kong International Arbitration Centre (HKIAC);

b. Paragraph 31.1 also provides that the arbitration rules would be that of

HKIAC, except as the Rules may be modified (hereinafter “HKIAC

2013 Rules” for brevity.); and

c. In the same paragraph 31.1, the seat of arbitration has been agreed upon

by the parties to be in Hong Kong .

54. Clearly, the parties have intended to be governed by the HKIAC. They also

intended to be bound by the rules of HKIAC. And, to clarify their intentions, they

even agreed to submit their selves to the domestic laws of Hong Kong, in case an

arbitration proceeding is commenced, as what actually happened in this case.

55. Premises and discussions considered, the averments regarding the applicability of

certain Philippine Laws supposedly conferring jurisdiction to the CIAC does not

have a leg to stand, since it is Hong Kong Law, not Philippine Law, that governs

the Arbitration Agreement.

56. Further, said laws (E.O. No. 1008 and R.A. 876) are categorically made by the

parties to be inapplicable in their case.

57. Moreover, the other stipulations of the Arbitration Clause show unambiguous

signs that the parties intended to do away with Philippine Law and submit before

the circle of Hong Kong Law.

58. Assuming, arguendo, that laws conferring jurisdiction to CIAC cannot be waived,

CIAC would still not have jurisdiction because the Arbitration Agreement, as

opposed to the EPC Contract, is governed by Hong Kong Law. Therefore, there

was no waiver of jurisdiction because there never was any conferment of

jurisdiction. Clause 31, being a separate contract, is not governed by Philippine

Law. The contention that there could not be a waiver of jurisdiction

presupposes that there already is.

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59. Wherefore, due to above reasons expounded, there could be no doubt that the

HKIAC has exclusive jurisdiction, being selected and agreed upon by the parties,

and such agreement is the law binding both parties.

II. ANTI-SUIT INJUNCTION

60. The Manila Court issued an Anti-Suit Injunction Order on November 25, 2013.

Be that as it may, herein claimant most humbly submits that said order cannot

stay, much less, intervene with the proceedings of this Honourable Arbitral

Tribunal in determining jurisdiction and deciding upon the merits of the case.

A. The Seat of Arbitration

is Hong Kong

61. The seat of arbitration is the jurisdiction in which an arbitration takes place

legally.33 The seat of arbitration in the legal sense is the legal domicile of the

arbitration.34 It is the court which has jurisdiction over the legal domicile that can

assist the arbitration proceedings and/ or provide provisional relief.35

62. The parties herein have chosen Hong Kong as the seat of arbitration. Hence, the

local courts of Hong Kong are the ones that could provide interim measures, such

as the issuance of an anti-suit injunction.

63. The moment the parties assigned ‘Hong Kong’ as the seat of arbitration, the

Manila (or any Philippine) Court has no jurisdiction whatsoever over the subject

matter of the controversy. The manila court cannot therefore be deemed as a

competent judicial authority in the context of the HKIAC 2013 Rules.36 To insist

upon the existence of the Manila Court’s jurisdiction will inevitably result to an

unlawful encroachment of the sovereignty of Hong Kong. This was expressly

admitted by the respondents in paragraphs 40 and 41, pp. 20 and 21 of CC’s

Motion:

33Supra note 24 at Par. 2.2, p. 54.34 Belohlavek, Importance of the Seat of Arbitration in International Arbitration: Delocalization and Denationalization of Arbitration as an Outdated Myth, 31 ASA BULLETIN 2/2013 (JUNE), at p. 263.35 Please see Salomon and Sivachenko, Choosing an arbitral seat in the United States, Lexis Nexis, p. 1.36 Par. 23.9, Article 23 of the HKIAC 2013 Rules provide:“Article 23 – Interim Measures of Protection and Emergency Relief xxx xxx xxx23.9 A request for interim measures addressed by any party to a competent judicial authority shall not be deemed incompatible with the arbitration agreement(s), or as a waiver thereof. “(Underscoring added.)

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“40. When a court enjoins a party from proceeding in a foreign

court, even though the basis for the injunction is the first court’s

jurisdiction over the party, there is nonetheless an impact on the

jurisdiction of the foreign court.

41. As the European Court of Justice noted with respect to anti-

suit injunction in litigation:

“A prohibition imposed by a court, backed by a penalty restraining

a party from commencing or continuing proceedings before a

foreign court undermines the latter court’s jurisdiction to determine

the dispute. Any injunction prohibiting a claimant from bringing

such an action must be seen as constituting interference with the

jurisdiction of the foreign court.” (Underscoring supplied.)

64. Further, the intervention of the Manila Court, if allowed to stay these proceedings,

would affect the merits of the case, by patently disregarding the intent of the

parties.

B. HKIAC is Empowered to

Determine its Own

Jurisdiction

65. The HKIAC 2013 Rules provide:

“19.1 The arbitral tribunal may rule on its own jurisdiction under

these Rules, including any objections with respect to the existence,

validity or scope of the arbitration agreement(s).”

This provision clearly gives this Honourable Arbitral Tribunal the power to

determine its own jurisdiction over the controversy.

66. At present, there is a ‘wide consensus that the arbitral tribunal has the power to

rule on all aspects of its own jurisdiction.’ Reported decisions have showed that

the courts recognise the right of the arbitral tribunal to determine:

“— whether arbitration agreement exists between the parties;

— whether the matter in dispute comes within the scope of the

arbitration agreement;

— what is the proper interpretation of the arbitration agreement;

— whether the arbitration agreement is valid or was terminated.”37

37 Uzelac, Jurisdiction of the Arbitral Tribunal: Current Jurisprudence and Problem Areas Under the UNCITRAL Model Law, [2005] Int.A.L.R., p. 156.

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B.1. Doctrine of

Kompetenz-Kompetenz

67. The right of the arbitrators to rule on their own jurisdiction is an almost fully

uncontroversial part of the well-established doctrine and practice in international

arbitration. This reflects the globally harmonised approach to the issue universally

called ‘Kompetenz-Kompetenz.’38

68. The doctrine of Kompetenz-Kompetenz, at its simplest sense, empowers an arbitral

tribunal to decide on any and all objections as to its own jurisdiction.39 This

doctrine, which is followed in most jurisdictions, provides that arbitrators are

competent to determine their own competence.40

69. In the case of Channel Tunnel Group Limited and others v. Baflour Beatty

Construction and others, the UK House of Lords while holding that the court has

the power to stay proceedings brought in breach of an alleged agreed method of

resolving disputes, such as arbitration, it also held that such a step would largely

pre-empt any decision to be made in the arbitration and thus it was not appropriate

for the court to do so.41

70. Any intervention from any court, especially from an incompetent one, would

gravely diminish and impair the said power belonging to this Honourable

Tribunal.

B.2. Prima Facie Approach

71. The above discussion regarding the competence of HKIAC to determine its own

jurisdiction does not divest a competent court the power to make a finding if the

arbitration agreement is null and void, inoperative or incapable of being

performed.42 However, as most commentators opine, the court should go no

38 Id at 155.39 Greenberg, et al. International Commercial Arbitration – An Asia-Pacific Perspective (2010). First Ed. Par. 5.46, p. 214.40 Supra note at p. 91.41 Parlade, Alternative Dispute Resolution Act of 2004 (R. A. 9285) Annotated, p. 112. (Citations omitted.)42 Please see Article 8(1) of the UNCITRAL Model Law, wit:“Article 8. Arbitration agreement and substantive claim before court(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed. xxx xxx xxx” (Underscoring supplied.)

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further than checking prima facie that there is an arbitration agreement, leaving

the jurisdictional issues to be decided by the arbitral tribunal.43

72. Hong Kong Law is now settled in adopting the prima facie approach. The case of

Ocean Park Corporation v. Proud Sky Co. Ltd.44 ruled:

“42. In terms of the benchmark for the existence of an arbitration

agreement, Burrell J held that it had to be demonstrated that there

was a good prima facie, or a plainly arguable case, that an

arbitration agreement existed and bound the parties, and that the

onus of so doing lay upon the defendant applicant for the stay, and

that in determining whether such a case had been made out, the

court should look first at the evidence in support of the defendant’s

contention, the relevant test being satisfied if the court was of the

view that cumulatively the evidence was cogent and arguable and

not dubious or fanciful. The learned judge also held that it was for

the arbitrator, and not the court itself on a stay application, to make

a detailed final determination as to the existence or otherwise of an

arbitration agreement, a matter upon which the arbitrator would

have the benefit of oral testimony from both sides.

43. The decision x x x was approved and followed in the Court

of Appeal in PCCW Limited v. Interactive Communications

Service Ltd, CACV 18 of 2006 (unrep.), x x x , which also

followed the approach in the much earlier Court of Appeal

decision, (also cited by Burrell J in Pacific Crown)of Private

Company ‘Triple V’ Inc. v. Star (Universal) Co. Ltd and

anor [1995] 3 HKC 129, wherein Litton VP (as he then was) held

that it was for the court to determine on a prima facie basis

whether there was a valid arbitration agreement.

44. The law on this point in this jurisdiction thus appears settled.

The question for the court in this application thus boils down to

whether, on the evidence read as a whole, and bearing in mind the

burden upon the applicant for the desired stay, it can be said to be

43 Greenberg, et al. International Commercial Arbitration – An Asia-Pacific Perspective (2010). First Ed. Par. 5.46, p. 219.44 [2007] HKCU 1974.

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‘plainly arguable’ that an arbitration agreement existed on the basis

of the documentation before the court?” (Underscoring added.)

73. Ergo, the action of the Manila Court in issuing an anti-suit injunction, which

issuance was way beyond the “power of said court to inquire whether there exists

an arbitration agreement,” is violative of the above discussed principles of

international law, and therefore should not be allowed to prevent this Honourable

Tribunal from hearing this case.

C. Rule of Comity

Cannot Apply

74. Comity is the courtesy one jurisdiction gives by enforcing the laws of another

jurisdiction.45

75. In paragraph 38 of CC’s Motion,46 respondent introduced the principle of Comity.

In paragraph 39,47 CC urged this Honourable Arbitral Tribunal to apply the same

and pacify itself from continuing the instant proceedings. PEC here

76. Firstly, the Principle of Comity is a theory used in Conflict of Laws,48 and the

HKIAC 2013 Rules specifically provide:

“Article 35 – Applicable Law, Amiable Compositeur

35.1 The arbitral tribunal shall decide the substance of the dispute

in accordance with the rules of law agreed upon by the parties.

Any designation of the law or legal system of a given jurisdiction

shall be construed, unless otherwise expressed, as directly referring

to the substantive law of that jurisdiction and not to its conflict of

laws rules. Failing such designation by the parties, the arbitral

tribunal shall apply the rules of law which it determines to be

appropriate.” (Underscoring supplied.)

45 Comity, Conflict of Laws, (http://conflictoflaws.uslegal.com/comity/) – last accessed 12 September 2015.46 P. 2047 Id.48 Please see Childress III, Comity as Conflict: Resituating International Comity as Conflict of Laws, University of California, Davis (2010) [Vol.44:01, p.11

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77. The aforequoted rule is clear. The Honourable Tribunal must construe and

apply only the law(s) designated by the parties. Said rule also categorically

prohibits the use of Conflict of Laws rules.

78. Secondly, the Theory of Comity is bombarded with criticisms. To begin with, the

theory presupposes the existence of an international duty. There is no such duty.

Theoretically, every State may apply its own internal law exclusively.49

79. Further, the theory assumes, although in a minimal sense, a desire to show

courtesy to other states. This is not true. The real reason for the application of the

proper foreign law is the avoidance of “gross inconvenience and injustice to

litigants.”50 However, in this case, the anti-suit injunction would only delay the

service of justice to the claimant, if the Honourable Arbitrator decides to bow

before it.

80. Furthermore, the theory apparently leaves the application of the foreign law to the

discretion of the forum. Clearly, this will prevent the adoption of definite rules

and principles for Conflict of Laws.51

81. In judicial context, comity should not be misinterpreted as implying that all laws

are of universal jurisdiction. In many countries, comity is effective only to the

extent that foreign laws or judgments do not directly conflict with the forum

country’s public policy.52

82. So not to impede the administration and service of justice, bearing in mind the

renowned legal quotation: “Justice delayed is justice denied,” and to protect the

jurisdiction conferred unto this Honourable Arbitral Tribunal, herein claimant

most humbly submits that this tribunal should not be prevented and disturbed by

the Manila Court. Taking also into consideration the fact that this tribunal is

outside the jurisdiction of the Manila Court, and that said court has no means to

obligate this respected arbitral tribunal to follow its injunction order.

49 Paras, Philippine Conflict of Laws (1996), p.65.50 Id.51 Id.52 Supra note 44.

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Reply to the Counterclaim

83. Claimant categorically denies the allegation of harassment of CC in its

counterclaim.53 It seems very clear that the PEC is the one who is being

maliciously harassed by CC by its deliberate act of invoking the jurisdiction of

another forum, in effect delaying the proceedings of this case and breaching the

agreement between the parties, by totally ignoring the same – this,

notwithstanding the fact that CC has full knowledge of the existence of the

stipulations and consciously agreed to the same.

84. Also, the ambitious counterclaim demanded by CC is obviously a mere

afterthought, which should have been included and raised in its Answer, dated 29

November 2013, as mandated by paragraph 5.4 of Article 5, HKIAC 2013

Rules.54

85. Moreover, the stand of CC in questioning the jurisdiction of this Honourable

Arbitral Tribunal is totally incompatible with its irrational counterclaim. For a

court (or in this case, a tribunal) to grant a claim, it is elementary that it should

first have jurisdiction, not only to entertain the suit, but also to grant the relief

sought.

86. Articles 21 and 22 of the UNCITRAL Arbitration Rules55 would highlight this

bold incompatibility:

“Article 21. (3.) In its statement of defence, or at a later stage in

the arbitral proceedings if the arbitral tribunal decides that the

delay was justified under the circumstances, the respondent may

make a counterclaim or rely on a claim for the purpose of a set-off

provided that the arbitral tribunal has jurisdiction over it.

xxx xxx xxx

Article 22. During the course of the arbitral proceedings, a party

may amend or supplement its claim or defence, including a

53 Paragraph 43, CC’s Motion, pp. 21 and 22.54 “5.4 Any counterclaim or set-off defence shall to the extent possible be raised with the Respondent's

Answer to the Notice of Arbitration, x x x” (Underscoring supplied.)

55 2013.

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counterclaim or a claim for the purpose of a set-off, unless the

arbitral tribunal considers it inappropriate to allow such

amendment or supplement having regard to the delay in making it

or prejudice to other parties or any other circumstances. However,

a claim or defence, including a counterclaim or a claim for the

purpose of a set-off, may not be amended or supplemented in such

a manner that the amended or supplemented claim or defence falls

outside the jurisdiction of the arbitral tribunal.” (Underscoring

added.)

RELIEF SOUGHT

87. In light of the foregoing, herein claimant most humbly and respectfully asks,

moves and prays before the Honourable Arbitrator that:

a. This tribunal declares that it has jurisdiction to take cognizance of the

case;

b. This tribunal should not yield before the injunction issued by the

Manila court;

c. The proceedings will continue at the soonest possible time, to cover all

the unnecessary delays brought by the improper actions of the

respondent;

d. The respondent’s counterclaim be dismissed for lack of merit; and

e. The respondents be made liable to all the necessary and legal fees

arising out of and / or related to these arbitration proceedings.

Yanga Barrion & Arceo LLP

13 September 2015 (Counsel for Claimant, PEC)

(SGD.)Daryl Yanga y Rivera

(SGD.)Lorene Tadena Barrion

(SGD.)Francis Arceo

Herbert Smith Freehills, 22nd Floor, Gloucester Tower, 15 Queen's Road Central, Hong Kong

Telephone: (007) 26-11-2015Email: [email protected]

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REFERENCES

FOOTNOTE KINDLY REFER TO:

1. Submission of the Respondent designated as: “Motion to Dismiss on the Ground of Lack of Jurisdiction,” dated 30 August 2015

Annex “A”

2. I. Statement of Facts, id, pp. 1 - 5 Annex “A”

3. Id. Annex “A”

4. II. Answer to the notice of Arbitration on the matter of: 1.) Jurisdiction, supra note 1, p. 6.

Annex “A”

5. Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines (2002), p.415.

Annex “B”

6. Please see Habas Sinai Ve Tibbi Istihsal Endustrisi As v VSC Steel Company Ltd [2013] EWHC 4071

Annex “C”

7. Please see Gonzales vs. Climax Mining Ltd., G.R. No. 161957, January 22, 2007

Annex “D”

8. G.R. No. 187838, 23 December 2009 Annex “E”

9. Article 7, United Nations Commission on International Trade Law (UNCITRAL), as amended in 2006. The same is adopted in the legal systems of Hong Kong and the Philippines thru Section 19, Arbitration Ordinance 609 and Section 19, R.A. 9285, respectively

Annex “F”

10. Moses, M. L., The Principles and Practice of International Commercial Arbitration (2012),2nd Ed., p. 6

Annex “G”

11. Fiesta World Mall Corporation vs. Lindberg Philippines, Inc. G.R. No. 152471, 18 August 2006

Annex “H”

12. Averment of “paragraph 31.2, clause 31” was made by CC in supra note 3, p.2. No other discussion or a following withdrawal was made in the whole document (CC’s Motion)

Annex “A”

13. Please see CC’s Motion, p. 18 Annex “A”

14. Insigma Technology Co Ltd v. Alstom Technology Ltd. [2009] 3 SLR 936; [2009] SGCA 24

Annex “I”

15. G.R. No. 95536, 23 March 1992 Annex “J”

16. Domingo Realty, Inc. vs. Court of Appeals, G.R. No. 126236, 26 January 2007

Annex “K”

17. Manila International Airport Authority vs. Avia Filipinas International, Inc., G.R. No. 180168, 27 February 2012

Annex “L”

845

6

18. Greenberg, et al. International Commercial Arbitration – An Asia-Pacific Perspective (2010). First Ed. Par. 4.36, p. 155

Annex “M”

19. Greenberg, et al. International Commercial Arbitration – An Asia-Pacific Perspective (2010). First Ed., par. 4.47, p. 158

Annex “M”

20. G.R. No. 161957, 22 January 2007 Annex “D”

21. [1994] 2 HKC 526 Annex “N”

22. Greenberg, et al. International Commercial Arbitration – An Asia-Pacific Perspective (2010). First Ed. Par. 4.50, p. 159

Annex “M”

23. Habas Sinai Ve Tibbi Gazlar Istihsal Endustrisi As v. VSC Steel Company Ltd. [2013] EWHC 4071 (Comm)

Annex “C”

24. Greenberg, et al. International Commercial Arbitration – An Asia-Pacific Perspective (2010). First Ed. Par. 4.50, pp. 159-160

Annex “M”

25. [2012] EWCA Civ 638 Annex “O”

26. Chui and Roebuck, Hong Kong Contracts, p. 5. (1991)

Annex “P”

27. Id. Annex “P”

28. Id at p. 15 Annex “P”

29. [2013] HKCFA 40; 16 HKCFAR 351; 6 HKC 374

Annex “Q”

30. Please see CC’s Motion, par. 20, pp. 10-11.

Annex “A”

31. Please see CC’s Motion, pp. 12-17 Annex “A”

32. Union of India v. Mc Donnell Douglas Corp [1993] 2 LLR 48, p. 50

Annex “R”

33. Greenberg, et al. International Commercial Arbitration – An Asia-Pacific Perspective (2010). First Ed. Par. 2.2, p. 54.

Annex “M”

34. Belohlavek, Importance of the Seat of Arbitration in International Arbitration: Delocalization and Denationalization of Arbitration as an Outdated Myth, 31 ASA BULLETIN 2/2013 (JUNE), at p. 263.

Annex “S”

35. Please see Salomon, C. and Sivachenko, I., Choosing an Arbitral Seat in the United States, Lexis Nexis, p. 1.

Annex “T”

36. Par. 23.9, Article 23 of the HKIAC 2013 Rules provide: “Article 23 – Interim Measures of Protection and Emergency Relief xxx xxx xxx 23.9 A request for interim measures

Annex “U”

7

addressed by any party to a competent judicial authority shall not be deemed incompatible with the arbitration agreement(s), or as a waiver thereof. “(Underscoring added.)

37. Uzelac, Jurisdiction of the Arbitral Tribunal: Current Jurisprudence and Problem Areas Under the UNCITRAL Model Law, [2005] Int.A.L.R., p. 156.

Annex “V”

38. Id at 155.Annex “V”


Annex “M”

40. Moses, The Principles and Practice of International Commercial Arbitration (2012), Second Ed., p. 91.

Annex “G”

41. Parlade, Alternative Dispute Resolution Act of 2004 (R. A. 9285) Annotated, p. 112.

Annex “AA”

42. Please see Article 8(1) of the UNCITRAL Model Law, wit:

“Article 8. Arbitration agreement and substantive claim before court(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

xxx xxx xxx” (Underscoring supplied.)

Annex “F”


Annex “M”

44. [2007] HKCU 1974. Annex “W”

45. Comity, Conflict of Laws, (http://conflictoflaws.uslegal.com/comity/) – last accessed 12 September 2015.


46. Please see CC’s Motion, p. 20 Annex “A”

47. Please see Childress III, Comity as Conflict: Resituating International Comity as Conflict of Laws, University of California, Davis (2010) [Vol.44:01, p.11

Annex “X”

48. Paras, Philippine Conflict of Laws (1996), p.65.

Annex “Y”

49. Id. Annex “Y”



8

50. Id. Annex “Y”

51. Supra note 44. Annex “W”

52. Paragraph 43, CC’s Motion, pp. 21 and 22.

Annex “A”

53. “5.4 Any counterclaim or set-off defence

shall to the extent possible be raised with

the Respondent's Answer to the Notice of

Arbitration, x x x” (Underscoring

supplied.)

Annex “U”

54. 2013Annex “Z”

846

Yanga Barrion Arceo Submission - Claimant Pec

Documents

Transcript of Yanga Barrion Arceo Submission - Claimant Pec