SEC sets arbitration guidelines for intra-corporate spats

Published June 24, 2021, 3:35 PM

by James A. Loyola

The Securities and Exchange Commission (SEC) is finalizing the guidelines for arbitration that would ensure the speedy and impartial resolution of intra-corporate disputes.

The Commission released for public comment the draft guidelines operationalizing Section 181 the Revised Corporation Code of the Philippines (RCC) which allows corporations to refer intra-corporate disputes to arbitration.

Section 181 of the RCC provides that an arbitration agreement may be provided in the articles of incorporation or bylaws of a corporation.

When such an agreement is in place, disputes between the corporation, its stockholders or members, which arise from the implementation of the articles of incorporation, bylaws, or from intra-corporate relations shall be referred to arbitration.

The arbitration agreement shall be binding on the corporation, its directors, trustees, officers, and executives or managers. However, disputes that involve criminal offenses and interests of third parties shall be non-arbitrable.

Under the draft guidelines issued by the SEC, arbitration is defined as a voluntary dispute resolution process in which one or more arbitrators, appointed by the parties’ designated independent third party or in accordance with the rules, resolve a dispute by rendering an award.

With an arbitration agreement in place, disputes between the corporation, its stockholders or members that arise from the implementation of the articles of incorporation, bylaws, or from intra-corporate relations, shall be referred to arbitration. The seat of arbitration is presumed to be the Philippines, unless otherwise stated.

Further, an intra-corporate dispute filed with a regional trial court shall be dismissed before the termination of the pre-trial conference if the corporation has an arbitration agreement in place.

Prior to arbitration, parties must comply with alternative forms of dispute resolution, such as negotiation or mediation, as prescribed under the agreement.

To proceed with arbitration, a designated independent party shall appoint arbitrators. The SEC may make the appointment should the designated appointing authority fail to appoint the arbitrators as specified in the arbitration agreement.

The arbitral tribunal shall have the power to rule on its own jurisdiction and on questions relating to the validity of the arbitration agreement.

It shall also have the power to grant the necessary interim measures to ensure enforcement of the award, prevent a miscarriage of justice, or otherwise protect the rights of the parties.

The final arbitral award shall be executory after 15 days from receipt thereof by the parties and shall be stayed only by the filing of a bond or the issuance by the appellate court of an injunctive writ.

 
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