Appeals from arbitral awards issued by the Construction Industry Arbitration Commission (CIAC) have been shortened by the Supreme Court (SC) for the “quickest and most conclusive conflict resolution” on issues that affect national interests, particularly public infrastructure and safety.
In a full court decision, the SC underscores the need “for CIAC arbitral awards to henceforth be given the authoritative sway and deference that they merit, as well as demonstrates the call for courts to stay their hands until a pure question of law can be distilled from the dispute and brought before it.”
The SC’s full court decision, written by Associate Justice Alfredo Benjamin S. Caguioa, was promulgated last May 11 but uploaded on the court’s website last Aug. 6.
The SC said that after the promulgation of the decision last May 11, appeals from CIAC arbitral awards involving pure question of law should be filed directly with the SC.
Appeals on factual issues like “allegations of corruption, fraud, misconduct, evident partiality, incapacity or excess of powers within the tribunal or an allegation that the arbitral tribunal violated the Constitution or positive law in the conduct of the arbitral process” should be filed before the Court of Appeals (CA).
“The CA may conduct a factual review only upon sufficient and demonstrable showing that the integrity of the CIAC arbitral tribunal had indeed been compromised, or that it committed unconstitutional or illegal acts in the conduct of the arbitration,” the SC said.
Since the decision is prospective in application, the CA has to resolve all pending petitions filed against CIAC rulings even if they involved issues outside of the guidelines contained in the May 11, 2021 decision.
The decision was issued on the petitions filed against each other by Ross Systems International, Inc., (RSII) and Global Medical Center of Laguna, Inc. (GMCLI). They both assailed the decision issued by the Court of Appeals (CA) on Oct. 28,2016 which upheld with modification the CIAC’s arbitral award on May 10, 2016.
Case records showed that GMCLI engaged the services of RSII for the construction of its hospital in Cabuyao, Laguna for P248,500,000 with 15 percent down payment and the balance to be paid in monthly installments based on the percentage of work accomplished.
On April 12, 2015, RSII submitted to GMCLI its progress billing which indicated that it had already accomplished 79.31 percent of the project, equivalent to P9,228,286.77.
However, GMCLI estimated that the accomplished percentage was only at 78.84 percent of the entire contract price or equivalent to P7,043,260 for the said progress billing.
After internal audit, GMCLI found it was not able to withhold and remit two percent CWT on RSII's progress billings Nos. 1 to 14. It decided to withhold the two percent CWT not only from progress billing No. 15 but from the cumulative amount of all progress billings Nos. 1-15 or from the amount of P197,088,497.
Instead of P7,043,260 due to billing No. 15, GMCLI only paid a total of P3,101,491. This prompted RSII to file a complaint and request for arbitration before the CIAC on Aug. 6, 2015.
On May 10, 2016, the CIAC ruled that GMCLI has no authority to withhold and remit the two percent creditable withholding tax (CWT) on the cumulative amount of 15 progress billings of RSII; RSII was not entitled to the release of the amount of P4,884,778.92, equivalent to the two percent CWT withheld because at the time the same was remitted to the Bureau of Internal Revenue (BIR), RSII had not yet paid income taxes on the payments from progress billings nos. 1 to 15.
CIAC also ruled that RSII was still entitled to the amount of P1,088,214.33, representing the balance due after deducting from P8,131,474.83 the two percent CWT on progress billings in the amount of P3,941,769 and the payment already made to RS II in the amount of P3,101,491.
RSII elevated the matter before the CA which affirmed with modification the CIAC’s ruling by declaring that the petitioner (RSII) is entitled to the payment of the amount of P1.088 million representing the balance after deducting from P8,131,474.83 (at 78.84 percent work accomplishment) the two percent CWT on progress billings Nos. 1 to 15 in the amount of P3.9 million and the payment already made to RSII in the amount of P3.1 million.
When the motions for reconsideration filed by RSII and GMCLI were denied, they elevated the issues to the SC in separate petitions that were consolidated by the High Court.
The SC partially reversed the CA’s decision with respect to RSII’s entitlement to the amount of P1,088,214.33. It reinstated with modification the May 10,2016 final award by CIAC.
The decision then tackled the modes of appeals on arbitral awards issued by CIAC.
It noted that the petitions involving the dispute over the construction of a hospital has already been pending for over four years, “which in the construction industry exponentially translates to increasingly damaging delay, all the more necessitating resolution at the soonest possible time.”
The SC said:
"This need to enable the quickest and most conclusive conflict resolution possible finds exacting relevance in the case of the construction industry, with its inherently complex dynamics, and with the takes that involve national interests, not in the least of which are lpublic infrastructure and safety.
“The attributes and functions of the CIAC also operatively place it in a hybrid classification, in that it is categorized as a quasi-judicial agency, but its very nature as an arbitral tribunal effectively places it at par with other commercial arbitral tribunals, with their characteristic speed, subject matter authoritativeness and overall autonomy.
“This amalgamation of its design and utilities created a whole new legal animal, which, like all things novel, poses for the Court a challenge of ascertaining its parameters and remedial routes set by law. Perhaps, unless the legislature deems it fit to create a new and independent set of rules that apply to the CIAC more responsively, the Court must continue to contend with harmonizing varying material rules, all in a manner that is as just as it is tenable under existing laws.
“It is central, therefore, that the CIAC be empowered and enabled to fulfill its function as the professionally authoritative venue for settlement of construction disputes, and not straitjacketed to fit into the mold of the court system which it was meant to be an alternative of.
“To this end, and perhaps somewhat ironically, the courts can contribute best through non-participation, save on the narrowest of grounds. The courts are, after all, ultimately dealers of justice, more so in industries that are of greater consequence, and must remain true to this highest mandate, even if it means relinquishing review powers that, in the sum of things, it was demonstrably not meant to bear.
“As has been fleshed out by the present controversy, this overarching attempt towards less court litigation and more of alternative conflict resolution in the construction industry must only get support from the Court through its own restraint, lest it be accused of being eager towards copious and lengthy litigations, or worse, indifferent to their costs.”