A domestic commercial dispute is one that does not fall under the purview of an intra-corporate dispute and does not include criminal prosecution.

An intra-corporate dispute is a dispute between the corporation, its stockholders or members, arising from the implementation of the articles of incorporation or bylaws, or from intra-corporate relations

For intra-corporate disputes and the arbitrator appointment and challenge process, Memorandum Circular No. 8, series of 2022 (MC No. 8-2022) or the Guidelines on Arbitration of Intra-Corporate Disputes for Corporations governs and is slightly different and is discussed in another article.

A domestic commercial dispute is those not following under the intra-corporate dispute umbrella and that does not involve criminal law.

For domestic commercial disputes, the law governing the procedure is RA 9285 (the ADR Act) and its implementing Rules and Regulations (IRR of RA 9285) as well as the RA 876 (the Arbitration Law).

An arbitrator is a person empowered to render an award in a dispute.

An arbitrator is the person appointed to render an award, alone or with others, in a dispute that is the subject of an arbitration agreement.

Any person appointed to serve as an arbitrator must be of legal age, in full enjoyment of his civil rights and know how to read and write.

Foreigners can also be appointed. 

No citizen shall be disqualified on account of his or her nationality from acting as an arbitrator unless otherwise agreed by the parties. 

An arbitrator cannot serve in the following instances:

• If he/she is related by blood or marriage within the sixth degree to either party to the controversy.
• If he/she has or has had financial, fiduciary or other interest in the controversy or cause to be decided or in the result of the proceeding, or has any personal bias, which might prejudice the right of any party to a fair and impartial award. 
• If he/she has been selected by a party to act as the party’s champion or to advocate their cause.

^[1] Sec. 3(e), RA 9285

Alternatively, the parties can decide to have one arbitrators or several.

An arbitrator can either be appointed alone or with others.

Arbitration can proceed faster and with less expense on a sole arbitrator setup. The parties can agree that they shall jointly appoint the sole arbitrator.

But this could lead to another dispute if the parties cannot even agree on who to choose as the sole arbitrator to resolve their disputes.

What happens if the parties cannot agree on a sole arbitrator?

In such a case, a sole arbitrator may be appointed by the appointing authority designated by the parties or by law. We will talk about the appointing authority later on.

The parties can also agree that there will be three adjudicators instead of just one.

In this scenario, each party can choose one arbitrator and the chosen arbitrators will be the ones to choose the third arbitrator.

The parties are free to determine the number of arbitrators but what happens if the parties failed to agree on the number of arbitrators?

If the parties fail to agree, the number of arbitrators shall be three (3).^[1]

^[1] Art. 4.10, IRR of RA 9285

An appointing Authority can also appoint an arbitrator.

The ADR Act defines the appointing authority as the person or institution named in the arbitration agreement as the appointing authority. 

It can be the regular arbitration institution under whose rules the arbitration is agreed to be conducted. 

This means that the parties may designate in their arbitration agreement any person or institution of choice as the appointing authority.

For domestic arbitration, the appointing authority in ad hoc arbitration, in the absence of an agreement, is the National President of the IBP or his/her duly authorized representative. 

The parties can also agree that the appointing authority will be the Office for Alternative Dispute Resolution (OADR). 

The OADR is an agency attached to the Department of Justice which is empowered to act as appointing authority, among others. 

The Court can also be requested by any party to act as an appointing authority. We will talk about how the Court can be the appointing authority later on. 

The parties are free to agree on a procedure of appointing an arbitrator or arbitrators. 

The manner by which any arbitrator shall be appointed shall be in accordance with the appointment procedure agreed upon by them. 

The appointing authority can appoint an arbitrator when the parties cannot agree.

If the arbitration is with a sole arbitrator, then the arbitrator will be appointed, upon request of a party, by the appointing authority. 

If the arbitration is with three arbitrators, then each party shall appoint one arbitrator and the two appointed arbitrators shall appoint the third one.

If a party fails to appoint an arbitrator within thirty (30) days of receipt of a request to do so form the other party or if the two arbitrators fail to agree on the third within thirty (30) days of their appointment, the appointment will be made by the appointing authority upon request of a party.

Even in cases where an agreed-upon appointment procedure exists, a party may nevertheless ask the appointing authority to designate an arbitrator.

Any party may request the appointing authority to appoint an arbitrator under these instances:

• Where a party fails to act or appoint an arbitrator as required under the procedure
• Where the parties or the two arbitrators are unable to appoint an arbitrator or reach an agreement expected of them under the procedure
• Where a third party, including an institution, fails to appoint an arbitrator or to perform any function entrusted to it under the procedure
• Where the multiple claimants or the multiple respondents is/are unable to appoint its/their respective arbitrator^[1]

^[1] Art. 5.10(d), IRR of RA 9285

The appointing authority makes the appointment in a process called the arbitrator’s default appointment.

The appointing authority shall summon the parties and their respective counsel to appear before them on a date, time and place set by it. 

This is for the purpose of selecting and appointing a sole arbitrator.

If a sole arbitrator is not appointed in such a meeting, or the meeting did not take place because of absence of either or both parties despite notice, the appointing authority shall appoint the sole arbitrator.

This procedure is called the default appointment of an arbitrator.

If this is objected to by the party on whose behalf the default appointment is to be made, the defaulting party can request the appointing authority for additional time to appoint his/her arbitrator.

The appointing authority may give the requesting party not more than thirty (30) days to make the appointment. This is within the discretion of the appointing authority, having regard to the circumstances of the case.

However, if the party’s objection is based on the ground that the party did not fail to choose, he/she can attach to the objection the appointment of an arbitrator together with the latter’s acceptance and curriculum vitae. 

Otherwise, the appointing authority shall appoint the arbitrator for that party.  

The appointing authority shall also consider the appointment of an independent and impartial arbitrator.

Preference will be given to a qualified person who has a place of residence or business in the same general locality as the agreed venue of the arbitration and who is likely to accept the arbitrator’s fees.

This is done to achieve speedy and impartial justice and to moderate the cost of arbitration. 

Each arbitrator must submit an acceptance letter with the below statements.

The arbitrator, in accepting an appointment, shall include in his/her acceptance letter a statement that:

• he/she agrees to comply with the applicable law, the arbitration rules agreed upon by the parties, or in default thereof, the IRR of RA 9285, and the Code of Ethics for Arbitrators in Domestic Arbitration, if any
• he/she accepts as compensation the arbitrator’s fees agreed upon by the parties or as determined in accordance with the rules agreed upon by the parties, or in default, the IRR of RA 9285
• he/she agrees to devote as much time and attention to the arbitration as the circumstances may require in order to achieve the objective of a speedy, effective and fair resolution of the dispute^[1]

^[1] Art. 5.10(o), IRR of RA 9285

Only in certain situations can Philippine courts serve as the appointing body.

Yes, the Philippines actually have special rules of court on alternative dispute resolution cases.

The Special ADR Rules also apply on issues about the appointment of an arbitrator.^[1]

Philippine courts can act as the appointing authority but only in these limited instances.

• When there is failure or refusal in the appointing of an arbitrator.

This happens when these two instances both occur:

First, when the parties failed to reach an agreement on the sole arbitrator or when the two designated arbitrators failed to reach an agreement on the third arbitrator.

And second, when the institution under whose rules arbitration is to be conducted fails or is unable to perform its duty as appointing authority within a reasonable time from receipt of the request for appointment.^[2]

• Where the arbitration is ad hoc and the parties failed to provide a method for appointing an arbitrator or the method is ineffective

This happens when these two instances both occur:

First, when the parties fail to provide a method for appointing or replacing arbitrator, or a substitute arbitrator, or the method agreed upon is ineffective.

And second, when the National President of the Integrated Bar of the Philippines (IBP) or his duly authorized representative fails or refuses to act within the period as allowed under the rules of the IBP or within such period agreed upon by the parties, or in the absence thereof, within thirty (30) days from receipt of the request for appointment.^[3]

An instance where the court can be the appointing body is when the IBP fails to act within the appointed time.

• Where the parties agreed that the dispute will be resolved by three arbitrators but no method of appointing has been agreed upon

When this happens, each party shall appoint one arbitrator and the two arbitrators thus appointed shall appoint a third arbitrator.

If a party fails to appoint his arbitrator within thirty (30) days of receipt of the request from the other party, or if the two arbitrators fail to agree on the third arbitrator within a reasonable time from their appointment, the appointment shall be made by the Appointing Authority.

If the appointing authority fails or refuses to act or appoint an arbitrator within a reasonable time from receipt of the request to do so, any party or the appointed arbitrator/s may request the court to appoint an arbitrator or the third arbitrator as the case may be.^[4]

^[1] Rule 1.1, A.M. No. 07-11-08-SC

^[2] Rule 6.1, A.M. No. 07-11-08-SC

^[3] Rule 6.1, A.M. No. 07-11-08-SC

^[4] Rule 6.1, A.M. No. 07-11-08-SC

Yes, an appointment of an arbitrator can be challenged.

A default appointment of an arbitrator can be objected by a party on whose behalf the default appointment is to be made.

An arbitrator may be challenged only if:

• Circumstances exist that give rise to justifiable doubts as to his/her impartiality or independence
• He/she does not possess qualifications as provided for under the Rules or those agreed to by the parties
• He/she is disqualified to act as arbitration under the Rules
• He/she refuses to respond to questions by a party regarding the nature and extent of his/her professional dealings with a party or its counsel

The arbitrator should disclose any relationship or interest that could compromise impartiality or give the impression of bias or partiality.

An arbitrator must disclose any circumstance that is likely to create a presumption of bias which he/she believes might disqualify him/her as an impartial arbitrator. 

An arbitrator must also disclose if he/she has or has had financial or professional dealings with a party to the arbitration or to the counsel of either party.

The arbitrator will disclose in writing and will, in good faith, promptly respond to questions from a party regarding the nature, extent and age of such financial or professional dealings. ?

There is always room for challenge, even in the middle of the arbitration procedure.

Yes, there is still a ground for challenge.

After appointment but before or during the hearing, if a person appointed to serve shall discover any circumstance likely to create a presumption of bias or which he/she believes might disqualify him/her as an impartial arbitrator, he/she shall immediately disclose such information to the parties.

What should the parties do after this disclosure?

The parties may agree in writing to waive the presumptive disqualifying circumstance or declare the office of such arbitrator vacant. The vacancy shall be filled in the same manner the original appointment was made.

Even during the course of the arbitration proceedings, there is still a ground for challenge.

When the arbitrator discovers circumstances that are likely to create a presumption of bias, he/she shall also immediately disclose those circumstances to the parties.

Written disclosure of this is not required where it is made during arbitration and it appears in a written record of the arbitration proceedings.

The parties are free to agree on a procedure for challenging an arbitrator.

A request for inhibition to an arbitrator shall also be deemed as a challenge.

A written statement with the reasons for the challenge must be submitted.

A party who intends to challenge shall send a written statement of the reasons for the challenge to the arbitral tribunal. 

The party must send this within fifteen (15) days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstance under Art. 5.11.

The arbitral tribunal will then decide on the challenge unless the challenged arbitrator withdraws from his/her office or the other party agrees to the challenge.

If a challenge under the procedure agreed upon by the parties or under Art. 5.12(b) is not successful, the challenging party may request the appointing authority to decide on the challenge.

The request must be within thirty (30) days after having received notice of the decision rejecting the challenge. 

The arbitral tribunal, including the challenged arbitrator, can still continue the arbitral proceedings and make an award while the request is pending.

Reconsideration requests and appeals regarding arbitrator appointments are not accepted.

No, the appointing authority’s decision is not subject to appeal or a motion for reconsideration and shall be immediately executory.  

However, a party may challenge an arbitrator appointed by him/her/it or whose appointment he/she/it has participated in.

This should only when the party becomes aware of possible conflicts after the appointment has been made. 

The challenge shall be in writing and shall state the facts that provide the basis for the ground relied upon for the challenge. 

A challenge shall be made within fifteen (15) days from knowledge by a party of the existence of a ground for a challenge or within fifteen (15) days from the rejection by an arbitrator of a party’s request for his/her inhibition. 

The challenged arbitrator shall decide whether he/she shall accept the challenge or reject it. 

This must be within fifteen (15) days from receipt of the challenge.

If he/she accepts, he/she shall voluntarily withdraw as arbitrator.

If he/she rejects, he/she shall communicate within the same period of time, his/her rejection and state the facts and arguments relied upon. 

Until a decision is made to replace the arbitrator, the arbitration proceeding may still continue

A challenged arbitrator shall be replaced on these instances:

• If he/she withdraws as arbitrator
• The parties agree in writing to declare the office of arbitrator vacant
• The arbitral tribunal decides the challenge and declare the office of the challenged arbitrator vacant
• The appointing authority decides the challenge and declare the office of the challenged arbitrator vacant
• In default of the appointing authority, the court decides the challenge and declares the office of the challenged arbitrator vacant

A substitute arbitrator can be appointed only in very specific instances.

A substitute arbitrator can only be appointed in the following instances:

• When the mandate of an arbitrator terminates because of a challenge
• There was failure or impossibility to perform his/her functions as arbitrator

What is considered as failure or impossibility to act?

If an arbitrator is unable to perform his/her functions or for other reasons fails to act without undue delay, his/her mandate terminates if he/she withdraws from office or if the parties agree on the termination.

• Withdrawal from office for any other reason
• There was a revocation of his/her mandate by the agreement of the parties
• Any other case of termination of the arbitrator’s mandate

The substitute arbitrator shall be appointed according to the rules applicable to the appointment of the arbitrator being replaced.^[1]

^[1] Art. 5.14, IRR of RA 9285