MC No. 8-2022 is the main law that provides the guidelines for Arbitration.

This article is focused on arbitrators for intra-corporate disputes of corporations.

This is primarily governed by Memorandum Circular No. 8, series of 2022 (MC No. 8-2022) or the Guidelines on Arbitration of Intra-Corporate Disputes for Corporations.

MC No. 8-2022 was released by the Securities and Exchange Commission (Commission) in accordance with Section 181 of the Revised Corporation Code.

Section 181 of the Revised Corporation Code provides that an arbitration agreement may be provided in the articles of incorporation or bylaws of a corporation, or in the form of a separate agreement.

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

If the arbitration agreement fails to meet the minimum requirements under MC No. 8-2022, it will not apply but arbitration can proceed under the ADR Act and its implementing rules and regulations.

The Alternative Dispute Resolution (ADR) Act, its implementing rules and regulations, the SEC Rules of Procedure, and the Special Rules of Court on ADR may still be applied by analogy or in a suppletory character and effect.^[1]

Arbitrators for commercial disputes follow a different set of guidelines, which we talk about here.

^[1] Sec. 25, SEC M.C. No. 8, series of 2022

An arbitrator is an independent person or body officially appointed to settle 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.^[1]

An arbitral tribunal can be a sole arbitrator or a panel, board or committee of arbitrators appointed to render an award in a dispute.^[2]

The arbitrators must be accredited by the Office of Alternative Dispute Resolution (OADR) or the Commission or accredited by organizations accredited by the OADR or the Commission for the purpose of arbitration.^[1]

^[1] Sec. 10, SEC M.C. No. 8, series of 2022

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

^[2] Sec. 4(b),

Arbitrators are appointed following the procedure in the Arbitration Agreement.

The power to appoint the arbitrator or arbitrators forming the arbitral tribunal is granted to a designated independent third party and in accordance with the procedure agreed upon in the Arbitration Agreement.

The independent third-party is any person, other than the corporation, its director, trustees, officers, stockholder or member, and executives or manager.^[1]

It is possible that the independent third party fails to appoint an arbitrator in the manner and within the period specified in the Arbitration Agreement.

If this happens, any of the parties to the arbitration may request the Securities and Exchange Commission to appoint the arbitrators.

^[1] Sec. 4(j), SEC M.C. No. 8, series of 2022

Both parties can define the process for choosing the arbitrator.

The arbitrators shall be appointed by a designated independent third party based on the parties’ agreed procedure.

The parties are deemed to have agreed on an appointment procedure if:

• The Arbitration Agreement provides for an application of a set of arbitration rules that includes an appointment procedure and a designated appointing authority

OR

• The Arbitration Agreement expressly provides an appointment procedure, which requires the parties’ designated independent third party to appoint an arbitrator or arbitrators.

In the absence of an agreement on the appointing procedure, the arbitration shall proceed under the ADR Act and its implementing rules and regulations if the seat or place of arbitration is the Philippines, or under the relevant arbitration law if the seat or place of arbitration is outside Philippines.

The ADR act has different processes depending on how many arbitrators are appointed.

This is the procedure under the ADR Act:

• For arbitration with a sole arbitrator:

If the parties are unable to agree on the arbitrator, he/she shall be appointed, upon request of a party, by the appointing authority.

• For arbitration with three arbitrators:

Each party will appoint one arbitrator then the two arbitrators will appoint the third.

If a party fails to appoint an arbitrator within thirty (30) days of receipt of a request to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within thirty (30) days of their appointment, the appointment shall be made, upon request of a party, by the appointing authority.^[1]

^[1] Art. 4.11(c), IRR of RA 9285

The appointment will be made by the Commission upon written request should the appointing authority fail to appoint an arbitrator.

If the appointing authority fails to appoint the arbitrators in the manner and within the period specified in the Arbitration Agreement, the Commission shall make the appointment upon written request from a party to the arbitration, having regard to the following:

• Nature of the dispute
• Whether the arbitrators who possess the required qualifications would be available to accept the appointment
• Identity and nationality of the parties to the arbitration agreement
• Any considerations in respect of the independence and impartiality of the person to be appointed as arbitrator
• Any stipulations in the relevant agreement
• Any suggestions made by the parties themselves

There is an specific request form that needs to be accomplished

The requesting party must make the request to the Commission in the following manner:

The request must be:

In the form found in Schedule 1 of SEC Memorandum Circular No. 8, series of 2022 (MC No. 8-2022).^[1]

Accompanied with the relevant fee that the Commission may charge. The schedule of fees are found in Schedule 2 of MC No. 8-2022.

• Signed by the requesting party, or by a person authorized to sign on behalf of the requesting party, stating that the details contained in the request are true and accurate.

The requesting party must:

• Serve a copy of the request on the other party or parties to the arbitration in accordance with modes of service allowed under the ADR Act and
• Submit with the Commission the relevant proof of the service.^[2]

^[1] Form for Request to Appoint an Arbitrator

^[2] Sec. 15(c), SEC M.C. No. 8, series of 2022

The Commiision will make the appointment in this case. Each party will receive an identical list of candidates from the commission.

In such a case, it is the Commission that shall make the appointment.

The Commission shall follow this procedure:

First, the Commission shall send to each party an identical list of candidates. This list shall include the names of at least three candidates in alphabetical order with their respective curriculum vitae.

After this, each party shall have the right to delete the name of any candidate or candidates it objects to and shall number any remaining candidates in the order of preference.

Each party may then return the marked list to the Commission within fifteen (15) days from their receipt of the list.

Lastly, after expiration of the fifteen-day period, the Commission shall appoint the sole arbitrator from among the names approved on the lists returned to it and in accordance with the order of preference by the parties.

If the appointment cannot be made according to this procedure, then the appointing authority may exercise its discretion in appointing the sole arbitrator.

The Commission will consider any information either parties considers relevant to the request.

The Commission shall allow the other party or parties to give the Commission any written information that the other party or those other parties consider relevant to the request.

This includes objections to the appointment of an arbitrator.

The Commission may proceed to make an appointment if no information is given to them within fifteen (15) days after the date on which a copy of the request is served on the other party or parties.

The Commission can decline to appoint an arbitrator. 

If reasons why no arbitrator should be appointed are given to the Commission by the other party or parties to the arbitration and the Commission is satisfied that no arbitrator should be appointed, the Commission may decline to appoint an arbitrator. 

The arbitrator must accept in writing.

Each prospective arbitrator shall accept the potential appointment in writing and sent to the Commission.

By accepting the appointment, the arbitrator shall make sufficient time available to enable the arbitration to be conducted and completed expeditiously.

The arbitrator must perform his or her functions with impartiality and independence.

When a person is approached in connection with his or her possible appointment as arbitrator, he or she shall disclose any circumstances likely to give rise to justifiable doubts as to his or her impartiality or independence.

An arbitrator, from the time of his or her appointment and throughout the arbitral proceedings, shall without delay disclose any such circumstances to the parties and the other arbitrators unless they have already been informed.^[1]

^[1] Sec. 18, SEC Memorandum Circular No. 8, series of 2022

Any arbitrator may be challenged if circumstances arise that lead to suspicion of his impartiality.

A party may challenge the arbitrator appointed by it only for reasons of which it becomes aware after the appointment has been made.^[1]

Any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to his or her impartiality or independence.^[2]

A party who intends to challenge an arbitrator shall send a Notice of Challenge within fifteen (15) days after it has been notified of the appointment of the challenged arbitrator. 

The Notice of Challenge can also be filed by a party within fifteen (15) days after the circumstances that will likely give rise to justifiable doubts about the arbitrator’s impartiality or independence became known to that party.

^[1] Sec. 19, Ibid.

^[2] Id.

It is recommended that the notice be sent personally by a company messenger to the arbitrators and the Commission.

The Notice of Challenge must be communicated to all other parties, to the arbitrator who is challenged, to the other arbitrators, and the Commission.

The Notice must clearly state the reasons for the challenge.

It must be sent within fifteen (15) days after notice of appointment of the challenged arbitrator or within the same period after knowledge of the circumstances that could give rise justifiable doubts to an arbitrator’s impartiality or independence.

The other party must respond within 15 days to the Notice.

The other party shall have the right to respond to the Notice within fifteen (15) days from receipt of such notice, copy furnished to the Commission, the arbitrators and the other party.

The other party may also agree to the challenge.

Even the challenged arbitrator can also agree and voluntarily withdraw from his or her appointment.

In such a case, the arbitrator shall be replaced without implying acceptance of the validity of the grounds for the challenge.

But what happens if all parties do not agree or the challenged arbitrator does not withdraw?

In this case, the party making the challenge may elect to pursue it.

Within thirty (30) days from the date of the Notice, the party may seek a decision on the challenge from the Commission upon payment of the Challenge Fee.

According to the Schedule of Fees^[1] in M.C. No. 8-2022, the rate of the Challenge Fee is Php 50,000.

The Commission’s decision is administrative in nature and shall be final. The Commission is also not required to state the reasons for its decision.

^[1] Schedule 2, Schedule of Fees, SEC M.C. No. 8, series of 2022

The arbitral tribunal may suspend or continue proceedings.

This depends on the arbitral tribunal. 

While there is an ongoing challenge, the arbitral tribunal may either suspend or continue the arbitral proceedings at its discretion. 

An arbitrator can also voluntarily withdraw even without a challenge.

He or she may file a request to be released from appointment either with the consent of the parties or by the Commission. 

A replacement can then be found under the same procedure for appointment of arbitrators.