Companies opting for arbitration of intra-corporate disputes need to put in black and white the agreement for dispute resolution for such agreement to be enforceable, according to the Securities and Exchange Commission (SEC).
The regulator in a statement said the agreement must state the number of arbitrators; the designated independent third-party who shall appoint the arbitrators; procedure for the appointment of the arbitrators; and the period within which the arbitrators should be appointed by the designated independent third party.
“Arbitration agreements that do not comply with such requirements shall be unenforceable, although arbitration shall still proceed under Republic Act No. 9285, or the Alternative Dispute Resolution Act of 2004,” the SEC said.
The provision forms part of the arbitration guidelines the SEC released through a memo dated Sept. 19, 2022.
The guidelines operationalize section 181 of the Revised Corporation Code of the Philippines (RCC) or Republic Act 11232, which provides for an alternative way to resolve corporate disputes through an arbitration.
The SEC said 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 and bylaws, or from intra-corporate relations shall be referred to arbitration.
“However, disputes that involve criminal offenses and interests of third parties shall be excluded from arbitration,” it said.
The SEC said unless expressly stressed in the agreement, the place of arbitration shall be presumed to be the Philippines.
“Prior to arbitration, parties must comply with alternative forms of dispute resolution, such as negotiation or mediation, as prescribed under the agreement,” the SEC said.
The SEC said it may make the appointment for an arbitrator should the designated appointing authority fail to appoint the arbitrators as specified in the arbitration agreement.
