RULES
(2) Sections 42 to 45 of Republic Act No. 9285, Alternative Dispute Resolution Act
(3) Rules 12 and 13, Special Rules of Court on Alternative Dispute Resolution (A.M. No. 07-11-08-SC)
CASE LAW
(1) Mijares v. Ranada, G.R. No. 139325, April 12, 2005
(2) Pioneer Insurance & Surety Corporation v. The Insurance Company, G.R. No. 256177, June 27, 2022
(1) Rules of Civil Procedure
The Rules of Civil Procedure being enforced in the Philippines is part of remedial law that has been promulgated by the Supreme Court of the Philippines to prescribe rules and procedures involving civil lawsuits. Under its Rule 39, Section 48, the effect of a foreign judgment depends upon the subject of litigation. When the foreign judgment is upon a specific thing, the judgment is conclusive upon the title to the thing. On the other hand, when the foreign judgment is against a person, the judgment is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title.
(2) Republic Act No. 9285
Under Philippine jurisdiction, a foreign judgment may also come in the form of a foreign arbitral award. This presupposes that the parties had a prior written agreement to refer a dispute to arbitration to be conducted outside the Philippines. As a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), the Philippines follows the principles for the recognition and enforcement of arbitral awards covered by the New York Convention, where the award is rendered by a court of a foreign country who is a party to the said Convention. Nonetheless, where an award is rendered by a court of a foreign country that is not a party to the Convention, the pertinent provisions of the Rules of Court shall apply. In enforcing a foreign arbitral award, it must first be confirmed by the appropriate Regional Trial Court.
When confirmed by the Regional Trial Court, the award shall be recognized and enforced as a foreign arbitral award and not as a judgment of a foreign court. In this regard, the recognition and enforcement of the arbitral award may still be questioned on grounds enumerated under the New York Convention, which are:
(a) Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(i) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(ii) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
(iii) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(iv) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(v) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
(b) Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
(i) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(ii) The recognition or enforcement of the award would be contrary to the public policy of that country.
(3) Mijares v. Ranada, G.R. No. 139325, April 12, 2005
In the case of Mijares v. Ranada, the Supreme Court explained the rules on recognition and enforcement of foreign judgment as follows:
There is an evident distinction between a foreign judgment in an action in rem and one in personam. For an action in rem, the foreign judgment is deemed conclusive upon the title to the thing, while in an action in personam, the foreign judgment is presumptive, and not conclusive, of a right as between the parties and their successors in interest by a subsequent title. However, in both cases, the foreign judgment is susceptible to impeachment in our local courts on the grounds of want of jurisdiction or notice to the party, collusion, fraud, or clear mistake of law or fact. Thus, the party aggrieved by the foreign judgment is entitled to defend against the enforcement of such decision in the local forum. It is essential that there should be an opportunity to challenge the foreign judgment, in order for the court in this jurisdiction to properly determine its efficacy.
It is clear then that it is usually necessary for an action to be filed in order to enforce a foreign judgment, even if such judgment has conclusive effect as in the case of in rem actions, if only for the purpose of allowing the losing party an opportunity to challenge the foreign judgment, and in order for the court to properly determine its efficacy. Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption of its validity.
The rules are silent as to what initiatory procedure must be undertaken in order to enforce a foreign judgment in the Philippines. But there is no question that the filing of a civil complaint is an appropriate measure for such purpose. A civil action is one by which a party sues another for the enforcement or protection of a right, and clearly an action to enforce a foreign judgment is in essence a vindication of a right prescinding either from a “conclusive judgment upon title” or the “presumptive evidence of a right.” Absent perhaps a statutory grant of jurisdiction to a quasi-judicial body, the claim for enforcement of judgment must be brought before the regular courts.
There are distinctions, nuanced but discernible, between the cause of action arising from the enforcement of a foreign judgment, and that arising from the facts or allegations that occasioned the foreign judgment. They may pertain to the same set of facts, but there is an essential difference in the right-duty correlatives that are sought to be vindicated. For example, in a complaint for damages against a tortfeasor, the cause of action emanates from the violation of the right of the complainant through the act or omission of the respondent. On the other hand, in a complaint for the enforcement of a foreign judgment awarding damages from the same tortfeasor, for the violation of the same right through the same manner of action, the cause of action derives not from the tortious act but from the foreign judgment itself.
More importantly, the matters for proof are different. Using the above example, the complainant will have to establish before the court the tortious act or omission committed by the tortfeasor, who in turn is allowed to rebut these factual allegations or prove extenuating circumstances. Extensive litigation is thus conducted on the facts, and from there the right to and amount of damages are assessed. On the other hand, in an action to enforce a foreign judgment, the matter left for proof is the foreign judgment itself, and not the facts from which it prescinds.
As stated in Section 48, Rule 39, the actionable issues are generally restricted to a review of jurisdiction of the foreign court, the service of personal notice, collusion, fraud, or mistake of fact or law. The limitations on review is in consonance with a strong and pervasive policy in all legal systems to limit repetitive litigation on claims and issues. Otherwise known as the policy of preclusion, it seeks to protect party expectations resulting from previous litigation, to safeguard against the harassment of defendants, to insure that the task of courts not be increased by never- ending litigation of the same disputes, and – in a larger sense – to promote what Lord Coke in the Ferrer’s Case of 1599 stated to be the goal of all law: “rest and quietness.” If every judgment of a foreign court were reviewable on the merits, the plaintiff would be forced back on his/her original cause of action, rendering immaterial the previously concluded litigation.
(4) Pioneer Insurance & Surety Corporation v. The Insurance Company, G.R. No. 256177, June 27, 2022
In Pioneer Insurance & Surety Corporation v. The Insurance Company, the Court upheld the RTC’s Decision confirming, recognizing, and enforcing a Final Award of the United States Board of Arbitrators which ordered Pioneer Insurance & Surety Corporation (Pioneer Insurance) to pay The Insurance Company USD 344,991.68.
The Court explained that Philippine courts may refuse recognition and enforcement of a foreign arbitral award if recognition and enforcement would be contrary to public policy, but rejected Pioneer Insurance’s contention that the assailed Final Award was contrary to public policy:
Rule 13.4(b)(ii) of the Special ADR Rules provides that the Philippine court may refuse the recognition and enforcement of a foreign arbitral award when it finds that its recognition and enforcement would be contrary to public policy. In Mabuhay Holdings Corporation v. Sembcorp Logistics Limited, the Court adopted the narrow approach in determining whether the enforcement of an arbitral award is contrary to public policy. The Court emphasized that not all violations of law may be deemed contrary to public policy. The Philippine court may only refuse to recognize or enforce a foreign arbitral award when its enforcement would be against the fundamental tenets of justice and morality, or would blatantly be injurious to the public, or the interests of the society, thus:
In light of the foregoing and pursuant to the State’s policy in favor of arbitration and enforcement of arbitral awards, the Court adopts the majority and narrow approach in determining whether enforcement of an award is contrary to Our public policy. Mere errors in the interpretation of the law or factual findings would not suffice to warrant refusal of enforcement under the public policy ground. The illegality or immorality of the award must reach a certain threshold such that, enforcement of the same would be against Our State’s fundamental tenets of justice and morality, or would blatantly be injurious to the public, or the interests of the society. (Emphasis supplied)
In the same case, the Court cited an example in another jurisdiction when the arbitral award would violate public policy:
Most arbitral jurisdictions adopt a narrow and restrictive approach in defining public policy pursuant to the pro- enforcement policy of the New York Convention. The public policy exception, thus, is “a safety valve to be used in those exceptional circumstances when it would be impossible for a legal system to recognize an award and enforce it without abandoning the very fundaments on which it is based.”
An example of a narrow approach adopted by several jurisdictions is that the public policy defense may only be invoked “where enforcement [of the award] would violate the forum state’s most basic notions of morality and justice.” Thus, in Hong Kong, an award obtained by fraud was denied enforcement by the court on the ground that fraud is contrary to Hong Kong’s “fundamental notions of morality and justice.” In Singapore, also a Model Law country, the public policy ground is entertained by courts only in instances where upholding the award is “clearly injurious to the public good or … wholly offensive to the ordinary reasonable and fully informed member of the public.” (Emphases supplied and citations omitted)
Based on the foregoing, the party raising the ground of violation of public policy in opposing the recognition and enforcement of a foreign arbitral award must: (a) identify the State’s fundamental tenets of justice and morality; (b) prove the illegality or immorality of the award; and (c) show the possible injury to the public or the interests of the society.
Pioneer’s prescription and violation of public policy arguments rest on shaky ground. Pioneer identifies the State’s policy against stale claims, but its evidence falls short in proving the illegality or immorality of the award. It fails to establish that Clearwater’s claims have already prescribed.
… .
All told, the final award will significantly affect Pioneer, but it will not injure the public or compromise the society’s interest. The final award’s alleged violation of our policy against stale claims was not established with certainty. Thus, confirming and enforcing the final award is not contrary to public policy.
The information in the above write-up is provided only for general guidance and is not intended to be taken as legal advice. Readers and/or users should refrain from acting on the above information without first seeking independent legal advice.