Effective Tool in Settlement of Business Disputes
(Excerpts of the lecture delivered during the Chamber-to-Chamber
II-Dialogues with the Business Sector and Integration of Mediation in
Business on 29 March 2005 at the Xavier Sports and Country Club,
Cagayan de Oro City).
by: Justice Myrna Dimaranan Vidal
I. HISTORICAL BACKGROUND
History tells us that amicable settlement of litigious cases is a
highly efficient and effective instrument in the settlement of
disputes. Even the Holy Bible chronicled this mode in the Book of St.
Matthew, Chapter 5:25-26 wherein Our Lord Jesus Christ preached the
wisdom of going to and out of court settlement. Our Lord preached:
Settle with your opponent quickly while on the way to court with
him. Otherwise, your opponent will hand you over to the judge, and
the judge will hand you over to the guard, and you will be thrown
into prison. Amen and I say to you, you will not be released until
you have paid the last penny.
Conflict is inherent in human society so much so that much effort
has been expended in devising ways of resolving it. With the progress
of civilization, physical fighting has been ruled out and instead,
more pacific means have been evolved.
History dating back to the Golden Age of Rome reveals that the
early judges called upon to solve private conflicts were primarily
the arbiters, persons not specially trained but in whose morality,
probity and good sense the parties in conflict reposed full trust.
Thus, in Republican Rome, arbiter and judge (judex) were synonymous.
The magistrate or praetor, after noting down the conflicting claims
of litigants, and clarifying the issues, referred them for decision
to a private person designated by the parties, by common agreement,
or selected by them from an apposite listing (the album judicium) or
else by having the arbiter chosen by lot.
In the Philippines, alternative dispute resolutions have come
about to address the perennial problem of court delays.
II. CAUSES OF COURT DELAYS
As far back as in 1967, a survey disclosed the problem of judicial
delay in the Philippines as due to such factors as the misuse of the
due process and the abuse of legal technicalities; the intervention
of political pressure in court cases; the sheer weight of court
litigations arising from development and growth; the dilatory tactics
of lawyers; and neglect and laxity on the part of judges.
We add to the list the matter of court vacancies which Associate
Justice Artemio Panganiban of the Supreme Court acknowledged in a
speech delivered during the 2005 anniversary celebration of Bantay
Katarungan to be the major cause of court delay. There are no
less than 739 vacancies out of 2,153 judicial positions in the
Philippines. This means that more than one third of the judicial
courts are vacant, or a vacancy rate of 34.3%.
III. LEGAL BASIS OF ALTERNATIVE DISPUTE RESOLUTION
o remedy the sad state of long-drawn-out court litigations, the
1987 Constitution mandates the Supreme Court to promulgate rules that
shall provide a simplified and inexpensive procedure for the
speedy disposition of cases. Pursuant to the constitutional
provision, the Supreme Court issued S.C. Circulars, Memoranda and
Administrative Orders of 2001 making mediation as mandatory in
certain types of civil cases. The 1997 Rules of Civil Procedure
requires the courts to consider the possibility of an amicable
settlement or of a submission to alternative modes of resolution.
On 19 July 1953, the Philippine Congress enacted RA 876 otherwise
known as the Arbitration Law which authorized the making of
arbitration and submission agreements and provided for the
appointment of arbitrators and the procedure for the arbitration in
On 2 April 2004, Congress enacted RA 9285 or the Alternative
Dispute Resolution Act (ADR Law) of 2004 which declares that it is a
policy of the State to encourage and actively promote the use of
Alternative Dispute Resolution systems as an important means to
achieve speedy and impartial justice and declog court dockets.
IV. FORMS OF ALTERNATIVE DISPUTE RESOLUTIONS
What is Alternative Dispute Resolution? It is defined as any
process or procedure used to resolve a dispute or controversy, other
than by adjudication of a presiding judge of a court or an officer of
a government agency, in which a neutral third party participates to
assist in the resolution of issues. It includes arbitration,
mediation or conciliation, mini-trial, early neutral evaluation, or
any combination thereof.
defined by ADR Law as a voluntary dispute resolution process in which
one or more arbitrators, appointed in accordance with the agreement
of the parties resolve a dispute by rendering an award. It is the
reference by mutual agreement or consent of the parties of a
controversy or dispute to selected persons for an informal hearing
and extra-judicial determination and resolution. The hearing is
usually held in private and the decision of the persons selected will
be a substitute for a court judgment. This avoids the formalities,
delay and expenses of ordinary litigation.
Mediation is a
dispute resolution procedure in which an impartial third party,
mutually chosen by the parties, acts as the referee to help the
contending parties settle their dispute. The mediator, unlike the
arbitrator, has no authority to make the parties reach an agreement.
He serves as a clarifier and facilitator without dictating
settlement. The term mediation used under ADR Law includes
defined under the ADR Law as a dispute resolution method in which the
merits of a case are argued before a panel created by agreement of
the parties comprising senior decision makers with or without the
presence of a neutral third person after which the parties seek a
D. Early neutral
evaluation is an alternative dispute resolution process whereby
parties and their lawyers are brought together early in a pre-trial
phase to present summaries of their cases and receive a non-binding
assessment by an experienced, neutral person with expertise in the
subject of the dispute.
E. Combination of
Alternative Dispute Resolution
alternative dispute resolution may be combined with the other types
of alternative dispute resolutions. The most common is the
mediation-arbitration (Med-Arb). In this kind of combination, parties
first proceed to mediation to define the dispute and settle as many
issues as possible, and then they engage in arbitration to settle
issues that remain unresolved by the mediator.
One of the oldest
forms of dispute resolution is arbitration which may be classified as
either international or domestic. International arbitration is
governed by the Model Law on International Commercial Arbitration per
Section 19 of the ADR Law, while domestic arbitration shall continue
to be governed by RA 876, as amended by the ADR Law. A highly
specialized form of domestic dispute resolution involving
construction disputes is governed by the Construction Industry
Arbitration Law, EO No. 1008. This falls within the exclusive
jurisdiction of the Construction Industry Arbitration Commission
A more popular form
of alternative dispute resolution is mediation. The ADR Law mentions
two kinds of mediation: court-annexed mediation and court-referred
mediation is defined under ADR Law as any mediation process conducted
under the auspices of the court, after such court has acquired
jurisdiction of the dispute. It is mandatory, being part of
pre-trial. On the other hand, court-referred mediation is mediation
ordered by a court to be conducted in accordance with an agreement of
the parties when an action is prematurely commenced in violation of
between court-annexed mediation and court-referred mediation is
important. The provisions of the ADR Law do not apply to
court-annexed mediation. They cover voluntary mediation only, not
court-annexed mediation or mandatory mediation. Under this law, there
must a binding agreement of the parties to mediate their dispute.
This usually results when the parties insert a clause in their
contract requiring a prior resort to mediation before the dispute may
be brought to arbitration or filed in court.
VII. WAYS OF
ENFORCEMENT OF SETTLEMENT AGREEMENTS IN MEDIATION UNDER ADR LAW
(other than Court-Annexed)
A. The parties may
deposit the settlement agreement arrived at during the mediation
process under the ADR Law with the appropriate clerk of a Regional
Trial Court of the place where one of the parties resides. Where
there is a need to enforce the settlement agreement, a petition may
be filed by any of the parties with the same court, in which case,
the court shall proceed summarily to hear the petition, in accordance
with such rules of procedure as may be promulgated by the Supreme
B. The other mode of
enforcing the settlement agreement is for the parties to agree that
the mediator shall become a sole arbitrator for the dispute and to
treat the settlement agreement as an arbitral award. This award shall
be subject to enforcement under RA 876, otherwise known as the
Arbitration Law wherein the party wishing to implement the agreement
may apply to the RTC for an order confirming an award. Once granted,
a judgment may be entered which shall have the same force and effect
in all respects as a judgment in an action; and it may be enforced as
if it had been rendered in the court in which it is entered.
ANNEXED MEDIATION UNDER SUPREME COURT GUIDELINES
A. Order of
Mediation – The trial court for civil cases with stamped-mark
Mediatable is mandated to issue an order during the pre-trial
referring the case to the Philippine Mediation Center (PMC) unit for
mediation and directing the parties to proceed immediately to the PMC
unit. The order will be personally given to the parties during the
pre-trial. There are PMC units in courthouses or near the court
premises to mediate the parties.
In Cagayan de Oro
City, the PMC unit was established on 18 October 2004. It is
heartening to note that as of January 2005, there were 376 cases
received by the Cagayan de Oro City Mediation Center and, out of
these, 154 cases were settled, and 102 cases were returned to court
either because the parties did not want to mediate or the parties
mediated but failed to reach an amicable settlement. It has only 120
Since mediation is
part of pre-trial, the trial court will impose the appropriate
sanction including but not limited to censure, reprimand, contempt
and such sanctions as are provided under the Rules of Court, in case
any or both of the parties absent himself/themselves, or for abusive
conduct during mediation proceedings.
B. Selection of
Mediator – The Supervisor of the PMC unit will assist the
parties to select a mutually acceptable mediator from the list of
available mediators. The mediator will be considered an officer of
the court. Lawyers may attend the mediation proceedings, but they
must cooperate with the mediator to reach an amicable settlement of
C. Conference –
The mediator will hold a conference with all the parties involved in
the case and will make serious attempts to settle the matter quickly.
If no settlement is
reached, the mediator may, with the consent of both parties, hold
separate caucuses with each party to enable the mediator to determine
their respective real interests in the dispute. Thereafter, another
joint conference may be held to consider various options proposed by
the parties to the mediator to resolve the dispute.
D. Submission of
Report – The mediator will submit to the trial court status
report on the progress of the proceedings at the end of the mediation
period. The mediator is mandated not to record the proceedings in any
manner, but he may take down personal notes to guide him. The PMC
will not keep a file of mediation proceedings except the report of
the mediator. This is because court-annexed mediation proceedings
like those voluntary mediation proceedings under the ADR Law are
E. Outcome of
mediation – When the mediation results in realization of all
claims of the plaintiff, a motion to dismiss may be filed in court.
If there are obligations still to be complied with, the parties may
execute a compromise agreement which will then be submitted to the
court for approval. If the court finds the compromise agreement to be
in order, judgment will be rendered in accordance therewith. If
mediation fails, the case will be returned to the court of origin per
a Certificate of Failed Mediation issued by the mediator.
IX. ADVANTAGES OF
It is effective –
In a recent pilot project conducted by PHILJA, 85% of cases
referred for court-annexed mediation had reached settlement.
Surveys conducted after mediation sessions reveal a high level of
satisfaction among disputing parties. As a result of mediation,
close to 100% comply with agreements reached in mediation.
It is faster –
Many cases reached settlement in 1-2 sessions. The enormous time
and effort expended in litigation are avoided.
It is cost-saving
– Unlike rigorous court proceedings, mediation is quick and
devoid of legal intricacies.
relationships – Mediation is a proven way to restore
relationships long torn by conflict. The process addresses
deep-rooted sources of misunderstanding which are inimical to