Second Congress of the Republic of the Philippines

Fourth Session

REPUBLIC ACT NO. 876

AN ACT TO AUTHORIZE THE MAKING OF ARBITRATION AND

SUBMISSION AGREEMENTS, TO PROVIDE FOR THE
APPOINTMENT OF ARBITRATORS AND THE PROCEDURE FOR
ARBITRATION IN CIVIL CONTROVERSIES, AND FOR OTHER
PURPOSES.

Be it enacted by the Senate and House of Representatives of the

Philippines in Congress assembled:

SECTION 1. Short Title – This Act shall be known as "The Arbitration

Law."

SECTION 2. Persons and matters subject to arbitration. – Two or more

persons or parties may submit to the arbitration of one or more
arbitrators any controversy existing between them at the time of the
submission and which may be the subject of an action, or the parties to
any contract may in such contract agree to settle by arbitration a
controversy thereafter arising between them. Such submission or
contract shall be valid, enforceable and irrevocable, save upon such
grounds as exist at law for the revocation of any contract.

Such submission or contract may include question arising out of

valuations, appraisals or other controversies which may be collateral,
incidental, precedent or subsequent to any issue between the parties.

A controversy cannot be arbitrated where one of the parties to

the controversy is an infant, or a person judicially declared to be
incompetent, unless the appropriate court having jurisdiction approve
a petition for permission to submit such controversy to arbitration
made by the general guardian or guardian ad litem of the infant or of
the incompetent.

But where a person capable of entering into a submission or

contract has knowingly entered into the same with a person incapable
of so doing, the objection on the ground of incapacity can be taken
only in behalf of the person so incapacitated.

SECTION 3. Controversies or cases not subject to the provisions of this

Act. – This Act shall not apply to controversies and to cases which are
subject to the jurisdiction of the Court of Industrial Relations or which
have been submitted to its as provided by Commonwealth Act
Numbered One hundred and three, as amended.

SECTION 4. Form of arbitration agreement. – A contract to arbitrate a

controversy thereafter arising between the parties, as well as a
submission to arbitrate an existing controversy shall be in writing and
subscribed by the party sought to be charged, or by his lawful agent.

The making of a contract or submission for arbitration described

in section two hereof, providing for arbitration of any controversy, shall
be deemed a consent of the parties to the jurisdiction of the Court of
First Instance of the province or city where any of the parties resides,
to enforce such contract or submission.

SECTION 5. Preliminary procedure. – An arbitration shall be instituted

by:

(a) In the case of a contract to arbitrate future controversies

by the service by either party upon the other of a demand for
arbitration in accordance with the contract. Such demand shall set
forth the nature of the controversy, the amount involved, if any, and
the relief sought, together with a true copy of the contract providing
for arbitration. The demand shall be served upon any party either in
person or by registered mail. In the event that the contract between
the parties provides for the appointment of a single arbitrator, the
demand shall set forth a specific time within which the parties shall
agree upon such arbitrator. If the contract between the parties
provides for the appointment of three arbitrators, one to be selected by
each party, the demand shall name the arbitrator appointed by the
party making the demand; and shall require that the party upon whom
the demand is made shall within fifteen days after receipt thereof
advise in writing the party making such demand of the name of the
person appointed by the second party; such notice shall require that
the two arbitrators so appointed must agree upon the third arbitrator
within ten days from the date of such notice.

(b) In the event that one party defaults is answering the

demand, the aggrieved party may file with the Clerk of the Court of
First Instance having jurisdiction over the parties, a copy of the
demand for arbitration under the contract to arbitrate, with a notice
that the original demand was sent by registered mail or delivered in
person to the party against whom the claim is asserted. Such demand
shall set forth the nature of the controversy, the amount involved, if
any, and the relief sought, and shall be accompanied by a true copy of
the contract providing for arbitration.
 (c) In the case of the submission of an existing controversy by
the filing with the Clerk of the Court of First Instance having
jurisdiction, of the submission agreement, setting forth the nature of
the controversy, and the amount involved, if any. Such submission may
be filed by any party and shall be duly executed by both parties.

(d) In the event that one party neglects, fails or refuses to

arbitrate under a submission agreement, the aggrieved party shall
follow the procedure prescribed in subparagraphs (a) and (b) of this
section.

SECTION 6. Hearing by court. – A party aggrieved by the failure,

neglect or refusal of another to perform under an agreement in writing
providing for arbitration may petition the court for an order directing
that such arbitration proceed in the manner provided for in such
agreement. Five days notice in writing of the hearing of such
application shall be served either personally or by registered mail upon
the party in default. The court shall hear the parties, and upon being
satisfied that the making of the agreement or such failure to comply
therewith is not in issue, shall make an order directing the parties to
proceed to arbitration in accordance with the terms of the agreement.
If the making of the agreement or default be in issue the court shall
proceed to summarily hear such issue. If the finding be that no
agreement in writing providing for arbitration was made, or that there
is no default in the proceeding thereunder, the proceeding shall be
dismissed. If the finding be that a written provision for arbitration was
made and there is a default in proceeding thereunder, an order shall be
made summarily directing the parties to proceed with the arbitration in
accordance with the terms thereof.

The court shall decide all motions, petitions or applications filed

under the provisions of this Act, within ten days after such motions,
petitions, or applications have been heard by it.

SECTION 7. Stay of civil action. – If any suit or proceeding be brought

upon an issue arising out of an agreement providing for the arbitration
thereof, the court in which such suit or proceeding is pending, upon
being satisfied that the issue involved in such suit or proceeding is
referable to arbitration, shall stay the action or proceeding until an
arbitration has been had in accordance with the terms of the
agreement: Provided, That the applicant for the stay is not in default in
proceeding with such arbitration.

SECTION 8. Appointment of arbitrators. – If, in the contract for

arbitration or in the submission described in section two, provision is
made for a method of naming or appointing an arbitrator or arbitrators,
such method shall be followed; but if no method be provided therein
the Court of First Instance shall designate an arbitrator or arbitrators.

The Court of First Instance shall appoint an arbitrator or

arbitrators, as the case may be, in the following instances:

(a) If the parties to the contract or submission are unable to

agree upon a single arbitrator; or

(b) If an arbitrator appointed by the parties is unwilling or

unable to serve and his successor has not been appointed in the
manner in which he was appointed; or

(c) If either party to the contract fails or refuses to name his

arbitrator within fifteen days after receipt of the demand for
arbitration; or

(d) If the arbitrators appointed by each party to the contract,

or appointed by one party to the contract and by the proper Court,
shall fail to agree upon or to select the third arbitrator.

(e) The court shall, in its discretion appoint one or three

arbitrators, according to the importance of the controversy involved in
any of the preceding cases in which the agreement is silent as to the
number of arbitrators.

(f) Arbitrators appointed under this section shall either accept

or decline their appointments within seven days of the receipt of their
appointments. In case of declination or the failure of an arbitrator or
arbitrators to duly accept their appointments the parties or the court,
as the case may be, shall proceed to appoint a substitute or substitutes
for the arbitrator or arbitrators who decline or failed to accept his or
their appointments.

SECTION 9. Appointment of additional arbitrators. – Where a

submission or contract provides that two or more arbitrators therein
designated or to be thereafter appointed by the parties, may select or
appoint a person as an additional arbitrator, the selection or
appointment must be in writing. Such additional arbitrator must sit
with the original arbitrators upon the hearing.

SECTION 10. Qualification of arbitrators. – 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. No person appointed to serve
as an arbitrator shall be related by blood or marriage within the sixth
degree to either party to the controversy. No person shall serve as an
arbitrator in any proceeding if he 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.

No party shall select as an arbitrator any person to act as his

champion or to advocate his cause.

If, after appointment but before or during hearing, a person

appointed to serve as an arbitrator shall discover any circumstances
likely to create a presumption of bias, or which he believes might
disqualify him as an impartial arbitrator, the arbitrator shall
immediately disclose such information to the parties. Thereafter the
parties may agree in writing:

(a) to waive the presumptive disqualifying circumstances; or

(b) to declare the office of such arbitrator vacant. Any such

vacancy shall be filled in the same manner as the original appointment
was made.

SECTION 11. Challenge of arbitrators. – The arbitrators may be

challenged only for the reasons mentioned in the preceding section
which may have arisen after the arbitration agreement or were
unknown at the time of arbitration.

The challenge shall be made before them.

If they do not yield to the challenge, the challenging party may

renew the challenge before the Court of First Instance of the province
or city in which the challenged arbitrator, or, any of them, if there be
more than one, resides. While the challenging incident is discussed
before the court, the hearing on arbitration shall be suspended, and it
shall be continued immediately after the court has delivered an order
on the challenging incident.

SECTION 12. Procedure by arbitrators. – Subject to the terms of the

submission or contract, if any are specified therein, the arbitrators
selected as prescribed herein must, within five days after appointment
if the parties to the controversy reside within the same city or
province, or within fifteen days after appointment if the parties reside
in different provinces, set a time and place for the hearing of the
matters submitted to them, and must cause notice thereof to be given
to each of the parties. The hearing can be postponed or adjourned by
the arbitrators only by agreement of the parties; otherwise,
adjournment may be ordered by the arbitrators upon their own motion
only at the hearing and for good and sufficient cause. No adjournment
shall extend the hearing beyond the day fixed in the submission or
contract for rendering the award, unless the time so fixed is extended
by the written agreement of the parties to the submission or contract
or their attorneys, or unless the parties have continued with the
arbitration without objection to such adjournment.

The hearing may proceed in the absence of any party who, after
due notice, fails to be present at such hearing or fails to obtain an
adjournment thereof. An award shall not be made solely on the default
of a party. The arbitrators shall require the other party to submit such
evidence as they may require for making an award.

No one other than a party to said arbitration, or a person in the

regular employ of such party duly authorized in writing by said party,
or a practicing attorney-at-law, shall be permitted by the arbitrators to
represent before him or them any party to the arbitration. Any party
desiring to be represented by counsel shall notify the other party or
parties of such intention at least five days prior to the hearing.

The arbitrators shall arrange for the taking of a stenographic

record of the testimony when such a record is requested by one or
more parties, and when payment of the cost thereof is assumed by
such party or parties.

Persons having a direct interest in the controversy which is the

subject of arbitration shall have the right to attend any hearing; but
the attendance of any other person shall be at the discretion of the
arbitrators.

SECTION 13. Oath of arbitrators. – Before hearing any testimony,

arbitrators must be sworn, by any officer authorized by law to
administer an oath, faithfully and fairly to hear and examine the
matters in controversy and to make a just award according to the best
of their ability and understanding. Arbitrators shall have the power to
administer the oaths to all witnesses requiring them to tell the whole
truth and nothing but the truth in any testimony which they may give
in any arbitration hearing. This oath shall be required of every witness
before any of his testimony is heard.

SECTION 14. Subpoena and subpoena duces tecum. – Arbitrators shall

have the power to require any person to attend a hearing as a witness.
They shall have the power to subpoena witnesses and documents
when the relevancy of the testimony and the materiality thereof has
been demonstrated to the arbitrators. Arbitrators may also require the
retirement of any witness during the testimony of any other witness.
All of the arbitrators appointed in any controversy must attend all the
hearing in that matter and hear all the allegations and proofs of the
parties; but an award by the majority of them is valid unless the
concurrence of all of them is expressly required in the submission or
contract to arbitrate. The arbitrator or arbitrators shall have the power
at any time, before rendering the award, without prejudice to the rights
of any party to petition the court to take measures to safeguard and/or
conserve any matter which is the subject of the dispute in arbitration.

SECTION 15. Hearing by arbitrators. – Arbitrators may, at the

commencement of the hearing, ask both parties for brief statements of
the issue in controversy and/or an agreed statement of facts.
Thereafter the parties may offer such evidence as they desire, and
shall produce such additional evidence as the arbitrators shall require
or deem necessary to an understanding and determination of the
dispute. The arbitrators shall be the sole judge of the relevancy and
materiality of the evidence offered or produced, and shall not be bound
to conform to the Rules of Court pertaining to evidence. Arbitrators
shall receive as exhibits in evidence any document which the parties
may wish to submit, and the exhibits shall be properly identified at the
time of submission. All exhibits shall remain in the custody of the Clerk
of Court during the course of the arbitration and shall be returned to
the parties at the time the award is made. The arbitrators may make
an ocular inspection of any matter or premises which are in dispute,
but such inspection shall be made only in the presence of all parties to
the arbitration, unless any party who shall have received notice thereof
fails to appear, in which event such inspection shall be made in the
absence of such party.

SECTION 16. Briefs. – At the close of the hearings, the arbitrators shall
specifically inquire of all parties whether they have any further proof or
witnesses to present; upon the receipt of a negative reply from all
parties, the arbitrators shall declare the hearing closed unless the
parties have signified an intention to file briefs. Then the hearing shall
be close by the arbitrators after the receipt of briefs and/or reply briefs.
Definite time limit for the filing of such briefs must be fixed by the
arbitrators at the close of the hearing. Briefs may be filed by the
parties within fifteen days after the close of the oral hearings; the reply
briefs, if any, shall be filed within five days following such fifteen-day
period.

SECTION 17. Reopening of hearing. – The hearing may be reopened by

the arbitrators on their own motion or upon the request of any party,
upon good cause, shown at any time before the award is rendered.
When hearings are thus reopened the effective date for the closing of
the hearings shall be the date of the closing of the reopened hearing.
SECTION 18. Proceeding in lieu of hearing. – The parties to a
submission or contract to arbitrate may, by written agreement, submit
their dispute to arbitration by other than oral hearing. The parties may
submit an agreed statement of facts. They may also submit their
respective contentions to the duly appointed arbitrators in writing; this
shall include a statement of facts, together with all documentary proof.
Parties may also submit a written argument. Each party shall provide
all other parties to the dispute with a copy of all statements and
documents submitted to the arbitrators. Each party shall have an
opportunity to reply in writing to any other party's statements and
proofs; but if such party fails to do so within seven days after receipt of
such statements and proofs, he shall be deemed to have waived his
right to reply. Upon the delivery to the arbitrators of all statements and
documents, together with any reply statements, the arbitrators shall
declare the proceeding in lieu of hearing closed.

SECTION 19. Time for rendering award. – Unless the parties shall have
stipulated by written agreement the time within which the arbitrators
must render their award, the written award of the arbitrators shall be
rendered within thirty days after the closing of the hearings or if the
oral hearings shall have been waived, within thirty days after the
arbitrators shall have declared such proceedings in lieu of hearing
closed. This period may be extended by mutual consent of the parties.

SECTION 20. Form and contents of award. – The award must be made
in writing and signed and acknowledged by a majority of the
arbitrators, if more than one; and by the sole arbitrator, if there is only
one. Each party shall be furnished with a copy of the award. The
arbitrators in their award may grant any remedy or relief which they
deem just and equitable and within the scope of the agreement of the
parties, which shall include, but not be limited to, the specific
performance of a contract.

In the event that the parties to an arbitration have, during the

course of such arbitration, settled their dispute, they may request of
the arbitrators that such settlement be embodied in an award which
shall be signed by the arbitrators. No arbitrator shall act as a mediator
in any proceeding in which he is acting as arbitrator; and all
negotiations towards settlement of the dispute must take place without
the presence of the arbitrators.

The arbitrators shall have the power to decide only those matters
which have been submitted to them. The terms of the award shall be
confined to such disputes.
 The arbitrators shall have the power to assess in their award the
expenses of any party against another party, when such assessment
shall be deemed necessary.

SECTION 21. Fees of arbitration. – The fees of the arbitrators shall be

fifty pesos per day unless the parties agree otherwise in writing prior to
the arbitration.

SECTION 22. Arbitration deemed a special proceeding. – Arbitration

under a contract or submission shall be deemed a special proceeding,
of which the court specified in the contract or submission, or if none be
specified, the Court of First Instance for the province or city in which
one of the parties resides or is doing business, or in which the
arbitration was held, shall have jurisdiction. Any application to the
court, or a judge thereof, hereunder shall be made in the manner
provided for the making and hearing of motions, except as-otherwise
herein expressly provided.

SECTION 23. Confirmation of award. – At any time within one month

after the award is made, any party to the controversy which was
arbitrated may apply to the court having jurisdiction, as provided in
section twenty-eight, for an order confirming the award; and thereupon
the court must grant such order unless the award is vacated, modified
or corrected, as prescribed herein. Notice of such motion must be
served upon the adverse party or his attorney as prescribed by law for
the service of such notice upon an attorney in action in the same court.

SECTION 24. Grounds for vacating award. – In anyone of the following

cases, the court must make an order vacating the award upon the
petition of any party to the controversy when such party proves
affirmatively that in the arbitration proceedings;

(a) That award was procured by corruption, fraud, or other

undue means; or

(b) That there was evident partiality or corruption in the

arbitrators or any of them; or

(c) That the arbitrators were guilty of misconduct in refusing

to postpone the hearing upon sufficient cause shown, or in refusing to
hear evidence pertinent and material to the controversy; that one or
more of the arbitrators was disqualified to act as such under section
nine hereof, and willfully refrained from disclosing such disqualification
or of any other misbehavior by which the rights of any party have been
materially prejudiced; or
 (d) That the arbitrators exceeded their powers, or so
imperfectly executed them, that a mutual, final and definite award
upon the subject matter submitted to them was not made.

Where an award is vacated, the court, in its discretion, may

direct a new hearing either before the same arbitrators or before a new
arbitrator or arbitrators to be chosen in the manner provided in the
submission or contract for the selection of the original arbitrator or
arbitrators, and any provision limiting the time in which the arbitrators
may make a decision shall be deemed applicable to the new arbitration
and to commence from the date of the court's order.

When the court vacates an award, costs, not exceeding fifty

pesos and disbursements may be awarded to the prevailing party and
the payment thereof may be enforced in like manner as the payment
of costs upon the motion in an action.

SECTION 25. Grounds for modifying or correcting award. – In anyone of

the following cases, the court must make an order modifying or
correcting the award, upon the application of any party to the
controversy which was arbitrated:

(a) Where there was an evident miscalculation of figures, or an

evident mistake in the description of any person, things or property
referred to in the award; or

(b) Where the arbitrators have awarded upon a matter not

submitted to them, not affecting the merits of the decision upon the
matter submitted; or

(c) Where the award is imperfect in a matter of form not

affecting the merits of the controversy, and if it had been a
commissioner's report, the defect could have been amended or
disregarded by the court.

The order may modify and correct the award so as to effect the
intent thereof and promote justice between the parties.

SECTION 26. Motion to vacate, modify or correct award: when made. –

Notice of a motion to vacate, modify or correct the award must be
served upon the adverse party or his counsel within thirty days after
the award is filed or delivered, as prescribed by law for the service
upon an attorney in an action.

SECTION 27. Judgment. – Upon the granting of an order confirming,

modifying or correcting an award, judgment may be entered in
conformity therewith in the court wherein said application was filed.
Costs of the application and the proceedings subsequent thereto may
be awarded by the court in its discretion. If awarded, the amount
thereof must be included in the judgment.

SECTION 28. Papers to accompany motion to confirm, modify, correct,

or vacate, award. – The party moving for an order confirming,
modifying, correcting, or vacating an award, shall at the time that such
motion is filed with the court for the entry of judgment thereon also file
the following papers with the Clerk of Court;

(a) The submission, or contract to arbitrate; the appointment

of the arbitrator or arbitrators; and each written extension of the time,
if any, within which to make the award.

(b) A verified copy of the award.

(c) Each notice, affidavit, or other paper used upon the

application to confirm, modify, correct or vacate such award, and a
copy of each order of the court upon such application.

The judgment shall be docketed as if it were rendered in an

action.

The judgment so entered shall have the same force and effect in
all respects, as, and be subject to all the provisions relating to, a
judgment in an action; and it may be enforced as if it had been
rendered in the court in which it is entered.

SECTION 29. Appeals. – An appeal may be taken from an order made in

a proceeding under this Act, or from judgment entered upon an award
through certiorari proceedings, but such appeals shall be limited to
questions of law. The proceedings upon such an appeal, including the
judgment thereon shall be governed by the Rules of Court in so far as
they are applicable.

SECTION 30. Death of party. - Where a party dies after making a

submission or a contract to arbitrate as prescribed in this Act, the
proceedings may be begun or continued upon the application of, or
notice to, his executor or administrator, or temporary administrator of
his estate. In any such case, the court may issue an order extending
the time within which notice of a motion to confirm, vacate, modify or
correct an award must be served. Upon confirming an award, where a
party has died since it was filed or delivered, the court must enter
judgment in the name of the original party; and the proceedings
thereupon are the same as where a party dies after a verdict.

SECTION 31. Repealing clause. – The provisions of chapters one and

two, Title XIV, Book IV, of the Civil Code shall remain in force. All other
laws and parts of laws inconsistent with this Act are hereby repealed. If
any provision of this Act shall be held invalid the remainder shall not be
affected thereby.

SECTION 32. Effectivity. – This Act shall take effect six months after its
approval.

Approved, June 19, 1953.