This case discusses whether a foreign corporation not licensed to do business in the Philippines has the legal capacity to sue under the Alternative Dispute Resolution Act of 2004. The Supreme Court ruled that the ADR Act, being a special law for arbitration, prevails over the general Corporation Code. Thus, Tuna Processing Inc., though a foreign corporation, could seek recognition and enforcement of a foreign arbitral award against Philippine Kingford Inc. in accordance with the provisions of the ADR Act. The Court said allowing technical objections like lack of capacity would undermine arbitration and the parties' agreement to arbitrate disputes.
This case discusses whether a foreign corporation not licensed to do business in the Philippines has the legal capacity to sue under the Alternative Dispute Resolution Act of 2004. The Supreme Court ruled that the ADR Act, being a special law for arbitration, prevails over the general Corporation Code. Thus, Tuna Processing Inc., though a foreign corporation, could seek recognition and enforcement of a foreign arbitral award against Philippine Kingford Inc. in accordance with the provisions of the ADR Act. The Court said allowing technical objections like lack of capacity would undermine arbitration and the parties' agreement to arbitrate disputes.
This case discusses whether a foreign corporation not licensed to do business in the Philippines has the legal capacity to sue under the Alternative Dispute Resolution Act of 2004. The Supreme Court ruled that the ADR Act, being a special law for arbitration, prevails over the general Corporation Code. Thus, Tuna Processing Inc., though a foreign corporation, could seek recognition and enforcement of a foreign arbitral award against Philippine Kingford Inc. in accordance with the provisions of the ADR Act. The Court said allowing technical objections like lack of capacity would undermine arbitration and the parties' agreement to arbitrate disputes.
This case discusses whether a foreign corporation not licensed to do business in the Philippines has the legal capacity to sue under the Alternative Dispute Resolution Act of 2004. The Supreme Court ruled that the ADR Act, being a special law for arbitration, prevails over the general Corporation Code. Thus, Tuna Processing Inc., though a foreign corporation, could seek recognition and enforcement of a foreign arbitral award against Philippine Kingford Inc. in accordance with the provisions of the ADR Act. The Court said allowing technical objections like lack of capacity would undermine arbitration and the parties' agreement to arbitrate disputes.
TUNA PROCESSING, INC., Petitioner, vs. PHILIPPINE KINGFORD, INC., Respondent.
FACTS:
On 14 January 2003, Kanemitsu Yamaoka (hereinafter referred to as
the “licensor”), co-patentee of U.S. Patent No. 5,484,619, Philippine Letters Patent No. 31138, and Indonesian Patent No. ID0003911 (collectively referred to as the “Yamaoka Patent”), and five (5) Philippine tuna processors, namely, Angel Seafood Corporation, East Asia Fish Co., Inc., Mommy Gina Tuna Resources, Santa Cruz Seafoods, Inc., and respondent Kingford (collectively referred to as the “sponsors”/”licensees”) entered into a Memorandum of Agreement (MOA). The parties likewise executed a Supplemental Memorandum of Agreement dated 15 January 2003 and an Agreement to Amend Memorandum of Agreement dated 14 July 2003.
Due to a series of events not mentioned in the petition, the licensees,
including respondent Kingford, withdrew from petitioner TPI and correspondingly reneged on their obligations. Petitioner submitted the dispute for arbitration before the International Centre for Dispute Resolution in the State of California, United States and won the case against respondent.
To enforce the award, petitioner TPI filed on 10 October 2007 a
Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral Award before the RTC of Makati City. The petition was raffled to Branch 150 presided by Judge Elmo M. Alameda. At Branch 150, respondent Kingford filed a Motion to Dismiss.16 After the court denied the motion for lack of merit, respondent sought for the inhibition of Judge Alameda and moved for the reconsideration of the order denying the motion. Judge Alameda inhibited himself notwithstanding “[t]he unfounded allegations and unsubstantiated assertions in the motion.” Judge Cedrick O. Ruiz of Branch 61, to which the case was re-raffled, in turn, granted respondent’s Motion for Reconsideration and dismissed the petition on the ground that the petitioner lacked legal capacity to sue in the Philippines.
Petitioner TPI now seeks to nullify, in this instant Petition for Review on Certiorari under Rule 45, the order of the trial court dismissing its Petition for Confirmation, Recognition, and Enforcement of Foreign Arbitral Award.
ISSUE:
Whether or not a foreign corporation not licensed to do business in
the Philippines have the legal capacity to sue under the provisions of the Alternative Dispute Resolution Act of 2004?
RULING:
Yes.
In the present case, enforcement has been effectively refused on a ground
not found in the the [Alternative Dispute Resolution Act of 2004], New York Convention, or Model Law.. It is for this reason that TPI has brought this matter before this most Honorable Court, as it [i]s imperative to clarify whether the Philippines’ international obligations and State policy to strengthen arbitration as a means of dispute resolution may be defeated by misplaced technical considerations not found in the relevant laws. In several cases, this Court had the occasion to discuss the nature and applicability of the Corporation Code of the Philippines, a general law, viz- a-viz other special laws. Thus, in Koruga v. Arcenas, Jr., this Court rejected the application of the Corporation Code and applied the New Central Bank Act. It ratiocinated: Koruga’s invocation of the provisions of the Corporation Code is misplaced. In an earlier case with similar antecedents, we ruled that:
“The Corporation Code, however, is a general law applying to all types of
corporations, while the New Central Bank Act regulates specifically banks and other financial institutions, including the dissolution and liquidation thereof. As between a general and special law, the latter shall prevail – GENERALIA SPECIALIBUS NON DEROGANT.” (Emphasis supplied)
Without doubt, the Corporation Code is the general law providing for the formation, organization and regulation of private corporations. On the other hand, RA 6657 is the special law on agrarian reform. As between a general and special law, the latter shall prevail— generalia specialibus non derogant.
Following the same principle, the Alternative Dispute Resolution Act of
2004 shall apply in this case as the Act, as its title –An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to to Establish the Office for Alternative Dispute Resolution, and for Other Purposes – would suggest, is a law especially enacted “to actively promote party autonomy in the resolution of disputes or the freedom of the party to make their own arrangements to resolve their disputes.” It specifically provides exclusive grounds available to the party opposing an application for recognition and enforcement of the arbitral award. Indeed, it is in the best interest of justice that in the enforecement of a foreign arbitral award, we deny availment by the losing party of the rule that bars foreign corporations not licensed to do business in the Philippines from maintaining a suit in our courts. When a party enters into a contract containing a foreign arbitration clause and, as in this case, in fact submits itself to arbitration, it becomes bound by the contract, by the arbitration and by the result of arbitration, conceding thereby the capacity of the other party to enter into the contract, participate in the arbitration and cause the implementation of the result. Although not on all fours with the instant case, also worthy to consider is the wisdom of then Associate Justice Flerida Ruth P. Romero in her Dissenting Opinion in Asset Privatization Trust v. Court of Appeals, to wit:
xxx Arbitration, as an alternative mode of settlement, is gaining adherents
in legal and judicial circles here and abroad. If its tested mechanism can simply be ignored by an aggrieved party, one who, it must be stressed, voluntarily and actively participated in the arbitration proceedings from the very beginning, it will destroy the very essence of mutuality inherent in consensual contracts.
Clearly, on the matter of capacity to sue, a foreign arbitral award should
be respected not because it is favored over domestic laws and procedures, but because Republic Act No. 9285 has certainly erased any conflict of law question.
Finally, even assuming, only for the sake of argument, that the court a quo correctly observed that the Model Law, not the New York Convention, governs the subject arbitral award, petitioner may still seek recognition and enforcement of the award in Philippine court, since the Model Law prescribes substantially identical exclusive grounds for refusing recognition or enforcement. Premises considered, petitioner TPI, although not licensed to do business in the Philippines, may seek recognition and enforcement of the foreign arbitral award in accordance with the provisions of the Alternative Dispute Resolution Act of 2004.
*Case Digest by Mary Tweetie Antonette G. Semprun, JD – IV, Andres
Bonifacio College, SY 2019 – 2020 Masyado mahaba kaya kinuha ko na ito
