DFA loses arbitration case over passport deal


THE Supreme Court (SC) has junked a petition filed by the Department of Foreign Affairs (DFA) seeking to annul and set aside two procedural orders both issued by the UNCITRAL Ad Hoc Arbitral Tribunal in arbitration proceedings between the department and the BCA International Corporation.

In a full-court decision penned by Associate Justice Diosdao Peralta, the SC’s Second Division held that under Article 33 of the UNCITRAL Arbitration Rules governing the parties, “the arbitral tribunal shall apply the law designated by the parties as applicable to the substance of the dispute.”

“Failing such designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable,” the court said.

“Established in this jurisdiction is the rule that the law of the place where the contract is made governs, or lex loci contractus.”

In an Amended Build-Operate-Transfer agreement on April 5, 2002, the DFA awarded the Machine Readable Passport and Visa Project (MRP/V Project) to the BCA.

In the course of implementing the MRP/V Project, conflict arose and the DFA sought to terminate the agreement.

The BCA opposed the termination and filed a request for arbitration on April 20, 2006.

The tribunal gave the BCA time within which to file its amended statement of claims and also gave the DFA time to formally interpose its objections.

The DFA brought its case to the SC but did not get a favorable ruling there.

“Wherefore, the court resolves to dismiss the petition for failure to observe the rules on court intervention allowed by [Republic Act] 9285 . . . in the pending arbitration proceedings of the parties to this case,” the High Court said.

“It is clear that an appeal by certiorari to the Supreme Court is from a judgment or final order or resolution of the Court of Appeals and only questions of law may be raised. There have been instances when we overlooked the rule on hierarchy of courts and took cognizance of a petition for certiorari alleging grave abuse of discretion by the Regional Trial Court when it granted interim relief to a party and issued an order assailed by the petitioner, considering the transcendental importance of the issue involved therein or to better serve the ends of justice when the case is determined on the merits rather on technicality,” the SC held in its ruling dated July 19, 2017 but was released only recently.

“However, in this case, the appeal by certiorari is not from a final order of the Court of Appeals or the Regional Trial Court, but from an interlocutory order of the Arbitral Tribunal; hence, the petition must be dismissed.”


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