Arbitration of construction issues
A bruising court battle looms between DATEM Inc. and Megaworld Corp., two of the country’s leading real property developers of commercial leases and residential units.
DATEM had sued Megaworld for the collection of some P873 million in unpaid charges for its work on some of the latter’s projects.
Ahead of the trial, the court, upon DATEM’s petition, had issued a freeze order on some of Megaworld’s projects to cover the payment of DATEM’s claim if it is able to prove its case.
Megaworld had denied DATEM’s claim and said the latter was remiss in the performance of its construction contracts with it. Piqued by that suit, Megaworld threatened to sue DATEM for damages for gross negligence and breach of contract.
If the parties fail to amicably settle their dispute, the hearing of their cases may see a host of engineers, architects and other construction specialists testifying for or against each other.
The costs of engaging the services of those potential witnesses, on top of the hefty fees their respective lawyers are expected to charge, could run into millions of pesos.
It is unfortunate that the Megaworld-DATEM dispute had reached the courts. Knowing the snail pace of our judicial system, it may take years before that case can be decided with finality.
Why the two real estate giants did not avail of arbitration instead to resolve their differences is a big question mark.
In 1985, then President Ferdinand Marcos issued Executive Order (EO) No. 1008 which created the Construction Industry Arbitration Commission (CIAC) to undertake the arbitration of “… disputes arising from, or connected with contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof.”
The EO is aimed at avoiding the adverse effects of prolonged delay in the construction of vital commercial and infrastructure projects if they are mired in litigation.
The exercise of the CIAC’s authority is dependent on the contending parties agreeing in writing, either through their contract or, in a later agreement, to avail of the CIAC’s services.
It is up to the parties to decide if they want their dispute to be resolved by a single arbitrator or a panel of arbitrators, subject to the condition that they must be drawn from the list of arbitrators accredited by the CIAC.
The parties can also agree that the arbitration decision shall be final and executory or may be appealed to the Court of Appeals for review.
Going through arbitration instead of resorting to the judicial process has decided advantages. Foremost of this is the competence of the arbitrators to resolve the dispute. They are the companies’ peers in their industry.
As fellow construction, architectural or engineering professionals, the arbitrators would be familiar with the rules, practices and nuances of the construction business.
No offense meant, but when the witnesses from those fields take the witness stand, His or Her Honor may suffer a “nosebleed” in making sense of the terms, concepts and jargon that are peculiar to building construction.
At the end of the trial, when the judge has to make a decision, he or she may be obliged to discreetly consult with technically able friends on issues that may be beyond his or her legal mind to comprehend or pass upon.
Then there is the issue of the expeditious resolution of the dispute. Considering the heavy caseload of our courts, perish the thought that it can be decided in a year’s time. And if the decision is appealed to the higher courts, a final resolution in five years would be heaven sent.
A speedy resolution is more assured in the arbitration process because the arbitrators have usually only that case to decide and, with their expertise, would be able to easily make odds and ends of issues and render the proper judgment.
And most importantly, they would not need the services of expensive lawyers for that purpose. INQ
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