What cases may the Construction Industry Arbitration Committee take on?

Pursuant to the Construction Industry Arbitration Law (CIAL), the Construction Industry Arbitration Committee (CIAC) was created to encourage the expeditious settlement of disputes in the Philippine construction industry. It is under the administrative supervision of the Philippine Domestic Construction Board, whose duties include adjudicating and settling disputes on implementing public construction contracts.

The disputes that the CIAC can pass upon may relate to: (a) violation of specifications for materials and workmanship; (b) violation of terms of agreement; (c) interpretation and/or application of contractual time and delays; (d) maintenances and defects; (d) payment, default of employer or contractor, and changes in contract cost. Meanwhile, those arising from employer-employee relationships shall continue to be covered by the Philippine Labor Code.

The Supreme Court has further dwelt on the nature of the cases that the CIAC may decide in Chua v. De Castro. In this case, petitioner Karen Chua and her husband engaged respondent Jose De Castro’s services for the construction of a two-storey house. Chua and De Castro did not prepare the corresponding written contact, considering the latter’s years of experience and relationship as her mother’s first cousin.

De Castro prepared the necessary building plans, designs, and material specifications, which the couple approved, and was given by them the funds he had requested. Nevertheless, a month after the couple had moved into their house, they noticed defects such as leaking ceilings, flooding, cracks on the doors, and plumbing issues.

The couple engaged the services of another foreman to fix the defects and an engineer to inspect the house, both of whom revealed that De Castro had: (a) compromised on the work done and the materials used; and (b) deviated from the structural plans agreed upon.

The dispute was referred to the Lupong Tagapamayapa, which issued a Certificate to File Action since the parties failed to resolve their differences. Consequently, Chua filed against De Castro a complaint for rescission, breach of contract, and damages before the Regional Trial Court (RTC).

The RTC dismissed the complaint for referral to the CIAC, finding it to have exclusive jurisdiction over construction disputes pursuant to the Supreme Court Office of the Court Administrator’s (OCA) Circular No. 103-2015.

Chua moved for the RTC to reconsider this order, which the latter denied. This constrained Chua to file the instant petition for certiorari before the Supreme Court. She argued that under the CIAL, parties must agree to submit the dispute to the CIAC for voluntary arbitration before it could exercise its jurisdiction, which was not the case here.

The Supreme Court granted Chua’s petition. At the outset, it affirmed that jurisdiction over the subject matter of a dispute is conferred by law, and not by the consent or acquiescence of any or all parties, or by erroneous belief of the court or tribunal that it existed.

The CIAL, which applies in this case, states that the CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with, contracts entered into by parties involved in construction in the Philippines. This jurisdiction exists, whether the dispute arises before or after the completion of the contract, or after the abandonment or breach thereof, and whether the contracts are governmental or private in nature.

Moreover, the parties to the dispute must have agreed to submit it to voluntary arbitration. In this regard, merely incorporating an arbitration clause in a construction contract operates as the parties’ consent as required by the law, and may not be subjected to any condition or qualification.

The records of this case neither reflected that Chua and De Castro had agreed to submit their dispute to arbitration nor indicated that they had acquiesced to the same. Meanwhile, there is no arbitration clause from which such consent to arbitrate could be inferred since there was no written construction contract executed between the parties.