FIRST DIVISION

[G.R. No. 212734. December 5, 2018.]

MABUHAY HOLDINGS
CORPORATION, petitioner, vs. SEMBCORP LOGISTICS
LIMITED, respondent.

DECISION

TIJAM, J :
p

This is an appeal from the Decision 1 dated November 19, 2013 and the
Resolution 2 dated June 3, 2014 of the Court of Appeals (CA) in CA-G.R. CV
No. 92296, reversing and setting aside the Decision of the Regional Trial Court
(RTC) 3 of Makati City, Branch 149, in SP Proc. No. M-6064.

Facts of the Case

Petitioner Mabuhay Holdings Corporation (Mabuhay) and Infrastructure

Development & Holdings, Inc. (IDHI) are corporations duly organized and
existing under the Philippine Laws. 4
Respondent Sembcorp Logistics Limited (Sembcorp), formerly known as
Sembawang Maritime Limited, is a company incorporated in the Republic of
Singapore.5
On January 23, 1996, Mabuhay and IDHI incorporated Water Jet
Shipping Corporation (WJSC) in the Philippines to engage in the venture of
carrying passengers on a common carriage by inter-island fast ferry. On
February 5, 1996, they also incorporated Water Jet Netherlands Antilles, N.V.
(WJNA) in Curasao, Netherlands. 6Their respective shareholding percentage
are as follows: 7
WJSC WJNA
Mabuhay 70% 70%
IDHI 30% 30%
On September 16, 1996, Mabuhay, IDHI, and Sembcorp entered into a
Shareholders' Agreement 8 (Agreement) setting out the terms and conditions
governing their relationship in connection with a planned business expansion
of WJSC and WJNA. Sembcorp decided to invest in the said corporations. As
a result of Sembcorp's acquisition of shares, Mabuhay and IDHI's shareholding
percentage in the said corporations were reduced, as follows: 9
WJSC WJNA
Mabuhay 45.5% 45.5%
IDHI 19.5% 19.5%
Sembcorp 35.0% 35.0%
Pursuant to Article 13 of the Agreement, Mabuhay and IDHI voluntarily
agreed to jointly guarantee that Sembcorp would receive a minimum accounting
return of US$929,875.50 (Guaranteed Return) at the end of the 24th month
following the full disbursement of the Sembcorp's equity investment in WJNA
and WJSC. They further agreed that the Guaranteed Return shall be paid three
(3) months from the completion of the special audits of WJSC and WJNA as
per Article 13.3 of the Agreement. 10
The Agreement included an arbitration clause, viz.:
Article XIX. APPLICABLE LAW; ARBITRATION
19.1 This Agreement and the validity and performance thereof
shall be governed by the laws of the Republic of the Philippines.
19.2 Any dispute, controversy or claim arising out of or relating to
this Agreement, or a breach thereof, other than intra-corporate
controversies, shall be finally settled by arbitration in accordance with
the rules of conciliation and arbitration of the International Chamber of
Commerce by one arbitrator with expertise in the matter at issue
appointed in accordance with said rules. The arbitration proceeding
including the rendering of the award shall take place in Singapore and
shall be conducted in the English Language. This arbitration shall
survive termination of this Agreement. Judgment upon the award
rendered may be entered in any court having jurisdiction or application
may be made to such court for a judicial acceptance of the award and
an order of enforcement, as the case may be. 11
On December 6, 1996, Sembcorp effected full payment of its equity
investment. Special audits of WJNA and WJSC were then carried out and
completed on January 8, 1999. Said audits revealed that WJSC and WJNA
both incurred losses. 12
On November 26, 1999, Sembcorp requested for the payment of its
Guaranteed Return from Mabuhay and IDHI. Mabuhay admitted its liability but
asserted that since the obligation is joint, it is only liable for fifty percent (50%)
of the claim or US$464,937.75. 13
On February 24, 2000, Sembcorp sent a Final Demand to Mabuhay to
pay the Guaranteed Return. Mabuhay requested for three (3) months to raise
the necessary funds but still failed to pay any amount after the lapse of the said
period. 14
On December 4, 2000, Sembcorp filed a Request for Arbitration before
the International Court of Arbitration of the International Chamber of Commerce
(ICC) in accordance with the Agreement and sought the following reliefs:
(1) payment of the sum of US$929,875.50;
(2) alternatively, damages;
(3) interest on the above sum at such rate as the Arbitral Tribunal deems
fit and just;
(4) cost of the arbitration; and
(5) Such further and/or other relief as the Arbitral Tribunal deems fit and
just. 15
On April 20, 2004, a Final Award 16 was rendered by Dr. Anan Chantara-
Opakorn (Dr. Chantara-Opakorn), the Sole Arbitrator appointed by the ICC. The
dispositive portion of the award reads:
The Sole Arbitrator hereby decides that the Sole Arbitrator has
jurisdiction over the parties' dispute and directs [Mabuhay] to make the
following payments to [Sembcorp]:
1. Half of the Guaranteed Return or an amount of US$464,937.75
(Four Hundred Sixty-Four Thousand Nine Hundred Thirty-Seven and
Point Seventy-Five US Dollars);
2. Interest at the rate of 12% per annum on the said amount of
US$464,937.75 calculated from the date of this Final Award until the
said amount of US$464,937.75 is actually and completely paid by
[Mabuhay] to [Sembcorp]; and
3. A reimbursement of half of the costs of arbitration fixed by the
ICC Court at US$57,000 or the aggregate half of which amount to
US$28,500 together with an interest at the rate of 12% per annum
calculated from the date of this Final Award until the said amount is
actually and completely paid by [Mabuhay] to [Sembcorp]. 17
Consequently, on April 14, 2005, Sembcorp filed a Petition for
Recognition and Enforcement of a Foreign Arbitral Award 18 before the RTC of
Makati City, Branch 149. 19
Mabuhay filed an Opposition citing the following grounds for non-
enforcement under Article V of the 1958 Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York Convention): (1) the award
deals with a conflict not falling within the terms of the submission to arbitration;
(2) the composition of the arbitral authority was not in accordance with the
agreement of the parties; and (3) recognition or enforcement of the award would
be contrary to the public policy of the Philippines. 20
Mabuhay argued that the dispute is an intra-corporate controversy,
hence, excluded from the scope of the arbitration clause in the Agreement. It
alleged that on March 13, 1997, Sembcorp became the controlling stockholder
of IDHI by acquiring substantial shares of stocks through its nominee, Mr. Pablo
N. Sare (Sare). Mabuhay thus claimed that it has already been released from
the joint obligation with IDHI as Sembcorp assumed the risk of loss when it
acquired absolute ownership over the aforesaid shares. Moreover, Mabuhay
argued that the appointment of Dr. Chantara-Opakorn was not in accordance
with the arbitral clause as he did not have the expertise in the matter at issue,
which involved application of Philippine law. Finally, Mabuhay argued that the
imposition of twelve percent (12%) interest from the date of the Final Award
was contrary to the Philippine law and jurisprudence. 21

Ruling of the RTC

In a Decision 22 dated May 23, 2008, the RTC dismissed the petition and
ruled that the Final Award could not be enforced.
The RTC ruled that the "simple contractual payment obligation" of
Mabuhay and IDHI to Sembcorp had been rescinded and modified by the
merger or confusion of the person of IDHI into the person of Sembcorp. As a
result, said obligation was converted into an intra-corporate matter. 23
The RTC also ruled on the issue of the lack of expertise of the Sole
Arbitrator. Thus, the dispositive portion of its Decision reads:
WHEREFORE, premises considered, this court finds in favor of
the defendant Mabuhay Holdings Corporation, hence it hereby
DISMISSED the petition for the recognition and enforcement of the
subject Arbitral Award for the simple reason that it was issued in violation
of the agreement. Moreover, this court cannot recognize the Arbitral
Award because it was not the work of an expert as required under the
agreement. Finally, the payment obligation in interest of 12% per annum
on the US Dollar Amounts ($464,937.75 and $28,500) as ordered by the
Sole Arbitrator is contrary to law and existing jurisprudence, hence void.
Thus, it cannot be enforced by this Court.
Cost de oficio.
SO ORDERED. 24
Aggrieved, Sembcorp appealed to the CA via a Notice of Appeal under
Rule 41 of the Rules of Court. 25
 Ruling of the CA

On November 19, 2013, the CA promulgated its Decision 26 reversing

and setting aside the RTC Decision.
The CA noted that the Final Award already settled the factual issue on
whether Sembcorp acquired the adverted shares of stock in IDHI. Thus, RTC's
contrary findings constituted an attack on the merits of the Final Award. In sum,
the CA held that the court shall not disturb the arbitral tribunal's determination
of facts and/or interpretation of the law. It recognized the Final Award and
remanded the case to the RTC for proper execution. 27
Undaunted, Mabuhay moved for the reconsideration of the CA Decision
but the same was denied in a Resolution 28 dated June 3, 2014.
Hence, this petition.

Issue

The core issue for resolution is whether the RTC correctly refused to
enforce the Final Award. Stated differently, was Mabuhay able to establish a
ground for refusing the enforcement of the Final Award under our applicable
laws and jurisprudence on arbitration?

Our Ruling

We deny the petition.

I. Governing Laws
An assiduous analysis of the present case requires a prefatory
determination of the rules and other legal authorities that would govern the
subject arbitration proceedings and award.
The arbitration proceedings between the parties herein were conducted
in Singapore and the resulting Final Award was also rendered therein. As such,
the Final Award is a "foreign arbitral award" or an award made in a country other
than the Philippines. 29
The Philippines is among the first signatories of the 1958 Convention on
the Recognition and Enforcement of Foreign Arbitral Awards (New York
Convention) and acceded to the same as early as 1967. 30 Singapore, on the
other hand, became a Contracting State in 1986. 31 The New York
Convention aims to provide common legislative standards for the recognition of
arbitration agreements and court recognition and enforcement of foreign and
non-domestic arbitral awards. Thus, the New York Convention primarily
governs the recognition and enforcement of foreign arbitral awards by our
courts. 32
In addition, as a member of the United Nations Commission in
International Trade Law (UNCITRAL), the Philippines also adopted the
UNCITRAL Model Law 33(Model Law) as the governing law on international
commercial arbitrations. Hence, when the Congress enacted Republic Act No.
9285 or the Alternative Dispute Resolution Act of 2004 34 (ADR Act), it
incorporated the Model Law in its entirety.
Sections 19 and 42 of the ADR Act expressly provided for the
applicability of the New York Convention and the Model Law in our
jurisdiction, viz.:
SEC. 19. Adoption of the Model Law on International
Commercial Arbitration. — International commercial arbitration shall
be governed by the Model Law on International Commercial Arbitration
(the "Model Law") adopted by the United Nations Commission on
International Trade Law on June 21, 1985 (United Nations Document
A/40/17) and recommended approved on December 11, 1985, copy of
which is hereto attached as Appendix "A".
xxx xxx xxx
SEC. 42. Application of the New York Convention. — The
New York Convention shall govern the recognition and
enforcement of arbitral awards covered by the said Convention.
The recognition and enforcement of such arbitral awards shall be
filled (sic) with regional trial court in accordance with the rules of
procedure to be promulgated by the Supreme Court. Said
procedural rules shall provide that the party relying on the award or
applying for its enforcement shall file with the court the original or
authenticated copy of the award and the arbitration agreement. If the
award or agreement is not made in any of the official languages, the
party shall supply a duly certified translation thereof into any of such
languages.
The applicant shall establish that the country in which foreign
arbitration award was made is a party to the New York Convention.
xxx xxx xxx (Emphasis ours)
Five years after the enactment of the ADR Act, the Department of Justice
issued the ADR Act's Implementing Rules and Regulations (IRR), 35 and the
Supreme Court issued the Special Rules of Court on Alternative Dispute
Resolution 36 (Special ADR Rules). These two rules, in addition to the ADR
Act incorporating the New York Convention and the Model Law, are our
arbitration laws.
 In addition to our arbitration laws, our courts, in recognizing or enforcing
a foreign arbitral award, shall also take into consideration the laws applied by
the arbitral tribunal. These may comprise the substantive law of the contract
and the procedural rules or the rules governing the conduct of arbitration
proceedings.
As agreed upon by the parties herein under the arbitral clause in their
Agreement, the substantive law of the contract is the Philippine law and the
procedural rules are the ICC Rules. During the filing of the request for
Arbitration, the ICC Rules in effect was the ICC Rules of Arbitration
1998. 37 Considering that the essence of arbitration is party autonomy, the
Court shall refer to the said Rules for purposes of examining the procedural
infirmities raised by the parties to the arbitration.
II. Jurisdiction
Mabuhay argues that the CA seriously erred in not dismissing outright
the appeal of Sembcorp as it had no jurisdiction to act on the appeal. Mabuhay's
argument hinges on Rule 19.12 of the Special ADR Rules, as follows:
Rule 19.12. Appeal to the Court of Appeals. — An appeal to the
Court of Appeals through a petition for review under this Special Rule
shall only be allowed from the following final orders of the Regional Trial
Court:
xxx xxx xxx
k. Refusing recognition and/or enforcement of a foreign arbitral
award; (Emphasis supplied)
xxx xxx xxx
Mabuhay thus contends that filing a petition for review and not a notice
of appeal is the proper remedy to contest the RTC's refusal to enforce the Final
Award.
The Court notes, however, that the Special ADR Rules took effect in
2009. Sembcorp's notice of appeal was filed only in 2008. The ADR Act, which
was already in effect at that time, did not specify the proper remedy of appeal
from the RTC to the CA. It merely provides that "a decision of the regional trial
court confirming, vacating, setting aside, modifying or correcting an arbitral
award may be appealed to the CA in accordance with the rules of procedure to
be promulgated by the Supreme Court." 38
The Special ADR Rules shall retroactively apply to all pending cases
provided that no vested rights are impaired or prejudiced. 39 In this case,
Sembcorp filed a notice of appeal in accordance with Section 2 of Rule 41 40 as
it is the only applicable rule existing at that time. Sembcorp had a vested right
to due process in relying on the said rule. Consequently, the CA had jurisdiction
to act on Sembcorp's appeal.
We now discuss the Court's jurisdiction to entertain the instant petition.
The Court's review of a CA Decision is discretionary and limited to specific
grounds provided under the Special ADR Rules. Thus:
Rule 19.36. Review discretionary. — A review by the Supreme
Court is not a matter of right, but of sound judicial discretion, which will
be granted only for serious and compelling reasons resulting in
grave prejudice to the aggrieved party. The following, while neither
controlling nor fully measuring the court's discretion, indicate the serious
and compelling, and necessarily, restrictive nature of the grounds that
will warrant the exercise of the Supreme Court's discretionary powers,
when the Court of Appeals:
a. Failed to apply the applicable standard or test for
judicial review prescribed in these Special ADR Rules
in arriving at its decision resulting in substantial
prejudice to the aggrieved party;
b. Erred in upholding a final order or decision despite the
lack of jurisdiction of the court that rendered such final
order or decision;
c. Failed to apply any provision, principle, policy or rule
contained in these Special ADR Rules resulting in
substantial prejudice to the aggrieved party; and
d. Committed an error so egregious and harmful to a party
as to amount to an undeniable excess of jurisdiction.
The mere fact that the petitioner disagrees with the Court of
Appeals' determination of questions of fact, of law or both questions of
fact and law, shall not warrant the exercise of the Supreme Court's
discretionary power. The error imputed to the Court of Appeals must be
grounded upon any of the above prescribed grounds for review or be
closely analogous thereto.
A mere general allegation that the Court of Appeals has
committed serious and substantial error or that it has acted with grave
abuse of discretion resulting in substantial prejudice to the petitioner
without indicating with specificity the nature of such error or abuse of
discretion and the serious prejudice suffered by the petitioner on account
thereof, shall constitute sufficient ground for the Supreme Court to
dismiss outright the petition. (Emphasis ours)
In relation to the applicable standard or test for judicial review by the CA
in arriving at its decision, the Special ADR Rules further provide:
Rule 19.20. Due course. — If upon the filing of a comment or
such other pleading or documents as may be required or allowed by the
 Court of Appeals or upon the expiration of the period for the filing thereof,
and on the basis of the petition or the records, the Court of Appeals
finds prima facie that the Regional Trial Court has committed an
error that would warrant reversal or modification of the judgment,
final order, or resolution sought to be reviewed, it may give due course
to the petition; otherwise, it shall dismiss the same.
xxx xxx xxx
Rule 19.24. Subject of appeal restricted in certain instance. — If
the decision of the Regional Trial Court refusing to recognize and/or
enforce, vacating and/or setting aside an arbitral award is premised on
a finding of fact, the Court of Appeals may inquire only into such fact
to determine the existence or non-existence of the specific ground
under the arbitration laws of the Philippines relied upon by the
Regional Trial Court to refuse to recognize and/or enforce, vacate
and/or set aside an award. Any such inquiry into a question of fact shall
not be resorted to for the purpose of substituting the court's judgment for
that of the arbitral tribunal as regards the latter's ruling on the merits of
the controversy. (Emphasis ours)
Here, Mabuhay did not specifically raise any of the grounds under Rule
19.36 above in its petition before this Court. Nonetheless, considering the
dearth of jurisprudence on enforcement of foreign arbitral awards and the fact
that the CA reversed the RTC decision, the Court exercises its discretion to
review the CA decision solely for purposes of determining whether the CA
applied the aforecited standard of judicial review.
III. Grounds for Refusing Enforcement or Recognition
We now delve into the core of the issue — whether there is a ground for
the RTC to refuse recognition and enforcement of the Final Award in favor of
Sembcorp.
Our jurisdiction adopts a policy in favor of arbitration. 41 The ADR Act and
the Special ADR Rules both declare as a policy that the State shall encourage
and actively promote the use of alternative dispute resolution, such as
arbitration, as an important means to achieve speedy and impartial justice and
declog court dockets. 42 This pro-arbitration policy is further evidenced by the
rule on presumption in favor of enforcement of a foreign arbitral award under
the Special ADR Rules, viz.:
Rule 13.11. Court action. — It is presumed that a foreign
arbitral award was made and released in due course of arbitration
and is subject to enforcement by the court.
The court shall recognize and enforce a foreign arbitral award
unless a ground to refuse recognition or enforcement of the foreign
arbitral award under this rule is fully established.
 The decision of the court recognizing and enforcing a foreign
arbitral award is immediately executory.
In resolving the petition for recognition and enforcement of a
foreign arbitral award in accordance with these Special ADR Rules, the
court shall either [a] recognize and/or enforce or [b] refuse to recognize
and enforce the arbitral award. The court shall not disturb the arbitral
tribunal's determination of facts and/or interpretation of law.
(Emphasis ours)
Under Article V of the New York Convention, the grounds for refusing
enforcement and recognition of a foreign arbitral award are:
1. Recognition and enforcement of the award may be refused, at
the request of the party against whom it is invoked, only if that party
furnishes to the competent authority where the recognition and
enforcement is sought, proof that:
(a) The parties to the agreement referred to in
article II were, under the law applicable to them, under
some incapacity, or the said agreement is not valid under
the law to which the parties have subjected it or, failing any
indication thereon, under the law of the country where the
award was made; or
(b) The party against whom the award is invoked
was not given proper notice of the appointment of the
arbitrator or of the arbitration proceedings or was
otherwise unable to present his case; or
(c) The award deals with a difference not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to arbitration,
provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted,
that part of the award which contains decisions on matters
submitted to arbitration may be recognized and enforced;
or
(d) The composition of the arbitral authority or
the arbitral procedure was not in accordance with the
agreement of the parties, or, failing such agreement, was
not in accordance with the law of the country where the
arbitration took place; or
(e) The award has not yet become binding on the
parties, or has been set aside or suspended by a
competent authority of the country in which, or under the
law of which, that award was made.
 2. Recognition and enforcement of an arbitral award may also be
refused if the competent authority in the country where recognition and
enforcement is sought finds that:
(a) The subject matter of the difference is not
capable of settlement by arbitration under the law of that
country; or
(b) The recognition or enforcement of the award
would be contrary to the public policy of that country.
(Emphasis ours)
The aforecited grounds are essentially the same grounds enumerated
under Section 36 43 of the Model Law. The list is exclusive. Thus, Section 45 of
the ADR Act provides:
SEC. 45. Rejection of a Foreign Arbitral Award. — A party to
a foreign arbitration proceeding may oppose an application for
recognition and enforcement of the arbitral award in accordance with the
procedural rules to be promulgated by the Supreme Court only on
those grounds enumerated under Article V of the New York
Convention. Any other ground raised shall be disregarded by the
regional trial court. (Emphasis ours)
In Our jurisdiction, We have incorporated the grounds enumerated under
the New York Convention in our arbitration laws. Article 4.36, Rule 6 44 of
the IRR and Rule 13.4 45 of the Special ADR Rules reiterated the exact same
exclusive list of grounds.
After a careful review of the case, We find that Mabuhay failed to
establish any of the grounds for refusing enforcement and recognition of a
foreign arbitral award. We discuss the grounds raised by Mabuhay in seriatim:
A. The arbitral authority, composed
of Dr. Chatara-Opakorn as the sole
arbitrator, was constituted in
accordance with the arbitration
agreement.

The first ground raised by Mabuhay is Article V (1) (d) of the New York
Convention, i.e., that the composition of the arbitral authority was not in
accordance with the agreement of the parties. Mabuhay and Sembcorp
stipulated in their Agreement that the sole arbitrator must have "expertise in the
matter at issue." Since they also agreed that the validity and the performance
of the Agreement shall be governed by the Philippine law, Mabuhay argues that
the phrase "expertise in the matter at issue" necessarily means expertise in the
Philippine law. Dr. Chatara-Opakorn, a Thai national, does not possess any
educational degree or training in Philippine law.
 The Agreement provides, however, that the arbitrator with expertise in
the matter at issue shall be appointed in accordance with the ICC Rules. The
ICC, thus, is the appointing authority agreed upon by the parties. The
"appointing authority" is the person or institution named in the arbitration
agreement as the appointing authority; or the regular arbitration institution
under whose rule the arbitration is agreed to be conducted. 46 Where the parties
have agreed to submit their dispute to institutional arbitration rules, and unless
they have agreed to a different procedure, they shall be deemed to have agreed
to procedure under such arbitration rules for the selection and appointment of
arbitrators. 47
The pertinent rules in the ICC Arbitration Rules of 1998 provide:
Article 9 — Appointment and Confirmation of the Arbitrators

xxx xxx xxx

3. Where the Court is to appoint a sole arbitrator or the chairman

of an Arbitral Tribunal, it shall make the appointment upon a proposal of
a National Committee of the ICC that it considers to be appropriate. If
the Court does not accept the proposal made, or if the National
Committee fails to make the proposal requested within the time limit
fixed by the Court, the Court may repeat its request or may request a
proposal from another National Committee that it considers to be
appropriate.
xxx xxx xxx
5. The sole arbitrator or the chairman of the Arbitral Tribunal shall
be of a nationality other than those of the parties. However, in
suitable circumstances and provided that neither of the parties objects
within the time limit fixed by the Court, the sole arbitrator or the chairman
of the Arbitral Tribunal may be chosen from a country of which any of
the parties is a national. (Emphasis ours)
In accordance with the aforecited rules, Dr. Chantara-Opakorn was
appointed upon the proposal of the Thai National Committee.
It bears stressing that the pro-arbitration policy of the State includes its
policy to respect party autonomy. Thus, Rule 2.3 of the Special ADR
Rules provides that "the parties are free to agree on the procedure to be
followed in the conduct of arbitral proceedings." The procedure to be followed
on the appointment of arbitrator are among the procedural rules that may be
agreed upon by the parties.
Moreover, under Rule 7.2 of the Special ADR Rules, a challenge to the
appointment of an arbitrator may be raised in court only when the appointing
authority fails or refuses to act on the challenge within such period as may be
allowed under the applicable rule or in the absence thereof, within thirty (30)
days from receipt of the request, that the aggrieved party may renew the
challenge in court. This is clearly not the case for Mabuhay as it was able to
challenge the appointment of Dr. Chantara-Opakorn in accordance with Article
11 of the ICC Rules, but the ICC Court rejected the same. 48 As such, the Court
shall not entertain any challenge to the appointment of arbitrator disguised as
a ground for refusing enforcement of an award.
At any rate, Mabuhay's contention that the sole arbitrator must have the
expertise on Philippine law fails to persuade. If the intent of the parties is to
exclude foreign arbitrators due to the substantive law of the contract, they could
have specified the same considering that the ICC Rules provide for
appointment of a sole arbitrator whose nationality is other than those of the
parties.
B. The dispute is not an intra-
corporate controversy, hence,
included in the scope of disputes
submitted to arbitration.

Under Article V (1) (c) of the New York Convention, the court may refuse
enforcement of a foreign arbitral award when the award deals with a difference
not contemplated by or not falling within the terms of the submission to
arbitration. Mabuhay argues that the dispute is an intra-corporate controversy
which is expressly excluded from the scope of disputes submitted to arbitration
under the Agreement. In essence, Mabuhay attacks the jurisdiction of the
arbitral tribunal to hear the dispute as it did not fall within the terms of
submission to arbitration.
The CA correctly applied the Kompetenz-Kompetenz principle expressly
recognized under Rule 2.2 of the Special ADR Rules, viz.:
The Special ADR Rules recognize the principle of competence-
competence, which means that the arbitral tribunal may initially rule on
its own jurisdiction, including any objections with respect to the existence
or validity of the arbitration agreement or any condition precedent to the
filing of a request for arbitration.
The Special ADR Rules expounded on the implementation of the said
principle:
Rule 2.4. Policy implementing competence-competence
principle. — The arbitral tribunal shall be accorded the first opportunity
or competence to rule on the issue of whether or not it has the
competence or jurisdiction to decide a dispute submitted to it for
decision, including any objection with respect to the existence or validity
 of the arbitration agreement. When a court is asked to rule upon issue/s
affecting the competence or jurisdiction of an arbitral tribunal in a dispute
brought before it, either before or after the arbitral tribunal is
constituted, the court must exercise judicial restraint and defer to
the competence or jurisdiction of the arbitral tribunal by allowing
the arbitral tribunal the first opportunity to rule upon such issues.
(Emphasis ours)
To recall, the Agreement provides that "(a)ny dispute, controversy or
claim arising out of or relating to this Agreement, or breach thereof, other than
intra-corporate controversies, shall be finally settled by arbitration. . ."
Among the issues settled in the Final Award is whether the dispute is an
intra-corporate controversy. Dr. Chantara-Opakorn ruled in the negative. The
pertinent portion of the Final Award is reproduced as follows:
x x x Indeed, during the cross-examination of Mr. Chay, he
admitted that there was no transfer of shares from IDHI to the
Claimant [p. 130 of Transcript of Proceedings]:
xxx xxx xxx
During the re-examination of Mr. Chay by the Respondent's
counsel, he again admitted that the transfer of the shares from IDHI to
the Claimant has not taken effect [p. 155 of Transcript of Proceedings]:
xxx xxx xxx
It is clear that the Claimant's claim is neither premised on
allegations of mismanagement of WJNA and WJSC, nor on who
manages or controls or who has the right to manage or control WJNA
and WJSC, nor is it a claim to effect the transfer of the share, nor an
action for registration of the shares transfer [sic] already transferred
from IDHI to the Claimant in the books of WJNA and WJSC. The nature
of the Claimant's claim is not intrinsically connected with the regulation
of the corporation. The Claimant's claim in this arbitration is
straightforward: that the Respondent agreed, under a contract, to make
payment of certain amount of money to the Claimant upon the
occurrence of a specified event; that the said event occurred but the
Respondent refused to pay such amount of money to the Claimant; that
the Claimant filed the Request in order to enforce the payment.
Accordingly, the Sole Arbitrator is of the opinion that the dispute in this
arbitration is not an intra-corporate controversy, and, hence, it is
not excluded from arbitration under Article 19.2 of the Shareholders'
Agreement. 49 (Emphasis ours)
Again, the Special ADR Rules specifically provides that in resolving the
petition for recognition and enforcement of a foreign arbitral award, the court
shall not disturb the arbitral tribunal's determination of facts and/or
interpretation of law. 50
 Yet, the RTC, in its decision dismissing the petition of Sembcorp,
declared that "it is undisputed that the shares of stocks of IDHI in WJNA and
WJSC were actually owned by [Sembcorp] before the filing of the request for
arbitration" 51 without providing any factual basis for such conclusion which
directly contradicts the arbitral tribunal's findings.
Even granting that the court may rule on the issue of whether the dispute
is an intra-corporate controversy, Mabuhay's argument is premised on the
factual issue of whether Sembcorp indeed acquired the shares of IDHI.
Mabuhay failed to establish such fact before the arbitral tribunal. The RTC, on
the other hand, concluded that Sembcorp acquired the subject shares but failed
to explain the basis for such conclusion. In the absence of sufficient evidence
that Sembcorp acquired the shares of IDHI, the Court finds no cogent reason
to disturb the arbitral tribunal's ruling in favor of the latter's jurisdiction over the
dispute.
C. Enforcement of the award
would not be contrary to public
policy of the Philippines.

Under Article V (2) (b) of the New York Convention, a court may refuse
to enforce an award if doing so would be contrary to the public policy of the
State in which enforcement is sought. Neither the New York Convention nor the
mirroring provisions on public policy in the Model Law and Our arbitration laws
provide a definition of "public policy" or a standard for determining what is
contrary to public policy. Due to divergent approaches in defining public policy
in the realm of international arbitration, public policy has become one of the
most controversial bases for refusing enforcement of foreign arbitral awards. 52
Most arbitral jurisdictions adopt a narrow and restrictive approach in
defining public policy pursuant to the pro-enforcement policy of the New York
Convention. The public policy exception, thus, is "a safety valve to be used in
those exceptional circumstances when it would be impossible for a legal system
to recognize an award and enforce it without abandoning the very fundaments
on which it is based." 53 An example of a narrow approach adopted by several
jurisdictions 54 is that the public policy defense may only be invoked "where
enforcement [of the award] would violate the forum state's most basic notions
of morality and justice." 55 Thus, in Hong Kong, an award obtained by fraud was
denied enforcement by the court on the ground that fraud is contrary to Hong
Kong's "fundamental notions of morality and justice." 56 In Singapore, also a
Model Law country, the public policy ground is entertained by courts only in
instances where upholding the award is "clearly injurious to the public good or
. . . wholly offensive to the ordinary reasonable and fully informed member of
the public." 57
 In Our jurisdiction, the Court has yet to define public policy and what is
deemed contrary to public policy in an arbitration case. However, in an old case,
the Court, through Justice Laurel, elucidated on the term "public policy" for
purposes of declaring a contract void:
x x x At any rate, courts should not rashly extend the rule which
holds that a contract is void as against public policy. The term "public
policy" is vague and uncertain in meaning, floating and changeable
in connotation. It may be said, however, that, in general, a contract
which is neither prohibited by law nor condemned by judicial decision,
nor contrary to public morals, contravenes no public policy. In the
absence of express legislation or constitutional prohibition, a court, in
order to declare a contract void as against public policy, must find that
the contract as to the consideration or thing to be done, has a tendency
to injure the public, is against the public good, or contravenes
some established interests of society, or is inconsistent with
sound policy and good morals, or tends clearly to undermine the
security of individual rights, whether of personal liability or of
private property. 58 (Emphasis ours)
An older case, Ferrazzini v. Gsell, 59 defined public policy for purposes of
determining whether that part of the contract under consideration is against
public policy:
By "public policy," as defined by the courts in the United States
and England, is intended that principle of the law which holds that
no subject or citizen can lawfully do that which has a tendency to
be injurious to the public or against the public good, which may be
termed the "policy of the law," or "public policy in relation to the
administration of the law." Public policy is the principle under which
freedom of contract or private dealing is restricted by law for the good of
the public. In determining whether a contract is contrary to public policy
the nature of the subject matter determines the source from which such
question is to be solved. (Emphasis ours and citation omitted)
In light of the foregoing and pursuant to the State's policy in favor of
arbitration and enforcement of arbitral awards, the Court adopts the majority
and narrow approach in determining whether enforcement of an award is
contrary to Our public policy. Mere errors in the interpretation of the law or
factual findings would not suffice to warrant refusal of enforcement under the
public policy ground. The illegality or immorality of the award must reach a
certain threshold such that, enforcement of the same would be against Our
State's fundamental tenets of justice and morality, or would blatantly be
injurious to the public, or the interests of the society.
We now discuss the pertinent claims of Mabuhay in relation to public
policy.
i. Violation of partnership law
Mabuhay contends that it entered into a joint venture, which is akin to a
particular partnership, with Sembcorp. Applying the laws on partnership, the
payment of the Guaranteed Return to Sembcorp is a violation of Article
1799 60 of the Civil Code, as it shields the latter from sharing in the losses of
the partnership. Ergo, enforcement of the Final Award would be contrary to
public policy as it upholds a void stipulation.
The restrictive approach to public policy necessarily implies that not all
violations of the law may be deemed contrary to public policy. It is not
uncommon for the courts in Contracting States of the New York Convention to
enforce awards which does not conform to their domestic laws. 61
At any rate, Mabuhay's contention is bereft of merit. The joint venture
between Mabuhay, IDHI, and Sembcorp was pursued under the Joint Venture
Corporations, WJSC and WJNA. By choosing to adopt a corporate entity as the
medium to pursue the joint venture enterprise, the parties to the joint venture
are bound by corporate law principles under which the entity must
operate. 62 Among these principles is the limited liability doctrine. The use of a
joint venture corporation allows the co-venturers to take full advantage of the
limited liability feature of the corporate vehicle which is not present in a formal
partnership arrangement. 63 In fine, Mabuhay's application of Article 1799 is
erroneous.
ii. Imposition of interest
Mabuhay argues that the twelve percent (12%) annual interest from the
date of the Final Award is also contrary to the Philippine law and jurisprudence.
To reiterate, the only ground for refusing enforcement of a foreign arbitral award
is when enforcement of the same would be contrary to public policy.
Mere incompatibility of a foreign arbitral award with domestic mandatory
rules on interest rates does not amount to a breach of public policy. However,
some jurisdictions refused to recognize and enforce awards, or the part of the
award which was considered to be contrary to public policy, where they
considered that the awarded interest was unreasonably high. 64 In this case,
the twelve percent (12%) interest rate imposed under the Final Award is not
unreasonably high or unconscionable such that it violates our fundamental
notions of justice.
IV. Attorney's Fees
Mabuhay avers that the dispositive portion of the CA Decision failed to
include its finding that Mabuhay is not liable for attorney's fees and exemplary
damages. The pertinent portion of the CA Decision is reproduced as follows:
 Turning now to Sembcorp's prayer for the award of attorney's
fees and exemplary damages, We find the same bereft of legal and
factual bases. Article 2208 of the Civil Code allows attorney's fees to be
awarded if the claimant is compelled to litigate with third persons or to
incur expenses to protect his interest by reason of an unjustified act or
omission of the party from whom it is sought, there must be a showing
that the losing party acted willfully or in bad faith and practically
compelled the claimant to litigate and incur litigation expenses.
Meanwhile, in order to obtain exemplary damages under Article 2232 of
the Civil Code, the claimant must prove that the assailed actions of the
defendant are not just wrongful, but also wanton, fraudulent, reckless,
oppressive or malevolent.
Indeed, Sembcorp was compelled to file the instant appeal.
However, such fact alone is insufficient to justify an award of attorney's
fees and exemplary damages when there is no sufficient showing of
MHC's [Mabuhay] bad faith in refusing to abide by the provisions of the
Final Award. To Us, MHC's [Mabuhay] persistent acts in rejecting
Sembcorp's claim proceed from an erroneous conviction in the
righteousness of its cause. 65
We affirm the aforecited findings of the CA. However, We find no conflict
between the fallo and the ratio decidendi of the CA Decision. The fallo of the
CA Decision includes "[n]o pronouncement as to cost." The CA also reversed
and set aside the RTC Decision in its entirety. As such, even the
pronouncement of the RTC as to costs is set aside. Accordingly, We find no
merit in Mabuhay's prayer for a statement in the dispositive portion expressly
stating that it is not liable for attorney's fees and exemplary damages.
On a final note, We implore the lower courts to apply the ADR Act and
the Special ADR Rules accordingly. Arbitration, as a mode of alternative
dispute resolution, is undeniably one of the viable solutions to the longstanding
problem of clogged court dockets. International arbitration, as the preferred
mode of dispute resolution for foreign companies, would also attract foreign
investors to do business in the country that would ultimately boost Our
economy. In this light, We uphold the policies of the State favoring arbitration
and enforcement of arbitral awards, and have due regard to the said policies in
the interpretation of Our arbitration laws.
WHEREFORE, the Petition is hereby DENIED. The November 19, 2013
Decision and the June 3, 2014 Resolution of the Court of Appeals in CA-G.R.
CV No. 92296 are AFFIRMED.
SO ORDERED.
Bersamin, C.J., Del Castillo, Jardeleza and Gesmundo, JJ., concur.
 Footnotes
1. Penned by Associate Justice Zenaida T. Galapate-Laguilles, with Associate
Justices Mariflor P. Punzalan Castillo and Amy C. Lazaro-Javier,
concurring. Rollo, pp. 68-84.
2. Id. at 65-66.
3. Penned by Presiding Judge Cesar O. Untalan. Id. at 85-92.
4. Id. at 19.
5. Id.
6. Id. at 19-20.
7. Id. at 213.
8. Id. at 93-112.
9. Id. at 20-21 and 69.
10. Id. at 69.
11. Id. at 108.
12. Id. at 69-70.
13. Id. at 70.
14. Id.
15. Id.
16. Id. at 210-260.
17. Id. at 260.
18. Id. at 265-270.
19. Id. at 71.
20. Id. at 71-72.
21. Id. at 70-71, 291-297.
22. Id. at 85-92.
23. Id. at 89.
24. Id. at 91-92.
25. Id. at 75.
26. Id. at 68-84.
27. Id. at 77-82.
28. Id. at 65-66.
29. Rule 1.11 (d), A.M. No. 07-11-08-SC, entitled "Special Rules of Court on
Alternative Dispute Resolution" (October 30, 2009).
30. New York Convention was ratified by the Philippines under Senate Resolution No.
71 on July 6, 1967; See last accessed on November 30, 2018.
31. <http://www.newyorkconvention.org/countries> last accessed on November 30,
2018.
32. Transfield Philippines, Inc. v. Luzon Hydra Corporation, 523 Phil. 374 (2006).
33. Adopted by the UNCITRAL on June 21, 1985 (United Nations Document A/40/17)
and recommended for enactment by the General Assembly in Resolution No.
40/72, approved on 11 December 1985. Subsequently amended on July 7,
2006.
34. Republic Act No. 9285, An Act to Institutionalize the Use of an Alternative Dispute
Resolution System in the Philippines and to Establish the Office for Alternative
Dispute Resolution, and for Other Purposes, promulgated on April 2, 2004.
35.Department Circular No. 98 or the Implementing Rules and Regulations of the
Alternative Dispute Resolution Act of 2004, December 4, 2009.
36.Special ADR Rules, A.M. No. 07-11-08-SC, September 1, 2009.
37.1998 International Chamber of Commerce, Rules of Arbitration, available online at
<http://www.iccwbo.org/uploadedFiles/Court/Arbitration/other/rules_arb_english
.pdf> last visited on November 4, 2018.
38.See Sec. 46 of RA 9285.
39.Special ADR Rules, Rule 24.1 Transitory Provision. — Considering its procedural
character, the Special ADR Rules shall be applicable to all pending arbitration,
mediation or other ADR forms covered by the ADR Act, unless the parties
agree otherwise. The Special ADR Rules, however, may not prejudice or impair
vested rights in accordance with law.
40.Rule 41 — Appeal from the Regional Trial Courts
Section 2. Modes of appeal. —
(a) Ordinary appeal. — The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its original jurisdiction shall be taken by
filing a notice of appeal with the court which rendered the judgment or final
order appealed from and serving a copy thereof upon the adverse party. x x x
41.Lanuza, Jr. v. BF Corporation, et al., 744 Phil. 612 (2014).
42.See Sec. 2 of RA 9285 and Rule 2.1 of the Special ADR Rules.
43.Article 36. Grounds for refusing recognition or enforcement
(1) Recognition or enforcement of an arbitral award, irrespective of the country in
which it was made, may be refused only:
 (a) at the request of the party against whom it is invoked, if that party furnishes to
the competent court where recognition or enforcement is sought proof that:
(i) a party to the arbitration agreement referred to in article 7 was under some
incapacity; or the said agreement is not valid under the law to which the parties
have subjected it or, failing any indication thereon, under the law of the country
where the award was made; or
(ii) the party against whom the award is invoked was not given proper notice of the
appointment of an arbitrator or of the arbitral proceedings or was otherwise
unable to present his case; or
(iii) the award deals with a dispute not contemplated by or not falling within the
terms of the submission to arbitration, or it contains decisions on matters
beyond the scope of the submission to arbitration, provided that, if the
decisions on matters submitted to arbitration can be separated from those not
so submitted, that part of the award which contains decisions on matters
submitted to arbitration may be recognized and enforced; or
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties or, failing such agreement, was
not in accordance with the law of the country where the arbitration took place;
or
(v) the award has not yet become binding on the parties or has been set aside or
suspended by a court of the country in which, or under the law of which, that
award was made; or (b) if the court finds that: (i) the subject-matter of the
dispute is not capable of settlement by arbitration under the law of this State; or
(ii) the recognition or enforcement of the award would be contrary to the public
policy of this State.
44.Article 4.36. Grounds for Refusing Recognition or Enforcement.
A. CONVENTION AWARD.
Recognition or enforcement of an arbitral award, made in a state, which is a party
to the New York Convention, may be refused, at the request of the party
against whom it is provoked, only if the party furnishes to the Regional Trial
Court proof that:
(a) The parties to the arbitration agreement are, under the law applicable to them,
under some incapacity; or the said agreement is not valid under the law to
which the parties have subjected it or; failing any indication thereon, under the
law of the country where the award was made; or
(b) the party against whom the award is invoked was not given proper notice of the
appointment of an arbitrator or of the arbitral proceedings or was otherwise
unable to present his case; or
(c) the award deals with dispute not contemplated by or not falling within the terms
of the submission to arbitration, or it contains decisions on matters beyond the
 scope of the submission to arbitration; provided that, if the decisions on matters
submitted to arbitration can be separated from those not so submitted, that part
of the award which contains decisions on matters submitted to arbitration may
be recognized and enforced; or
(d) the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties or, failing such agreement, was
not in accordance with the law of the country where the arbitration took place;
or
(e) the award has not yet become binding on the parties or has been set aside or
suspended by a court of the country in which, or under the law of which, that
award was made.
Recognition and enforcement of an arbitral award may also be refused if the
Regional Trial Court where recognition and enforcement is sought finds that:
(a) the subject-matter of the dispute is not capable of settlement by arbitration
under the law of the Philippines; or
(b) the recognition or enforcement of the award would be contrary to the public
policy of the Philippines.
A party to a foreign arbitration proceeding may oppose an application for
recognition and enforcement of the arbitral award in accordance with
the Special ADR Rules only on the grounds enumerated under paragraphs (a)
and (c) of Article 4.35 (Recognition and Enforcement). Any other ground raised
shall be disregarded by the Regional Trial Court.
45.Rule 13.4. Governing law and grounds to refuse recognition and enforcement. — x
xx
A Philippine court shall not set aside a foreign arbitral award but may refuse it
recognition and enforcement on any or all of the following grounds:
a. The party making the application to refuse recognition and enforcement of the
award furnishes proof that:
(i). A party to the arbitration agreement was under some incapacity; or the said
agreement is not valid under the law to which the parties have subjected it or,
failing any indication thereof, under the law of the country where the award was
made; or
(ii). The party making the application was not given proper notice of the
appointment of an arbitrator or of the arbitral proceedings or was otherwise
unable to present his case; or
(iii). The award deals with a dispute not contemplated by or not falling within the
terms of the submission to arbitration, or contains decisions on matters beyond
the scope of the submission to arbitration; provided that, if the decisions on
matters submitted to arbitration can be separated from those not so submitted,
 only that part of the award which contains decisions on matters not submitted to
arbitration may be set aside; or
(iv). The composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties or, failing such agreement, was
not in accordance with the law of the country where arbitration took place; or
(v). The award has not yet become binding on the parties or has been set aside or
suspended by a court of the country in which that award was made; or
b. The court finds that:
(i). The subject-matter of the dispute is not capable of settlement or resolution by
arbitration under Philippine law; or
(ii). The recognition or enforcement of the award would be contrary to public policy.
The court shall disregard any ground for opposing the recognition and
enforcement of a foreign arbitral award other than those enumerated
above. (Emphasis ours)
46.See Rule 1.11 (b) of the Special ADR Rules.
47.Id.
48.Rollo, p. 221.
49.Id. at 230-231.
50.See Rule 11.9 of the Special ADR Rules.
51.Rollo, p. 88.
52.See Gary Born, International Commercial Arbitration (2nd ed., 2001) 815.
53.UNCITRAL Secretariat Guide on the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York, 1958) (2016 ed.) 240.
54.Id.
55.Parsons & Whittemore Overseas v. Société Générale de L'Industrie du Papier
(RAKTA), Court of Appeals, Second Circuit, United States of America, 508 F.2d
969, 974 (1974).
56.Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara,
[2009] 12 H.K.C.F.A.R. 84, 100 (C.F.A.); See also Hebei Import & Export
Corporation v. Polytek Engineering Company Limited [1999] 1 HKLRD 665.
57.PT Asuransi Jasa Indonesia (Persero) v. Dexia Bank SA [2007] 1 SLR(R) 597
citing Deutsche Schachtbau-und Tiefbohrgesellschaft m.b.H. v. Shell
International Petroleum Co. Ltd., Court of Appeal, England and Wales, 24
March 1987, [1990] 1 A.C. 295.
58.Gabriel vs. Monte De Piedad, 71 Phil. 497, 500 (1941).
 59.34 Phil. 697, 711-712 (1916).
60.Art. 1799. A stipulation which excludes one or more partners from any share in the
profits or losses is void.
61.See Oberlandesgericht Dresden, Germany, 11 Sch 06/98, 13 January 1999;
and Robert E. Schreter v. Gasmac, Inc., Ontario Court, General Division,
Canada, 13 February 1992, [1992] O.J. No. 257.
62.Cesar L. Villanueva, Non-Corporate Media of Doing Business: Agency, Trusts,
Partnerships & Joint Ventures (2011) 795-796.
63.Id. at 805.
64.See UNCITRAL Secretariat Guide, Article V (2) (b) or p. 246.
65.Rollo, pp. 82-83.
(Mabuhay Holdings Corp. v. Sembcorp Logistics Limited, G.R. No. 212734,
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[December 5, 2018])