*

G.R. No. 146717. May 19, 2006.

TRANSFIELD PHILIPPINES, INC., petitioner, vs. LUZON HYDRO

CORPORATION, AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED and SECURITY BANK CORPORATION, respondents.

Civil Procedure; Actions; Forum Shopping; The essence of forum shopping is

the filing of multiple suits involving the same parties for the same cause of action,
either simultaneously or successively, for the purpose of obtaining a favorable
judgment; Grounds for Forum Shopping to Exist.—The essence of forum shopping
is the filing of multiple suits involving the same parties for the same cause of action,
either simultaneously or successively, for the purpose of obtaining a favorable
judgment. Forum shopping has likewise been defined as the act of a party against
whom an adverse judgment has been rendered in one forum, seeking and possibly
getting a favorable opinion in another forum, other than by appeal or the special civil
action of certiorari, or the institution of two or more actions or proceedings
grounded on the same cause on the supposition that one or the other court would
make a favorable disposition. Thus, for forum shopping to exist, there must be (a)
identity of parties, or at least such parties as represent the same interests in both
actions; (b) identity of rights asserted and relief prayed for, the relief being founded
on the same facts; and (c) the identity of the two preceding particulars is such that
any judgment rendered in the other action will, regardless of which party is
successful, amount to res judicata in the action under consideration.
Same; Same; Same; Arbitration; The pendency of arbitral proceedings does not
foreclose resort to the courts for provisional reliefs.—As a fundamental point, the
pendency of arbitral proceedings does not foreclose resort to the courts for
provisional reliefs. The Rules of the ICC, which governs the parties’ arbitral dispute,
allows the application of a party to a judicial authority for interim or conservatory
measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The Arbitration
Law) recognizes the rights of any party to petition the court to take measures to
safeguard and/or conserve any

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* SPECIAL SECOND DIVISION.

 VOL. 490, MAY 19, 2006 15

Transfield Philippines, Inc. vs. Luzon Hydro Corporation

matter which is the subject of the dispute in arbitration. In addition, R.A. 9285,
otherwise known as the “Alternative Dispute Resolution Act of 2004,” allows the
filing of provisional or interim measures with the regular courts whenever the arbitral
tribunal has no power to act or to act effectively.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the resolution of the Court.

Manuel M. Cosico and M.B. Tomacruz & Associates for petitioner.
Lariba, Perez, Anastacio, Mangrobang, Miralles & Vil-lones for
respondent Security Bank.
Quasha, Ancheta, Peña & Nolasco Law Office for respondent ANZ
Bank.
Sycip, Salazar, Hernandez & Gatmaitan for respondent LHC.

R ESOLUTION

TINGA, J.:

The adjudication of this case proved to be a two-stage process as its constituent

parts involve two segregate but equally important issues. The first stage relating
to the merits of the case, specifically the question of the propriety of calling on
the securities during the pendency of the arbitral proceedings, was resolved in
1
favor of Luzon Hydro Corporation (LHC) with the Court’s Decision of 22
November 2004. The second stage involving the issue of forum shopping 2on
which the Court required the parties to submit their respective memoranda is
disposed of in this Resolution.
The disposal of the forum shopping charge is crucial to the parties to this
case on account of its profound effect on the

_______________

1 443 SCRA 307 (2004).

2 Resolution dated 27 April 2005, Rollo, pp. 1213-1219.
16 SUPREME COURT REPORTS ANNOTATED
Transfield Philippines, Inc. vs. Luzon Hydro Corporation

final outcome of the international arbitral proceedings

3
which they have chosen as
their principal dispute resolution mechanism.
LHC claims that Transfield Philippines, Inc. (TPI) is guilty of forum shopping
when it filed the following suits:

1. Civil Case No. 04-332 filed on 19 March 2004, pending before the
Regional Trial Court (RTC) of Makati, Branch 56 for confirmation,
recognition and enforcement of the Third Partial Award in case 11264
TE/MW, ICC International Court of Arbitration, 4
entitled Transfield
Philippines, Inc. v. Luzon Hydro Corporation.
2. ICC Case No. 11264/TE/MW, Transfield Philippines, Inc. v.
Luzon Hydro Corporation filed before the International Court of
Arbitration, International Chamber of Commerce (ICC) a request for
arbitration dated 3 November 2000 pursuant to the Turnkey Contract
between LHC and TPI;
3. G.R. No. 146717, Transfield Philippines, Inc. v. Luzon Hydro
Corporation, Australia and New Zealand Banking Group Limited
and Security Bank Corp. filed on 5 February 2001, which was an
appeal by certiorari with prayer for TRO/preliminary prohibitory and
mandatory injunction, of the Court of Appeals Decision dated 31
January 2001 in CA-G.R. SP No. 61901.

a. CA-G.R. SP No. 61901 was a petition for review of the Decision in

Civil Case No. 00-1312, wherein TPI claimed that LHC’s call on the
securities was premature considering

_______________

3 The growth of international commercial arbitration (ICA) is both a rejection of the

non-binding conciliation and mediation process and a retreat from the vicissitudes and
uncertainties of international business litigation. More positively, the mechanism offers
predictability and neutrality as a forum and allows the parties to select and shape the
procedures and costs of dispute resolution. On the other hand, ICA procedures are often
informal and not laden with legal rights. R. H. FOLSOM, M. W. GORDON, J. A.
SPANOGLE, JR., INTERNATIONAL BUSINESS TRANSACTIONS, pp. 1113-1114 (2nd ed.,
1 year published).
4 The award purportedly held that LHC wrongfully drew on the securities; and that TPI
is entitled to the return of the said sums, liquidated damages, and liquidation costs.
 VOL. 490, MAY 19, 2006 17
Transfield Philippines, Inc. vs. Luzon Hydro Corporation

that the issue of default has not yet been resolved with finality; the
petition was however denied by the Court of Appeals;
b. Civil Case No. 00-1312 was a complaint for injunction with prayer for
temporary restraining order and/or writ of preliminary injunction dated
5 November 2000, which sought to restrain LHC from calling on the
securities and respondent banks from transferring or paying of the
securities; the complaint was denied by the RTC.

On the other hand, TPI claims that it is LHC which is guilty of forum shopping
when it raised the issue of forum shopping not only in this case, but also in Civil
Case No. 04-332, and even asked for the dismissal of the other case based on
this ground. Moreover, TPI argues that LHC is relitigating in Civil Case No. 04-
332 the very same causes of action in ICC Case No. 11264/TE/MW, and even
manifesting therein5
that it will present evidence earlier presented before the
arbitral tribunal.
Meanwhile, ANZ Bank and Security Bank moved to be excused from filing
a memorandum. They claim that with the finality of the Court’s Decision dated
22 November 2004, any resolution by the Court on the issue of forum shopping
will not materially
6
affect their role as the banking entities involved are
concerned. The Court granted their respective motions.
On 1 August 2005, TPI moved to set the case for oral argument, positing
that the resolution of the Court on the issue of forum shopping may have
significant implications on the interpretation of the Alternative Dispute Resolution
Act of 2004, as well as the viability of international commercial
7
arbitration as an
alternative mode of dispute resolution in the country. Said motion was opposed
by LHC in its opposition

_______________

5 Rollo, pp. 1289-1293.

6 ANZ Bank’s Motion to be Excused, Id., at p. 1220; Security Bank’s Motion to be
Excused, Temporary Rollo.
7 Motion for Leave to Set Case for Oral Argument, Id., at pp. 1747-1751.
18 SUPREME COURT REPORTS ANNOTATED
Transfield Philippines, Inc. vs. Luzon Hydro Corporation

filed on 2 September 2005, with LHC arguing that the respective memoranda of
8
the parties are sufficient for the Court to resolve the issue of forum shopping.
9
On 28 October 2005, TPI filed its Manifestation and Reiterative Motion to set
the case for oral argument, where it manifested that the International Chamber
of Commerce (ICC) arbitral tribunal had issued its Final Award ordering LHC
to pay TPI US$24,533,730.00 (including the US$17,977,815.00 proceeds of
the two standby letters 10
of credit). TPI also submitted a copy thereof with a
Supplemental Petition to the Regional 11
Trial Court (RTC), seeking recognition
and enforcement of the said award.
The essence of forum shopping is the filing of multiple suits involving the
same parties for the same cause of action, either simultaneously
12
or successively,
for the purpose of obtaining a favorable judgment. Forum shopping has
likewise been defined as the act of a party against whom an adverse judgment
has been rendered in one forum, seeking and possibly getting a favorable
opinion in another forum, other than by appeal or the special civil action of
certiorari, or the institution of two or more actions or proceedings grounded on
the same cause on the 13
supposition that one or the other court would make a
favorable disposition.
Thus, for forum shopping to exist, there must be (a) identity of parties, or at
least such parties as represent the same interests in both actions; (b) identity of
rights asserted and relief prayed for, the relief being founded on the same facts;
and (c) the identity of the two preceding particulars is such

_______________

8 Opposition, Id., at pp. 1757-1760.

9 Id., at pp. 1763-1767.
10 Id., at pp. 1823-1829.
11 TPI also submitted a copy of the Award, Id., at pp. 1768-1818.
12 Mondragon Leisure and Resorts Corporation v. United Coconut Planters Bank ,
G.R. No. 154187, 14 April 2004, 427 SCRA 585, 590.
13 Roxas v. Court of Appeals, G.R. No. 139337, 15 August 2001, 363 SCRA 207, 217.
 VOL. 490, MAY 19, 2006 19
Transfield Philippines, Inc. vs. Luzon Hydro Corporation

that any judgment rendered in the other action will, regardless of which party is
14
successful, amount to res judicata in the action under consideration.
There is no identity of causes of action between and among the arbitration
case, the instant petition, and Civil Case No. 04-332.
The arbitration case, ICC Case No. 11264 TE/MW, is an arbitral
proceeding commenced pursuant to the Turnkey Contract between TPI and
LHC, to determine the primary issue of whether the delays in the construction of
the project were excused delays, which would consequently render valid TPI’s
claims for extension of time to finish the project. Together with the primary issue
to be settled in the arbitration case is the equally important question of monetary
awards to the aggrieved party.
On the other hand, Civil Case No. 00-1312, the precursor of the instant
petition, was filed to enjoin LHC from calling on the securities and respondent
banks from transferring or paying the securities in case LHC calls on them.
However, in view of the fact that LHC collected the proceeds, TPI, in its appeal
and petition for review asked that the same be returned and placed15in escrow
pending the resolution of the disputes before the ICC arbitral tribunal.
While the ICC case thus calls for a thorough review of the facts which led to
the delay in the construction of the project, as well as the attendant
responsibilities of the parties therein, in contrast, the present petition puts in issue
the propriety of drawing on the letters of credit during the pendency of the
arbitral case, and of course, absent a final determination by the ICC Arbitral
tribunal. Moreover, as pointed out by TPI, it

_______________

14 Korea Exchange Bank v. Hon. Rogelio C. Gonzales, et al., G.R. Nos. 142286-87, 15
April 2005, 456 SCRA 224, 243, citing Benedicto v. Court of Appeals, G.R. No. 125359, 4
September 2001, 364 SCRA 334.
15 Rollo, p. 1270.
20 SUPREME COURT REPORTS ANNOTATED
Transfield Philippines, Inc. vs. Luzon Hydro Corporation

did not pray for the return of the proceeds of the letters of credit. What it asked
instead is that the said moneys be placed in escrow until the final resolution of
the arbitral case. Meanwhile, in Civil Case No. 04-332, TPI no longer seeks
the issuance of a provisional relief, but rather the issuance of a writ of execution
to enforce the Third Partial Award.
Neither is there an identity of parties between and among the three (3)
cases. The ICC case only involves TPI and LHC logically since they are the
parties to the Turnkey Contract. In comparison, the instant petition includes
Security Bank and ANZ Bank, the banks sought to be enjoined from releasing
the funds of the letters of credit. The Court agrees with TPI that it would be
ineffectual to ask the ICC to issue writs of preliminary injunction against Security
Bank and ANZ Bank since these banks are not parties to the arbitration case,
and that the ICC Arbitral tribunal would not even be able to compel LHC to
16
obey any writ of preliminary injunction issued from its end. Civil Case No. 04-
322, on the other hand, logically involves TPI and LHC only, they being the
parties to the arbitration agreement whose partial award is sought to be
enforced.
As a fundamental point, the pendency of arbitral proceedings does not
foreclose resort to the courts for provisional reliefs. The Rules of the ICC,
which governs the parties’ arbitral dispute, allows the application
17
of a party to a
judicial authority for interim or conservatory measures. Likewise,

_______________

16 Id., at p. 1267.
17 Art. 23 (2), Rules of Arbitration of the International Chamber of Commerce provides:
Before the file is transmitted to the Arbitral tribunal and in appropriate circumstances
even thereafter, the parties may apply to any competent judicial authority for interim or
conservatory measures. The application of a party to a judicial authority for such measure
or for the implementation of any such measure ordered by an Arbitral tribunal shall not be
deemed to be an
 VOL. 490, MAY 19, 2006 21
Transfield Philippines, Inc. vs. Luzon Hydro Corporation
18
Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law) recognizes
the rights of any party to petition the court to take measures to safeguard and/or
conserve any matter which is the subject of the dispute in arbitration. In
addition, R.A. 9285, otherwise known as the “Alternative Dispute Resolution
Act of 2004,” allows the filing of provisional or interim measures with the regular
19
courts whenever the arbitral tribunal has no power to act or to act effectively.

_______________

shall not affect the relevant powers reserved to the Arbitral tribunal. Any such
application and any measures taken by the judicial authority must be notified without
delay to the Secretariat. The Secretariat shall inform the Arbitral tribunal thereof.
(emphasis supplied)
18 Section 14. Subpoena and subpoena duces tecum.—Arbitrators shall have the
power to require any person to attend a hearing as a witness. They shall have the power
to subpoena witnesses and documents when the relevancy of the testimony and the
materiality thereof has been demonstrated to the arbitrators. Arbitrators may also require
the retirement of any witness during the testimony of any other witness. All of the
arbitrators appointed in any controversy must attend all the hearings in that matter and
hear all the allegations and proofs of the parties; but an award by the majority of them is
valid unless the concurrence of all of them is expressly required in the submission or
contract to arbitrate. The arbitrator or arbitrators shall have the power at any time, before
rendering the award, without prejudice to the rights of any party to petition the court to
take measures to safeguard and/or conserve any matter which is the subject of the dispute
in arbitration. (Emphasis supplied).
19 Sec. 28, R.A. No. 9285. Grant of Interim Measure of Protection. (a) It is not
incompatible with an arbitration agreement for a party to request, before constitution of
the tribunal, from a Court an interim measure of protection and for the Court to grant such
measure. After constitution of the arbitral tribunal and during arbitral proceedings, a
request for an interim measure of protection, or modification thereof, may be made with the
arbitral tribunal or to the extent that the arbitral tribunal has no power to act or is unable to
act effectively, the request may be made with the Court. x x x. (Emphasis supplied).
22 SUPREME COURT REPORTS ANNOTATED
Transfield Philippines, Inc. vs. Luzon Hydro Corporation

TPI’s verified petition in Civil Case No. 04-332, filed on 19 March 2004, was
captioned as one “For: Confirmation, Recognition and Enforcement of Foreign
Arbitral Award in Case 11264 TE/MW, ICC International Court of Arbitration,
‘Transfield Philippines, Inc. v. Luzon Hydro Corporation’ (Place of
20
arbitration: Singapore).” In the said petition, TPI prayed:

“1. That the THIRD PARTIAL AWARD dated February 18, 2004 in
Case No. 11264/TE/MW made by the ICC International Court of
Arbitration, the signed original copy of which is hereto attached as
Annex “H” hereof, be confirmed, recognized and enforced in
accordance with law.
2. That the corresponding writ of execution to enforce Question 31 of the
said Third Partial Award, be issued, also in accordance with law.
3. That TPI be granted such other relief as may21be deemed just and
equitable, and allowed, in accordance with law.”
22
The pertinent portion of the Third Partial Award relied upon by TPI were the
answers to Questions 10 to 26, to wit:

“Question Did TPI [LHC] wrongfully draw upon the security?

30
Yes
“Question Is TPI entitled to have returned to it any sum wrongfully taken by
31 LHC for liquidated damages?
Yes
“Question Is TPI entitled to any acceleration costs? TPI is entitled to the
32 reasonable costs TPI incurred after Typhoon23Zeb as a result of
LHC’s 5 February 1999 Notice to Correct.

_______________

20 Rollo, p. 672.
21 Id., at p. 680.
22 Id., at p. 661.
23 Third Partial Award, id., at pp. 114-664.
 VOL. 490, MAY 19, 2006 23
Transfield Philippines, Inc. vs. Luzon Hydro Corporation

According to LHC, the filing of the above case constitutes forum shopping since
it is the same claim for the return of US$17.9 Million which TPI made before
the ICC Arbitral Tribunal and before this Court. LHC adds that while Civil
Case No. 04-332 is styled as an action for money, the Third Partial Award
used as basis of the suit does not authorize TPI to seek a writ of execution for
the sums drawn on the letters of credit. Said award does not even contain an
order for the payment of money, but instead has reserved the quantification of
the amounts for a subsequent determination, LHC argues. In fact, even the Fifth
24
Partial Award, dated 30 March 2005, does not contain such orders. LHC
insists that the declarations or the partial awards issued by the ICC Arbitral
Tribunal do not constitute orders for the payment of money and are not intended
to be enforceable as such, but merely constitute amounts which will be included
in the Final Award and will be taken into account in determining the actual
25
amount payable to the prevailing party. R.A. No. 9825 provides that
international commercial arbitrations shall be governed shall be governed by the
Model Law on International Commercial Arbitration (“Model Law”) adopted
by the United Nations Commission on International Trade Law
26
(UNCITRAL). The UNCITRAL Model Law provides:

ARTICLE 35. Recognition and enforcement

(1) An arbitral award, irrespective of the country in which it was made, shall
be recognized as binding and, upon application in writing to the competent
court, shall be enforced subject to the provisions of this article and of
article 36.
(2) The party relying on an award or applying for its enforcement shall supply
the duly authenticated original award or a duly certified copy thereof, and
the original arbitration agreement

_______________

24 Id., at pp. 1685-1743.

25 Id., at pp. 1665-66.
26 Rep. Act No. 9285, Sec. 19.
24 SUPREME COURT REPORTS ANNOTATED
Transfield Philippines, Inc. vs. Luzon Hydro Corporation

referred to in article 7 or a duly certified copy thereof. If the award or agreement is

not made in an official language of this State, the party shall supply a duly certified
translation thereof into such language.
27
Moreover, the New York Convention, to which the Philippines is a signatory,
governs the recognition and enforcement of foreign arbitral awards. The
applicability of the New York Convention in the Philippines was confirmed in
Section 42 of R.A. 9285. Said law also provides that the application for the
recognition and enforcement of such awards shall be filed with the proper RTC.
While TPI’s resort to the RTC for recognition and enforcement of the Third
Partial Award is sanctioned by both the New York Convention and R.A. 9285,
its application for enforcement, however, was premature, to say the least. True,
the ICC Arbitral Tribunal had indeed ruled that LHC wrongfully drew upon the
securities, yet there is no order for the payment or return of the proceeds of the
said securities. In fact, Paragraph 2142, which is the final paragraph of the Third
Partial Award, reads:

2142. All other 28issues, including any issues as to quantum and costs, are reserved to
a future award.
29
Meanwhile, the tribunal issued its Fifth Partial Award on 30 March 2005. It
contains, among others, a declaration that while LHC wrongfully drew on the
securities, the drawing was made in good faith, under the mistaken assumption
that the contractor, TPI, was in default. Thus, the tribunal ruled that while the
amount drawn must be returned, TPI is not entitled to any damages or interests
due to LHC’s drawing on

_______________

27 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, signed

at New York on 10 June 1958, and ratified by the Philippines under Senate Resolution No.
71.
28 Rollo, p. 663.
29 Id., at pp. 1685-1703.

.
 VOL. 490, MAY 19, 2006 25
Transfield Philippines, Inc. vs. Luzon Hydro Corporation
30
the securities. In the Fifth Partial Award, the tribunal ordered:

“6. Order
6.1. General
166. This Fifth Partial Award deals with many issues of quantum. However, it
does not resolve them all. The outstanding quantum issues will be determined in a
future award. It will contain a reconciliation of the amounts awarded to each party
and a determination of the net amount payable to Claimant or Respondent, as the
case may be.
167. In view of this the Tribunal will make no orders for payment in this Fifth
Partial Award. The Tribunal will make a number of declarations concerning the
quantum issues it has resolved in this Award together with the outstanding liability
issues. The declarations do not constitute orders for the payment of money and are
not intended to be enforceable as such. They merely constitute amounts which will
be included in the Final31 Award and will be taken into account in determining the
actual amount payable.” (Emphasis Supplied.)

Further, in the Declarations part of the award, the tribunal held:

6.2 Declarations
168. The Tribunal makes the following declarations:
xxx
3. LHC is liable to repay TPI the face value of the securities drawn down by it,
namely, $17,977,815. It is not liable for any further damages claimed by TPI in
respect of32 the drawdown of the securities.
x x x.

Finally, on 9 August 2005, the ICC Arbitral tribunal issued its Final Award, in
essence awarding US$24,533,730.00,

_______________

30 Id., at pp. 1703-1705.

31 Id., at p. 1741.
32 Id., at pp. 1741-1742.
26 SUPREME COURT REPORTS ANNOTATED
Transfield Philippines, Inc. vs. Luzon Hydro Corporation

which included33
TPI’s claim of US$17,977,815.00 for the return of the securities
from LHC.
The fact that the ICC Arbitral tribunal included the proceeds of the securities
shows that it intended to make a final determination/award as to the said issue
only in the Final Award and not in the previous partial awards. This supports
LHC’s position that when the Third Partial Award was released and Civil Case
No. 04-332 was filed, TPI was not yet authorized to seek the issuance of a writ
of execution since the quantification of the amounts due to TPI had not yet been
settled by the ICC Arbitral tribunal. Notwithstanding the fact that the amount of
proceeds drawn on the securities was not disputed the application for the
enforcement of the Third Partial Award was precipitately filed. To repeat, the
declarations made in the Third Partial Award do not constitute orders for the
payment of money.
Anent the claim of TPI that it was LHC which committed forum shopping,
suffice it to say that its bare allegations are not sufficient to sustain the charge.
WHEREFORE, the Court RESOLVES to DISMISS the charges of forum
shopping filed by both parties against each other.
No pronouncement as to costs.
SO ORDERED.

Puno (Chairperson), Austria-Martinez, Callejo, Sr. and Chico-

Nazario, JJ., concur.

Charges of forum shopping dismissed.

Note.—Forum shopping is present when there is identity of parties, rights or

causes of action and reliefs sought in two or more pending cases. (R & E
Transport, Inc. vs. Latag, 422 SCRA 698 [2004])

——o0o——

_______________

33 Final Award, Id., at pp. 1768-1815.

 VOL. 490, MAY 31, 2006 27
Re: Dishonesty and/or Falsification of Official Document of Mr. Rogelio
M. Valdezco, Jr.