Arbitration rules for settling intra-corporate tiffs issued

The Securities and Exchange Commission (SEC) has issued guidelines that will allow firms to resolve intra-corporate disputes through arbitration.

The agency issued SEC Memorandum Circular No. 8, Series of 2022, which provides for the Guidelines on Arbitration of Intra-Corporate Disputes for Corporations.

The guidelines operationalize Section 181 of Republic Act (RA) 11232, or the Revised Corporation Code of the Philippines (RCC), which states that an arbitration agreement may be provided in the articles of incorporation or bylaws of a corporation.

The guidelines provide for the minimum provisions of the arbitration agreement that a corporation may execute, the place of arbitration if not specified in the arbitration agreement, the procedure for the appointment of arbitrators, the composition and powers of the arbitral tribunal, and disclosure requirements, among others.

The guidelines define arbitration as a voluntary dispute resolution process in which one or more arbitrators, appointed by the parties’ designated independent third party or in accordance with the rules, resolve a dispute by rendering an award. 

A domestic corporation may provide an arbitration agreement in its articles of incorporation or bylaws, as well as in the form of a separate agreement.

An arbitration agreement must state the number of arbitrators; the designated independent third party who shall appoint the arbitrator/s; procedure for the appointment of the arbitrator/s; and the period within which the arbitrator/s should be appointed by the designated independent third party.

Arbitration agreements that do not comply with such requirements shall be unenforceable, although arbitration shall still proceed under RA 9285, or the Alternative Dispute Resolution Act of 2004.

When such an agreement is in place, disputes between the corporation, its stockholders or members, which arise from the implementation of the articles of incorporation and bylaws, or from intra-corporate relations shall be referred to arbitration. However, disputes that involve criminal offenses and interests of third parties shall be excluded from arbitration.

When an intra-corporate dispute is filed with a regional trial court despite the adoption of an arbitration agreement in the corporation’s articles of incorporation, bylaws or in a separate agreement, the court shall act in accordance with the rules of procedure that the Supreme Court may promulgate to implement Section 181 of the RCC.