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How PSEi member stocks performed — May 28, 2019

Here’s a quick glance at how PSEi stocks fared on Tuesday, May 28, 2019.

 

House adopts Senate version of Security of Tenure bill

THE House of Representatives on Tuesday adopted the Senate’s version of a bill which seeks to prohibit the practice of “endo,” clearing the way for more workers to enjoy regular status with their employers.

The House adopted Senate Bill 1826 or the Security of Tenure Bill which will amend its own version of the legislation, House Bill 6908.

Its adoption eliminates the need for lengthy bicameral sessions to reconcile the two chambers’ bills.

The Senate bill’s principal author, Senator Emmanuel Joel J. Villanueva said in a Viber message: “The Senate version will be enrolled to Malacañang for the signature of the President.”

“Endo” or “end of contract” denies workers a pathway to permanent employment status and the associated benefits.

The bill rules out the following practices which it classifies as labor-only contracting: the provision by a job contractor of workers it recruits and places; the performance by contract workers of core industry tasks; the company where workers are assigned, or the contractee, having direct control and supervision of the workers supplied.

It also classifies workers as either regular, probationary, project and seasonal.

The Security of Tenure bill has been identified by the Legislative-Executive Development Advisory Council as a priority. It was also among the measures President Rodrigo R. Duterte pushed for during his Third State of the Nation Address in July 2018. — Vince Angelo C. Ferreras

Employers warn anti-‘endo’ bill will discourage investment, hiring

EMPLOYERS warned that the Security of Tenure Bill (SoT) will dampen investment and increase unemployment if enacted, ahead of the bicameral conference committee session to reconcile the House and Senate versions of the bill later this week.

At the Employers Confederation of the Philippines’ (ECoP) 40th annual conference, ECoP Chair Edgardo G. Lacson said: “For regulations to provide punitive sanctions, we believe that these are disincentives to investment. No investor in their right mind will do business in a country where they are intimidated and threatened to be put in jail should they be found non-compliant, especially with the kind of labor inspectorate and labor justice system we have right now.”

“Investment creates employment so you should not discourage investment,” he said.

Philippine Association of Legitimate Service Contractors Inc. (PALSCON) President Rhoda C. Caliwara added that passing the SoT Bill is not the only way to assure protection of workers.

“If there’s a policy, it should be how to harmonize the interests of both labor and capital, not about demonizing one or the other. We still need investment to generate employment. It’s still employment that’s the best social protection that the economy can give to our workers,” she said.

Former Labor Undersecretary Josephus B. Jimenez said he believes the bill may not be approved as is by President Rodrigo R. Duterte despite its designation as urgent last year.

“It’s very possible that a compromise will be agreed but the president will not approve the entire bill as proposed by the Bicam because the president understands the realities on the ground… Such a law will be harmful to the economy,” Mr. Jimenez said during the conference.

ECoP President Sergio R. Ortiz-Luis said that regularizing workers does not always assure better employment, since employers will be forced to reduce hiring if they don’t have the capacity to regularize every worker. Any elimination of contracting activities should focus on those that are already classified in the current Labor Code as illegal.

“You have to be remember that regularization does not create jobs… We have already succeeded in eliminating the evils of 555 and Endo but we’re going beyond that (with the SoT Bill) which will affect worldwide competition,” he told reporters on Tuesday. Endo and 555 refer to employment practices that deny workers a pathway to regular employment, typically by denying them the six-month tenure the law requires before mandatory regularization.

Last week, the Senate approved the SoT Bill 15-0 on third and final reading. The bicameral conference committee session to harmonize the two versions of the bill is scheduled for Wednesday and Thursday.

The 17th Congress is scheduled to adjourn next week, June 3.

Labor Undersecretary Ana B. Dione said employers have nothing to worry about if ever the SoT Bill is enacted as it just clarifies the definition of contractualization, which the Labor Code failed to explain.

“There is still contractualization… but legal work arrangements. We hope that it clarifies the unclear provisions of the current law… if it’s a clearer definition, it’s easier to implement. It creates a better understanding for employees and management,” she said at the conference. — Gillian M. Cortez

Shops warned to translate foreign-language signs into English/Filipino

THE Department of Trade and Industry (DTI) said it has prepared a draft order that would require shops to translate foreign-language signs into Filipino or English, apparently in response to reports of restaurants catering to Chinese-only clients.

In an advisory to solicit comment on the draft, the DTI said the draft department administrative order will cover all businesses offering products or services covered by the Consumer Act of 1992.

The order bans untranslated signage, billboards, brochures, fliers, notices, fliers, labels, advisories, price tags, menus, and receipts, among others.

“The use of foreign language or languages shall be allowed, provided, that a corresponding translation is made in both or either Filipino or English, which translation shall be written or printed in the same material, either above or below the written foreign language, or in such manner that the English/Filipino translation clearly indicates or refers to the foreign language intended to be translated,” according to the draft order.

It requires the English or Filipino translation to be as easily visible and legible as the foreign language.

The order refers to “Filipino” as including all regional languages of the Philippines.

It proposed penalties of P50,000 for a first offense, P100,000 for a second and P300,000 for a third. Third-time violators also face cancellation of their business name certificate at the DTI’s Business Name registry. The DTI will also recommend to local government units or other agencies the revocation of the company’s business registration, permits, licenses and other clearances. — Janina C. Lim

FDA orders seizure of all pork products from countries affected with African Swine Fever

THE Food and Drug Administration (FDA) said it has ordered the recall and seizure of pork meat products imported from countries affected by African Swine Fever (ASF).

The order covers products which are for distribution, offered for sale, transfer, or donation.

“Pursuant to the FDA Order No. 2018-133 dated 24 September 2018 and FDA Order No. 2019-045 dated 27 May 2019, all importers, distributors, retail outlets, and other dealers of processed pork meat products, are hereby ordered to immediately recall all pork meat products imported from countries suspected to be affected by the African Swine Fever (ASF) virus as identified in the aforementioned Orders,” FDA said through the FDA Order 2019-046 given to reporters on Tuesday.

Food-Drug Regulation Officers and Regulatory Enforcement Unit (REU) officers have been instructed to collect all pork products in circulation originating from ASF-affected countries. It authorized them to seek the assistance of the Philippine National Police (PNP) and Local Government Units (LGUs) if necessary.

Section 14 of Republic Act (RA) No. 9711 authorizes the FDA Director-General “to issue orders of seizure, to seize and hold in custody any article or articles of food… that is adulterated, counterfeited, misbranded or unregistered, or drug, in-vitro diagnostic reagent, biologicals, and vaccine that is adulterated or misbranded.”

The FDA also reiterated its warning against the purchase and consumption and importation of all pork meat products from ASF-affected countries like China, Hungary, Latvia, Poland, Romania, Russia, Ukraine, Vietnam, Zambia, South Africa, the Czech Republic, Bulgaria, Cambodia, Mongolia, Moldova, and Belgium.

ASF is non-treatable and contagious, and can kill swine in as little as two days. The Bureau of Customs first alerted NAIA in January about the possible entry of contaminated pork products after it received reports of their entry into South Korea and Japan late last year. — Vincent Mariel P. Galang

NFA says rice procurement funds adequate after reports of delayed payments

THE NATIONAL Food Authority (NFA) said it has sufficient funding to fulfill its domestic rice procurement mandate, despite high buying prices that have persuaded farmers to sell it 4.1 million bags of palay, or unmilled rice, as of May 20.

In a statement Tuesday, NFA Officer-in-Charge Administrator Tomas R. Escarez said he had to deliver reassurances amid reports of delayed payments to farmers in some NFA buying stations.

“NFA management assures those isolated instances are being addressed at the soonest possible time,” it said in the statement.

The NFA has lost its rice importing functions under the rice tariffication law, which liberalizes the import process for private entities. It has been relegated to maintaining a buffer stock from domestically-produced rice.

The NFA currently pays P20.70 per kilogram (kg) for palay, consisting of the P17.00 per kilogram support price and an additional P3.00 as a buffer stocking incentive (BSI); a P0.20 drying incentive; a P0.20 delivery incentive; and a P0.30 cooperative development incentive fee (CDIF).

The average farmgate price for palay paid by commercial rice buyers fell 0.5% week-on-week during the second week of May to P18.35 per kilogram (kg), the Philippine Statistics Authority (PSA) said.

Mr. Escarez has advised NFA field offices to request funds in advance to be able to pay for palay deliveries from farmers.

As of May 20, the NFA has bought about 4.1 million bags of palay worth P4.2 billion. The NFA’s ultimate target is to procure 15 to 30 million bags to keep in inventory for emergencies. — Vincent Mariel P. Galang

Bicam adopts provision reserving 100% of service charge for distribution to workers

A PROVISION reserving 100% of service charges in the hospitality industry for distribution to workers was adopted by the bicameral conference committee Tuesday, a senior legislator said.

“Ngayon, ‘yung service charge ay 100% na na mapupunta sa ating mga workers (The workers will now get 100% of the service charge); we were able to thresh out the differences between the version of the House and the Senate,” Senator Emmanuel Joel J. Villanueva, who chairs the Senate committee on labor, employment and human resources development, told reporters in a chance interview.

The bicameral session adopted a provision in Senate Bill No. 1299, which proposed to equally distribute the entire service charge collection to rank-and-file and supervisory employees. House Bill 8784 had raised the distributable amount to 90% from the current 85%, leaving 10% to cover breakage and pilferage.

“Ang usual is 85-15 (The usual split is 85-15). Fifteen percent remains with management. Their reasoning is to pay for breakage, pilferage, and sometimes to augment salaries,” Mr. Villanueva said.

He said he believes the measure is likely to be ratified later Tuesday.

He added that the measure will authorize the Department of Labor and Employment (DoLE) to regulate and ensure compliance with the proposed law.

“DoLE will be there to check,” he said.

He said the panel also agreed that establishments currently imposing service charges will be banned from discontinuing the practice after the measure is enacted.

“Ang gusto ko pang i-raise ay ‘yung kapag tinanggal, kasi ‘yung iba sasabihin, tanggalin na lang natin, optional naman, meron tayong provision doon na hindi pwede ‘yung tinatawag na non-dimunition. (Another thing I want to raise is a non-diminution provision that prevents establishments from abandoning the practice of collecting service charges),” he said. — Charmaine A. Tadalan

House panels authorize technical working group to draft water crisis plan for Metro Manila

TWO House committees agreed to form a technical working group that will draft a master plan to avert future water supply crises similar to the interruptions in March, legislators said.

The committees on Government Enterprises and Privatization and Public Works and Highways jointly approved the plan Tuesday as embodied in resolutions 2547 and 2548 written respectively by Speaker Gloria Macapagal-Arroyo and the chair of the Committee on Metro Manila Development, Rep. Winston Castelo of the 2nd district of Quezon City.

“There is no lead agency to coordinate the different government offices towards the goal of averting these crisis… We have to accelerate the submission of the contingency plan so we will be able to address the issue and prevent the recurrence of the Metro Manila (water shortage),” Mr. Castelo said during deliberations Tuesday.

Water shortages have hit Metro Manila this year due to low water levels at Angat Dam.

According to House Resolution 2547, the technical working group will be composed of the Metropolitan Waterworks and Sewerage System (MWSS), National Water Resources Board (NWRB), Local Water Utilities Administration (LWUA), Department of Agriculture (DA), National Irrigation Administration (NIA), Manila Water Company, Inc. (MWCI), and Maynilad Water Services, Inc. (MWSI).

House Resolution 2548 urges the MWSS, MWSS-Regulatory Office (MWSS-RO), NWRB, LWUA, Bureau of Soils and Water Management (BSWM), NIA, MWCI, and MWSI to immediately formulate a water security master plan for Metro Manila.

“What we envision now is a coordinated effort, not only with the regulators but also with the major players right now and other agencies involved in the distribution of water like NIA and LWUA,” Mr. Castelo added.

He said the plan also needs to be readily implemented “at the push of a button” should a new water crisis emerge. — Vince Angelo C. Ferreras

Weighing the cost of appeasing china

In diplomacy and foreign relations, appeasement refers to a state’s effort to mollify or pacify, but not necessarily align with, a revisionist power. An appeasing state could extend diplomatic concessions to a revisionist power without necessarily aligning or subordinating its foreign policy with the latter’s. Appeasement can either complement a bandwagoning policy because a weak power is vulnerable to external pressure and has little capacity to confront the threatening power. Alternatively, it can supplement a state’s balancing strategies, in the same way that “talking tough” and leveling coercive threats can accompany or preclude taking concrete measures to improve one’s power relative to the threatening state.

A state appeases a revisionist power to prevent a conflict it cannot win or to acquire resources without necessarily aligning with the source of threats. In many instances, the provision of foreign economic assistance can affect a small power’s decision on whether or not it seeks to balance a revisionist power because it provides a clear and credible signal that the latter does not have any aggressive intention.

THREE YEARS OF APPEASEMENT
Since 2016, President Rodrigo Duterte has pursued an appeasement policy toward China, aimed at unravelling President Benigno Aquino’s policy of challenging the Asian power’s expansive claim in the South China Sea. He has extended the following diplomatic concessions to China: a) he distances his country from its long-standing treaty ally, the U.S., and gravitates toward an emergent regional power, China, bent on affecting a territorial reconfiguration in East Asia, and b) he has set aside the Permanent Court of Arbitration (PCA) award to the Philippines in the South China Sea dispute. The Duterte administrations yields these diplomatic concessions to earn China’s goodwill. This is because it intends to harness Chinese financial resources under the Belt and Road Initiative (BRI) to fund several major infrastructure projects under the Build, Build, Build program.

President Duterte and his closest economic advisers saw how Chinese investments boosted infrastructure development in Myanmar, Laos, and Cambodia. They also observed that China’s BRI plans for increased connectivity among Southeast Asian countries through roads, railways, sea routes, airways, and the internet to promote unimpeded trade, policy-coordination, and financial integration. At the onset of his six-year term in June 2016, President Duterte sought a dramatic increase in Chinese investment and infrastructure projects in the southern part of the Philippines. He hoped that this massive inflow of Chinese development funds would facilitate the peaceful settlement of the Moro secessionist conflict, allow for both peaceful development, and create efficient connections to remote markets through the New Maritime Silk Road.

President Duterte, however, has not aligned or subordinated Philippine foreign policy to China’s revisionist goal of maritime expansion. He still challenges China’s expansionist goal. He has implemented the following policies: a) he has downgraded his country’s security relations with the U.S. but has not abrogated the 1951 Mutual Defense Treaty (MDT) and the 2014 Enhanced Defense Cooperation Agreement (EDCA) and has even allowed the conduct of several Philippine-U.S. joint military exercises in the South China Sea; b) he continued to bankroll the Armed Forces of the Philippines (AFP) modernization program, aimed at developing the Philippine military’s territorial defense capabilities against China; and c) he has fostered a security partnership with Japan, China’s traditional rival in East Asia.

Philippine President Rodrigo Duterte (R) with Chinese President Xi Jinping (L) during the state banquet at the Rizal hall of Malacañang on Nov. 20, 2018 — RUSSELL PALMA/POOL PHOTO

THE COST OF APPEASEMENT
Facilitating China’s efforts to project its maritime power in the Western Pacific, however, is adversely affecting the Philippines’ territorial and long-term strategic and economic interests as an archipelagic state. By appeasing an expansionist power, the Philippines is complicit to China’s long-term strategy of maritime expansion aimed to push the U.S. out of East Asia. It has also become a partner of China in its destruction of at least 28 coral reefs across the South China Sea. The Philippines is also conniving with China in upsetting the balance of power in the region and, more significantly, causing the slow demise of the Southeast Asian maritime order, which is based on an open, liberal, and global system. This is because the appeasement policy on China has the following implications:

The Duterte administration has prevented the formation of a coalition of states that can implement the 2016 UNCLOS ruling. The UNCLOS award produced the basis and motivation for cooperation among all the states that are threatened by China’s maritime expansion and consequently are supportive of the UNCLOS award to the Philippines. However, by appeasing China, the Philippines has lost any motivation and moral high ground to form and lead this coalition of states. Instead, it subscribes to China’s preferred solutions to the South China Sea imbroglio — bilateral negotiations and joint development.

The current administration has also widened the cleavage within the Association of Southeast Asian Nations (ASEAN). The ASEAN has the potential to constrain China from expanding into the South China Sea and unravelling the regional maritime order. China, however, has effectively neutralized the regional organization by creating division within the member states of ASEAN through its Salami strategy. This involves China offering each claimant state a joint development venture as a means of resolving the dispute. By accepting China’s offer of joint development, the Philippines has effectively widened the division within ASEAN and has effectively weakened this regional association vis-à-vis this expansionist power.

Finally, the Duterte administration’s appeasement policy has further emboldened China to pursue its goal of expansion in the South China Sea and in the process unravel Southeast Asia’s maritime order. Relevant to the dispute, the launching of the BRI in 2013 enabled China to foster greater stability in its bilateral relations with the disputant states. China offered to finance several BRI-related infrastructure projects in the Philippines. As a result, China was able to influence the Duterte administration in distancing the Philippines from the United States, and altering the Aquino administration’s policy of challenging Chinese maritime expansion. China’s ability to change the Philippines’ foreign policy relative to the dispute is further encouraging this emergent power to pursue its expansion agenda in the South China Sea, transforming what used to be a global, open, and liberal maritime order in the region into something that is severely outdated.

 

Dr. Renato Cruz De Castro is Trustee and Convenor of the National Security and East Asian Affairs Program, Stratbase ADR Institute.

The Public Service Act and provincial tourism

One of the oldest laws in the Philippines yet having a huge and restrictive impact on the modern economy is Commonwealth Act 146 or the Public Service Act (PSA), which was approved on November 7, 1936, or nearly 83 years ago.

That law lists five sectors as “public utilities,” and hence, foreign capital is restricted, if not prohibited. These are (a) transmission of electricity, (b) distribution of electricity, (c) water works and sewerage system, (d) telecommunications, and (e) transportation (land, sea, air).

Where there is restriction, there is limited or no competition and thus, consumers are penalized with the limited choices. The solution is to expand competition, and one proposed legislation is amending the PSA and removing for now sectors (d) and (e), telecommunications and transportation. These are contained in HB 5828 (passed on third reading since September 2017) and SB 1754 (still a Senate Committee Report).

CRECENCIO I. CRUZ

Two relevant news here and I quote portions of those stories:

1. “Public Service Act Amendments to open economy to more investments, generate more jobs – Poe”

(Senate Press Release, February 15, 2018).

“Poe, chairperson of the Senate committee on public services, said the proposed amendments seek to address the confusion in the definition of a public utility and public services, which, for several decades, hampered economic growth. ‘Foreign entities would be allowed to come in and invest. The goal is to increase competition, provide better quality services and also to create jobs,’ Poe said.”

2. “Senate eyes approval of Public Services Act amendments before 17th Congress ends in June” (BusinessWorld, April 3, 2019)

“‘Increasing FDI and promoting national security are not conflicting goals. The country can have both as long as proper safeguards are observed’” she (Sen. Poe) said, “Foreign competition can give consumers more genuine alternatives to existing services.”

These are good announcements and there are many numbers to prove this. One is about domestic tourism and domestic airports. In the ASEAN, there are three big archipelagic countries, with their estimated number of islands — Indonesia with 18,100 islands, Philippines with 7,500, and Thailand with 1,400 islands.

More islands mean more shipping lines and seaports needed, or better yet, more airlines and more airports needed. Indonesia and Thailand have expanded their number of airports over the last 10 years and their domestic passengers have nearly tripled. The Philippines did not expand its domestic airports and domestic passengers have only doubled. Vietnam has consolidated its domestic airports but it has expanded the number of domestic and foreign airlines into its soil and domestic passengers have expanded more than four times (see table).

To further promote the Philippines’ domestic and international tourism, and in the process further expand our GDP size, we need further airlines liberalization, further expansion of existing provincial airports, and further improvement of roads, seaports, energy and other physical infrastructures to serve the many resorts and hotels in many provinces and islands of the country.

There is only one week left in the current Congress that will have sessions until June 7, 2019. The Senate and then the bicameral committee should pass the PSA Amendment bills into law. This should be among the important laws that the Duterte administration can do for the consumers, passengers, visitors and investors.

 

Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.

minimalgovernment@gmail.com

Just one proof of reform, please

Now that the elections are over and new senators and local government officials are going to assume office, can we the citizenry expect the “promising” men and women who courted us for our votes and promised a Utopian government to please, please, puleezze make good on some of those promises?

No, we don’t expect you to fulfill all or even most of your promises. We know that many — most — of those promises were B.S., but that’s the way politics works. What we would like to appeal to you is to provide one or two proofs of reform.

Well, okay, even just one.

Yes sir, yes ma’am, just ONE PROOF that you folks are serious about being of service to the people (while you go about “recovering” your campaign expenses plus the usual ROI or return on investment).

We would like you to do something about the dozens of signatures, initials, notations, endorsements, confirmations and counter-approvals required just to get some service from the government.

Expectedly, the usual “Crusaders for Good Government” will focus on high-profile issues like gambling, drug dealing, smuggling and big-time influence peddling because these are the kind that land in the papers and generate TV interviews. They pay little attention to the “autographs” because the matter is not considered “serious enough” to give priority to.

The fact is that those “autographs” are among the main vehicles for graft and corruption in the civil service. I’ve been writing about these blasted signatures for years and the only time a plan was ever announced that something would be done about them, it turned out to be inadequate, it was actually funny.

Newly installed President Gloria Macapagal-Arroyo, who had displaced President Joseph “Erap” Estrada (for corruption, remember?), was apparently aware of the profit generating magic of signatures and initials on government application forms. She also appeared to be aware of the potential for red tape and the undue burden that too many “approvals” and “endorsements” were being inflicted on the citizenry.

She obviously knew that ordinary folks had to pay for each blasted signature. And not just one signature but many. And if they didn’t pay, forms and papers had a way of getting lost or ending up at the bottom of a pile.

It’s a bribery-extortion racket, that’s what it is.

Arroyo, having been involved in politics since she was knee-high, must also have been aware that there was no use complaining about the red tape and the bribery-extortion rackets because, likely as not, the upper-level person with whom the complaint would be filed was in on the action. And the one above him, too.

In her first State of the Nation Address, the newly-minted “redeemer” of an unspeakably graft-ridden Estrada administration vowed that she would cut red tape in government, making a specific reference to the issuance of housing permits. According to her, the processing of housing permits required 188 signatories. She then vowed to reduce that to “only 45.”

45 SIGNATURES???!!!! BAKIIIT???!!! But then 45 is a dramatic reduction from 188, hindi iba???

At any rate, how did Arroyo fare on this promise, among many promises she made in her SONA? Months later, they were “still working on it.”

According to reports from the palace, Arroyo had issued Executive Order No. 45 concerning “the issuance of housing-related certifications, clearances and permits and imposing sanctions for failure to observe the same.” The reports added that getting this Executive Order off the ground required consultations among government agencies. Naturally, that would take a while.

With the Executive Order released, an Implementing Rules and Regulations (IRR) had been drafted. That was reportedly still being studied by the legal eagles in Malacañang. Naturally, that would also take a while. It would then be submitted to Congress for action. Of course, that, too, would take a while.

We lost track of the progress of that “major anti-corruption initiative” because the Arroyo government got embroiled in too many cases of bigtime corruption such that the “small matter” of signatures got snowed under.

If it’s any consolation to corruption-weary citizens, “play for pay,” which is what these approvals are called in other countries, is common and apparently continues to fester in spite of the fact that a lot of officials are aware of it.

In a story in the Washington Post, a high government official talked about the problem of corruption in public office: “Corrupt and overlapping bureaucracy is choking the growth of small business.”

Sounds familiar? The story continued:

“He laid the blame squarely on the government — especially on permit-givers, inspectors and regulators ‘who feed off small business at every stage of its development’ and who limit the growth of businesses by ‘constant extortions.’”

This story, written by Sharon LaFraniere was about present-day Russia under President Vladimir Putin. According to the piece, Putin’s “biggest challenge” will be “to alter the culture of corruption.”

Apparently, in Russia, “most small and medium-size businesses pay bribes in one form or another.”

Big business has the “political muscle to cut through smothering state bureaucracy” but small business owners are at the mercy of the bribe-takers and extortionists.

And here’s something that could well have been part of the first State of the Nation Address of Arroyo: “Putin’s economic adviser, Andrei Illarionov, recently held up a chart on national television depicting the more than 500 steps that are legally required to start a business. Hundreds more agencies then regulate almost every aspect of business life, he said. Each step in the bureaucratic chain presents an opportunity to extract a fee, a gift or a gratuity from a business owner whose existence depends on government approval.”

The Washington Post story added:

“‘The president has sent a signal that the attitude of the government is changing,’ (Alexander) Ioffe (of the Russian Entrepreneurial Organizations Union) said. ‘But what lies ahead will be very difficult, very painstaking work because it will mean depriving officials who are financially doing pretty well.’”

THERE is where the problem lies.

As in Russia, cutting the red tape and reducing the number of autographs in this and future Philippine administrations will mean “depriving officials who are financially doing pretty well.”

Yes, indeed. It will mean depriving politicians, bureaucrats and even-lowly government clerks of a major source of income — a prospect that no one relishes, particularly those who have to survive on measly civil service wages.

If the newly-elected senators and local officials would like to provide proof of reform, this is where they should start.

 

Greg B. Macabenta is an advertising and communications man shuttling between San Francisco and Manila and providing unique insights on issues from both perspectives.

gregmacabenta@hotmail.com

Revisiting important concepts in arbitration

Alternative dispute resolution methods or ADRs, i.e., arbitration, mediation, conciliation among others, “are encouraged by the Supreme Court, since by enabling the parties to resolve their disputes amicably, they provide solutions that are less time-consuming, less tedious, less confrontational, and more productive of goodwill and lasting friendships.”

Arbitration in particular has been consistently dubbed in our jurisprudence as the “wave of the future” in civil and commercial disputes. It has become a matter of state policy in the Philippines to protect and ensure the enforcement of any and all kinds of agreement to arbitrate, such that non-compliance with a valid arbitration agreement renders null and void all the judicial proceedings conducted after the case should have been referred to arbitration; whatever decision may have been rendered should be vacated and set aside.

In line with the said state policy favoring arbitration, the following important concepts bear revisiting.

ARBITRATION AGREEMENT AS A CONTRACT
An arbitration agreement is a commitment on the part of the parties to submit to arbitration the disputes covered therein, it is the law between them. An agreement to arbitrate is a contract, which must satisfy the essential requisites of a valid contract, and the rights and liabilities of the parties are controlled by the law of contracts. Since the arbitration agreement is binding, the parties are expected to abide by it in good faith.

An arbitration agreement may be included in a main contract as an arbitration clause or a compromissoire, or may be constituted in a separate contract. It may also come in the form of a reference in a written contract to a document containing an arbitration clause such as to make that clause part of the contract. In the 2018 case of Tourism Infrastructure and Enterprise Zone Authority v. Global-V Builders Co. (G.R. No. 219708, 3 October 2018), the Supreme Court upheld the jurisdiction of the Construction Industry Arbitration Commission (CIAC) over the dispute, even if the five (5) Memorandum of Agreements (MoAs) between the parties did not contain an arbitration agreement, which agreement was actually found in another or separate document (such as the General Conditions of the Contract) deemed to form part of the MoAs. The Court held:

“In this case, the Court of Appeals found that there was an agreement to arbitrate in the General Conditions of Contract, particularly in Clause 20.2 thereof, which formed part of the MoAs xxx.

Undoubtedly, Clause 20.2 of the General Conditions of Contract is an arbitration clause that clearly provides that all disputes arising from the implementation of the contract covered by R.A. No. 9184 shall be submitted to arbitration in the Philippines. In accordance with Section 4.1 of the CIAC Rules, the existence of the arbitration clause in the General Conditions of Contract that formed part of the said MoAs shall be deemed an agreement of the parties to submit existing or future controversies to CIAC’s jurisdiction. Since CIAC’s jurisdiction is conferred by law, it cannot be subjected to any condition; nor can it be waived or diminished by the stipulation, act or omission of the parties, as long as the parties agreed to submit their construction contract dispute to arbitration, or if there is an arbitration clause in the construction contract. Hence, the fact that the process of arbitration was not incorporated in the contract by the parties is of no moment. Moreover, the contracts in this case are expressly covered by R.A. No. 9184 (The Government Procurement Reform Act), which provides under Section 5945 thereof that all disputes arising from the implementation of a contract covered by it shall be submitted to arbitration in the Philippines, and disputes that are within the competence of CIAC to resolve shall be referred thereto.”

In the 2017 case of Steamship Mutual Underwriting Association (Bermuda) Limited v. Sulpicio Lines, Inc. (G.R. No. 196072, 20 September 2017, 840 SCRA 203), the arbitration agreement set forth in the Club Rules, which was incorporated by reference in the contract between the parties, was likewise upheld by the Supreme Court. The Court ruled that “[t]he reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement provided that the contract is in writing and the reference is such as to make that clause part of the contract …” and that “an arbitration agreement that was not embodied in the main agreement but set forth in another document is binding upon the parties, where the document was incorporated by reference to the main agreement. The arbitration agreement contained in the Club Rules, which in turn was referred to in the Certificate of Entry and Acceptance, is binding upon Sulpicio even though there was no specific stipulation on dispute resolution in this Certificate.”

DOCTRINE OF SEPARABILITY
Otherwise known as the doctrine of severability or autonomy, the doctrine of separability directs that the arbitration agreement be treated as a separate agreement, is independent of the main contract even if it is contained in an arbitration clause. The doctrine denotes that the invalidity of the main contract does not affect the validity of the arbitration agreement. Thus, in Cargill Philippines, Inc. v. San Fernando Regala Trading, Inc. (G.R. No. 175404, 31 January 2011, 641 SCRA 31), it was held that even a party who has repudiated the main contract is not prevented from enforcing its arbitration agreement. Being a separate contract in itself, the arbitration agreement may thus be invoked regardless of the possible nullity or invalidity of the main contract. In fact, the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law states that “[a] decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.”

The foregoing important concepts on arbitration are significant in encouraging arbitration as an alternative mode of dispute resolution, in order to prevent lengthy and expensive court litigations from happening, or at the very least making it available merely as a last resort. Resort to arbitration helps rid our courts’ dockets with cases which at the onset may be settled more amicably and expeditiously out of court.

Since Philippine courts are keen on making arbitration or other modes of alternative dispute resolution (ADRs) the staple in settling disputes domestically, parties who regularly enter into various contracts may well consider incorporating a template arbitration clause, or a reference to a different document bearing such arbitration clause, or such contractual stipulation on the agreement of the parties to undergo any of the ADRs. In case of disputes, the presence of such clause would be more advantageous for the parties in particular, and the justice system in general.

The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes only and not offered as and does not constitute legal advice or legal opinion.

 

John Frederick E. Derije is an Associate of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW), Davao Branch.

(6382) 224-0996

jederije@accralaw.com

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