By Keren Concepcion G. Valmonte

THE SECURITIES and Exchange Commission (SEC) has proposed guidelines on the arbitration of disputes within corporations.

“Section 181 of the Revised Corporation Code (RCC) now allows arbitration,” SEC Commissioner Kelvin Lester K. Lee said in a private message sent via Twitter. “So this is prepared in accordance with that provision and to allow the commission to implement that provision.”

Under Section 181 of Republic Act No. 11232 or the RCC, a domestic corporation can include an arbitration agreement in its articles of incorporation or by-laws, or as a separate document. Once this is in place, any intra-corporate dispute will be referred to arbitration.

This will be used to address disputes among the corporation, its stockholders or members, arising from the implementation of the articles of incorporation or by-laws, or from intra-corporate relations.

However, any intra-corporate dispute that involves criminal offenses and interests of third parties shall be nonarbitrable.

Under the proposed rules, the arbitration agreements must enumerate the number of arbitrators who will form the tribunal and include the name of the independent party who chose them, as well as the appointment procedures.

Arbitrators must be accredited by the Office for Alternative Dispute Resolution or by organizations authorized by the said office or the SEC. Arbitrators must be appointed within a specified timeframe.

“Any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to his or her impartiality or independence,” the draft circular said.

Should the period for appointing arbitrators lapse, parties of the dispute may request the commission to appoint members to the tribunal. The draft circular also details the procedures the SEC will undertake, including sending each party the list of its candidates.

“The arbitral tribunal shall have the power to grant interim measures necessary to ensure enforcement of the award, prevent a miscarriage of justice, or otherwise protect the rights of the parties,” the SEC said.

The decision of the tribunal must be carried out within 15 days after parties of the dispute have been notified. It shall only be suspended by the filing of a bond or the issuance by the concerned court of an injunctive writ.

“I personally anticipate, that, moving forward, more corporations will have provisions on arbitration once the rules are approved and implemented, which would in effect help minimize court cases as more corporations will, hopefully, engage in arbitration instead,” Mr. Lee said.

Under the draft rules, regional trial courts should dismiss cases related to an intra-corporate dispute if a company has an arbitration agreement.

“Exceptional cases” may be exempt from the rules, the corporate regulator added.

The SEC is now requesting the public to comment on the draft memorandum.