Construction arbitration in the Philippines

While commercial arbitration in the Philippines follows the Alternative Dispute Resolution Act of 2004, based on the pre-2006 UNCITRAL Model Law, construction disputes are governed by a separate regime, the Construction Industry Arbitration Law (CIAL) under Executive Order No. 1008 (1985), which established the Construction Industry Arbitration Commission (CIAC).

Now marking its 40th year, the CIAC offers a distinct statutory framework and procedural rules that parties should carefully consider when drafting arbitration clauses for Philippine construction projects.

Exclusive jurisdiction over construction disputes

The CIAC has original and exclusive jurisdiction over disputes arising from Philippine construction contracts, whether public or private and at any stage of the project, provided the dispute involves construction, parties engaged in construction in the Philippines and there is an agreement to arbitrate.

The CIAC’s authority covers a wide range of construction-related disputes, from contract issues to delays and payment defaults, excluding only labour matters governed by the Labor Code. ‘Construction’ is broadly defined to include all on-site work from land clearance to installation and completion.

The CIAC’s exclusive jurisdiction has important practical consequences. Firstly, even if a contract specifies another arbitral institution such as the International Chamber of Commerce (ICC), the CIAC can still assert jurisdiction under the CIAC Rules of Procedure and latest rulings from the Supreme Court. Secondly, pre-arbitration steps such as mediation, conciliation or dispute adjudication board referrals may not be effective as the Philippine Supreme Court has considered that these steps conflict with the exclusive jurisdiction of the CIAC.

Some experts believe CIAC follows a “first to file” rule, meaning it may decline authority if arbitration is initiated with the institution named in the contract, like the ICC. However, this view has not been confirmed by Philippine courts, and few reported construction cases outside CIAC have progressed far enough to test enforceability.

To avoid enforcement risks and jurisdictional challenges, the best practice is to expressly refer construction disputes to the CIAC when the project is in the Philippines. Where contracts may involve both construction and non-construction issues, it is advised to clearly split these in the dispute resolution clause, sending construction matters to CIAC and others to a different arbitral institution.

The CIAC arbitral tribunal

The CIAC’s arbitral tribunal has unique features that set it apart from other arbitral institutions. While foreign counsel can assist in proceedings, they cannot act as advocates before the tribunal. 

Appointing foreign arbitrators is also possible, but is subject to strict conditions, including the requirement that the dispute involves a truly international party, not just a local subsidiary or joint venture.

A CIAC award may be subject to appeal

Unlike non-construction awards governed by the ADR Act, a CIAC award may be subject to appeal on limited grounds, including pure questions of law, and those involving questions of fact where there are challenges to the integrity of the arbitration.

Reflections on CIAC at 40

The CIAC has become a cornerstone of construction dispute resolution in the Philippines. Originally established to provide a specialised, efficient and accessible forum, CIAC has largely fulfilled that vision by offering structured procedures, a dedicated pool of arbitrators and a strong track record of timely awards, with most cases resolved within six months and awards becoming enforceable 15 days after receipt.

CIAC arbitration is generally accessible to international practitioners, with familiar procedural rights, but key differences remain: foreign counsel may assist but cannot appear as advocates; appointing foreign arbitrators is possible but subject to strict conditions; emergency arbitration is unavailable; the arbitrator pool is limited, and awards may be appealed. These features, along with CIAC’s default authority over construction disputes, require careful consideration when drafting arbitration clauses.

As projects in the Philippines grow in scale and complexity, parties are advised to structure dispute resolution clauses deliberately, including by splitting construction and non-construction disputes, specifying institutions and seats with enforcement in mind, and tailoring provisions to reflect procedural preferences. Looking ahead, CIAC’s continued relevance will depend on its ability to evolve in line with international best practices and the needs of increasingly sophisticated infrastructure projects.