The signing of statements of support to the Singapore Convention on Mediation (SCM) by 46 countries in August last year ushered in a new era of enforcement of international commercial settlement agreements that resulted from mediation. Through the SCM, settlement agreements reached through mediation may now be enforced internationally like arbitral awards under the 1958 New York Convention.
As one of the original signatories to the SCM, the Philippines, through the Department of Justice, is now in the process of completing all the documentary requirements to ratify the SCM. Once completed, the documents will be submitted to the Office of Treaties and Legal Affairs of the Department of Foreign Affairs (DFA), which will then officially deposit them with the United Nations as an instrument of ratification. The instrument of ratification expresses the consent of the Philippines to be bound by the SCM.
As of February 2020, Singapore and Fiji were the first countries to deposit their instruments of ratification with the United Nations.
Commission on Audit has no authority to review arbitral awards
In a recent ruling, the Supreme Court demonstrated its firm commitment to making the Philippines as a pro-arbitration jurisdiction. It held that the Commission on Audit (COA), in the exercise of its general audit power over money claims against the government, cannot disturb and review final and binding arbitral awards. COA’s authority over money claims confirmed in an arbitral award is restricted to determining the source of public funds from which the award may be satisfied pursuant to general auditing laws.
In G.R. No. 238671, Taisei Shmizu Joint Venture v. Commission on Audit and the Department of Transportation (“Taisei”), June 2, 2020, a dispute arose between the Department of Transportation (DOTr) and Taisei Shmizu Joint Venture (TSJV) during the construction of the New Iloilo Airport. Since its billings were left unpaid despite project completion and delivery, TSJV initiated arbitration against DOTr to collect its aggregate money claims of P2.3 billion.
In its Final Award, the arbitral tribunal appointed by the Construction Industry Arbitration Commission (CIAC) awarded P223.4 million to TSJV, which was later reduced to P216 million upon DOTr’s motion to correct the award. TSJV’s initial efforts to satisfy the award through CIAC’s writ of execution failed, with DOTr claiming that COA’s approval of the payment was required. Thus, TSJV filed a petition for enforcement and payment of the arbitral award with COA.
Despite the absence of any objection from DOTr, COA allowed the payment of only P104.6 million, less than half of the total award. In doing so, COA reviewed the evidence on record and reversed most of the arbitral tribunal’s findings. TSJV’s partial motion for reconsideration to pay the remaining amount was denied. On petition for certiorari to the Supreme Court, TSJV argued that COA acted with grave abuse of discretion amounting to excess or lack of jurisdiction in disregarding the final arbitral award rendered in favor of TSJV.
In its decision issued on June 2, 2020, the Supreme Court en banc granted TSJV’s petition for certiorari and held that COA gravely abused its discretion when it modified or amended the CIAC’s final and executory award. It held that while the COA is clothed with primary jurisdiction over money claims due from or owing to the government, COA cannot disturb the final and executory decisions of courts, tribunals, or other adjudicative bodies.
The Supreme Court distinguished between two types of money claims that may be brought before the COA.
The first type covers liquidated claims and quantum meruit cases, which may be originally filed with COA. Liquidated claims refer to those determined or readily determinable from vouchers, invoices, and such other papers within reach of accounting officers [Euro-Med Laboratories, Phil., Inc. v. Province of Batangas, 527 Phil. 623, 628 (2006)]. As held in several cases, claims against the government on a quantum meruit basis were likewise declared by the Supreme Court as properly filed or referred to COA [Metropolitan Manila Development Authority v. DMCI, 894 SCRA 119 (2019)].
In this first set of cases, COA acts as “adjudicator of money claims for or against the government,” exercising judicial discretion by investigating, weighing evidence, and ultimately resolving whether claims should be allowed or disallowed in whole or in part [see also Uy v. Commission on Audit, 328 SCRA 607 (2000)]. COA decisions resulting from this adjudicatory process may be appealed to the Supreme Court on certiorari within 30 days from notice (Rule XII, 009 Revised Rules of Procedure of the COA).
The second type of money claims pertains to those arising from a final and executory judgment of a court or arbitral body, which may no longer be reviewed or modified, directly or indirectly, by the Supreme Court, or any branch or department of government, including COA.
On this point, the High Court noted that COA’s original and primary jurisdiction over money claims due from or owing to the government is not exclusive. Courts and other tribunals or adjudicative bodies, too, may have concurrent jurisdiction over these matters. Applied to this case, the final and executory arbitral award was validly issued by CIAC in the exercise of its jurisdiction over the construction dispute between TSJV and the DOTr. Being a specific law, Executive Order No. 1008 (“EO 1008”) providing for CIAC’s exclusive jurisdiction prevails over Presidential Decree No. 1445 (Government Auditing Code of the Philippines).
The Supreme Court then emphasized that although COA has constitutional authority to examine, audit, and settle claims against government funds, the latter cannot transgress long standing legal principles and case doctrines. In the words of the Supreme Court, COA is not “a super body over and above the rule of law.”
For one, COA has no appellate review power over the decisions of any other court or tribunal. There is no constitutional or statutory provision giving the COA review powers or the power to modify or set aside a judgment of a court or other tribunal on errors of fact or law. Moreover, COA is devoid of power to disregard the principle of immutability of final judgments, which precludes the modification of the judgment even if meant to correct perceived errors of law or fact. When a court or tribunal having jurisdiction over an action renders judgment and the same becomes final and executory, res judicata sets in.
Accordingly, COA’s exercise of discretion in approving or disapproving money claims determined by final judgment was declared by the Supreme Court as merely akin to the power of execution by courts. COA’s authority is thus restricted to determining the source of public funds to answer for the award and ensuring that the funds are not diverted from their legally appropriated purpose. Nothing more.
Another reason that could have also been emphasized in the High Court’s decision was Section 19 of EO 1008 stating that CIAC arbitral awards are final and unappealable save under limited exceptions. This is in keeping with the policy of non- intervention on the substantive merits of arbitral awards adopted by our courts, based on the cornerstone principle of party autonomy underpinning Republic Act No. 9285 (ADR Act of 2004) [Asset Privatization Trust v. Court of Appeals, 300 SCRA 579 (1998); Freuhauf Electronics Phils. Corp. v. TEAM, 810 SCRA 280 (2016); Special ADR Rules, Rule 19.10].
Taisei, therefore, qualifies the Supreme Court’s pronouncement in Department of Environment and Natural Resources v. United Planners Consultants, Inc., 751 SCRA 389, 409 (2015), where it stated that “the settlement of respondent’s money claim is still subject to the primary jurisdiction of the COA despite finality of the confirmed arbitral award by the RTC pursuant to the Special ADR Rules.” Taken together with Taisei, it is clear that COA’s power and jurisdiction to approve or disapprove a money claim arising from a final arbitral award does not include the authority to review the factual and legal rulings of the arbitral tribunal.