Litigation

Court system

What is the structure of the civil court system?

The Philippine judicial system comprises first-level courts (municipal, metropolitan and regional trial courts), the Court of Appeals and the Supreme Court. A single judge presides over first-level courts, while the Court of Appeals comprises 69 justices, which sit in divisions of three members. The Supreme Court comprises 15 justices, which sit en banc or in divisions of three, five or seven members.

The jurisdiction of first-level courts depends on the nature of the proceedings and the amounts involved. A metropolitan trial court has exclusive original jurisdiction over civil actions involving amounts at lower limits. Civil actions involving amounts beyond the threshold of metropolitan trial courts, as well as actions incapable of pecuniary estimation, are handled at the first instance by regional trial courts.

Metropolitan trial court decisions can be appealed to a regional trial court. In turn, regional trial court decisions can be appealed to the Court of Appeals and the Supreme Court.

Judges and juries

What is the role of the judge and the jury in civil proceedings?

The judge presiding over civil proceedings:

  • determines the facts;
  • ensures that the parties comply with the rules of procedure;
  • interprets the applicable laws; and
  • in penning the decision, applies the law.

In the performance of their functions, judges must be impartial. Nonetheless, during a trial, judges may adopt an inquisitorial role only for clarificatory purposes.

The Philippines has not adopted the jury system.

Limitation issues

What are the time limits for bringing civil claims?

The time limits for bringing civil claims are as follows:

  • eight years from the time possession was lost for actions to recover movable property;
  • 30 years for actions affecting title to or possession of real property;
  • 10 years for actions involving mortgages, written contracts, obligations created by law and judgments;
  • six years for actions involving oral contracts and quasi-contracts;
  • four years for actions involving injury to the rights of the claimant and quasi-delicts;
  • one year for actions involving forcible entry, detainers and defamation; and
  • five years for all other actions.

Actions to demand a right of way or to bring an action to abate a public or private nuisance are not time limited.

Time limits for bringing civil claims may not be suspended merely on agreement of the parties involved. However, such periods may be interrupted if:

  • a relevant action is filed before the court;
  • the creditors produce a written extrajudicial demand; or
  • the debtor issues a written acknowledgment of the debt.
Pre-action behaviour

Are there any pre-action considerations the parties should take into account?

Depositions may be commenced before a civil action has been instituted. However, a proper petition for this purpose must be filed with the court. The petition should indicate that the petitioner expects to be a party to an action but is presently unable to commence said action. The petition must also describe the expected action in which the deposition would be used and the facts to be established in and purpose of the deposition. If allowed, the deposition may be used in any action involving the same subject matter.

All other remedies may be availed of only after a civil action has been instituted.

Starting proceedings

How are civil proceedings commenced? How and when are the parties to the proceedings notified of their commencement? Do the courts have the capacity to handle their caseload?

A claimant institutes a civil action by filing a complaint and paying the proper fees therefor. The responding party will be notified by the court of the complaint through a summons and issued a copy of the complaint.

Due to greater court accessibility and the relative ease of initiating civil actions, court dockets have become congested. As a response, the Philippine judiciary has actively promoted amicable settlements to resolve civil actions. Thus, after they are instituted and before the trial, civil actions are diverted to mediation over which accredited mediators from the Philippine Mediation Centre preside. Where mediation fails, another chance to arrive at an amicable settlement is available during judicial dispute resolution, presided over by a judge. If mediation fails again and trial ensues until complete resolution of the civil action, a third attempt at mediation is available at the appellate level.

Timetable

What is the typical procedure and timetable for a civil claim?

After the institution of a civil action, the responding party is served with a summons requiring an answer within 15 days and is issued a copy of the complaint. The claimant may file a reply within 10 days of receiving an answer. After all pleadings have been submitted, the court will set a hearing for a pre-trial conference, during which the parties identify:

  • the admitted facts;
  • the legal issues to be resolved;
  • their respective evidence and witnesses; and
  • the trial dates.

The trial then ensues, during which the parties present their evidence and witnesses. After trial terminates, the court may require the submission of memoranda. Thereafter, the civil action will be submitted for resolution.

The 1987 Constitution requires courts to resolve cases in three months in the first instance, 12 months on appeal (ie, before the Court of Appeals) and 24 months on final appeal (ie, before the Supreme Court). These periods commence after the case is submitted for resolution.

Case management

Can the parties control the procedure and the timetable?

In general, parties cannot control the procedure, as each step in the process is a prerequisite for the next. However, the timetable may be controlled by implication. Parties may request specific deadlines and choose when hearings will be set, subject to the court’s approval. Further, while courts frown on postponements, parties may ask for leave of court to extend reglementary periods for submissions and defer trial dates or hearings for compelling reasons.

Evidence – documents

Is there a duty to preserve documents and other evidence pending trial? Must parties share relevant documents (including those unhelpful to their case)?

While there is no express requirement on the matter, diligence dictates that parties preserve their evidence prior to the termination of the trial. After the presentation of their testimonial, documentary and object evidence in open court, parties submit their evidence to the court through a formal offer of evidence. It then becomes the court’s duty to preserve the parties’ evidence until the final disposition of the case.

Parties need not volunteer documents; however, they may seek leave of court to compel another party to produce documents (ie, non-privileged) which are material to the case.

Evidence – privilege

Are any documents privileged? Would advice from an in-house lawyer (whether local or foreign) also be privileged?

Communications between the following persons are generally privileged:

  • husband and wife;
  • attorney and client;
  • doctor and patient; and
  • priest and penitent.

In-house lawyers are covered by the attorney-client privilege. However, the privilege may be waived by the person in whose favour the privilege was constituted.

Evidence – pretrial

Do parties exchange written evidence from witnesses and experts prior to trial?

Parties may exchange written evidence from witnesses prior to the trial proper. In civil actions, parties are required to submit the judicial affidavits of their witnesses to the court at least five days before pre-trial and serve the same on the other parties within the same period. Documentary evidence to be identified and authenticated by the witnesses is attached to these judicial affidavits.

Evidence – trial

How is evidence presented at trial? Do witnesses and experts give oral evidence?

Evidence is presented through the presentation of witnesses, who are tasked with identifying and authenticating the parties’ documentary and object evidence. Witnesses may be subject to direct examination, cross-examination, re-direct examination and re-cross examination. Moreover, after both parties have concluded the presentation of their evidence, witnesses may be recalled with the court’s permission.

In civil actions, witnesses’ judicial affidavits take the place of their oral direct testimony. Nonetheless, the cross-examination, re-direct examination and re-cross examination of the witnesses are given orally.

If a party wishes to present an unwilling witness summoned by the court through a subpoena, this witness must give oral evidence. The rule on judicial affidavits does not apply to unwilling witnesses.

Interim remedies

What interim remedies are available?

Parties may apply for preliminary attachment, preliminary injunction, receivership, replevin or support as interim remedies. These remedies are available to local proceedings only.

The more common interim remedies are:

  • preliminary attachment, which is available where the applicable fraudulent circumstances are present in a case and the applicant wishes to attach on the opponent’s property as security for the potential judgment award; and
  • preliminary injunction, which is available where:
    • the relief sought in the civil action is the performance or restraining the commission of a certain act;
    • the performance or non-performance of an act will result in injustice or irreparable damage to the applicant; or
    • there is a threat of violation of the rights of the applicant with respect to the subject matter of the action.
Remedies

What substantive remedies are available?

Parties may seek relief in the form of specific performance or rescission of contracts and damages. The damages that may be recovered are as follows:

  • actual damages or the loss capable of pecuniary estimation;
  • moral damages, which compensates the claimant for (among other things) physical suffering, mental anguish and besmirched reputation;
  • nominal damages, which is similar to punitive damages;
  • temperate or moderate damages to compensate for a pecuniary loss where the amount cannot be determined with certainty;
  • liquidated damages or an indemnity or penalty agreed to be paid based on a contract; and
  • exemplary damages, which are imposed by way of example for the public good.
Enforcement

What means of enforcement are available?

As regards judgments for money, the officer of the court may simply demand payment from the judgment obligor. If the judgment obligor cannot pay in full, the officer may levy on the properties of the judgment obligor, which includes debts due the judgment obligor and bank deposits. However, certain properties indispensable to the judgment obligor’s livelihood and those qualifying as basic necessities are exempt from execution.

The execution of judgments for specific performance are straightforward. Failure to comply may result in the court directing the performance of the act at the cost of the judgment obligor, or contempt in some cases.

Public access

Are court hearings held in public? Are court documents available to the public?

In general, court hearings for civil cases are conducted in public, except those concerning children and family cases and adoption proceedings, which are confidential in nature. Similarly, case files are generally available to the public, except records concerning children and family cases and adoption proceedings.

Costs

Does the court have power to order costs?

Yes. The courts may rule that either party pay the costs of an action, or that the same be divided. Costs are calculated in accordance with the Supreme Court’s guidelines.

Funding arrangements

Are ‘no win, no fee’ agreements, or other types of contingency or conditional fee arrangements between lawyers and their clients, available to parties? May parties bring proceedings using third-party funding? If so, may the third party take a share of any proceeds of the claim? May a party to litigation share its risk with a third party?

Yes, contingent fee arrangements are accepted in the Philippines as these are beneficial to parties which have meritorious claims but are unable to secure legal counsel due to insufficient funds. Under contingent fee arrangements, legal fees are usually a fixed percentage of what may be recovered in an action. Hence, a lawyer would be able to collect legal fees only if the litigation succeeds.

A party may commence an action using third-party funding. However, in the strict sense, the court will not recognise the funding arrangement. Hence, the third party may not be able to collect from the judgment award. Instead, the third party may demand payment from the party pursuant to their agreement.

Insurance

Is insurance available to cover all or part of a party’s legal costs?

Yes, legal costs may be covered by liability insurance, including indemnity insurance, director and officer liability insurance and comprehensive general liability insurance.

Class action

May litigants with similar claims bring a form of collective redress? In what circumstances is this permitted?

Yes, the Philippines allows class action suits to be filed in regular courts. The general rule for a class suit to be filed is that:

  • the subject matter is of common or general interest to many persons; and
  • the persons are so numerous making it impractical to bring them all before the court.

Class action suits aim to obtain relief for or against numerous persons as a group or as an integral entity, and not as separate, distinct individuals whose rights or liabilities are separate from and independent of those affecting the others.

Appeal

On what grounds and in what circumstances can the parties appeal? Is there a right of further appeal?

In general, appeals to higher courts are available against adverse decisions rendered by lower courts. The appeal, when available, usually requires the listing of an assignment of errors by the court in rendering the decision on any question of law or fact that has been raised in the lower court and which is within the issues framed by the parties.

Court of Appeals decisions may be appealed to the Supreme Court, which is deemed the final arbiter for all cases.

Foreign judgments

What procedures exist for recognition and enforcement of foreign judgments?

The Philippines recognises foreign judgments and allows procedures for the enforcement thereof. This practice is based on generally accepted principles of international law, by virtue of the incorporation clause of the Constitution that consider these principles as forming part of the laws of the land even if they are not derived from treaty obligations.

Although Philippine courts have not laid down the exact boundaries by which foreign judgments can be recognised and enforced, there is no question that this remedy is considered among the universally accepted tenets of international law. States generally accept in principle the need for such recognition and enforcement – albeit subject to limitations of varying degrees – and the Philippines is no exception.

Nonetheless, anyone seeking to enforce a foreign judgment or final order may be prevented by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake of law or fact.

Foreign proceedings

Are there any procedures for obtaining oral or documentary evidence for use in civil proceedings in other jurisdictions?

Yes. The Revised Rules of Evidence requires documentary evidence arising from official acts of a sovereign authority, or its official bodies, tribunals or public officers to be accompanied by:

its official publication; ora copy attested by the officer having legal custody of the document and a certificate that said officer has custody.

The certificate may be made by any officer (ie, secretary of the embassy or legation, consul general, consul, vice consul or consular agent) in the foreign service of the Philippines stationed in the pertinent foreign country. The certificate must also be authenticated by the seal of their office. Public documents not covered above must be authenticated at the Philippine embassy in the foreign country. Notably, the Philippines recently acceded to the Apostille Convention, which allows for a simplified process in authenticating foreign-made or foreign-kept documents.

As regards oral evidence, depositions and written interrogatories are acceptable modes of preserving testimony of witnesses located outside the Philippines.

Arbitration

UNCITRAL Model Law

Is the arbitration law based on the UNCITRAL Model Law?

Yes. The Alternative Dispute Resolution Act 2004 categorically adopts in its entirety the UNCITRAL Model Law, both for international and domestic commercial arbitration.

Arbitration agreements

What are the formal requirements for an enforceable arbitration agreement?

An agreement to arbitrate a controversy arising between parties, as well as a submission to arbitrate an existing controversy, must be in writing and subscribed by the party sought to be charged or by their lawful agent.

Choice of arbitrator

If the arbitration agreement and any relevant rules are silent on the matter, how many arbitrators will be appointed and how will they be appointed? Are there restrictions on the right to challenge the appointment of an arbitrator?

In the absence of an agreed method to select an arbitrator, the parties must seek guidance from a first-level court, which will designate an arbitrator or arbitrators.

The court may appoint one or three arbitrators, according to the importance of the controversy involved.

The appointment of an arbitrator may be challenged if an arbitrator discovers any circumstances likely to create a presumption of bias or which they believe might disqualify them as an impartial arbitrator; the parties are made aware of such circumstances. Such challenges can be made even after arbitration has begun.

Arbitrator options

What are the options when choosing an arbitrator or arbitrators?

A person who wishes to be an arbitrator should be of legal age, with no imposed restrictions as to their capacity to exercise their civil rights and must be able to read and write. No person appointed to serve as an arbitrator may be related by blood or marriage within the sixth degree to either party to the controversy. No person may serve as an arbitrator in any proceeding if they:

  • have or have had financial, fiduciary or other interest in the controversy or cause to be decided or in the result of the proceeding; or
  • have any partiality or prejudice that may gravely affect the right of a party to a fair award.
Arbitral procedure

Does the domestic law contain substantive requirements for the procedure to be followed?

Yes, there are specific provisions on how to initiate arbitration, appoint arbitrators and conduct arbitration hearings under Republic Act 876 (the Arbitration Law) and Republic Act 9285 (the Alternative Dispute Resolution Act 2004) and its implementing rules and regulations.

Arbitration is allowed when:

  • Two or more persons agree to submit to arbitration any controversy existing between them at the time of the submission, which controversy may be the subject of an action.
  • The parties to a contract agreed in said contract to settle by arbitration a controversy thereafter arising between them.

In order to initiate arbitration, the provisions of the submission or contract must be complied with. For instance, where a prior demand is required under the arbitration contract, the claimant must serve on the responding party a demand for arbitration containing the nature of the controversy, the amount involved and the relief sought.

On the other hand, where a party to a submission to arbitration refuses to arbitrate, the other party must also serve a demand for arbitration as stated above.

However, the submission or contract may be revoked on such grounds that exist under Philippine law for revocation of any contract.

Further, the following matters cannot be the subject of arbitration by virtue of certain public policies that may be affected or violated:

  • labour disputes covered by the Labour Code;
  • a person’s civil status;
  • marriage validity;
  • grounds for legal separation;
  • courts’ jurisdiction;
  • future legitime (ie, a succession issue);
  • criminal liability; and
  • future support (ie, a family law issue).
Court intervention

On what grounds can the court intervene during an arbitration?

Judicial intervention is permitted if:

  • it is unclear whether the arbitration agreement and its provisions are valid and enforceable;
  • it is unclear whether a dispute is covered by the arbitration agreement;
  • an action demanding arbitration should be filed;
  • interim remedies are necessary to conserve the subject matter of arbitration pending appointment of the arbitrators;
  • a petition to quash or vacate the award is warranted;
  • the confirmation and enforcement of the award is due;
  • the appointment or challenge of an arbitration is necessary due to an event of default of the appointing authority; or
  • appeals from a judgment of the court are filed.
Interim relief

Do arbitrators have powers to grant interim relief?

Yes. A request for an interim measure of protection to prevent irreparable loss, preserve evidence or compel the performance of an act may be made with the arbitral tribunal after its constitution and during the arbitral proceedings. The arbitral tribunal is deemed constituted when the final nominated arbitrator (ie, the sole arbitrator or the third arbitrator) has accepted the nomination and the party making the request received written communication of such acceptance.

Where an arbitral tribunal is powerless to act or unable to act effectively, the request may be made with the regular courts. If the arbitral tribunal is not yet constituted, the request for an interim measure will have to be filed in court.

Award

When and in what form must the award be delivered?

The parties may agree on the period within which the award must be rendered. Such agreement must be in writing. In the absence of an agreement, arbitrators must render an award within 30 days after the closing of the hearings or, if the oral hearings have been waived, within 30 days after the arbitrators have officially closed the proceedings in lieu of oral hearings. The parties may likewise agree to extend this period.

The award must be written and signed and acknowledged by the sole arbitrator or by a majority of the arbitrators, if more than one. Each party will be provided with a copy of the award.

Appeal

On what grounds can an award be appealed to the court?

The agreement by the parties to refer a dispute to arbitration means that the arbitral award is final and binding. A party to an arbitration is therefore precluded from filing an appeal or a petition for certiorari questioning the merits of an arbitral award.

Unless a public policy is violated or the substance and format of the arbitration proceedings are infirm, as provided for under the UNCITRAL Model Law, the arbitral award may not be vacated by filing an appeal or set aside by filing an action with the appellate courts.

Enforcement

What procedures exist for enforcement of foreign and domestic awards?

Domestic arbitral awards are executed in the same manner as final and executory decisions of first-level courts.

The recognition and enforcement of international arbitral awards are governed by the rules set out in the New York Convention, to which the Philippines is a signatory.

Costs

Can a successful party recover its costs?

Under Philippine arbitral rules, costs are generally borne equally by the parties unless otherwise agreed on or directed by the arbitrator or arbitral tribunal.

There are specific instances in court filings where the parties which are unsuccessful in opposing the enforcement of arbitral awards or in questioning the jurisdiction of the arbitral tribunal are made to shoulder the costs of the suit, including the payment of lawyers’ fees incurred by the prevailing party.

Alternative dispute resolution

Types of ADR

What types of ADR process are commonly used? Is a particular ADR process popular?

Aside from arbitration, the Philippines recognises other forms of ADR. Acceptable forms of ADR include:

  • mediation;
  • conciliation;
  • early neutral evaluation;
  • mini trial; or
  • any combination thereof.

The most commonly used ADR methods (and mandated by the courts) are mediation and judicial dispute resolution conferences. These are normally conducted before the trial proper begins.

Requirements for ADR

Is there a requirement for the parties to litigation or arbitration to consider ADR before or during proceedings? Can the court or tribunal compel the parties to participate in an ADR process?

In both civil and criminal cases, mediation and judicial dispute resolution conferences are ADR methods that parties to a case must undergo during the proceedings or before the trial begins. In criminal cases, only the civil aspect of the claim can be the subject of ADR proceedings.

Miscellaneous

Interesting features

Are there any particularly interesting features of the dispute resolution system not addressed in any of the previous questions?

If mediation fails and the case proceeds to trial, discussions or statements made during ADR hearings are generally inadmissible as evidence against the party making the statement. 

Further, even at the appellate level, mediation is available in civil claims (except for those that cannot be compromised as a matter of public policy) and for minor crimes. Tax court and quasi-judicial agency judgments can also be the subject of appellate court mediation proceedings.

Update and trends

Recent developments

Are there any proposals for dispute resolution reform? When will any reforms take effect? (Please also mention any ground-breaking recent cases, etc.)

One of the more contentious issues in arbitration involves questions of law on jurisdiction, particularly cases heard and tried before the Construction Industry Arbitration Commission (CIAC). The construction industry in the Philippines is at the forefront of arbitration law practice due to the fact that the CIAC was one of the earliest arbitral bodies created by law (ie, in 1985) and has the richest experience among all other arbitral bodies.

The law creating the CIAC provides that the CIAC has original and exclusive jurisdiction in commercial disputes between parties to a construction agreement where there exists an arbitration clause, regardless of whether the parties themselves specified a different arbitration procedure or tribunal and venue (outside the Philippines) to hear and decide the dispute.

The Supreme Court has generally upheld the CIAC’s right to assume jurisdiction regardless of the intent of the parties in the contract to confer jurisdiction to a different arbitral tribunal. However, this is particularly controversial, as one of the main elements of arbitration is giving importance to the wishes of the parties, including their choice of jurisdiction. Depriving the parties of this option (at least in construction agreements) nullifies one of the key elements of arbitration.

There has been a move to soften this position among some members of the CIAC, but so far the Supreme Court has made no ruling to the contrary. Notably, in a recent Supreme Court decision, the CIAC’s jurisdiction was expanded to include government contracts involving construction projects even where the contract contains no arbitration clause.

Aside from the CIAC, one of the more popular arbitration centres is the privately run Philippine Dispute Resolution Centre (PDRCI).  In recent years the number of cases referred to the PDRCI has steadily grown.