ADR - A Welcome Development

Manila Bulletin, July 9, 2004 | Go to article overview

ADR - A Welcome Development


(Keynote address delivered by Justice Reynato S. Puno to the 2nd International Conference on Construction Arbitration held at New World Renaissance Hotel, Makati City, July 2, 2004.)

IT is chronicled by legal historians that "private dispute resolution amongst commercial men is as old as commerce itself." Prof. Craig, however, traces the modern development of private dispute resolution system to medieval Europe when merchants coming from different places met to do business. The brevity of these business meetings and the ignorance of trade practices on the part of regular judges led to the development both of special procedures for dealing with mercantile matters and a substantive law of merchants the lex mercatoria.

In England, this mothered the courts of fair and boroughs, also known as pie powder courts, which resolved mercantile disputes. Outside England, merchant fairs and markets likewise resulted in the growth of informal tribunals to meet the same commercial needs. Eventually, these informal tribunals were absorbed into a system of commercial courts that adjudicated mercantile transactions. Still, they were different from the ordinary civil courts.

Upon the other hand, international commercial arbitration has more recent vintage. It originated in Greece but it is the Industrial Revolution that led to the formation of trade and industry associations with rules that encouraged the use of arbitration by its members.

In the United States, the development of arbitration was not without the usual birth pains. Commercial arbitration had taken roots in the United States as early as the 18th century, but the courts looked at arbitration initially with hostile eyes. This hostility has been attributed to Lord Cokes belief that arbitration agreements were against public policy because they ousted courts of their jurisdiction.

There was a meltdown of this judicial hostility at the start of the 20th Century when laws sprouted allowing arbitration. Among the more significant of these laws is the US Arbitration Act, now known as the Federal Arbitration Act, enacted in 1925. Legal commentators observe that it was this law that reversed centuries of judicial hostility towards the arbitration process. In one sweep, it elevated arbitration agreements in the same category as other civil contracts even as it openly encouraged resort to commercial arbitration. Today, arbitration is widely used in the US to resolve unfair labor practice complaints, prisoners rights, medical malpractice, consumer rights, intellectual property rights and anti-trust.

The universal trend towards the use of alternative dispute resolution is irreversible. In the world over, the mechanisms for alternative dispute resolution such as mediation, mini-trial, early neutral evaluation, and arbitration have generally proved effective. Let me just cite the survey conducted by the Cornell University and Price Waterhouse on the use of ADR in Fortune 1000 companies. The 1997 survey showed solid corporate support for ADR. The respondent corporations cited reduced cost of resolving legal disputes and better alternative to the risk and uncertainty of litigation as the reasons for their patronage.

I am glad that the Philippines has firmed up its commitment to the universal movement towards the use of ADR. Truth to tell, ADR is not an unfamiliar concept to Filipinos. Indeed, some of our administrative tribunals have been using certain types and modes of ADRs. They include the National Labor Relations Commission, the Bureau of Labor Relations, the National Conciliation and Mediation Board, the Commission on Settlement of Land Problems, the Department of Agrarian Reform Adjudication Board, the Cooperative Development Authority, the Insurance Commission, and the Bureau of Trade Regulation and Consumer Protection.

We have been using compulsory conciliation in our Barangay Justice System. Pursuant to law, cases involving R5,000 or less have to undergo compulsory conciliation.

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ADR - A Welcome Development
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