FACTS:

The parties in this case entered into an Engineering Procurement Construction Contract (EPCC) for the construction of a project. The contract included an arbitration clause that required any dispute to be submitted to and decided by a Dispute Adjudication Board (DAB) to be constituted by the parties. The petitioner filed a Request for Arbitration with the Construction Industry Arbitration Commission (CIAC) without first referring the dispute to the DAB as required by the contract. The respondent filed a motion before the Court of Appeals seeking to annul the CIAC's order and to enjoin the CIAC from proceeding with the case until the dispute had been referred to and decided by the DAB. The Court of Appeals granted the respondent's motion, ruling that the CIAC exceeded its jurisdiction by not complying with the requirement to refer the dispute to the DAB first. The petitioner filed a motion for reconsideration, which was denied, leading it to file a petition for review before the Supreme Court, raising the issue of whether the CIAC had jurisdiction over the case.

ISSUES:

1. Whether the parties are required to incorporate the model terms published by the Fédération Internationale des Ingénieurs-Conseils (FIDIC) in the contract.

2. Whether the parties are required to appoint independent members for the Dispute Adjudication Board.

3. Whether the Dispute Adjudication Board is required to act impartially and in accordance with the contract.

4. Whether the parties are required to include undertakings that the members of the Dispute Adjudication Board shall not be liable for breach of duty or contract arising out of their appointment.

5. Whether the remuneration of the Dispute Adjudication Board and its members should be mutually agreed upon by the Employer, the Contractor, and each member.

6. Whether the Employer and the Contractor should each pay one-half of the Dispute Adjudication Board's remuneration.

7. Whether the Dispute Adjudication Board's appointment may be terminated only by mutual agreement of the Employer and the Contractor.

8. Whether the parties may appoint a replacement for any member of the Dispute Adjudication Board under certain circumstances.

9. Whether the person or administration named in the Appendix to the Tender has the authority to nominate a member of the Dispute Adjudication Board in case of failure to agree upon an appointment or replacement within 28 days.

10. Whether disputes between the Employer and the Contractor should be referred to the Dispute Adjudication Board for its decision.

11. Whether the Contractor is required to continue with the Works and give effect to the Dispute Adjudication Board's decision unless revised through amicable settlement or an arbitral award.

12. Whether either party is entitled to notify the other party of its dissatisfaction with the Dispute Adjudication Board's decision and commence arbitration in case of failure to give notice or dissatisfaction.

13. Whether the dispute should have been referred to the Dispute Adjudication Board (DAB) before the CIAC can acquire jurisdiction over the case.

14. Whether the presence of an arbitration clause in the construction contract is sufficient to vest the CIAC with jurisdiction.

15. Whether the Court of Appeals erred in ruling that the Construction Industry Arbitration Commission (CIAC) has no jurisdiction over the dispute between the parties due to their failure to refer the dispute to the Dispute Adjudication Board (DAB) as required by the arbitration clause in their construction contract.

RULING:

1. Yes, the parties are required to incorporate the model terms published by the Fédération Internationale des Ingénieurs-Conseils (FIDIC) in the contract.

2. Yes, the parties are required to appoint independent members for the Dispute Adjudication Board.

3. Yes, the Dispute Adjudication Board is required to act impartially and in accordance with the contract.

4. Yes, the parties are required to include undertakings that the members of the Dispute Adjudication Board shall not be liable for breach of duty or contract arising out of their appointment.

5. Yes, the remuneration of the Dispute Adjudication Board and its members should be mutually agreed upon by the Employer, the Contractor, and each member.

6. Yes, the Employer and the Contractor should each pay one-half of the Dispute Adjudication Board's remuneration.

7. Yes, the Dispute Adjudication Board's appointment may be terminated only by mutual agreement of the Employer and the Contractor.

8. Yes, the parties may appoint a replacement for any member of the Dispute Adjudication Board under certain circumstances.

9. Yes, the person or administration named in the Appendix to the Tender has the authority to nominate a member of the Dispute Adjudication Board in case of failure to agree upon an appointment or replacement within 28 days.

10. Yes, disputes between the Employer and the Contractor should be referred to the Dispute Adjudication Board for its decision.

11. Yes, the Contractor is required to continue with the Works and give effect to the Dispute Adjudication Board's decision unless revised through amicable settlement or an arbitral award.

12. Yes, either party is entitled to notify the other party of its dissatisfaction with the Dispute Adjudication Board's decision and commence arbitration in case of failure to give notice or dissatisfaction.

13. The Court held that the referral of the dispute to the DAB is not a condition precedent for the CIAC to acquire jurisdiction over the case. The arbitration clause in the construction contract ipso facto vests the CIAC with jurisdiction. The parties cannot be precluded from electing to submit their dispute to CIAC as this right has been vested in each party by law.

14. The presence of an arbitration clause in the construction contract is sufficient to vest the CIAC with jurisdiction. Under Section 1, Article III of the CIAC Rules, an arbitration clause in a construction contract shall be deemed as an agreement to submit an existing or future controversy to CIAC jurisdiction, regardless of whether the parties specifically choose another forum or make reference to another arbitral body. The jurisdiction of CIAC is conferred by law and cannot be subject to any condition, waiver, or diminishment by the stipulation, act, or omission of the parties.

15. The Supreme Court ruled that the Court of Appeals erred in holding that the CIAC has no jurisdiction over the dispute between the parties. The existence of an arbitration clause in the construction contract is considered by law as an agreement to submit existing or future controversies between the parties to CIAC jurisdiction, without any qualification or condition precedent. Thus, even if the arbitration clause requires prior referral of the dispute to the DAB, the failure to comply with this condition precedent does not deprive the CIAC of jurisdiction over the dispute. The CIAC has been vested with original and exclusive jurisdiction over disputes arising from or connected with construction contracts in the Philippines, and this jurisdiction should not be suspended or delayed by additional conditions or requirements. The purpose of creating the CIAC is to expeditiously resolve construction industry disputes and prevent unnecessary delays and expenses. Therefore, the case is remanded to the CIAC for further proceedings.

PRINCIPLES:

• Parties are required to incorporate the model terms published by the Fédération Internationale des Ingénieurs-Conseils (FIDIC) in the contract.

• Members of the Dispute Adjudication Board must be independent of the parties and act impartially in accordance with the contract.

• There should be undertakings by the parties that members of the Dispute Adjudication Board shall not be liable for breach of duty or contract arising out of their appointment.

• The remuneration of the Dispute Adjudication Board and its members should be mutually agreed upon by the parties.

• The Employer and the Contractor should each pay one-half of the Dispute Adjudication Board's remuneration.

• The Dispute Adjudication Board's appointment may only be terminated by mutual agreement of the parties.

• Replacement members of the Dispute Adjudication Board may be appointed under certain circumstances.

• Parties are required to refer disputes to the Dispute Adjudication Board for its decision.

• The Contractor is required to continue with the Works and give effect to the Dispute Adjudication Board's decision, unless revised through amicable settlement or an arbitral award.

• Either party is entitled to notify the other party of its dissatisfaction with the Dispute Adjudication Board's decision and commence arbitration in case of failure to give notice or dissatisfaction.

• The presence of an arbitration clause in a construction contract vests the Construction Industry Arbitration Commission (CIAC) with jurisdiction over any construction controversy or claim between the parties.

• Referral to the Dispute Adjudication Board (DAB) is not a condition precedent for the CIAC to acquire jurisdiction over a dispute.

• The jurisdiction of the CIAC cannot be waived or diminished by the stipulation, act, or omission of the parties, as long as the parties agreed to submit their construction contract dispute to arbitration or if there is an arbitration clause in the construction contract.

• The jurisdiction of the Construction Industry Arbitration Commission (CIAC) over disputes arising from or connected with construction contracts in the Philippines cannot be suspended or delayed by additional conditions or requirements.

• The mere existence of an arbitration clause in a construction contract is considered by law as an agreement to submit existing or future controversies between the parties to CIAC jurisdiction, without any qualification or condition precedent.

• The purpose of creating the CIAC is to expeditiously resolve construction industry disputes and prevent unnecessary delays and expenses.