SPECIAL SECOND DIVISION

[G.R. No. 146717. May 19, 2006.]

TRANSFIELD PHILIPPINES, INC., petitioner, vs. LUZON HYDRO
CORPORATION, AUSTRALIA AND NEW ZEALAND BANKING
GROUP
LIMITED
and
SECURITY
BANK
CORPORATION,
respondents.
RESOLUTION
TINGA, J :
p

The adjudication of this case proved to be a two-stage process as its constituent

parts involve two segregate but equally important issues. The rst stage relating to
the merits of the case, specically the question of the propriety of calling on the
securities during the pendency of the arbitral proceedings, was resolved in favor of
Luzon Hydro Corporation (LHC) with the Court's Decision 1 of 22 November 2004.
The second stage involving the issue of forum-shopping on which the Court required
the parties to submit their respective memoranda 2 is disposed of in this Resolution.
The disposal of the forum-shopping charge is crucial to the parties to this case on
account of its profound eect on the nal outcome of the international arbitral
proceedings which they have chosen as their principal dispute resolution
mechanism. 3
LHC claims that Transeld Philippines, Inc. (TPI) is guilty of forum-shopping when it
filed the following suits:
1.

Civil Case No. 04-332 led on 19 March 2004, pending before the
Regional Trial Court (RTC) of Makati, Branch 56 for conrmation,
recognition and enforcement of the Third Partial Award in case 11264
TE/MW, ICC International Court of Arbitration, entitled Transfield
Philippines, Inc. v. Luzon Hydro Corporation. 4

2.

ICC Case No. 11264/TE/MW, Transeld Philippines, Inc . v. Luzon

Hydro Corporation led before the International Court of Arbitration,
International Chamber of Commerce (ICC) a request for arbitration
dated 3 November 2000 pursuant to the Turnkey Contract between
LHC and TPI;

3.

G.R. No. 146717, Transeld Philippines, Inc . v. Luzon Hydro

Corporation, Australia and New Zealand Banking Group Limited and
Security Bank Corp. led on 5 February 2001, which was an appeal by
certiorari with prayer for TRO/preliminary prohibitory and mandatory
injunction, of the Court of Appeals Decision dated 31 January 2001 in
CA-G.R. SP No. 61901.
AHEDaI

a.

CA-G.R. SP No. 61901 was a petition for review of the Decision

in Civil Case No. 00-1312, wherein TPI claimed that LHC's call on
the securities was premature considering that the issue of
default has not yet been resolved with nality; the petition was
however denied by the Court of Appeals;

b.

Civil Case No. 00-1312 was a complaint for injunction with

prayer for temporary restraining order and/or writ of
preliminary injunction dated 5 November 2000, which sought to
restrain LHC from calling on the securities and respondent
banks from transferring or paying of the securities; the
complaint was denied by the RTC.

On the other hand, TPI claims that it is LHC which is guilty of forum-shopping when
it raised the issue of forum-shopping not only in this case, but also in Civil Case No.
04-332, and even asked for the dismissal of the other case based on this ground.
Moreover, TPI argues that LHC is relitigating in Civil Case No. 04-332 the very same
causes of action in ICC Case No. 11264/TE/MW, and even manifesting therein that
it will present evidence earlier presented before the arbitral tribunal. 5
Meanwhile, ANZ Bank and Security Bank moved to be excused from ling a
memorandum. They claim that with the nality of the Court's Decision dated 22
November 2004, any resolution by the Court on the issue of forum-shopping will
not materially aect their role as the banking entities involved are concerned. 6 The
Court granted their respective motions.
On 1 August 2005, TPI moved to set the case for oral argument, positing that the
resolution of the Court on the issue of forum-shopping may have signicant
implications on the interpretation of the Alternative Dispute Resolution Act of 2004,
as well as the viability of international commercial arbitration as an alternative
mode of dispute resolution in the country. 7 Said motion was opposed by LHC in its
opposition led on 2 September 2005, with LHC arguing that the respective
memoranda of the parties are sucient for the Court to resolve the issue of forumshopping. 8 On 28 October 2005, TPI led its Manifestation and Reiterative Motion 9
to set the case for oral argument, where it manifested that the International
Chamber of Commerce (ICC) arbitral tribunal had issued its Final Award ordering
LHC to pay TPI US$24,533,730.00 (including the US$17,977,815.00 proceeds of the
two standby letters of credit). TPI also submitted a copy thereof with a
Supplemental Petition 10 to the Regional Trial Court (RTC), seeking recognition and
enforcement of the said award. 11
The essence of forum-shopping is the ling of multiple suits involving the same
parties for the same cause of action, either simultaneously or successively, for the
purpose of obtaining a favorable judgment. 12 Forum-shopping has likewise been
dened as the act of a party against whom an adverse judgment has been rendered
in one forum, seeking and possibly getting a favorable opinion in another forum,
other than by appeal or the special civil action of certiorari, or the institution of two
or more actions or proceedings grounded on the same cause on the supposition that
one or the other court would make a favorable disposition. 13

Thus, for forum-shopping to exist, there must be (a) identity of parties, or at least
such parties as represent the same interests in both actions; (b) identity of rights
asserted and relief prayed for, the relief being founded on the same facts; and (c)
the identity of the two preceding particulars is such that any judgment rendered in
the other action will, regardless of which party is successful, amount to res judicata
in the action under consideration. 14
There is no identity of causes of action between and among the arbitration case, the
instant petition, and Civil Case No. 04-332.
The arbitration case, ICC Case No. 11264 TE/MW, is an arbitral proceeding
commenced pursuant to the Turnkey Contract between TPI and LHC, to determine
the primary issue of whether the delays in the construction of the project were
excused delays, which would consequently render valid TPI's claims for extension of
time to nish the project. Together with the primary issue to be settled in the
arbitration case is the equally important question of monetary awards to the
aggrieved party.
DHaEAS

On the other hand, Civil Case No. 00-1312, the precursor of the instant petition,
was led to enjoin LHC from calling on the securities and respondent banks from
transferring or paying the securities in case LHC calls on them. However, in view of
the fact that LHC collected the proceeds, TPI, in its appeal and petition for review
asked that the same be returned and placed in escrow pending the resolution of the
disputes before the ICC arbitral tribunal. 15
While the ICC case thus calls for a thorough review of the facts which led to the
delay in the construction of the project, as well as the attendant responsibilities of
the parties therein, in contrast, the present petition puts in issue the propriety of
drawing on the letters of credit during the pendency of the arbitral case, and of
course, absent a nal determination by the ICC Arbitral tribunal. Moreover, as
pointed out by TPI, it did not pray for the return of the proceeds of the letters of
credit. What it asked instead is that the said moneys be placed in escrow until the
nal resolution of the arbitral case. Meanwhile, in Civil Case No. 04-332, TPI no
longer seeks the issuance of a provisional relief, but rather the issuance of a writ of
execution to enforce the Third Partial Award.
Neither is there an identity of parties between and among the three (3) cases. The
ICC case only involves TPI and LHC logically since they are the parties to the
Turnkey Contract. In comparison, the instant petition includes Security Bank and
ANZ Bank, the banks sought to be enjoined from releasing the funds of the letters of
credit. The Court agrees with TPI that it would be ineectual to ask the ICC to issue
writs of preliminary injunction against Security Bank and ANZ Bank since these
banks are not parties to the arbitration case, and that the ICC Arbitral tribunal
would not even be able to compel LHC to obey any writ of preliminary injunction
issued from its end. 16 Civil Case No. 04-322, on the other hand, logically involves
TPI and LHC only, they being the parties to the arbitration agreement whose partial
award is sought to be enforced.
ACDTcE

As a fundamental point, the pendency of arbitral proceedings does not foreclose

resort to the courts for provisional reliefs. The Rules of the ICC, which governs the
parties' arbitral dispute, allows the application of a party to a judicial authority for
interim or conservatory measures. 17 Likewise, Section 14 of Republic Act (R.A.) No.
876 (The Arbitration Law) 18 recognizes the rights of any party to petition the court
to take measures to safeguard and/or conserve any matter which is the subject of
the dispute in arbitration. In addition, R.A. 9285, otherwise known as the
"Alternative Dispute Resolution Act of 2004," allows the ling of provisional or
interim measures with the regular courts whenever the arbitral tribunal has no
power to act or to act effectively. 19
TPI's veried petition in Civil Case No. 04-332, led on 19 March
captioned as one "For: Conrmation, Recognition and Enforcement
Arbitral Award in Case 11264 TE/MW, ICC International Court of
'Transeld Philippines, Inc. v. Luzon Hydro Corporation (Place of
Singapore)." 20 In the said petition, TPI prayed:

2004, was
of Foreign
Arbitration,
arbitration:

1.
That the THIRD PARTIAL AWARD dated February 18, 2004 in Case No.
11264/TE/MW made by the ICC International Court of Arbitration, the signed
original copy of which is hereto attached as Annex "H" hereof, be conrmed,
recognized and enforced in accordance with law.
2.
That the corresponding writ of execution to enforce Question 31 of
the said Third Partial Award, be issued, also in accordance with law.
3.
That TPI be granted such other relief as may be deemed just and
equitable, and allowed, in accordance with law. 21

The pertinent portion of the Third Partial Award

answers to Questions 10 to 26, to wit:

22

relied upon by TPI were the

"Question 30
Did TPI [LHC] wrongfully draw upon the security?
Yes
"Question 31
Is TPI entitled to have returned to it any sum wrongfully taken by LHC
for liquidated damages?
Yes
"Question 32
Is TPI entitled to any acceleration costs? TPI is entitled to the reasonable
costs TPI incurred after Typhoon Zeb as a result of LHC's 5 February
1999 Notice to Correct. 23

According to LHC, the ling of the above case constitutes forum-shopping since it is

the same claim for the return of US$17.9 Million which TPI made before the ICC
Arbitral Tribunal and before this Court. LHC adds that while Civil Case No. 04-332 is
styled as an action for money, the Third Partial Award used as basis of the suit does
not authorize TPI to seek a writ of execution for the sums drawn on the letters of
credit. Said award does not even contain an order for the payment of money, but
instead has reserved the quantication of the amounts for a subsequent
determination, LHC argues. In fact, even the Fifth Partial Award, 24 dated 30 March
2005, does not contain such orders. LHC insists that the declarations or the partial
awards issued by the ICC Arbitral Tribunal do not constitute orders for the payment
of money and are not intended to be enforceable as such, but merely constitute
amounts which will be included in the Final Award and will be taken into account in
determining the actual amount payable to the prevailing party. 25
R.A. No. 9825 provides that international commercial arbitrations shall be governed
shall be governed by the Model Law on International Commercial Arbitration
("Model Law") adopted by the United Nations Commission on International Trade
Law (UNCITRAL). 26 The UNCITRAL Model Law provides:
ARTICLE 35.

Recognition and enforcement

(1)
An arbitral award, irrespective of the country in which it was made,
shall be recognized as binding and, upon application in writing to the
competent court, shall be enforced subject to the provisions of this article
and of article 36.
ADHcTE

(2)
The party relying on an award or applying for its enforcement shall
supply the duly authenticated original award or a duly certied copy thereof,
and the original arbitration agreement referred to in article 7 or a duly
certied copy thereof. If the award or agreement is not made in an ocial
language of this State, the party shall supply a duly certied translation
thereof into such language.

Moreover, the New York Convention, 27 to which the Philippines is a signatory,

governs the recognition and enforcement of foreign arbitral awards. The
applicability of the New York Convention in the Philippines was conrmed in Section
42 of R.A. 9285. Said law also provides that the application for the recognition and
enforcement of such awards shall be led with the proper RTC. While TPI's resort to
the RTC for recognition and enforcement of the Third Partial Award is sanctioned by
both the New York Convention and R.A. 9285, its application for enforcement,
however, was premature, to say the least. True, the ICC Arbitral Tribunal had
indeed ruled that LHC wrongfully drew upon the securities, yet there is no order for
the payment or return of the proceeds of the said securities. In fact, Paragraph
2142, which is the final paragraph of the Third Partial Award, reads:
2142.
All other issues, including any issues as to quantum and costs,
are reserved to a future award. 28

Meanwhile, the tribunal issued its Fifth Partial Award 29 on 30 March 2005. It
contains, among others, a declaration that while LHC wrongfully drew on the

securities, the drawing was made in good faith, under the mistaken assumption
that the contractor, TPI, was in default. Thus, the tribunal ruled that while the
amount drawn must be returned, TPI is not entitled to any damages or interests due
to LHC's drawing on the securities. 30 In the Fifth Partial Award, the tribunal
ordered:
6.
6.1

Order
General

166.

This Fifth Partial Award deals with many issues of quantum.

However, it does not resolve them all. The outstanding quantum
issues will be determined in a future award. It will contain a
reconciliation of the amounts awarded to each party and a
determination of the net amount payable to Claimant or Respondent,
as the case may be.

167.

In view of this the Tribunal will make no orders for payment in this
Fifth Partial Award. The Tribunal will make a number of declarations
concerning the quantum issues it has resolved in this Award together
with the outstanding liability issues. The declarations do not
constitute orders for the payment of money and are not
intended to be enforceable as such. They merely constitute
amounts which will be included in the Final Award and will be
taken into account in determining the actual amount payable.
31 (Emphasis Supplied.)

Further, in the Declarations part of the award, the tribunal held:

6.2
168.

Declarations
The Tribunal makes the following declarations:
xxx xxx xxx

3.
LHC is liable to repay TPI the face value of the securities drawn
claimed by TPI in respect of the drawdown of the securities.
EIDTAa

xxx xxx xxx.

32

Finally, on 9 August 2005, the ICC Arbitral tribunal issued its Final Award, in
essence awarding US$24,533,730.00, which
included TPI's claim
of
U$17,977,815.00 for the return of the securities from LHC. 33
The fact that the ICC Arbitral tribunal included the proceeds of the securities shows
that it intended to make a nal determination/award as to the said issue only in the
Final Award and not in the previous partial awards. This supports LHC's position that
when the Third Partial Award was released and Civil Case No. 04-332 was led, TPI
was not yet authorized to seek the issuance of a writ of execution since the
quantication of the amounts due to TPI had not yet been settled by the ICC
Arbitral tribunal. Notwithstanding the fact that the amount of proceeds drawn on

the securities was not disputed the application for the enforcement of the Third
Partial Award was precipitately led. To repeat, the declarations made in the Third
Partial Award do not constitute orders for the payment of money.
Anent the claim of TPI that it was LHC which committed forum-shopping, suce it
to say that its bare allegations are not sufficient to sustain the charge.
WHEREFORE, the Court RESOLVES to DISMISS the charges of forum-shopping led
by both parties against each other.
No pronouncement as to costs.
SO ORDERED.

Puno, Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.

Footnotes
1.

443 SCRA 307.

2.

Resolution dated 27 April 2005, rollo, 1213-1219.

3.

The growth of international commercial arbitration (ICA) is both a rejection of the

non-binding conciliation and mediation process and a retreat from the vicissitudes
and uncertainties of international business litigation. More positively, the
mechanism oers predictability and neutrality as a forum and allows the parties to
select and shape the procedures and costs of dispute resolution. On the other
hand, ICA procedures are often informal and not laden with legal rights. R. H.
FOLSOM, M. W. GORDON, J. A. SPANOGLE, JR., INTERNATIONAL BUSINESS
TRANSACTIONS, pp. 1113-1114 (2nd ed., 1 year published).

4.

The award purportedly held that LHC wrongfully drew on the securities; and that
TPI is entitled to the return of the said sums, liquidated damages, and liquidation
costs.

5.

Rollo, pp. 1289-1293.

6.

ANZ Bank's Motion to be Excused, id. at 1220; Security Bank's Motion to be

Excused, temporary rollo.

7.

Motion for Leave to Set Case for Oral Argument, id. at 1747-1751.

8.

Opposition, id. at 1757-1760.

9.

Id. at 1763-1767.

10.

Id. at 1823-1829.

11.

TPI also submitted a copy of the Award, id. at 1768-1818.

12.

Mondragon Leisure and Resorts Corporation v. United Coconut Planters Bank ,

G.R. No. 154187, 14 April 2004, 427 SCRA 585, 590.

13.

Roxas v. Court of Appeals , G.R. No. 139337, 15 August 2001, 363 SCRA 207,
217.

14.

Korea Exchange Bank v. Hon. Rogelio C. Gonzales, et al ., G.R. Nos. 142286-87,

15 April 2005, 456 SCRA 224, 243, citing Benedicto v. Court of Appeals , G.R. No.
125359, 4 September 2001, 364 SCRA 334.

15.

Rollo, p. 1270.

16.

Id. at 1267.

17.

Art. 23 (2), Rules of Arbitration of the International Chamber of Commerce

provides:
Before the le is transmitted to the Arbitral tribunal and in appropriate
circumstances even thereafter, the parties may apply to any competent judicial
authority for interim or conservatory measures. The application of a party to a
judicial authority for such measure or for the implementation of any
such measure ordered by an Arbitral tribunal shall not be deemed to be
an infringement or a waiver of the arbitration agreement and shall not
aect the relevant powers reserved to the Arbitral tribunal. Any such
application and any measures taken by the judicial authority must be notied
without delay to the Secretariat. The Secretariat shall inform the Arbitral tribunal
thereof. (emphasis supplied)

18.

Section 14. Subpoena and subpoena duces tecum. Arbitrators shall have the
power to require any person to attend a hearing as a witness. They shall have the
power to subpoena witnesses and documents when the relevancy of the
testimony and the materiality thereof has been demonstrated to the arbitrators.
Arbitrators may also require the retirement of any witness during the testimony of
any other witness. All of the arbitrators appointed in any controversy must attend
all the hearings in that matter and hear all the allegations and proofs of the parties;
but an award by the majority of them is valid unless the concurrence of all of them
is expressly required in the submission or contract to arbitrate. The arbitrator or
arbitrators shall have the power at any time, before rendering the award, without
prejudice to the rights of any party to petition the court to take
measures to safeguard and/or conserve any matter which is the subject
of the dispute in arbitration. (Emphasis supplied.)

19.

Sec. 28, R.A. No. 9285. Grant of Interim Measure of Protection. (a) It is not
incompatible with an arbitration agreement for a party to request, before
constitution of the tribunal, from a Court an interim measure of protection and for
the Court to grant such measure. After constitution of the arbitral tribunal and
during arbitral proceedings, a request for an interim measure of protection,
or modication thereof, may be made with the arbitral tribunal or to the
extent that the arbitral tribunal has no power to act or is unable to act
eectively, the request may be made with the Court . . . . . (Emphasis
supplied.)

20.

Rollo, p. 672.

21.

Id. at 680.

22.

Id. at 661.

23.

Third Partial Award, id. at 114-664.

24.

Id. at 1685-1743.

25.

Id. at 1665-66.

26.

Rep. Act No. 9285, Sec. 19.

27.

Convention on the Recognition and Enforcement of Foreign Arbitral Awards,

signed at New York on 10 June 1958, and ratied by the Philippines under Senate
Resolution No. 71.

28.

Rollo, p. 663.

29.

Id. at 1685-1703.

30.

Id. at 1703-1705.

31.

Id. at 1741.

32.

Id. at 1741-1742.

33.

Final Award, id. at 1768-1815.