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  • (G.R. No. 143581) Korea Technologies vs. Hon. Lerma (Digest)

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    Ryan Leocario
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    The document summarizes a dispute between Korea Technologies Co., Ltd. (KOGIES), a Korean corporation that supplies and installs LPG cylinder manufacturing plants, and Pacific General Steel Manufacturing Corp. (PGSMC), a Philippine corporation. KOGIES and PGSMC signed a contract for KOGIES to set up an LPG plant in the Philippines, but PGSMC later cancelled payment and the contract. KOGIES insisted the dispute be settled through arbitration in Korea as stipulated in their contract. However, the trial court declared the arbitration clause invalid as against public policy for ousting the courts' jurisdiction. The Supreme Court ultimately ruled the arbitration clause was not against public policy and

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    [G.R. No. 143581] Korea Technologies vs. Hon. Lerma (digest)

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    [G.R. No. 143581] Korea Technologies vs. Hon. Lerma (digest)

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    The document summarizes a dispute between Korea Technologies Co., Ltd. (KOGIES), a Korean corporation that supplies and installs LPG cylinder manufacturing plants, and Pacific General Steel Manufacturing Corp. (PGSMC), a Philippine corporation. KOGIES and PGSMC signed a contract for KOGIES to set up an LPG plant in the Philippines, but PGSMC later cancelled payment and the contract. KOGIES insisted the dispute be settled through arbitration in Korea as stipulated in their contract. However, the trial court declared the arbitration clause invalid as against public policy for ousting the courts' jurisdiction. The Supreme Court ultimately ruled the arbitration clause was not against public policy and

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    © All Rights Reserved
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    2K views2 pages

    (G.R. No. 143581) Korea Technologies vs. Hon. Lerma (Digest)

    Uploaded by

    Ryan Leocario
    The document summarizes a dispute between Korea Technologies Co., Ltd. (KOGIES), a Korean corporation that supplies and installs LPG cylinder manufacturing plants, and Pacific General Steel Manufacturing Corp. (PGSMC), a Philippine corporation. KOGIES and PGSMC signed a contract for KOGIES to set up an LPG plant in the Philippines, but PGSMC later cancelled payment and the contract. KOGIES insisted the dispute be settled through arbitration in Korea as stipulated in their contract. However, the trial court declared the arbitration clause invalid as against public policy for ousting the courts' jurisdiction. The Supreme Court ultimately ruled the arbitration clause was not against public policy and

    Copyright:

    © All Rights Reserved
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    of 2

    [G.R. No.

    143581] January 7, 2008

    KOREA TECHNOLOGIES CO., LTD., petitioner,


    vs.
    HON. ALBERTO A. LERMA, in his capacity as Presiding Judge of Branch 256 of Regional
    Trial Court of Muntinlupa City, and PACIFIC GENERAL STEEL MANUFACTURING
    CORPORATION, respondents.

    Facts:

    Korea Technologies Co., Ltd. (KOGIES), herein petitioner, is a Korean corporation which is
    engaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants,
    while private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic corporation.

    On March 5, 1997, PGSMC and KOGIES executed a Contract whereby KOGIES would set up
    an LPG Cylinder Manufacturing Plant in Carmona, Cavite. The contract was executed in the Philippines.

    However, PGMC stopped payment of its balance under the contract because KOGIES allegedly
    used inferior quality materials contrary to what was agreed upon. PGMC then sent a notice cancelling
    the contract.

    KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their
    contract nor dismantle and transfer the machineries and equipment on mere imagined violations by
    KOGIES. It also insisted that their disputes should be settled by arbitration as agreed upon in the
    arbitration clause of their contract. KOGIES instituted an Application for Arbitration before the Korean
    Commercial Arbitration Board (KCAB) in Seoul, Korea. Meanwhile, KOGIES also filed a complaint for
    specific performance against PGSMC in the Regional Trial Court of Muntinlupa City (RTC).

    KOGIES then filed before the Court of Appeals (CA) a petition for certiorari seeking annulment
    of certain interlocutory orders of the RTC and praying for, among other reliefs, to direct the RTC to
    enforce the specific agreement on arbitration to resolve the dispute.

    The CA affirmed the trial court and declared the arbitration clause to be against public policy
    because it provided for a final determination of the parties’ legal rights, therefore ousting the courts
    of its jurisdiction.

    Hence, this petition.

    Issue:

    Whether or not the arbitration clause is against public policy.

    Ruling:

    According to the Supreme Court, the arbitration clause which stipulates that the arbitration
    must be done in Seoul, Korea and that the arbitral award is final and binding, is not contrary to public
    policy. The courts should liberally construe arbitration clauses. Provided such clause is susceptible of
    an interpretation that covers the asserted dispute, an order to arbitrate should be granted. Any doubt
    should be resolved in favor of arbitration.
    Also, Article 2044 of the Civil Code sanctions the validity of mutually agreed arbitral clause or the
    finality and binding effect of an arbitral award. Under the said provision, "Any stipulation that the
    arbitrators’ award or decision shall be final, is valid, without prejudice to Articles 2038, 2039
    and 2040."

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