Jorge Gonzales and Panel of Arbitrators v. Climax Mining, Climax-Arimco Mining, and Australasian Philippines Mining, G.R. NO. 161957, February 28, 2005

FACTS:

Petitioner Jorge Gonzales, as claimowner of mineral deposits located in Didipio granted to Geophilippines and Inmex collectively, the exclusive right to explore and survey the mining claims for a period of 36 months within which the latter could decide to take an operating agreement on the mining claims.

The exploration of the mining claims was extended for another period of three years.

Later, petitioner Gonzales, Arimco, Geophilippines, Inmex, and Aumex entered into an agreement designated as Addendum whereby Arimco would apply to the Government for permission to mine the claims as the Government's contractor under a Financial and Technical Assistance Agreement. Arimco eventually obtained the FTAA.

Respondents then executed the Operating and Financial Accommodation Contract (between Climax-Arimco and Climax, as first parties, and Australasian, as second party) and Assignment, Accession Agreement (between Climax-Arimco and Australasian). Respondent Climax and respondent Australasian entered into a Memorandum of Agreement whereby the former transferred its FTAA to the latter.

Petitioner Gonzales filed before the Panel of Arbitrators of the Mines and Geosciences Bureau against respondents Climax-Arimco, Climax, and Australasian, a Complaint seeking the declaration of nullity or termination of the Addendum Contract, the FTAA, the Operating and Financial Accommodation Contract, the Assignment, Accession Agreement, and the Memorandum of Agreement. He sought said reliefs on the grounds of "FRAUD, OPPRESSION and/or VIOLATION of the CONSTITUTION perpetrated by these foreign RESPONDENTS."

On 21 February 2001, the Panel of Arbitrators dismissed the Complaint for lack of jurisdiction. Petitioner moved for reconsideration and this was granted on 18 October 2001, the Panel believing that the case involved a dispute involving rights to mining areas and a dispute; therefore, the question on the validity of the contract amounts to a mining conflict or dispute. Hence, the Panel granted the Motion for Reconsideration with regard to the issues of nullity, termination, withdrawal or damages, but with regard to the constitutionality of the Addendum Agreement and FTAA, it held that it had no jurisdiction.

Respondents assailed the orders of the Panel of Arbitrators before the CA.

The Court of Appeals granted the petition, declaring that the Panel of Arbitrators did not have jurisdiction over the complaint filed by petitioner. The jurisdiction of the Panel of Arbitrators, said the Court of Appeals, is limited only to the resolution of mining disputes, defined as those which raise a question of fact or matter requiring the technical knowledge and experience of mining authorities. It was found that the complaint alleged fraud, oppression and violation of the Constitution, which called for the interpretation and application of laws, and did not involve any mining dispute. The Court of Appeals was of the opinion that the petition should have been settled through arbitration under the Arbitration Law as stated in Clause 19.1 of the Addendum Contract.

 

ISSUES:

1) Whether the complaint filed by petitioner raises a mining dispute over which the Panel of Arbitrators has jurisdiction, or a judicial question which should properly be brought before the regular courts

2) Whether the dispute between the parties should be brought for arbitration under Rep. Act No. 876

 

RULING:

1) Judicial question. Arbitration before the Panel of Arbitrators is proper only when there is a disagreement between the parties as to some provisions of the contract between them, which needs the interpretation and the application of that particular knowledge and expertise possessed by members of that Panel. It is not proper when one of the parties repudiates the existence or validity of such contract or agreement on the ground of fraud or oppression as in this case. The validity of the contract cannot be subject of arbitration proceedings. Allegations of fraud and duress in the execution of a contract are matters within the jurisdiction of the ordinary courts of law. These questions are legal in nature and require the application and interpretation of laws and jurisprudence which is necessarily a judicial function.

2) NO. Petitioner also disagrees with the Court of Appeals' ruling that the case should be brought for arbitration under Rep. Act 876, pursuant to the arbitration clause in the Addendum Contract which states that "[a]ll disputes arising out of or in connection with the Contract, which cannot be settled amicably among the Parties, shall finally be settled under R.A. 876." He points out that respondents Climax and APMI are not parties to the Addendum Contract and are thus not bound by the arbitration clause in said contract.

We agree that the case should not be brought under the ambit of the Arbitration Law, but for a different reason. The question of validity of the contract containing the agreement to submit to arbitration will affect the applicability of the arbitration clause itself. A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are enjoined from taking inconsistent positions. As previously discussed, the complaint should have been filed before the regular courts as it involved issues which are judicial in nature.