G.R. No. 196171 & G.R. No. 199238, December 10, 2012
RCBC CAPITAL CORPORATION vs. BANCO DE ORO UNIBANK, INC. (and consolidated case)

FACTS

RCBC Capital Corporation (RCBC) purchased shares in Bankard, Inc. from Equitable-PCI Bank (EPCIB, later merged into Banco De Oro Unibank, Inc. or BDO) and other shareholders under a Share Purchase Agreement (SPA) containing an arbitration clause. RCBC later alleged an overpayment due to accounting misrepresentations and initiated arbitration before the International Chamber of Commerce (ICC). The ICC required an advance on costs to be shared equally by the parties. BDO (as successor to EPCIB) refused to pay its share, arguing for separate advances given the disparity in claim amounts. The ICC denied BDO’s application and, due to non-payment, terminated the arbitration under its rules. RCBC then petitioned the Regional Trial Court (RTC) to appoint a substitute arbitrator, which the RTC granted. The Court of Appeals reversed the RTC, holding the arbitration had been terminated. Subsequently, the RTC issued a writ of execution to enforce its order for arbitration, which BDO sought to enjoin.

ISSUE

The core issue is whether the RTC correctly ordered the appointment of a substitute arbitrator to continue the arbitration proceedings after the ICC terminated the case due to BDO’s failure to pay its share of the advance on costs.

RULING

The Supreme Court ruled in favor of BDO and upheld the termination of the arbitration. The legal logic rests on the principle of party autonomy and the governing procedural rules agreed upon by the parties. The SPA explicitly stipulated that arbitration would be conducted under the ICC Rules. Article 30(4) of the ICC Rules (1998 version) states that if an advance on costs is not paid, the claim shall be considered withdrawn. The ICC, applying its own rules, formally terminated the proceedings due to BDO’s non-payment. The Court emphasized that when parties select an institutional arbitration body like the ICC, they are bound by its procedural rules, including those on cost advances and termination. The RTC’s order to appoint a substitute arbitrator effectively disregarded this agreed-upon institutional mechanism and the ICC’s final administrative action. The Court held that compelling arbitration under a new tribunal would violate the parties’ contract, which incorporated the ICC Rules, and would unjustly revive a proceeding already terminated by the chosen arbitral institution for a valid reason under its rules. The termination was a procedural consequence of BDO’s default, not a denial of RCBC’s right to arbitrate, as that right was conditioned on compliance with the agreed institutional procedures.