G.R. No. 212734 . December 05, 2018.
Mabuhay Holdings Corporation, Petitioner, vs. Sembcorp Logistics Limited, Respondent.

FACTS

Petitioner Mabuhay Holdings Corporation (Mabuhay), Infrastructure Development & Holdings, Inc. (IDHI), and respondent Sembcorp Logistics Limited (Sembcorp) entered into a Shareholders’ Agreement concerning their investments in Water Jet Shipping Corporation and Water Jet Netherlands Antilles. Under Article 13 of the Agreement, Mabuhay and IDHI jointly guaranteed Sembcorp a minimum accounting return on its investment. The Agreement contained an arbitration clause requiring disputes to be settled by arbitration under ICC rules in Singapore. When the guaranteed return became due and unpaid, Sembcorp initiated arbitration proceedings.
The Sole Arbitrator rendered a Final Award ordering Mabuhay to pay Sembcorp half of the guaranteed return plus interest and costs. Sembcorp then filed a Petition for Recognition and Enforcement of this foreign arbitral award before the Regional Trial Court (RTC) of Makati. Mabuhay opposed, arguing grounds for non-enforcement under the New York Convention, including that the dispute was an intra-corporate controversy excluded from arbitration, the arbitrator lacked required expertise, and enforcement would violate Philippine public policy concerning joint obligations. The RTC denied the petition, but the Court of Appeals reversed and ordered the award’s enforcement.

ISSUE

Whether the RTC correctly denied the petition for recognition and enforcement of the foreign arbitral award based on the grounds raised by Mabuhay.

RULING

No. The Supreme Court affirmed the Court of Appeals and ordered the enforcement of the foreign arbitral award. The Court emphasized the pro-enforcement bias under the New York Convention and the Special ADR Rules. Mabuhay’s grounds for refusal were properly rejected.
First, the dispute concerned the enforcement of a contractual guarantee under the Shareholders’ Agreement, not an intra-corporate matter relating to internal corporate affairs. The arbitration clause explicitly excluded intra-corporate controversies, and the claim fell squarely within the clause’s scope. Second, Mabuhay’s challenge to the arbitrator’s expertise was a factual issue that was waived, as it was not raised during the arbitration proceedings despite having the opportunity to do so. A party cannot actively participate in arbitration and later challenge the arbitrator’s appointment on a ground it knowingly failed to raise.
Third, enforcement would not be contrary to public policy. Mabuhay argued that enforcing a joint obligation against only one obligor (itself) violates Article 1217 of the Civil Code. The Court held that the arbitral award, which was based on the parties’ submissions and the arbitrator’s interpretation of their agreement and conduct, did not blatantly violate basic legal principles. The New York Convention’s public policy defense is construed narrowly and applies only when enforcement would violate the forum state’s most basic notions of morality and justice. No such extreme violation was present. The grounds raised by Mabuhay did not fall under the exclusive list of grounds for refusing enforcement under the law.