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 under ICC rules in Singapore. When the guaranteed ventures incurred losses, Sembcorp demanded payment. Mabuhay admitted liability but claimed it was only liable for half of the guaranteed sum as a joint obligor.
Sembcorp initiated arbitration. The Sole Arbitrator rendered a Final Award ordering Mabuhay to pay 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 enforcement, arguing 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 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 grounds for refusing enforcement under the New York Convention, as adopted in Philippine law, are limited and construed narrowly. Mabuhay’s claims failed to meet this strict standard.
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 subject claim fell squarely within the clause’s scope. Second, the challenge to the arbitrator’s expertise was a factual issue that Mabuhay failed to raise during the arbitration proceedings, precluding its belated invocation as a ground for non-enforcement. Third, the award’s enforcement was not contrary to public policy. The argument that it violated the principle of joint liability under Article 1207 of the Civil Code was unavailing. The Arbitrator correctly interpreted the joint guarantee under the Agreement and Philippine law, finding Mabuhay liable for its proportionate share. Public policy against enforcement is invoked only when the award violates the forum state’s most basic notions of morality and justice, which was not present here. The RTC erred in substituting its judgment for the Arbitrator’s on the merits of the obligation.