G.R. No. 235853 , July 13, 2020
Department of Public Works and Highways, Petitioner, vs. Italian-Thai Development Public Company, Ltd. and Katahira & Engineers International, Respondents.

FACTS

On March 15, 2002, the Department of Public Works and Highways (DPWH) entered into a Consultancy Agreement with a Joint Venture, which included Katahira & Engineers International (KEI), for the Detailed Engineering Design and Construction Supervision of the Patapat Viaduct, Suyo-Cervantes-Mankayan-Abatan, Cervantes Sabangan, and Ligao-Pio Duran Road Improvement Project. As Project Consultant, KEI created an original sloping design for the Suyo-Cervantes Road Section. Subsequently, KEI, with DPWH’s agreement, abandoned the original design and imposed an “Overhang Design.”
On March 27, 2006, DPWH entered into a Contract Agreement with Italian-Thai Development Public Company, Ltd. (ITD) for the civil works of the Project. The Contract incorporated the FIDIC Conditions and Conditions of Particular Application (COPA). During construction, KEI instructed ITD to widen the carriageway to a uniform width of 6.10 meters instead of the original 4.0 to 5.0 meters and to limit the height of stone masonry to 1.0 meter. Several Variation Orders were approved by DPWH reflecting these changes, including the shift to overhang design.
In July 2010, ITD submitted a claim to DPWH and KEI for overrun earthwork quantities attributable to the overhang design, road realignment, and road improvement. KEI recommended denial of the claim. A joint survey was conducted but not completed. After KEI formally disallowed the claim in August 2011, ITD initiated arbitration before the Construction Industry Arbitration Commission (CIAC).
The CIAC, in a Final Award dated January 14, 2014, ruled in favor of ITD, awarding it P106,509,724.49 for overrun earthwork quantities, finding that the change to the overhang design caused the overruns due to geological instability. The CIAC held that ITD’s non-compliance with contractual notice requirements was mooted by FIDIC provisions and DPWH’s conduct (agreeing to a joint survey), and that the claims were not barred by waiver or estoppel. It denied all counterclaims by DPWH and KEI. DPWH filed a Petition for Review under Rule 43 before the Court of Appeals (CA), which dismissed the petition and affirmed the CIAC award. DPWH then elevated the case to the Supreme Court via a Petition for Review under Rule 45.

ISSUE

Whether the Court of Appeals erred in affirming the CIAC arbitral award, which granted ITD’s monetary claims for overrun earthwork quantities.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Decision of the Court of Appeals. The Court held that arbitral awards of the CIAC are final and unappealable, and may be reviewed by the Supreme Court only on pure questions of law. It reiterated the doctrine that factual findings of arbitral tribunals are final and binding and cannot be reviewed by the courts. The Court emphasized that the parties voluntarily submitted to arbitration and are bound by the arbitrator’s factual conclusions. Exceptions to this rule are limited to instances such as a deprivation of a fair opportunity to be heard, or an award obtained through fraud or arbitrator corruption. The Court found that DPWH failed to demonstrate any such exceptional circumstance that would warrant a review of the CIAC’s factual findings. Consequently, the Court upheld the integrity of the arbitration process and the finality of the CIAC award.