• In 1998, the respondent faced financial difficulties and underwent a rehabilitation process overseen by the

Securities and Exchange Commission (SEC). As part of this process, all payment claims against the
respondent were suspended.
• To address this situation, the respondent sought the expertise of technical advisors with experience in the
airline industry. This led them to consult with Peter W. Foster, a former Cathay Pacific Airlines employee,
and Michael R. Scantlebury. Together, they negotiated the terms of a proposed technical services
agreement.
• Subsequently, Foster and Scantlebury established Regent Star Services Ltd. (Regent Star) in the British
Virgin Islands. On January 4, 1999, the respondent and Regent Star entered into a Technical Services
Agreement (TSA) for the provision of technical and advisory services.
• The TSA outlined the terms of the agreement, including the fees to be paid to Regent Star and the penalties
that would be imposed if either party terminated the agreement prematurely. The respondent agreed to pay
Regent Star an upfront fee of US$4,700,000 and additional fees upon certain conditions.
• Furthermore, the TSA stipulated that if either party terminated the agreement early, they would be liable
to pay penalties. The specific penalties varied depending on the role of the individual involved.
• Regent Star agreed to the terms of the TSA, and the Securities and Exchange Commission approved the
agreement on January 19, 1999.
• In addition to Foster and Scantlebury, Regent Star hired Andrew D. Fyfe, Richard J. Wald, and Richard T.
Nuttall as Senior Technical Advisors. These individuals started providing their services to the respondent
immediately after the TSA was executed.
• However, on July 26, 1999, the respondent sent a notice to Regent Star, terminating the TSA on the grounds
of lack of confidence. The respondent also demanded the offsetting of penalties due to the petitioners with
the advance advisory fees they had already paid to Regent Star.
• Regent Star disagreed with the respondent's claims and proposed arbitration. The petitioners, who were
working for Regent Star, initiated arbitration proceedings with the Philippine Dispute Resolution Center.

• PDRIC
PAL cannot withhold termination penalties from the complainants by offsetting them against
unserved advisory fees. The contract and its side letter do not allow for refunds. The arbitration
tribunal cannot interpret the contract in a way that goes beyond its literal meaning or the parties' intended
purpose.
• The penalties serve as security for the complainants, ensuring they are compensated even if PAL
closes. This is not unjust enrichment since PAL terminated their services without cause. In fact, PAL
acknowledged that the complainants were performing well at the time of termination.

RTC
The respondent was dissatisfied with the arbitration award and filed an application to vacate it in the Regional
Trial Court (RTC) in Makati City. The respondent argued that the SEC's July 1, 1998 order suspending payments
should invalidate the arbitration decision.
• The petitioners countered by filing a motion to dismiss, citing lack of jurisdiction, lack of a cause of action,
and improper remedy. They argued that the respondent should have appealed the arbitration decision to
the Court of Appeals (CA) instead of filing an application to vacate.
• The arbitration award issued on September 29, 2000 is hereby invalidated and dismissed. The
complainants retain the right to file their claim with the SEC rehabilitation receiver for further
consideration. The panel of arbitrators, consisting of lawyers Beda Fajardo, Arturo de Castro, and
Bienvenido Magnaye, is dismissed due to clear bias.

Issue of Jurisdiction:
• The respondent argued that the court lacked jurisdiction over the complainants because they were not
properly served with summons. However, the court ruled that the complainants had voluntarily
submitted themselves to the court's jurisdiction by requesting affirmative relief.
 • The court also cited Sections 22 and 26 of the Arbitration Law, which state that an application or
petition to vacate an arbitral award is considered a motion and that serving this motion on the
opposing party or their counsel is sufficient to confer jurisdiction.
• Since the complainants were duly served with copies of the application to vacate and had appeared
through counsel, the court found that the objection regarding lack of a cause of action was also
without merit. The court noted that this case was a special proceeding under the Arbitration Law
and therefore not subject to the usual procedural requirements.

Issue of Vacation of Arbitral Award:

• The purpose of suspending payments is to allow the rehabilitation receiver to act without interference,
protecting the distressed corporation. The duration of the suspension is not specified in the law and
continues for as long as the company is under SEC receivership.
• Since PAL is under receivership, the SEC's July 1, 1998 order suspending payments effectively prevents
other courts from handling claims against PAL during this period.
• The SEC has exclusive jurisdiction over rehabilitation proceedings, including the power to hear claims
against the distressed corporation. Until the SEC lifts the suspension order, the arbitration panel
cannot handle the complainants' claims without overstepping the SEC's authority.

ISSUE:
1. Whether or not there was sufficient compliance with the rule on verification and certification against
forum shopping.
2. Whether or not the Appeal TO the RTC order vacating an arbitral award was valid.
3. Whether or not the Panel of Arbitrators had no jurisdiction to hear and decide the petitioners' claim.
4. Whether or not the requirement of due process was observed.
5. Whether or not the Arbitration Law is constitutional.

HELD:
1. YES. The SPAs individually signed by the petitioners vested in their counsel the authority. The authority was
sufficiently broad to expressly and specially authorize their counsel, Atty. Ida Maureen V. Chao-Kho, to sign the
verification/certification on their [Link] also uphold the efficacy of the certification on non-forum shopping
executed by Atty. Chao-Kho on the basis of the authorization bestowed under the SPAs by the petitioners.
Petitioners are foreign residents who reside and are presently abroad. Further, the Firm is Petitioners' sole legal
counsel in the Philippines, and hence, is in a position to know that Petitioners have no other cases before any
court o[r] tribunal in the Philippines.
2. YES. The assailed resolution of the CA did not expressly declare that the petition for review on certiorari under
Rule 45 was the sole remedy from the RTC's order vacating the arbitral award. The CA rather emphasized that
the petitioners should have filed the petition for review on certiorari under Rule 45 considering that Section 29
of the Arbitration Law has limited the ground of review to "questions of law." Accordingly, the CA correctly
dismissed the appeal of the petitioners because pursuant to Section 2, Rule 41 of the Rules of Court an appeal
of questions of law arising in the courts in the first instance is by petition for review on certiorari under Rule 45
3. YES. The RTC correctly opined that the SEC's suspension order effective July 1, 1998 deprived the arbitration
panel of the jurisdiction to hear any claims against the respondent. The reason behind the imperative nature of
a suspension or stay order in relation to the creditors’ claims cannot be downplayed, for indeed the
indiscriminate suspension of actions for claims intends to expedite the rehabilitation of the distressed
corporation by enabling the management committee or the rehabilitation receiver to effectively exercise its/his
powers free from any judicial or extrajudicial interference that might unduly hinder or prevent the rescue of the
debtor company.
4. YES. The RTC observed that the respondent's Application to Vacate Arbitral Award was duly served personally
on the petitioners, who then appeared by counsel and filed pleadings. The petitioners countered with their
Motion to Dismiss vis-a-vis the respondent's application, specifying therein the various grounds earlier
mentioned, including the lack of jurisdiction over their persons due to the improper service of summons. Under
the circumstances, the requirement of notice was fully complied with, for Section 2657 of the Arbitration Law
required the application to be served upon the adverse party or his counsel within 30 days after the award was
filed or delivered "as prescribed by law for the service upon an attorney in an action
5. YES. Based on the tenor and text of Section 30, Article VI of the 1987 Constitution, the prohibition against
increasing the appellate jurisdiction of the Supreme Court without its advice and concurrence applies
prospectively, not retrospectively. Considering that the Arbitration Law had been approved on June 19, 1953,
and took effect under its terms on December 19, 1953, while the Constitution was ratified only on February 2,
1987, Section 29 of the Arbitration Law could not be declared unconstitutional.