Busan Universal Rail, Inc. vs. Department of Transportation-Metro Rail Transit 3

A lower court lacks jurisdiction to issue interim measures of protection enjoining the termination of a national government project when the dispute is purely contractual and does not involve a constitutional issue of extreme urgency, notwithstanding an arbitration clause in the contract, because the special law (RA 8975) prevails over the general law (RA 9285).

Busan Universal Rail, Inc. (BURI) was a special purpose company incorporated by a Joint Venture to undertake the MRT3 Contract with the Department of Transportation (DOTr)-MRT3. The contract, resulting from a negotiated procurement under RA 9184, involved maintenance, general overhaul of light rail vehicles, and replacement of the signaling system. The contract included a dispute settlement clause mandating arbitration under RA 9285.

Busan Universal Rail, Inc. (BURI) was incorporated as a special purpose company by a Joint Venture composed of Busan Transportation Corporation, Edison Development and Construction, Tramat Mercantile, Inc., TMICorp, Inc., and Castan Corporation. BURI entered into a contract with the Department of Transportation (DOTr)-Metro Rail Transit (MRT) 3 for the MRT3 System Maintenance Provider, 43 light rail vehicles (LRVs) General Overhaul and Total Replacement of the Signaling System (MRT3 Contract) through a negotiated procurement under Republic Act No. 9184. The total contract amount was P3,809,128,888.00, divided into four packages covering maintenance, general overhauling of LRVs, replacement of the signaling system, and additional maintenance works.

After commencing performance under Package 1, BURI sent Billing Nos. 1 to 8, which were paid by DOTr-MRT3. However, Billing No. 9, sent on October 26, 2016, was not settled after DOTr Undersecretary for Railways Cesar B. Chavez required additional supporting documents and directed the withholding of certain amounts. BURI explained its position, but the billing remained unpaid. Subsequently, in April 2017, Usec. Chavez sent letters directing BURI to explain why the MRT3 Contract should not be terminated due to a series of serious incidents and the failure to deliver any overhauled LRVs. BURI responded by invoking the dispute settlement clause in the contract and requesting mutual consultation, which DOTr-MRT3 did not accede to.

BURI notified DOTr-MRT3 of its intention to commence arbitration and subsequently sent a Notice of Arbitration. On October 6, 2017, BURI filed a petition before the RTC for the issuance of interim measures of protection to maintain the status quo and enjoin the termination of the MRT3 Contract. The RTC denied the petition on October 13, 2017, noting that the case had been referred to arbitration. DOTr-MRT3 issued a Notice to Terminate on October 16, 2017, and a Decision terminating the contract on November 3, 2017. The RTC denied BURI's omnibus motion on December 11, 2017, citing RA 8975, which prohibits lower courts from issuing temporary restraining orders or preliminary injunctions against government infrastructure projects, and ruling that the issues were arbitrable.

• Jurisdiction to Issue Interim Measures: Petitioner argued that the RTC has authority to issue interim measures of protection in disputes proper for arbitration by virtue of RA 9184 and RA 9285, which allow a party to request interim measures from the court before the constitution of the arbitral tribunal.
• Inapplicability of RA 8975: Petitioner maintained that the prohibitory provision under Section 3(d) of RA 8975 does not apply because the arbitration clause in the MRT3 Contract is anchored on RA 9184.
• Extreme Urgency Involving a Constitutional Issue: Petitioner argued that there is extreme urgency involving a constitutional issue, specifically the denial of due process, making the prohibition under RA 8975 inapplicable.

• Prohibition under RA 8975: Respondent contended that RA 8975 prohibits lower courts from issuing temporary restraining orders, preliminary injunctions, or preliminary mandatory injunctions against national government projects, such as the MRT3 Contract.
• Avoidance of Prejudgment: Respondent asserted that the petition should be dismissed to avoid prejudgment on the merits, as the issues raised by petitioner are the same matters to be discussed in the arbitration proceeding.

• Jurisdiction: Whether the RTC has jurisdiction to issue interim measures of protection and restraining orders against the termination of a national government project pending arbitration.
• Applicability of RA 8975: Whether RA 8975 prohibits the RTC from issuing interim measures of protection in this case, notwithstanding the arbitration clause and RA 9285.
• Constitutional Issue of Extreme Urgency: Whether the dispute involves a constitutional issue of extreme urgency that would exempt it from the prohibition under RA 8975.

• Jurisdiction: No. The RTC properly dismissed the petition for lack of jurisdiction, as RA 8975 prohibits lower courts from issuing injunctions against the termination of national government projects.
• Applicability of RA 8975: Yes. RA 8975, as a special law governing national government projects, prevails over RA 9285, a general law on alternative dispute resolution, and prohibits the issuance of interim measures of protection against the termination of such projects.
• Constitutional Issue of Extreme Urgency: No. The dispute is purely contractual and does not involve a constitutional issue of extreme urgency that would warrant an exception to the prohibition under RA 8975.

• Jurisdiction: The RTC's jurisdiction to issue interim measures of protection is limited by RA 8975. While RA 9285 allows courts to grant interim measures before the constitution of an arbitral tribunal, this general statute must yield to RA 8975, which specifically prohibits courts, except the Supreme Court, from issuing TROs or preliminary injunctions against the government to restrain the termination or rescission of national government projects.
• Applicability of RA 8975: The MRT3 Contract is a national government project. Petitioner's prayer to enjoin the termination of the contract falls squarely under Section 3(d) of RA 8975. The rationale is to prevent the government from being indefinitely hampered in providing vital public goods and services while a controversy is pending litigation. If a project proponent could enjoin termination, the government could not enter into a new contract. The BOT Law presupposes that a project proponent can be adequately compensated if the termination is found to be wrongful.
• Constitutional Issue of Extreme Urgency: Petitioner invoked the exception in RA 8975 for matters of extreme urgency involving a constitutional issue. However, the Court found the dispute to be purely contractual. The relationship between DOTr-MRT3 and BURI is primarily contractual, and the dispute involves the adjudication of contractual rights. The propriety of the termination should be gauged against the contract and applicable statutes, not constitutional provisions. Thus, there is no constitutional issue of extreme urgency.

• Special law prevails over general law — RA 9285 (Alternative Dispute Resolution Act of 2004) is a general law applicable to all matters resolved through ADR, allowing RTCs to grant interim measures. RA 8975 is a special law governing national government projects, prohibiting lower courts from issuing TROs or injunctions against such projects. The general law must give way to the special law.
• Prohibition on injunctions against government projects (RA 8975) — Lower courts are prohibited from issuing TROs, preliminary injunctions, or preliminary mandatory injunctions against the government to restrain the termination or rescission of national government projects. The exception is when the matter is of extreme urgency involving a constitutional issue, such that grave injustice and irreparable injury will arise without a TRO. The rationale is to prevent the government from being hampered in providing public goods and services.

• "Republic Act No. 9285 is a general law applicable to all matters and controversies to be resolved through alternative dispute resolution methods. This law allows a Regional Trial Court to grant interim or provisional relief, including preliminary injunction, to parties in an arbitration case prior to the constitution of the arbitral tribunal. This general statute, however, must give way to a special law governing national government projects, Republic Act No. 8975 which prohibits courts, except the Supreme Court, from issuing TROs and writs of preliminary injunction in cases involving national government projects." — This passage articulates the ratio decidendi, establishing the hierarchy between RA 9285 and RA 8975 in the context of interim measures of protection for government projects.
• "The issue between the parties are purely contractual. We again direct petitioner's attention to Falcon where it was sharply ruled that, and as applicable herein: ... The relationship of DFA to BCA is primarily contractual and their dispute involves the adjudication of contractual rights." — This passage explains why the exception for constitutional issues of extreme urgency does not apply, as the dispute is contractual rather than constitutional.

• Department of Foreign Affairs, et al. vs. Hon. Judge. Falcon, et al. — 644 Phil. 105 (2010). Controlling precedent. The Court applied the ruling in Falcon, which established that RA 9285 must yield to RA 8975 in cases involving national government projects, and that purely contractual disputes do not involve constitutional issues of extreme urgency.

• Section 3, RA 8975 — Prohibits lower courts from issuing TROs, preliminary injunctions, or preliminary mandatory injunctions against the government to restrain the termination or rescission of national government projects, except in cases of extreme urgency involving a constitutional issue. Applied to bar the RTC from issuing interim measures against the termination of the MRT3 Contract.
• Section 28, RA 9285 — Allows a party to request an interim measure of protection from the court before the constitution of the arbitral tribunal. The Court noted this provision but ruled it must yield to RA 8975.
• Section 59, Rule XVIII, Revised IRR of RA 9184 — Mandates that disputes arising from government procurement contracts be submitted to arbitration under RA 876 and RA 9285. Recognized as the basis for the arbitration clause in the MRT3 Contract.

Perlas-Bernabe (Chairperson), A. Reyes, Jr., Hernando, and Delos Santos, JJ., concur.