RCBC Capital Corporation vs. Banco De Oro Unibank, Inc.

An arbitral award may be vacated on the ground of evident partiality when a reasonable person would have to conclude that an arbitrator was partial to one party, such as when the arbitrator furnishes the parties with legal literature that supports one party's position and signals a preconceived course of action.

RCBC Capital Corporation purchased 67% of Bankard, Inc. shares from Equitable-PCI Bank, Inc. (EPCIB) and individual shareholders under a Share Purchase Agreement (SPA). RCBC subsequently claimed overpayment due to overstated valuations and initiated arbitration with the International Chamber of Commerce-International Court of Arbitration (ICC-ICA). EPCIB refused to pay its equal share of the advance on costs, prompting RCBC to pay the balance to avert suspension of the proceedings. RCBC sought a partial award for reimbursement of EPCIB’s share and the withdrawal of EPCIB’s counterclaims.

• The SPA and the Dispute: RCBC purchased Bankard shares from EPCIB and individual shareholders. RCBC later alleged overpayment due to overstated valuations and breached warranties, initiating ICC arbitration when settlement failed.
• Arbitration Cost Dispute: The ICC-ICA fixed advance on costs. EPCIB refused to pay its equal share, arguing its counterclaim was significantly smaller than RCBC's principal claim and proposing separate advances. The ICC-ICA denied EPCIB's proposal. To prevent the suspension of the proceedings and the withdrawal of its claims under Article 30(4) of the ICC Rules, RCBC paid EPCIB's share.
• Chairman Barker's Intervention: RCBC repeatedly requested that EPCIB be declared in default and its counterclaims withdrawn due to non-payment. Chairman Barker responded that the Tribunal had no power under the ICC Rules to order payment or declare default, but suggested that RCBC could apply for a partial award for reimbursement. RCBC subsequently filed an Application for Reimbursement of Advance on Costs Paid.
• The Secomb Article: During the exchange on the reimbursement issue, Chairman Barker furnished the parties with a copy of an article by Matthew Secomb—a lawyer serving at the ICC Secretariat who had participated in the case—discussing the "contractual approach" and "provisional approach" to advance on costs. Chairman Barker directed the parties to submit comments on the authorities cited in the article.
• The Partial Awards: The Tribunal issued a First Partial Award finding EPCIB liable for breach of warranty but denying rescission. Subsequently, the Tribunal issued a Second Partial Award adopting the "contractual approach" discussed in the Secomb article, ordering EPCIB to reimburse RCBC for the advance costs and considering EPCIB's counterclaims withdrawn.
• Judicial Confirmation and Execution: The RTC confirmed the Second Partial Award, but the CA reversed, finding evident partiality. Meanwhile, the Arbitral Tribunal issued a Final Award granting RCBC damages and dismissing EPCIB's counterclaims. The RTC confirmed the Final Award and issued a Writ of Execution. BDO paid the judgment under protest to avert the sale of its shares.

• Evident Partiality Standard: RCBC argued that the CA erred in finding evident partiality because BDO's allegations fall short of the jurisprudential requirement of clear and convincing evidence.
• Judicial Review Limitations: RCBC maintained that the CA reversals of the Arbitral Tribunal’s findings of fact and law contravene the Special ADR Rules, which prohibit courts from disturbing the Arbitral Tribunal's determinations.
• Entitlement to Injunctive Relief: BDO argued that the CA gravely abused its discretion in denying the stay order or TRO because BDO possessed clear and unmistakable rights, suffered irreparable damage due to the RTC's hasty execution, and was denied due process.

• Excess of Jurisdiction and Partiality: BDO countered that the Arbitral Tribunal exceeded its powers and that Chairman Barker exhibited evident partiality by interpreting RCBC’s letter as an application for a partial award and by furnishing the Secomb article, which favored RCBC.
• Mootness of Injunction: RCBC argued that BDO’s application for injunctive relief became moot and academic because the writ of execution was already enforced and BDO had already made full payment under protest.

• Evident Partiality: Whether there is legal ground to vacate the Second Partial Award based on the arbitrator's evident partiality.
• Injunction: Whether BDO is entitled to injunctive relief to enjoin the execution of the Final Award.

• Evident Partiality: The Second Partial Award was properly vacated. The "reasonable impression of partiality" standard applies, requiring a showing that a reasonable person would have to conclude that an arbitrator was partial. Chairman Barker’s act of furnishing the Secomb article—which advanced legal arguments favoring RCBC and was written by an ICC Secretariat member involved in the case—indicated a preconceived course of action and pre-judgment. This violated the requirement of impartiality under Article 15 of the ICC Rules, as the article reflected in advance the disposition of the Tribunal.
• Injunction: The petition for injunction was properly denied. Because BDO had already paid the judgment debt under protest, which RCBC accepted as full satisfaction, the act sought to be enjoined was already consummated. Injunction cannot issue to restrain the performance of an act already done.

• Evident Partiality in Arbitration — Defined as the existence of signs and indications that must lead to an identification or inference of partiality. The standard requires a showing that a reasonable person would have to conclude that an arbitrator was partial to one party. The interest or bias must be direct, definite, and capable of demonstration rather than remote, uncertain, or speculative. The Court adopted this standard over the stricter "appearance of bias" or the looser "proof of actual bias" standards.
• Limited Judicial Review of Arbitral Awards — Courts are generally without power to amend or overrule an arbitral award merely because of disagreement with matters of law or fact. Judicial review is limited to the statutory grounds for vacation, such as evident partiality, and courts cannot substitute their judgment for that of the arbitrators.
• Injunction as a Provisional Remedy — Injunction is a preservative remedy for the protection of substantive rights. When the act sought to be enjoined has become a fait accompli, the prayer for provisional remedy must be denied, as an injunction will not issue to restrain the performance of an act already done.

• "Evident partiality in its common definition thus implies 'the existence of signs and indications that must lead to an identification or inference' of partiality."
• "[T]he Court adopts the reasonable impression of partiality standard, which requires a showing that a reasonable person would have to conclude that an arbitrator was partial to the other party to the arbitration."
• "By furnishing the parties with a copy of this article, Chairman Barker practically armed RCBC with supporting legal arguments under the 'contractual approach' discussed by Secomb."
• "A writ of injunction becomes moot and academic after the act sought to be enjoined has already been consummated."

• Asset Privatization Trust v. Court of Appeals — Followed. Established the principle that courts cannot review findings of law and fact in an arbitral award and substitute their judgment for that of the arbitrators.
• Commonwealth Coatings Corp. v. Continental Casualty Co. — Distinguished. The Supreme Court declined to adopt the CA's reliance on the obiter in this US case that arbitrators are held to the same standard of conduct as judges, opting instead for the "reasonable impression of partiality" standard.
• Morelite Construction Corp. v. New York District Council Carpenters Benefit Funds — Followed. Adopted the "reasonable impression of partiality" standard, which finds evident partiality where a reasonable person would have to conclude that an arbitrator was partial to one party.
• Gov. Looyuko — Followed. Cited for the rule that an injunction will not issue to restrain an act that has already happened.

• Section 24(b), Republic Act No. 876 (The Arbitration Law) — Enumerates evident partiality as a ground for vacating an arbitral award.
• Sections 40 and 41, Republic Act No. 9285 (Alternative Dispute Resolution Act of 2004) — Govern the confirmation and vacation of domestic arbitral awards, directing courts to apply the grounds under RA 876.
• Rule 11.4(b), Special Rules of Court on Alternative Dispute Resolution — Reiterates evident partiality or corruption in the arbitral tribunal as a ground to vacate an arbitral award.
• Rule 19.10, Special Rules of Court on Alternative Dispute Resolution — Prescribes the standard for judicial review, prohibiting courts from setting aside awards merely for errors of fact or law.
• Rule 19.22, Special Rules of Court on Alternative Dispute Resolution — States that an appeal shall not stay the award unless the CA directs otherwise.
• Article 15, ICC Rules of Arbitration — Requires the Arbitral Tribunal to act fairly and impartially and ensure each party has a reasonable opportunity to present its case. Violation of this rule through pre-judgment formed the basis for finding evident partiality.
• Article 30(3), ICC Rules of Arbitration — Fixes the advance on costs payable in equal shares by the claimant and respondent, allowing one party to pay the whole should the other fail to pay its share.

Sereno, C.J., Leonardo-De Castro, Bersamin, Reyes