Arbitration and Third Parties in Legal Proceedings

Posted on Nov 7, 2024 in Law & Jurisprudence

1. Concept of Arbitration

Arbitration is a dispute settlement mechanism outside of state jurisdiction. Disputes between parties are settled based on their expressed wills in a compromise. They prefer to settle their claims based on the compromise of another person (legal entity) called an arbitrator.

2. Constitutional Basis of Arbitration

Article 17 of the Constitution states: “No person may take the law itself, or resort to violence to reclaim their right.” This article provides a generic concept that can be applied to arbitration.

3. Mediation

Mediation involves a third party who facilitates a rapprochement between the parties involved in a dispute.

4. Settlement

In a settlement, a third party proposes a solution to resolve the dispute.

5. Instrument Embodying Arbitration Commitment

The instrument that embodies the commitment to arbitration can be a policy, arbitration agreement, or arbitration award.

6. Subjects Involved in Arbitration

The subjects involved in the arbitration process include the referee, the two litigants, and a judge.

7. Issues Not Subject to Arbitration

Article 662 outlines issues that cannot be submitted to arbitration:

  1. The right to receive food;
  2. Divorces, except for the division of property and other purely pecuniary differences;
  3. Actions for the annulment of marriage;
  4. Matters concerning the civil status of persons;
  5. Other issues specifically prohibited by law.

8. Non-Waivable Issues in Arbitration

Within the arbitration process, parties cannot waive the right to a hearing, the evidentiary stage, the stage of allegations, and the right to object.

9. Termination of Referee’s Commitment

Article 669 states that the referee’s commitment ends:

  1. Upon the death of the arbitrator chosen by or on a clause if there is no substitute.
  2. Upon the arbitrator’s excuse, which can only be granted for illness preventing them from carrying out their task.
  3. For an admissible challenge for cause if the arbitrator was designated by the judge (arbitrators appointed by agreement cannot be challenged).
  4. If the appointed referee has served as a magistrate, judge, or interim owner for more than three months, or in any other employment in the administration of justice that prevents them in fact or in law from fulfilling the role of arbitration.
  5. Upon the expiry of the legal deadline or the deadline referred to in Article 664.

10. Rules Governing Referees

Referees will resolve disputes according to the rules of law, unless the parties have entrusted them to resolve the matter amicably and in good faith.

11. Execution of the Award

Article 679 states that once the award is reported, the case will be passed to the judicial court for execution, unless the parties request clarification of the sentence. The trial judge will also attend to carry out orders and decrees. If an admissible appeal is filed, the judge will admit it, send the documents to the superior court, and the proceedings will be subject to the provisions for joint trials.

12. Differences Between Ruling and Sentence

A judgment does not need approval to be executed, is issued by a judge, and is a ruling. An award needs approval to be executed (passed to the judge for execution), is binding between the parties but lacks enforceability and authority.

13. Concept of Third Party

A third party is a person who appears in a trial to defend their own interests. They are not a direct party to the dispute but are related to the parties involved.

14. Classification of Third Parties

  • Third-party intervener
  • Excluding third party
    • Domain
    • Preference

15. Third-Party Intervener

A third-party intervener has their own interest in the outcome of the case, but this interest favors one of the existing parties. They can intervene in any proceeding and any action.

16. Rights of the Third-Party Intervener

Article 566 outlines the rights of third-party interveners:

  1. They can enter the litigation at any stage, provided that no executory sentence has been pronounced.
  2. They can take any steps they deem appropriate in the trial, provided they do not introduce a new cause of action or raise the same objection that the plaintiff or defendant failed to raise.
  3. They can continue their action even if the principal party withdraws.
  4. They can appeal and invoke the appropriate remedies.

17. Basis for Third-Party Exclusive Domain Claim

Article 571 states that a third-party exclusive domain claim must be filed with the title supporting the claim, or it will be dismissed outright. It must be based on a title that covers the domain.

18. Basis for Third-Party Exclusive Preference Claim

Article 570 states that a third-party exclusive preference claim must be based on the superior right of the third party to be paid.

19. Creditors Excluded from Third-Party Preference

Article 572 lists creditors who cannot claim third-party preference:

  1. Creditors with a mortgage or other accessory real right other than the foreclosed property.
  2. Creditors who do not have a real right to the property being seized.
  3. Creditors for whom the debtor has sufficient property to satisfy the credit.
  4. Creditors who are prohibited by law from claiming preference.

20. Time Limits for Third-Party Intervention

  • Third-party intervener: Can intervene at any stage of the process as long as no decision has been issued.
  • Excluding third party: Can intervene in any proceeding regardless of its status.
    • Domain: As long as possession of the property has not been given to the bidder or to the plaintiff by way of allotment.
    • Preference: Provided that no payment has been made to the plaintiff.