The Philippine legal system is primarily based on civil law, traceable to the Spanish colonial period. Its laws are principally based on statutes. This civil law tradition is supplemented by common law principles attributable to the American colonial influence, in that decisions of the Supreme Court applying or interpreting the laws or the Constitution form part of the legal system of the Philippines.

Legal proceedings are generally adversarial in nature. The parties in dispute are each represented by counsel before a judge or tribunal. Outside the evidential hearings, the legal process is conducted primarily through written submissions. However, the parties are allowed to request – or the court may require – oral arguments to discuss or clarify particular issues.

The Philippine judicial system consists of a four-level judicial hierarchy.

At the first level are:

• the Metropolitan Trial Courts (MeTCs);
• the Municipal Trial Courts in Cities (MTCCs);
• the Municipal Trial Courts (MTCs) and Municipal Circuit Trial Courts (MCTCs) established in cities and municipalities; and
• Sharia Circuit Courts in certain municipalities in Mindanao.

At the second level are the Regional Trial Courts (RTCs) distributed throughout the 13 judicial regions of the Philippines, and Sharia District Courts established in certain provinces in Mindanao. Certain RTCs are designated as Family Courts and Commercial Courts. 

The third level courts include:

• the Court of Appeals;
• the Court of Tax Appeals; and
• the Sandiganbayan.

At the top of the hierarchy of courts is the Supreme Court. The Supreme Court administers and supervises all regular courts comprising the integrated judicial system, and promulgates rules concerning pleading, practice and procedure.

There are also quasi-judicial agencies with quasi-judicial powers, including the three Constitutional Commissions – ie:

• the Commission on Elections;
• the Commission on Audit; and
• the Civil Service Commission.

Other quasi-judicial agencies include (among others):

• the Securities and Exchange Commission;
• the Land Registration Authority; and
• the Energy Regulatory Board.

In general, the proceedings of every court are open to the public, and court records are deemed public records available for inspection by any interested person. However, the court may, in the interest of decency or morality, exclude access to certain proceedings and records from the public. In practice, courts or court personnel usually resist attempts by non-parties to access records without the consent of a party to the case, citing concerns about potential violations of the Data Privacy Act.

Further, certain judicial proceedings and records are deemed private and confidential by law, and may only be made public when “necessary” and with the consent of the judge, such as cases falling under the jurisdiction of Family Courts. Even in the absence of specific legislation, certain judicial proceedings or information, such as trade or business secrets, may be kept confidential.

In certain instances, the court may, upon motion, exclude the public from the hearings and conceal from the records the identity of the parties in criminal cases, such as in rape cases.

Only members of the Philippine Bar who are in good and regular standing are allowed to engage in the practice of law in the Philippines. An applicant for admission to the bar must be:

• a citizen and resident of the Philippines;
• at least 21 years of age; and
• of good moral character.

A lawyer who is serving in the government cannot practise law privately, unless otherwise authorised by the Constitution, the law or applicable Civil Service rules and regulations.

Foreign lawyers cannot directly or indirectly practise law in the Philippines.

Currently, there is no law or rule specifically dealing with third-party litigation funding in the Philippines. As long as cases are brought under the name of the real parties-in-interest and the requisite filing and docket fees are paid, courts do not enquire into a party’s source of funding for litigation.

However, the Rules of Court state that a lawyer cannot accept “compensation in connection with his client’s business except from (his client) or with his knowledge and approval”. The language of the provision is ambiguous in respect of its applicability to third-party litigation funding. In any case, it is clear that there is no restriction to an agreement or arrangement where a third party will pay for the legal fees and costs incurred by a party to litigation. 

Please see 2.1 Third-Party Litigation Funding.

Please see 2.1 Third-Party Litigation Funding.

Please see 2.1 Third-Party Litigation Funding.

Please see 2.1 Third-Party Litigation Funding.

Contingency fees are a fairly common legal fee arrangement in the Philippines. There is no law specifically governing this agreement, other than the general law on contracts.

In general, under this arrangement, the payment of the legal fees of a lawyer is based, either entirely or partially, on the “successful” prosecution or defence of the client’s case. The client may pay a minimal monthly retainer fee, or pay for the costs of litigation while the case is pending, and the majority or the entire legal fees are paid (or not) upon the final resolution of the case or when an acceptable settlement is reached.

The legal fees may be payable in cash or, in many cases, real property or a portion thereof. The legal fees may be a percentage of the judgment award, or the amount received by the client in the case of a settlement.

Please see 2.1 Third-Party Litigation Funding.

Private agreements between the parties prescribing certain preconditions (including referral to arbitration, mediation or any mode of alternative dispute resolution) to litigation are legally binding. Failure to comply with such a precondition renders the case dismissible on the ground that a condition precedent for filing the claim has not been complied with.

The Katarungang Pambarangay Law stipulates that private civil disputes and minor crimes involving residents of the same city or municipality must first undergo mandatory mediation at the barangay level before a case may be filed before the courts. The Civil Code of the Philippines also requires members of the same family to exert earnest efforts towards a compromise before filing an action against each other.

The Philippines also adheres to the doctrine of exhaustion of administrative remedies, which mandates that disputes falling within the jurisdiction of administrative or quasi-judicial agencies must first be raised before the proper government agency prior to filing a complaint with the courts.

The prescriptive periods for initiating particular civil actions are mostly found in the Civil Code.

The prescriptive period for filing civil cases ranges from one to 30 years depending on the nature of the action. In general:

• civil actions for personal injury claims, real property damage claims and torts prescribe four years;
• actions for breach of written contracts, enforcement of statutory obligations and judicial decisions prescribe ten years;
• actions based on oral contracts or quasi-contracts prescribe six years;
• summary actions for recovery of possession of real property prescribe one year;
• actions to recover movable property prescribe eight years; and
• actions to enforce real rights over immovable property prescribe 30 years. 

All other actions whose periods are not fixed in the Civil Code or in other laws must be brought within five years from the time the right of action accrues.

The general rule is that a court acquires jurisdiction over the person of the defendant in civil cases by service of summons. However, even without valid service of summons, a court may still acquire jurisdiction over the person of the defendant if the latter voluntarily appears before it. A defendant is deemed to have voluntarily submitted to the jurisdiction of the court if they seek affirmative relief from the court.

A civil action is commenced when the plaintiff files a “complaint” with the appropriate court. A complaint is the initial document filed by the plaintiff in a lawsuit containing the allegations, legal claims and the relief sought. Generally, the plaintiff is required to attach to the complaint the sworn statements of their intended witnesses and copies of the documentary evidence cited in the body of the complaint.

A plaintiff is allowed to amend the complaint once as a matter of right at any time before the defendant files a responsive pleading, called an “answer”. After the defendant files an answer, the plaintiff may make substantial amendments to the complaint only with leave of court. Formal or nominal amendments to the complaint may be made at any stage of the judicial proceedings, provided no prejudice is caused to the defendant.

A defendant is informed of the filing of the complaint through the service of summons upon them, together with a copy of the complaint.

Summons is served by personally handing this to the defendant and informing them that they are being served. Domestic private corporations are served summons through their President, managing partner, general manager, corporate secretary, treasurer or in-house counsel. In the case of foreign private corporations, summons is served upon their resident agent in the Philippines. If service upon the defendant by hand cannot be made, substituted service of summons may be resorted to. Summons may also be served even if the defendant is not located in the Philippines. In such cases, extraterritorial service of summons may be allowed by the courts.

Service of summons is principally the duty of the sheriff of the court/branch to which the case has been referred. Under certain circumstances, the plaintiff may also be authorised by the court to serve summons together with the sheriff.

If the defendant fails to answer within the period prescribed under the Rules of Court, the plaintiff may – with notice to the defendant – move that the latter be declared in default. If the court declares the defendant in default, it may proceed to either render judgment granting the plaintiff such relief as the complaint may warrant or require the plaintiff to present evidence ex parte.

When the subject matter of the dispute is one of common or general interest to many persons – ie, so numerous that it is impracticable to join all of them as parties – a number of them (called representative plaintiffs) as the court finds to be sufficiently numerous and representative as to fully protect the interests of all concerned may sue or defend for the benefit of all. Under the Rules of Court, any parties-in-interest are allowed to intervene in a class suit to protect their individual interests.

Lawyers are not required by law to provide clients with a cost estimate of the potential litigation at the outset. However, lawyers have a fiduciary duty to their clients, and should charge fair and reasonable fees based on certain criteria, including (among others):

• the time spent and the extent of the services rendered;
• the novelty or difficulty of the issues involved;
• the skill, expertise and experience of the lawyer;
• the probability of losing other engagements as a result of accepting the case; and
• the quantitative and qualitative value of the client’s interest in the engagement.

Before trial on the merits, parties may avail of provisional remedies to preserve certain rights or properties and to ensure that the final order of the court will not be rendered nugatory by the actions of the parties in the interim. Among the remedies available are preliminary attachments and preliminary injunctions. 

A preliminary attachment generally intends to preserve assets of the defendant, to ensure that any favourable monetary judgment or award in favour of the plaintiff will be satisfied. An attachment places the assets under the constructive control of the court and cannot be disposed of by the defendant pending litigation.

A preliminary injunction ensures that the status quo prior to the start of the dispute is maintained pending litigation, to prevent grave irreparable injury to the applicant.

Please see also 4.2 Early Judgment Applications, 5.1 Discovery and Civil Cases, 6.1 Circumstances of Injunctive Relief and 7.2 Case Management Hearings.

A party may avail of certain modes to resolve all or some issues without a full-blown trial.

The plaintiff may file a motion for:

• judgment on the pleadings; or
• a motion for summary judgment.

Judgment on the pleadings is proper “where an answer fails to tender an issue, or otherwise admits the material allegations of the adverse party’s pleading.” Summary judgment, meanwhile, is granted when “the pleadings, supporting affidavits, depositions and admissions on file, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law”.

On the other hand, the defendant may:

• file a motion to dismiss the complaint; or
• assert affirmative defences in their answer.

The defendant may file a motion to dismiss on the following grounds:

• that the court has no jurisdiction over the subject matter of the claim;
• the pendency of another action between the same parties for the same cause; and
• that the cause of action is barred by a prior judgment or by prescription.

Another option for the defendant is to assert affirmative defences in their answer, which include (among others):

• the same grounds as may be raised in a motion to dismiss;
• lack of jurisdiction over the person of the defendant;
• improper venue;
• the plaintiff’s lack of legal capacity to sue;
• failure to state a cause of action; and
• failure to comply with a condition precedent.

Please see 4.2 Early Judgment Applications.

Interested parties may join either as plaintiff or defendant in a lawsuit by filing a motion for intervention, with leave of court. Intervention is allowed when the intervenor:

• has a legal interest in the matter in litigation or in the success of either of the parties;
• has an interest against both the foregoing; or
• is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer.

Intervention may be denied if:

• the intervenor fails to show sufficient interest in the case; or
• it appears to the court that the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, or that the intervenor’s rights may be fully protected in a separate proceeding.

There is no law or rule requiring the plaintiff to pay a sum of money or post security for the defendant’s costs. Such costs may be recovered by the defendant by including attorney’s fees and costs of litigation by way of a counterclaim in their answer to the complaint.

If the plaintiff applies for a writ of preliminary attachment or injunction, they may be assessed minimal application fees by the court based on a schedule of fees that correspond to the nature of the application.

Further, if the court grants the writ, the court will require the plaintiff to post a bond in favour of the defendant in such sum as, in the court’s discretion, will enable the defendant to recover any damage they may suffer by reason of the issuance of the writ if it is eventually determined that the plaintiff is not entitled to the relief sought. 

Please see 4.1 Interim Applications/Motions and 6.1 Circumstances of Injunctive Relief.

The timeframe for resolving applications and motions varies depending on:

• nature and complexity;
• whether the court will set such timeframe for hearing regarding reception of evidence or oral arguments; and
• whether the court will require further submissions from the parties.

While there are prescribed timeframes for the resolutions of certain motions and applications, in practice the courts do not necessarily follow these prescribed time limits and have certain latitude in resolving them. In general, applications for a preliminary attachment or injunction are quickly attended to by the courts and in accordance with the timeframe prescribed by the Rules of Court.

Motions to dismiss, judgment on the pleadings and summary judgment may take anywhere from 30 days to six months for the trial court to resolve. Other motions may take longer (even years) to resolve. Parties may file motions for early resolution if the application is urgent.

The following modes of discovery are available in civil cases:

• depositions;
• interrogatories to parties;
• requests for admission;
• production or inspection of documents or things; and
• physical and mental examination of persons.

These modes of discovery are principally driven by the litigants, especially the applicant, with costs incurred by them. The scope of discovery is limited to matters relevant and material to the case, which are not privileged. The court may step in to limit the scope or to control the manner of conducting the discovery process, and to protect the deponent and the parties.

Depositions and motions for production or inspection of documents or things may be availed of, not only against the parties to the case but also against third parties who may have personal knowledge of facts or possession of documents or things relevant to the case. The movant party may apply for the issuance of subpoenas to compel third parties to submit to discovery proceedings, such as the taking of depositions and production of documents or things.

The Rules of Court require that, when an action or defence is based on a written instrument, the substance of such instrument be set forth in the appropriate pleading and/or that the original or a copy thereof be attached as an exhibit.

Further, the Rules of Court require that:

• the parties disclose in their complaint or answer the names of their respective witnesses and the substance of their testimonies, as well as the documents or things they intend to introduce into evidence during trial; and
• the sworn statements of the parties’ respective witnesses be attached to the complaint or answer – the court may not allow the presentation of witnesses or admission into evidence of testimonies and documentary or object evidence not identified or attached to the complaint or answer.

This topic is not applicable.

The Rules of Court provide that a lawyer cannot, without the consent of their client, be examined as to any communication made by the client to them or as to their advice given thereon in the course of, or with a view to, professional employment.

Additionally, an attorney’s secretary or clerk cannot, without the consent of the client and their employer, be examined concerning any fact knowledge of which has been acquired in such capacity. It is further stated that it is the duty of a lawyer to maintain as inviolate the confidence of, and to preserve the secrets of, their client.

No distinction is made between external and in-house counsel. However, it is important to recognise that an in-house counsel performs both business and legal functions. Hence, in invoking such privilege, it should be clear that subject communication or advice was received or given by the in-house counsel from or to their employer in the discharge of their duties requiring their knowledge and expertise as a lawyer.

Please see 1.3 Court Filings and Proceedings.

The Data Privacy Act, which protects personal information and sensitive personal information of data subjects, should also be considered when determining whether the disclosure of a particular document will violate its provisions. The Civil Code prohibits the publication or dissemination of letters and other private communications without the consent of the writer or their heirs (although they are owned by the person to whom they are addressed and delivered). However, the court may authorise their publication or dissemination if the public good or the interest of justice so requires.

The purpose of an injunction is to prevent threatened or continuous irremediable injury to the applicant before the issues can be thoroughly studied – ie, to preserve the status quo and to prevent serious irreparable damage until the merits of the case are fully heard. An injunction may come in various forms, including the following.

Ex Parte 72-hour Temporary Restraining Order (TRO)

This is granted when the matter is of extreme urgency and the applicant will suffer grave irreparable injury. Within said 72 hours, the court shall conduct a summary hearing to determine whether the ex parte TRO shall be extended for a period of not more than 20 days, during which the application for preliminary injunction can be heard.

Ex Parte 20-day TRO

This is granted when it appears from facts shown by affidavits or by the verified application that great or irreparable injury would result to the applicant before the matter can be heard on notice. Within the 20-day period, the court will order said party or person to show cause as to why a writ of preliminary injunction should not be granted.

Writ of Preliminary Injunction

This is granted at any stage of an action or proceeding prior to the judgment or final order, to maintain the status quo pending litigation and to prevent grave irreparable injury to the applicant.

Status Quo Ante Order

This is granted to maintain the last peaceable, uncontested status between the parties. It is an equitable remedy granted by the courts and guided by several factors:

• justice and equity considerations;
• when conservation of the status quo is desirable or essential;
• the prevention of any serious damage; and
• where constitutional issues are raised.

Please see 4.1 Interim Applications/Motions in relation to applications for writs of preliminary attachment.

Courts generally observe the prescribed periods for resolving applications for injunctive writs, though not necessarily in favour of the applicant.

Injunctive relief may only be applied for and heard during business hours, and there are no mechanisms in place for applications to be heard by “out-of-hours judges”. While there are “night courts” that operate beyond normal business hours, these are not authorised to hear applications for injunctive relief.

Please see 6.1 Circumstances of Injunctive Relief.

A writ of preliminary injunction or TRO may be granted only when the applicant files a bond executed to the party or person enjoined, with the court where the action is pending and in an amount to be fixed by the court, to the effect that the applicant will pay to such party or person all damages that they may sustain by reason of the injunction or the TRO if the court should finally decide that the applicant was not entitled thereto. This rule applies to the issuance of an ex parte 72-hour TRO.

Injunctive relief issued by Philippine courts are effective only within the Philippines.

Generally, injunctive relief binds only parties to the action where it is issued. Injunction will not work to prejudice third parties who have not been given the opportunity to oppose the application for the writ. However, persons who are not parties in a proceeding may be declared guilty of contempt for wilful violation of an order issued in the case, if said persons are guilty of conspiracy with any of the parties in violating the court’s order.

In a proceeding to punish criminal contempt for wilful disobedience of an injunction, the fact that those disobeying the injunction were not named parties to the action in which it was granted, and were not personally served, is no defence, where the injunction restrains not only the parties but also those who act as a party’s agents or employees.

If a defendant fails or refuses to comply with the terms of an injunction, they may be held in contempt of court. If, after hearing, the court finds that the respondent wilfully and knowingly violated the terms of the injunction, they may be sanctioned with a fine or imprisonment, or with both.

Trial in the Philippines is a combination of evidential hearings, presentation and examination of witnesses, as well as written submissions.

Trial typically starts with the plaintiff adducing evidence in support of their claims by presenting the direct testimony of their witnesses, either in the form of sworn statements duly identified by such witness in open court or given orally under oath in open court. The plaintiff’s documentary and object evidence is identified by witnesses willing to testify on the genuineness, authenticity and contents thereof. The defendant is given the opportunity to cross-examine witnesses of the plaintiff as they are presented.

After the presentation of the plaintiff’s witnesses, the plaintiff is required to formally offer into evidence their documentary and object evidence. A formal offer of evidence is required by the Rules of Court to be conducted orally. However, courts usually require the submission of a written formal offer of evidence and opposition thereto.

After the plaintiff rests their case, the defendant will then adduce evidence in support of their defences, in a manner similar to that described for the presentation of a plaintiff’s evidence. After the defendant presents all their evidence, they will make a formal offer of their evidence.

The plaintiff may then present witnesses and/or additional evidence on rebuttal, and the defendant may, in the same manner, thereafter present witnesses and/or additional evidence by way of surrebuttal.

After both parties have completed the presentation of their respective witnesses and evidence, the court will resolve the case. The filing of memoranda is not required under the Rules of Court, but is almost always required in practice by the courts or upon motion of the parties.

After the last responsive pleading has been filed, the court shall set the case for pretrial conference (pretrial). Pretrial is mandatory, and is a procedural device intended to (among others):

• clarify and limit the disputed factual and legal issues, with the primary objective of simplifying and expediting (or even dispensing with) the trial;
• identify the parties’ respective evidence; and
• explore the possibility of an early resolution of the case.

After pretrial, the court will issue a pretrial order, which shall control the subsequent proceedings, unless modified before trial to prevent injustice.

Additionally, following pretrial and after issues are joined, the court shall refer the parties for mandatory court-annexed mediation to explore the possibility of settlement. If court-annexed mediation fails, and if the judge of the court to which the case was originally referred is convinced that settlement is still possible, the case may be referred to another court for judicial dispute resolution.

There are no jury trials in the Philippines. Cases are heard and decided by a judge or by a tribunal composed of several justices, constituting a division of a collegial court.

Under the Rules of Court, evidence is admissible when it is competent and relevant. Evidence is competent when not excluded by law or the rules. An example of this is the exclusionary rule or the “fruit of the poisonous tree” doctrine enshrined in the Constitution, which provides that any evidence obtained in violation of the right against unreasonable searches and seizures shall be inadmissible for any purpose in any proceeding. On the other hand, evidence is relevant when it has such a relation to the fact in issue as to induce belief in its existence or non-existence.

Object evidence may be admitted into evidence when its relevance is shown, and when it has been properly identified by a witness and exhibited to the court.

The same rule applies to documentary evidence, subject to:

• the further requirement of authentication as provided under the Rules of Court;
• the Rules on Electronic Evidence in the case of electronic documents; and
• compliance with particular rules on admissibility, such as the original document rule and the parol evidence rule.

Regarding testimonial evidence, testimonies of witnesses are generally admissible, as long as:

• they are not disqualified from testifying;
• their testimonies do not cover privileged matters;
• their testimonies are relevant to the issues being litigated; and
• their testimonies are matters within their personal knowledge, subject to the relevant exceptions (eg, exceptions for hearsay, testimony of experts, etc).

The Rules of Court state that “[t]he opinion of a witness on a matter requiring special knowledge, skill, experience or training which he is shown to possess, may be received in evidence”. The qualification of a witness as an expert, their credibility and the evaluation of their testimony is left to the discretion of the trial court, whose finding thereon is not reviewable in the absence of abuse of discretion.

A court may itself seek the assistance of an expert witness. For example, under the Rules of Court, “experienced and impartial attorneys may be invited by the Court to appear as amici curiae to help in the disposition of issues submitted to it”.

Please see 1.3 Court Filings and Proceedings.

A judge may intervene in the manner by which a counsel conducts the examination of a witness or presents evidence during trial – subject to certain general guidelines – such as to:

• protect the witness;
• maintain order in the proceedings;
• prevent delay or delaying tactics;
• stop manifestly objectionable questions;
• clarify any question being propounded by counsel or any answer given by a witness; and
• promote the expeditious and orderly presentation of evidence in compliance with the pretrial order.

Other than these, judges generally give lawyers wide latitude in the manner they conduct trial. 

Objections to questions propounded during the examination of a witness are immediately resolved by judges. The same is true for simple or non-litigious motions such as motions for postponement or continuance. For more complex or litigious motions or applications, judges usually reserve making a decision for a later date, or require the parties to make written submissions, unless such motion or application necessitates urgent resolution.

The timeframe for proceedings from commencement through to trial and judgment by the trial court varies significantly based on the complexity of the case, whether interim relief is applied for and whether discovery measures are availed of. The case load of the court also significantly affects timeframes as it imposes limitations on setting the intervals between hearing dates.

By way of very rough estimate, it may take a year to a year and a half from the time the complaint is filed before the evidential hearings or the initial presentation of witnesses. The evidential hearings and the submission of memoranda by the parties may take one and a half to two years.

It may take the court six months to issue its decision. Any party may file a motion for reconsideration within 15 days from receipt of the decision. It may take the court another six months to resolve this.

To be valid, compromise agreements by way of settlement of a case do not require court approval. As long as the compromise agreement complies with the requisites and principles of contracts, it is deemed a legally binding agreement with the force and effect of law between the parties.

Nevertheless, parties to a compromise agreement almost always seek court approval for purposes of officially terminating the proceedings, out of deference to the court, and most importantly to give the agreement the force and effect of a judgment of a court.

Once a compromise agreement is approved by the court, it becomes a determination of the controversy between the parties, having the force and effect of a judgment. It is immediately executory and unappealable, except when there is vitiation of consent, mistake, forgery, fraud or coercion.

The parties may include a confidentiality clause in the compromise agreement, which becomes a valid and binding obligation for the parties. They may, alternatively, submit a simple compromise agreement to the court for approval, and may enter into a separate but related agreement containing the details of the compromise agreement that they prefer to remain private and confidential and that will not be submitted to the court for approval. One drawback of this alternative is that the confidential version does not have, or loses, the desired effects of a court-approved compromise as a judgment of the court.

Compromise agreements, if judicially approved, can be enforced through execution similar to other judgments of the court. This is because once a compromise agreement is judicially approved it becomes a judgment on the merits of the case. A party seeking to enforce the compromise agreement may file a motion with the court to execute the judgment based on compromise and to compel compliance with its provisions. 

If no judicial approval was sought, a compromise agreement may be enforced by filing a complaint for specific performance.

A compromise agreement may be set aside on grounds of vitiation of consent, mistake, forgery, fraud or coercion. The party seeking to set aside the compromise agreement may file a motion to set aside said agreement with the same court that approved the compromise.

A prevailing litigant may generally be awarded only the relief they sought in their pleading.

In an action for specific performance, the plaintiff will ask the court to direct the defendant to comply with the provisions of the contract. Aside from this, the most common form of relief sought and granted is monetary damages. Monetary damages are typically awarded in cases involving breach of contract, personal injury, damage to property and torts.

The court may also grant:

• a permanent injunction;
• a declaratory judgment clarifying the rights and legal relationships between the parties; and
• delivery of things.

It may also compel the losing party to perform an act or obligation other than payment of money.

The forms of damages that may be awarded by courts include:

• actual or compensatory damages awarded in satisfaction of, or in recompense for, loss or injury sustained;
• moral damages awarded to alleviate physical suffering, mental anguish, anxiety, besmirched reputation and social humiliation;
• liquidated damages awarded if agreed upon by the parties to a contract;
• nominal damages awarded to vindicate the rights of the prevailing party;
• temperate damages awarded when the court finds that pecuniary loss has been suffered but the amount thereof cannot be proven with certainty; and
• exemplary or punitive damages imposed, by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages.

While case law provides general guidance on how to compute the amount of damages that may be awarded, there are no laws expressly limiting this.

The prevailing litigant may collect both pre-judgment and post-judgment interest.

Pre-judgment interest is interest on the principal amount of the obligation computed from the time said obligation should have been paid, or from date of default, until the date of full payment. The applicable interest rate is the rate agreed upon by the parties in writing, unless reduced by the court for being unconscionable. On the other hand, in the absence of stipulated interest, the applicable rate of interest shall be the legal rate of interest, which is currently set at 6% per annum. Further, the interest due on the principal amount shall itself separately earn legal interest from the date of judicial demand until full payment.

Post-judgment interest is interest on the total amount of the judgment award, which contemplates both the principal amount and the accrued interest thereon at the time the judgment was rendered. When the judgment awarding a sum of money becomes final and executory, this shall earn interest computed from the date of finality of the judgment until its satisfaction.

The Rules of Court provide various mechanisms for the enforcement of domestic judgments.

For enforcement of a judgment awarding a sum of money, after the issuance of a writ of execution, the court sheriff shall first demand that the losing party voluntarily pay the full amount of the award to the winning party. If the losing party fails to comply, the sheriff shall levy upon the losing party’s real and personal properties. The sheriff may also garnish bank deposits and other monies of the losing party.

For awards not consisting of payment of money, such as delivery of possession of real or personal properties, the sheriff shall likewise first make a demand to the losing party to voluntarily comply with the decision. If the losing party fails to do so, the sheriff is authorised to forcefully dispossess the losing party of such properties and to deliver these to the prevailing party, for that purpose enlisting the assistance of law enforcement agencies. The sheriff may ask for the issuance of such orders as will authorise them to perform the necessary actions.

Foreign judgments may be enforced in the Philippines by filing a complaint with the RTC for recognition and enforcement.

Philippine courts will recognise the validity of a foreign judgment so long as it is shown that there has been an opportunity for a full and fair hearing before a court of competent jurisdiction.

In the case of a foreign judgment on a specific thing, the judgment is deemed conclusive upon the title to the thing. In the case of a judgment against a person, the judgment is merely presumptive evidence of a right between the parties and their successors in interest. In either case, an action for enforcement of a foreign decision may be repelled only on narrow grounds, by evidence of:

• want of jurisdiction;
• want of notice to the adverse party;
• collusion;
• fraud; or
• clear mistake of law or fact.

Depending on the level at which the suit was initiated, the Philippine regular court system provides for three levels of appeal.

Suits initiated at the first-level courts may be appealed, by notice of appeal, to the second-level courts. Thereafter, the decision of second-level courts may be further appealed, through a petition for review, to the Court of Appeals.

Appeals brought to the Court of Appeals through the latter mode of appeal are not a matter of right, and thus may be dismissed outright by the Court of Appeals for lack of merit. Finally, the decision of the Court of Appeals may be appealed, by petition for review on certiorari, to the Supreme Court.

For suits initiated at the second-level courts, decisions of the latter may be appealed, by notice of appeal, to the Court of Appeals. Thereafter, the decision of Court of Appeals may be further appealed to the Supreme Court through a petition for review on certiorari. However, decisions of the second-level courts should be appealed directly to the Supreme Court, by petition for review on certiorari, in cases where only pure questions of law are involved.

The Court of Appeals’ decisions, whether in the exercise of its original jurisdiction or appellate jurisdiction, are appealable only to the Supreme Court through a petition for review on certiorari.

Please see 10.1 Levels of Appeal or Review to a Litigation.

Depending on the level at which the suit was initially filed, appeal may be taken through:

• a notice of appeal filed with the RTC or the Court of Appeals;
• a petition for review filed with the Court of Appeals; or
• a petition for review on certiorari filed with the Supreme Court.

Generally, parties have 15 days from date of receipt of the adverse decision to file their appeal.

Appeals are generally confined to reviewing the records of the case generated through the proceedings conducted at the trial court level. Appellate courts review the transcripts of the proceedings, the pleadings, motions and other documents filed by the parties, as well as the various exhibits admitted into evidence, to determine whether there was an error in the determination of an issue of fact and law committed by the lower court. Appellants are not permitted to raise new issues or to present new evidence that were not properly raised before the trial court. 

In the exercise of their appellate jurisdiction, RTCs and the Court of Appeals may review both questions of fact and law. On the other hand, only pure questions of law may be entertained on appeal by the Supreme Court.

Other than the payment of the filing fees and compliance with the formal requirements for an appeal stated in the Rules of Court, appellate courts generally do not impose conditions for granting an appeal. Decisions on whether to grant or deny an appeal are based on the merits of the case.

Appellate courts have the power to affirm, set aside, reverse or modify (wholly or partially) the appealed decision to correct errors of judgment by the lower court. The appellate court also has the power to remand the case to the trial court for the continuation of litigation and reception of further evidence.

Generally, each party bears its own costs of litigation. Parties may, however, stipulate in their contract the amount of recoverable attorney’s fees in the case of litigation. In the absence of such a stipulation, a party may still recover attorney’s fees and litigation expenses when (among others):

• exemplary damages are awarded;
• the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect their interest;
• a clearly unfounded civil action or proceeding against the plaintiff is brought; or
• the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim.

Courts are likewise authorised to award attorney’s fees based on analogous grounds, if they find that it is just and equitable that attorney’s fees and expenses of litigation should be recovered by the claimant.

Courts only consider costs actually incurred, and duly substantiated, in determining the amount that may be awarded as attorney’s fees and litigation expenses. In practice, however, regardless of the amount requested or substantiated, courts only award a relatively insignificant amount by way of attorney’s fees and litigation expenses.

Interest is generally not imputed to costs of a suit.

Alternative dispute resolution (ADR) is highly encouraged by the State and the Supreme Court. In recent years, resorting to ADR (especially arbitration) has become increasingly common.

In certain industries, ADR has become the primary mode by which disputes are resolved. For example, in the construction industry, most disputes are referred to arbitration before the Construction Industry Arbitration Commission (CIAC), which the law provides as an available forum for ADR even if a different forum is stipulated in the construction contract.

More commercial disputes are also now being referred for arbitration to (among others):

• the Singapore International Arbitration Centre;
• the Hong Kong International Arbitration Centre; and
• the International Chamber of Commerce’s International Court of Arbitration.

In ordinary civil cases, resorting to ADR is made mandatory by the Rules of Court as part of regular procedure.

After pretrial, the court directs the parties to compulsorily submit to court-annexed mediation. If mediation at that level fails, but the original court determines that settlement is still possible, it may further refer the parties to another court for judicial dispute resolution (JDR). Only after the failure of JDR shall the case be referred to the original court for trial.

Under the guidelines issued by the Supreme Court for the conduct of court-annexed mediation and JDR, parties who fail to appear before the mediator or the JDR judge, or who exhibit contemptuous conduct during mediation or JDR, may be sanctioned upon the recommendation of the mediator or the JDR judge. Sanctions include (among others):

• the dismissal of the case, when the plaintiff fails to appear without valid cause; or
• the ex parte presentation of the plaintiff’s evidence and dismissal of defendant’s counterclaims, when the defendant fails to appear without valid cause.

Outside the regular court system, institutions offering and promoting ADR are well-established and organised. The main arbitration institutions in the Philippines include:

• the Philippine Dispute Resolution Center, Inc:
• the Philippine International Center for Conflict Resolution; and
• the Construction Industry Arbitration Commission.

These provide not only ADR services but also training and resources to promote ADR.

Republic Act No 9285, or the Alternative Dispute Resolution Act (the “ADR Act”), institutionalised the use of ADR in the Philippines and governs arbitration in the country. The ADR Act provides that the 1985 UNCITRAL Model Law (the “Model Law”) will govern international commercial arbitration. Domestic arbitration continues to be governed by Republic Act No 876 (the “Arbitration Law”).

Construction disputes are governed by the Construction Industry Arbitration Law. The recognition and enforcement of foreign arbitral awards is governed by the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) .

Supplementing the ADR Act are the Special Rules of Court on Alternative Dispute Resolution promulgated by the Supreme Court (the “Special ADR Rules”). In respect of the procedural aspect before the regular courts, these rules govern cases relating to arbitration, including (among others):

• relief on the issue of existence, validity or enforceability of the arbitration agreement;
• referral to ADR;
• interim measures of protection;
• recognition and enforcement of arbitral awards; and
• confidentiality/protective orders.

The following cannot be the subject of arbitration in the Philippines:

• labour disputes;
• the civil status of persons;
• the validity of marriage;
• any ground for legal separation;
• the jurisdiction of courts;
• future legitime;
• future support;
• the validity of legal separation;
• criminal liability; and
• cases that cannot be compromised by law.

Philippine courts may set aside an international commercial arbitral award rendered in the Philippines if:

• a party to the agreement was under some incapacity;
• the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereof, under Philippine law;
• the party making the application to set aside or resist enforcement was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present their case;
• the award deals with a dispute outside the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration;
• the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the parties’ agreements or, failing such agreement, under Philippine law;
• the subject matter of the dispute cannot be settled by arbitration under Philippine law; or
• the recognition or enforcement of the award would be contrary to public policy.

Domestic arbitral awards may be vacated on the following grounds:

• the arbitral award was procured through corruption, fraud or other undue means;
• the tribunal or any of its members exhibited evidently partial or corrupt behaviour;
• the misconduct or misbehaviour of the arbitral tribunal materially prejudiced the rights of a party;
• one or more arbitrators was disqualified from acting as such under the law and wilfully refrained from disclosing their disqualification;
• the tribunal exceeded its powers or executed them in such a way that a complete, final and definite award on the subject matter was not possible;
• the arbitration agreement is non-existent, invalid or unenforceable;
• one of the parties is a minor or has been judicially declared incompetent;
• there was a violation of public policy; or
• any of the grounds specified under Rule 34 of the Model Law are fulfilled.

Foreign arbitral awards cannot be set aside by Philippine courts. However, a court may refuse to recognise and enforce the award based, generally, on the same grounds on which an international commercial arbitral award rendered in the Philippines may be set aside.

A domestic arbitral award may be enforced by filing a petition for confirmation of a domestic arbitral award at any time after the lapsing of 30 days from receipt of the arbitral award. A petition to confirm the arbitral award may also be filed, in opposition to a petition to vacate the arbitral award, at any time after the petition to vacate such arbitral award is filed.

For international commercial arbitral awards, a petition for the recognition and enforcement of an international commercial arbitral award or foreign arbitral award is required to be filed. Such petition may be filed at any time after receipt of the award.

The RTCs have jurisdiction to hear petitions for the recognition and enforcement of arbitral awards, whether domestic or foreign.

Currently, the Supreme Court is deliberating on proposals to the Rules of Court as part of its Strategic Plan for Judicial Innovations 2022–2027 (SPJI). The Supreme Court has been vocal about the promotion of the use of ADR, which is as one of the projects under the SPJI. It is expected that more elements of ADR will be incorporated into regular court proceedings, encouraging litigants to resort to mediation, judicial dispute resolution and other forms of ADR in and out of court. This will hopefully expedite the resolution of disputes.

There is likewise a proposal to make conciliation and arbitration prerequisites for filing court actions, which would help to not only promote ADR but also to de-clog court dockets.

ADR, particularly arbitration, remains one of the main areas of growth for commercial disputes in the Philippines.

Another main area of growth is improving access to justice, considering the rapid growth of the country’s digital economy. The International Trade Organization projected a 17% growth in the digital economy of the Philippines from 2021 through 2025.

Notwithstanding, commercial activities and commercial disputes are still governed by regulatory and procedural frameworks enacted well before the current state of the country’s digital economy. While the Supreme Court has taken steps to ensure easier access to justice using modern technology, there is still a long way to go towards regularising access to in-court and out-of-court remedies in commercial disputes, in a way that keeps up with the rapid growth of the country’s digital economy.