Dear Atty. Kathy,

Our family-owned company has an agreement with Supplier X. We have disagreements about the pricing and products that Supplier X provided us. Unfortunately, I feel that we have to resort to filing a case in court because we have reached a deadlock in our negotiations. Supplier X, however, is saying that we cannot file a case in court because we have an arbitration clause in our supplier agreement, which says that “each party shall have the right to have disputes settled through arbitration.” Can we not file a case in regular courts because of the arbitration clause?

Ella

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Dear Ella,

Based solely on your narration, the arbitration clause in your agreement with Supplier X provides that “each party shall have the right to have disputes settled through arbitration.”

We note the use of the word “shall,” which refers to the party’s right to have disputes settled through arbitration. Based on jurisprudence, “shall” connotes a mandatory character. The word “shall,” however, as used in your agreement with Supplier X, emphasizes the party’s right to have disputes settled through arbitration. Subject to any other provision in your agreement on arbitration, it does not appear that there is a mandate that disputes must be submitted to arbitration to the exclusion of all other recourses, including judicial remedies. Thus, what appears is that the language of the arbitration clause in your agreement with Supplier X is permissive and does not foreclose judicial remedies.

As ruled by the Supreme Court, like all rights, the right of each party to submit disputes through binding arbitration may be exercised, and even waived depending on the express or implied actions of each party. Considering the permissive language of the arbitration clause in your agreement with Supplier X, you may therefore resort to judicial action or to the regular courts to enforce the terms of your agreement with Supplier X.

(Poro Point Management Corporation vs Bulk Handler’s, Inc., G.R. Nos. 188034, 188077, 216537, 217060 & 216589-216590, 7 April 2025)

Atty. Kathy Larios