Enforcing contracts in the Philippines

Out of the box

Enforcing contracts in the Philippines

By Rita Linda V. Jimeno

On Friday last week, in the APEC-Ease of Doing Business Workshop, one of the major reasons that investors avoid the Philippines stood like a sore thumb was discussed. Based on a study that was presented, the Philippines rated poorly in getting a contract enforced through the trial courts. The study showed that it takes no less than 842 days—roughly two years and four months—before a case is decided in the trial court level, assuming that the defendant does not appeal. This was compared to the South Korean judicial system where it only takes 230 days, or about seven months, until a case filed in a court gets decided upon.

Why was a comparison between ease of enforcing contracts in the Philippines and South Korea done? And what are the lessons we could learn from the studies?

South Korean Ambassador to the Philippines Hye Min Lee, in his welcome address at the forum sponsored by the South Korean government, explained that South Korea is the third largest investor in the Philippines. Moreover, South Koreans comprise the biggest number of tourist arrivals in the Philippines. It would work to their best interest then if the ease of doing business in the Philippines and the ease of enforcing contracts would improve, he said.

Now back to the comparative study of enforcing contracts. In terms of costs, in the Philippines, it would cost as much as 26 per cent of the claim. In South Korea, only 10.3 per cent of the claim constitutes the total cost. Costs include attorneys’ fees, filing or docket fees and expenses in enforcing the decision.

The Philippine judicial system, contrasted with the South Korean system, has too many stages or procedures that consume time. For instance, from the filing of a case alone, until the summons and copy of the complaint are served upon the defendant, 58 days or nearly two months would pass. In South Korea, on the other hand, it takes only 20 days to complete the same stage in the proceedings.

In the Philippines, a judge is assigned to a permanent post until he gets promoted or separated from service, or until he retires. The Philippines has many vacant courts, that is, with no judges appointed to fill the posts. This necessitates a situation where judges from other courts act as pairing judges for the vacant courts. This results in additional workload for judges who, very often, already have more than they can handle in their own courts. Thus, while they hear cases in courts where they pair, they hardly have time to render decisions anymore leading to the piling up of unresolved cases in their own courts and the courts where they pair.

Also, Philippine judges handle both criminal and civil cases. Even specialized courts, such as family courts, also handle criminal cases when, at least one of the victims or the accused, is a minor. In South Korea, as explained to me by the South Korean Ambassador, there are 2,000 judges while there are only 200 courts. A judge in South Korea has no permanent post but may be assigned to any court where he is most needed. Thus, there are no backlogs. Moreover, their judges have specializations. Thus, a judge exclusively handles either civil cases, criminal cases, administrative, intra-corporate, commercial cases or tax cases, and so on. Case build up does not happen because several judges may be assigned where the caseload is heaviest.

Most importantly, Ambassador Hye Min Lee explained, there is a high degree of transparency in judicial proceedings in South Korea. The work of the judges is constantly monitored by the Supreme Court and, at any given time, the Supreme Court can access the status of every case by using South Korea’s electronic-based data system. By contrast, in the Philippines, judges are virtual kings in their salas. Judicial audit is not regularly done. In fact, unless a complaint is lodged against a certain judge, he is pretty much left on his own to manage his docket. Thus, some judges always come to court late or are often absent. Some set hearings of cases as far as six months from the last; or render decisions two or more years from the time a case is submitted for decision.

One of the highlights of the forum was the presentation by the South Korean Supreme Court Judge, Bom Sok Ko, who showed his country’s judicial IT system. Any person may file a complaint electronically anywhere in South Korea. Docket fees are paid electronically by way of credit and as soon as completed, a case is assigned a permanent docket number. The defendant’s answer may be filed through the internet, too, and the judge to whom the case will be assigned can issue orders electronically. A litigant is given a secured access code to allow him to access the case record and the court’s calendar at anytime. In the Philippines, filing is still through paper submissions in court, with a copy served to the other party. Not only does the electronic system of filing in South Korea lead to greater efficiency, it is also more environmentally friendly.

The Filipinos who attended the forum agreed that there is much to be desired in our government and judicial systems if we are to rank higher in competitiveness and ease of doing business. Right now, our rank is 136th–the bottom–in the chart of Ease in Doing Business among the nations surveyed. In the category of ease in enforcing contracts, the Philippines ranked 112th; Republic of Korea, 2nd; the USA, 7th, Thailand, 24th; Vietnam, 30th; and Malaysia, 31st.

To improve the speed and efficiency of our country’s judicial system, much can be learned from the South Korean experience. And if the electronic filing system in courts is remotely achievable because of the pathetically miniscule budget for the judiciary, at least, the Philippine Supreme Court should consider for adoption close monitoring of courts, training of judges toward specializations, and removing permanent assignments to posts so that judges may be sent to where backlogs are heavy.

The sad reality is that the Judiciary is treated by our government as a poor relation. It gets a budget share of less than one per cent of the national annual budget. Worse, its independence is always at risk as practically every sitting president attempts to control it. Given this scenario, the Supreme Court’s focus is diverted from creating much-needed reforms to efforts directed toward self-preservation.

Email: ritalindaj@gmail.com Visit:www.jimenolaw.com.ph