The concept of "neighborhood paralegal committee" was first advocated by the Chief Justice of the Supreme court Fred Ruiz Castro in one of his speeches in 1976. Official recognition of the value of this innovative concept of settling disputes came with the promulgation of Presidential Decree No. 1293 on January 27, 1978 which created a commission charged "with the duty of studying the feasibility of instituting a system of resolving disputes among family and barangay members at the barangay level without recourse to the courts".
The work of the Commission was assigned to a technical committee organized by virtue of Administrative Order No. 12 issued by the Chief Justice. This committee formulated the rules and procedural guidelines that was to be incorporated in the draft of the proposed law on resolving disputes among barangay members. The draft of the Katarungang Pambarangay Law was submitted ot the President and this was signed into law on June 11, 1978 as Presidential Decree No. 1508. This law formally organized and institutionalized a system of amicably settling disputes at the barangay level. For the last thirteen years it was successfully implemented as envisioned by its authors.
With the enactment of Republic Act No. 7160, otherwise known as the Local Government Code of 1991, the Katarungang Barangay Law is given added force by including within its scope all offenses punishable by imprisonment of not exceeding one year or a fine not exceeding five thousand pesos. This law also takes into cognizance the role of elders and the council of datus in settling disputes among members of indigenous cultural communities adopting local systems. To give more responsibility to Lupon members, Republic Act No. 7160 extends their term of office to three years and it also mandates the Department of Interior and Local Government to provide for a system of granting economic or other incentives to the Lupon or Pangkat members who adequately demonstrate the ability to judiciously and expeditiously resolve cases referred to them.
(Based from Barangay Administration Handbook)