International Arbitration 2021 - Malaysia Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee Shearn Delamore & Co - Shearn Delamore ...
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Definitive global law guides offering comparative analysis from top-ranked lawyers International Arbitration 2021 Malaysia Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee Shearn Delamore & Co practiceguides.chambers.com
MALAYSIA
Law and Practice
Contributed by:
Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan
and Alexius Lee
Shearn Delamore & Co see p.22
CONTENTS
1. General p.4 6. Preliminary and Interim Relief p.13
1.1 Prevalence of Arbitration p.4 6.1 Types of Relief p.13
1.2 Impact of COVID-19 p.4 6.2 Role of Courts p.13
1.3 Key Industries p.4 6.3 Security for Costs p.14
1.4 Arbitral Institutions p.5
7. Procedure p.14
1.5 National Courts p.5
7.1 Governing Rules p.14
2. Governing Legislation p.5 7.2 Procedural Steps p.14
2.1 Governing Law p.5 7.3 Powers and Duties of Arbitrators p.14
2.2 Changes to National Law p.6 7.4 Legal Representatives p.15
3. The Arbitration Agreement p.6 8. Evidence p.16
3.1 Enforceability p.6 8.1 Collection and Submission of Evidence p.16
3.2 Arbitrability p.7 8.2 Rules of Evidence p.16
3.3 National Courts’ Approach p.8 8.3 Powers of Compulsion p.16
3.4 Validity p.8
9. Confidentiality p.16
4. The Arbitral Tribunal p.9 9.1 Extent of Confidentiality p.16
4.1 Limits on Selection p.9
10. The Award p.17
4.2 Default Procedures p.9
10.1 Legal Requirements p.17
4.3 Court Intervention p.9
10.2 Types of Remedies p.17
4.4 Challenge and Removal of Arbitrators p.10
10.3 Recovering Interest and Legal Costs p.18
4.5 Arbitrator Requirements p.10
11. Review of an Award p.18
5. Jurisdiction p.10
11.1 Grounds for Appeal p.18
5.1 Matters Excluded from Arbitration p.10
11.2 Excluding/Expanding the Scope of Appeal p.19
5.2 Challenges to Jurisdiction p.11
11.3 Standard of Judicial Review p.19
5.3 Circumstances for Court Intervention p.11
5.4 Timing of Challenge p.12 12. Enforcement of an Award p.19
5.5 Standard of Judicial Review for Jurisdiction/ 12.1 New York Convention p.19
Admissibility p.12 12.2 Enforcement Procedure p.19
5.6 Breach of Arbitration Agreement p.12 12.3 Approach of the Courts p.20
5.7 Third Parties p.13
2
MALAYSIA CONTENTS 13. Miscellaneous p.20 13.1 Class-Action or Group Arbitration p.20 13.2 Ethical Codes p.20 13.3 Third-Party Funding p.20 13.4 Consolidation p.21 13.5 Third Parties p.21 3
Law and Practice MALAYSIA
Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee,
Shearn Delamore & Co
1. GENERAL Malaysia’s Ministry of Health, the attendees at
an in-person hearing are closely monitored to
1.1 Prevalence of Arbitration ensure the minimum distance is maintained. As a
Litigation continues to be the primary method of result, most of the larger meeting/hearing rooms
resolving disputes in Malaysia, for both domestic at the various arbitration venues are booked out
and international disputes. This is not expected well in advance.
to change in the near future.
COVID-19 Lockdowns
Based on statistics from the Asian International The biggest impact to arbitrations both interna-
Arbitration Centre (AIAC), there is no observ- tional and domestic has has been the lockdown
able trend in respect of the volume of domes- periods imposed in 2020 and 2021. This has
tic arbitration registrations over the last three necessitated law firms, institutions such as AIAC
years – with 80 registered domestic arbitrations and workspaces to close their premises. With
in 2018, 117 domestic arbitrations in 2019, and respect to AIAC, although it has been able to act
89 domestic arbitrations in 2020. on commencement and appointment requests
during the lockdown where the Director’s office
There has been little change in international has not been vacant, the provision of a neutral
arbitration registrations at the AIAC over the location for witnesses to take their oath and give
last three years. In 2018, the AIAC registered ten evidence in an otherwise virtual arbitration has
international arbitration cases; in 2019, the AIAC been impacted by the lockdowns.
registered a total of eight international arbitration
cases; and in 2020, the AIAC registered a total Parties, arbitrators and counsels, whilst amena-
of 11 international arbitration cases. ble to some extent to a virtual arbitration, have
been somewhat opposed to witnesses testifying
1.2 Impact of COVID-19 from their homes. With the movement control
During the period of the Movement Control restrictions and closure of many establishments
Order in Malaysia, virtual hearings have been including the AIAC, this has impacted the abil-
successfully held at the AIAC and elsewhere with ity of witnesses to give evidence from a neutral
the witnesses testifying from a neutral venue at venue.
the AIAC or elsewhere.
1.3 Key Industries
Some arbitrations have been deferred where AIAC statistics indicate that the majority of arbi-
parties/arbitral tribunals’ preference for physical trations registered in 2020–21 relate to construc-
hearings has necessitated this. The reasons for tion contracts. This is largely consistent with the
the preference of physical hearings are generally trend in previous years.
tied to the nature of the dispute, the volumes of
documents that need to be referred to and the There is also a marginal increase in the number
complexity of the subject matter of the dispute. of oil and gas company disputes being referred
These factors have caused parties to opt for an to the AIAC in 2020–21.
in-person hearing resulting in adjournments dur-
ing the COVID-19 pandemic. AIAC statistics do not indicate any particular
industries that experienced decreased arbitra-
For in-person hearings, in accordance with the tion activity in 2020–21 as a result of the COV-
requirement of social distancing dictated by ID-19 pandemic.
4MALAYSIA Law and Practice
Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee,
Shearn Delamore & Co
1.4 Arbitral Institutions Following the onset of the COVID-19 pandemic,
The arbitral institution most used for interna- AIAC initiated a series of webinars on a multitude
tional arbitration in Malaysia is the Asian Inter- of areas relating to arbitration and other alterna-
national Arbitration Centre (AIAC). tive dispute resolution processes. These webi-
nars have been well attended and have been
The AIAC was previously known as the Kuala instrumental in bringing together local and inter-
Lumpur Regional Centre for Arbitration, and was national speakers.
first established in 1978 under the Asian-African
Legal Consultative Organisation as a not-for- 1.5 National Courts
profit, non-governmental international organisa- The High Courts of Malaysia are designated to
tion aimed at promoting alternative dispute reso- hear disputes related to international arbitration
lution in the Asian region. It was subsequently and domestic arbitrations for matters in which
rebranded as AIAC on 7 February 2018. they have jurisdiction under the Arbitration Act
2005. There is a construction High Court in Kuala
There have been no new arbitral institutions Lumpur that specifically hears construction dis-
established in Malaysia in 2020–21. putes, including those arising from arbitrations.
AIAC’s Initiatives
The AIAC maintains its own rules of arbitration, 2. GOVERNING
known as the AIAC Arbitration Rules. Further- L E G I S L AT I O N
more, the AIAC actively takes the initiative to
modernise the AIAC Arbitration Rules in accord- 2.1 Governing Law
ance with international trends in alternative dis- The Arbitration Act 2005 governs international
pute resolution proceedings in order to compete arbitration in Malaysia. Parts I, II and IV of the
with the best arbitral institutions that Asia has to Arbitration Act 2005, comprising Sections 1 to
offer, contributing to its popularity in Malaysia. 5, Sections 6 to 39 and Sections 47 to 51, are of
mandatory application in respect of international
The AIAC recently released the AIAC Arbitration arbitration. Part III of the Arbitration Act 2005,
Rules 2021 on 1 August 2021. The AIAC Rules comprising Sections 40 to 46, does not apply to
2021 streamline proceedings and embrace the international arbitration unless the parties agree
needs of a fast-evolving disputes climate with to opt in, in writing.
third-party funding, summary disposal of cases,
enhancements to multi-party arbitrations and Comparison with UNCITRAL Model Law
various other welcome changes. The Arbitration Act 2005 is based closely on the
UNCITRAL Model Law. Part II of the Arbitration
The AIAC i-Arbitration Rules offer a practical Act 2005 – containing Sections 6 to 39 governing
solution for the settling of disputes arising out general provisions, provisions relating to arbitra-
of or in connection with Sharia-based commer- tion agreements, the composition of arbitrators,
cial transactions, enabling the arbitral tribunal the jurisdiction of the arbitral tribunal, conduct of
to refer a matter to the relevant Sharia Advisory arbitral proceedings, the making of awards and
Council or Sharia expert in respect of opinions termination of proceedings, recourse against
on matters related to Sharia principles. awards and the recognition and enforcement of
awards – closely mirrors the subject headings
5Law and Practice MALAYSIA
Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee,
Shearn Delamore & Co
and sequence of Articles 3 to 36 of the UNCI- • the recognition that the requirement that an
TRAL Model Law. arbitration agreement is made in writing can
be met by any electronic communication;
In the context of international arbitration, there • the introduction of provisions dealing with
are no significant differences between the Arbi- the arbitral tribunal’s powers to grant interim
tration Act 2005 and the UNCITRAL Model Law. measures; and
However, specific powers are provided to arbi- • the reinstatement of parties’ rights to choose
trators in several sections of the Arbitration Act any law or rules of law applicable to the sub-
2005, which are not found in the UNCITRAL stance of a dispute and the arbitral tribunal’s
Model Law. right to decide according to equity and con-
science if so authorised by the parties.
For instance, the Arbitration Act 2005 empowers
the arbitral tribunal to grant security for costs The said amendments, amongst others, allowed
as an interim measure (see Section 19E of the the parties the right to choose representation by
Arbitration Act 2005) and to give directions for any representative and not merely a lawyer, fur-
the speedy determination of a claim if the claim- ther it expanded the definition of “arbitral tribu-
ant fails to proceed with the claim (see Section nal” to include emergency arbitrators.
27(d) of the Arbitration Act 2005).
Developments in 2020–21
The Arbitration Act 2005 also provides for spe- Following the passing of Mr Vinayak Pradhan
cific powers of the arbitral tribunal in conduct- on 8 March 2020, the AIAC was left without a
ing the arbitration, which includes drawing on its director.
own knowledge and expertise, ordering for the
provision of further particulars, the granting of On 16 November 2020, Tan Sri Datuk Suriyadi
security for costs, fixing and amending time lim- bin Halim was appointed as the Director for the
its in which various steps in arbitral proceedings 2020–22 term, with effect on 1 December 2020.
must be completed, ordering the discovery and This allowed the backlog of pending registra-
production of documents or material within the tions, appointment of arbitrator requests and
possession or power of a party, ordering inter- decisions and/or approvals requiring the Direc-
rogatories to be answered, and ordering that any tor of the AIAC’s consideration to be acted upon.
evidence be given on oath or affirmation (see
Section 21 of the Arbitration Act 2005). There is also talk that legislation in relation to
third-party funding in arbitration may be intro-
2.2 Changes to National Law duced.
There have not been amendments to the Arbi-
tration Act 2005 since the 2018 amendments to
the Arbitration Act 2005. The 2018 amendments 3 . T H E A R B I T R AT I O N
brought the Arbitration Act 2005 further in line AGREEMENT
with the UNCITRAL Model Law, such as:
3.1 Enforceability
• clarification of the definition of an arbitration An arbitration agreement must be an agreement
agreement that is “in writing”; by the parties to submit to arbitration all or cer-
tain disputes which have arisen or may arise
between them in respect of a defined legal rela-
6MALAYSIA Law and Practice
Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee,
Shearn Delamore & Co
tionship, whether contractual or not (see Section clear and unequivocal (see the Malaysian Court
9 of the Arbitration Act 2005). of Appeal’s decision in Albilt Resources Sdn Bhd
v Casaria Construction Sdn Bhd [2010] 3 MLJ
Forms of Arbitration Agreement 656).
An arbitration agreement may be in a form of an
arbitration clause contained in an agreement, in 3.2 Arbitrability
a standalone agreement or reference to another Any dispute the parties have agreed to submit to
agreement that contains an arbitration clause. arbitration under an arbitration agreement may
be determined by arbitration, unless the arbi-
Recently, in Pandan Etika Sdn Bhd v Liang Build- tration agreement is contrary to public policy or
ers Sdn Bhd [2019] 1 LNS 1978, the High Court the subject matter of the dispute is not capable
gave effect to an arbitration clause that had been of settlement by arbitration under the laws of
incorporated by reference. Malaysia (see Section 4 of the Arbitration Act
2005). The fact that any written law confers juris-
Arbitration Agreement Must Be in Writing diction in respect of a matter on any court of
The arbitration agreement must be in writing law but does not refer to the determination of
(see Section 9 of the Arbitration Act 2005). This that matter by arbitration does not indicate that
requirement of a written agreement may be met a dispute about that matter is not capable of
if its content is recorded in any form, including determination by arbitration.
situations where the initial arbitration agreement
or contract has been concluded orally, by con- Public Policy
duct, or by other means. The requirement can There is no universally accepted test on what is
also be met if the existence of an agreement public policy; different courts and different tribu-
is alleged by one party and not denied by the nals may have different views as to the enforce-
other in an exchange of statement of claim and ability of contracts on the ground of public policy
defence. (see the Federal Court judgment in Arch Rein-
surance Ltd v Akay Holdings Sdn Bhd [2019] 1
An arbitration agreement is deemed to be in writ- CLJ 305).
ing if it is evidenced by any electronic commu-
nication that the parties make by means of data The Arbitration Act 2005 does not name any
message, if the information contained therein is specific subject matter that cannot be referred
accessible so as to be useable for future ref- to arbitration.
erence. The signature of the parties is not a
prerequisite to an arbitration agreement being The question of whether a subject matter is arbi-
enforced. trable is not determined by jurisdictional limita-
tions on the relief that may be granted (see the
No Specific Words or Form Required UK Court of Appeal decision in Fulham Football
No specific words or form are required to be Club (1987) Ltd v Richards and another [2011]
used to constitute an arbitration clause or an EWCA Civ 855). Matters that may have public
arbitration agreement; an electronic transmis- interest elements have been approved as being
sion referring to or implying the parties’ inten- non-arbitrable in the Singapore courts, such as
tion to submit to arbitration suffices, as long as citizenship, the legitimacy of a marriage, grants
there is an agreement to refer disputes to arbi- of statutory licences, the validity of the registra-
tration and the parties’ intention to arbitrate is tion of trade marks or patents, copyrights, the
7Law and Practice MALAYSIA
Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee,
Shearn Delamore & Co
winding up of companies, the bankruptcy of tration agreement is the law of the seat of the
debtors and the administration of estates (see arbitration, ie, the lex arbitrii (see the Malaysian
the Singapore Court of Appeal decision in Lars- Federal Court case of Thai-Lao Lignite Co Ltd &
en Oil and Gas Pte Ltd v Petroprod Ltd [2011] Anor v Government of The Lao People’s Demo-
3 SLR 414). Malaysian courts would find such cratic Republic [2017] 9 CLJ 273).
judicial findings to be persuasive.
Enforcement of Arbitration Agreements
In Arch Reinsurance Ltd v Akay Holdings Sdn Arbitration agreements are frequently enforced
Bhd [2019] 1 CLJ 305, the Federal Court held by the Malaysian courts. Where court proceed-
that the provisions of the National Land Code ings are brought in respect of a matter that is
setting out the rights and remedies of parties the subject of an arbitration agreement and a
under statutory charge over land are exhaus- party makes an application to stay the court
tive and exclusive and any attempt to contract proceedings, in view of the existence of a valid
out of these rights are void as being contrary to agreement to arbitrate, it is mandatory for the
public policy; and hence a dispute triggered by court to do so (see the Malaysian Federal Court’s
a statutory notice of demand under the National decision in Press Metal Sarawak Sdn Bhd v Eti-
Land Code is not arbitrable under the Arbitration ka Takaful Sdn Bhd [2016] 5 MLJ 417). There is
Act 2005. Based on this decision, the Malaysian no discretion for the Malaysian courts to refuse
Courts have taken the position where there are enforcement of an arbitration agreement when
statutory provisions that exhaustively set out the arbitration agreement is not null and void,
procedures involving the rights and remedies of inoperative or incapable of being performed.
parties, then that subject matter will most likely
not be arbitrable. This was emphasised recently in the case of
Tindak Murni Sdn Bhd v Juang Setia Sdn Bhd
The Tribunal’s Powers to Determine & Another Appeal [2020] MLJU 232. There, the
Arbitrability issue before the Federal Court was whether a
If the issue of whether a dispute is arbitrable or judgment in default may be sustained when the
not is raised by any party, the arbitral tribunal has plaintiff who obtained the judgment in default
the power to rule on its own jurisdiction, which is bound by a valid arbitration agreement. The
includes deciding whether a dispute is arbitra- defendant raised disputes to be ventilated in
ble. Within 30 days of receiving notice of the arbitration pursuant to the arbitration clause. The
arbitral tribunal’s ruling that there is jurisdiction, Federal Court held that a judgment in default
then any party may appeal to the High Court to cannot act as a bar to arbitration and, as such,
decide the matter. set aside the judgment in default and granted a
stay pending reference to arbitration.
3.3 National Courts’ Approach
Law of Arbitration Agreement 3.4 Validity
The conflict of laws rules are used by Malaysian Malaysia applies the rule of separability of
courts with respect to determining the law gov- arbitration clauses contained in invalid agree-
erning arbitration agreements. The general prin- ments. An arbitration clause that forms part of
ciple is that, in the absence of an express choice an agreement shall be treated as an agreement
of the governing law of the arbitration agreement independent of the other terms of the agreement
or any contrary indication, the law that has the in which it is contained. A decision by an arbi-
closest and most real connection with the arbi- tral tribunal that the agreement is null and void
8MALAYSIA Law and Practice
Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee,
Shearn Delamore & Co
does not invalidate the agreement to arbitrate on the third arbitrator within 30 days of their
(see Standard Chartered Bank Malaysia Bhd v appointment or within such extended period as
City Properties Sdn Bhd & Anor [2008] 1 MLJ the parties may agree, either party may apply to
233 – High Court). the director of the AIAC for such appointment.
This position has also been applied in the recent Where the arbitration consists of a sole arbitra-
case of Pandan Etika Sdn Bhd v Liang Build- tor and the parties fail to agree on the arbitrator,
ers Sdn Bhd [2019] 1 LNS 1978 where the High either party may apply to the director of the AIAC
Court gave effect to an arbitration clause that for the appointment of the sole arbitrator. The
had been referentially incorporated into an agree- decision of the director of the AIAC is final and
ment, regardless of the fact that the remaining non-appealable (see Section 13 of the Arbitra-
aspects of the agreement could potentially be tion Act 2005).
void for uncertainty.
Multiparty Arbitrations
Where there are multiple parties in an arbitration,
4. THE ARBITRAL where the arbitration consists of a sole arbitra-
TRIBUNAL tor and the parties fail to agree on the arbitrator,
any party may apply to the director of the AIAC
4.1 Limits on Selection for the appointment of the sole arbitrator. The
There are no limits set by the Arbitration Act 2005 decision of the AIAC is final and non-appealable.
on the parties’ autonomy to select arbitrators in
Malaysia. It is explicitly provided in Section 13 of There is no default procedure in the Arbitration
the Arbitration Act 2005 that no person shall be Act governing multi-party arbitrations where the
precluded by reason of nationality from acting as number of arbitrators is three, as the Arbitration
an arbitrator, unless the parties agree otherwise. Act only states “each party shall appoint one
arbitrator”. However, it is a common practice for
4.2 Default Procedures multiple parties on the same side (whether as
Where the parties’ chosen method for selecting joint claimants or respondents) to jointly appoint
arbitrators fails, the default procedure depends an arbitrator.
on the number of arbitrators appointed, ie, one
or three. In the context of international arbitra- The AIAC Rules address this and provides for
tion, where parties fail to determine the num- claimants and respondents to jointly nominate
ber of arbitrators, the default position is three an equal number of arbitrators. If no agreement
arbitrators in an international arbitration and one is reached on the joint nomination, the entire
in a domestic arbitration (see Section 12 of the Arbitral Tribunal shall be constituted by the
Arbitration Act 2005). Director of the AIAC upon the request of any
party. In this case, in the absence of agreement,
Where the arbitration consists of three arbitra- the previously nominated and appointed arbitra-
tors, each party shall appoint one arbitrator, and tors shall not form part of the Tribunal.
the two appointed arbitrators shall appoint the
third arbitrator as the presiding arbitrator. If a 4.3 Court Intervention
party fails to appoint an arbitrator within 30 days Where the director of the AIAC is unable to act
of receiving a request in writing to do so from the or fails to act within 30 days when any party
other party, or if the two arbitrators fail to agree applies to him or her for the appointment of an
9Law and Practice MALAYSIA
Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee,
Shearn Delamore & Co
arbitrator, any party may apply to the High Court challenging party may apply to the High Court
for the appointment of the arbitrator (see Sec- to make a decision on the challenge, within 30
tion 13(7) of the Arbitration Act 2005). If such an days of receiving notice of the decision rejecting
application is made, the High Court is required the challenge. The High Court’s decision on the
to have due regard to any qualifications required matter is final and non-appealable.
of the arbitrator by the agreement of the par-
ties, other considerations that are likely to secure 4.5 Arbitrator Requirements
the appointment of an independent and impar- It is a requirement that there should be no justifi-
tial arbitrator, and the advisability of appointing able doubt as to an arbitrator’s impartiality and
an arbitrator of a nationality other than those of independence. A person who is approached in
the parties. The appointment of the arbitrator by connection with a possible appointment as arbi-
the High Court in this manner is final and non- trator is required to disclose any circumstances
appealable. that are likely to give rise to justifiable doubts as
to their impartiality or independence under the
The Malaysian High Court does not have any Arbitration Act 2005 without delay (see Section
power under the Arbitration Act 2005 to inter- 14(2) of the Arbitration Act 2005).
vene in the selection of arbitrators in any other
manner. Recently, the Malaysian High Court in Low Koh
Hwa @ Low Kok Hwa (practising as sole Char-
4.4 Challenge and Removal of tered Architect at Low & Associates) v Persatuan
Arbitrators Kanak-Kanak Spastik Selangor & Wilayah Perse-
Grounds for Challenge of Arbitrators kutuan and another case, [2021] MLJU 430, held
An arbitrator may be challenged in two situa- that the Arbitration Act 2005 requires an arbitra-
tions: if the circumstances give rise to justifiable tor to be impartial, free from bias and independ-
doubts as to their impartiality or independence; ent as a matter of fact, and as perceived objec-
or if they do not possess the qualifications tively by a “fair-minded and informed observer”.
agreed by the parties (see Section 14 of the
Arbitration Act 2005).
5. JURISDICTION
Challenge Procedure
Under the default procedure governing the chal- 5.1 Matters Excluded from Arbitration
lenge or removal of arbitrators, any party who There are no specific subject matters that may
intends to challenge the appointment of an not be referred to arbitration under the Arbitra-
arbitrator shall send a written statement of the tion Act 2005. Section 4 of the Arbitration Act
reasons for the challenge to the arbitral tribunal, 2005 provides that any dispute which the par-
within 15 days of becoming aware of the con- ties have agreed to submit to arbitration under
stitution of the arbitral tribunal or of any of the an arbitration agreement may be determined by
reasons referred to above (see Section 15 of the arbitration unless the arbitration agreement is
Arbitration Act 2005). contrary to public policy or the subject matter
of the dispute is not capable of settlement by
Unless the challenged arbitrator withdraws from arbitration under the laws of Malaysia.
office or the other party agrees to the challenge,
the arbitral tribunal shall decide on the chal- The wide construction of what is arbitrable was
lenge. Where the challenge is not successful, the also affirmed in Renault SA v Inokom Corp Sdn
10MALAYSIA Law and Practice
Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee,
Shearn Delamore & Co
Bhd & Anor and other appeals [2010] 5 MLJ 394, Petroleum Equipment (Malaysia) Sdn Bhd v FMC
where in addition to conventional commercial Wellhead Equipment Sdn Bhd [2019] MLJU 473.
disputes, the Court of Appeal held that tortious
disputes are arbitrable. 5.2 Challenges to Jurisdiction
The principle of competence-competence is
Case Law applicable in Malaysia with the enactment of
While there is no universally accepted test on Section 18(1) of the Arbitration Act 2005, ie, an
public policy, matters that are naturally contrary arbitral tribunal can rule on a party’s challenge
to public policy and not capable of settlement by to the tribunal’s own jurisdiction. This is affirmed
arbitration would include criminal proceedings, in Press Metal Sarawak Sdn Bhd v Etiqa Takaful
citizenship, legitimacy of a marriage, validity of Bhd [2016] 5 MLJ 417, where the Federal Court
a matter where the court is conferred sole juris- held that the court must acknowledge the com-
diction to make specific orders or declarations petency of an arbitral tribunal to decide on its
such as grants of statutory licences, validity of own jurisdiction without interference.
the registration of trade marks or patents, copy-
rights, winding up of companies, bankruptcy of 5.3 Circumstances for Court
debtors and administration of estates (see the Intervention
Singapore Court of Appeal decision in Larsen Pursuant to Section 18(7) of the Arbitration Act
Oil and Gas Pte Ltd v Petroprod Ltd[2011] 3 SLR 2005, the arbitral tribunal may rule on a plea
414). that it does not have jurisdiction or is exceeding
the scope of its authority either as a preliminary
In general, the question of whether the subject question or in an award on the merits.
matter is arbitrable is not determined by the
jurisdictional limitations on the relief that may Positive Rulings on Jurisdiction
be granted (see Section 4(2) of the Arbitration Where the arbitral tribunal rules on such a plea
Act 2005 and the UK Court of Appeal decision as a preliminary question that it has jurisdiction,
in Fulham Football Club (1987) Ltd v Richards any party may appeal to the High Court within
and another [2011] EWCA Civ 855). 30 days of receiving a notice of that ruling (see
Section 18(8) of the Arbitration Act 2005). A deci-
This principle appears to have been circum- sion of the High Court herein is final and non-
scribed by the Malaysian courts. In Pendaftar appealable (see Section 18(10) of the Arbitration
Pertubuhan Malaysia v Establishmen Tribunal Act 2005).
Timbangtara Malaysia & Ors [2011] 6 CLJ 684,
the High Court held that disputes relating to any On the other hand, if the arbitral tribunal decides
act, duty or functions carried out by a statutory to address such plea in the award stage, then
body in the exercise of its statutory powers are the parties may apply to the High Court under
not subject to arbitration. Recently, the Federal Section 37 of the Arbitration Act 2005 to set
Court in Arch Reinsurance Ltd v Akay Holdings aside such award made by the arbitral tribunal.
Sdn Bhd [2019] 1 CLJ 305 held that subject
matter concerning a statutory notice of demand The courts generally show a reluctance to inter-
for order for sale of a charged property under vene in issues regarding the jurisdiction of an
the National Land Code 1965 is not arbitrable. arbitral tribunal. In Capping Corp Ltd & Ors v
This was endorsed by the High Court in FMC Aquawalk Sdn Bhd & Ors [2013] 6 MLJ 579, the
Court of Appeal held that under the Arbitration
11Law and Practice MALAYSIA
Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee,
Shearn Delamore & Co
Act 2005, the courts are dictated to take a mini- 5.5 Standard of Judicial Review for
mal interference approach and such approach Jurisdiction/Admissibility
is reflected in Section 18 of the Arbitration Act In Malaysia, the standard of review by the courts
2005, where the arbitrator is empowered to rule on questions of arbitral jurisdiction is generally
on their own jurisdiction. de novo. It was upheld by the High Court in Usa-
hasama SPNB-LTAT Sdn Bhd v ABI Construc-
Negative Rulings on Jurisdiction tion Sdn Bhd [2016] 7 CLJ 275 that an appeal
The Arbitration Act 2005 provides for an appeal under Section 18(8) of the Arbitration Act 2005
against an arbitral ruling that it has jurisdiction. involves a full rehearing of all issues afresh and
The converse (ie, a negative ruling on jurisdic- uninfluenced by the prior decision of the arbitra-
tion) is not referenced as a ground for appeal tor.
under Section 18(8).
5.6 Breach of Arbitration Agreement
In PT Asuransi Jasa Indonesia (Persero) v Dexia When there are court proceedings brought in
Bank SA [2007] 1 SLR(R) 597, the Singapore breach of an arbitration agreement, it is manda-
Court of Appeal accepted that pursuant to Arti- tory for the Malaysian courts to stay such pro-
cle 16(3) of the UNCITRAL Model Law, a nega- ceedings in favour of arbitration, unless it finds
tive jurisdictional ruling by a tribunal is intended that the agreement is null and void, inoperative
to be a final and binding decision between the or incapable of being performed (see Section 10
parties, and is not appealable. Whilst the Singa- of the Arbitration Act 2005).
pore International Arbitration Act was amended
in 2012 to allow appeals to the High Court on This was confirmed by the Federal Court in
a negative jurisdictional ruling, no such amend- Press Metal Sarawak Sdn Bhd v Etiqa Takaful
ment has been made to the Arbitration Act 2005. Bhd [2016] 5 MLJ 417 where it was held that in
granting a stay under Section 10 of the Arbitra-
5.4 Timing of Challenge tion Act 2005, the court only needs to consider
Pursuant to Section 18(8) of the Arbitration Act whether there is in existence a binding arbitra-
2005, if the arbitral tribunal rules on a plea as a tion agreement or clause between the parties,
preliminary question that it has jurisdiction, par- which agreement is not null and void, inoperative
ties have the right to go to court to challenge the or incapable of being performed. Referring to the
jurisdiction of the arbitral tribunal within 30 days Court of Appeal’s decision in TNB Fuel Services
of receiving a notice of the arbitral tribunal’s rul- Bhd v China National Coal Group Corp [2013] 4
ing on the issue. MLJ 857, the Federal Court held that the ques-
tion as to whether there is a dispute in existence
If the arbitral tribunal determines such plea in is not a requirement to be considered as it is an
an award on the merits, the parties may, within issue to be decided by the arbitral tribunal.
90 days from the date of receipt of the award,
make an application to the High Court set aside This was reinforced in the recent case of Tindak
such award (see Section 37(4) of the Arbitration Murni Sdn Bhd v Juang Setia Sdn Bhd [2020] 3
Act 2005). MLJ 545, where the Federal Court set aside a
judgment in default over disputes that were con-
tractually bound to be resolved by arbitration.
12MALAYSIA Law and Practice
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Shearn Delamore & Co
5.7 Third Parties country in which it was issued (see Section 19H
The arbitral tribunal cannot assume jurisdiction of the Arbitration Act 2005).
over individuals or entities that are neither party
to an arbitration agreement nor signatories to 6.2 Role of Courts
the contract containing the arbitration agree- The High Court has the power to issue interim
ment. The Arbitration Act 2005 does not apply relief before or during arbitration proceedings,
to non-parties to an arbitration agreement (see irrespective of whether the seat of arbitration is
the Federal Court decision in Jaya Sudhir a/l in Malaysia.
Jayaram v Nautical Supreme Sdn Bhd & Ors
[2019] 5 MLJ 1). Pursuant to Section 11 of the Arbitration Act
2005, the High Court may make the following
orders:
6. PRELIMINARY AND
INTERIM RELIEF • to maintain or restore status quo pending the
determination of the dispute;
6.1 Types of Relief • to take action that would prevent current or
Pursuant to Section 19(1) of the Arbitration Act imminent harm or prejudice to the arbitral
2005, an arbitral tribunal is permitted to grant process, or to refrain from taking action that
interim measures at the request of either party is likely to cause such harm or prejudice;
to the arbitration agreement. The 2018 amend- • to provide a means of preserving assets out
ments to the Arbitration Act 2005 confer power of which a subsequent award may be satis-
upon the arbitral tribunal under Section 19(2)(a) fied, whether by way of arrest of property or
to (e) of the Arbitration Act 2005 to grant the fol- bail or other security, pursuant to the admi-
lowing interim reliefs: ralty jurisdiction of the High Court;
• to preserve evidence that may be relevant
• to order a party to maintain or restore the sta- and material to the resolution of the dispute;
tus quo pending determination of the dispute; or
• to take action that would prevent current or • to provide security for the costs of the dis-
imminent harm or prejudice to the arbitral pute.
process itself, or to refrain from taking action
that is likely to cause such harm or prejudice; It should be noted that the powers of the court
• to provide a means of preserving assets out to grant interim relief are slightly wider than the
of which a subsequent award may be satis- powers of an arbitral tribunal. In considering an
fied; order to provide a means of preserving assets
• to preserve evidence that may be relevant out of which a subsequent award may be satis-
and material to the resolution of the dispute; fied, the High Court has the power to order an
or arrest of property or bail or other security, pur-
• to provide security for the costs of the dis- suant to the admiralty jurisdiction of the High
pute. Court.
An interim measure issued by an arbitral tribunal Emergency Arbitrators
shall be recognised as binding and, unless oth- Pursuant to the 2018 Amendments, the Arbitra-
erwise provided by the arbitral tribunal, enforced tion Act 2005 recognises the use of emergency
upon application to the court, irrespective of the arbitrators, and the definition of “arbitral tribu-
13Law and Practice MALAYSIA
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Shearn Delamore & Co
nal” under the Act has been defined to include or institutional. The most commonly adopted
an emergency arbitrator. institutional rules in Malaysia is the AIAC Arbi-
tration Rules.
Emergency arbitrators are prescribed with the
same powers as the arbitral tribunal. The deci- If parties fail to agree on the procedural rules,
sions of emergency arbitrators are recognised as the arbitral tribunal will become the master of
binding, and can be enforced upon application the proceedings, upon which it will be empow-
to the court, irrespective of the country in which ered to determine matters such as the time and
it is issued. place of proceedings, time limits for pleadings
and written submissions as well as taking of evi-
The AIAC Rules provides additional powers to dence.
emergency arbitrators; virtual or documents-
only emergency arbitration proceedings are 7.2 Procedural Steps
permitted, as are ex parte proceedings. Emer- Regardless of the applicable procedural rules,
gency arbitrators are permitted to rule on their the claimant is in law required to submit a state-
own jurisdiction. ment of claim containing the facts supporting
their claim, the points in issue and the relief or
The Malaysian courts do not have the power remedy sought from the arbitration after the
to intervene in arbitration proceedings once commencement of arbitration and within the
an emergency arbitrator has been appointed, period of time agreed by the parties or deter-
except in situations specifically provided by the mined by the arbitral tribunal. The respondent
Arbitration Act 2005, such as determination of to the arbitration shall then state their defence in
an appeal against the emergency arbitrator’s rul- respect of the particulars set out by the claimant.
ing of an unsuccessful challenge to the arbitral
tribunal. Together with the submissions of the parties’
statement of claim and defence, the parties may
Interim relief by the courts is permissible both further submit any document they consider rel-
before and after an emergency arbitrator has evant or add a reference to the documents or
been appointed. other evidence that they may submit.
6.3 Security for Costs The arbitral tribunal will then decide whether to
Malaysian law confers concurrent jurisdiction hold oral hearings for the presentation of evi-
to both courts and arbitral tribunals to make an dence or oral arguments, or to conduct the pro-
order for security for costs as an interim measure ceedings on the basis of documents and other
upon an application for such. materials. If any party applies for the arbitral
tribunal to hold oral hearings at an appropriate
stage of the proceedings, it is mandatory for the
7. PROCEDURE arbitral tribunal to hold such oral hearings (see
Section 26 of the Arbitration Act 2005).
7.1 Governing Rules
The parties are free to agree on the procedure to 7.3 Powers and Duties of Arbitrators
be followed by the arbitral tribunal in conducting Powers of Arbitrators
the arbitration (see Section 21 of the Arbitration In Malaysia, arbitrators are conferred with the
Act 2005). Such procedural rules can be ad hoc following powers:
14MALAYSIA Law and Practice
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Shearn Delamore & Co
• to rule on their own jurisdiction, including any Duties of Arbitrators
objections with respect to the existence or When a potential arbitrator is approached in
validity of the arbitration agreement; connection with their possible appointment as
• to order interim measures as described in 6.1 an arbitrator, that person has a duty to disclose
Types of Relief; any circumstances that are likely to give rise to
• to conduct the arbitration in such manner as justifiable doubts as to their impartiality or inde-
they consider appropriate if no procedure is pendence.
agreed upon by the parties, which includes
the powers to: Once the person is appointed as an arbitrator,
(a) determine the admissibility, relevance, they have the duty to treat the parties with equal-
materiality and weight of any evidence, ity, and to give the parties a fair and reasonable
(b) draw on their own knowledge and exper- opportunity to present their case. The arbitra-
tise, tor is also under a duty to act in good faith at
(c) order for the provision of further particu- all times of the arbitration. In making an award,
lars in a statement of claim or statement arbitrators are also duty-bound to state the rea-
of defence, sons upon which the award is based, unless the
(d) order for the provision of security for parties have agreed that no reasons are to be
costs, given, or if the award is on agreed terms pursu-
(e) fix and amend the time limits within which ant to a settlement.
various steps in the arbitral proceedings
must be completed, 7.4 Legal Representatives
(f) order the discovery and production of Generally, parties to arbitral proceedings are per-
documents or materials within the pos- mitted to be represented in arbitral proceedings
session or power of a party, by any representative appointed by the party.
(g) order the interrogatories to be answered, Section 37A of the Legal Profession Act 1976
(h) order that any evidence be given on oath provides that the restrictions on non-Malaysian
or affirmation, and qualified lawyers to practise in Malaysia shall not
(i) make any such orders as the arbitral tribu- apply to any person representing any party in
nal considers appropriate; arbitral proceedings.
• to determine the seat of arbitration, the lan-
guage to be used in arbitration proceedings However, it must be noted that the above princi-
and the time line to submit pleadings, sub- ple is only applicable to arbitrations taking place
missions, etc, where the parties fail to agree in West Malaysia. In respect of arbitration pro-
on these points; and ceedings in East Malaysia (Sabah & Sarawak),
• to appoint one or more experts to report on Sabah and Sarawak advocates are conferred
specific issues to be determined by the arbi- exclusive right to practise in East Malaysia
tral tribunal, and to require a party to give the and such exclusivity includes representation in
expert any relevant information or to produce arbitration proceedings (see Samsuri bin Baha-
or provide access to any relevant documents, ruddin & Ors v Mohamed Azahari bin Matiasin
goods or other property for the expert’s and another appeal [2017] 2 MLJ 141 (Federal
inspection. Court)).
15Law and Practice MALAYSIA
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Shearn Delamore & Co
8. EVIDENCE 8.3 Powers of Compulsion
With the approval of the arbitral tribunal, the
8.1 Collection and Submission of parties are empowered to make an application
Evidence under Section 29(2) of the Arbitration Act 2005
In arbitration, the parties are free to agree on to the High Court for assistance in taking evi-
the procedure to be followed by the arbitral tri- dence. The High Court has the power to order
bunal, including the approach to the collection the attendance of a witness to give evidence
and submission of evidence. In the submission or, where applicable, to produce documents on
of the statement of claim and the defence, the oath or before an officer of the High Court or
parties are free to submit with their statements any other person, including the arbitral tribunal.
any document that they consider to be relevant,
or to add a reference to the documents or oth- Pursuant to the AIAC Arbitration Rules, the arbi-
er evidence that they may submit. One of the tral tribunal may order any party to produce any
examples of such procedural rules include the documents in its possession or control which the
International Bar Association (IBA) Rules on Tak- arbitral tribunal deems relevant to the case, and
ing Evidence in International Arbitration. to supply these documents and/or copies there-
of to the arbitral tribunal and the other parties.
Unless otherwise agreed by the parties, the arbi-
tral tribunal retains the power to decide whether
to hold oral hearings for the presentation of evi- 9. CONFIDENTIALITY
dence or oral arguments, or to conduct the pro-
ceedings on the basis of documents and other 9.1 Extent of Confidentiality
materials. However, if there is an application to The 2018 Amendments introduced Section
hold oral hearings at an appropriate stage of the 41A of the Arbitration Act 2005, to reinforce
proceedings, it is mandatory for the arbitral tri- the confidentiality of arbitration proceedings,
bunal to do so. which provides that no party may publish, dis-
close or communicate any information relating
8.2 Rules of Evidence to the arbitral proceedings under the arbitration
The rules of evidence that apply to arbitral pro- agreement or an award made in those arbitral
ceedings seated in Malaysia would depend on proceedings. This would include all pleadings,
the applicable rules of evidence agreed between evidence, documents and the award, which will
the parties. Where the parties fail to agree on the remain confidential and cannot be disclosed in
applicable rules of evidence, the arbitral tribunal subsequent proceedings.
may determine the rules of evidence regarding
admissibility, relevance, materiality and weight in There are three exceptions to this rule:
such manner as it considers appropriate.
• where the publication, disclosure or commu-
In respect of the application of the rules of evi- nication is made to protect or pursue a legal
dence in court, it is statutorily stipulated that the right or interest of the party, or to enforce
Evidence Act 1950 does not apply to proceed- or challenge the award in legal proceedings
ings before an arbitrator. before a court or other judicial authority;
• if the publication, disclosure or communica-
tion is made to any government body, regu-
latory body, court or tribunal and the party
16MALAYSIA Law and Practice
Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee,
Shearn Delamore & Co
is obliged by law to make the publication, If there is a time limit, the arbitrator must deliver
disclosure or communication; or the award within that time limit or give notice
• if the publication, disclosure or communica- to extend the time limit where this is provided
tion is made to a professional or any other for under the arbitration agreement between the
adviser of any of the parties. parties, failing which the award may be set aside
(see Ken Grouting Sdn Bhd v RKT Nusantara
The confidentiality obligation under Section 41A Sdn Bhd [2021] 2 CLJ 173).
of the Arbitration Act 2005 does not, however,
extend to non-parties of an arbitration proceed- The High Court may also extend the time limit,
ing (see Dato’ Seri Timor Shah Rafiq v Nautilus unless otherwise agreed by the parties (Section
Tug & Towage Sdn Bhd [2019] 10 MLJ 693). 46 of the Arbitration Act 2005). However, the
High Court may only do so where there is an
The exceptions under the AIAC Rules are where application made by the arbitrator or the parties
disclosure is necessary for the implementation and not on its own volition (see Ken Grouting
and enforcement of the award or to the extent Sdn Bhd v RKT Nusantara Sdn Bhd [2021] 2 CLJ
that disclosure may be required of a party by a 173 (Court of Appeal)).
legal duty, or to protect or pursue a legal right,
or to challenge an award in bona fide legal pro- Pursuant to the AIAC Rules, the arbitral tribunal
ceedings before a court or other judicial author- is required to submit a draft of the final award to
ity. The AIAC Rules extend confidentiality further, the director of the AIAC within three months after
with the same applying equally to the Arbitral the proceedings are declared to be closed for a
Tribunal, the Director, the AIAC, any tribunal sec- technical review. The time limit may be extended
retary and any witness or expert appointed by by the arbitral tribunal with the consent of the
the Arbitral Tribunal, and parties are required to parties and upon consultation with the Director
seek an undertaking of confidentiality from those of the AIAC or unilaterally by the Director of the
involved in the arbitration. AIAC where it is deemed necessary.
10.2 Types of Remedies
10. THE AWARD The types of remedies that an arbitral tribunal
may award are not limited by the Arbitration Act
10.1 Legal Requirements or the AIAC Rules. However, the type of rem-
The arbitral award must be made in writing, edies awarded are necessarily confined to the
signed by the arbitrator or a majority of all the powers conferred on the arbitral tribunal by the
members of the arbitral tribunal, state its date parties in the agreement to arbitrate.
and seat of arbitration and, unless the parties
have agreed otherwise or it is an award pursuant Reliefs that form part of the exclusive jurisdic-
to a settlement, the award must also state the tion of the court pursuant to statute may not be
reasons upon which it is based (see Section 33 granted by an arbitral tribunal, even if the arbitral
of the Arbitration Act 2005). tribunal may decide on the subject matter of the
dispute (see the UK Court of Appeal decision in
There is no time limit provided by Malaysian law Fulham Football Club (1987) Ltd v Richards and
on the delivery of the award, but the time for another [2011] EWCA Civ 855).
making an award may be limited by the arbitra-
tion agreement entered into between the parties.
17Law and Practice MALAYSIA
Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee,
Shearn Delamore & Co
10.3 Recovering Interest and Legal 11. REVIEW OF AN AWARD
Costs
Parties are entitled to recover interest and legal 11.1 Grounds for Appeal
costs in an arbitration, especially where doing An arbitral award made by an arbitral tribunal
so is provided for in the arbitration agreement. pursuant to an arbitration agreement is final,
The arbitral tribunal has the discretion to award binding and conclusive, and is not appeal-
simple or compound interest from such date, able based on questions of fact or law. This is
rate and rest as the arbitral tribunal considers because the arbitrator is master of the facts, and
appropriate. the courts should not review the arbitral award
on its merits (see the Court of Appeal decision
The interest granted may also be for: in Asean Bintulu Fertilizer Sdn Bhd v Wekajaya
Sdn Bhd and another appeal [2018] 4 MLJ 799).
• any period, ending no later than the date of
payment; The limited circumstances in which an arbitral
• of the whole or any part of sums awarded by award may be set aside, or its recognition and
the arbitral tribunal; enforcement may be opposed, are on the fol-
• sums paid before the date of the award; or lowing grounds:
• costs awarded or ordered by the arbitral
tribunal in the arbitral proceedings. • a party to the arbitration agreement was
under any incapacity;
The 2018 amendments to the Arbitration Act • the arbitration agreement is not valid under
2005 make it possible for both pre-award and the law to which the parties have subjected
post-award interest to be claimed for arbitra- it or, failing any indication thereon, under the
tions commencing after the statutory amend- laws of Malaysia;
ments came into force (see UDA Land Sdn Bhd • the party making the application was not
v Puncak Sepakat Sdn Bhd [2020] MLJU 892 given proper notice of the appointment of an
(High Court)). arbitrator or the arbitral proceedings, or was
otherwise unable to present their case;
The Arbitration Act 2005 does not limit the grant • the award deals with a dispute that is not
to simple interest or compound interest. This is contemplated by or does not fall within the
dealt with in accordance with underlying con- terms of the submission to arbitration;
tract and the substantive law. • the award contains decisions on matters that
are beyond the scope of the submission to
The general principle in relation to the award of arbitration;
costs is for the arbitral tribunal to order costs in • the composition of the arbitral tribunal or the
favour of the successful party and to award all arbitral procedure was not in accordance with
reasonable costs incurred by that party during the agreement of the parties;
the arbitration. This would generally include legal • the subject matter of the dispute is not capa-
fees and disbursements reasonably incurred by ble of settlement by arbitration under the laws
the party in respect of the arbitration. of Malaysia; or
• the award is in conflict with the public policy
of Malaysia.
18MALAYSIA Law and Practice
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Shearn Delamore & Co
(See Sections 37 and 39 of the Arbitration Act The commitment to the New York Convention
2005.) is reflected in the provisions of the Arbitration
Act 2005.
Further, the recognition and enforcement of the
arbitration award may be refused where the 12.2 Enforcement Procedure
award has not yet become binding on the par- The party seeking to enforce an arbitral award
ties or has been set aside or suspended by a may make an application to the High Court
court of the country in which, or under the law in Malaysia. Upon such an application, the
of which, that award was made (see Section 39 award will be recognised as binding and will be
of the Arbitration Act 2005 and Malaysian Bio- enforced by entry as a judgment in terms of the
XCell Sdn Bhd v. Lebas Technologies Sdn Bhd award. The award to be enforced may be made
& Another Appeal [2020] 3 CLJ 534 (Court of in respect of an arbitration where the seat of
Appeal)). arbitration is in Malaysia or a foreign state.
11.2 Excluding/Expanding the Scope of The only legal requirement for the enforcement
Appeal of an arbitral award is the production of a duly
There is no provision for parties to agree to authenticated original award or a duly certified
exclude or expand the scope of challenge to the copy of the award, and the original arbitration
decision of the arbitral tribunal under the Arbitra- agreement or a duly certified copy of the agree-
tion Act 2005. ment. As long as this formal requirement is com-
plied with, the court must grant recognition and
11.3 Standard of Judicial Review enforcement of an arbitration award upon such
Judicial review of an arbitral award is not intend- an application being made (see the Court of
ed to review the merits of the case but instead to Appeal’s decision in Tune Talk Sdn Bhd v Padda
confine itself to the limited grounds in the Arbi- Gurtaj Singh [2020] 3 MLJ 184).
tration Act. The standard of review is intended
to be deferential rather than de novo. Having Nevertheless, if the party against whom the
said that, in the Government of the Lao Peo- enforcement of the award is invoked provides
ple’s Democratic Republic v Thai-Lao Lignite Co proof that the arbitral award has been set aside
Ltd, A Thai Co and Anor [2017] 9 CLJ 273, the or suspended by a court of the country in which
Federal Court equally held that its role was not the award was made or under the law under
to rubber-stamp arbitral awards. which the award was made, the High Court
may refuse the recognition or enforcement of
the award.
12. ENFORCEMENT OF AN
AWARD The provisions of the Arbitration Act 2005,
including the provisions of the enforcement of
12.1 New York Convention arbitral awards, bind the federal government
Malaysia has been a signatory to the New York or the government of any component state of
Convention on the Recognition of Foreign Arbi- Malaysia that are parties to an arbitration. There-
tral Awards 1958 since 1985. This requires courts fore, no defence of sovereign immunity can be
of contracting states to recognise and enforce raised by a state or state entity at the enforce-
arbitral awards made in other contracting states. ment stage of arbitration.
19Law and Practice MALAYSIA
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Shearn Delamore & Co
The Court has a discretion to adjourn the setting 13.2 Ethical Codes
aside or recognition and enforcement of an arbi- It is implicit in the Arbitration Act 2005 that an
tration award in Malaysia pursuant to Section arbitrator must be impartial; the requirement to
37 and Section 39(2) of the Arbitration Act 2005 disclose any circumstances that are likely to give
where the award is subject to ongoing setting rise to justifiable doubts regarding that person’s
aside proceedings at its seat (see Ipco (Nige- impartiality or independence makes this clear.
rian National Petroleum Corp [2005] EWHC 726 Good faith requirements are also mandated by
(Comm) and Man Diesel Turbo SE v I.M. Skau- the Arbitration Act 2005. Arbitrations pursuant
gen Marine Services Pte Ltd [2018] SGHC 132). to the Asian International Arbitration Centre are
bound by the Asian International Arbitration
12.3 Approach of the Courts Centre’s Code of Conduct for Arbitrators, which
The public policy considerations that domestic references the International Bar Association
courts apply in refusing to enforce foreign arbi- Guidelines on Conflict of Interest in International
tral awards are based not on domestic public Arbitration.
policy, but on international norms; conflict with
public policy is defined as violating the most Advocates and solicitors in Malaysia who act as
basic notions of morality and justice, or as that counsel in arbitration proceedings remain bound
which would shock the public conscience or be by the ethical codes and professional standards
injurious to the public good. Thus, instances governing advocates and solicitors contained in
such as “patent injustice”, “manifestly unlaw- the Legal Profession Act 1976.
ful and unconscionable”, “substantial injustice”,
“serious irregularity” and other similar serious 13.3 Third-Party Funding
flaws in the arbitral process and award, would The Arbitration Act 2005 is silent on whether
fall within the applicable concept of public policy third-party funding or champerty is permissible
(Jan De Nul (Malaysia) Sdn Bhd v Vincent Tan in Malaysia; there are currently no explicit rules
Chee Yioun [2019] 2 MLJ 413). enabling either.
Recently, the Federal Court in Master Mulia Sdn There is a restriction on champerty or third-party
Bhd v Sigur Rus Sdn Bhd [2020] 12 MLJ 198 funding in the Legal Profession Act 1976, which
confirmed that the courts may set aside an arbi- expressly prohibits advocates and solicitors in
tration award that was made in breach of natural Malaysia from purchasing or agreeing to pur-
justice but this would only be done where the chase an interest that is the subject matter of
breach had material and causative effect on the a client in a contentious proceeding, or from
outcome of the arbitration. entering into any agreement that stipulates or
contemplates payment only in the event of suc-
cess in such suit, action or proceeding.
13. MISCELLANEOUS
The Common Law Position
13.1 Class-Action or Group Arbitration There is also a common law restriction on cham-
The possibility of class-action arbitration or pertous agreements as being against public
group arbitration remains untested in Malaysia. policy – see the UK Court of Appeal case of Re
Trepca Mines Ltd (No 2) [1962] 3 All ER 351.
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