International Arbitration 2017 Comparisons

Last Updated June 28, 2017

Contributed By Malik Imtiaz Sarwar

Law and Practice

Author(s)

Dato’ Malik Imtiaz Sarwar is one of Malaysia's leading advocates. With more than 20 years experience as a litigator and about 200 reported decisions in a diverse range of practice areas to his credit, he has firmly established himself as a point of reference in dispute resolution. Regularly consulted and briefed as counsel in high value and complex litigation in civil, commercial, administrative and constitutional law matters, he is a familiar presence in the appellate courts, the High Court and the arbitration circuit. Imtiaz read law at the International Islamic University, has an LLM from the University of Hong Kong and a Masters in Studies in International Human Rights Law from Oxford University.

Malik Imtiaz Sarwar was established in 1997 and has come to be recognised as a leading dispute resolution practice that fearlessly advocates its clients’ interests, and the Rule of Law. Known for its professionalism and effectiveness, it is regularly consulted and briefed in a diverse range of practice areas. It also contributes to the development of the law through pro-bono work in matters of legal significance, the publication of scholarly work and socio-legal commentary, continuing professional development.

<table><tr><td><p><b>Year</b></p></td><td><p><b>Domestic Cases</b></p></td><td><p><b>International Cases</b></p></td><td><p><b>Total Number of Cases</b></p></td></tr><tr><td><p>2010</p></td><td><p>20</p></td><td><p>2</p></td><td><p>22</p></td></tr><tr><td><p>2011</p></td><td><p>49</p></td><td><p>3</p></td><td><p>52</p></td></tr><tr><td><p>2012</p></td><td><p>118</p></td><td><p>17</p></td><td><p>135</p></td></tr><tr><td><p>2013</p></td><td><p>128</p></td><td><p>28</p></td><td><p>156</p></td></tr><tr><td><p>2014</p></td><td><p>80</p></td><td><p>32</p></td><td><p>112</p></td></tr><tr><td><p>2015</p></td><td><p>95</p></td><td><p>18</p></td><td><p>113</p></td></tr><tr><td><p>2016</p></td><td><p>73</p></td><td><p>17</p></td><td><p>90</p></td></tr></table><p>*data available as of 2nd November 2016</p>
<p>Cross-cultural difficulties in arbitral practice, choices of substantive law and jurisdiction in International Arbitration Agreements and incorporation of trade norms are all live issues in Malaysia at the current time.</p>
<p>The construction and maritime industries are experiencing significant international arbitration activity in 2017.</p>
<p>The Kuala Lumpur Regional Centre for Arbitration (“KLRCA”) is the most used institution for international arbitration in Malaysia.</p>
<p>The Arbitration Act 2005 (“AA 2005”) governs international arbitration where subsections 2(1) and 2(2) provide the definition of international arbitration. This definition is taken directly from Articles 1(3) and (4) of the Model Law itself, with the exception that the definition of international arbitration in the first limb of Article 1(3) of the Model Law reads “the parties to an arbitration agreement have, at the time of the conclusion of the agreement, their places of business in different states”, while s.2(1)(a) AA 2005 reads “one of the parties to an arbitration agreement, at the time of the conclusion of that agreement, has its place of business in any State other than Malaysia”, which therefore avoids the consequence that if both parties of an arbitration come from the same foreign country, the arbitration may be deemed domestic. </p><p>Additionally, AA 2005 also makes provisions for international arbitration where the seat of arbitration is in Malaysia under Section 3(3), which states that Part III of the Act will not apply unless the parties agree otherwise in writing.</p>
<p>There have been no significant changes to the legislation in the past year, and there is no pending legislation. </p>
<p>Under Section 9(3) AA 2005, an arbitration agreement must be in writing. Section 9(4) AA 2005 further provides that it is deemed to be in writing where it is contained in:</p><ul style="disc"><li value="1">a document signed by the parties;</li><li value="2">an exchange of letters, telex, facsimile or other means of communication which provide a record of the agreement; or</li><li value="3">an exchange of a statement of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.</li></ul><p>An arbitration agreement can be in the form of an arbitration clause in an agreement or in the form of a separate agreement, as provided in Section 9(2). Pursuant to Section 9(5) AA 2005, a reference in an agreement to a document containing an arbitration clause should also be sufficient, provided that the agreement is in writing and the reference was such as to make that clause part of the agreement.</p>
<p>The Malaysian judiciary has been supportive of arbitration, as acknowledged by the Chief Justice of Malaysia, Tun Arifin Zakaria:</p><p>"Reported cases show that the Malaysian judiciary have been supportive of arbitration. The lack of judicial intervention by the Malaysian Judiciary of the arbitral awards are clearly illustrated in the federal case of Intelek Timur Sdn Bhd v Future Heritage Sdn Bhd (2004) 1 CLJ 743 where it was held that 'an arbitrator’s award is final, binding and conclusive, and may only be challenged in exceptional circumstances'. In a more recent case of The Government Of India v Cairn Energy India Pty Ltd &amp; Anor (2012) 3 CLJ 423, the Federal Court reiterate the same non-intervention principle whereby it held: 'Where a specific matter is referred to arbitration for consideration, it ought to be respected in that no such interference is possible upon the ground that the decision upon the question in law is an erroneous one'.</p><p>In short, the courts are there to provide a supporting role, with minimal intervention strictly as provided for and circumscribed under the Arbitration Act 2005. Hence, the Malaysian legal and judicial system serves to augment and support arbitration, be it domestic or international arbitration."</p><p>Further, in the recent case of Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd (2016) 5 MLJ 417, the Federal Court unanimously recognised the competency of an arbitral tribunal to decide on its own jurisdiction without interference. </p>
<p>The AA 2005 recognises the doctrine of severability as can be seen in Section 18(2) where it provides:</p><ul style="disc"><li value="1">an arbitration clause which forms part of an agreement shall be treated as an agreement independent of the other terms of the agreement; and</li><li value="2">a decision by the arbitral tribunal that the agreement is null and void shall not ipso jure entail the invalidity of the arbitration clause.</li></ul>

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<p>Subject to any rules of arbitration that may be adopted, the parties are generally given a free hand to decide on matters relating to the appointment of the arbitral tribunal under the AA 2005.</p>
<p>Section 13(3) AA 2005 provides for a default procedure whereby the arbitral tribunal shall consist of three arbitrators – each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator as the presiding arbitrator. In any event, Section 13(4) AA 2005 provides where a party fails to appoint an arbitrator within 30 days of receipt of a request in writing to do so from the other party, or the two arbitrators fail to agree on the third arbitrator within 30 days of their appointment or such extended period as the parties </p>
<p>Section 8 AA 2005 expressly prohibits judicial intervention unless otherwise provided in the Act. The appointment of arbitrators is governed by Section 13 and there is nothing in the provision which allows a court to intervene in the selection of arbitrators, except for circumstances where the director of the KLRCA is unable or fails to appoints within 30 days upon written request to do so by any party. </p>
<p>There are provisions governing the challenge or removal of arbitrators under sections 14 to 17 AA 2005. Section 14(3) allows for the challenge of arbitrators only in circumstances which give rise to justifiable doubts as to his/her impartiality or independence, or that he/she does not possess qualifications agreed to by the parties.</p><p>The challenge procedure is provided for under Section 15 where the party who intends to challenge an arbitrator shall send a written statement of the reasons for such challenge within 15 days after becoming aware of the composition of the arbitral tribunal or of any reasons in Section 14(3), unless otherwise agreed by the parties. Section 15(2) provides that unless the challenged arbitrator withdraws from office or the other party agrees to the challenge, the arbitral tribunal shall make a decision on the challenge. Under Section 15(3), where a challenge fails, the challenging party may apply to the High Court to make a decision on the challenge within 30 days after having received notice of the decision rejecting the challenge. It must be noted that the decision by the High Court shall be final – see Section 15(4).</p><p>Aside from the reasons stated in Section 14(3), the legal and physical inability of an arbitrator is also a ground to revoke his/her authority pursuant to Section 16.</p><p>The AA 2005 also refers to the termination of an arbitrator's mandate, rather than the removal of an arbitrator. Section 17(1) provides that a substitute arbitrator must be appointed where a member of the arbitral tribunal loses his mandate or has his mandate terminated in any other manner, unless otherwise agreed by the parties. Section 17(2) regulates the arbitral proceedings where the arbitral tribunal has been reconstituted.</p>
<p>Section 14(1) AA 2005 renders it mandatory for a prospective arbitrator to disclose all facts which may raise justifiable doubts about his/her impartiality or independence to all the parties of the arbitration, and Section 14(2) provides a continuing obligation to do so throughout the arbitral proceedings.</p>
<p>Section 4(1) AA 2005 states that the arbitral tribunal would have no jurisdiction if the arbitration agreement is contrary to public policy. However, the Malaysian courts have yet to adjudicate as to what constitutes “contrary to public policy” in Section 4(1) of the Act.</p>
<p>An arbitral tribunal may rule on a party's challenge to the tribunal's own jurisdiction. This was expressly stated in Section 18(1) of the AA 2005 and includes any objections with respect to the existence or validity of the arbitration agreement. The arbitral tribunal may fashion the jurisdictional ruling as a preliminary award on jurisdiction or incorporate it into an award on the merits of the dispute. </p>
<p>A court can address issues of jurisdiction of an arbitral tribunal under the following circumstances:</p><ul style="disc"><li value="1">when the arbitral tribunal ruled on its jurisdiction in a preliminary award and after the aggrieved party has appealed to the High Court as per Section 18(8) AA 2005;</li><li value="2">when the arbitral tribunal has ruled that it has jurisdiction to order an award on the merits of the case and after the aggrieved party has applied to the High Court as per Section 37 of the AA 2005 to set it aside.</li></ul>
<p>Parties would only have the right to challenge the jurisdiction of the arbitral tribunal in the courts after the arbitral tribunal rules that it has jurisdiction. If the arbitral tribunal rules that it has jurisdiction as a preliminary question, then the aggrieved party has 30 days after receiving the notice of that ruling to appeal to the High Court. This can be seen in Section 18(8) of the AA 2005. </p><p>If the arbitral tribunal rules that it has jurisdiction to order an award on the merits of the case, then the aggrieved party has 90 days from the date on which the party making the application had received the award to apply to the High Court to set it aside; this can be seen in Section 37 of the AA 2005.</p>
<p>The standard of judicial review for questions of admissibility and jurisdiction is de novo. The courts would take the “approach as if hearing the issue afresh and uninfluenced by the prior decision of the arbitrator either way, respecting always the cogency of reasons given by the arbitrator but unrestrained by what has undergirded his decision” – see Usahasama SPNB-LTAT Sdn Bhd v ABI Construction Sdn Bhd (2016) 7 CLJ 275.</p>
<p>Unless the court finds that the arbitration agreement is “null and void, inoperative or incapable of being performed”, the court must grant a stay in the court proceedings and refer the parties to arbitration as this is mandatory under Section 10 AA 2005. The mandatory nature of Section 10 AA 2005 was underscored by the Federal Court in Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd (2016) 5 MLJ 417. Section 10 of the AA 2005 is also read together with Section 8 of the AA 2005, which stipulates that no court shall intervene in any of the matters governed by this Act unless otherwise provided. </p>
<p>Section 29 AA 2005 confers power to the arbitral tribunal to assume jurisdiction over individuals or entities which are neither party to an arbitration agreement nor signatories to the contract which contains the arbitration agreement. It allows parties to apply to the High Court, with the approval of the arbitral tribunal, for assistance in the taking of evidence. The section also empowers the High Court to order the attendance of a witness to give evidence or, where applicable, produce documents on oath or affirmation before an officer of the High Court or any other person, including the arbitral tribunal.</p>
<p>In Malaysia, an arbitral tribunal is permitted to award preliminary or interim relief. This is stipulated in Section 19(1) of the AA 2005. The arbitral tribunal may order for (a) the security for costs, (b) discovery of documents and interrogatories, (c) giving of evidence by affidavit, and (d) the preservation, interim custody or sale of any property which is the subject-matter of the dispute.</p>
<p>Section 11(1) of the AA 2005 states that a party may apply to the High Court before or during the arbitral proceedings for the following interim measures and the High Court may grant them. The orders which the High Court is able to grant are as follows:</p><ul style="disc"><li value="1">security for costs;</li><li value="2">discovery of documents and interrogatories;</li><li value="3">giving of evidence by affidavit;</li><li value="4">appointment of a receiver;</li><li value="5">securing the amount in dispute, whether by way of arrest of property or bail or other security pursuant to the admiralty jurisdiction of the High Court;</li><li value="6">the preservation, interim custody or sale of any property which is the subject-matter of the dispute;</li><li value="7">ensuring that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by a party; and</li><li value="8">an interim injunction or any other interim measure.</li></ul><p>However, the courts can only grant interim measures if the arbitral tribunal has yet to rule on any matter which is relevant to the application made by the party for the interim measures. If the arbitral tribunal has already ruled on the matter, the High Court must respect the findings of fact already made by the arbitral tribunal and treat them as conclusive in accordance with Section 11(2) of the AA 2005.</p>
<p>Section 11 of the AA 2005 expressly states that the High Court may make an order for security for costs if it was applied by a party before or during arbitral proceedings. Section 19 of the AA 2005 also gives this power to the arbitral tribunal as it expressly states that a party may apply to the arbitral tribunal for the order of security for costs, unless otherwise agreed by the parties. </p>
<p>Parties are at liberty to agree on the procedure governing the arbitral process, whether it is a domestic or international arbitration. The most commonly employed arbitration rules in Malaysia include </p><ul style="disc"><li value="1">KLRCA Arbitration Rules (revised in 2013) (“KLRCA Rules”); </li><li value="2">UNCITRAL Arbitration Rules (as revised in 2010); and </li><li value="3">ICC Arbitration Rules.</li></ul>
<p>Under section 21(1) of the AA 2005, subject to the provisions of the AA 2005, parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. In the event parties fail to agree on the procedure, Section 21(2) provides that the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate.  </p>
<p>Section 20 of the AA 2005 states that parties shall be treated equally and each party shall be given a fair and reasonable opportunity of presenting its case. Section 21(3) of the AA 2005 provides that the power conferred upon the arbitral tribunal under subsection (2) shall include the power to:</p><ul style="disc"><li value="1">determine the admissibility, relevance, materiality and weight of any evidence;</li><li value="2">draw on its own knowledge and expertise;</li><li value="3">order the provision of further particulars in a statement of claim or statement of defence;</li><li value="4">order the giving of security for costs;</li><li value="5">fix and amend time limits within which various steps in the arbitral proceedings must be completed;</li><li value="6">order the discovery and production of documents or materials within the possession or power of a party;</li><li value="7">order the interrogatories to be answered;</li><li value="8">order that any evidence be given on oath or affirmation; and</li><li value="9">make such other orders as the arbitral tribunal considers appropriate.</li></ul><p>Further, as stated in paragraph 6.1 above, Section 19(1) of the AA 2005 empowers the arbitrators to order various interim measures. </p>
<p>There are no particular qualifications/requirements for legal representatives in Malaysia.</p>
<p>At the pleading stage, the AA 2005 encourages the early exchange of documents. When the pleadings are filed, the pleadings should, as far as possible, be accompanied by all the documents and other evidence relied upon by the said party. </p><p>The AA 2005 does not does not provide for any specific procedure for the submission of evidence at the hearing. The arbitral tribunal has general powers, pursuant to Section 21(3) of the AA, to order the (a) provision of further and better particulars in a statement of claim or statement of defence, (b) discovery and production of documents or materials within the possession or power of a party, and (c) interrogatories to be answered. </p><p>Generally, the IBA Rules on taking of evidence in international arbitration (“IBA Rules”) are adopted, whether in part or in whole, by parties. In the usual course, there are two stages for disclosure of documents:</p><ul style="disc"><li value="1">voluntary disclosure where parties produce the documents which are available to it which it relies on within the stipulated time; and </li><li value="2">ordered disclosure where any party may submit, within the stipulated time, to the tribunal and to the other parties a request to produce documents. The request for documents normally takes the form of a “Redfern Schedule”. This usually takes place after the close of pleadings. Any objection to the request is to be made in writing. Upon receiving any such objections, the arbitral tribunal may invite parties to consult with each other to resolve the objections. If parties are not able to resolve the objections, the tribunal – with the consultation of parties – will consider the request and rule on it. </li></ul><p>Article 4.4 of the IBA Rules specifies the details which are to be included in a witness statement. Parties have a choice of exchanging their witness statements simultaneously or consecutively. Subsequently, parties are given an opportunity to submit rebuttal witness statements that should address only information contained in witness statements, expert reports or submissions submitted by the other party in the first round or otherwise not previously presented in the arbitration. </p><p>It is common practice for the witness statement to be taken as read upon the affirmation by witnesses and their confirmation that the witness statement reflects their evidence. This allows for the dispensation of the examination in chief. Following that, the opposing counsel will proceed to cross-examine the witness. Cross-examination is a hallmark feature of evidentiary hearings in common law jurisdictions such as Malaysia. A large amount of the time dedicated to the evidentiary hearing is taken up by cross-examinations.</p>
<p>The strict rules of evidence in civil proceedings do not apply to arbitral proceedings seated in Malaysia. Section 2 of the Evidence Act 1950 provides that the said act is not applicable to proceedings before an arbitrator. As mentioned above, the IBA Rules are usually adopted by parties as a guideline.</p><p>The AA 2005 does not provide any specific rules of evidence. Section 21(3)(a) of the AA 2005 provides that the arbitral tribunal has the power to determine the admissibility, relevance, materiality and weight of any evidence. In practice, most tribunals adopt a flexible approach to the admissibility of evidence and it is unlikely that a party will be prevented from admitting evidence that may genuinely assist the tribunal in determining the dispute. Given that the general rules of evidence do not apply, documentary and oral hearsay evidence are more readily admitted in evidence in arbitral proceedings. </p>
<p>Under Section 11(1)(b) of the AA 2005, a party may, before or during arbitral proceedings, apply to the High Court for discovery of documents and interrogatories. </p><p>Further, Section 29 of the AA 2005 allows parties to apply to the High Court, with the approval of the arbitral tribunal, for assistance in the taking of evidence. This section empowers the High Court to order the attendance of a witness to give evidence or, where applicable, produce documents on oath or affirmation before an officer of the High Court or any other person, including the arbitral tribunal.</p><p>It appears that there is no distinction between parties and non-parties. </p>

The AA 2005 does not contain any provision on confidentiality. The AA 2005 defines “agreement” by reference to the adaptation of the arbitration rules. Rule 15 of the KLRCA Rules provides that all matters relating to the arbitral proceedings must be kept confidential. The phrase “matters relating to the arbitral proceedings” means the existence of the proceedings and the pleadings, evidence and other materials in the arbitral proceedings and all other documents produced by another party in the proceedings or the award arising from the proceedings, but excludes any matter that is otherwise in the public domain. The exception to this rule is where disclosure is necessary for purpose of implementation and enforcement or to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right or to challenge an award in bona fide legal proceedings before a state court or other judicial authority.

A question arises as to whether there is such duty where no such agreement exists. The Malaysian courts have taken the approach that it is the policy of the AA 2005 to maintain confidentiality, and that such duty could be implied from the very nature of the arbitral process itself; see Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd (2016) 2 MLJ 697, and Malaysian Newsprint Industries Sdn Bhd v Bechtel International, Inc & Anor (2008) 5 MLJ 254. The extent of confidentiality or the scope of the same has not been seriously considered by the Malaysian courts as yet.

<p>Section 33 AA 2005 sets out the legal requirements. Section 33(1) provides that an award must be in writing and signed by the arbitrator; where there is more than one arbitrator, the signatures of the majority of all members of the arbitral tribunal is sufficient, provided that the reason for any omitted signature is stated.</p><p>An award shall state the reasons upon which it is based upon unless the parties have agreed that no reasons are to be given or if the award was made on agreed terms. However, it is believed that failure by the arbitral tribunal to give reasons does not render an award a nullity or incapable of enforcement because the objecting party is entitled to seek reasons from the arbitral tribunal in the course of review proceedings, including references to the court. The Act also provides for requirements of the date of award and seat of arbitration. Section 33(5) provides for the requirement that a copy of the written and signed award be delivered to each party. </p>
<p>The AA 2005 is silent on the limitation of remedies. Section 38 AA 2005 reads that an award should be recognised as binding and be enforced by entry as a judgment in terms of the award or by action; thus, assuming it has the same treatment as a court judgment, if the Act is silent and does not prohibit, then arguably it is possible to provide for remedies that the courts can give, subject to any agreement to the contrary and/or the possibility of enforcement.</p>
<p>Section 33(6) AA 2005 states that unless otherwise agreed, the arbitral tribunal may award interest on any sum of money ordered to be paid by the award from the date of the award to the date of realisation and determine the rate of interest. Therefore, it deals only with awards of interest from the date of the award to the date of realisation. It does not put any limit on the quantum nor does it specifically prohibit compound interest. It is wider than the Rules of the High Court 2012, which provides for every judgment debt to carry from the date of judgment at a maximum rate of 8% per annum unless a higher rate can be included in the judgment. </p><p>However, in the Court of Appeal case of Far East Holdings Bhd &amp; Anor v Majlis Ugama Islam Dan Adat Resam Melayu Pahang (2015) 4 MLJ 766, it was held that since Section 33 AA 2005 does not explicitly provide for pre-award interest, thus it came to the conclusion that implicitly the legislature did not intend to confer on an arbitrator the power to award pre-award interest. However, it appears from the judgment that the Court of Appeal failed to consider the fact that Section 33(6) reads “unless otherwise provided in the arbitration agreement”. This decision is subject to an appeal to the Federal Court and is fixed to be heard on 10 November 2016.</p><p>It should be noted that while AA 2005 is silent on pre-award interest, KRCA Arbitration Rule 11(8)(a) provides for such an award, unless otherwise agreed by the parties. </p><p>On the issue of costs, the arbitral tribunal has the discretion, unless otherwise agreed by the parties, to fix the costs and expenses of the arbitration under Section 44 AA 2005. This should be included in the final award on the merits. If it is to be made in a separate award – which often happens in practice to give parties an opportunity to agree on costs, failing which a full submission on costs can be made before determination – the award on merits should be characterised as a “Final Award Save as to Costs” or some such formulation. In fixing costs, the arbitral tribunal may direct by whom and in what manner those costs are to be paid, tax or settle the amount of such costs and award such costs and expenses to be paid as between solicitor and client. Settlement is encouraged by empowering the arbitral tribunal to penalise a party who does not accept a reasonable offer of settlement with costs incurred after the date of that offer, which ought not be revealed to the tribunal until all disputes except for costs have been determined.</p>
<p style="heading"><b>Setting aside an award</b></p><p>Parties are entitled to challenge an arbitral award on a limited list of grounds under Section 37 of the AA 2005, which is almost identical to Article 34 of the UNCITRAL Model Law. These grounds are:</p><ul style="disc"><li value="1">incapacity of a party in the arbitration agreement;</li><li value="2">invalidity of the arbitration agreement;</li><li value="3">failure of procedural due process where either (a) no proper notice was given to a party on the appointment of the arbitrator or the arbitral proceedings, or (b) the party challenging the award was unable to present that party’s case;</li><li value="4">excess of jurisdiction on the part of the arbitrator, where (a) the award deals with a dispute outside the terms of the submission to arbitration, or (b) the award contains decisions on matters beyond the scope of the submission to arbitration;</li><li value="5">composition of the arbitral tribunal or the arbitral procedure, where it was not in accordance with the agreement of the parties or not in accordance with the AA 2005;</li><li value="6">non-arbitrability of the subject-matter; and</li><li value="7">conflict with the public policy of Malaysia, where (a) the making of the award was induced or affected by fraud or corruption, or (b) a breach of natural justice occurred during the arbitral process or in connection with the making of the award.</li><li value="8">The entire arbitral award must be put aside if the challenge is successful. The only exception is a challenge under paragraph d(ii), where the court can set aside part of an arbitral award if decision on matters submitted to arbitration can be separated from those not so submitted.</li></ul><p>Parties have 90 days from the date of receipt of the arbitral award to make an application to challenge the same. An application to the court to set aside an award on the ground that the award was induced or affected by fraud or corruption may be made within 90 days after the alleged fraud or corruption became known to the party making the application. Such an application must be made using the originating summons procedure. The applicant must file, by affidavit, written evidence on which he intends to rely when he files his originating summons, including a copy of the arbitration agreement and the award, where relevant. The originating summons and affidavit must be served on each arbitrator and the other arbitral party.</p><p style="heading"><b>Reference of questions of law</b></p><p>Parties are also entitled to refer questions of law arising out of an arbitral award to the court under Section 42 of the AA 2005. There is no equivalent provision in the UNCITRAL Model Law, but there are similar provisions in the United Kingdom, New Zealand, Hong Kong and Singapore. However, provisions in these jurisdictions use the term “appeal on questions of law”. The general guidelines on the judicial approach under Section 42 can be summarised as follows:</p><ul style="disc"><li value="9">the question of law must be identified with sufficient precision;</li><li value="10">the grounds in support must also be stated on the same basis;</li><li value="11">the questions of law must arise from the award, not the arbitration proceeding generally;</li><li value="12">the party referring the question of law must satisfy the court that a determination of the question of law will substantially affect his rights;</li><li value="13">the question of law must be a legitimate question of law, and not a question of fact “dressed up” as a question of law;</li><li value="14">the court must dismiss the reference if a determination of the question of law will not have a substantial effect on the rights of parties;</li><li value="15">the jurisdiction under the said section should be exercised only in clear and exceptional cases;</li><li value="16">the intervention by the court must only be if the award is manifestly unlawful and unconscionable;</li><li value="17">the arbitral tribunal remains the sole determiners of questions of fact and evidence.</li></ul><p>A reference has to be filed within 42 days of the publication and receipt of the arbitral award by way of an originating summons. It must identify the question of law to be determined and state the grounds on which it is sought. The applicant must file, by affidavit, written evidence on which he intends to rely when he files his originating summons, including a copy of the arbitration agreement and the award, where relevant. The originating summons and affidavit must be served on each arbitrator and the other arbitral party.</p><p>In determining the reference, the court may either set aside or remit the award in whole or in part. Where it remits the award, its determination on the questions of law shall also be remitted to the arbitral tribunal for the arbitral tribunal’s reconsideration of the award. The arbitral tribunal shall make a fresh award on the matter remitted within 90 days from the date of the order for remission. The court may direct any other alternative period for compliance. The court can also vary the award, where such variation shall have effect as part of the award. Further, the court is also vested with the power to order the arbitral tribunal to state the reasons for its award where the award either does not contain reasons or the reasons are not set out in sufficient detail. In exercising this power, the High Court may make any other further order as it thinks fit. Unlike the law in other jurisdictions mentioned above, there is no leave requirement to file a reference under Section 42 of the AA 2005.</p>
<p>Parties in both domestic and international arbitrations cannot exclude the application of Section 37 of the AA 2005. Section 42 of the AA 2005 is only applicable to domestic arbitrations, unless the parties agree otherwise in writing. Parties in an international arbitration can opt into the Section 42 mechanism by agreement in writing. </p>
<p>The standard of review for challenges under both section 37 and 42 of the AA 2005 is deferential. The arbitral tribunal remains the master of facts and evidence. The courts are restrained from interference “unless it is a case of patent injustice which the law permits in clear terms to intervene” and “once parties have agreed to arbitration they must be prepared to be bound by the decision of the arbitrator and refrain from approaching the court to set it aside”, as “constant interference of the court as was the case in the past will defeat the spirit of the Arbitration Act 2005 which is for all intent and purpose to promote one-stop adjudication in line with the international practice”; see Far East Holdings Bhd &amp; Anor v Majlis Ugama Islam dan Adat Resam Melayu Pahang (2015) 4 MLJ 766.</p><p>It is for this reason that Section 36(1) of the AA 2005 provides for the finality of arbitral awards, subject only to the limited jurisdiction of the courts to allow a challenge under Sections 37 and 42 of the AA 2005.</p>
<p>Malaysia is a signatory to the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards. </p>
<p>The applicable procedural law for the recognition and enforcement of an arbitral award in Malaysia is Section 38, while Section 39 AA 2005 deals with the grounds for refusing the recognition and enforcement of an award.</p><p>The application for registration of an award must be made in writing to the High Court by originating summons to the High Court. The originating summons must comply with the requirements of Orders 28 and 69 of the Rules of Court 2012 in which the originating summons must be supported by an affidavit providing evidence in support of the application. </p><p>The formal requirements under Section 38, AA 2005 must also be complied with in the affidavit filed by the applicant, namely he must produce: </p><ul style="disc"><li value="1">a duly authenticated original award or a duly certified copy of it; </li><li value="2">the original arbitration agreement or a duly certified copy of it; and </li><li value="3">where the award or arbitration agreement is in a language other than the national language or English, a duly certified translation of the award or arbitration agreement in English. </li></ul><p>The court may also specify parties to the arbitration agreement shall be served and may also allow the application to be served out of jurisdiction, irrespective of where the award is made or is treated as made. Once these requirements are fulfilled, the registration of the award is largely a formality unless the party opposing the registration is able to raise and prove any of the grounds for refusing recognition or enforcement under Section 39, AA 2005. Under Section 38, the plaintiff is not required to argue its case for recognition and enforcement.</p>
<p>A court called upon to recognise and register an award of an arbitral tribunal under the AA 2005 is not required to enter into a minute examination or analysis of the award, save where there is sufficient proof placed before the court, to satisfy any of the grounds provided in Section 39(1)(a) or Section 39(1)(b).</p><p>Whether or not the Malaysian courts will apply a narrow or broad interpretation to the notion of public policy is still unclear. While Section 4(1) does not define the term “public policy”, other sections of the AA 2005 provide some assistance in its interpretation by setting out several factors, considered to be contrary to public policy, such as Section 37(2)(a). This provision stipulates that an application to set aside an arbitral award on public policy grounds may be initiated where there is fraud, corruption and breach of natural justice. </p><p>The High Court in Harris Adacom Corporation v Perkom Sdn Bhd (1994) 3 MLJ 504 had to consider whether it was contrary to public policy to enforce an award as the plaintiff had an Israeli connection. Malaysia does not have diplomatic relations with Israel. The argument was that the recognition of the award which had an Israeli connection would violate Malaysian foreign policy and therefore, by implication, the public policy of Malaysia. The High Court judge, however, did not accede to this argument.</p><p>The Malaysian courts have taken an inconsistent route on the issue of public policy, especially when enforcing gaming debts which are the subject matter of foreign court judgments. Where Malaysia’s public policy differs from that of a foreign jurisdiction, the differing policy must be interpreted by the courts from a Malaysian perspective or context; see Banque Nasionale De Paris v Wuan Swee May (2000) 3 MLJ 587. Recent authorities in Malaysia appear to suggest that the courts have become friendlier towards the recognition and enforcement of arbitral awards. </p><p>Generally, once a ground is established under the AA 2005, the court may refuse to recognise an award. However, there is naturally little leeway in those situations involving a lack of capacity, as opposed to those cases where there has been a minor departure from the agreed procedure.</p>
Malik Imtiaz Sarwar

E3, Taman Tunku Apartment
Kuala Lumpur
Malaysia
50480

(+603) 6203 5633)

(+603) 6203 3644

[email protected] http://www.malikimtiaz.com.my
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