News & Views

ARBITRATION IN MALAYSIA

Posted on 28th January 2019

The Malaysian Arbitration Act, 2005

Arbitration proceedings in Malaysia are governed by the Arbitration Act 2005 (“the Act”). The Act distinguishes between domestic and international arbitration. Section 3(3)(b) removes the application of Part III of the Act to an international arbitration unless the parties agree otherwise in writing. Therefore, an international arbitration will not be subject to consolidation of proceedings nor to a determination of preliminary points of law by a Court[1].

One of the benefits of instituting an arbitration proceeding under the Act is that it provides parties with the right to representation by any person of his choice[2] and there are no conditions imposed on the appointment of an arbitrator or arbitrators. Therefore, parties may appoint foreign arbitrators to arbitrate a dispute and select a foreign lawyer to represent them in an arbitration. In tandem with this policy the Legal Profession Act 1976[3] was also been amended to remove the restriction on legal practice by foreign lawyers who may act as arbitrator or represent any party in arbitral proceedings conducted under the Act.  These amendments to the Legal Profession Act have allowed the London barristers chambers 39 Essex Street to open offices in Kuala Lumpur.

Furthermore, the Act enables the High Court and the arbitral tribunal to grant interim measures before the conclusion of an arbitration[5]. There are also express provisions empowering an arbitral tribunal to grant pre- and post-award interest on any sums that are in dispute[6].

What is an arbitration agreement?

The Act, amongst others, widely defines the meaning of an “agreement in writing” making it easier for many forms of arbitration agreements to come within the ambit of the Act. An arbitration agreement includes any form of recognition of arbitration made in electronic form[7]. Therefore, communications contained in an email could amount to an arbitration agreement.

Can an arbitral award be challenged in court?

Awards given under the Malaysian Arbitration Act are final and binding and may not be set aside by the Courts unless the come within specific exceptions set out in section 37 of the Act [8].  An application can be made to the High Court to set aside an award if the party making the application is able to prove vitiating factors, such as,the invalidity of the arbitration agreement, the absence of proper notice or the award deals with a matter beyond the terms of the submission to arbitration[9]. The Court can also set aside the award if it finds that the subject matter in dispute is not capable of settlement under existing laws or the award is in conflict with public policy[10].

A stay of court proceedings would usually be ordered by the Court if there is an arbitration agreement unless the arbitration agreement is null and void, inoperative or incapable of being performed[11].A stay may be refused where the parties have agreed to submit to the Court’s jurisdiction[12] or where the parties have been involved in Court proceedings prior to the arbitration[13].

What is the role of the AIAC?

The Asian International Arbitration Centre or AIAC was previously known as the Kuala Lumpur Regional Centre for Arbitration. The Centre was the first in the world to adopt the UNCITRAL Rules for Arbitration as revised in 2013 and has its own set of procedural rules which governs the conduct of the entire arbitration proceedings from its commencement to its termination. The AIAC provides a neutral and independent venue for the conduct of domestic and international arbitrations and takes pride in having progressive rules that make arbitration more time and cost effective. In has expanded its rules to cater to the growing demands of the global business community with the introduction of the AIAC Arbitration Rules, the AIAC i-Arbitration Rules, the AIAC Fast Track Rules and the AIAC Mediation Rules. The AIAC also organizes various courses, training programmes and forums on the different avenues of ADR covering niche areas such as sports arbitration, domain name dispute resolution and Islamic finance. 

The number of cases referred to AIAC has risen over the years. In 2015, there were 113 cases being referred to the AIAC but this quadrupled to 461 cases in 2016 and in 2017 it was the venue for 923 cases.

by Danny Khoo


[1] Part III also includes provisions in relation to costs and expenses of arbitration, extension of time for commencing arbitration and extension of time for making award.

[2] Section 3A of the Arbitration (Amendment)(No.2) Act 2018

[3] Section 37A of the Legal Profession Act 1976

[4] Section 41A and section 41B of the Arbitration (Amendment)(No.2) Act 2018

[5] Section 11, section 19 and the new section 19A – J of the Malaysian Arbitration Act

[6]Section 33 of Arbitration (Amendment) (No.2) Act 2018

[7] Section 9 of Arbitration(Amendment)(No.2) Act 2018

[8]Arbitration Act 2005

[[9] Section 37(1)(a) of Arbitration Act 2005

[10] Section 37(1)(b) of Arbitration Act 2005

[11] Section 10(1) of Arbitration Act 2005

[12] Lembaga Pelabuhan Kelang v Kuala Dimensi Sdn Bhd and another appeal (2011) 2 MLJ 606

[13] Winsin Enterprise Sdn Bhd v Oxford Talent (M) Sdn Bhd (2009) MLJU 286