5 Things Arbitrators don’t know about Arbitration in Malaysia

With the prevalence of arbitration-friendly procedures, Malaysia is coming out as one of the plumped for arbitration seats in Asia. A number of factors contribute to Malaysia’s emergence as pro-arbitration leadership. These include important amendments to the country’s Arbitration Act of 2005, the Malaysian Judiciary’s orientation as pro-arbitration, and lastly, the advancement of the Asian International Arbitration Centre (AIAC) in Kuala Lumpur as a premier arbitration institute in the area.

The Malaysian Arbitration Act, 2005 regulates arbitration in Malaysia. The Malaysian Arbitration Act is a modern law based on the UNCITRAL. UNCITRAL is a law to govern International Commercial Arbitration.

Here are a few things to know about arbitration in Malaysia-

Malaysia emerging as a dispute resolution hub

Considering the country’s prime location and its many initiatives towards the development of alternative disputes resolution mechanisms. The famous Asian International Arbitration Centre is Malaysia’s very own arbitration hub, resolving domestic and international matters. Moreover, AIAC offers hearing facilities and administrative services to tribunals working ad hoc or under the aegis of another institution.

The Malaysian legal community and the Malaysian Government have collaborated to show strategic efforts in promoting ADR, especially arbitration, AIAC being the forerunner. The consistent development of domestic and international arbitrations held in Malaysia is evident in the continuing increase of the AIAC’s arbitration caseload. In 2019, there were 27 new ad-hoc cases and 98 new administered cases at the AIAC, suggesting the preference for institutional arbitration by the parties.

Talking about the AIAC, her Ladyship said-

“the significant role of the AIAC cannot be understated, the work it has done in the past has greatly improved the arbitration scheme in Malaysia, tremendous job in establishing its own set of rules that parties may feel free to adopt .. drafting of rules aside, the AIAC constantly undertakes efforts to ensure that our arbitration laws remain up to date”.

More than one arbitration centre to choose from

Arbitration in Malaysia is more common in existence than most people realize. AIAC is not the only centre for arbitration for Malaysians. The Singapore International Arbitration Centre (SIAC) and the Hong Kong International Arbitration Centre (HKIAC) are other options. Also, the thing that bothers is parties resolving disputes using the arbitration process that follows SIAC rules.

Further, it is not mandatory to use an arbitration centre at all, parties have either option to resolve the dispute with an ad-hoc arbitration.

The finality of an arbitral award and interim measures

The entitled recovery claim of a party is decided by the arbitral panel and is referred to as “arbitral award”. An arbitral award is final and binding on both parties, and can only be set aside in exceptional circumstances ( like an award obtained through fraud).  An arbitration award in Malaysia, once registered, is to be enforced as a court judgment. An arbitral award made in Malaysia can also be applicable in other countries.

Enforcement of arbitration awards comes under Section 8 of the Arbitration Act. An award must be in writing and signed by the arbitrator, and in case of an arbitral tribunal, signed by the majority to be enforceable. The award should have details like valid reasons, the date of the award, and the seat of arbitration. Section 38 of the Arbitration Act contains the procedure for recognizing and enforcing awards, whereas Section 39 deals with grounds on which recognition or enforcement can be refused.

Arbitration tribunals in Malaysia have powers to order interim measures.Section 19(1) of the Arbitration Act states that a party may apply for one of the following orders:

(a) security for costs;

(b) discovery of documents and interrogatories;

(c) giving of evidence by affidavit;

(d) the preservation, interim custody or sale of any property which is the subject matter of the dispute.

Informal setting of proceedings while retaining the autonomy of the parties

The informal settings of arbitration in Malaysia over formalities followed in a courtroom are preferable at any time. Moreover, arbitrators tend to settle and satisfy both parties in the best possible way. The intimacy in an arbitration process which what makes it better than litigation. Personal opinions of the parties given considerable attention and value.  The Malaysian Arbitration Act, 2005 provides that “unless otherwise agreed by the parties, no party may publish, disclose or communicate any information relating to the arbitration proceedings or an award made in those arbitral proceedings”.

Autonomy of the parties is vital in arbitration proceedings, which conveys that parties are basically free to agree on how the arbitration should go on. The autonomy of the parties reflects in the sense that- there is a liberty to choose the arbitrator. The parties involved even decide the venue of the arbitration proceedings, as well as the language of the proceedings.

However, the court fees are comparatively nominal as compared to fees charged by arbitrators in Malaysia. Thus, arbitration in Malaysia is a little expensive in contrast to the traditional litigation process.

The arbitrator

An arbitrator is a person who presides over an arbitration proceeding. He is different from a judge in the formal courtroom. Depending upon the requirement, there can either be a single arbitrator or a dual arbitrator setting. At times, even more than two arbitrators can exit.

An arbitrator need not necessarily be someone belonging to a legal background. However, a person with legal knowledge is generally preferrable to hear the arbitration proceeding. The arbitrator is a neutral identity. An arbitrator is usually a specialist in the concerned field of dispute. If parties fail to appoint an arbitrator themselves, it is also possible to have an independent third party (for instance, the Asian International Arbitration Centre) appoint the arbitrator.

Conclusion

Arbitration in Malaysia is improving tremendously with each passing year. All the significant efforts taken by Malaysians to develop arbitration and allied services clearly indicate the bright future of arbitration in Malaysia. The growing popularity of arbitration can be attributed to the above-mentioned features.

There is great appreciation for Malaysia, for standing firm while adapting to the changing international standards of arbitration. How a comparatively small country like Malaysia is leading in developing its alternative disputes resolution mechanism is commendable.