Malaysia
Guide to Arbitration Rules and Procedures in Malaysia
Our Country Chapters set out key aspects of the arbitration framework of each jurisdiction highlighted in our website, covering basics like judicial hierarchy and domestic arbitral institutions to substantive issues such as conflicts of laws and the extent of adoption of the UNCITRAL Model Law. New topics will be added periodically, with recent additions such as responding to court proceedings in breach of the arbitration agreement, tribunal powers and jurisdictions, and more.
1. Legal System and Framework
Malaysia has a dual legal system, comprising civil law and Syariah law. The national civil legal system is based primarily on the English common law tradition. The Federal Constitution is the supreme law of the federation which sets out the legal framework and basic civil rights. Malaysia has a mix of (a) statutory laws, which were adopted during the British colonial era and subsequently enacted by parliament post-independence; (b) subsidiary legislation, which are made by ministers, government agencies and statutory boards as well as State Legislative Assemblies; and (c) judge-made law, which arises from precedents set by way of judicial decisions.
The Syariah system also operates concurrently but is restricted to the subject matters of family and inheritance, and only binds Muslim citizens. Customary laws also apply in a similarly restricted fashion.
As relevant to international arbitration, the judiciary in Malaysia is comprised of the superior courts, being the Federal Court, the Court of Appeal and the two High Courts (namely the High Court of Malaya (Peninsular Malaysia) and the High Court of Sabah and Sarawak (East Malaysia)). An application made under the Arbitration Act may only be heard by the High Courts with subsequent right to appeal to the Court of Appeal.
Under section 8 of the Arbitration Act, no court may intervene in any matter governed by the Arbitration Act unless otherwise provided.
In respect of jurisdiction, if the arbitral tribunal decides on the issue of jurisdiction as a preliminary question, or at any stage of the arbitral proceedings rules that it has no jurisdiction, a party may appeal against the arbitral tribunal’s ruling to the High Court within 30 days after having received notice of that ruling (section 18 of the Arbitration Act). Therefore, the arbitral tribunal’s decision on the issue of jurisdiction is not final.
Additionally, at any time before or during arbitral proceedings a party can apply to a High Court for any interim measure, i.e. security for costs, discovery of documents and interrogatories, interim injunctions, etc.
The only recourse against an arbitral award is to apply to set it aside (section 37 of the Arbitration Act). The Arbitration Act does not contain any provisions enabling an appeal against an arbitral award.
Lastly, all arbitral awards must be converted into a court judgment or order of the High Court by way of registration for the purposes of enforcement.
The Arbitration Act is the main source of law in Malaysia for international arbitration. The Act makes a distinction between domestic and international arbitration stating:
(a) Parts I, II and IV of the Act apply to domestic arbitration and Part III applies unless the parties agree otherwise in writing (section 3(2)); and
(b) Parts I, II and IV apply to international arbitration and Part III does not apply unless the parties agree otherwise in writing (section 3(3)).
In addition, Order 69 of the Rules of Court 2012 sets out the procedural requirements for arbitration-related suits, such as applications for the appointment of arbitrators and the enforcement of awards. Part II of the Arbitration Act deals with the general provisions of arbitration, and generally follows the structure and headings of the UNCITRAL Model Law on International Commercial Arbitration 1985 (“UNCITRAL Model Law“).
As for procedural law, each international arbitral institution in Malaysia (i.e. the Asian International Arbitration Centre (“AIAC“), the Institute of Engineers Malaysia, the Palm Oil Refiners Association of Malaysia, and the Malaysian Institute of Architects) may provide for its own arbitration rules.
The Limitation Act 1953 and any other written law relating to the limitation of actions applies to arbitrations (section 30 of the Limitation Act 1953).
The enactment of the Arbitration Act is substantially based on the UNCITRAL Model Law.
Under Malaysian law, a distinction is drawn between international and domestic arbitration. Section 2 of the Arbitration Act defines international arbitration as an arbitration where:
- 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;
- one of the following is situated in any State other than Malaysia in which the parties have their places of business:
- the seat of arbitration if determined in, or pursuant to, the arbitration agreement;
- any place where a substantial part of the obligations of any commercial or other relationship is to be performed or the place with which the subject matter of the dispute is most closely connected; or
- the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one State.
Domestic arbitration is defined in the same section as any arbitration which is not an international arbitration.
Section 8 of the Arbitration Act states that no court may intervene in matters governed by the Arbitration Act, except where so provided by the Arbitration Act. One of the fundamental concepts under Malaysian law is the need to respect party autonomy in the arbitral process. The limited circumstances provided by the Arbitration Act that allows for court intervention includes the:
- appointment of arbitrators, where the director of AIAC fails to do so within 30 days from the request;
- determination on any challenge made by a party to the appointment of an arbitrator;
- determination of the jurisdiction of the arbitral tribunal upon an appeal by a party;
- power to issue interim measures in relation to arbitral proceedings, including to maintain or restore the status quo pending the determination of the dispute, to preserve assets, or to preserve evidence;
- power to order the attendance of a witness (or where applicable, to produce documents);
- determination of any preliminary question of law arising in the course of arbitration; and
- extension of time for commencing arbitral proceedings.
2. Arbitral Institutions
There are a number of arbitral institutions in Malaysia, such as the Asian International Arbitration Centre (“AIAC“), the Chartered Institute of Arbitrators (“CIArb“) and the Malaysian Institute of Arbitrators (“MIArb“). However, the arbitration hub in Malaysia is AIAC.
Previously known as the Kuala Lumpur Regional Centre for Arbitration, AIAC is the main arbitral institution in Malaysia. Apart from providing support for domestic and international arbitrations and other alternative dispute resolution proceedings, AIAC offers hearing facilities and ancillary administrative services to tribunals operating ad hoc or under the auspices of another institution. AIAC was the first arbitral institution 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 arbitral proceedings from its commencement to its termination.
AIAC also provides for its own rules in administering arbitrations. It must be noted that both ad hoc and institutional arbitration are recognised in Malaysia. However, the most popular mode of institutional arbitration in Malaysia is arbitration administered by AIAC. The AIAC Arbitration Rules 2018 adopt the framework of the UNCITRAL Arbitration Rules 2013 and provide for, among other things, the expeditious appointment of emergency arbitrators, joinder of parties, and consolidation of disputes.
3. Confidentiality
Arbitrations in Malaysia are governed by the Arbitration Act, which is silent on the issue of confidentiality of arbitrations.
Notwithstanding this, the issue of confidentiality of arbitrations in Malaysia has been considered by the Malaysian Courts. In the case of Jacob and Toralf Consulting Sdn Bhd & Ors v Siemens Industry Software Gmbh & Co KG & Ors [2013] MLJU 1621, the High Court set out the Malaysian position with respect to the confidentiality of arbitral proceedings:
- Firstly, confidentiality is an essential attribute of a private arbitration imposing an obligation on each party not to disclose the proceedings or documents and information provided in and for the purposes of the arbitration.
- Secondly, the obligation is not limited to documents which are per se confidential or to documents which contain material which is inherently confidential, such as trade or commercial secrets. It includes and extends to all documents generated in the course of arbitration. The obligation arises, not as a matter of business efficacy, but is implied as a matter of law.
- Thirdly, that disclosure of documents is permissible:
a. with the consent of the parties, express or implied;
b. by order of court;
c. with leave of court; and
d. when it is reasonably necessary for the protection of the legitimate interests of an arbitrating party.
The case was ultimately appealed to the Federal Court of Malaysia. The Federal Court did not suggest the High Court’s statement of the law was incorrect, and expressly accepted that:
“Arbitration is a private means of dispute resolution between disputing parties and the award made binds parties who had consensually submitted to arbitration proceedings. Due to the private nature of an arbitration, it imposes certain implied obligation of confidentiality…”
Further, in Malaysian Newsprint Industries Sdn Bhd v Bechtel International, Inc & Anor [2008] 5 MLJ 254, the Court referred to the English principle that in the absence of an express term in an arbitration clause providing for confidentiality, the presumption of confidentiality arises as an implied term by the very nature of the arbitral process itself. The Court also remarked that “it is now accepted, by all and sundry, that arbitrations are private and confidential” in quoting supporting English cases on this point.
4. The Law of the Arbitration and Conflicts of Law
Yes, Malaysia does recognise the concept of the seat of arbitration in determining the law applicable to the arbitral proceedings. In this regard, section 22 of the Arbitration Act clearly provides as follows:
“Seat of arbitration 22.
- The parties are free to agree on the seat of arbitration.
- Where the parties fail to agree under subsection (1), the seat of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
- Notwithstanding subsections (1) and (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of goods, other property or documents.”
In Government of India v Petrocon India Ltd [2016] 3 MLJ 435; [2016] 6 CLJ 321, the Federal Court considered that the seat of arbitration determined the curial law governing the arbitral proceedings. The Federal Court recognised that the ‘seat’ refers to the legal seat rather than the geographical seat, and that it is a permanent or fixed seat which can only be changed by consent of the parties to the arbitration, and must be distinguished from the physical or geographical place where the arbitration was held.
The law applicable to the substance of the parties’ dispute would be the law chosen by the parties. Where the parties to a contract have not made an express choice of the proper law to be applied, the court would have to find an implied choice to be inferred from the terms or form of contract or its surrounding circumstances. In the absence of such choice, the law of the country with which the agreement is most closely connected would be the applicable law (James Capel (Far East) Ltd v YK Fung Securities Sdn Bhd (Tan Koon Swan, Third Party) [1996] 2 MLJ 97 (CA)).
Yes. The arbitral tribunal in Malaysia shall decide the dispute in accordance with the law agreed by the parties to be the substantive law governing the parties’ obligations with respect to the subject matter of the dispute, which may be the law of another jurisdiction (section 30(1) of the Arbitration Act).
The fact that the seat of the arbitration is Malaysia would not necessarily impose any mandatory rules of substantive law which would apply to the parties’ rights and obligations.
For procedural law, however, seating the arbitration in Malaysia would mean that certain aspects of procedural law under the Arbitration Act would apply (section 3 of the Arbitration Act).
Where the parties have made an express or implied choice as to the law governing their commercial agreement, that law will be considered the applicable law for claims in tort (section 30(1) of the Arbitration Act).
Where there is no express or implied choice, section 30(4) of the Arbitration Act provides that the arbitral tribunal shall apply the law determined by the conflict of laws rules which it considers applicable.
Following the decision in Thai-Lao Lignite Co Ltd & Anor v Government of the Lao People‘s Democratic Republic [2017] 9 CLJ 273, a distinction is drawn between the law governing the arbitration agreement and the law applicable to the arbitration.
The law governing the arbitration agreement governs all issues related to the substantive validity of the arbitration agreement, such as the existence of a valid arbitration agreement and errors of consent. It also extends to issues of interpretation, assignment and waiver of an international arbitration agreement, as well as to issues of non-arbitrability.
In contrast, the law applicable to the arbitral proceedings (the lex arbitri) comprises the rules governing interim measures (e.g. filing Court orders for the preservation or storage of goods), the rules empowering the exercise by the Court of supportive measures to assist an arbitration which has run into difficulties (e.g. filling a vacancy in the composition of the arbitral tribunal if there is no other mechanism) and the rules providing for the exercise by the Court of its supervisory jurisdiction over arbitrations (e.g. removing an arbitrator for misconduct).
In Malaysia, the limitation period is prescribed under the Limitation Act 1953 (“Limitation Act“). Section 30(1) of the Limitation Act specifically provides that the Limitation Act and any other written law relating to the limitation of actions shall apply to arbitrations as they apply to actions.
In accordance to the Court of Appeal case of Sakapp Commodities (M) Sdn Bhd v Cecil Abraham [1998] 4 CLJ 812, questions of limitation are procedural and not substantive law, as limitation is merely a defence to an action. It assumes the existence of a cause of action but does not create one. The defence of limitation cannot be relied upon unless specifically pleaded.
Currently under section 6 of the Limitation Act, the limitation period to bring an action founded on a contract or on tort is 6 years from the date on which the cause of action accrued.
5. Arbitration Agreements
In Malaysia, the arbitration agreement is required to be in writing to be binding and enforceable under the Arbitration Act (section 9(3) of the Arbitration Act).
Section 9(4) of the Arbitration Agreement provides that an arbitration agreement is in writing if:
- its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means; or
- it is contained in an exchange of statement of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.
The arbitration agreement need not be a formal agreement signed by the parties to the dispute (Bina Puri Sdn Bhd v EP Engineering Sdn Bhd & Anor [2008] 3 MLJ). The writing requirement is satisfied when there is a document which incorporates or confirms the existence of an agreement to arbitrate (Bauer (M) Sdn Bhd v Daewoo Corp [1999] 4 MLJ 545).
Where there is a clear intention to arbitrate, effect will be given to the arbitration agreement even if the arbitration agreement is incomplete or lacks certain particulars (Lim Su Sang v Teck Guan Construction & Development Co Ltd [1966] 2 MLJ 29).
Yes, electronic arbitration agreements are recognised in Malaysia. The requirement that an arbitration agreement be in writing is met by any electronic communication that the parties make by means of data message if the information contained therein is accessible so as to be useable for subsequent reference (section 9(4A) of the Arbitration Act). The phrase “data message” means information generated, sent, received or stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic data interchange, electronic mail, telegram, telex or telecopy (section 9(6) of the Arbitration Act).
Section 9(5) of the Arbitration Act provides that a reference in an agreement to a document containing an arbitration clause constitutes an arbitration agreement, provided that the agreement is in writing and the reference is such as to make that clause part of the agreement.
However, there is no requirement that the arbitration agreement contained in the document must be explicitly referred to in the reference. The reference need only be to the document and no explicit reference to the arbitration clause contained therein is required (Ajwa for Food Industries Co (MIGOP), Egypt v Pacific Inter-Link Sdn Bhd [2013] 5 MLJ 625).
Whether an incorporation by reference was intended by the parties in a particular case is a question that must be resolved according to the facts and circumstances of the individual case (Bauer (M) Sdn Bhd v Daewoo Corp [1999] 4 MLJ 545).
The Arbitration Act also does not restrict the scope of arbitration agreements to only claims that are commercial or contractual in nature, and may include claims that are, for example, tortious in nature (Renault SA v Inokom Corp Sdn Bhd & Anor and other appeals [2010] 5 MLJ 394). The general rule is that all disputes between parties to an arbitration agreement are presumed to fall within the scope of that agreement, based on the language of the arbitration clause, unless the language makes it clear that certain matters are to be excluded from arbitration (Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] 9 CLJ 1).
The fact that any written law confers jurisdiction in respect of any matter on any court of law, but does not refer to the determination of that matter by arbitration, shall not by itself indicate that the dispute is not capable of determination by arbitration. However, if the arbitration agreement is contrary to public policy or the subject matter of the dispute is not capable of settlement by arbitration under the laws of Malaysia, the dispute would not be arbitrable (section 4 of the Arbitration Act).
As for claims in fraud, where the dispute involves whether a party has been guilty of fraud, the High Court previously had power (under the now repealed Arbitration Act 1952) to order the question to be determined by the High Court instead. However, this provision has been abolished under the current Arbitration Act. Therefore, any claims involving the element of fraud are now in principle capable of falling within the scope of an arbitration agreement, subject to the express language of the agreement.
The principle of separability is recognised by Malaysian law under section 18(2) of the Arbitration Act. As such, the invalidity or unenforceability of the main agreement would not ipso jure affect the validity of the arbitration agreement (Article 16, UNCITRAL Model Law).
6. Proceedings in Breach of the Arbitration Agreement
Yes, so long as (i) the arbitration agreement is operative and capable of being performed, and (ii) the subject matter of the dispute is not contrary to public policy.
Nevertheless, it is not uncommon for parties to attempt to commence proceedings in court despite the agreement to arbitrate. In such instances, the Malaysian courts are to give effect to the agreement to arbitrate and will generally grant a stay of court proceedings in favour of the parties’ agreement to arbitrate (subject to certain exceptions as set out in the answer to Question 6.2 below).
The party seeking to enforce the arbitration agreement can do so by applying to the Malaysian courts for a stay of court proceedings in favour of arbitration by relying on section 10(1) of the Arbitration Act 2005 (“Arbitration Act“).
Per section 10(2) of the Arbitration Act, the Malaysian courts will then (i) grant a stay of court proceedings; (ii) impose (if necessary) any conditions as it may deem fit; and (iii) refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
There is no difference if the arbitration is seated in a foreign jurisdiction, as stipulated in section 10(4) of the Arbitration Act.
While there is no legislation in Malaysia which specifically caters for anti-suit injunctions within the context of arbitration proceedings, the Malaysian courts (and Malaysia-seated arbitral tribunals) draw guidance from common law principles. There have been cases in which the Courts have recognised their power to grant anti-suit injunctions.
This power is also reflected in the Arbitration Act, which enables the arbitral tribunal to grant interim or final measures (including the granting of injunctions).
A party will likely be found to be entitled to an anti-suit injunction if it can establish that:
- the injunction is to prevent a breach of an arbitration clause;
- the dispute sought to be litigated in the foreign jurisdiction prima facie falls within the scope of the arbitration clause; and
- the dispute is prima facie
The above principles should apply even in the context of an arbitration that is seated in a foreign jurisdiction.
None. However, parties should be cautious when responding to proceedings initiated in breach of an arbitration agreement, and should consider applying for an anti-suit injunction.
This is illustrated in PT Sandipala Arthaputra v Muehlbauer Technologies Sdn Bhd [2021] 9 CLJ 484, where the plaintiff commenced proceedings against the defendant at the District Court in Indonesia notwithstanding the existence of an arbitration clause. Despite the defendant’s objections, the District Court proceeded to hear the merits of the dispute and ultimately allowed the plaintiff’s claim. When the defendant sought to resist enforcement of the judgment, it attempted to rely on, among others, the existence of the arbitration clause to establish that a breach of natural justice had occurred.
The Malaysian High Court found in favour of the plaintiff. It held that by defending the plaintiff’s suit at the District Court, the defendant had submitted to the jurisdiction of the Indonesian District Court and could no longer dispute that jurisdiction.
In that situation, it may have been prudent for the defendant to have applied for an anti-suit injunction, thereby avoiding defending the suit and submitting to the Indonesian court’s jurisdiction.
7. Jurisdiction and Powers of the Arbitral Tribunal
Yes. Section 4(1) of the Arbitration Act states that a dispute may not be determined by arbitration if the arbitration agreement is contrary to public policy. There is no universally accepted test on what amounts to “public policy”, as different courts and different tribunals might have different views as to the unenforceability of contracts on the ground of public policy. However, it is generally accepted that “public policy” is construed restrictively in favour of allowing parties to arbitrate their disputes.
Section 4(2) of the Arbitration Act provides that any written law which confers jurisdiction on any matter at any court of law, but does not refer to the determination of that matter by arbitration, shall not be indicative that a dispute about that matter is not capable of determination by arbitration.
In Goh Nguang Chian v Dynapack Eoss Packaging Sdn Bhd [2018] MLJU 885, the Malaysian High Court applied the approach taken by the Federal Court of Australia in WDR Delaware Corporation and Another v Hydrox Holdings Pty Ltd and Another [2016] FCA 1164 in determining the arbitrability of a dispute. This approach addresses two issues:
- What is the substantive dispute? This involves the characterisation of the dispute.
- Is the substantive dispute non-arbitrable under Malaysia law and public policy?
In Arch Reinsurance Ltd v Akay Holdings Sdn Bhd [2019] 1 CLJ 305 (“Arch“), the Federal Court considered the scope of arbitrability under Section 4(1) of the Arbitration Act and relied on the text of Russell on Arbitration (24th edn) that a dispute will “not be arbitrable if it involves an issue of public policy, public rights or the interests of third parties, or where the dispute in question is clearly covered by a statutory provision which provides for inalienable access to the courts.” In Arch, the Federal Court found that a statutory right, here the right under the National Land Code, cannot be taken away by a private agreement to arbitrate.
The tribunal has broad powers to grant final relief. Examples of final relief include orders to pay money, and the grant of injunctive and declaratory relief (which may also include negative declarations). The Court of Appeal in Tune Talk Sdn Bhd v Padda Gurtaj Singh [2019] MLJU 67 held that despite the final award being declaratory in nature and/or without a positive order, the plaintiff had the right under law to apply for judicial recognition of that final award.
However, in the event a party seeks relief from the tribunal as against a third party, the tribunal cannot compel the third party to be joined with the arbitration if there is no applicable arbitration agreement. Nor can the tribunal make any orders against a third party.
The tribunal’s powers are broad. In summary, section 19 of the Arbitration Act provides that a tribunal may make orders or give directions to any party to the arbitration to:
- maintain or restore the status quo pending the determination of the dispute;
- take action that would prevent (or refrain from taking action that is likely to cause) current or imminent harm or prejudice to the arbitral process itself;
- provide a means of preserving assets out of which a subsequent award may be satisfied;
- preserve evidence that may be relevant and material to the resolution of the dispute; and/or
- provide security for the costs of the dispute.
Pursuant to section 19A of the Arbitration Act, the party requesting for interim relief must satisfy the tribunal that:
- harm not adequately reparable by an award of damages is likely to result if the relief is not ordered. Further, such harm substantially outweighs the harm that is likely to result to the party against whom the relief is directed if the relief is granted; and
- there is a reasonable possibility that the requesting party will succeed on the merits of the claim.
Interim relief under section 19 of the Arbitration Act only binds the parties to the arbitration proceedings. It may be enforced irrespective of the country in which it was issued, as provided under section 19H of the Arbitration Act. This section also applies to foreign-seated arbitrations pursuant to section 3(3)(a) of the Arbitration Act.
For foreign-seated arbitrations, section 11 of the Arbitration Act allows a party to, before or during arbitral proceedings, apply to a High Court for essentially the same interim relief. Section 11(3) of the Arbitration Act extends the powers to grant interim relief to arbitrations where the seat of the arbitration is not in Malaysia.
An “award” is defined in section 2(1) of the Arbitration Act as including interim awards. Pursuant to section 19H of the Arbitration Act, an application may be made to the High Court for an interim measure to be recognised as binding and be enforced as an order of the High Court. Therefore, orders for interim measures made in the form of an arbitral award may be enforced in Malaysia in accordance with section 19H.
Where the arbitration is foreign-seated, such applications may also be made under section 19H and are specifically permitted pursuant to section 19H(1).
The Arbitration Act provides the arbitral tribunal and the High Court with concurrent jurisdiction to grant interim relief (see Questions 7.3 and 7.4 respectively for further details). In this regard, there is a clear overlap between their respective powers.
Section 11(2) of the Arbitration Act provides that where a party applies to the High Court for any interim measure and an arbitral tribunal has already ruled on any matter which is relevant to the application, the High Court shall treat any findings of fact made in the course of such ruling by the arbitral tribunal as conclusive for the purposes of the application.
The timing of an application for interim relief may also be relevant to determine the appropriate forum where that application should be made. If an application is made before the arbitral tribunal is constituted or after the arbitral tribunal has become functus officio, the application will, for obvious reasons, have to be made to the High Court. At any other stage, the application can be made to either the arbitral tribunal or the High Court.
Section 11(3) of the Arbitration Act provides that this section shall also apply in respect of a foreign-seated arbitration.
Yes. In section 2(1) of the Arbitration Act, the definition of an “arbitral tribunal” expressly includes an emergency arbitrator.
Yes, the doctrine of kompetenz-kompetenz is recognised in Malaysia in section 18(1) of the Arbitration Act.
Section 18(3) of the Arbitration Act however provides that a plea that the arbitral tribunal does not have jurisdiction shall be raised not later than in the statement of defence. The Malaysian Federal Court in Thai-Lao Lignite Co Ltd & Anor v Government Of The Lao People’s Democratic Republic [2017] 9 CLJ 273 further elaborated that an arbitral tribunal may rule on the plea as a preliminary question or in the award of the merits, and the parties cannot insist on an immediate ruling.
8. Appointment of Arbitrators, Challenge, and Liability
Parties are free to determine on the constitution of the arbitral tribunal as well as the number of arbitrators on the tribunal. The default provision is to appoint three arbitrators in international arbitration and one arbitrator in domestic arbitration.
Under Section 13 of the Arbitration Act, the parties are free to agree on a procedure for appointing the arbitrator or the presiding arbitrators. In cases where the parties fail to agree on the procedure and the tribunal is to consist of three arbitrators:
- Each party shall appoint one arbitrator within 30 days of being requested to do so by the other party.
- The two arbitrators will then appoint the third arbitrator as the presiding arbitrator.
- Where the two arbitrators fail to agree on the third arbitrator within 30 days of their appointment, either party may apply to the Director of the Asian International Arbitration Centre (“AIAC“) for the appointment of the third arbitrator.
For arbitrations with a single arbitrator, where the parties fail to agree on the procedure of appointment and fail to agree on the arbitrator, either party may similarly apply to the Director of AIAC for the appointment of an arbitrator. In the event the Director of AIAC is unable to act or fails to act within 30 days, any party may apply to the High Court for such appointment.
Yes. Section 13 of the Arbitration Act read in conjunction with the AIAC Arbitration Rules 2021 (“AIAC Rules“) in particular Rule 9, provides as follows:
- in an arbitration with three arbitrators, the procedure for the appointment, unless otherwise agreed to by the parties, shall be that:
- Each party shall nominate one arbitrator. The Claimant must nominate the first arbitrator within 30 days after the delivery of the notice of arbitration upon the Respondent, while the Respondent must nominate the second arbitrator within 30 days after the receipt of the Claimant’s notification of its nomination of the first arbitrator.
- The two nominated arbitrators shall then nominate the third arbitrator within 30 days after the Respondent has notified the Claimant of its nomination of the second arbitrator. The third arbitrator shall act as the presiding arbitrator of the arbitral tribunal.
- If any nomination is not made within the relevant timeframe, either party may request the Director of AIAC (“Director“) to make the relevant appointment. Where the Director is unable or fails to appoint an arbitrator within 30 days from the request, any party may apply to the High Court for such appointment.
- in an arbitration with a sole arbitrator, the procedure for the appointment, unless otherwise agreed to by the parties, shall be that:
- the Parties are at liberty to agree on the sole arbitrator; or
- if the Parties are unable to agree on the sole arbitrator within 30 days of the Respondent’s receipt of the notice of arbitration, then upon the request of any Party, the Director shall appoint the sole arbitrator.
Under the Arbitration Act
Pursuant to section 13(8) of the Arbitration Act, in appointing an arbitrator, the Director of AIAC (or the High Court where relevant) shall have due regard to:
- any qualifications required of the arbitrator by the agreement of the parties;
- other considerations that are likely to secure the appointment of an independent and impartial arbitrator; and
- in the case of an international arbitration, the advisability of appointing an arbitrator of a nationality other than those of the parties.
Section 13(1) of the Arbitration Act provides that for a domestic arbitration, no person shall be precluded by reason of his or her nationality from acting as an arbitrator unless it is otherwise agreed by the parties.
Under the AIAC Rules
For AIAC arbitrations, Rule 10 of the AIAC Rules requires the arbitral tribunal to be and remain at all times impartial and independent and conduct itself in accordance with the AIAC Code of Conduct for Arbitrators. A prospective arbitrator is required to:
- disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence. Such obligation to disclose is a continuing one, to be undertaken without delay from the time of the arbitrator’s appointment.
- only accept an appointment if he or she is fully satisfied that he or she is:
- independent of the parties at the time of the appointment and is able to remain so throughout the proceedings;
- able to discharge his or her duties without bias;
- able to give to the proceedings the time and attention which parties are reasonably entitled to expect; and
- has adequate knowledge of the language of the proceedings, experience, and ability for the case at hand.
Where the parties are of different nationalities, a sole or presiding arbitrator shall not be of the same nationality as any party, unless otherwise agreed to by the parties or determined by the Director after taking into account all relevant circumstances considered appropriate.
Yes. If the parties’ agreed limitations are not given effect to, the award rendered may be liable to be set aside pursuant to section 37(1)(a)(vi) of the Arbitration Act on the ground that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties.
Pursuant to section 14(3) of the Arbitration Act, an arbitrator’s appointment may only be challenged if the circumstances give rise to justifiable doubts as to that arbitrator’s impartiality or independence, or if the arbitrator does not possess qualifications agreed to by the parties.
Such circumstances may include misconduct and bias on the part of the arbitrator arising from his relationship or connection with one of the parties: Kuala Ibai Development Sdn Bhd v Kumpulan Perunding (1988) Sdn Bhd & Anor [1999] 5 MLJ 137.
Section 14(4) of the Arbitration Act further qualifies that a party may challenge the arbitrator nominated by that party, or in whose appointment that party has participated, only for reasons which that party becomes aware of after the appointment has been made.
The parties are free to agree on the procedure of challenging an arbitrator’s appointment. However, in the absence of such agreement, section 15 of the Arbitration Act applies:
(1) A party who intends to challenge an arbitrator shall, within 15 days after becoming aware of the constitution of the arbitral tribunal or of any reasons referred to in subsection 14(3), send a written statement of the reasons for the challenge to the arbitral tribunal.
(2) 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.
(3) Where a challenge is not successful, the challenging party may, within 30 days after having received notice of the arbitral tribunal’s decision rejecting the challenge, apply to the High Court to make a decision on the challenge and which decision shall not be subject to any appeal.
(4) While such an application to the High Court is pending, the arbitral tribunal (which includes the challenged arbitrator) may continue the arbitral proceedings and make an award.
Pursuant to section 47 of the Arbitration Act, an arbitrator shall not be liable for any act or omission in the discharge of his functions as an arbitrator unless the act or omission is shown to have been in bad faith.
Subject to section 47, the Court of Appeal has indicated in Asean Bintulu Fertilizer Sdn Bhd v Wekajaya Sdn Bhd & Another Appeal) [2018] 2 CLJ 257), that an arbitrator’s failure to fulfil his obligations (including disclosure obligations) can subject him to an action in contract and tort. Please see Question 8.3 for more details on the obligations of an arbitrator.
9. Party Representation
No. Section 3A of the Arbitration Act provides that unless otherwise agreed by the parties, a party to arbitral proceedings may be represented in the proceedings by any representative appointed by the party.
There is no specific provision for foreign representation or any rules of etiquette or conduct in the Arbitration Act.
Although there are rules regarding qualifications and etiquette for legal representatives under the Legal Profession Act 1976 (“LPA“), these do not apply to representatives in arbitral proceedings. By extension, it can be surmised that vis-à-vis the LPA, the requirements for adherence to the practice of etiquette rules in Malaysia as set out therein will not apply to foreign representatives.
However, representatives of any party to an arbitral proceeding are still expected to act and conduct themselves in accordance with the rules applicable to the arbitration.
There are no specific provisions in the Arbitration Act which reflect the IBA Guidelines on Party Representation in International Arbitration. However, parties are free to agree on whether to adopt the IBA Guidelines in domestic practice.
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