Arbitration Rules in Malaysia

The second amending law of 2018 significantly eroded the differences between interventionist and non-interventionist regimes by repealing sections 41 and 42 of the 2005 law. Paragraph 41 had allowed a party, with the consent of the other parties to the arbitration, or failing that, with the consent of the arbitral tribunal, to apply to the High Court for a ruling on a point of law arising in the course of the arbitration. whereas article 42 allowed a party to refer to the High Court a point of law arising from an arbitral award. Articles 41 and 42 were provisions applicable to the “interventionist” national arbitration system that the parties to the international arbitration could have chosen. These provisions are no longer part of the 2005 Act. AIAC described the change as motivated by the desire to “make Malaysia a safe seat and bring the law into line with other arbitration laws around the world.” Section 8 of the 2005 Act forms the basis of the current approach to arbitration by Malaysian law and courts. It provides that “[t]he court shall rule on matters covered by this Act, except as provided for in this Act”; This confirms the philosophy of model law, which itself provides for all cases of potential judicial interference in matters governed by law within the framework of the law. [1] The Appellant sought an injunction to limit the arbitration, while the Respondents requested that the Appellant`s application be stayed until arbitration. The Judge of the Supreme Court granted the applicant`s application for an injunction. However, the judge dismissed the respondent`s application for suspension on the basis that, since the appellant was not a party to the shareholders` agreement, he was not a party to the arbitration and could not be done. The Court of Appeal set aside the injunction and ruled that the mandatory stay provisions of the Arbitration Act – Article 10(1) in conjunction with Article 10(3) – could apply to persons who were not parties to the arbitration.

A relevant change is the introduction of Section 8, according to which judicial intervention is limited only to matters expressly provided for in the 2005 Act. The Federal Court in Far East Holdings Bhd v. Majlis Ugama Islam dan Adat Resam Melayu Pahang5 confirmed that this section provides for a minimum intervention policy consistent with the underlying policy of the UNCITRAL Model Law. In addition, the provisions on the jurisdiction and powers of the courts have been amended to follow the UNCITRAL Model Law. With regard to the power of tribunals to issue interim injunctions in support of arbitration, article 11 had been amended to adopt the wording of the UNCITRAL Model Law. Prior to the 2018 amendment, section 42 allowed either party to refer any point of law arising from an arbitral award to the High Court. When making a request for a preliminary ruling, the High Court may confirm or vary the award, refer the award back to the court for review in whole or in part, or set aside the award in whole or in part. Section 42 has since been deleted. The Federal Court further noted that the main issue of whether the injunction to restrict arbitration should be issued when the rights of a non-party are affected is “what would be the fairest approach for all parties. The decision must not result in a serious disadvantage for a party, and for the objectives of justice to be achieved, the benefits must outweigh the benefits.

In this context, the Federal Court of Justice agreed with the Supreme Court Judge that, in cases where the issues concern a party that is not subject to arbitration, priority should be given to the case to be dealt with by the tribunal, particularly in view of the fact that the tribunal`s decision would necessarily include: PT Sandipala, an Indonesian company, has filed a civil action against Muehlbauer AG (a German entity) and Muehlbauer Technologies Sdn Bhd (a Malaysian entity) in the Jakarta District Courts. Pt Sandipala`s trial in Jakarta was based on two pleas, namely breach of contract and conspiracy. The treaty, as amended, contained a provision on Geneva-based arbitration. In the case of PT Sandipala Arthaputra v Muehlbauer Technologies Sdn Bhd in 2021[13], the Shah Alam High Court was faced with a difficult question regarding the application of the rules of Malaysian private international law when foreign legal proceedings are brought for alleged breach of an arbitration agreement. To date, Malaysia has participated in three arbitration proceedings for investment treaties under bilateral investment treaties (BITs). However, those actions were either dismissed or dismissed. In Gruslin v. Malaysia (II)34, an action was brought against Malaysia for alleged breach of the conditions of the Belgo-Luxembourg Economic Union-Malaysia BIT 1979, which was subsequently dismissed for lack of jurisdiction. In Malaysia Historical Salvors Sdn Bhd v. Malaysia35, a lawsuit has been filed before the Malaysia-United Kingdom BIT for non-payment of proceeds from the recovery of cargoes from ships in Malaysian waters. That action was also subsequently dismissed on the ground that it lacked jurisdiction.

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