U a

5 Things to Know About Arbitration in Malaysia

by Donovan & Ho (BD) | May 21, 2019 | Dispute Resolution

    

LinkedIn Facebook Twitter Gmail Print Frie

45 ndly
12

While most of us may have a rough idea about what court proceedings are, not many may be aware of an
alternative dispute resolution process known as “arbitration”. While sharing the same objective as court
proceedings (i.e.: the aim is to resolve a dispute), arbitration is a private process that is done without a
judge, and can even be completed in your office meeting room. Here are five things you should know about
arbitration in Malaysia:

Party Autonomy is Key – but it could come with a price

Unlike court proceedings, arbitration can only take place if both parties have agreed to have their disputes
resolved via arbitration.  For example, if there is a dispute arising under a contract, there should be an
arbitration clause in that contract whereby parties have agreed to arbitration.  Party autonomy is key in
arbitration proceedings – which means that parties are generally free to agree on how the arbitration
should proceed. Unlike court proceedings, parties can agree on the arbitrator (the person deciding the
dispute), the language of the proceedings, what arbitration rules to apply, and other factors.

Unlike the court process, arbitration is often viewed as being less formal due to the concept of party
autonomy as described above.  Parties do not have to deal with the formalities and technicalities of a court
process (e.g.: courtroom etiquette).    The venue of the arbitration can take place anywhere – e.g.: one
party’s office, or a rented meeting room such as in a hotel or at the premises of the Asian International
Arbitration Centre (AIAC).

However, arbitration is more expensive compared to court proceedings. Parties will have to pay for
arbitrator’s fees (which, depending on which rules of arbitration are adopted, are usually based on the
quantum of the claim), the arbitration institution’s administrative fees (if institutionalized arbitration is
adopted) and other miscellaneous costs such as meeting room rental. In Malaysia, court filing fees are
nominal in comparison.

No judge, just an arbitrator

The person who presides over an arbitration proceeding is known as an arbitrator (not a judge).  Depending
on the arbitration agreement or the rules of arbitration that are adopted, the arbitral tribunal can consist of
either a sole arbitrator, or an odd number such as three arbitrators or five arbitrators.

There is no requirement for an arbitrator to be a lawyer, a judge, or someone legally trained. Parties are free
to specify the qualifications and expertise required – for example, if it is a construction dispute, parties
may agree that any arbitrator appointed should have engineering qualifications, or a minimum number of
years of experience in the construction industry. This is different from court proceedings whereby the
selection of the judge hearing your case is randomized and you cannot select or impose pre-conditions on
the judge’s qualifications.

If parties cannot agree on the arbitrator, it is also possible to have an independent third party (e.g.: the
Asian International Arbitration Centre) appoint the arbitrator.

There are many arbitration institutes to choose from

In Malaysia, we have the Asian International Arbitration Centre (AIAC), formerly known as the Kuala Lumpur
Regional Centre for Arbitration. AIAC is Malaysia’s very own hub for alternative dispute resolution.  Apart
from the provision of institutional support for domestic and international arbitrator and other ADR
proceedings, AIAC offers hearing facilities and ancillary administrative services to tribunals operating ad
hoc or under the auspices of another institution.

Malaysian parties are not limited to choosing the AIAC as the arbitration institute. There are many
arbitration institutions around the world. For example, the Singapore International Arbitration Centre (SIAC)
or the Hong Kong International Arbitration Centre (HKIAC).  To illustrate, it would be perfectly acceptable
for two Malaysian parties to agree that their disputes are to be settled by arbitration using the rules of the
SIAC.

It is not mandatory to select an arbitration institute when entering into an arbitration agreement, as parties
can also agree to conduct an “ad hoc” arbitration without any institute involved.

Due to the complexities involved and the different implications, parties are always advised to get legal
advice when drafting an arbitration agreement.

Arbitration is confidential

Court proceedings are potentially a public affair: some court judgments are published, court papers can be
publicly accessible via online file search, and trials are usually heard in “open court” (which means any
member of the public can observe the proceedings).  In comparison, arbitration is a private process that
only involves the parties named.  To this end, the Malaysian Arbitration Act 2005 was recently amended to
provide 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.

An arbitral award is final, and almost like a court judgment

The decision of the arbitral tribunal on the merits of the claim is referred to as an “award”. An arbitral award
is final and binding on the parties, and can only be set aside in exceptional circumstances (e.g.: if the
award was obtained via fraud).  An arbitration award (even if obtained outside of Malaysia), once registered
with the High Court, may be enforced as a court judgment. In certain circumstances, an arbitral award
made in Malaysia may be enforced in other countries, too.

The above are just some of the key fundamentals of arbitration, compared to court proceedings. While the
speed and efficiency of the court process in Malaysia has improved tremendously over the past few years,
arbitration is still seen as an attractive method of resolving disputes, especially where confidentiality is
paramount and specialist expertise is required.

***

About the author: Zi-Han Lim is an associate in the dispute resolution practice group at Donovan & Ho. He is
experienced in dispute resolution, focusing on employment and industrial relations, administrative law and
commercial litigation. 

Donovan & Ho is a law firm in Kuala Lumpur, Malaysia. Our practice areas include employment law, dispute
resolution (litigation and arbitration), corporate and tax advisory, and real estate/conveyancing. Have a
query? Contact us.
« Case Spotlight: Who is my Real
Employer?
Employees Who Resign Without
Notice »

FOLLOW US BY E-MAIL

Subscribe to our mailing list to receive updates on new articles and other useful information.

Your name

Your e-mail

I consent to my submitted data being collected via this form*

SUBSCRIBE

By clicking subscribe, you agree to the terms of our privacy notice.

Most Recent
Can Employees Refuse Overtime?

Condition Precedents in Dispute Resolution Clauses

What is Quiet Firing?

Conditional Payment In Construction Contracts

2022 Amendments to the Trade Unions Act 1959 

This Month's Top 10 Most Viewed Articles

Employees Who Resign Without Notice

May 9 Declared Public Holiday: Do Employers Need to Observe it?

5 Things You Should Know About Probationers in Malaysia

Do Employers Have To Observe Sudden Public Holidays?

Update: Employment Act Will Cover All Employees Effective 1 January 2023 (With Some Exceptions)

What payments are subject to EPF?

Guide to Malaysian Employment Law

The Importance of a Company Constitution in Malaysia

Must Your Employer Give You Time Off to Vote?

Should I delay the ‘perfection’ of strata title?

Categories
#LegalFlix Videos (16)

Consumer Protection (8)

Corporate (85)

Covid-19 (1)

Debt Recovery (12)

Dispute Resolution (96)

Donovan and Ho updates (18)

Employment Law (238)

Insolvency and Bankruptcy (6)

Intellectual Property (1)

Media & Entertainment Law (3)

Personal Data Protection (18)

Real Estate (41)

Tax (22)

Uncategorized (3)

Disclaimer
Articles and publications on this blog are not intended as legal advice. If you have specific queries or
require legal advice, please contact us. By subscribing to our mailing list, or otherwise contacting us, you
consent and agree to the terms of our Privacy Notice.

“Donovan & Ho” is a registered trade mark under the provisions of the Trade Marks Act 1976 and the Trade
Marks Regulations 1997.
Recent Posts
Can Employees Refuse Overtime?

Condition Precedents in Dispute Resolution Clauses

What is Quiet Firing?

Conditional Payment In Construction Contracts

2022 Amendments to the Trade Unions Act 1959 

Donovan & Ho

15-2 Oval Damansara

685 Jalan Damansara

60000 Kuala Lumpur

T: +603 2856 9728

F: +603 2726 2725

E: info@dnh.com.my




Copyright Donovan & Ho (2014 to present)