Arbitration In Malaysia

Maran Nandan
 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:

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

2. No judge, just an arbitrator
3. There are many arbitration institutions to choose from
4. Arbitration is confidential
5. An arbitral award is final, and almost like a court
judgment
1. Party Autonomy is Key –
it could come with a price
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.
Party Autonomy is Key – but it could come with a price

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

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 institutions 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.
2. No judge, just an arbitrator
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
arbiter tribunal can consist of either a sole
arbitrator, or an odd number such as three
arbitrators or five arbitrators.
No judge, just an arbitrator
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.
3. There are many arbitration
institutions to choose from
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.
There are many arbitration institutions to choose from

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.
There are many arbitration institutions to choose from

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

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

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.