ARBITRATION – SEAT OF ARBITRATION – DOMESTIC ARBITRATION

In brief

  •  The Federal Court held in Masenang Sdn Bhd v Sabanilam Enterprise Sdn Bhd that the courts of first instance of the place specified as the seat of arbitration in Malaysia have exclusive supervisory jurisdiction over arbitrations seated there, including any award arising from such proceedings. In this regard, a court of a Malaysian state that is not the court of the arbitration’s seat will have no supervisory authority over the arbitration or its award. As a result, parties desiring to have their arbitrations seated in Malaysia must select a specific Malaysian state or city as the arbitration seat.

Q. What happens if one High Court recognizes an arbitral award but another High Court refuses to recognize the identical arbitral award?

A. In Masenang Sdn Bhd v. Sabanilam Enterprise Sdn Bhd, the Federal Court was faced with this situation. [1] The Federal Court unanimously decided on 3.9.2021, that the seat of arbitration cannot simply be “Malaysia” as a whole, even for domestic arbitrations. The seat, i.e., a specific site in Malaysia, must be stated, and the courts in that location shall have exclusive supervisory jurisdiction. Because it would “give rise to deception and disorder,” and the party can no longer bring a challenge to the courts anywhere in Malaysia.

What is the law that governs both domestic and international arbitrations?

  •  Both domestic and international arbitrations in Malaysia are governed by the Arbitration Act 2005 (“AA 2005”). Section 2 of the AA 2005 defines “High Court” to mean the “High Court in Malaya and the High Court in Sabah and Sarawak or either of them, as the case may require…”.
  •  The seat of arbitration is dealt with in Section 22 of the AA 2005, which states that: 1) The parties are allowed to agree on the seat of arbitration. (2) If the parties fail to agree under subsection (1), the arbitral tribunal will select the seat of arbitration based on the facts of the case, including the convenience of the parties.
  • Furthermore, Section 37 of the AA 2005 allows for the revocation of both domestic and international arbitral awards: (1) The High Court may set aside an award only if…”
  •  As a result, the reference to the “High Court” in Section 37 of the AA 2005 refers to either the High Court in Malaya or the High Court in Sabah and Sarawak, as the case may be. The question is whether the High Court of Malaya and the High Courts of Sabah and Sarawak have independent supervisory jurisdictions over arbitrations or arbitral awards in Malaysia

Decision of Federal court

  •  The Federal Court initially evaluated whether the principle of the “juridical seat” of arbitration has relevance or application in domestic arbitrations within Malaysia before going into the legal issues.
  • The Federal Court, in contrast to the Court of Appeal, found that the seat of arbitration in a domestic arbitration, i.e., the specified location within Malaysia, is a relevant consideration in determining the jurisdiction of the courts, in order to avoid multiple proceedings and conflicting decisions, and, most importantly, to maintain party autonomy.
  •  Because the arbitration is held in Kuala Lumpur, the KL High Court has exclusive supervisory authority over the arbitration and, naturally, the Award. The KK High Court’s judgement to set aside the Award, KK High Court Decision No. 2, was thus declared null and void, and the KL High Court’s decision allowing the Award to be recognized and enforced, i.e., KL High Court Decision, prevailed.

Conclusion

  •  The Federal Court’s decision harmonizes the concept of “juridical seat” in domestic arbitration with that in international arbitration, where if the parties agree that the seat of arbitration should be Kuala Lumpur, Malaysia, the court with supervisory jurisdiction over the arbitration must be the High Court of Malaya in Kuala Lumpur.
  •  It makes no difference where the cause of action arose; the appointed seat of arbitration determines which court has supervisory authority over the arbitration.

Sorotan Terkini

PROPERTY LAW – LEGAL IMPLICATIONS OF SALE AND PURCHASE AGREEMENT BREACHES AND THE RIGHT TO OFFSET IN MALAYSIAN PROPERTY TRANSACTIONS

In the realm of Malaysian property transactions, the intricacies of Sale and Purchase Agreements (SPAs) and the enforcement of Liquidated Ascertained Damages (LAD) play pivotal roles in safeguarding the interests of both developers and purchasers. This article delves into the legal framework governing the rights and obligations of parties involved in property transactions, particularly focusing on the consequences of contractual breaches and the conditions under which a purchaser can exercise the right to offset against LAD. Through the examination of relevant case law and statutory provisions, we illuminate the legal pathways available for resolving disputes arising from the failure to adhere to the terms of SPAs, thereby offering insights into the equitable administration of justice in the context of Malaysian property law.

Read More »

WINDING-UP – OFFICIAL RECEIVER AND LIQUIDATOR (“ORL”)

In cases of compulsory winding up, the court would appoint a liquidator under s.478 of the Companies Act 2016 (“CA 2016”) to expeditiously recover and realise the assets of the wound-up company for the distribution of dividends to creditors and administer any outstanding matters involving………..

Read More »

JUDICIAL REVIEW – PROCEDURAL FAIRNESS AND LOCUS STANDI

This excerpt illuminates the foundational principles of judicial review as outlined in Order 53 of the Rules of Court 2012. It highlights the criteria for challenging public decisions on grounds of illegality, irrationality, or procedural impropriety. Central to the discussion is the question of timing in judicial review applications, particularly in cases of procedural unfairness. The practical scenario underscores the significance of a “decision” by the relevant authority as a prerequisite for locus standi, drawing insights from the case of Hisham bin Halim v Maya bt Ahmad Fuad & Ors [2023] 12 MLJ 714.

Read More »

CONTRACT LAW – CONTRACTUAL INTERPRETATION REMEDIES UNVEILED: DECIPHERING CONTRACTUAL CLAUSES AND LEGAL BALANCE

This legal updates explore the principles governing the interpretation of agreements, emphasizing the importance of clarity and unambiguity in contractual terms. It delves into a key issue involving restrictions on remedies for breach of contract, shedding light on the court’s commitment to upholding plain meanings. The illustrative scenario involving shareholders X and Y dissects a pertinent clause, showcasing the delicate balance between restricting remedies and ensuring fairness in legal proceedings.

Read More »

TIME’S UP: NAVIGATING THE 12-YEAR LIMITATION

In the intricate dance of land security and loan agreements, the ticking clock of the limitation period cannot be ignored. This excerpt delves into the critical understanding of how the 12-year limitation period, as prescribed by the Limitation Act 1953, plays a pivotal role in the enforcement of property charges in Malaysia. It elucidates the start time of this countdown and its legal implications, providing a comprehensive guide for both lenders and borrowers in navigating these time-sensitive waters.

Read More »
ms_MYBahasa Melayu
× Bagaimana boleh kami membantu?