Court Cases Contribute To Development Of Arbitration Law

• Law Firm: Gan Partnership
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Author: Ms Min Lee Tan
• Published date: 20 January 2023

Due to the various amendments to the Arbitration Act 2005 (the 2005 Act) throughout the years, the Malaysian courts have been occupied with interpreting the provisions in the arbitration act and developing the laws of arbitration. The following court cases illustrate this progression.

East or west Malaysian high court

Background

Malaysia is made up of Peninsular Malaysia (West Malaysia) and Sabah and Sarawak (East Malaysia). While the 2005 Act and its amendments apply throughout Malaysia, this does not mean that the term "High Court" in the 2005 Act refers to both the high courts in West Malaysia and East Malaysia.

Decision

In settling the issue of which high court (ie, Kota Kinabalu High Court in East Malaysia or Kuala Lumpur High Court in West Malaysia) has supervisory jurisdiction to hear an application to set aside an arbitration award, the Federal Court¹ looked at where the seat of arbitration was determined by party autonomy and decided that:

it is the court at the seat of the domestic arbitration that enjoys exclusive jurisdiction to exercise supervisory and regulatory powers over the arbitration, it follows that the court where the cause of action arose cannot oust the jurisdiction afforded and vested in the seat court.

Comment

This decision provided clarity as to the jurisdictions of the high courts in Malaysia, insofar as hearing matters concerning arbitration is concerned, in light of confusion caused by its unique geographical landscape.

Arbitration in preference to court proceedings

Background

It is often debated whether a case ought to be stayed in court and referred to arbitration based on the arbitration agreement between parties pursuant to section 10(1) of the 2005 Act (provided that the party who makes the application under this provision has not taken any other steps in the court proceedings). The court would generally grant the application for stay if the arbitration agreement is valid, operative and capable of being performed.

However, should the parties misstep, the court may decide otherwise.

Facts

In Kebabangan Petroleum Operating Company Sdn Bhd v Mikuni (M) Sdn Bhd & Ors, ² the appellant initiated an action in arbitration against the first respondent company. However, as the first respondent repeatedly failed to pay its portion of the provisional advance deposit, the appellant filed an action in court against all five respondents (ie, the company and its directors).

In addition to filing an application to stay the court action...