Malaysian Court Reconfirms That Tribunals Take Priority Over Courts When Granting Interim Relief

• Law Firm: Herbert Smith Freehills
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Author: Mr Peter Godwin, Craig Shepherd and Kin-Hoe Loi
• Published date: 23 February 2023

The Malaysian High Court has reconfirmed that if the same interim relief can be granted by an arbitral tribunal and the courts, a party should first apply to the tribunal. The decision in Malaysia Resources Corporation Bhd v Desaru Peace Holdings Club Sdn Bhd [2022] MLJU 3355 is significant for arbitrations with a Malaysian nexus as parties should prioritise tribunal-ordered interim relief in their case strategy where possible. This case demonstrates that should a party fail to approach its tribunal in the first instance, the Malaysian courts would generally be reluctant to grant the interim relief sought, resulting in wasted costs.

Background

Malaysia Resources Corporation Bhd ("MRCB") was the main contractor for upgrade works to a luxury resort owned by Desaru Peace Holdings Club Sdn Bhd ("Desaru"). Disputes arose during the project, which led to MRCB commencing three separate adjudications against Desaru. The adjudications, in turn, resulted in a series of related court actions. The parties eventually agreed to refer all their disputes to arbitration, and to suspend the adjudication awards and related court proceedings, following which a three-member tribunal was constituted.

MRCB sought to have Desaru provide security for costs in the arbitral proceedings due to alleged concerns over Desaru's financial position. MRCB initially asked Desaru to provide this security. This was rejected by Desaru, following which MRCB enquired if Desaru would have any objections to it commencing a security for costs application before the arbitral tribunal. Desaru did not respond.

MRCB eventually filed a security for costs application before the Malaysian High Court pursuant to Section 11(1) of the Arbitration Act 2005 ("AA 2005"), rather than the arbitral tribunal. Throughout the court proceedings, Desaru did not object to MRCB's interim relief application to the Court.

High Court Decision

MRCB's security for costs application was dismissed. The Court, on its own motion, questioned whether MRCB's application should first be filed before the arbitral tribunal. Following the parties' submissions, the Court found that the framework of the AA 2005 required that MRCB seek the relief from the arbitral tribunal in the first instance before resorting to court as both fora could grant the same relief.

The Court's decision centred on the interplay between Sections 11(1) and 19(1) of the AA 2005. Both provisions expressly granted the Court and arbitral tribunals concurrent...