The Malaysian Arbitration Act 2005 and the UNCITRAL Model Law
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The Malaysian Arbitration Act 2005
and the UNCITRAL Model Law
th
W S W Davidson and
Sundra Rajoo
Introduction
alaysia enacted the Arbitration
Act 2005 (Act 646) on 30
December 2005 (the '2005 Act').
It is based on the UNCITRAL Model Law on
International Commercial Arbitration (the
'Model Law' or 'UNCITRAL Model Law').
The 2005 Act repeals and replaces the
Arbitration Act 1952 (Act 93) (the '1952
Act') and the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards
Act 1985 (Act 320), which implemented
the New York Convention on the
Recognition and Enforcement of Foreign
Arbitral Awards 1958 (the 'New York
Convention').
The 2005 Act came into force on 15
March 2006. It applies to all arbitrations
commenced after that date, regardless of
when an arbitration agreement was entered
into.. The 1952 Act continues to govern
arbitral proceedings commenced before 15
March 20061.
Although the 1952 Act was relatively
simple and clear, it had become long
outmoded and a considerable amount of
judicial authority exposed its shortcomings.
The 2005 Act implements a long-awaited
and much needed overhaul to arbitration
law demanded by the business and arbitral
communities in Malaysia.
Historical context
The 1952 Act
The genesis of Malaysian statute law on
arbitration can be traced to the Arbitration
Ordinance (No XIII of 1809), of what were
then the British India-controlled Straits
Settlements, comprising Penang, Malacca
and Singapore. That Ordinance governed
arbitration law and practice for nearly 150
years before it was replaced by the 1952
Act, which was based almost word for
word on the English Arbitration Act 1950.
Both the 1952 Act and the English 1950
Act reflected an age when the courts were
given wide powers to intervene in and
control the arbitral process. These Acts also
did not distinguish between domestic and
international arbitrations, a divide that is
nowadays a critical aspect of arbitration in
the modern world.
The court exercised powers to i)
revoke the arbitrator's authority or restrain
arbitral proceedings on the ground that the
arbitrator was not or might not be impartial;
(ii) order that the arbitration agreement
cease to have effect where the dispute
involved questions of fraud; (iii) remove an
arbitrator for delay in entering on the
reference or making the award; (iv) set
aside, confirm or vary the award on appeal
on a question of law; and (v) order the
arbitrator to state a case on an issue of law
arising from the arbitration proceedings.
The Arbitration (Amendment) Act 1980
(Act A478/80) (the '1980 amendment')
added section 34 to the 1952 Act. This
section created a curious divide based on
the choice of regime dictated by the
arbitration agreement. Section 34(1) stated:
Notwithstanding anything to the
contrary in this Act or in any other written
law but subject to subsection (2) in so far as
it relates to the enforcement of an award,
the provisions of this Act or other written
law shall not apply to any arbitration held
under the [Washington] Convention on the
Settlement of Investment Disputes Between
States and Nationals of Other States 1965
or under the United Nations Commission
on International Trade Law Arbitration Rules
1976 and the Rules of the [Kuala Lumpur]
Regidral Centre for Arbitration.
The 1980 amendment therefore totally
excluded the operation of the 1952 Act
and any written law in relation to arbitrations
conducted under the ICSID Convention,
the UNCITRAL Arbitration Rules (1976 Edn)
and the Rules of the Kuala Lumpur Regional
Centre for Arbitration ('KLRCA Rules')2. All
other international arbitrations, whether
conducted under other institutional rules
such as HKIAC, SIAC, ICC, LCIA or ad hoc,
remained subject to the full supervisory
jurisdiction of the Malaysian courts under
the 1952 Act. Until recently there was even
doubt whether parties to arbitrations
specified under section 34 of the 1952 Act
could apply to court for relief such as
interim preservation of property3.
The Kuala Lumpur Regional Centre for
Arbitration
The clear purpose of the 1980
amendment was to encourage the use of
the Kuala Lumpur Regional Centre for
Arbitration ('KLRCA') by parties from other
countries in the region that would not wish
to become involved with the Malaysian
courts4. It gave no opportunity for any
party to invoke the court's jurisdiction and
so to cause delay and escalation in costs.
Whatever doubts parties may have of the
impartiality and competence of the
Malaysian courts were therefore rendered
irrelevant.
In effect, the statutory exclusion of the
1952 Act was based on the chbice of
arbitration rules provided for in the
arbitration agreement and did not require
the parties specifically to agree on the
exclusion. Furthermore, not only the 1952
Act but also 'other written law' was
excluded. This meant in practice that the
court's supervisory jurisdiction was totally
ousted. In turn, there were nagging doubts
about whether the Malaysian courts had a
supportive jurisdiction in section 34 cases,
which is the norm in modern arbitral laws.
For their part, arbitral tribunals did not
always possess the powers of the court to
ensure that arbitral proceedings were
conducted properly so as to lead to a fair
and just award.
N 80 [2006] Asian DR](ViewImageLocal?handle=hein.kluwer/asidpurv0008&div=28&collection=&method=preview&ext=.png&size=3)
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