22 Aug The New Malaysian Arbitration Act 2005

Legislation and Guidelines
The New Malaysian Arbitration Act 2005
by W.S.W. DAVIDSON and SUNDRA RAJOO

1. INTRODUCTION

The Malaysian Arbitration Act 2005 (the new Act) brings a long-awaited and much-needed change to the landscape of arbitration practice in Malaysia. It received the Royal Assent on December 30, 2005 and will be applicable to all arbitrations commenced after March 15, 2006, while arbitrations commenced prior to that date will remain governed by the old Arbitration Act 1952.

2. LEGISLATIVE HISTORY

The origins of Malaysian statutory law on arbitration can be traced to the Arbitration Ordinance XIII of 1809, of what was then the British India-controlled Straits Settlements, comprising Singapore, Malacca and Penang. That Ordinance stood undisturbed for nearly 150 years until it was replaced by the Arbitration Act 1952 (the 1952 Act), which was based
on the United Kingdom’s Arbitration Act 1950. Both the 1952 Act and the UK Arbitration Act 1950 envisaged a relatively high level of judicial intervention. This included the judicial power to revoke the arbitrator’s authority or restrain arbitral proceedings on the ground that the arbitrator is not or may not be impartial; to order that the arbitration agreement cease to have effect where the dispute involved questions of fraud; to remove an arbitrator for delay in entering on the reference or making the award; to set aside, confirm, or vary the award on appeal on a question of law; and to order the arbitrator to state a case on an issue of law arising during the arbitral proceedings.

The 1952 Act drew no distinction between domestic and international arbitration, a divide which was subsequently to become critical in the consideration of the new Act. However, in 1980, a curious divide was created by a new s.34 of the 1952 Act based on the choice of regime dictated by the arbitration agreement. Section 34(1) states: “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 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 Regional Centre for Arbitration.”

The only arbitrations protected from the court’s purview except for enforcement were therefore arbitrations held under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States 1965 (the ICSID Rules) or under the United Nations Commission on International Trade Law Arbitration Rules 1976 and the Rules of the Regional Centre for Arbitration (the KLRCA Rules). All other international arbitrations, whether conducted under other institutional rules such as the ICC, LCIA or ad hoc, remained subject to the full supervisory jurisdiction of the Malaysian courts under the 1952 Act.