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Amendments to the Arbitration Act 2005 (Act 646)

Updated: Jan 21


The Arbitration Amendment (No. 2) Act 2018 (“the Amendment Act”) came into force on 8 May 2018. The Amendment Act follows the latest revision of the United Nations Commission on International Trade Law Model on International Commercial Arbitration (“UNICITRAL Model Law”) and arbitral laws of leading jurisdiction in the region and worldwide.

Malaysia as the Global Hub for Arbitration

Malaysia is committed to becoming the global hub for arbitration, and intends to continue strengthening its reputation as a modern pro-arbitration jurisdiction. In line with that vision Asian International Arbitration Centre (“AIAC”) has taken the followings steps towards the reinforcement of Malaysia as the leading countries in dispute resolution in the region.

Earlier this year, AIAC took its first step in that direction by signing an agreement with Asian-African Legal Consultative Organisation to officiate their rebranding. As such, the Kuala Lumpur Regional Centre for Arbitration is now known as the AIAC.

Following that is the adoption of the Amendment Act which introduces important and long-awaited changes to the Arbitration Act 2005. This alert provides a summary of key amendments which may affect you following its adoption.

Amendments to Existing Interpretation and Provision

  • Arbitral Tribunal: The Amendment Act expanded the existing definition of “arbitral tribunal” to include emergency arbitrator thereby guaranteeing the status and the authority of the decision of an emergency arbitrator.

  • Arbitration Agreement: The Amendment Act now recognises that the validity of arbitration agreements can be concluded by form of electronic communication. This amendment takes into account the changes in economic and arbitration realities as arbitration agreements now are often executed electronically.

  • Power of arbitral tribunal to order interim measures: The Amendment Act completely overhauled the previous provisions of interim measures and brought it in line with the UNCITRAL Model Law 2006. The new provisions now address the issue of recognition and enforcement of interim measurements which was previously not dealt with. The amendment provides for much greater clarity and safeguards against whom such measures are sought.

  • Law applicable to the substance of the dispute: Previously, the applicable law had to be in respect of domestic arbitration and the dispute must be decided in accordance with the substantive law of Malaysia. Now, the Amendment Act allows for parties to agree on the rules of law as applicable to the substance of the dispute. The amendment does away with certain ambiguities surrounding the old provision.

Express Addition of Representation and Confidentiality Provision

  • Representation: The Amendment Act included a provision to allow parties to arbitral proceeding to be represented in the proceedings by any representative appointed by them. The addition of this provision provides parties with greater autonomy on choice of representation in their arbitral proceedings.

  • Confidentiality: The Amendment Act now has a confidentiality provision which explicitly provides for and protects the confidentiality of arbitration proceedings. The Amendment Act makes clear that unless there is another agreement all arbitration proceedings are confidential.

The publication, disclosure or communication of information related to arbitral proceedings or the arbitral award may only be made if it is (i) to protect or pursue a party’s legal right or interest; or (ii) to enforce or challenge the arbitral award and it must be made before a court or judicial body in Malaysia or elsewhere.

Furthermore, all court proceedings are in principle to be heard in closed court. This ensures that the confidentiality of the parties and the dispute is preserved.

This provision on confidentiality addresses the criticisms arbitration is often faced with, the fact that when there are arbitration related court proceedings, the often cited confidentiality advantage does not hold true any longer.

Repeal of Reference on Questions of Law and Appeal

Now, with the adoption of the Amendment Act, Malaysian courts are no longer equipped with vast powers, such as the varying of the award or the remission of the award or parts thereof. The referral provision, and a related additional provision, was removed as it appears to have become a counter-intuitive mechanism to make Malaysia a safe seat. Therefore, the only recourse against an arbitral award is a setting-aside action.

Conclusion

The amendments above made are substantial and a reflection of the 2006 amendments to the UNICITRAL Model Law. These modern amendments were made to ensure our legislation is up to date with key development in arbitration practices worldwide especially Singapore, Hong Kong and the United Kingdom and aims to further enhance the features of party autonomy in arbitration.

Furthermore, the Amendment Act was passed in the hopes that it will not only provide Malaysia a competitive edge to become a destination for international arbitration but would correspondingly pivot Malaysia as a safe seat.

For further information, please contact

H.R.Dipendra

Partner

+603 2095 6505

dipendra@kdj-law.com

#Arbitration #Amendments #UNICITRAL #AIAC

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