Arbitration is an established form of alternative dispute resolution (ADR) and has been popular in solving both domestic and international disputes. Like court proceedings, arbitration involves a neutral third party who will decide on the outcome of the proceedings. Unlike court proceedings, arbitration is less formal and can take place anywhere. If you are about to begin the arbitration process, here are a few things you should know:
The key feature of arbitration is party autonomy, meaning arbitration proceedings can only take place when all parties agree to settle their dispute via this method of ADR. This involves one party informing the other of its intention to arbitrate the dispute. It can also manifest in the form of an arbitration agreement, although typically it would be worded into a clause conveying that parties agree to settle any disputes through arbitration (s 9(2) Arbitration Act 2005 (“AA 2005”)). Once both parties agree to this, the arbitration process begins.
Another flexible feature afforded to parties is to structure or design the procedural rules of the arbitral proceedings as needed (s 21 AA 2005) provided, of course, that they align with Malaysian public policies. Otherwise, any award may be subject to being set aside under Section 37 Arbitration Act 2005.
Choosing your Arbitrator(s)
The neutral person that will decide on the outcome of the dispute is called an arbitrator and parties are free to choose the number of arbitrators (s 12(1) AA 2005) and the procedure to appoint said arbitrators (s 13(2) AA 2005). This can be through agreement, elimination process, or simply selecting from a list of arbitrators. That being said, you are not confined to Malaysian arbitrators but are free to appoint arbitrators from all over the world that can cater to the complexity of your case (s 13(1) AA 2005). Parties can also agree that arbitrators must fulfil certain qualifying criteria to be appointed (s 14(3) AA 2005). In this situation, your appointed arbitrator can be challenged by the opposing party if he does not possess the agreed qualifications or if there is serious doubt about his impartiality.
If you and your opposing party fail to determine the number of arbitrators, the number will be determined by default per Section 12(2) of the Arbitration Act 2005. International arbitrations will consist of 3 arbitrators while domestic arbitrations will consist of 1 arbitrator. If you and your opposing parties fail to agree on a panel 3 of arbitrators, each party will appoint an arbitrator of its own choice and the two arbitrators will then appoint a third, presiding arbitrator.
Arbitrators can make awards which may be a final award, interim award, or partial award (s 2 AA 2005). These awards are recognised and are capable of being enforced by the Malaysian courts. The power to award interim measures are expressly provided for under Section 19 of the Arbitration Act 2005. Although it should be highlighted that the applicability fo this provision is subject to the agreement of parties which highlights the significance autonomy plays in the arbitration arena.
When an award is ready to be delivered, Section 33 of the Arbitration Act 2005 states that it shall be in written form and signed by the sole arbitrator ot by majority of the arbitral tribunal, in the event the panel of arbitrators consists of more than one arbitrator. The award should also contain the reasons for the award unless parties have agreed otherwise. Each party will then receive its own copy of the written and signed award.
Role of the Courts
An understandable concern parties may face is the role Malaysian courts play in arbitration proceedings namely whether the Court can intervene in proceedings and affect the finality of an arbitral award. The general answer to this is enshrined in Section 8 of the Arbitration Act 2005 wherein the Courts shall not intervene unless the Act provides otherwise. Section 37 empowers the High Court to set aside an arbitral award while Section 39 allows the High Court to refuse recognition or enforcement of an award. These, however, can only be done in exceptional circumstances.
The High Court can enforce an arbitral award as it would a court judgement even if the award was obtained abroad, as Malaysia is a signatory to the Convention on Recognition and Enforcement of Foreign Arbitral Awards 1958, also known as the New York Convention. This means that awards obtained in Malaysia can also be recognised as binding and enforceable in countries that are also a signatory to the New York Convention.
To this day, the above formalities have been especially important in making arbitration a popular choice among parties seeking to resolve disputes out of court.