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Tuesday, 12 March 2013

Article: Understanding Arbitration

By J.R. Tey

1.      Alongside adjudication and mediation, arbitration has been an effective means to avoid taking your case to the level of litigation where legal procedures must be involved. When it comes to matters of the law, the utmost skill and attention need to be paid to the particulars of any case, especially those that involve disputes of any nature from straightforward to contentious ones and these are not to be compromised. At its core, arbitration is an alternative process to dispute resolution that is conducted outside of the courtroom.

2.      In Malaysia, it has been a myth that arbitration serves as a less time consuming and more cost effective means to settling a legal issue than those which would be employed if the matter were taken to court. This perception subsisted until quite recently the judiciary underwent a dramatic and historic reform under the leadership of the then Chief Justice Tun Zaki whom is a true believer of Magna Carta’s “Justice Delayed is Justice Denied” that sees a drastic improvement in the judiciary in a lot of ways.

3.      Due to the nature and the way in which arbitration is conducted, it is most often used to resolve commercial disputes, especially those that involved international commercial transactions. Arbitration is further employed in matters pertaining to inter alia construction law, insurance law, employment law as well as Islamic banking law (KLRCA recently published the very first iKLRCA Rules governing all syariah compliant disputes).

4.      Intrinsically, it is the arbitration agreement that extricates arbitration from other form of dispute resolution i.e. mediation and conciliation. Only if there is an agreement reached between the parties, can they submit the dispute arisen for arbitration. Section 9 of the 2005 Act spells out the definition and nature of an arbitration agreement.

5.      To arbitrate a dispute or to commence arbitration, as opposed to filing a writ in the court of law; the party claiming is to issue a notice of arbitration to the respondent showing its intention to claim against the respondent. In this regard, the procedural rules governing the arbitration proceedings fall back to the provision of the arbitration agreement. It is not uncommon for parties to decide and agree upon the specific rules i.e. KLRCA Rules, ICC Rules and SIAC Rules governing the arbitration proceedings.

6.      Rather than employing the professional services of a judge, matters of arbitration will be addressed by an arbitrator whom will act as the deciding factor in how a dispute occurred and how it could be corrected or compensated. The appointment of the arbitral tribunal is rather flexible as it allows the parties to arrive at an agreement as to whom to be the arbitrator(s) most suitable to hear and decide upon their dispute(s).
7.      All parties subject to the jurisdiction of an arbitrator will be legally bound to the decisions ruled by said authority. This is meant to act as a resolution technique. After care review of the evidence provided regarding the given situation at hand, an arbitrator will impose a decision regarding the matter that will be considered legally binding for all parties involved in the matter and all parties are expected to follow suit in terms of the ruling made. This is reflected vide section 36 of the 2005 Act. Upon making their ruling, an arbiter’s decision will be immediately enforceable.

8.      Enforcement of an arbitration award is another major concern of the parties when arbitrating their dispute(s). This is particularly important especially when the arbitration concerned involves parties from different jurisdictions. In this regard, the New York Convention is one of the key instruments in international arbitration for the convention primarily intends to facilitate the enforcement of awards against foreign parties. In this region, whilst nearly every Asian jurisdiction is a signatory to this convention, fully implementing of and giving full effect to the convention is as challenging. 

9.      Finally, what is evident over the past few years is that the development of arbitration in Asia will unlikely to regress. There has been exponential growth in most of the major economies in this region in various aspects from establishing a user-friendly set of rules for practitioners by our legislatures to giving support to the arbitral process by our courts. 

10.  Over the years of development in Malaysia, in particular the introduction of the new 2005 Act which superseded the previous 1952 Act as well as the tireless efforts of various stakeholders in promoting Malaysia as the arbitration hub along with Hong Kong and Singapore in the region; there have been a plethora of case laws and discussions stemming from various issues as regards arbitration and these are vitally important in order to brand Malaysia as the best alternative to those established arbitration centres; at least in the region, if not in the world. KLRCA has been swift and resilient to keep pace with the demands of the market from updating its rules to providing good facility in this regard.

J.R. Tey is currently reading in the chambers of Mr. Sanjay Mohan of Kadir, Andri and Partners. 

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