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The Guide to Challenging and Enforcing Arbitration Awards - First Edition

Malaysia

Applicable requirements as to the form of arbitral awards


Applicable legislation as to the form of awards

1     Must an award take any particular form (e.g., in writing, signed, dated, place, the need for reasons, delivery)?

For an award to be enforceable, an award must comply with the provisions of Section 33 of the Arbitration Act 2005 (the Act). Pursuant to Section 33 of the Act, an award must be in written form and signed by the arbitrator. In respect of an award by a larger tribunal, the award need only be signed by the majority, although for clarity and prudence, all members are advised to sign the award. In the same vein, reasons must be provided for any absent signatures. An award must also furnish the reasons upon which it is based. Exceptions lie where there is an agreement to the contrary between parties or the award is a consent award. Further, the award must be dated and the seat of arbitration stated.

Applicable procedural law for recourse against an award


Applicable legislation governing recourse against an award

2     Are there provisions governing modification, clarification or correction of  an award?

Upon receipt of an award, parties to arbitration proceedings will be afforded a 30-day window to bring forth any requests for correction, interpretation or for additional awards to be made, as the case may require. The relevant provisions are contained in Section 35 of the Act.

Correction

A party may bring to the arbitral tribunal’s attention any accidental slips in the award (i.e., computation, clerical or typographical errors) and request that the tribunal rectify the matter. In appropriate cases, the arbitral tribunal will grant a ‘corrective award’ to effect the necessary changes.

Interpretation

A party may request the arbitral tribunal to give an interpretation of a specific point or part of an award to resolve any areas of ambiguity. As a prerequisite, the other party must agree to the same. The arbitral tribunal will then make an ‘interpretative award’ to address and resolve the ambiguity.

Additional awards

A party may request the arbitral tribunal to make an additional award for claims omitted from the award. If the arbitral tribunal considers such a request to be justified, it will make the additional award within 60 days of receipt of the request.


Appeals from an award

3     May an award be appealed to or set aside by the courts? If so, on what grounds and what procedures? What are the differences between appeals and applications for set-aside?

The Malaysian courts have consistently demonstrated judicial adherence to the non-interventionist approach with respect to arbitral awards. This is to promote the finality of awards in accordance to legislative intent. Parties who have elected to resolve their disputes via arbitration are prohibited from resiling from their undertaking and seeking alternative remedies in a court of law. As such, stringent standards have been set up in the face of any applications concerning the setting aside of an arbitral award.

In the past, parties could apply to either set aside an arbitral award pursuant to Section 37 of the Act or refer to the High Court any question of law arising out of an award pursuant to Section 42 of the Act. The latter, dubbed ‘an appeal in all but name’, gave rise to considerable difficulties in the administration of justice where the distinction between questions of law and fact became muddied. The provision under Section 42 of the Act was eventually repealed by the Arbitration (Amendment) (No. 2) Act 2018 (which came into force on 8 May 2018) in an attempt to counter the Federal Court’s wide-ranging interpretation in Far East Holdings Bhd & Anor v. Majlis Ugama Islam dan Adat Resam Melayu Pahang and other appeals [2018] 1 MLJ 1. In brief, the decision expanded the scope of judicial challenges against arbitral awards on questions of law to include those that have been previously referred to an arbitrator. This area was previously non-challengeable.

The repeal of Section 42 of the Act leaves the provision under Section 37 as the only one available for an aggrieved party to mount a challenge on the arbitral awards. Eight grounds are available under Section 37(1)(a) and 37(1)(b) that warrant the setting aside of an arbitral award. The party making the application to set aside an arbitration award must provide proof that:

  • a party to the arbitration agreement was under some form of incapacity;
  • the arbitration agreement is invalid under the law to which the parties have subjected it;
  • the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings;
  • the arbitration award is not linked to the terms of arbitration;
  • the arbitration award is beyond the scope of the agreement;
  • there are irregularity on the composition of the arbitral tribunal or arbitral procedure;
  • the dispute is not capable of settlements by Arbitration; and
  • the award is in conflict with the public policy of Malaysia.

These provisions mirror Article 34 of the UNCITRAL Model Law.

Applicable procedural law for recognition and enforcement of arbitral awards


Applicable legislation for recognition and enforcement

4     What is the applicable procedural law for recognition and enforcement of an arbitral award in your jurisdiction? Is your jurisdiction party to treaties facilitating recognition and enforcement of arbitral awards?

Arbitration proceedings are governed by the Arbitration Act 1952 and the Arbitration Act 2005, which came into force on 15 March 2006. The 1952 Act applies to arbitrations commenced prior to 15 March 2006 and the 2005 Act applies to arbitrations commenced after 15 March 2006. The applicable procedural law for recognition and enforcement of an arbitral award can be found under Section 38 of the Act, while Section 39 deals with the grounds for refusing recognition and enforcement of an award.

In respect of international conventions, Malaysia is a signatory to the New York Convention and the Convention on the Settlement of Investment Disputes (the ICSID Convention); the latter was enacted in 1966.

Malaysia is also a signatory of the Comprehensive Investment Treaty between members of the Association of Southeast Asia Nations.


The New York Convention

5     Is the state a party to the 1958 New York Convention? If yes, what is the date of entry into force of the Convention? Was there any reservation made under Article I(3) of the Convention?

Yes, subject to the reciprocity reservation (i.e., it will only enforce arbitration awards of other signatory states). The Convention came into force in Malaysia on 3 February 1986.

Recognition proceedings


Competent court

6     Which court has jurisdiction over an application for recognition and enforcement of arbitral awards?

Pursuant to Sections 38 and 39 of the Act, an application for recognition and enforcement is made to the High Court. Pursuant to Section 2 of the Act, the term ‘High Court’ refers to the High Court of Malaya or High Court of Sabah and Sarawak, as the case may require.


Jurisdictional issues

7     What are the requirements for the court to have jurisdiction over an application for recognition and enforcement of arbitral awards? Must the applicant identify assets within the jurisdiction of the court that will be the subject of enforcement for the purpose of recognition proceedings?

Section 38 of the Act provides a summary procedure for recognition and enforcement of awards that is applicable both to awards where the seat of arbitration is in Malaysia and to foreign awards sought to be enforced in Malaysia.

On written application to the High Court, an award made in respect of an arbitration where the seat of arbitration is in Malaysia or an award from a foreign state shall, subject to Sections 38 and 39 be recognised as binding and be enforced by entry as a judgment in terms of the award or by action (Sections 38(1) and (2)). A ‘foreign state’ in this context means a state that is a party to the New York Convention (Section 38(4)).

The mandatory nature of Section 38 of the Act serves to limit the court’s discretion in refusing to recognise and enforce an award when the formal requirements of the Act have been satisfied. Reference is made to Section 39 of the Act, which lists the exhaustive grounds upon which recognition or enforcement may be refused (see question 13).

There is no express requirement in the Act for the applicant to identify the assets within the jurisdiction of the court that will be the subject of enforcement for the purpose of recognition proceedings.

See also questions 9, 10 and 11.


Form of the recognition proceedings

8     Are the recognition proceedings in your jurisdiction adversarial or ex parte?

Applications for recognition in Malaysia are made ex parte, but can be directed to be heard on an inter partes basis by the court. Generally, applications for recognition of awards are determined on an ex parte basis. 


Form of application and required documentation

9     What documentation is required to obtain the recognition of an arbitral award?

Pursuant to Section 38 of the Act, a party seeking to recognise an arbitral award will need to make an application to the High Court by way of an originating summons. The application must be accompanied by the duly authenticated original copy of the award or a duly certified copy of the same, and the original arbitration agreement or a duly certified copy of the same. 


Translation of required documentation

10     If the required documentation is drafted in a language other than the official language of your jurisdiction, is it necessary to submit a translation with an application to obtain recognition of an arbitral award? If yes, in what form must the translation be?

If the award or the agreement is in a language other than the national language (Malay) or English, the applicant must provide a duly certified translation of the full award in English.


Other practical requirements

11     What are the other practical requirements relating to recognition and enforcement of arbitral awards?

The enforcement of awards falls within the jurisdictional ambit of the commercial division of the High Court. Proceedings brought must be completed within nine months of the date of filing the application to enforce the award. In the event that a challenge is made against the award that is sought to be enforced, the time limit can vary from three to nine months. An appeal arising therefrom to the Court of Appeal may take between six and 12 months to be determined. Thereafter, any application for leave to appeal to the Federal Court may take a further three to six months to be determined. If leave to appeal to the Federal Court is granted, that appeal may take a further six to nine months to be determined.


Recognition of interim or partial awards

12     Do courts recognise and enforce partial or interim awards?

Yes, the courts recognise and enforce partial and interim awards in Malaysia. Section 2 of the Act defines an award as ‘any final, interim or partial award and any award on costs or interest’ but excludes any interlocutory orders.


Grounds for refusing recognition of an award

13     What are the grounds on which an award may be refused recognition? Are the grounds applied by the courts different from the ones provided under Article V of the Convention?

The grounds for refusing recognition of an award under Section 39 are identical to the grounds for setting aside an award under Section 37 of the Act (see question 3).

In addition, an award may be refused recognition when the award has not yet become binding on the parties, or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made (Section 39(a)(a)(vii) of the Act).


Effect of a decision recognising an award

14     What is the effect of a decision recognising an award in your jurisdiction? Is it immediately enforceable? What challenges are available against a decision recognising an arbitral award in your jurisdiction?

Section 38(1) of the Act states that on application to the High Court, an award shall be recognised as binding and be enforced by entry of judgment in terms of the award or by action. The award then becomes immediately enforceable.

The challenges would include those stated in question 10.


Decisions refusing to recognise an award

15     What challenges are available against a decision refusing to recognise an arbitral award in your jurisdiction?

Section 39 of the Act, which corresponds with Article 36 of the UNCITRAL Model Law deals with grounds for refusing recognition or enforcement. The listed grounds for refusal of recognition are exhaustive; therefore, if no ground is present, the award must be recognised. This position has recently been affirmed by the apex court of Malaysia in CTI Group Inc v. International Bulk Carriers SPA [2017] 5 MLJ 314.


Stay of recognition or enforcement proceedings pending annulment proceedings

16     Will the courts adjourn the recognition or enforcement proceedings pending the outcome of annulment proceedings at the seat of the arbitration? What trends, if any, are suggested by recent decisions? What are the factors considered by courts to adjourn recognition or enforcement?

One of the grounds for refusing recognition or enforcement under Section 39(1)(vii) of the Act is if the award has not yet become binding on the parties, or has been set aside or suspended by a court of the country in which, or under the law of which, the award was made. In this respect, courts have the discretion to order a stay or suspension of the recognition or enforcement of arbitration decisions.

In matters relating to arbitration, Malaysian courts, like their foreign counterparts, have always accorded foremost consideration to the achievement of the objects of the arbitral regime – finality and resolution. This is to give effect to legislative intent and to protect successful claimants who have submitted themselves to arbitration from having their rights rendered illusory.

With this in mind, the High Court in Lebas Technologies Sdn Bhd v. Malaysian Bio-Excell Sdn Bhd [2018] 12 MLJ 321 opined that the courts’ inherent powers to order a stay as amplified in cases such as Kosma Palm Oil Mill Sdn Bhd & Ors v. Koperasi Serbausaha Makmur Bhd [2003] 4 CLJ 1 should not be imposed on matters that are legitimately caught by the provisions of the Act. It was further stated that nothing in the Act allows for the admission of a stay of enforcement based on special circumstances that would typically warrant a stay of execution in respect of a court judgment.


Security

17     If the courts adjourn the recognition or enforcement proceedings pending the annulment proceedings, will the defendant to the recognition or enforcement proceedings be ordered to post security? What are the factors considered by courts to order security? Based on recent case law, what are the form and amount of the security to be posted by the party resisting enforcement?

The High Court can order a party to provide appropriate security pending enforcement of an award under Section 39(2) of the Act, which deals with parallel proceedings.

The discretion granted to the High Court under this subsection may only be exercised to protect the party seeking enforcement during the period of an adjournment. Therefore, this is the fundamental consideration against the grant of security. Other relevant factors may include the following: a lack of enthusiasm on behalf of the party applying to set aside or suspend the award or to prosecute that award; the validity of the award; or the difficulty threshold for enforcement of the award because of the delay.

In determining whether to grant security, the High Court is also likely to take into consideration the financial situation of the respondent and whether the respondent has any assets within the jurisdiction. The High Court may direct a conditional stay be granted subject to a bank guarantee being provided or a sum of money being paid into a joint account between the parties or their respective solicitors.

The forms of security over assets generally include financial instruments, real estate, movable property, cash deposits, and claims and receivables. 


Recognition or enforcement of an award set aside at the seat

18     Is it possible to obtain the recognition and enforcement of an award that has been fully or partly set aside at the seat of the arbitration? If an award is set aside after the decision recognising the award has been issued, what challenges are available against this decision?

One of the grounds for refusing recognition or enforcement pursuant to Section 39(1)(vii) of the Act is if the award has been set aside or suspended by a court of the country in which, or under the law of which, the award was made. 

Service


Service in your jurisdiction

19     What is the applicable procedure for service of extrajudicial and judicial documents to a defendant in your jurisdiction?

Order 62 of the Rules of Court 2012 (the ROC 2012) governs the service of judicial documents to a defendant in Malaysia. Personal service of a document is required only where specifically provided for in the ROC 2012 or by order of the High Court.

Personal service of a document is effected by leaving a copy of the document with the person to be served (Order 62, Rule 3 ROC 2012) and not his or her agent, except when authorised under Order 10, Rule 2(1) of the ROC 2012. Service on a corporate office is effected by leaving a copy of the document at the registered office of the corporation, by sending a copy of the document by registered post addressed to the corporation at its principal office, handing a copy of the document to the secretary or any director of the corporation, or in the case of a foreign company registered in Malaysia, by handing a copy of the document or by sending the same by registered post to a person authorised to accept service of process on behalf of the foreign company (Order 62, Rule 4 ROC 2012). The court may make an order for substituted service if personal service is required.

Ordinary service is effected by leaving the document at the proper address of the person to be served, by prepaid registered post, by facsimile through a party’s solicitor, in such other manner as may be agreed between the party serving and the party to be served or in such other manner as the court may direct. The proper address for service of any person is the address for service of that person. If, at that time, the person does not have a proper address for service, service may be effected at the business address of his or her solicitor; in the case of an individual, his or her last known address; in the case of individuals who are suing or being sued in the name of a firm, the principal or last known place of business of the firm; or in the case of a body corporate, the registered or principal office of the body (Order 62, Rule 6 ROC 2012).

Service on a minister in proceedings that are not by or against the government is governed by the Government Proceedings Act 1956 (Order 62, Rule 7 ROC 2012). Section 26 of the Government Proceedings Act provides that all documents required to be served on the government for the purpose of , or in connection with, any civil proceedings by or against the government may be served, in the case of proceedings by or against the federal government, on the Attorney General, and in the case of proceedings by or against the state government, on the State Secretary.

Notices sent from any court may be sent by post or electronically (Order 62, Rule 11 ROC 2012).

If no appearance has been entered or if the address for service is non-existent, all relevant documents that need to be served may be served by filing them with the proper officer of the court (Order 62, Rule 13 ROC 2012).


Service out of your jurisdiction

20     What is the applicable procedure for service of extrajudicial and judicial documents to a defendant out of your jurisdiction?

Malaysia is not a party to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. Therefore, any service to a defendant out of Malaysia may be accomplished through a law firm within the particular foreign jurisdiction.

However, Malaysia is a party to a number of bilateral investment treaties and is therefore afforded a method for the service of documents outside diplomatic channels or for private process servers. In general, these communications are sent and received by the Ministry of Foreign Affairs unless the relevant treaty specifies an alternative designated authority, be it the Ministry of International Trade and Industry or the Attorney General of Malaysia.

Identification of assets


Asset databases

21     Are there any databases or publicly available registers allowing the identification of an award debtor’s assets within your jurisdiction?

No.


Information available through judicial proceedings

22     Are there any proceedings allowing for the disclosure of information about an award debtor within your jurisdiction?

Yes – see, for example, question 28. 

Enforcement proceedings


Availability of interim measures

23     Are interim measures against assets available in your jurisdiction? May award creditors apply such interim measures against assets owned by a sovereign state?

Yes – see, for example, questions 24 to 27. Interim measures are also available against assets owned by a sovereign state. 


Procedure for interim measures

24     What is the procedure to apply interim measures against assets in your jurisdiction? Is it a requirement to obtain prior court authorisation before applying interim measures? If yes, are such proceedings ex parte?

Yes, court authorisation is required and the application is made to the High Court by way of a notice of application supported by an affidavit. The notice of application can be heard ex parte in urgent situations or if there is a real risk that the assets might be dissipated.


Interim measures against immovable property

25     What is the procedure for interim measures against immovable property within your jurisdiction?

One generally relies on Section 11 or Section 19 of the Act, or both, in seeking to secure interim relief in aid of arbitration. If one seeks the court’s assistance in securing interim measures, Section 11 read together with the ROC 2012 yield the relevant provisions.

If one places sole reliance on the tribunal to order interim measures, the relevant provision is Section 19 of the Act, which corresponds to Article 17 of the UNCITRAL Model Law. See question 24 for the procedure for filing an application before the High Court.

The main difference between the aforementioned two Sections of the Act is that the power of the High Court under Section 11 can be invoked at any time after the arbitration agreement comes into existence to the commencement of the arbitral process, until the time of the making of the award and its enforcement. However, Section 19 of the Act can only be invoked after the constitution of the arbitral tribunal and up to the termination of the arbitration proceedings. 


Interim measures against movable property

26     What is the procedure for interim measures against movable property within your jurisdiction?

See question 25.


Interim measures against intangible property

27     What is the procedure for interim measures against intangible property within your jurisdiction?

See question 25.


Attachment proceedings

28     What is the procedure to attach assets in your jurisdiction? Is it a requirement to obtain prior court authorisation before attaching assets? If yes, are such proceedings ex parte?

It is a requirement to obtain court authorisation to attach assets in Malaysia, and these proceedings are made on an ex parte basis. Order 49 of the ROC 2012 prescribes a two-stage process:

  • If the garnishee is within the jurisdiction (Order 49, Rule 1(1) ROC 2012), an applicant may commence proceedings by obtaining an order for the garnishee to show cause why he or she should not pay the judgment creditor (Order 49, Rule 1(2) ROC 2012).
  • The order to show cause in Form 97, specifying the time and place for further consideration of the matter, will attach the debt to answer the judgment and the costs of the garnishee proceedings (Order 49, Rule 1(2) ROC 2012).

The ex parte application for the show cause order must be supported by a Form 98 affidavit stating the judgment or order and the unpaid sum for enforcement; that the garnishee is believed to be within the jurisdiction and the judgment debtor is indebted by the garnishee; and the sources of the aforementioned information and belief (Order 49, Rule 2 ROC 2012).

Service must be made, personally, at least seven days before the time appointed for further consideration to the garnishee and the judgment debtor, unless the court orders otherwise (Order 49, Rule 3(1) ROC 2012). The order will bind the garnishee from the service time of any debt specified in the order (Order 49, Rule 3(2) ROC 2012).

If a garnishee does not attend or dispute the debt owed, an order absolute (Form 99) shall be made (Order 49, Rule 4(1) ROC 2012).


Attachment against immovable property

29     What is the procedure for enforcement measures against immovable property within your jurisdiction?

If the property is to be seized, a seizure shall be made by order of court prohibiting the transfer, charge, lien or lease of title of immovable property (Order 47, Rule 6 ROC 2012).

An application for seizure can be made ex parte by way of notice of application supported by an affidavit (Order 47, Rule 6(b), (c) ROC 2012). The judgment debtor must then be served with a copy of the order issued to the judgment creditor for presentation to the Land Office Registrar, and issued to the Registrar (Order 47, Rule 6(d) ROC 2012). The order will then need to be registered in order to seize the property.

Alternatively, one may seek injunctive relief pursuant to Order 29 of the ROC 2012, read with Section 11 of the Act, in the form of a prohibitory order or Mareva injunction to prevent a party from dealing with the immovable property. This is generally applied for in seeking interim relief in aid of arbitration as opposed to post-award final relief.


Attachment against movable property

30     What is the procedure for enforcement measures against movable property within your jurisdiction?

See questions 23 and 25. 


Attachment against intangible property

31     What is the procedure for enforcement measures against intangible property within your jurisdiction?

See answers to questions 24 and 25. 

Enforcement against foreign states


Applicable law

32     Are there any rules in your jurisdiction that specifically govern recognition and enforcement of arbitral awards against foreign states?

Sections 38 and 39 of the Act deal with recognition and enforcement of both domestic foreign arbitral awards and the grounds for refusal, respectively. The provisions apply to foreign states as well.


Service of documents to a foreign state

33     What is the applicable procedure for service of extrajudicial and judicial documents to a foreign state?

See question 20.


Immunity from enforcement

34     Are assets belonging to a foreign state immune from enforcement in your jurisdiction? If yes, are there exceptions to such immunity?

No, assets belonging to a foreign state may not be immune from enforcement in Malaysia.


Waiver of immunity from enforcement

35     Is it possible for a foreign state to waive immunity from enforcement in your jurisdiction? If yes, what are the requirements of such waiver?

It is possible for a foreign state to waive immunity from enforcement in Malaysia; however, there should be an agreement between the parties to waive immunity.


Notes

[1] Cecil W M Abraham is a senior partner, Aniz Ahmad Amirudin is a partner and Syukran Syafiq is an associate at Cecil Abraham & Partners.