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Published: Sunday June 23, 2013 MYT 12:00:00 AM
Updated: Sunday June 23, 2013 MYT 8:56:10 AM

Arbitration in Malaysia: Taking it to the next level

ARBITRATION is a form of alternative dispute resolution to resolve legal disputes outside the traditional court system. It aims to provide fair and unbiased resolution to disputes.

Nowadays, arbitration clauses are found in many different agreements or contracts.

In Malaysia, arbitration is governed by the Arbitration Act 2005 (Amended 2011), which is based substantially on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration.

There is a marked increase in the number of arbitration cases in Asian countries over the past 10 years. Total arbitration cases from 2003-2012 are 39,280 (as extracted from published data from major arbitral institutions).

Kuala Lumpur Regional Centre for Arbitration (KLRCA) has seen a rise in the number of arbitration cases referred to it since 2010. Prior to 2010, the number of cases registered with KLRCA were between 10 and 20 cases per year. Currently, the numbers have increased to 100 cases with the value of disputed amounts adding up to about RM4bil.

Arbitration’s appeal

Malaysia is a signatory to the 1958 New York Convention which presently has 148 signatories. Arbitral awards made in Malaysia can be enforced in these countries and vice versa.

Arbitrations are private and confidential, whereas court cases are open to the public and sometimes aired in the media. Most commercial entities prefer to keep their business arrangements away from the glare of publicity.

Disputing parties are also able to select their arbitrator from a pool of experts who specialise in particular fields. They ensure a fair resolution of dispute based on deep knowledge of the disputed subject.

AALCO and the independence of KLRCA

KLRCA is set up under the auspices of the Asian African Legal Consultative Organisation (AALCO) which is an inter-governmental Organisation established in 1956. AALCO adopted the “Integrated Scheme for Settlement of Disputes in 1978. As a result of the scheme, five Regional Centres for Arbitration were established, the first one being KLRCA for the Asia Pacific region. Each of the centres runs independently and receives special privileges and immunity to conduct its functions.

KLRCA’s growth and expansion plans

KLRCA has experienced a revitalisation driven by the government of Malaysia’s continued vision for arbitration in Malaysia. With the appointment of Datuk Sundra Rajoo as Director of KLRCA, the organisation has seen rapid development.

KLRCA’s growth has been supported by legislative reform and continuous upgrading of its Arbitration Rules. The Arbitration Act 2005 (Amended 2011) is Model Law compliant. The KLRCA aims to arbitrate 250 cases per year by 2016, from 100 cases last year.

KLRCA is also improving its infrastructure and services. As part of this, it will move into new state of the art premises at Bangunan Sulaiman next year. We have assurances of the Ministry of Works that the project will be completed in February 2014.


The Director of KLRCA has the statutory authority and independence to appoint arbitrators. KLRCA has a panel of over 700 experienced domestic and international arbitrators from diverse fields of expertise.

Foreign lawyers are allowed to appear in arbitral proceedings. There is no withholding tax imposed on the fees of foreign arbitrators.

KLRCA’s fee structure is about 20% less than other established international arbitration centres.

KLRCA has developed new rules to cater to the growing demands of the global business community such as the KLRCA i-Arbitration Rules, the KLRCA Fast Track Rules as well as the Mediation and Conciliation Rules.

There has been a tremendous interest in the i-Arbitration Rules and this is evident with KLRCA winning the prestigious Global Arbitration Review Award for ‘innovation by an individual or organisation in 2012’.

The i-Arbitration Rules is the first of its kind to adopt the UNCITRAL Arbitration Rules with provisions catering for Shariah-compliant commercial transactions. In disputes involving such transactions, Shariah related issues arising in an arbitration are to be referred to a Shariah Advisory Council or Shariah Expert. Malaysia has strong legal and regulatory background in Islamic finance and banking so it was only natural that KLRCA has leveraged on it.

The arbitrators

Arbitrators are the backbone of the arbitral process, just as the judges are the backbone of the judicial system. As such the quality and ethical behaviour of arbitrators are paramount.

Arbitration, like any legal process, requires trust, transparency, consistency and the confidence of those using it to ensure the legitimacy of the process and of the awards rendered.

Trust and confidence is paramount in the arbitral process and the arbitrator. It follows that the finality and enforceability of an award is a function of the quality and integrity of the arbitrator who issued it.


> Adequate expertise, whether legal or industry specific

> Adequate knowledge and experience of arbitration and the arbitral procedure

> Ability to preside over an arbitration including administering the process of the        arbitration in a timely and efficient manner

> Ability to render an award in a timely manner

> Ability to arrive at and draft a reasoned award

> Impartiality and objectivity

> Fair and equal treatment of the parties

> Compliance with issues of confidentiality

> Impeccable integrity

Safeguarding arbitrator’s integrity

KLRCA has stringent requirements for persons who wish to be empanelled as arbitrators. The arbitrators are bound by the KLRCA Code of Conduct for Arbitrators.

This Code of Conduct for Arbitrators is the result of the collaborative efforts of KLRCA, Pemandu, MACC and the Bar Council.

KLRCA has also signed the Corporate Integrity Pledge which is a commitment to uphold the anti-corruption principles for organisations in Malaysia.

KLRCA will insert appropriate anti-corruption provisions in its Code of Conduct for Arbitrators by June 24, 2013. This is in line with the Corporate Integrity Pledge and the fight against corruption which is a key focus of the Government Transformation Programme.

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