Many countries have updated or replaced their age-old arbitration laws. It’s time Malaysia’s Arbitration Act was revamped in line with developments worldwide, writes SHAILA KOSHY.
THINGS are brewing in the Malaysian arbitral fraternity. More companies, local and international, are resorting to arbitration for resolving disputes.
But instead of rising to meet new challenges, the fraternity is finding that the Arbitration Act 1952 – modelled on the 1950 English Arbitration Act – is shackling its feet.
Many countries that have replaced their old arbitration laws have used the United Nations Commission on International Trade Law (Uncitral) model law on international commercial arbitration.
Although they differ in whether the act should provide for a dual-track arbitral regime or whether international and domestic arbitrations should be legislated separately, the Bar Council and the Malaysian Institute of Arbitrators (MIArb) have been pushing hard for the change.
The Bar Council’s alternative dispute resolution committee prepared a draft based largely on the Uncitral model law and along the lines of the New Zealand Arbitration Act 1996.
With the rise in transnational transactions, a comprehensive arbitration law is sorely needed, especially in dealing with those who register their business in one country, conduct their business in a second and have their bank account in a third.
“The trend is to adopt the Uncitral model law so that there will be a uniform set of rules for arbitration,” said Cecil Abraham, who is a council member and chairman of the Chartered Institute of Arbitrators Malaysia branch (CIAbr Malaysia).
The arbitral community will have the excellent opportunity to debate on which model a new act should follow, as well as pick up international developments in arbitral matters, come Friday.
CIAbr Malaysia is hosting the inaugural International Conference on Arbitration from Feb 28 to March 1.
Minister in the Prime Minister's Department Datuk Seri Dr Rais Yatim is scheduled to deliver the opening address.
Eminent arbitrators from the Asia Pacific have been invited to speak on Reform on the Arbitration Act in Malaysia and the Asia-Pacific Ex- perience with the Uncitral Model Law, Enforcement of Foreign Arbitral Awards/Court Intervention and Recent Developments in Arbitration in the Asia-Pacific region.
Man-made laws – drafted with the objectives of a specific time and context – lack timelessness of the laws of nature and become obsolete even before one generation is over.
“The concept of arbitration and relationships between parties is very different today,” said N. Sundra Rajoo, immediate past chairman of CIAbr Malaysia. “The movement worldwide has been to employ uniform arbitration rules. Together with the New York convention, one can enforce an award obtained in Malaysia wherever the companies assets are.”
In the days of yore, the resolution of commercial disputes was London-centric, said former CIAbr Malaysia chairman Vinayak Pradhan.
This was one of the reasons why the United Nations’ Asian-African legal consultative committee set up regional centres of arbitration at Kuala Lumpur, Cairo and Lagos in 1978.
The Malaysian government was quick to show strong support. In 1979, Datuk Seri Dr Mahathir Mohamad, who was then deputy prime minister, gave his assurance at the First Conference on International Com- mercial Arbitration for the Asia-Pacific region the government would respect the independent function of the Kuala Lumpur Regional Centre for Ar- bitration (KLRCA) as an international arbitral institution.
The Malaysian Act was amended in 1985 to exclude local courts from having a supervisory role over arbitrators and arbitrations conducted under the rules of the KLRCA, the Convention of the Settlement of Investment Disputes Between States and Nationals of Other States 1965 or under the UN Commission on International Trade Law Arbitration Rules 1976, added Vinayak.
If it now drags its feet in bringing reform to arbitral laws, Malaysia will not only fail to attract international arbitration, but will lose even more domestic arbitrations to neighbouring countries.
Which way should Malaysia go?
“The question is whether we should have one act with two regimes or two acts,” said CIArb secretary Chong Thaw Sing
Architect Datuk Kevin Woo, who is a committee member of CIArb Malaysia and MIArb, said the latter would like two separate regimes for domestic and international arbitrations.
“If they were separate, the international community would be confident there would be fewer amendments to an international arbitration act. A law for domestic arbitrations is more likely to be amended whenever it deems it's necessary,” said architect David Cheah Ming Yaw, who is CIArb treasurer and a committee member of MIArb.
“In Singapore, Parliament acts very quickly to amend an act if a court makes a ruling against the intention of the legislature. The MIArb is in favour of basing the domestic act law on the UK Act 1996 as most of us are familiar with English law and the common law tradition,” he added.
Rajoo said that Singapore had left the original act as it was when they enacted an international arbitration act in 1994 based on the model law.
However, in March 2002, they updated the old act to include many of the model law provisions for domestic arbitrations, he said.
“We don’t have to follow them. We can repeal the 1952 Act and have both international and domestic arbitrations in one statute,” he added.
Senior lawyer W.S.W Davidson, who worked on the council's draft, agreed, saying that having one law for both international and domestic arbitrations would provide commonality in the two regimes.
He said there was a need for clarity in the definitions, for a filtered system of appeal, limiting the stated case procedure which was being used to delay proceedings and to create the environment for the better recognition and enforcement of arbitration awards.
“The Bar Council's draft act is well-structured. Many of the provisions read like a wish list. It is easily understood and Malaysia will become in tandem with the world,” said Rajoo.
While the arbitral community here shuffles around in its 1952 shackles China, which only has a developing civil law system, has been able to attract international arbitrations and New Zealand has gone on to arbitrate sports disputes.
Both the MIArb and Bar Council have submitted their draft proposals to the Attorney-General's Chambers. If the government is serious about making Malaysia an international seat for arbitration, it must act quickly.
o For further details of conference, call CIArb Malaysia at (03) 2273-1718.
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