International Arbitration 2025 Comparisons

Litigation continues to be the primary method of resolving disputes in Malaysia, for both domestic and international disputes. This is not expected to change in the near future.

The Asian International Arbitration Centre (AIAC) has not published its statistics for 2024.

Based on statistics from the Asian International Arbitration Centre (AIAC), for arbitrations registered with the AIAC (both AIAC-administered matters and ad hoc appointments), the number of domestic arbitration registrations is increasing in recent years (69 domestic arbitrations in 2022 and 92 domestic arbitrations in 2023) and it is expected to improve further. Quite a fair number of domestic construction-based disputes are disposed of by adjudication.

The number of international arbitration registrations at the AIAC has been relatively constant over the last few years (nine international arbitrations in 2022 and 11 international arbitrations in 2023).

The available statistics for 2023 show a significant surge in AIAC-registered domestic arbitration and a slight rise in international arbitrations compared to the preceding year. We expect this trend to continue in 2024 as the effects of the COVID-19 pandemic recede.

AIAC statistics indicate that the majority of arbitrations registered in 2022-2023 relate to construction contracts. This is largely consistent with the trend in previous years. We expect this trend to continue in 2025.

AIAC statistics do not indicate any particular industries that experienced significant international arbitration activity in 2022-2023.

The arbitral institution most used for international arbitration in Malaysia is the AIAC. 

The AIAC was previously known as the Kuala Lumpur Regional Centre for Arbitration. It was first established in 1978 under the Asian–African Legal Consultative Organization as a not-for-profit, non-governmental international organisation aimed at promoting alternative dispute resolution in the Asian region. It was subsequently rebranded as the AIAC on 7 February 2018.

In 2021, the Affordable Arbitration and ADR Chambers PLT (AA-ADR Chambers) was established with the goal of promoting University cum Court Annexed Arbitration – ie, where courts allow parties to opt, by mutual agreement, out of the court system and refer the dispute to arbitration. The chambers targets arbitration and alternative dispute resolution solutions for matters filed in court where there is no agreement to arbitrate. The chambers provides all forms of domestic and international alternative dispute resolution services, including hearing rooms, administrative support and a panel list of arbitrators, mediators and other adjudicators.

AIAC’s Initiatives

The AIAC maintains its own rules of arbitration, known as the AIAC Arbitration Rules. The AIAC takes the initiative to actively upgrade the AIAC Arbitration Rules from time to time in accordance with international trends to cater for best practices in the global environment. 

The AIAC also released the AIAC i-Arbitration Rules, which offer a practical solution for the settling of disputes arising out of or in connection with Sharia-based commercial transactions, enabling the arbitral tribunal to refer to the relevant Sharia Advisory Council or Sharia expert for opinions on matters related to Sharia principles. The AIAC regularly updates its i-Arbitration rules, with the latest update being the AIAC i-Arbitration Rules 2023, which took effect from 24 August 2023.

The AIAC released its inaugural Asian Sports Arbitration Rules 2023, which took effect from 6 October 2023. The Asian Sport Arbitration Rules aim to cater to the needs of the sports industry and provide an effective and efficient mechanism for resolution of sports-related disputes. The Asian Sport Arbitration Rules contain two procedures: the general rules applicable to any matter related to sport and the special procedure for resolution in disputes relating to selection and eligibility misunderstandings.

The High Courts of Malaysia are designated to hear disputes related to international arbitration and domestic arbitrations for matters where they have jurisdiction under the Arbitration Act 2005. There are designated arbitration specialist courts that deal with arbitration-related matters arising typically from construction and commercial-related arbitration disputes.

The Arbitration Act 2005 (“AA 2005”) governs international arbitration in Malaysia. Parts I, II and IV of the AA 2005, comprising Sections 1 to 5, Sections 6 to 39 and Sections 47 to 51, are of mandatory application in respect of international arbitration. Part III of the AA 2005, comprising Sections 40 to 46, do not apply to international arbitrations unless the parties agree to opt in, in writing. 

Comparison with UNCITRAL Model Law

The AA 2005 is based closely on the UNCITRAL Model Law. Part II of the AA 2005 – containing Sections 6 to 39 governing general provisions and provisions relating to arbitration agreements, the composition of arbitrators, the jurisdiction of the arbitral tribunal, conduct of arbitral proceedings, the making of awards and termination of proceedings, recourse against awards and the recognition and enforcement of awards – closely mirrors the subject headings and sequence of Articles 3 to 36 of the UNCITRAL Model Law. 

In the context of international arbitration, there are no significant differences between the AA 2005 and the UNCITRAL Model Law. However, specific powers are provided to arbitrators in several sections of the AA 2005 which are not found in the UNCITRAL Model Law. 

For instance, the AA 2005 empowers the arbitral tribunal to grant security for costs as an interim measure (see Section 19E of the AA 2005) and to give directions for the speedy determination of a claim if the claimant fails to proceed with the claim (see Section 27(d) of the AA 2005).

The AA 2005 also provides for specific powers of the arbitral tribunal in conducting the arbitration, which includes drawing on its own knowledge and expertise, making orders for the provision of further particulars, the granting of security for costs, fixing and amending time limits within which various steps in arbitral proceedings must be completed, ordering the discovery and production of documents or material within the possession or power of a party, ordering interrogatories to be answered, and ordering that any evidence be given on oath or affirmation (see Section 21 of the AA 2005).

The biggest recent development in Malaysian arbitration was the Arbitration (Amendment) Act 2024 proposing amendments to the AA 2005, which was gazetted on 1 November 2024. The amendments will come into force on a date to be determined.

The 2024 Amendments provide the following notable changes:

• A default provision has been introduced, where the law applicable to the arbitration agreement shall be the law of the seat of the arbitration in the absence of an agreement by the parties (Section 5 of the Arbitration (Amendment) Act 2024).
• Digital and electronic signatures on arbitral awards are now expressly recognised (Section 8 of the Arbitration (Amendment) Act 2024).
• An arbitration award shall now be recognised as binding without requiring an application to be made for its recognition (Section 9 of the Arbitration (Amendment) Act 2024).
• The common law against maintenance and champerty shall cease to apply in relation to third-party funding and shall not be treated as contrary to public policy (Section 10 of the Arbitration (Amendment) Act 2024).
• A code of practice has been introduced, setting out the practices and standards relating to third-party funding in which third-party funders are expected to comply and disclosure requirements (Section 10 of the Arbitration (Amendment) Act 2024).
• The term “Director of the Asian International Arbitration Centre (Malaysia)” has been substitied with the term “President” (which refers to the President of the Asian International Arbitration Centre Court of Arbitration (Sections 2 and 6 of the Arbitration (Amendment) Act 2024).

An arbitration agreement must be an agreement by the parties to submit to arbitration all or certain disputes which have arisen or may arise between them in respect of a defined legal relationship, whether contractual or not (see Section 9 of the AA 2005).

Forms of Arbitration Agreement

An arbitration agreement may be in the form of an arbitration clause contained in an agreement, in a standalone agreement or in a reference to another agreement that contains an arbitration clause. 

Arbitration Agreement Must Be in Writing

The arbitration agreement must be in writing (see Section 9(3) of the AA 2005). This requirement of a written agreement may be met if its content is recorded in any form, including situations where the initial arbitration agreement or contract has been concluded orally, by conduct, or by other means (see Section 9(4) of the AA 2005). The requirement can also be met if the existence of an agreement is alleged by one party and not denied by the other in an exchange of statement of claim and defence.

An arbitration agreement is deemed to be in writing if it is evidenced by any electronic communication that the parties make by means of a data message, if the information contained therein is accessible so as to be usable for future reference (see Section 9(4A) of the AA 2005). The signature of the parties is not a prerequisite to an arbitration agreement being enforced (see Ajwa for Food Industries Co (MIGOP), Egypt v Pacific Inter-Link Sdn Bhd [2013] 5 MLJ 625).

No Specific Words or Form Required

No specific words or form are required to be used to constitute an arbitration clause or an arbitration agreement; an electronic transmission referring to or implying the parties’ intention to submit to arbitration suffices, as long as there is an agreement to refer disputes to arbitration and the parties’ intention to arbitrate is clear and unequivocal (see the Malaysian Court of Appeal’s decision in Albilt Resources Sdn Bhd v Casaria Construction Sdn Bhd [2010] 3 MLJ 656).

Any dispute the parties have agreed to submit to arbitration under an arbitration agreement may be determined by arbitration, unless the arbitration agreement is contrary to public policy or the subject matter of the dispute is not capable of settlement by arbitration under the laws of Malaysia (see Section 4 of the AA 2005). The fact that any written law confers jurisdiction in respect of a matter on any court of law but does not refer to the determination of that matter by arbitration does not indicate that a dispute about that matter is incapable of determination by arbitration. 

Public Policy

There is no universally accepted test on what public policy is; different courts and different tribunals may have different views as to the enforceability of contracts on the ground of public policy (see the Malaysian Federal Court judgment in Arch Reinsurance Ltd v Akay Holdings Sdn Bhd [2019] 1 CLJ 305).

The AA 2005 does not identify any specific subject matter that cannot be referred to arbitration.

Matters that may have public interest elements have been identified as being non-arbitrable in the Court of Appeal case of Peninsula Education (Setia Alam) Sdn Bhd (previously known as Segi International Learning Alliance Sdn Bhd) v Biaxis (M) Sdn Bhd (in liquidation) [2024] 5 MLJ 388, such as the grant of a dissolution of marriage, orders with respect to adoption, judicial review matters involving certiorari and mandamus, contempt of court, registration and expunging of patent and other intellectual property rights, order for sale under the National Land Code, issues arising out of liquidation, judicial management or receivership under the Companies Act 2016.

In Arch Reinsurance Ltd v Akay Holdings Sdn Bhd [2019] 1 CLJ 305, the Malaysian Federal Court held that the provisions of the National Land Code setting out the rights and remedies of parties under statutory charge over land are exhaustive and exclusive and any attempt to contract out of these rights is void as being contrary to public policy; and hence a dispute triggered by a statutory notice of demand under the National Land Code is not arbitrable under the AA 2005. Based on this decision, the Malaysian courts have taken the position that where there are statutory provisions that exhaustively set out procedures involving the rights and remedies of parties, then that subject matter will most likely not be arbitrable.

Recently, in V Medical Services M Sdn Bhd v Swissray Asia Healthcare Co Ltd [2025] 2 MLJ 744, the Federal Court held that the provisions of the AA 2005 do not purport to extend its reach to the insolvency provisions under the Companies Act 2016; its provisions ought not to be invoked or incorporated into the exercise of discretion in determining whether to grant a Fortuna injunction, or stay, dismiss or allow a winding-up petition, reinforcing the proposition that insolvency proceedings under the Companies Act 2016 are non-arbitrable.

The Tribunal’s Powers to Determine Arbitrability

If the issue of whether a dispute is arbitrable or not is raised by any party, the arbitral tribunal has the power to rule on its own jurisdiction, which includes deciding whether a dispute is arbitrable. Within 30 days of receiving notice of the arbitral tribunal’s ruling that there is jurisdiction, any party may appeal to the High Court to decide the matter. 

Law of Arbitration Agreement

The 2024 Amendments provide for the default provision where the law applicable to the arbitration agreement shall be the law of the seat of the arbitration in the absence of an agreement by the parties (Section 5 of the Arbitration (Amendment) Act 2024).

As the 2024 Amendments have not come into force, the conflict of laws rules have been used by Malaysian courts with respect to determining the law governing arbitration agreements. The general principle is that, in the absence of an express choice of the governing law of the arbitration agreement or any contrary indication, the law that has the closest and most real connection with the arbitration agreement is the law of the seat of the arbitration – ie, the lex arbitrii (see the Malaysian Federal Court decision in Thai-Lao Lignite Co Ltd & Anor v Government of The Lao People’s Democratic Republic [2017] 9 CLJ 273).

Enforcement of Arbitration Agreements

Arbitration agreements are frequently enforced by the Malaysian courts. Where court proceedings are brought in respect of a matter that is the subject of an arbitration agreement and a party makes an application to stay the court proceedings, where there is valid agreement to arbitrate, it is mandatory for the court to do so (see the Malaysian Federal Court’s decision in Press Metal Sarawak Sdn Bhd v Etika Takaful Sdn Bhd [2016] 5 MLJ 417). So long as an application to stay the court proceedings is made before any further steps in the court proceedings are taken, there is no discretion for the Malaysian courts to refuse enforcement of an arbitration agreement when the arbitration agreement is not null and void, inoperative or incapable of being performed.

However, where the validity of the arbitration agreement itself is questioned, the Malaysian courts may find that they retain jurisdiction to determine that issue. Recently, in Macsteel International Far East Ltd v Lysaght Corrugated Pipe Sdn Bhd and other appeals [2023] 4 MLJ 551, the Court of Appeal held that as the High Court and arbitral tribunal both have concurrent jurisdiction and power to investigate and conclude the validity of the arbitration agreement, a flexible approach should be adopted as to the appropriate forum in which to investigate and determine the validity of the arbitration agreement. The forum should be the one that is, on balance, more just and convenient, having regard to the facts and circumstances in issue. In this case it was held that the Malaysian courts were the appropriate forum to determine the validity of the arbitration agreement.

Malaysia applies the rule of separability of arbitration clauses contained in invalid agreements. An arbitration clause that forms part of an agreement shall be treated as an agreement independent of the other terms of the agreement in which it is contained. A decision by an arbitral tribunal that the agreement is null and void does not invalidate the agreement to arbitrate (see Standard Chartered Bank Malaysia Bhd v City Properties Sdn Bhd & Anor [2008] 1 MLJ 233 – High Court).

The Court of Appeal has reiterated the rule of separability of arbitration clauses in the recent cases of Tumpuan Megah Development Sdn Bhd v Ing Bank N V & Anor [2024] 3 CLJ 18 and Peninsula Education (Setia Alam) Sdn Bhd v Biaxis (M) Sdn Bhd [2024] 5 MLJ 388.

There are no limits set by the AA 2005 on the parties’ autonomy to select arbitrators in Malaysia. It is explicitly provided in Section 13 of the AA 2005 that no person shall be precluded by reason of nationality from acting as an arbitrator, unless the parties agree otherwise.

Where the parties’ chosen method for selecting arbitrators fails, the default procedure depends on the number of arbitrators appointed – ie, one or three. In the context of international arbitration, where parties fail to determine the number of arbitrators, the default position is three arbitrators in an international arbitration and one in a domestic arbitration (see Section 12 of the AA 2005).

Where the arbitration consists of three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator as the presiding arbitrator (see Section 13(3) of the AA 2005). If a party fails to appoint an arbitrator within 30 days of receiving a request in writing to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within 30 days of their appointment or within such extended period as the parties may agree, either party may apply to the Director of the AIAC for such appointment (see Section 13(4) of the AA 2005).

Where the arbitration consists of a sole arbitrator and the parties fail to agree on the arbitrator, either party may apply to the Director for the appointment of the sole arbitrator (see Section 13(5) of the AA 2005).

Where the parties have agreed on the procedure for appointment of the arbitrator(s), and (i) a party fails to act as required under such procedure; or (ii) the parties, or two arbitrators, are unable to reach an agreement under such procedure; or (iii) a third party, including an institution, fails to perform any function entrusted to it under such procedure, any party may request the Director to take the necessary measures, unless the agreement on the appointment procedure provides other means for securing the appointment (see Section 13(6) of the AA 2005). The decision of the Director is final and non-appealable (see Section 13(9) of the AA 2005).

Multi-Party Arbitrations

Where there are multiple parties in an arbitration, where the arbitration consists of a sole arbitrator and the parties fail to agree on the arbitrator, any party may apply to the Director of the AIAC for the appointment of the sole arbitrator. The decision of the AIAC is final and non-appealable.

There is no default procedure in the AA 2005 governing multi-party arbitrations where the number of arbitrators is three, as the AA 2005 only states that “each party shall appoint one arbitrator”. However, it is common practice for multiple parties on the same side (whether as joint claimants or respondents) to jointly appoint an arbitrator and Rule 3.5 of the AIAC Arbitration Rules 2023 addresses this.

Where the Director of the AIAC is unable to act or fails to act within 30 days when any party applies to him or her for the appointment of an arbitrator, any party may apply to the High Court for the appointment of the arbitrator (see Section 13(7) of the AA 2005). If such an application is made, the High Court is required to have due regard to any qualifications required of the arbitrator by the agreement of the parties, other considerations that are likely to secure the appointment of an independent and impartial arbitrator, and the advisability of appointing an arbitrator of a nationality other than those of the parties. The appointment of the arbitrator by the High Court in this manner is final and non-appealable.

The High Court does not have any power under the AA 2005 to intervene in the selection of arbitrators in any other manner. 

Grounds for Challenge of Arbitrators

An arbitrator may be challenged in two situations: if the circumstances give rise to justifiable doubts as to his or her impartiality or independence; or if he or she does not possess the qualifications agreed by the parties (see Section 14 of the AA 2005).

Challenge Procedure

Under the default procedure governing the challenge or removal of arbitrators, any party who intends to challenge the appointment of an arbitrator shall send a written statement of the reasons for the challenge to the arbitral tribunal, within 15 days of becoming aware of the constitution of the arbitral tribunal or of any of the reasons referred to above (see Section 15 of the AA 2005). In ZMSB v PSB [2025] 1 MLJ 120, the Court of Appeal held that the timeframe to challenge the appointment of an arbitrator set out above must be complied with; a party cannot reserve its right to challenge the appointment until after the award has been delivered at the conclusion of the arbitration.

Unless the challenged arbitrator withdraws from office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge. Where the challenge is not successful, the challenging party may apply to the High Court to decide on the challenge, within 30 days of receiving notice of the decision rejecting the challenge. The High Court’s decision on the matter is final and non-appealable.

A person who is approached in connection with a possible appointment as arbitrator is required to disclose any circumstances that are likely to give rise to justifiable doubts as to his or her impartiality or independence under the AA 2005 without delay (see Section 14(2) of the AA 2005).

In the case of Persatuan Kanak-Kanak Spastik Selangor & Wilayah Persekutuan v Low Koh Hwa & Another Appeal [2023] 1 CLJ 536, the Court of Appeal found that although the arbitrator did not make the declaration promptly as required by Section 14 of the Arbitration Act (AA), the crucial information regarding his relationship with a witness was disclosed. This disclosure was enough to raise concerns about his impartiality or independence.

The party’s decision not to object to the arbitrator’s continued appointment, after this disclosure indicates confidence in the arbitrator’s impartiality. The disclosure averted a breach of public policy.

The principle of competence-competence is applicable in Malaysia with the enactment of Section 18(1) of the AA 2005 – ie, an arbitral tribunal can rule on a party’s challenge to the tribunal’s own jurisdiction. This was affirmed in Press Metal Sarawak Sdn Bhd v Etiqa Takaful Bhd [2016] 5 MLJ 417.

In discussing Section 18 of the AA 2005, the case of Tumpuan Megah Development Sdn Bhd v ING. Bank NV & Anor [2024] 3 CLJ 18 held that while an arbitral tribunal may decide on its jurisdiction under the principle of competence-competence, its decision is not final and can be challenged in the court of the seat of arbitration or the enforcement court.

Pursuant to Section 18(7) of the AA 2005, the arbitral tribunal may rule on a plea that it does not have jurisdiction or is exceeding the scope of its authority either as a preliminary question or in an award on the merits.

Positive Rulings on Jurisdiction

Where the arbitral tribunal rules on such a plea as a preliminary question that it has jurisdiction, any party may appeal to the High Court within 30 days of receiving a notice of that ruling (see Section 18(8) of the AA 2005). A decision of the High Court thereon is final and non-appealable (see Section 18(10) of the AA 2005).

On the other hand, if the arbitral tribunal decides to address such plea at the award stage, then the parties may apply to the High Court under Section 37 of the AA 2005 to set aside such award made by the arbitral tribunal.

The courts generally show a reluctance to intervene in issues regarding the jurisdiction of an arbitral tribunal. In Capping Corp Ltd & Ors v Aquawalk Sdn Bhd & Ors [2013] 6 MLJ 579, the Malaysian Court of Appeal held that under the AA 2005, the courts are obliged to take a minimal interference approach, and such approach is reflected in Section 18 of the AA 2005, where the arbitral tribunal is empowered to rule on its own jurisdiction.

Negative Rulings on Jurisdiction

The AA 2005 provides for an appeal against an arbitral ruling that it has jurisdiction. The converse (ie, a negative ruling on jurisdiction) is not referenced as a ground for appeal under Section 18(8).

In PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR(R) 597, the Singapore Court of Appeal accepted that pursuant to Article 16(3) of the UNCITRAL Model Law, a negative jurisdictional ruling by a tribunal is intended to be a final and binding decision between the parties, and is not appealable. While the Singapore International Arbitration Act was amended in 2012 to allow appeals to the High Court on a negative jurisdictional ruling, no such amendment has been made to the AA 2005.

Pursuant to Section 18(8) of the AA 2005, if the arbitral tribunal rules on a plea as a preliminary question that it has jurisdiction, parties have the right to go to court to challenge the jurisdiction of the arbitral tribunal within 30 days of receiving a notice of the arbitral tribunal’s ruling on the issue. 

If the arbitral tribunal determines such plea in an award on the merits, the parties may, within 90 days from the date of receipt of the award, make an application to the High Court to set aside such award (see Section 37(4) of the AA 2005).

In Malaysia, the standard of review by the courts on questions of arbitral jurisdiction is generally de novo. In Usahasama SPNB-LTAT Sdn Bhd v ABI Construction Sdn Bhd [2016] 7 CLJ 275, the High Court held that an appeal under Section 18(8) of the AA 2005 involves a full rehearing of all issues afresh and uninfluenced by the prior decision of the arbitrator(s).

When there are court proceedings brought in breach of an arbitration agreement, it is mandatory for the Malaysian courts to stay such proceedings in favour of arbitration, unless it finds that the agreement is null and void, inoperative or incapable of being performed (see 3.3 National Court’s Approach).

The arbitral tribunal cannot assume jurisdiction over individuals or entities that are neither party to an arbitration agreement nor signatories to the contract containing the arbitration agreement. The AA 2005 does not apply to non-parties to an arbitration agreement (see the Malaysian Federal Court decision in Jaya Sudhir a/l Jayaram v Nautical Supreme Sdn Bhd & Ors [2019] 5 MLJ 1).

Pursuant to Section 19 of the AA 2005, unless otherwise agreed by the parties, an arbitral tribunal is permitted to grant the following interim reliefs:

• to order a party to maintain or restore the status quo pending determination of the dispute;
• to take action that would prevent current or imminent harm or prejudice to the arbitral process itself, or to refrain from taking action that is likely to cause such harm or prejudice;
• to provide a means of preserving assets out of which a subsequent award may be satisfied;
• to preserve evidence that may be relevant and material to the resolution of the dispute; or
• to provide security for the costs of the dispute. 

An interim measure issued by an arbitral tribunal shall be recognised as binding and, unless otherwise provided by the arbitral tribunal, enforced upon application to the court, irrespective of the country in which it was issued (see Section 19H of the AA 2005). 

The powers of the tribunal under Section 19 of the AA 2005 were further clarified in the case of Malaysia Resources Corporation Bhd v Desaru Peace Holdings Clubs Sdn Bhd [2023] 4 CLJ 91, which affirmed that, by default, arbitral tribunals have jurisdiction to grant interim measures. The phrase “unless otherwise agreed by the parties” in Section 19(1) requires a clear, mutual agreement that interim measures are to be sought exclusively from the courts rather than the arbitral tribunal. A mere refusal to consent or a lack of response does not constitute such an agreement.

The High Court has the power to issue any interim relief before or during arbitration proceedings, and it is only approached to grant an interim remedy which will ultimately support or aid that arbitration (see the Malaysian Court of Appeal decision in KNM Process Systems Sdn Bhd v Lukoil Uzbekistan Operating Company LLC [2020] MLJU 85; [2020] 1 LNS 479 affirmed in the Court of Appeal case of Damai City Sdn Bhd v MCC Overseas (M) Sdn Bhd and other appeals [2023] 1 MLJ 258). This is irrespective of whether the seat of arbitration is in Malaysia (see Sections 11(3) and 19J(1) AA 2005). 

Pursuant to Section 11 of the AA 2005, the High Court may make the following orders:

• to maintain or restore the status quo pending the determination of the dispute;
• to take action that would prevent current or imminent harm or prejudice to the arbitral process, or to refrain from taking action that is likely to cause such harm or prejudice;
• to provide a means of preserving assets out of which a subsequent award may be satisfied, whether by way of arrest of property or bail or other security, pursuant to the admiralty jurisdiction of the High Court;
• to preserve evidence that may be relevant and material to the resolution of the dispute; or
• to provide security for the costs of the dispute. 

It should be noted that the powers of the court to grant interim relief are wider than the powers of an arbitral tribunal. In considering an order to provide a means of preserving assets out of which a subsequent award may be satisfied, the High Court has the power to order an arrest of property or bail or other security. Such power is not confined to the admiralty jurisdiction of the High Court; it extends to its civil jurisdiction under the Courts of Judicature Act 1967 (see the High Court decision in JANA DCS Sdn Bhd v TAR PH Family Entertainment Sdn Bhd and other cases [2022] 8 MLJ 201).

Recently, in Malaysia Resources Corporation Bhd v Desaru Peace Holdings Club Sdn Bhd [2023] 4 CLJ 91, the claimant in an arbitration filed an application for security for costs in the High Court instead of the arbitral tribunal. This was opposed by the respondent, who argued that the application should have been made to the arbitral tribunal instead. The High Court held that in the absence of a prior agreement between the parties to exclude the arbitral tribunal’s jurisdiction to grant interim measures pursuant to Section 19 of the AA 2005, the parties must resort to the arbitral tribunal first to grant such interim measures notwithstanding the court’s parallel jurisdiction. The only exceptions which may justify bypassing the arbitral tribunal’s jurisdiction in granting interim relief are where (i) the interim measure is sought against a third party over whom the arbitral tribunal has no jurisdiction; (ii) the issue in question is very urgent; (iii) where the High Court’s coercive powers of enforcement are needed; or (iv) where the arbitral tribunal has not been constituted.

Emergency Arbitrators

The AA 2005 recognises the use of emergency arbitrators. The definition of “arbitral tribunal” under the AA 2005 includes an emergency arbitrator. 

Emergency arbitrators are prescribed the same powers as the arbitral tribunal. Accordingly, pursuant to Section 19H of the AA 2005, decisions of emergency arbitrators are recognised as binding, and can be enforced upon application to the court, irrespective of the country in which they are issued (see CRCC Malaysia Bhd v DSG Projects Malaysia Sdn Bhd [2023] 9 MLJ 713).

The AIAC Arbitration Rules provide additional powers to emergency arbitrators; virtual or documents-only emergency arbitration proceedings are permitted, as are ex parte proceedings. Emergency arbitrators are permitted to rule on their own jurisdiction.

The Malaysian courts do not have the power to intervene in arbitration proceedings once an emergency arbitrator – who has the same powers as any arbitrator under the AA 2005 – has been appointed (see Section 19J(3) AA 2005), except in situations specifically provided by the AA 2005, such as determination of an appeal against the emergency arbitrator’s ruling of an unsuccessful challenge to the arbitral tribunal.

Interim relief by the courts is permissible both before and after an emergency arbitrator has been appointed. 

Malaysian law confers concurrent jurisdiction on both courts and arbitral tribunals to make an order for security for costs as an interim measure upon an application for such. As outlined in 6.2 Role of Courts, an application for security for costs should be first made to the arbitral tribunal (Malaysia Resources Corporation Bhd v Desaru Peace Holdings Club Sdn Bhd [2023] 4 CLJ 91).

The parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the arbitration (see Section 21 of the AA 2005). Such procedural rules can be ad hoc or institutional. The most commonly adopted institutional rules in Malaysia are the AIAC Arbitration Rules. 

If parties fail to agree on the procedural rules, the arbitral tribunal will become the master of the proceedings, upon which it will be empowered to determine matters such as the time and place of proceedings, the time limits for pleadings and written submissions as well as the taking of evidence (see Section 21(2) AA 2005).

Regardless of the applicable procedural rules, the claimant is in law required to submit a statement of claim containing the facts supporting its claim, the points in issue and the relief or remedy sought from the arbitration after the commencement of arbitration and within the period of time agreed by the parties or determined by the arbitral tribunal. The respondent to the arbitration shall then state its defence in respect of the particulars set out by the claimant. 

Together with the submissions of the parties’ statement of claim and defence, the parties may further submit any document they consider relevant or add a reference to the documents or other evidence that they may submit. 

The arbitral tribunal will then decide whether to hold oral hearings for the presentation of evidence or oral arguments, or to conduct the proceedings on the basis of documents and other materials. If any party applies for the arbitral tribunal to hold oral hearings at an appropriate stage of the proceedings, it is mandatory for the arbitral tribunal to hold such oral hearings (see Section 26 of the AA 2005). 

Powers of Arbitrators

In Malaysia, arbitrators are granted the following powers:

• to rule on their own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement; 
• to order interim measures as described in 6.1 Types of Relief;
• to conduct the arbitration in such manner as they consider appropriate if no procedure is agreed upon by the parties (as described in 7.1 Governing Rules), which includes the powers to:
1. determine the admissibility, relevance, materiality and weight of any evidence;
2. draw on their own knowledge and expertise;
3. order the provision of further particulars in a statement of claim or statement of defence;
4. order the provision of security for costs;
5. fix and amend the time limits within which various steps in the arbitral proceedings must be completed;
6. order the discovery and production of documents or materials within the possession or power of a party;
7. order the interrogatories to be answered;
8. order that any evidence be given on oath or affirmation; and
9. make any such orders as the arbitral tribunal considers appropriate (see Section 21(3) AA 2005);

• to determine the seat of arbitration, the language to be used in arbitration proceedings and the timeline to submit pleadings, submissions, etc, where the parties fail to agree on these points; and
• to appoint one or more experts to report on specific issues to be determined by the arbitral tribunal, and to require a party to give the expert any relevant information or to produce or provide access to any relevant documents, goods or other property for the expert’s inspection. 

Duties of Arbitrators

When a potential arbitrator is approached in connection with his or her possible appointment as an arbitrator, that person has a duty to disclose any circumstances that are likely to give rise to justifiable doubts as to his or her impartiality or independence. 

Once the person is appointed as an arbitrator, he or she has a duty to treat the parties with equality, and to give the parties a fair and reasonable opportunity to present their case. The arbitrator is also under a duty to act in good faith at all times of the arbitration. In making an award, arbitrators are also duty-bound to state the reasons upon which the award is based, unless the parties have agreed that no reasons are to be given, or if the award is on agreed terms pursuant to a settlement. 

Generally, parties to arbitral proceedings are permitted to be represented in arbitral proceedings by any representative appointed by the party. Section 37A of the Legal Profession Act 1976 provides that the restrictions on non-Malaysian qualified lawyers from practising in Malaysia shall not apply to any person representing any party in arbitral proceedings.

However, it must be noted that the above principle is only applicable to arbitrations taking place in West Malaysia. In respect of arbitration proceedings in East Malaysia (Sabah & Sarawak), Sabah and Sarawak advocates are conferred exclusive right to practise in East Malaysia, and such exclusivity includes representation in arbitration proceedings (see Samsuri bin Baharuddin & Ors v Mohamed Azahari bin Matiasin and another appeal [2017] 2 MLJ 141 (Malaysian Federal Court)).

In arbitration, the parties are free to agree on the procedure to be followed by the arbitral tribunal, including the approach to the collection and submission of evidence. In the submission of the statement of claim and the defence, the parties are free to submit with their statements any document that they consider to be relevant, or to add a reference to the documents or other evidence that they may submit. One of the examples of such procedural rules includes the International Bar Association (IBA) Rules on the Taking of Evidence in International Arbitration. 

Unless otherwise agreed by the parties, the arbitral tribunal retains the power to decide whether to hold oral hearings for the presentation of evidence or oral arguments, or to conduct the proceedings on the basis of documents and other materials. However, if there is an application to hold oral hearings at an appropriate stage of the proceedings, it is mandatory for the arbitral tribunal to do so.

The rules of evidence that apply to arbitral proceedings seated in Malaysia would depend on the applicable rules of evidence agreed between the parties. Where the parties fail to agree on the applicable rules of evidence, the arbitral tribunal may determine the rules of evidence regarding admissibility, relevance, materiality and weight in such manner as it considers appropriate. 

It is statutorily stipulated that the Evidence Act 1950 (rules of evidence in courts) does not apply to proceedings before an arbitrator.

With the approval of the arbitral tribunal, the parties are empowered to make an application under Section 29(2) of the AA 2005 to the High Court for assistance in taking evidence. The High Court has the power to order the attendance of a witness to give evidence or, where applicable, to produce documents on oath or before an officer of the High Court or any other person, including the arbitral tribunal. 

Section 41A of the AA 2005 provides that no party may publish, disclose or communicate any information relating to the arbitral proceedings under the arbitration agreement or an award made in those arbitral proceedings. This would include all pleadings, evidence, documents and the award, which will remain confidential and cannot be disclosed in subsequent proceedings.

There are three exceptions to this rule:

• where the publication, disclosure or communication is made to protect or pursue a legal right or interest of the party, or to enforce or challenge the award in legal proceedings before a court or other judicial authority;
• if the publication, disclosure or communication is made to any government body, regulatory body, court or tribunal and the party is obliged by law to make the publication, disclosure or communication; or
• if the publication, disclosure or communication is made to a professional or any other adviser of any of the parties. 

The confidentiality obligation under Section 41A of the AA 2005 does not, however, extend to non-parties of an arbitration proceeding (see Dato’ Seri Timor Shah Rafiq v Nautilus Tug & Towage Sdn Bhd [2019] 10 MLJ 693).

The arbitral award must be made in writing, be signed by the arbitrator or a majority of all the members of the arbitral tribunal, state its date and seat of arbitration and, unless the parties have agreed otherwise or it is an award pursuant to a settlement, also state the reasons upon which it is based (see Section 33 of the AA 2005). In Telekom Malaysia Berhad v Obnet Sdn Bhd [2024] 6 MLJ 293, the Federal Court held that Section 33 of the AA 2005 excludes the possibility of an arbitrator making an oral award; an award other than the form prescribed will necessarily be invalid. 

There is no statutory time limit provided by Malaysian law on the delivery of the award, but the time for making an award may be limited by the arbitration agreement entered into between the parties. Where such a time limit exists, failure to comply with it may expose the award to a risk of being set aside unless an extension is validly granted (see Ken Grouting Sdn Bhd v RKT Nusantara Sdn Bhd [2021] 2 CLJ 173 (Court of Appeal)).

The High Court may also extend the time limit, unless otherwise agreed by the parties (Section 46 of the AA 2005). However, the High Court may only do so where there is an application made by the arbitrator or the parties and not on its own volition (see Ken Grouting Sdn Bhd v RKT Nusantara Sdn Bhd [2021] 2 CLJ 173 (Malaysian Court of Appeal)).

The types of remedies that an arbitral tribunal may award are not limited by the AA 2005 or the AIAC Arbitration Rules. However, the type of remedies awarded are necessarily confined to the powers conferred on the arbitral tribunal by the parties in the agreement to arbitrate.

Reliefs that form part of the exclusive jurisdiction of the court pursuant to statute may not be granted by an arbitral tribunal, even if the arbitral tribunal may decide on the subject matter of the dispute (see the UK Court of Appeal decision in Fulham Football Club (1987) Ltd v Richards and another [2011] EWCA Civ 855. The English position is also adopted in the Malaysian Federal Court case of Arch Reinsurance Ltd v Akay Holdings Sdn Bhd [2019] 5 MLJ 186.

Parties are entitled to recover interest and legal costs in an arbitration, especially where such entitlements are expressly provided for in the arbitration agreement. The arbitral tribunal has the discretion to award simple or compound interest from such date, rate and rest as the arbitral tribunal considers appropriate.

The interest granted may also be for:

• any period, ending no later than the date of payment;
• of the whole or any part of sums awarded by the arbitral tribunal;
• sums paid before the date of the award; or
• costs awarded or ordered by the arbitral tribunal in the arbitral proceedings. 

The AA 2005 does not limit the grant of interest to simple interest or compound interest. This is dealt with in accordance with underlying contract and the substantive law. 

The general principle in relation to the award of costs is for the arbitral tribunal to order costs in favour of the successful party and to award all reasonable costs incurred by that party during the arbitration. This would generally include legal fees and disbursements reasonably incurred by the party in respect of the arbitration.

An arbitral award made by an arbitral tribunal pursuant to an arbitration agreement is final, binding and conclusive, and is not appealable based on questions of fact or law.

The limited circumstances in which an arbitral award may be set aside are on the following grounds:

• a party to the arbitration agreement was under any incapacity;
• the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the laws of Malaysia;
• the party making the application was not given proper notice of the appointment of an arbitrator or the arbitral proceedings, or was otherwise unable to present their case;
• the award deals with a dispute that is not contemplated by or does not fall within the terms of the submission to arbitration;
• the award contains decisions on matters that are beyond the scope of the submission to arbitration; 
• the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties;
• the subject matter of the dispute is not capable of settlement by arbitration under the laws of Malaysia; or
• the award is in conflict with the public policy of Malaysia (see Section 37 AA 2005).

These grounds are exhaustive (see Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd and another appeal [2021] 1 MLJ 1)

There is no provision for parties to agree to exclude or expand the scope of challenge to the decision of the arbitral tribunal under the AA 2005.

Judicial review of an arbitral award is not intended to review the merits of the case but instead to confine itself to the limited grounds in the AA 2005. The standard of review is intended to be deferential rather than de novo. Having said that, in the Government of the Lao People’s Democratic Republic v Thai-Lao Lignite Co Ltd, A Thai Co and Anor [2017] 9 CLJ 273, the Malaysian Federal Court equally held that its role was not merely to rubber-stamp arbitral awards.

Malaysia has been a signatory to the New York Convention on the Recognition of Foreign Arbitral Awards 1958 since 1985. This requires courts of contracting states to recognise and enforce arbitral awards made in other contracting states.

The commitment to the New York Convention is reflected in the provisions of the AA 2005.

A party seeking to enforce an arbitral award may make an application to the High Court in Malaysia. Upon such an application, the award will be recognised as binding and will be enforced by entry as a judgment in terms of the award. The award to be enforced may be made in respect of an arbitration where the seat of arbitration is in Malaysia or a foreign state. However, pursuant to the passing of the Arbitration (Amendment) Act 2024, one of the key changes to the AA 2005 will include that an arbitral award delivered in an arbitration where the seat of arbitration is in Malaysia or a “foreign state” is binding instantly or automatically, without the need for an enforcement application (Section 9 of the Arbitration (Amendment) Act 2024. The amendment eliminates the additional step of obtaining recognition of the award as a judgment.

The only legal requirement for the enforcement of an arbitral award is the production of a duly authenticated original award or a duly certified copy of the award, and the original arbitration agreement or a duly certified copy of the agreement. As long as this formal requirement is complied with, the court must grant recognition and enforcement of an arbitration award upon such an application being made (see the Malaysian Court of Appeal’s decision in Tune Talk Sdn Bhd v Padda Gurtaj Singh [2020] 3 MLJ 184). 

Nevertheless, if the party against whom the enforcement of the award is invoked provides proof that the arbitral award has been set aside or suspended by a court of the country in which the award was made or under the law under which the award was made, the High Court may refuse the recognition or enforcement of the award. 

Section 39 of the AA 2005 provides an exhaustive list of grounds on which enforcement of an arbitral award may be refused similar to that of setting aside an arbitral award in 11.1 Grounds for Appeal. However, Section 39 of the AA 2005 does not mention sovereign immunity as a defence. Therefore, sovereign immunity arguments must be framed within the limited statutory grounds under Section 39, rather than asserted independently.

In Elisabeth Regina Maria Gabriele Von Pezold & Ors v Republic of Zimbabwe [2023] MLJU 2657, the High Court recognised and enforced an ICSID arbitration award against the Republic of Zimbabwe. The High Court held that sovereign immunity cannot be used to prevent the recognition of an ICSID award.

The court has a discretion to adjourn the recognition and enforcement of an arbitration award in Malaysia pursuant to Section 39(2) of the AA 2005 where the award is subject to ongoing set-aside proceedings at its seat.

However, the courts do not have the jurisdiction to permanently injunct an application to recognise and enforce an arbitral award on the basis that the award sum is allegedly not due (Southern HRC Sdn. Bhd. v Danieli Co., Ltd [2023] 2 CLJ 831).

The public policy considerations that domestic courts apply in refusing to enforce foreign arbitral awards are based not on domestic public policy but on international norms; conflict with public policy is defined as violating the most basic notions of morality and justice, or as that which would shock the public conscience or be injurious to the public good. Thus, instances such as “patent injustice”, “manifestly unlawful and unconscionable”, “substantial injustice”, “serious irregularity” and other similar serious flaws in the arbitral process and award would fall within the applicable concept of public policy (Jan De Nul (Malaysia) Sdn Bhd v Vincent Tan Chee Yioun [2019] 2 MLJ 413).

In Master Mulia Sdn Bhd v Sigur Rus Sdn Bhd [2020] 12 MLJ 198, the Malaysian Federal Court confirmed that the Malaysian courts may set aside an arbitration award that was made in breach of natural justice but this would only be done where the breach had material and causative effect on the outcome of the arbitration.

The possibility of class action arbitration or group arbitration remains untested in Malaysia.

It is implicit in the AA 2005 that an arbitrator must be impartial; the requirement to disclose any circumstances that are likely to give rise to justifiable doubts regarding that person’s impartiality or independence makes this clear. Good faith requirements are also mandated by the AA 2005. Arbitrations pursuant to the AIAC are bound by the Asian International Arbitration Centre’s Code of Conduct for Arbitrators, which references the IBA Guidelines on Conflict of Interest in International Arbitration. 

Advocates and solicitors in Malaysia who act as counsel in arbitration proceedings remain bound by the ethical codes and professional standards governing advocates and solicitors contained in the Legal Profession Act 1976.

The AA 2005 (in its current form) is silent on whether third-party funding or champerty is permissible in Malaysia.

Pursuant to the Arbitration (Amendment) Act 2024, the new Sections 46A to 46I of the AA 2005 will provide a comprehensive framework for regulating third-party funding in Malaysia. The Arbitration (Amendment) Act 2024 provides that the common law rule against maintenance and champerty shall cease to apply, meaning that future third-party funding agreements shall not be treated as being contrary to public policy on the grounds of maintenance and champerty (Section 10 of the Arbitration (Amendment) Act 2024).

Where the funded party has made a third-party funding agreement, the funded party shall disclose or communicate to the other party to the arbitration and the arbitral tribunal or the court before which proceedings are brought in respect of the arbitration, as the case may be, the fact that a third-party funding agreement has been made and the name of the third-party funder in the third-party funding agreement. The disclosure or communication shall be made where the third-party funding agreement is made on or before the commencement of the arbitration or court proceedings in respect of the arbitration, upon the commencement of the arbitration or court proceedings or where the third-party funding agreement is made after the commencement of the arbitration or court proceedings in respect of the arbitration, within fifteen days after the third-party funding agreement is made.

To regulate third-party funding, the Minister may issue, revoke, vary, revise or amend a code of practice setting out the practices and standards parties and third-party funders are expected to comply with. 

An arbitral tribunal may consolidate separate arbitral proceedings, provided that the parties agree to confer such power on the arbitral tribunal. Section 40 of the AA 2005 confers express power on the arbitrator to consolidate proceedings in such circumstances. 

The court will not be able to exercise this power to consolidate separate arbitral proceedings under Section 40 of the AA 2005 (Ragawang Corporation Sdn Bhd v One Amerin Residence Sdn Bhd [2020] 1 LNS 895 (High Court)).

Generally, an arbitral award pursuant to an arbitration agreement is only binding on the parties to the arbitration agreement. The national court does not have the ability to bind foreign third parties.