Top 5 Arbitration Cases in Malaysia 2021

I feature the Top 5 Arbitration Cases in Malaysia for the year 2021. This follows the past editions of the 2020 cases and the 2019 cases.

This year-end review covers the issues on the seat of arbitration for West Malaysia and East Malaysia, the stay of arbitration proceedings, court reliefs after the issuance of the arbitral award, the availability of the Mareva injunction interim measure, and the grant of an anti-arbitration injunction.

#1: Mesenang Decision – Federal Court Decides on Seat of Arbitration in context of Peninsular Malaysia, Sabah or Sarawak

Grounds by: Nallini Pathmanathan FCJ

(Masenang Sdn Bhd v Sabanilam Enterprise Sdn Bhd [2021] 6 MLJ 255 and grounds of judgment dated 3 September 2021)

Why is this case important?

In arbitration law, the seat of arbitration determines the court with the exclusive jurisdiction to exercise supervisory or regulatory powers. That would include the court with the power to set aside an award.

In the context of Malaysia, the seat of arbitration could be in Peninsular Malaysia, Sabah or Sarawak. It would then be the High Court of Malaya (for Peninsular Malaysia) or the High Court of Sabah and Sarawak (for Sabah or Sarawak) that has the supervisory jurisdiction.

In this case, the arbitration was a result of a dispute of a construction project in Kota Kinabalu, Sabah. The seat of arbitration was stipulated as Kuala Lumpur. The successful claimant in arbitration filed an enforcement application in the Kuala Lumpur High Court. On the other hand, the respondent, located in Sabah, filed a setting aside application in the Kota Kinabalu High Court.

The Federal Court ultimately ruled that the Kuala Lumpur High Court was the appropriate supervisory court. Hence, all of the enforcement or setting aside applications should have been filed in Kuala Lumpur.

This decision then shows the importance of the arbitration agreement itself stating that the seat of arbitration is: Kuala Lumpur/Peninsular Malaysia/which particular State of Malaysia/Sabah/Sarawak. Arbitrating parties can then avoid uncertainty and legal challenges.
 

#2: Samling Resources Decision – High Court Stays Arbitration Proceedings Pending Court Suit

Grounds by: Aliza Sulaiman J

(Samling Resources Sdn Bhd v Ekovest Berhad & Anor [2021] 1 LNS 260 and grounds of judgment dated 11 January 2021)

Why is this case important?

This case shows the Court having to carry out a difficult balancing act when there is an overlap of issues to be determined in arbitration and that in court proceedings. That overlap and different parties could involve some parties to an arbitration agreement and some entities who are not parties to the arbitration agreement.

Here, the Plaintiff filed a court suit against the 1st Defendant and the 2nd Defendant for, among others, misrepresentation relating to a construction project. Related to this project, the Plaintiff had also signed a joint venture agreement with the 2nd Defendant. A dispute arose from the joint venture agreement and the 2nd Defendant had already initiated arbitration against the Plaintiff.

The 1st Defendant had sought for a stay of the court suit under the Court’s inherent jurisdiction. The stay was pending the arbitration between the Plaintiff and the 2nd Defendant. This was to prevent inconsistent findings between the court suit and the arbitration proceedings.

Further, the 2nd Defendant also sought for a stay under section 10 of the Arbitration Act 2005 (AA 2005) of the court suit pending the same arbitration.

Ultimately, the Court allowed for the 2nd Defendant’s stay of the Plaintiff’s court action against the 2nd Defendant. But the Court made the stay subject to this condition: that the 2nd Defendant’s arbitration itself would have to be stayed. This stay of arbitration would be to allow the Plaintiff to first proceed and determine its claim against the 1st Defendant.

The decision demonstrated the wide conditions that the Court could impose when there is a stay under section 10 of the AA 2005. The Court was also prepared to order a stay of the arbitration proceedings itself in ensuring no inconsistency in the determination of overlapping issues.

#3: Danieli Decision – High Court Explains the Sole Relief of Enforcing the Arbitral Award

Grounds by: Anand Ponnudurai JC

(Danieli & C Officine Mecchaniche SpA v Southern HRC Sdn Bhd [2021] 10 MLJ 48 and grounds of judgment dated 22 February 2021)

Why is this case important?

The facts would make it easier to understand this case.

Danieli is an Italian company. It built a plant in Penang for Southern HRC, a Malaysian company.

The arbitral tribunal decided that Danieli had to pay damages to Southern HRC. In return, Southern HRC was to transfer the title of the Penang plant to Danieli.

Danieli wanted to have access to the plant for inspection. Southern HRC responded that it would only give Danieli access after Danieli paid the sums under the arbitral award. There was an impasse.

Danieli filed a court action in Malaysia seeking certain declarations to allow Danieli to inspect the plant.

Southern HRC responded and challenged whether the court had jurisdiction to determine the matter and applied for striking out of the action. In essence, that the Court’s sole power in respect of the arbitral award was to enforce the award. The award itself could not give rise to any cause of action.

The Court upheld the strict application of section 8 of the Arbitration Act 2005 (AA 2005):

“No court shall intervene in matters governed by this Act, except where so provided in this Act.”

 

The Court held that once a foreign award is handed down, the court facilitation is limited to recognition and enforcement. The Court cannot grant any other relief in respect of a foreign award.

#4: Jana DCS Decision – High Court Confirms Availability of Mareva Injunction Relief as an Interim Measure

Grounds by: Faizah Jamaludin J

(Jana DCS Sdn Bhd v TAR PH Family Entertainment Sdn Bhd and other cases [2021] MLJU 1275)

Why is this case important?

The High Court confirmed its jurisdiction to grant a Mareva freezing injunction pending the disposal of arbitral proceedings. This is under the interim measures of section 11 of the AA 2005. The Court read its section 11 powers widely.

The High Court held that the ability to grant an interim measure to “provide a means of preserving assets” is not confined only to the admiralty jurisdiction of the Court (as referred to in section 11(1)(c) of the AA 2005).

The High Court also held that while the arbitral tribunal can grant the interim measure under section 19(2) of the AA 2005 to “provide a means of preserving assets“, that does not replace the Court’s power under section 11 of the AA 2005.

The High Court upheld the wide powers of the Court to grant interim measures under section 11 of the AA 2005. This power also included the discretion to grant other interim measures pursuant to its civil jurisdiction under the Courts of Judicature Act 1967.

#5: MISC Cockett Marine Decision – High Court Grants Anti-Arbitration Injunction

Grounds by: Atan Mustaffa Yussof Ahmad JC

(MISC Bhd v Cockett Marine Oil (Asia) Pte Ltd [2021] MLJU 563 and grounds of judgment dated 7 April 2021)

Why is this case important?

The High Court granted an anti-arbitration injunction to restrain an ongoing arbitration with the seat in London. It appears that the American Cyanamid test is to apply in the grant of such an anti-arbitration injunction.

In this case, the Court decided that there was no arbitration agreement between the parties and instead, the contract was subject to the exclusive jurisdiction of the Malaysian Court.

The High Court applied the American Cyanamid test of serious issues to be tried, the adequacy of damages and the balance of convenience.

 

 

One thought on “Top 5 Arbitration Cases in Malaysia 2021

  1. yee huan 24 December, 2021 / 5:01 pm

    #2 has been overturned by the Court of Appeal.

Leave a Reply

Your email address will not be published.