Federal Court Grants Anti-Arbitration Injunction to a Non-Party to the Arbitration

The Federal Court in its grounds of judgment dated 1 July 2019 reinstated the injunction of a non-party to an arbitration. The anti-arbitration injunction was made against the parties to an ongoing arbitration to restrain them from proceeding and continuing with the arbitration proceedings, pending the parallel Court proceedings.

The Federal Court ruled on the questions of law that sections 8 and 10 of the Arbitration Act 2005 (AA 2005) would not apply to a party litigant who is not a party to the arbitration agreement and/or arbitration proceedings. Section 8 of the AA 2005 essentially states that no court shall intervene in matters governed by the AA 2005. Section 10 of the AA 2005 allows for the court to stay court proceedings and refer parties to arbitration.

In this decision, the Federal Court allowed a non-party to the arbitration to resort to the Court’s inherent jurisdiction to grant an anti-arbitration injunction to restrain the arbitrating parties from proceeding with the arbitration. The test to be applied is the American Cyanamid-like test of a serious issue to be tried (or as applied in Malaysia via the Keet Gerald Francis test) instead of a higher threshold in the English High Court decision in J Jarvis v Blue Circle Dartfort Estates [2007[ EWHC 1262 (TCC).

Where there are parallel court proceedings involving some parties in an arbitration and non-parties to an arbitration, this Federal Court decision appears to favour giving primacy to the court proceedings and to allow an injunction or stay of the arbitration proceedings. Continue reading

Winding Up vs Arbitration: No to Stay but Court has Discretion to Dismiss the Winding Up

The Malaysian Courts continue to tackle the issue of the effect of an arbitration agreement on the litigant’s ability to present a winding up petition based on a debt. This is in the context of a purported debt arising from a contract containing the arbitration clause. There have been conflicting High Court decisions on this point, especially on the issue of whether the Court can stay the winding up pursuant to section 10 of the Arbitration Act 2005 (AA 2005).

The recent High Court decision in Awangsa Bina Sdn Bhd v Mayland Avenue Sdn Bhd (Grounds of Judgment dated 2 May 2019) decided that it would not stay the winding up proceedings under the AA 2005. Nonetheless, the Court agreed with the authorities from the UK, Singapore and Hong Kong to apply the test of whether there is a prima facie dispute of the debt. Since there was, the winding up petition was dismissed. The decision provides a useful summary of the cases in Malaysia and other jurisdictions. Continue reading

Case Update: Federal Court Rules on Scope of An International Arbitration under Malaysia’s Arbitration Act 2005

In its recent grounds of judgment dated 31 October 2018, the Federal Court in the Jan De Nul decision clarified the effect of an international arbitration and the applicability of certain provisions of the Arbitration Act 2005 (AA 2005). The Federal Court also overruled the decision in the Court of Appeal AJWA case. The dispute gave rise to two separate appeals, one in relation to section 42 of the AA 2005 and another relating to the setting aside under section 37 of the AA 2005. This decision only deals with the section 42 aspect.

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Case Update: Winding Up Petition Cannot be Stayed Pending Reference to Arbitration

In an earlier article ‘Arbitration and Liquidation: Never the Twain Shall Meet?, I had examined the possible tension between the contractual bargain to arbitration and the statutory right to bring winding up proceedings based on a debt. Would an arbitration agreement trump the statutory winding up process?

The recent High Court decision in NFC Labuan Shipleasing I Ltd v Semua Chemical Shipping Sdn Bhd [2017] MLJU 900; [2017] 1 LNS 943 found that there cannot be a stay under the Arbitration Act 2005 (AA 2005) of a winding up petition. A winding up petition is not a claim for payment. It is a class action in the public interest as part of a statutory regime. Therefore, it was held that a winding up petition is not a ‘proceeding’ that is susceptible to a stay pending arbitration. Further, a winding up petition does not concern a matter that is subject to an arbitration agreement. Continue reading

Case Update: Federal Court Rules on Seat of Arbitration and the Law of the Arbitration Agreement

The Federal Court in its grounds of judgment dated 17 August 2017 has ruled on the Thai-Lao Lignite v Government of the Lao People’s Democratic Republic appeal.

The Question of Law and the Determination

There was one critical question of law that was answered by the Federal Court:

Where the governing law of the contract is foreign law and the seat of arbitration [seat] is Malaysia, does the parties’ stipulation of Malaysia as the seat constitute an express agreement that the law governing the arbitration agreement is Malaysian law?

In answer to this question, the Federal Court answered as follows. Continue reading