What is Arbitration?

While most of us may have a rough idea about what court proceedings are, not many may be aware of an alternative dispute resolution process known as “arbitration”. While sharing the same objective as court proceedings to solve the dispute, arbitration is a private process that is done without a judge, and can even be completed in your office meeting room. Here are four things you should know about arbitration in Malaysia:

1.There is an agreement to resolve the dispute by arbitration

Unlike court proceedings, arbitration can only take place if both parties have agreed to have their disputes resolved via arbitration.  For example, if there is a dispute arising under a contract, there should be an arbitration clause in that contract whereby parties have agreed to arbitration.  Party autonomy is key in arbitration proceedings – which means that parties are generally free to agree on how the arbitration should proceed. Unlike court proceedings, parties can agree on the arbitrator (the person deciding the dispute), the language of the proceedings, what arbitration rules to apply, and other factors.

Unlike the court process, arbitration is often viewed as being less formal due to the concept of party autonomy as described above.  Parties do not have to deal with the formalities and technicalities of a court process (e.g.: courtroom etiquette).   The venue of the arbitration can take place anywhere – e.g.: one party’s office, or a rented meeting room such as in a hotel or at the premises of the Asian International Arbitration Centre (AIAC).

However, case like criminal cases, bankruptcy, winding up, divorce and so on are could not be resolved by arbitration.

2. Arbitration is confidential

Court proceedings are potentially a public affair: Some court judgments are published, court papers can be publicly accessible via online file search, and trials are usually heard in “open court” (which means any member of the public can observe the proceedings).  In comparison, arbitration is a private process that only involves the parties named.  To this end, the Malaysian Arbitration Act 2005 was recently amended to provide that unless otherwise agreed by the parties, no party may publish, disclose or communicate any information relating to the arbitration proceedings or an award made in those arbitral proceedings.

This is very important especially if the cases involve confidential document such as cost of the product, technical know-how whereby if by way of arbitration, it could not be accessed by third party. Cases conducted by way of arbitration due to is private and confidential, the record could not be found in CTOS, RAMCI as well and this indirectly would not affect the parties from taking a loan.

3. No judge, just an arbitrator

The person who presides over an arbitration proceeding is known as an arbitrator (not judge).  Depending on the arbitration agreement or the rules of arbitration that are adopted, the arbitral tribunal can consist of either a sole arbitrator, or an odd number such as three arbitrators or five arbitrators.

4. Award

The decision of the arbitral tribunal on the merits of the claim is referred to as an “award”. An arbitral award is final and binding on the parties, and can only be set aside in exceptional circumstances such as if the award was obtained via fraud.  An arbitration award (even if obtained outside of Malaysia), once registered with the High Court, may be enforced as a court judgment. In certain circumstances, an arbitral award made in Malaysia may be enforced in other countries, too.

The above are just some of the key fundamentals of arbitration, compared to court proceedings. While the speed and efficiency of the court process in Malaysia has improved tremendously over the past few years, arbitration is still seen as an attractive method of resolving disputes, especially where confidentiality is paramount and specialist expertise is required.

5. Reason why arbitration?

As the party decide the case is arbitrator elected by both parties and arbitrator normally possess the knowledge and skill of the dispute topic. Therefore, the parties need not be worried the qualification and knowledge of the arbitrator. Unlike arbitration, in court proceeding, the parties cannot elect the judge and yet the judge might not possess or expertise in the disputing area.

Our office Lawyer Ng and Lawyer Khoo are admitted as members of The Malaysian Institute Of Arbitrators due to they have handled lot arbitration cases and lot experiences.

In any event, you need assistance or any inquiries, please do not hesitate to contact Lawyer Khoo. A Whatsapp text first will be more preferable.


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