Proceedings against federal or state government
This article is part of a series on arbitral awards in Malaysia.(1)
Arbitral awards may, with the leave of the High Court, be enforced as a judgment of the High Court pursuant to section 27 of the Arbitration Act 1952 (the 1952 Act).(2) The 1952 Act does not set out grounds for refusing enforcement. However, the grounds for refusing enforcement would include grounds such as:
- misconduct on the part of the arbitrator;
- ambiguity and uncertainty in the award;
- incompleteness; and
- the arbitrator having exceeded their jurisdiction.
Moreover, when a party is not able to resort to summary procedure under section 27, the party may enforce it by way of an action on the award.
Sections 38 and 39 of the Arbitration Act 2005 (the 2005 Act) deal with recognition and enforcement of foreign arbitral awards and the grounds for refusing recognition or enforcement. These sections apply to awards sought to be enforced in Malaysia in respect of both domestic and foreign awards.
Section 38 sets out the procedure to enforce a foreign award.(3) The Arbitration (Amendment) Act 2011 (the 2011 Act) allows for awards made in an international arbitration with a seat in Malaysia to be enforceable.
Prior to the 2011 Act, there was some confusion with regard to the enforcement of foreign arbitral awards in the Court of Appeal case of Sri Lanka Cricket v World Sport Nimbus Pte Ltd.(4) The Court decided that gazette notification under section 2(2) of the New York Convention Act was a compulsory requirement for enforcement of a Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) award under that Act. The Act omitted to gazette the New York Convention countries. This New York Convention award handed down in Singapore was not enforced.
The decision in Sri Lanka Cricket was eventually overruled by the Federal Court in Lombard Commodities Ltd v Alami Vegetable Oil Products Sdn Bhd.(5) The Federal Court held that gazette notification under section 2(2) of the New York Convention Act could not be construed as a mandatory requirement before a New York Convention award made in a contracting state can be enforced in Malaysia. Therefore, in the absence of gazette notification, evidence could be led to show that a particular country is a contracting state.
In Siemens Industry Software Gmbh & Co Kg (Germany) (formerly known as Innotec Gmbh) v Jacob and Toralf Consulting Sdn Bhd (formerly known as Innotec Asia Pacific Sdn Bhd) (Malaysia) & Ors,(6) the Federal Court held that for the purposes of an application under section 38, the recognition and enforcement of an arbitral award relate only to the dispositive portion of the arbitral award and not to the entire award. The Federal Court held that the entire arbitral award – which embodies the witnesses' testimonies, the submissions of the parties and the findings, reasoning and analysis of the arbitral tribunal – is not necessary for the purposes of registration and enforcement under section 38.(7) These parts of the arbitral award would only be relevant in an application to set aside the arbitral award under section 39. In an application under section 38, a court is not required to go behind the arbitral award and understand the arbitral tribunal's reasoning as having complied with the formal requirements of section 38; the registration of the award is granted as of right.
Section 39 deals with grounds for refusing recognition or enforcement and corresponds with article 36 of the United Nations Commission of International Trade Law Model Law. The grounds for refusal for recognition are exhaustive and if none of these grounds are present, the award must be recognised.
The area in which a dispute may arise is the question of public policy. It now appears that the Malaysian courts generally adopt a narrow interpretation of "public policy" in relation to setting aside applications. The same interpretation has been held to be applicable to "public policy" under section 39 of the 2005 Act.(8)
Under the 2005 Act, it does not appear from published decisions that a party may avail itself of a passive remedy in the event a party fails to raise a plea of no jurisdiction in the arbitral proceedings. In Agrovenus LLP v Pacific Inter-Link Sdn Bhd and Another Appeal, in proceedings brought under sections 38 and 39 of the 2005 Act (relating to recognition and enforcement and refusal to accord recognition and enforcement), the Court of Appeal held that an award-debtor must be estopped from relying on a jurisdictional objection as a basis to refuse recognition or enforcement of an arbitral award in Malaysia.(9)
Subsequently, the Federal Court in CTI Group Inc v International Bulk Carriers SpA confirmed that grounds for refusal are exhaustive, and an application to refuse recognition must fail (and consequently an award must be recognised and enforced) where none of the grounds set out under section 39 are present.(10)
Difference between sections 38 and 39
The Court of Appeal in Alami Vegetable Oil Products Sdn Bhd v Hafeez Iqbal Oil & Ghee Industries (Pvt) Ltd(11) explained the differences between sections 38 and 39 of the 2005 Act and the arguments that may be raised by a party in relation to these two provisions:
- Section 38 is a "recognition procedure" to convert an arbitration award to a judgment and can only be brought as a ground by the person holding an arbitration award. Therefore, it is impermissible to argue issues relating to the award or merits of the award under section 38 as the merits of the award could not be an issue under this provision.(12)
- Arguments relating to the award or merits of the award are permitted in an application under section 39, which can only operate upon an application made by the respondent to the award.(13)
The Court of Appeal in Alami Vegetable Oil further added that it would be tantamount to an abuse of judicial process if a party had not taken the argument before the trial judge by a proper application under section 39 of the 2005 Act should it seek to appeal the decision of the trial judge (which was the core issue in the case at hand).(14) Parties and counsel would therefore be well advised to familiarise themselves with the core distinction between sections 38 and 39 of the 2005 Act in making an application to recognise or enforce an arbitral award.
Proceedings against federal or state government
With regard to enforcement proceedings against the government of Malaysia or a state government within the federation of Malaysia, a party seeking to enforce an award must apply for the issuance of a certificate pursuant to section 33 of the Government Proceedings Act 1956.(15) An application for the certificate is to be made after the application under section 38 of the 2005 Act is granted. In Triumph City Development Sdn Bhd v Kerajaan Negeri Selangor, the High Court held that once the provisions of section 33(1) of the Government Proceedings Act are fulfilled, a corresponding certificate shall be issued by the court. In the event that the federal government or a state government refuses to comply with the judgment, the aggrieved party may thereafter apply for a mandamus order to compel payment by the federal or state government.(16)
For further information on this topic please contact Tan Sri Dato' Cecil Abraham, Dato' Sunil Abraham, Aniz Ahmad Amirudin or Syukran Syafiq at Cecil Abraham & Partners by telephone (+60 3 2726 3700) or email ([email protected], [email protected], [email protected] or [email protected]). The Cecil Abraham & Partners website can be accessed at cecilabraham.com.
(1) For earlier articles in the series, see:
- "Arbitral awards in Malaysia: overview, form requirements, and correction, supplementation and amendment"; and
- "Arbitral awards in Malaysia: challenge and other actions".
(2) For details of the current arbitration legislation in Malaysia, see "Introduction to arbitration in Malaysia: history and current legislation".
(3) The manner in which such an application is to be made is set out in Order 69 rule 8(1) of the Rules of Court 2012. The application may be made on an ex parte basis. In Tune Talk Sdn Bhd v Padda Gurtaj Singh  MLJU 67, the Court of Appeal held that the provisions of sections 38 and 39 are exhaustive and that there is no room for any other substantive requirements to be satisfied for the recognition and enforcement of an arbitral award. The Court of Appeal further held that the provisions of Order 69 rule 8(1) of the Rules of Court 2012 merely set out the procedural means to obtain enforcement and recognition of the arbitral award. An act of non-compliance with the procedural requirements is therefore not absolutely fatal.
(7) The Federal Court also held that such a position is consistent with the confidentiality of the arbitration process.
(8) See Kelana Erat Sdn Bhd v Niche Properties Sdn Bhd  5 MLJ 809. See also "Arbitral awards in Malaysia: challenge and other actions".
(12) Id, , ,  (Hamid Sultan JCA).
(13) Id,  (Hamid Sultan JCA).
(14) Id,  (Hamid Sultan JCA).
(15) Originating Summons No. BA-24NCC(ARB)-03-07/2017. The decision of the High Court was upheld on appeal by the Court of Appeal in Civil Appeal No. B-01(NCC)(A)-19-01/2018.
(16) Minister of Finance, Government of Sabah v Petrojasa Sdn Bhd  4 MLJ 641.