Interaction between national courts and arbitration tribunals
Effect of insolvency
This article is part of a series on conducting arbitration in Malaysia.(1)
Interaction between national courts and arbitration tribunals
There is doubt as to whether the High Court has inherent power(2) to supervise the conduct of an arbitration(3) by the arbitrator. The High Court, in section 13(4) to (6) of the Arbitration Act 1952 (the 1952 Act)(4) has the following powers:
- ordering security for costs;
- ordering the discovery of documents and interrogatories;
- ordering the giving of evidence by affidavit;
- ordering the examination under oath of any witness;
- ordering the preservation, interim custody or sale of any goods that are the subject matter of the reference;
- securing the amount in dispute in the reference;
- ordering the detention, preservation or inspection of any property or thing that is the subject of the case or regarding which any question may arise; and
- any of the above;
- any persons to enter upon or into any land or building in the possession of any party to the case; or
- any samples to be taken or any observation to be made or experiment to be carried out that may be necessary or expedient for the purpose of obtaining full information or evidence and interim injunctions and the appointment of a receiver.
The Supreme Court in Rimbunan Hijau Sdn Bhd v Sarawak Plywood (M) Sdn Bhd held that the test for awarding interlocutory injunctions under American Cynamid Co v Ethicon Ltd does not apply to cases that are already pending an arbitrator's decision on certain issues submitted to them under the terms of an agreement executed between the parties.(5)
The High Court also has the jurisdiction, pursuant to section 22 of the 1952 Act, to order an arbitrator to state a special case on any question of law arising in the course of the defence. This power may also be exercised by the arbitrator on their own initiative or at the request of a party.
The High Court may also, pursuant to section 23 of the 1952 Act, remit an award to the arbitrator for reconsideration.
The basic tenet of the Arbitration Act 2005 (the 2005 Act) is that of non-interference by the court, unless there are express provisions allowing this.
Previously, the High Court, pursuant to the old section 11, had the power to grant interim measures in respect of:
- security for costs;
- discovery of documents and interrogatories;
- giving of evidence by affidavit;
- securing the amount in dispute;
- preservation, interim custody and sale of any property that is the subject matter of a dispute; and
- ensuring that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets and interim injunctions.
The arbitral tribunal was also given similar powers under the old section 19 save that it had no power to grant an injunction or appoint receivers. The reason for this could have been that, with regard to the grant of injunctions – and, in particular, Mareva injunctions – the power of the court was required for purposes of enforcement. Therefore, the rationale appeared to be to provide the parties with a choice in view of the concurrent nature of the powers set out in sections 11 and 19. It is doubtful whether a court has the power to also grant a Mareva injunction in respect of an international arbitration held elsewhere, where there are assets located in Malaysia.
The amended section 19 of the 2005 Act (for further details, see "Conducting arbitration in Malaysia: interim measures of protection") conferred widened powers to the arbitral tribunal, which is now able to grant interim measures similar to the measures granted by the High Court. In addition, an extensive legislative scheme has been put in place, which currently governs the procedures for the arbitral tribunal to grant such measures. The High Court retains the power to recognise and enforce interim measures issued by the arbitral tribunal. However, in the absence of any judicial determination, it remains unclear as to whether the changes brought under the Arbitration (Amendment) Act 2018 (No. 2) have expanded the powers of the arbitral tribunal to grant injunctions or appoint receivers.
There is power in section 40 for the court to order consolidation and concurrent hearings of arbitral proceedings. This would be exercised in the case of multi-party disputes where there is an agreement among the parties.
Under the 1952 Act, the arbitrator cannot order consolidation or concurrent hearings without the consent of the parties. Even the courts may not have the power to intervene in such situations.(6)
Similarly, under section 40 of the 2005 Act, it is clear that unless the parties agree to confer such power on the arbitral tribunal, the tribunal has no power to order consolidation of arbitration proceedings or concurrent hearings. However, it is arguable that a court may appoint the same arbitral tribunal to hear the various disputes consecutively to avoid inconsistent findings and simultaneously save costs and time.
Under the Asian International Arbitration Centre (AIAC) Arbitration Rules 2021, Part 1, rule 20 allows for the joinder of an additional party. The request for joinder of the additional party ought to be made no later than the filing of the statement of defence and counterclaim, or at any time thereafter, provided there exists exceptional circumstances. A joinder request can be made where:
- all parties to the arbitration and the additional party consent in writing to the joinder;
- such an additional party is prima facie bound by the arbitration agreement that gives rise to the arbitral proceedings; or
- the participation of such an additional party is necessary for the efficient resolution of the dispute and directly affects the outcome of the arbitral proceedings.
If the arbitral tribunal has yet to be constituted, the joinder request is to be submitted to the director of the AIAC. If the arbitral tribunal has been constituted, the joinder request is to be submitted to the relevant arbitral tribunal.
Pursuant to Part 1, rule 21 of the AIAC Arbitration Rules 2021, at the request of a party, the director of the AIAC has the power to consolidate two or more arbitral proceedings where:
- all parties agree in writing to consolidate the proceedings;
- the claims and counterclaims in the arbitrations are made under the same arbitration agreement; or
- the claims and counterclaims are made under different arbitration agreements, provided that the dispute arises from the same legal relationship and the arbitration agreements are compatible.
Under section 5(1) of the 1952 Act, a party to an arbitration agreement that is subsequently adjudged to be bankrupt may, if the person who has jurisdiction to administer the property adopts the agreement, commence or defend an arbitration. Under section 5(2) of the 1952 Act, where such an agreement is not adopted by the person who has jurisdiction to administer the property and the matter needs to be determined in connection with the bankruptcy proceedings, then any other party to the agreement or the official assignee of the bankrupt party's estate may apply to the court that has jurisdiction over the bankruptcy proceedings for leave to refer the matter to arbitration in accordance with the agreement.
Where a company is being wound up, the liquidator may bring or defend proceedings and, by giving notice, disclaim any onerous property such as unprofitable contracts, and thereby disclaim any arbitration agreements within them. On being informed of the appointment of a liquidator, the arbitrator has no option but to issue directions to the parties indicating that the arbitration proceedings are temporarily stayed. Once the company is wound up and the liquidator has control of the company's assets, the liquidator has the power to commence an arbitration or continue with an existing one. If there is no response from the liquidator, the arbitrator may make a peremptory order stating that failure to comply may lead to the arbitration being terminated.
An administrative receiver, when appointed, takes the role of the board of directors. They cannot disclaim unprofitable contract but, bearing in mind the company's position, may repudiate them by merely failing to perform the company's obligations. The other party is entitled to damages but as an unsecured creditor.
The 2005 Act, under section 49, re-enacts section 5 of the 1952 Act in substantially the same terms.
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:
- "Conducting arbitration in Malaysia: doctrine of separability, jurisdiction and arbitrability";
- "Conducting arbitration in Malaysia: arbitral tribunals";
- "Conducting arbitration in Malaysia: law governing conduct";
- "Conducting arbitration in Malaysia: procedure";
- "Conducting arbitration in Malaysia: taking of evidence"; and
- "Conducting arbitration in Malaysia: interim measures of protection".
(2) Sarawak Shell Bhd v PPES Oil & Gas Sdn Bhd,  2 MLJ page 20 at 25.
(3) Bina Jati Sdn Bhd v Sum Projects Bros Sdn Bhd,  2 MLJ page 71.
(4) For details of the current arbitration legislation in Malaysia, see "Introduction to arbitration in Malaysia: history and current legislation".
(5)  2 MLJ 377 at 380 (Syed Agil Barakbah SCJ).
(6) See, for example, Safege Consulting Engineers v Ranhill Bersekutu Sdn Bhd  1 MLJ 689.