Existence of a Dispute
'Step in the Proceedings'
Granting Stay Pending Reference to Arbitration
Questions of Fraud
Section 34 of the Arbitration Act 1952
Setting Aside Arbitral Awards
In Celcom (M) Sdn Bhd v Sarawak Electricity Supply Corp ([2002] 4 MLJ 593) the Court of Appeal reiterated that the existence of a dispute which falls within the scope of the arbitration agreement is a prerequisite for a stay of proceedings in favour of arbitration under Section 6 of the Arbitration Act 1952.
The Malaysian courts have discretionary power to grant a stay of proceedings in favour of arbitration under Section 6.
In Celcom the Court of Appeal pointed out that the burden on the defendant in an application for a stay of proceedings is very light. All that is required is some evidence to show an agreement to arbitrate, coupled with an assertion that he or she is ready and willing to proceed to arbitration. Once these elements are satisfied, and provided that the dispute falls within the scope of the arbitration clause, then it normally follows that the stay of proceedings will be granted.
In Malaysian European Production Sdn Bhd v Zurich Insurance (Malaysia) Berhad ([2003] 1 AMR 670) the High Court ruled that an extension of time to file its defence under Order 3 Rule 5(3) of the Rules of High Court 1980 can be obtained by consent without a formal application to court, and that asking for an extension by letter did not constitute 'taking a step in the proceedings' within the meaning of Section 6 of the Arbitration Act.
In the event that a party to an arbitration agreement commences legal proceedings against another party to the agreement, Section 6 stipulates that that other party may apply to the court to have the dispute referred to arbitration only if it has not taken any steps in the legal proceedings.
The High Court also stated that the Sessions Court (in addition to the High Court) has the power to grant a stay of proceedings under Section 6.
Granting Stay Pending Reference to Arbitration
In Pekeliling Triangle Sdn Bhd v Chase Perdana Bhd ([2003] 1 CLJ 153) the Court of Appeal reiterated that the respondent must satisfy the court as to why an application for stay should be refused. The courts retain their discretion even if the appellant satisfies all the requisite conditions for a stay under Section 6 of the Arbitration Act. However, the general approach of the courts is to hold the parties to their bargain where they have agreed to arbitrate their disputes.
In Capital Insurance Bhd v Wierig Prefab (Selangor) Sdn Bhd ([2003] 1 MLJ 449) the High Court ruled that questions of fraud are outside the jurisdiction of an arbitrator and so when such matters arise the respondent cannot invoke the arbitration clause. The court added that the applicant need only show a genuine allegation of fraud at the time of the application. The need to prove fraud beyond reasonable doubt is required only at trial stage.
Section 34 of the Arbitration Act 1952
In Jati Erat Sdn Bhd v City Land Sdn Bhd ([2002] 1 CLJ 346) the High Court, considering Section 34 of the Arbitration Act 1952, concluded that it has no power to exercise its supervisory jurisdiction over arbitrations held under the Kuala Lumpur Regional Centre for Arbitration (KLRCA).
Section 34(1) states that the provisions of the act (except for the enforcement provisions) or any other written law do not apply to any arbitration held under the arbitration rules of the KLRCA.
The High Court also held that Section 34 applies to all arbitrations held under the KLRCA rules, irrespective of whether the parties are local or international.
In Government of India v Cairn Energy Pte Ltd ([2003] 1MLJ 348) the High Court held that the courts have the right to intervene and set aside an award where inadmissible evidence was relied upon or where material evidence was not considered.
The court had to reconcile two conflicting decisions, namely the Supreme Court decision in Ganda Edible Oils Sdn Bhd v Transgrain BV ([1998] 1 MLJ 428) and the Court of Appeal decision in Hartela Contractors v Hartecon JV Sdn Bhd ([1999] 2 MLJ 481).
In Ganda Edible Oils the Supreme Court held that the courts have the right to intervene on the grounds that the arbitrator made wrong inferences of fact and/or considered inadmissible evidence. In Hartela Contractors the Court of Appeal took the view that the courts do not have such a wide jurisdiction.
This case is on appeal and it will be interesting to see how the Court of Appeal responds, particularly in light of its recent decision in Future Heritage Sdn Bhd v Intelek Timur Sdn Bhd ([2003] 1 MLJ 49). In that case the court, while reiterating the law on setting aside an award, appeared to rely heavily on the dictum in Hartela Contractors when reversing the decision of the High Court which had set aside the award. The Court of Appeal stressed that the arbitrator is the sole judge of the facts and the issue of whether he drew wrong inference of fact from the evidence is not a sufficient basis to warrant the setting aside of the award.
For further information on this topic please contact Rodney Gomez, K Shanti Mogan or Muralee Nair at Shearn Delamore & Co by telephone (+603 2076 28 44 490 90) or by fax (+603 2026 6076) or by email ([email protected] or [email protected] or [email protected]).