Previously, settled law and existing legislation in Malaysia did not permit the arrest of a vessel in admiralty proceedings to secure a claim in arbitration (for further details please see "Arresting ships in Malaysian waters to secure a claim in arbitration").
However, there has been a positive development: a bill to amend the Arbitration Act 2005 has been tabled in Parliament, which, once passed, will be known as the Arbitration (Amendment) Act 2010. This bill seeks to amend the 2005 act to empower a Malaysian court that exercises admiralty jurisdiction to order the retention of vessels or the provision of security pending the determination of arbitration proceedings related to admiralty disputes. The bill proposes to amend Sections 10 and 11 of the 2005 act.
At present, Sections 10 and 11 read as follows:
"S.10 Arbitration agreement and substantive claim before court
(1) A court before which proceedings are brought in respect of a matter which is the subject of an arbitration agreement shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the parties to arbitration unless it finds:
(a) that the agreement is null and void, inoperative or incapable of being performed; or
(b) that there is in fact no dispute between the parties with regard to the matters to be referred.
(2) The court, in granting a stay of proceedings pursuant to subsection (1), may impose any conditions as it deems fit.
(3) Where the proceedings referred to in subsection (1) have been brought, arbitral proceedings may be commenced or continued, and an award may be made, while the issue is pending before the court.
S.11 Arbitration agreement and interim measures by High Court
(1) A party may, before or during arbitral proceedings, apply to a High Court for any interim measure and the High Court may make the following orders for:
(a) security for costs;
(b) discovery of documents and interrogatories;
(c) giving of evidence by affidavit;
(d) appointment of a receiver;
(e) securing the amount in dispute;
(f) the preservation, interim custody or sale of any property which is the subject matter of the dispute;
(g) ensuring that any award which may be made in the arbitral proceedings is not rendered ineffectual by the dissipation of assets by a party; and
(h) an interim injunction or any other interim measure.
(2) Where a party applies to the High Court for any interim measure and an arbitral tribunal has already ruled on any matter which is relevant to the application, the High Court shall treat any findings of fact made in the course of such ruling by the arbitral tribunal as conclusive for the purposes of the application." (emphasis added)
The bill proposes the following amendments to Section 10.
First, the following subsections are to be inserted after subsection (2):
"(2A)Where admiralty proceedings are stayed pursuant to subsection (1), the court granting the stay may, if in those proceedings property has been arrested or bail or other security has been given to prevent or obtain release from arrest:
(a) order that the property arrested be retained as security for the satisfaction of any award given in the arbitration in respect of that dispute; or
(b) order that the stay of those proceedings be conditional on the provision of equivalent security for the satisfaction of any such award.
(2B) Subject to any rules of court and to any necessary modifications, the same law and practice shall apply in relation to property retained in pursuance of an order under subsection (2A) as would apply if it were held for the purposes of proceedings in the court making the order.
(2C) For the purposes of this section, admiralty proceedings refer to admiralty proceedings under Order 70 of the Rules of the High Court 1980 [PU(A) 50/1980] and proceedings commenced pursuant to paragraph 24(b) of the Courts of Judicature Act 1964 [Act 91]."
Second, the following subsection is to be inserted after subsection (3): "(4) This section shall also apply in respect of an international arbitration, where the seat of arbitration is not in Malaysia."
Furthermore, the bill proposes the following amendments to Section 11.
First, in paragraph (1)(e), the words "whether by way of arrest of property or bail or other security pursuant to the admiralty jurisdiction of the High Court" are to be inserted after the word 'dispute'.
Second, the following subsection is to be inserted after subsection (2): "(3) This section shall also apply in respect of an international arbitration, where the seat of arbitration is not in Malaysia."
Once the Arbitration (Amendment) Act 2010 comes into force and the proposed amendments have their desired effect, Malaysia will be on a par with other maritime nations that permit the arrest of a vessel to secure a claim in arbitration.
The bill received its first reading in the House of Commons on December 14 2010.
For further information on this topic please contact Rajasingam Gothandapani at Shearn Delamore & Co by telephone (+60 3 2070 0644), fax (+60 3 2078 5625) or email ([email protected]).