In Dato’ Seri Timor Shah Rafiq v Nautilus Tug & Towage Sdn Bhd [2019] MLJU 405, the High Court considered for the first time the new section 41A of Malaysia’s Arbitration Act 2005 (“Arbitration Act“), and its application to non-parties to an arbitration.

Background

In the context of a shareholders’ dispute, the plaintiff-director of the defendant company applied for leave to commence derivative proceedings against the defendant company. The defendant company objected to the production of two documents annexed to the plaintiff’s affidavit supporting the application. These documents were originally produced for the purpose of arbitration proceedings between the defendant company and its corporate shareholders, Nautical Supreme Sdn Bhd (to which the plaintiff is a director) and Azimuth Marine Sdn Bhd.

In objecting to the production of the two documents, the defendant company relied on section 41A of the Arbitration Act, which provides as follows:

41A. Disclosure of information relating to arbitral proceedings and awards prohibited

  • Unless otherwise agreed by the parties, no party may publish, disclose or communicate any information relating to –
    • the arbitral proceedings under the arbitration agreement; or
    • an award made in those arbitral proceedings.
  • Nothing in subsection (1) shall prevent the publication, disclosure or communication of information referred to in that subsection by a party –
    • if the publication, disclosure or communication is made –
      • to protect or pursue a legal right or interest of the party; or
      • to enforce or challenge the award referred to in that subsection,

in legal proceedings before a court or other judicial authority in or outside Malaysia

  • if the publication, disclosure or communication is made to any government body, regulatory body, court or tribunal and the party is obliged by law to make the publication, disclosure or communication; or
  • if the publication, disclosure or communication is made to a professional or any other adviser of any of the parties.

Although the plaintiff was not a party to the arbitration, the defendant company argued that the rules on confidentiality under section 41A applied to non-parties, citing a prior decision of the High Court that “[t]he principle of privacy precludes third parties from making use of documents generated in arbitration proceedings outside the arbitration without the consent of the party producing it or the leave of court“. As a party to the arbitration, the defendant company did not consent to the disclosure of the two documents.

Decision

The High Court dismissed the objection on the following grounds:

  • First, that the plaintiff, as a non-party to the arbitration, is not bound by section 41A. The High Court considered that the wording of section 41A(1) does not envisage its application to non-parties to an arbitration. In its analysis, third parties are not parties to which the statutory duty of confidentiality under section 41A(1) applies. As third parties are not bound by the statutory duty of confidentiality, they do not require the consent of the parties nor do they need to qualify under any exemption under section 41A(2) in order to disclose confidential information relating to the arbitration.
  • Second, that the introduction of section 41A is intended to supersede any Malaysian common law principles of confidentiality of arbitrations, including any duty of confidentiality imposed on third parties.
  • Third, that any express or implied obligation of confidentiality between the parties to an arbitration cannot extend to non-parties due to a lack of privity.
  • Fourth, that confidentiality can be superseded where the interests of justice requires disclosure. However, this did not appear to be decisive in dismissing the defendant’s objection.

The High Court also remarked that any party to an arbitration may publish, disclose or communicate information relating to that arbitration if it is within the circumstances set out under section 41A(2)(a) to (c), without requiring any prior leave to do so.

Comment

Section 41A was modelled on section 18 of Hong Kong’s Arbitration Ordinance, which in turn was modelled on section 14 of the New Zealand Arbitration Act prior to its amendments in 2007. Prior to the introduction of section 41A in 2018, the Arbitration Act did not address the confidentiality of arbitrations, which led Malaysia’s Federal Court to observe that “the whole topic of confidentiality of arbitral proceedings” was not regulated by the Arbitration Act (Far East Holdings Bhd & Anor v Majlis Ugama Islam dan Adat Resam Melayu Pahang and Other Appeals [2018] 1 MLJ 1), which justified the Malaysian courts’ recourse to common law principles. As such, Malaysian courts broadly implied a duty of confidentiality on parties to arbitrations and non-parties alike.

As was recently decided by the Federal Court in a separate judgment (which we discussed here), the Arbitration Act does not apply to non-parties. Thus, where the Arbitration Act refers to a ‘party’, any statutory right, obligation or prohibition provided thereunder does not extend to a non-party. Based on the decision of the High Court (which was decided prior to the Federal Court’s ruling), this appears to include section 41A. In short, a non-party is exempted from rules which are intended to preserve the privacy and confidentiality of arbitration proceedings.

The circumstances surrounding the claim and the reasoning of the High Court are curious.

  • One of the statutory exceptions to confidentiality allows a party to the arbitration to disclose confidential documents where any party (including a third party) brings litigation proceedings against it. However, it does not envisage a situation where a third party commences proceedings against a party to the arbitration by relying on confidential documents in the arbitration. It is unclear from the case how the plaintiff obtained the confidential documents.
  • Section 8 of the Arbitration Act provides that “[n]o court shall intervene in matters governed by [the Arbitration Act] except where so provided in [the Arbitration Act]. As evident from the judgment, the prevailing notion under Malaysian arbitration law is for the Arbitration Act to take precedence on any area of arbitration law previously regulated by Malaysian common law where the Arbitration Act makes such provision. If that is the case, then it is arguable that the Malaysian common law rule prohibiting third parties from using confidential documents produced in arbitral proceedings should continue to stand, as it is not specifically regulated by the strict wording of the Arbitration Act.

Parties should bear in mind that both the obligation and extent of confidentiality differ between jurisdictions and institutional rules. Given this uncertainty, parties ought to draft robust clauses in their contracts to regulate the various different aspects of confidentiality in an arbitration, and work with the tribunal to regulate the confidentiality of arbitral proceedings.