In Shanghai All Green Environmental Engineering(1) the plaintiff claimed against the defendant for money due in respect of work done and services rendered. This was disputed by the defendant, which applied to stay the court proceedings and have the dispute referred to arbitration pursuant to Section 10 of the Arbitration Act 2005.
Clause 5.12 of the agreement referenced arbitration pursuant to the rules of the Malaysian International Arbitration Centre and used the word 'may' in relation to the reference to arbitration:
"In the event of any dispute or disagreement ('dispute') arising out of or in connection with or in relation this Contract, the parties shall make every reasonable effort to agree amicably upon a reasonable solution. Failing a negotiated settlement within 30 days from the commencement of the parties' negotiation/discussion, either party may refer such dispute to arbitration."
The plaintiff opposed the defendant's stay application on two grounds:
- The defendant was prevented from making its application as it had submitted to the jurisdiction of the Malaysian courts by way of a letter dated December 9 2014.
- Given that the agreement made reference to the rules of the Malaysian International Arbitration, the arbitration agreement in Clause 5.12 was incapable of being performed.
The high court granted the stay and held that the dispute between the parties was fit and proper to be referred to the Kuala Lumpur Regional Centre for Arbitration.
With reference to the rules of the Malaysian International Arbitration Centre, the court took a robust approach and held that the non-existence of such a centre or applicable rules for such a centre did not invalidate the agreement to arbitrate. The court held as follows:
"It was not disputed that the intended [Malaysian International Arbitration Centre] is not in existence in Malaysia and the only applicable rules for arbitration in Malaysia at all material time is the [Kuala Lumpur Regional Centre for Arbitration]. In fact in Malaysia, the only arbitration centre is none other than the [Kuala Lumpur Regional Centre for Arbitration]. Thus, the incapacity is not something beyond the control of the parties because that misnaming of the arbitration institution or arbitral rules is not a proper ground for finding that the arbitration agreement is incapable of being performed. Further, the non-existence of the stipulated 'Rules of the Malaysia International Arbitration Centre'... for the time being in force for the arbitration does not render the arbitration clause null and void, inoperative or incapable of being performed."
With respect to the estoppel point, the high court found that the plaintiff had, through its conduct, demonstrated that it intended to refer the dispute to arbitration. The defendant's letter sought the plaintiff's agreement to refer the dispute to the Kuala Lumpur Regional Centre for Arbitration, failing which the defendant indicated that it would consider the plaintiff to have agreed for the dispute to be heard in the Malaysian courts. There was no reply to that letter. The court found that the plaintiff's silence could not be deemed an acceptance of the defendant's offer since before the letter was sent, the plaintiff had by its conduct demonstrated it intent to refer the dispute to arbitration. As such, the high court granted an order approving the defendant's stay application.
Shanghai All Green Environmental Engineering demonstrates the Malaysian courts continued attempts to give effect to arbitration agreements and to discount attempts to renege on agreements to arbitrate by relying on technical objections.
For further information on this topic please contact K Shanti Mogan at Shearn Delamore & Co by telephone (+60 3 2070 0644) or email (firstname.lastname@example.org). The Shearn Delamore & Co website can be accessed at www.shearndelamore.com.
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