INGENIEUR
UNCITRAL
MODEL LAW ON
INTERNATIONAL
COMMERCIAL
ARBITRATION
Malaysia enacted the new Arbitration Act 2005 based on
the United Nations Commission on International Trade
Law (UNCITRAL) Model Law on International Commercial
Arbitration.
Merely by looking at Section 9(1) Arbitration
Act 2005, one would understand that it is an
agreement that parties submit their disputes to
arbitration proceedings.
However, Section 10(1) of the Arbitration Act
2005 further states that;
“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 that the
agreement is null and void, inoperative or
incapable of being performed.”
Please note the word “shall” used in Section
10(1) above. This means that Section 10(1) of
the Arbitration Act 2005, being the operative
provision, provides for a mandatory stay of
court proceedings where there is an arbitration
agreement unless the arbitration agreement is
null and void, inoperative or incapable of being
performed. In layman terms, this means that the
Court must stop or suspend a legal claim, if there
is an arbitration agreement found between the
parties unless the arbitration agreement is “null
and void, inoperative or incapable”. However,
the exception, i.e. “null and void, inoperative or
incapable” is rarely invoked by the court to strike
down arbitration agreements due to the liberal
approach the courts have adopted in interpreting
arbitration clauses (See heading below, “The
Court’s approach (i): Interpreting an “Arbitration
Agreement””, for further discussion). the New York Convention and the United
Nations Commission on International Trade
Law (UNCITRAL) Model Law on International
Commercial Arbitration, where Malaysia is a
Contracting State of both the treaties.
On December 30, 2005, Malaysia enacted
the new Arbitration Act 2005 based on the United
Nations Commission on International Trade
Law (UNCITRAL) Model Law on International
Commercial Arbitration. The new Act came into
force on March 15, 2006 and it repealed and
replaced the previous Arbitration Act 1952. The
stay provision of Section 10 of the Arbitration
Act 2005, which follows Model Law Article 8,
basically makes the stay mandatory where there
is a bona fide dispute and removes the discretion
to retain the proceedings in court given by Section
6 of the old Act. In addition, Article II.3 of the New
York Convention requires a mandatory stay to be
provided where the arbitration is to be held in a
convention country.
However, such intention for mandatory
arbitration may not be well served simply
because of the high fees and costs of initiating
an arbitration, which is very much higher than
commencing a claim in Court. Furthermore, it must
not be forgotten that arbitration proceedings are
not any less adversarial than legal proceedings.
In fact, arbitration proceedings can be overly
technical and complex. At least in litigation, the
Courts have maxims of equity and inherent court’s
jurisdiction to avoid injustice that comes into play
to allow some flexibility in interpreting the law.
Such rules are not apparent in arbitration.
Why Mandatory and Binding? The Court’s approach (i): Interpreting an
“arbitration agreement”
There is a significant global shift to arbitration.
This can be seen from the signing and ratification
of various pro-arbitration international treaties
by a large number of countries. These include
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Standard arbitration clauses seen in standard
form contracts such as the PAM 2006 Form of
Building Contract, the CIDB Standard Form of