MALAYSIA Law and Practice Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee, Shearn Delamore & Co
4. The Arbitral Tribunal 4.1 Limits on Selection
agreement to arbitrate, it is mandatory for the court to do so (see the Malaysian Federal Court’s decision in Press Metal Sarawak Sdn Bhd v Etika Takaful Sdn Bhd [2016] 5 MLJ 417). So long as an application to stay the court proceedings is made before any further steps in the court proceedings are taken, there is no discretion for the Malaysian courts to refuse enforce - ment of an arbitration agreement when the arbitration agreement is not null and void, inoperative or incapa - ble of being performed. However, where the validity of the arbitration agree - ment itself is questioned, the Malaysian courts may find that they retain jurisdiction to determine that issue. Recently, in Macsteel International Far East Ltd v Lysaght Corrugated Pipe Sdn Bhd and other appeals [2023] 4 MLJ 551, the Court of Appeal held that as the High Court and arbitral tribunal both have concurrent jurisdiction and power to investigate and conclude the validity of the arbitration agreement, a flexible approach should be adopted as to the appropriate forum in which to investigate and determine the valid - ity of the arbitration agreement. The forum should be the one that is, on balance, more just and convenient, having regard to the facts and circumstances in issue. In this case it was held that the Malaysian courts were the appropriate forum to determine the validity of the arbitration agreement. 3.4 Validity Malaysia applies the rule of separability of arbitration clauses contained in invalid agreements. An arbitra - tion clause that forms part of an agreement shall be treated as an agreement independent of the other terms of the agreement in which it is contained. A decision by an arbitral tribunal that the agreement is null and void does not invalidate the agreement to arbitrate (see Standard Chartered Bank Malaysia Bhd v City Properties Sdn Bhd & Anor [2008] 1 MLJ 233 – High Court). The Court of Appeal has reiterated the rule of sepa - rability of arbitration clauses in the recent cases of Tumpuan Megah Development Sdn Bhd v Ing Bank N V & Anor [2024] 3 CLJ 18 and Peninsula Education (Setia Alam) Sdn Bhd v Biaxis (M) Sdn Bhd [2024] 5 MLJ 388.
There are no limits set by the AA 2005 on the par - ties’ autonomy to select arbitrators in Malaysia. It is explicitly provided in Section 13 of the AA 2005 that no person shall be precluded by reason of nationality from acting as an arbitrator, unless the parties agree otherwise. 4.2 Default Procedures Where the parties’ chosen method for selecting arbi - trators fails, the default procedure depends on the number of arbitrators appointed – ie, one or three. In the context of international arbitration, where parties fail to determine the number of arbitrators, the default position is three arbitrators in an international arbitra - tion and one in a domestic arbitration (see Section 12 of the AA 2005). Where the arbitration consists of three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator as the presiding arbitrator (see Section 13 (3) of the AA 2005). If a party fails to appoint an arbitrator within 30 days of receiving a request in writing to do so from the other party, or if the two arbitrators fail to agree on the third arbitrator within 30 days of their appointment or within such extended period as the parties may agree, either party may apply to the Director of the AIAC for such appointment (see Section 13 (4) of the AA 2005). Where the arbitration consists of a sole arbitrator and the parties fail to agree on the arbitrator, either party may apply to the Director for the appointment of the sole arbitrator (see Section 13 (5) of the AA 2005). Where the parties have agreed on the procedure for appointment of the arbitrator(s), and (i) a party fails to act as required under such procedure; or (ii) the parties, or two arbitrators, are unable to reach an agreement under such procedure; or (iii) a third party, including an institution, fails to perform any function entrusted to it under such procedure, any party may request the Director to take the necessary measures, unless the agreement on the appointment procedure provides other means for securing the appointment (see Section 13 (6) of the AA 2005). The decision of
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