MALAYSIA Trends and Developments Contributed by: Rabindra S. Nathan, Rodney Gomez, K. Shanti Mogan and Alexius Lee, Shearn Delamore & Co
towards giving effect to the parties’ agreement to arbitrate wherever reasonably possible. This decision underscores Malaysia’s ongoing com - mitment to party autonomy and the promotion of arbi - tration as an efficient and viable method for dispute resolution. It affirms that arbitration clauses that con - tain option clauses can give rise to binding arbitration obligations under Malaysian law. Arbitrator is Bound by Precedent in Arbitration Proceedings In Datuk Bandar Kuala Lumpur v Sri Tinggi Sdn Bhd [2025] MLJU 618, the High Court addressed the issue of whether an arbitrator is bound by the doctrine of stare decisis. The dispute stemmed from a contract between Datuk Bandar Kuala Lumpur (DBKL), as the employer, and Sri Tinggi Sdn Bhd (STSB), as the contractor, for the construction of a multi-level interchange at Jalan Ampang/Jalan Jelatek. During arbitration, the arbitra - tor rejected the Malaysian case law cited by DBKL’s counsel, stating that: (i) the legal principle of stare decisis is only applicable to court proceedings, not arbitration; and (ii) most case law submitted was from court decisions, not arbitration cases, and therefore not strictly applicable. Dissatisfied with this approach, DBKL applied to set aside the arbitral award, arguing that the arbitrator had disregarded established Malaysian law and sub - stituted his own legal theories without allowing parties to address them. The High Court held that the award contravened Malaysian public policy as the arbitrator had acted on a frolic of his own by disregarding Malaysian case law and relying solely on Malaysian statutes. Accord - ing to the High Court, the arbitrator’s decision not to be bound by the doctrine of stare decisis goes wholly against the law of the land. The arbitrator had commit - ted a denial of natural justice by wrongly disregarding and dismissing the doctrine of stare decisis merely due to his own belief that he was not bound by it. The High Court further explained that under Arti - cle 160 of the Federal Constitution, the term “law”
encompasses (i) written law and (ii) the common law as it operates in Malaysia. Given that Malaysian com - mon law encompasses judicial precedents estab - lished by Malaysian courts, decisions of Malaysian courts must be applied in cases before inferior tribu - nals, including arbitration proceedings. The arbitrator was duty bound to consider and analyse the case law presented to him before deciding whether to accept, disregard, or dismiss it. Accordingly, the High Court concluded that the arbi - trator had acted in excess of jurisdiction by failing to apply the doctrine of stare decisis. This further amounts to a breach of public policy and natural jus - tice under Sections 37 and 39 of the Arbitration Act 2005, as the arbitrator had deprived the parties of their right to be heard on key legal points, failing to provide them with an opportunity to address his interpretation of the law. The award was set aside. This decision serves as a firm reminder that arbitra - tors in Malaysia must not disregard judicial precedent. Failure to do so may give rise to grounds for setting aside the award. Validity of Oral Pronouncements by an Arbitral Tribunal Recently, the Federal Court in Telekom Malaysia Ber- had v Obnet Sdn Bhd [2024] 6 MLJ 293 addressed a pivotal issue concerning the validity and enforceability of oral pronouncements by an arbitral tribunal. In this case, the appellant, Telekom Malaysia Berhad (“Telekom”), challenged the arbitrator’s approach of delivering a decision on liability vide oral pronounce - ment before completing the hearing on quantum. The arbitrator declined Telekom’s request for a written award on liability at that stage. Telekom applied to the High Court seeking, among other things, a declaration that the oral decision on liability was invalid. Both the High Court and the Court of Appeal dismissed the application, prompting an appeal to the Federal Court. The Federal Court began by examining the definition of an “award” under Section 2 of the AA, noting that an “award” is defined as a decision of the arbitral tri - bunal on the “substance of the dispute” and included any final, interim or partial award. The Federal Court
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