MALAYSIA Law and Practice Contributed by: Samantha Chiang Xin Li, Yee Yik Shien and Tay Zi Li, Zi Li & Partners
stricter project criteria with minimum project cost of MYR50 million, enhanced evaluation and monitoring processes, and expansion into new sectors such as renewable energy and smart agriculture. Malaysia does not have a dedicated PPP law; instead, PPPs are governed by policies, guidelines and con- tracts (notably concession agreements). This creates legal uncertainty, compounded by the need to navi- gate overlapping land, financial and sector-specific laws and regulations, which may cause delays, added costs and jurisdictional complexity. 8.3 Governing Law Parties are generally free to choose the governing law of the project documents, provided that the choice is made in good faith and not contrary to public policy. In practice, Malaysian law is typically chosen as the governing law for project documents for projects involving only local parties, and instead of referring disputes to the local courts, parties may choose to resolve the dispute by way of arbitration in Malaysia or abroad. However, if there are any foreign parties involved in the project, it is not uncommon for pro- ject documents to be governed by foreign law and the parties may opt for a foreign arbitration seat, for example, any one of the countries which is a party to the New York Convention. This is because Malaysia is a member of the New York Convention and there- fore arbitral awards from the other contracting states to the New York Convention would be recognised as binding and enforced in Malaysia provided that cer- tain requirements are complied with – see 6.3 Foreign Court Judgments . 8.4 Foreign Ownership Acquisition of land by foreign entities is subject to the following restrictions: • Prior approval of the relevant state authority if the land is subject to restriction-in-interest on transfer of real property. Such restriction, if any, is expressly endorsed on the issue document of title to the land. • Prior approval of the relevant state authority pursu- ant to Section 433B of the NLC for acquisition of
land by non-citizens or foreign companies respec- tively. • Prior approval of the Economic Planning Unit (EPU) pursuant to the EPU’s Guideline on the Acquisi- tion of Properties, for the direct acquisition of land valued at MYR20 million and above, resulting in dilution of ownership of property held by Bumi- putera (Malays and other indigenous ethnic groups in Malaysia) and/or a government agency. There is no “water rights” concept in Malaysia. Under the federal constitution, water supplies fall under the jurisdiction of both federal and state governments. For projects where there is a need to draw water directly from rivers, lakes or underground sources, the devel- opers or contractors must obtain a permit or licence from the relevant state or local authorities. There is no general restriction under Malaysian law on foreign entities applying for a water permit or licence but this is subject to requirements and conditions as may be imposed by the authorities governing and regulating the water resources. Typically, in a project-financing deal, the subject land will be charged in favour of a lender or security agent acting for and on behalf of the lender(s) as part of the security package, and registered with the relevant land office/registry. In an enforcement event, the reg- istered chargee will be entitled to the power to sell or take possession of the land in accordance with the NLC. However, if the land is to be sold or taken pos- session of by a foreign entity, the transfer of land to the foreign entity will be subject to the restrictions as set out above. 8.5 Structuring Deals Project Company In Malaysia, projects are typically undertaken through a special-purpose vehicle which is incorporated as a private limited company by the project sponsors or joint ventures. Under the Companies Act, there is no minimum paid-up capital requirement for incorporat- ing a company, and the paid-up capital is generally determined based on the company’s operational and financial needs. However, certain sectors or indus- tries may be subject to minimum capital requirements imposed by the relevant government departments or regulators.
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