ARBITRATION

JSB v. ACSB [2024] 1 CLJ 382 [Court of Appeal]

Brief facts

The Appellant in this case, JSB (‘JSB’) and the Respondent, ACSB (‘ACSB’) were in the preliminary stage of arbitration. The Asian International Arbitration Centre (‘AIAC’) requested both parties under r.6 of the AIAC Arbitration Rules 2018 for payment of a further deposit of the arbitrator’s fees and administrative costs, of which ACSB refused to pay. As a result, the arbitrator terminated the arbitration.

JSB then filed its claim in the High Court. This was objected by ACSB who argued that the arbitration agreement was still operative and that JSB could first pay for ACSB’s share of the costs as it could be recovered in the final arbitral award. ACSB applied to strike out JSB’s claim under the Rules of Court 2012 (‘ROC’), and alternatively, for a stay of the court proceedings under s.10 of the Arbitration Act 2005 (‘AA’) to continue with arbitration.

High Court’s Decision

The High Court found that the non-payment of the AIAC’s further deposit by ACSB did not render the arbitration agreement inoperative or incapable of being performed. The High Court concluded that JSB, as the claimant in the arbitration could pay for ACSB’s share of the costs and recover the same in the final award of the arbitrator and thus, the High Court ordered a stay of the proceedings under s. 10 of the AA 2005.

Dissatisfied with the decision of the High Court, JSB appealed to the Court of Appeal.

The issues before the Court of Appeal were:

(1) Whether in applying to strike out the High Court suit brought by JSB, ACSB had invoked the jurisdiction of the court and taken fresh steps in the proceedings.

(2) Whether the arbitration agreement had become inoperative within the meaning of s. 10 of the AA 2005.

(3) Whether a stay of the court proceedings would be an exercise in futility as ACSB had resolutely resolved not to pay the Arbitrator’s fees.

Court of Appeal’s Decision

The Court of Appeal, through the judgment delivered by Lee Swee Seng JCA, allowed JSB’s appeal with costs of RM15,000.00 here and below and set aside the order of the High Court on the grounds that:

[1] The High Court had erred in granting a stay of the court proceedings pending arbitration. ACSB, by making an application to strike out JSB’s claim, had taken a further step in the court proceedings, thus, submitted to the jurisdiction of the court. It was clear that ACSB, having filed an affidavit in support and a further affidavit in reply to support its application, was inviting and invoking the jurisdiction of the court to consider the merits of JSB’s claim. ACSB had thus waived its right to arbitration.

[2] Electing to abide by the arbitration agreement would be to also comply with the applicable AIAC Arbitration Rules. Under s.14 of the AIAC Rules in relation to deposits, the parties are obliged to make payment of the deposit in equal shares upon receiving a notice from AIAC. ACSB’s refusal to pay the AIAC’s further deposit would amount to a non-compliance or a breach of the arbitration rules. As such, the arbitration agreement had been rendered inoperative and the arbitrator was correct in exercising his right to terminate the arbitration under the Rules. The party refusing to pay its share of the arbitrator fees knows fully well that there is no more effective way to tax the financial resources of the other party than by compelling it to pay the refusing party's share of the AIAC's deposit if the other party is keen to have the arbitrator continue with the hearing until an award is handed down.

[3] Clearly, ACSB is not entitled to take advantage of its own breach and insist on continuing with the arbitration. It would be a case of the defendant not walking its talk. The practical effect of not paying one’s share of the arbitrator's fees would be that the arbitrator is not obliged to continue with the hearing and may indeed terminate the arbitration before him. Parties are then at liberty to pursue litigation in court as the arbitration agreement has been rendered inoperative. The refusing party that has defaulted in the equally binding contractual obligation to pay its share of the AIAC’s deposit cannot insist on wanting the benefits of arbitration without wanting to pay the costs that come with it.

[4] It is not a case of JSB rewriting the arbitration agreement when it opted for court proceedings after ACSB had obstinately refused to pay its share of the AIAC’s deposits but rather a case of ACSB rewriting the Rules of the Arbitration in its attempt to obfuscate its true intent of obstructing the arbitration by declaring that the arbitration must be kept within its orbit. In as much as an arbitration agreement is a term of the contract, a refusal to abide by it would free the other party from its obligation to proceed with the arbitration  and instead to opt for a proceeding in court which ordinarily cannot be restrained under s. 29 of the Contracts Act 1950.

[5] To stay the proceedings in court would be an exercise in futility and tantamount to the court having acted in vain and frustrating further JSB’s attempt to have the dispute heard and resolved with all due diligence and without further delay.

KEE HIN VENTURES SDN BHD v. GREAT PARTNERS INDUSTRIES LTD & ORS [2024] 9 CLJ 1 (Court of Appeal)

Case Digest:

(1) An arbitration award, which involves only the shareholders of a company, does not bind the company itself as the company is a separate legal entity that could not be bound by proceedings to which it is not made a party.

(2) The court’s power to award pre-judgment interest, pursuant to s. 11 of the Civil Law Act 1956 , is subject to contractual provisions and the court's discretion to award interest shall then be limited to the express terms of the contract.

(3) Clear and unequivocal written admission of debt may prevent the operation of the limitation period. The limitation period for a claim of debt restarts if a debtor acknowledges such debt in writing.

TELEKOM MALAYSIA BHD v. OBNET SDN BHD [2025] 1 CLJ 17 (Federal Court)

Case Digest:

[1] To ensure minimal intervention or ideally no intervention at all by the courts, the Arbitration Act 2005 sets out the procedures which must be followed and complied with not only by the arbitrator but also by the parties involved in an arbitration. Under the Act, an award by an arbitrator whether interim or final must be in writing giving reasons for its decision, only then can the arbitrator be entitled to proceed with the determination of quantum. The Act excludes the possibility of the arbitrator delivering an oral award.

[2] Undeniably, the arbitrator is the master of the arbitration proceedings and can decide to bifurcate the proceedings or otherwise. However, the arbitrator must carry out his functions and duties as expressly required under the Act. Any failure to comply is a violation of the Act and will taint any decision made by the arbitrator.

ASIAN INTERNATIONAL ARBITRATION CENTRE v. ONE AMERIN RESIDENCE SDN BHD & ORS AND ANOTHER APPEAL [2025] 3 CLJ 633 (Federal Court)

Case Digest:

[1] The immunity from a suit and from other legal processes, in para. 1 of the First Schedule to the International Organizations (Privileges and Immunities) Act 1992 (IOPIA) conferred upon the Asian International Arbitration Centre (AIAC) as an international organisation is applicable to render the AIAC immune from judicial review, of acts and decisions made by the AIAC in its capacity as the domestic and statutory adjudication authority under the Construction Industry Payment and Adjudication Act 2012 (CIPAA).

[2] The IOPIA and the CIPAA do not oust the High Court’s inherent powers in judicial review proceedings. There is no necessity to draw distinction on the capacity of the AIAC, either as an international arbitral institution or the statutory adjudication authority, before the AIAC is entitled to enjoy the immunity conferred under the IOPIA and the CIPAA.

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