Fraud, Asset Tracing & Recovery Asia

Fraud, Asset Tracing & Recovery

AsiaRecognition & Enforcement of Foreign

Court Judgments and Foreign Arbitral

Awards in China and Malaysia

Sunil AbrahamPartner

[email protected]

Contents:

I. Law of Arbitration in Malaysia

II. Setting Aside of Awards

III. Post-Award Reference on Question of

Law

IV. Safeguards against Frivolous Challenge

V. Recognition and Enforcement, and

Refusal, of Awards


Arbitration Act 1952 (“AA 1952”)

Arbitration Act 2005 (“AA 2005”)

◦ Based on UNCITRAL Model Law 1985 and

the New Zealand Arbitration Act 1996


English is the authoritative version of the

AA 2005◦ Total Safe Sdn Bhd v Tenaga Nasional Berhad & Anor

[2009] 1 LNS 420


Modes of Challenging an Award

◦ Section 37 Arbitration Act 2005: Application

for setting aside

◦ Section 42 Arbitration Act 2005: Reference on

questions of law

◦ Section 39 Arbitration Act 2005: Grounds for

refusing recognition or enforcement


Challenge to Award before

Commencement of Proceedings for

Recognition and Enforcement

◦ Section 37 Arbitration Act 2005: Application

for setting aside

◦ Section 42 Arbitration Act 2005: Reference on

questions of law

◦ Concurrent challenge


Challenge to Award during Proceedings

for Recognition and Enforcement

◦ Section 39 Arbitration Act 2005: Grounds for

refusing recognition or enforcement

◦ Active Remedy vs Passive Remedy


Section 37 AA 2005

◦ Mirrors the grounds for setting aside under

the Article V of the New York Convention and

Section 34 of the UNCITRAL Model Law

1985


Narrow view of jurisdiction in AA 1952

The Government of India v Cairn Energy India Pty Ltd

& Anor [2011] 6 MLJ 441 (FC):

“Where a specific matter is referred to arbitration for

consideration… no such interference is possible upon the

ground that the decision upon the question of law is an

erroneous one… [I]f the matter is a general reference,

interference may be possible ‘if and when any error

appears on the face of the award.”


Narrow view of jurisdiction in AA 2005


& Anor [2014] 9 MLJ 149 (HC):

“[T]he principle which has remained constant, be it under the old

Arbitration Act of 1952 or the new 2005 Act … the fundamental

approach that the courts generally bear when dealing with

challenges of arbitral awards. Not only are courts slow to intervene

even where there is discretion to do so, the courts are cognisant of

the fact that as supervisory courts, there is a more than healthy

respect for party autonomy and party choice. The courts here have

long ascribed to this philosophy practiced in many jurisdictions.”


Narrow view of jurisdiction


& Anor [2014] 9 MLJ 149 (HC):

“Court’s powers are not invoked in the field of appellate

jurisdiction. [It] does not scrutinise the merits of the parties’

respective case or responses before the tribunal. The court

must also resist interfering in the decisions of the arbitral

tribunal save where it is prescribed under the Arbitration Act

2005.”


Narrow view of jurisdiction

Taman Bandar Baru Masai Sdn Bhd v Dindings

Corporations Sdn Bhd [2010] 2 AMR 151: Mere

allegation of grounds is insufficient; proof of

grounds must be provided.


Section 37(1)(a)(i) AA 2005:

“An award may be set aside by the High Court only if

a party to the arbitration agreement was under any

incapacity.”


Section 37(1)(a)(ii) AA 2005:


the arbitration agreement is not valid under the law to

which the parties have subjected it, or, failing any

indication thereon, under the laws of Malaysia.”


Section 37(1)(a)(iii) AA 2005:

“ An award may be set aside by the High Court only if

the party making the application was not given

proper notice of the appointment of an arbitrator or

of the arbitral proceedings or was otherwise unable to

present that party’s case.”


Section 37(1)(a)(iv) AA 2005:


the award deals with dispute not contemplated by or

not falling within the terms of the submission to

arbitration.”

Infineon Technologies (M) Sdn Bhd v Orisoft

Technology Sdn Bhd [2011] 7 MLJ 539: This only

concerns procedural natural justice, not

substantive natural justice.


Section 37(1)(a)(vi) AA 2005:


the composition of the arbitral tribunal or the arbitral

procedure was not in accordance with the agreement

of the parties, unless such agreement was in conflict

with a provision of this Act from which the parties

cannot derogate, or, failing such agreement, was not in

accordance with this Act.”


Section 37(1)(a)(vi) AA 2005

Kerajaan Malaysia v Perwira Bintang Holdings Sdn

Bhd [2015] 6 MLJ 126


Section 37(1)(b)(i) AA 2005:

“ The High Court finds that the subject-matter of the

dispute is not capable of settlement by arbitration

under the laws of Malaysia.”

Aras Jalinan Sdn Bhd v Tipco Asphalt Public Co Ltd

& Ors [2012] 1 MLJ 510: statutory remedy of

winding-up under the Companies Act, 1965, is

not arbitrable.


Section 37(1)(b)(ii) AA 2005:

“ The High Court finds that the award is in conflict with the

public policy of Malaysia.”

Section 37(2) AA 2005:

“Without limiting the generality of Section 37(1)(b)(ii), an

award is in conflict with the public policy of Malaysia where (a)

the making of the award was induced or affected by fraud or

corruption; or (b) a breach of the rules of natural justice

occurred (i) during the arbitral proceedings; or (ii) in connection

with the making of the award.”


No cases wherein award was set aside for breach

of public policy

Majlis Amanah Rakyat v Kausar Corporation Sdn Bhd

[2011] 3 AMR 315: Malaysia adopts a narrow view,

consistent with Hong Kong, Singapore and New

Zealand.

◦ Hebei Import & Export Corp v Polytek Engineering Co Ltd

[1999] 2 HKCFAR 111

◦ Aloe Vera of America Inc v Asianic Food (S) Pvt Ltd and

another [2006] 3 SLR(R) 174

◦ Downer Hill Joint Venture v Government of Fiji [2005] 1

NZLR 554


Formal requirements for challenge

◦ Order 69, rule 5(3) Rules of Court: originating

summons must (a) provide details of the award

challenged; (b) identify part(s) of award being

challenged; and (c) grounds for the challenge.

◦ Order 69, rule 5(4): “The applicant shall file by affidavit,

written evidence on which he intends to rely when he files

his writ, including a copy of the arbitration agreement and

award.

◦ Perembun (M) Sdn Bhd v Binas BMK Sdn Bhd and

another case [2015] 11 MLJ 447


Section 37(4) AA 2005: “An application for setting

aside may not be made after the expiry of ninety

days from the date on which the party making the

application had received the award or, if a request

has been made to correct or give an interpretation

to the award, or provide an additional award, from

the date on which that request had been disposed

of by the arbitral tribunal.”


Government Of The Lao People’s Democratic

Republic v Thai-Lao Lignite Co Ltd (“TLL”), A

Thai Company & Anor [2011] 1 LNS 1903

(CA) (“Thai-Lao Lignite”)

◦ Court of Appeal granted an extension of time

for the plaintiff to file its application to set

aside an award on the basis of its inherent

jurisdiction.

◦ Remains an unreported decision to date.


Section 8 AA 2005:

“No court shall intervene in matters governed

by this Act, except where so provided under this

Act.”


Decisions departing from Thai-Lao Lignite

on the basis that the decision was

reached without the benefit of Section 8

AA 2005

◦ JHW Reels Sdn Bhd v Syarikat Brocos Shipping

Sdn Bhd [2013] 7 CLJ 249

◦ Kembang Serantau Sdn Bhd v Jeks Engineering

Sdn Bhd [2016] 2 CLJ 427


JHW Reels Sdn Bhd v Syarikat Brocos Shipping Sdn Bhd

[2013] 7 CLJ 249

“[O]n a proper reading of s. 37(4) the time limit imposed is

mandatory. This view accords with the generally accepted view that

under the Model Law, the time limit is strict and express power must

be given under the law itself before the court can extend time. This

view also accords with the principle of minimal intervention by the

courts of law as strongly underlined in our s. 8 of the Act. Support for

this strict reading can be found within the four corners of s. 37 itself.



[2013] 7 CLJ 249

“Unlike art. 34 of the Model Law which provides no exceptions,

our s. 37(5) provides two exceptions:

“(5) Subsection (4) does not apply to an application for setting aside

on the ground that the award was induced or affected by fraud or

corruption.”

Thus, expressio unius est exclusio alterius.”



[2013] 7 CLJ 249

“The appearance of the words "may not" in s. 37(4) cannot

reasonably be read as denoting a merely directory requirement. In

the total scheme of our Arbitration Act and bearing in mind the full

provision of s. 37, this will be a case where "may" should be read as

"must" or "shall" to effectuate the legislative intent. To this extent, I

have to say, with due respect to my learned brother judge

in Government of the Lao People's Democratic Republic v. Thai-Lao

Lignite Co Ltd & Anor, I differ in my reading of s. 37(4).”


Kembang Serantau Sdn Bhd v Jeks Engineering Sdn Bhd

[2016] 2 CLJ 427

“Sometimes, as it is the case here, the sentence construction simply

does not permit the use of the word "shall"; and the word "may" is

then used. This usage does not detract from the basic object or

intention of the provision which is to require mandatory or strict

compliance.”


Kembang Serantau Sdn Bhd v Jeks Engineering Sdn Bhd

[2016] 2 CLJ 427

“sub-s. 37(4) must be given a strict reading. That being so, it is

irrelevant the length of delay, be it a day or nine months; the

identity of the applicant, a commercial concern or a

government; or even the subject matter; so long as the parties

have agreed to arbitrate. The only exceptions are within sub-s.

37(4) and sub-s. 37(5)”

III. Post-Award Reference on

Questions of Law42. Reference on questions of law

(1) Any party may refer to the High Court any question of

law arising out of an award.

(1A) The High Court shall dismiss a reference made under

subsection (1) unless the question of law substantially

affects the rights of one or more of the parties.

(2) A reference shall be filed within forty-two days of the

publication and receipt of the award, and shall identify the

question of law to be determined and state the grounds

on which the reference is sought.



(3) The High Court may order the arbitral tribunal to

state the reasons for its award where the award –

(a) Does not contain the arbitral tribunal's reasons; or

(b) Does not set out the arbitral tribunal's reasons in

sufficient detail.



(4) The High Court may, on the determination of a

reference –

(a) Confirm the award;

(b) Vary the award;

(c) Remit the award in whole or in part, together with

the High Court's determination on the question of law to

the arbitral tribunal for reconsideration; or

(d) Set aside the award, in whole or in part.



(5) Where the award is varied by the High Court, the

variation shall have effect as part of the arbitral tribunal's

award.

(6) Where the award is remitted in whole or in part for

reconsideration, the arbitral tribunal shall make a fresh

award in respect of the matters remitted within ninety

days of the date of the order for remission or such other

period as the High Court may direct.



(7) Where the High Court makes an order under

subsection (3), it may make such further order as it thinks

fit with respect to any additional costs of the arbitration

resulting from that order.

(8) On a reference under subsection (1) the High Court

may –

(a) Order the applicant to provide security for costs;

or

(b) Order that any money payable under the award

shall be brought into the High Court or otherwise

secured pending the determination of the reference.


Questions of Law Relatively unique provision

◦ Not found in Singapore’s International

Arbitration Act and Arbitration Act, nor Hong

Kong’s Arbitration Ordinance.

◦ A similar provision is contained in Section 69

of the English Arbitration Act 1996 (“AA

1996”).


Questions of Law Comparison between English and Malaysian

provisions: Timing of reference

Section 42(1) AA 2005: Any party may refer to the High

court any question of law arising out of an award within 42

days of the date the award was notified to the party.

Section 45 AA 1996: Determination of preliminary point of

law; can be made by application to the English High Court

during arbitral proceedings

Section 69 AA 1996: Determination of a point of law arising

out of an award within 28 days from the date of the award

or from the result of any arbitral process of appeal or

review.



provisions: Opt-in/Opt-out

Section 3(2) and (3) AA 2005: Opt-out for domestic

arbitration, opt-in for international arbitration.



provisions: Opt-in/Opt-out

Section 45(1) and 68(1) AA 1996: Opt-out.

“Unless otherwise agreed by the parties, a party to arbitral

proceedings may (upon notice to the other parties and to the

tribunal) [determine any question of law arising in the course of the

proceedings which the court is satisfied substantially affects the

rights of one or more of the parties] or [appeal to the court on a

question of law arising out of an award made in the proceedings].

An agreement to dispense with reasons for the tribunal’s award shall

be considered an agreement to exclude the court’s jurisdiction under

this section.



provisions: Conditions to commence

appeal/reference proceedings

Section 42 AA 2005: No prior procedural conditions.





Section 45(2)(a) AA 1996: must be made with the

agreement of all other parties to the proceedings; or

Section 45(2)(b) AA 1996: made with the permission of

the tribunal and the court is satisfied that (i) the

determination of the question is likely to produce

substantial savings in costs, and (ii) that the application

was made without delay.





Section 69(2) AA 1996: (a) must be made with the

agreement of all other parties to the proceedings; or (b)

with the leave of the court.

Section 70(2) AA 1996: must first exhaust any available

process of appeal or review, and any available recourse

to correct



provisions: Conditions for permission/leave to

appeal

Section 69(3) AA 1996: 4 conditions:

◦ Determination of question will substantially affect the

rights of one or more of the parties

◦ Question is one which the tribunal was asked to

determine



provisions: Conditions for permission/leave to

appeal

Section 69(3) AA 1996: 4 conditions:

◦ Based on the findings of fact in the award, the

decision of the tribunal on the question is obviously

wrong, or the question is of general public

importance and the decision of the tribunal is at least

open to serious doubt, and

◦ Despite the agreement of the parties to resolve the

matter by arbitration, it is just and proper in all the

circumstances to determine the question.


Questions of Law Restrictive approach◦ Section 42 AA 2005 appears to provide an appeal in

all but name. Since the AA 2005 omits any

requirement to obtain leave of the court, it makes it

all the more necessary for a strict approach to be

adopted: Sundra Rajoo and WSW Davidson, Arbitration

Act 2005.

◦ Courts to take a limited view of its jurisdiction under

Section 42: Majlis Amanah Rakyat v Kausar Corporation

Sdn Bhd [2011] 3 AMR 315 (HC)


Questions of Law Restrictive approach◦ The arbitral tribunal remains the sole determiners of

questions of fact and evidence: Gold and Resource

Developments (NZ) Ltd v Doug Hood Ltd [2003] 3

NZLR 318.

◦ Jurisdiction under Section 42 AA 2005 should be

exercised only in clear and exceptional cases: Lembaga

Kemajuan Ikan Malaysia v RJ Construction Sdn Bhd

[2013] 8 CLH 655 (HC).


Questions of Law Restrictive approach◦ The Court cannot consider the questions of law in a

reference in the same manner as an appeal: Awangku

Dewa PGN Momin & Ors v Superintendent of Lands and

Surveys, Limbang Division [2015] 3 CLJ 1


Questions of Law Question of law arising out of award◦ Question of law must arise from the award, not the

arbitration proceedings generally: Majlis Amanah

Rakyat v Kausar Corporation Sdn Bhd [2011] 3 AMR 315

(HC)


Questions of Law Question of law arising out of award◦ Question of law and its supporting grounds must be

identified with sufficient precision: Tune Insurance

Malaysia Bhd & Anor v Messrs K Sila Dass & Partners

[2015] 9 CLJ 93 (HC)

◦ Question of law must be a legitimate question of law,

not a question of fact “dressed up” as a question of

law: Chain Cycle Sdn Bhd v Kerajaan Malaysia [2016] 1

MLJ 681; Magna Prima Construction Sdn Bhd v Bina BMK

Sdn Bhd and another case [2015] 11 MLJ 841


Questions of Law Question of law arising out of award◦ Where the findings of facts and the applications of

legal principles by the arbitrator is wrong (questions

of mixed fact and law), the court should not intervene

unless the decision is perverse: Lembaga Kemajuan

Ikan Malaysia v RJ Construction Sdn Bhd [2013] 8 CLJ

655 (HC).


Questions of Law Substantially affect rights of a party◦ Burden of proving that the question of law will

substantially affect a party’s rights is on the party

making the reference: Kerajaan Malaysia v Perwira

Bintang Holdings Sdn Bhd [2015] 1 CLJ 617

◦ The party referring the question of law must provide

affidavit evidence showing precisely what right has

been affected, how that right has been substantially

affected, : Magna Prima Construction Sdn Bhd v Mina

BMK Sdn Bhd and another case [2014] 11 MLJ 841

(HC)


Questions of Law Substantially affect rights of a party◦ Where the determination of the question(s) of law

will not have a substantial effect on the rights of

parties, the court must dismiss the reference:

Exceljade Sdn Bhd v Bauer (Malaysia) Sdn Bhd [2014] 1

AMR 253


Questions of Law Awangku Dewa PGN Momin & Ors v

Superintendent of Lands and Surveys,

Limbang Division [2015] 3 CLJ 1

◦ Drafting Questions of Law

◦ Approach of the High Court to Questions of

Law


Questions of Law Drafting Questions of Law

“In our judgment the eight 'questions of law' referred to the

High Court are not genuine questions of law but rather an

attempt to appeal against the decision of the arbitrator. If it

had been a genuine move to refer questions of law to the

High Court, then, the questions of law would have been

concisely and clearly framed; and the questions posed need

not have to be as many as eight.”


Questions of Law Drafting Questions of Law

“Instead, what we find in the originating summons, are not

concisely and clearly framed questions of law, but rather

criticisms of the decisions of the learned arbitrator drafted in

the manner that one normally finds in the 'grounds' of a

memorandum (or petition) of appeal (note the repeated

usage of the phrase 'erred in law' in every 'question' that

was posed). In other words, we find the 'reference' to be an

attempt to appeal against the award (which the Act does

not allow) but disguised as a 'reference on questions of law'

under s. 42.”


Questions of Law Approach of the Court

“A High Court in considering a s. 42 reference must not take

lightly the duty to critically examine the questions posed by the

applicant and to ensure that the question referred to the court is

purely a question of law and not a question of mixed law and

fact, and is clearly and concisely framed, before embarking to

entertain the application and to answer the question posed. There

should be no complication, confusion or duplicity in framing the

questions. Instead, there should be simplicity and clarity. The legal

burden is on the applicant to ensure that these requirements are

strictly complied with.”


Questions of Law Approach of the Court

“A High Court in dealing with a s. 42 reference must summarily

dismiss the application, without even attempting to answer the

'question of law' posed to the court, if the question is, in the first

place, not properly and intelligibly framed; or where it is clear to

the court that there is a disguised attempt by the applicant to

appeal against the decision of the arbitral tribunal. In other words,

a court of law must always be vigilant against any attempt by a

party to abuse the s. 42 procedure as provided for by the Act and

to utilise the provision as a backdoor avenue for appealing

against the decision of an arbitral tribunal.”


Questions of Law

Proper law of the contract is foreign law

Issue: Can a reference on a question of foreign

law be brought under Section 42 AA 2005?

In Malaysia, foreign law is a question of fact: Mak

Sik Kwong v Minister of Home Affairs, Malaysia (No

2) [1975] 2 MLJ 175


Questions of Law


Egmatra AG v Marco Trading Corp [1999] 1 Lloyd’s

Rep 862: English High Court refused to grant

leave to appeal the arbitrator’s award under

Section 69 AA 1996 because the parties’

contract was subject to Swiss law.


Questions of Law


Hussman (Europe) Ltd v Al Ammen Development

and Trade Co [2000] 2 Lloyd’s Rep 83:

“If there is no suggestion by the parties that there is an

issue under the applicable system of law which is different

from the law of England and Wales, or the tribunal does

not itself raise a specific issue, then the tribunal is free to

decide the matter on the basis of the presumption that

the applicable system of law is the same as the law of

England and Wales.”


Questions of Law

Section 42(3) AA 2005: “The High Court may

order the arbitral tribunal to state the reasons for

its award where the award–

(a) does not contain the arbitral tribunal’s reasons;

or

(b) does not set out the arbitral tribunal’s reasons in

sufficient detail.”


Questions of Law

Section 42(4) AA 2005: “The High Court may, on

the determination of a reference–

(a) confirm the award;

(b) vary the award;

(c) Remit the award in whole or in part, together

with the High Court’s determination on the question

of law to the arbitral tribunal for reconsideration; or

(d) Set aside the award, in whole or in part.”


Questions of Law

Section 42(5) AA 2005: “Where the award is

varied by the High Court, the variation shall have

effect as part of the arbitral tribunal’s award.”

Section 42(6) AA 2005: “Where the award is

remitted in whole or in part for reconsideration, the

arbitral tribunal shall make a fresh award in respect

of the matters remitted within ninety days of the

date of the order for remission or such other period

as the High Court may direct.


Questions of Law

Pancaran Prima Sdn Bhd v Iswarabena Sdn Bhd and

another appeal [2017] MLJU 326

◦ Concurrent application to set aside under Section 37

AA 2005 and refer questions of law under Section 42.

◦ Set aside and remitted part of the award to the

arbitrator for reconsideration.

◦ Extended the time frame under Section 42(6) AA

2005 to 120 days.

◦ Section 37 application became academic.


Questions of Law

Majlis Ugama Islam dan Adat Resam Melayu

Pahang v Far East Holdings Bhd and anor (Federal

Court Civil Appeal No: 02(f)-21-04/2016(W))

◦ Federal Court is hearing arguments on whether a

liberal approach should be taken for Section 42 AA

2005, i.e. that a question of law is anything which

arises out of the award which substantially affects the

rights of the parties, or to maintain conservative

approach taken thus far.

◦ Still pending decision.

IV. Safeguards Against Challenges


“Where an application is made to set aside an award,

the High Court may order that any money made

payable by the awards shall be brought into the High

Court or otherwise secured pending the determination

of the application.”



“On a reference under subsection (1) the High Court

may–

(a) order the applicant to provide security for costs;

or

(b) order that any money payable under the award

shall be brought into the High Court or otherwise

secured pending the determination of the

reference.”


Considered only in a few cases

◦ Mechanalysis Sdn Bhd (in liquidation) v Appraisal Property

Management Sdn Bhd [2011] 11 MLJ 566 (HC):

RM45,000 awarded under Section 42(8)(b).

◦ Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd

[2016] 2 MLJ 697 (CA): Court noted that application

should have been the first thing done by the award-

creditor.


Considered only in a few cases

◦ Zenbay Sdn Bhd v Yong Choo Kui Shipyard Sdn Bhd

[2015] 10 CLJ 924: Court refused the application

under Section 42(8)(b) on the basis that award-

creditor did not attempt to enforce the award. There

was therefore no evidence that the award-creditor’s

right to enforce the award would be affected.

V. Recognition and Enforcement,

and Refusal, of Awards


“On an application in writing to the High Court, an award

made in respect of an arbitration where the seat of

arbitration is in Malaysia o an award from a foreign State

shall, subject to this section and section 39 be recognised

as binding and be enforced by entry as a judgment in

terms of the award or by action.”



Section 38(2) AA 2005: Application must

exhibit the following:

◦ Duly authenticated original award or a duly

certified copy; and

◦ Duly authenticated original arbitration

agreement or a duly certified copy.




“ Where the award or arbitration agreement is in a

language other than the national language or the English

Language, the applicant shall supply a duly certified

translation of the award or agreement in the English

Language.”



Section 39(2) AA 2005:“If an application for setting aside or suspension of an award

has been made to the High Court on the grounds referred to in

subparagraph (1)(a)(vii), the High Court may, if it considers it

proper, adjourn its decision and may also, on the application of

the party claiming recognition or enforcement of the award,

order the other party to provide appropriate security.”



Section 39(2) AA 2005:“If an application for setting aside or suspension of an award

has been made to the High Court on the grounds referred to in

subparagraph (1)(a)(vii), the High Court may, if it considers it

proper, adjourn its decision and may also, on the application of

the party claiming recognition or enforcement of the award,

order the other party to provide appropriate security.”



Direct overlap of Sections 37 and 39

Section 37 AA 2005 Section 39 AA 2005

(1)(a)(i) A party to the arbitration

agreement was under any incapacity.

(1)(a)(i) A party to the arbitration

agreement was under any incapacity.

(1)(a)(ii) The arbitration agreement is

not valid under the law to which the

parties have subjected it, or, failing any

indication thereon, under the laws of

Malaysia.

(1)(a)(ii) The arbitration agreement is

not valid under the law to which the

parties have subjected it, or, failing any

indication thereon, under the laws of

the State where the award was made.





(1)(a)(iii) The party making the

application was not given proper

notice of the appointment of an

arbitrator or of the arbitral

proceedings or was otherwise unable

to present that party’s case.

(1)(a)(iii) The party making the

application was not given proper

notice of the appointment of an

arbitrator or of the arbitral

proceedings or was otherwise unable

to present that party’s case.

(1)(a)(iv) The award deals with dispute

not contemplated by or not falling

within the terms of the submission to

arbitration.

(1)(a)(iv) The award deals with dispute

not contemplated by or not falling

within the terms of the submission to

arbitration.





(1)(a)(v) Subject to subsection (3), the

award contains decisions on matters

beyond the scope of the submission

to arbitration.

(1)(a)(v) Subject to subsection (3), the

award contains decisions on matters

beyond the scope of the submission

to arbitration.





(1)(a)(vi) The composition of the

arbitral tribunal or the arbitral

procedure was not in accordance with

the agreement of the parties, unless

such agreement was in conflict with a

provision of this Act from which the

parties cannot derogate, or, failing

such agreement, was not in

accordance with this Act.

(1)(a)(vi) The composition of the

arbitral tribunal or the arbitral

procedure was not in accordance with

the agreement of the parties, unless

such agreement was in conflict with a

provision of this Act from which the

parties cannot derogate, or, failing

such agreement, was not in

accordance with this Act.





N/A (1)(a)(vii) The award has not yet

become binding on the parties or has

been set aside or suspended by a

court of the country in which, or

under the law of which, that award

was made.





(2)(b)(i) The High Court finds that the

subject-matter of the dispute is not

capable of settlement by arbitration

under the laws of Malaysia.

(2)(b)(i) The High Court finds that the

subject-matter of the dispute is not

capable of settlement by arbitration

under the laws of Malaysia.

(2)(b)(ii) The award is in conflict with

the public policy of Malaysia.

(2)(b)(ii) The award is in conflict with

the public policy of Malaysia.



Choice of remedies

◦ Active remedy: award-debtor makes an

application to set aside the award

◦ Passive remedy: award-debtor resists

enforcement by award-creditor

Issue: Should courts allow an award-

debtor to rely on a passive remedy where

it fails to pursue an active remedy?



Astro v Lippo (Singapore proceedings)

◦ During the arbitration, Lippo chose not to

challenge the Tribunal’s decision that it had

jurisdiction by way of an application pursuant

to Article 16(3) of the UNCITRAL Model Law

to the court of the seat (Singapore). Instead

Lippo waited until the Astro entities took

steps to enforce the awards and raised its

challenge at that stage.



Astro v Lippo Arbitration

◦ PT First Media TBK v Astro Nusantara

International [2014] 1 SLR 372 (“Astro v Lippo

(Singapore)”)

◦ Astro Nusantara International BV v PT First

Media TBK HCCT 45/2010 (“Astro v Lippo

(Hong Kong)”)



Astro v Lippo (Singapore)

◦ During the arbitration, Lippo chose not to

challenge the Tribunal’s decision that it had

jurisdiction by way of an application pursuant

to Article 16(3) of the UNCITRAL Model Law

to the court of the seat (Singapore). Instead

Lippo waited until the Astro entities took

steps to enforce the awards and raised its

challenge at that stage.




◦ The Singapore Court of Appeal held that both

an active and passive remedy was available in

Singapore, and failure to exercise its active

remedy to set aside an award did not

prejudice the availability of the passive remedy

of challenging enforcement proceedings.




◦ The Singapore Court of Appeal held that

active and passive remedies apply to both

foreign and domestic awards.

◦ Therefore, grounds available for resisting

enforcement are equally available to a party

resisting enforcement of awards.



Astro v Lippo (Singapore)◦ The Singapore Court of Appeal held that a failure to

challenge a tribunal’s preliminary ruling on jurisdiction

under Article 16(3) of the Model Law cannot prevent

the availability of passive remedies.

◦ Therefore, the fact that Lippo had not raised a

timeous challenge to the preliminary award on

jurisdiction did not prevent it from exercising its

passive remedy to challenge the enforcement of the

awards.



Astro v Lippo (Hong Kong)

◦ Astro obtained judgment on the award in

Hong Kong in November 2010 and in July

2011 obtained a garnishee order to attach

funds in the amount of US $44m due to First

Media from its parent company. Lippo only

took steps to set aside the judgment in Hong

Kong in early 2012, well after the time limit

for doing so had expired.




◦ Those proceedings were stayed to await the

outcome of the decision in Singapore referred

to above. Once the Singapore judgment was

handed down, the Hong Kong Court of First

Instance had to address the question of

enforceability in Hong Kong. The Court first

declined to extend the 14 day deadline for

challenging the enforcement decision.




◦ HKCFI found that First Media had acted in

bad faith by not challenging the Tribunal’s

joinder decision by way of setting aside

proceedings, instead waiting until the

enforcement stage to mount its challenge.




◦ The Hong Kong Court of Appeals clarified that

the requirement of good faith is breached where

there appears to be an active attempt to mislead

the counterparty.

◦ Recognised that a party’s failure to challenge

jurisdiction before both the arbitral tribunal and a

supervisory court during arbitral proceedings

could be construed as a breach of good faith.




◦ The Hong Kong Court of Appeals found good

faith as being complementary with the

principle of choice of remedies.

◦ Therefore, where a party fails to pursue an

active remedy in bad faith, recourse to passive

remedies may be denied.



Malaysian position under AA 1952

◦ State Government of Sarawak v Chin Hwa

Engineering Development Co [1995] 4 CLJ 1

(SC): “A party may, in certain circumstances, avail

himself of a passive remedy. This means that he

does not take the initiative to attack an award

but simply waits and only resists when the

opponent seeks to enforce the award.”




◦ State Government of Sarawak v Chin Hwa

Engineering Development Co [1995] 4 CLJ 1

(SC): “Passive remedy would be available where

the award is so defective in form or substance

that it is incapable of enforcement, and secondly,

where the whole or part of the award is

ineffective on the ground that the relief granted

lies outside the jurisdiction of the arbitrator.”




◦ Bauer (M) Sdn Bhd v Daewoo Corp [1999] 4 CLJ

665 (CA): “mere participation in proceedings before

an arbitrator does not cure any jurisdictional defect.

Accordingly, a party who appears with or without

protest and takes part in proceedings before an

arbitrator is not precluded from later challenging the

award of such arbitrator on the grounds of lack of

jurisdiction.”




◦ Bauer (M) Sdn Bhd v Daewoo Corp [1999] 4 CLJ

665 (CA) “mere participation in proceedings before

an arbitrator does not cure any jurisdictional defect.

Accordingly, a party who appears with or without

protest and takes part in proceedings before an

arbitrator is not precluded from later challenging the

award of such arbitrator on the grounds of lack of

jurisdiction.”



Malaysian position under AA 2005.

Unreported cases suggest no passive

remedy where active remedy not

pursued.

◦ Bauer (M) Sdn Bhd v Embassy Court Sdn Bhd

[2010] 1 LNS 1260 (HC)

◦ Alami Vegetable Oil Products Sdn Bhd v Hafeez

Iqbal Oil & Ghee Industries (Pvt) Ltd [2016] 7

CLJ 19 (CA)




◦ Bauer (M) Sdn Bhd v Embassy Court Sdn Bhd

[2010] 1 LNS 1260

Appeal was filed to the Court of Appeal, and the

Astro-Lippo decisions were cited for the Court’s

consideration.

Court of Appeal had sight of the Astro-Lippo

decisions, but could not make a finding as parties

reached an agreement to resolve the matter out of

court.




◦ Alami Vegetable Oil Products Sdn Bhd v Hafeez

Iqbal Oil & Ghee Industries (Pvt) Ltd [2016] 7

CLJ 19 (CA)

Appeal dismissed – No formal application was made

by the Appellant under Section 39 AA 2005 in

resisting enforcement proceedings under Section 38

AA 2005



AlamiVegetable Oil Products Sdn Bhd v Hafeez Iqbal

Oil & Ghee Industries (Pvt) Ltd (Federal Court Civil

Application No. 08-572-10/2014):

3 Questions allowed to the Federal Court.



1. Whether or not the Applicant, being part of a

group of persons/entities upon whom an

international arbitration award had been made

against prior to 1st July 2011 would be allowed

to challenge the international arbitration award

at the recognition or enforcement stage, i.e.

when an application was made pursuant to

section 38 AA 2005?



2. Whether under the circumstances of this case, the

Applicant, being part of a group of persons/entities

upon whom an international arbitration award had

been made against prior to 1st July 2011 could avail

itself of a passive remedy as recognised in the Federal

Court decision in State Government of Sarawak v Chin

Hwa Engineering Development Co [1995] 3 MLJ 237,

meaning that did not have to take the initiative to

attack an award, but could simply wait until an

application was made to recognise or enforce the

award and resist the application then?



3. Could the circumstances of the present case

constitute an additional situation upon which a

party in the same position as the Applicant

could avail itself of the passive remedy in order

to meet the ends of justice?



AlamiVegetable Oil Products Sdn Bhd v Hafeez Iqbal

Oil & Ghee Industries (Pvt) Ltd (Federal Court Civil

Appeal No. 02-79-10/2015):

Appeal was allowed. Remitted to the High Court

for retrial before a different Judge.



Lessons

◦ Fork-in-the-road once enforcement

proceedings begin.

◦ Award-debtor must resist enforcement in

that jurisdiction within the time allowed, or

risk losing the right to enforcement.



Section 39(3) AA 2005:“Where the decision on matters submitted to arbitration can

be separated from those not so submitted, only that part of the

award which contains decisions on matters submitted to

arbitration may be recognized and enforced.”

Fraud, Asset Tracing & Recovery

AsiaRecognition & Enforcement of Foreign

Court Judgments and Foreign Arbitral

Awards in China and Malaysia

Sunil AbrahamPartner

[email protected]

Documents

Fraud, Asset Tracing & Recovery Asia