An introduction to the Kuala Lumpur Regional Centre for Arbitration and the current legal framework
Today, arbitration is the most popular dispute settlement tool that promotes trade and investment. As such, States have adopted a series of international treaties and have enacted legislation with the view to facilitating and enhancing the arbitral functioning.
Malaysia has undertaken various efforts that have advanced its position as a seat of arbitration. Notably, the making of the hostcountry agreement with the Asian-African Legal Consultative Organisation (“AALCO”) that established in 1978 the Kuala Lumpur Regional Centre for Arbitration (the “KLRCA”). The KLRCA was the first regional center for arbitration in Asia and since its inception it has been operating as a non-profit, independent international body, providing institutional support as a neutral and autonomous venue for the conduct of domestic and international arbitration proceedings in region.
Along with the establishment of the KLRCA by AALCO, Malaysia took important steps towards modernising its arbitration related legislation. Those efforts came to fruition with the enactment of the Arbitration Act 2005. The Arbitration Act 2005 provides, inter alia, that national courts do not have inherent jurisdiction to supervise an arbitration proceeding. In addition, it excludes the supervisory jurisdiction of the High Court over the KLRCA, thus respecting the independence of the KLRCA an international arbitration institution.
The KLRCA: An institution recognised for innovation and excellence
As an international arbitration institution, the KLRCA has its own rules for arbitration (the “KLRCA Arbitration Rules”). The KLRCA Arbitration Rules have been revised numerous times since the institution’s inception, with the most recent edition having been launched in October 2013. The KLRCA Arbitration Rules, as has always been the case, draw extensively on the rules made by the United Nations Commission on International Trade Law (the “UNCITRAL Rules for Arbitration”) by including the UNCITRAL text in its entirety. They leave a wide discretion to the parties in regard to the choice of the arbitrators, the place of arbitration and the applicability of the procedural rules.
Structurally, the KLRCA Arbitration Rules are split into three parts: Part I containing the KLRCA Arbitration Rules, Part II containing the UNCITRAL Rules for Arbitration and Part III containing the Schedules. Part I of the KLRCA Arbitration Rules modifies the effect and functioning of Part II, to account for the involvement of an administering institution. Part I takes precedence over Part II where there is any conflict between the two sections.
The types of procedural issues that are covered in Part I are precisely those that are handled by an administering institution. They include:
- Commencement of Proceedings, including documentary requirements and address for service;
- Appointment procedures, including the identity of the appointing authority;
- Time limits in the arbitration procedure;
- Calculation of fees and collection of deposits; and
- Issues specific to the location of the institution, such as consolidation, the seat of arbitration and confidentiality.
Catering to the demands of the corporate community for expediency in dispute resolution, the KLRCA introduced in 2010 its Fast Track Arbitration Rules. This set of rules enable smaller quantum disputes to be settled with binding effect within a shorter period of time. In a continuing spirit of innovation, the KLRCA introduced in 2012 the so-called i-Arbitration Rules. The i-Arbitration Rules are designed for disputes that arise from commercial transactions that may contain Shariah elements or premised on Shariah principles. The i-Arbitration Rules incorporate a reference procedure to a Shariah Advisory Council or Shariah expert whenever the arbitral tribunal has to form an opinion on a point related to Shariah principles. Last but not least, the KLRCA aims to promote mediation as a viable commercial option for parties, with the introduction of the KLRCA Mediation Rules.
As far as enforcement of arbitral awards is concerned, under the Arbitration Act 2005 and the KLRCA Arbitration Rules, upon application to the High Court, an award will be recognised and enforced in the same way as a judgment.
The KLRCA imposes an administrative charge, advises parties on the applicable rules, appoint arbitrators (where there is a default of appointment), decides on the amount of the arbitrators fees and collects deposits. It also provides the venue for arbitration, technical facilities and other assistance.
GUARANTEEING EFFICACY, EFFECTIVENESS AND ACCURACY
The catch phrase in today’s fast-paced world is efficacy, effectiveness and accuracy. Business organisations often insist on time and cost effective solutions in resolving any contractual disputes, which they may face from time to time as it adds to the cost of doing business. Such disputes can revolve around payment issues arising from money owed, goods sold or services rendered. An effective arbitration regime matters to foreign investors. The KLRCA offers several sets of rules with the view to providing effective dispute resolution. Its rules are the most popular choice of arbitral rules for arbitrations in Malaysia and in the region, which testifies to the efficacy of the institution.
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Upcoming Events
MGBF is hosting a networking session with Romania's global analyst, Radu Magdin, in Kuala Lumpur. Join the discussion on strategic shifts and conflict flash points that impact Malaysia’s international facing business.
Expanding on the Malaysian government's efforts to promote the country as a trade and investment destination of choice, MGBF will engage with the many industry leaders who announced multi-billion dollar commitments.
The global trend towards a sustainable future is driven by multiple forces. What does Malaysia have to do to achieve resilience at the corporate level while creating new business opportunities?
Special session: Cyberwarfare Waged on the Corporate Sector - Lessons from the Russia-Ukraine Crisis. Corporations are in a digital arms race that many don't realise. How does this relate to your organisation?
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