The “seat of arbitration” refers to the jurisdiction in which the arbitration takes place. It does not refer to a physical venue, but instead to the law that governs the arbitration’s procedure.
In domestic arbitrations (ie: arbitrations that involve no international subject matter, parties or law), the seat of arbitration may often be overlooked. However, the Federal Court case of Masenang Sdn Bhd v Sabanilam Enterprise Sdn Bhd [2021] 6 MLJ 255 shows that the seat of arbitration can affect how an arbitral award can be challenged, even in a domestic arbitration setting.
Brief facts
- The Appellant, Masenang Sdn Bhd (“Masenang”), was a contractor appointed by the Respondent, Sabanilam Enterprise Sdn Bhd (“Sabanilam”), for a construction project in Kota Kinabalu, Sabah.
- A dispute occurred between Masenang and Sabanilam which was arbitrated in Kuala Lumpur.
- The final arbitral award was handed down in favour of Masenang.
- Masenang then applied to register the arbitral award at the Kuala Lumpur High Court, while Sabanilam went to the Kota Kinabalu High Court to set aside the award.
- This gave rise to a multiplicity of proceedings and conflicting decisions were delivered by both the High Courts as explained below.
At the High Court(s)
- After learning that Sabanilam applied to set aside the arbitral award, Masenang applied to strike out Sabanilam’s application on the basis that the Kuala Lumpur High Court is the proper supervisory court for the arbitration proceedings, and not the Kota Kinabalu High Court.
- Sabanilam asserted that the Kota Kinabalu High Court is the correct court, since the cause of action arose in Kota Kinabalu.
- The Kota Kinabalu High Court agreed with Masenang’s argument and struck out Sabanilam’s application to set aside the arbitral award.
- Meanwhile, the Kuala Lumpur High Court allowed Masenang’s application to register the award.
At the Court of Appeal
- Sabanilam appealed against the Kota Kinabalu High Court decision.
- The Court of Appeal reversed the decision of the Kota Kinabalu High Court:
- The Arbitration Act 2005 recognised that both the High Court of Malaya and the High Court of Sabah and Sarawak enjoyed concurrent jurisdiction to hear applications on the registration and setting aside the arbitral award.
- Since there is only one curial law involve, i.e. Malaysian law, Sabanilam can set aside the arbitral award in any court in Malaysia, in as much as Masenang can also do in registering it.
- This Court of Appeal’s decision was then appealed to the Federal Court, which is the topic of this article.
Back at the Kota Kinabalu High Court
- After receiving the Court of Appeal’s decision, Sabanilam went back to the Kota Kinabalu High Court to set aside the arbitral award.
- The Kota Kinabalu High Court then set aside certain parts of the arbitral award and remitted the award to the arbitrator for re-determination.
- This decision contradicted the Kuala Lumpur High Court’s decision in registering the award as is.
- The Kota Kinabalu’s High Court decision here to now set aside certain parts of the award, was then appealed to the Court of Appeal. The Court granted a stay pending the decision of the Federal Court.
At the Federal Court
- The Federal Court had to determine whether the High Court of Malaya and the High Court of Sabah and Sarawak are two separate supervisory jurisdictions in Malaysia especially when it relates to enforcing or setting aside an arbitral award.
- The Federal Court recognised that the Arbitration Act 2005 (“AA”) applies to the whole Malaysia.
- However, section 2 of the AA defines High Court to mean the High Court in Malaya and the High Court in Sabah and Sarawak “or either of them, as the case may require”. The Federal Court held that the words “or either of them, as the case may require” are intentional to denote that both High Courts do not enjoy concurrent jurisdiction regarding any particular domestic arbitration.
- In the context of a domestic arbitration, the seat of arbitration, which is determined by the parties or the arbitral tribunal under section 22 of the AA, becomes important to determine which High Court has supervisory jurisdiction.
- Here, since the seat of arbitration is in Kuala Lumpur, the Kota Kinabalu High Court had no supervisory jurisdiction. Therefore:
- The Kota Kinabalu High Court’s decision to set aside the award and remit parts to the arbitrator for re-determination, was void.
- The decision of the Kuala Lumpur High Court, which is the court at the seat of the domestic arbitration in Kuala Lumpur, is the court that enjoys exclusive jurisdiction to supervise and regulate the arbitration. This includes the registration and enforcement, as well as the setting aside of the arbitral award.
- In arbitration law, where the cause of action arose had no bearing in determining the seat of arbitration. The seat of arbitration is a matter determined by party autonomy, the arbitral tribunal, or otherwise under the AA.
Key Takeaways
The choice of the seat of arbitration determines which High Court has supervisory jurisdiction. Considerations such as the location of the cause of action, or the business premises of any involved party, cannot oust the jurisdiction afforded and vested in the court of the seat of arbitration.
In domestic arbitration, considerations of the seat become crucial especially if there are elements from both Peninsular Malaysia and East Malaysia involved in the arbitration. If the seat of the domestic arbitration is in Peninsular Malaysia, then the supervising court is the High Court in Malaya. If the seat is in Sabah or Sarawak, then the court enjoying exclusive supervisory jurisdiction will follow on from the seat, and fall within the jurisdiction of the High Court in Sabah and Sarawak.
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This article was written by Sean Ferdinand Ng (Associate) from Donovan & Ho’s dispute resolution practice.
Donovan & Ho is a law firm in Malaysia. Our dispute resolution provides advice and legal representation in the civil and industrial courts. We also represent clients in both domestic and international arbitration, as well as other forms of alternative dispute resolution. Our experienced lawyers are also able to assist in commercial and civil disputes (such as debt recovery, shareholders’ or directors’ disputes, breach of contract and claims for injunctive relief), constructive disputes (arbitration and/or adjudication proceedings, disputes relating to delays, liquidated damages, defects and rectification work) and employment disputes (unfair dismissal claims, judicial review proceedings, and employment-related civil claims). Have a question? Please contact us.
