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Arbitration
Series
Advantages & Disadvantages
of Arbitration in Malaysia
By Wong Mew Sum
As society becomes
more aware of its rights, it is natural for the number of legal disputes
to increase. With this increase, its is not surprising that if, for
various reasons, the traditional courts are seen to be no longer
sufficient to cope with the demands of a litigant. Arbitration has now
become a popular alternative to litigation as a means of dispute
resolution as it offers a number of advantages over the latter.
One primary
advantage that arbitration has over litigation, especially in the
Malaysian context, is speed. In Malaysia, a commercial case may
typically take at least two years to come up for trial. Even on the date
fixed for trial, there is no assurance that the case will proceed as the
judge will have to consider if there are other cases which should have
priority for the day. Even if a litigant was to have his day in court,
it is unlikely to be a whole day. This of course results in inefficient
use of parties’ time as well as that of counsel. The natural
consequence of this would be an increase in costs. Moreover, the longer
a case is delayed the greater the likelihood that a party may suffer
prejudice by, for instance, the non – availability of witnesses. This
is especially so as the Evidence Act 1950 requires the maker of all
documents to be present to give testimony in court proceedings
In contrast, parties
to an arbitration to a large extent determine the pace of arbitration.
Upon an arbitrator being appointed, he will usually call for a
preliminary meeting. At this meeting, directions will be given on the
timetable to be adopted after consultation with the parties. So long as
parties are realistic when agreeing on the schedule, there is no reason
why a hearing cannot proceed on the date fixed. Further the
non-availability of the maker of a document would not render it
inadmissible during arbitration, although it may be relevant to the
weight to be attached to it. Moreover, an arbitrator’s award has an
element of finality and the court’s power to review is limited, for
instance, to where there has been an error on the face of the award or
misconduct on the part of the arbitrator.
Another advantage of
arbitration is that hearings are not open to the public. In the case of Esso
Australia Resources Ltd. & 2 Others v. The Honourable Sidney James
Plowman,
Toohey J implied, as a matter of law, a term requiring privacy into
every arbitration agreement. In contrast, court proceedings involving viva
voce testimony are generally held in open court. Even where matters
are held in chambers, the cause papers are freely available to the
public upon payment of the requisite fee. It is not commercially
advantageous to have the details of one’s disputes being aired in
public as it could lead to a loss of reputation amongst one’s
commercial partners. In the Asian context, privacy may be especially
important as parties are always concerned about the concept of “loosing
face”. In the premise, arbitration provides an alternative to the
public airing of grievances. And since, it is held in private, parties
may be more inclined to reach a compromise without having to “loose
face”.
There
are certain disputes, which, because of the inherent nature of the
industry, should ideally be decided
by experts in the field. Prime examples would be disputes involving
construction and maritime claims. Parties are free to select an
arbitrator who is an expert in the field and this generally leads to a
more efficient handling of the case. Again, this is especially
significant in Malaysia where all judges are “general practitioners”
. A
corollary advantage
is that parties can also
appoint experts to present their case. Whereas, only qualified lawyers
may appear in court, no such restriction appears in respect of
arbitration proceedings as the Legal Profession Act 1976 which governs
the legal profession in Malaysia has no application to arbitration
proceedings.
The involvement of experts may also lead to savings in costs as the need
for expert witnesses may be minimised as the arbitrator himself may be
familiar with the technical aspects of the case.
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Notwithstanding
the aforesaid benefits of arbitration, there may be instances that
parties may still prefer to resort to the courts or even where it would
be appropriate to do so. Since an arbitrator derives his powers from
agreement between the parties, he has no powers to join other parties in
the proceedings. As such, arbitration is not suitable for multi party
disputes. Conversely, the Rules of Court make adequate provision for
joinder of parties and third party proceedings.
Another
issue that parties would have to consider is costs. Whereas the costs of
court proceedings are borne by the public purse, parties have to pay the
arbitrator’s fees and other incidental costs such as hire charges for
the venue. However, when one considers that arbitrations proceed at a
much quicker pace, the savings may be negligible. Moreover, there is a
proposal to charge litigants court fees and if this proposal is adopted,
then traditional court proceedings may no longer offer this advantage.
An
arbitrator may not have the power to grant remedies that a court can.
There is support for the view that a court will refuse to stay
proceedings in support of arbitration if the arbitrator cannot award the
remedy claimed.
For instance, in the case of Hashim bin Majid v. Param Cumaraswamy,
an application to stay court proceedings was refused on the grounds
that one of the remedies claimed by the plaintiff was a dissolution of
the partnership and the court was of the view that this was not an issue
that could be decided by an arbitrator.
In
conclusion, it can be said that arbitration proceedings do offer
advantages over traditional court proceedings and will continue to ease
the present burden on the public funded courts. However, the courts will
still have a role to play
and will certainly function much more efficiently as a greater of number
of disputes are referred to arbitration.
References
1.
Russel on Arbitration, Twenty First Edition
2.
Law and Practice of Arbitration in Malaysia by Grace Xavier
Footnotes
Section 73A. This is unless the parties agree to dispense with the maker
or the maker comes wiyhin the exceptions contained in Section 73A
Moreover, Section 34 of the Arbitration Act 1952, excludes jurisdiction
of the courts where the arbitration is conducted pursuant to the Rules
of the Kuala Lumpur Regional Centre for Arbitration
[1995] 2 CLJ 673 at 675
Except the judge of the Family Court
Zublin Muhibbah JV v. Government of Malaysia [1990] 3 MLJ 125
Order 15 Rule 6 and Order 16 Rule 1 of the Rules of the High Court 1980
Singapore has already implemented such charges. In Malaysia, this
proposal mooted about two years ago appears
to now be dormant
Halsbury’s Laws of England, Fourth Edition
[1993] 2 MLJ 20 |
