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Case Update: Seat of Arbitration grants relevant court exclusive supervisory jurisdiction in domestic arbitration.

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30 September 2021

CIVIL PROCEDURE
Domestic Arbitration – Seat of Arbitration – Supervisory jurisdiction – High Court of Malaya – High Court of Sabah & Sarawak – Court of Judicature Act 1964 – Arbitration Act 2005

Masenang Sdn Bhd v Sabanilam Enterprise Sdn Bhd
Civil Appeal No.: 02(i)-20-03/2020(S) | Federal Court
- see the grounds of judgment here

Facts Sabanilam Enterprise Sdn Bhd (‘Respondent’) appointed Masenang Sdn Bhd (‘Appellant’) as the main contractor under a standard PAM Contract 2006 to construct a technology and commercial centre in the district of Penampang, located in Sabah. Dispute arose between the parties and the matter was referred to arbitration. The arbitration agreement provided that the arbitration shall be governed by the Arbitration Act 2005 (‘AA 2005’) and that the seat of arbitration to be in Kuala Lumpur. The tribunal dismissed the Respondent’s claims and allowed the Appellant’s counterclaim. Subsequently, the Appellant commenced enforcement of Award proceedings at the High Court in Kuala Lumpur (‘KLHC’) while at the same time, the Respondent moved to set aside the Award at the Kota Kinabalu High Court (‘KKHC’) in Sabah. The KLHC registered the Award as a judgement of the High Court while the KKHC allowed the striking out application filed by the Appellant on the grounds that KLHC had the supervisory jurisdiction over the Award as the seat of arbitration was Kuala Lumpur. However, this was overturn by the Court of Appeal citing that the seat of arbitration has no bearing in a domestic arbitration as under the AA 2005, the High Court in Malaya and High Court in Sabah and Sarawak enjoyed concurrent jurisdiction and the matter was referred back to the KKHC. The KKHC then set aside certain paragraphs of the Award and remitted the award to the arbitrators for re-determination. At that material time, there were two diametrically opposed decisions of the High Court in respect of a single arbitral award. The Appellant was granted leave to appeal the decision of the Court of Appeal. Hence the present appeal.
          
Issue 1. Whether the High Court of Sabah and Sarawak has supervisory jurisdiction to hear an application to set aside an Arbitration Award issued in Kuala Lumpur.
2. Whether in the context of there being two separate territorial jurisdictions in Malaysia, the seat of a domestic arbitration may be a state or a territory within Malaysia.

Held In allowing the appeal, the Federal Court answered the first issue in the negative while answering the second issue in the affirmative. The Federal Court was of the view that the seat of arbitration is very much relevant and that the seat is vested with the exclusive jurisdiction to regulate or supervise the arbitral proceedings. In other words, the choice of seat therefore determines the court enjoying exclusive supervisory jurisdiction even in a domestic arbitration. The Federal Court was of the view that if the seat of the domestic arbitration is in Peninsular Malaysia, then the supervising court will follow on from the seat of arbitration and accordingly fall within the jurisdiction of the High Court in Malaya. If the seat is in Sabah or Sarawak, the High Court there will be vested with jurisdiction. Therefore, the Federal Courts opined that since Kuala Lumpur was named as the seat of arbitration, the KLHC enjoyed exclusive supervisory jurisdiction over the arbitration and naturally, the Award. The decision of the Court of Appeal was set aside and consequently, the decision of KKHC was deem void and was set aside as well.

ZUL RAFIQUE & partners
{30 September 2021}

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