Arbitration Agreement Law in Malaysia
Arbitration Agreement Law in Malaysia: Understanding the Essentials
Arbitration is an alternative dispute resolution mechanism commonly used in Malaysia. It is an effective approach to resolving disputes outside the court system. The underlying principle of arbitration is that the parties agree to appoint a neutral third party to settle their disputes. Arbitration agreements are legally binding, and they can be enforced through the Malaysian courts. In this article, we will dive into the essentials of arbitration agreement law in Malaysia.
What is an Arbitration Agreement?
An arbitration agreement is a contract entered into by parties to a dispute, whereby they agree to submit their disputes to arbitration instead of going through the traditional court system. It is a written agreement that specifies the terms and conditions of the arbitration process. The agreement outlines the roles of the parties, the number of arbitrators, the rules governing the arbitration, and the place of arbitration.
Enforceability of Arbitration Agreements
The enforceability of arbitration agreements in Malaysia is governed by the Arbitration Act 2005. Section 8 of the Act provides that a court shall refer parties to arbitration if it finds that there is a valid arbitration agreement. The Malaysian courts have adopted a pro-arbitration approach to enforcing arbitration agreements. This means that the courts will uphold the agreement, unless it is manifestly null and void, inoperative, or impossible to perform.
Validity of Arbitration Agreements
To be valid, an arbitration agreement must meet certain legal requirements. The agreement must be in writing, signed by the parties, and contain an agreement to refer disputes to arbitration. The agreement must also be clear and unambiguous.
The parties must have the capacity to enter into an arbitration agreement. This means that they must have the legal capacity to contract. For example, minors, persons of unsound mind, and bankrupt individuals are not allowed to enter into an arbitration agreement.
The subject matter of the dispute must be arbitrable. Some disputes, such as criminal matters, cannot be settled by arbitration. Similarly, disputes involving public policy issues may not be arbitrated. The parties must agree to arbitrate the dispute voluntarily.
Arbitration Institutions in Malaysia
There are several arbitration institutions in Malaysia that parties can choose to administer their arbitrations. The most popular institutions include the Kuala Lumpur Regional Center for Arbitration (KLRCA), the Asian International Arbitration Center (AIAC), and the Malaysian Institute of Arbitrators (MIArb).
In conclusion, arbitration is a popular mechanism for resolving disputes in Malaysia. The enforceability of arbitration agreements is guaranteed by the Arbitration Act 2005. To be valid, arbitration agreements must meet certain legal requirements, including being in writing and signed by the parties. Parties can choose to administer their arbitrations through various institutions, including KLRCA, AIAC, and MIArb. If you have any questions about arbitration agreement law in Malaysia, it is best to seek the advice of a qualified lawyer.