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Proposed Amendments to the Arbitration Act 2005 (as revised in 2010)

Updated: Jan 4, 2022

The Kuala Lumpur Regional Centre for Arbitration (“KLRCA”) now known as the Asian International Arbitration Centre (Malaysia) (“AIAC”) recently conducted a consultative workshop on the proposed amendments to the Arbitration Act 2005 (as revised in 2011).

Proposed Key Amendments

Among the proposed amendments are as follows:-

  • Introduction of third-party funding for international arbitration.

  • Implementation of the latest revision of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration.

  • Adoption of best regional practices in regulation of arbitration.

These proposals were initiated in view of material developments in international arbitration at global, regional and domestic levels and in line with the Malaysian Government’s initiatives to establish Malaysia as a global hub for alternative dispute resolution.

Third Party Funding

  • The amendment seeks to introduce third-party funding for international arbitration and related court proceedings only. Here are the proposed definition:-

Funded Party” means a party or potential party to Funded Proceedings that has entered into a Third-Party Funding Contract.

Funded Proceedings” means either commenced or potential international arbitration and/or Related Court Proceedings, the costs in respect of which a Funded Party and a Third-Party Funder have entered into a Third-Party Funding Contract.

Third-Party Funder” means any natural or legal person who carries on the business of funding all or part of the costs of Funded Proceedings, that does not or did not at all material times have an interest recognized by law in such Funded Proceedings, other than under the Third-party Funding Contract and that satisfies and continues to satisfy such qualifications and other requirements as may be prescribed by the Third-Party Funding.

Third-Party Funding Contract” means a contract or agreement between a Funded Party and a Third-Party Funder for the funding of all or part of the costs of Funded Proceedings in return for a share or other interest in the proceeds or potential proceeds of the proceedings to which the party or potential party may become entitled.

Third-Party Funding” means provision of money and/or any other financial assistance for the Funded Proceedings by a Third-Party Funder to the Funded Party pursuant to a Third-Party Funding Contract.

Current version of the UNCITRAL Model Law 1986

  • Arbitration Agreement: The proposed amendment seeks to update the scope of the definition ‘in writing’ whereby the requirement for the arbitration to be in writing can also be met by electronic communications. This expansion stands to benefit parties that rely on electronic commerce.

  • Power of arbitral tribunal: The proposed amendment seeks to address the issue of the recognition and enforcement of interim measurements by the arbitral tribunal.

  • Law applicable to the substance of the dispute: The proposed amendments seeks to eliminate the ambiguity that arises from the use of phrase ‘the law’. With the proposed amendment, parties may agree on rules of law that have been elaborated by an international forum but have not yet been incorporated into any national legal system.

Regional Competitiveness

  • Expanding the Scope of Interpretation: The proposed amendment seeks to expand the existing definition of “arbitral tribunal” to include emergency arbitrator (in line with modern arbitration practice, including Singapore and Hong Kong).

  • Representation: The proposed amendment seeks to expand party’s autonomy on choice of representation. The introduction of this new section (which is similar to the UK Arbitration Act) allows a party to arbitral proceedings be represented by any representative chosen by it.

  • Confidentiality: The proposed amendment seeks to add a confidentiality provision which explicitly provides for and protects the confidentiality of arbitration proceedings. Parties may still opt out by agreement.

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