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( Source of the document: ICC Digital Library )
Jocelyn Lim Yean Tse, partner in SKRINE in Kuala Lumpur, and Shashank Garg, partner in Advani & Co. in Delhi, report on their respective jurisdictions, Malaysia and India, as examples of recent and shifting trends in South Asia.
South Asia has seen the opening of an increased number of arbitration centres over the years, as well as numerous developments as a result of a surge of international arbitration matters in the region.
In Malaysia, the Federal Court rendered two recent noticeable decisions. In CTI Group Inc v International Bulk Carriers SPA (Civil Appeal No. 02(f)-61-09/2015(S)) (‘CTI Group Inc case’), the Federal Court expressly ruled that the grounds for refusing recognition or enforcement of foreign arbitral awards are exhaustively set out in section 39 of the Malaysian 2005 Arbitration Act (equivalent to Article 36 of the UNCITRAL Model Law). In this case, the plaintiff filed an application before the court for an enforcement order recognising an ICC arbitral award rendered in favour of the plaintiff and another party. In reaching its decision, the Federal Court took an exhaustive interpretation of Section 39 of the 2005 Arbitration Act and held that a party applying to set aside an enforcement order should apply based on the grounds exclusively set out in Section 39.
In another case, Thai-Lao Lignite Co. Ltd and Hongsa Lignite Co. Ltd v Government of the Lao People’s Democratic Republic (Civil Appeal No. 02(f)-91-12-2015) (‘Thai Lao case’), the Federal Court upheld the decision of the lower courts allowing the respondent’s application to set aside a foreign arbitral award on the grounds that the arbitral tribunal had failed to stick to the disputes that had arisen under the relevant project development agreement – thereby exceeded its jurisdiction – and allowed the arbitral award to be set aside under the provisions of the 2005 Arbitration Act.
The Federal Court in the Thai-Lao case also had the opportunity to deal with the following issue:
[W]here the governing law of the contract is foreign law and the seat of arbitration is Malaysia, does the parties’ stipulation of Malaysia as the seat constitute an express agreement that the law governing the arbitration agreement is Malaysian law?
The Federal Court adopted the conflict of laws rules whereby the law with the closest and most real connection to the arbitration agreement is the law applicable to the arbitration agreement. Whilst the Federal Court recognised that:
[T]he stipulation of Malaysia as the seat is not an express agreement that the law applicable to the arbitration agreement is the law of Malaysia.
It nonetheless held that, unless it is shown to the contrary:
[U]nder the conflict of laws rules, the stipulation of the seat is usually decisive in the determination of the law applicable to the arbitration agreement.
In summary, by adopting a restrictive approach to the interpretation of the 2005 Arbitration Act provisions in the CTI Group Inc. case, it appears that the Malaysian courts have taken a pro-arbitration stance in restraining the role of courts in international arbitration proceedings. However, this approach does not amount to an absolute blanket not to intervene in international arbitration proceedings as illustrated in the Thai Laos case whereby the Malaysian courts, as the supervisory court, will not merely rubber stamp arbitral awards but will continue to review arbitral awards thoroughly.
In India, the modifications introduced by the 2015 Amendment Act (‘the Amendment Act’) to the 1996 Arbitration and Conciliation Act (‘the 1996 Act’) have rightly addressed several inadequacies of the 1996 Act. The Amendment Act has included strict timelines for arbitral proceedings and the option to adopt a fast track mechanism. It also deals with the grounds for challenging the appointment of an arbitrator, and sets out in detail the circumstances affecting the independence and impartiality of arbitrators. The Amendment Act also gives arbitrators the power to grant interim relief in a foreign seated arbitration before the commencement of the arbitration, and removes the automatic stay of the enforcement and execution process pending a challenge against the award. Further, the introduction of the ‘cost follow the event’ doctrine brings the Indian arbitration legislation in line with international standards and practices regarding the allocation of costs.
In recent years, the Supreme Court of India has also rendered decisions towards modernizing the arbitration regime, such as the possibility for Indian parties to choose a foreign seat of arbitration. Even though this issue had been addressed by a number of High Courts in the past, no clarification had been made on this issue. In Addhar Mercantile Private Limited v. Shree Jagdamba Agrico Exports Pvt. Ltd (Arbitration Petition Judgment, no. 910/2013, 12 June 2015), the Bombay High Court expressed the view that two Indian parties agreeing to a foreign seat and a foreign law governing their arbitration agreement may be contrary to national public policy. In a more recent case, Sasan Power Ltd v. North America Coal Corporation India Pvt. Ltd (First Appeal Judgment, no. 10/2015, 11 September 2015), the Madhya Pradesh High Court opined that two Indian parties may agree to conduct arbitration in a foreign seat under English law. The Madhya Pradesh High Court primarily relied on the ruling in the case Atlas Exports Industries v. Kotak & Company ( 7 SCC 61) wherein the Supreme Court had ruled that two Indian parties could contract to have a foreign-seated arbitration.
Although South Asia has its own set of challenges in becoming an international arbitration hub, the trends and developments within this region seems to show a positive outlook towards international arbitration becoming increasingly ‘Asian’.