Peter Godwin and Daniel Chua

Last year, we examined the caseload statistics of various arbitral institutions with the aim of providing an empirical perspective on the participation of Malaysian parties in institutional arbitration over recent years. This was done by reference to published caseload statistics of various arbitral institutions across the globe starting from a mean year of 2015 and ending in 2018. This year, we continue to trace the trend of Malaysian involvement and usage of arbitration based on published statistics of these major arbitral institutions.

Overview of institutional statistics

In 2019, the Asian International Arbitration Centre (“AIAC”) largely maintained its pipeline of new arbitration referrals with 98 administered cases (100 in 2018). Notably, the Director of the AIAC, who is the designated default appointing authority under Malaysia’s Arbitration Act 2005, reported at least 27 new ad hoc cases. The AIAC also saw its first emergency arbitrator proceedings administered under its rules.

The International Court of Arbitration of the International Chamber of Commerce (“ICC“) continues to receive a modest level of acceptance among Malaysian parties, with a three-year high of 17 users in 2019.

Dropping from a record high of 82 parties in 2018, only 38 Malaysian parties (including the number of parent companies from Malaysia, whose subsidiaries were parties to an arbitration at the Singapore International Arbitration Centre (“SIAC”) but incorporated elsewhere) participated in new SIAC arbitrations.

2019 has also seen usage of other Asia-based arbitral institutions by Malaysian parties. The Korean Commercial Arbitration Board (“KCAB“) reported that 1.4% of all parties involved in KCAB arbitrations were Malaysian parties. Although the total number of parties are not reported, the KCAB administered 443 arbitration cases in 2019. The 2019 Work Report of the China International Economic and Trade Arbitration Commission (“CIETAC”) also indicates some level of participation by Malaysian parties in CIETAC arbitrations, although the exact numbers are not reported. It is also notable that 2 Malaysian parties (1 claimant and 1 respondent) were involved in arbitrations administered by the Japan Commercial Arbitration Association between 2015 and 2019.

One case involving a Malaysian party was also administered by the Arbitration Institute of the Stockholm Chamber of Commerce (“SCC“), following two registered cases involving Malaysian parties in 2018.

These statistics, of course, should not be taken to mean that other leading arbitral institutions, such as the London Court of International Arbitration (“LCIA“), the Hong Kong International Arbitration Centre (“HKIAC“) and the American Arbitration Association – International Centre for Dispute Resolution (“AAA-ICDR”) have been abandoned by Malaysian parties in 2019; rather that the recorded number of Malaysian parties in their respective caseload reports were not numerically displayed. Though coming in at a relatively small amount, historic Malaysian usage of LCIA and HKIAC arbitration is anecdotally known. The HKIAC does not elaborate on the total number of parties involved in arbitration by nationality, but instead ranks the top 10 nationalities of users most frequently involved in arbitrations it administers. Unlike 2018, Malaysia was not listed in the top 10 party nationalities bracket in 2019. The AAA-ICDR also indicated that Malaysian parties were involved as party to their international arbitration caseloads between 2016-2018.

Comment

AIAC, ICC and SIAC arbitration continue to be among the more highly sought institutions for arbitrations among Malaysian parties. As can be gleaned from the analysis from the published statistics, the appetite for arbitration remains fairly steady amongst various arbitral institutions. Although each institution presents the details of its caseload differently, it is evident that institutional arbitration has continued to remain popular among Malaysian parties. Ad hoc arbitrations also remain a feature in Malaysian arbitration, stemming from ad hoc arbitration clauses in older contracts and contracts which have abstained from administrative oversight from mainstream arbitral institutions. But whether ad hoc or institutional arbitration is preferred will also depend on the nature and background of the dispute in question. Many arbitration users have a preference for arbitrating with institutional support, and these parties will continue to be engaged by the convenience, familiarity, reputation and transparency of the leading institutions.

Users and practitioners will await the release of 2020’s suite of arbitration statistics with interest, given the impact of the COVID-19 pandemic on arbitration, the AIAC’s lack of a Director for much of 2020 (reported here)  and the appetite of users to commence arbitrations in general.

Further, as Malaysia shifts its focus to participation in multilateral and mega-regional investment initiatives, from the Belt and Road Initiative to Malaysia’s signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and recently the Regional Comprehensive Economic Partnership Agreement (which impact is summarised here), there is little doubt that arbitration will continue to play a significant role amongst Malaysian businesses and those who do business with them.

Disclaimer

Herbert Smith Freehills LLP is licensed to operate as a Qualified Foreign Law Firm in Malaysia. Where advice on Malaysian law is required, we will refer the matter to and work with licensed Malaysian law practices where necessary.

Peter Godwin
Peter Godwin
Managing Partner, Kuala Lumpur
+60 3-2777 5104
Daniel Chua
Daniel Chua
Associate, Kuala Lumpur
+60 3 2777 5101