Shearn Delamore & Co
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Arbitration & ADR
In 2005 the Indian government unsuccessfully applied to the Malaysian courts to set aside a partial award issued by the arbitral tribunal. In 2014 the Indian government issued the defendants with a notice to show cause, prompting the defendants to request the tribunal to be reconvened since there was a dispute on the quantification of sums payable. The tribunal granted the final award and the Indian government applied to the Malaysian High Court to set it aside.
The legal battle between La Kaffa International Co Ltd and Loob Holding Sdn Bhd, which has garnered much public attention, recently made its way to the Court of Appeal. This court's decision clarifies that the Arbitration Act 2005 does not oust the inherent jurisdiction or the powers of the courts to order interim measures. However, by virtue of Section 8, the court will be slow to provide relief which is not clearly spelled out in act.
Court directs suit involving non-parties to arbitration agreement to proceed ahead of arbitration proceedingsMalaysia | 26 April 2018
The Court of Appeal recently considered the law governing a stay of proceedings in relation to non-parties to an arbitration agreement pending the outcome of arbitration proceedings. The court determined that the facts of the case supported the conclusion that the court proceedings involving the non-parties to the arbitration agreement should proceed ahead of the arbitration proceedings between the parties to the arbitration.
The Federal Court recently held that under Section 42 of the Arbitration Act, judicial intervention is warranted only where the award substantially affects the rights of one or more parties. A perverse, unconscionable and unreasonable award is not grounds to set aside the award under Section 42. Further, according to the court, Section 42 provides no jurisdiction to deal with questions of fact.
The Federal Court recently delivered its decision in a dispute involving the Laotian government and two foreign companies. The dispute related to the termination of a project development agreement and was set to be resolved by arbitration. Dissatisfied with the arbitration award, the Laotian government applied to the High Court to set aside the award on the ground that the arbitral tribunal had gone beyond the scope of arbitration.
The high court recently held that resisting an application for an interlocutory injunction is not a 'step in the proceedings'. The only steps that amount to a step in the proceedings under Section 10 of the Arbitration Act are those taken to advance the substantive dispute in the action. Parties' compliance with court directions will not constitute steps to advance the dispute.
The Federal Court recently held that Sections 2(1)(a) and (b) of the Advocates Ordinance must be read with Section 8. The statutory right given to advocates admitted in Sabah to practise in Sabah by virtue of Section 8(1) of the Advocates Ordinance cannot be taken away by tying the non-exclusive right of barristers and solicitors in England to appear for parties in arbitration proceedings with the practice in Sabah.
In a recent case, the plaintiff opposed the defendant's stay application on the basis that, among other things, the ambit of the arbitration clause was confined to disputes arising before and during the completion of the work. The contract did not provide for disputes after completion of the work to be referred to arbitration. Despite the ambiguous clauses, the court upheld the arbitration clause to give effect to the parties' intentions.
A high court recently granted an order approving the defendant's application to stay the court proceedings and have the dispute referred to arbitration pursuant to the Arbitration Act 2005, finding that the plaintiff had, through its conduct, demonstrated that it intended to refer the dispute to arbitration. This case demonstrates the Malaysian courts continued attempts to give effect to arbitration agreements and to discount attempts to renege on agreements to arbitrate by relying on technical objections.
The Federal Court recently ruled in a case involving an arbitration agreement within a production sharing contract. The court held that the term 'venue' was more than a mere reference to the geographical or physical seat and in this respect could be construed as the seat of arbitration. The court also held that the Supreme Court of India's earlier ruling did not bind the parties, as a decision issued by a court without jurisdiction does not give rise to res judicata.
A recent high court decision has set out clear parameters within which an arbitral award can be set aside as a result of an arbitral tribunal acting in excess of its jurisdiction and on the grounds of public policy. The court clarified that an award will be set aside on the basis of public policy only if it causes "actual prejudice" or offends the "fundamental principles of justice and morality".
The Court of Appeal recently held that general words are sufficient for the incorporation of arbitration clauses by way of reference, emphasising the importance of arbitration clauses in commercial contracts and the need to give business efficacy to commercial arrangements. Given the widespread use of arbitration clauses in commercial contracts, this is a welcome decision.
The Malaya High Court recently considered the recognition and enforcement of four Australian awards by a sole Australian arbitrator. The court held that it had no supervisory jurisdiction or power under the Arbitration Act 2005 to inquire into the validity and correctness of awards. In any event, the defendant should have applied to the Australian courts to challenge and review the validity and correctness of the awards.
The Malaya High Court recently considered awards rendered by arbitral tribunals which the parties neither claimed nor pleaded in the arbitral proceedings. The court found that the arbitral tribunal in the case at hand had exceeded its jurisdiction by rendering an award in respect of a matter not claimed or pleaded by the parties and thus amended the award accordingly.
The Court of Appeal recently considered whether the appointment of an arbitrator by an appointing authority can be challenged and, if so, on what basis. The court highlighted that a proper challenge to the appointment of an arbitrator should stem from the Arbitration Act. Further, if an arbitrator needs special knowledge or expertise, this should be made clear to the appointing authority before appointment.
The Federal Court recently considered the applicable limitation periods in respect of the registration and enforcement of arbitral awards. The court concluded that two separate limitation periods apply to arbitral awards from countries which are signatories to the New York Convention. The first is a six-year period for registration and the second is a 12-year period for enforcement.
The Malaysian Court of Appeal has upheld the High Court's grant of a Mareva injunction that froze the assets of six individuals and two companies. This decision bodes well for international arbitration, as the Malaysian court granted an injunction in aid of an injunction in a foreign jurisdiction.
The High Court in Sabah and Sarawak recently ruled in a case to set aside an arbitration award rendered in Paris pursuant to the rules of the International Chamber of Commerce. The plaintiff applied to have the award recognised and enforced within Malaysia under Section 38 of the Arbitration Act 2005, while the defendant applied to set it aside.
The Court of Appeal recently set aside high court orders granting injunctions restraining the appellant from proceeding with arbitration proceedings and an order refusing a stay in relation to the arbitration proceedings, in line with the Arbitration (Amendment) Act 2011. The court noted that under the amended act, a stay of court proceedings is mandatory unless the agreement is null and void or impossible to perform.
In a recent dispute involving the delivery of de-acidified palm oil and catalyst resins, the Kuala Lumpur High Court held that in light of an amendment to the Arbitration Act, it was no longer possible to argue that in respect of the controversy between the parties, there was no dispute with regard to the matter to be referred to arbitration. The test should instead be limited to what is included in the wording of the act.
In an ongoing case concerning energy contractors, the Court of Appeal recently upheld the high court decision confirming the setting aside of the arbitral award. The Court of Appeal agreed with the high court that in assuming jurisdiction over disputes arising out of the mining contracts in arbitration under the project development agreement, the arbitral tribunal had gone beyond the scope of the submission to arbitration.
The Court of Appeal recently considered whether an arbitration clause could oust the statutory jurisdiction of the court under Section 181 of Companies Act, either wholly or in part. In its decision, the court also held that while there could be findings on the facts that would be res judicata in view of the final award, these matters should be fully argued when the petition is heard on its merits.
The Federal Court recently considered what amounts to an arbitration agreement in the context of incorporation by reference. The appellant had argued that the reference in the standard terms and conditions to an arbitration clause was insufficient, as the arbitration clause was not attached to the sales contracts and the sales contracts were not signed by the appellant. The court held that that was not a prerequisite.
The Putrajaya Court of Appeal recently considered Section 9 of the Arbitration Act 2005 and what amounts to an agreement to arbitrate. Section 9 defines 'arbitration agreement' and provides that such an agreement includes, among other things, a reference in an agreement to a document containing an arbitration clause where the agreement is in writing and the reference is such as to make that clause part of the agreement.
The courts were recently asked to examine whether a party may file an application to set aside an arbitral award outside the timeframe provided under the Arbitration Act. Under the act, an aggrieved party may seek to set aside an arbitral award within a 90-day limit; in the case at hand, there was a nine-month delay. However, the Putrajaya Court of Appeal held that it had the jurisdiction to extend this timeframe.
The Putrajaya Federal Court recently analysed a technical services agreement between two parties in order to determine what constitutes an agreement to arbitrate. The court recognised that there should be minimal interference with parties seeking to have their dispute arbitrated, but that clear terms and written evidence of an agreement to arbitrate were a requirement for the grant of a stay.
An arbitral award was recently set aside by the Kuala Lumpur High Court after it found that the arbitrator could not be said to be impartial. The sole arbitrator had signed a statement of independence before being appointed, declaring his impartiality and independence, but failed to disclose the fact that he later became a director of the bank that had financed the joint venture between the parties.
The Federal Court recently upheld an arbitral award that had been granted following a dispute over a production sharing contract. The court decided against setting aside the award, but held that if the award had been tainted with illegality, it could have been set aside on the grounds that an error of law has been committed. The court also held that all matters regarding the construction of a document are questions of law.
In Sabah in East Malaysia, no one can practise as an advocate or solicitor unless his or her name is on the roll and he or she has a valid practising certificate with authorisation to act in such role. This would ordinarily be of little interest to the international arbitration community, but in a recent case the Sabah courts construed it to mean that foreign lawyers were barred from appearing as counsel in arbitral proceedings.
Sections 38 and 39 of the Arbitration Act 2005 empower the court to recognise and enforce an award from a foreign state. The Kuala Lumpur High Court recently had occasion to consider the exercise of this power. In its decision, the court held that there was no valid arbitration agreement from which the arbitral tribunal could validly render an award and refused to recognise and enforce the arbitral awards.
In a recent decision the High Court confirmed that the Arbitration Act places a discretionary, not obligatory, requirement on the court regarding the 90-day timeframe for filing an application to set aside an arbitral award. The court thus retains some degree of discretion to extend this timeframe where circumstances so require.
The Kuala Lumpur High Court recently ruled on which of two competing arbitration clauses applied. The court found that the dispute should be left to determination at trial, as it involved serious disputes that required resolution after the witness testimony of the parties had been heard in court. Furthermore, allowing arbitration to proceed could result in large sums of money being wasted.
The Kuala Lumpur High Court recently ruled on the enforcement of a foreign arbitral award. The case considered by the court concerned the enforcement in Malaysia of an award obtained by the plaintiff from a Russian tribunal, pursuant to the Arbitration Act 2005. In its ruling the court found that the defendant had failed to show that there had been a failure to adhere to arbitral procedure.
Section 11 of the Arbitration Act 2005 empowers the court to issue an injunction pending the resolution of disputes between parties. In a recent decision, the court ruled that where (following a decision of the arbitral tribunal against the defendant) the damages that the defendant would be required to pay would be large and would ultimately come out of public funds, a grant of interim relief by way of an injunction was in order.
The Kuala Lumpur High Court recently decided on a request to set aside an arbitral award, brought under the Arbitration Act 2005. The award was based on the allegation that the arbitrators had acted in breach of natural justice in making the award, and that the matter was not deliberated on by a three-person arbitration panel. The court upheld the challenges, set aside the award and remitted the matter for rehearing.
The High Court recently considered an arbitrator's duty of disclosure. Upon learning that the respondent had been nominated as arbitrator by the claimant in more than 20 arbitrations, the applicant felt that those previous appointments ought to have been disclosed to the parties to the arbitration. The central issue was whether a co-arbitrator has a duty of disclosure to the arbitral tribunal in addition to the parties.
In a recent case the High Court relied on its powers under the 1952 Arbitration Act, which provides for the removal of an arbitrator on grounds of misconduct or lack of impartiality. Although the court found that the opposing party had not made a case for removal and the arbitrator's conduct did not warrant interference, concerns were raised over whether the arbitrator's continued presence would lead to a miscarriage of justice.
In a recent case the Court of Appeal ruled that as the defendant had failed to demonstrate that an arbitration agreement had been signed, the claim could not be subject to an agreement to arbitrate. An arbitration agreement must be in writing before the court will give effect to what it thinks may be the parties' intention.
Two awards were issued in favour of the plaintiff and enforcement was sought pursuant to Section 38 of the Arbitration Act 2005. The defendant opposed the enforcement of the awards on the grounds of public policy pursuant to Section 39(1)(b)(ii) of the act. The Malaya High Court held that 'public policy' means more than a mere conflict with domestic laws and must be such as to lead to a substantive miscarriage of justice.
In a recent case the Court of Appeal took the opportunity to restate the limited jurisdiction of the Malaysian courts to set aside or remit an award on the grounds of, among other things, an error of law on the face of the award. The court held that errors by the arbitrator in drawing wrong inferences of fact from the evidence before him were not sufficient to warrant the setting aside of the award.
The Arbitration Act 2005, which repealed the Arbitration Act 1952 and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act 1985, was enacted to address the various inadequacies in those acts. However, Malaysia faces continued challenges in the enforcement of foreign arbitral awards under the Foreign Arbitral Awards Convention Act.
When a dispute arose between Cairn Energy India Pty Ltd and the government of India over a production sharing contract, the matter was referred to arbitration in Malaysia. The dispute was decided in favour of Cairn Energy, but the government of India challenged the award on the basis that there was manifest error in its construction. On appeal, an error of construction was held to be an insufficient ground for setting aside the award.
This update summarizes three arbitration disputes involving construction contracts. In each case the court considered whether to grant a stay of proceedings pursuant to Section 10 of the Arbitration Act 2005. The third and most recent decision enforced the two earlier decisions and reiterated the Malaysian courts' position on staying proceedings pending a reference to arbitration.
A recent case dealt with the enforcement of foreign arbitral awards pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act 1985. The court held that since His Majesty the Yang di-Pertuan Agong had not declared, by way of an order in the Official Gazette, that the United Kingdom was a party to the New York Convention, the award could not be enforced.
The High Court recently considered the ambit of the savings provision in Section 51 of the Arbitration Act 2005. The case involved arbitration proceedings that had been commenced in Malaysia after the act came into force and resulted in an award being handed down in October 2007. The court held that all proceedings subsequent to the handing-down of the arbitral award were governed by the act.
A recent case involved an apparent conflict between an arbitration clause and an exclusive jursidiction clause in an insurance policy. The policy holder sought to refer to arbitration a disagreement regarding whether he had suffered any 'permanent disability' as required under the policy. The respondent relied on the exclusive jurisdiction clause to deny him that right.
The Kuala Lumpur High Court recently ruled on the enforceability of an arbitration clause which formed part of an agreement that had been assigned. When a dispute arose between the employer and the subcontractor, the subcontractor referred the matter to arbitration under the main contract. The employer challenged the arbitrator's jurisdiction on three grounds.
In a recent case the High Court of Malaysia dismissed the plaintiff’s application for an injunction pending a reference to arbitration in Singapore, on the basis that the High Court has no statutory or inherent jurisdiction to grant injunctive leave in matters where the seat of arbitration is outside Malaysia. The Court of Appeal has dismissed the appeal.
In a recent case the court was required to interpret the repeal and savings provision of Section 51 of the Arbitration Act 2005. In doing so, it had to deal with discrepancies in the wording of the English and Malay texts of Section 51(2). The court chose to apply the Malay version, which states that if an arbitration agreement was made before the commencement of the 2005 act, the 1952 act will apply.
In a recent subcontracting case the plaintiff applied for and obtained an ex parte injunction to restrain the defendant from proceeding with arbitration proceedings in respect of a sum of money which the plaintiff allegedly owed the defendant. The defendant applied for a stay of proceedings pursuant to Section 10 of the Arbitration Act 2005.
In a recent case a Malaysian court of appeal considered the validity of an arbitration clause which limited the timeframe for referring a claim to arbitration. The appellant contended that a clause imposing a timeframe on referring claims to arbitration was void.
In a recent case the defendant applied for a stay of proceedings pending arbitration pursuant to Section 6 of the Arbitration Act 1952. At issue was whether extended project services negotiated by the parties after the execution of a technical services agreement fell within the ambit of the arbitration clause provided for in the agreement.
In a recent case the plaintiff sought security and an order to restrain the defendant from dissipating its assets outside of the court’s jurisdiction until after the determination and disposal of the arbitration proceedings. In assessing its powers to grant interim relief, the court considered Sections 11(1)(f) and 11(1)(g) of the Arbitration Act 2005.
The High Court recently ruled in a case involving a settlement agreement regarding shares of a Malaysian company. The settlement agreement was governed by an arbitration clause under the International Chamber of Commerce Arbitration Rules, with a seat in Singapore.
This update summarizes three recent arbitration disputes: one arising out of a retention bond in a construction contract; another concerning a joint venture agreement which contained an arbitration clause; and the third in relation to a partnership contract and reseller's agreement. In each case the court considered whether to grant a stay of proceedings.
In a recent case the High Court considered the setting aside of an arbitral award relating to the construction of a hockey stadium in Malaysia. The application to set aside was filed pursuant to the Arbitration Act 1952. The court was asked to consider whether any misconduct or impropriety had taken place.
In a recent case the Court of Appeal was asked to decide whether a High Court decision, which had overturned an arbitral award on the grounds of an error of law, was valid. Its ruling confirmed the criteria used to determine whether court inteference in an arbitration is justified.
The Kuala Lumpur High Court has issued its decision in I-Expo Sdn Bhd v TNB Engineering Corporation Sdn Bhd. This is the first reported case in respect of the Arbitration Act 2005; it involved a dispute arising from a contract for the decommissioning and dismantling of the defendant's power station.
In Bintulu Development Authority v Pilecon Engineering Bhd the High Court ruled that the appellant could not dispute the validity of the arbitration proceedings as it had participated in the arbitration proceedings from the start by jointly appointing an arbitrator with the other party.
The High Court has held that, in appeals of arbitration awards, the court's jurisdiction is limited as it has no jurisdiction to examine the correctness of the arbitral award on its merit. The court's function is not to re-hear the matter, but rather to determine whether there is an error of law on the face of the award.
In a recent decision the Court of Appeal has construed an arbitration clause and concluded that, as some of the disputes were of a non-contractual nature, they did not fall within the scope of the arbitration clause. The court held that the claims were basically claims under the law of tort and thus did not fall within the scope of the arbitration clause.
In recent months the Court of Appeal has issued decisions dealing with arbitral awards. In one case, the court held that Section 23 of the Arbitration Act 1952 confers a wide discretion on the court to remit an award. However, this discretion will not be exercised merely on the premise that the parties believe that the award is bad on the face of it.
The Arbitration Act 2005 came into force on March 15 2006, bringing in significant changes to arbitration practice in Malaysia. Among other changes, the new act restricts the level of court intervention in arbitrations and places the degree of court intervention under the control of the parties.
In Intelek Timur v Future Heritage the question on appeal was whether the High Court can set aside an arbitrator's award for misconduct and/or error of law on the face of the award, on the grounds that the arbitrator made incorrect inferences of fact from the evidence and/or misconstrued the provisions of a contract in relation to its drafting.
In a recent case the Court of Appeal outlined the factors it will take into account when considering an application for extension of time for the appointment of an arbitrator under Section 28 of the Arbitration Act.
In Bandar Sungai Buaya Sdn Bhd v Sri Lanjutan (M) Sdn Bhd the Kuala Lumpur High Court considered the extent of judicial interjection in arbitral awards. The applicant contended that the arbitrator had committed an error of law and acted inappropriately, and applied to set aside the award under Section 24 of the Arbitration Act, or to have it remitted for reconsideration.
Few applications to set aside an arbitrator's award on the basis of error on the face of it have been successful. A recent decision of the Court of Appeal takes a more liberal approach and appears to be at odds with another recent decision of a differently constituted panel of the Court of Appeal in Future Heritage Sdn Bhd v Intelek Timur Sdn Bhd.
The domestic courts recently held that the existence of a dispute which falls within the scope of the arbitration agreement is a prerequisite for a stay of proceedings in favour of arbitration under Section 6 of the Arbitration Act. They also considered the impact of questions of fraud on arbitral proceedings.
In a recent case, IBM Malaysia applied for an advance ruling from the director general of inland revenue (DGIR) to determine whether a payment made by it to IBM Ireland under a software distribution agreement would be considered royalty under the Income Tax Act and thus subject to withholding tax. One of the issues raised by the DGIR for consideration by the court was whether the advance ruling was a decision amenable to judicial review.
Members of the Malaysian Bar recently complained that Inland Revenue Board officers had carried out raids on them in order to audit their clients' accounts and gain access to those records. The Malaysian Bar then wrote to the director general of inland revenue (DGIR), stating that such audits breached the principle of solicitor-client privilege. However, the DGIR held that the Income Tax Act overrode the provisions of the Evidence Act that conferred solicitor-client privilege.
Shipping & Transport
A recent case before the High Court of Kuala Lumpur concerned an agreement to deliver cargo from Indonesia to India. The plaintiff, Jiang Xin Shipping Co Ltd, had brought an action against the defendant seeking indemnity for the losses incurred by the plaintiff in connection with an arrest of the plaintiff's vessel on delivery of the cargo.
In a recent case, the plaintiff had instructed the defendant – the owner of the vessel Silver Moon – to head to the South Indian Ocean for cargo operations. Despite having received the instructions, the vessel had to deviate and deal with multiple repair works. In view of the vessel being unseaworthy, the plaintiff contended that the defendant was in repudiatory breach of the time charterparty and had the vessel arrested.
The prime minister recently proposed that Sabah, Sarawak and Labuan be exempted from the National Cabotage Policy, which governs maritime transport between Peninsular Malaysia and East Malaysia, effective June 1 2017. Under the proposal, foreign ships can transport cargo domestically. This announcement attracted differing opinions regarding its possible impact.
A court recently considered an insurance claim under a marine cargo all-risk insurance policy for damages to a ship unloader crane that had occurred while it was being unloaded onto a barge at West Port, Port Klang. The court ultimately found that the plaintiffs had proven their case on the balance of probability and granted their claim for RM4.5 million, with costs.
In a recent high court case, the plaintiff's notice of lien stipulated that it had exercised a lien over the bunkers, and that the defendants should pay the plaintiff and not the second intervener. The defendants applied to set aside or strike out the plaintiff's subsequent in rem action, as they had no contractual nexus with the plaintiff for the purchase and supply of the bunkers. The court held that since there was no direct contract between the plaintiff and the defendants, a contractual lien did not arise.
The Court of Appeal recently reviewed a high court decision which had dismissed an application by the first defendant for determination of a preliminary issue. The Court of Appeal had to consider whether the limitation period in the bill of lading, as provided for in the Hague Rules, was contrary to Section 29 of the Contracts Act 1950 and whether an earlier Court of Appeal decision was binding on the high court.
The courts recently dealt with a case involving competing claims for the vessel Safir Kish 4. After hearing extensive arguments over which party had priority over the ship, the court found the registration and transfer of the ship from the shipbuilder to the first defendant to be null and void. As such, the court ordered the ship to be retransferred and reregistered in the shipbuilder's name.
A recent case before the High Court in Kuala Lumpur concerned the loss of cargo delivered from Indonesia to Saudi Arabia. The plaintiff shipper brought the claim against the non-vessel owning common carrier for acting in breach of contract as carrier or duty of care as bailee under the terms of the bill of lading by releasing the shipper's cargo without due production of the original house bills of lading.
The plaintiff in a recent High Court case brought an in rem action against the owners of four vessels for wrongful occupation of its lay-up site and trespassing. The defendants applied to strike out the action, contending that the plaintiff's claim did not fall within the High Court's admiralty jurisdiction. As the plaintiff failed to prove that its claim fell squarely within the court's admiralty jurisdiction, the court struck out the claim with costs.
The plaintiff in a recent case commenced admiralty proceedings against two vessels for unpaid bunkers supplied to those vessels. After both vessels were arrested, the defendant contended that the arrests were flawed, as the plaintiff had not applied to strike out the other vessel from the plural writ after the first vessel was arrested. The court rejected the defendant's argument, holding that the plaintiff need not strike out the other vessel named in the plural writ.
The Admiralty Court recently ruled on the liability of a shipowner in a case involving a ruptured oil pipeline. The court found that the defendant shipowner had failed to discharge its burden to establish that the damages were not caused by its actual fault or privity and that, on a balance of probability, it was liable to the plaintiff for negligence.
A recent maritime incident brought into play the provisions under the Merchant Shipping Ordinance 1952 that relate to collisions. The ordinance requires that special inquiries and investigations take place whenever there are shipping casualties. It also makes clear what constitutes a 'shipping casualty' and outlines responsibility for damages.
The Merchant Shipping Order 1952 stipulates that ships must notify the director general of the Marine Department before engaging in certain activities in Malaysian waters. In a recent case the sessions court found Komas Energy responsible for anchoring a ship without proper notification. On appeal, the high court held that the prosecution had failed to prove a prima facie case against the appellant and that the latter had raised reasonable doubt.
On March 1 2014 the Convention on the Limitation of Liability For Maritime Claims 1976, as amended by the 1996 Protocol to Amend the Convention on Limitation of Liability for Maritime Claims 1976, came into force in Malaysia. Prior to this, the 1957 International Convention on the Limitation of the Liability of Owners of Seagoing Ships was in force.
The High Court recently considered a loan granted to one party to part-finance the purchase of two vessels owned by a second party. As security for the loan, the two vessels were to be mortgaged by way of a third-party mortgage charged to the plaintiff. Some time later, the first party defaulted on its payment and the plaintiff initiated foreclosure proceedings. However, the plaintiff had failed to register the mortgage.
A fire and subsequent explosion during the loading of a cargo of dangerous goods at Port Klang resulted in the loss of both the vessel and its other cargo. In a recent court judgment, the shipper was found liable in negligence to the carrier. The court argued that the shipper owed a reasonable duty of care to the carrier to prevent the dangerous goods from causing or doing injury to the vessel.
The Malaysian courts recently considered the applicability of a plea of limitation under the Hague Rules, as incorporated into national law. The case arose following alleged damage to cargo as a result of faulty refrigeration. The court held that as the plaintiff's claim was brought after the expiry of the one-year limitation period under the rules, it was time barred and the plea of limitation was therefore a valid defence.
A Malaysian court recently examined liability for loss caused by the discharge or delivery of cargo without the production of original bills of lading. The court held that the act of discharging cargo belonging to the plaintiff into the hands of a third party at a different destination from that contracted for under the bill of lading was the cause of the loss. The defendant was found to have failed in carrying out its duties as bailee.
It is not uncommon for a bill of lading to have a pre-agreed stipulation that any dispute or claim arising out of the bill is to be brought before and determined by a foreign tribunal or court, known as a forum selection clause. Malaysian courts of first instance seized with jurisdiction over disputes between a shipper and a carrier have considered the application of such a pre-agreed forum selection clause.
The Court of Appeal recently ruled that an appeal by an owner in a collision action was allowed in part. The court overturned an earlier High Court decision that had held that the owner was not entitled to limit its liability for damage under Section 360 of the Merchant Shipping Ordinance. The appellate court held that the owner was liable in negligence but was granted limitation pursuant to the ordinance.
The Admiralty Court recently issued Practice Direction 1/2012 in relation to admiralty and maritime claims, which is to be followed in relation to admiralty and maritime matters at the high courts. The Kuala Lumpur Admiralty Court and the other high courts are to hear all matters pertaining to 'maritime claims', which are defined in detail in the practice direction.
There are two key items of Malaysian legislation that address marine pollution from ships - the Merchant Shipping (Oil Pollution) Act 1994 and the Merchant Shipping Ordinance 1952. Both were recently amended in order to bring domestic legislation into line with international conventions on the prevention of oil pollution.
The Arbitration (Amendment) Act 2011 was recently passed. This bill amends the Arbitration Act 2005 and empowers a Malaysian court that exercises admiralty jurisdiction to order the retention of vessels or the provision of security, pending the determination of arbitration proceedings related to admiralty disputes. The bill brings into force the amendments to Sections 10 and 11 of the 2005 act.
Previously, settled law and existing legislation in Malaysia did not permit the arrest of a vessel in admiralty proceedings to secure a claim in arbitration. However, a new bill seeks to amend the Arbitration Act to empower a Malaysian court that exercises admiralty jurisdiction to order the retention of vessels or the provision of security pending the determination of arbitration proceedings related to admiralty disputes.
As a matter of policy, Malaysian flagged vessels plying their trade within Malaysian waters are encouraged to employ local crew. However, merchant shipping laws do not prohibit the use of foreign crew on board a Malaysian flagged vessel working in foreign waters. Part III of the 1952 Merchant Shipping Ordinance governs the merchant shipping requirements in respect of rules relating to the qualifications of officers and crew.
The new Admiralty Court has been formally launched in Kuala Lumpur. The court is designed to meet the needs and expectations of various stakeholders within the maritime industry. It aims to give litigants the option, by consent, to have all their claims litigated and resolved expeditiously at one centralised location, in a court that routinely deals with such matters.
The Domestic Shipping Licence Board is responsible for regulating and controlling the licensing of ships engaged in domestic shipping in Malaysia. However, before engaging in domestic shipping, a ship must possess a valid domestic shipping licence. To qualify for a licence, the ship must qualify as a 'Malaysian ship' and the licence applicant must fulfil certain requirements.
A shipowner may find itself faced with a claim against its ship. If its attempts to negotiate a settlement are unsuccessful, it is alive to the possibility of the claimant availing itself of the option to arrest the ship. The shipowner knows that ship arrest will severely disrupt its commercial operations and may even expose it to possible claims by the cargo interest. In such a situation the shipowner could resort to lodging a caveat against arrest.
Various stakeholders are making a concerted effort to pave the way for the formation of a specialized court to hear maritime and admiralty-related disputes. It is hoped that this specialized court will be able to guarantee speed, efficiency and judicial specialization and integrity, and in the process help greatly in further developing and promoting maritime activities in Malaysia.
The National Cabotage Policy reserves domestic trade to Malaysian-flagged vessels. However, the policy is not popular - in the past year the East Malaysian states have renewed calls to abolish it, claiming that the exclusionary nature of the policy is to be blamed for high freight rates and high prices in East Malaysia. As a result, the Ministry of Transport has announced an independent study to review the mechanism of the policy.
The primary aim of commencing an in rem admiralty action is to obtain security for a maritime claim. Once the respondent's ship is arrested, it has two options: attempt to set aside the arrest or negotiate security for the claimant's claim. The question is whether a claimant can arrest a vessel in Malaysia as security for its maritime claim which is to be referred to arbitration.
The primary point of reference for a party intending to acquire, register, transfer or mortgage a Malaysian-flagged ship is the Malaysian Shipping Ordinance 1952. The ordinance was introduced with the intention of consolidating and amending the law on merchant shipping.
The purpose of arresting a vessel in an action in rem (ie, an action against the vessel) is to obtain security for the satisfaction of any judgment which the plaintiff or defendant may obtain in such an action or counterclaim. The arrest of vessels in Malaysia is carried out through the High Court exercising its admiralty jurisdiction.