Something Old Something New: Which Arbitration Act to apply?

The Arbitration Act 2005 (“2005 Act”) came into force on 15 March 2006, and by virtue of section 51(1) of the 2005 Act, it repealed the previous Arbitration Act 1952 (“1952 Act”). The changes in the 2005 Act were far-ranging, marking a shift from the English Arbitration Act 1950 to that of the UNCITRAL Model Law.To further enforce the agreement struck between parties to arbitrate, section 10 of the 2005 Act makes it almost mandatory for a Court to stay court proceedings pending arbitration except in very specific circumstances. The stay provisions under section 6 of the 1952 Act gave the Court more discretion to refuse such a stay of the Court proceedings and to continue to hear the case.

Justice Ramly Ali J in the High Court decision of Putrajaya Holdings Sdn Bhd v Digital Green Sdn Bhd [2008] 1 LNS 92 had to consider whether to grant the order for a stay of the Court proceedings. The arbitration agreement had been entered into prior to the coming into force of the 2005 Act, and the question arose as to whether the 1952 Act or the 2005 Act should apply when determining the stay application.

Under section 51(2) of the 2005 Act, it seemed clear that the 1952 Act would apply only where arbitration proceedings had commenced before the coming into force of the 2005 Act. Section 51(2) states:

“(2) Where the arbitral proceedings were commenced before the coming into operation of this Act, the law governing the arbitration agreement and the arbitral proceedings shall be the law which would have applied as if this Act had not been enacted.”

However, one of the grounds that led the High Court to apply the 1952 Act was that the Judge found that the Bahasa Malaysia version of section 51(2) of the 2005 Act states:

Jika perjanjian timbang tara dibuat atau prosiding timbang tara dimulakan sebelum permulaan kuat kuasa Akta ini, undang-undang yang mengawal perjanjian timbang tara dan prosiding timbang tara itu adalah undang-undang yang sepatutnya terpakai seolah-olah Akta ini tidak diperbuat.” (emphasis added)

The Bahasa Malaysia version essentially translates to:

Where the arbitration agreement is made or the arbitration proceedings were commenced before the coming into operation of this Act, the law governing the arbitration agreement and the arbitral proceedings shall be the law which would have applied as if this Act had not been enacted.”

The Judge found that the Bahasa Malaysia version expressed the intention of Parliament to exclude the applicablity of the 2005 Act from applying “where the arbitration agreement is made or the arbitration proceedings were commenced before the coming into operation of this Act”. As an aid to interpretation, the Judge also found it incongruous and inconsistent that in the English version of the section 51(2) of the 2005 Act, the second portion after the comma (,) made reference to ‘arbitration agreement’ but the first portion before the comma (,) made no reference to ‘arbitration agreement’.

This, along with other factors, led the Judge to make the finding that the 1952 Act applied in this case.

This decision stands in contrast to an earlier High Court decision in Majlis Ugama Islam dan Adat Resam Melayu Pahang v Far East Holdings Bhd & Anor [2007] 10 CLJ 318 where an identical issue arose. In that case, the joint venture agreement, containing the arbitration clause, was signed in 1992 and the Judge, interpreting the English version of section 51(2) of the 2005 Act held that since the arbitration proceedings in that case only commenced after the coming into force of the 2005 Act, the 2005 Act and its stay provisions applied.

This is a stunning discovery that the Bahasa Malaysia version of the statute is different from the English version. Arguably, the decision in Putrajaya Holdings should be the correct interpretation of section 51(2) of the 2005 Act since the Bahasa Malaysia version will be the authoritative version, under section 6 of the National Language Act 1963. It has now been brought to my attention that under P.U. (B) 62/2006, pursuant to section 6 of the National Language Act 1963/67, the authoritative text of the Arbitration Bill 2005 introduced in the Third Meeting of the Second Session of the Eleventh Parliament is the text in the English language. I understand that the decision of Putrajaya Holdings is not under appeal and this discrepancy in the Bahasa Malaysia and the English version must be corrected by Parliament.

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