Federal Court Ajwa decision on the Arbitration Act 2005

The Federal Court has recently released its Grounds of Judgment for its decision in the arbitration case of Ajwa for Food Industries Co (MIGOP), Egypt v Pacific Inter-link Sdn Bhd. This is the first reported Federal Court decision relating to the Arbitration Act 2005 and I had written earlier on the Court of Appeal decision.

The facts of this case involved Court applications to set aside or vary two PORAM arbitration awards. The parties had dealt with each other in an informal basis and that agreements were concluded through telephone conversations and email exchanges prior to any formal documentation. The Appellant, Ajwa, did not dispute purchasing the products from the Respondent, Pacific. Ajwa contended however that it never agreed to refer any disputes to PORAM arbitration.

Ajwa’s contention was that the Sales Contracts relied on by Pacific did not contain any specific dispute resolution clause and in most cases, were unsigned. Pacific had also relied on certain Standard Terms and Conditions (“STC”) and which Ajwa contended it had never seen nor agreed to. Therefore, Ajwa’s case for setting aside was essentially that the PORAM Tribunal had no jurisdiction to conduct the arbitral procedings as there was no agreement, written or otherwise, to refer the disputes arising from the purchases.

The Federal Court had granted leave to appeal on these two questions of law:

1st Question:

Whether for the purpose of section 9(5) of the Arbitration Act 2005, the agreement in writing where a reference is said to be made to a document containing an arbitration clause must satisfy the conditions of an agreement in writing as set out in section 9(4) of the Arbitration Act 2005.

2nd Question:

Whether an arbitration agreement in writing in respect of specific transactions, can be constituted by reference in an agreement to a document containing an arbitration clause pursuant to section 9(5) of the Arbitration Act 2005, where:

(i) The document containing an arbitration agreement is not attached to the purported agreement or otherwise published; and/or

(ii) Notice of the document containing an arbitration clause is purportedly founded on past conduct of the parties in referring to arbitration disputes arising out of unrelated transactions.

It was held at [28] that:

  1. There is no requirement under the Act that where a reference is said to be made to a document containing an arbitration clause in an agreement, that agreement must be signed. In the present case, it is clear that the contract of sale was in writing and satisfies the requirement of section 9(4) of the Act. That agreement in writing incorporates the STC which contains the arbitration clause and satisfies the requirement of section 9(5) of the Act.
  2. Section 9(5) of the Arbitration Act does not require that the STC which contains the arbitration agreement being attached or published. It is sufficient that the incorporation is by notice in the document.

I was anticipating this Federal Court decision not so much on the specific legal issues raised but more on the chance for our apex Court to lay down a conclusive pro-arbitration policy for the judiciary under the Arbitration Act 2005. From that aspect, I was left disappointed.

Intelek Timur Sdn Bhd v Future Heritage Sdn Bhd [2004] 1 MLJ 401 (FC) but this was under the old Arbitration Act 1952. In my view, it would have been useful for our apex Court to have seized this opportunity to explain the significance of our Arbitration Act 2005 in adopting the Model Law and to reiterate the policy of judicial non-interference save in the exceptional and the specific circumstances provided for under Model Law / the Arbitration Act 2005.

This pro-arbitration approach by the judiciary can be seen time and time again in the apex Court of Singapore. We see such a pronouncements such as in the decisions of Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR 86 (CA), Tjong Very Sumitomo and others v Antig Investments Pte Ltd [2009] 4 SLR 732  (CA) and AJU v AJT [2011] 4 SLR 739 (CA). In England, we also see a similar pro-arbitration stance taken by the House of Lords in Fiona Trust & Holding Corporation & Ors v Privalov & Ors [2007] 4 All ER 951 (HL).

It is hoped that in the near future, through the guidance of submissions of Counsel, Malaysia’s Federal Court will lay down this marker that Malaysia is very much in support of the party’s right to choose arbitration and that the Court will not easily interfere in the arbitration process.