High Court Has No Jurisdiction to Grant Declaratory Relief in Respect of Final Arbitration Award

A recent judgment was handed down by the High Court in Danieli & C Officine Mecchaniche SPA v Southern HRC Sdn Bhd [2021] MLJU 203, confirming that the Malaysian courts have no jurisdiction to intervene a final arbitration award after it is handed down, aside from dealing with the application to enforce or set aside the final award. This is even if the relief sought relates to rights or orders under the final award, or is relevant to enforcement proceedings for the final award.

Brief Facts

  • The Plaintiff and Defendant were involved in an arbitration in Singapore.
  • The arbitral tribunal issued a final award, ordering the Plaintiff to pay certain sums to the Defendant, and in exchange, the Defendant was to transfer the title of a plant (and additional equipment) to the Plaintiff.
  • The Defendant sought payment of the award sum from the Plaintiff.
  • However, the Plaintiff requested access to the site to inspect the plant to determine its status and integrity and ability to operate.
  • In response, the Defendant claimed that they would only grant access to the plant subject to the Plaintiff paying the award sum.
  • The Plaintiff’s view was that their access to the site is not conditional on the payment of the award sum.
  • The Plaintiff applied to the Malaysian High Court for a declaration that they could inspect the plant, and for consequential orders relating to that declaration.

Court’s Findings

The Defendant opposed the application, claiming that the arbitral tribunal was the appropriate forum with the powers to grant the relief sought by the Plaintiff.  As a final award was already issued, the rights of the parties have now merged into and can be determined only from that final award. The Plaintiff could have applied during the arbitration proceedings to inspect the plant, but did not do so. The High Court’s power regarding a final award is only to enforce the same under the Arbitration Act 2005, and the award itself does not give rise to a cause of action for the declaratory relief sought. The High Court had no jurisdiction to grant the relief sought by the Plaintiff.

The Plaintiff argued that the High Court had jurisdiction because the plant is in Malaysia and the Defendant is a Malaysian company.  The Plaintiff is merely seeking to ascertain if the plant (the subject of the Award) exists, and if so, the condition it is in. The Plaintiff could not have sought for inspection of the plant during the arbitration because transferring the plant was not a relief sought.  The relief sought would have a material impact on the registration and enforcement proceedings of the award in Italy (where the Plaintiff is based).  Further, the Plaintiff argued that since the Plaintiff’s application seeking inspection of the plant is not a matter governed by the Arbitration Act 2005, the “non-interventionist” approach should not apply.

The Court held:

  • The Plaintiff should have sought this relief from the arbitral tribunal while the arbitration was ongoing. The possibility of an order for transferring the plant would have been in parties’ contemplation at the time given the factual matrix of the dispute. The Plaintiff had made submissions on the return of the plant during the arbitration proceedings.
  • Interim measures may be applied only before or during the arbitral proceedings. Here, the arbitration proceedings had concluded. Since the intent of the Arbitration Act 2005 was to limit court intervention before or during arbitral proceedings, it cannot be the case that the Court now has wider powers of intervention upon conclusion of the arbitral proceedings.
  • The cause of action regarding an arbitral award is only in relation to the right to enforce the award. The Plaintiff has undertaken no proceedings in Malaysia to enforce the award, and its application for declaratory relief is not an application to enforce the award. The Plaintiff’s application is therefore a court proceeding relating to arbitration, and Section 8 of the Arbitration Act 2005 will apply to prohibit the Court’s intervention.
  • While Section 8 of the Arbitration Act 2005 is to facilitate arbitration proceedings, it facilitates the same before or during arbitral proceedings. Once an award is handed down, the Court’s facilitation is limited to recognition and enforcement of the award. Besides this, the Court can grant no other relief regarding a final award.

Key Takeaways

In Malaysia, Courts follow the principle of minimal intervention in arbitration proceedings. Parties are expected to honour their agreement to arbitrate and to deal with disputes in the agreed forum.

The High Court’s decision in Danieli underscores the importance for parties to think ahead in arbitration to ensure that all interim or ancillary relief can be applied before the arbitral tribunal, while arbitration is still on foot.  Here, the Plaintiff did not appear to envisage what practical steps would flow from a potential order for the return of the plant, even though this potential order was within the contemplation of parties during the arbitration proceedings.  Perhaps, the Plaintiff did not anticipate that the arbitral tribunal would decide against them. However, when the final award was handed down, it was too late.

Parties in an arbitration which may involve the return or delivery of plant or property, should therefore consider whether it is necessary to apply for interim measures (such as an order for inspection) while the arbitration proceedings are ongoing. For example, Rule 6(d) of the AIAC Arbitration Rules 2018  allows the arbitral tribunal to order parties to make any property, items, goods or sites available for inspection.

Once a final award is handed down, the parties cannot seek recourse from the Court, even if such relief is intrinsically connected to rights or orders under the final award. The High Court’s powers regarding a final award will be limited to that set out in the Arbitration Act 2005 – mainly an application to register and enforce the final award or an application to set aside the final award.

***

This article was written by Donovan Cheah with assistance from Tiffany Chin (Intern). Donovan is an Advocate and Solicitor of the High Court of Malaya. He is a Fellow at the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and the Asian Institute of Alternative Dispute Resolution. He is also a registered foreign lawyer with the Singapore International Commercial Court. 

Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory.  Have a question? Please contact us.

 

Securities Commission's Ban of Binance in Malaysia: Why and what next?
Case Spotlight: Is Absolute Discretion Absolute?
Share This