Major Changes Brought About by the KLRCA Arbitration Rules 2017

The Kuala Lumpur Regional Centre for Arbitration (“KLRCA”) recently revised its Arbitration Rules. The new rules known as the KLRCA Arbitration Rules 2017 supersedes the previous KLRCA Arbitration Rules 2013 and is aimed to cater to more cost and time effective procedural mechanisms for KLRCA-administered arbitrations, such as the appointment of emergency arbitrators.

The KLRCA Arbitration Rules 2017 takes effect from 1 June 2017 and is applicable to arbitrations or the filing of an application for the appointment of an emergency arbitrator after its coming into force, unless otherwise agreed by the parties.

Here are 9 key changes brought about by the KLRCA Arbitration Rules 2017:

1. Guide to the KLRCA Arbitration Rules 2017

The Guide to the KLRCA Arbitration Rules 2017 sets out an overview of the most relevant definitions used in the KLRCA Arbitration Rules 2017.

2. Model arbitration clause

The KLRCA Arbitration Rules 2017 recommend additional terms to be added to the existing model arbitration clause, for example, the seat of arbitration, language of arbitration, substantive law of the contract, and mandatory mediation in accordance with the KLRCA Mediation Rules where parties have agreed to this. The recommended additions are as follows:

1. “the seat of arbitration shall be [ ]”
2. “the language to be used in the arbitral tribunal shall be [           ]”
3. “this contract shall be governed by the substantive law of [          ]”
4. “before referring to the dispute to arbitration, the parties shall seek an amicable settlement of that dispute by mediation in accordance with the KLRCA Mediation Rules as in force on the date of commencement of the mediation”

The KLRCA Arbitration Rules 2017 also sets out the model clause that parties may adopt if they wish to substitute an existing arbitration clause or to incorporate an arbitration clause referring the dispute to arbitration under the KLRCA Arbitration Rules:

“the parties hereby agree that the dispute arising out of the contract dated [         ] shall be settled by arbitration under the KLRCA Arbitration Rules.”

3. Adoption of UNCITRAL Arbitration Rules (as revised in 2013)

The previous KLRCA Arbitration Rules 2013 adopt the UNCITRAL Arbitration Rules (as revised in 2010). The KLRCA Arbitration Rules 2017 now adopt the latest updated UNCITRAL Arbitration Rules as revised in 2013.  Note that the latest UNCITRAL Arbitration Rules incorporate a new provision relating to Investor-State arbitration initiated pursuant to a treaty providing for protection of investments or investors. In such a case, the KLRCA rules now include the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration (“Rules on Transparency”) subject to article 1 of the Rules on Transparency.

4. Commencement of arbitration

The commencement of arbitration process under the KLRCA Arbitration Rules 2017 is similar to the previous KLRCA Arbitration Rules 2013. One significant change is the increase of the non-refundable registration fee – an increase from USD500 to USD750 for an international arbitration and an increase from RM1,000 to RM1,590 for domestic arbitration.

5. Joinder of the Parties

The KLRCA Arbitration Rules 2017 introduces a new rule for the joinder of any third party to the arbitration. Any party to an arbitration or any third party may request one or more parties to be joined as a party if:

1. all parties to the arbitration and the additional party give their consent in writing to the joinder; or
2. if the additional party is prima facie bound by the arbitration agreement.

The request for joinder is submitted for determination:

1. by the arbitral tribunal; or
2. by the Director of the KLRCA if the arbitral tribunal has yet to be constituted.

6. Power of the Director of the KLRCA to consolidate disputes

Under the KLRCA Arbitration Rules 2013, arbitration proceedings may only be consolidated with the consent of the parties. Pursuant to the KLRCA Arbitration Rules 2017, the Director of the KLRCA is vested with the power to consolidate two or more arbitrations into one arbitration upon the request of any party to an arbitration or on his own motion if he deems it appropriate if one of the following conditions is present:

1. the parties have agreed to consolidation;
2. all claims in the arbitrations are made under the same arbitration agreement; or
3. the claims are made under more than one arbitration agreement, the dispute arises in connection with the same legal relationships, and the Director of the KLRCA deems the arbitration agreements to be compatible.

Parties may not use the decision of the Director of KLRCA to consolidate proceedings as a basis to challenge the validity or enforcement of any award made by the arbitral tribunal.

7. Technical review of awards

Under the KLRCA Arbitration Rules 2017, the arbitral tribunal shall declare the proceedings closed after the final oral or written submissions and is now required to submit its draft of the final award to the Director of KLRCA for technical review within 3 months from the close of proceedings.

The Director of the KLRCA may, without affecting the arbitral tribunal’s liberty of decision, draw the arbitral tribunal’s attention to any perceived irregularity as to the form of the award and any errors in the calculation of interest and costs.

If there are perceived irregularities, the arbitral tribunal is required to resubmit the draft final award to the Director of the KLRCA within 10 days  from the date on which the arbitral tribunal is notified of such irregularities, or any further date as may be extended by the Director of the KLRCA.

The final award shall only be released to the parties upon completion of the technical review and full settlement of the costs of arbitration.

8. Power of the arbitral tribunal

The KLRCA Arbitration Rules 2017 contain express provisions on the powers which may be exercised by the arbitral tribunal. Unless otherwise agreed by the parties, the arbitral tribunal may:

1. limit or extend the time available for each party to present its case;
2. conduct enquiries as may appear necessary or expedient, including whether the arbitral tribunal should itself take initiative to identify relevant issues applicable to the dispute;
3. conduct enquiries by inviting parties to make their respective submissions on such issues;
4. order for inspection of any property items, goods or sites in their possession or control;
5. order the production of documents;
6. decide the rules of evidence applicable to the material tendered by the parties on any issue of fact or expert opinion, and to decide the time in which the material should be exchange and presented to the arbitral tribunal.

9. Simplified structure of Schedules

The KLRCA Arbitration Rules 2017 has simplified the structure of the Schedules:

1. Schedule 1 sets out the Arbitrator’s Fees and KLRCA Administrative Fees for international arbitration and domestic arbitration;
2. Schedule 2 sets out the notes on the following:
   • Arbitrator’s fees and expenses;
   • KLRCA administrative fees;
   • deposits;
   • registration fee;
   • application fee for the appointment of emergency arbitrator and the emergency arbitrator’s fee.
3. Schedule 3 sets out the process for the appointment of an emergency arbitrator and application for emergency interim measures.

Conclusion

It is hoped that the coming into force of the KLRCA Arbitration Rules 2017 will further enhance KLRCA’s profile as one of the leading arbitration institutions in Asia and place it as the preferred arbitration institution in the international arena.

If you have any questions or require any additional information, please contact Sabarina Samadi or the ZICO Law partner you usually deal with.

This alert is for general information only and is not a substitute for legal advice.