Section 38 of the Arbitration Act (2005), empowers the High Court to register an award made in respect to an arbitration. The applicant shall produce a duly authenticated original award or a duly certified award and the original arbitration agreement or a duly certified copy of the agreement.
The issue is whether a party must provide the court the whole award given in arbitration proceedings or only a dispositive part of an award. The recent Federal Court in Siemens Industry Software Gmbh & Co KG (Germany) v Jacob and Toralf Consulting Sdn Bhd [2020] 1 LNS 249 held that the ‘dispositive portion’ of the arbitral award is only to be recognised and registered under section 38 of the Arbitration Act 2005.
Brief Facts
In 2008, the appellants, (“Siemens Industry”) and the respondent Jacob and Toralf Consulting Sdn Bhd and others (“J&T” Consulting”) entered into a settlement agreement to resolve their dispute. The settlement agreement contains an arbitration clause to be referred to Singapore to settle any disputes and differences out of the settlement agreement.
In 2009, notwithstanding the agreement to arbitrate, the respondent commenced a legal proceeding against the appellant at the Kuala Lumpur High Court for fraudulent misrepresentation.
The appellants later applied for an order to stay those proceedings pursuant to an arbitration clause under section 10 of the Arbitration Act (2005). The arbitration proceeding was commenced in Singapore and the tribunal granted an award in favour of the respondent.
The respondents filed an Originating Summons to register the final award in the Malaysian High Court by registering the entire award which was granted in the arbitration proceedings. The High Court interpreted the term “award” under section 2 of the Arbitration Act (2005) to encompass the dispositive part of the award and not the full award.
The Court of Appeal subsequently overturned the High Court’s decision, and affirmed that parties must provide the whole award given in an arbitration proceeding. Dissatisfied with the Court of Appeal decision, the appellants later appeal to the Federal Court.
Federal Court’s decision
The recent Federal Court held that the ‘dispositive portion’ of the arbitral award is only to be recognised and registered under section 38 of the Arbitration Act 2005.
In a nutshell, a dispositive section of an award is normally known as the ‘judgement’, while the award itself is known as the ‘grounds of judgement’. The dispositive part refers to the orders and reliefs granted by the arbitral tribunal.
The Federal Court’s decision was mainly decided on two factors:
1.) Arbitration is a private means of dispute resolution between parties. The purpose of the bifurcation of the award is to uphold confidentiality. Registering the entire award would undermine the confidentiality of arbitration proceedings which is the cornerstone of arbitration.
2.) The approach under the Reciprocal of Judgement Act 1958 (REJA), ought to be adopted. REJA is only concerned with the registration of the operative part of the judgement and is not concerned with the finding or reasoning made by a foreign court.
Conclusion
The recent Federal Court decision is satisfactory as it maintains the privacy sanctity of arbitration. Confidentiality is one of the biggest benefits in commercial arbitration. It ensures that legal complications do not affect the profitability of commercial projects although it’s known that some countries such as the US do not strictly impose a duty of confidentiality.
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