30 October, 2015
Sebiro Holdings Sdn Bhd v Bhag Singh and Government of Malaysia
Court
COURT OF APPEAL OF MALAYSIA HOLDEN AT KUCHING, SARAWAK
Case Citation
CIVIL APPEAL NO. Q-01-338-10/2013
Date of judgment
17 MARCH 2015
Facts
Sebiro Holdings Sdn Bhd (hereinafter referred to as “the appellant”) and the Government of Malaysia (hereinafter referred to as “the second respondent”) are entangled in a disagreement over the appointment of an arbitrator by the Director of the Kuala Lumpur Regional Centre for Arbitration (hereinafter referred as to “the KLRCA”) to hear and decide their dispute related to the alleged unlawful termination of the Contract by the second respondent.
The appellant entered into an agreement with the second respondent for a contract with regard to a project for replacement and upgrade of schools in Sarawak (hereinafter referred to as “the contract”).
The second respondent terminated the contract on the ground of the alleged failure of the appellant to complete the project on time in accordance with contract and notified the same to the appellant.
The appellant sent a notice of intention to commence arbitration to the Ministry of Education and proposed Y.Bhg. Tan Sri Datuk Amar Steve Shim Lip Kiong (hereinafter referred to as “the proposed arbitrator”) as a sole arbitrator. The second respondent did not agree on the proposed arbitrator.
The appellant requested the Director of the KLRCA to appoint a sole arbitrator indicating the proposed arbitrator as their client’s choice due to his knowledge of locality of the place of performance of the said contract and his previous experience and position.
The Director of the KLRCA informed the appellant that the proposed arbitrator would not be appointed as sole arbitrator as there was no agreement between the parties to the proposed appointment. Therefore the Director of the KLRCA appointed Mr. Bhag Singh (hereinafter referred to as “the first respondent”) as the sole arbitrator to hear and decide the dispute between the appellant and the second respondent.
After 21 days from the appointment of the first respondent as sole arbitrator, the appellant disputed the said appointment on the ground that the first respondent was not from Sarawak and he was deemed to be unqualified due to lack of geographical knowledge of Sarawak.
The Director of the KLRCA informed the appellant that the arbitration matter was not administered by the KLRCA under the KLRCA Arbitration Rules and as such the KLRCA was functus officio upon appointing the sole arbitrator to the arbitration matter.
Dissatisfied with the appointment, the appellant filed the originating summons to, inter alia, terminate the appointment of the first respondent as sole arbitrator containing that the KLRCA had appointed him unilaterally without considering the appellant’s request to appoint the proposed arbitrator as a sole arbitrator.
The appellant alleges that parties have to be heard not only regarding the appointment but also the person to be appointed as arbitrator.
Issues
The issue was whether the appointment of the first respondent as the sole arbitrator was a valid appointment in regards to the dispute and whether the KLRCA had breached their duties to act fairly and to consult the appellant as to the alternative proposed arbitrator with local knowledge would be acceptable by the appellant.
Held
On the facts, the High Court stated that the challenge must be made under subsection 15(1) of Act 646 which refers that the opposition to the appointment must be made to the arbitrator appointed within 15 days from the time they were aware of his appointment by sending him a written statement on the grounds relied on for challenging the same. The High Court found that the appellant failed to do so.
Moreover, in regards to the suitability of the first respondent as the sole arbitrator, the High Court found that the appellant did not indicate the specific requirement that the arbitrator be one with a special knowledge of the geography of Sarawak; and that the parties had agreed in the contract that “the arbitration was to be conducted at the KLRCA Kuala Lumpur.”
The parties had agreed that in the event they failed to agree on the appointment of an arbitrator, an arbitrator shall be appointed by the Director of the KLRCA. In addition, there was no sign in the contract of thereafter of any pre- agreement between the parties on the qualification of an arbitrator in this instant appeal.
As regards to the qualification of an arbitrator to be appointed, the Court found that subsection 13(8) of Act 646 provides that the Director of the KLRCA shall have regard to any qualification required of the arbitrator by the agreement of the parties; and, other considerations that are likely to secure the appointment of an independent and impartial arbitrator.
Furthermore, it is clear that the subsection 13(8) does not stipulate that before the appointment of a sole arbitrator, the consent of the parties is required nor does it stipulate that before the arbitrator is appointed, the Director of the KLRCA is required to seek consent of the parties. Therefore, there is no doubt that the Director of the KLRCA is empowered to appoint a sole arbitrator.
The Court clarified in its decision that if a party had agreed with ‘open eyes and full knowledge and comprehension’ of a clause in the contract that in the event they fail to agree on the appointment of an arbitrator, an arbitrator shall be appointed by the Director of the KLRCA, such a party cannot subsequently turn around and contend that it agrees to the settlement of disputes by arbitration but only by the arbitrator of his/her own choice.
in the Court’s view it cannot interpose and interdict the appointment of an arbitrator whom the parties have agreed to be appointed by the named appointing authority under the terms of the Contract, except in cases where it is proved that there are circumstances which give rise to justifiable doubt as the first respondent’s impartiality or independence or that he did not possess the qualification agreed to by the parties.
The Court concluded with the finding that that the appellant failed to demonstrate that the first respondent should be disqualified on those grounds.
Impact
This decision is an affirmation of the principle of procedural fairness between parties to an arbitration agreement. Parties are able to craft the process as they please – so long as they are both in agreement. This decision also serves as a reminder that parties need to consider all aspects of the decision making process at the time of drafting the contract; if there are qualifications they wish any potential arbitrator to possess, those must be clearly set out so that both parties may agree. This can be done either at the contract drafting stage or subsequently at the time of the dispute, although this case is an example of the difficulties faced securing agreement once a dispute has already arisen.
For further information, please contact:
Laura Jimenez Jaimez, Kuala Lumpur Regional Centre for Arbitration
enquiry@klrca.org
