Introduction
In Hindustan Oil Exploration Company Limited v Hardy Exploration & Production (India) Inc [2022] MLJU 617 (“Hindustan Oil”), the High Court has reaffirmed Malaysia’s adherence to the policy of minimal curial intervention in the context of international arbitration. The High Court, in dismissing an application to set aside an arbitral award, has accepted that section 37 of the Arbitration Act 2005 (“AA 2005”) remains the only provision under which an arbitral award may be set aside.
Facts
The plaintiff, defendant and two others (“Parties”) entered into a Joint Operating Agreement (“JOA”) which was made pursuant to the Production Sharing Contract (“PSC”) between the Parties and the Government of India. Pursuant to the PSC, the Government of India granted permission to the Parties to conduct petroleum operations in the Cauvery Basin (“Contract Area”). Under the JOA and the PSC, the defendant was responsible for the performance of the operating functions. The plaintiff and the other parties were required to share the expenditure incurred by the defendant in proportion to their respective participating interests.
The JOA also provided the following:
• The arbitration agreement is governed by English law;
• The venue of the arbitration is Kuala Lumpur, Malaysia; and
• The JOA is governed by Indian law.
In 2011, the Contract Area was shut down, giving rise to a dispute among the Parties as to their respective contribution towards the expenses the defendant incurred and continued to incur in the performance of its obligations under the JOA and the PSC.
In the ad hoc arbitration, the majority of the Tribunal found for
the defendant (“Majority Award”), holding inter alia that:
• The defendant’s claims against the plaintiff, construed in accordance with Malaysian Limitation laws (as opposed to Indian Limitation laws), were not timebarred (“Limitation laws Decision”);
• The defendant could recover costs incurred by it from the Joint Account of the Parties and from an award of a separate arbitration (“Joint Account and Samson Award Decisions”); and
• The Parties were to undertake a reconciliation of their cash contributions and expenditures to determine their respective contribution to the defendant’s costs; should a disagreement arise, the Parties may refer the same to the Tribunal (“Reconciliation Decision”)
High Court decision
The plaintiff sought to set aside the Majority Award by relying on sections 30 and 37 of the AA 2005. The plaintiff argued that the Tribunal had acted outside its jurisdiction contrary to the public policy of Malaysia and in breach of natural justice.
The High Court disagreed and dismissed the plaintiff’s application, holding that:
• The application of limitation laws was a question of law; it was within the remit of the Tribunal to decide. Even if the majority was wrong in this regard, the Court had no jurisdiction to substitute its own interpretation of the law and facts as this did not fall within the limited grounds under section 37 of the AA 2005.
• In respect of the Joint Account and Samson Award Decisions, the Tribunal similarly had jurisdiction in rendering the same. The Court may not review the merits of the same as if it were an appellate court.
• In respect of the Reconciliation Decision, the plaintiff had not been seriously impacted given the availability of an avenue to address the Tribunal on the same. The High Court held that the plaintiff had failed to satisfy the requirements laid down in Master Mulia Sdn Bhd v Sigur Rus Sdn Bhd [2020] 12 MLJ 198.
Conclusion
Hindustan Oil is a firm addition to the jurisprudence on the setting aside of arbitral awards in Malaysia. The threshold is high. The Court would not allow a party to relitigate issues that had been argued in the arbitration. That the arbitral award contains errors of law is no ground for the court to set it aside. Importantly, even if an arbitral award was rendered in breach of public policy or natural justice, it being set aside is not automatic; the court has a discretion to decide the same under section 37 of the AA 2005.
For further information, please contact:
Shanti Mogan, Shearn Delamore & Co
shanti@shearndelamore.com
