AIAC Arbitration Rules 2021 – What’s New?

A summary of some notable amendments to the 2021 Rules is set out below:

(a) Consolidation of Rules

Under the previous 2018 Rules, rules were separated into two parts (i.e., the AIAC Arbitration Rules and the UNCITRAL Arbitration Rules 2013). Further, should the parties intend to adopt Fast Track Arbitration, they would have to expressly agree on adopting the AIAC Fast Track Arbitration Rules, a separate set of rules altogether.[i] These rules often overlap with one and another, making it difficult for parties to comprehend and apply.

This issue is now resolved with the 2021 Rules, where the AIAC Arbitration Rules, UNCITRAL Arbitration Rules 2013 and Fast Track Arbitration Rules have now been consolidated into one single rule. This is a welcomed change as it provides a more coherent and comprehensive rule, making it more user-friendly for the parties.

(b) Fast Track Procedure

As mentioned, with the consolidation of the rules, the Fast Track Arbitration is automatically part of the 2021 Rules, making it an option for the parties who wish to dispose of the arbitration in a quicker and cheaper manner. However, for parties to utilise the Fast Track Procedure, one or more of the following circumstances must be present:

(i) the amount in dispute[ii] is quantified at less than USD500,000.00 for international arbitration or less than RM2,000,000.00 for domestic arbitration;[iii] or

(ii) there is exceptional urgency;[iv] or

(iii) the parties have agreed to adopt the Fast Track Procedure. The parties can agree to this either by expressly including this in the arbitration clause or by subsequent agreement by way of a submission agreement.[v]

The 2021 Rules further provides that in the event of any dispute on whether the requirement under item (i) and/or (ii) above have been established, such dispute is to be determined by the Director of the AIAC,[vi] the decision of which is binding on the parties.[vii]

In the event that arbitration is conducted via the Fast Track Procedure, the following will, amongst others, apply:

(i) the determination of disputes will be by a sole arbitrator unless parties agree otherwise;[viii]

(ii) the arbitration will proceed on a documents-only basis, with there being no oral hearing.[ix] Whilst the Tribunal may convene an oral hearing upon consulting the parties, such hearing cannot exceed five days;[x]

(iii) the arbitration is to be concluded (including any oral hearing)[xi] within 90 days from the date the Arbitral Tribunal first issued its procedural order.[xii] Thereafter, the Tribunal is required to submit its draft Final Award for the AIAC’s technical review within 90 days from the closure of the proceedings;

This change is definitely welcomed as it allows parties to have their dispute resolved at a quicker and cheaper rate. It is also important to note that, unlike the previous AIAC Fast Track Arbitration Rules,[xiii] there is no express provision in the 2021 Rules allowing for an extension of the timeline stipulated under Rule 8.8 of the 2021 Rules, leaving it a moot point on whether the stringent timeline under Rule 8 can be extended.

(c) Summary Determination Procedure

Another significant change introduced by the 2021 Rules is the introduction of a summary determination mechanism aimed at the early dismissal of claims (i.e., Rule 19 of the 2021 Rules). This provides another option for cost and time savings to the parties.

The new Rule 19 allows arbitrators to dismiss a claim, counterclaim or defence that is manifestly without merit or falls outside the jurisdiction of the Arbitral Tribunal.

Under Rule 19, a claim can be dismissed, in whole or in part, as early as within 90 days from the filing of a statement of defence:

(i) 30 days within the filing of a statement of defence and counterclaim, the party intending for summary determination is to submit a request to the Arbitral Tribunal (copied to AIAC and other Parties) for summary determination.

(ii) 15 days thereafter, the other party is to respond to the application for summary determination.

(iii) 45 days from the Arbitral Tribunal’s receipt of final submission, the Arbitral Tribunal is to decide whether to allow or dismiss the request.

In light of the new provision for summary determination of a dispute, parties will be encouraged to ensure that sufficient particulars are set out in their statement of claim and statement of defence to avoid their claims or counterclaims being dismissed summarily under Rule 19 of the 2021 Rules.

(d) Publication of Awards

The new Rule 44.6 of the 2021 Rules allows the AIAC to publish the entire, excerpts or summaries of arbitration awards, provided always that the parties’ names and other identifying information are redacted. This is a significant step taken to promote arbitration in Malaysia as it facilitates the development of commercial jurisprudence and enables arbitration practitioners to refer to some of these past rulings as a guide to their arbitration proceedings. Such an option also promotes transparency in arbitration.

(e) Multi-Party Appointments of Arbitrators

The Rules 9.6 and 9.7 of the 2021 Rules introduce new and welcomed provisions dealing with the default mode of appointment of arbitrators in the cases where:

(i) The parties have agreed to an even number of arbitrators to be appointed; and

(ii) There are multiple parties as claimant or respondent involved.

In brief, where an even-numbered Tribunal is used, under Rule 9.6, each party will nominate half the required number of arbitrators. If any party fails to nominate, the entire Arbitral Tribunal shall be constituted by the Director upon request by any party.[xiv]

On the other hand, in the event of multiple parties as claimants or respondents, under Rule 9.7, the appointment will depend on the number of arbitrators agreed by the parties to be appointed. In the event of an even-numbered Tribunal, all claimants and respondents will nominate half the required number of arbitrators. For odd-numbered Tribunals, all claimants and respondents will nominate an equal number of arbitrators who shall thereafter nominate a presiding arbitrator. If joint nomination fails, the entire Arbitral Tribunal shall be constituted by the Director of AIAC.

Whilst these changes are very much welcomed since it deals with the two scenarios that were previously absent in the 2018 Rules, the effectiveness/relevancy of these provisions remains to be seen considering that it may be uncommon for parties to agree to an even-numbered Tribunal.

(f) Clarification in Commencement Date for Arbitration

Under the previous 2018 Rules, arbitration is only deemed to be commenced when a request to initiate arbitration is submitted to the Director of the AIAC (Rule 2(2)). This is not ideal and is not in line with international practice. More often than not, arbitration is deemed commenced upon service of notice of arbitration by the claimant to the respondent. This position has now been rectified in Rule 7.5 of the 2021 Rules, which clarifies that the date of commencement of arbitration is when the notice of arbitration is delivered to the respondent.

(g) Consolidating Multi-Contractual Disputes

Under the previous 2018 Rules, in the event that there are disputes arising from various contracts between the same parties, a party intending for these disputes to be heard together can only do so by commencing different arbitrations under the respective contracts and request to have these arbitrations be consolidated.

However, with the introduction of Rule 5.3, a party can now refer claims arising from multiple contracts in a single notice of arbitration, further reducing the costs and time for parties involved. Be that as it may, the parties seeking to refer these disputes under a single notice of arbitration may still have to satisfy the requirements set out in Rule 22.1 of the 2021 Rules for the consolidation of proceedings.