In Masenang Sdn Bhd v Sabanilam Enterprise Sdn Bhd [2021] 9 CLJ 1, the Federal Court clarified that (i) the concept of the seat of arbitration applies to domestic arbitrations; (ii) the seat must be designated as a place within a country (and not the entire country); and (iii) the seat determines which High Court has exclusive supervisory jurisdiction over the arbitration (as opposed to the factors usually applicable in other types of civil proceedings).
The Background
Sabanilam is the employer, and Masenang the contractor, of a construction project in Sabah. The contract between them contained an arbitration clause. The seat of the arbitration was in Kuala Lumpur (“KL”).
The arbitration between Masenang and Sabanilam was heard in KL, and an award handed down in KL in favour of Masenang.
Masenang applied to register the award in the High Court of Malaya at KL (“KL High Court”).
Sabanilam on the other hand applied to set aside the award in the High Court of Sabah & Sarawak at Kota Kinabalu (“KK High Court”)
Both applications were allowed. Hence, there were two diametrically opposed decisions of the High Court in respect of this single arbitral award – one registering the award as a judgment of court, and the other remitting the award to the arbitrator for re-determination of certain issues. See para 12(xvi).
By way of background, there are two High Courts in Malaysia – (i) the High Court of Malaya; and (ii) the High Court of Sabah & Sarawak. Each High Court has branches within their respective territorial jurisdictions. In this regard, the KL High Court is a branch of the High Court of Malaya, whereas the KK High Court is a branch of the High Court of Sabah & Sarawak.
The appeal to the Federal Court (“FC”) arose out of Masenang’s unsuccessful application to strike out Sabanilam’s setting aside application before the KK High Court. The core question is – whether the High Court of Malaya or the High Court of Sabah & Sarawak has jurisdiction over the registration and setting aside applications.
The Decision
The FC enunciated the following general principles:
a) The seat of arbitration ascertains the curial law and the court that enjoys exclusive jurisdiction to regulate and supervise the arbitration (paras 44, 46, 47, 115).
b) Such exclusive jurisdiction includes having jurisdiction over court proceedings to register / enforce an award, or to set aside the award (para 172).
c) The concept of the seat is also applicable to domestic arbitration, and is not limited to only international arbitration (para 68).
d) The seat of a domestic arbitration must be designated as a place within Malaysia, and not the entire country (paras 72, 81, 88, 95).
e) If the seat is within Peninsula Malaysia, then the court supervising the arbitration is the High Court of Malaya. If the seat is in Sabah or Sarawak, then the supervising court is the High Court of Sabah & Sarawak (para 184).
Applying the above principles, the FC found that as the seat is in KL (and therefore within Peninsula Malaysia), the court with exclusive supervisory jurisdiction is the High Court of Malaya. Consequently, the decision of the KL High Court (to register the award) is valid whereas the decision of the KK High Court (to remit the award) is void. See paras 171 – 173.
Comment
To determine which High Court has territorial jurisdiction in civil proceedings, the usual factors to consider include:
a) the place where the cause of action arose;
b) the place where any of the defendants reside or has a place of business;
c) the place where the facts of the dispute are alleged to have occurred; and
d) the location of any land the ownership of which is disputed.
The above factors are prescribed in s 23(1), Courts of Judicature Act 1964.
However, those factors would not apply where the civil proceedings relate to arbitration. Which High Court has supervisory jurisdiction over an arbitration depends instead on the seat of arbitration. See paras 100, 118, 129.
The parties are free to agree on the seat, failing which the same shall be determined by the arbitral tribunal. See s 22, Arbitration Act 2005.
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