Institution Profile: AIAC (Malaysia)

Summary of findings

  • Number of arbitrations filed per year in 2017 grew by ca. 250% from 2011. Overall growth has shown more pronounced highs and lows compared to other countries in the region. The increase is largely fuelled by an increase in domestic arbitrations.
  • Domestic arbitration cases (85% of total arbitrations) comprise a majority of cases, but the international arbitrations show steadier

The highest amount of international arbitrations in any given year tends to be much lower than that of domestic arbitrations, except in 2016 indicating that this may have related to one or a limited number of large project(s).

Snapshot of the AIAC as an arbitral institution, by Harald Sippel, Asian International Arbitration Centre

One of the most recent trends in the arbitration market is no doubt third-party funding. The AIAC works closely with the Government of Malaysia and we expect amendments to the Arbitration Act 2005 allowing for third-party funding for international arbitrations to be introduced in 2019.

Domestic arbitration cases are on the rise in Malaysia. Other than purely economic reasons (multiplication of projects, transactions and, hence, disputes), the main driver for Malaysia is, of course, revision of the legal framework in 2011 and 2018, that brought Malaysia in line with UNCITRAL Model Law, and promotional activities by the AIAC, aimed at raising awareness about arbitration as a dispute resolution mechanism and training the future counsels and arbitrators.

The AIAC has seen construction as a sector taking dominance in the Asia Pacific region. Some sectors historically gravitate to particular seats and particular institutions. For example, construction disputes involving Commonwealth of Independent States (CIS) parties are usually arbitrated at the Arbitration Institute of the Stockholm Chamber of Commerce (SCC), corporate disputes tend to gravitate towards the LCIA, and finance and intellectual property disputes will gravitate towards the ICC. 73% of our arbitration cases administered in 2017 originated from the construction industry.

Parties originating from the USA are not among the top five parties of origin for Malaysia-seated arbitrations administered by the AIAC. In view of the US-China “trade war”, one may expect an increase in arbitrations involving US and Chinese parties in the short term, and a decrease in the long run, provided that the “trade war” continued and substantially affects cross-border business.