KLRCA i-Arbitration Rules are suitable for arbitration of disputes arising from commercial transactions premised on Islamic principles. The Rules incorporate a reference procedure to a Shariah Advisory Council or Shariah expert whenever the arbitral tribunal has to form an opinion on a point related to Shariah principles. This is in addition to covering all aspects of the arbitral process, providing a model arbitration clause, setting out procedural rules regarding the appointment of arbitrators and the conduct of arbitral proceedings, and establishing rules in relation to the form, effect and interpretation of the award.View here
The KLRCA i-Arbitration Rules will be available in Malay, Indonesian, Arabic, Spanish, Spanish, Korean and Russian soon.
- The KLRCA Rules consist of the following parts: Part I – KLRCA i-Arbitration Rules, Part II – UNCITRAL Arbitration Rules (as revised in 2013), Part III – Schedules and Part IV – Frequently Asked Questions. The KLRCA i-Arbitration Rules are Shariah-compliant.
- Under any arbitration agreement referring to the KLRCA Rules the parties shall be deemed to have agreed that the following rules, or such amended rules, in force on the date of the commencement of the arbitration, or the filing of an application for the appointment of an emergency arbitrator, shall be applied unless otherwise agreed by the parties.
Rule 1 – General
- Where parties have agreed in writing to arbitrate their disputes in accordance with the KLRCA Rules, then:
a. such disputes shall be settled or resolved by arbitration in accordance with the KLRCA Rules; b. the arbitration shall be conducted and administered by the Kuala Lumpur Regional Centre for Arbitration in accordance with the KLRCA Rules; and c. if the seat of arbitration is Malaysia, Section 41, Section 42, Section 43 and Section 46 of the Malaysian Arbitration Act 2005 (as amended in 2011) shall not apply.
- The KLRCA Rules applicable to the arbitration shall be those in force at the time of commencement of the arbitration unless otherwise agreed by the parties.
- To the extent that there is a conflict between Part I and Part II of the KLRCA Rules, the provisions in Part I shall prevail.
Rule 2 – Commencement of Arbitration
- The party or parties initiating arbitration under the KLRCA Rules shall submit a request in writing to commence arbitration (hereinafter referred to as the “Commencement Request”) to the Director pursuant to Article 3. The Commencement Request shall be accompanied by the following:
a. a copy of the written arbitration clause; b. a copy of the contractual documentation in which the arbitration clause is contained or in respect of which the arbitration arises; c. a copy of the notice of arbitration accompanied by a confirmation that it has been or is being served on all other parties by one or more means of service to be identified in such confirmation; and d. a non-refundable registration fee amounting to USD795.00 in international arbitration and RM1,590.00 in domestic arbitration.1
- The date on which the Director has received the Commencement Request with all accompanying documentation shall be treated as the date on which the arbitration has commenced. The KLRCA will notify the parties of the date of commencement of arbitration.
Rule 3 – Notifications
All documents served on the other party pursuant to Articles 3, 4, 20, 21, 22, 23 and 24 shall be served on the Director at the same time or immediately thereafter.
Rule 4 – Appointment
- Where the parties have agreed to the KLRCA Rules, the Director shall be the appointing authority.
- Parties are free to determine the number of arbitrators.
- If the parties fail to determine the number of arbitrators and the Director does not determine the number having regard to the circumstances of the case, the arbitral tribunal shall:
a. in the case of an international arbitration, consist of three arbitrators; and b. in the case of a domestic arbitration, consist of a sole arbitrator.
- If the parties have agreed that a sole arbitrator is to be appointed, unless the parties have agreed otherwise, the procedure for the appointment shall be:
a. the parties are free to agree on the sole arbitrator; or b. if within 30 days of the other party’s receipt of the notice of arbitration, the parties have not reached an agreement on the appointment of the sole arbitrator, any party may request for the sole arbitrator to be appointed by the Director.
- If the parties have agreed that three arbitrators are to be appointed, unless the parties have agreed otherwise, the procedure for the appointment shall be:
a. each party shall appoint one arbitrator, and the two appointed arbitrators shall choose the third arbitrator, who will act as the presiding arbitrator of the arbitral tribunal; b. if within 30 days after the receipt of a party’s notification of the appointment of an arbitrator the other party has not notified the first party of the arbitrator it has appointed, the first party may request the Director to appoint the second arbitrator; and c. if within 30 days after the appointment of the second arbitrator the two arbitrators have not agreed on the choice of the presiding arbitrator, the presiding arbitrator shall be appointed by the Director.
- If the KLRCA upon the request of a party is to appoint a sole arbitrator, a member of the arbitral tribunal or emergency arbitrator, the Director shall appoint the arbitrator in accordance with the KLRCA Rules. In doing so, the Director at the Director’s discretion may seek such information from the parties as the Director deems appropriate and exercise other powers as vested in the Director by the KLRCA Rules.
- Where the parties have agreed that any arbitrator is to be appointed by one or more parties, or by any authority agreed by the parties, including where the arbitrators have already been appointed, that agreement shall be treated as an agreement to nominate an arbitrator under the KLRCA Rules and shall be subject to confirmation by the Director at the Director’s discretion.
Rule 5 – Challenge to the Arbitrators
- An arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence, or if the arbitrator does not possess any requisite qualification on which the parties agreed.
- A party may challenge the arbitrator nominated by that party only for reasons which the party becomes aware of after the appointment has been made.
- A challenge to an arbitrator shall be made by sending a notice of challenge within 15 days after having received the notice of appointment of the challenged arbitrator or within 15 days after the circumstances mentioned in Rule 5(1) or Rule 5(2) became known to that party.
- The notice of challenge shall be sent simultaneously to the other Parties, to the arbitrator who is challenged, to the other members of the arbitral tribunal, if any, and copied to the Director. The notice shall be in writing and shall state the grounds for the challenge. The notice of challenge shall be accompanied by a non-refundable fee amounting to USD5,300.00 in international arbitration and RM10,600.00 in domestic arbitration.2
- The Director may order suspension of the arbitration until the challenge is resolved.
- If an arbitrator is challenged by one party, the other party may agree to the challenge. The challenged arbitrator may also withdraw from office. In neither case does this imply acceptance of the validity of the grounds for the challenge.
- If within 15 days after having received the notice of challenge, the other party does not agree to the challenge and the arbitrator who is being challenged does not withdraw voluntarily, the Director shall decide on the challenge in writing and state reasons for the decision.
- If required pursuant to Rule 5(6) or Rule 5(7), the substitute arbitrator shall be appointed in accordance with the procedure provided in Rule 4.
2 The amounts are inclusive of 6% GST.
Rule 6 – Powers of the Arbitral Tribunal
The arbitral tribunal may conduct the arbitration in such manner as it deems appropriate. In particular, the arbitral tribunal may, unless otherwise agreed by the parties
|a.||limit or extend the time available for each party to present its case;|
|b.||conduct such enquiries as may appear to the arbitral tribunal to be necessary or expedient, including whether and to what extent the arbitral tribunal should itself take the initiative in identifying relevant issues applicable to the dispute;|
|c.||conduct enquiries by inviting parties to make their respective submissions on such issues;|
|d.||order the parties to make any property items, goods or sites in their possession or control, which the arbitral tribunal deems relevant to the case, available for inspection;|
|e.||order any party to produce any documents in its possession or control which the arbitral tribunal deems relevant to the case, and to supply these documents and/or their copies to the arbitral tribunal and to the other parties; and|
|f.||decide whether or not to apply any rules of evidence as to the admissibility, relevance or weight of any material tendered by a party on any issue of fact or expert opinion, and to decide the time, manner and form in which such material should be exchanged between the parties and presented to the arbitral tribunal.|
Rule 7 – Seat of Arbitration
- The parties may agree on the seat of arbitration. Failing such agreement, the seat of arbitration shall be Kuala Lumpur, Malaysia unless the arbitral tribunal determines, having regard to the circumstances of the case, that another seat is more appropriate.
- Unless otherwise agreed by the parties, the arbitral tribunal may also meet at any location it deems appropriate for any purpose, including hearings.
- Unless otherwise agreed by the parties, if any hearing, meeting, or deliberation is held elsewhere than at the seat of arbitration, the arbitration shall be deemed to have taken place at the seat of arbitration.
Rule 8 – Consolidation of Proceedings and Concurrent Hearings
- The arbitral tribunal may, at the request of a party, grant interim measures pursuant to Article 26.
- A party in need of urgent interim measures prior to the constitution of the arbitral tribunal may submit a request to appoint an emergency arbitrator to the Director pursuant to Schedule 3.
Rule 9 – Joinder of Parties
- Any party to an arbitration or any third party (hereinafter the “Additional Party”) may request one or more Additional Parties to be joined as a party to the arbitration (hereinafter referred to as the “Request for Joinder”), provided that all parties to the arbitration and the Additional Party give their consent in writing to the joinder, or provided that such Additional Party is prima facie bound by the arbitration agreement. The Request for Joinder will be determined by the arbitral tribunal or, prior to the constitution of the arbitral tribunal, by the Director.
- If a Request for Joinder is granted, the date on which the complete Request for Joinder is received by the arbitral tribunal or, prior to the constitution of the arbitral tribunal, by the Director, shall be deemed to be the date of the commencement of the arbitration in respect of the Additional Party.
- A Request for Joinder shall be submitted to the arbitral tribunal or, prior to the constitution of the arbitral tribunal, to the Director. The Request for Joinder shall include:
a. the names and contact details of the Additional Party; b. whether the Additional Party is to be joined as a Claimant or a Respondent; c. a copy of any relevant agreements, in particular, of any written arbitration clause; d. a brief description of the legal and factual basis supporting such joinder; and e. a confirmation that the Request for Joinder has been or is being served on all parties to the arbitration and the Additional Party, by one or more means of service to be identified in such confirmation.
- Any party and any Additional Party that receives a Request for Joinder shall, within 15 days of receipt, submit to the arbitral tribunal or, prior to the constitution of the arbitral tribunal, to the Director, a Response to the Request for Joinder indicating their consent or objection to the Request for Joinder.
- In deciding whether to grant, in whole or in part, the Request for Joinder, the arbitral tribunal shall consult all parties and any Additional Party, and shall have regard to any relevant circumstances.
- If the Director receives the Request for Joinder prior to the constitution of the arbitral tribunal, the Director shall decide whether to grant, in whole or in part, the Request for Joinder. In deciding whether to grant the Request for Joinder, the Director shall consult all parties and any Additional Party, and shall have regard to any relevant circumstances.
- Notwithstanding a decision of the Director pursuant to Rule 9(6), the arbitral tribunal may decide on a Request for Joinder, either on its own initiative or upon the application of any party or Additional Party pursuant to Rule 9(1).
- If the Additional Party is joined to the arbitration before the date on which the arbitral tribunal is constituted, the Director shall appoint the arbitral tribunal and may release any arbitrators already appointed. In these circumstances, all parties shall be deemed to have waived their right to nominate an arbitrator.
- The parties irrevocably waive their rights to any form of appeal, review or recourse to any court or other judicial authority, on the basis of any decision to join an Additional Party to the arbitration, to the validity and/or enforcement of any award made by the arbitral tribunal, insofar as such waiver can validly be made
Rule 10 – Consolidation of Proceedings and Concurrent Hearings
- Upon the request of any party to an arbitration or, if the Director deems it appropriate, the Director may consolidate two or more arbitrations into one arbitration, if:
a. the parties have agreed to consolidation; b. all claims in the arbitrations are made under the same arbitration agreement; or c. the claims are made under more than one arbitration agreement, the dispute arises in connection with the same legal relationships, and the Director deems the arbitration agreements to be compatible.
- In deciding whether to consolidate, the Director shall consult all parties and any appointed arbitrators, and shall have regard to any relevant circumstances including, but not limited to:
a. the stage of the pending arbitrations and whether any arbitrators have been nominated or appointed; b. any prejudice that may be caused to any of the parties; and c. the efficiency and expeditiousness of the proceedings.
- When the arbitrations are consolidated, they shall be consolidated into the arbitration that commenced first, unless otherwise agreed by the parties.
- Within 15 days of being notified of a decision by the Director to consolidate two or more arbitrations, all parties may agree on the arbitrators to be appointed, if any, to the consolidated arbitration and/or the process of such appointment. Failing such agreement, any party may request the Director to appoint the arbitral tribunal, in which case, the Director may release any arbitrators appointed prior to the consolidation decision. In these circumstances, all parties shall be deemed to have waived their right to nominate an arbitrator.
- The parties irrevocably waive their rights to any form of appeal, review or recourse to any court or other judicial authority, on the basis of any decision to consolidate arbitrations pursuant to this Rule, to the validity and/ or enforcement of any award made by the arbitral tribunal, insofar as such waiver can validly be made.
Rule 11 – Procedure for Reference to Shariah Advisory Council or Shariah Expert
- Whenever the arbitral tribunal has to:
a. form an opinion on a point related to Shariah principles; and b. decide on a dispute arising from the Shariah aspect of the contract;
- the arbitral tribunal may refer the matter to the relevant Council or Shariah expert for its ruling.
- For the purposes of paragraph 1 above, the relevant Council or Shariah expert shall be:
a. the Shariah Council under whose purview the Shariah aspect to be decided falls, where there is one; or b. where the Shariah aspect to be decided does not fall under the purview of a specific Shariah Council, a Shariah Council or expert is to be agreed between the parties. Where the parties fail to agree to a Shariah Council or expert, the provisions relating to experts appointed by the arbitral tribunal under Article 29 shall apply.
- Any reference under paragraph 1 above shall include any relevant information as the relevant Council or Shariah expert may require to form its opinion including the question(s) or issue(s) so referred, the relevant facts, issues and the questions to be answered by the relevant Council or Shariah expert.
- If a reference to the relevant Council or Shariah expert has been made, the arbitrator shall then adjourn the arbitration proceedings until the ruling has been given by the relevant Council or Shariah expert, as the case may be, or if there are any other areas of dispute which are independent of the said ruling, shall proceed to deliberate on such areas which are independent of the said ruling.
- The relevant Council or Shariah expert, as the case may be, shall then deliberate and make its ruling on the issue or question so submitted.
- The relevant Council or Shariah expert shall deliver its ruling within the period of 60 days from the date the reference is made.
- Where the relevant Council or Shariah expert fails to deliver its ruling within 60 days, the arbitral tribunal may proceed to determine the dispute and give its award based on the submissions it has before it. The validity of an award given pursuant to this Rule shall not be affected in any way by the unavailability of the relevant Council or Shariah expert’s ruling.
- For avoidance of doubt, the ruling of the relevant Council or the Shariah expert may only relate to the issue or question so submitted by the arbitral tribunal and the relevant Council or the Shariah expert shall not have any jurisdiction in making discovery of facts or in applying the ruling or formulating any decision relating to any fact of the matter which is solely for the arbitral tribunal to determine.
Rule 12 – Facilities
The Director shall, at the request of the arbitral tribunal or either party, make available or arrange for such facilities and assistance for the conduct of the arbitral proceedings as may be required, including suitable accommodation for sittings of the arbitral tribunal, secretarial assistance, transcription services, video or tele conferencing and interpretation facilities. The costs of such additional facilities shall be borne in equal shares by the parties unless otherwise agreed by the parties.
Rule 13 – Technical Review and Awards
- Following the final oral or written submissions, the arbitral tribunal shall declare the proceedings closed. The arbitral tribunal’s declaration and the date on which the proceedings are closed shall be communicated in writing to the parties and to the Director. After this date, the parties may not submit any further evidence or make any further submission with respect to the matters to be decided in the award.
- The arbitral tribunal shall, before signing the award, submit its draft of the final award (hereinafter referred to as the “Draft Final Award”), to the Director within three months for a technical review. The time limit shall start to run from the date when the arbitral tribunal declares the proceedings closed pursuant to Rule 13(1).
- The time limit may be extended by the arbitral tribunal with the consent of the parties and upon consultation with the Director. The Director may further extend the time limit in the absence of consent between the parties if deemed necessary.
- The Director may, as soon as practicable and without affecting the arbitral tribunal’s liberty of decision, draw the arbitral tribunal’s attention to any perceived irregularity as to the form of the award and any errors of calculation.
- If there are no perceived irregularities pursuant to Rule 13(4), the Director shall notify the arbitral tribunal in writing that the technical review has been completed.
- If there are perceived irregularities pursuant to Rule 13(4), the arbitral tribunal shall resubmit the Draft Final Award to the Director within 10 days from the date on which the arbitral tribunal is notified of such irregularities. The time limit for the arbitral tribunal to consider any irregularities under Rule 13(4) may be extended by the Director. Upon completion of the technical review, the Director shall notify the arbitral tribunal in writing of the completion of the technical review.
- The arbitral tribunal shall deliver sufficient copies of the award to the Director. The award shall only be released to the parties by the Director upon full settlement of the costs of arbitration.
- The Director shall notify the parties of its receipt of the award from the arbitral tribunal. The award shall be deemed to have been received by the parties upon collection by hand by an authorised representative or upon delivery by registered post.
- If the parties reach a settlement after the arbitration has commenced, the arbitral tribunal shall, if so requested by the parties, record the settlement in the form of an award made by the consent of the parties. If the parties do not require a consent award, the parties shall inform the Director that a settlement has been reached. The arbitration shall only be deemed concluded and the arbitral tribunal discharged upon full settlement of the costs of arbitration.
- By agreeing to arbitration under the KLRCA Rules, the parties undertake to carry out the award immediately and without delay, and they also irrevocably waive their rights to any form of appeal, review or recourse to any court or other judicial authority insofar as such waiver may be validly made, and the parties further agree that an award shall be final and binding on the parties from the date it is made.
- Unless the parties have agreed otherwise, the arbitral tribunal may on any sum of money ordered to be paid by the award on the whole or any part of the period between the date on which the cause of action arose and to the date of realisation of the award:
a. award a late payment charge determined by applying the principles of ta’widh and gharamah, where ta’widh refers to compensation on actual loss and gharamah refers to penalty for late payment; or b. in any other way that the arbitral tribunal considers appropriate.
Rule 14 – Costs
- The term “costs” as specified in Article 40 shall also include:
a. expenses reasonably incurred by the KLRCA in connection with the arbitration, the administrative costs of the KLRCA as well as the cost of the facilities made available by the KLRCA under Rule 12; and b. Expenses reasonably incurred by the arbitral tribunal in connection with the reference to a relevant Council or Shariah expert under Rule 11.
- Unless otherwise agreed by the parties and the arbitral tribunal pursuant to Rule 14(4), the fees of the arbitral tribunal shall be fixed by the Director in accordance with Schedule 1.
- Unless otherwise agreed upon by parties in writing, Schedule 1(A) shall apply to international arbitrations (USD scale) and Schedule 1(B) shall apply to domestic arbitrations (RM scale).
- Notwithstanding the above, all parties and arbitral tribunal are at liberty to agree on the fees and expenses of the arbitral tribunal within the period of time of 30 days from the appointment of the arbitral tribunal (hereinafter referred to as the “Fee Agreement”). The arbitral tribunal shall inform the Director that the Fee Agreement has been executed. If the Fee Agreement is executed after the 30 day period has expired, the Fee Agreement shall be subject to approval by the Director.
- The KLRCA administrative fees shall be fixed by the Director in accordance with Schedule 1. Unless otherwise agreed by the parties, Schedule 1(A) shall apply to international arbitrations and Schedule 1(B) shall apply to domestic arbitrations.
- The costs of arbitration may, in exceptional, unusual or unforeseen circumstances, be adjusted from time to time at the discretion of the Director.
- The arbitrator’s fees and the KLRCA administrative fees under Schedule 1 are determined based on the amount in dispute. For the purpose of calculating the amount in dispute, the value of any counterclaim and/ or set-off will be taken into account.
- Where a claim or counterclaim does not state a monetary amount, an appropriate value for the claim or counterclaim shall be settled by the
- Director in consultation with the arbitral tribunal and the parties for the purpose of computing the arbitrator’s fees and the administrative fees.
Notwithstanding Rule 14, the arbitral tribunal may determine the proportion of costs to be borne by the parties.
Rule 15 – Deposits
In lieu of the provisions of Article 43, the following provisions shall apply:
- After the arbitration has commenced in accordance with Rule 2, the Director shall fix a provisional advance deposit in an amount intended to cover the costs of the arbitration. Any such provisional advance deposit shall be paid by the parties in equal shares and will be considered as a partial payment by the parties of any deposits of costs fixed by the Director under Rule 15.
- Such provisional advance deposit shall be payable within 21 days upon receiving the request from the
- In the event that any of the parties fails to pay such deposit, the Director shall give the other party an opportunity to make the required payment within a specified period of time. The arbitral tribunal shall not proceed with the arbitral proceedings until such provisional advance deposit is paid in full.
- Upon fixing of the fees of the arbitral tribunal and administrative costs of arbitration by the Director pursuant to Rule 15, including the fees and expenses of the arbitral tribunal, if any, pursuant to Rule 15(4), the Director shall prepare an estimate of the fees and expenses of the arbitral tribunal and the administrative costs of the arbitration which the parties shall bear in equal shares. Within 21 days of written notification by the Director of such estimate, each party shall deposit its share of the estimate with the KLRCA.
- During the course of the arbitral proceedings the Director may request further deposits from the parties which shall be paid by the parties in equal shares within 21 days of such request.
- Notwithstanding Rule 15(4), where counterclaims are submitted by the Respondent, the Director may fix separate advance preliminary deposits on costs for the claims and counterclaims. When the Director has fixed separate advance preliminary deposits on costs, each of the parties shall pay the advance preliminary deposit corresponding to its claims.
- If the required deposits are not paid in full, the Director shall give the other party an opportunity to make the required payment within a specified period of time. If such payment is not made, the arbitral tribunal may, after consultation with the Director, order the suspension or termination of the arbitral proceedings or any part thereof.
- Notwithstanding the above, the Director shall have the discretion to determine the proportion of deposits required to be paid by the parties.
- The Director may apply the deposits towards the administrative costs of the KLRCA, fees of the arbitrator and the arbitrator’s out-of-pocket and per diem expenses in such a manner and at such times as the Director deems appropriate.
- After the award has been made, the Director shall render an accounting of the deposits received to the parties and return any unexpended balance to the parties based on the parties’ respective contributions.
Rule 16 – Mediation to Arbitration
If the parties have referred their dispute to mediation under the KLRCA Mediation Rules and they have failed to reach a settlement and thereafter proceed to arbitration under the KLRCA Rules, then half of the administrative fees paid to the KLRCA for the mediation shall be credited towards the KLRCA administrative fees
Rule 17 – Confidentiality
- The arbitral tribunal, the parties, all experts, all witnesses and the KLRCA shall keep confidential all matters relating to the arbitral proceedings, except where disclosure is necessary for implementation and enforcement of the award or to the extent that disclosure may be required of a party by a legal duty, to protect or pursue a legal right or to challenge an award in bona fide legal proceedings before a court or other judicial authority.
- In this Rule, “matters relating to the arbitral proceedings” means the existence of the proceedings, and the pleadings, evidence and other materials in the arbitration proceedings and all other documents produced by another party in the proceedings or the award arising from the proceedings, but excludes any matter that is otherwise in the public domain.
Rule 18 – No Liability
Neither the KLRCA nor the arbitral tribunal shall be liable for any act or omission related to the conduct of the arbitral proceedings.
Rule 19 – Non-reliances
The parties and the arbitral tribunal agree that statements or comments whether written or oral made in the course of the arbitral proceedings shall not be relied upon to institute or commence or maintain any action for defamation, libel, slander or any other complaint.