Client Alerts

New Fast Track Arbitration Rules launched by the Kuala Lumpur Regional Centre for Arbitration

Volterra Fietta Client Alert
12 March 2012

On 28 February 2012, the Kuala Lumpur Regional Centre for Arbitration (the “KLRCA”) launched the second edition of the 2012 Fast Track Arbitration Rules (the “Rules”). The Rules cater for those parties who wish to quickly and effectively obtain an arbitral award whilst also minimalising cost.

Background

The KLRCA was established in 1978 under the auspices of the Asian-African Legal Consultative Organisation (“AALCO”) and was the first regional centre in Asia to provide institutional support as a neutral and independent venue for the conduct of domestic and international arbitration proceedings.

To resolve a dispute under the Rules, an arbitration agreement must exist either in the form of an arbitration clause or, alternatively, in a supplementary agreement. KLRCA’s Fast Track model clause, which is recognisable and enforceable internationally, states as follows:

“Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof shall be settled by arbitration in accordance with the Kuala Lumpur Regional Centre for Arbitration Fast Track Rules.”

A party wishing to either substitute an existing arbitration clause for the KLRCA Fast Track model clause, or utilise the model clause where no arbitration clause exists in the contract in question, may enter into an agreement which reads:

“The parties hereby agree that the dispute arising out of the contract dated [ ] shall be settled by arbitration under the Kuala Lumpur Regional Centre for Arbitration Fast Track Rules.”

The Fast Track Rules
The Rules differ from the KLRCA arbitration rules in four main respects; (1) the number of arbitrators; (2) the possibility of a documents-only arbitration; (3) time frame; and (4) cost.

Number of Arbitrators
Unless the parties agree otherwise, the default position under the Rules is that the arbitration will be decided by a sole arbitrator (Article 4). This differs from the conventional number of three arbitrators normally appointed under the KLRCA arbitration rules.

The Rules contain no restrictions regarding the selection of arbitrators. Therefore parties are free to appoint who they wish. If the parties cannot agree or decide on the appointment, the Director of KLRCA will make the appointment by selecting from KLRCA’s panel of arbitrators.

Documents-Only Arbitration
The Rules allow for the possibility of a documents-only arbitration (Article 9). For such arbitration, no attendance by the parties for an oral hearing is required (unless exceptional circumstances exist and the Tribunal deems it necessary).

Where the aggregate amount of the claim (and/or counter claim) in dispute in an international arbitration is less than or unlikely to exceed US $75,000, that arbitration must proceed as a documents-only arbitration unless an oral hearing is deemed necessary by the arbitrator in consultation with the parties (Article 9(3)).

Time Frame
Due to “the overriding interest of an expeditious determination” of a dispute under the Rules, no interim award may be sought by the parties (Article 12(1)).

With regards to a documents-only arbitration, the tribunal must publish the final award within 90 days from the commencement of the arbitration (Article 12(4)). A tribunal handling an arbitration which encompasses an oral hearing must publish a final award within 160 days from the commencement of the arbitration (Article 12(5)). By contrast, arbitrations which proceed under the KLRCA arbitration rules are estimated to last between one year (365 days) and one year and a half (547 days).

Cost
Under the Rules, the costs which the parties may recover are capped. In a documents-only arbitration, neither party is entitled to recover more than 30% of the total amount claimed. In arbitration with an oral hearing, no more than 50% of the amount claimed can be recovered in costs (Article 14(3)). It should be noted that these percentages are maximum figures and a tribunal may, at its discretion, cap costs at a lower percentage.

Comments

The Rules seek to provide an expeditious and cost-effective way for parties to resolve their disputes. With the added inclusion of an express confidentiality clause (Article 18), these revised Rules represent the latest in a successful series of innovations at the KLRCA and in Malaysia’s arbitration law to make Malaysia a highly attractive seat for international arbitration.