TEFD: How do you see Malaysia as a a regional arbitration hub?
Rajoo: Malaysia is an attractive hub for international arbitration due to numerous reasons. First, we have a conducive legal infrastructure and environment.

We are an English-speaking common-law country, so parties who are from other common-law countries would find the legal process familiar. We are also a signatory to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (more commonly known as the New York Convention) since 1985 and we have an Arbitration Act 2005, which is based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law.

We have the full support of the Malaysian government, the legal fraternity and the judiciary, who understand the important role that arbitration can play in the legal system. Their strong support is evidenced by the funding that the government has given us, the involvement of the Malaysian Bar through our partnership and activities, and the recent enactment of amendments to the Arbitration Act 2005, which came into force on 1 July 2011. The amendments were significant as they were designed to reassure parties of the courts limited powers of intervention, the availability of interim measures and the likelihood of enforcement of awards by the courts. More importantly, they represent part of the government’s strategy to increase Malaysia’s prominence as a seat of international arbitration and to provide better clarity and comfort to international arbitration users.

Can we compete with Singapore, for example, to achieve this?
Malaysia can also boast of the most cost-effective arbitration in this part of the region, not only in arbitration fees, but also in living and logistics costs as well such as transport and hotel. Parties to international disputes, who always seek a neutral forum for dispute resolution, may also avail themselves to KLRCA’s panel of nearly 700 domestic and international arbitrators and mediators with various expertise and qualifications.

We also have a good physical infrastructure that complements arbitration, a fact that will be strengthened when KLRCA moves into its new location in 2013. The new KLRCA premises will be bigger with more modern and state-of-the-art facilities and hearing rooms, and will push our centre to be on par with others in the region.

Since KLRCA’s inception as a regional arbitration centre in 1978, the centre has always taken a low- key approach, with more focus given to domestic arbitration. However, with the increasing international and cross-border trade and commercial activities conducted by Malaysian business overseas, and also more and more foreign companies investing in Malaysia, there is now a greater need for an alternative means to dispute resolution, other than litigation.

What changes have shifted Malaysia’s position in the regional arbitration scene?
The shift has been in terms of focus and strategy. KLRCA had always been a regional arbitration centre since it was founded. At the time, the main objective of setting up arbitration centres in Asia and Africa was so that the flow of arbitration cases to arbitral institutions outside the Asian-African region could be minimised. The birth of KLRCA in 1978 came about from the intergovernmental international legal body, Asian-African Legal Consultative Organisation (AALCO) and represented an effort by the developing countries then to set up a fair, inexpensive and speedy procedure for settlement of disputes. AALCO signed a host country agreement with the Malaysian government and subsequent, KLRCA was the first arbitration centre to be set up by AALCO in 1978.

In 2009, the Malaysian government realising how important international arbitration was becoming given the increasing cross-border investments and trade, coupled with the plans for Malaysia’s Economic Transformation Programme, decided to revitalise the centre. As part of that revitalisation strategy, I was appointed director of KLRCA in 2010 and was given the challenge to breathe new life into the centre and make it a recognised player in the region.

Since then we have gone on an aggressive marketing and promotional campaign not only in Malaysia but also around the region on KLRCA’s capabilities and potential drive to increase awareness and educate the business community. We also engaged our stakeholders, such as the Law Affairs Department of the Prime Minister’s Department, Malaysian judiciary and the Malaysian Bar, as well as the Chartered Institute of Arbitrators and the Malaysian Institute of Arbitrators. We have been collaborating and working together with them to promote arbitration and alternative dispute resolution in Malaysia as well as promoting Malaysia as an arbitration seat and venue.Strong government encouragement means that other Malaysian government-linked companies (GLCs) will also use KLRCA arbitration clauses in the future.

Tell us about the recent updates and the adoption of the UNCITRAL arbitration rules
The KLRCA was the first international arbitration centre to have adopted the 2010 version of the UNCITRAL rules with modifications. The rules provide for procedural framework in resolving disputes. They commonly set out the powers, duties and obligations of the parties, arbitral tribunal and the designated institution. They are not restricted to institutional administered arbitration, but they also cover “ad hoc” arbitrations. Also out next year will be an update of the KLRCA Rules that will cater to the maritime and shipping industry.

KLRCA also introduced other rules to encourage alternative dispute resolution such as the Fast Track Rules 2010 and Mediation/Conciliation Rules 2011. The Fast Track Rules were designed in collaboration with the Malaysian Institute of Arbitrators and aimed at providing a quick settling of dispute (within 140 days) for disputes of smaller quantum (less than RM1 million).

These made a huge impact on the arbitration community here in Malaysia.

In the meantime, we are updating our KLRCA Rules for Islamic Banking and Financial Services Arbitration 2007 to widen the scope to generally cover Islamic arbitration. With these new Islamic arbitration rules, KLRCA will possibly be the first centre in the world to have such rules that will adhere to Syariah Law as well as the New York Convention.

We are also excited about the upcoming Construction Industry Payment and Adjudication (CIPA) Bill that will be tabled in March. The bill will help facilitate regular and timely progress payments, provide a mechanism for speedy dispute resolution through adjudication and fast track arbitration and provide remedies for the recovery of payment in the construction industry. KLRCA will play an important role as the default appointing authority and setting of the standards for adjudicators.

We are also getting recognition on the international front. We are hoping to bring the Permanent Court for Arbitration (PCA) in Hague to be based in Malaysia/KLRCA as an alternate venue for their proceedings. KLRCA was also successful in its recent bid with the International Council of Arbitration for Sport (ICAS) in Lausanne, Switzerland and as at June 28, 2011, is the official host of an alternative hearing centre for the Court of Arbitration for Sport (CAS). In July, I was appointed president of the Asia-Pacific Regional Arbitration Group (APRAG), which comprises 31 arbitral institutions in the region.

What do you wish to see, or expect for Malaysia as a centre for arbitration?
My wish is to see Malaysia recognised as one of the leading arbitration hubs in the Asia-Pacific region.

Arbitration and alternative dispute resolution have a great future in Malaysia, simply because they have not reached their full potential yet. Our country is recognised as an emerging economic power. It is a major destination for investment, business and tourism. It is therefore well connected with no dearth in trained arbitrators. Moreover, the government of Malaysia is very supportive in making Malaysia as a major arbitration destination. This is why KLRCA has been aggressive in raising awareness about it through our marketing and promotional activities.

What are the issues that we need to work on?
We have a lot of catching up to do, especially when compared to other arbitration centres such as those in Singapore and Hong Kong as these are now the leading centres in Asia-Pacific when it comes to international arbitration.

We are on track towards that goal. We already have arbitration-friendly legislature, and we have the right business strategy of delivering new products and making people aware of them. Two other major things that will happen is capacity building and the availability of a larger, new premises for KLRCA.

In 2012, aside from our usual seminars and workshops to create awareness, we will be offering the Chartered Institute of Arbitrators’ Diploma in International Commercial Arbitration, which is the recognised professional qualification for international arbitration. This is part of our plan to build capacity for the next generation of Malaysian arbitrators.

More excitingly, the government has kindly offered us bigger premises in Kuala Lumpur in anticipation of the higher number of arbitration cases in the next few years. It will offer state-of-the-art and modern arbitration facilities as well as supporting business facilities, and would make us on par with other leading centres in the region. This new premises is expected to open in early 2013.

So with the software and hardware in place, coupled with the right marketing strategy and up-to-date products, I am confident that we will have positive results in five years’ time. We hope to put Kuala Lumpur on the map first as a cost-effective venue for international arbitration, and, later, when parties grow more familiar with the benefits that our jurisdiction has to offer, as a seat.

What are we doing to achieve this so far?
We have come far in our efforts but there is still more that needs to be done. The first challenge would be to overcome the lack of awareness and visibility of arbitration within the business community. To mitigate this, we have organised educational seminars, workshops and talks. We also organise outreach programmes to the various business associations and industry sectors.

The other main challenge would be credibility. International parties would be reluctant to come and settle disputes in countries where there is perceived judiciary or political interference, especially in the enforcement of arbitral awards. Fortunately, in Malaysia, we have a judiciary that is fully supportive of arbitration and clear legislature under the Arbitration Act 2005 (with recent amendments in 2011), which limits the interference of the courts.

The Act makes it clear and reinforces that fact KLRCA is an independent, neutral, non-profit international arbitration institution that is not an arm of the government. Our task then is to communicate this legislature to ensure and comfort the international arbitration users of the present day arbitration-friendly legal framework in Malaysia.

This article appeared in The Edge Financial Daily, January 3, 2012.