Envac Scandinavia A.B. v Muhibbah Engineering (M) Bhd (BA-24NCC(ARB)-2-01/2020)

This Originating Summons (the “OS”) dated 8 January 2020 was filed by the Plaintiff for an order to recognize and enforce a foreign arbitral award dated 11 January 2019 (“the Award”) that orders the Defendant to pay to the Plaintiff an amount of QAR 5,157,612 – QAR2,838,023 = QAR2,319,589, which included withholding tax of QAR888,665.

The Defendant has, before the filing of this Originating Summons (“OS”), paid the substantial part of the awarded sum to the Plaintiff but has taken the position that the Plaintiff has to obtain a Letter of No 2 Objection from the Qatar Revenue Authority before the Defendant is obliged to release to the Plaintiff the balance QAR888,665.00, which represents the withheld amount on account of Qatar withholding tax. The Defendant objects to the OS on the ground that the enforcement of the balance withheld amount (being the Qatar withholding tax) of the Arbitral Award is illegal, an abuse of court process and would therefore be against the Malaysian public policy.

The parties have filed and exchanged the following cause papers in connection with this case:-

3.1. the Originating Summons dated 8 January 2020;

3.2. the Affidavit in Support of the OS affirmed by Patrick Haraldsson on 20 December 2019(“the Plaintiff’s’ Affidavit”);

3.3. the Defendant’s Affidavit in Reply affirmed by Cheong Lai Keong on 18 May 2020 (“the Defendant’s Affidavit in Reply”);

3.4. the Plaintiff’s Affidavit in Reply affirmed by Patrick Haraldsson on 9June 2020 (“the Plaintiff’s Affidavit in Reply”);

3.5. the Defendant’s Further in Affidavit in Reply affirmed by Cheong Lai Keong on 26 June 2020 (“the Defendant’s 2nd Affidavit in

3.6. the Plaintiff’s 2nd Affidavit in Reply affirmed by Patrick Haraldsson on 2 July 2020 (“the Plaintiff’s 2nd Affidavit in Reply”). 3

The undisputed background facts of this matter are as follows:-

4.1. The Plaintiff is a company incorporated under the laws of Sweden and carries out the business of automated waste collection systems.

4.2. The Defendant is a public limited company registered under the laws of Malaysia and carries on the business of oil and gas, marine, infrastructure, civil and structural engineering contract works.

4.3. On 23 June 2008, the Defendant and the Government of the State of Qatar, represented by the New Doha International Airport Steering Committee, entered into a Main Contract No. 25045-000-FC1-C000-00021 (“the Main Contract”) with respect to the Catering Facility for the New Doha International Airport. [see pages 17 – 266 of Exhibit C of the Plaintiff’s Affidavit affirmed by Patrick Haraldsson on 20 December 2019].

4.4. By a Subcontract Document No. 25045-000-FC1-AEFS-00040 with an effective date of 5 June 2008 (the “Subcontract”), the Plaintiff was engaged to carry out works in relation to the Vacuum Waste System relating to the Catering Facility under the Main Contract. [see pages 268 – 405 of Exhibit C of the Plaintiff’s Affidavit affirmed by Patrick Haraldsson on 20 December 2019]. 4

4.5. Clause GC-33 of the Subcontract contained a dispute resolution provision between the parties, which provides that the parties shall proceed with arbitration as per the General Condition contained in the Main Contract if the Contractor’s final determination is not accepted by Subcontractor. The Subcontract is to be read together with the Main Contract and incorporates the dispute resolution mechanism by reference. [see page 283 of Exhibit C of the Plaintiff’s Affidavit affirmed by Patrick Haraldsson on 20 December 2019].

4.6. Dispute arose between the parties and the Plaintiff instituted arbitration proceedings culminating in the Award dated 11 January 2019 by a sole arbitrator consisting of Ms Nadine Debbas Achkar. [see Exhibit D of the Plaintiff’s Affidavit affirmed by Patrick Haraldsson on 20 December 2019].

4.7. In the arbitral award, the arbitral tribunal allowed the Plaintiff/Claimant’s claims in the amount of QAR 5,157,612.00 and also allowed the Defendant/Respondent’s counterclaims in the amount of QAR2,838,023.00. After set-off between the claims allowed and the counterclaims allowed, the net amount payable by the Defendant/Respondnet to the Plaintiff/Claimant under the arbitral award was QAR2,319,589.00, which included withholding tax of QAR888,665.00. Only part of the outstanding sum has been paid, leaving an outstanding balance of QAR888,665.00. [see paragraph 628 of Exhibit D of the Plaintiff’s Affidavit affirmed by Patrick Haraldsson on 20 December 2019] 5

4.8. Up to the filing of the OS, only part of the awarded sum has been paid by the Defendant leaving an outstanding balance of QAR 888,665.00. By a letter sent by email dated 6.5.2019 from the solicitors of the Plaintiff to the solicitors of the Defendant, the Plaintiff demanded for the balance sum of QAR 888,665.00 from the Defendant.

4.9. In reply the Defendant by its e-mail dated 12 March 2019 stated that it was still waiting for clearance pertaining to Qatar tax retention requirement of 3% of total payment and that it would only release the withheld amount of QAR888,665 upon the Plaintiff obtaining and producing a Letter of No Objection from the tax authority of Qatar. [see Exhibit CLK-3 of the Defendant’s

4.10. To date, the sum of QAR888,665.00 remains unpaid. [see pages 565-569 of Exhibit E of the Plaintiff’s Affidavit affirmed by Patrick Haraldsson on 20 December 2019].

In both the Subcontract dated 6 June 2008 (made between the Defendant as the main contractor and the Plaintiff as the subcontractor) and the Main Contract dated 23 June 2008 (made between the Government of the State of Qatar and the Defendant , the applicable law is the law of the State of Qatar [see clause SC-20 in the Special Conditions of the Subcontract and GC-75 in the General Conditions of Main Contract. The settlement of disputes by arbitration shall be in accordance with the Rules of Arbitration of the International Chamber of Commerce and the place of arbitration shall be Dolha, State of Qatar: see GC-33 in the General Conditions of the 6 Subcontract read together with GC 68 of the Main Contract. Hence, it is indisputable that the subcontract and the parties’ rights and obligations thereunder are governed by the laws of Qatar.

The Defendant has not challenged or applied to set aside the arbitral award in the Court of Law in Qatar.

In this OS, the Plaintiff has raised a preliminary point that the Defendant must raise an objection to the recognition and enforcement of an award by way of an application under Section 39 of the Arbitration Act 2005 (“AA 2005”) and that the Defendant cannot raise an objection merely by an affidavit in opposition to the OS which in law is an ex parte application.

In support of the said preliminary point, the Plaintiff quoted the following passages of the Federal Court’s judgment in CTI Group INC v International Bulk Carriers SPA [2017] 9 CLJ 499: “[1] The provisions on recognition and enforcement of arbitral awards as contained in arts. 35 and 36 of the UNCITRAL Model Law on International Commercial Arbitration have been incorporated into ss. 38 and 39 of the 2005 Act. The procedure for the purpose of recognition and enforcement of an arbitral award in Malaysia is contained in O. 69 rr. 8 and 9 of the Rules of Court 2012 ('ROC'). Sections 38 and 39 of the 2005 Act read with O. rr. 8 and 9 of the ROC, provide for a two-stage process: (i) the first 7 stage, an ex parte proceeding - but subject to the power of the court as stipulated in O. 69 r. 8 requiring service of the arbitration claim originating summons on a party to the arbitration. An ex parte order giving permission to enforce an arbitral award is made at this stage; and (ii) the second stage, an inter partes proceeding during which the court deals with the application to set aside an ex parte order giving leave to enforce an arbitral award. The application must be made within the prescribed time after that order is served on the party against whom the order is made. (paragraphs 56, 63, 64 & 66) [5] The two-stage process for the enforcement of arbitral awards as contained in ss. 38 and 39 of the 2005 Act (read with O. 69 r. of the ROC) does not permit a party seeking to set aside an order made under s. 38 to apply to set it aside under that very section on the ground that there was no arbitration agreement in existence between the parties. That party must apply to set aside the order under s. 39. When the matter moves to the second stage under s. 39, the defendant can only apply to set aside the order made under s. 38, upon any one or more of the grounds set out in s. 39 and no other. (paragraphs 105 & 106)”

It is the submission of the Plaintiff that the Defendant’s ground of objection that the recognition and enforcement of the Award is against the Malaysian public policy is not within the ambit of Section 38 of the Arbitration Act 2005 but in fact one that falls within the ambit of Section 39(1)(b)(ii) of the Arbitration Act 2005 and therefore it is argued by the Plaintiff that such an objection cannot stand without an application under Section 39(1) of the Arbitration Act 2005. 8

The Plaintiff further argues that based on the case law an objection under Section 39 of the Arbitration Act 2005 merely by way of an opposing affidavit has no merit and is an abuse of process and as such, the Defendant’s objections cannot stand. In support of this contention, the Plaintiff quoted the following passages of the following cases:

Alami Vegetable Oil Products Sdn Bhd v Hafeez Iqbal Oil & Ghee Industries (PVT) Ltd [2016] 7 CLJ 19 (Hamid Sultan JCA’s judgment on behalf of the Court of Appeal) has held that: “[2] For s. 39 to apply, the application must be made by the respondent to the award. In this case, the respondent to the award was the appellant and no such application had been filed. Instead, the appellant had only filed an opposing affidavit stating why the respondent’s application should not be allowed. What was before the court was a s. 38 application which was in respect of the merit of the award, which was irrelevant consideration at the stage of s. 38 application. Therefore, the appeal had no merit and was an abuse of judicial process as the appellant had not taken the argument before the court by a proper application under s. 39 of the AA 2005. (paragraphs 2, 9 & 14) [3] The appellant had not appreciated the distinction between ss. 38 and 39 of the AA 2005. Section 38 procedure is a ‘recognition procedure’ to convert an arbitration award to a judgment. This can only be done 9 by a person holding an arbitration award. If the respondent to the award wants to object to the procedure, he can file an affidavit to do so. (See International Bulk Carriers SPA v. CTI Group Inc [2014] 8 CLJ 854; [2014] 6 MLJ 851). If the respondent to the award wants to object to its enforcement, then an application under s. 39 setting out one of the grounds must be made by the respondent to the award. To put it in another way, the appellant in the instant case was attempting to convince the court ‘to put the cart before the horse’, that too without making an application under the mandatory provision to challenge the enforcement of the award.

Siemens Industry Software GMBH & Co KG [Germany] vs Jacob and Toaralf Consulting Sdn Bhd & Ors [2020 MLJU 363] (judgment of the Federal Court): “[50] Having regard to all the above, we therefore agreed with the High Court that only the dispositive portion of the arbitral award ought to be registered for purposes of enforcement of the arbitral award. The reasoning or findings of the arbitral tribunal would be relevant, if at all, to a court which is considering the merits of the award, for example in an application to set aside the arbitral award under s. 39 of the AA 2005. And this will be done by way of an affidavit evidence, not by way of registration as a judgment of the High Court. Nevertheless, as stated earlier, there is no application filed by the appellant under s. 39 of the AA 2005” 10

Based on the arguments and references in paragraphs 7 to 10 above, the Plaintiff has submitted that on this ground alone, this Court ought to disregard the affidavits filed by the Defendant and allow the Plaintiff’s OS.

On the other hand, the Defendant argues that the Plaintiff’s preliminary point is flawed and that it is correct in procedure for the Defendant to file affidavits to oppose the Plaintiff’s application for registration and enforcement of arbitral award as a court order or judgment.

In a summary, the Defendant’s arguments on the preliminary point are as follows:

The wording of Section 39 of AA 2005 does not require any application to be made for a party to raise any grounds of refusal in relation to enforcement of an Award.

(ii) An application under Section 39 of AA 2005 is usually made when the successful party has obtained an ex parte order for enforcement of the Award.

(iii) There are numerous cases which demonstrate that the Courts have considered grounds for refusal under Section 39 of AA 2005 based on affidavit evidence, similar to the present case. 11

In respect of the first argument in subparagraph 13(i) above that it is not necessary for the Defendant to make an application under section 39 in the present case, the Defendant contends that :

Unlike Section 39 of AA 2005, it is clear that the provision under Section 38 AA 2005 requires an application to be made by any party seeking for an Award to be registered;

However, contrary to the wording set out in Section 38, Section 39 of AA 2005 does not make any provision for an application to be made thereunder, unless it falls within Section 39(1)(a)(vii) of AA 2005, which the Defendant is not relying on;

It is clear from the provision of Section 39 AA 2005, that the Court will have to consider refusing enforcement of an award, upon the “request” of the Defendant (as the unsuccessful party) provided that there is proof of one of the grounds for refusal;

As such, it is clear from the wording of Section 39 of AA 2005 that there is no obligation on the Defendant to make any formal application to raise the grounds relied on under Section 39 of AA

A “request” cannot be construed as a requirement to make a formal application;

It is clear that the intention of Section 39 of AA 2005 is that the Defendant can request for the grounds set out therein to be considered by this Honourable Court and at the same time, if there has been an order obtained on an ex parte basis, then it is 12 open for the Defendant to make an application under Section 39 of AA 2005;

It is clear by the decided cases and the above text, that both avenues are open to a party challenging the enforcement and recognition of an Award, and it would be largely dependent on whether an ex parte order has already previously been obtained;

Relyng on the case of Kejuruteraan Bintai Kindenko Sdn Bhd v Serdang Baru Properties Sdn Bhd and another case [2018] 12 MLJ 706, it has been held that Section 39 of AA 2005 is intended to be a “passive remedy”. As opposed to Section 42 (now repealed) and 37 of AA 2005 (which are “active remedies”), where it is clearly spelt out that any application to set aside or vary an award may be made within the prescribed time, Sections 38 and 39 of AA 2005, do not prescribe for any limited time frame. This led the Court to conclude that Section 39 of AA 2005 is available for an opposing party to resist an enforcement application, just as the Defendant is doing herein; and

As such, it is clear that the Section 39 of AA 2005 was intended to be used as grounds to oppose an application made under Section 38 of AA 2005, and there is no valid basis for the Plaintiff’s preliminary objection herein.

In respect of the argument in subparagraph 13(ii) above regarding the two-stage procedure, the Defendant contends that: 13

CTI Group Inc v. International Bulk Carriers Spa [2017] 5 MLJ 314 was a case where there was an ex parte application made to the High Court under Section 38 AA 2005. As such, subsequent to this, the opposing party would then be required to make an application to set aside the ex-parte order obtained using the provisions of Section 39 of AA 2005. This is the two-stage process envisioned by the Court in that case.

However, contrary to this, in the present case, the Plaintiff had not gone through with the first stage by issuing the Originating Summons on an ex parte basis for leave to enforce an arbitral award.

CTI Group also sets out that the second stage involves an inter partes proceedings that deals with the application to set aside an ex parte order giving leave to enforce an arbitration award.

This has no application in the present case when the Plaintiff has not made an ex parte application nor obtained an order for leave to enforce the arbitration award against the Defendant.

The same scenario in CTI Group involving an ex parte order obtained had also occurred in the case of Tune Talk Sdn Bhd v. Padda Gurtaj Singh [2020] 3 MLJ 184, which similarly does not apply to the present case.

In respect of the arguments in subparagraph 13(iii) above regarding court decisions where the Court has considered refusal of the plaintiff’s application based on grounds for refusal raised by way of affidavits, 14 without a formal application, the Defendant referred to the following cases as examples:

Open Type Joint Stock Co Efirnoye ('EFKO') v. Alfa Trading Ltd [2012] 1 MLJ 685 where the learned Judge also considered grounds raised under Section 39 of AA 2005 in response to an application filed under Section 38 of AA 2005.

Food Ingredients Llc v. Pacific Inter-Link Sdn Bhd And Another Application [2012] 8 MLJ 585 where there was an application made under Section 38 of AA 2005, and the learned Judge then considered grounds raised in opposition under Section 39 AA 2005 based solely on affidavit evidence.

Agrovenus Llp v. Pacific Inter-Link Sdn Bhd And Another Appeal [2014] 3 MLJ 648. In this case, it was held that there was a two stage process, but it was held that the second stage is s 39, which deals with the request and grounds relied upon for refusal of the recognition or enforcement sought, is where “questions relating to jurisdiction of the arbitral tribunal as well as whether, inter alia, the arbitral tribunal exceeded its jurisdiction or dealt with any dispute not contemplated or not falling within the terms of the submission to arbitration may properly be addressed”. This was also a case where the Court considered grounds raised under Section 39 of AA 2005 without a formal application. 15

Kelana Erat Sdn Bhd v. Niche Properties Sdn Bhd and another application [2012] 5 MLJ 809 which was also a case where the Court considered matters raised in the affidavit by the Defendant to determine if there were any grounds submitted pursuant to Section 39 of AA 2005 to justify the refusal of an application for enforcement made under Section 38 of AA 2005 (however, the Defendant had filed a separate setting aside application under Section 37 of AA 2005 that was heard together with the section 38 application).

Hiap-Taih Welding & Construction SdnBhd v. Boustead Pelita Tinjar Sdn Bhd (formerly known as Loagan Bunut Plantations Sdn Bhd) [2008] 8 MLJ 471 which was also a case where the Court considered grounds for refusal based on affidavit evidence. ANALYSIS OF THE STATUTORY PROVISIONS AND LEGAL PRINCIPLES

As this Court’s decision of the preliminary point will involve interpretation of statutes and reading of judgments of the courts in the various decided cases, it is pertinent to remind ourselves of the principles of interpretation of statutes and the guidelines on reading of common law judgments.

It is apt to be mindful of the guidance of the English Law Lords that all judgments in the common law systems are to be read in the factual context of the cases in question and not in the abstract. “Every 16 judgment of the Court must be read as governed by the facts of the case”: Quinn v. Leatham [1901] A.C. at page 506. Every case is decided on its own facts and must be read accordingly: per Viscount Simon in Harris v. D.P.P [1952] 1 All ER at page 1050D. “ All judgment under the common law system must be understood secundum subjectectum materiam: judges, in pronouncing principles, have in mind the characteristics present in the case, which characteristics may be absent in other cases” : per Lord Diplock in Mutual Life & Citizens’ Assurance Company Ltd & Another v. Clive Raleigh Evatt [1971] AC 793, at page 802D-F. These are the guidelines which this Court will follow when reading and interpreting the judgments of the courts which the parties have cited or quoted.

It is also important to bear in mind that one has to extract the ratio decidendi of the courts in the judgments and distinguish them from obiter dictum, as under the doctrine of stare decisis, this Court is bound by the ratio decidendi of the appellate courts in the previous cases, while the obiter dictum, though they are of persuasive force, are not binding on this Court: Kerajaan Malaysia $ 2 Ors v. Tay Chai Huat [2012] MLJU 60 (Federal Court] in paragraphs to [46] to [50] thereof, as reproduced below: “[46] A precedent can be defined as a judicial decision which serves as a rule for future determinations in similar or analogous cases. A precedent or authority is a legal case establishing a principle or rule that a court or other judicial body adopts when deciding in subsequent cases with similar issues or facts. A precedent that must be applied or followed is known as a binding precedent. I would think that this Court must follow its own proclamations of law made earlier on other cases and honour these rulings. After all, this Court is the highest court in the country. The 17 doctrine of precedent, a fundamental principle of English Law, is a form of reasoning and decision-making formed by case law. Precedents not only have persuasive authority but also must be followed when similar circumstances arise. Any principle announced by a higher court must be followed in later cases. In short the courts are bound within prescribed limits by prior decisions of superior courts. Judges are also obliged to obey the set-up precedents established by prior decisions. This legal principle is called stare decisis. Adherence to precedent helps to maintain a system of stable laws. Judicial precedent means the process whereby judges follow previously decided cases where the facts are of sufficient similarity. The doctrine of judicial precedent involves an application of the principle of stare decisis, i.e., to stand by the decided. In practice, this means that inferior courts are bound to apply the legal principles set down by superior courts in earlier cases. This provides consistency and predictability in the law. [47] It has been said in certain textbooks that the decision or judgement of a judge may fall into two parts, i.e., the ratio decidendi (reason for the decision) and obiter dictum (something said by the way). The ratio decidendi of a case is the principle of law on which a decision is based. When a judge delivers judgement in a case he outlines the facts which he finds have been proved on the evidence. Then he applies the law to those facts and arrives at a decision, for which he gives the reason (ratio decidendi). The judge may also go on to speculate about what his decision would or might have been if the facts of the case had been different. This is an obiter dictum. The binding part of a judicial decision is the ratio decidendi. An obiter dictum is not binding in later cases 18 because it was not strictly relevant to the matter in issue in the original case. However, an obiter dictum may be of persuasive (as opposed to binding) authority in later cases. [48] It has also been said that distinguishing a case on its facts, or on the point of law involved, is a device used by judges usually in order to avoid the consequences of an earlier inconvenient decision which is, in strict practice, binding on them. What is reasonably distinguishable depends on the particular cases and the particular court - some judges being more inclined to 'distinguish' disliked authorities than others. In Jones v Secretary of State for Social Services [1972] All ER 145, Lord Reid said (at page 149): "It is notorious that where an existing decision is disapproved but cannot be overruled courts tend to distinguish it on inadequate grounds. I do not think that they act wrongly in so doing; they are adopting the less bad of the only alternatives open to them. But this is bound to lead to uncertainty for no one can say in advance whether in a particular case the court will or will not feel bound to follow the old unsatisfactory decision. On balance it seems to me that overruling such a decision will promote and not impair the certainty of the law. But that certainty will be impaired unless this practice is used sparingly.... and that it should only be in rare cases that we should reconsider questions of construction of statutes or other documents." [Emphasis added] [49] The common law tradition is built on the doctrine of stare decisis which directs a court to look to past decisions for guidance 19 on how to decide a case before it. This means that the legal rules applied to a prior case with facts similar to those of the case now before a court should be applied to resolve the legal dispute. The use of precedent has been justified as providing predictability, stability, fairness and efficiency in the law. Reliance upon precedent contributes predictability to the law because it provides notice of what a person's rights and obligations are in particular circumstances. It also means that lawyers can give legal advice to clients based on settled rules of law. There is certainty in the law. There is also uniformity in the law. Similar cases will be treated in the same way. The use of precedent also stabilises the law. [50] This Court create precedents. The use of precedent is an indispensable foundation on which to decide what is the law and how it should be applied in individual cases. Utra Badi and Vickeswary are decisions that settled the law in cases of this genre with finality. I would think that this Court would have need to hesitate long before distinguishing Utra Badi and Vickneswary on inadequate grounds or on a hypothetical issue raised by appellants in appeals before this Court such as whether there are exceptions to the ratio decidendi formulated in both authorities. Such hypothetical issues raised in cases of this genre can have disruptive and seemingly unfair consequences and extremely capricious results. It creates uncertainty in the law and would seriously hinder administration of the General Orders by government departments resulting in administrative confusion. For the aforesaid reasons adumbrated, I am unable to follow the majority decision in Yusof bin Sudin”. Rules Governing Interpretation of Statutes 20

In the recent decision of our Federal Court, the apex court has reviewed various previous decisions and summarised the general rules of interpretation of statute in the judgment of the Federal Court delivered by Vernon Ong FCJ in Federal Court Civil Appeal 02(f)-23- 04/2018 (Q) between Tebin bin Postapa [as administrator of the estate of Haji Mostapa bin Asan, deceased] v. Hulba-Danyal bin Balai & Sophee Sulong bin Balia [as joint administrators of the estate of Balia bin Munir, deceased [2020] 4 MLJ 721 as follows: “[30] In our opinion, the rules governing statutory interpretation may be summarized as follows. First, in construing a statute effect must be given to the object and intent of the Legislature in enacting the statute. Accordingly, the duty of the Court is limited to interpreting the words used by the Legislature and to give effect to the words used by it. The Court will not read words into a statute unless clear reason for it is to be found in the statute itself. Therefore, in construing any statute, the Court will look at the words in the statute and apply the plain and ordinary meaning of the words in the statute. Second, if, however the words employed are not clear, then the Court may adopt the purposive approach in construing the meaning of the words used. Section 17A of the Interpretation Acts 1948 and 1967 provides for a purposive approach in the interpretation of statutes. Therefore, where the words of a statute are unambiguous, plain and clear, they must be given their natural and ordinary meaning. The statute should be construed as a whole and the words used in a section must be given their plain grammatical meaning. It is not the province of the Court to add or subtract any word; the duty of the Court is limited to interpreting the words used by the legislature and it has no power to fill in the gaps disclosed. Even if the words in a statute may be ambiguous, the 21 power and duty of the Court “to travel outside them on a voyage of discovery are strictly limited.” Third, the relevant provisions of an enactment must be read in accordance with the legislative purpose and applies especially where the literal meaning is clear and reflects the purposes of the enactment. This is done by reference to the words used in the provision; where it becomes necessary to consider every word in each section and give its widest significance. An interpretation which would advance the object and purpose of the enactment must be the prime consideration of the Court, so as to give full meaning and effect to it in the achievement to the declared objective. As such, in taking a purposive approach, the Court is prepared to look at much extraneous materials that bears on the background against which the legislation was enacted. It follows that a statute has to be read in the correct context and that as such the Court is permitted to read additional words into a statutory provision where clear reasons for doing so are to be found in the statute itself.”

Further aids to the interpretation of statutes can be derived from other decisions of the appellate courts on specific principles of statutory interpretation including those summarised below:

The Legislature does not legislate in vain, and the interpretation of words in a section of the statute should not to the extent of rendering redundant or superfluous other words used in another section in the same statute: Eusoffe Abdoolcader SCJ in Foo Loke Ying v. Television Broadcasts Limited [1985] MLJ 35, following House of Lords in Southwest Water Authority v. Rumbles [1985] 2 WLR 405 at 411. In Foo Loke Ying, the Supreme Court held that all words in a statute are to be 22 considered; on presumption that the Parliament does nothing in vain, the court must endeavour to give significance to every words of an enactment and it is presumed that if a word or phrase appears in a statute it was put there for a purpose. See also Privy Council decision in Enmore Estates v. Darsan [1970] AC 497 at p. 506. The relevant part of the Supreme Court’s judgment in Foo Loke Yong is as follows: “Section 5(2) prescribes the periods for the subsistence of copyright conferred by that section and section 6(2) adopts the same duration as is provided for in section 5 in respect of copyright conferred by section 6 in relation to the same type of work. Now if sections 5 and 6 are indeed intended to be read conjunctively, quite apart from the fact that there would be no reason why they could not have been enacted together as a composite section, section 6(2) would be wholly unnecessary and redundant. The court however is not at liberty to treat words in a statute as mere tautology or surplusage unless they are wholly meaningless. On the presumption that Parliament does nothing in vain, the court must endeavour to give significance to every word of an enactment, and it is presumed that if a word or phrase appears in a statute, it was put there for a purpose and must not be disregarded. In Quebec Railway, Light, Heat and Power Co Ltd v Vandry [1920] AC 662, Lord Sumner in delivering the judgment of the Judicial Committee said (at page 676)” "Secondly, there is no reason why the usual rule should not apply to this as to other statutes — namely, that effect must be given, if possible, to all the words used for the legislature is deemed not to waste its words or to say anything in vain." 23 The Judicial Committee applied and followed this case in Enmore Estates Ltd v Darson [1970] AC 497 506 (at page 506

A statute ought to be so construed that, if it can be prevented, no clause or sentence or words shall be superfluous, void or insignificant: per Cockburn C.J in Rex v. Bishop of Oxford

4 QBD 245, 5 App Cas 214;

Where different words are used in a statute, they refer to different things; this is particularly so when the different words are used repeatedly: per Thomas CJ in Lee Lee Cheng v. Seow Peng Kwang [1960] MLJ 1 at pg 3 (Court of Appeal);

In the event of any inconsistency between a parent Act and a subsidiary legislation, the provision of the parent Act prevails to the extent of any inconsistency: section 23 of the Interpretation

To some extent, heading or marginal note to the sections can be used as aid to interpretation. In Foo Loke Yong (supra) Eusoffe Abddolcader SCJ said as follows: “To consider the inter-relationship if any between sections 5 and 6 in the context of the appellants' argument, it might perhaps be useful to refer to the marginal notes to these two sections. A side note or marginal note to a section is part of the statute. It may be considered in construing the section or any other provision of the statute, provided due account is taken of the fact that its function is merely to serve as a brief guide to the content of the section. Collins, M.R., in Bushell v Hammond [1904] 2 KB 563 took the 24 approach that the marginal note, while forming no part of the section, was of some assistance as it showed the drift of the section. In Reg v Schildkamp [1971] AC 1, Lord Reid and Lord Upjohn took the view that the marginal or side note will rarely be of any use in interpreting a statute but that they should not be rejected completely as aids, the former putting this (at page 10) on the basis that it is the whole statute that is the product of the legislature and that therefore the whole statute can be looked at if any doubt should arise as to its meaning.”

A domestic statute designed to give effect to an international convention should in general be given a broad and liberal meaning: per Lord Brandon in The Antonis P Lemons [1985] 1 AC 711 at p. 725 – 726.

The statutory provisions on the recognitions and registration of arbitral awards and challenge of arbitral awards which are relevant to the preliminary point here are reproduced below: “Chapter 7

Application for Setting Aside 1) An award may be set aside by the High Court only if— a) the party making the application provides proof that— i) a party to the arbitration agreement was under any incapacity; 25 ii) the arbitration agreement is not valid under the law to which the parties have subjected it, or, failing any indication thereon, under the laws of Malaysia; iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present that party’s case; iv) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration; v) subject to subsection (3), the award contains decisions on matters beyond the scope of the submission to arbitration; or Asian International Arbitration Centre (AIAC) 38 vi) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Act; or b) the High Court finds that— i) the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Malaysia; or ii) the award is in conflict with the public policy of Malaysia. 2) Without limiting the generality of subparagraph (1) (b)(ii), an award is in conflict with the public policy of Malaysia where— 26 a) the making of the award was induced or affected by fraud or corruption; or b) a breach of the rules of natural justice occurred— i) during the arbitral proceedings; or ii) in connection with the making of the award. 3) Where the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside. 4) An application for setting aside may not be made after the expiry of ninety days from the date on which the party making the application had received the award or, if a request has been made under section 35, from the date on which that request had been disposed of by the arbitral tribunal.

Recognition and Enforcement

On an application in writing to the High Court, an award made in respect of an arbitration where the seat of arbitration is in Malaysia or an award from a foreign State shall, subject to this section and section 39 be recognised as binding and be enforced by entry as a judgment in terms of the award or by action.

In an application under subsection (1) the applicant shall produce- 27

the duly authenticated original award or a duly certified copy of the award; and

the original arbitration agreement or a duly certified copy of the agreement. ……………. 4) For the purposes of this Act, “foreign State” means a State which is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial Arbitration in 1958.

Grounds for Refusing Recognition or Enforcement

Recognition or enforcement of an award, irrespective of the State in which it was made, may be refused only at the request of the party against whom it is invoked-

where that party provides to the High Court proof that-

a party to the arbitration agreement was under any incapacity;

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it, or, failing any indication thereon, under the laws of the State where the award was made;

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present that party's case; 28

(iv) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration;(v) subject to subsection (3), the award contains decisions on matters beyond the scope of the submission to arbitration;

(vi) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Act; or

(vii) the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made; or

if the High Court finds that-

the subject-matter of the dispute is not capable of settlement by arbitration under the laws of

(ii) the award is in conflict with the public policy of Malaysia 2) If an application for setting aside or suspension of an award has been made to the High Court on the grounds referred to in subparagraph (1) (a)(vii), the High Court may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the 29 other party to provide appropriate security.

Where the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced.

Mode of Application Any application to the High Court under this Act shall be by an originating summons as provided in the Rules of the High Court 1980. Relevant provisions of the Rules of Court 2012: Claims under the 2005 Act (O. 69, r. 2)

(1) In this Order, “arbitration claim” means any application to the Court under the 2005 Act, including a claim to—

appoint an arbitrator under subsection 13(7) of the 2005 Act;

decide on the challenge of an arbitrator under subsection 15(3) of the 2005 Act;

decide on the termination of the mandate of an arbitrator under subsection 16(2) of the 2005 Act;

appeal against the ruling of the arbitral tribunal on jurisdiction under subsection 18(8) of the 2005 Act; 30

enforce interlocutory orders or directions of an arbitral tribunal made under section 19 of the 2005 Act; P.U. (A) 351

seek interlocutory orders or directions under section 11 of the 2005 Act;

determine under section 41 of the 2005 Act, any question of law arising in the course of the arbitration proceedings;

determine under section 42 of the 2005 Act, any question of law arising out of an award;

set aside an award under section 37 of the 2005 Act;

direct any matter in connection with bankruptcy proceedings under section 49 of the 2005 Act;

enforce an award under section 38 of the 2005 Act;

extend time under section 45 or 46 of the 2005 Act; and

seek an order under subsection 44(4) of the 2005 Act where the arbitral tribunal withholds its award for non-payment of fees and expenses. Starting the claim (O. 69, r. 4)

(1) An arbitration claim under rule 2 or rule 3 may be made using the originating summons procedure, and Form 5 shall be filed in the High Court. An arbitration claim originating summons shall—

include a concise statement of—

the remedy claimed; and

(ii) any question on which the applicant seeks the decision of the Court;

state the grounds in support of the originating summons;

show that any statutory requirements have been met; 31

specify the section of the 1952 Act or the 2005 Act under which the claim is made;

specify the respondents on whom the arbitration claim originating summons is to be served, stating their role in the arbitration; and

identify against which, if any, respondents an order of costs is sought.

The applicant shall file by affidavit, written evidence on which he intends to rely when he files his originating summons, including a copy of the arbitration agreement and the award, where relevant.

Unless the Court orders otherwise, an arbitration claim originating summons and the affidavit shall be served on the respondents specified in subparagraph (1)(e), within thirty days from the date of issue.

Where relevant, rules 5 to 8 shall additionally apply. Application to set aside an award (O. 69, r. 5)

(1) Subject to subparagraph (2), an application to the Court to set aside an award under section 37 of the 2005 Act may be made—

at any time within ninety days from the date on which the applicant received the award; or

if a request has been made to the arbitral tribunal for a correction or interpretation of the award or for an additional award under section 35 of the Act, at any time within ninety days after the request has been disposed off by the arbitral tribunal. 32

An application to the Court to set aside an award on the ground that the award was induced or affected by fraud or corruption may be made within ninety days after the alleged fraud or corruption became known to the party making the application.

In every application to set aside an award, the originating summons shall, in addition to matters stated in rule 4(1)—

give details of the award challenged;

identify which part or parts of the award are challenged; and

specify the grounds for the challenge.

The applicant shall file by affidavit, written evidence on which he intends to rely when he files his writ, including a copy of the arbitration agreement and the award.

The originating summons and affidavit shall be served on each arbitrator and the respondents.” Fundamental Features of Arbitration Law and Practice

Before this Court embarks on further discussion and analysis of the parties’ submissions on the preliminary point, it is important to bear in mind some basic and fundamental features of arbitration law and practice.

A fundamental feature of law and practice of arbitration is that it is only the court which has territorial jurisdiction at the seat of the arbitration that is competent to hear and decide on an application to set aside an arbitral award. An arbitral award in an arbitration with its seat of arbitration in a foreign country cannot be the subject-matter of an 33 application in Malaysia to set aside the foreign arbitral award, and vice versa. This fundamental feature of arbitration law and practice is well recognised in our statute as well as in international treaty signed by our country, as explained in paragraphs 25 to 30 below.

The relevant provisions include section 3 of our Arbitration Act 20025 which read as follows: “3. Application to arbitrations and awards in Malaysia 1) This Act shall apply throughout Malaysia. 2) In respect of a domestic arbitration, where the seat of arbitration is in Malaysia— a) Parts I, II and IV of this Act shall apply; and b) Part III of this Act shall apply unless the parties agree otherwise in writing. 3) In respect of an international arbitration, where the seat of arbitration is in Malaysia— a) Parts I, II and IV of this Act shall apply; and b) Part III of this Act shall not apply unless the parties agree otherwise in writing. 4) For the purposes of paragraphs (2)(b) and (3)(b), the parties to a domestic arbitration may agree to exclude the application of Part III of this Act and the parties to an international arbitration may agree to apply Part III of this Act, in whole or in part.” There are a total of 4 Parts in the Arbitration Act 2005. Part III (Additional Provisions Relating to Arbitration) of the 2005 Act is comprised of sections 40 to 46 dealing with consolidation of proceedings and concurrent hearings (s. 40), determination of 34 preliminary point of law by court (s. 41), reference on questions of law (s. 42 which has now been deleted), appeal (s. 43), costs and expenses of arbitration (s. 44), extension of time for commencing arbitration proceedings) and extension of time for making award (s. 46). This section 3 provides for a general rule of applicability of Part III to domestic arbitration where the seat of arbitration is in Malaysia and non-applicability of Part III to international arbitration where the seat of arbitration is in Malaysia, while subsection 3(4) gives the parties the rights to “opt out” and “opt in” regarding the applicability of Part III. For ease of reference in this judgment, the term “local awards” shall be used to describe both domestic and international arbitration awards where the seat of arbitration are in Malaysia.

Implicit in section 3 of the 2005 Act is that any arbitration where the seat of arbitration is outside Malaysia is not governed by the 2005 Act except where the express provision of the 2005 Act stipulates otherwise. Section 37 (setting aside of arbitral award) is included in Part II of the 2005 Act. Section 38 (recognition and enforcement of award) and section 39 (refusal to recognize the award) are also included in Part II of the 2005 Act. As explained below, sections 38 and 39 are expressly stipulated as applicable to arbitral award where the seat of arbitration is outside Malaysia provided the seat is within a State which is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial Arbitration in 1958: see subsections 38(10 and 38(4). For ease of reference in this judgment, the term “foreign award” is used to describe arbitral award in an arbitration where the seat of arbitration is in a Foreign State, i.e. State (other than Malaysia) which is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by 35 the United Nations Conference on International Commercial Arbitration in 1958.

The underlying rationale for excluding the applicability of section 37 (setting aside award) from foreign arbitral awards where the seat of arbitration is outside Malaysia is that only the court which has territorial jurisdiction at the seat of the foreign arbitration that is competent to hear and decide on an application to set aside the foreign arbitral award. This is our statutory recognition of a fundamental feature of arbitration law which is well-recognised internationally and also part of comity of nations. This fundamental feature is also judicially recognised by our Federal Court which held: “This, couple with the filing of the application to set aside the partial award in the Kuala Lumpur High Court by the appellant, go to show that the appellant had accepted Kuala Lumpur as the seat of arbitration. It is trite law that such a challenge can only be made in the jurisdiction which is the seat of arbitration. (See Lombard Commodities Ltd v. Alami Vegetable Oil Products Sdn Bhd [2010] 1 CLJ 137 (FC); A v. B [2007] 1 Lloyd's LR 237; C v. D [2007] EWHC 1541).”: per Ariffin Zakaria CJ in Government of India v. Petrocon India Limited [2020] 6 CLJ 321 at paragraph [37].

When it comes to section 38 (recognition of arbitral awards), section 38 of our Arbitration Act 2005 has expressly provided for the applicability of section 38 recognition of awards to both the local awards (i.e. awards where the seat of arbitration is within Malaysia) and foreign awards (i.e. awards where the seat of arbitration is in a foreign country which is a Convention Country). The express words of “an award made in respect of an arbitration where the seat of arbitration is in Malaysia or an award from a foreign State” in section 36 38(1) constitutes the specific inclusion of foreign arbitral awards for the purposes of recognition of awards which would otherwise have been brought under the general exclusionary provision of section 3 of the same Act. As the foreign arbitral awards have been specifically included in section 38 and section 38 is expressly subject to the provisions of section 39, the foreign arbitral awards are also brought under the provisions of section 39 of our Arbitration Act 2005.

However, in the considered view of this Court, inclusion of the foreign arbitral awards into sections 38 and 39 does not deviate or depart from the fundamental feature of arbitration law and practice that the Malaysian courts do not have any jurisdiction to hear or decide an application to set aside a foreign arbitral award in which the seat of arbitration is outside Malaysia – a feature so well entrenched in international arbitration law and practice and implicitly embodied in the exclusionary provisions in sections 3(2) and (3) of our Arbitration Act 2005.

Another fundamental feature of arbitration law and practice is that after an arbitral award is published in a Convention Country, the award can be enforced in any of the other Convention Countries. Accordingly, a party who wants to put a complete stop to the enforcement of an arbitral award where the seat of arbitration is in a Convention country, must apply for setting aside the foreign award at the Convention Country whose court has territorial jurisdiction at the seat of the foreign arbitration (i.e. the seat court). On the other hand, if a dissatisfied party successfully opposes the recognition and enforcement of the arbitral award at a country outside the seat of arbitration, the winning party in the arbitration can still apply for recognition and enforcement of the award in other Convention Countries. If I may use a simply analogy to 37 illustrate this point, setting aside an arbitral award at the seat court is like cutting off the tree at its trunk and completely uprooting it, whereas a successful opposition to an application for recognition and enforcement of the arbitral award at a particular country is like cutting off only one of the many branches of the tree. A winning party in a Convention award can choose whatever Convention country where the assets of the losing party can be found to apply for recognition and enforcement of the arbitral award until he has recovered fully the awarded sum. Rejection or refusal of recognition of the arbitral award in one Convention country does not operate as a bar to any of the applications for recognition of the same arbitral award in other Convention countries. The co-existence of “active remedy’ (i.e. applying at the seat court to set aside the arbitral award) and the ‘passive remedy’ (i.e. resisting recognition or enforcement at the court of another country) is well-recognised internationally including Malaysia, though the courts in different countries seem to adopt different extent of such co-existence. In Singapore and Hong Kong the courts’ recognition of the co-existence of ‘active remedy’ and ‘passive remedy’ is to the fullest extent whereby a party whose arbitrability challenge or jurisdictional challenge which was rejected by the arbitral tribunal but which was brought on appeal to the court could at the enforcement proceeding be re-opened and decided by the court at the ‘passive remedy’ stage: see PT First Media TBK v Astro Nusantara Internationalo BV & Ors [2014] 1 SLR 372, Rakna Arakshaka Lanka Ltd v Avant Garde Maritime Services (Private) Limited [2019] SGCA 33, and Astro Nusantara International BV v. PT First Media TBR HCCT 45/2010 [2014] 1 SLR 372. Although the appellate courts in Malaysia have not specifically decided on the exact extent of the co-existence of the ‘active remedy’ and ‘passive remedy’ in Malaysia, Justice Hamid Sultan in his book Jainab’s Key to International 38 Arbitration: Malaysian Arbitration Act 2005 has criticised the decisions of the Singapore Court of Appeal and the Hong Kong Court of Final Appeal in Astro v. Lippo cases which gave full-scale extent of recognition to the co-existence of ‘passive remedy’ and expressed his view that the co-existence of ‘passive remedy’ in Malaysia would be to a very limited extent. An international jurist Nata Ghibradze in an article “Preclusion of Remedies Under Article 16(3) of the UNCITRAL Model Law” published in Pace International Law Review Volume 27 Issue 1, Commercial Edition, Spring 2015 has critically analysed the Astro v. Lippo decisions in light of the UNCITRAL Model Law provisions, legislative background and history and the universal acceptance of the :Choice of Remedies” policy under the UNCITRAL Model Law before coming to her learned opinion that the express preclusionary provisions of the UNCITRAL Model Law ought not to be stultified by the co-existence of the ‘active remedy’ and ‘passive remedy’. Whatever the schools of thought on this uncertain and fluid topic of international arbitration law, the co-existence of ‘active remedy’ and ‘passive remedy’ is universally recognised and even the proponent of the narrowest extent of co-existence on the part of Justice Hamid Sultan recognises that public policy is a valid ground for ‘passive remedy’ at the enforcement stage to refuse to accord recognition and to disallow enforcement. In the premises, the present case before this Court is one where the Defendant opposes recognition and enforcement of a foreign arbitral award on ground of contravention of the public policy of Malaysia, and as this public policy ground is recognised as valid ground of ‘passive remedy’ irrespective of the schools of thought on this topic, it is not necessary for this Court to delve further into the question of what should be the extent of co-existence of ‘active remedy’ and ‘passive remedy’ in Malaysia. For the purposes of the present suit, suffice it be said that public policy is a 39 valid ground of ‘passive remedy’ to oppose the recognition and enforcement of foreign arbitral awards under section 39 of our Arbitration Act 2005.

Yet another fundamental feature of arbitration law and practice is that when the sovereign States negotiated the UNCITRAL Model Law on Arbitration, there were initial resistance by quite a number of countries to accept recognition of foreign arbitral awards where the seat is outside their national territories and the applicable substantive law of the arbitration is different from the local laws. Such unconditional recognition of foreign arbitral award was perceived by many as excessive surrender of the national sovereignty over the applicable laws and enforcement of judgment to foreign arbitral tribunals. After rounds of negotiations and give-and-take, the final draft approved in the UNCITRAL Model Law recommended inter alia that the enforcement of arbitral awards would be reciprocal between the Convention countries and the recognition and enforcement of foreign arbitral awards will be subject to the reservation of the local court’s jurisdiction to refuse recognition in cases where the arbitral award is contrary to the public policy of the country or its subject-matter is not arbitrable under the laws of that country . With this right of reservation to refuse recognition of foreign arbitral awards, the UNCITRAL Model Law of Arbitration became widely accepted by Convention countries including Malaysia. In Malaysia, we have paragraph 39(1)(b) reservation of our national sovereignty over foreign arbitral award by conferring upon our courts the discretion to refuse recognition of foreign arbitral awards on grounds including “if the High Court finds that— (i) the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Malaysia; or (ii) the award is in conflict with the public policy of Malaysia”. As explained in the immediately 40 foregoing paragraph, this public policy ground for opposing recognition and enforcement by way of ‘passive remedy’ is universally-recognised.

With abovementioned principles, fundamental features and concepts in mind, we shall now proceed to discuss and analyse the parties’ respective submissions and to interpret the statutory provisions and the cited judgments.

Section 37 of Arbitration Act 2005 (setting aside of awards) apply only to arbitral awards where the seat of arbitration is within Malaysia (“local awards”). Sections 38 and 39 of the Arbitration Act 2005 (recognition and refusing recognition) apply to both local arbitral awards and foreign arbitral awards: see the provisions and analysis in paragraphs 25 to 28 above.

In section 39(1) of the Arbitration Act 2005, the word “request” is used to connote a party’s request to refuse recognition or enforcement. The word “request” is also used in section 35 and 37(4) to connote a party’s request for interpretation of award or supplemental award or correction of award. The word “request” is also used in other provisions of the same Act, including –

subsection 13(6) : a party’s request to the Director of AIAC for appointment of arbitrator;

subsection 32(1) : request to record the settlement in the form of an award;

subsection 37(6): a party’s request to adjourn the challenge proceeding; and 41

subsection 44(1)(b) : request the arbitrator to tax the costs of arbitration;

In the Arbitration Act 2005, the words “apply” and “application” to the High Court are used in many sections including –

section 37 : application to set aside local awards;

section 38 : application by the winning party for recognition and enforcement of arbitral awards, local or foreign;

section 39(2) : “If an application for setting aside or suspension of an award has been made to the High Court on the grounds referred to in subparagraph (1)(a)(vii).”

The use of the words “request” in subsection 39(1) coupled with “application” in subsection 39(2) in the Arbitration Act 2005 which Act combines the local awards and foreign awards in the substantive sections without clearly segregating them except by general provisions in section 3(2) and 3(3) at the front part of the Act which is rather distanced from the substantive sections have proved to be a source of confusion and much difficulty in interpretation unless one constantly bears in mind the fundamental features of arbitration law and practice as summarized in paragraphs 25 to 31 above.

Section 39 provides for two (2) broad categories of situations when an arbitral awards, be they local awards or foreign awards, are to be refused recognition or enforcement by the Malaysian courts. These tow (2) broad categories are both to be at the request of the party against whom the recognition or enforcement is sought, and the 42 modes the Court will handle such request appear to be different, as shown from the relevant words of section 39(1) reproduced below: “39(1) Recognition or enforcement of an award, irrespective of the State in which it was made, may be refused only at the request of the party against whom it is invoked –

where that party provides to the High Court proof that –

……

(ii) ……

(iii) ……

(iv) …….

if the High Court finds that –

the award of the dispute is not capable of settlement by arbitration under the laws of Malaysia, or

(ii) the award is in conflict with the public policy of Malaysia. Sub-paragraphs (b)(i) and (b)(ii) of section 39 relate to matters of Malaysian law, and the requesting party’s proof is not necessary, although in practice the requesting party will almost invariably put forward his proof and arguments to persuade the Court for a case for refusal of recognition or enforcement. Nevertheless, if the requesting party neglects to provide proof or arguments on the law or public policy of Malaysia, the Court on its own volition may still refuse recognition or enforcement if the Court finds that the subject matter of the award is not arbitrable under Malaysia laws or the award is in conflict with the public policy of Malaysia. This is also consistent with the principle decided by the Courts that where a matter concerns public policy (such as res judicata), the Court can decide on it although it is not pleaded: see the judgment of the 43 Supreme Court in Asia Commercial Finance Bhd v. Kawal Teliti Sdn Bhd [1995] 3 CLJ 783 where the Supreme Court approved the principle that res judicata may be relied upon even if it is not pleaded because it is a matter of public policy that no re-litigation should be entertained. In the words of the Supreme Court at page 795: “Another source of small confusion is the rule that generally an estoppel, of which an estoppel per rem judicatum is a kind, as the name implies, has to be pleaded. But in Superintendent Pudu Prison v. Sim Kie Chong [1986 CLJ 256[1986] 1 MLJ 494, 498, Abdoolcader, SCJ, held to the effect that the Court has the inherent jurisdiction to dismiss an action by applying the doctrine of res judicata against a party even if it has not been pleaded. We venture to think the reason for the ratio is that an estoppel or exclusion of evidence is based on a question of public policy ie. in this case, the question of public policy that there should be finality in litigation, is more vigorous in excluding evidence and need not be pleaded, unlike an ordinary estoppel which should be pleaded.” As the Legislature is presumed to know the law as at the date of passing the statute, it is reasonably safe to interpret the Legislature choice of using the words “if the Court finds that” in paragraph (b)(ii) in the context of public policy and non-arbitrability in the same sense as that propounded by the apex courts then in Superintendent of Pudu Prison v. Sim Kie Chon (No. 2) and in Asia Commercial Finance Bhd v. Kawal Teliti Sdn Bhd, namely, on a matter of public policy, the Court can take judicial notice and make finding on it even if the parties do not prove them to the Court.

On the mode of application, section 50 of the Arbitration Act 2005 specifically provides that “Any application to the High Court under this 44 Act shall be by an originating summons as provided in the Rules of High Court 1980,” now Rules of Court 2012. In contrast, wherever the 2005 Act uses the word “request” there is no statutory provision to require that such request be made by way of an originating summons. Even where a statute uses the word “application” to the High Court without specifying any particular mode of application, such application can be made by a notice of application in a pending suit or action: O.32 r.1 of Rules of Court 2012. It is also settled practice that some types of applications can be made orally or informally in a pending suit or action, and examples include (1) oral application for minor amendment; (2) oral application for extension of time to serve pleadings or submissions; (3) oral applications for directions or orders at case management sessions; (4) oral application for withdrawal of actions; (5) oral application for variation of interlocutory orders; etc. Such being the position, it is difficult to conceive the use of word “request” in subsection 39(1) of the 2005 Act as imposing a mandatory obligation upon the requesting party to make a formal written application by way of an originating summons to oppose the opposite party’s application for recognition or enforcement of an arbitral award in a pending suit or action.

Sub-section 39(2) with the expression “if an application for setting aside or suspension of an award has been made to the High Court on the grounds referred to in subparagraph 1(a)(vii)” –

does not apply to a foreign arbitral award because the High Court (i.e. the High Court of Malaya and the High Court of Sabah and Sarawak, as defined in section 3 of the Act) has no jurisdiction to hear or decide on any application to set aside a foreign arbitral award : see paragraphs 25 to 31 above); 45

cross-refers to sub-paragraph 1(a)(vii) wherein the relevant part stipulates as “the award .. has been set aside or suspended by a court of the country in which, or under the law of which, that award was made” – as the Malaysian courts have no jurisdiction to set aside or suspend a foreign arbitral award, this subparagraph 1(a)(vii) is only operative as applicable to local awards (i.e. awards where the seat of arbitration is within Malaysia);

the specific provision on the High Court’s power, on setting aside of local awards is in section 37. If subsection 39(2) were to make a simple cross-reference to section 37 instead of the otiose cross-reference to subparagraph 1(a)(vii) of section 39, there would probably be no confusion or misinterpretation of the same. This is perhaps the result of combining section 39’s applicability to both local awards and foreign awards while also trying to segregate part of them as applicable to only local awards. Brevity of words in the drafting process has led to this difficult and confusing state of affairs in interpretation of section 39. Fortunately for our present case involving a foreign arbitral award, both subsection 39(2) and subparagraph 39(1)(a)(vii) do not apply to the foreign arbitral award here. This non-applicability of both subsection 39(2) and subparagraph 39(1)(a)(vii) has made the task of interpretation and application to the facts of the present case slightly easier, as compared with applicability of the said provisions to local arbitral awards.

As both subsection 39(2) and subparagraph 39(1)(a)(vii) have been ruled out due to their non-applicability to the foreign arbitral award 46 here, the said provisions should not be allowed to govern or control the meaning of “request” in subsection 39(1) in the context of a foreign arbitral award. As such, the relevant and applicable operative words of subsection 39(1) are as follows : “39(1) Recognition or enforcement of an award, irrespective of the State in which it was made, may be refused only at the request of the party against whom it is invoked –

where that party provides to the High Court proof that –

……

(ii) ……

(iii) ……

(iv) …….

if the High Court finds that –

the award of the dispute is not capable of settlement by arbitration under the laws of Malaysia, or

(ii) the award is in conflict with the public policy of Malaysia.”

Applying the principle of interpretation decided by our Federal Court in Tebin bin Postapa [as administrator of the estate of Haji Mostapa bin Asan, deceased] v. Hulba-Danyal bin Balai & Sophee Sulong bin Balia [as joint administrators of the estate of Balia bin Munir, deceased [as stated in paragraph 20 above] and our Supreme Court in Foo Loke Ying [as stated in subparagraphs 21(a) to 21(c) above], this Court finds and concludes that a party who requests for refusal of recognition or enforcement of a foreign arbitral award in the High Court may put forward his request by way of affidavit proof and submissions [if he relies on one or more limbs of paragraph 39(1)(a)] or by way of submissions [if he relies only on either of the limbs of paragraph 47 39(1)(b)]. Accordingly, a party who requests for refusal of recognition or enforcement of a foreign arbitrator award in Malaysia does not have to file a separate originating process by way of originating summons to oppose an existing application for recognition or enforcement of the foreign arbitral award in a pending suit or action.

The above mentioned interpretation of the relevant sections of the Arbitration Act 2005 is also consistent with, and is further reinforced by, the provisions of O.69 r.2, 4 and 5 of the Rules of Court 2012 quoted in paragraph 22 above. In O.69 r.2(1) of Rules of Court 2012, “arbitration claim” is defined to mean “application to the Court” under the 2005 Act”, and the specific items enumerated thereunder expressly mention a claim to – (i) set aside an award under section 37 of the 2005 Act; ….. (k) enforce an award under section 38 of the Act”, with the mode of application stipulated in r. 4(1) as an originating summons – similar to section 50 of the 2005 Act. A request for refusal of recognition or enforcement of award under section 39(1) of the 2005 Act is excluded from the definition of “arbitration claim” in O.69 r. 2(1) of the Rules of Courts 2012.

The abovementioned interpretation of the statute is also consistent with the purpose of the relevant statutory provisions. The actual words used in subsection 39(4) of the Arbitration Act 2005 are as follows: “39(2) If an application for setting aside or suspension of an award has been made to the High Court on the grounds referred to in subparagraph (1) (a)(vii), the High Court may, if it considers it proper, adjourn its decision and may also, on the application of the party claiming recognition or enforcement of the award, order the other party to provide appropriate security.” 48 Following the principles of statutory interpretation laid down in section 17A of the Interpretation Act to give effect to the purpose of the statutory provision, it can be seen from the express words that the purpose of subsection 39(2) is to confer upon the High Court a discretionary power to adjourn its decision or to order the respondent to provide appropriate security pending the High Court’s hearing and disposal of an application for setting aside or suspension of an award. The specific grounds stipulated in subparagraph (1)(a)(vii) are “the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made”. Reading subparagraph 39(1)(a)(vii) together with the opening part of subsection 39(2) which stipulates “If an application for setting aside or suspension of an award has been made to the High Court on the grounds referred to in subparagraph (1) (a)(vii)”, this means that in an application to the High Court for setting aside or suspension of a local award on the specific grounds stated in subparagraph (1)(a)(vii). This is because the High Court has no jurisdiction to entertain any application to set aside or suspend a foreign award. This interpretation will give effect to the purpose of subsection 39(2). It is not consistent with the principles of statutory interpretation to stretch the words in subsection 39(2) to the extent of holding that the said subsection has laid down an additional ground and basis for making an application for setting aside or suspending a local award under subparagraph 39(1)(a)(vii) over and above the grounds specified in section 37 of the 2005 Act.

In the considered view of this Court, an interpretation of the statutory provisions which sustains the Plaintiff/Envac’s objection on the preliminary point would involve an interpretation of some words in the 49 statute in isolation and out of the legislative context of the Arbitration Act 2005 and also contradictory to the fundamental features of the arbitration law and practice as summarized in paragraphs 25 to 31 above. Moreover, that would also be tantamount to an erroneous statutory interpretation which contravenes the well-recognised principles of statutory interpretation as summarized in paragraps 20 and 21 above.

In line with the fundamental features of the arbitration law and practice, Lee Swee Seng J. (now JCA) in Kejuruteraan Bintai Kindenko Sdn Bhd v. Serdang Baru Properties Sdn Bhd & Anor Case [2018] 2 MLJ 706, [2018] 1 CLJ 369 has explained the section 38 application to set aside as “active remedy” and the section 39 request for refusal of recognition or enforcement as “passive remedy” in the following parts of the judgment: “[18] There is no good reason why a party that has not applied to set aside an award under s. 37 or refer a question of law under s. 42 may not at the stage of enforcement of the award raise the grounds listed under s. 39(1) to oppose enforcement of the award. [19] As the award was against the defendant as claimant in the arbitration, the claimant was well entitled to apply to set aside the award under s. 37 or refer a question of law under s. 42 at least with respect to pre-award interest but it did not do so. [20] The plaintiff as respondent in the arbitration did apply to vary the award under s. 42 but that was not on the point of the power of the arbitrator to award pre-award interest but rather on the award of LAD without the need to prove loss but by applying the agreed formula for 50 the LAD. Indeed it is not for the plaintiff to raise the issue of pre-award interest as it is a point in favour of the plaintiff whether on the smaller sum as awarded by the learned arbitrator or the much bigger sum as varied by this court. [21] The question then is whether the defendant as claimant in the arbitration may raise this now in opposing the recognition and enforcement of the award. [22] The fact that Parliament had allowed the same grounds under a setting aside of an award under s. 37(1) to be repeated in an application to oppose recognition and enforcement under s. 39(1) would mean that Parliament does not consider the same grounds to be redundant. [23] Granted, in a domestic arbitration, both an application for setting aside under s. 37 and also a corresponding application under s. 38 of the AA 2005 to recognise and enforce the award, generally the court would hear both applications together as one would be a flip side of the other in that if the award is set aside then correspondingly it will not be enforced and conversely if not set aside it would generally be enforced. [24] However, in the case of an international arbitration, the setting aside is at the court where the seat of arbitration is. In the case of an international arbitration the seat of arbitration may well be different from the jurisdiction where a party may want to enforce an award in its favour. An award for instance may be against the public policy of the State where the award is sought to be enforced though the same award is not successfully set aside by the court where the seat of arbitration is. 51 [25] Likewise whilst an application for setting aside may not be made after the expiry of 90 days from the date on which the party making the application had received the award as provided under s. 37(4) of the AA 2005 there is no such time frame for the enforcement of an award by way of registering it as a judgment of the court under s. 38 of the AA 2005. This is understandable and the enforcement would normally be applied for in the State where the award debtor has assets to be attached. [26] As both ss. 37 and 38 of the AA 2005 are applicable to domestic as well as international arbitration it is difficult to say that a ground that could be raised in a setting aside of an award if not raised, cannot be so raised for the first time in opposing an application for recognition and enforcement of the award. [27] Our Supreme Court in State Government of Sarawak v. Chin Hwa Engineering Development Co [1995] 4 CLJ 1; [1995] 3 MLJ 237 had recognised passive remedy even under the old Arbitration Act 1952. His Lordship Edgar Joseph Jr FCJ observed at p. 8 (CLJ); p. 245 (MLJ) as follows: We agree, that in certain circumstances, a party may avail himself of a passive remedy by which is meant he does not take the initiative to attack an award, but simply waits until his opponent seeks to enforce the award by action or summary process, when he resists enforcement. Mustill and Boyd on Commercial Arbitration (2nd Ed) at p 546 have instanced two situations when the passive remedy would be available; namely: (1) where the award is so defective in form or substance that it is incapable of enforcement; (2) where the whole or part of the award is ineffective, 52 on the ground that the relief granted lies outside the jurisdiction of the arbitrator. [28] The Singapore Court of Appeal wrestled with this issue of "passive remedy" in PT First Media TBK v. Astro Nusantara International BV and Ors [2013] SGCA 57; [2014] 1 SLR 372. "Active remedy" is understood to mean an award debtor applying to set aside an award and "passive remedy" as in an award debtor resisting or opposing an application by an award creditor to recognise and enforce the award. It was explained thus in the award by Sundaresh Menon CJ as follows:

Thus, under the 1950 EAA, an award debtor had two options to avoid the consequences of an award: (a) the active remedy of setting aside under s. 23; or (b) the passive remedy of resisting enforcement under s. 26. This is buttressed by Sir Michael Mustill and Stewart Boyd, The Law and Practice of Commercial Arbitration in England (Butterworths, 1982) ("Mustill & Boyd"), where the authors recognised that there are two categories of remedies available after an award has been released. They termed these two categories as "passive remedies" and "active remedies" and described their operation in the following terms (at p 489): A party avails himself of a passive remedy when he does not himself take any initiative to attack the award, but simply waits until his opponent seeks to enforce the award by action or summary process, and then relies upon his matter of complaint as a ground why the Court should refuse enforcement. (emphasis added) 53

The authors' commentary (at p. 488) on the options available to parties with jurisdictional objections is remarkably on point: Jurisdictional problems If concerned with the existence or continued validity of the arbitration agreement, the validity of the notice to arbitrate or the qualifications of the arbitrator, (a party may) issue an originating summons or a declaration. Alternatively, (that party may) wait until after the award (has been published) and then set aside the award or raise the objection as a ground for resisting enforcement. (emphasis added)

If the system of "choice of remedies" is to be interpreted as one which permits parties to defend against an award passively by seeking to resist its recognition and enforcement in the enforcing court even though no active attack had been taken against the award, which is exactly how both Mr Landau and Mr Joseph understood it and how we saw it, it is evident that the features of this system were already part of English arbitration law by the 1970s at the latest. [29] In Singapore, international arbitration is governed by the International Arbitration Act (Cap 143A, 2002 Rev Ed) ("IAA") wherein s. 3 provides as follows: 3 - (1) Subject to this Act, the Model Law, with the exception of Chapter VIII thereof, shall have the force of law in Singapore. [30] The "Model Law" referred to is the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law ("the Model Law"). Chapter VIII of the Model 54 Law is where the various grounds for refusing recognition or enforcement of the arbitral award are set out in art. 36 thereof which is reproduced in our s. 39 of the AA 2005. [31] Their s. 19 on the enforcement of awards merely states that leave of the High Court is required for its enforcement as a judgment of the court. It is the same as our s. 27 of our old Arbitration Act 1952 and s. 26 of the English Arbitration Act 1950. It reads:

Enforcement of awards An award on an arbitration agreement may, by leave of the High Court or a Judge thereof, be enforced in the same manner as a judgment or an order to the same effect and, where leave is so given, judgment may be entered in terms of the award. [32] The Singapore Court of Appeal had to delve and dig deeply into the legislative history of the IAA and the rationale for excluding the application of Chapter VIII of the model law in coming to the conclusion that the courts there would still refer to the grounds for resisting an enforcement of an award as set out in art. 36 of the Model Law in deciding whether or not leave to enforce the award as a judgment of the court ought to be given. The Chief Justice of Singapore Sundaresh Menon CJ concluded as follows:

As we have held, the content of the power to refuse enforcement under s. 19 must be construed in accordance with the purpose of the IAA which, as we have stated, is to embrace the Model Law. Given that de-emphasising the seat of arbitration by maintaining the award debtor's "choice of remedies" and alignment with the grounds under the New York Convention are the pervading themes under the enforcement regime of the Model Law, the most 55 efficacious method of giving full effect to the Model Law philosophy would, in our view, be to recognise that the same grounds for resisting enforcement under Art. 36(1) are equally available to a party resisting enforcement under s. 19 of the IAA. [33] Quite obviously we do not have this problem as the whole of art. 36 of the Model Law is reproduced in our s. 39 of the AA 2005. The reproduction in s. 39 following the same grounds in a setting aside of an award under s. 37 cannot be for decorative purposes but for the deliberate design of permitting the same grounds not raised because there was no previous application to set aside under s. 37 to be raised in resisting or opposing an application under s. 39 of the AA 2005. The repetition of the same grounds has nothing to do with it being redundant but everything to do with reiteration as in making those same grounds available in resisting an enforcement application under s. 39 of the AA 2005. [34] One can appreciate that if a ground has been argued in a setting aside application under s. 37 and the same ground is sought to be argued under a subsequent s. 38 application in opposing an enforcement of an award, then res judicata might well apply to prevent the same ground from being ventilated again.”

The use of the terms “active remedy” in the context of application to set aside awards and “passive remedy” in the context of opposing recognition or enforcement by arbitration awards have been in widely-accepted use and well-settled by various decided authorities and textbook authors in Malaysia as well as outside Malaysia. Examples include – 56

Sir Michael Mustill and Stewart Boyd, The Law and Practice of Commercial Arbitration in England (Butterworths, 1982), cited with approval by Edgar Joseph Jr SCJ in State Government of Sarawak v. Chin Hwa Engineering Development Co [1995] 4 CLJ 1; [1995] 3 MLJ 237 and by Sundradesh Menon CJ in PT First Media TBK v. Astro Nusantara International BV and Ors [2013] SGCA 57; [2014] 1 SLR 372;

Richard Garnet, Henry Gabrial, Jeff Waincymer & Judd Epstein,

A Practical Guide to International Commercial Arbitration, at #1.20;

Janab’s Key to ‘International Arbitration: Malaysian Arbitration Act 2005;

Nata Ghibradze in an article “Preclusion of Remedies Under Article 16(3) of the UNCITRAL Model Law” published in Pace International Law Review Volume 27 Issue 1, Commercial Edition, Spring 2015.

In line with the fundamental features of arbitration law and practice, the Courts in various cases have considered on merits the respondents’ requests by way of affidavits and submissions in opposition to the plaintiffs’ application for recognition and enforcement of arbitral awards. These decided cases include the cases cited by the Defendant herein and referred to in paragraphs 16(a) to 16(d) above.

I have read in detail the two Federal Court cases cited by the Plaintiff but I do not find any ratio decidendi in either of those cases which had 57 clearly and finally decided on the issue in this preliminary point as to constitute a binding precedent upon this Court. In Siemens Industry Software GMBH & Co KG [Germany] vs Jacob and Toaralf Consulting Sdn Bhd & Ors [2020 MLJU 363] the question was whether the Court should enter judgment on the arbitral award in terms of the dispositive part of the arbitral award or in the entirety of the award including the grounds, findings and reasons for the award. The ratio decidendi of the Federal Court in Siemens Industry Software case is that in entering a judgment on the arbitral award, the Court should only record the dispositive part of the arbitral award but not the other parts of the arbitral award which includes the findings, reasons and grounds for the arbitrator’s decisions in the award. It is rather puzzling how a practice of the courts in recording the dispositive part of the arbitral awards which had been in existence for many decades had to be questioned all the way to the Federal Court in that case when, as held by the Federal Court, any attempt to record the entirety of the arbitral awards would be contrary to the concept of privacy and confidentiality in arbitrations; moreover, recording the entirety of the arbitral awards as court judgments would certainly lead to much confusing when these judgments recording the entirety of arbitral awards are published in the law reports and erroneously quoted by other lawyers subsequently as binding precedents as if these were the courts’ own judgments. In the second Federal Court decision in CTI Group INC v International Bulk Carriers SPA [2017] 9 CLJ 499 cited by the Plaintiff, the Federal Court was dealing with the ex parte procedure for recognition of arbitral awards and the inter partes procedure for setting aside such ex parte court order of recognition under Order 69 of the Rules of Court 2012. In CTI Group case by the Federal Court, the ratio decidendi of the Federal Court’s decision was not on the question posed in the preliminary point herein. In the third 58 Federal Court case of Lombard Commodities Ltd v. Alami Vegetable Oil Products [2010] 2 MLJ 23, [2010] 1 CLJ 137 (which was referred to in Jainab’s Key to International Arbitration: Malaysian Arbitration Act 2005), the sole question posed before the Federal Court was “Does the failure of the Yang di-Pertuan Agong to issue a Gazette Notification pursuant to s. 2(2) of the CREFA declaring the UK to be a party to the NYC render a Convention Award made in the UK unenforceable in Malaysia, notwithstanding the fact that all the conditions ordinarily required for the enforcement of the said Award under CREFA have been satisfied?”, to which the Federal Court answered in the negative and thereafter proceeded to grant recognition of the foreign arbitral award in that case. As such, the ratio decidendi of the Federal Court’s decision in Lombard Commodities was not on the question posed in the preliminary point herein.

From the conclusion of this Court in the preliminary point as discussed in paragraph 17 to 48 above, it has become unnecessary or irrelevant for this Court to decide on the question whether the section 39 of Arbitration Act 2005 involves a two-stage process or one-stage process or both.

Nevertheless, since the parties have submitted at length on the procedural process of section 39 and have referred to a number of case authorities and the Plaintiff has taken this matter on appeal, it is perhaps not otiose for this Court to analyse the parties’ submissions and discuss the law on the procedural process under section 39 of the Arbitration Act 2005. 59

For completeness and wholesome understanding of the procedural processes relevant to this topic, reference has to be made to section 37 (application to set aside an award), section 38 (recognition and enforcement of award) and section 39 (grounds of refusing recognition or enforcement) of award in the Arbitration Act 2005 as well as O.69 rr.2, 4 and 5, of the Rules of Court 2012 on arbitration proceedings.

Section 37 (application to set aside an award) is only applicable to award where the seat of arbitration is in Malaysia (i.e. local award), and the Malaysian courts have no jurisdiction to hear or decide to set aside an award where the seat of arbitration is outside Malaysia (i.e. foreign award). An application to set aside a local award under section 37 is to be by way of an originating summons: section 50 of Arbitration Act 2005. An application to set aside a local award is defined as an “arbitration claim” in O.69 r. 2(1)(i) of Rules of Courts 2012. O.69 r. 4(1) of Rules of Courts 2012 provides generally that “An arbitration claim under rule 2 or rule 3 may be made using the originating summons procedure and Form 5 shall be filed in the High Court. An arbitration claim originating summons shall - … (e) specify the respondents on whom the arbitration claim originating summons is to be served, stating their role in the arbitration.” O.69 r.4(3) provides that “unless the Court orders otherwise, an arbitration claim originating summons and the affidavit shall be served on the respondents specified in subparagraph (1)(e) within thirty days from the date of issue.” O.69 r. 4(4) provides: “Where relevant, rules 5 and 8 shall additional apply.” Form 5 is an inter partes Originating Summons. Form 6 is Ex Parte Originating Summons, but none of O.69 r.4, r.5 or r.6 cross-refers to Form 6. 60

O.69 r.5 provides for the specific procedure of application to set aside and award. O. 69 r. 5(5) provides that “The originating summons and affidavit shall be served on each arbitrator and the respondents.”

O.69 r.8 provides for the specific procedure of application for permission to enforce an award. O.69 r. 8(1) provides that “An application for permission to enforce an award in the same manner as a judgment or an order may be made without notice in an arbitration claim originating summons”. O.69 r.8(4) provides that “The Court may specify parties to the arbitration on whom the arbitration claim originating summons shall be served.” O.69 r. 8(7) and r.8(8) provide as follows: “(7)Within fourteen days after service of the order giving permission to enforce the award or, if the order is to be served out of the jurisdiction, within such other period as the Court may set-

the respondent may apply to set aside such order; and

the award shall not be enforced until-

after the expiration of that period; or

(ii) if the respondent applies within that period to set aside, until after the application made by the respondent has been finally disposed of.

The order giving permission for enforcement shall contain a statement of the right to make an application to set aside the order.”

O.69 r.9 provides as follows:

“Registration in High Court of foreign awards (O. 69, r. 9) Where an award has, under the law in force in the place where it was made become enforceable in the same manner as a judgment 61 given by a Court in that place, an applicant may enforce the award in the manner provided for under rule 8.” 56 It is settled law that the specific provisions of the statute supersede or prevail over the general provisions in the statute.

In the premises, the procedure for recognition and enforcement of award is primarily a two-stage process, subject to the Court’s discretion to direct service upon the respondent which has the effect of converting it into a one-stage process – as decided and explained by the Federal Court in CTI Group Inc v. International Bulk Carriers SPA [2017] 9 CLJ 499. The relevant part of the Federal Court’s judgment in CTI Group Inc case are reproduced below: “[1] The provisions on recognition and enforcement of arbitral awards as contained in arts. 35 and 36 of the UNCITRAL Model Law on International Commercial Arbitration have been incorporated into ss. 38 and 39 of the 2005 Act. The procedure for the purpose of recognition and enforcement of an arbitral award in Malaysia is contained in O. 69 rr. 8 and 9 of the Rules of Court 2012 ('ROC'). Sections 38 and 39 of the 2005 Act read with O. rr. 8 and 9 of the ROC, provide for a two-stage process: (i) the first stage, an ex parte proceeding - but subject to the power of the court as stipulated in O. 69 r. 8 requiring service of the arbitration claim originating summons on a party to the arbitration. An ex parte order giving permission to enforce an arbitral award is made at this stage; and (ii) the second stage, an inter partes proceeding during which the court deals with the application to set aside an ex parte order giving leave to enforce an arbitral award. The application must be made within the prescribed time after that order 62 is served on the party against whom the order is made. (paragraphs 56, 63, 64 & 66) [5] The two-stage process for the enforcement of arbitral awards as contained in ss. 38 and 39 of the 2005 Act (read with O. 69 r. of the ROC) does not permit a party seeking to set aside an order made under 38 to apply to set it aside under that very section on the ground that there was no arbitration agreement in existence between the parties. That party must apply to set aside the order under s. 39. When the matter moves to the second stage under s. 39, the defendant can only apply to set aside the order made under s. 38, upon any one or more of the grounds set out in s. 39 and no other. (paragraphs 105 & 106)”

In this context, it is important to note that –

the statutory provisions in section 38 and 39 of the Arbitration Act 2005 do not stipulate the procedure as a two-stage process or one-stage process;

it is the provisions in O.69 r.8 of the Rules of Courts 2012 which stipulate that the procedure can be either a two-stage process or one-stage process depending on the applicant’s choice and subject to the High Court’s order, and it is provided to the following effects :

“An application for permission to enforce an award ….. may be made without notice in an arbitration claim originating summons” O.69r. 8(1); 63

(ii) O.69 r.8(1) by the use of word “may” gives the applicant the choice of commencing his application by either ex parte originating summons in Form 6 or inter partes originating summons in Form 5;

(iii) If the applicant chooses to commence by ex parte originating summons under O.69 r.8(1) in Form 6, the enforcement application becomes a two-stage process – this was what happened in CTI Group Inc. case;

(iv) However, the enforcement application can become a one-stage process if –

the Court orders the ex parte originating summons to be served on the respondent (as is provided in O. 69 r. 8(4) and was noted in CTI Group Inc case); or

the applicant chooses to a commence the enforcement application by inter partes originating summons in Form 5 [see O.69 r. 8(1) “may” and O.69 r.4(3) and O.69 r.4(4)].

As the application to set aside the Ex Parte Order is made in a pending suit, the application is by Notice of Application: O. 32 of Rules of Court 2012.

(vi) If the respondent fails or neglects to apply to set aside the Ex Parte Order, the procedure of enforcement then reverted to a one-stage process from the originally–intended two-stage process, as the process would in such event ends with the Ex Parte Order. 64

(vii) In CTI Group Inc case the Federal Court did not state that all applications for enforcement of awards must invariably be commenced by ex parte originating summonses;

(viii) As the specific provision in O.69 r.8(1) gives the applicant the choice of commencing an enforcement application by ex parte originating summons, it is till correct to say that the O.69 r.8 procedure for enforcement of awards is primarily a two-stage process subject to the power of the High Court to order it to be served, thereby converting it into a one-stage process, as described in CTI Group Inc;

(ix) In a two-stage process under O.69 r.8, the two stages envisaged are –

ex parte stage where the applicant may obtain an ex parte order for enforcement [o.69 r.8(1) to (6)] and

inter partes stage where the respondent, after being served with ex parte enforcement order, applies to set aside the ex parte enforcement order [o.69 r.8(7)].

The application to set aside under O.69 r.8(7) is directed against the ex parte Court Order which granted the ex parte permission to enforce award, and it is not directed against or for the purpose of setting aside the arbitral award, An application to set aside an arbitral award must be made to the Court having jurisdiction over the seat of arbitration. Even after the ex parte Court Order (for enforcement) has been set aside by the High Court here, 65 the arbitral award remains intact and can be the subject of enforcement applications in other Convention Countries.

In light of the above, it is improper and incorrect to say that by reason of the two-stage process for enforcement application, the respondent who opposes an application for enforcement must do so by making a separate application by way of an originating summons, or that any failure of the respondent to proceed by a separate originating summons would be fatal to his rights under section 39(1) to oppose the application for recognition and enforcement.

It can be clearly seen that no such procedural requirement or fatal effect is expressly stipulated in either the Arbitration Act 2005 or O.69 of the ROC 2012.

Sustaining the Plaintiff’s procedural contention in the present case would also lead to a very strange result whereby an express requirement by court rules to make an application need only be commenced by a less formal Notice of Application than an implied requirement said to be imposed by the word “request”.

In any event, if perchance the Court is compelled or obliged to interpret O.69 of Rules of Court 2012 as impliedly requiring the respondent to oppose an enforcement application by making a separate application by way of an originating summons any failure or neglect to adopt such procedure by the respondent is not necessarily fatal to the respondent’s right to oppose the application for enforcement of award : see O.1A and O.2 r.1 and r.3 of the Rules of Court 2012. In the present case, the Defendant’s affidavit and exhibits have clearly stated its ground for opposing recognition and enforcement and the facts and 66 evidence in support of such ground, and the Plaintiff has been given plenty of opportunity to know and reply to the same. In the circumstances, there is no miscarriage of justice which can be argued as having allegedly been occasioned by the Defendant’s filing of affidavit and exhibits in opposing recognition instead of filing a separate originating summons.

We now turn to consider and analyse the judgment of Hamid Sultan JCA in Alami Vegetable Oil Products Sdn Bhd v. Hafeez Iqbal Oil & Ghee Industries (PVT) Ltd [2016] 7 CLJ 19, cited by the Plaintiff in support of their arguments in our present case.

At the outset, it must be emphasized that Alami Vegetable Oil Products case was in respect of recognition and enforcement of a specie of local award, namely a domestic international award where the seat of arbitration is in Malaysia. This is specifically stated in paragraph [10] of the learned Judge’s judgment which reads as follows: “[1] The appellant/defendant appealed against the judgment of the learned High Court Judge in respect of an application by the respondent/plaintiff/claimant for two arbitration awards issued in Malaysia, to be recognised and enforced as judgments, pursuant to s. 38 of the Arbitration Act 2005 (AA 2005)”.

In contrast, the character of the arbitral award in our present case is different, because what we have in the present case is a foreign arbitral award where the seat of arbitration is Qatar, a foreign country. The factual distinction is relevant and important here because the Courts in Malaysia have no jurisdiction to hear and decide in an 67 application to set aside a foreign arbitral award: see the analysis and explanation in the paragraphs above, and subsection 39(2) of the Arbitration 2005 Act which cross-refers to paragraph 39(1)(a )(vii) of the same Act cannot operate vis-à-vis a foreign award. Therefore, subsection 39(2) of the Arbitration Act 2005 is applicable to the local award in Alami Vegetable Oil Products case but does not apply to the foreign award in our present case. In the circumstances the case of Alami Vegetable Oil Products can be distinguished from our present case on the facts, and the dicta in the judgment in Alami Vegetable Oil Products case are, according to the doctrine of stare decisis, not binding on this Court in our present case with materially different facts.

In Hafeez Iqbal Oil & Ghee Industries (PVT) Ltd v. Alami Vegetable Oil Products Sdn Bhd [2018] 3 CLJ 635, Azimah Omar J. referred to the Court of Appeal’s decision in Alami Vegetable Oil Products Sdn Bhd v. Hafeez Iqbal Oil & Ghee Industries (PVT) Ltd [2016] 7 CLJ 19 and held as follows: [50] Coming back to the issue of contravention of public policy, the law requires the defendant to adduce proof that the award is in conflict with the public policy of Malaysia. The defendant here has clearly failed to prove the same. It is trite law that the contravention of public policy argument ought not to be utilised as a I to reopen settled matters in the arbitration. (See: i. Colliers International Property Consultants (USA) v. Colliers Jordan Lee and Jaafar (Malaysia) [2010] 1 LNS 636; [2010] MLJU 650; ii. Open Tyre Joint Stock Company Efirnoye (“EFKO”) v. Alfa Trading Ltd [2012] 1 CLJ 323; [2012] 1 MLJ 685) 68 [51] The defendant here did not make any application under s. 37(1)(a)(i) to (vi) or under (b)(ii) of the Act. [52] This court agrees with the plaintiff’s submission that if the defendant was indeed serious about their contention (that the final appeal board had acted outside the terms of arbitration stipulated in the plaintiff’s request for arbitration and/or contains decisions on matters beyond the scope of the submission to arbitration and that both the final award and final appeal award are in conflict with the public policy of Malaysia) the defendant should have moved the court under s. 37 of the Act to set aside the award which they failed to do. [53] The failure in applying to set aside the award under s. 37 the Act on the same grounds now attempted to be raised under s. the Act, leads to the inescapable conclusion that the issues raised by the defendant in this application lacks bona fide intent and obviously an afterthought. [54] It is this court’s judgment that the defendant in the present case has ultimately failed to discharge the burden of proof to prove that the defendant’s challenges against the recognition under s. of the Act falls within any of the circumstances under s. 39 of the same Act”.

It is important to note that the case of Hafeez Iqbal Oil & Ghee Industries (PVT) Ltd v. Alami Vegetable Oil Products Sdn Bhd [2018] 3 CLJ 635 also relates to PORAM awards, which are domestic international awards where the seat of arbitration is in Malaysia, and are a specie of local awards. As such, that case can be distinguished from the facts of our present case which involves a foreign award where the seat of arbitration is in Qatar, a foreign country. 69

In In Hafeez Iqbal Oil & Ghee Industries (PVT) Ltd v. Alami Vegetable Oil Products Sdn Bhd [2018] 3 CLJ 635, Azimah Omar J. referred to the Federal Court’s decision in State Government of Sarawak v. Chin Hwa Engineering Development Co. [1995] 3 MLJ 237 but did not discuss or analyse whether or not the law decided therein still applies now. The relevant parts of Edgar Joseph Jr. FCJ’s judgment in State Government of Sarawak v. Chin Hwa Engineering Development Co. are reproduced below: “By way of amplification, it was argued that the judge had misdirected himself in holding, as he did in fact hold, that the employer was precluded from challenging the validity of the award for the first time, at the very late stage of enforcement proceedings under s 27 of the Act, when it was open for it to have done so at a much earlier stage, under s 24(2) of the Act or under O 69 r 2(3) of the Rules of the High Court 1980. In support, our attention was directed to the following passage in Commercial Arbitration by Mustill and Boyd (2nd Ed) at p 546: A party avails himself of a passive remedy does not himself take the initiative to attack the award, but simply waits until his opponent seeks to enforce the award by action or summary process, and then relies upon his matter of complaint as a ground why the court should refuse enforcement. It was implicit in the submissions of the Attorney General that what he was contending for was a ruling by this court that the arbitration clause – cl 43 – was not wide enough to confer jurisdiction upon the arbitrator to determine the questions:

whether the suspension of the contractor from future tendering, until further notice, was unlawful; and 70

if so, what was the appropriate sum to award by way of damages for wrongful suspension? We agree, that in certain circumstances, a party may avail himself of a passive remedy by which is meant he does not take the initiative to attack an award, but simply waits until his opponent seeks to enforce the award by action or summary process, when he resists enforcement. Mustill and Boyd on Commercial Arbitration (2nd Ed) at p 546 have instanced two situations when the passive remedy would be available; namely:

where the award is so defective in form or substance that it is incapable of enforcement;

where the whole or part of the award is ineffective, on the ground that the relief granted lies outside the jurisdiction of the arbitrator. In the circumstances, we agree with the submission of the Attorney General that it was open to the employer to have had recourse to the passive remedy of resisting the enforcement proceedings under s 27 of the Act by relying on its complaint that the arbitrator had no jurisdiction to determine the validity of the suspension order and, consequently, no jurisdiction to award damages for alleged wrongful suspension, these being matters in dispute which were outside the scope of cl 43 of the contract. Whether or not the employer is entitled to succeed in this contention is, of course, a separate matter, and it is to this question that we must now direct our attention”

In State Government of Sarawak v. Chin Hwa Engineering Development case, the Federal Court was referring to Mustill & Boyd’s summary of the fundamental feature of arbitration law and practice as at 1995. The fundamental feature of arbitration law and 71 practice, which allowed a respondent to either resort to an active remedy of applying to set aside and arbitral award or adopt a passive remedy of waiting until the enforcement stage to oppose the enforcement, was already in existence for many decades before 1995 both internationally and in Malaysia. Under the old Arbitration Act 1952, there was no express statutory provision for opposing the enforcement application and there was no specific ground expressly recognised by the statute for opposing the enforcement application. Yet the Courts have recognized the respondent’s right to adopt the passive remedy of opposing the enforcement application on certain exceptional grounds. Under the old Arbitration Act 1952 the available statutory grounds for challenging the arbitral award and for applying to set aside the arbitral award were more extensive as they permitted the case stated procedure which related to the substantive merits of the arbitral award. The common law principles which permitted the setting aside of awards on procedural grounds under the Old Arbitration Act 1952 were rather similar to the express statutory grounds for setting aside awards under section 37 of our Arbitration Act 2005. Yet the Federal Court in State Government of Sarawak v. Chin Hwa Engineering Development accepted the principle that failure or neglect on the part of the respondent to take the active remedy of setting aside did not deny him the right to take the passive remedy of opposing recognition and enforcement of award.

When our Legislature decided to adopt the UNCITRAL Model Law on Arbitration as the model for drafting our new Arbitration Act 2005, our Legislature intended to bring our arbitration law to be more in line with the international arbitration law and practice : see The Government of India v. Cairns Energy India [2014] 9 MLJ 149. As the co-existence of active remedy (application to set aside awards) and 72 passive remedy (waiting until enforcement application to oppose the enforcement of awards) has been recognised internationally as well as in Malaysia at the time of the enactment of the Arbitration Act 2005 as a fundamental feature in the arbitration law and practice, it is highly improbable that our Legislature in adopting UNCITRAL Model Arbitration Law as the model for our Arbitration Act 2005 could have intended to make a substantial departure from such fundamental feature of international arbitration law and practice in the absence of clear or express words to that effect.

A fortiori, in respect of a foreign award where the Malaysian courts have no jurisdiction to entertain any application to set aside, any omission or neglect on the part of the respondent to apply to set aside the foreign award cannot be a ground to deny him of the right to oppose the enforcement of foreign award under section 39 – the only statutory right of recourse which the respondent has against a foreign award in the Malaysian courts. In jurisprudence and common sense, it is rather inconceivable how a respondent’s omission to do something, which the statute disallows him from doing, can be held to deny him the only right which the same statute expressly confers upon him.

In the premises, it is the considered view of this Court that the co-existence of active remedy (application to set aside an award) and passive remedy (resisting the enforcement of an award) stated by Edgar Joseph Jr SCJ in State Government of Sarawak v. Chin Hwa Engineering Development and elucidated by Lee Swee Seng J. (now JCA) in Kejuruteraan Bintai Kindenko Sdn Bhd v. Serdang Baru Properties Sdn Bhd & Anor Case is still valid and relevant under our Arbitration Act 2005 today, and that public policy as a ground for 73 passive remedy can be raised by the Defendant in the present suit to oppose the Plaintiff’s application for recognition and enforcement of a foreign award. As explained, the facts of our present suit do not necessitate any decision on the exact extent of the co-existence of active remedy and passive remedy to be recognised in Malaysia in respect of the other grounds of opposing recognition or enforcement under subsection 39(1) of our 2005 Act.

In the premises, this Court has dismissed the Plaintiff/Envac’s objection on the preliminary point

Section 39 of the Arbitration Act 2005 provides that “recognition or enforcement of an award … may be refused only at the request of the party against whom it is invoked …. (b) if the High Court finds that …..

(ii) the award is in conflict with the public policy of Malaysia.”

In our present case, the Defendant by its affidavit and submissions has requested this Court to refuse the recognition and enforcement of the foreign Arbitral Award. In procedure, the Defendant has fulfilled the procedural requirement of request under section 39(1) of our Arbitration Act 2005.

The statutory expression “public policy of Malaysia” involves the legislative recognition that the public policy of Malaysia on some matters or issues may differ from the public policy of another foreign country on such matters or issues. 74

This Court accepts and applies the concept of minimal court intervention as stipulated in section 8 of our Arbitration Act 2005 in the following words: “No court shall intervene in matters governed by this Act except where so provided in this Act.”

Subsection 39(1)(b)(ii) provides that recognition or enforcement may be refused “if the Court finds that the award is in conflict with the public policy of Malaysia.”

This Court also accepts and will apply the general principles regarding public policy which have been laid down in the following case authorities:

Jan D Nul (M) Sdn Bhd & Anor v. Vincent Tan Chee Yioun & Anor [2019] 2 MLJ 413 (Federal Court) in paragraphs [51], [53] and [58] of the judgment : “[51] A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary by Howard M Holtzmann and Joseph E Neuhaus (Kluwer, 1989) had highlighted the term ‘public policy’ as follows: ‘In discussing the term ‘public policy, it was understood that it was not equivalent to the political stance or international policies of a state but comprised the fundamental notions and principles of justice. It was understood that the term ‘public policy’, which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects’. 75 ………… [53] The decision of the Singapore Court of Appeal in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA [2007] 1 SLR 597, provides a good guidance on the interpretation of the term ‘public policy’ in an application to set aside an arbitral award made by a tribunal, on the ground of a breach of the rule of natural justice for being in conflict with the public policy. In that case Chan SekKeong CJ (delivering the judgment of the court) ruled: Although the concept of public policy of the State is not defined in the Act or the Model Law, the general consensus of judicial and expert opinion is that public policy under the Act encompasses a narrow scope. In our view, it should only operate in instances where the upholding of an arbitral award would ‘shock the conscience’ (see Downer Connect (58) at (136), or is ‘clearly injurious to the public good or … wholly offensive to the ordinary reasonable and fully informed member of the public’ (see Deutsche Schachbau v Shell International Petroleum Co Ltd [1987] 2 Lloyds Rep 246 at 254, per Sir John Donaldson MR), or where it violates the forum’s most basic notion of morality and justice: see Parsons & Whittemore Overseas Co Inc v. SocieteGeneraledeL’Industrie du Papier (RAKTA) 508 F 2d 969 (second Cir, 1974) at 974. …………… [58] The scope of public policy ground for setting aside an arbitral award could only be invoked in deserving case ie in instances where it appears a violation of the most basic notions of morality and justice. It covers fundamental 76 principles of law and justice in substantive as well as procedural respect. Instances where the upholding of an arbitral award would shock the conscience, or clearly injurious to the public good, or wholly offensive to the ordinary reasonable and fully informed member of the public, had been held by courts in various jurisdiction to fall within the category of public policy ground for setting aside an arbitral award. The court must adopt the principle as laid down by Howard M Holtzmann and Joseph E Neuhans as found in their commentary in A guide to the UNCITRAL Model on International Commercial Arbitration: Legislative History and Commentary ‘that the term ‘public policy’ which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects’. The terms ‘patent injustice’ or ‘substantial injustice’ or ‘manifestly unlawful and unconscionable’ as often used by the court in setting aside arbitral awards, do not mean injustice which is more than de minimis; what is required is that the injustice had real effect and had prejudiced the basic right of the applicant (see: Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd [2007] 3 SLR 86].

Sui Southern Gas Co. Ltd v. Habibullah Coastal Power Co. Pte Ltd [2010] 3 SLR 1, para [59] : “[59] Although the concept of public policy of the State is not defined in the Act or the Model Law, the general consensus of judicial and expert opinion is that public policy under the Act encompasses a narrow scope. In our view, it should only operate in instances where the upholding of an arbitral award would 77 ‘shock the conscience’ (see Downer Connect ([58] supra) at [136]), or is ‘clearly injurious to the public good or … wholly offensive to the ordinary reasonable and fully informed member of the public’ (see Deutsche Schachbau v Shell International Petroleum Co Ltd [1987] 2 Lloyds’ Rep 246 at 254, per Sir John Donaldson MR), or where it violates the forum’s most basic notion of morality and justice: see Parsons & Whittemore Overseas Co Inc v SocieteGenerale de L’Industrie du Papier (RAKTA) 508 F 2d, 969 (2nd Cir, 1974) at 974. This would be consistent with the concept of public policy that can be ascertained from the preparatory materials to the Model Law. As was highlighted in the Commission Report (A/40/17), at para 297 (referred to in A Guide to the UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary by Howard M Holtzmann and Joseph E Neuhaus (Kluwer, 1989) at 914): In discussing the term ‘public policy’, it was understood that it was not equivalent to the political stance or international policies of a State but comprised the fundamental notions and principles of justice … It was understood that the term ‘public policy’, which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects. Thus, instances such as corruption, bribery or fraud and similar serious cases would constitute a ground for setting aside. [Court of Appeal’s emphasis in PT Asuransi] 78 [48] It is clear, therefore, that in order for SSGC to have succeeded on the public policy argument, it had to cross a very high threshold and demonstrate egregious circumstances such as corruption, bribery or fraud, which would violate the most basic notions of morality and justice. Nothing of the sort had been pleaded or proved by SSGC, and its ambiguous contention that the Award was “perverse” or “irrational” could not, of itself, amount to a breach of public policy.”

Sigur Ros Sdn Bhd v. Master Mulia Sdn Bhd [2018] 3 MLJ 608 paragraph [32] & [33] : “[32] This then makes the threshold to be met somewhat high in that by its very nature, ‘it should be immediately obvious or at least fairly rapidly apparent that there has been such a breach or conflict with the public policy of Malaysia … The Court must be compelled to agree or that a strong case has been made out that the award conflicts with the public policy of Malaysia. Otherwise, the contractual arrangements of the parties must be maintained’. [33] Further, ‘it must be understood that the notion or concept of public policy in arbitration is not one grounded in public law, generally understood as the Wednesbury principles. In other words, the award will not be set aside simply because it is irrational or unreasonable or one that is so irrational or unreasonable that no reasonable person could have made such an award. The concept of public policy must be one taken in the 79 ‘higher sense, where some fundamental principle of law and justice is engaged, some element of illegality, where enforcement of the award involves clear injury to public good or the ‘integrity of the Court’s process and powers will thereby be abused’.” “[32] This then makes the threshold to be met somewhat high in that by its very nature, ‘it should be immediately obvious or at least fairly rapidly apparent that there has been such a breach or conflict with the public policy of Malaysia … The Court must be compelled to agree or that a strong case has been made out that the award conflicts with the public policy of Malaysia. Otherwise, the contractual arrangements of the parties must be maintained’. [33] Further, ‘it must be understood that the notion or concept of public policy in arbitration is not one grounded in public law, generally understood as the Wednesbury principles. In other words, the award will not be set aside simply because it is irrational or unreasonable or one that is so irrational or unreasonable that no reasonable person could have made such an award. The concept of public policy must be one taken in the ‘higher sense, where some fundamental principle of law and justice is engaged, some element of illegality, where enforcement of the award involves clear injury to public good or the ‘integrity of the Court’s process and powers will thereby be abused’.”

The Government of India v. Cairns [2014] 9 MLJ 149 paragraph [154], [156] and [157] : 80 “[154] …..as one which is in the 'higher sense', where some fundamental principle of law and justice is engaged, some element of illegality, where enforcement of the award involves clear injury to public good or the 'integrity of the court's process and powers will thereby be abused'.. [156] I appreciate the Court of Appeal did not finally define the scope of public policy, nor did it have to in that case. Nevertheless, it made those points including remarking that 'the considerations of public policy could never be exhaustively defined'; and that it favoured a narrower as opposed to wide view of the compass of the words 'public policy'. In the context of Malaysian law, it must be treated with caution and construed narrowly with the court finding compelling or strong reasons for intervention. “[157] Lest it be misconstrued that the courts are adopting a hands-off attitude when dealing with arbitration awards, it is in fact the contrary. These minimalistic interventions go towards supporting arbitration, giving healthy respect for autonomy, confidentially, commerciality and a host of multifarious reasons why many corporate entities opt for arbitration in the first place. “[154] …..as one which is in the 'higher sense', where some fundamental principle of law and justice is engaged, some element of illegality, where enforcement of the award involves clear injury to public good or the 'integrity of the court's process and powers will thereby be abused'.. 81 [156] I appreciate the Court of Appeal did not finally define the scope of public policy, nor did it have to in that case. Nevertheless, it made those points including remarking that 'the considerations of public policy could never be exhaustively defined'; and that it favoured a narrower as opposed to wide view of the compass of the words 'public policy'. In the context of Malaysian law, it must be treated with caution and construed narrowly with the court finding compelling or strong reasons for intervention. “[157] Lest it be misconstrued that the courts are adopting a hands-off attitude when dealing with arbitration awards, it is in fact the contrary. These minimalistic interventions go towards supporting arbitration, giving healthy respect for autonomy, confidentially, commerciality and a host of multifarious reasons why many corporate entities opt for arbitration in the first place. DEFENDANT’S OBJECTION TO RECOGNITION AND ENFORCEMENT

In our present case, the Defendant (Malaysian company) opposes the application of the Plaintiff (Scandinavian company) for recognition and enforcement of the foreign arbitral award because –

the Defendant has paid the bulk of the total net awarded amount to the Plaintiff; 82

the balance unpaid amount of QAR888,654.91 is being held back on account of Qatari withholding tax pursuant to laws of Qatar;

despite repeated request, the Plaintiff has failed to obtain tax clearance from the Qatari Tax Authority on release of the balance unpaid amount; and

under the laws of Qatar, it would be contravention of the tax laws for the Defendant to pay the balance amount to the Plaintiff (Scandinavian company resident outside Qatar) without the written clearance certificate or official letter from the Qatari Tax Authority, and doing so would also render the Defendant (Malaysian company) liable to pay the balance amount as withholding tax.

On the part of the Plaintiff, the Plaintiff insists that the balance unpaid amount must be released to the Plaintiff irrespective of the Defendant’s objection regarding Qatari withholding tax.

In the present case, it is undisputed fact that –

the Plaintiff is a Scandinavian company ordinarily resident in Scandinavia;

of the total net arbitral award sum, the bulk thereof has already been paid by the Defendant to the Plaintiff; 83

only the balance amount of QAR888,654.91 has not been paid by the Defendant to the Plaintiff.

According to the Defendant-

Under the Qatar laws, the Defendant is required to retain QAR888,654.91 as the Tax Retention Sum until the production of a No Objection Letter for the Qatar Tax Authority for the Plaintiff to receive the same : paragraph 9 and Exhibit “CLK-2” to Defendant’s Affidavit in Reply;

The Defendant had in compliance with Qatar Laws, specifically asked the Plaintiff to produce a No Objection Letter from the Qatar Tax Authority to enable the release of the Tax Retention Sum to the Plaintiff. However, the Plaintiff has not made any attempt to obtain the No Objection Letter and paragraph 10 of Defendant’s Affidavit-In-Reply and Exhibit “CLK-3” thereto (e-mails dated 30.01.2019 and 12.3.2019).

By letter dated 7.5.2019, the Plaintiff’s stated that there was no obligation for the Plaintiff to provide any certification or letter in relation to the so-called Withholding Tax and demanded for the payment of the same : paragraph 12 of Defendant’s Affidavit-In-Reply and Exhibit “E” to Plaintiff’s Affidavit-in-Support.

The Defendant’s solicitors by letter dated 13.5.2019 stated that the Defendant was unable to make the payment of the Tax Retention Sum as the released of the sum would place the Defendant in breach of the Qatar Laws : paragraph 13 of Defendant’s Affidavit-In-Reply and Exhibit “CLK-5” thereof. 84

In Exhibit “CLK-2” to the Defendant’s Affidavit-In-Reply, the Defendant produced a copy of the Circular No. 2/2011 issued under Qatar Laws. The relevant parts of the Circular No. 2/2011 in paragraph 1(6) read as follows: “ CIRCULAR NO. 2/2011 Your Excellencies/the Ministers Messrs / Heads of Government bodies and public authorities and corporations Messrs / Taxpayers and external auditors Doha Greetings, In reference to the provisions of the Income Tax Law issued by way of Law 21 of 2009, and particularly Articles 2, 3, 4, 11, 20 and 21 thereof, kindly follow the following instructions when making payments under contract wholly or partly carried out in the State: First : Where payments are made to taxpayers who are residents in the State

In the case of companies A company shall be resident if it is incorporated in the State or has its place of effective management therein. This can be confirmed through the data in the extract of the Commercial Register (which must be valid). The company will, then, have the Qatari nationality and will take one of the forms provided for in the Commercial Company Law issued 85 by way of Law 5 of 2002 (joint company, limited liability company, shareholding company, etc.). Where the payments are made in execution of a contract concluded with a resident company as described above, the last payment shall be made upon the presentation of a valid tax card by the company. The issuance of a tax assessment or a non-objection letter by the Public Revenues and Taxes Department is not required.

In the case of natural persons Where the payments are made to a natural person resident in the State and holding the Qatari nationality (or the nationality of another State of the Cooperation Council for the Arab States of the Gulf) and carries on an activity in his name (in a sole proprietorship), the last payment shall be made upon the presentation of a valid tax card. Second : Where payments are made to taxpayers who are residents in the State

In the case of taxpayers registered in the Commercial Register The extract of the Commercial Register (which must be valid) provides, in this case, that the taxpayer has a foreign nationality and takes the form of a branch. Where the payments are made to a branch of a foreign taxpayer, the following must be observed: a) If the branch is permanent in the State 86 This can be confirmed in the extract of the Commercial Register through the existence of a fixed address in the State and also through the absence of a link between the activity of the branch and a specific period, contract or project. In this case, the last payment shall be made upon the presentation of a valid tax card by the branch. The issuance of a tax assessment or a non-objection letter by the Public Revenues and Taxes Department is not required. b) If the branch is not permanent in the State and the period of its activity is at least one year Where the extract of the Commercial Register provides that the activity of the branch is linked to a specific period, contract or project and the period of activity is at least one year, the last payment of the contract or 3% of its value after deduction of supply and works carried out abroad, whichever is higher, must be retained. It will be released only after the presentation by the taxpayer of a non-objection letter issued by the Department. The retention shall apply only to the last payment (or 3% of the contract value) shall be made upon the presentation of a valid tax card by the taxpayer. The issuance of a tax assessment of a non-objection letter by the Public Revenues and Taxes Department is not required.

In the case of taxpayers not registered in the Commercial Register or registered for an activity or a project which lasts less than one year 87 Where the payments are made to a non-resident taxpayer who is not registered in the Commercial Register or who is registered therein for a contract, an activity or a project the period of which is less than one year, then the payments shall be subject to withholding tax in accordance with the provisions of Article 11/2 of the above mentioned law, and a certificate to this effect shall be delivered to the taxpayer in accordance with Article 20 of the same law. Taxpayers who have a permanent establishment in the State may submit to the Department a request for refund of the tax withheld unduly. Third : Where the payments are made to taxpayers registered in the Qatar Financial Center In this case, the amount due (including the last payment) shall be paid upon the presentation by the taxpayer of a valid certificate issued by the competent authorities of the Qatar Financial Center stating that the taxpayer is registered in the Center. Finally, the Ministry reminds all parties that make payments to taxpayers as envisaged above, including Ministries, Government bodies and public authorities and corporations, that they are required to provide the Public Revenues and Tax Department in the Ministry of the details of the contracts they conclude in accordance with the conditions of Article 38 of the Executive Regulations of the above mentioned law (copy of which is enclosed). This circular repeals any contrary provision in previous circulars. Your faithfully, 88 Yousef Hussain Kamal Minister of Economy and Finance ”

In paragraph 9 of the Plaintiff’s Affidavit-In-Reply, the Plaintiff’s deponent replied as follows: “9. The Plaintiff denies paragraphs 16 to 18 Defendant’s Affidavit and state that the Plaintiff is advised by its solicitors and which advice the Plaintiff verily believes to be true that the Arbitrator had dealt explicitly with the issue of the withholding tax in paragraphs 442 to 455 (at pages 109 to 112) of the Arbitral Award found in Exhibit “D” of the Plaintiff’s 1st Affidavit and decided inter alia that: i. However, the 1993 Tax Law which requires the Respondent to withhold the final payment due to the Claimant was expressly repealed upon enactment of Law No. 21 of 2009 (“the 2009 Tax Law”) [para 446]; ii. The withholding of tax is applicable for all services rendered on or after 1 Januari 2010. [para 449] iii. Given that the amount of QAR844,662.91 was deducted by the Respondent, the Tribunal is of the view that the burden of proof to demonstrate that this amount was rightly withheld rests on the Respondent. The Tribunal finds that the Respondent has not met this burden. [para 450] 89 iv. The Tribunal is also mindful of the fact that, under the terms of the Subcontract, the Works of the Claimant were completed by 21 October 2009 ie over two months prior to the entry into force of the 2009 Tax Law. As noted elsewhere in this Award, the Respondent extended the Subcontract Milestones, and in particular Milestone 3.4 until 20 October 2011. [para 454] v. On the basis of the above, the Tribunal determines that the Claimant is entitled to payment of the amount withheld of QAR844,662.91. [para 455] It is to be noted that the learned arbitrator did not decide to the effect that there was no liability for withholding tax under the Qatar laws in respect of the last payment to be made to the Plaintiff/Claimant. Instead, the learned arbitrator avoided the issue on withholding tax under Qatar laws by merely holding that the Defendant/Respondent has failed to discharge the burden of proof in the arbitration that withholding tax had to be retained under the Qatar laws.

The Plaintiff in its Affidavit-in-Reply contended as follows: “13. In reply to paragraph 26 of the Defendant’s affidavit which is denied, I state that the Arbitral Tribunal has decided that the Plaintiff is entitled to the payment of the amount withheld and consequently, the Defendant must pay the same.

Paragraph 27 of the Defendant’s Affidavit is denied. The Plaintiff states that the Defendant has not taken steps to raised the issue pertaining to the tax requirement of Qatar by way of a challenge 90 to the Arbitral Award or otherwise and consequently is estopped from contending that the sum of QAR888,54.91 is not payable.

Paragraphs 29 to 33 of the Defendant’s Affidavit are denied. I state that :

16.1 The Defendant is not ready willing and able to pay the sum of QAR888,654.91 despite the arbitrator’s decision that such sum is payable and particularly since the award is final and binding;

16.2 The Defendant is grabbing at straws in order to evade compliance with the Arbitral Award by relying on a purported tax requirement in Qatar that was repealed upon enactment of Law No. 21 of 2009 and which was found by the arbitrator to not apply to the contract between the parties. Payment under a repealed foreign law that no longer applies is not against public policy in Malaysia;

16.3 The Defendant now seeks to rely on Circular No. 2/2011 in relation to Income Tax 21 of 2009 which is a Ministerial Decree of the Qatari Ministry of Economy and carries no force of law or legal basis.

I state further that in the event the orders sought herein for the recognition and enforcement of the Arbitral Award is not allowed, the Plaintiff will suffer prejudice in that it will be prevented from recovering the sums awarded to it under an Arbitral Award that is now final and binding an which sums are held by the Defendant for its benefit upon the Plaintiff having concluded its 91 works. On the contrary, the Defendant will be unjustly enriched in that it will benefit from the retention sums held for the benefit of the Plaintiff relying on a Ministerial Decree of the Qatari Ministry of Economy which is not issued by the tax authorities of Qatar and which carries no force of law or legal basis.”

In the Defendant’s Further Affidavit-In-Reply, the Defendant replied as follows:

release of the Tax Retention Sum without a letter of no objection from Qatari Tax Authority would place the Defendant in breach of the Qatari tax laws : paragraph 6;

the Arbitrator does not state anywhere in her decision that the Plaintiff is precluded from paying tax under the contract, and as such the issue of payment of tax by the Plaintiff under the terms of the Subcontract remains very much alive and resolved to-date : paragraph 7;

ordering the Defendant to release the Tax Retention Amount would be a breach of Malaysian public policy because it will force the Defendant, a Malaysian entity, to commit an illegal act under the Qatari tax laws, thereby exposing the Defendant to further liabilities while allowing the Plaintiff, a foreign entity, to evade Qatari tax laws : paragraph 8(i) of Defendant’s Further Affidavit-In-Reply.

The Defendant does not challenge the Award because it wishes to comply with the Award, including the Tax Retention Amount upon the Plaintiff’s production of No Objection Letter from the 92 Qatari Tax Authorities : paragraph 9(i) of Defendant’s Further Affidavit-In-Reply.

If the Plaintiff takes the position that no tax is payable under Qatari tax laws, if fails reason why the Plaintiff cannot get a letter of no objection from the Qatari Tax Authority confirming the same so as to facilitate the release of the Tax Retention Sum: paragraph 9 (iii) of Defendant’s Further Affidavit-In-Reply.

In the Plaintiff’s 2nd Affidavit-In-Reply, the Plaintiff further contends that: “ 5. With reference to paragraph 6 of the Defendant’s 2nd Affidavit, which is denied, I state that the dispute as regards tax was determined by the Arbitral Tribunal and the award is final and binding. The Defendant is precluded in law from imposing its own conditions for payment of the sums ordered to be paid in the award.

Paragraph 7 of the Defendant’s 2nd Affidavit is denied. The Arbitral Tribunal dealt explicitly with the issue of the withholding tax in paragraphs 442 to 455 (at pages 109 to 112) of the Arbitral Award found in Exhibit “D” of the Plaintiff’s 1st Affidavit and decided inter alia that the 1993 Tax Law was expressly repealed upon enactment of Law No. 21 of 2009 (“the 2009 Tax Law”) [para 446] which applied to services rendered on or after 1 January 2010. [para 449] and that in this case, the new law was not applicable since the works herein was completed by 21 October 2009. 93

Save that the Defendant owes a remaining sum of QAR 888,654.91 to the Plaintiff, the rest of paragraph 8 of the Defendant’s 2nd Affidavit is denied. I am advised by the solicitors of the Plaintiff and which advise I verily believe to be true that the Defendant has not adduced any evidence to show that a demand has been made against it by the Qatari tax authorities or that the purported tax is due and payable. Even if there was such a liability, a breach of Qatari Law is not an illegality in Malaysia and thus not against public policies in

The Plaintiff has taken objection to the opinion of Clyde & Co. which was reproduced in part and with substantial parts thereof blackened out: Exhibit “CLK-6”.

In the entirety of the facts and circumstances of the present case, this court finds that –

the Defendant has established a strong prima facie case that it would contravene the tax laws of Qatar if the Defendant releases the balance QAR888,665.00 to the Plaintiff without a Letter of No Objection from the Qatar tax authority;

the tax law of Qatar is foreign law which is treated as a fact to be proved; 94

although the Defendant has established a strong prima case of contravention of Qatar tax law, the Plaintiff has not adduced evidence of Qatar law expert or lawyer to rebut the prima facie case;

the evidence adduced by the parties, though establishing a strong prima facie case of contravention of the Qatar tax law, is not sufficient for this Court to make a specific finding of fact as to whether the release of the unpaid balance QAR888,665 would or would not contravene Qatar tax law;

although the learned arbitrator has ruled in the Arbitration Award that the balance amount should be paid by the Defendant to the Plaintiff, the learned arbitrator has not made a specific decision that no withholding tax was leviable or payable under the laws of Qatar; in any event, neither the learned arbitrator’s ruling nor the decision of this Court would be binding on the Qatar tax authority; and

neither the arbitrator’s ruling nor this Court’s decision on the question regarding Qatar tax law will discharge the Defendant from any liablility vis-à-vis the Qatar tax authority.

From the facts, circumstances and the findings in our present case, this Court has come to the conclusion that –

on the one hand, if this Court were to make an outright refusal to recognize the foreign arbitral award for enforcement, this Court would cross the permissible line of minimal intervention and 95 contravene the legislative policy of readily accepting arbitral awards for enforcement;

(ii) on the other hand, if this Court were to make an unconditional order for recognition and enforcement as per the prayers sought by the Plaintiff here, it would saddle the Court with the wrong impression of condoning the evasion of foreign tax thereby shocking the conscience, injurious to public good, offensive to the informed members of the public or a clear injury to the integrity of the court process, and therefore contrary to the public policy of Malaysia.

In the entire circumstances of our present case, this Court has concluded that there should be permission granted to the Plaintiff to enforce the balance unpaid amount of QAR888,665 in the Award on terms that would not be contrary to the public policy of Malaysia. The public policy in this context is that in making court orders, the Malaysian courts do not issue a court order which has the effect of condoning a litigant’s evasion of foreign tax.

It is also to be noted that even if this Court were to uphold the Plaintiff’s preliminary objection on the point of procedure, this Court in exercise of discretion would still have come to the same decision there should be permission granted to the Plaintiff to enforce the balance unpaid amount of QAR888,665 in the Award on terms that would not be contrary to the public policy of Malaysia. Irrespective of whether or not there was compliance with procedure on the part of the Defendant, once this Court has come to notice that granting permission to enforce an award, be it local award or foreign award, in the terms as prayed for by the Plaintiff would be contrary to the public policy of Malaysia, 96 this Court has the discretion to grant the permission to enforce the award in a manner which does not contradict the public policy of Malaysia. The public policy in this context is that in making court orders, the Malaysian courts do not issue a court order which has the effect of condoning a litigant’s evasion of foreign tax. While a particular litigant may have his own commercial interest as the sole or primary consideration for approaching the Court for relief, the Court has to balance it with consideration for the image and integrity of the system of administration of justice, a matter of public policy which the 2005 Act expressly stipulates as a relevant consideration by the Court.

It is to be clarified that if this Court were to find that the Defendant has proved to the satisfaction of this Court that the balance unpaid amount of QAR888,665 was liable to be retained as withholding tax under the laws of Qatar, this Court would have refused to grant leave to enforce the Award for the said amount of QAR888,665 instead of granting leave with terms as is done in the present case.

In the premises, this Court on 26.8.2020 made an order on the following terms: This Court grants prayer 1 of the Plaintiff’s Originating Summons in Enclosure 1 on these terms & conditions:

the Plaintiff is only entitled to enforce recovery of the unpaid balance of QAR888,654.91 subject to terms in (b) to (d) below; 97

if the Plaintiff obtains a written Letter of No Objection from the relevant Qatari tax authority, the Defendant shall pay the amount of QAR888,654.91 to the Plaintiff within 7 working days of being served with a true certified copy of such non-objection letter;

in the event that the Plaintiff fails or neglects to obtain a non-objection letter from the relevant Qatari tax authority within 2 months from the date of this Order, the Defendant is only duty-bound to pay the said unpaid balance amount to the Plaintiff within 7 days of Plaintiff providing to the Defendant an on-demand bank guarantee from a licensed bank in Malaysia to indemnity and pay the Defendant on demand and unconditionally the said amount in the event the Qatari tax authority demands the Defendant to pay the amount as withholding tax; and

the terms of the on-demand guarantee under item (c) above shall be mutually agreed upon by the Plaintiff and Defendant, failing which the terms thereof shall be resolved and decided by the Registrar of this Court. After hearing counsel on costs, this Court ordered that each party shall bear its own respective costs of this proceeding. 98

The primary term imposed on the permission to enforce the unpaid balance amount of the award sum in the foreign arbitral award is in item 1 of the Court Order – making it conditional upon the Plaintiff’s production of the Letter of No Objection from the Qatar tax authority. If the retained amount of QAR888,665 is truly and really not subject to withholding tax of Qatar, it would not be difficult or problematic for the Plaintiff to approach the Qatar tax authority for issuance of such Letter of No Objection.

The alternative term imposed in item 2 of the Court Order is a latitude granted to the Plaintiff in the event the Plaintiff needs the said money urgently and it would require a rather long time for the Plaintiff to procure the Qatar tax authority’s Letter of No Objection.

Without such terms imposed, it would be in conflict with the public policy of Malaysia, and it would be injurious to the integrity of the court process here as well as injurious or detrimental to the Defendant.

Without such conditional term in item 1 of the Court Order, this Court would bear the real risks of being inflicted with the infamy of Malaysian court in granting leave to enforce arbitral award in a manner which condones evasion of a foreign tax law.

In the considered view of this Court, it is in the public policy of Malaysia that the Court of Law in Malaysia should not bear the real risk of being inflicted with such infamy. Dated : 12 November, 2020 99 Signed ................................................................ TEE GEOK HOCK JUDICIAL COMMISIONER HIGH COURT OF MALAYA AT SHAH ALAM (NCVC 10) To the parties’ solicitors / counsel:

For the Plaintiff : Norliza Rasoo Khan & Vanessa Victor, Messrs Liza Khan & Sankey (Kuala Lumpur)

For the Defendant : Sathya Kumardas & Aarthi Jeyarajah,