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15 December 2020
The Kuala Lumpur High Court has held that the appointment of the director of the Asian International Arbitration Centre (AIAC) is not justiciable in the Malaysian courts.
On 12 October 2020 the high court struck out two originating summonses against the former director of the AIAC, the late Vinayak Pradhan.(1)
The originating summonses were taken out by Prestij Mega Construction Sdn Bhd against the claimants in two separate adjudication proceedings. Prestij Mega sought to set aside the adjudication decisions on the grounds that, among other things, the appointments of the adjudicators were invalid. To this end, Prestij Mega sought declarations that:
Pradhan was named as the first defendant. The Malaysian government was subsequently brought in as the third defendant in both originating summonses. After Pradhan passed away on 8 March 2020, upon Prestij Mega's application, the high court ordered the substitution of Pradhan with his personal representative.
Prestij Mega's challenges against Pradhan were built on various correspondence issued by the secretary general of AALCO. In this correspondence, the secretary general purported to dispute the government's appointment of Pradhan as the director of the AIAC on the ground that AALCO was not consulted prior to the appointment.
Prestij Mega argued that the appointment of the director of the AIAC must be done in accordance with the Host Country Agreement. Based on such correspondence, Prestij Mega argued that Pradhan had ceased to be the acting director of the AIAC when he was appointed as the director of the AIAC, and such an appointment without prior consultation with AALCO was invalid under the Host Country Agreement.
On that basis, it was argued that Pradhan did not have power to subsequently appoint the adjudicators in both adjudication proceedings. Therefore, Pradhan's appointment of these adjudicators was null and void. During the submissions, Prestij Mega took a step further and alleged that Pradhan had usurped the directorship.
Pradhan's personal representative argued that the court had no jurisdiction to adjudicate the dispute arising from the Host Country Agreement for the following reasons:
In addition, Pradhan also enjoyed immunity from legal proceedings for the appointment of the adjudicators as the acts were done in his capacity as the director of the AIAC. This immunity was pursuant to:
Further, Pradhan also enjoyed immunity from suit and action under Section 34 of the Construction Industry Payment and Adjudication Act (CIPAA) 2012.
Further, the originating summonses did not disclose a reasonable cause of action against Pradhan or his personal representative. Prestij Mega did not seek any remedies against Pradhan in his personal capacity or against his personal representative. The declarations sought by Prestij Mega concerned the government's appointment of Pradhan as the director of the AIAC and did not concern the action or inaction of Pradhan in his personal capacity.
The personal representative also argued that Pradhan's appointment was made by the government, and Section 114(e) of the Evidence Act 1950 provides that until and otherwise proven, an appointment made by the government must be presumed to have been carried out in line with the necessary procedure.
Even assuming that Prestij Mega was correct that Pradhan was wrongly appointed as the director of the AIAC, his acts when he was a director remained valid under the de facto doctrine.
Both originating summonses were heard by Justice Datuk Wong Kian Kheong, who struck out the originating summonses against Pradhan and his personal representative orally on grounds including the following:
These grounds may be supplemented or amended in the written grounds which have not yet been issued.
Similar grounds were raised to challenge the director's appointment in Mega Sasa Sdn Bhd v Kinta Bakti Sdn Bhd(2) (for further details please see "Court rules on challenges to AIAC and statutory adjudication").
One procedural difference between these cases is that in Mega Sasa, the high court refused to strike out the originating summons on the ground that the law on immunity conferred under the CIPAA and the International Organisations (Privileges and Immunities) Act was not settled. Therefore, the high court held that it was not a plain and obvious case that warranted striking out without hearing full arguments in the originating summons. However, the high court did dismiss the originating summons at the end of those proceedings.
When Mega Sasa was heard, case law had not significantly developed on the issue of the AIAC and its officers' immunities in law. With the benefits of the well-reasoned judgments in Mega Sasa and now Prestij Mega, it is likely that future actions against the director of the AIAC that are similar in nature may not sustain a striking-out application.
Further, the non-justiciability of the Host Country Agreement is an important factor. In Prestij Mega, the challenge was premised on Pradhan's appointment as director of the AIAC not complying with the Host Country Agreement.
The high court held the view that the Host Country Agreement can be challenged only at the international level and not in municipal courts as it has not been passed by Parliament as a domestic legislation. The high court further held that under the Federal Constitution, external affairs are within the purview of Parliament and the executive. Therefore, an intervention from the municipal courts would amount to judicial overreach.
It is hoped that the decisions in Mega Sasa and Prestij Mega will put similar challenges to rest. These challenges are not only vexatious but also a waste of judicial time and resources. Costs were ordered in both Mega Sasa and Prestij Mega.
For further information on this topic please contact Foo Joon Liang, Kang Mei Yee or Carissa How at Gan Partnership by telephone (+603 7931 7060) or email (email@example.com, firstname.lastname@example.org or email@example.com). The Gan Partnership website can be accessed at www.ganlaw.my.
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