Malaysia updates

Arbitration & ADR

Court discharges interim injunctions granted pursuant to Section 11 of Arbitration Act
  • Malaysia
  • 13 February 2020

The high court recently set aside interim injunctions which had been granted pursuant to Section 11 of the Arbitration Act 2005 following an inter partes hearing. With this decision, the high court has confirmed that interim injunctions granted pursuant to Section 11 of the Arbitration Act may be set aside on evidence of suppression of material facts leading to the grant of the interim injunctions and if there has been a material change of circumstances since such interim measures were granted.

It's confirmed! CIPAA applies prospectively to construction contracts
  • Malaysia
  • 12 December 2019

After much anticipation, the Federal Court has finally confirmed that the Construction Industry Payment and Adjudication Act 2012 applies only to construction contracts entered into after the act took effect on 15 April 2014. As such, any adjudication proceedings based on a claim arising from a construction contract which was entered into before that date, including adjudication decisions, are null and void.

High court rules that non-parties to arbitration are not bound by confidentiality
  • Malaysia
  • 17 October 2019

A high court recently ruled that the prohibition against third parties publishing, disclosing or communicating information relating to arbitration proceedings does not extend to non-parties to an arbitration. This decision will affect the extent to which the confidential documents used in arbitral proceedings remain confidential.

Federal Court rules on test applicable to applications to restrain arbitration proceedings made by non-parties
  • Malaysia
  • 08 August 2019

The Federal Court recently overturned a Court of Appeal decision on the test which applies to applications to restrain arbitration proceedings made by non-parties to the proceedings. The Federal Court concluded its judgment by affirming the findings of the High Court in this case, including that the balance of justice was in favour of the injunction order and that there were serious issues to be tried.

Court of Appeal determines that negative declaratory arbitration awards are enforceable
  • Malaysia
  • 23 May 2019

A recent Court of Appeal case addressed whether a negative declaratory arbitration award is enforceable. The decision emphasises the narrow grounds that enable the high courts to refuse to recognise or enforce an arbitration award, as long as the requirements of Section 38(2) of the Arbitration Act are complied with. It also establishes a precedent that there is no barrier to the enforcement of a negative declaratory arbitration award.


Aviation

Contributed by SKRINE
Air passenger rights curtailed by COVID-19 pandemic
  • Malaysia
  • 13 May 2020

According to the Malaysian Aviation Commission (MAVCOM), the COVID-19 pandemic constitutes 'extraordinary circumstances' under the Malaysian Aviation Consumer Protection Code. As a result, MAVCOM is temporarily providing some leeway in terms of how airlines can respond to passenger refund requests. However, in doing so, it may have inadvertently exposed passengers to the risk of losing their entire ticket cost.

Staying airborne during COVID-19 pandemic
  • Malaysia
  • 06 May 2020

The Malaysian Aviation Commission (MAVCOM) recently reported a bleak outlook in 2020 for the Malaysian aviation services market due to the COVID-19 pandemic. MAVCOM foresees that the significant decline in tourist arrivals and receipts, passenger traffic and revenue due to lower air travel demand could be made worse if the pandemic proves hard to contain, leading to prolonged travel restrictions. This article outlines government initiatives to support the aviation industry.

COVID-19: MAVCOM issues commentary on impact of potential government aid
  • Malaysia
  • 29 April 2020

The COVID-19 pandemic's impact on the Malaysian economy during this period of uncertainty and crisis depends on national-level efforts to contain the virus. Until then, the global restrictions imposed on travel will continue to severely undermine the aviation industry, possibly to the extent of necessitating government intervention in the market. It would be prudent for the government to consider the Malaysian Aviation Commission's position when conducting any cost-benefit analysis of measures or aid.

MAVCOM imposes significant financial penalties on AirAsia, AirAsia X and Malaysia Airports (Sepang)
  • Malaysia
  • 05 February 2020

The Malaysian Aviation Commission (MAVCOM) recently announced that it had imposed RM2 million fines on AirAsia Berhad and its long-haul sister airline AirAsia X Berhad. MAVCOM further announced that it had imposed an RM856,875 penalty on Malaysia Airports (Sepang) Sdn Bhd, which is the operator of Kuala Lumpur International Airport. The fines come at a time of considerable uncertainty for MAVCOM and the Malaysian aviation industry.

FAA downgrades Malaysia's air safety rating
  • Malaysia
  • 27 November 2019

Malaysia's International Aviation Safety Assessment air safety rating was recently downgraded from Category 1 to Category 2 by the US Federal Aviation Administration (FAA). As a result, all Malaysian airlines are now restricted from adding new flights to the United States, although existing flights will be allowed to continue under heightened FAA surveillance and checks. The downgrade also means that reciprocal code-sharing arrangements between US and Malaysian airlines are no longer permitted.


Corporate & Commercial

Caveat venditor – has the pendulum swung too far?
  • Malaysia
  • 08 July 2019

'Caveat emptor' or 'buyer beware' is a familiar concept. The effects and consequences of caveat emptor have been criticised over time and, as a result, commercial law has slowly developed more stringent protection for consumers and buyers. As such, the ramifications of a recent apex court's decision are far reaching. In short, liability can now be imposed on sellers even if the buyer has previously accepted the same product without qualification.

Directors duty to act in company's best interests: how much is too much?
  • Malaysia
  • 22 April 2019

A recent case suggests that there are limits to the way in which directors can act when taking steps to protect a company. The case is a useful reminder that while directors may avail themselves of the shield provided by the judicial management regime in order to allow a company time to regain its footing, the courts will not hesitate to put checks and balances in place to prevent the misuse of such legislation, albeit for the purpose of safeguarding a company's survival.

Exclusion clauses – abuse of freedom of contract?
  • Malaysia
  • 18 February 2019

It is common for large conglomerates to require customers to execute agreements with standard boilerplate terms and conditions. The fine print of these boilerplate terms and conditions typically contains an exclusion clause which seeks to restrict or limit the liability of the corporations. However, what happens when these corporations default under the agreement and then seek refuge behind the exclusion clause to disclaim liability?

Wrongdoer control: no longer just a numbers game
  • Malaysia
  • 12 November 2018

It has long been recognised that where wrongdoers control a company and thus prevent it from bringing an action, the courts will allow shareholders to do so on the company's behalf in order to obtain redress by way of a derivative action. While the courts have recognised a range of scenarios where wrongdoers can be said to control the company, can this concept of wrongdoer control apply where there is a deadlock at both the board and shareholder level obfuscating any clear majority or minority in the company?


Corporate Tax

Do databases constitute 'plant' and qualify for capital allowances?
  • Malaysia
  • 10 May 2019

In a recent case before the High Court, CIMB Bank Bhd had written to the director general of inland revenue (DGIR) to seek his confirmation on whether certain databases qualified for capital allowances under the Income Tax Act 1967. The DGIR opined that the databases were not 'plant' but 'goodwill' and would not qualify for capital allowances. However, the High Court rejected the DGIR's argument and held that he had had no basis for his submission.

Post-Budget 2019 – major amendments to Labuan Business Activity Tax Act
  • Malaysia
  • 25 January 2019

In Malaysia, the Income Tax Act 1967 governs the imposition of income tax. However, in 1990 a separate tax act, the Labuan Business Activity Tax Act, was introduced to govern the imposition of tax on Labuan business activities carried out by Labuan entities. The Labuan act has now been substantially revised following Budget 2019. In particular, Labuan entities can no longer elect to pay the RM20,000 flat tax rate; instead, they will be subject to 3% tax on chargeable profits from any Labuan business activity.

High court finds DGIR's advance ruling is decision subject to judicial review
  • Malaysia
  • 12 October 2018

In a recent case, IBM Malaysia applied for an advance ruling from the director general of inland revenue (DGIR) to determine whether a payment made by it to IBM Ireland under a software distribution agreement would be considered royalty under the Income Tax Act and thus subject to withholding tax. One of the issues raised by the DGIR for consideration by the court was whether the advance ruling was a decision amenable to judicial review.


Employment & Immigration

COVID-19: legal position of migrant workers in Malaysian construction sector
  • Malaysia
  • 27 May 2020

This article sets out the impact of the COVID-19 pandemic on the legal position of migrant workers in Malaysia, particularly in the construction sector, including the risk of deportation of undocumented workers and the current local stigma. This article covers possible restrictions, procedures and challenges faced by documented migrant workers, documented migrant workers with a permit or pass that expired during the Movement Control Order period and undocumented migrant workers in Malaysia.