Malaysia updates

Arbitration & ADR

Contributed by Shearn Delamore & Co
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.

Court clarifies test applicable to applications to restrain arbitration proceedings by non-parties
  • Malaysia
  • 04 April 2019

In a recent Court of Appeal case, the plaintiff sought an injunction to restrain arbitration proceedings between the second, third and fourth defendants, despite the fact that it was not a party to the proceedings. Among other things, the court had to consider whether Sections 10(1)(a) and 10(3) of the Arbitration Act 2005 apply to non-parties to arbitration proceedings and determine the test for accepting an injunction application to restrain arbitration proceedings by non-parties.


Aviation

Contributed by SKRINE
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.

Now everyone can fly… with even fewer headaches! Amendments to MAVCOM Protection Code
  • Malaysia
  • 06 November 2019

The Malaysian Aviation Commission Protection Code 2016 was recently amended. The amendments, which considered feedback from consumers and consultations with industry players, aim to promote greater transparency and fairness in dealings between airlines and passengers, which should allow consumers to enjoy monetary savings and make more informed decisions.

MAVCOM imposes fines on airline and airport operators
  • Malaysia
  • 30 October 2019

The Malaysian Aviation Commission recently imposed RM200,000 fines on two airline operators for charging credit card, debit card and online banking processing fees separately from their base fares in breach of the Aviation Consumer Protection Code. The commission also issued a RM1.179 million fine to airport operator Malaysian Airports (Sepang) Sdn Bhd for failing to meet several service level requirements regarding airport users under the Implementation of the Airports Quality of Service Framework Directive.

High court clarifies aviation regulator's dispute resolution jurisdiction
  • Malaysia
  • 07 August 2019

The Kuala Lumpur High Court recently granted summary judgment for a combined sum exceeding RM40 million for outstanding passenger service charges. In coming to this decision, the court dealt with the jurisdiction of the nation's aviation regulator to resolve disputes between aviation service providers prescribed under the Malaysian Aviation Commission Act 2015.

Judicial review leave principles reaffirmed as high court dismisses AirAsia's leave application
  • Malaysia
  • 10 July 2019

The Kuala Lumpur High Court recently dismissed a judicial review leave application brought by AirAsia Berhad and AirAsia X Berhad (collectively, AirAsia) against the Malaysian Aviation Commission, with Malaysia Airports (Sepang) Sdn Bhd being named as the second respondent. AirAsia argued that the passenger service charge rates prescribed in the regulations were ceiling rates rather than fixed rates and, as such, AirAsia was not required to pay the revised amount.


Company & Commercial

Contributed by Bodipalar Ponnudurai De Silva
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?


Construction

Federal Court rules that CIPAA is prospective
SKRINE
  • Malaysia
  • 11 November 2019

The Federal Court recently delivered a landmark ruling in which it clarified points of law on the retrospective application of the Construction Industry Payment and Adjudication Act 2012 (CIPAA) and the application of Section 35 of the CIPAA, which governs the validity of pay-when-paid clauses in construction contracts. The court's decision that the CIPAA has no retrospective effect is far reaching.

2018 developments in statutory adjudication
  • Malaysia
  • 09 September 2019

In 2018 Malaysia saw considerable developments in case law on statutory adjudication. Stakeholders' use of this form of dispute resolution mechanism continues to grow exponentially with no sign of abating. This article examines some of the significant decisions that the Malaysian courts handed down in 2018 and their impact on statutory adjudication under the Construction Industry Payment and Adjudication Act.

Developments in statutory adjudication in 2017
  • Malaysia
  • 21 May 2018

Malaysia witnessed considerable developments in statutory adjudication case law in 2017, probably due to the increasing use of this form of dispute resolution mechanism by stakeholders in the construction industry. This update examines some of the significant decisions that were handed down by the Malaysian courts in 2017 and their impact on statutory adjudication under the Construction Industry Payment and Adjudication Act.

Statutory adjudication: pay-when-paid clauses remain valid
  • Malaysia
  • 19 March 2018

The Court of Appeal recently considered whether a pay-when-paid clause in a construction contract is void under the Construction Industry Payment and Adjudication Act. It found that pay-when-paid clauses under a construction contract drawn up before the enactment of the Construction Industry Payment and Adjudication Act will remain valid and not be affected by the introduction of Section 35, which prohibits any conditional payment clauses in construction contracts.

Federal Court decision changes adjudication practice in Malaysia
  • Malaysia
  • 18 December 2017

The Federal Court recently dealt with three broad issues under the Construction Industry Payment and Adjudication Act – namely, jurisdictional challenge, the exclusion of defences and the setting aside and staying of decisions. The decision has broad repercussions for the way that adjudications are conducted in Malaysia.


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.

Legal professional privilege and director general of inland revenue's powers
  • Malaysia
  • 11 May 2018

Members of the Malaysian Bar recently complained that Inland Revenue Board officers had carried out raids on them in order to audit their clients' accounts and gain access to those records. The Malaysian Bar then wrote to the director general of inland revenue (DGIR), stating that such audits breached the principle of solicitor-client privilege. However, the DGIR held that the Income Tax Act overrode the provisions of the Evidence Act that conferred solicitor-client privilege.