ALTERNATIVE DISPUTE RESOLUTION IN MALAYSIA

ADR stands for Alternative Dispute Resolution. Why do we have an ADR? One of the factors we
have an ADR is because of the problems of the court system. The main problem facing the court
system is the backlog of cases. Court organization and procedures follow common law practices,
and cases in all but the Federal Court and Court of Appeal are usually heard by a single judge.
Appeals from the subordinate courts are heard by the High Courts, in additional to their normal
workload of original jurisdiction cases, while those from the High Court go to the Court of
Appeal, which like the Federal Court does operate in panels. The total numbers of judges is
unusually low, even for a common law country, but judicial and Legal Services staff assigned to
courtroom positions also does some processing of cases. When this group is included, the judge
to population level arises. Moreover, the state courts (Syariah and traditional) as well as a system
of administrative tribunals take up some demand. In any event, judicial caseloads while
substantial, are not large enough to explain delays and backlogs
In Malaysia, we have MIArb. MIArb stands for The Malaysian Institute of Arbitrators which
was established in 1991 with the main aim of promoting the determination of disputes by
arbitration. The methods of an Alternative Dispute Resolution (ADR) in Malaysia are principally
mediation, conciliation, adjudication, and arbitration. These methods of ADR are becoming
increasingly popular mechanisms to resolve disputes. Many perceive litigation as timeconsuming and believe these methods of ADR would save time and costs, can resolve their
disputes in confidence and also that it would not create ill-will or animosity as it sometimes does,
in litigation. However, it is a misconception to think that arbitration in particular, is less
expensive to a litigation.

From statistics available, it appears that society has responded well to arbitration and mediation.
For example, the number of cases heard by the Insurance Mediation Bureau rose from 375 in
1998 to 483 in the first 8 months of 1999, while the Banking Mediation Bureau handled about
144 cases in 1999. As for the Tribunal for Consumer Complaints, its success is reflected in the
growing number of cases in just short span of time since its establishment.
The Alternative Dispute Resolution Methods
Mediation
The concept of Mediation is nothing novel but is a set of Eastern values and teachings, which has
been conceptualized by the West and structured as it is an invention of theirs. The fundamentals
of mediation, for example, the encouragement of settlement by the assistance of a third party, has
been a practice of the East for centuries and the roots can be traced back to the teachings of
Islam, Hinduism, Buddhism, Christianity and the teachings of Confucius. Malaysia, a country
with multitude of faiths and religions has been a host for the practice of mediation amongst its
recipients. In Islam, mediation is an indispensable condition and is represented by the word
shafaa, whilst in Hinduism, the mediation process is reflective in the text of its scriptures as well
in the concept of the panchayat. So, great was the emphasis of harmony and the resolution of
dispute in an amicable manner to Confucius that a proverb was couched to express his
dissatisfaction to the adversarial process in death avoid process, in life avoid law courts.
Mediation is also evidenced in the rural areas of Malaysia by the determination of dispute by the
penghulu. The Penghulu, is the chief or head of the village who is asked to preside over a
dispute, in the capacity of a middleman. Despite evidence of mediation in early Malaysian
history, the practice of mediation in its conceptualized form is still at its embryonic stages. So,

So far, only Persatuan Insuran Am Malaysia (PIAM), the Banking Mediation Bureau
(BMB), the Housing Buyers Tribunal (HBT) and the Tribunal for Consumer Claims
(CCM) have facilitated statutory mediation.
Adjudication
Adjudication can be defined as a process in which a neutral third party imposes an authoritative
and principled decision on the disputants which is supported by reasoned opinion. In coming to a
decision, the judge decides between the competing arguments put forward by the two parties to
the litigation, so that one party loses and the other wins. Beyond these key characteristics it is
clear that many different forms of adjudication exist within the English legal system.
Adjudication concept which primarily involves a third party making a decision during the
currency of the project pending the completion of the works of termination of the contract is a
good concept as it enables parties to have a binding decision until they can litigate or arbitrate
their substantive dispute. In this area the construction industry has taken the initiative. The
various standard forms in construction contracts used in Malaysia tend to have a clause that
enables the Superintending Officer to make a temporary decision binding on the parties until the
works are completed. Besides that, an adjudication is in place the parties can thereafter focus the
energies to completing the works. More often than not once, there is a successful completion
most of the intermediate grievances are forgotten.

Arbitration
In Malaysia, there are two regimes governing arbitration, namely the Arbitration Act 1952 and
the new Arbitration Act 2005, which came into effect on 14 th March 2006. Arbitration is the
private, judicial determination of a dispute, by an independent third party. Arbitration begins with
an agreement, made either when a contract is made, or after a dispute has arisen, that certain
matters which are or may be in contention between the two parties will be resolved by submitting
them to arbitration and not at least in the first instance to the courts. In that agreement it is
usually stated that the parties will honour the valid award of the arbitrator in respect of matters
referred to him in accordance with that arbitration agreement. Should a party fail to honour the
award, the other party may still seek relief from the courts.
Arbitration Act 1952
The Act applies to both domestic and international arbitration. The Act is in pari materia with the
English Arbitration Act of 1950. The other relevant legislation include the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards Act 1985. Malaysia is a party to the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York
Convention). The New York Convention has the force of law in Malaysia by virtue of the
Convention on the Recognition and Enforcement of Foreign Awards Act 1985 (the New York
Convention Act).

Arbitration Act 2005

The Arbitration Act 2005 (2005 Act) has resulted from a long period of gestation. There were
heated debates about the form the new Act should take. Various points of view were hotly
canvassed. The protectionist lobby, argued for registration and licensing of arbitrators and for a
separate domestic Act modelled on the English Arbitration Act 1996. Representations were also
made for the retention of the special position given to KLRCA arbitrations under Section 34 of
the 1952 Act. The Malaysian Bar Council, on the other hand wanted a single Act based on the
Model Law, arguing that a dual regime based on the English 1996 Act for domestic arbitrations
and the Model Law for international arbitrations were illogical, confusing and against the spirit
of harmonization.
The debate is now settled. The 2005 Act adopts most of the broad principles outlined in the
Model Law to fit in with some of the more beneficial aspects of the existing common law
systems of Malaysia, as well as to enhance the use of arbitration in Malaysia. It must be noted
that under Section 51(2) and (3), of the Arbitration Act 2005, the Act does not apply to arbitral
proceedings commenced before the coming into force of the Act which was the 14 th of March
2006. Such arbitral proceedings will be governed by the 1952 Act. Among the principal features
of the 2005 Act is the distinction between international and domestic arbitrations. An
international arbitration is defined as that where one of the parties has its place of business
outside Malaysia, or where the seat of the arbitration is outside Malaysia or where outside
Malaysia the substantial part of the obligations of any commercial or other relationship is
performed or the place where the subject matter of the dispute is most closely connected with. A
domestic arbitration is defined as any arbitration which is not an international arbitration.

Conciliation
Conciliation is one of the ADR process where the parties to a dispute, agree to utilize the services
of a conciliator, who then meets with the parties separately in an attempt to resolve their
differences. They do this by lowering tensions, improving communications, interpreting issues,
providing technical assistance, exploring potential solutions and bringing about a negotiated
settlement. Conciliation differs from arbitration in that the conciliation process, in and of itself,
has no legal standing, and the conciliator usually has no authority to seek evidence or call
witnesses, usually writes no decision, and makes no award.
Conciliation differs from mediation in that the main goal is to conciliate, most of the time by
seeking concessions. In mediation, the mediator tries to guide the discussion in a way that
optimizes parties needs, takes feelings into account and reframes representations.
In conciliation the parties seldom, if ever, actually face each other across the table in the presence
of the conciliator. The effectiveness is when a conciliator assists each of the parties to
independently develop a list of all of their objectives (the outcomes which they desire to obtain
from the conciliation). The conciliator then has each of the parties separately prioritize their own
list from most to least important. He/She then goes back and forth between the parties and
encourages them to "give" on the objectives one at a time, starting with the least important and
working toward the most important for each party in turn. The parties rarely place the same
priorities on all objectives, and usually have some objectives that are not listed by the other party.
Thus the conciliator can quickly build a string of successes and help the parties create an
atmosphere of trust which the conciliator can continue to develop.