Alternate Dispute Resolution Law at Malaysia
In Malaysia, Alternative Dispute Resolution (ADR) is an important method of resolving disputes outside of the formal court system. ADR is seen as a more efficient, cost-effective, and quicker way to resolve conflicts compared to litigation. It encompasses various processes such as mediation, arbitration, negotiation, and conciliation.
Legal Framework for ADR in Malaysia
Malaysia has a well-developed legal framework for ADR, with specific laws and guidelines for different ADR mechanisms. Key laws and institutions that govern ADR in Malaysia include:
Arbitration Act 2005
The Arbitration Act 2005 is the principal law governing arbitration in Malaysia. It provides the legal framework for arbitration proceedings, including the formation of arbitration agreements, the selection of arbitrators, the conduct of arbitration, and the enforcement of arbitral awards.
The Act is based on the UNCITRAL Model Law on International Commercial Arbitration, making Malaysia a pro-arbitration jurisdiction, especially for international disputes.
The Act covers both domestic and international arbitration.
Mediation and Conciliation
The Mediation Act 2012 is a significant piece of legislation that governs mediation in Malaysia. It provides a structure for mediation processes, particularly in commercial disputes. The Act allows for court-referred mediation and establishes the procedures for mediators and the mediation process.
Malaysia’s Court Annexed Mediation is also a common way to resolve disputes. The courts have set up mediation programs where parties can refer their cases for mediation before proceeding to trial.
The Malaysian Mediation Centre (MMC) and the Bar Council's Alternative Dispute Resolution Centre (ADR Centre) are prominent institutions that provide mediation and conciliation services.
The Industrial Relations Act 1967
This Act is a key piece of legislation governing labor disputes in Malaysia. It establishes the Industrial Court and mandates the use of conciliation and arbitration for resolving employment-related disputes, such as wrongful dismissal or issues related to collective bargaining.
Conciliation is typically carried out by the Director General of Industrial Relations before a dispute is escalated to the Industrial Court.
The Courts (Alternative Dispute Resolution) Rules 2014
These rules provide the framework for the use of ADR in the Malaysian civil courts. Under these rules, courts can refer parties to mediation or arbitration if they believe it is appropriate for resolving the dispute. This rule promotes ADR as an integral part of the judicial system, encouraging the resolution of civil disputes outside of formal trial.
The Arbitration (International Investment Disputes) Act 1966
This Act governs international investment disputes in Malaysia, and it allows for the recognition and enforcement of arbitral awards related to investment disputes. It is aligned with international arbitration standards.
Other ADR Bodies
The Asian International Arbitration Centre (AIAC), formerly known as the Kuala Lumpur Regional Centre for Arbitration (KLRCA), is an important institution in Malaysia that provides arbitration and ADR services.
The Malaysian Bar’s ADR Centre and other private institutions also offer ADR services, including mediation and arbitration.
Types of ADR in Malaysia
Arbitration
Arbitration is a formal ADR process where a neutral third party, called an arbitrator, makes a binding decision after hearing both sides of the dispute. The Arbitration Act 2005 governs this process. It is commonly used for commercial disputes, including contractual disagreements and international trade matters.
Arbitration can be either domestic (between parties within Malaysia) or international (involving foreign parties), and Malaysia is recognized as a pro-arbitration jurisdiction in the region.
Mediation
Mediation is a voluntary and confidential process where an impartial third party, the mediator, facilitates communication between the disputing parties to help them reach a mutually acceptable resolution. It is used in a wide range of disputes, including commercial, family, and civil matters.
Court-annexed mediation is a common practice in Malaysia, where parties can be referred by the court to mediation before proceeding to trial.
The Malaysian Mediation Centre (MMC) and AIAC offer mediation services.
Conciliation
Conciliation is similar to mediation but can involve a more active role by the third-party conciliator in suggesting possible solutions to the dispute. Conciliation is often used in labor disputes and industrial relations matters.
The Industrial Relations Act 1967 emphasizes conciliation in resolving labor disputes before escalating them to the Industrial Court.
Negotiation
Negotiation is the least formal ADR process and involves the disputing parties directly communicating with each other, usually with the assistance of their lawyers, to try and reach a settlement without involving third-party intervention.
ADR Institutions in Malaysia
Asian International Arbitration Centre (AIAC)
AIAC is one of the most important institutions in Malaysia for arbitration and mediation. It provides facilities for domestic and international arbitration, as well as training and development in the field of ADR.
Malaysian Mediation Centre (MMC)
MMC is an initiative by the Malaysian Bar Council to offer mediation services. It provides mediators and helps facilitate the settlement of disputes through mediation.
Court-Annexed Mediation
The Malaysian courts offer court-annexed mediation programs in civil cases. These programs are designed to assist litigants in resolving disputes before proceeding to a full trial.
Benefits of ADR in Malaysia
Cost-effective: ADR is generally less expensive than going to court, as it avoids the costs of prolonged litigation.
Time-saving: ADR processes can be completed much quicker than traditional court trials, which can take years.
Confidentiality: ADR proceedings are private, unlike court trials, which are open to the public.
Flexibility: Parties have more control over the outcome and process of the dispute resolution.
Preservation of Relationships: ADR, particularly mediation, helps preserve business and personal relationships, as it tends to be less adversarial than litigation.
Challenges of ADR in Malaysia
Limited Awareness: While ADR is growing in popularity, many individuals and businesses are still unaware of the benefits of ADR processes or how to access them.
Underutilization in Some Sectors: Despite the availability of ADR mechanisms, not all sectors in Malaysia, especially in rural or less commercially developed areas, have embraced ADR as a viable alternative to litigation.
Enforcement of Mediation Agreements: While arbitration awards are enforceable by the courts, mediated settlements may not always be binding unless specifically agreed upon by the parties.
Conclusion
ADR in Malaysia is a vital part of the dispute resolution landscape, providing an alternative to the formal court system. With strong legal frameworks, such as the Arbitration Act 2005 and the Medation Act 2012, Malaysia encourages the use of ADR methods like arbitration, mediation, and conciliation. While there is progress in increasing the awareness and accessibility of ADR, continued efforts are needed to promote its use and address challenges such as underutilization and enforcement issues.
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