The statutory law on arbitration in Malaysia can be traced to the Arbitration Ordinance XIII of 1809, which governed what were then the British India-controlled Straits Settlements, comprising of Penang, Malacca and Singapore. It was in force for nearly 150 years before the Arbitration Act 1952 (Act 93) replaced it.

The payment of interest on monies paid later than it should is a normal feature of modern contractual relationships. It is highly probable that a party would suffer financial loss resulting from late payment of principal sums which could lead to a claim in arbitration either as a debt or damages. Such loss is recovered as interest.

The award of interest in arbitration has become routine. In fact, it is now rare for interest not to be awarded where an award provides for payment of monies due. The availability and rate of interest in arbitration can have substantial practical importance. Such interest can be significant where the amount in dispute is large and the time periods involved are lengthy. At times, the ultimate interest award can exceed the principal sum in dispute.

The basis upon which interest is awarded does vary. The presumption is that an arbitral tribunal has the power to award interest just like its power to make an award in respect of any other claims submitted to it. The right to interest flows from either a contractual provision for the levying of late interest payment, or by virtue of the applicable law.

The flow of goods and services in a modern economy and international trade is based on contracts agreed by the parties. Such contracts are in turn based on trust that the other party will carry out the contracts as agreed. Should a dispute arise, it is possible to take legal action against a offending party. Commercial disputes may range from small to large ones.

Although there are no statistics, it is generally accepted that a large number of disputes never get anywhere near lawyers. It is inevitable that parties will try to turn away from allowing disputes to fester until they mature into a state in which third party interventions become the only available option. It is now common in international trade for commercial entities to evaluate risks and develop mechanisms for early dispute evaluation and prevention.

The procedures available for the resolution of trade disputes extend over a wide spectrum. Either, the parties resolve the disputes promptly by reaching an agreement on an “interest basis” rather than a “rights basis” or they are nipped in the bud before they can burst into flower.

In such circumstances, the parties assess whether it would be advantageous to implement a solution reflecting elements such as fairness, maintenance of long-term relationships and which of them will feel less pain in taking a hit.

It is suggested that an interest-based approach is not confined to a resolution that is based on rights claimed by the parties and remedies offered by the legal system, the mediator and the parties can probe more deeply to meet the disputants real interest and needs.

Delivery of a construction project is a process requiring the involvement of many parties. Apart from the developer and purchasers, there are a host of contractors, consultants and regulatory authorities. There are normally matters of considerable technical difficulties generated in the course of the actual works.

The Certificate Of Fitness for occupation problem
In particular, the housing sector has been plagued by many problems. A perpetual complaint relates to the issue of the Certificate of Fitness for Occupation as issued by local authorities (See s 3, The Street, Drainage & Building Act 1974 (Act 133) and the Uniform Buildings By-Laws for definition of the Certificate of Fitness for Occupation (‘CFO’)).

It is a normal occurrence that many developers give vacant possession without the CFO being issued. This has caused considerable difficulties to house buyers for such vacant possession does not mean beneficial takeover and ability to use of the relevant building lawfully.

The situation is no better even for commercial buildings and industrial premises. Disgruntled purchasers have complained to the Ministry of Housing & Local Government (‘MOHLG’) and other governmental authorities whenever there was delay or failure to issue CFO by local authorities. Such complaints have even been directed to activist consumer and non-governmental organisations such as the Consumer Association of Penang and FOMCA.

Malaysia enacted a new Arbitration Act 2005 (Act 646) on 30 December 2005 based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. The new Act repeals and replaces the previous Arbitration Act 1952 and the New York Convention enacted by Act 320 which dealt with the recognition and enforcement of international awards. It will be applicable to all arbitrations commenced after 15 March 2006, while the old 1952 Act will continue to apply to arbitral proceedings commenced before the operative date of the new Act.

While the old 1952 Act had the merits of simplicity and clarity, it was long outmoded. With the increasing popularity of arbitrations in Malaysia, there was more and more judicial grist exposing the infirmities, shortcomings and lacunae found in the old Act. The Malaysian Arbitration Act 2005 is to be applauded as it makes the long awaited and much needed change clamoured for by the business and arbitral communities in Malaysia. Arbitration law, practice and procedure will now see a major overhaul and it would therefore be timely for practitioners in the arbitration field to take a close look at the 2005 Act.

Arbitration is the process by which a dispute or difference between two or more parties as to their mutual legal rights and liabilities is referred to and determined judicially and with binding effect by the application of law by one or more persons (the arbitral tribunal) instead of a court of law. 1

The purpose of the parties choosing arbitration, as against litigation, is that they expect a hand-picked expert tribunal to be able to resolve their dispute more proficiently, economically and expeditiously than the court. As compared to litigation, arbitration still is more rapid and less expensive. It provides for confidentiality of arbitral proceedings and neutrality of the forum. In international commerce, arbitral awards are generally more enforceable than municipal court decisions under the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards.

The primary objective of having an arbitration clause in a contract is to ensure that when a controversy arises between parties, neither one is able to avoid arbitration. There can be no arbitration at all without an effective and valid arbitration clause. The arbitration agreement is the keystone which leads to arbitration as no dispute can be decided by arbitration without it. All too often, arbitrators, arbitral institutions and the courts are called upon to consider whether a contractual clause endows jurisdiction on arbitrators to decide the dispute between them.

In such circumstances, the key question is whether the clause is in fact and in law a valid arbitration agreement with issues like the existence, validity, effectiveness, and scope of the arbitration clause being examined in great detail. The scope of the arbitration agreement is pivotal to the success of the arbitral process as it empowers parties to agree on a number of matters which deal with future disputes.

Arbitration is distinguished from litigation by two essential features: privacy of the proceedings and confidentiality of the process. Privacy is concerned with the rights of persons other than arbitrators, parties and witnesses to attend meetings and hearings and to know about the arbitration. Confidentiality is the obligation on the arbitrators and the parties not to divulge or give out information relating to the contents of the proceedings, documents or the award.

Introduction
The arbitrator’s remuneration are sums due to him in respect of his fees and expenses. Such remuneration is also known as the costs of the award which must be distinguished from the costs of the reference, ie, legal costs incurred by the parties. 1
The arbitrator’s expenses
The expenses of the arbitrator or umpire will include the reasonable disbursements of the arbitral tribunal with regard to the recording of evidence and the hiring of a suitable venue. Where the arbitrator is empowered to employ a person, eg, an expert, legal advisor or assessor to assist with the reference, the expenses paid to such person will be allowed as costs of the reference. 2
The court in Appleton v Norwich Union Fire Insurance Society Ltd 3 allowed an umpire’s fees to be included in a joint award. If the umpire participates prematurely in the proceedings before being entitled, he cannot claim any remuneration. The fees of a legal assessor sitting with the arbitrator without the consent of the parties will be disallowed. 4
Fixing remuneration
The arbitrator’s fees is an important consideration when parties are contemplating arbitrating a dispute. The parties may make an agreement on the remuneration of the arbitrator or umpire with him expressly in advance. In most cases, the amount to be paid to the arbitrators, or at least the machinery in establishing the amount are usually pre-agreed or settled at the first preliminary meeting between the parties and the arbitrators.
The arbitrator’s entitlement in contract
An arbitrator’s entitlement to payment of his fees and expenses is normally a matter of contractual arrangement between the arbitrator and the parties. In practice, arbitrators invariably send out proposed terms and conditions to the parties at the outset. The terms are then either accepted or negotiated at an early stage. If agreement cannot be reached, it is necessary for the parties to make another appointment.

Synopsis

This article deals with the entitlement of a successful claimant in arbitration proceedings (including a respondent who succeeds in a counterclaim) to have included in the award an amount in respect of interest on the principle sum awarded in his favour; and with the accumulation of interest on the award itself from the date of the award until the date of payment. Generally, interest from the date of the award until the date of payment is purely statutory whereas the arbitrator’s power to award interest generally is based on contract or claim by way of proof of special damages.

Introduction
The House of Lords in London, Chaltam & Dover Railway Co v South Eastern Railway Co1 held that ‘at common law, in the absence of any agreement or statutory provisions for the payment of interest, a court has no power to award interest, simple or compound, by way of damages for the detention (that is, the late payment) of a debt’. Based on this ratio decidendi, there is no right of action to recover interest, as damages or otherwise, upon any monies (whether debts or damages) for any period in which such monies are wrongfully withheld.

While the House of Lords in President of India v La Pintada Cia Navigacion SA2 recognized the injustice inherent in the rule, it nevertheless affirmed that the rule was too well settled to be departed from other than by legislation. The court explained that the ratio applied only to claims for interest by way of general damages, and did not extend to claims for special damages. The rule in London, Chaltam & Dover Railway Co v South Eastern Railway Co3 has, therefore, survived. It is, however, subject to a number of exceptions.

On the other hand, the general rule at common law established in Page v Newman4 was that an arbitrator had no inherent jurisdiction to award interest, nor had he any such jurisdiction arising from statute. He derived such jurisdiction from an implied term by a submission to arbitration that the arbitrator should have power to decide the issues on the subject of the reference according to the law which would be applied in the courts.5

The first step in any arbitration proceeding is to notify the arbitrator that he or she has been appointed. Once validly appointed, the arbitrator then enters into a tripartite relationship with the parties. This relationship, in addition to conferring on the arbitrator various powers and rights, imposes upon him or her certain duties.