LAUNCH OF AIAC ARBITRATION RULES 2021

The Asian International Arbitration Centre has launched the latest revisions to its Arbitration Rules, following their last update in 2018. Upon coming into effect on 1 August 2021, the AIAC Arbitration Rules 2021 will apply to all AIAC arbitrations commenced after this date, unless parties agree otherwise. The 2021 revisions come following an extensive study by an international External Advisory Committee for the Revision of the AIAC Arbitration Rules (including Peter Godwin, Partner, HSF Kuala Lumpur) and a public consultation of the draft rules.

The revision includes significant changes to existing Malaysian arbitral practice and extends the AIAC's various efforts to improve the efficiency of arbitration. It also responds to the growing calls for enhanced cost and time savings and transparency in arbitration by introducing new procedures for summary determination, expedited procedure and the publication of AIAC arbitral awards. No doubt, the 2021 Rules demonstrate the AIAC’s focus on modernising its rules in line with international best practices. We set out below the key features of the 2021 Rules.

Notable Amendments in the AIAC Rules

New streamlined structure

The 2021 Rules consolidate into its main body the UNCITRAL Arbitration Rules 2013 and the institution's standalone expedited arbitration procedure (Fast Track Arbitration Rules). This provides a more streamlined document for users, and dispenses with the AIAC's previous practice of referring to the UNCITRAL Arbitration Rules (previously Part II) or requiring a separate submission to the Fast Track Arbitration Rules.

Summary determination procedure

A significant update is new Rule 19, which introduces a summary determination mechanism into AIAC arbitrations. This brings the 2021 Rules into line with the new practices of leading arbitration institutions, such as LCIA, ACICA, HKIAC and SIAC, and provides the potential for considerable cost and time savings to users.

The new Rule 19 expressly empowers arbitrators to dismiss a claim, counterclaim or defence that is manifestly outside the jurisdiction of the tribunal, is inadmissible, or is manifestly without merit. This closely mirrors the equivalent provisions under the SIAC and LCIA Arbitration Rules.

The summary determination procedure can be engaged upon a request by an arbitral party. Such requests must be filed within 30 days from the filing of the statement of defence and counterclaim. Notably, it is common for further submissions to be filed after the statement of defence and counterclaim, as the AIAC's new fast track procedure acknowledges in the new Rule 8.8(i). However, the wording of Rule 19.2 would mean that, in practice, parties will have to ensure that their factual and legal positions are sufficiently developed in early submissions to avoid challenge under the summary determination procedure.

Fast Track Procedure

Under the previous versions of the AIAC Arbitration Rules, the Fast Track Arbitration Rules existed as a standalone set of rules, alongside the main AIAC Arbitration Rules.

The new Rule 8 under the 2021 Rules introduces an expedited procedure for all AIAC arbitrations, known as the Fast Track Procedure, which repurposes and revitalises the Fast Track Arbitration Rules by incorporating it into the 2021 Rules itself. The new Fast Track Procedure will be applicable where:

• the parties have agreed to adopt the Fast Track Procedure (i.e. by expressly agreeing to this in the arbitration clause or subsequently by way of a submission agreement – the 2021 Rules provides a model clause which the parties can insert into their arbitration agreement or submission agreement), or where the parties have adopted any edition of the Fast Track Arbitration Rules (Rule 8.2(a));
• the amount in dispute, at the time of the commencement of the arbitration pursuant to Rule 7, is quantified at less than USD500,000.00 for an international arbitration or less than RM2,000,000.00 for a domestic arbitration (Rule 8.2(b)); or
• there is exceptional urgency (Rule 8.2(c)).

Two observations arise:

• First, apart from arbitrations where the parties have expressly agreed to adopt the Fast Track Procedure or any previous edition of the Fast Track Arbitration Rules (i.e. as per Rule 8.2(a)), please note that the Fast Track Procedure may also apply to arbitrations where the parties have not expressly adopted it but the amount in dispute is below the specified threshold or if there is exceptional urgency (Rule 8.2(b) and Rule 8.2(c)). In such circumstances, a Fast Track Request submitted under these limbs would be determined by the Director of the AIAC, having regard to all circumstances considered appropriate (Rule 8.3).
• Second, the Fast Track Procedure appears to be available to all proceedings relating to arbitration agreements concluded before the effective date of the 2021 Rules. It will be interesting to see if Malaysian courts have any concerns when enforcing arbitral awards issued under the Fast Track Procedure. Enforcement of such awards may be given different treatment depending on jurisdiction (see here and here).

Where the Fast Track Procedure is adopted, the arbitration will have the following key features:

• The determination of disputes by a sole arbitrator unless parties agree otherwise.
• By default, the arbitration will proceed on a documents-only basis, with there being no oral hearing. The tribunal may, however, convene an oral hearing upon consulting the parties, but any such hearing cannot exceed five days.
• Significantly truncated timelines for the arbitration. Most notably, the tribunal is required to declare proceedings closed no later than 90 days from its delivery of the first Procedural Order; and thereafter the tribunal is required to submit its draft Final Award for the AIAC's technical review within 90 days from the date the proceedings were declared closed.

Enhanced transparency

New Rule 44.6 allows the AIAC to now publish the whole, excerpts or summaries of arbitration awards, with the written consent of the parties. Published awards will be redacted to remove all references to the parties’ names and other identifying information. This marks a fundamental shift from current Malaysian arbitration practice and is a welcome response to calls for institutions to improve transparency in arbitration and facilitate the development of commercial jurisprudence in Malaysia.

Further transparency measures are inserted by new Rule 44.4. Parties will now be required to obtain undertakings of confidentiality from "all those that they involve in the arbitration". This includes a wide range of participants, including "any authorised representative, witness of fact, expert or service provider", which may extend to providers of transcription, electronic discovery and virtual hearing hosting services. This will be an additional step that users will need to actively comply with in AIAC arbitrations going forward.

Consolidating multi-contract disputes

The revisions will now allow a claimant to file a single notice of arbitration in respect of claims arising from multiple contracts between the same parties together with a consolidation request (new Rule 22.4). This is a departure from the previous requirement that a claimant issue multiple arbitration requests even where the disputes could be consolidated.

The AIAC has also given further guidance on the factors to be considered for a consolidation request. Unlike previous iterations, the 2021 Rules require parties seeking consolidation to consider:

• whether the disputes under each arbitration concern the same legal relationship;
• whether the rights or reliefs claimed are in respect of, or arise out of, the same transaction or a series of related transactions; and
• the compatibility of the arbitration agreements.

Clarifying multi-party appointments

New Rule 9.7 streamlines the default mode of appointment of arbitrators in multi-party arbitrations. Where an even-numbered tribunal is used, all claimants and respondents will nominate half the required number of arbitrators. For odd-numbered tribunals, all claimants and respondents will nominate an equal number of arbitrators who shall thereafter nominate a presiding arbitrator. If joint nomination fails, the entire Arbitral Tribunal shall be constituted by the Director. In this case, any nominated arbitrators shall be excluded from consideration and any appointed arbitrators shall be released, unless the parties agree to retain such nominations or appointments.

Further, the 2021 Rules insert a new requirement for prospective arbitrators to ensure their capacity to determine the case in a prompt and efficient manner (new Rule 10.4). This mirrors the diligence duty under the initial draft of ICSID's Code of Conduct for Adjudicators in Investor-State Dispute Settlement.

Emergency arbitrators' powers

The 2021 Rules maintain the AIAC's existing emergency arbitration mechanism, which allows users to seek urgent temporary relief from an emergency arbitrator prior to the formation of the arbitral tribunal that will determine the main dispute. New Rules 17 and 18 insert helpful clarification on the authority of emergency arbitrators, including:

• confirming that emergency arbitration proceedings can be conducted virtually or on a documents-only basis (new Rule 18.4).
• clarifying that emergency arbitrators may proceed with the arbitration in the absence of a non-participating party (new Rule 18.5).
• expressly empowering emergency arbitrators to rule on their own jurisdiction (new Rule 18.6).
• confirming that emergency arbitrators may make any order or award that the main arbitral tribunal can make. This includes adjourning all or any part of the claim for emergency interim measures for determination by the main arbitral tribunal (new Rule 18.7).

Other notable changes in the 2021 Rules include:

• substantive revisions to the provisions on the closure and termination of proceedings, the technical review process, and the release, correction and interpretation of awards to enhance clarity (new Rules 32 – 39).
• revisions to the provisions relating to costs and deposits to enhance clarity (new Rules 40 and 41).

If you have questions about the 2021 Rules or how they might affect you, please reach out to the contacts below.

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