KLRCA i-Arbitration Rules are suitable for arbitration of disputes arising from commercial transactions premised on Islamic principles. The Rules incorporate a reference procedure to a Shariah Advisory Council or Shariah expert whenever the arbitral tribunal has to form an opinion on a point related to Shariah principles. This is in addition to covering all aspects of the arbitral process, providing a model arbitration clause, setting out procedural rules regarding the appointment of arbitrators and the conduct of arbitral proceedings, and establishing rules in relation to the form, effect and interpretation of the award.DOWNLOAD RULES
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The KLRCA i-Arbitration Rules (hereinafter referred to as “Rules”) shall be the UNCITRAL Arbitration Rules as modified in accordance with the rules set out below. These Rules are Shariah-compliant and may be cited as the “Kuala Lumpur Regional Centre Rules for i-Arbitration” or “KLRCA i-Arbitration Rules”.
“Rule” shall refer to Part I of the Rules and “Article” shall refer to Part II of the Rules.
Rule 1 – General
- Where parties have agreed in writing to arbitrate their disputes in accordance with the Rules, then:
i. a. Such disputes shall be settled or resolved by arbitration in accordance with the Rules; and
b. The arbitration shall be conducted and administered by the Kuala Lumpur Regional Centre for Arbitration (hereinafter referred to as “KLRCA”) in accordance with the Rules.
ii. Where the seat of arbitration is Malaysia, Section 41, Section 42, Section 43 and Section 46 of the Malaysian Arbitration Act 2005 (Amended 2011) shall not apply.
- The Rules applicable to the arbitration shall be those in force at the time of commencement of the arbitration unless the parties have agreed otherwise.
- For avoidance of any doubt, in so far as there is any conflict between Part I and Part II of the Rules, the provisions in Part I shall prevail.
Rule 2 – Commencement of Arbitration
- The party or parties initiating recourse to arbitration under the Rules shall be required to submit a written request to the Director of the KLRCA together with a copy of the Notice of Arbitration served on the Respondent pursuant to Article 3 and shall be accompanied by the following:
a. A copy of the written arbitration clause and the contractual documentations in which the arbitration clause is contained or in respect of which the arbitration arises;
b. Confirmation to the Director of the KLRCA that the Notice of Arbitration has been or is being served on all other parties to the arbitration by one or more means of service to be identified in such confirmation; and
c. A non-refundable registration fee amounting to USD500.00 in international arbitration (as defined in Rule 4(4)(c)) and RM1000.00 in domestic arbitration.
- The date of receipt by the Director of the KLRCA of the request complete with all the accompanying documentation and non-refundable registration fee shall be treated as the date on which the arbitration has commenced for all purposes.
Rule 3 – Notification and Pleadings
- All documents served pursuant to Articles 3, 4, 20, 21, 22, 23 and 24 shall be served on the Director of the KLRCA at the time of such service on the other party or immediately thereafter.
Rule 4 – Appointment
- Where the parties have agreed to the Rules, the Director of the KLRCA shall be the appointing authority.
- “Arbitral tribunal” means a sole arbitrator or a panel of arbitrators and includes an emergency arbitrator appointed pursuant to Schedule 2.
- Parties are free to determine the number of arbitrators.
- Where the parties fail to determine the number of arbitrators, the arbitral tribunal shall:
a. In the case of an international arbitration, consist of 3 arbitrators; and
b. In the case of a domestic arbitration, consist of a sole arbitrator;
c. “international arbitration” means an arbitration where –
a. one of the parties to an arbitration agreement, at the time of the conclusion of that agreement, has its place of business in any State other than Malaysia;
b. one of the following is situated in any State other than Malaysia in which the parties have their places of business:
i. the seat of arbitration if determined in, or pursuant to, the arbitration agreement;
ii. any place where a substantial part of the obligations of any commercial or other relationship is to be performed or the place with which the subject matter of the dispute is most closely connected; or
c. the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one State.
d. “domestic arbitration” means any arbitration which is not an international arbitration.
- Unless the parties have agreed otherwise, the procedure for the appointment of a sole arbitrator shall be:
a. If the parties have agreed that a sole arbitrator is to be appointed, the parties are free to mutually agree on the sole arbitrator.
b. If within 30 days of the other party’s receipt of the Notice of Arbitration, the parties have not reached an agreement on the appointment of the sole arbitrator, either party may request for the sole arbitrator to be appointed by the Director of the KLRCA.
- Unless the parties have agreed otherwise, the procedure for the appointment of 3 arbitrators shall be:
a. If the parties have agreed that 3 arbitrators are to be appointed, each party shall appoint 1 arbitrator. The 2 arbitrators thus appointed shall choose the third arbitrator who will act as the presiding arbitrator of the arbitral tribunal.
b. If within 30 days after the receipt of a party’s notification of the appointment of an arbitrator the other party has not notified the first party of the arbitrator it has appointed, the first party may request the Director of the KLRCA to appoint the second arbitrator.
c. If within 30 days after the appointment of the second arbitrator the two arbitrators have not agreed on the choice of the presiding arbitrator, the presiding arbitrator shall be appointed by the Director of the KLRCA.
- Where the KLRCA upon the request of a party is to appoint a sole, presiding, second, emergency arbitrator, the Director of the KLRCA shall appoint such arbitrator in accordance with the Rules and in doing so may exercise all powers and discretions specified in the Rules.
- Where the parties have agreed that any arbitrator is to be appointed by one or more parties, or by any authority agreed by the parties, including where the arbitrators have already been appointed, that agreement shall be treated as an agreement to nominate an arbitrator under these rules and shall be subject to appointment by the Director of the KLRCA in his discretion.
- Where the Director of the KLRCA is to appoint any arbitrator, the Director of the KLRCA may at his discretion seek such information from the parties as he may think fit.
Rule 5 – Challenge to the Arbitrators
- An arbitrator may be challenged if circumstances exists that give rise to justifiable doubts as to the arbitrator’s impartiality or independence or if the arbitrator does not possess any requisite qualification on which the parties agreed.
- A party may challenge the arbitrator nominated by him only for reasons of which he becomes aware of after the appointment has been made.
- The party who intends to challenge an arbitrator shall send notice of challenge within 15 days after the receipt of the notice of appointment of the challenged arbitrator or within 15 days after the circumstances mentioned in Rule 5(1) or Rule 5(2) became known to that party.
- The notice of challenge shall be sent simultaneously to the other party, to the arbitrator who is challenged, to the other members of the arbitral tribunal, if any, and copied to the Director of the KLRCA. The notice shall be in writing and shall state the reasons for the challenge. The Director of the KLRCA may order suspension of arbitration until the challenge is resolved.
- When an arbitrator is challenged by one party, the other party may agree to the challenge. The challenged arbitrator may also withdraw from his office. In neither case does this imply acceptance of the validity of the grounds of the challenge.
- If within 14 days of the receipt of the notice of challenge, the other party does not agree to the challenge and the arbitrator who is being challenged does not withdraw voluntarily, the Director of the KLRCA shall decide on the challenge.
- Upon such withdrawal or sustainment of the challenge, the substitute arbitrator shall be appointed in accordance with the procedure provided in Rule 4.
- The Director of the KLRCA may fix the costs of the challenge and may direct by whom and how such costs should be borne.
Rule 6 – Seat of Arbitration
- The parties may agree on the seat of arbitration. Failing such agreement, the seat of arbitration shall be Kuala Lumpur, Malaysia unless the arbitral tribunal determines, having regard to all the circumstances of the case, that another seat is more appropriate.
- The arbitral tribunal may meet at any location it considers appropriate for deliberations. Unless otherwise agreed by parties, the arbitral tribunal may also meet at any location it considers appropriate for any purpose, including hearings.
Rule 7 – Interim Relief
- The arbitral tribunal may, at the request of a party grant interim measures pursuant to Article 26.
- A party in need of emergency interim relief prior to the constitution of the arbitral tribunal may apply for such relief pursuant to the procedures set forth in Schedule 2.
Rule 8 – Consolidation of Proceedings and Concurrent Hearings
- The parties may agree –
a. That the arbitration proceedings shall be consolidated with other arbitration proceedings; or
b. That concurrent hearings shall be held, on such terms as may be agreed.
- Unless the parties agree to confer such power on the arbitral tribunal, the tribunal has no power to order consolidation of arbitration proceedings or concurrent hearings.
Rule 9 – Facilities
The Director of the KLRCA shall, at the request of the arbitral tribunal or either party, make available, or arrange for, such facilities and assistance for the conduct of the arbitral proceedings as may be required, including suitable accommodation for sittings of the arbitral tribunal, secretarial assistance, transcription services, video conferencing and interpretation facilities.
Rule 10 – Arbitration Procedure
The arbitral tribunal may conduct the arbitration in such manner as it considers appropriate and without prejudice to the generality of the foregoing may, unless all parties to the arbitration otherwise agree, limit the time available for each party to present its case.
Rule 11 – Procedure for Reference to Shariah Advisory Council or Shariah Expert
- Whenever the arbitral tribunal has to:-
a. Form an opinion on a point related to Shariah principles; and
b. Decide on a dispute arising from the Shariah aspect of the contract;
the arbitral tribunal may refer the matter to the relevant Council or Shariah expert for its ruling.
- For the purposes of paragraph 1 above, the relevant Council or Shariah expert shall be:
a. The Shariah council under whose purview the Shariah aspect to be decided falls, where there is one; or
b. Where the Shariah aspect to be decided does not fall under the purview of a specific Shariah council, a Shariah council or expert is to be agreed between the parties. Where the parties fail to agree to a Shariah council or expert, the provisions relating to experts appointed by the arbitral tribunal under Article 29 shall apply.
- Any reference under paragraph 1 above shall include any relevant information as the relevant Council or Shariah expert may require to form its opinion including the question(s) or issue(s) so referred, the relevant facts, issues and the questions to be answered by the relevant Council or Shariah expert.
- If a reference to the relevant Council or Shariah expert has been made, the arbitrator shall then adjourn the arbitration proceedings until the ruling has been given by the relevant Council or Shariah expert, as the case may be, or if there are any other areas of dispute which are independent of the said ruling, shall proceed to deliberate on such areas which are independent of the said ruling.
- The relevant Council or Shariah expert, as the case may be, shall then deliberate and make its ruling on the issue or question so submitted.
- The relevant Council or Shariah expert shall deliver its ruling within the period of 60 days from the date the reference is made.
- Where the relevant Council or Shariah expert fails to deliver its ruling within 60 days, the arbitral tribunal may proceed to determine the dispute and give its award based on the submissions it has before it. The validity of an award given pursuant to this Rule shall not be affected in any way by the unavailability of the relevant Council or Shariah expert’s ruling.
- For avoidance of doubt, the ruling of the relevant Council or the Shariah expert may only relate to the issue or question so submitted by the arbitral tribunal and the relevant Council or the Shariah expert shall not have any jurisdiction in making discovery of facts or in applying the ruling or formulating any decision relating to any fact of the matter which is solely for the arbitral tribunal to determine.
Rule 12 – Awards
- The arbitral tribunal shall render its final award within a period which is limited to 3 months. Such time limit shall start to run from the date of the closing or final oral or written submissions. The arbitral tribunal shall inform the Director of the KLRCA of such date.
- Such time limit may be extended by the arbitral tribunal with the consent of the parties and upon consultation with the Director of the KLRCA.
- The Director of the KLRCA may further extend the time limit in the absence of consent between the parties notwithstanding its expiry.
- The arbitral tribunal shall deliver sufficient copies of the completed award to the Director of the KLRCA. The award shall only be released to the parties upon full settlement of the costs of arbitration.
- The KLRCA shall notify the parties of its receipt of the award from the arbitral tribunal. The award shall be deemed to have been received by the parties upon collection by hand by an authorised representative or upon delivery by registered mail.
- In the event the parties reach a settlement after the commencement of the arbitration, the arbitral tribunal shall, if so requested by the parties, record the settlement in the form of an award made by consent of the parties. If the parties do not require a consent award, the parties shall inform the Director of the KLRCA that a settlement has been reached. The arbitration shall only be deemed concluded and the arbitral tribunal discharged upon full settlement of the costs of arbitration.
- By agreeing to arbitration under these Rules, the parties undertake to carry out the award immediately and without delay, and they also irrevocably waive their rights to any form of appeal, review or recourse to any state court or other judicial authority insofar as such waiver may be validly made and the parties further agree that an award shall be final and binding on the parties from the date it is made.
- Unless the parties have agreed otherwise, the arbitral tribunal may on any sum of money ordered to be paid by the award on the whole or any part of the period between the date on which the cause of action arose and to the date of realisation of the award:
a. Award a late payment charge determined by applying the principles of ta’widh and gharamah, where ta’widh refers to compensation on actual loss and gharamah refers to penalty for late payment; or
b. In any other way that the arbitral tribunal considers appropriate, including interest.
- An “award” as referred to herein shall include an interim, partial or final award and an award of an emergency arbitrator.
Rule 13 – Costs
In lieu of the provisions of Article 43, the following provisions shall apply:
- The term “costs” as specified in Article 40 shall include the:
a. Expenses reasonably incurred by the KLRCA in connection with the arbitration, the administrative costs of the KLRCA as well as the cost of the facilities made available by the KLRCA under Rule 9; and
b. Expenses reasonably incurred by the arbitral tribunal in connection with the reference to relevant Council or Shariah expert under Rule 11.
- Unless otherwise agreed by the parties and the arbitral tribunal pursuant to Rule 13(4), the Director of the KLRCA shall fix the fees of the arbitral tribunal in accordance with the Schedule of Fees.
- As a general rule, Appendix A1 (USD scale) shall apply to international arbitrations [as defined in Rule 4(4)(c)] and Appendix A2 (RM scale) shall apply to domestic arbitrations.
- Notwithstanding the above, all the parties and the arbitral tribunal are at liberty to agree on the fees and expenses of the arbitral tribunal within the period of 30 days after the appointment of the arbitral tribunal and the arbitral tribunal shall inform the Director of the KLRCA.
- The administrative costs of the arbitration shall be fixed by the Director of the KLRCA in accordance with the Schedule of Fees. As a general rule, Appendix B1 (USD scale) shall apply to international arbitrations [as defined in Rule 4(4)(c)] and Appendix B2 (RM scale) shall apply to domestic arbitrations.
- The fees of the arbitral tribunal and administrative costs of the arbitration under Rule 13(3), (4) and (5) above may, in exceptional, unusual or unforeseen circumstances, be adjusted from time to time at the discretion of the Director of the KLRCA.
- The fees of the arbitral tribunal and the administrative costs of arbitration under the Schedule of Fees are determined based on the amount in dispute. For the purpose of calculating the amount in dispute, the value of any counterclaim and/or set-off will be added to the amount of the claim.
- Where a claim or counterclaim does not state a monetary amount, an appropriate value for the claim or counterclaim shall be settled by the Director of the KLRCA in consultation with the arbitral tribunal and the parties for the purpose of computing the arbitrator’s fees and the administrative costs.
- Notwithstanding Rule 14, the arbitral tribunal may determine the proportion of costs to be borne by the parties.
Rule 14 – Deposits
In lieu of the provisions of Article 43, the following provisions shall apply:
- Subsequent to the commencement of arbitration in accordance with Rule 2, the Director of the KLRCA shall fix a provisional advance deposit in an amount intended to cover the costs of the arbitration. Any such provisional advance deposit shall be paid by the parties in equal shares and will be considered as a partial payment by the parties of any deposits on costs fixed by the Director of the KLRCA under Rule 13.
- Such provisional advance deposit shall be payable within 21 days upon request from the KLRCA. In the event that any of the parties fail to pay such deposit, the Director of the KLRCA shall so inform the parties in order that one or the other may make the required payment. The arbitral tribunal shall not proceed with the arbitral proceedings until such provisional advance deposit is paid in full.
- Upon finalisation of the applicable Schedule of Fees under Rule 13(2), including the fees and expenses of the arbitral tribunal, if any, pursuant to Rule 13(4), the Director of the KLRCA shall prepare an estimate of the fees and expenses of the arbitral tribunal and the administrative charges and expenses of the KLRCA which the parties shall bear equally. Within 21 days of written notification by the Director of the KLRCA of such estimate, each party shall deposit its share of the estimate with the KLRCA.
- During the course of the arbitral proceedings the Director of the KLRCA may request further deposits from the parties which shall be paid by the parties in equal shares within 21 days of such request.
- Notwithstanding Rule 14(4), where counterclaims are submitted by the respondent, the Director of the KLRCA may fix separate deposits on costs for the claims and counterclaims. When the Director of the KLRCA has fixed separate advance preliminary deposits on costs, each of the parties shall pay the advance preliminary deposit corresponding to its claims.
- If the required deposits are not paid in full, the Director of the KLRCA shall so inform the parties in order that one or the other may make the required payment. If such payment is not made, the arbitral tribunal, after consultation with the Director of the KLRCA, may order the suspension or termination of the arbitral proceedings or any part thereof.
- Notwithstanding the above, the Director of the KLRCA shall have the discretion to determine the proportion of deposits required to be paid by the parties.
- The Director of the KLRCA may apply the deposits towards the administrative costs of the KLRCA, fees of the arbitrator and the arbitrator’s out-of-pocket and per diem expenses in such manner and at such times as the Director thinks fit.
- After the award has been made, the Director of the KLRCA shall render an accounting to the parties of the deposits received and return any unexpended balance to the parties based on the parties respective contributions.
Rule 15 – Mediation to Arbitration
Where the parties have referred their dispute to mediation under the KLRCA’s Mediation Rules and they have failed to reach a settlement and thereafter proceed to arbitration under the Rules, then one-half of the administrative costs paid to the KLRCA for the mediation shall be credited towards the administrative costs of the arbitration.
Rule 16 – Confidentiality
The arbitral tribunal, the parties, all experts including relevant councils and Shariah experts, all witnesses and the KLRCA shall keep confidential all matters relating to the arbitral proceedings including any award except where disclosure is necessary for purposes of implementation and enforcement or to the extent that disclosure may be required of a party by legal duty, to protect or pursue a legal right or to challenge an award in bona fide legal proceedings before a state court or other judicial authority.
In this Rule, “matters relating to the proceedings” means the existence of the proceedings, and the pleadings, evidence and other materials in the arbitration proceedings, and all other documents produced by another party in the proceedings or the award arising from the proceedings, but excludes any matter that is otherwise in the public domain.
Rule 17 – No Liability
Neither the KLRCA nor the arbitral tribunal shall be liable to any party for any act or omission related to the conduct of the arbitral proceedings.
Rule 18 – Non-Reliances
The parties and the arbitral tribunal agree that statements or comments whether written or oral made in the course of the arbitral proceedings shall not be relied upon to institute or commence or maintain any action for defamation, libel, slander or any other complaint.